<PAGE>
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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
DH TECHNOLOGY, INC.
(NAME OF SUBJECT COMPANY)
AX ACQUISITION CORPORATION
AND
AXIOHM S.A.
(BIDDER)
COMMON STOCK, WITHOUT PAR VALUE
(TITLE OF CLASS OF SECURITIES)
23290610
(CUSIP NUMBER OF CLASS OF SECURITIES)
MR. PATRICK DUPUY
BP 675-1 A 9, RUE D'ARCUEIL
92542 MONTROUGE CEDEX, FRANCE
011-33-1-47-46-78-02
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF BIDDER)
COPY TO:
HELEN R. FRIEDLI
MCDERMOTT, WILL & EMERY
227 WEST MONROE STREET
CHICAGO, IL 60606-5096
CALCULATION OF FILING FEE
TRANSACTION VALUATION $175,000,000* AMOUNT OF FILING FEE $35,000
[_]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: _______________________________________________________
Form or Registration No.: _____________________________________________________
Filing Party: _________________________________________________________________
Date Filed: ___________________________________________________________________
* NOTE: The Transaction Value is calculated by multiplying $25, the net per
share tender offer price, by 7,000,000 (the "Maximum Number") of
outstanding shares of Target Common Stock which bidder is offering to
purchase.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CUSIP NO. 23290610
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
AX Acquisition Corporation
- -------------------------------------------------------------------------------
Check the Appropriate Box if a Member of a Group (See
2. Instructions) (a)[X]
(b)[_]
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3. SEC Use Only
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4. Source of Funds (See Instructions)
BK
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Check Box if Disclosure of Legal Proceedings is Required Pursuant
5. to Items 2(e) or 2(f) [_]
- -------------------------------------------------------------------------------
6. Citizenship or Place of Organization
California
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7. Aggregate Amount Beneficially Owned by Each Reporting Person
None
- -------------------------------------------------------------------------------
Check if the Aggregate Amount in Row (7) Excludes Certain Shares
8. (See Instructions) [_]
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9. Percent of Class Represented by Amount in Row (7)
0%
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10. Type of Reporting Person (See Instructions)
CO
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</TABLE>
2
<PAGE>
CUSIP NO. 23290610
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Axiohm S.A.
- -------------------------------------------------------------------------------
Check the Appropriate Box if a Member of a Group (See
2. Instructions) (a)[X]
(b)[_]
- -------------------------------------------------------------------------------
3. SEC Use Only
- -------------------------------------------------------------------------------
4. Source of Funds (See Instructions)
BK
- -------------------------------------------------------------------------------
Check Box if Disclosure of Legal Proceedings is Required Pursuant
5. to Items 2(e) or 2(f) [_]
- -------------------------------------------------------------------------------
6. Citizenship or Place of Organization
France
- -------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by Each Reporting Person
None
- -------------------------------------------------------------------------------
Check if the Aggregate Amount in Row (7) Excludes Certain Shares
8. (See Instructions) [_]
- -------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
0%
- -------------------------------------------------------------------------------
10. Type of Reporting Person (See Instructions)
CO
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</TABLE>
3
<PAGE>
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by AX Acquisition Corporation, a California corporation
("Purchaser") and an indirect wholly owned subsidiary of Axiohm S.A., a French
corporation ("Parent"), to purchase not less than 6,500,000 (representing
81.3% of the outstanding Common Stock of DH Technology, Inc. as of July 11,
1997) and not more than 7,000,000 (representing 87.6% of the outstanding
Common Stock of DH Technology, Inc. as of July 11, 1997) shares of Common
Stock, without par value (the "Shares"), of DH Technology, Inc., a California
corporation (the "Target"), at a price of $25 per Share, net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in Purchaser's Offer to Purchase dated July 16, 1997 (the "Offer to Purchase")
and in the related Letter of Transmittal (which together with any supplements
or amendments thereto collectively constitute the "Offer"), copies of which
are attached hereto as Exhibits (a)(1) and (a)(2), respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is DH Technology, Inc., a California
corporation, which has its principal executive offices at 15070 Avenue of
Science, San Diego, California 92128.
(b) The class of equity securities being sought is no less than 6,500,000
(representing approximately 81.3% of the outstanding Common Stock of Target as
of July 11, 1997) and no more than 7,000,000 (representing approximately 87.6%
of the outstanding Common Stock of Target as of July 11, 1997) shares of
Common Stock, without par value, of Target. The information set forth in
"Introduction" and "The Offer--Terms of the Offer, Proration and Expiration
Date" and "The Offer--Certain Conditions of the Offer" of the Offer to
Purchase is incorporated herein by reference.
(c) The information concerning the principal market in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market set forth in "The Offer--Price Range of the Shares and Dividends" of
the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by Purchaser and Parent. The
information concerning the name, state or other place of organization,
principal business and address of the principal office of each of Purchaser
and Parent, and the information concerning the name, business address, present
principal occupation or employment and the name, principal business and
address of any corporation or other organization in which such employment or
occupation is conducted, material occupations, positions, offices or
employments during the last five years and citizenship of each of the
executive officers and directors of Purchaser and Parent are set forth in the
"Introduction," "The Offer--Certain Information Concerning Purchaser and
Parent; Relation to Target" and Annex A of the Offer to Purchase and is
incorporated herein by reference.
(e) and (f) During the last 5 years, none of Purchaser or Parent, and, to
the best knowledge of Purchaser and Parent, none of the persons listed in
Annex A of the Offer to Purchase has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding 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 laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) There have been no transactions which would be required to be disclosed
under this Item 3(a) between any of the Purchaser, the Parent or, to the best
knowledge of the Purchaser and the Parent, any of the persons listed in Annex
A to the Offer to Purchase and Target or any of its executive officers,
directors or affiliates.
(b) The information set forth in "Introduction," "The Offer--Certain
Information Concerning Purchaser and Parent; Relation to Target," "The Offer--
Purpose of the Offer, the Axiohm Exchange, the Acquisition of Purchaser and
the Merger" and "The Offer--Background of the Offer" of the Offer to Purchase
is incorporated herein by reference.
4
<PAGE>
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in "The Offer--Source and Amount of Funds"
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)-(e) The information set forth in "Introduction," "The Offer--Background
of the Offer," "The Offer--Purpose of the Offer, the Axiohm Exchange, the
Acquisition of Purchaser and the Merger" and "The Offer-- Operations after the
Offer, the Axiohm Exchange, the Acquisition of Purchaser and the Merger" of the
Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth in "The Offer--Effect of the Offer on
the Market for Target's Common Stock, Stock Quotation, Exchange Act
Registration and Margin Securities" and "The Offer--Certain Information
Concerning Purchaser and Parent; Relation to Target" of the Offer to Purchase
is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in "The Offer--Certain Information
Concerning Purchaser and Parent; Relation to Target" of the Offer to Purchase
and Annex 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.
Except as set forth in the Offer to Purchase, none of the Purchaser, the
Parent, nor, to the best knowledge of the Purchaser or the Parent, any of the
persons listed in Annex A to the Offer to Purchase, has any contract,
arrangement, understanding or relationship with any other person with respect
to any securities of Target (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any such securities, joint venture, loan or option arrangements, puts
or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies). See "The Offer--Certain Information Concerning Target"
and "The Offer--Source and Amount of Funds" of the Offer to Purchase.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Introduction" and "The Offer--Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in "The Offer--Certain Information Concerning
Purchaser and Parent; Relation to Target," "The Offer--Operations After the
Offer, the Axiohm Exchange, the Acquisition of Purchaser and the Merger" and
"Annex B--Consolidated Financial Information of Parent for the Years Ended
December 31, 1996 and 1995" of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in "Introduction," "The Offer--Background of
the Offer," "The Offer-- Certain Information Concerning Purchaser and Parent;
Relation to Target," "The Offer--Purpose of the Offer, the Exchange Offer, the
Acquisition of Purchaser and the Merger," "The Offer--Certain Information
Concerning Target," "The Offer--Certain Information Concerning Purchaser and
Parent; Relation to Target" and "The Offer--Operations after the Offer, the
Axiohm Exchange, the Acquisition of Purchaser and the Merger" of the Offer to
Purchase is incorporated herein by reference.
(b)-(c) The information set forth in "The Offer--Certain Legal Matters and
Regulatory Approvals" of the Offer to Purchase is incorporated herein by
reference.
5
<PAGE>
(d) The information set forth in "The Offer--Effect of the Offer on the
Market for Target's Common Stock, Stock Quotation, Exchange Act Registration
and Margin Securities" of the Offer to Purchase is incorporated herein by
reference.
(e) To the best knowledge of the Purchaser and the Parent, no such
proceedings are pending or have been instituted.
(f) The information set forth in the Offer to Purchase, Letter of
Transmittal and the Agreement and Plan of Merger, dated as of July 14, 1997,
among Parent, Purchaser and Target, copies of which are attached hereto as
Exhibits (a)(1), (a)(2) and (c)(1), is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated July 16, 1997
(a)(2) Form of Letter of Transmittal
(a)(3) Form of Notice of Guaranteed Delivery
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Nominees
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees to Clients
(a)(6) Form of Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9
(a)(7) Form of Summary Advertisement dated July 16, 1997.
(a)(8) Press Release issued by Parent and Target on July 15, 1997.
(b)Not applicable
(c)(1) Agreement and Plan of Merger, dated as of July 14, 1997, among
Parent, Purchaser and Target
(c)(2) Employment Agreement between DH Technology, Inc. and William H.
Gibbs, included as an annex to Item (c)(1) above.
(c)(3) Employment Agreement between DH Technology, Inc. and Walter S. Sobon,
included as an annex to Item (c)(1) above.
(d)None
(e)Not applicable
(f)None
6
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
July 16, 1997
AX ACQUISITION CORPORATION
/s/ Patrick Dupuy
By: _________________________________
Patrick Dupuy, President
AXIOHM S.A.
/s/ Patrick Dupuy
By: _________________________________
Patrick Dupuy, Chairman
7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE IN
SEQUENTIAL
EXHIBIT NUMBERING
NO. DESCRIPTION SYSTEM
------- ----------- ----------
<C> <S> <C>
(a)(1) Form of Offer to Purchase dated July 16, 1997
(a)(2) Form of Letter of Transmittal
(a)(3) Form of Notice of Guaranteed Delivery
Form of Letter to Brokers, Dealers, Commercial Banks,
(a)(4) Trust Companies and Nominees
Form of Letter from Brokers, Dealers, Commercial Banks,
(a)(5) Trust Companies and Nominees to Clients
(a)(6) Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9
(a)(7) Form of Summary Advertisement dated July 16, 1997
Press Release issued by Parent and Target on July 15,
(a)(8) 1997
(b) Not applicable
(c)(1) Agreement and Plan of Merger, dated as of July 14, 1997,
among Parent, Purchaser and Target
(c)(2) Employment Agreement between DH Technology, Inc. and
William H. Gibbs, included as an annex to Item (c)(1)
above.
(c)(3) Employment Agreement between DH Technology Inc. and
Walter S. Sobon, included as an annex to Item (c)(1)
above.
(d) None
(e) Not applicable
(f) None
</TABLE>
8
<PAGE>
OFFER TO PURCHASE FOR CASH
UP TO 7,000,000
SHARES OF COMMON STOCK
OF
DH TECHNOLOGY, INC.
AT
$25 NET PER SHARE
BY
AX ACQUISITION CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
AXIOHM S.A.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 12, 1997, UNLESS THE OFFER
IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
6,500,000 SHARES (REPRESENTING APPROXIMATELY 81% OF THE OUTSTANDING SHARES OF
COMMON STOCK OF TARGET AS OF JULY 11, 1997) (THE "MINIMUM CONDITION") AND (II)
THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-
SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"),
AND THE REGULATIONS THEREUNDER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND
CONDITIONS WHICH ARE CONTAINED IN THIS OFFER TO PURCHASE. SEE "INTRODUCTION,"
"THE OFFER--TERMS OF THE OFFER, PRORATION AND EXPIRATION DATE" AND "THE
OFFER--CERTAIN CONDITIONS OF THE OFFER."
THE BOARD OF DIRECTORS OF TARGET ("TARGET'S BOARD") HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT (AS DEFINED HEREIN) AND DETERMINED THAT THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER, THE AXIOHM EXCHANGE (AS DEFINED
HEREIN), THE ACQUISITION OF PURCHASER (AS DEFINED HEREIN) AND THE MERGER (AS
DEFINED HEREIN) ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF
TARGET, AND RECOMMENDS THAT THE SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
----------------
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
shares of Common Stock, without par value (the "Shares"), of Target pursuant
to this Offer should either (i) complete and sign the enclosed Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in
the Letter of Transmittal, have such shareholder's signature thereon
guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or
deliver the Letter of Transmittal (or such facsimile) together with
certificate(s) evidencing tendered Shares, and any other required documents,
to The Bank of New York (the "Depositary") and either deliver the
certificate(s) for such Shares to the Depositary along with the Letter of
Transmittal (or facsimile) or deliver such Shares pursuant to the procedure
for book-entry transfer set forth in "The Offer--Procedure for Tendering
Shares" or (ii) request such shareholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such shareholder.
A shareholder having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if such shareholder
desires to tender the Shares held by the nominee.
ANY SHAREHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATE(S) FOR
SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY IN A TIMELY
MANNER WITH THE PROCEDURE FOR BOOK-ENTRY TRANSFER, OR WHO CANNOT DELIVER ALL
REQUIRED DOCUMENTS TO THE DEPOSITARY PRIOR TO THE EXPIRATION OF THE OFFER, MAY
TENDER SUCH SHARES BY FOLLOWING THE PROCEDURES FOR GUARANTEED DELIVERY SET
FORTH IN "THE OFFER--PROCEDURE FOR TENDERING SHARES."
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth on the back cover of this
Offer to Purchase. Questions or requests for assistance may also be directed
to the Dealer-Manager at its address set forth on the back cover of this Offer
to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may also be obtained from
the Information Agent or from brokers, dealers, commercial banks or trust
companies.
----------------
THE DEALER-MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
July 16, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION............................................................. 3
THE OFFER................................................................ 5
1. Terms of the Offer, Proration and Expiration Date................. 5
2. Acceptance for Payment and Payment................................ 6
3. Procedure for Tendering Shares.................................... 8
4. Withdrawal Rights................................................. 11
5. Certain U.S. Federal Income Tax Consequences...................... 11
6. Price Range of the Shares and Dividends........................... 13
7. Effect of the Offer on the Market for Target's Common Stock, Stock
Quotation, Exchange Act Registration and Margin Securities........ 14
8. Certain Information Concerning Target............................. 16
9. Certain Information Concerning Purchaser and Parent; Relation to
Target............................................................ 19
10. Purpose of the Offer, the Axiohm Exchange, the Acquisition of Pur-
chaser and the Merger............................................. 29
11. Operations after the Offer, the Axiohm Exchange, the Acquisition
of Purchaser and the Merger....................................... 29
12. Source and Amount of Funds........................................ 37
13. Background of the Offer........................................... 41
14. The Merger Agreement.............................................. 42
15. Dividends and Distributions....................................... 52
16. Certain Conditions of the Offer................................... 53
17. Certain Legal Matters and Regulatory Approvals.................... 55
18. Fees and Expenses................................................. 57
19. Miscellaneous..................................................... 58
Annex A Directors and Executive Officers of Purchaser and Parent......... A-1
Annex B Consolidated Financial Information of Parent for the Years Ended
December 31, 1996 and 1995....................................... B-1
Report of Price Waterhouse, Independent Accountants.............. B-1
Consolidated Balance Sheet as of December 31, 1996 and 1995...... B-2
Consolidated Statement of Income for the Years Ended
December 31, 1996 and 1995...................................... B-3
Consolidated Statement of Cash Flow for the Years Ended
December 31, 1996 and 1995...................................... B-4
Consolidated Statement of Shareholders' Equity For the Years
Ended
December 31, 1996 and 1995...................................... B-5
Notes to Consolidated Financial Statements....................... B-6
</TABLE>
2
<PAGE>
To the Holders of Common Stock
of DH Technology, Inc.
INTRODUCTION
AX Acquisition Corporation, a newly formed California corporation (the
"Purchaser") and an indirect wholly owned subsidiary of Axiohm S.A., a French
corporation (the "Parent"), is offering to purchase not less than 6,500,000
(the "Minimum Condition") and up to 7,000,000 (the "Maximum Number") shares of
Common Stock, without par value (the "Shares"), of DH Technology, Inc., a
California corporation (the "Target"), which shares represented 87.6% of
Target's Common Stock outstanding as of July 11, 1997, at a price of $25 per
Share, net to the seller in cash, without interest (the "Offer Price"), upon
the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (which, together with any supplements
or amendments hereto or thereto collectively constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of July 14, 1997 (the "Merger Agreement") among Parent, Purchaser and Target.
Pursuant to the Merger Agreement, Purchaser and Target will effect a series of
transactions consisting of, among other things, the Offer, the Axiohm Exchange
(defined below), the Acquisition of Purchaser (defined below) and the Merger
(defined below).
Following (or concurrently with) the Offer, Purchaser will attempt to enter
into stock purchase agreements with the shareholders of Parent pursuant to
which Purchaser will attempt to purchase from such shareholders up to all of
the outstanding shares of the capital stock of Parent for an aggregate of
5,518,524 of the Shares which Purchaser is acquiring in this Offer (the
"Exchange Shares") and an aggregate of $12,197,900 in cash (the "Axiohm
Exchange") (or, if at the closing of the Axiohm Exchange, Purchaser has not
obtained the financing necessary to pay the entire amount of such cash, an
aggregate of 5,833,732 Exchange Shares and an aggregate of $4,317,700 in
cash). The Axiohm Exchange will result in approximately 79% to 85% of Target's
outstanding Common Stock being held by Parent shareholders after the
completion of the Merger and the cancellation of the Shares owned by Purchaser
(described below) (depending on the actual number of Shares purchased pursuant
to the Offer and the actual number of Exchange Shares transferred by Purchaser
in the Axiohm Exchange and assuming no exercise of outstanding options or
warrants to purchase shares of Target's Common Stock). Simultaneously with the
closing of the Axiohm Exchange, Parent will sell to Target, and Target will
purchase from Parent (the "Acquisition of Purchaser"), all of the outstanding
shares of the capital stock of Purchaser in exchange for Target's assumption,
on a joint and several basis with Purchaser, of any and all obligations with
respect to indebtedness incurred, or preferred stock issued, by Purchaser or
Purchaser's shareholder in connection with the Offer and the Axiohm Exchange,
which obligations shall not exceed $199.0 million. See "The Offer--Purpose of
the Offer, the Axiohm Exchange, the Acquisition of Purchaser and the Merger"
and "The Offer--Source and Amount of Funds." As a result of the Axiohm
Exchange and the Acquisition of Purchaser, Parent will become a subsidiary of
Purchaser and Purchaser will become a wholly owned subsidiary of Target.
Following the Axiohm Exchange and the Acquisition of Purchaser, Purchaser will
be merged with and into Target (the "Merger") and the Shares owned by
Purchaser will be cancelled. In the Merger, the name of Target, as the
surviving corporation in the Merger, will be changed to Axiohm Inc.
Following the Offer, the Axiohm Exchange, the Acquisition of Purchaser and
the Merger, Parent will be a subsidiary of Target and Target will be
approximately 79% to 85% owned by the former Parent shareholders and
approximately 15% to 21% owned by the current shareholders of Target
(depending on the actual number of Shares purchased pursuant to the Offer and
the actual number of Exchange Shares transferred by Purchaser in the Axiohm
Exchange and assuming no exercise of outstanding options or warrants to
purchase shares of Target's Common Stock). Following such transactions, an
aggregate of approximately 51% to 55% of the outstanding shares of Target's
Common Stock will be beneficially owned by two principal shareholders and
directors of Parent. See "The Offer--Certain Information Concerning Purchaser
and Parent; Relation to Target." Target's Common Stock is expected to continue
to be quoted on the Nasdaq National Market, however, following the change of
Target's name in the Merger to Axiohm Inc., the Common Stock may be quoted
under a different trading symbol and it is anticipated that Target will remain
subject to the reporting requirements of the U.S. Securities Exchange Act of
1934, as amended (the "Exchange Act"). However, if the Maximum
3
<PAGE>
Number is increased by Purchaser, the anticipated Nasdaq quotation and
Exchange Act reporting treatment described above may be materially and
adversely affected. See "The Offer--Effect of the Offer on the Market for
Target's Common Stock, Stock Quotation, Exchange Act Registration and Margin
Securities."
Prudential Securities Incorporated ("Prudential"), Target's financial
advisor, has delivered to Target its written opinion, dated as of July 14,
1997, that the consideration to be received by the holders of shares of Target
Common Stock (other than Parent and its affiliates), consisting of cash
consideration to be received by such holders pursuant to the Offer and the
shares of Target Common Stock to be retained by such holders following the
consummation of the Axiohm Exchange, the Acquisition of Purchaser and the
Merger, is fair to such holders from a financial point of view. A copy of the
opinion of Prudential is contained in Target's Solicitation/Recommendation
Statement on Schedule 14D-9 filed with the Commission pursuant to the Exchange
Act in connection with the Offer, a copy of which is being furnished to the
shareholders by Target.
TARGET'S BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND DETERMINED
THAT THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER, THE AXIOHM
EXCHANGE, THE ACQUISITION OF PURCHASER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE SHAREHOLDERS OF TARGET, AND RECOMMENDS THAT
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THE
AMOUNT OF SHARES CONSTITUTING THE MINIMUM CONDITION AND (II) THE EXPIRATION OR
TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND THE
REGULATIONS THEREUNDER. THE CONSUMMATION OF THE OFFER, THE AXIOHM EXCHANGE,
THE ACQUISITION OF PURCHASER AND THE MERGER ARE ALSO SUBJECT TO OTHER TERMS
AND CONDITIONS WHICH ARE CONTAINED IN THE MERGER AGREEMENT AND DESCRIBED IN
THIS OFFER TO PURCHASE. SEE "THE OFFER--TERMS OF THE OFFER, PRORATION AND
EXPIRATION DATE," "THE OFFER--THE MERGER AGREEMENT" AND "THE OFFER--CERTAIN
CONDITIONS OF THE OFFER."
Target has advised Purchaser that as of July 11, 1997, there were 7,994,402
shares of Target's Common Stock outstanding (and 1,378,450 shares of Target's
Common Stock issuable upon the exercise of all outstanding options, warrants,
rights or any other security exercisable or convertible into shares of
Target's Common Stock). As of the date of this Offer to Purchase, no shares of
Target's Common Stock are beneficially owned by Purchaser or Parent. Pursuant
to the Merger Agreement, outstanding options and warrants will either: if
vested, be (i) cancelled in exchange for an amount in cash equal to the Offer
Price minus the option exercise price for each share of Target's Common Stock
subject to such option or (ii) cancelled in exchange for an arrangement
whereby an amount in cash equal to the Offer Price minus the option exercise
price for each share of Target's Common Stock subject to such option would be
paid on a deferred basis, or if unvested, will remain outstanding with certain
modifications. See "The Offer--Certain Information Concerning Target." Holders
of vested options covering 730,410 shares of Target's Common Stock have agreed
not to exercise their options until the Merger Agreement is either consummated
or terminated. Subject to Purchaser's right to modify the number of Shares it
is seeking to acquire in the Offer, the number of Shares to be purchased
pursuant to this Offer is not less than 6,500,000 and not more than 7,000,000.
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all fees and expenses of
Lehman Brothers Inc., which is acting as Dealer-Manager, Georgeson & Company
Inc., which is acting as Information Agent and The Bank of New York, which is
acting as the Depositary, incurred in connection with the Offer. See "The
Offer--Fees and Expenses."
The sale of Shares pursuant to the Offer will be a taxable transaction, the
consequences of which will be determined under the stock redemption rules of
Section 302 of the Internal Revenue Code of 1986, as amended (the "Code"). See
"The Offer--Certain U.S. Federal Income Tax Consequences."
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
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THE OFFER
1.TERMS OF THE OFFER, PRORATION AND EXPIRATION DATE
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for the Maximum
Number of Shares validly tendered prior to the Expiration Date (as defined
below) and not theretofore withdrawn in accordance with "The Offer--Withdrawal
Rights." The term "Expiration Date" means 12:00 midnight, New York City time,
on Tuesday August 12, 1997, unless and until Purchaser, in its sole discretion
extends the period of time during which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by Purchaser, shall expire.
If more than the Maximum Number of Shares are validly tendered prior to the
Expiration Date and not properly withdrawn, Purchaser will, upon the terms and
subject to the conditions of the Offer, accept for payment and pay for only
the Maximum Number of Shares, on a pro rata basis, with adjustments to avoid
purchases of fractional Shares, based upon the number of Shares validly
tendered prior the Expiration Date and not properly withdrawn. Currently, the
Maximum Number is 7,000,000 Shares. Purchaser expressly reserves the right, in
its sole discretion, at any time or from time to time, to increase the Maximum
Number and, if such action is required under the rules of the Commission,
Purchaser will extend the Offer.
Because of the difficulty of determining precisely the number of Shares
validly tendered and not withdrawn, if proration is required, Purchaser would
not expect to be able to announce the final results of the proration or pay
for Shares until at least five Nasdaq National Market trading days after the
Expiration Date. Preliminary results of proration will be announced by press
release as promptly as practicable after the Expiration Date. Holders of
Shares may obtain such preliminary information from the Dealer-Manager or the
Depositary and may also be able to obtain such preliminary information from
their brokers.
Purchaser expressly reserves the right, in its sole discretion, at any time
and from time to time, to extend the period during which the Offer is open for
any reason, including the occurrence of any of the events specified in "The
Offer--The Merger Agreement."
Subject to the applicable rules and regulations of the Commission, Purchaser
expressly reserves the right, in its sole discretion (but subject to the terms
and conditions of the Merger Agreement) at any time and from time to time (i)
to delay acceptance for payment of, or, regardless of whether such Shares were
theretofore accepted for payment, payment for, any Shares pending receipt of
any regulatory or governmental approval specified in "The Offer--Certain Legal
Matters and Regulatory Approvals," (ii) to terminate the Offer and not accept
for payment any Shares upon the occurrence of any of the conditions specified
in "The Offer--Certain Conditions of the Offer" and (iii) to waive any
condition or otherwise amend the Offer in any respect, in each case by giving
oral or written notice of such delay, termination, waiver or amendment to the
Depositary and by making a public announcement thereof; provided, however,
that without the consent of Target, Purchaser will not (i) decrease the Offer
Price, (ii) change the form of consideration payable in the Offer (other than
by adding consideration), (iii) reduce the Maximum Number of Shares, (iv)
change the Minimum Condition or (v) impose conditions to the Offer in addition
to those set forth in the Merger Agreement which are adverse to the holders of
shares of Target's Common Stock. Purchaser acknowledges that (x) Rule 14e-1(c)
under the Exchange Act requires Purchaser to pay the consideration offered or
to return the Shares tendered promptly after the termination or withdrawal of
the Offer and (y) Purchaser may not delay acceptance for payment of, or
payment for (except as provided in clause (i) of the first sentence of this
paragraph), any Shares upon the occurrence of any of the conditions specified
in "The Offer--Certain Conditions of the Offer" without extending the period
of time during which the Offer is open.
Any extension, delay, amendment, waiver or termination of the Offer will be
followed as promptly as practicable by a public announcement. In the case of
an extension, Rule 14e-1(d) under the Exchange Act requires that the
announcement be made no later than 9:00 a.m., New York City time, on the next
business day
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after the previously scheduled Expiration Date in accordance with the public
announcement requirements of Rule 14d-4(c) under the Exchange Act. Subject to
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that any material change in the information published, sent or
given to shareholders in connection with the Offer be promptly disseminated to
shareholders in a manner reasonably designed to inform shareholders of such
change), and without limiting the manner in which Purchaser may choose to make
any public announcements, Purchaser will not have any obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a press release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
then Purchaser will disseminate additional tender offer materials and extend
the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. In the
Commission's view, the Offer should remain open for a minimum of five business
days from the date a material change is first published, sent or given to
security holders, and if material changes are made with respect to information
that approaches the significance of price and share levels, then a minimum of
ten business days may be required to allow for adequate dissemination and
investor response. Accordingly, if prior to the Expiration Date, Purchaser
increases or decreases the Maximum Number of Shares or increases or decreases
the consideration offered pursuant to the Offer, and if the Offer is scheduled
to expire at any time earlier than the period ending on the tenth business day
from the date that notice of such increase or decrease is first published, sent
or given to the holders of Shares, the Offer will be extended at least until
the expiration of such ten business day period. As used herein, a "business
day" means any day other than a Saturday, Sunday or U.S. federal holiday and
consists of the time period from 12:01 a.m. through midnight, New York City
time.
Target has provided Purchaser with Target's shareholder lists and security
position listings for the purpose of disseminating the Offer to Target's
shareholders. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by Purchaser to record holders of
Shares whose names appear on Target's shareholder list and will be furnished by
Purchaser, for subsequent transmittal to beneficial owners of Shares, to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on such shareholder lists, or, if
applicable, who are listed as participants in a clearing agency's security
position listing.
2.ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Offer (including the
Minimum Condition and, if the Offer is extended or amended, the terms and
condition of any such extension or amendment), Purchaser will purchase, by
accepting for payment, and will pay for, the Maximum Number of Shares which are
validly tendered on or prior to the Expiration Date (and not properly withdrawn
in accordance with "The Offer-- Withdrawal Rights") promptly after the latest
to occur of (i) the Expiration Date, (ii) the expiration or termination of any
applicable waiting periods under the HSR Act and (iii) the satisfaction or
waiver of the conditions set forth in "The Offer--Certain Conditions of the
Offer." Any determination concerning the satisfaction or waiver of such terms
and conditions will be within the sole discretion of Purchaser, and such
determination will be final and binding on all holders of Shares. See "The
Offer--Terms of the Offer, Proration and Expiration Date" and "The Offer--
Procedure for Tendering Shares." Subject to applicable rules and regulations of
the Commission, Purchaser expressly reserves the right, in its sole discretion,
to delay acceptance for payment of or payment for Shares pending receipt of any
regulatory approvals specified in "The Offer--Certain Legal Matters and
Regulatory Approvals" or in order to comply in whole or in part with any
applicable law. Any such delays will be effected in compliance with Purchaser's
obligation under Rule 14e-1(c) under the Exchange Act to pay for or return
tendered Shares promptly after the termination or withdrawal of the Offer.
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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 (i)
certificates for such Shares (or timely Book-Entry Confirmation, as defined
herein, of the book-entry transfer of such Shares into the Depositary's
account at a Book-Entry Transfer Facility, as defined herein, pursuant to the
procedures set forth in "The Offer--Procedure for Tendering Shares"), (ii) a
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message (as
defined below) in connection with a book-entry transfer and (iii) any other
documents required by such Letter of Transmittal. Payment for Shares accepted
for payment pursuant to the Offer may be delayed in the event of proration due
to the difficulty of determining the number of Shares validly tendered and not
withdrawn. See "The Offer--Terms of the Offer, Proration and Expiration Date."
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of
the Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgement from each participant in the
Book-Entry Transfer Facility tendering the Shares which are the subject of
such Book-Entry Confirmation that each participant has received the Letter of
Transmittal and agrees to be bound by the terms of the Letter of Transmittal
and that Purchaser may enforce such agreement against each participant.
If, prior to the Expiration Date, Purchaser increases the consideration
offered to the holders of Shares pursuant to the Offer, then Purchaser will
pay such increased consideration for all Shares purchased pursuant to the
Offer, whether or not such Shares were tendered prior to such increase in the
consideration.
On July 16, 1997, Parent filed with the Federal Trade Commission (the "FTC")
and the Antitrust Division of the Department of Justice (the "Antitrust
Division"), a Premerger Notification and Report Form under the HSR Act with
respect to the Offer. Accordingly, it is anticipated that the waiting period
under the HSR Act applicable to the Offer will expire at 11:59 p.m., New York
City time, on July 31, 1997. Prior to the expiration or termination of such
waiting period, the FTC or the Antitrust Division may extend such waiting
period by requesting additional information from Parent with respect to the
Offer. If such a request is made with respect to the purchase of Shares in the
Offer, the waiting period will expire at 11:59 p.m., New York City time, on
the tenth calendar day after substantial compliance by Parent with such a
request. Thereafter, the waiting period may only be extended by court order.
The waiting period under the HSR Act may be terminated prior to its expiration
by the FTC and the Antitrust Division. Parent has requested early termination
of the waiting period, although there can be no assurance that this request
will be granted. See "The Offer--Certain Legal Matters and Regulatory
Approvals" for additional information regarding the HSR Act.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered to Purchaser and not
withdrawn, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares. 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 tendering
shareholders for the purpose of receiving payment from Purchaser and
transmitting payment to validly tendering shareholders whose Shares have been
accepted for payment. Under no circumstances will interest be paid by
Purchaser on the Offer Price for the Shares tendered pursuant to the Offer,
regardless of any extension of the Offer or any delay in making such payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the Offer or if certificates are submitted evidencing more Shares than are
tendered, certificates for any such Shares will be returned, without expense,
to the tendering shareholder (or, in the case of Shares delivered by book-
entry transfer of such Shares into the Depositary's account at a Book-Entry
Transfer Facility pursuant to the procedures set forth in "The Offer--
Procedure for Tendering Shares," such Shares will be credited to an account
maintained at such Book-Entry Transfer Facility), as promptly as practicable
after the expiration, termination or withdrawal of the Offer.
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3.PROCEDURE FOR TENDERING SHARES
Valid Tender. In order for a shareholder to validly tender Shares pursuant
to the Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees or an
Agent's Message in connection with a book-entry delivery of Shares, and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and either (i)
certificates for tendered Shares must be received by the Depositary at one of
such addresses or such Shares must be delivered pursuant to the procedures for
book-entry transfer set forth below (and a Book-Entry Confirmation received by
the Depositary), in each case on or prior to the Expiration Date or (ii) the
tendering shareholder must comply with the guaranteed delivery procedures set
forth below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND SOLE RISK OF THE TENDERING
SHAREHOLDERS AND DELIVERY, INCLUDING ANY DELIVERY THROUGH A BOOK-ENTRY
TRANSFER FACILITY, WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, THEN REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Delivery. The Depositary will make a request to establish an
account with respect to the Shares at each of The Depository Trust Company and
Philadelphia Depository Trust Company (each a "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 a Book-
Entry Transfer Facility may make book-entry delivery of Shares by causing the
book-entry transfer system to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. 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." Although delivery of Shares may be effected through book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility, the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees or an Agent's
Message in connection with a book-entry transfer 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 on or prior to the
Expiration Date, or the tendering shareholder must comply with the guaranteed
delivery procedures described below. Delivery of documents to a Book-Entry
Transfer Facility does not constitute delivery to the Depositary.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a participant in the Security Transfer Agents
Medallion Program, the New York Stock Exchange Signature Guarantee Medallion
Program or the Stock Exchange Medallion Program or by a commercial bank or
trust company having an office or correspondent in the U.S. or by any other
entity identified as an "eligible guarantor institution" as such term is
defined in Rule 17Ad-15 under the Exchange Act (each an "Eligible
Institution"). However, no signature guarantee is required on the Letter of
Transmittal if (i) the Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this section, includes
any participant in the Book-Entry Transfer Facility system whose name appears
on a security position listing as the owner of the Shares) tendered therewith
and such registered holder(s) has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on such Letter of Transmittal or (ii) such Shares are tendered
for the account of an Eligible Institution. 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
validly tendered or not accepted for payment or not purchased are to be issued
or returned to a person other than the registered holder of the certificate(s)
surrendered, 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 holder or holders appear on the certificates, with
signatures on such certificates or stock powers guaranteed by an Eligible
Institution. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer
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cannot be completed on a timely basis or time will not permit all required
documents to reach the Depositary on or prior to the Expiration Date, such
Shares may be tendered provided that all of the following guaranteed delivery
procedures are duly complied with:
(a)such tender is made by or through an Eligible Institution;
(b)the Depositary receives (by hand, mail, telegram or facsimile
transmission) on or prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form
provided by Purchaser; and
(c)the certificates for all tendered Shares, in proper form for transfer
(or a Book-Entry Confirmation with respect to 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 book-
entry transfer, an Agent's Message) and any other documents required by the
Letter of Transmittal, are received by the Depositary within five trading
days after the date of execution of such Notice of Guaranteed Delivery.
A "trading day" is any day on which the Nasdaq National Market is open for
business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or by mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery made available by Purchaser.
Notwithstanding any other 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 (i) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or
facsimile thereof) for such Shares, properly completed and duly executed, with
any required signature guarantees (or in the case of book-entry transfer, an
Agent's Message) and (iii) any other documents required by the Letter of
Transmittal.
Appointment. By executing a Letter of Transmittal as set forth above, the
tendering shareholder irrevocably appoints designees of Purchaser as such
shareholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by Purchaser and with respect to any and
all other Shares or other securities or rights issued or issuable in respect of
such Shares on or after July 14, 1997. All such proxies shall be considered
coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, Purchaser accepts for payment
Shares tendered by such shareholder as provided herein. Upon such acceptance
for payment, all prior powers of attorney and proxies given by such shareholder
with respect to such Shares or other securities or rights will, without further
action, be revoked and no subsequent powers of attorney and proxies may be
given (and, if given, will not be deemed effective). The designees of Purchaser
will thereby be empowered to exercise all voting and other rights with respect
to such Shares or other securities or rights in respect of any annual, special
or adjourned meeting of Target's shareholders, or otherwise, as the designees
in their sole discretion deem proper. Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's acceptance for payment of such Shares, Purchaser must be able to
exercise full voting and other rights with respect to such Shares and other
securities or rights, including, without limitation, voting at any meeting of
shareholders then scheduled.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by Purchaser, in its sole discretion, whose
determination will be final and binding. Purchaser reserves the absolute right
to reject any or 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
Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right to
waive any of the conditions of the Offer or any defect or irregularity in any
tender with respect to any particular Shares, or with respect to those Shares
held by any particular shareholder whether or not similar conditions, defects
or irregularities are waived in the case of other Shares. No tender of Shares
will be deemed to have been validly made until all defects or irregularities
relating thereto have been cured or waived. None of Purchaser, Parent, any of
their respective affiliates or assigns, the
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Depositary, the Dealer-Manager, 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.
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding.
Purchaser's acceptance for payment of Shares validly tendered pursuant to
any of the procedures described above is intended to constitute a binding
agreement between the tendering shareholder and Purchaser upon the terms and
subject to the conditions of the Offer.
Backup Withholding. In order to avoid backup withholding of U.S. federal
income tax on payments of cash pursuant to the Offer, each shareholder
surrendering Shares in the Offer must provide the Depositary with such
shareholder's correct taxpayer identification number ("TIN") on a Substitute
Form W-9 and certify under penalty of perjury that such TIN is correct and
that such shareholder is not subject to backup withholding. Certain
shareholders (including, among others, all corporations and certain foreign
individuals and entities) are not subject to backup withholding. If a
shareholder does not provide its correct TIN or fails to provide the
certification described above, under U.S. federal income tax laws, the
Depositary will be required to withhold 31% of the amount of any payment made
to such shareholder pursuant to the Offer. All shareholders tendering Shares
pursuant to the Offer should complete and sign the Transmittal Letter and
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 provided in a manner
satisfactory to Purchaser and the Depositary). Noncorporate foreign
shareholders should complete and sign the Letter of Transmittal and a Form W-
8, Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instructions 9 and 10 to
the Letter of Transmittal.
Withholding for Foreign Shareholders. The Depositary will withhold U.S.
federal income taxes equal to 30% of the gross payments payable to a foreign
shareholder unless such foreign shareholder proves in a manner satisfactory to
the Purchaser and the Depositary that either (i) the sale of its Shares
pursuant to the Offer will qualify as a sale or exchange, rather than a
dividend, for U.S. federal income tax purposes (as described in "The Offer--
Certain U.S. Federal Income Tax Consequences"), in which case no withholding
is required, or (ii) the foreign shareholder is eligible for a reduced tax
treaty rate with respect to dividend income, in which case the Depositary will
withhold at the reduced treaty rate. For this purpose, a foreign shareholder
is any shareholder that is not (i) an individual citizen or resident of the
U.S., (ii) a corporation, partnership or other entity created or organized
under the laws of the U.S. or any political subdivision thereof, (iii) any
estate the income of which is subject to U.S. federal income taxation
regardless of the source of such income, (iv) a trust which is subject to the
supervision of a court within the U.S. or the control of a U.S. fiduciary or
(v) a shareholder who establishes that dividends on the Shares held by such
shareholder are effectively connected with a trade or business carried on by
such shareholder within the United States. In order for the Depositary to
determine whether the sale of Shares will qualify as a sale or exchange, all
foreign shareholders must complete the Ownership Change Questionnaire attached
as Annex A to the Letter of Transmittal. The Depositary will determine a
shareholder's status as a foreign shareholder and eligibility for a tax treaty
reduced rate of withholding by reference to the shareholder's address and to
any outstanding certificates or statements concerning eligibility for a
reduced rate of withholding unless facts and circumstances indicate that
reliance is not warranted. A foreign shareholder who has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of withholding for which such shareholder may be eligible should consider
doing so in order to avoid overwithholding. A foreign shareholder may be
eligible to obtain from the U.S. Internal Revenue Service a refund of tax
withheld if such shareholder meets one of the three tests for sale or exchange
treatment described in "The Offer--Certain U.S. Federal Income Tax
Consequences" or is otherwise able to establish that no tax or a reduced rate
of tax was due.
4.WITHDRAWAL RIGHTS
Except as otherwise provided in this Section, tenders of Shares made
pursuant to the Offer are irrevocable, provided that Shares tendered pursuant
to the Offer may be withdrawn pursuant to the procedures set forth below at
any time prior to the Expiration Date and, unless theretofore accepted for
payment by Purchaser pursuant to the Offer, may also be withdrawn at any time
after September 12, 1997.
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If Purchaser extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to accept Shares for payment pursuant to the Offer for any
reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as described in this Section.
Any such delay will be by an extension of the Offer to the extent required by
law.
For a withdrawal to be effective, a written, telegraphic 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 and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn, and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the persons who
tendered the Shares. If certificates for the Shares have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant
to the procedures for book-entry transfer as set forth in "The Offer--Procedure
for Tendering Shares," any notice of withdrawal must also specify the name and
number of the account at the appropriate financial institution that is a
participant in a Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's procedures
for such withdrawal, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the first
sentence of this paragraph. Withdrawals of tenders of Shares may not be
rescinded, and any Shares properly withdrawn will thereafter be deemed not
validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described above in "The
Offer--Procedure for Tendering Shares" at any time on or prior to the
Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
which determination will be final and binding. None of Purchaser, Parent, any
of their respective affiliates or assigns, the Depositary, the Dealer-Manager,
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 any such notification.
5.CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The discussion set forth below of the U.S. federal income tax consequences of
participating in the Offer is for general information only and does not purport
to consider all aspects of U.S. federal income taxation that may be relevant to
shareholders. The consequences to any particular shareholder may differ
depending upon that shareholder's own circumstances and tax position. In
addition, certain types of shareholders (including financial institutions, tax-
exempt organizations, foreign persons and persons who acquired their shares of
Target Common Stock upon the exercise of employee stock options or otherwise as
compensation) may be subject to special rules. This discussion does not
consider the effect of any applicable foreign, state or local tax laws. EACH
SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES OF THE OFFER TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION OF
STATE, LOCAL AND FOREIGN TAX LAWS.
For purposes of this discussion, shareholders are assumed to hold their
Shares as capital assets.
A shareholder who disposes of Shares pursuant to the Offer will generally
recognize either (i) capital gain or loss ("Capital Gain Treatment") or (ii)
dividend income ("Dividend Treatment") with respect to proceeds from the
disposition, depending on whether the disposition of Shares is treated as a
redemption of the Shares by the shareholder. As more fully described below, the
disposition will be treated as a redemption under Section 302 of the Code (and
therefore will qualify for Capital Gain Treatment) if (a) the disposition
results in a "complete termination" of the shareholder's interest in Target,
(b) the distribution of proceeds is "substantially disproportionate" with
respect to the shareholder or (c) the distribution of proceeds is "not
essentially equivalent to a dividend" (the foregoing (a), (b) and (c)
collectively, the "Redemption Tests").
11
<PAGE>
If a shareholder satisfies one of the Redemption Tests so that the
disposition is treated as a redemption, the shareholder will be subject to
Capital Gain Treatment and will recognize gain or loss equal to the difference
between the cash proceeds received for the Shares and the shareholder's tax
basis for such Shares. Gain or loss must be determined separately for each
block of Shares (i.e., Shares acquired at the same cost in a single
transaction) disposed of pursuant to the Offer, although, under proposed
legislation not yet effective, gain or loss would be determined based on the
average tax basis of all Shares held by the beneficial owner. Such gain or
loss will be capital gain or loss and will be long-term capital gain or loss
if the beneficial owner held the Shares for more than one year as of the date
of disposition. A long-term capital gain of individuals currently is taxed at
a maximum rate of 28%. Various legislative proposals, including separate
versions of the Revenue Reconciliation Bill of 1997 recently passed by the
House of Representatives and the Senate (the "Bill") would reduce the long-
term capital gains rates applicable to individuals. It is uncertain whether,
in what form, and with what effective date any such legislation will be
enacted.
If a shareholder does not satisfy any of the Redemption Tests, the
shareholder will be subject to Dividend Treatment and will recognize dividend
income equal to the proceeds from the disposition to the extent of the
shareholder's allocable share of Target's current or accumulated earnings and
profits. Any excess will be treated first as a return of capital and will be
applied against and reduce the adjusted basis of all of the Shares held by
such shareholder (including those disposed of pursuant to the Offer). Any
remaining amount after the shareholder's basis has been reduced to zero will
be taxable as capital gain.
In determining whether any of the Redemption Tests is satisfied, a
shareholder must take into account both Shares actually owned by such
shareholder and any Shares considered owned by such shareholder by reason of
certain constructive ownership rules set forth in Section 318 of the Code.
Under Section 318 of the Code, a shareholder generally will be considered to
own Shares which such shareholder has the option to acquire and Shares owned
(and, in some cases, constructively owned) by certain members of the
shareholder's family and by certain entities (such as corporations,
partnerships, trusts and estates) in which such shareholder has an interest.
Following is a further description of the Redemption Tests:
(a) A sale of Shares pursuant to the Offer will result in a "complete
termination" of all of a shareholder's stock in Target if, pursuant to the
Offer, Target purchases all of the Shares actually and constructively owned
by the shareholder and the shareholder thereafter owns no other stock of
Target. If the shareholder's sale of Shares pursuant to the Offer includes
all Shares actually owned by the shareholder, but the shareholder continues
to constructively own Shares held by family members, such shareholder may
qualify for "complete redemption" treatment if he, she or it effectively
waives the constructive ownership rules regarding attribution from family
members. Shareholders in this position should consult their own tax
advisors as to the availability of such a waiver.
(b) The sale of Shares pursuant to the Offer will be "substantially
disproportionate" with respect to a shareholder if, immediately after the
Offer, such shareholder's actual and constructive percentage ownership of
Shares then outstanding is less than 80% of the shareholder's actual and
constructive percentage ownership of Shares outstanding immediately before
the purchase of Shares pursuant to the Offer, and after the sale, the
shareholder owns less than 50% of the total combined voting power of all
classes of stock of Target entitled to vote.
(c) Whether the sale of Shares pursuant to the Offer is "not essentially
equivalent to a dividend" depends upon the individual shareholder's facts
and circumstances, but in any case requires a "meaningful reduction" in the
shareholder's proportionate interest in Target. The Internal Revenue
Service has held in a published ruling that, under the particular facts of
that ruling, a small reduction in the percentage ownership of a shareholder
constituted a "meaningful reduction" when the shareholder owned an
insignificant percentage of the corporation's stock before and after a
redemption and did not exercise any control over corporate affairs.
However, some reduction in a shareholder's interest is required.
Shareholders intending to satisfy this test should consult their own tax
advisors as to the application of this standard to their particular
situations.
12
<PAGE>
Shareholders should be aware that their ability to satisfy any of the
foregoing tests may be affected by any proration pursuant to the Offer. In
addition, it is likely that an acquisition or disposition of Shares (including
market purchases and sales) by a shareholder substantially contemporaneously
with the Offer will be taken into account in determining whether any of the
Redemption Tests described above is satisfied. Further, it is possible that an
acquisition or disposition of options to acquire Shares may also be taken into
account in determining whether any of the Redemption Tests is satisfied.
Shareholders should consult their own tax advisors as to any effect of such
events on the application of these tests.
Treatment of Dividend Income for Corporate Shareholders. Any income subject
to Dividend Treatment pursuant to the rules described above will be eligible
for the 70% dividends received deduction allowable to domestic corporate
shareholders under Section 243 of the Code, subject to applicable limitations,
including those relating to "debt-financed portfolio stock" under Section 246A
of the Code and to the holding period requirements of Section 246 of the Code.
Also, any amount treated as a dividend may constitute an "extraordinary
dividend" subject to the provisions of Section 1059 of the Code. Under Section
1059, a corporate shareholder must reduce the tax basis of such shareholder's
stock (but not below zero) by the portion of any "extraordinary dividend"
which is deducted under the dividends received deduction, and, if such portion
exceeds the shareholder's tax basis for the stock, must treat any such excess
as additional gain on the subsequent sale or other disposition of such shares.
In addition, the aggregation rules of Section 1059 might require that other
dividends received by the shareholders on stock of Target be treated as part
of the "extraordinary dividend." Corporate shareholders should consult their
own tax advisors as to the application of Section 1059 to the Offer.
The Bill, if enacted, would provide, among other things, that the non-taxed
portion of any extraordinary dividend in excess of basis shall be treated as
gain from the sale or exchange of such stock. This proposed modification, if
enacted, would apply to all distributions after May 3, 1995.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY. EACH SHAREHOLDER IS URGED TO CONSULT SUCH
SHAREHOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO
SUCH SHAREHOLDER (INCLUDING THE APPLICABILITY AND EFFECT OF THE CONSTRUCTIVE
OWNERSHIP RULES AND FOREIGN, STATE AND LOCAL TAX LAWS) OF THE SALE OF SHARES
PURSUANT TO THE OFFER.
6.PRICE RANGE OF THE SHARES AND DIVIDENDS
Target's Common Stock is included for quotation on the Nasdaq National
Market under the symbol "DHTK." Following the change of Target's name in the
Merger to Axiohm Inc., the Common Stock may be quoted on the Nasdaq National
Market under a different trading symbol. The following table sets forth, for
each of the periods indicated, the high and low reported sales prices per
share for Target's Common Stock as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1995:
First Quarter.................................................... $16.17 $13.83
Second Quarter................................................... 19.41 13.83
Third Quarter.................................................... 22.17 17.33
Fourth Quarter................................................... 24.75 19.00
1996:
First Quarter.................................................... $24.50 $21.25
Second Quarter................................................... 27.75 22.00
Third Quarter.................................................... 26.50 22.50
Fourth Quarter................................................... 25.25 22.75
1997:
First Quarter.................................................... $24.13 $15.00
Second Quarter................................................... 18.00 13.50
Third Quarter (through July 14, 1997)............................ 17.25 15.75
</TABLE>
13
<PAGE>
On July 14, 1997, the last full trading day before public announcement of the
execution by Target, Purchaser and Parent of the Merger Agreement and of
Purchaser's intention to commence the Offer, the last reported sale price of
Target's Common Stock on the Nasdaq National Market was $15.875 per share.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR TARGET'S
COMMON STOCK.
Target has never paid dividends on its Common Stock nor does it expect to pay
dividends in the foreseeable future.
7. EFFECT OF THE OFFER ON THE MARKET FOR TARGET'S COMMON STOCK, STOCK
QUOTATION, EXCHANGE ACT REGISTRATION AND MARGIN SECURITIES
The purchase of Shares pursuant to the Offer, the Axiohm Exchange, the
Acquisition of Purchaser and the Merger will likely decrease both the number of
holders of shares of Target's Common Stock and the number of shares of Target's
Common Stock that might otherwise trade publicly and could adversely affect the
liquidity and market value of the remaining shares of Target's Common Stock.
Based on the number of shares of Target Common Stock outstanding on July 11,
1997, if the Offer is consummated for the Maximum Number of Shares and the
Axiohm Exchange is completed, the holders of Target Common Stock immediately
prior to the Offer would own approximately 15% to 21% of the outstanding shares
of Target Common Stock and the shareholders of Parent would own approximately
79% to 85% of the outstanding shares of Target Common Stock (depending on the
actual number of Shares purchased pursuant to the Offer and the actual number
of Exchange Shares transferred by Purchaser in the Axiohm Exchange and assuming
no exercise of outstanding options or warrants to purchase shares of Target's
Common Stock). Following such transactions, an aggregate of approximately 51%
to 55% of the shares of Target's Common Stock will be beneficially owned by two
principal shareholders and directors of Parent. See "The Offer--Certain
Information Concerning Purchaser and Parent; Relation to Target."
Nasdaq Registration. Target's Common Stock is currently included for
quotation on the Nasdaq National Market. Based upon the Maximum Number of
Shares to be purchased in the Offer, it is anticipated that, following the
Offer, Target's Common Stock will continue to meet the requirements of the
National Association of Securities Dealers, Inc. ("NASD") for continued
inclusion in the Nasdaq National Market (the "Nasdaq National Market") (the top
tier market of the Nasdaq Stock Market) which currently requires that an issuer
have at least 200,000 publicly held shares, held by at least 400 shareholders
or 300 shareholders of round lots, with a market value of $1,000,000, and have
net tangible assets of at least either $1,000,000 or $4,000,000, depending on
profitability levels during the issuer's four most recent fiscal years.
However, if these standards are not met in the future, Target's Common Stock
may no longer qualify for inclusion in the Nasdaq National Market, although
Target's Common Stock might nevertheless continue to have quotations published
in the Nasdaq "additional list" or in one of the "local lists," but if the
number of holders of Target's Common Stock were to fall below 300, or if the
number of publicly held shares of Target's Common Stock were to fall below
100,000 or there were not at least two registered and active market makers for
Target's Common Stock, NASD rules provide that Target's Common Stock would no
longer be "qualified" for Nasdaq reporting and Nasdaq would cease to provide
any quotations. Shares of Target's Common Stock held directly or indirectly by
any officer or director of Target, or by any beneficial owner of more than 10%
of the outstanding shares of Target's Common Stock, ordinarily will not be
considered publicly held for this purpose. Target has advised Purchaser that,
as of July 11, 1997, there were approximately 454 holders of record of shares
of Target's Common Stock and 7,994,402 shares of Target's Common Stock were
outstanding (and 1,378,450 shares of Target's Common Stock were issuable upon
exercise of all outstanding options, warrants, rights or any other security
exercisable or convertible into shares of Target's Common Stock).
If, after the purchase of Shares pursuant to the Offer, the Axiohm Exchange,
the Acquisition of Purchaser and the Merger, Target's Common Stock does not
meet the requirements of the NASD for continued inclusion in the Nasdaq Stock
Market or the Nasdaq National Market, as the case may be, the market for shares
of Target's Common Stock would be likely be materially and adversely affected.
14
<PAGE>
Pursuant to Section 19(b)(1) of the Exchange Act and Rule 19b-4 thereunder,
on March 3, 1997, the NASD filed with the Commission a proposed rule change
(the "Proposal") which would revise the listing standards for Nasdaq by, among
other things, revising the net tangible asset tests, the public float
requirement and the market value of public float requirement. The Proposal may
have an effect upon whether Target's Common Stock continues to be listed on the
Nasdaq National Market. Although certain companies, including Target, may not
be able to meet the more stringent standards contained in the Proposal,
companies not in compliance with such standards will have six months after the
Proposal is approved by the Commission to comply with the new rules. In
addition, for those companies who are unable to qualify under the new
standards, an alternative is now available through such companies' eligibility
for quotation in the OTC Bulletin Board ("OTCBB"). The OTCBB is a quotation
medium used by NASD members to reflect quotations in non-Nasdaq securities.
Securities quoted in the OTCBB are subject to real-time reporting. None of
Target, Purchaser or Parent can predict whether Target or Target's Common Stock
will meet the new requirements contained in the Proposal. Questions about the
Proposal and the status of the Commission's approval process should be directed
to the Commission located at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located in the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048 or may be obtained from the Commission's Internet site on the World Wide
Web at http://www.sec.gov. Copies of the Proposal may also be obtained by mail,
upon payment of the Commission's customary charges, by writing to the
Commission's principal office at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Proposal may also be inspected at the Nasdaq
Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
In the event that Target's Common Stock no longer meets the requirements of
the NASD for quotation through Nasdaq and Target's Common Stock is no longer
included in the Nasdaq Stock Market, it is possible that Target's Common Stock
would continue to trade in the over-the-counter market and that price
quotations would be reported by other sources, such as OTCBB. The extent of the
public market for Target's Common Stock and the availability of such quotations
would, however, depend upon the number of holders of Target's Common Stock
remaining at such time, the interest in maintaining a market in Target's Common
Stock on the part of securities firms, the possible termination of registration
of Target's Common Stock under the Exchange Act, as described below, and other
factors.
If, as a result of the purchase of the Shares in the Offer or otherwise,
trading of Target's Common Stock on Nasdaq is discontinued, the liquidity of
any market for Target's Common Stock would likely be materially and adversely
affected. Purchaser cannot predict whether or the extent to which the reduction
in the number of outstanding shares of Target's Common Stock that might
otherwise trade publicly after the consummation of the Offer, coupled with the
impact of the Axiohm Exchange, the Acquisition of Purchaser and the Merger,
would have on the market price for or marketability of Target's Common Stock or
whether it would cause future market prices to be greater or less than the
Offer Price.
Exchange Act Registration. Target's Common Stock is currently registered
under the Exchange Act and, following the purchase of the Maximum Number of
Shares in the Offer, and the consummation of the Axiohm Exchange, the
Acquisition of Purchaser and the Merger, are intended to remain so registered.
However, other possible factors (while not currently known or anticipated by
Purchaser or Parent) may result in Target's Common Stock becoming eligible for
deregistration under the Exchange Act. Registration of Target's Common Stock
under the Exchange Act may be terminated upon application by Target to the
Commission if such shares are neither listed on a national securities exchange
nor held by 300 or more holders of record. Termination of registration of
Target's Common Stock under the Exchange Act would substantially reduce the
information required to be furnished by Target to its shareholders and to the
Commission or eliminate certain protection currently provided to shareholders
by making certain provisions of the Exchange Act no longer applicable to
Target, such as the short-swing profit recovery and reporting provisions of
Section 16 of the Exchange Act, the requirement of furnishing a proxy statement
pursuant to Section 14(a) of the Exchange Act in connection with shareholders'
meetings, the related requirements of furnishing annual and transition reports
to shareholders pursuant to Section 15(d) of the Exchange Act and the
requirements of Rule 13e-3 under the Exchange Act with
15
<PAGE>
respect to "going private" transactions. Furthermore, the ability of
"affiliates" of Target and persons holding "restricted securities" of Target
to dispose of such securities pursuant to Rule 144 or 144A promulgated under
the Securities Act may be impaired or eliminated. Additionally, if
registration of Target's Common Stock under the Exchange Act is terminated,
then Target's Common Stock would no longer be considered "margin securities"
or be eligible for listing on the Nasdaq National Market.
Margin Securities. Shares of Target's Common Stock are currently "margin
securities" under the regulations of the Board of Governors of the U.S.
Federal Reserve System (the "Federal Reserve Board"), which has the effect,
among other things, of allowing brokers to extend credit on the collateral of
shares of Target's Common Stock. Depending upon factors similar to those
described above regarding listing and market quotations, it is expected that,
following the purchase of the Maximum Number of Shares in the Offer, and
following consummation of the Axiohm Exchange, the Acquisition of Purchaser
and the Merger, Target's Common Stock should continue to constitute "margin
securities" for the purposes of the margin regulations of the Federal Reserve
Board. However, if circumstances change in the future, Target's Common Stock
may lose its status as "margin securities" and therefore could no longer be
used as collateral for loans made by brokers. If registration of Target's
Common Stock under the Exchange Act were terminated, then Target's Common
Stock would no longer be considered "margin securities" or be eligible for
Nasdaq trading.
8.CERTAIN INFORMATION CONCERNING TARGET
Except as otherwise set forth herein, the information concerning Target
contained in this Offer to Purchase, including financial information, has been
furnished by Target or has been taken from or based upon publicly available
documents and records on file with the Commission and other public sources.
Neither Purchaser nor Parent assumes any responsibility for the accuracy or
completeness of the information concerning Target furnished by Target or
contained in such documents and records or for any failure by Target to
disclose events which may have occurred or may affect the significance or
accuracy of any such information but which are unknown to Purchaser or Parent.
General. Target is a California corporation with its principal executive
offices located at 15070 Avenue of Science, San Diego, California 92128.
Target designs, manufactures, and sells transaction printers and mechanisms,
impact printheads and magnetic heads, bar code printers and related services
and supplies, such as labels and ribbons. Target also offers printhead repair
and replacement services. Target's products provide printing solutions for
many diverse applications, including freight and bar code labels, retail
point-of-sale transactions, gasoline vending receipts and airline ticketing.
Other applications include banking and automated teller machine ("ATM")
transactions, health care industry transactions, data processing reports,
gaming tickets and multi-part forms.
Financial Information. Set forth below is certain selected historical
consolidated financial information with respect to Target and its subsidiaries
for the fiscal years ended December 31, 1996, 1995 and 1994 and for the three
month periods ended March 31, 1997 and 1996. This information has been
excerpted or derived from the information contained in Target's audited
financial statements contained in Target's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 and the unaudited consolidated financial
statements contained in Target's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997. More comprehensive financial information is included in
such reports and other documents filed by Target with the Commission, and the
following information is qualified in its entirety by reference to such
reports and such other documents and all the financial information (including
any related notes) contained therein. Such reports and other documents may be
inspected and copied in the manner set forth below under "Available
Information." The selected historical consolidated financial information of
Target as of March 31, 1997 and for the three month periods ended March 31,
1996 and 1997 have been derived from the unaudited financial statements of
Target and, in the opinion of Target's management, reflects all adjustments
necessary for the fair presentation of such unaudited interim financial
information. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the entire year or any other
future period.
16
<PAGE>
DH TECHNOLOGY, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------ ----------------
1996 1995 1994 1997 1996
-------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................ $115,784 $98,855 $77,918 $19,185 $28,196
Gross profit......................... 40,937 35,588 28,946 6,658 9,726
Income (loss) from operations........ 19,135 15,198 11,492 (10,046) 4,478
Income (loss) before income taxes.... 20,477 16,153 12,136 (9,665) 4,762
Net income (loss).................... 13,027 10,301 8,058 (7,883) 3,035
Net income (loss) per share.......... $ 1.56 $ 1.24 $ 1.00 $ (0.99) $ 0.36
Weighted average number of shares
outstanding including common stock
equivalents......................... 8,351 8,337 8,076 7,976 8,469
</TABLE>
Target did not declare or pay any cash dividends on its Common Stock during
the periods covered.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1996 1995 1994 1997
------- ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.............................. $75,247 $64,205 $49,429 $77,555
Total assets................................ 97,105 85,285 71,306 94,550
Current liabilities......................... 13,218 15,541 12,238 18,098
Long-term debt (less current maturities).... 1,635 2,115 2,992 2,367
Shareholders' equity........................ 82,252 67,480 55,848 74,085
</TABLE>
Target has advised Parent and Purchaser that it expects to report net sales,
net income and net income per share of approximately $25.5 million, $1.8
million and $0.22, respectively, for the quarter ended June 30, 1997, compared
to $29.2 million, $3.3 million and $0.39, respectively, for the quarter ended
June 30, 1996. Included in the net income for the period ended June 30, 1997
are expenses of $390,000 associated with the transactions described herein.
Without these charges, net income and net income per share would have been
$2.0 million and $0.25, respectively.
Available Information. Target is subject to the reporting requirements of
the Exchange Act and, in accordance therewith, is required to file periodic
reports, proxy statements and other information with the Commission relating
to its business, financial condition and other matters. Information as of
particular dates concerning Target's directors and officers (including their
remuneration and stock options granted to them), shares of Target's Common
Stock held by them, the principal holders of Target's securities and any
material interest of such persons in transactions with Target and certain
other matters is required to be disclosed in proxy statements distributed to
Target's shareholders and filed with the Commission. Such reports, proxy
statements and other information may be inspected without charge at the Public
Reference Room maintained by the Commission at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. In addition, upon request, such reports, proxy
statements and other information will be made available for inspection and
copying at the Commission's Public Reference Facilities located at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can be
obtained at prescribed rates upon request from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
material may also be accessed electronically at the Commission's site on the
World Wide Web located at http://\www.sec.gov. The Target's Common Stock is
listed on the Nasdaq National Market, and such reports, proxy statement and
other information concerning the Target may be inspected and copied at the
offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington D.C. 20006.
17
<PAGE>
Treatment of Target Options
Pursuant to the Merger Agreement, Target's Board has agreed to take all
actions necessary such that all Company Outstanding Options (as defined in the
Merger Agreement) are treated as follows. Upon acceptance for payment of Shares
by Purchaser pursuant to the Offer, all Vested Company Outstanding Options (as
defined below), other than Company Outstanding Options held by certain
individuals to be designated by Target, subject to the reasonable acceptance of
Parent (the "Designated Optionees"), shall be cancelled and each holder thereof
shall thereupon be paid by Target an amount, in cash, equal to the product of
(i) the number of Shares subject to Vested Company Outstanding Options held by
such holder and (ii) the Offer Price minus the exercise price applicable to
such Vested Company Outstanding Options (the "Option Spread"), less applicable
taxes. The Designated Optionees may elect, as to all or a portion of the
individual's Vested Company Outstanding Options, to be covered under the
preceding sentence or to receive the Option Spread on a deferred basis over a
period not to exceed seven years following the Effective Time, subject to
earlier distribution upon termination of the individual's employment for any
reason. Target shall also pay a tax subsidy payment on the Option Spread
consisting of (i) a payment to reflect the federal and state tax rate
differential between long-term capital gains and ordinary income, and (ii) a
payment to reimburse the individual for taxes due as a result of the rate
differential payment, provided that such tax subsidy payments shall be limited
so as to avoid triggering the golden parachute excise tax under Sections 280G
and 4999 of the Internal Revenue Code. For purposes of the foregoing, Vested
Company Outstanding Options shall mean: (i) all Company Outstanding Options
that are vested as of the date of acceptance for payment of Shares by Purchaser
pursuant to the Offer or that would have vested through September 6, 1997; (ii)
one-half of Company Outstanding Options issued to Walter Sobon; and (iii) all
warrants outstanding under Target's Director Warrant Plan (as defined in the
Merger Agreement).
All Company Outstanding Options other than Vested Company Outstanding Options
("Unvested Company Outstanding Options") shall remain outstanding and subject
to the terms and conditions of the applicable Company option plan and option
agreement, but shall be modified to provide for full vesting acceleration in
the event the employee's employment is terminated (i) by Target other than for
cause, or (ii) as the result of the employee's death or disability. Unvested
Outstanding Company Options held by William Gibbs, Walter Sobon, David Ledwell
and Janet Shanks shall also be modified to provide for acceleration upon a
constructive termination of employment. In the event Target engages in a
transaction prior to April 1, 2001, as a result of which Target's Common Stock
is no longer registered under the Exchange Act, each holder of Unvested Company
Outstanding Options shall be entitled to receive from Target a cash payment
equal to the product of (i) the number of shares subject to Unvested Company
Outstanding Options held by such holder and (ii) the Offer Price minus the
exercise price applicable to such Unvested Company Outstanding Options, less
applicable taxes.
Employment Agreements
In connection with the Merger Agreement and the transactions contemplated
thereby, Target has entered into employment agreements with William Gibbs and
Walter Sobon, executive officers of Target. Each of the agreements will take
effect upon the consummation of the Offer.
The employment agreement with Mr. Gibbs (the "Gibbs Agreement") provides for
Mr. Gibbs to be employed as Target's Chief Executive Officer at a base salary
of no less than $225,000. Mr. Gibbs is also eligible to receive a minimum
target bonus equal to 50% of his base salary to be awarded based on Target's
financial performance and is entitled to a car and a car allowance and to
participate in other employee benefit plans and programs available to Target's
other employees. The Gibbs Agreement also contemplates that he will be granted
an option to purchase a number of shares of Target's Common Stock as determined
by the compensation committee of Target's Board at an exercise price which
shall be equal to the then fair market value of the Target Common Stock. The
option shall vest as to 50% of the shares 24 months following the grant date
and as to an additional 1/48th of the shares each month thereafter. In the
event Mr. Gibbs' employment with Target terminates in an Involuntary
Termination (as defined in the Gibbs Agreement), Mr. Gibbs shall receive a lump
sum severance payment equal to two years compensation if terminated in the
first 12 months, 18 months compensation if terminated in the second 12 months
and 12 months compensation if terminated thereafter. In
18
<PAGE>
addition, in the event Mr. Gibbs' employment is terminated as a result of an
Involuntary Termination, disability or death, the vesting and exercisability
of all outstanding stock options that were granted to Mr. Gibbs prior to the
consummation of the Offer shall accelerate in full. The Gibbs Agreement
supersedes the employment agreement between Target and Mr. Gibbs dated
December 3, 1985.
The employment agreement with Mr. Sobon (the "Sobon Agreement") provides for
Mr. Sobon to be employed as Target's Chief Financial Officer at a base salary
of no less than $160,000. Mr. Sobon is also eligible to receive a minimum
target bonus of $50,000, to be awarded based on Target's financial performance
and is entitled to a car allowance and to participate in other employee
benefit plans and programs available to Target's other employees. The Sobon
Agreement also contemplates that he will be granted an option to purchase a
number of shares of Target's Common Stock as determined by the compensation
committee of Target's Board at an exercise price which shall be equal to the
then fair market value of the Target Common Stock. The option shall vest as to
50% of the shares 24 months following the grant date and as to an additional
25% of the shares each year thereafter. In the event Mr. Sobon's employment
with Target terminates in an Involuntary Termination (as defined in the Sobon
Agreement), Mr. Sobon shall receive a lump sum severance payment equal to 12
months compensation, except that (i) in the event that Mr. Gibbs' employment
is terminated in the first 12 months following the consummation of the Offer
and Sobon is terminated in the same 12 month period, Sobon shall receive a
lump sum severance payment equal to 18 months compensation and (ii) in the
event that Gibbs' employment is terminated in the second 12 months following
the consummation of the Offer and Sobon is terminated in the same 12 month
period, Sobon shall receive a lump sum severance payment equal to 15 months
compensation. In addition, in the event Mr. Sobon's employment is terminated
as a result of an Involuntary Termination, disability or death, the vesting
and exercisability of all outstanding stock options that were granted to Mr.
Sobon prior to the consummation of the Offer shall accelerate in full. The
Sobon Agreement supersedes the employment arrangement between Target and Sobon
as set forth in a letter from Target dated September 20, 1996 and amended
September 30, 1996.
In connection with the Merger Agreement and the transactions contemplated
thereby, Target also intends to enter into employment arrangements with David
Ledwell and Janet Shanks, executive officers of Target. Such agreements are
expected to take effect upon the consummation of the Offer. The employment
agreement with Mr. Ledwell (the "Ledwell Agreement") is expected to provide
for Mr. Ledwell to be employed at a base salary of no less than $160,000. Mr.
Ledwell will also be eligible to receive a minimum target bonus equal to
$40,000, to be awarded based on Target's financial performance and will be
entitled to participate in other employee benefit plans and programs available
to Target's other employees. The Ledwell Agreement is also expected to contain
language providing that, in the event that Mr. Ledwell's employment with
Target terminates in an "involuntary termination," Mr. Ledwell shall receive a
lump sum severance payment equal to 2 years compensation, if terminated in the
first 24 months and 12 months salary if terminated thereafter. The employment
agreement with Ms. Shanks (the "Shanks Agreement") is expected to provide for
Ms. Shanks to be employed as Target's Chief Accounting Officer at a base
salary of no less than $90,000. Ms. Shanks will also be eligible to receive a
minimum target bonus equal to $20,000, to be awarded based on Target's
financial performance and will be entitled to participate in other employee
benefit plans and programs available to Target's other employees. The Shanks
Agreement is also expected to contain language providing that, in the event
that Ms. Shanks' employment with Target terminates in an "involuntary
termination," Ms. Shanks shall receive a lump sum severance payment equal to
12 months compensation, if terminated in the first 24 months and 6 months
salary if terminated thereafter. The Ledwell Agreement and the Shanks
Agreement are also expected to provide that Mr. Ledwell and Ms. Shanks,
respectively, will be granted an option to purchase a number of shares of
Target's Common Stock as determined by the compensation committee of Target's
Board at an exercise price equal to the then fair market value of the Target
Common Stock. The option shall vest as to 50% of the shares 24 months
following the grant date and as to an additional 25% of the shares each year
thereafter. In addition, each agreement is expected to provide that, in the
event Mr. Ledwell's or Ms. Shanks' respective employment is terminated as a
result of an "involuntary termination," disability or death, the vesting and
exercisability of all outstanding stock options that such received prior to
the Effective Time shall accelerate in full.
19
<PAGE>
9.CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT; RELATION TO TARGET
PURCHASER. Purchaser is a newly incorporated California corporation
organized in connection with the Offer, the Axiohm Exchange, the Acquisition
of Purchaser and the Merger and has not carried on any activities other than
in connection with such transactions. The principal offices of Purchaser are
located at 950 Danby Road, Ithaca, New York 14850. Purchaser is an indirect
wholly owned subsidiary of Parent.
Until immediately prior to the time that Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer, the Axiohm Exchange, the Acquisition of Purchaser and the
Merger. Because Purchaser is newly formed and has minimal assets and
capitalization, no meaningful financial information regarding Purchaser is
available.
PARENT. Parent was incorporated in France in 1988, as a result of the
acquisition of a division of Schlumberger Industries S.A. by a group of former
executives of that company. Parent's principal offices are located at BP 675-1
a 9, rue d'Arcueil, 92542 Montrouge Cedex, France. Parent's strategy has been
(i) to grow revenue through aggressive geographic expansion into areas such as
Japan and China, sales and marketing efforts aimed at satisfying customers'
long-term, application specific needs, and research and development efforts
focused on the timely introduction of new products and the creation of a
broader offering of products; (ii) to reduce operating costs through the
improvement of manufacturing processes and the allocation of manufacturing to
cost effective locations; and (iii) to pursue consolidation opportunities
within the specialty printer industry in order to achieve benefits such as
economies of scale, rationalization of overhead expenses and greater product
breadth and geographic scope within the specialty printer industry.
BUSINESS
Parent designs, manufactures and sells transaction printers and thermal
printing mechanisms. Parent believes it is the only printer manufacturer,
outside of Japan, with fully integrated thermal printhead manufacturing
capability. Parent also offers repair and replacement services. Parent's
products provide printing solutions for many diverse applications, including
retail point-of-sale transactions, gasoline vending receipts, cash registers,
banking and ATM transactions, couponing and gaming tickets.
Parent's products are marketed and sold worldwide directly to original
equipment manufacturers (OEMs) or via sales representatives, value-added
resellers and distributors. Parent's sales offices are located in France,
Germany, the U.S., Japan and Taiwan.
Parent develops products that serve the application-specific needs of its
customers as well as products focused on general requirements of the
transaction printer and thermal printing mechanism market. To serve these
markets and applications, Parent uses a broad range of printing techniques,
including impact and thermal printing technologies and provides related
supplies, services and repairs.
Impact printing can form a variety of characters, graphics or bar codes by
printing vertical columns of dots in combinations of patterns as the printhead
sweeps horizontally across a page. Impact printing permits multiple fonts and
multiple language characters to be intermingled under software control and
also can be used to print bar codes and multi-part forms. Compared with non-
impact printers, impact printers generally have the advantage of lower
operating costs.
Thermal printing is accomplished either directly or through thermal
transfer. Direct thermal printing creates images directly on specially treated
paper by transferring heat to the paper using a linear array of miniature
heater elements. Thermal transfer printing uses a ribbon that transfers images
onto untreated paper, using a linear array of miniature heater elements.
PRODUCTS
Parent's products are designed for precision, reliability and durability
and, as such, operate using a full range of print speeds.
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<PAGE>
Thermal Printing Mechanisms. Thermal printing mechanisms are supplied to OEMs
(exclusive of printer manufacturers) requiring a ticket printing capability
such as gasoline pumps, weighing scales, credit card verifiers and cash
registers. Thermal printing mechanisms are used in applications where speed,
versatility, reliability, low noise level, low maintenance costs and relatively
low costs are important factors.
Transaction Printers. Parent's transaction printers utilize impact and
thermal printing technology and consist of three product families: impact
printers, thermal printers and related supplies and services. Applications for
these products include bank teller transactions, ATM receipts and statement
printing, point-of-sale receipts, money order printing, lottery tickets and
label printing.
MARKETING AND CUSTOMERS
Parent's thermal printing mechanisms are sold primarily to OEMs. Parent's
transaction printers are sold to OEMs, distributors and value-added resellers.
Parent believes many of its customers rely on Parent as their sole source
supplier but could modify their systems to utilize competitive products.
Marketing efforts include advertisements in a number of trade journals, news
releases covering new products and participation in certain industry trade
shows in the U.S. and Europe. As of March 30, 1997, domestic and international
sales were conducted directly to OEMs or via sales representatives, value-added
resellers and distributors.
In 1996, one client, NCR, accounted for 52% of Parent's total revenues, or
approximately $49.5 million. No other customer accounted for more than 10% of
Parent's revenues in 1996. Sales to NCR for the six months ended June 30, 1997
were approximately $26.7 million, compared to approximately $25.7 million for
the six months ended June 30, 1996.
An OEM Purchase Agreement, dated December 29, 1994 (the "OEM Agreement"),
governs certain aspects of the relationship between Parent's wholly owned
subsidiary, Axiohm IPB, Inc., a Delaware corporation ("IPB") and NCR. Pursuant
to the terms and conditions of the OEM Agreement, IPB has agreed to sell
specified products and parts (relating to thermal and contact printing) (the
"Specified Products") to NCR. The initial term of the OEM Agreement commenced
on December 29, 1994 and expires December 28, 1997, with automatic renewal
unless notice of termination is provided by either party (the "Term"). IPB and
NCR are currently negotiating a new agreement to take effect January 1, 1998.
Under the OEM Agreement, NCR agreed to purchase (on the terms and conditions of
the OEM Agreement) 75% of its requirements for the Specified Products during
the Term of the OEM Agreement. NCR's obligation to purchase the Specified
Products is subject to, among other things, IPB's ability to meet NCR's
specifications and requirements for price, performance, quality and delivery of
the Specified Products. Over the Term of the OEM Agreement, NCR agreed to use
its best efforts to permit IPB to bid on the design, development and/or
manufacture of new products similar (e.g. improvements, enhancements or
products performing the same or similar function, etc.) to the Specified
Products. However, NCR may, in its reasonable judgement, determine whether to
accept any offer by IPB to provide such design, development or manufacturing
services or to provide such parts. The OEM Agreement provides that prices for
the Specified Products may not exceed the prices for such products charged to
buyers other than NCR, provided such buyers are in a class similar to NCR
(taking similarities in purchase quantity and terms into consideration). The
OEM Agreement also contains provisions requiring IPB to provide warranties
(including, without limitation, product repair, replacement and service
warranties) and indemnities relating to the Specified Products. Parent's
relationship with NCR is significant to its business, financial condition and
results of operations. A significant reduction in sales to NCR may have a
material adverse effect on Parent's future business, financial condition and
results of operations.
Parent's sales outside of France are made directly by Parent and by
distributors and agents and are subject to certain risks common to all export
activities such as governmental regulation and the risk of imposition of
tariffs or other trade barriers. However, a majority of Parent's sales are
denominated in U.S. Dollars and, thus, are not subject to the risk of currency
fluctuations. Parent reviews potential foreign currency risks on an ongoing
basis and uses forward foreign exchange contracts to minimize currency
exposure.
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<PAGE>
BACKLOG
Most of Parent's customers purchase products from Parent under purchase
orders that specify prices for particular quantities and anticipated release
dates ranging up to ten months. The total backlog under such purchase orders
was approximately $26.0 million as of March 31, 1997, compared to approximately
$25.2 million as of March 31, 1996. Parent's backlog is generally subject to
cancellation or rescheduling by the customer on short notice with little or no
penalty. Accordingly, Parent's backlog as of any particular date may not
necessarily be indicative of actual sales for any future period.
MANUFACTURING AND SUPPLIERS
Parent manufactures all of its thermal printheads, and direct thermal
mechanisms in Puiseaux, France. Parent manufactures substantially all of its
transaction printers in Ithaca, New York. Manufacturing outside the country in
which the customer is located is subject to certain risks, including
transportation delays and interruptions, the imposition of tariffs and export
control and changes in governmental policies.
Parent manufactures its products in high volume and to exacting quality
standards. Accordingly, Parent maintains an extensive quality assurance
program, including computerized final testing of all printheads, transaction
printers and mechanisms.
At the end of 1995 and into 1996, Parent experienced severe disruption of its
thermal head clean room output due to water damage caused by a subcontracting
company performing routine maintenance work. In 1996, Parent received insurance
proceeds of $1.0 million to compensate for the loss of revenue and commercial
damage. There can be no assurance that incidents of this nature will not occur
in the future or that such incidents will be adequately covered by insurance.
Component parts used in the assembly of Parent's products, most of which use
tooling designed and owned by Parent, are purchased primarily from suppliers in
the U.S., the Far East and Europe. Although Parent has more than one vendor
available for most parts, some parts are available only from a single vendor.
Additionally, Parent will often initially rely on one single manufacturer for
its supply of parts for newly developed products. If such a product becomes
viable in the market, Parent then attempts to qualify additional
vendors/manufacturers to supply such parts. An interruption in supply of a
component part which is only available from a single vendor or manufacturer
could temporarily result in Parent's inability to deliver products containing
such a component part on a timely basis, which in turn could adversely affect
Parent's results of operations.
PATENTS AND LICENSES
Parent holds various French, U.S. and other foreign patents on thermal
printheads, transaction printers and printing mechanisms and has applied for
additional domestic and foreign patents. The basic technology for Parent's
products is based upon these patents and manufacturing expertise. There can be
no assurance that any issued patents will provide Parent with competitive
advantages or will not be challenged by third parties, or that the patents of
other individuals or entities will not have an adverse effect on Parent's
ability to do business, or that other individuals or entities will not
independently develop similar products, duplicate Parent's products, engage in
"reverse engineering" or otherwise design around the patents issued to Parent.
COMPETITION
Several thermal printing mechanism manufacturers compete directly with Parent
in the high performance segment of the transaction printer and thermal printing
mechanism market, and Parent's customers have the option of buying a
competitor's thermal printheads or designing and manufacturing their own
printers and printing mechanisms. The principal competitive factors in the
transaction printer and thermal printing mechanism market are technological
expertise and the ability to deliver reliable and cost-effective products on a
timely basis. Parent believes that it successfully competes on each of these
bases.
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There are numerous small and large competitors in the transaction printing
market. Large, typically Japanese, manufacturers dominate the low cost segment
of the market. Parent believes it has been successful in the intermediate to
high cost segment of the market due to Parent's ability to provide application-
specific products for its customers within relatively short production and
delivery schedules.
PRODUCT DEVELOPMENT
Parent believes it is a leader in the development of both printing mechanisms
and thermal printing technology. Parent's product development activities are
targeted at both existing and new applications. A variety of engineering skills
are required in the development of Parent's products, and Parent maintains
expertise in mechanical, electrical, hardware and software engineering
disciplines relating to printing mechanisms and thermal printing. As of March
31, 1997, Parent employed 76 individuals dedicated to research and development.
For the period ended March 31, 1997, and the years ended December 31, 1996 and
1995, Parent spent approximately $1.7 million, $6.6 million and $5.8 million,
respectively, for research and development of new and existing products.
EMPLOYEES
As of March 31, 1997, Parent and its subsidiaries had 547 full-time
employees.
LITIGATION
From time to time, Parent is involved in litigation incidental to its
business. In the opinion of Parent, no litigation to which it is currently a
party is likely to have a material adverse effect on Parent's business,
financial condition, results of operations or cash flows.
PROPERTIES
Parent has two manufacturing plants in France with an aggregate total area of
approximately 100,000 square feet.
The Montrouge (a suburb of Paris) facility (approximately 25,000 square feet)
serves as the corporate headquarters of Parent and is the center for Parent's
research and development efforts. Parent has recently negotiated a new lease
for the Montrouge facility. The term of the new lease will commence in July of
1997 and terminate in June of 2006. Consistent with French law, Parent has an
opportunity to terminate the lease relating to the Montrouge facility at three
year intervals from commencement of the term of the lease (i.e., in June of
2000, 2003 and 2006), with no penalty.
The Puiseaux (80 kilometers south of Paris) facility (approximately 75,000
square feet) is the location of Parent's printer assembly lines. Parent
occupies the Puiseaux facility pursuant to a capitalized lease. The Puiseaux
facility also contains a "clean room" for printhead manufacturing. The term of
the capitalized lease commenced in 1995 and will be fully paid in 2010.
A wholly owned subsidiary of Parent, IPB, owns a manufacturing plant in the
U.S. which is located on a 66 acre parcel of land in Ithaca, New York. The
Ithaca facility includes two structures, a 265,000 square foot building which
serves as both the manufacturing facility and an office building (the "Main
Building") and a 5,000 square foot building used for storage and as an
additional office building. The Main Building contains approximately 180,000
square feet of space dedicated to manufacturing and 85,000 square feet of space
dedicated to use as offices.
In addition, Parent has sales offices located in Baesweiler (Aachen,
Germany), Taipei (Taiwan), Tokyo (Japan) and several locations in the U.S.
Parent believes that its existing facilities are suitable and adequate for
its current operations and future growth.
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<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of Parent are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Patrick Dupuy.......................... 44 Chairman and Director
Gilles Gibier.......................... 43 Director
Jean-George Huglin..................... 42 Chief Financial Officer and Director
Bernard Patry.......................... 45 Vice President of Sales and Director
Nicolas Dourassof...................... 42 Director
Gonzague de Blignieres................. 41 Director
</TABLE>
Mr. Dupuy has served as a director and the Chairman of Parent since 1988.
Since 1988, Mr. Dupuy has also been a Co-Chairman and a fifty-percent
shareholder of Dardel Technologies, S.A., a French holding company and a
principal shareholder of Parent ("Dardel"). Mr. Dupuy is also a director and
the President of Purchaser.
Mr. Gibier has served as a director of Parent since 1988. Since 1988, Mr.
Gibier has also been a Co-Chairman and a fifty-percent shareholder of Dardel.
Mr. Gibier is also a director and the Secretary and Treasurer of Purchaser.
Mr. Huglin has served as a director of Parent since 1988. Mr. Huglin is
currently the Chief Financial Officer of Parent, a position he has held since
June of 1995. Prior to joining Parent, Mr. Huglin held the position of Chief
Financial Officer of Dardel since September 1992. Between May 1992 and
September 1992, Mr. Huglin served as the Managing Director of Enerdis, S.A.
("Enerdis"), a manufacturer of measuring equipment which is owned by Dardel.
Mr. Patry has served as a director of Parent since 1988. Mr. Patry is
currently the Vice President of Sales of Parent, a position he has held since
1996. From 1991 to 1995, Mr. Patry was the Chief Executive Officer of Parent
and from 1995 to 1996, he was Vice President of Marketing and Business
Development of Parent.
Mr. Dourassof has served as a director of Parent since 1996. Mr. Dourassof
is currently a Managing Director of ABN AMRO Investissement, the investment
subsidiary of ABN AMRO (a Dutch bank), a position he has held since 1996.
Prior to joining ABN AMRO Investissement, Mr. Dourassof had served as the
Director of the Acquisition Financing Department of Banque de Neuflize,
Schlumberger Mallet (NSM), a subsidiary of ABN AMRO, since 1995. Prior to
joining Banque de Neuflize, Mr. Dourassof commanded Alcyon, Commandant Jacques
Cousteau's second ship, for which Mr. Dourassof served as designer and
architect. Prior to 1995, Mr. Dourassof attended business school and served as
a Naval architect.
Mr. de Blignieres has served as a director of Parent since 1996. Mr. de
Blignieres is currently the General Manager of Barclay's Capital Development,
an investment subsidiary of Barclay's, a position he has held since 1992.
Following the Offer, the Axiohm Exchange, the Acquisition of Purchaser and
the Merger, an aggregate of approximately 51% to 55% of Target's outstanding
Common Stock will be beneficially owned by Messrs. Dupuy and Gibier and an
aggregate of approximately 60% to 65% will be beneficially owned by Parents'
executive officers and directors as a group (depending on the actual number of
Shares purchased pursuant to the Offer and the actual number of Exchange
Shares transferred by Purchaser in the Axiohm Exchange and assuming no
exercise of outstanding options or warrants to purchase shares of Target's
Common Stock).
CERTAIN TRANSACTIONS
Dardel, which is owned by Messrs. Dupuy and Gibier (officers and directors
of Parent), owns approximately 44% of the voting stock of Parent. Dardel
provides services to Parent, including insurance coverage, telecommunications
and legal and management assistance. Parent paid an aggregate of $991,000 and
$995,000 to Dardel for such services in 1996 and 1995, respectively. Dardel
also subleases to Parent office space which Dardel leases from La Noire
(defined below). Parent made an aggregate of $279,000 and $291,000 in sublease
payments to Dardel in 1996 and 1995, respectively. Parent believes that the
terms of such transactions approximate those of an arm's length transaction
with an unrelated party.
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<PAGE>
SNC La Noire ("La Noire"), which is owned by Messrs. Dupuy, Gibier and Huglin
(officers and directors of Parent), provides real estate and office management
services to Parent. Parent paid an aggregate of $542,000 and $579,000 to La
Noire for such services in 1996 and 1995, respectively. Parent believes that
the terms of such transactions approximate those of an arm's length transaction
with an unrelated party.
In 1996, Parent participated in a cash pooling arrangement with Dardel which
allowed each company to borrow or loan cash as considered necessary. At
December 31, 1996, Parent had an outstanding loan to Dardel amounting to $1.8
million and bearing interest at 6.42%. This loan was repaid by Dardel in April
1997 and the cash pooling arrangement has been terminated.
FINANCIAL STATEMENTS
As a private company, Parent is not subject to the information reporting
requirements of the Exchange Act, and, accordingly, does not file reports or
other information with the Commission relating to its business, financial
condition and other matters. As a result, such information has not generally
been available to the public.
Set forth below is certain selected historical consolidated financial data
relating to Parent and its subsidiaries for the fiscal years ended December 31,
1996 and 1995. The historical consolidated financial data for the fiscal years
ended December 31, 1996 and 1995 have been derived from Parent's audited
financial statements and the notes thereto included as Annex B to this Offer to
Purchase. The consolidated financial statements for the years ended December
31, 1996 and 1995 have been prepared in accordance with U.S. generally accepted
accounting principles ("US GAAP").
The information set forth below should be read in conjunction with, and is
qualified in its entirety by, Parent's Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Audited Consolidated
Financial Statements and the Notes thereto appearing in Annex B to this Offer
to Purchase.
AXIOHM S.A.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1995
(1) (1)
------- -------
<S> <C> <C>
INCOME STATEMENT DATA:
Revenue....................................................... $95,302 $72,155
Costs and expenses
Costs of products sold....................................... (66,390) (52,202)
Selling, general and administrative.......................... (10,972) (8,807)
Research and development..................................... (6,648) (5,836)
Goodwill amortization........................................ (200) (161)
------- -------
Income from operations........................................ 11,092 5,149
Interest expense, net......................................... (874) (1,731)
Other income (expenses), net.................................. 992 (393)
------- -------
Income before income taxes.................................... 11,210 3,025
Provision for income taxes.................................... (4,406) (1,095)
Net income.................................................... 6,804 1,930
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
------- -------
<S> <C> <C>
BALANCE SHEET DATA (2):
Current assets................................................. $29,577 $26,277
Total assets................................................... 43,978 40,184
Current liabilities............................................ 15,505 13,564
Long-term debt (less current maturities)....................... 8,210 17,349
Shareholders' equity........................................... 16,433 5,977
</TABLE>
- --------
(1) Derived from Parent's audited Consolidated Financial Statements prepared in
accordance with US GAAP.
(2) Derived from Parent's audited Consolidated Financial Statements prepared in
accordance with US GAAP, by adding the following captions of the
Consolidated Balance Sheet: long-term debt, capital lease and financial
obligations and Government grant obligations.
25
<PAGE>
Parent's Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of Parent attached as
Annex B to this Offer to Purchase. The following discussion and analysis is
based on the financial condition and results of operations of Parent and its
subsidiaries on a stand-alone basis. Following the consummation of the Offer,
the Axiohm Exchange, the Acquisition of Purchaser and the Merger, Parent will
be a subsidiary of Target and therefore the historical information relating to
Parent may not be indicative of the future financial condition or results of
operations of Parent. See "The Offer--Operations after the Offer, the Axiohm
Exchange, the Acquisition of Purchaser and the Merger".
Certain statements contained in this Offer to Purchase, such as those
concerning Parent's business strategy, capital requirements and other
statements regarding matters that are not historical facts are forward-looking
statements (as such term is defined under the Securities Act). Because such
forward-looking statements include risks and uncertainties, actual results may
differ materially from those expressed in or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to, those discussed below and in "The Offer--
Certain Information Concerning Purchaser and Parent; Relation to Target" and
"The Offer--Operations after the Offer, the Axiohm Exchange, the Acquisition
of Purchaser and the Merger".
Results of Operations. The following table sets forth income statement and
other data as a percentage of Parent's revenue for the fiscal years ended
December 31, 1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Revenue........................................................... 100.0% 100.0%
Cost of products sold............................................. 69.7 72.3
Selling, general and administrative expenses...................... 11.5 12.2
Research and development expenses................................. 7.0 8.1
Income from operations............................................ 11.6 7.1
Income before income taxes........................................ 11.8 4.2
Provision for income taxes........................................ 4.6 1.5
Net income........................................................ 7.1 2.7
</TABLE>
1996 compared to 1995
In 1996, revenue increased to $95.3 million, a 32% increase over 1995
revenue of $72.2 million. Sales of thermal mechanisms increased to $29.0
million in 1996 from $22.1 million in 1995, primarily in the U.S. Sales of
transaction printers increased to $66.3 million in 1996 from $50.1 million in
1995, with NCR Corp. ("NCR") accounting for $49.5 million and $46.3 million of
such sales in 1996 and 1995, respectively.
Gross margin increased to 30.3% of revenue in 1996 from 27.7% in 1995. In
1995, cost of products sold included a non-recurring provision for inventory
obsolescence of approximately $1.0 million related to the 1995 write-off of
components and products dedicated to a customer who filed for bankruptcy
protection. If this provision were excluded, gross margin in 1995 would have
been 29.0% of revenue. The remaining increase in gross margin resulted
primarily from the favorable fluctuation of currency exchange rates on the
cost of products sold through Parent's French operations and a change in the
mix of products sold from 1995 to 1996.
Selling expenses increased to $5.3 million in 1996 from $3.6 million in
1995, primarily as a result of the reinforcement of IPB's sales force after
the acquisition of IPB by Parent. General and administrative expenses
increased to $5.6 million in 1996 from $5.2 million in 1995. In addition,
Parent incurred non-recurring charges of $0.3 million in 1996 and $0.6 million
in 1995 in connection with the transfer of its manufacturing facility to
Puiseaux in France.
26
<PAGE>
Research and development expenses increased to $6.6 million in 1996 from
$5.8 million in 1995. Parent believes that the timely development of new
products and enhancements to its existing products are essential to
maintaining its competitive position. Accordingly, Parent anticipates that
such expenses will continue to increase in absolute dollars. As a part of its
long-term development strategy, Parent maintains on-going policies of
fundamental research to continually improve the basic functions of its
printers and application research to respond to customer requirements and
market opportunities.
Income from operations as a percentage of revenue increased to 11.6% in 1996
from 7.1% in 1995, as a result of the factors described above.
Other income, net of expenses, increased to $1.0 million in 1996 compared to
$0.4 million in net expenses in 1995, as a result of insurance proceeds of
$1.0 million received as compensation for the loss of revenue and commercial
damage caused by water in the thermal head clean room of the Puiseaux
facility.
Net interest expense decreased to $0.9 million in 1996 compared to $1.7
million in 1995, as a result of lower interest rate 1996 compared to 1995 and
the partial repayment of $8.4 million of long-term bank debt.
Income taxes as a percentage of income before taxes increased to 39.3% for
1996 from 36.2% for 1995, principally due to the reduced benefits from the
French research and development tax credit, partially offset by the impact of
non-utilized loss carry forwards in overseas subsidiaries. See Note 12 of
Notes to Consolidated Financial Statements of Parent, included as Annex B to
this Offer to Purchase.
Liquidity and Capital Resources
As of December 31, 1996, Parent had $1.8 million in cash and cash
equivalents, compared to $0.6 million at December 31, 1995. Working capital
increased to $1.7 million at December 31, 1996, from $0.8 million at December
31, 1995.
As of December 31, 1996, Parent had outstanding long-term debt of $10.5
million, including current maturities of $2.3 million. This compares with
outstanding long-term debt of $19.5 million, including current maturities of
$2.2 million, at December 31, 1995. The net decrease of $9.0 million primarily
arose from net repayments of maturing obligations and early repayments of (i)
a $4.3 million bank loan which had been secured by IPB shares, (ii) a $3.0
million bank loan which had been secured by U.S. assets and (iii) five
business loans, totaling $0.5 million.
For 1996, the $1.2 million increase in cash and cash equivalents resulted
primarily from $11.7 million generated from operating activities, the use of
$3.0 million from investing activities and the use of $7.7 million from
financing activities.
The $11.7 million of cash generated by operating activities arose primarily
from $6.8 million of net income, $2.9 million in depreciation and amortization
charges, $0.8 million in working capital and $2.7 million of other non-cash
items. The $3.0 million of cash used in investing activities arose primarily
from the purchase of property and equipment for production and research
activities and the purchase of a MIS system for IPB. The $7.7 million of cash
used in financing activities arose primarily from the repayment of long-term
debt amounting to $8.4 million and a loan repayment to a related party of $1.9
million, offset by the net proceeds of an issuance of common stock received
from two institutional investors and an employee of Parent.
In 1995, Parent negotiated a $1.6 million grant (the "Grant") from various
agencies of the French government to subsidize the purchase and improvement of
certain properties in France. The agreement is structured as a sale/leaseback
transaction in which title to the purchased property was sold to a French
government agency in exchange for a cash payment of $3.2 million and
subsequently leased back to Parent for a fifteen year period. At December 31,
1996, Parent had a contingent liability to repay, in whole or in part, an
27
<PAGE>
aggregate of $1.6 million received under the Grant in the event that Parent
does not meet the requirements of the Grant, which include minimum employment
levels through 1997, minimum capital expenditures and continued use of the
building throughout the lease term.
In connection with the 1994 acquisition of IPB, Parent remains contingently
liable to the seller for up to $5.0 million annually through 1997, based upon
IPB achieving certain sales levels with the seller. Any additional
consideration paid will be treated by Parent as additional acquisition cost.
Foreign Currency
Parent's financial results have been reported in U.S. dollars. The functional
currencies of Parent's subsidiaries are the local currencies where the
subsidiaries operate. Fluctuations in the value of the currencies in which
Parent conducts its business relative to the U.S. Dollar have caused, and will
continue to cause, translated amounts to change in comparison with previous
periods. The French operations of Parent incur a majority of Parent's expenses
in French Francs, while a substantial majority of Parent's revenues are in U.S.
Dollars. Any appreciation in the French Franc relative to the U.S. Dollar
would, absent any effects associated with hedging or currency trading
transactions, detrimentally affect Parent's financial performance. Parent
attempts to limit its exposure to French Franc currency fluctuation compared to
the U.S. Dollar by entering into various financial instruments, including
forward exchange contracts, to offset its French Franc denominated expenses
with associated U.S. Dollar denominated revenue, if, in the opinion of Parent,
to do so would mitigate foreign exchange losses. Parent does not hold or issue
derivative financial instruments for trading purposes. Unrealized gains and
losses on forward contracts to hedge specific future currency transactions are
deferred and recognized against the matching losses and gains on the specific
transactions. Parent cannot predict the effect of exchange rate fluctuations
upon future operating results.
Seasonality
Parent's results of operations may fluctuate from year to year or quarter to
quarter due to a variety of factors. Parent expects lower levels of sales and
profitability during the period from mid-November to the end of December,
impacting the last quarter of each fiscal year. Parent believes that this
seasonality is caused by the fact that most POS providers do not install new
systems in their stores between Thanksgiving and Christmas, so as not to
disturb their sales flow during this heavy selling period.
Relation to Target
Except as set forth in this Offer to Purchase and the Merger Agreement, (a)
there have not been any contracts, transactions or negotiations between
Purchaser, Parent, their respective subsidiaries or, to the best knowledge of
Purchaser or Parent, any of the persons listed in Annex A to this Offer to
Purchase, on the one hand, and Target, Target's affiliate corporations or any
of Target's directors, officers or affiliates, on the other hand, that are
required to be disclosed pursuant to the rules and regulations of the
Commission and (b) none of Purchaser or Parent or, to the best knowledge of
Purchaser and Parent, any of the persons listed in Annex A, has any contract,
arrangement, understanding or relationship with any person with respect to any
securities of Target.
Except as otherwise stated in this Offer to Purchase, to the best of
Purchaser's or Parent's knowledge, none of Purchaser's or Parent's directors,
executive officers or subsidiaries beneficially owns any equity security of
Target, and except as otherwise stated in this Offer to Purchase, neither
Parent nor Purchaser nor, to the best of Purchaser's or Parent's knowledge, any
of the directors, executive officers or subsidiaries of Purchaser or Parent has
effected any transaction in any equity security of Target during the past 60
days.
10.PURPOSE OF THE OFFER, THE AXIOHM EXCHANGE, THE ACQUISITION OF PURCHASER AND
THE MERGER
The purpose of the Offer and the Axiohm Exchange is for Parent's shareholders
to acquire control of, and own an approximately 79% to 85% aggregate equity
interest in Target and for Parent to become a subsidiary of Purchaser. The
purpose of the Acquisition of Purchaser is for Purchaser to become a wholly
owned subsidiary of
28
<PAGE>
Target. The purpose of the Merger is to consolidate Purchaser and Target and
cause Parent to become a subsidiary of Target. The Offer is being made
pursuant to the Merger Agreement. Following completion of the Offer, the
Axiohm Exchange, the Acquisition of Purchaser and the Merger, Target intends
to conduct a detailed review of itself and Parent and their respective
businesses, assets, corporate structure, certificate of incorporation and
bylaws (or equivalent organizational documents), capitalization, operations,
properties, policies, management and personnel and to consider if any changes
would be desirable in light of the circumstances then existing. Target
reserves the right to take such actions or effect such changes as it deems
desirable.
11.OPERATIONS AFTER THE OFFER, THE AXIOHM EXCHANGE, THE ACQUISITION OF
PURCHASER AND THE MERGER
Plans for Target. Following the completion of the Offer, the Axiohm
Exchange, the Acquisition of Purchaser and the Merger, an aggregate of
approximately 51% to 55% of Target's outstanding Common Stock will be
beneficially owned by Messrs. Dupuy and Gibier, principal shareholders and
directors of Parent, and an aggregate of approximately 60% to 65% will be
beneficially owned by Parent's executive officers and directors as a group
(depending on the actual number of Shares purchased pursuant to the Offer and
the actual number of Exchange Shares transferred by Purchaser in the Axiohm
Exchange and assuming no exercise of outstanding options or warrants to
purchase shares of Target's Common Stock). It is expected that, initially
following the completion of the Offer, the Axiohm Exchange, the Acquisition of
Purchaser and the Merger, the business and operations of Target and Parent
will, except as set forth in this Offer to Purchase, be continued by Target
and Parent substantially as they are currently being conducted. However,
Parent will continue to evaluate the business and operations of Target during
the pendency of the Offer and after the consummation of the Offer, the
Exchange Offer, the Acquisition of Purchaser and the Merger, and will take
such actions as it deems appropriate under the circumstances then existing.
Parent intends to seek additional information about Target during this period.
Thereafter, Parent intends to review such information as part of a
comprehensive review of Target's business, operations, capitalization and
management with a view to optimizing exploitation of Target's potential in
conjunction with Parent's businesses.
Management of Parent has developed a strategy designed to, among other
things, consolidate the businesses of Parent and Target in a manner that it is
anticipated will enable the Surviving Corporation (as defined herein) to offer
its customers a wider range of products and better service and selection at a
lower cost, thereby attempting to improve its competitive position. Management
of Parent hopes to be able to generate revenue and cost benefits as a result
of the Merger. However, neither Purchaser, Parent nor Target can predict
whether, or to what extent, the anticipated consolidation will result in any
such revenue or cost benefits.
Except as indicated in this Offer to Purchase, Parent does not have any
present plans or proposals which relate to or will result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving Target or any subsidiary of Target, a sale or transfer of a material
amount of assets of Target or any subsidiary or any material change in
Target's capitalization or dividend policy or any other material changes in
Target's corporate structure or business.
Other than as described herein, Parent does not have any present plans or
proposals which would result in any material changes in Target's management.
See "The Offer--Certain Information Concerning Target" for a description of
new employment agreements which have been entered into between Target and each
of William H. Gibbs, Target's President, Chief Executive Officer and Chairman,
and Walter S. Sobon, Target's Chief Financial Officer, and a description of
employment agreements which Target expects to enter into with Janet Shanks,
Target's Corporate Controller and Chief Accounting Officer, and David Ledwell,
Target's Executive Vice President--Transaction Products, all in connection
with the transactions described in this Offer to Purchase. Following the
Offer, Target has agreed to take all actions necessary to (i) increase the
number of directors on the Target Board from five to seven, (ii) cause one of
the existing directors to resign from the Target Board and (iii) appoint to
the Target Board three individuals selected by Parent, which designees will
include Patrick Dupuy, the President and a director of Parent, and Gilles
Gibier, a director of Parent. Additionally, Target has agreed to cause Messrs.
Dupuy and Gibier to become Co-Chairmen of the Target Board. Following the
completion of the
29
<PAGE>
Offer, the Axiohm Exchange, the Acquisition of Purchaser and the Merger,
Messrs. Dupuy and Gibier will own an aggregate of approximately 51% to 55% of
Target's outstanding Common Stock (depending on the actual number of Shares
purchased pursuant to the Offer and the actual number of Exchange Shares
transferred by Purchaser in the Axiohm Exchange and assuming no exercise of
outstanding options or warrants to purchase shares of Target's Common Stock).
Pro Forma Information. The accompanying Unaudited Pro Forma Combined
Financial Statements are based on the historical financial statements of Target
and Parent after giving effect to the purchase method of accounting and other
Merger related adjustments relating to the Offer, the Axiohm Exchange, the
Acquisition of Purchaser and the Merger as described herein. The Unaudited Pro
Forma Combined Balance Sheet is presented giving effect to the Offer, the
Axiohm Exchange, the Acquisition of Purchaser and Merger as if each had been
consummated on March 31, 1997. The Unaudited Pro Forma Combined Statements of
Income for the year ended December 31, 1996 and the three months ended March
31, 1997 are presented giving effect to the Offer, the Axiohm Exchange, the
Acquisition of Purchaser and Merger as if each had been consummated on January
1, 1996.
Although Target will be the surviving legal entity as a result of the Merger,
the transaction will be treated as a reverse acquisition for accounting
purposes with Parent as the acquiring entity and Target as the acquired entity.
The Unaudited Pro Forma Combined Balance Sheet combines Target with Parent as
of March 31, 1997 and Unaudited Pro Forma Combined Statements of Income for the
year ended December 31, 1996 and the three months ended March 31, 1997 combines
Target with Parent as of January 1, 1996 and January 1, 1997, respectively. The
Unaudited Pro Forma Combined Financial Statements should be read in conjunction
with the Audited Consolidated Financial Statements, including the notes
thereto, of Target in its Annual Report on Form 10-K for the year ended
December 31, 1996 and Parent's Audited Consolidated Financial Statements
included as Annex B to this Offer to Purchase, for the year ended December 31,
1996 and the Unaudited Consolidated Financial Statements, including the notes
thereto, of Target in its Quarterly Report on Form 10-Q for the period ended
March 31, 1997.
The Unaudited Pro Forma Combined Financial Statements are intended for
informational purposes only and are not necessarily indicative of the future
financial position or future results of operations of the combined company that
would have actually occurred had the Merger been in effect as of the date or
the periods presented.
30
<PAGE>
DH TECHNOLOGY, INC. AND AXIOHM S.A.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1997
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
DH
TECHNOLOGY, AXIOHM
INC. S.A. PROFORMA PROFORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
----------- ---------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (in-
cluding short-term investment
securities held to maturity)... $48,812 $ 1,388 $ (50,200)a $ 0
Accounts receivable, net ....... 12,534 12,978 -- 25,512
Inventories..................... 13,101 15,083 -- 28,184
Other........................... 3,108 1,545 -- 4,653
------- ------- --------- --------
Total current assets........... 77,555 30,994 (50,200) 58,349
Property, plant and equipment,
net............................. 8,615 11,459 -- 20,074
Intangible assets................ 5,080 2,555 88,052 b 95,687
Other assets..................... 3,300 521 6,000 a 9,821
------- ------- --------- --------
Total assets................... $94,550 $45,529 $ 43,852 $183,931
======= ======= ========= ========
LIABILITIES AND SHAREHOLDERS' EQ-
UITY
Current liabilities:
Accounts payable................ $ 4,332 $ 7,096 -- $ 11,428
Current portion of long-term
debt and other long-term
obligations.................... 5,420 2,318 -- 7,738
Accrued payroll................. 2,545 -- -- 2,545
Other accrued expenses.......... 3,472 5,598 -- 9,070
Income taxes payable............ 2,329 -- -- 2,329
------- ------- --------- --------
Total current liabilities...... 18,098 15,012 -- 33,110
Long-term debt and other long-
term obligations................ 2,367 11,424 157,275 c 171,066
Deferred taxes................... -- 1,351 -- 1,351
------- ------- --------- --------
Total liabilities.............. 20,465 27,787 157,275 205,527
------- ------- --------- --------
Shareholders' equity (deficit):
Common stock.................... 13,188 3,841 (13,188)d 3,841
Additional paid in capital...... -- 346 24,860 d 25,206
Retained earnings (deficit)..... 60,808 13,702 (125,006)d (50,496)
Foreign currency translation ad-
justment....................... 89 (147) (89)d (147)
------- ------- --------- --------
Total shareholders' equity
(deficit)..................... 74,085 17,742 (113,423) (21,596)
------- ------- --------- --------
Total liabilities and share-
holders' equity (deficit)..... $94,550 $45,529 $ 43,852 $183,931
======= ======= ========= ========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements
31
<PAGE>
DH TECHNOLOGY, INC. AND AXIOHM S.A.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DH
TECHNOLOGY, AXIOHM
INC. S.A. PROFORMA PROFORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales........................ $ 115,784 $95,302 -- $ 211,086
Costs and expenses:
Cost of net sales............... 74,847 66,390 -- 141,237
Selling, general and administra-
tive........................... 15,997 11,172 29,351 e 56,520
Research and development........ 5,805 6,648 12,453
--------- ------- -------- ---------
Total costs and expenses......... 96,649 84,210 29,351 210,210
Income (loss) from operations.... 19,135 11,092 (29,351) 876
Interest income.................. 1,491 992 (2,483)f --
Interest expense................. (149) (874) (15,734)g (16,757)
--------- ------- -------- ---------
Net interest income (expense).... 1,342 118 (18,217) (16,757)
Income (loss) before income tax-
es.............................. 20,477 11,210 (47,568) (15,881)
Income taxes (benefit)........... 7,450 4,406 (6,740)h 5,116
--------- ------- -------- ---------
Net income (loss)................ $ 13,027 $ 6,804 $(40,828) $ (20,997)
========= ======= ======== =========
Net income (loss) per share...... $ 1.56 $ (3.22)
========= =========
Weighted average shares used in
calculation..................... 8,351,000 6,513,000
========= =========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements
32
<PAGE>
DH TECHNOLOGY, INC. AND AXIOHM S.A.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DH
TECHNOLOGY, AXIOHM
INC. S.A. PROFORMA PROFORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales........................ $ 19,185 $24,902 -- $ 44,087
Costs and expenses:
Cost of net sales............... 12,527 17,330 29,857
Selling, general and administra-
tive........................... 3,963 2,860 $ 7,338 e 14,161
In process technology, acquisi-
tion and other charges......... 11,290 -- -- 11,290
Research and development........ 1,451 1,740 -- 3,191
--------- ------- -------- ---------
Total costs and expenses......... 29,231 21,930 7,338 58,499
Income (loss) from operations.... (10,046) 2,972 (7,338) (14,412)
Interest income.................. 421 15 (436)f --
Interest expense................. (40) (273) (3,933)g (4,246)
--------- ------- -------- ---------
Net interest income (expense).... 381 (258) (4,369) (4,246)
Income (loss) before income tax-
es.............................. (9,665) 2,714 (11,707) (18,658)
Income taxes (benefit)........... (1,782) 1,135 (1,617)h (2,264)
--------- ------- -------- ---------
Net income (loss)................ (7,883) 1,579 (10,090) (16,394)
========= ======= ======== =========
Net income (loss) per share...... $ (0.99) $ (2.52)
========= =========
Weighted average shares used in
calculation..................... 7,976,000 6,513,000
========= =========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements
33
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The Unaudited Pro Forma Combined Financial Statements have been prepared
using the following assumptions:
(1) Purchaser acquires 7.0 million shares (87.6%) of Target's outstanding
common stock for $25 per share for approximately $175.0 million.
(2) Target acquires approximately 877,000 outstanding Target options for an
aggregate consideration of $12.3 million.
(3) The purchase price for Target, including the ownership in the Surviving
Corporation represented by the non-tendered shares, based on a per
share price of $25 per share and the cost of acquiring Target employee
options, plus transaction costs of $2.0 million is approximately $214.1
million. The purchase price has been preliminarily allocated to the net
assets (tangible and intangible) and in-process technology of Target
based on the estimated fair values at the date of acquisition with the
excess of cost over fair value of the identifiable tangible and
intangible assets and in-process technology allocated to goodwill.
Goodwill is amortized over three years and the value of in-process
technology will be written off immediately subsequent to consummation
of the Merger.
(4) Following the Offer, Purchaser will effect the Axiohm Exchange in which
it will purchase all of the outstanding capital stock of Parent from
the Parent shareholders in exchange for an aggregate of 5,518,524 of
the Shares which Purchaser is acquiring in this Offer and an aggregate
of $12.2 million in cash. Simultaneously with the closing of the Axiohm
Exchange, Parent, IPB and Target will effect the Acquisition of
Purchaser in which Parent will cause IPB to sell to Target, and Target
will purchase from IPB, all of the outstanding shares of the capital
stock of Purchaser in exchange for Target's assumption, on a joint and
several basis with Purchaser, of any and all obligations with respect
to indebtedness incurred, or preferred stock issued, by Purchaser or
IPB in connection with the Offer and the Axiohm Exchange. Following the
Axiohm Exchange and the Acquisition of Purchaser, Target will effect
the Merger in which Purchaser will be merged with and into Target and
the Target Shares owned by Purchaser (which have not been transferred
in the Axiohm Exchange) will be cancelled. A reconciliation of the
outstanding shares of Target from immediately preceding the Offer to
immediately following the Merger follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Target shares outstand-
ing immediately preced-
ing the Offer.......... 7,994
Shares cancelled in the
Merger................. (1,481)
------
Shares outstanding imme-
diately after the Merg-
er..................... 6,513
======
</TABLE>
(5) The allocation of the purchase price of Target to the fair market value
of net assets acquired is based on preliminary estimates and may change
based on the completion of additional analysis. Specifically, the
allocation of the purchase price to the in-process technology as well
as the potential allocations to other intangible assets and property,
plant and equipment will ultimately be based on a valuation performed
by an independent third party and is very preliminary in nature. In
addition, the estimated life of the resulting goodwill is also
preliminary and based upon further analysis, may also change.
Management of Target anticipates that such analysis will be finalized
within three months following the consummation of the Merger. Based on
the preliminary analysis performed to date, Management expects that the
final purchase price allocation for in-process technology and goodwill
will range from $45.0 million to $55.0 million and $85.0 million to
$95.0 million, respectively. The Unaudited Pro Forma Combined
Statements of Income do not reflect the write-off of the anticipated
$52.0 million of in-process technology which will be recorded in the
financial statements of the combined company immediately following the
consummation of the Merger.
34
<PAGE>
(6) Income taxes have been provided for all applicable adjustments at an
assumed rate of 37% and the amortization of goodwill is not deductible
for tax purposes.
(7) The weighted average shares used in the calculation of the Unaudited
Pro Forma Combined Net Loss per share does not reflect any common stock
equivalents outstanding due to their anti-dilutive effect.
(8)Parent's debt in the amount of $10.0 million will be repaid as a part of
the transaction.
Pro forma adjustments reflect estimates which will be refined as additional
information is obtained.
Pro forma adjustments have been made to the Unaudited Pro Forma Combined
Balance Sheet to reflect the following:
(a)Net adjustment to cash:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
Sources of cash:
Proceeds from issuance of Senior Debt......................... $ 67,275
Proceeds from issuance of Senior Subordinated Notes........... 100,000
--------
Total sources of cash........................................ $167,275
--------
Uses of cash:
Tender Target shares and retire options....................... $187,277
Debt issuance costs........................................... 6,000
Transactions costs............................................ 2,000
Cash payment to Parent shareholders in Axiohm Exchange........ 12,198
Repay existing current and long-term debt of Parent........... 10,000
--------
Total uses of cash........................................... $217,475
--------
Pro Forma adjustment to cash................................... (50,200)
Combined Target and Parent cash prior to Merger............... 50,200
--------
Pro forma cash................................................ $ 0
========
</TABLE>
35
<PAGE>
(b) Excess of the purchase price over the fair value of net assets
acquired, which will be recorded as goodwill to be amortized over three
years as follows:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
Cash tendered for Target shares.............................. $175,000
Cash tendered for Target options............................. 12,277
Cash paid for transaction costs.............................. 2,000
Fair value of non-tendered shares............................ 24,860
--------
Total purchase price.......................................... 214,137
Less fair value of net assets acquired........................ (74,085)
Less estimated purchase price allocated to in-process technol-
ogy.......................................................... (52,000)
--------
Goodwill...................................................... $ 88,052
========
(c) Adjustment to long-term debt:
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
Issuance of new Senior Debt.................................. $ 67,275
Issuance of new Senior Subordinated Debt..................... 100,000
Repay existing current and long-term debt of Parent.......... (10,000)
--------
Pro forma adjustment......................................... $157,275
========
</TABLE>
(d) Elimination of Target Common Stock, historical retained earnings
(including the write-off of the portion of the purchase price allocated
to in-process technology of $52.0 million) and foreign currency
translation equity adjustment, recording of $12.2 million cash payment
to Parent shareholders in the Axiohm Exchange and the non-cash portion
of the purchase price.
Pro Forma adjustments have been made to the Unaudited Pro Forma Combined
Statements of Income to reflect the following (in thousands):
(e) Amortization of goodwill calculated on a straight line basis over three
years.
(f) Since a portion of the acquisition is to be funded by existing cash, a
pro forma adjustment is required to adjust for the interest income
lost. Interest income not earned as a result of the use of cash to
partially fund the transaction was approximately $436,000 and $2.5
million for the three months ended March 31, 1997 and the year ended
December 31, 1996, respectively.
(g) Adjustment to interest expense:
<TABLE>
<CAPTION>
(DOLLARS
IN THOUSANDS)
-------------
<S> <C>
For the year ended December 31, 1996:
Interest expense on historical Parent debt repaid in the Merger.. $ (750)
Interest on the Senior Debt and Senior Subordinated Notes (at an
assumed weighted average interest rate of 9.3%)................. 15,584
Amortization of deferred debt issuance costs..................... 900
-------
Pro forma total adjustment....................................... $15,734
=======
For the three months ended March 31, 1997:
Interest expense on historical Parent debt repaid in the Merger.. $ (188)
Interest on Senior Debt and Senior Subordinated Notes............ 3,896
Amortization of deferred debt issuance costs..................... 225
-------
Pro forma total adjustment....................................... $ 3,933
=======
</TABLE>
A 0.125% increase or decrease in the assumed weighted average interest rate
would change the pro forma interest expense by $209,000. The pro forma net
income would change by $132,000 and pro forma net income per share would
change by $0.02.
(h) Income tax effects of pro forma adjustments.
36
<PAGE>
12.SOURCE AND AMOUNT OF FUNDS
Parent estimates that the total amount of funds required by Purchaser,
Parent and Target to consummate the Offer, the Axiohm Exchange, the
Acquisition of Purchaser and the Merger; to refinance Parent, Purchaser and
Target indebtedness; to retire existing Target stock options; and to pay
related fees and expenses will be $218.6 million. Purchaser and Parent have
agreed to pay the costs and expenses associated with the preparation,
execution and delivery of the Tender Loan Commitment Letter and the Interim
Preferred Stock Commitment Letter (as each such term is defined herein) and
the definitive agreements relating thereto and to indemnify Lehman and certain
of its affiliates (and their respective officers, directors and employees)
against certain liabilities in connection with the Offer Financing and Merger
Financing (as each such term is defined herein). In connection with the
issuance of the commitment letters described herein and the consummation of
the Offer, the Axiohm Exchange, the Acquisition of Purchaser and the Merger,
Parent has agreed to pay Lehman and certain of its affiliates customary fees.
See "The Offer--Fees and Expenses."
The following arrangements have been made to borrow money for the Offer and
finance or repay such borrowings.
Senior Secured Term Loan Facility. Pursuant to the Tender Loan Commitment
Letter, a $175.0 million Senior Secured Term Loan Facility (the "Tender
Facility") by and among Purchaser, as borrower, Parent and each of its direct
and indirect subsidiaries, as guarantors, Lehman Commercial Paper Inc., as
advisor and arranger ("LCPI") and a to be determined financial institution
(selected by the advisor), as administrative agent will provide the funds to
purchase Shares pursuant to the Offer. Funds under the Tender Facility will be
available in an initial draw on the date (in no event later than September 16,
1997) on which Purchaser accepts for payment (pursuant to the terms and
conditions of the Offer) at least 6,500,000 Shares (the "Closing Date") and in
one additional draw of not less than $5.0 million prior to the maturity date.
The loan (the "Tender Loan") under the Tender Facility is repayable on the
earlier of (i) the Effective Time of the Merger (as defined in the Merger
Agreement) or (ii) 45 days after the Closing Date. Purchaser may elect that
all (or any portion) of the Tender Loan bear an interest rate per annum equal
to either the Base Rate (defined below) plus the Applicable Margin (defined
below) or the Eurodollar Rate (defined below) plus the Applicable Margin.
"Applicable Margin" means (a) with respect to an election of the Base Rate
Option, 2.00% and (b) with respect to an election of the Eurodollar Option,
3.00%.
"Base Rate" means the highest of (i) the rate of interest publicly announced
by Citibank, N.A. as its prime rate in effect at its principal office in New
York City (the "Prime Rate"), (ii) the secondary market rate for certificates
of deposit (grossed up for maximum statutory reserve requirements) plus 1% and
(iii) the U.S. federal funds effective rate from time to time plus 0.50%.
"Eurodollar Rate" means the rate (grossed-up for maximum statutory reserve
requirements for eurocurrency liabilities) at which eurodollar deposits for
one month are offered in the interbank eurodollar market.
The obligations of Borrower and Guarantors under the Tender Facility will be
secured by a perfected first priority security interest in substantially all
tangible and intangible assets of each such party, including, without
limitation (a) all of the capital stock of Purchaser and all Shares owned by
Purchaser or any affiliate or designee thereof, whether acquired in the Offer
or otherwise and (b) certain capital stock of all existing subsidiaries of
Parent.
It is currently anticipated that portions of the total commitment under the
Tender Facility may be sold to various participating lenders. It is also
anticipated that documentation relating to the Tender Facility shall contain
representations, warranties, covenants and events of default customary for
financings of this type. The availability of the Tender Facility is subject to
certain conditions, one of which being that Purchaser shall have received
$24.0 million in cash as equity, constituting the proceeds of $24.0 million in
liquidation preference of Cumulative Redeemable Exchangeable Preferred Stock
(the "Interim Preferred Stock") issued and sold by IPB.
37
<PAGE>
Interim Preferred Stock. Pursuant to the Interim Preferred Stock Commitment
Letter, LB I Group Inc. and one or more of its affiliates (the "Interim
Purchasers") have committed to purchase $24.0 million in liquidation
preference of the Interim Preferred Stock. The Interim Preferred Stock
Commitment Letter provides that the commitments of the Interim Purchasers will
terminate upon the earlier of (i) the termination of the Merger Agreement,
(ii) the consummation of the Tender Offer without the issuance of any Interim
Preferred Stock or (iii) September 16, 1997, or if additional information is
requested for compliance under the HSR Act, October 16, 1997.
Funding pursuant to the Interim Preferred Stock Commitment Letter is subject
to certain conditions precedent, including but not limited to: (i) the
definitive financing documentation shall have been executed with respect to
the Tender Facility; (ii) the Board of Directors of Target shall have approved
and recommended the Tender to the shareholders, and such approval and
recommendation shall not have been withdrawn; (iii) Purchaser shall have the
ability to acquire the Minimum Condition concurrently with the purchase of the
Interim Preferred Stock; (iv) no material adverse change shall have occurred
in the consolidated financial condition, results of operations, business,
assets, liabilities, management or value of Parent, IPB, Purchaser, Target or
Surviving Corporation; (v) William Gibbs and Walter Sobon shall have committed
to certain employment arrangements; (vi) an opinion from an independent firm
reasonably satisfactory to the Interim Purchasers attesting to the solvency of
the Parent, Purchaser and the Surviving Corporation shall have been received
and (vii) all material governmental and third party approvals necessary in
connection with the Tender Offer, Axiohm Exchange, Acquisition of Purchaser
and Merger shall have been obtained.
The Interim Preferred Stock is scheduled to be redeemed 180 days from the
date of issuance (the "Scheduled Redemption Date"). IPB shall redeem the
Interim Preferred Stock, however, on the earlier of (a) the Scheduled
Redemption Date or (b) the Closing Date of the Merger. If the Interim
Preferred Stock is not redeemed upon consummation of the Merger, the Interim
Purchasers shall elect either of the following: require the redemption of the
Interim Preferred Stock or exchange the Interim Preferred Stock for Senior
Subordinated Rollover Notes due 2005 (the "Rollover Notes") in an aggregate
principal amount equal to the liquidation preference plus all accumulated and
unpaid dividends of the Interim Preferred Stock so exchanged. The Interim
Preferred Stock Commitment Letter also provides for the issuance, under
certain circumstances of certain warrants to acquire up to 10% of IPB Common
Stock, Parent Common Stock or the Target Common Stock.
Dividends on the Interim Preferred Stock shall accrue at a rate per annum
equal to 11.0% of the liquidation preference thereof and shall be payable, in
cash, quarterly in arrears. All dividends will be cumulative, whether or not
earned or declared, on a daily basis from the date of issuance of the Interim
Preferred Stock.
Senior Subordinated Notes. The Target intends to issue $100.0 million in
aggregate principal amount of Senior Subordinated Notes (as defined in the
Interim Preferred Stock Commitment Letter) with a maturity date of ten years
from the date of issuance at a fixed interest rate to be determined to
refinance a portion of the Tender Facility and the Interim Preferred Stock.
The Senior Subordinated Notes will be general unsecured obligations of the
Target and will be subordinated in right of payment to all current and future
Senior Debt.
The Senior Subordinated Notes will be guaranteed (the "Subsidiary
Guarantees") on a senior subordinated basis by certain of the Target's
Subsidiaries (the "Guarantors"). The Subsidiary Guarantee of each Guarantor
will be subordinated in prior payment in full of all Senior Debt of such
Guarantor.
The Senior Subordinated Notes and the indenture under which the Senior
Subordinated Notes will be issued are expected to contain customary covenants,
events of default, optional redemption and repurchase and other provisions,
which provisions will be negotiated based on prevailing market conditions at
the time of the offering.
The Senior Subordinated Notes are expected to be offered in a private
placement offering that will not be registered under the Securities Act. The
Senior Subordinated Notes may not be offered or sold in the United States
absent registration and applicable exemption from the registration
requirements of the Securities Act. This Offer to Purchase does not constitute
an offer to sell or a solicitation of an offer to buy any of the Senior
Subordinated Notes.
38
<PAGE>
The Offer. Parent estimates that the total amount of funds required to
consummate the Offer, refinance certain existing indebtedness of the Parent,
and pay related fees and expenses will be approximately $188.7 million. Parent
has a commitment from Lehman to finance (i) the purchase of Shares pursuant to
the Offer and (ii) the refinancing of approximately $5.0 million of
indebtedness of Parent and its subsidiaries upon the consummation of the Offer
in an aggregate amount of up to $175.0 million to be obtained under the Tender
Facility and up to $24.0 million to be obtained through the issuance of the
Interim Preferred Stock (collectively the "Offer Financing").
The Axiohm Exchange, Acquisition of Purchaser and Merger. Parent estimates
that the total amount of funds required to consummate the Axiohm Exchange,
Acquisition of Purchaser and Merger, refinance the Offer Financing and certain
existing indebtedness of Purchaser, Parent and Target, retire existing Target
stock options and pay any related fees and expenses to be approximately $218.6
million. Parent will have the funds available to consummate the transactions
described above through the Offer Financing, which is permitted to continue as
the permanent financing, and the cash of Target, but expects to have in place
a Term Loan Facility of up to $70.0 million and a Revolving Credit Facility of
$35.0 million (undrawn at closing) and to have completed a $100.0 million
offering of Senior Subordinated Notes (collectively, the "Merger Financing").
The availability of the Tender Facility is conditioned upon satisfaction of
the following conditions precedent and other conditions precedent customary in
transactions of this kind (which shall occur no later than September 16, 1997,
if there is no second request for information under the HSR Act, or October
16, 1997, if there is a second request): (a) the execution of satisfactory
definitive financing documentation, (b) the Offer shall have been made in
accordance with applicable law and the price per Share offered thereunder
shall not be greater than $25 per share, (c) the Target's Board (consisting of
a majority of the directors holding office as of the date hereof) shall have
approved the Offer and shall have recommended to the shareholders of Target
the acceptance of the Offer, which recommendation shall not have been
withdrawn), (d) the Merger Agreement shall have been entered into and not
modified without LCPI's consent, (e) Purchaser shall have acquired not less
than 6,500,000 and not more than 7,000,000 Shares of Target and there shall
not have been any material change in the number of outstanding shares of
Target, (f) documents filed publicly by Parent, Purchaser and Target in
connection with the Offer and the Merger shall be reasonably satisfactory to
LCPI, (g) Purchaser shall have received $24.0 million in cash from the
proceeds of such amount of Interim Preferred Stock issued and sold by IPB, (h)
there shall be no outstanding indebtedness or liens except as permitted, (i)
the lenders, the administrative agent and LCPI shall have received all fees
and expenses required to be paid, (j) all governmental approvals shall have
been obtained, (k) all actions to perfect liens shall have been taken, (l) the
lenders shall be satisfied that the Offer and the financing thereof complies
with Regulations G, T, U and X of the Board of Governors the Federal Reserve
System, (m) the lenders shall have received satisfactory projected pro forma
balance sheets and certain financial statements, (n) satisfactory lien search
results shall have been received, (o) a satisfactory independent opinion shall
have been received regarding the solvency of the Parent, Purchaser and Target
taken as a whole, (p) Purchaser shall have entered into stock purchase
agreements with the direct and indirect owners of Parent for exchange of 90%
of the outstanding shares of Parent in accordance with the Exchange Offer, (q)
Walter Sobon and William Gibbs shall have entered into arrangements with
Target consistent with Annex B of the Merger Agreement and (r) satisfactory
opinions of legal counsel shall have been delivered. The making of each
extension of credit is conditioned upon all representations and warranties
remaining correct, including that there has been no material adverse change in
the business, assets, property or condition of Parent and its subsidiaries
taken as a whole.
Alternative A Merger Facilities. Upon consummation of the Merger and assuming
the issuance of $100.0 million of Senior Subordinated Notes described above,
LCPI has committed to make available: (a) a five year term loan facility (the
"Tranche A Facility") in an aggregate principal amount of $50.0 million, (b) a
six year term loan facility (the "Tranche B Facility" and, collectively with
the Tranche A Facility, the "Term Loan Facilities") in an aggregate principal
amount of $20.0 million and (c) a revolving credit facility (the "Revolving
Credit Facility" and together with the Term Loan Facilities, the "Alternative
A Merger Facilities") in an
39
<PAGE>
aggregate principal amount of $35.0 million, with a $7.5 million sublimit
available for issuance of letters of credit. Up to $10.0 million of the
Tranche A Facility may be borrowed by Dardel. LCPI has advised Parent and
Target that LCPI expects to syndicate the Alternative A Merger Facilities to a
group of banks and financial institutions.
The proceeds from the Term Loan Facilities, together with the proceeds of
the Senior Subordinated Notes, will be used by Target to (i) refinance all
outstanding loans under the Tender Facility and (ii) fund other costs of the
Offer and the Merger payable on the Merger Date. The proceeds from the
Revolving Credit Facility will be used to finance part of the on-going working
capital requirements and other general corporate purposes of Target.
Amounts outstanding under the Tranche A Facility will be repaid in 20
quarterly installments, the first four of which (each in the principal amount
of $1.0 million) to be due on the last day of each of the first four calendar
quarters after the Merger Date. Subsequent quarterly payments under the Term
Loan Facilities are each in the amount of $2.625 million during the second and
third years after the Merger Date and $3.125 million during the fourth and
fifth years after the Merger Date. Amounts outstanding under the Tranche B
Facility will be repaid in 24 quarterly installments, the first twenty of
which (in the principal amount of $125,000 each) to be due on the last day of
each of the first twenty calendar quarters after the Merger Date. The final
four installments, each in the principal amount of $4.375 million, will be due
on the last day of each quarter during the sixth year after the Merger Date.
The Revolving Credit Facility will mature on the fifth anniversary of the
Merger Date.
Loans under the Term Loan Facilities will be subject to certain mandatory
prepayments including (i) 75% of net proceeds received from any issuance of
Target equity and 100% of the net proceeds of any incurrence of indebtedness
by Target or any of its subsidiaries after the Merger Date, with certain
exceptions, (ii) 100% of proceeds from certain asset sales and (iii) 75% (when
the ratio of Total Debt, as defined, to EBITDA, as defined, is greater than or
equal to 3.00 to 1.00) and 50% (when such ratio is less than 3.00 to 1.00) of
Target's Excess Cash Flow. Mandatory prepayments will be applied first, pro
rata to loans outstanding under the Tranche A Facility and the Tranche B
Facility (pro rata), except that holders of Tranche B Term Loans have the
right to refuse up to 50% of any optional prepayment if Tranche A remains
outstanding, in which event the prepayment shall be allocated to the Tranche A
Term Loans.
The loans outstanding under the Alternative A Merger Facilities will bear
interest, at the Target's option, equal to (i) the Base Rate plus the
Applicable Margin or the Eurodollar Rate (which have the same definitions
given to them in the Tender Facility except that the Eurodollar rate shall be
based on one, two, three or six month periods) plus the Applicable Margin. The
Applicable Margin under the Alternative A Facility means, with respect to Base
Rate Loans, 1.50% in the case of Revolving Credit Loans and Tranche A Term
Loans and 2.00% in the case of Tranche B Term Loans; and, with respect to
Eurodollar Loans, 2.50% in the case of Revolving Credit Loans and Tranche A
Term Loans and 3.00% in the case of Tranche B Term Loans, provided that the
Applicable Margin in respect of Tranche A Loans and Revolving Credit Loans is
subject to downward adjustment from and after the date which is one year after
the Merger Date. A commitment fee of 0.375% is payable on any portion of the
Alternative A Merger Facilities which remain unutilized.
The amount of the Alternative A Merger Facilities allocated among the
Tranche Facilities and the interest rates are subject to change under certain
specified circumstances.
The Alternative A Merger Facilities will be guaranteed, on a joint and
several basis, by all of Target's direct and indirect subsidiaries (except
non-U.S. subsidiaries) and will be secured by a first priority security
interest in, and lien upon, 100% of the capital stock of such subsidiaries
(other than non-U.S. subsidiaries, as to which only 65% of the capital stock
will be pledged) and all tangible and intangible assets of Target and any
Guarantor, except for assets where LCPI determines that the costs of obtaining
the security are disproportionate to the value of the security. Loans to
Dardel will be secured and guaranteed by Target in the above-described manner.
The documentation relating to the Alternative A Merger Facilities will
include representations and warranties, affirmative and negative covenants and
events of default customary in similar financing situations and other terms
deemed appropriate by LCPI.
40
<PAGE>
The availability of the Alternative A Merger Facility is conditioned upon
satisfaction of the following conditions precedent and other conditions
precedent customary in similar financing situations (which satisfaction shall
occur no later than October 16, 1997, if there is no second request for
information made under the HSR Act, or November 16, 1997, if there is a second
request): (a) the execution of definitive financing documentation, (b) the
issuance and sale of $100.0 million of the Senior Subordinated Notes on terms
and conditions satisfactory to LCPI, (c) all obligations of Purchaser and
Target under the Tender Facility shall have been refinanced with the proceeds
of the Alternative A Senior Facilities and the Senior Subordinated Notes, (d)
the Merger shall have been consummated, (e) there shall be no outstanding
indebtedness or liens except as permitted, (f) the Exchange Offer shall have
been consummated and after giving effect to the Exchange Offer and the Merger
Target owns directly or indirectly at least 90% of the stock of Parent, (g)
documents filed publicly by Parent, Purchaser and Target in connection with the
Offer and the Merger shall be reasonably satisfactory to LCPI, (h) the lenders,
the administrative agent and LCPI shall have received all fees and expenses
required to be paid (i) all governmental approvals shall have been obtained,
(j) all actions to perfect liens shall have been taken, (k) satisfactory
insurance is in place, and (l) satisfactory opinions of legal counsel shall
have been delivered. Each extension of credit (including later draws on the
Revolving Credit Facility) is conditioned upon all representations and
warranties being true as of the date of each such extension, including that
there has been no material adverse change in the business, assets, property or
condition of Target and its subsidiaries taken as a whole.
Alternative B Merger Facilities. If the $100.0 million of Senior Subordinated
Notes described below are not issued, upon consummation of the Merger LCPI has
committed to provide the following financing: (a) a five year term loan
facility (the "Tranche A Facility") in an aggregate principal amount of $50.0
million, (b) a six year term loan facility in the aggregate amount of $20.0
million (the "Tranche B Facility"), (c) a seven year term loan facility in the
aggregate principal amount $70.0 million (the "Tranche C Facility," and
together with the Tranche A Facility and the Tranche B Facility, the "Term Loan
Facilities") and (d) a revolving credit facility (the "Revolving Credit
Facility" and together with the Term Loan Facilities, the "Alternative B Merger
Facilities") in an aggregate principal amount of $35.0 million, with a $7.50
million sublimit available for issuance of letters of credit. Up to $10.0
million of the Term Loan Facility may be borrowed by Dardel. LCPI has advised
Parent and Target that LCPI expects to syndicate the Alternative B Merger
Facilities to a group of banks and financial institutions.
The proceeds from the Term Loan Facilities of the Alternative B Merger
Facilities will be used by the Target to (i) refinance all outstanding loans
under the Tender Facility and (ii) fund other costs of the Offer and the Merger
payable on the Merger Date. The proceeds from the Revolving Credit Facility
will be used to finance part of the ongoing working capital requirements and
other general corporate purposes of the Target.
Amounts outstanding under the Tranche A Facility will be repaid in 20
quarterly installments, the first four of which (each in the principal amount
of $1.25 million) to be due on the last day of each of the first four calendar
quarters after the Merger Date. Subsequent quarterly payments under the Term
Loan Facility are each in the amount of $2.5 million during the second and
third years after the Merger Date and $3.125 million for calendar quarters
during the fourth and fifth years after the Merger Date. Amounts outstanding
under the Tranche B Facility will be repaid in 24 quarterly installments, the
first twenty of which (in the principal amount of $125,000 each) are due and
payable on the last day of each of the first twenty quarters after the Merger
Date. The remaining four installments, each in the principal amount of $4.375
million, will be due on the last day of each calendar quarter during the sixth
year after the Merger Date. Amounts outstanding under the Tranche C Facility
will be repaid in 28 quarterly installments, the first twenty-four of which (in
the principal amount of $125,000 each) are due and payable on the last day of
each of the first twenty calendar quarters after the Merger Date. The remaining
four installments, each in the principal amount of $16.75 million, will be due
on the last day of each calendar quarter during the seventh year after the
Merger Date. The Revolving Credit Facility will mature on the fifth anniversary
of the Merger Date.
41
<PAGE>
Loans under the Term Loan Facilities will be subject to certain mandatory
prepayments including (i) 100% of net proceeds received from any issuance of
Target equity or any incurrence of indebtedness by Target or any of its
subsidiaries after the Merger Date, except for certain exceptions including the
issuance of equity or subordinated debt to repay the Rollover Notes described
below (ii) 100% of proceeds from certain asset sales and (iii) 75% Target's
Excess Cash Flow (to be determined in a mutually satisfactory manner).
Mandatory prepayments will be applied first, pro rata to loans outstanding
under the Tranche A Facility, the Tranche B Facility and the Tranche C Facility
(pro rata), except that holders of Tranche B Term Loans and Tranche C Term
Loans have the right to refuse up to 50% of any optional prepayment if Tranche
A remains outstanding, in which event the prepayment shall be allocated to
Tranche A Term Loans.
The loans outstanding under the Alternative B Merger Facilities will bear
interest, at the Target's option, equal to (i) the Base Rate plus the
Applicable Margin or the Eurodollar Rate (which have the same definitions given
to them in the Tender Offer Facility except that the Eurodollar rate shall be
based on one, two, three or six month periods) plus the Applicable Margin. The
Applicable Margin under the Alternative B Merger Facility means, with respect
to Base Rate Loans, 2.00% in the case of Revolving Credit Loans and Tranche A
Term Loans, 2.25% in the case of Tranche B Term Loans and 2.50% in the case of
Tranche C Term Loans; and, with respect to Eurodollar Loans, 3.00% in the case
of Revolving Credit Loans and Tranche A Term Loans, 3.25% in the case of
Tranche B Term Loans and 3.50% in the case of Tranche C Terms loans. A
commitment fee of 0.375% is payable on any portion of the Alternative B Merger
Facilities which remains unutilized.
The amount of the Alternative B Merger Facilities allocated among the Tranche
Facilities and the interest rates are subject to change under certain specified
circumstances.
The Alternative B Merger Facilities will be guaranteed, on a joint and
several basis, by all of Target's direct and indirect subsidiaries (except non-
U.S. subsidiaries) and will be secured by a first priority security interest
in, and lien upon, 100% of the capital stock of such subsidiaries (other than
non-U.S. subsidiaries, as to which only 65% of the capital stock will be
pledged) and all tangible and intangible assets of Target and any Guarantor,
except for assets where LCPI determines that the costs of obtaining the
security are disproportionate to the value of the security. Loans to Dardel
will be secured and guaranteed by Target in the above-described manner.
The documentation relating to the Alternative B Merger Facilities will
include representations and warranties, affirmative and negative covenants and
events of default customary in similar financing situations and other terms
deemed appropriate by LCPI.
The availability of the Alternative B Merger Facilities is conditioned upon
satisfaction of the following conditions precedent and other conditions
precedent customary in similar financing situations (which satisfaction shall
occur no later than October 16, 1997, if there is no second request for
information made under the HSR Act, or November 16, 1997, if there is a second
request): (a) the execution of definitive financing documentation, (b) all
obligations of the Purchaser and Target under the Tender Facility shall have
been refinanced with the proceeds of the Alternative A Senior Facilities and
the Senior Subordinated Notes, (c) the Merger shall have been consummated, (d)
there shall be no outstanding indebtedness or liens except as permitted, (e)
the Exchange Offer shall have been consummated and after giving effect to the
Exchange Offer and the Merger Target owns directly or indirectly at least 90%
of the stock of Parent, (f) documents filed publicly by Parent, Purchaser and
Target in connection with the Offer and the Merger shall be reasonably
satisfactory to LCPI, (g) the lenders, the administrative agent and LCPI shall
have received all fees and expenses required to be paid, (h) all governmental
approvals shall have been obtained, (i) all actions to perfect liens shall have
been taken, (j) satisfactory insurance is in place and (k) satisfactory
opinions of legal counsel shall have been delivered. Each extension of credit
(including later draws on the Revolving Credit Facility) is conditioned upon
all representations and warranties being true as of the date of each such
extension, including that there has been no material adverse change in the
business, assets, property or condition of Target and its subsidiaries taken as
a whole.
42
<PAGE>
The following tables have been prepared by Parent after discussions with
management of Target and set forth the approximate amounts and proposed
sources and uses of funds necessary to consummate the Transactions, assuming
that the Offer closes on August 12, 1997 and the Merger closes on or about
September 18, 1997:
THE OFFER
(IN MILLIONS)
<TABLE>
<S> <C>
SOURCES:
Tender Offer Loan Facilities........................................... $164.7
Interim Preferred Stock................................................ 24.0
------
Total Sources......................................................... $188.7
======
USES (2):
Purchase Shares (1).................................................... $175.0
Pre-funded Interest.................................................... 3.2
Refinance Existing Purchaser Debt...................................... 5.0
Estimated Fees and Expenses............................................ 5.6
------
Total Uses............................................................ $188.7
======
THE AXIOHM EXCHANGE, ACQUISITION OF PURCHASER AND MERGER
(IN MILLIONS)
SOURCES (2):
Cash of Target......................................................... $ 45.9
Refund of Prepaid Interest............................................. 2.6
Term Loan Facilities................................................... 70.0
Senior Subordinated Notes.............................................. 100.0
------
Total Sources......................................................... $218.6
======
USES (2):
Refinance Tender Offer Loan Facilities................................. $164.7
Refinance Interim Preferred Stock...................................... 24.0
Refinance Target Debt.................................................. 2.9
Cashout Target Options................................................. 12.3
Purchaser Share Purchase............................................... 12.2
Estimated Fees and Expenses (3)........................................ 2.4
------
Total Uses............................................................ $218.6
======
</TABLE>
- --------
(1) Assumes that the Maximum Number of Shares is tendered in the Offer.
(2) Sources and Uses totals do not sum due to rounding.
(3) Aggregate estimated fees and costs for the Offer, the Axiohm Exchange, the
Acquisition of Purchaser and the Merger are $8.0 million. See "The Offer--
Fees and Expenses."
43
<PAGE>
13.BACKGROUND OF THE OFFER
On December 6, 1996, William H. Gibbs ("Gibbs") and Patrick Dupuy ("Dupuy"),
a director and the President of Parent had a telephone conversation which
resulted in Dupuy meeting with Endre Varga, the General Manager of Target's
Cognitive Solutions, Inc. facility located in Paso Robles, California (the
"CSI Facility"), to tour the CSI Facility on December 12, 1996. On December
13, 1996, Gibbs and Dupuy met with David Ledwell, Executive Vice President-
Transaction Products of Target ("Ledwell"), to visit Target's plant located in
Tijuana, Mexico (the "Mexico Facility"). On January 9, 1997, in Paris, Gibbs
met with Dupuy and Gilles Gibier, a director of Parent ("Gibier"), where a
decision was made by the representatives of Target and Parent to begin
preparation of plans relating to a potential business combination of Target
and Parent for presentation to their respective Boards of Directors. Between
January 9, 1997 and March 10, 1997, Gibbs, Dupuy and Gibier participated in a
series of conference telephone calls to discuss various business and
accounting issues raised by a potential combination and to coordinate due
diligence with respect to their respective businesses. On March 17, 1997, in
Denver, Colorado, Gibier met with Gibbs to discuss the details of a potential
combination. The Denver meeting was followed by Gibbs and Gibier touring
Target's Stadia Print Facility located in Denver, Colorado, the CSI Facility
and the Mexico Facility on March 18, 19 and 20, 1997, respectively.
On April 2, 1997, at a meeting in New York City, representatives of Target
and Parent continued to discuss the issues raised by alternative structures
for a potential business combination. At this meeting, Gibbs and Walter Sobon
("Sobon"), Target's Chief Financial Officer, also presented Dupuy and Gibier
with a draft confidentiality letter designed to ensure that certain
proprietary information to be exchanged between Target and Parent would be
held in confidence. Although no proprietary information was exchanged at the
April 2, 1997 meeting, the parties discussed projected financial data which
had been prepared by Lehman which projections were based on publicly available
financial data.
At the April 3, 1997 meeting of Target's Board of Directors, Gibbs reported
to Target's Board regarding the discussions between Target and Parent relating
to a potential business combination and the results of the due diligence
review of Parent's business. The report included a discussion of various
approaches to, and structures of, a potential combination.
On April 14, 15 and 16, 1997, in Paris, Sobon met with Dupuy to further
develop a structure for a potential business combination and to discuss the
financial projections relating to possible combined operations of Target and
Parent. The meetings included a tour of Parent's Puiseaux manufacturing
facility.
At the April 24, 1997 meeting of Target's Board of Directors, Gibbs again
reported to Target's Board about the nature of the discussions between Target
and Parent relating to a potential combination and the results of the on-going
due diligence.
On April 25, 1997, at the offices of Lehman in New York City, Gibbs and
Sobon met with Dupuy and Gibier, where options regarding the timing, financing
alternatives and structural issues relating to a potential business
combination were discussed.
At the May 6 and 7, 1997 meeting of Target's Board of Directors, Gibbs again
reported to Target's Board about the nature of the discussions between Target
and Parent relating to a potential combination. A representative of Wilson
Sonsini Goodrich & Rosati, P.C., Target's legal counsel, Dupuy and Gibier also
attended the Board meeting. Representatives of Parent signed the
confidentiality letter originally presented to Parent at the April 2, 1997
meeting in New York City and representatives of Target signed a
confidentiality agreement presented to it by Parent. Dupuy and Gibier made a
presentation to Target's Board outlining certain of the benefits and risks of
a business combination and a potential transaction structure.
Between May 7, 1997 and May 26, 1997, representatives of Target and Parent
and their respective legal counsel participated in a series of conference
telephone calls to discuss alternative transaction structures, due diligence
matters and financing of the proposed combination.
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On May 23, 1997, Target engaged Prudential to render a fairness opinion with
respect to a proposed transaction with Parent.
On May 27 and 28, 1997, Bernard Patry ("Patry"), a Director of Parent, met
with Gibbs, Ledwell, Sobon, and Janet Shanks, Corporate Controller and Chief
Accounting Officer of Target, to discuss Target's business operations. From
May 14 to June 5, 1997, the legal and accounting advisors of Target performed
due diligence on the Parent at Parent's Ithaca, New York and Paris, France
locations. From May 27 to June 5, 1997, the legal and accounting advisors of
Parent performed due diligence on Target at Target's San Diego, California
location.
Target and Parent each continued their respective due diligence
investigations during the month of June 1997. On June 4 and 5, Gibier, Dupuy,
Gibbs and Sobon meet in New York to discuss issues related to a potential
combination and discuss a draft merger agreement. Target's Board received
updates from Gibbs and Sobon throughout the month as to the status of the
negotiations and the results of the on-going due diligence. During the week of
June 23, Gibier, Dupuy, Gibbs and Sobon and their respective legal counsel met
in Chicago to discuss the details of a merger agreement and the financing
related to a potential transaction. Additional meetings and telephone
discussions were held during the weeks of June 30, 1997 and July 5, 1997.
Telephone discussions continued until a formal proposal was presented to
Target's Board on July 13, together with commitment letters with respect to
financing for the transaction.
On July 13-14, 1997, Target's Board met to discuss the proposed terms of the
Merger Agreement and related documents and the financing commitment for the
transaction and to receive a report on the ongoing due diligence review of
Purchaser. Target's Board also received a written opinion from Prudential that
the consideration to be received by the holders of shares of Target's Common
Stock (other than Parent and its affiliates), consisting of cash consideration
to be received by such holders pursuant to the Offer and the shares of Target
Common Stock to be retained by such holders following the consummation of the
Axiohm Exchange, the Acquisition of Purchaser and the Merger, is fair to such
holders from a financial point of view. A copy of the opinion of Prudential is
contained in Target's Solicitation/Recommendation Statement on Schedule 14D-9
filed with the Commission pursuant to the Exchange Act in connection with the
Offer, a copy of which is being furnished to the shareholders by Target.
The contacts described above resulted in the Merger Agreement, Axiohm
Exchange, Acquisition of Purchaser and the Offer and related documents, which
were approved and, in the case of the Offer recommended to Target's
shareholders, at a meeting of the Board of Directors of Target held on July
13-14, 1997.
14.THE MERGER AGREEMENT
A copy of the Merger Agreement is filed as an Exhibit to the Schedule 14D-1
and is incorporated by reference in this Offer to Purchase. Following is a
summary of the Merger Agreement which summary is qualified in its entirety by
reference to the Merger Agreement. For purposes of this Section, all
capitalized terms not defined in this Offer to Purchase shall have the
definitions assigned to them in the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as practicable, but in no event later than five business days
after the initial public announcement of Purchaser's intention to commence the
Offer. The obligation of Purchaser to accept for payment and pay for the
Shares tendered pursuant to the Offer is subject to the satisfaction of (i)
the Minimum Condition prior to the expiration of the Offer and (ii) certain
other conditions described in "The Offer--Certain Conditions of the Offer."
Purchaser expressly reserves the right, in its sole discretion, to increase
the Maximum Number and waive any Offer Condition and make any other changes in
the terms and conditions of the Offer, provided, however that, unless
previously approved by Target in writing, no change may be made which
decreases the Offer Price, changes the form of consideration payable in the
Offer (other than by adding consideration), reduces the Maximum Number,
changes the Minimum Condition, or imposes conditions to the Offer in addition
to those set forth in the Merger Agreement which are adverse to holders of the
Shares. Purchaser may, without the consent of Target, (i) extend the Offer
beyond the scheduled expiration date (the initial scheduled expiration date
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August 12, 1997, if, at the scheduled expiration date of the Offer, any of the
conditions to Purchaser's obligation to accept for payment, and to pay for,
the Shares, shall not be satisfied or waived, (ii) extend the Offer for any
period required by any rule, regulation or interpretation of the Commission or
the staff thereof applicable to the Offer, or (iii) extend the Offer for an
aggregate period of not more than 10 business days beyond the latest
applicable date that would otherwise be permitted under clause (i) or (ii) of
this sentence, if as of such date, all of the conditions to Purchaser's
obligations to accept for payment, and to pay for, the Shares are satisfied or
waived, but the number of Shares validly tendered and not withdrawn pursuant
to the Offer equals at least the Minimum Condition but less than the Maximum
Number of the outstanding Shares; provided, however, that if, on the initial
scheduled expiration date of the Offer, the sole condition remaining
unsatisfied is the failure of the waiting period under the HSR Act, to have
expired or been terminated, then, in either case, Purchaser shall extend the
Offer from time to time until five business days after the expiration or
termination of the applicable waiting period under the HSR Act.
The Axiohm Exchange. Pursuant to the Merger Agreement, as soon as
practicable after the date of the Merger Agreement, Purchaser shall commence
the Axiohm Exchange by seeking to enter into stock purchase agreements
("Axiohm Purchase Agreements") with all holders of Parent Shares (the "Parent
Holders"). Pursuant to the Axiohm Purchase Agreements, Purchaser shall attempt
to purchase from the Parent Holders all Parent Shares held by such Parent
Holders for an aggregate of 5,518,524 Shares of Target Common Stock purchased
by Purchaser in the Offer (the "Exchange Shares") plus an aggregate of
$12,197,900 in cash (the "Exchange Cash") (the Exchange Shares and the
Exchange Cash are hereinafter referred to collectively as the "Exchange
Consideration"). The aggregate value of the Exchange Consideration to be paid
by Purchaser to each Parent Holder shall be in proportion to the percentage of
outstanding Parent Shares which are held by such Parent Holder, provided,
however, that Purchaser reserves the right to vary the relative amount of
Exchange Shares and Exchange Cash to be received by each Parent Holder as a
part of such Exchange Consideration. In the event that at the Axiohm Exchange
Closing (as defined below) Purchaser does not have available the financing
necessary to pay the entire amount of the Exchange Cash to the Parent Holders,
then the aggregate Exchange Cash to be paid by Purchaser shall be reduced to
$4,317,700 and the number of Exchange Shares to be transferred by Purchaser to
the Parent Holders in the Axiohm Exchange shall be increased to an aggregate
of 5,833,732 Shares.
The Merger Agreement provides that, within 45 days after the satisfaction or
waiver of the conditions set forth in the Merger Agreement and immediately
prior to the consummation of the Merger, Purchaser shall cause the Axiohm
Exchange to be consummated.
The Merger Agreement also provides that, as soon as practicable following
the closing of the Axiohm Exchange, Target shall file with the Commission a
registration statement on Form S-3 under the Securities Act relating to the
resale by the Parent Holders of the Exchange Shares and will cause such
registration statement to be continuously effective for a period of not less
than two years.
The Acquisition of Purchaser. Pursuant to the Merger Agreement,
simultaneously with the closing of the Axiohm Exchange, Parent, IPB and Target
shall effect the Acquisition of Purchaser. In such transaction, Target shall
purchase from IPB and Parent shall cause IPB to sell to Target, all of the
outstanding shares of capital stock of Purchaser in exchange for the
assumption by Target, on a joint and several basis with Purchaser, of any and
all obligations with respect to indebtedness incurred, or preferred stock
issued, by Purchaser or IPB in connection with the Offer and the Axiohm
Exchange, which obligations shall not exceed $199.0 million.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement and in accordance with California
law, at the Effective Time, Purchaser shall be merged with and into Target. As
a result of the Merger, the separate corporate existence of Purchaser shall
cease and Target shall continue as the surviving corporation of the Merger
(the "Surviving Corporation"). In the Merger, the name of Target, as the
Surviving Corporation will be changed to Axiohm Inc.
At the Effective Time, by virtue of the Merger and without any action on the
part of Purchaser, Target or the holders of any of the following securities,
(i) each share of Target Common Stock issued and outstanding
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immediately prior to the Effective Time (other than any shares to be cancelled
pursuant to (ii) below) shall remain outstanding; (ii) each share of Target
Common Stock owned by Parent, Purchaser or any other direct or indirect wholly
owned subsidiary of Parent, in each case immediately prior to the Effective
Time but after the consummation of the Axiohm Exchange, shall be cancelled and
retired without any conversion thereof and no payment or distribution shall be
made with respect thereto; and (iii) each share of common, preferred or other
capital stock of Purchaser issued and outstanding immediately prior to the
Effective Time, shall be cancelled, since such shares will, immediately prior
to the Effective Time, be owned by Target.
The Merger Agreement provides that, at the Effective Time, the Articles of
Incorporation of Target will be amended to change the name of the Target to
Axiohm Inc. and, as so amended, will be the Articles of Incorporation of the
Surviving Corporation. The Merger Agreement also provides that the By-laws of
Target, as in effect immediately prior to the Effective Time, will be the By-
laws of the Surviving Corporation. Pursuant to the Merger Agreement, the
directors of Target immediately prior to the Effective Time (which includes
three directors designated by Parent) will be the initial directors of the
Surviving Corporation and the officers of Target immediately prior to the
Effective Time (which include Messrs. Dupuy and Gibier as Co-Chairmen) will be
the initial officers of the Surviving Corporation. See "The Offer--Certain
Information Concerning Target" for a description of new employment agreements
which have been entered into between Target and each of William H. Gibbs,
Target's President, Chief Executive Officer and Chairman, and Walter S. Sobon,
Target's Chief Financial Officer and a description of employment agreements
which Target expects to enter into with Janet Shanks, Target's Corporate
Controller and Chief Accounting Officer, and David Ledwell, Target's Executive
Vice President--Transaction Products, all in connection with the transactions
described in this Offer to Purchase.
Conduct of Target's Business. Pursuant to the Merger Agreement, Target has
covenanted and agreed that, during the period from the date of the Merger
Agreement to the earlier of termination of the Merger Agreement or the
Effective Time, Target will conduct its business and that of its subsidiaries
only in the ordinary course of business consistent with past practice and will
use all reasonable efforts consistent with past practices and policies to
preserve intact its present business organization (including the services of
its existing employees) and preserve its relationships with customers,
suppliers and others having business dealings with it, to the end that its
goodwill and on-going business shall be unimpaired at the Effective Date. By
way of amplification and not limitation, the Merger Agreement provides that
neither Target nor any of its subsidiaries will, without the prior written
consent of the Purchaser:
(a)amend or propose to amend its Articles of Incorporation or By-laws;
(b)(i) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights) except shares of Target Common Stock issuable upon
exercise of Company Outstanding Options (as defined in the Merger
Agreement) or (ii) amend any of the terms of any such securities or
agreements outstanding as of the date of the Merger Agreement, except as
specifically contemplated by the Merger Agreement;
(c)split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock
or property or any combination thereof) in respect of its capital stock, or
redeem or otherwise acquire any of its securities or any securities of
Target's subsidiaries;
(d)(i) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings under existing lines of credit in the
ordinary course of business; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person or entity except in the ordinary
course of business consistent with past practice, and except for
obligations of its wholly owned subsidiaries; (iii) make any loans,
advances or capital contributions to, or investments in, any other person
or entity (other than to its wholly owned subsidiaries or advances to
employees in the ordinary course of business consistent with past practice
and in amounts not material to the maker of such loan or advance); (iv)
pledge or otherwise encumber shares of its capital stock or any of its
subsidiaries; or (v) mortgage or pledge any of its material assets,
tangible or intangible, or create or suffer to exist any material lien
thereupon;
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(e)except as may be required by law or as contemplated by the Merger
Agreement or described on Target's Disclosure Schedule accompanying the
Merger Agreement (the "Target Disclosure Schedule"), enter into, adopt or
amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreement, trust, plan, fund or other arrangement for the benefit
or welfare of any director, officer, employee or former employee or
independent contractor in any manner, or (except for normal increases in
the ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to it and as required under existing agreements) increase in any
manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan and arrangement as in
effect as of the date of the Merger Agreement (including, without
limitation, the granting of stock appreciation rights or performance
units);
(f)acquire, sell, lease, license to others or dispose of any assets
outside the ordinary course of business which individually or in the
aggregate are material to Target or enter into any commitment or
transaction outside the ordinary course of business consistent with past
practice which would be material to Target;
(g)except as may be required as a result of a change in law or in US
GAAP, change any of the accounting principles or practices used by it;
(h)revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or writing-off notes or
accounts receivable other than in the ordinary course of business;
(i)(i) acquire or agree to acquire (by merger, consolidation, acquisition
of stock or assets or otherwise) any corporation, partnership or other
business organization or division thereof or any equity interest therein,
other than as specifically described on the Target Disclosure Schedule;
(ii) enter into any contract or agreement other than in the ordinary course
of business consistent with past practice which would be material to it;
(iii) authorize any new capital expenditure or expenditures which,
individually, is in excess of $250,000 or, in the aggregate, are in excess
of $2,500,000; or (iv) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action that would
be prohibited hereunder;
(j)make any tax election or settle or compromise any income tax liability
material to Target;
(k)pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in, or contemplated
by Company Financial Statements and Company Subsidiaries or incurred in the
ordinary course of business consistent with past practice or customary fees
and expenses relating to the transactions contemplated by the Merger
Agreement;
(l)settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby; or
(m)take, or agree in writing or otherwise to take, any of the actions
described in (a) through (l) above or any action which would make any of
the representations or warranties of Target contained in the Merger
Agreement untrue or incorrect as of the date when made.
Maintenance of Cash by Target. Pursuant to the Merger Agreement, Target has
agreed, from the date of the Merger Agreement until the consummation of the
Offer, to cause approximately $45.0 million to be maintained in its existing
investments and, upon maturity of such investments, to invest such sums in
municipal instruments with a rating of BBB or better (together, the "Target
Investments"). From the consummation of the Offer until the Effective Time,
Target agreed to cause approximately $33.0 million to be maintained in Target
Investments.
Conduct of Parent's Business. The Merger Agreement includes Parent's
covenant that, except as contemplated by the Merger Agreement, during the
period from the date of the Merger Agreement to the earlier
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of termination of the Merger Agreement or the Effective Time, Parent has
agreed to conduct its business and that of its subsidiaries only in the
ordinary course of business consistent with past practice and to use all
reasonable efforts consistent with past practices and policies to preserve
intact its present business organization (including the services of its
existing employees) and preserve its relationships with customers, suppliers
and others having business dealings with it, to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Date. Without limiting
the generality of the foregoing, and except as otherwise expressly provided in
the Merger Agreement, neither Parent nor any of its subsidiaries will, without
the prior written consent of Target:
(a)amend or propose to amend its Articles of Incorporation or By-laws (or
equivalent organizational documents), provided, however, that IPB may amend
its Articles of Incorporation or By-laws in any manner as may be necessary
in connection with the transactions contemplated by the Merger Agreement
and the Financing Letter;
(b)except as contemplated in connection with the Financing, (i) authorize
for issuance, issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class or any other securities or equity equivalents (including, without
limitation, any stock options or stock appreciation rights) except shares
of Common Stock of the Parent issuable upon exercise of the Parent
Outstanding Options or (ii) amend any of the terms of any such securities
or agreements outstanding as of the date of the Merger Agreement, except as
specifically contemplated by the Merger Agreement;
(c)split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock
or property or any combination thereof) in respect of its capital stock, or
redeem or otherwise acquire any of its securities or any securities of
Parent's subsidiaries, except as otherwise contemplated in the Financing
Letter;
(d)except for the Financing contemplated by the Financing Letter, (i)
incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings under existing lines of credit in the
ordinary course of business; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person or entity except in the ordinary
course of business consistent with past practice, and except for
obligations of its wholly owned subsidiaries; (iii) make any loans,
advances or capital contributions to, or investments in, any other person
or entity (other than to its wholly owned subsidiaries or advances to
employees in the ordinary course of business consistent with past practice
and in amounts not material to the maker of such loan or advance); (iv)
pledge or otherwise encumber shares of its capital stock or any of its
subsidiaries; or (v) mortgage or pledge any of its material assets,
tangible or intangible, or create or suffer to exist any material lien
thereupon;
(e)except as may be required by law or as contemplated by the Merger
Agreement or described on the Parent Disclosure Schedule, enter into, adopt
or amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreement, trust, plan, fund or other arrangement for the benefit
or welfare of any director, officer, employee or former employee or
independent contractor in any manner, or (except for normal increases in
the ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to it and as required under existing agreements) increase in any
manner the compensation or fringe benefits of any director, officer or
employee or payany benefit not required by any plan and arrangement as in
effect as of the date hereof (including, without limitation, the granting
of stock appreciation rights or performance units);
(f)acquire, sell, lease, license to others or dispose of any assets
outside the ordinary course of business which individually or in the
aggregate are material to Parent, or enter into any commitment or
transaction outside the ordinary course of business consistent with past
practice which would be material to Parent;
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(g)except as may be required as a result of a change in law or in US
GAAP, change any of the accounting principles or practices used by it;
(h)revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or writing-off notes or
accounts receivable other than in the ordinary course of business;
(i)(i) acquire or agree to acquire (by merger, consolidation, acquisition
of stock or assets or otherwise) any corporation, partnership or other
business organization or division thereof or any equity interest therein,
other than as specifically described on the Parent Disclosure Schedule;
(ii) enter into any contract or agreement other than in the ordinary course
of business consistent with past practice which would be material to it;
(iii) authorize any new capital expenditure or expenditures which,
individually, is in excess of $250,000 or, in the aggregate, are in excess
of $2,500,000; or (iv) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action that would
be prohibited hereunder;
(j)make any tax election or settle or compromise any income tax liability
material to Parent;
(k)except as contemplated in the Financing Letter and the engagement
letter between Parent, Purchaser, IPB, and Lehman, pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge
or satisfaction in the ordinary course of business of liabilities reflected
or reserved against in, or contemplated by the Parent Financial Statements
or incurred in the ordinary course of business consistent with past
practice or customary fees and expenses relating to the transactions
contemplated by the Merger Agreement;
(l)settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby; or
(m)take, or agree in writing or otherwise to take, any of the actions
described in (a) through (l) above or any action which would make any of
the representations or warranties of Parent or Purchaser contained in the
Merger Agreement untrue or incorrect as of the date when made.
Directors. Following the Offer, Target has agreed to take all actions
necessary to (i) increase the number of directors on Target's Board from five
to seven, (ii) cause one of the existing directors to resign from Target's
Board, and (iii) appoint to Target's Board three individuals selected by
Parent, which designees will include Patrick Dupuy, the President and a
director of Parent and Gilles Gibier, the Co-Director of Parent's holding
company. Additionally, Target has agreed to cause Messrs. Dupuy and Gibier to
become Co-Chairmen of Target's Board.
Pursuant to the Merger Agreement, after the election of designees of
Purchaser pursuant to the preceding paragraph and prior to the Effective Time,
any amendment of the Merger Agreement or the Articles of Incorporation or By-
laws of Target, any termination of the Merger Agreement by Target, any
extension by Target of the time for the performance of any of the obligations
or other acts of Purchaser or waiver of any of Target's rights under the
Merger Agreement will require the concurrence of a majority of the directors
of Target then in office who were not designated by Purchaser.
No Solicitation. Target has agreed that it, its affiliates and their
respective officers, directors, employees, representatives and agents (i)
shall cease (and not reopen except as permitted by the Merger Agreement) any
existing discussions or negotiations, if any, with any parties with respect to
any acquisition (other than the transactions contemplated by the Merger
Agreement) of all or any material portion of the assets of, or any equity
interest in, Target or any of its subsidiaries or any business combination
with Target or any of its subsidiaries and (ii) shall not, directly or
indirectly, (A) solicit or initiate discussions, or, except with respect to a
Superior Proposal (as defined below) received by Target, engage in
negotiations with any person or, except with respect to a Superior Proposal
received by Target, take any other action intended, designed or reasonably
likely to facilitate the efforts of any person, other than Parent and
Purchaser, relating to the possible acquisition of Target or any of its
subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise)
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of any material portion of its or their capital stock or assets, (B) except
with respect to a Superior Proposal received by Target, and provided that
Target has required the party submitting the Superior Proposal to execute a
non-disclosure agreement comparable to the one executed by Parent in
connection with the Merger Agreement, provide non-public information with
respect to Target or any of its subsidiaries to any person, other than Parent
and Purchaser, relating to the possible acquisition of Target or any of its
subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any material portion of its or their capital stock or
assets, (C) enter into an agreement with any person, other than Parent and
Purchaser, providing for the possible acquisition of Target or any of its
subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any material portion of its or their capital stock or
assets, (D) except with respect to a Superior Proposal received by Target,
make or authorize any statement, recommendation or solicitation in support of
any possible acquisition of Target or any of its subsidiaries (whether by way
of merger, purchase of capital stock, purchase of assets or otherwise) or any
portion of its or their capital stock or assets by any person, other than by
Parent and Purchaser or withdraw or modify the recommendation by Target's
Board with respect to the Offer, the Merger Agreement, the Exchange Offer, the
Acquisition of Purchaser and the Merger. Notwithstanding the foregoing,
following the receipt of an offer or proposal that Target's Board, in the
exercise of its reasonable good faith judgement, after consultation with its
legal and financial advisors, deems to be a Superior Proposal, Target may
terminate the Merger Agreement (subject to Target's obligations with respect
to the payment of certain fees and expenses described further below) and
accept such Superior Proposal, and Target's Board may approve or recommend
(and, in connection therewith, withdraw or modify its approval and
recommendation of the Offer, the Merger Agreement, the Axiohm Exchange, the
Acquisition of Purchaser and the Merger).
A "Superior Proposal" means a written proposal that has not been solicited
by Target following the date of the Merger Agreement relating to the possible
acquisition of Target or any of the Target Subsidiaries (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise) or any
material portion of its or their capital stock or assets by any person other
than by Parent or Purchaser, which proposal is, in the reasonable good faith
judgment of Target's Board, after consultation with its legal and financial
advisors, on financial and other terms more favorable to the shareholders of
Target than the terms of the Offer, the Axiohm Exchange, the Acquisition of
Purchaser and the Merger, collectively, and which is made by a party that can
reasonably be expected to consummate the transaction on the terms proposed.
The Merger Agreement also provides that if Target or any of its subsidiaries
receives any offer or proposal to enter negotiations relating to any of the
above, Target shall as promptly as practicable, notify Parent or Purchaser
thereof, including information as to the identity of the party making any such
offer or proposal and the specific terms of such offer or proposal, as the
case may be, and provide Parent or Purchaser with the same information (if
any) Target provides to the party making the Superior Proposal.
Target Stock Options. The Merger Agreement provides that the parties will
take all actions with respect to the Company Outstanding Options such that the
Options are treated as follows. Upon acceptance for payment of Shares by
Purchaser pursuant to the Offer, all Vested Company Outstanding Options (as
defined below), other than Company Outstanding Options held by certain
individuals to be designated by Target, subject to the reasonable acceptance
of Parent (the "Designated Optionees"), shall be cancelled and each holder
thereof shall thereupon be paid by Target an amount, in cash, equal to the
product of (i) the number of Shares subject to Vested Company Outstanding
Options held by such holder and (ii) the Offer Price minus the exercise price
applicable to such Vested Company Outstanding Options (the "Option Spread"),
less applicable taxes. The Designated Optionees may elect, as to all or a
portion of the individual's Vested Company Outstanding Options, to be covered
under the preceding sentence or to receive the Option Spread on a deferred
basis over a period not to exceed seven years following the Effective Time,
subject to earlier distribution upon termination of the individual'semployment
for any reason. Target shall also pay a tax subsidy payment on the Option
Spread consisting of (i) a payment to reflect the federal and state tax rate
differential between long-term capital gains and ordinary income, and (ii) a
payment to reimburse the individual for taxes due as a result of the rate
differential payment, provided that tax subsidy payments shall be limited so
as to avoid triggering the golden
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parachute excise tax under Sections 280G and 4999 of the Internal Revenue
Code. For purposes of the foregoing, Vested Company Outstanding Options shall
mean: (i) all Company Outstanding Options that are vested as of the date of
acceptance for payment of Shares by Purchaser pursuant to the Offer or that
would have vested through September 6, 1997; (ii) one-half of Company
Outstanding Options issued to Walter Sobon; and (iii) all warrants outstanding
under Target's Director Warrant Plan.
All Company Outstanding Options other than Vested Company Outstanding
Options ("Unvested Company Outstanding Options") shall remain outstanding and
subject to the terms and conditions of the applicable Target option plan and
option agreement, but shall be modified to provide for full vesting
acceleration in the event the employee's employment is terminated (i) by
Target other than for cause, or (ii) as the result of the employee's death or
disability. Unvested Outstanding Company Options held by William Gibbs, Walter
Sobon, David Ledwell and Janet Shanks shall also be modified to provide for
acceleration upon a constructive termination of employment. In the event
Target engages in a transaction prior to April 1, 2001, as a result of which
Target's Common Stock is no longer registered under the Exchange Act, each
holder of Unvested Company Outstanding Options shall be entitled to receive
from the Company a cash payment equal to the product of (i) the number of
Shares subject to Unvested Company Outstanding Options held by such holder and
(ii) the Offer Price minus the exercise price applicable to such Unvested
Company Outstanding Options, less applicable taxes.
Directors' and Officers' Indemnification. The Merger Agreement provides that
all rights to indemnification for acts or omissions occurring prior to the
Effective Time now existing in favor of the current or former directors or
officers (the "Indemnified Parties") of Target and its subsidiaries as
provided in their respective articles of incorporation or By-laws (or similar
organizational documents) or existing indemnification contracts in the form
filed with the Commission shall survive the Offer, the Axiohm Exchange, the
Acquisition of Purchaser and the Merger and shall continue in full force and
effect in accordance with their terms. Additionally, for six years from the
Effective Time, Target shall use commercially reasonable efforts to maintain
in effect Target's current directors' and officers' liability insurance
covering those persons who are currently covered by Target's directors' and
officers' liability insurance policy; provided, however, that in no event
shall Target be required to expend in any one year an amount in excess of 150%
of the annual premiums currently paid by Target for such insurance and
provided, further, that if the annual premiums of such insurance coverage
exceed such amount, Target shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
The Merger Agreement also provides that the Surviving Corporation shall pay
all expenses, including attorney's fees, that may be incurred by any
Indemnified Party in enforcing the indemnity described above and other
obligations related thereto provided for in the Merger Agreement.
Issuance of Target Warrants and Roll-Over Notes. The Merger Agreement
provides that Target shall, in accordance with the Financing Letter, (A) upon
the closing of the Offer and in accordance with the instructions of Parent,
issue warrants, exercisable into an aggregate of 10% of the outstanding
capital stock of Target (calculated after giving effect to the exercise of
such warrants and all other outstanding warrants, options or other convertible
securities) and containing such other terms and provisions as are contemplated
in the Financing Letter, and to cause such warrants to be placed into an
escrow account until such warrants are released to Lehman Brothers in
accordance with the Financing Letter, and (B) at the Effective Date issue the
Roll-Over Notes contemplated by the Financing Letter, in exchange for the
Interim Preferred Stock, if the Interim Purchasers so elect. See "The Offer--
Source and Amount of Funds."
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations by Target and Parent and Purchaser as to the absence of
certain changes or events concerning the such entity's corporate organization
and qualification, capitalization, authority, filings with the Commission (if
applicable) and other governmental authorities, financial statements,
litigation, employee benefit matters, intellectual property, real property,
taxes, insurance, environmental matters, material contracts and compliance
with law.
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Conditions to Consummation of the Axiohm Exchange. The Merger Agreement
provides that the respective obligations of each party to effect the Axiohm
Exchange shall be subject to the satisfaction at or prior to the Axiohm
Exchange Closing of the following conditions:
(a)No statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any U.S.
federal or state court or governmental authority, or any French national or
provincial court or governmental authority, as the case may be which
prohibits, restrains, enjoins or restricts the consummation of the Axiohm
Exchange;
(b)Any waiting period applicable to the Axiohm Exchange under the HSR Act
and French law, if applicable, shall have terminated or expired;
(c)Purchaser shall own Shares representing at least the Minimum Condition
(whether purchased pursuant to the Offer or otherwise acquired); and
(d)Parent Holders owning at least a majority of the then outstanding
Parent Shares shall have executed and delivered to Purchaser the Axiohm
Purchase Agreements.
Conditions to Consummation of the Acquisition of Purchaser. The Merger
Agreement provides that the respective obligations of each party to effect the
Acquisition of Purchaser shall be subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a)No statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any U.S.
federal or state court or governmental authority, or any French national or
provincial court or governmental authority, as the case may be, which
prohibits, restrains, enjoins or restricts the consummation of the
Acquisition of Purchaser;
(b)Any waiting period applicable to the Acquisition of Purchaser under
the HSR Act and French law, if applicable, shall have terminated or
expired;
(c)Purchaser shall own Shares representing at least the Minimum Condition
(whether purchased pursuant to the Offer or otherwise acquired), less the
Exchange Shares; and
(d)The Axiohm Exchange Closing shall have occurred.
Conditions to Consummation of the Merger. The Merger Agreement provides that
the respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a)No statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any U.S.
federal or state court or governmental authority, or any French national or
provincial court or governmental authority, as the case may be which
prohibits, restrains, enjoins or restricts the consummation of the Merger;
(b)Any waiting period applicable to the Merger under the HSR Act, and
French law, if applicable, shall have terminated or expired;
(c)Purchaser shall own Shares representing at least the Minimum Condition
(whether purchased pursuant to the Offer or otherwise acquired), less the
Exchange Shares;
(d)The Axiohm Exchange shall have been consummated; and
(e)The Acquisition of Purchaser shall have occurred.
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Termination. The Merger Agreement may be terminated and the Axiohm Exchange,
the Acquisition of Purchaser and the Merger may be abandoned at any time prior
to the Effective Time, notwithstanding any approval thereof by the
shareholders of Target:
(a)By mutual written consent of Parent, Purchaser and Target;
(b)By Parent or Target if any court of competent jurisdiction or other
governmental body located or having jurisdiction within the U.S., France or
any country or economic region in which either Target or Parent, directly
or indirectly, has material assets or operations, shall have issued a final
order, decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Offer, the Axiohm Exchange, the
Acquisition of Purchaser or the Merger and such order, decree, ruling or
other action is or shall have become final and nonappealable, except if the
party relying on this clause (b) to terminate the Merger Agreement is in
breach of any of its material obligations under the Merger Agreement;
(c)By Parent if, (i) due to a failure of any of the Offer Conditions,
Purchaser shall have (A) terminated the Offer or (B) failed to pay for
Shares pursuant to the Offer within 60 days (or 90 days if there has been a
second request under the HSR Act) following the date of the Merger
Agreement, unless such termination or failure has been caused by or results
from (x) a breach of any representation or warranty on the part of Parent
or Purchaser contained in the Merger Agreement that has a Material Adverse
Effect on Parent or Purchaser or (y) there shall have been any breach of
any covenant or agreement on the part of Parent or Purchaser contained in
the Merger Agreement that has a Material Adverse Effect on Parent or
Purchaser or (ii) Target's Board shall have withdrawn or modified
(including by amendment of the Schedule 14D-9) in a manner adverse to
Purchaser its approval or recommendation of the Offer, the Merger
Agreement, the Axiohm Exchange, the Acquisition of Purchaser or the Merger
or shall have approved or recommended another offer or transaction, or
shall have resolved to effect any of the foregoing; and
(d)By Target (i) if Purchaser shall not have commenced the Offer within
five days of the date on which Purchaser's intention to make the Offer is
publicly announced; (ii) if the Offer shall not have been consummated
within 60 days (or 90 days if there has been a second request under the HSR
Act) following the date of the Merger Agreement; (iii) if due to a failure
of any of the Offer Conditions, Purchaser shall have terminated the Offer,
unless such termination has been caused by or results from (A) a breach of
any representation or warranty on the part of Target contained in the
Merger Agreement that has a Material Adverse Effect on Target or could
reasonably be expected to materially adversely affect (or materially delay)
the consummation of the Offer or (B) there shall have been any breach of
any covenant or agreement on the part of Target contained in this Agreement
that has a Material Adverse Effect on Target or could reasonably be
expected to materially adversely affect (or materially delay) the
consummation of the Offer; or (iv) in connection with its determination to
pursue a Superior Proposal pursuant to the Merger Agreement; provided that
such termination under clause (iv) shall not be effective until Target has
made payment of the Initial Fee required by the Merger Agreement.
Fees. The Merger Agreement provides that (i) in the event that the Merger
Agreement is terminated pursuant to Section 8.1(d)(iv) thereof (item (d)(iv)
above), Target shall pay to Parent, in same day funds, upon demand, an amount
equal to $2.6 million (the "Initial Fee") and that (ii) in addition to the
Initial Fee, in the event that (x) a proposal with respect to an Acquisition
Transaction (as defined in the Merger Agreement) is commenced by Target,
publicly proposed, publicly disclosed or communicated to Target or any
representative or agent thereof after the date of the Merger Agreement and
prior to the date of termination of the Merger Agreement, (y) the Merger
Agreement is thereafter terminated pursuant to Section 8.1(c) or 8.1(d) (items
(c) and (d) above), and (z) within six months following such termination, an
Acquisition Transaction is consummated or Target enters into an agreement
relating thereto, then, in any such event, Target shall pay Parent, in same
day funds, promptly (but in no event later than one business day after the
first of such events shall have occurred) an additional fee of $3.9 million
(the "Subsequent Fee").
In the event that Target shall fail to pay either the Initial Fee or the
Subsequent Fee, the terms "Initial Fee" and/or "Subsequent Fee" shall be
deemed to include the costs and expenses actually incurred or accrued by
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Parent, Purchaser and their respective shareholders and affiliates (including,
without limitation, fees and expenses of counsel) in connection with the
collection under and enforcement of Section 8.3 of the Merger Agreement,
together with interest on such unpaid Fee, commencing on the date that the
applicable Fee became due.
The Merger Agreement also provides that, in the event that Parent or
Purchaser shall have terminated the Offer due solely to a failure of the
financing condition described in subsection (c) of Annex A to the Merger
Agreement (See "The Offer--Certain Conditions of the Offer") and the failure
of such Offer Condition was not a result, directly or indirectly, of (i) any
event or condition having a Material Adverse Effect on Target or (ii) any
misrepresentation made by any of Parent, Purchaser or IPB to Lehman or its
affiliates which was based upon information provided by Target to Parent,
Purchaser or IPB then Parent shall reimburse Target for the out-of-pocket
expenses incurred by Target in connection with the Merger Agreement and the
transactions contemplated thereby, up to a maximum reimbursement of $1.0
million.
Except as set forth above, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby shall be
paid by the party incurring such expenses, whether or not any such transaction
is consummated.
15.DIVIDENDS AND DISTRIBUTIONS
The Merger Agreement provides that Target shall not, between the date of the
Merger Agreement and the Effective Time, without the prior written consent of
Parent, (a) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities or equity equivalents (including,
without limitation, any stock options or stock appreciation rights) and
(except shares of Target Common Stock issuable upon exercise of outstanding
stock options on the date of the Merger Agreement) or amend any of the terms
of any such securities or agreements outstanding as of the date of the Merger
Agreement, except as specifically contemplated by the Merger Agreement or (b)
split, combine or reclassify any shares of its capital stock, declare, set
aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, or
redeem or otherwise acquire any of its securities or any securities of
Target's subsidiaries.
If on or after the date of the Merger Agreement, Target should (a) split,
combine or otherwise change its Common Stock or its capitalization, (b)
acquire shares of its Common Stock or otherwise cause a reduction in the
number of outstanding shares of its Common Stock, (c) issue or sell additional
shares of its Common Stock (other than shares of its Common Stock issued or
sold upon the exercise of employee stock options outstanding on the date of
the Merger Agreement in accordance with their terms) or shares of its Common
Stock 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, or (d) disclose that it has taken
any such action, then without prejudice to Purchaser's rights under the
provisions of "The Offer--Terms of the Offer, Proration and Expiration Date"
and "The Offer--Certain Conditions of the Offer," Purchaser, in its sole
discretion, may (subject to the provisions of the Merger Agreement) make such
adjustments as it deems appropriate in the Offer Price 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, Target should declare or
pay any cash dividend on the shares of its Common Stock or make any other
distribution on such shares, or issue with respect to such shares of its
Common Stock any additional shares of its Common Stock, 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 shareholders of record on a
date prior to the transfer of the shares of its Common Stock purchased
pursuant to the Offer to Purchaser or its nominee or transferee on Target's
stock transfer records, then, subject to the provisions of "The Offer--Terms
of the Offer, Proration and Expiration Date" and "The Offer--Certain
Conditions of the Offer" below, (a) the Offer Price may (subject to the terms
of the Merger Agreement), in the sole discretion of Purchaser, be reduced by
the amount of any such
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cash dividend or cash distribution and (b) the whole of any such noncash
dividend, distribution or issuance to be received by the tendering
shareholders will (i) be received and held by the tendering shareholders for
the account of Purchaser and will be required to be promptly remitted and
transferred by each tendering shareholder to the Depositary for the account of
Purchaser, accompanied by appropriate documentation of transfer, or (ii) at
the direction of Purchaser, be exercised for the benefit of Purchaser, in
which case the proceeds of such exercise will promptly be remitted to
Purchaser. Pending such remittance and subject to applicable law, Purchaser
will be entitled to all rights and privileges as owner of any such noncash
dividend, distribution, issuance, proceeds or rights and may withhold the
entire Offer Price or deduct from the Offer Price the amount of value thereof,
as determined by Purchaser in its sole discretion.
Target has never paid dividends on its Common Stock nor does it expect to
pay dividends in the foreseeable future.
16.CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-l(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for any Shares
tendered pursuant to the Offer, and may postpone the acceptance for payment
or, subject to the rules and regulations of the Commission, payment for any
Shares tendered pursuant to the Offer, and may amend or terminate the Offer in
accordance with the Merger Agreement if, prior to the expiration of the Offer,
(i) at least 6.5 million Shares shall not have been validly tendered and not
properly withdrawn prior to the expiration of the Offer or (ii) at any time on
or after the date hereof and prior to the acceptance for payment of or payment
for Shares, any one or more of the following conditions occurs or has
occurred:
(a)there shall have been instituted or pending any action or proceeding
brought by any governmental authority before any federal or state court, or
any order or preliminary or permanent injunction entered in any action or
proceeding before any federal or state court or governmental,
administrative or regulatory authority or agency, or any other action
taken, or statute, rule, regulation, legislation, interpretation, judgment
or order enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to Parent, Purchaser, Target or any subsidiary or affiliate of
Purchaser or Target or the Offer, the Axiohm Exchange, the Acquisition of
Purchaser or the Merger, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency that would
reasonably be expected to have the effect of: (i) making illegal,
materially delaying or otherwise directly or indirectly restraining or
prohibiting the making of the Offer, the acceptance for payment of, or
payment for, some of or all the Shares by Purchaser or any of its
affiliates or the consummation of any of the transactions contemplated by
the Merger Agreement or materially delaying the Axiohm Exchange, the
Acquisition of Purchaser or the Merger; (ii) prohibiting or materially
limiting the ownership or operation by Target or any of its subsidiaries
or Parent, Purchaser or any of Parent's affiliates of all or any material
portion of the business or assets of Target or any of its subsidiaries or
Parent, or any of its affiliates, or compelling Parent, Purchaser or any of
Parent's affiliates to dispose of or hold separate all or any material
portion of the business or assets of Target or any of its subsidiaries or
Parent, or any of its affiliates, as a result of the transactions
contemplated by the Offer, the Axiohm Exchange, the Acquisition of
Purchaser or the Merger Agreement; (iii) imposing or confirming limitations
on the ability of Parent, Purchaser or any of Parent's affiliates or
shareholders effectively to acquire or hold or to exercise full rights of
ownership of Shares, including without limitation the right to vote any
Shares acquired or owned by Parent or Purchaser or any of its affiliates or
shareholders on all matters properly presented to the shareholders of
Target, including without limitation the adoption and approval of the
Merger Agreement, the Axiohm Exchange, the Acquisition of Purchaser and the
Merger or the right to vote any shares of capital stock of any subsidiary
directly or indirectly owned by Target; or (iv) requiring divestiture by
Parent or Purchaser or any of their affiliates of any Shares; provided,
that Parent and Purchaser shall have used all reasonable efforts to cause
any such judgment, order or injunction to be vacated or lifted;
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(b)there shall have occurred any event that is reasonably likely to have
a Material Adverse Effect on the Purchaser;
(c)Purchaser shall not have received financing sufficient to acquire the
Maximum Number of the Shares tendered in the Offer (as amended pursuant to
the Merger Agreement) and to pay the anticipated expenses in connection
therewith and with the Axiohm Exchange, the Acquisition of Purchaser and
the Merger;
(d)the Company shall not have taken all actions with respect to the
Company Outstanding Options contemplated by Annex B to the Merger Agreement
or the Executives (as defined in the Merger Agreement) shall not have
executed Option Agreements (as defined in the Merger Agreement);
(e)there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market in the U.S., (ii) a material disruption of
or material adverse change in financial, banking or capital market
conditions in the U.S. or France or a declaration of a banking moratorium
by French, U.S. or New York State banking officials, (iii) a commencement
of a war or armed hostilities or other national or international calamity
directly or indirectly materially adversely affecting (or materially
delaying) the consummation of the Offer or (iv) in the case of any of the
foregoing existing at the time of commencement of the Offer, a material
acceleration or worsening thereof;
(f)(i) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange
Act) of more than 20% of the outstanding Shares has been acquired by any
corporation (including Target or any of its subsidiaries or affiliates),
partnership, person or other entity or group (as defined in Section
13(d)(3) of the Exchange Act), other than Parent or any of its affiliates,
or (ii) (A) Target's Board or any committee thereof shall have withdrawn or
modified in a manner adverse to Parent or Purchaser the approval or
recommendation of the Offer, the Axiohm Exchange, the Acquisition of
Purchaser, the Merger or the Merger Agreement, or approved or recommended
any takeover proposal or any other acquisition of more than 5% of the
outstanding Shares other than the Offer, the Axiohm Exchange, the
Acquisition of Purchaser and the Merger, (B) any corporation, partnership,
person or other entity or group shall have entered into a definitive
agreement or an agreement in principle with Target with respect to a tender
offer or exchange, offer for any Shares or a merger, consolidation or other
business combination with or involving Target or any of its subsidiaries,
or (C) Target's Board or any committee thereof shall have resolved to do
any of the foregoing;
(g)any of the representations and warranties of Target set forth in the
Merger Agreement shall not be true and correct, as if such representations
and warranties were made at the time of such determination, and the failure
of all such representations and warranties, together in their entirety, to
be true and correct has a Material Adverse Effect on Target;
(h)Target shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of Target to be performed or complied with by it under the Merger
Agreement, and (i) Target fails to cure any such failure within ten
business days after written notice from the Purchaser and (ii) the failure
to comply with such agreement or covenant has a Material Adverse Effect on
Target;
(i)the Merger Agreement shall have been terminated in accordance with its
terms or the Offer shall have been terminated with the consent of Target;
or
(j)any waiting periods under the HSR Act applicable to the purchase of
Shares pursuant to the Offer shall not have expired or been terminated, or
any material approval, permit, authorization or consent of any domestic or
foreign governmental, administrative or regulatory agency (federal, state,
local, provincial or otherwise) shall not have been obtained on terms
satisfactory to the Parent in its reasonable discretion and the failure to
obtain such approval, permit, authorization or consent has a Material
Adverse Effect on Target.
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The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition (except for any action or inaction by Purchaser or any of its
affiliates constituting a breach of the Merger Agreement) or may be waived by
Purchaser in whole or in part at any time and from time to time in its sole
discretion (subject to the terms of the Merger Agreement). The failure by
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with respect
to particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances, and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to
time.
17.CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS
General. Except as described in this Section, based on its review of Target,
neither Parent nor Purchaser is aware of any license or regulatory permit that
appears to be material to the business of Target and its subsidiaries, taken
as a whole, that might be adversely affected by Purchaser's acquisition of
Shares (and/or the indirect acquisition of the stock of Target's subsidiaries)
as contemplated herein or of any approval or other action by or with any
domestic, foreign or international government authority or administrative or
regulatory agency that would be required for the acquisition or ownership of
the Shares (and/or the indirect acquisition of the stock of Target's
subsidiaries) by Purchaser. Should any such approval or other action be
required, Purchaser currently contemplates that such approval or other action
will be sought, except as described below under "State Takeover Laws." While,
except as otherwise expressly described in this Section, Purchaser does not
presently intend to delay the acceptance for payment of or payment for Shares
tendered pursuant to the Offer pending the outcome of any such matter, there
can be no assurance that any such approval or other action, if needed, would
be obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to Target's
business or that certain parts of Target's business might not have to be
divested if such approvals were not obtained or such other actions were not
taken, any of which could cause Purchaser to decline to accept for payment or
pay for any Shares tendered. Purchaser's obligations to accept for payment or
pay for the Shares tendered pursuant to the Offer is subject to certain
conditions set forth in this Offer, including the conditions set forth above
in this paragraph and with respect to litigation and governmental action as
contemplated herein. See "The Offer--Certain Conditions of the Offer."
Section 1203 ("Section 1203") California General Corporation Law. Target is
incorporated under the laws of the State of California. Section 1203 provides
that if a tender offer is made to some or all of a corporation's shareholders
by an interested party, an affirmative opinion in writing as to the fairness
of the consideration to the shareholders of that corporation shall be
delivered to the shareholders at the time that the tender offer is first made
in writing to the shareholders. However, if the tender offer is commenced by
publication and tender offer materials are subsequently mailed or otherwise
distributed to the shareholders, the opinion may be omitted in that
publication if the opinion is included in the materials distributed to the
shareholders. For purposes of Section 1203, the term "interested party"
includes, among other things, a person who is a party to the transaction and
(A) directly or indirectly controls the corporation that is the subject of the
tender offer or proposal, (B) is, or is directly or indirectly controlled by,
and officer or director of the subject corporation, or (C) is an entity in
which a material financial interest is held by any director or executive
officer of the subject corporation. While none of Target, Parent or Purchaser
believes that the Offer constitutes a transaction which falls within the
provisions of Section 1203, an independent financial advisor, Prudential, has
been retained by Target to provide a fairness opinion with respect to the
Offer.
State Takeover Laws. Target is incorporated under the laws of the State of
California. A number of states throughout the U.S. have enacted takeover
statutes that purport, in varying degrees, to be applicable to attempts to
acquire securities of corporations that are incorporated or have assets,
shareholders, executive offices or places of business in such states. In Edgar
v. MITE Corp., the Supreme Court of the United States held that the Illinois
Business Takeover Act, which involved state securities laws that made the
takeover of certain corporations more difficult, imposed a substantial burden
on interstate commerce and therefore was unconstitutional. In CTS Corp.
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v. Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining shareholders, provided that such laws were
applicable only under certain conditions.
Target, directly or through subsidiaries, conducts business in a number of
states throughout the U.S., some of which have enacted "takeover" statutes.
Purchaser does not know whether any of these state takeover statutes will, by
their terms, apply to the Offer, the Axiohm Exchange, the Acquisition of
Purchaser or the Merger. Purchaser has not currently complied with any state
takeover statute or regulation. To the extent that certain provisions of these
statutes purport to apply to the Offer, the Axiohm Exchange, the Acquisition
of Purchaser or the Merger, Purchaser believes that there are reasonable bases
for contesting such statutes. Purchaser reserves the right to challenge the
applicability or validity of any state law purportedly applicable to the
Offer, the Axiohm Exchange, the Acquisition of Purchaser or the Merger and
nothing in this Offer to Purchase or any action taken in connection with the
Offer, the Axiohm Exchange, the Acquisition of Purchaser 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, the Axiohm Exchange, the Acquisition of
Purchaser or the Merger and an appropriate court does not determine that such
statute is inapplicable or invalid as applied to the Offer, the Axiohm
Exchange, the Acquisition of Purchaser or the Merger, then Purchaser may be
required to file certain information with, or to receive approvals from, the
relevant state authorities, and Purchaser may be unable to accept for payment
or pay for Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer, the Axiohm Exchange, the Acquisition of Purchaser or
the Merger. In such case Purchaser may not be obliged to accept for payment or
pay for any Shares tendered pursuant to the Offer. See "The Offer--Certain
Conditions of the Offer."
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division and
the FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares by Purchaser pursuant to the Offer is subject to such
requirements. See "The Offer--Acceptance for Payment and Payment."
Pursuant to the HSR Act, on July 16, 1997, Parent filed a Premerger
Notification and Report Form in connection with the purchase of Shares
pursuant to the Offer with the Antitrust Division and the FTC. Under the
provisions of the HSR Act applicable to the Offer, the purchase of Shares
pursuant to the Offer may not be consummated until the expiration of a 15-
calendar day waiting period following the filing by Parent. Accordingly, the
waiting period under the HSR Act applicable to the purchase of Shares pursuant
to the Offer will expire at 11:59 p.m., New York City time, on July 31, 1997,
unless such waiting period is earlier terminated by the FTC and the Antitrust
Division or extended by a request from the FTC or the Antitrust Division for
additional information or documentary material prior to the expiration of the
waiting period. Pursuant to the HSR Act, Parent has requested early
termination of the waiting period applicable to the Offer. There can be no
assurance, however, that the 15-day HSR Act waiting period will be terminated
early. If either the FTC or the Antitrust Division were to request additional
information or documentary material from Parent with respect to the Offer, the
waiting period with respect to the Offer 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. Thereafter, the waiting period could be extended
only by court order. If the acquisition of Shares is delayed pursuant to a
request by the FTC or the Antitrust Division for additional information or
documentary material pursuant to the HSR Act, the Offer may, but need not, be
extended and, in any event, the purchase of and payment for Shares will be
deferred until ten days after the request is substantially complied with,
unless the extended period expires on or before the date when the initial 15-
day period would otherwise have expired, or unless the waiting period is
sooner terminated by the FTC and the Antitrust Division. Only one extension of
such waiting period pursuant to a request for additional information is
authorized by the HSR Act and the rules promulgated thereunder, except 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. See "The
Offer--Withdrawal Rights." It is a condition to the Offer that the
59
<PAGE>
waiting period applicable under the HSR Act to the Offer expire or be
terminated. See "The Offer--Acceptance for Payment and Payment" and "The
Offer--Certain Conditions of the Offer."
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares
by Purchaser pursuant to the Offer. At any time before or after the purchase
of Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase
of Shares pursuant to the Offer or seeking the divestiture of Shares purchased
by Purchaser or the divestiture of substantial assets of Parent, Target or
their respective subsidiaries. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances. Based upon an examination of information available to Parent
relating to the businesses in which Parent, Target and their respective
subsidiaries are engaged, Parent and Purchaser believe that the Offer will not
violate the antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such a
challenge is made, what the result would be. See "The Offer--Certain
Conditions of the Offer," for certain conditions to the Offer, including
conditions with respect to litigation.
Should one or more merger notifications be required in foreign
jurisdictions, they shall be made at the appropriate time if necessary.
18.FEES AND EXPENSES
Purchaser has retained Lehman to act as the Dealer-Manager and to provide
certain financial advisory services in connection with the acquisition of
Target. Parent has agreed to pay Lehman a fee of $1.0 million for such
services. In addition, Target has agreed to reimburse Lehman for all out-of-
pocket expenses incurred by it, including the reasonable fees of its counsel,
and to indemnify Lehman and certain related persons against certain
liabilities and expenses, including certain liabilities under the federal
securities laws. In addition, it is anticipated that an aggregate of
approximately $8.0 million of fees and expenses (including the fees of the
Dealer-Manager) will be incurred by Target in connection with the Offer, the
Axiohm Exchange, the Acquisition of the Purchaser and the Merger. Such amounts
include usual and customary fees for accounting, lending, legal, printing,
appraisal, consulting, and related services, including fees payable to Lehman.
Parent has retained Georgeson & Company Inc. to act as the Information Agent
and The Bank of New York to act as the Depositary. In connection with the
Offer, the Information Agent and the Depositary each will receive reasonable
and customary compensation for its services, will be reimbursed for certain
reasonable out-of-ppocket expenses and will be indemnified against certain
liabilities and expenses in connection therewith, including certain
liabilities under the federal securities laws.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Dealer-Manager and the Information Agent) to
solicit tenders of Shares pursuant to the Offer. Brokers, dealers, commercial
banks and trust companies will be reimbursed by Purchaser upon request for
customary mailing and handling expenses incurred by them in forwarding
material to their customers.
It is estimated that the expenses incurred by Purchaser in connection with
the Offer will be approximately as set forth below:
<TABLE>
<S> <C>
Filing fees...................................................... $ 35,000
Legal Fees and Expenses.......................................... 1,000,000
Accounting Fees and Expenses..................................... 250,000
Investment Banking Fees and Expenses............................. 3,950,000
Depositary and Information Agent Fees and Expenses............... 25,000
Printing and Mailing Fees........................................ 75,000
Miscellaneous.................................................... 265,000
----------
Total.......................................................... $5,600,000
</TABLE>
The above estimate of fees does not include any fees and expenses incurred
by Purchaser or Target in connection with the Axiohm Exchange, the Acquisition
of Purchaser or the Merger. Target will not be responsible or pay for any of
the expenses incurred by Purchaser in connection with the Offer, prior to the
Merger.
60
<PAGE>
19.MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) shareholders residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. Purchaser is not
aware of any jurisdiction in which the making of the Offer or the tender of
Shares in connection therewith would not be in compliance with the laws of
such jurisdiction. If Purchaser becomes aware of any valid state law
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto in such state, Purchaser will make a good faith effort to comply with
any such state statute or seek to have such statute declared inapplicable to
the Offer. If, after such good faith effort, Purchaser cannot comply with any
such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED HEREIN OR IN THE LETTER OF
TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS OFFER
TO PURCHASE NOR ANY PURCHASE PURSUANT TO THE OFFER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF PURCHASER OR TARGET SINCE THE DATE AS OF WHICH INFORMATION IS
FURNISHED OR THE DATE OF THIS OFFER TO PURCHASE.
Purchaser and Parent have filed with the Commission a Schedule 14D-1,
together with exhibits, pursuant to Rule 14d-3 under the Exchange Act that
provides certain additional information with respect to the Offer. In
addition, Target has filed with the Commission a Schedule 14D-9, together with
exhibits, pursuant to Rule 14d-9 under the Exchange Act, setting forth its
recommendation and the recommendations of the members of Target's Board with
respect to the Offer and the reasons for such recommendations and furnishing
certain additional related information. Such Schedules and any amendments
thereto, including exhibits, may be inspected and copies may be obtained from
the Commission in the manner set forth in "The Offer--Certain Information
Concerning Target" (except that they will not be available at the regional
offices of the Commission).
61
<PAGE>
ANNEX A
DIRECTORS AND EXECUTIVE OFFICERS
OF PURCHASER AND PARENT
The name, business address, present principal occupation or employment and
employment history for the five years prior to the date hereof of each of the
directors and executive officers of Purchaser and Parent are set forth below.
All directors and executive officers listed below are citizens of France.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT FIVE YEAR
NAME AND BUSINESS ADDRESS EMPLOYMENT HISTORY
------------------------- --------------------------------------------
<C> <S>
Bernard Patry.............. Mr. Patry has served as a director of Parent since
BP 675-1 a 9, rue d'Arcueil 1988. Mr. Patry is currently the Vice President of
92 542 Montrouge Cedex, Sales of Parent, a position he has held since
France 1996. From 1991 to 1995, Mr. Patry was the Chief
Executive Officer of Parent and from 1995 to 1996,
he was Vice President of Marketing and Business
Development of Parent.
Nicolas Dourassof.......... Mr. Dourassof has served as a director of Parent
23, rue Balzac since 1996. Mr. Dourassof is currently a Managing
75008 Paris, Director of ABN AMRO Investissement, the
France investment subsidiary of ABN AMRO (a Dutch bank),
a position he has held since 1996. Prior to
joining ABN AMRO Investissement, Mr. Dourassof had
served as the Director of the Acquisition
Financing Department of Banque de Neuflize,
Schlumberger Mallet (NSM), subsidiary of ABN AMRO,
since 1995. Prior to joining Banque de Neuflize,
Mr. Dourassof commanded Alcyon, Commandant Jacques
Cousteau's second ship, for which Mr. Dourassof
served as designer and architect. Prior to 1995,
Mr. Dourassof attended business school and served
as a naval architect.
Gonzague de Blignieres..... Mr. de Blignieres has served as a director of
19, avenue de l'Opera Parent since 1996. Mr. de Blignieres is currently
75001 Paris, the General Manager of Barclay's Capital
France Development, an investment subsidiary of
Barclay's, a position he has held since 1992.
Gilles Gibier.............. Mr. Gibier is a director and the Secretary and
BP 675-1 a 9, rue d'Arcueil Treasurer of Purchaser. Mr. Gibier has also served
92 542 Montrouge Cedex, as a director of Parent since 1988. Since 1988,
France Mr. Gibier has also been a Co-Chairman and fifty-
percent shareholder of Dardel Technologies, S.A.,
a French holding company which is a principal
shareholder of Parent.
Jean-George Huglin......... Mr. Huglin has served as a director of Parent
BP 675-1 a 9, rue d'Arcueil since 1988. Mr. Huglin is currently the Chief
92 542 Montrouge Cedex, Financial Officer of Parent, a position he has
France held since June of 1995. Prior to joining Parent,
Mr. Huglin held the position of Chief Financial
Officer of Dardel Technologies, S.A., a French
holding company which is a principal shareholder
of Parent, since September 1992. Between May 1992
and September 1992 Mr. Huglin served as the
Managing Director of Enerdis, S.A., a manufacturer
of measuring equipment which is owned by Dardel.
Patrick Dupuy.............. Mr. Dupuy is a director and the President of
BP 675-1 a 9, rue d'Arcueil Purchaser. Mr. Dupuy has also served as a director
92 542 Montrouge Cedex, and the Chairman of Parent since 1988. Since 1988,
France Mr. Dupuy has also been a Co-Chairman and fifty-
percent shareholder of Dardel Technologies, S.A.,
a French holding company which is a principal
shareholder of Parent.
</TABLE>
A-1
<PAGE>
ANNEX B
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Axiohm S.A.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Axiohm
S.A. and its subsidiaries (the "Company") at December 31, 1996 and 1995 and
the results of their operations and their cash flows for the years then ended
in conformity with United States generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in accordance
with United States generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Price Waterhouse
Paris, June 27, 1997
B-1
<PAGE>
CONSOLIDATED FINANCIAL INFORMATION
AXIOHM S.A.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOTE DECEMBER 31,
---- ---------------
1996 1995
------- -------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................... $ 1,839 $ 636
Accounts receivable, net................................ 2 10,552 9,700
Inventories, net........................................ 3 13,900 13,506
Other current assets.................................... 3,286 2,435
------- -------
Total current assets................................... $29,577 $26,277
Property, plant and equipment, net...................... 4 11,235 11,002
Goodwill................................................ 5 2,606 2,254
Other assets............................................ 560 651
------- -------
Total Assets........................................... $43,978 $40,184
======= =======
CURRENT LIABILITIES:
Accounts payable........................................ $ 7,480 $ 6,675
Bank overdraft.......................................... -- 545
Current portion of long-term debt....................... 7 1,267 1,748
Current portion of financing obligation................. 8 139 84
Current portion of government grant obligations......... 10 916 327
Other current liabilities............................... 6 5,703 4,185
------- -------
Total current liabilities.............................. $15,505 $13,564
Long-term debt.......................................... 7 4,821 13,087
Capital lease and financing obligation.................. 8 1,543 1,662
Government grant obligations............................ 10 1,846 2,600
Deferred income taxes................................... 12 1,557 1,482
Other long-term liabilities............................. 2,273 1,812
------- -------
Total Liabilities...................................... $27,545 $34,207
======= =======
Commitments and contingencies........................... 9
SHAREHOLDERS' EQUITY: 14
Common stock, ordinary shares "A" par value FF 500 at
December 31, 1996 and FF 100 at December 31, 1995;
38,405 shares authorized and
outstanding at December 31, 1996; 38,000 shares
authorized
and outstanding at December 31, 1995
Common stock, ordinary shares "B" par value FF 500,
2,735 shares authorized and outstanding at December 31,
1996................................................... $ 3,841 $ 616
Capital in excess of par value.......................... 326 66
Retained earnings....................................... 12,149 5,434
Foreign currency translation adjustment................. 117 (139)
------- -------
Total Shareholders' Equity............................. $16,433 $ 5,977
======= =======
Total Liabilities and Shareholders' Equity............. $43,978 $40,184
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
B-2
<PAGE>
AXIOHM S.A.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED
NOTE DECEMBER 31,
---- ----------------
1996 1995
------- -------
<S> <C> <C> <C>
Revenue................................................. $95,302 $72,155
Costs and expenses:
Costs of products sold................................. (66,390) (52,202)
Selling, general and administrative.................... (10,972) (8,807)
Research and development............................... (6,648) (5,836)
Goodwill amortization.................................. 5 (200) (161)
------- -------
Total costs and expenses................................ (84,210) (67,006)
Income from operations.................................. 11,092 5,149
Interest expense, net................................... (874) (1,731)
Other income/(expenses), net............................ 992 (393)
------- -------
Income before income taxes.............................. 11,210 3,025
Provision for income taxes.............................. 12 (4,406) (1,095)
------- -------
Net income.............................................. $ 6,804 $ 1,930
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
B-3
<PAGE>
AXIOHM S.A.
CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 6,804 $ 1,930
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 2,921 2,696
Deferred income taxes...................................... 458 (155)
Provision for inventory obsolescence....................... 87 1,040
Provision for long-term liabilities........................ 461 184
Other...................................................... 213 36
Effect on cash of changes in operating assets and liabili-
ties:
(Increase) in accounts receivable.......................... (2,215) (4,659)
(Increase) in inventories.................................. (823) (1,896)
(Increase) in other current assets......................... (517) (248)
Increase in accounts payable............................... 2,700 160
Increase in other current liabilities...................... 1,137 1,371
Increase in income tax payable............................. 618 678
(Decrease) in deferred revenue............................. (107) (130)
------- -------
Net cash provided by operating activities.................. $11,737 $ 1,007
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures....................................... $(3,056) $(2,955)
Proceeds from disposition of property, plant and equipment. 71 53
Other...................................................... (12) (123)
------- -------
Net cash used in investing activities...................... $(2,997) $(3,025)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft............................................. (545) 409
Net borrowings under lines of credit....................... (128) 953
Proceeds from long-term debt............................... -- 1,000
Principal repayments under long-term debt.................. (8,446) (4,992)
Proceeds from government grant............................. 338 2,204
Proceeds from financing arrangements (Note 8).............. -- 1,600
Repayment of government grant.............................. (308) (196)
Principal repayments under financing obligations........... (119) (36)
Payments of dividends...................................... (411) --
Proceeds from stock issuance, net of issuance costs........ 3,807 --
Loans to related parties................................... (1,851) --
------- -------
Net cash used in financing activities........................ $(7,663) $ 942
------- -------
Effect of foreign exchange rate changes on cash and cash
equivalents................................................. $ 126 $ 216
------- -------
Change in cash and cash equivalents.......................... $ 1,203 $ (860)
Cash and cash equivalents at beginning of year............... 636 1,496
------- -------
Cash and cash equivalents at end of year..................... $ 1,839 $ 636
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
CASH PAID DURING THE YEAR FOR:
Interest.................................................... $ 845 $ 1,649
Income taxes, net of refunds................................ 3,245 604
NON-CASH TRANSACTIONS
Capital lease obligation.................................... $ 163 $ 1,750
Accrual for contingent purchase price consideration (Note
9)......................................................... 552 --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
B-4
<PAGE>
AXIOHM S.A.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NUMBER OF SHARES COMMON STOCK
-------------------------------
FOREIGN
CLASS CLASS CAPITAL IN CURRENCY
-------------------------------EXCESS OF RETAINED TRANSLATION
A B A B PAR VALUE EARNINGS ADJUSTMENT TOTAL
-------- --------------- ---------------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1,
1995................... 38,000 -- $ 616 -- $ 66 $ 3,504 $ 116 $ 4,302
Net income.............. -- -- -- -- -- 1,930 -- 1,930
Translation adjustment.. -- -- -- -- -- -- (255) (255)
BALANCE AT DECEMBER 31,
1995................... 38,000 -- $ 616 -- $ 66 $ 5,434 $(139) $ 5,977
Issuance of Common
Stock "A"............... 405 -- 8 -- 489 -- -- 497
Issuance of Common
Stock "B".............. -- 2,735 -- 52 3,297 -- -- 3,349
Stock issuance costs.... -- -- -- -- (39) -- -- (39)
Increases in nominal
value of each share
from FF 100 to FF 500.. -- -- 2,955 210 (3,165) -- -- --
Allocation to non
distributable reserves. -- -- -- -- (322) 322 -- --
Dividends............... -- -- -- -- -- (411) -- (411)
Net income.............. -- -- -- -- -- 6,804 -- 6,804
Translation adjustment.. -- -- -- -- -- -- 256 256
-------- ------- ------- ----- ------ ------- ----- -------
BALANCE AT DECEMBER 31,
1996................... 38,405 2,735 $ 3,579 $ 262 $ 326 $12,149 $ 117 $16,433
======== ======= ======= ===== ====== ======= ===== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
B-5
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
1)DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of business
Axiohm S.A. (the "Company") designs, develops, manufactures and services
printers, printer components and printing systems utilizing thermal and impact
technologies. The Company's customers include major point of sales ("POS")
providers, gasoline pump manufacturers, banking systems suppliers and other
manufacturers of equipment printing slips, tickets or receipts. The Company
operates on a worldwide basis with significant activities in North America and
Europe.
Basis of presentation
The financial statements of the Company include the accounts of its wholly-
owned subsidiaries in the United States, Hong Kong and Japan. All intercompany
accounts and transactions have been eliminated.
These accompanying financial statements have been presented in accordance
with accounting principles generally accepted in the United States of America
("US GAAP").
Use of estimates
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities
as of the date of the consolidated financial statements and the reported
amount of revenue and expenses during the reporting period. Actual results
could differ from estimates.
Goodwill
The Company amortizes costs in excess of the fair value of companies
acquired using the straight line method over a period of fifteen years.
Property, plant and equipment
Property, plant and equipment are recorded at cost and depreciated using the
straight-line method over the following estimated useful lives of the related
assets:
<TABLE>
<S> <C>
Buildings..................................................... 20 or 40 years
Machinery and equipment....................................... 3 to 5 years
Molds and tooling............................................. 3 to 5 years
Furniture and fixtures........................................ 3 to 7 years
Computer software............................................. 1 to 3 years
</TABLE>
Inventories
Inventories are valued at the lower of cost or market, cost being determined
using the first in, first out ("FIFO") method.
Cash and cash equivalents
Cash equivalents consist principally of short term highly liquid money
market funds with original maturities of less than three months.
Revenues
Revenue from product sales is recognized at the time of shipment. Service
revenue is recognized upon completion of the service activity and the shipment
of the repaired product to the customer.
B-6
<PAGE>
AXIOHM S.A.
NOTES TO THE FINANCIAL CONSOLIDATED STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
Research & development expenditures
Research and development expenditures are expensed as incurred. Certain
government research grants, which are repayable in the event that the related
research project proves to be successful, are recognized in income when the
research project has been determined to be unsuccessful and all other
conditions of earning the grant have been met.
Translation of financial statements
The Company's financial results have been reported in U.S. dollars. The
functional currencies of the Company's subsidiaries are the local currencies
where the subsidiaries operate. When translating local currency based
financial statements into U.S. dollars, assets and liabilities are translated
at the year end rate unless hedged by forward foreign exchange contracts, in
which case the rates specified in such forward contracts are used, while
income and expenses are translated using the average rate for the year.
Translation differences are presented as a component of shareholders' equity.
Foreign Currency Hedges
The Company uses forward foreign exchange contracts and options in its
management of currency risks. The Company does not hold or issue derivative
financial instruments for trading purposes. Unrealized gains and losses on
forward contracts to hedge specific future currency transactions are deferred
and recognized against the matching losses and gains on the specific
transactions.
Concentration of credit risk
The Company sells products to various companies across several industries
throughout the world. The Company performs on-going credit evaluations of its
customers and maintains reserves for potential credit losses, and such losses
have been within management's expectations. The Company generally requires no
collateral from its customers.
Income taxes
The Company follows Statement of Financial Accounting Standard No. 109
("SFAS 109"), Accounting for Income Taxes. Under SFAS 109, the tax provision
is determined under the liability method. Under this method deferred tax
assets and liabilities are recognized based on the differences between the
financial statements and the tax basis of assets and liabilities using
presently enacted tax rates. Valuation allowances are established on deferred
tax assets when management estimates that it is more likely than not that some
or all of deferred tax benefits will not be realized.
Government grants and subsidies
Grants received from government agencies for the acquisition of property and
equipment are netted against the related capital expenditure. Grants for
research and development and business investment are deferred and recognized
in earnings if and when the conditions for earning the grant have been met.
Subsidies received for employee training are recognized in earnings during the
period in which the related costs are incurred.
Fair value of financial instruments
At December 31, 1996 and 1995, the carrying amount of the Company's
financial instruments, including cash and cash equivalents, trade receivables
and payables and other accrued liabilities, approximate their fair value due
to their short term maturities. Based on quoted market prices and rates of
interest available to the Company, the carrying amount of its debt instruments
and other long-term liabilities at December 31, 1996 and 1995 also approximate
fair value.
B-7
<PAGE>
AXIOHM S.A.
NOTES TO THE FINANCIAL CONSOLIDATED STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
Profit sharing and retirement indemnity plans
Substantially all Axiohm S.A. employees participate in statutory profit
sharing and retirement indemnity plans. Amounts owed under the profit plan are
based on a formula prescribed by French law. Benefit obligations under the
retirement indemnity plan are determined based on length of service, annual
remuneration and job grade. These obligations and the related compensation
expense are recorded as liabilities in the financial statements during the
period the related benefits are earned.
Postretirement medical plan
Certain employees of the Company's Axiohm IPB subsidiary participate in a
defined benefit post retirement medical plan. The Company's projected benefit
obligation relating to such benefits is calculated and recorded in accordance
with Statement of Financial Accounting Standard No. 106 ("SFAS 106"),
Accounting for Postretirement Benefits.
New Accounting Standards
In March 1995, Statement of Financial Accounting Standards No. 121 ("SFAS
121"), Accounting for the Impairment of Long Lived Assets and for Long Lived
Assets to be disposed of was issued. This statement requires that long lived
assets held and used by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying value of an asset may
not be recoverable. This statement was implemented for the year ended December
31, 1996. The adoption of this accounting standard had no significant impact
on the financial position or results of operations of the Company. The Company
will continually assess impairment of long lived assets and certain
identifiable intangibles whenever changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123 ("SFAS 123") Accounting for Stock-Based
Compensation. This statement defines a fair value based method of accounting
for employee options or similar equity instruments and encourages all entities
to adopt that method of accounting. However, it also allows an entity to
continue to measure compensation costs using the intrinsic value based method
of accounting prescribed by Accounting Principle Board Opinion No. 25 ("APB
25"), Accounting for Stock Issued to Employees. The Company has elected to
account for its employee stock compensation plan under the provisions of APB
25.
2)ACCOUNTS RECEIVABLE, NET
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
------- ------
<S> <C> <C>
Trade accounts receivable...................................... $10,690 $9,838
Less allowance for doubtful accounts........................... (138) (138)
------- ------
Accounts receivable, net....................................... $10,552 $9,700
======= ======
</TABLE>
For the years ended December 31, 1996 and 1995, revenue in the amount of
$49,502 and $46,278, respectively came from sales to NCR (formerly AT&T GIS)
representing approximately 52% and 65%, respectively, of the Company's total
revenue. At December 31, 1996 and 1995, accounts receivable from this customer
were approximately $2,860 and $4,239, respectively. All amounts are due within
one year.
B-8
<PAGE>
AXIOHM S.A.
NOTES TO THE FINANCIAL CONSOLIDATED STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
3)INVENTORIES, NET
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Raw materials and components.................................. $13,345 $11,992
Work in process............................................... 949 2,152
Semi-finished and finished goods.............................. 1,793 1,555
------- -------
16,087 15,699
Less allowance for obsolescence............................... (2,187) (2,193)
------- -------
Inventories, net.............................................. $13,900 $13,506
======= =======
</TABLE>
4)PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Land.......................................................... $ 755 $ 803
Buildings..................................................... 5,355 5,085
Machinery and equipment....................................... 1,797 1,763
Molds and tooling............................................. 6,471 5,788
Furniture, fixtures and fittings.............................. 4,704 3,845
------- -------
19,082 17,284
Less accumulated depreciation................................. (7,847) (6,282)
------- -------
Property, plant and equipment, net............................ $11,235 $11,002
======= =======
Depreciation expense for the years ended December 31, 1996 and 1995 was
$2,721 and $2,421, respectively.
5)GOODWILL
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Goodwill...................................................... $ 2,967 $ 2,415
Less accumulated amortization................................. (361) (161)
------- -------
Goodwill, net................................................. $ 2,606 $ 2,254
======= =======
Amortization expense for the years ended December 31, 1996 and 1995 was $200
and $161, respectively.
6)OTHER CURRENT LIABILITIES
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Accrued salaries and benefits................................. $ 2,501 $ 2,172
Customer advance.............................................. 989 654
Accrued warranty expenses..................................... 718 485
Other......................................................... 1,495 874
------- -------
Total other current liabilities............................... $ 5,703 $ 4,185
======= =======
</TABLE>
B-9
<PAGE>
AXIOHM S.A.
NOTES TO THE FINANCIAL CONSOLIDATED STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
7)LONG-TERM DEBT
The Company has entered into borrowing arrangements with various banks for
loans denominated in French Francs ("FF") and U.S. Dollars ("USD").
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
------ -------
<S> <C> <C>
Revolving credit line up to $8,000, the first $3,000 at lend-
er's prime rate plus three quarters (9.5% at December 31,
1996 and 9.75% at December 31, 1995), the next $5,000 at
lender's prime plus one quarter (9.00% at December 31, 1996
and 9.25% at December 31, 1995) payable in full January 1,
1998 secured by inventory, accounts receivable, contract
rights, equipment and general intangibles.................... $1,174 $ 1,302
Revolving credit line in FF or USD up to FF 4.5 million at LI-
BOR plus 0.75% payable in full January 1, 1998 secured by the
Company's accounts receivable................................ -- 301
Business loan at 10% collateralized by various assets; balance
paid in full in July 1996.................................... -- 3,045
Bank mortgage loan at lender's prime rate plus three quarters
(9.5% at December 31, 1996 and 9.75% at December 31, 1995),
payable in monthly installments of $44 (including interest)
through 1997, amortized on twelve-year schedule beginning in
1998, with balloon for full outstanding balance due January
1, 2000; payment collateralized by building and machinery
equipment.................................................... 3,868 4,019
Three bank loans in FF at rates between 4.6% and 7.25% payable
through 1997 to 2002 secured by the Company's equipment...... 1,046 1,328
Bank loan in FF to acquire IPB assets at PIBOR one year rate
plus 1.2% payable in seven yearly installments through 2001
secured by IPB shares; balance paid in full in 1996.......... -- 4,373
Five business loans in FF at rates between 5.75% and 8.75% se-
cured by the Company's equipment; balance paid in full in
1996......................................................... -- 467
------ -------
$6,088 $14,835
Less current portion.......................................... (1,267) (1,748)
------ -------
Total long-term debt.......................................... $4,821 $13,087
====== =======
</TABLE>
Commitment fees on the total amount of the revolving credit line in USD are
payable annually at an annual rate of 0.25%.
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1997................................................................ $1,267
1998................................................................ 391
1999................................................................ 750
2000................................................................ 3,427
2001................................................................ 165
2002 and thereafter................................................. 88
------
Total............................................................... $6,088
======
</TABLE>
B-10
<PAGE>
AXIOHM S.A.
NOTES TO THE FINANCIAL CONSOLIDATED STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
8)FINANCING OBLIGATIONS
a)Capital lease
The Company and its subsidiaries lease office equipment and vehicles
under various capital lease contracts with terms extending through December
31, 2000.
b)Financing arrangement
In 1994, the Company negotiated a FF 8.0 million ($1.6 million) grant
from various agencies of the government of France to subsidize the purchase
and improvement of certain properties in France. The agreement is
structured as a sale/leaseback transaction in which title to the purchased
property was sold to a government agency in exchange for a cash payment of
FF 16 million ($3.2 million) and subsequently leased back for a fifteen
year period. The terms of the agreement provide for a bargain purchase
option at the conclusion of the lease term, hence the sales/leaseback
transaction has been accounted for as financing arrangement in which the
related assets and a corresponding obligation are recorded in the financial
statements of the Company. A financing obligation representing the proceeds
for the sale/leaseback component of the transaction has been netted against
the underlying capital expenditure. At December 31, 1996, the Company has a
contingent liability to repay, in whole or in part, grants received of
approximately FF 8.0 million ($1.6 million), in the event the Company does
not meet the requirements of the grant including minimum employment levels
through 1997, minimum capital expenditures and continued use of the
building throughout the lease term.
Future minimum lease commitments under capital leases and the financing
arrangement at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL
LEASES FINANCING TOTAL
------- --------- ------
<S> <C> <C> <C>
1997............................................... $102 $ 189 $ 291
1998............................................... 102 189 291
1999............................................... 47 189 236
2000............................................... 19 189 208
2001............................................... -- 189 189
2002 and thereafter................................ -- 1,600 1,600
---- ------ ------
Total minimum lease payments....................... $270 $2,545 $2,815
Less: amounts representing interest................ (1,133)
------
Present value of minimum lease payments............ $1,682
Current portion.................................... (139)
------
Long-term capital lease obligations................ $1,543
======
</TABLE>
Included in property, plant and equipment in the accompanying consolidated
balance sheets are the following assets under capital leases and financing
arrangements:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1995
------ ------
<S> <C> <C>
Building at cost............................................. $1,527 $1,634
Equipment at cost............................................ 310 150
------ ------
1,837 1,784
Less accumulated depreciation................................ (210) (64)
------ ------
Assets under capital lease, net.............................. $1,627 $1,720
====== ======
</TABLE>
B-11
<PAGE>
AXIOHM S.A.
NOTES TO THE FINANCIAL CONSOLIDATED STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
9)COMMITMENTS AND CONTINGENCIES
In connection with the 1994 acquisition of what is now its Axiohm IPB
subsidiary, the Company is contingently liable to the seller for up to $5,000
annually, for additional purchase consideration through 1997, based upon the
subsidiary achieving certain sales levels. Any additional consideration paid
will be treated as additional acquisition cost. As of December 31, 1996, the
Company had accrued $552 for contingent payments resulting from 1996 sales
performance.
10)GOVERNMENT GRANT OBLIGATIONS
French government agencies provide various long-term grants to promote
fundamental research programs and to encourage commercial implementation
overseas. The reimbursement of such grants is contingent upon the success of
the related program.
These grants are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1995
------ ------
<S> <C> <C>
Fundamental research......................................... $1,488 $1,709
Commercial implementation in Asia............................ 1,274 1,218
------ ------
2,762 2,927
Less current portion......................................... (916) (327)
------ ------
Total........................................................ $1,846 $2,600
====== ======
</TABLE>
11)INSURANCE PROCEEDS
At the end of 1995 and into 1996, severe disruption of its thermal head
clean room output and loss of business due to water damage caused by a
subcontracting company performing routine maintenance work were experienced in
France. Insurance proceeds of approximately $1.0 million received in
compensation in 1996 for the loss of revenue and commercial damage are
included in other income.
12)INCOME TAXES
The Company operates internationally and tax rates are subject to applicable
tax legislation in the country in which it operates. The domestic and foreign
components of pre-tax income are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
------- -------
<S> <C> <C>
Domestic (France) pre-tax income........................... $ 4,780 $(1,011)
Foreign pre-tax income..................................... 6,430 4,036
------- -------
Total...................................................... $11,210 $ 3,025
======= =======
</TABLE>
B-12
<PAGE>
AXIOHM S.A.
NOTES TO THE FINANCIAL CONSOLIDATED STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
A reconciliation of the differences between income taxes computed at the
French statutory rate and the Company's reported income tax provision is as
follows:
<TABLE>
<CAPTION>
DECEMBER
31,
-----------
1996 1995
---- -----
<S> <C> <C>
Statutory rate.................................................. 36.7% 36.7%
Tax research credit............................................ -- (11.9)
Non utilized foreign entities losses........................... 1.7 6.8
Effect of tax rate differences in foreign jurisdictions........ 1.1 1.7
Effect of change in tax rate on domestic deferred taxes........ -- 2.8
Other.......................................................... (0.2) 0.1
---- -----
Effective Tax Rate.............................................. 39.3% 36.2%
==== =====
</TABLE>
In 1995, a tax research credit of approximately $359 was recorded. This tax
research credit was based on an increase in research and development
expenditure. Additionally, certain tax losses in foreign jurisdictions were
unavailable for offset against taxable income.
As of December 31, 1996 and 1995, the components of deferred tax assets and
liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
DEFERRED TAX ASSETS
Postretirement benefit obligation........................ $ 677 $ 643
Investment grant......................................... 504 578
Operating loss carry forwards............................ 388 815
Other.................................................... 720 403
------- -------
Total deferred tax assets................................. 2,289 2,439
Less valuation allowance................................. (388) (260)
------- -------
Net deferred tax assets................................... $ 1,901 $ 2,179
======= =======
DEFERRED TAX LIABILITIES
Long-term investment..................................... $(1,603) $(1,756)
Plant and equipment...................................... (639) (576)
Goodwill................................................. (407) (436)
Provisions............................................... (304) --
Other.................................................... (16) (27)
------- -------
Total deferred tax liabilities............................ $(2,969) $(2,795)
======= =======
</TABLE>
The Company recorded a valuation allowance of $388 and $260 at December 31,
1996 and December 31, 1995, respectively, for net operating loss carry
forwards since realization of these future benefits cannot be reasonably
assured. These net operating loss carry forwards expire at varying dates
through 2001.
B-13
<PAGE>
AXIOHM S.A.
NOTES TO THE FINANCIAL CONSOLIDATED STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
The provision for income tax consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1995
------ ------
<S> <C> <C>
Current income tax expense
Domestic................................................... $1,159 $ (359)
Foreign.................................................... 2,789 1,609
------ ------
Total....................................................... $3,948 $1,250
====== ======
Deferred income tax expense
Domestic................................................... $ 577 $ (280)
Foreign.................................................... (119) 125
------ ------
Total....................................................... $ 458 $ (155)
====== ======
</TABLE>
13)EMPLOYEE BENEFIT PLANS
The Company sponsors an employee savings plan for certain U.S. employees
which conforms to the provisions of Section 401(k) of the U.S. Internal
Revenue Code of 1986, as amended. The Company also provides certain defined
pension benefits (based on years of service) to certain categories of U.S. and
French employees.
The Company's obligations under these plans for 1996 and 1995 were not
material.
The Company is currently obligated to provide certain postretirement medical
and life insurance benefits to approximately 100 U.S. employees who have met
certain requirements as to age (generally 55) and length of service (generally
10 years, which includes a minimum of 5 years after January 1, 1995). The
Company accounts for the cost of these benefits in accordance with Statement
of Financial Accounting Standards No. 106 Employer's Accounting for
Postretirement Benefits Other Than Pensions. The Company funds these costs on
a pay-as-you-go basis. The net post-retirement benefit expense for the years
ended December 31, 1996 and 1995 amounts to $96 and $144, respectively.
The total obligation and amounts recognized in the balance sheet at December
31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1995
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Active--not fully eligible.................................. $ 374 $1,471
Retired..................................................... 66 --
------ ------
Total...................................................... $ 440 $1,471
Unrecognized prior service cost.............................. 1,690 --
Unrecognized net loss........................................ (694) (130)
------ ------
Accrued postretirement benefit obligation.................... $1,436 $1,341
====== ======
</TABLE>
Significant assumptions employed in this valuation include a discount rate
of 7.50% at December 31, 1996, and 7.25% at December 31, 1995. A pre-Medicare
eligible healthcare cost trend rate is 8.0% for 1996 (6.0% for post-Medicare)
declining by one percent each year through the year 2000 (1998 for post-
Medicare), after which a rate of 5.0% was utilized for each year.
B-14
<PAGE>
AXIOHM S.A.
NOTES TO THE FINANCIAL CONSOLIDATED STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
The annual costs of postretirement benefits are based on assumed discount
rates set relative to the general level of interest rates in the economy. If
the healthcare cost trend rate was increased by one percentage point, the net
postretirement benefit expense for the year ended December 31, 1996 and 1995
and the accumulated postretirement benefit obligation, as of December 31, 1996
and 1995 would not increase by a material amount.
14)SHAREHOLDERS' EQUITY
a)Share Capital
On June 24, 1996, the Company completed a private offering of 405 Common
Shares "A", and 2,735 Common Shares "B" to an employee of the Company and
two institutional investors, respectively, from which it received total
proceeds of $3,807, net of offering costs of $39.
Common Shares "B" are divided into separate securities representing their
economic rights (represented by Certificats d'Investissements, or "CIs")
and their voting rights (represented by Certificats de Droit de Vote). CIs
have substantially the same terms as Common Shares "A" except for their
voting features (their associated voting right is represented by separate
voting right certificates).
On the same date the Company increased the par value of its common shares
from FF 100 to FF 500.
b)Retained Earnings
At December 31, 1996, the Company's distributable retained earnings
amounted to $11,025 and would be subject to $2,851 of additional
withholding tax, "precompte", in case of distribution. The withholding tax
would be recorded in equity as part of the dividend paid to shareholders
and shareholders receiving the dividend would be entitled to a tax credit
"avoir fiscal" at least equal to the withholding tax paid, under conditions
provided for in relevant tax treaties under French law.
c)Stock Options
On December 15, 1995, the shareholders of the Company implemented a stock
option plan authorizing the Board of Directors to issue stock options for
the subscription of a maximum of 1,583 shares of the Company's Common
Stock.
On February 19, 1996, the Board of Directors granted all 1,583 options
(to acquire one share of Common Stock each) to an officer of the Company at
an exercise price of FF 6,050 which approximated the fair value of the
underlying shares on the date of grant.
The options are valid for ten years (until December 31, 2005) and become
exercisable rateably over five years. Non-vested options become void upon
termination of employment. The plan also allows for accelerated vesting
upon certain conditions and events including a public offering of the
Company's stock and specified changes in the existing ownership of the
Company.
As of December 31, 1996, all 1,583 options (none of which are
exercisable) remained outstanding.
Had compensation costs for the Company's stock option plan been
determined consistent with the fair value approach set forth in SFAS No.
123, the Company's net income for the year ended December 31, 1996 would
have been reduced to $6,726. The fair value of the options granted is
estimated on the date of grant using the minimum value method with the
following assumptions: 3.9% dividend yield, a risk free interest rate of
6.35%, an expected option life of 10 years and no forfeitures.
B-15
<PAGE>
AXIOHM S.A.
NOTES TO THE FINANCIAL CONSOLIDATED STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
15)FOREIGN CURRENCY HEDGES
At December 31, 1996, the Company's portfolio consisted of five foreign
exchange contracts to sell $4,500 at an average rate of 1 USD = 5.17 FF and
one option to sell $3.0 million at August 29, 1997 at the rate of 5.15 FF for
1 USD. The option was acquired at a cost of $76.
16)RELATED PARTY TRANSACTIONS
The Company purchased from Dardel Technologies, a significant shareholder
(44% ownership) of the Company, services including insurance coverage,
telecommunications and legal and management assistance. These services
amounted to $991 and to $995 in fiscal years 1996 and 1995, respectively. In
addition, Dardel Technologies sub-leases to Axiohm S.A. office space that it
leases from a company owned by three directors of Axiohm S.A. These sub-lease
payments to Dardel Technologies amounted to $279 and $291 in 1996 and 1995,
respectively. This same company also provided office management services to
Axiohm S.A. for an amount of $263 and $288 in 1996 and 1995, respectively. The
terms of such transactions approximate those of an arm's length transaction
with an unrelated party.
In 1995 and 1996, the Company participated in a cash pooling agreement with
Dardel Technologies allowing it to borrow or loan cash as considered
necessary. At December 31, 1996, the Company had an outstanding loan with
Dardel Technologies amounting to $1,832 and bearing interest at 6.42% which
was recorded in other current assets. This loan was reimbursed in April 1997
and the cash pooling agreement has been subsequently terminated.
B-16
<PAGE>
AXIOHM S.A.
NOTES TO THE FINANCIAL CONSOLIDATED STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
17)GEOGRAPHICAL INFORMATION
The Company operates predominantly in a single industry as a manufacturer and
service provider of thermal and impact printing equipment. The Company has
operations in France, the United States, Hong Kong and Japan. Transfers between
geographic areas primarily represent intercompany export sales of approximately
$16,491 and $9,218 in 1996 and 1995, respectively. These produced goods are
accounted for based on established sales prices between the related companies.
In computing income from operations for foreign subsidiaries, no allocations of
general corporate expenses, interest or income taxes have been made.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------
NORTH
EUROPE AMERICA ASIA ELIMINATIONS CONSOLIDATED
------- ------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated custom-
ers.......................... $22,723 $72,262 $ 317 $95,302
Transfer between geographic
areas........................ 15,318 146 1,027 $(16,491) --
------- ------- ----- -------- -------
Total revenues................ 38,041 72,408 1,344 (16,491) 95,302
------- ------- ----- -------- -------
Operating profit/(loss)....... 3,955 7,581 (444) -- 11,092
Net income/(loss)............. $ 3,039 $ 4,264 $(499) -- $ 6,804
Total assets at December 31,
1996......................... $23,467 $29,324 $ 600 $ (9,413) $43,978
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------
NORTH
EUROPE AMERICA ASIA ELIMINATIONS CONSOLIDATED
------- ------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated custom-
ers......................... $18,284 $53,680 $ 191 $72,155
Transfer between geographic
areas....................... 7,751 921 546 $(9,218) --
------- ------- ----- ------- -------
Total revenues............... 26,035 54,601 737 (9,218) $72,155
------- ------- ----- ------- -------
Operating profit/(loss)...... (315) 5,992 (528) -- 5,149
Net income/(loss)............ $ (371) $ 2,862 $(561) -- $ 1,930
Total assets at December 31,
1995........................ $22,574 $26,475 $ 319 $(9,184) $40,184
</TABLE>
18)SUBSEQUENT EVENTS
As part of its long-term development strategy, the Company has an on-going
policy to pursue potential acquisitions worldwide. In particular, the Company
is currently negotiating a strategic alliance with a U.S. based company. The
outcome of these negotiations is as yet unknown.
B-17
<PAGE>
The Depositary for the Offer is:
THE BANK OF NEW YORK
By Mail: Facsimile Transmission: By Hand or Overnight
(for Eligible Courier:
Institutions Only)
(212) 815-6213
Tender & Exchange Tender & Exchange
Department Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver
New York, New York 10286- Window
1248 New York, New York 10286
For Confirmation by Telephone:
(800) 507-9357
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer-Manager at their
respective telephone numbers and locations listed below. Shareholders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer.
The Information Agent for the Offer is:
LOGO
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
ALL OTHERS CALL TOLL-FREE: (800) 223-2064
The Dealer-Manager for the Offer is:
LEHMAN BROTHERS
Three World Financial Center
New York, New York 10285
Call Collect: (212) 526-2161
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
DH TECHNOLOGY, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED JULY 16, 1997
BY
AX ACQUISITION CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
AXIOHM S.A.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 12, 1997, UNLESS THE OFFER
IS EXTENDED.
The Depositary for the Offer is:
THE BANK OF NEW YORK
By Mail: Facsimile Transmission: By Hand or Overnight
(for Eligible Courier:
Institutions Only)
(212) 815-6213
Tender & Exchange Tender & Exchange
Department Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver
New York, New York 10286- Window
1248 New York, New York 10286
For Confirmation Telephone:
(800) 507-9357
----------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE TO A NUMBER OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
<PAGE>
THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders either if
certificates are to be forwarded herewith or if delivery of Shares (as defined
below) is to be made by book-entry transfer to an account maintained by The
Bank of New York, as Depositary, at either The Depository Trust Company
("DTC") or Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry
Transfer Facility") pursuant to the procedures set forth in "The Offer--
Procedure For Tendering Shares" of the Offer to Purchase (as defined below).
Shareholders who deliver Shares by book-entry transfer are referred to herein
as "Book-Entry Shareholders" and other shareholders are referred to herein as
"Certificate Shareholders".
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver either the certificates for, or a Book-Entry Confirmation
(as defined in "The Offer--Procedure For Tendering Shares" of the Offer to
Purchase) with respect to, their Shares and all other documents required
hereby to The Bank of New York, as Depositary, prior to the Expiration Date
(as defined in "The Offer--Terms of the Offer, Proration and Expiration Date"
of the Offer to Purchase) must tender their Shares in accordance with the
guaranteed delivery procedures set forth in "The Offer--Procedure For
Tendering Shares" of the Offer to Purchase. DELIVERY OF DOCUMENTS TO A BOOK-
ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE BANK OF NEW YORK. SEE SECTION
2, "REQUIREMENTS OF TENDER", UNDER THE CAPTION "INSTRUCTIONS" HEREIN.
All capitalized terms not defined herein shall have the meaning ascribed
thereto in the Offer to Purchase.
DESCRIPTION OF SHARES TENDERED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
SHARES
TENDERED
(ATTACHED
PRINT NAME(S) AND ADDRESS(ES) OF REGISTERED ADDITIONAL
HOLDER(S) SIGNED LIST
EXACTLY AS NAME(S) APPEAR(S) ON IF
CERTIFICATE(S)(1) NECESSARY)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)(2) CERTIFICATE(S)(2) TENDERED(3)
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
(1) The names and addresses of the registered holders should be printed
exactly as they appear on the certificates representing Shares tendered
hereby. The certificates and number of Shares that the undersigned
wishes to tender should be indicated in the appropriate boxes.
(2) Need not be completed by Book-Entry Shareholders.
(3) Unless otherwise indicated, it will be assumed that all Shares described
above are being tendered. See Instruction 4.
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE BANK OF NEW YORK, AS DEPOSITARY,
WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY
PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY
BOOK-ENTRY TRANSFER):
Name of Tendering Institution: ___________________________________________
Check Box of Book-Entry Transfer Facility:
[_] DTC^^^[_] PDTC
Account Number: __________________________________________________________
Transaction Code Number: _________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE BANK OF NEW YORK, AS
DEPOSITARY, AND COMPLETE THE FOLLOWING. PLEASE INCLUDE A PHOTOCOPY OF
SUCH NOTICE OF GUARANTEED DELIVERY.
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: ____________________________
If delivered by Book-Entry, check box of applicable Book-Entry Transfer
Facility:
[_] DTC [_] PDTC
Account Number: __________________________________________________________
Transaction Code Number: _________________________________________________
3
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to AX Acquisition Corporation, a California
corporation (the "Purchaser") and an indirect wholly owned subsidiary of
Axiohm S.A., a French corporation ("the Parent"), the above-described shares
of Common Stock, without par value (the "Shares"), of DH Technology, Inc., a
California corporation (the "Target"), pursuant to the Purchaser's offer to
purchase the Maximum Number of Shares at a price of $25.00 per Share, net to
the seller in cash without interest, in accordance with the terms and
conditions of the Purchaser's Offer to Purchase, dated July 16, 1997 (the
"Offer to Purchase"), and this Letter of Transmittal (which, together with any
amendments or supplements thereto or hereto, collectively constitute the
"Offer"), receipt of which is hereby acknowledged.
Subject to, and effective upon, acceptance for payment of, and payment for,
the Shares tendered herewith in accordance with the terms of the Offer
(including, if the Offer is extended or amended, the terms or conditions of
any such 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 the Shares that are being tendered hereby (and any and
all other Shares or other securities or rights issued or issuable in respect
of such Shares on or after July 16, 1997) and irrevocably constitutes and
appoints The Bank of New York the true and lawful agent and attorney-in-fact
of the undersigned with respect to such Shares (and any such other Shares or
securities or rights), with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (a)
deliver certificates for such Shares (and any such other Shares or securities
or rights) or transfer ownership of such Shares (and any such other Shares or
securities or rights) on the account books maintained by a Book-Entry Transfer
Facility together, in any such case, with all accompanying evidences of
transfer and authenticity to, or upon the order of, the Purchaser, (b) present
such Shares (and any such other Shares or securities or rights) for transfer
on Target's books and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares (and any such other Shares or
securities or rights), all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the tendered Shares
(and any and all Shares or other securities or rights issued or issuable in
respect of such Shares on or after July 16, 1997), and, when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good title
thereto, free and clear of all liens, restrictions, claims and encumbrances.
The undersigned will, upon request, execute any additional documents deemed by
The Bank of New York, as Depositary, or the Purchaser to be necessary or
desirable to complete the sale, assignment and transfer of the tendered Shares
(and any such other Shares or other securities or rights).
All authority conferred or agreed to be conferred pursuant to this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable.
The undersigned hereby irrevocably appoints Patrick Dupuy and Gilles Gibier,
in their respective capacities as officers of Purchaser or its affiliates, and
any individual who shall hereafter succeed to any such office of Purchaser or
its affiliates, and each of them, and any other designees of the Purchaser,
the attorneys-in-fact and proxies of the undersigned, each with full power of
substitution, to vote at any annual, special or adjourned meeting of Target's
shareholders or otherwise in such manner as each such attorney-in-fact and
proxy or his substitute shall in his sole discretion deem proper with respect
to, and to otherwise act (by written consent or otherwise) as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to all the Shares tendered hereby that have been accepted
for payment by the Purchaser prior to the time any such action is taken and
with respect to which the undersigned is entitled to vote (and with respect to
any and all other Shares or other securities or rights issued or issuable in
respect of such Shares on or after July 16, 1997). This appointment is
effective when, and only to the extent that, the Purchaser accepts for payment
such Shares as provided in the Offer to Purchase. This power of attorney and
proxy are irrevocable and are granted in consideration of the acceptance for
payment of such Shares in accordance with the terms of the
4
<PAGE>
Offer. Such acceptance for payment shall, without further action, revoke all
prior powers of attorney and proxies appointed by the undersigned at any time
with respect to such Shares (and any such other Shares or securities or
rights) and no subsequent powers of attorney or proxies will be appointed by
the undersigned, or be effective, with respect thereto.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in "The Offer--Procedure for Tendering Shares"
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.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
for Shares not tendered or 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 certificates
for 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." In the event that both the Special Delivery
Instructions and the Special Payment Instructions are completed, please issue
the check for the purchase price and/or return any certificates for Shares not
tendered or accepted for payment (and any accompanying documents, as
appropriate) in the name of, and deliver such check and/or return such
certificates (and any accompanying documents, as appropriate) to, the persons
so indicated. 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 thereof if the Purchaser does not accept for
payment any of the Shares so tendered.
The Depositary will withhold U.S. federal income taxes equal to 30% of the
gross payments payable to a foreign shareholder unless such foreign
shareholder proves in a manner satisfactory to the Purchaser and the
Depositary that either (i) the sale of Shares pursuant to the Offer will
qualify as a sale or exchange, rather than a dividend, for U.S. federal income
tax purposes (as described in "The Offer--Certain U.S. Federal Income Tax
Consequences" of the Offer to Purchase), in which case no withholding is
required, or (ii) the foreign shareholder is eligible for a reduced tax treaty
rate with respect to dividend income, in which case the Depositary will
withhold at the reduced treaty rate. For this purpose, a foreign shareholder
is any shareholder that is not (i) an individual citizen or resident of the
U.S., (ii) a corporation, partnership or other entity created or organized
under the laws of the U.S. or any political subdivision thereof, (iii) any
estate the income of which is subject to U.S. federal income taxation
regardless of the source of such income or (iv) a trust which is subject to
the supervision of a court within the U.S. or the control of a U.S. fiduciary.
In order for the Depositary to determine whether the sale of Shares will
qualify as a sale or exchange, all foreign shareholders must complete the
Ownership Change Questionnaire attached hereto as Annex A. The Depositary will
determine a shareholder's status as a foreign shareholder and eligibility for
a tax treaty reduced rate of withholding by reference to the shareholder's
address and to any outstanding certificates or statements concerning
eligibility for a reduced rate of withholding unless facts and circumstances
indicate that reliance is not warranted. A foreign shareholder who has not
previously submitted the appropriate certificates or statements with respect
to a reduced rate of withholding for which such shareholder may be eligible
should consider doing so in order to avoid overwithholding. A foreign
shareholder may be eligible to obtain from the U.S. Internal Revenue Service a
refund of tax withheld if such shareholder meets one of the Redemption Tests
described in "The Offer--Certain U.S. Federal Income Tax Consequences" of the
Offer to Purchase or is otherwise able to establish that no tax or a reduced
rate of tax was due.
5
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if To be completed ONLY if
certificate(s) for Shares not certificate(s) for Shares not
tendered or not accepted for tendered or not accepted for
payment and/or the check for the payment and/or the check for the
purchase price of Shares accepted purchase price of Shares accepted
for payment are to be issued in for payment are to be sent to
the name of someone other than the someone other than the undersigned
undersigned. or to the undersigned at an
address other than that indicated
above.
Issue check and/or certificate(s)
to:
Name: _____________________________ Mail check and/or certificate(s)
(Please Print) to:
Address: __________________________ Name: _____________________________
(Include Zip Code) (Please Print)
----------------------------------- Address: __________________________
Tax Identification or Social (Include Zip Code)
Security No. -----------------------------------
(See Substitute Form W-9 on Tax Identification or Social
reverse side) Security No.
(See Substitute Form W-9 on
reverse side)
IMPORTANT
SHAREHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(Signature(s) of Shareholder(s))
Dated: , 1997
(Must be signed by registered holder(s) as name(s) appear(s) on the
certificate(s) for the Shares 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
corporations or others acting in a fiduciary or representative capacity,
please provide the following information and see Instruction 5.)
Name(s): ____________________________________________________________________
(Please Print)
Capacity (Full Title): ______________________________________________________
Address: ____________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.: ________________________________________________
Taxpayer Identification or Social Security No.: _____________________________
(Complete Substitute Form W-9 on reverse
side)
GUARANTEE OF SIGNATURE(S):
(IF REQUIRED--SEE INSTRUCTION 1 AND 5)
Authorized Signature(s): ____________________________________________________
Name(s): ____________________________________________________________________
(Please Print)
Name of Firm: _______________________________________________________________
Address: ____________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.: ________________________________________________
Dated: , 1997
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loans 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 or identified as an "eligible
guarantor institution" as such term is defined in Rule 17Ad-15 under the
Exchange Act (an "Eligible Institution"). No signature guarantee is required
on this Letter of Transmittal if (a) this Letter of Transmittal is signed by
the registered holder(s) (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears
on a security position listing as the owner of Shares) of Shares tendered
herewith, unless such holder(s) has completed the information under the
caption "Special Delivery Instructions" or "Special Payment Instructions"
herein, or (b) such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
shareholders either if certificates are to be forwarded herewith or if
delivery of Shares is to be made pursuant to the procedures for book-entry
transfer set forth in "The Offer--Procedure for Tendering Shares" of the Offer
to Purchase. For a shareholder validly to tender Shares pursuant to the Offer,
either (a) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees and any
other required documents, must be received by The Bank of New York, as
Depositary, at one of its addresses set forth herein prior to the Expiration
Date and either (i) certificates for tendered Shares must be received by The
Bank of New York, as Depositary, at one of such addresses prior to the
Expiration Date or (ii) Shares must be delivered pursuant to the procedures
for book-entry transfer set forth herein and a Book-Entry Confirmation must be
received by The Bank of New York, as Depositary, prior to the Expiration Date
or (b) the tendering shareholder must comply with the guaranteed delivery
procedure set forth below and in "The Offer--Procedure for Tending Shares" of
the Offer to Purchase.
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to The
Bank of New York, as Depositary, or complete the procedures for book-entry
transfer prior to the Expiration Date may tender their Shares by properly
completing and duly executing the Notice of Guaranteed Delivery pursuant to
the guaranteed delivery procedures set forth in "The Offer--Procedure for
Tendering Shares" of the Offer to Purchase.
Pursuant to such procedures, (a) such tender must be made by or through an
Eligible Institution, (b) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Purchaser must
be received by The Bank of New York, as Depositary, prior to the Expiration
Date and (c) the certificates for all physically delivered Shares or a Book-
Entry Confirmation with respect to all tendered 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 Bank of New York, as
Depositary, within five trading days after the date of execution of the Notice
of Guaranteed Delivery. A "trading day" is any day on which the Nasdaq
National Market(R) is open for business.
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering shareholders, 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.
7
<PAGE>
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE SHAREHOLDERS ONLY). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares that are to be tendered under the headnote
entitled "Description of Shares Tendered." In any such case, new
certificate(s) for the remainder of the Shares that were evidenced by the old
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 of the Offer. All Shares represented by
certificates delivered to The Bank of New York, as Depositary, will be deemed
to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTERS OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, agents,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority to so act must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or accepted for payment are to be issued
to a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of certificates listed, the certificates must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as
the name or names of the registered owner or owners appear on the
certificates. Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Purchaser will pay 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
certificates for Shares not tendered or accepted for payment are to be
registered in the name of, any persons other than the registered holder(s), or
if tendered certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder(s) or such person)
payable on account of the transfer to such person will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT
WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE
CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of and/or certificates for Shares not tendered or not accepted for
payment are to be returned to, a person other than the signer of this Letter
of Transmittal or if a check is to be sent and/or such certificates are to be
returned to a person other than the signer of this Letter of Transmittal or to
an address other than that shown above, the appropriate boxes on this Letter
of Transmittal should be completed. Any shareholder(s) delivering Shares by
book-entry transfer may request that Shares not accepted for payment be
credited to such account maintained at a Book-Entry Transfer Facility as such
shareholder(s) may designate.
8
<PAGE>
8. WAIVER OF CONDITIONS. Subject to the terms of the Offer, the Purchaser
reserves the absolute right in its sole discretion to waive any of the
specified conditions of the Offer, in whole or in part, in the case of any
Shares tendered.
9. BACKUP WITHHOLDING. Under U.S. federal income tax law, a shareholder
whose tendered Shares are accepted for payment is required to provide The Bank
of New York, as Depositary, with such shareholder's correct taxpayer
identification number, e.g., social security number or employer identification
number ("TIN"), on Substitute Form W-9 below. If The Bank of New York, as
Depositary, is not provided with the correct TIN, the U.S. Internal Revenue
Service may subject the shareholder or other payee to a $50 penalty. In
addition, payments that are made to such shareholder or other payee with
respect to Shares purchased pursuant to the Offer may be subject to a 31%
backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the shareholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from The Bank of New York, as Depositary. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for more instructions.
If backup withholding applies, The Bank of New York, as Depositary, is
required to withhold 31% of any such payments made to the shareholder or other
payee. Backup withholding is not an additional tax. Rather, the tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld, provided that the required information is given to the U.S. Internal
Revenue Service. If withholding results in an overpayment of taxes, then a
refund may be obtained from the U.S. Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
shareholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
shareholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, The Bank of New York, as
Depositary, will withhold 31% on all payments made prior to the time a
properly certified TIN is provided to The Bank of New York, as Depositary.
However, such amounts will be refunded to such shareholder if a TIN is
provided to The Bank of New York, as Depositary, within 60 days.
The shareholder is required to give The Bank of New York, as Depositary, the
TIN (e.g., Social Security Number or Employer Identification Number) of the
record owner of the Shares or of the last transferee appearing on the
transfers attached to, or endorsed on, the Shares. If the Shares are in more
than one name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for additional
copies of the Offer to Purchase, this Letter of Transmittal, the Notice of
Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 should be directed to Lehman
Brothers Inc., as Dealer-Manager, or Georgeson & Company Inc., as Information
Agent, at each party's respective address set forth below. Questions or
requests for assistance may be directed to the Dealer-Manager or the
Information Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A SIGNED FACSIMILE COPY THEREOF
(TOGETHER WITH CERTIFICATES FOR, OR A BOOK-ENTRY CONFIRMATION WITH RESPECT TO,
TENDERED SHARES WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED
DOCUMENTS) MUST BE RECEIVED BY THE BANK OF NEW YORK, AS DEPOSITARY, OR THE
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE BANK OF NEW YORK, AS
DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE.
9
<PAGE>
PART 1--PLEASE PROVIDE
YOUR TIN AND CERTIFY BY
SIGNING AND DATING BELOW. ----------------------
Social Security
Number
OR ___________________
SUBSTITUTE Employer
FORM W-9 Identification
Number:
DEPARTMENT OF THE
TREASURY
INTERNAL REVENUE ----------------------------------------------------
SERVICE
PAYER'S REQUEST FOR
TAXPAYER PART 2--CERTIFICATES--Under penalties of perjury,
IDENTIFICATION I certify that:
("TIN")
(1) The number shown on this form is my correct
TIN (or I am waiting for a number to be
issued for me) and
SIGN (2) I am not subject to backup withholding either
g because: (a) I am exempt from backup
HERE withholding, or (b) I have not been notified
by the U.S. Internal Revenue Service (the
"IRS") that I am subject to backup
withholding as a result of a failure to
report all interest or dividends, or (c) the
IRS has notified me that I am no longer
subject to backup withholding.
FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
CERTIFICATION INSTRUCTIONS--You must cross out
item (2) above if you have been notified by the
IRS that you are currently subject to backup
withholding because of under reporting interest
or dividends on your tax return. However, if
after being notified by the IRS that you are
subject to backup withholding, you received
another notification from the IRS that you are no
longer subject to backup withholding, do not
cross out such item (2).
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM
MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY
PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
PART 3--AWAITING TIN [_]
----------------------------------------------------
Signature: _______________________________________
Date: ____________________________________________
----------------------------------------------------
10
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER ("TIN")
I certify under penalty of perjury that a TIN has not been issued to me, and
either (1) I have mailed or delivered an application to receive a TIN to the
appropriate Internal Revenue Service Center or Social Security Administration
Office or (2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a TIN by the time of payment, 31% of all
reportable payments made to me will be withheld, but that such amounts will be
refunded to me if I then provide a TIN within sixty (60) days.
Signature: _________________________________________________ Date:
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES OF THE OFFER TO
PURCHASE, THIS LETTER OF TRANSMITTAL AND OTHER TENDER OFFER MATERIALS MAY BE
DIRECTED TO THE DEALER-MANAGER OR THE INFORMATION AGENT AS SET FORTH BELOW.
The Dealer-Manager for the Offer is:
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Telephone: (212) 526-2161
Facsimile: (212) 526-3843
The Information Agent for the Offer is:
Georgeson & Company Inc.
Wall Street Plaza
New York, New York 10005
Telephone: (212) 440-9915
Facsimile: (212) 440-9009
11
<PAGE>
ANNEX A
OWNERSHIP CHANGE QUESTIONNAIRE
FOR FOREIGN SHAREHOLDERS
THIS FORM IS TO BE COMPLETED ONLY BY FOREIGN SHAREHOLDERS.
The Depositary will withhold tax at a rate of 30% of the amount otherwise
payable to a foreign shareholder unless it can be established that one of the
Redemption Tests described in the Offer to Purchase is satisfied (so that the
proceeds should not be treated as a dividend for U.S. tax purposes), or unless
a reduced tax treaty rate applies. For purposes of determining whether any of
the Redemption Tests are satisfied, please indicate your actual and
constructive ownership of Shares of Target both before and after the sale of
Shares pursuant to the Offer on the form below.
For purposes of this verification, you must take into account the ownership
of Shares of Target that are held in your name and Shares held in the name of
any related parties, including certain family members (e.g., spouse, children
and grandchildren if you are an individual) and partnerships, corporations,
estates and trusts in which you own or have a beneficial interest. To the
extent you have an interest in Shares of Target through a related party such
Shares may be considered to be "constructively" owned by you for purposes of
determining whether the sale of Shares pursuant to the Offer satisfies one of
the Redemption Tests.
- -------------------------------------------------------------------------------
Under penalty of perjury, I certify that, to the best of my knowledge and
belief, after the sale of Shares pursuant to the Offer, the undersigned owns
the following Shares of Target either actually or constructively as described
above:
<TABLE>
<CAPTION>
ACTUALLY CONSTRUCTIVELY
OWNED OWNED
-------- --------------
<S> <C> <C>
Number of Shares of Target owned prior to sale..........
-------- --------
Number of Shares of Target owned after sale.............
-------- --------
</TABLE>
Signed this day
of 1997.
By:
- -------------------------------------
Name:
Title:
A-1
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
DH TECHNOLOGY, INC.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 12, 1997, UNLESS THE
OFFER IS EXTENDED.
As set forth in "The Offer--Procedure for Tendering Shares" of the Offer to
Purchase (as defined below), this form or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates
representing shares of Common Stock, without par value (the "Shares"), of DH
Technology, Inc., a California corporation (the "Target"), are not immediately
available or if the procedures for book-entry transfer cannot be completed on
a timely basis or time will not permit all required documents to reach The
Bank of New York, as Depositary, prior to the Expiration Date (as defined in
"The Offer--Terms of the Offer, Proration and Expiration Date" of the Offer to
Purchase). Such form may be delivered by hand or transmitted by telegram or
facsimile transmission or mailed to The Bank of New York, as Depositary, and
must include a guarantee by an Eligible Institution (as defined in "The
Offer--Procedure for Tendering Shares" of the Offer to Purchase). See "The
Offer--Procedure for Tendering Shares" of the Offer to Purchase.
The Depositary for the Offer is:
THE BANK OF NEW YORK
By Mail: Facsimile Transmission By Hand or Overnight
Courier:
(for Eligible
Institutions only):
(212) 815-6213
Tender & Exchange Tender & Exchange
Department Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver
New York, New York Window
10286-1248 New York, New York 10286
For Confirmation Telephone:
(800) 507-9357
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE
DEPOSITARY.
This form 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.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to AX Acquisition Corporation, a California
corporation (the "Purchaser") and an indirect wholly owned subsidiary of
Axiohm S.A., a French corporation (the "Parent"), upon the terms and subject
to the conditions set forth in the Purchaser's Offer to Purchase, dated July
16, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which together with any amendments or supplements thereto, collectively
constitute the "Offer"), receipt of which is hereby acknowledged, Shares
pursuant to the guaranteed delivery procedures set forth in "The Offer--
Procedure For Tendering Shares" of the Offer to Purchase.
Number of Shares: _________________ Name(s) of Record Holder(s):
Certificate Nos. (if available): -----------------------------------
----------------------------------- -----------------------------------
(Please Print)
-----------------------------------
Address(es):
Check ONE box if Shares will be
tendered by Book-Entry Transfer: -----------------------------------
[_]The Depository Trust Company -----------------------------------
[_]Philadelphia Depository Trust Area Code and Tel. No.: ___________
Company
Signature(s):
Account Number: ___________________
-----------------------------------
Dated: _____________________ , 1997
-----------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution, hereby guarantees to deliver to
The Bank of New York, as Depositary, either the certificates representing the
Shares tendered hereby, in proper form for transfer, or a Book-Entry
Confirmation (as defined in "The Offer--Procedure For Tendering Shares" of the
Offer to Purchase) of a transfer of such Shares, in any such case together
with a properly completed and duly executed Letter of Transmittal, or a
manually signed facsimile thereof, with any required signature guarantees, and
any other documents required by the Letter of Transmittal within five trading
days after the date hereof. A "trading day" is any day on which the Nasdaq
National Market(R) is open for business.
Name of Firm: Name:
------------------------- -------------------------------
(Please print)
Address:
----------------------------- Title:
--------------------------------
Area Code and Tel. No.:
------------------ Date:
--------------------------------
------------------------------------
Authorized Signature
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. SHARE
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
UP TO 7,000,000 SHARES OF COMMON STOCK
OF
DH TECHNOLOGY, INC.
AT
$25 NET PER SHARE
BY
AX ACQUISITION CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
AXIOHM S.A.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 12, 1997, UNLESS THE
OFFER IS EXTENDED.
July 16, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by AX Acquisition Corporation, a California
corporation (the "Purchaser") and an indirect wholly owned subsidiary of
Axiohm S.A., a French corporation (the "Parent"), to act as Dealer-Manager in
connection with the Purchaser's Offer to Purchase (defined below) the Maximum
Number (as defined in the Offer to Purchase) of the outstanding shares of
Common Stock, without par value (the "Shares"), of DH Technology, Inc., a
California corporation (the "Target"), at $25 per share, net to the seller in
cash without interest, upon the terms and subject to the conditions set forth
in the Purchaser's Offer to Purchase dated July 16, 1997 (the "Offer to
Purchase"), and the related Letter of Transmittal (which, together with any
supplements or amendments thereto collectively 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 copies of the following documents:
1. Offer to Purchase dated July 16, 1997;
2. Letter of Transmittal to be used by shareholders of Target accepting
the Offer;
3. The Letter to shareholders of Target from William H. Gibbs, the
Chairman, President and Chief Executive Officer of Target, accompanied by
Target's Solicitation/Recommendation Statement on Schedule 14D-9;
4. A printed form letter that may be sent to your clients for whose
account you hold Shares in your name or in the name of a nominee, with
space provided for obtaining such client's instructions with regard to the
Offer;
5. Notice of Guaranteed Delivery;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to The Bank of New York, as Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER,
PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, AUGUST 12, 1997, UNLESS THE OFFER IS EXTENDED.
<PAGE>
The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the expiration of the Offer at
least 6,500,000 Shares (the "Minimum Condition"). The Offer is also subject to
certain other conditions contained in the Offer to Purchase. See "The Offer--
Terms of the Offer, Proration and Expiration Date" and "The Offer--Certain
Conditions of the Offer".
THE BOARD OF DIRECTORS OF TARGET ("TARGET'S BOARD") HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT (AS DEFINED IN THE OFFER TO PURCHASE) AND DETERMINED THAT
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER, THE AXIOHM
EXCHANGE (AS DEFINED IN THE OFFER TO PURCHASE), THE ACQUISITION OF PURCHASER
(AS DEFINED IN THE OFFER TO PURCHASE) AND THE MERGER (AS DEFINED IN THE OFFER
TO PURCHASE) ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF
TARGET, AND RECOMMENDS THAT THE SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by The Bank of New York, as Depositary
(the "Depositary"), of certificates for such Shares (or timely Book-Entry
Confirmation of a transfer of such Shares as described in "The Offer--
Procedure for Tendering Shares" of the Offer to Purchase), a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and
any other documents required by the Letter of Transmittal.
Neither the Purchaser nor its affiliates will pay any fees or commissions to
any broker or dealer or other person (other than the Dealer-Manager) to
solicit 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 customers.
Questions and requests for additional copies of the enclosed material may be
directed to Lehman Brothers Inc., the Dealer-Manager for the Offer, or
Georgeson & Company Inc., the Information Agent for the Offer, at the
addresses and telephone numbers set forth on the back cover of the enclosed
Offer to Purchase.
Very truly yours,
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Telephone: (212) 526-2161
Facsimile: (212) 526-3843
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF PURCHASER, THE DEPOSITARY, THE INFORMATION
AGENT, THE DEALER-MANAGER OR ANY OF THEIR RESPECTIVE AFFILIATES OR AUTHORIZE
YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE
ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN
THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
OFFER TO PURCHASE FOR CASH
UP TO 7,000,000 SHARES OF COMMON STOCK
OF
DH TECHNOLOGY, INC.
AT
$25 NET PER SHARE
BY
AX ACQUISITION CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
AXIOHM S.A.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY AUGUST 12, 1997 (THE "EXPIRATION
DATE"), UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated July 16, 1997
(the "Offer to Purchase"), and a related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute
the "Offer") relating to an offer by AX Acquisition Corporation, a California
corporation (the "Purchaser") and an indirect wholly owned subsidiary of
Axiohm S.A., a French corporation (the "Parent"), to purchase the Maximum
Number (as defined in the Offer to Purchase) of shares of Common Stock,
without par value (the "Shares"), of DH Technology, Inc., a California
corporation (the "Target"), at $25 per share, net to the seller in cash
without interest, upon the terms and subject to the conditions set forth in
the Offer.
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 IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED 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 to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The tender price is $25 per share, net to the seller in cash without
interest, upon the terms and subject to the conditions set forth in the
Offer.
2. The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the expiration date of the
Offer at least 6,500,000 Shares (the "Minimum Condition"). The Offer is
also subject to certain other conditions contained in the Offer to
Purchase. See "The Offer--Terms of the Offer, Proration and Expiration
Date" and "The Offer--Certain Conditions of the Offer".
3. The Offer is being made for up to the Maximum Number. If more than the
Maximum Number of Shares are validly tendered prior to the Expiration Date
and not withdrawn, Purchaser will, upon the terms and subject to the
conditions of the Offer, accept such Shares on a pro rata basis, based upon
the number of Shares validly tendered prior to the Expiration Date and not
withdrawn.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Tuesday, August 12, 1997, unless the Offer is extended
by the Purchaser. In all cases, payment for Shares accepted for payment
pursuant to the Offer will be made only after timely receipt by The Bank of
New York, as Depositary, of certificates for such Shares (or timely Book-
Entry Confirmation of a transfer of such Shares as described in "The
Offer--Procedure for Tendering Shares" of the Offer to Purchase), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by the Letter of Transmittal.
5. The Purchaser will pay any stock transfer taxes with respect to the
transfer and sale of Shares to it or its order pursuant to the Offer,
except as otherwise provided in Instruction 6 of the Letter of Transmittal.
The Offer is being made solely by the Offer to Purchase and the related
Letter of Transmittal and is being made to all holders of Shares. Purchaser is
not aware of any jurisdictions where the making of the Offer is not in
<PAGE>
compliance with applicable law. If Purchaser becomes aware of any jurisdiction
in which the making of the Offer would not be in compliance with applicable
law, Purchaser will make a good faith effort to comply with any such laws. If,
after such good faith effort, Purchaser cannot comply with any such law, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares residing in 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 shall be deemed to be made on behalf of
Purchaser by Lehman Brothers Inc. as Dealer-Manager.
IF YOU WISH TO HAVE US TENDER ANY OR ALL OF YOUR SHARES, PLEASE SO INSTRUCT
US BY COMPLETING, EXECUTING, DETACHING AND RETURNING TO US THE INSTRUCTION
FORM SET FORTH BELOW. AN ENVELOPE TO RETURN YOUR INSTRUCTIONS TO US IS
ENCLOSED. IF YOU AUTHORIZE TENDER OF YOUR SHARES, ALL SUCH SHARES WILL BE
TENDERED UNLESS OTHERWISE SPECIFIED BELOW. YOUR INSTRUCTIONS TO US SHOULD BE
FORWARDED PROMPTLY TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE
EXPIRATION OF THE OFFER.
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH UP TO
THE MAXIMUM NUMBER OF THE OUTSTANDING
SHARES OF COMMON STOCK
OF
DH TECHNOLOGY, INC.
The undersigned acknowledge(s) receipt of your letter enclosing the Offer to
Purchase, dated July 16, 1997 (the "Offer to Purchase"), of AX Acquisition
Corporation, a California corporation (the "Purchaser") and an indirect wholly
owned subsidiary of Axiohm S.A., a French corporation (the "Parent"), and the
related Letter of Transmittal in connection with the Offer to Purchase the
Maximum Number (as defined in the Offer to Purchase) of shares of Common
Stock, without par value, of DH Technology, Inc., a California corporation
(the "Shares"), at a purchase price of $25 per Share, net to the seller in
cash without interest.
This will instruct you to tender all of the Shares held by you for the
account of the undersigned, unless another number is indicated below, on the
terms and conditions set forth in such Offer to Purchase and the related
Letter of Transmittal.
Number of Shares to be Tendered* Shares
*Unless otherwise indicated, it will be assumed that all your Shares are to
be tendered.
SIGN HERE
Signature(s): _________________________________________________________________
Name(s): ______________________________________________________________________
Please print name(s)
Address: ______________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.: __________________________________________________
Taxpayer Identification or Social Security No.:
Dated: , 1997
<PAGE>
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:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
(i) List first and circle the name of the person whose number you furnish.
(ii) Circle the minor's name and furnish the minor's Social Security Number.
(iii) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(iv) Show the name of the owner. You may also enter your business name. You
may use your Social Security Number or Employer Identification Number.
(v) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<TABLE>
<CAPTION>
- -------------------------
FOR THIS GIVE THE
TYPE OF SOCIAL SECURITY
ACCOUNT: NUMBER OF:
- -------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one
of the
individuals (i)
3. Husband and wife The actual owner
(joint account) of the account
or, if joint
funds, either
person (i)
4. Custodian account of a minor (Uniform Gift to Minors Act) The minor (ii)
5. Adult and minor (joint account) The adult or, if
the minor is the
only
contributor, the
minor (i)
6. Account in the name of guardian or committee for a The ward, minor,
designated ward, minor or incompetent person or incompetent
person (iii)
7a. The usual revocable savings trust account (grantor is The grantor-
also trustee) trustee (i)
b. So-called trust account that is not a legal or valid The actual owner
trust under State law (i)
</TABLE>
<TABLE>
<CAPTION>
- -------------------------
FOR THIS GIVE THE
TYPE OF SOCIAL SECURITY
ACCOUNT: NUMBER OF:
- -------------------------
<S> <C>
8. Sole proprietorship account The owner (iv)
9. A valid trust, estate, or pension trust The legal entity
(Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title) (v)
10. Corporate account The corporation
11. Religious, charitable, or educational organization The organization
account
12. Partnership The partnership
13. Association, club, or other tax-exempt organization The organization
14. A broker or registered nomine The broker or
nominee
15. Account with the Department of Agriculture in the name of The public
a public entity (such as a State or local government, entity
school district, or prison) that receives agricultural
program payments
</TABLE>
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you do not have a Taxpayer Identification Number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under Section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under Section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
Section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
. Payments to nonresident aliens subject to withholding under Section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct Taxpayer Identification Number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
. Payments described in Section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under Section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under Sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE--Section 6109 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. 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.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject to
a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT (a)(7)
FORM OF SUMMARY ADVERTISEMENT
This announcement is neither an offer to purchase nor a solicitation
of an offer to sell shares. The Offer is made solely by the Offer to Purchase
dated July 16, 1997 and the related Letter of Transmittal, and is being made to
all holders of Shares. Purchaser is not aware of any state where the making of
the Offer is prohibited by administrative or judicial action pursuant to any
valid state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, Purchaser will make a good faith effort to comply with such state
statute. If, after such good faith effort, Purchaser cannot comply with such
state statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares in such State. In any jurisdiction where
the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
Purchaser by Lehman Brothers Inc. as Dealer-Manager, or one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
up to 7,000,000
Shares of Common Stock
of
DH Technology, Inc.
at
$25 Net Per Share
by
AX Acquisition Corporation
an indirect wholly owned subsidiary of
Axiohm S.A.
AX Acquisition Corporation, a newly formed California corporation (the
"Purchaser") and an indirect wholly owned subsidiary of Axiohm S.A., a French
corporation (the "Parent"), is offering to purchase not less than 6,500,000 (the
"Minimum Condition") and up to 7,000,000 (the "Maximum Number") shares of Common
Stock, without par value (the "Shares"), of DH Technology, Inc., a California
corporation (the "Target"), which shares represented 87.6% of the Shares
outstanding as of July 11, 1997, at a price of $25 per Share, net to the seller
in cash, without interest (the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal (which, together with any supplements or amendments thereto
collectively constitute the "Offer"). Following the Offer, Purchaser and Target
intend to effect the Axiohm Exchange (as defined below), the Acquisition of
Purchaser (as defined below) and the Merger (as defined below).
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, AUGUST 12, 1997, UNLESS THE OFFER IS
EXTENDED.
The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer at least
6,500,000 shares (representing 81.3% of the outstanding shares of Common Stock
of Target as of July 11, 1997) and (ii) the expiration or termination of any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and the regulations thereunder. The Offer
is also subject to other terms and conditions which are contained in the Offer
to Purchase.
<PAGE>
The Offer is being made pursuant to an Agreement and Plan of Merger
dated as of July 14, 1997 (the "Merger Agreement") among Parent, Purchaser and
Target. Pursuant to the Merger Agreement, Purchaser and Target will effect a
series of transactions consisting of, among other things, the Offer, the Axiohm
Exchange (defined below), the Acquisition of Purchaser (defined below) and the
Merger (defined below).
The Board of Directors of Target ("Target's Board") has unanimously
approved the Merger Agreement and determined that the transactions contemplated
thereby, including the Offer, the Axiohm Exchange, the Acquisition of Purchaser,
and the Merger are fair to, and in the best interests of, the shareholders of
Target, and recommends that the shareholders accept the Offer and tender their
shares pursuant to the Offer.
Following (or concurrently with) the Offer, Purchaser will attempt to
enter into stock purchase agreements with the shareholders of Parent pursuant to
which Purchaser shall attempt to purchase from such shareholders all of the
outstanding shares of the capital stock of Parent for an aggregate of 5,518,524
of the Shares which Purchaser is acquiring in the Offer (the "Exchange Shares")
and an aggregate of $12,197,900 in cash (the "Axiohm Exchange") (or, if at the
closing of the Axiohm Exchange, Purchaser has not obtained the financing
necessary to pay the entire amount of such cash, an aggregate of 5,833,732
Exchange Shares and an aggregate of $4,317,700 in cash). The Axiohm Exchange
will result in approximately 79% to 85% (depending on the actual number of
Shares purchased pursuant to the Offer and the actual number of Exchange Shares
transferred by Purchaser in the Axiohm Exchange) of Target's outstanding Common
Stock being held by Parent shareholders after the completion of the Merger and
the cancellation of the Shares owned by Purchaser (described below).
Simultaneously with the closing of the Axiohm Exchange, Parent will sell to
Target, and Target will purchase from Parent (the "Acquisition of Purchaser"),
all of the outstanding shares of the capital stock of Purchaser in exchange for
Target's assumption, on a joint and several basis with Purchaser, of any and all
obligations with respect to indebtedness incurred, or preferred stock issued, by
Purchaser or Purchaser's Shareholder in connection with the Offer and the Axiohm
Exchange, which obligations shall not exceed $199.0 million. As a result of the
Axiohm Exchange and the Acquisition of Purchaser, Parent will become a
subsidiary of Purchaser and Purchaser will become a wholly owned subsidiary of
Target. Following the Axiohm Exchange and the Acquisition of Purchaser,
Purchaser will be merged with and into Target (the "Merger") and the Shares
owned by Purchaser will be cancelled (as will the shares of Purchaser owned by
Target). In the Merger, the name of Target, as the surviving corporation in the
Merger will be changed to Axiohm Inc.
Following the Offer, the Axiohm Exchange, the Acquisition of Purchaser
and the Merger, Parent will be a subsidiary of Target and Target will be
approximately 79% to 85% owned by the former Parent shareholders and
approximately 15% to 21% owned by the current shareholders of Target (depending
on the actual number of Shares purchased pursuant to the Offer and the actual
number of Exchange Shares transferred by Purchaser in the Axiohm Exchange).
Following such transactions, approximately 51% to 55% of the outstanding shares
of Target's Common Stock will be beneficially owned by two principal
shareholders and directors of Parent. Target's Common Stock is expected to
continue to be quoted on the Nasdaq National Market and it is anticipated that
Target will remain subject to the reporting requirements of the U.S. Securities
Exchange Act of 1934, as amended (the "Exchange Act"). However, if the Maximum
Number is increased by Purchaser, the anticipated Nasdaq quotation and Exchange
Act reporting treatment described above may be affected.
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<PAGE>
For purposes of the Offer, Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered to Purchaser and not
withdrawn as, if and when Purchaser gives oral or written notice to The Bank of
New York, as Depositary (the "Depositary"), of Purchaser's acceptance for
payment of such Shares. 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 tendering shareholders for the purpose of receiving payment
from Purchaser and transmitting payment to validly tendering shareholders whose
Shares have been accepted for 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 (i) certificates for such Shares (or timely
Book-Entry Confirmation of the book-entry transfer of such Shares into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set forth in "The Offer--Procedure for Tendering Shares" of the Offer
to Purchase), (ii) a Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in connection with a book-
entry transfer and (iii) any other documents required by such Letter of
Transmittal. Under no circumstances will interest be paid by Purchaser on the
Offer Price for the Shares tendered pursuant to the Offer, regardless of any
extension of the Offer or any delay in making such payment.
The term "Expiration Date" means 12:00 Midnight, New York City time,
on Tuesday, August 12, 1997, unless and until Purchaser, in its sole discretion,
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 at which
the Offer, as so extended by Purchaser, will expire. Purchaser expressly
reserves the right, in its sole discretion (subject to the terms and conditions
of the Merger Agreement), at any time and from time to time, to extend for any
reason the period of time during which the Offer is open, including the
occurrence of any condition specified in "The Offer--Certain Conditions of the
Offer" of the Offer to Purchase, 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, such announcement to be made no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date (as defined below) of the Offer. During
any such extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the rights of a tendering shareholder to
withdraw his Shares.
Upon the terms and subject to the conditions of the Offer, if more
than the Maximum Number of Shares shall be validly tendered and not withdrawn
prior to the Expiration Date, Purchaser will, upon the terms and conditions of
the Offer, purchase the Maximum Number of Shares on a pro rata basis (with
adjustments to avoid purchases of fractional shares) based upon the number of
Shares validly tendered and not withdrawn prior to the Expiration Date.
Except as otherwise provided in the Offer to Purchase, tenders of
Shares made pursuant to the Offer are irrevocable, provided that Shares tendered
pursuant to the Offer may be withdrawn pursuant to the procedures set forth
below at any time prior to the Expiration Date and, unless theretofore accepted
for payment by Purchaser pursuant to the Offer, may also be withdrawn at any
time after September 12, 1997. For a withdrawal to be effective, a written,
telegraphic 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 and must specify the name of the person having tendered
the Shares to be withdrawn, the number of Shares to be withdrawn, and the name
of the registered holder of the Shares to be withdrawn, if different from the
name of the persons who tendered the Shares. If certificates for the Shares have
been delivered or otherwise identified to the Depositary, then, prior to the
physical release of such certificates, the serial
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<PAGE>
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered by an Eligible Institution, the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been delivered pursuant to the procedures for book-
entry transfer as set forth in "The Offer--Procedure for Tendering Shares" of
the Offer to Purchase, any notice of withdrawal must also specify the name and
number of the account at the appropriate financial institution that is a
participant in a Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's procedures
for such withdrawal, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the second
sentence of this paragraph. Withdrawals of tenders of Shares may not be
rescinded, and any Shares properly withdrawn will thereafter be deemed not
validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described in "The Offer--
Procedure for Tendering Shares" of the Offer to Purchase at any time on or prior
to the Expiration Date.
All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by Purchaser, in its sole
discretion, which determination will be final and binding. None of Purchaser,
Parent, any of their affiliates or assigns, the Depositary, the Dealer-Manager,
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 any such notification.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) 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.
Target has provided Purchaser with Target's shareholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase, the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares whose names appear
on Target's shareholder list 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 shareholder 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 related Letter of Transmittal contain
important information which should be read before any decision is made with
respect to the Offer.
Questions and requests for assistance or for additional copies of the
Offer to Purchase and the related Letter of Transmittal and other tender offer
materials may be directed to the Dealer-Manager or the Information Agent as set
forth below, and copies will be furnished promptly at Purchaser's expense. No
fees or commissions will be paid to brokers, dealers or other persons (other
than the Dealer-Manager and the Information Agent) for soliciting tenders of
Shares pursuant to the Offer.
The Information Agent for the Offer is:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
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<PAGE>
The Dealer-Manager for the Offer is:
LEHMAN BROTHERS
Three World Financial Center
New York, New York 10285
Call Collect: (212) 526-2161
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<PAGE>
EXHIBIT (a)(8)
DH TECHNOLOGY, INC. AND AXIOHM S.A. AGREE TO COMBINE THROUGH
A TENDER OFFER FOR UP TO 7,000,000 OF THE OUTSTANDING SHARES
OF DH TECHNOLOGY AT $25 PER SHARE
(San Diego, California, July 14, 1997) DH Technology, Inc. (Nasdaq: DHTK)
("DH") and Axiohm S.A., a private French company ("Axiohm") announced today that
they have signed a definitive merger agreement to combine their operations.
Pursuant to the agreement, a wholly-owned subsidiary of Axiohm will commence a
cash tender offer no later than July 21, 1997 to acquire not less than 6,500,000
shares and not more than 7,000,000 shares of the outstanding stock of DH at $25
per share. As a result of a subsequent merger and related transactions, the
current DH shareholders will own between 15% and 21% of DH's outstanding shares
depending on the number of shares tendered.
<PAGE>
EXHIBIT C
AGREEMENT AND PLAN OF MERGER
Among
AXIOHM S.A.
AX ACQUISITION CORPORATION
and
DH TECHNOLOGY, INC.
Dated as of July 14, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE I
THE OFFER
<S> <C>
SECTION 1.1 The Offer......................................................... 2
SECTION 1.2 Company Action.................................................... 3
ARTICLE II
AXIOHM EXCHANGE, ACQUISITION OF PURCHASER AND MERGER
SECTION 2.1 The Axiohm Exchange............................................... 5
SECTION 2.2 Acquisition of Purchaser.......................................... 7
SECTION 2.3 The Merger........................................................ 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Organization and Standing; Subsidiaries........................... 9
SECTION 3.2 Capitalization of the Company..................................... 10
SECTION 3.3 Financial Statements; Exchange Act Filings........................ 11
SECTION 3.4 No Undisclosed Liabilities........................................ 11
SECTION 3.5 Absence of Certain Changes, Events or Conditions.................. 12
SECTION 3.6 No Default........................................................ 12
SECTION 3.7 Litigation, Etc................................................... 12
SECTION 3.8 Intellectual Property............................................. 12
SECTION 3.9 No Excess Parachute Payments; Section 162(m) of the Code.......... 13
SECTION 3.10 Environmental Laws and Regulations................................ 13
SECTION 3.11 Compliance........................................................ 14
SECTION 3.12 Offer Documents; Registration Statement and Exchange Documents.... 14
SECTION 3.13 No Conflict With Other Documents.................................. 15
SECTION 3.14 Authority; Consents............................................... 15
SECTION 3.15 Contracts......................................................... 16
SECTION 3.16 Customers and Suppliers........................................... 17
SECTION 3.17 Tax Matters....................................................... 17
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 3.18 Pension and Employee Benefit Plans.............................. 18
SECTION 3.19 Foreign Corrupt Practices Act................................... 19
SECTION 3.20 No Pending Transactions......................................... 20
SECTION 3.21 Transactions with Affiliates.................................... 20
SECTION 3.22 Opinion of Financial Advisor.................................... 20
SECTION 3.23 Brokers......................................................... 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
SECTION 4.1 Organization and Standing; Subsidiaries......................... 21
SECTION 4.2 Capitalization of Parent........................................ 22
SECTION 4.3 Financial Statements............................................ 22
SECTION 4.4 No Undisclosed Liabilities...................................... 23
SECTION 4.5 Absence of Certain Changes, Events or Conditions................ 23
SECTION 4.6 No Default...................................................... 23
SECTION 4.7 Litigation, Etc................................................. 24
SECTION 4.8 Intellectual Property........................................... 24
SECTION 4.9 Environmental Laws and Regulations.............................. 25
SECTION 4.10 Compliance...................................................... 25
SECTION 4.11 Offer Documents; Registration Statement and Exchange Documents.. 25
SECTION 4.12 No Conflict With Other Documents................................ 26
SECTION 4.13 Authority; Consents............................................. 26
SECTION 4.14 Contracts....................................................... 27
SECTION 4.15 Customers and Suppliers......................................... 27
SECTION 4.16 Tax Matters..................................................... 28
SECTION 4.17 Pension and Employee Benefit Plans.............................. 28
SECTION 4.18 Foreign Corrupt Practices Act................................... 30
SECTION 4.19 No Pending Transactions......................................... 30
SECTION 4.20 Transactions with Affiliates.................................... 30
SECTION 4.21 Brokers......................................................... 31
SECTION 4.22 Financing....................................................... 31
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending the Merger.......... 31
SECTION 5.2 Maintenance of Cash............................................ 33
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 5.3 Conduct of Business of Parent Pending the Merger.................. 33
SECTION 5.4 Conduct of Business of Purchaser Pending the Merger............... 36
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Company Board Representation; Co-Chairmen of the Board of
Directors; Section 14(f)........................................ 36
SECTION 6.2 Access to Information; Confidentiality............................ 37
SECTION 6.3 No Solicitation of Transactions................................... 38
SECTION 6.4 Stock Options..................................................... 39
SECTION 6.5 Notification of Certain Matters................................... 39
SECTION 6.6 Further Action; All Reasonable Efforts............................ 39
SECTION 6.7 Public Announcements.............................................. 40
SECTION 6.8 Disposition of Litigation......................................... 40
SECTION 6.9 Officer's and Directors' Indemnification.......................... 40
SECTION 6.10 Issuance of Company Warrants and Roll-Over Notes.................. 41
ARTICLE VII
CONDITIONS TO AXIOHM EXCHANGE,
ACQUISITION OF PURCHASER AND MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect the
Axiohm Exchange.................................................. 42
SECTION 7.2 Conditions to Obligation of Each Party to
Effect the Acquisition of Purchaser.............................. 42
SECTION 7.3 Conditions to Obligation of Each Party to
Effect the Merger ............................................... 43
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination......................................................... 43
SECTION 8.2 Effect of Termination............................................... 44
SECTION 8.3 Fees................................................................ 44
SECTION 8.4 Amendment........................................................... 46
SECTION 8.5 Waiver.............................................................. 46
</TABLE>
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ARTICLE IX
GENERAL PROVISIONS
<TABLE>
<CAPTION>
<S> <C>
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements.. 46
SECTION 9.2 Notices..................................................... 46
SECTION 9.3 Certain Definitions......................................... 47
SECTION 9.4 Severability................................................ 48
SECTION 9.5 Entire Agreement; Assignment................................ 48
SECTION 9.6 Parties in Interest......................................... 49
SECTION 9.7 Specific Performance........................................ 49
SECTION 9.8 Governing Law............................................... 49
SECTION 9.9 United States Currency...................................... 49
SECTION 9.10 Headings................................................... 49
SECTION 9.11 Counterparts............................................... 49
</TABLE>
ANNEX A Offer Conditions
ANNEX B Company Outstanding Options
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 14, 1997 (the "Agreement"),
among AXIOHM S.A., a French corporation ("Parent"), AX ACQUISITION CORPORATION,
a California corporation ("Purchaser") and a wholly-owned subsidiary of Axiohm
IPB, Inc., a Delaware corporation ("IPB") which is a wholly-owned subsidiary of
Parent and DH TECHNOLOGY, INC. a California corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Purchaser and the Company have
each determined that it is in the best interests of their respective
shareholders for the principal shareholders of Parent to acquire the Company
upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, it is proposed that Purchaser
shall make a cash tender offer (the "Offer") to acquire up to 7.0 million shares
(the "Specified Number") of Common Stock, no par value, of the Company ("Company
Common Stock"), representing approximately 88% of the outstanding shares of
Company Common Stock as of the date hereof (such shares of Company Common Stock
being hereinafter collectively referred to herein as "Shares") for $25.00 per
Share net to the seller in cash (such amount, or any greater amount per Share
paid pursuant to the Offer, being hereinafter referred to as the "Per Share
Amount"), upon the terms and subject to the conditions of this Agreement and the
Offer;
WHEREAS, the Board of Directors of the Company has unanimously consented to
the making of the Offer by Purchaser and resolved and agreed to recommend that
holders of Shares tender their Shares pursuant to the Offer;
WHEREAS, also in furtherance of such acquisition, the respective Boards of
Directors of Parent, Purchaser and the Company have each approved (i) the
purchases (collectively, the "Axiohm Exchange") to be made by Purchaser from the
shareholders of Parent, of all of the outstanding shares (each, a "Parent
Share") of the common stock of Parent (the "Parent Stock") held by such
shareholders for an aggregate of 5,518,524 Shares and approximately $12.2
million (or, if at the closing of the Axiohm Exchange, Purchaser does not have
available the financing necessary to pay the entire amount of such cash, an
aggregate of 5,883,732 Shares and approximately $4.3 million); (ii) the sale by
IPB to the Company and the purchase by the Company from IPB (the "Acquisition of
Purchaser") of all of the outstanding capital stock of Purchaser in exchange for
the assumption by the Company, on a joint and several basis with Purchaser, of
any and all obligations with respect to indebtedness incurred, or preferred
stock issued, by Purchaser or IPB in connection with the Offer and the Axiohm
Exchange (which obligations shall not exceed $199 million); (iii) the merger
(the "Merger") of Purchaser with and into the Company in accordance with the
California General Corporation Law ("CGCL") following the consummation of the
Offer, the Axiohm Exchange and
<PAGE>
the Acquisition of Purchaser upon the terms and subject to the conditions set
forth herein; and (iv) the other transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1 The Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Section 8.1 hereof and no event shall have
occurred and no circumstance shall exist which would result in a failure to
satisfy any of the conditions or events set forth in Annex A hereto (the "Offer
Conditions"), Purchaser shall commence the Offer at the initial Per Share Amount
as soon as reasonably practicable after the date hereof, and in any event within
five business days from the date hereof, but in no event later than five
business days after the initial public announcement of Purchaser's intention to
commence the Offer. The obligation of Purchaser to accept for payment the
Specified Number of Shares tendered pursuant to the Offer shall be subject to
the condition (the "Minimum Condition") that at least 6.5 million Shares
(representing approximately 81% of the outstanding Company Common Stock as of
the date of this Agreement) shall have been validly tendered and not withdrawn
prior to the expiration of the Offer, and also shall be subject to the
satisfaction of the other Offer Conditions. Purchaser expressly reserves the
right, in its sole discretion, to increase the Specified Number, waive any Offer
Condition and make any other changes in the terms and conditions of the Offer;
provided, however, that, unless previously approved by the Company in writing,
no change may be made which decreases the initial Per Share Amount, changes the
form of consideration payable in the Offer (other than by adding consideration),
reduces the Specified Number, changes the Minimum Condition, or imposes
conditions to the Offer in addition to those set forth herein which are adverse
to holders of the Shares. Purchaser covenants and agrees that, subject to the
terms and conditions of this Agreement, including but not limited to the Offer
Conditions, it will accept for payment and pay for up to the Specified Number of
Shares (in accordance with the proration provisions of Section 1.1(b), if
necessary) as soon as practicable after it is permitted to do so under
applicable law, subject to the prior satisfaction of the Offer Conditions.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, (i) extend the Offer beyond the scheduled expiration date (the initial
scheduled expiration date being 20 business days following the commencement of
the Offer) if, at the scheduled expiration date of the Offer, any of the
conditions to Purchaser's obligations to accept for payment, and to pay for, the
Shares, shall not be satisfied or waived, (ii) extend the Offer for any period
required by any rule, regulation or interpretation of the Securities and
Exchange Commission (the "SEC") or the staff thereof applicable to the Offer, or
(iii) extend the Offer for an aggregate
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<PAGE>
period of not more than 10 business days beyond the latest applicable date that
would otherwise be permitted under clause (i) or (ii) of this sentence, if as of
such date, all of the conditions to Purchaser's obligations to accept for
payment, and to pay for, the Shares are satisfied or waived, but the number of
Shares validly tendered and not withdrawn pursuant to the Offer equals at least
the Minimum Condition but less than the Specified Number, of the outstanding
Shares; provided, however, that if, on the initial scheduled expiration date of
the Offer, the sole condition remaining unsatisfied is the failure of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), to have expired or been terminated, then, in either
case, Purchaser shall extend the Offer from time to time until five business
days after the expiration or termination of the applicable waiting period under
the HSR Act.
(b) If more Shares than the Specified Number are validly tendered prior to
the expiration or termination of the Offer and not properly withdrawn, Purchaser
will, upon the terms and subject to the conditions of the Offer, accept for
payment and pay for only the Specified Number, on a pro rata basis, with
adjustments to avoid purchases of fractional Shares, based on the number of
Shares validly tendered and not properly withdrawn prior to the expiration or
termination of the Offer.
(c) As soon as reasonably practicable on the date of commencement of the
Offer, Purchaser and Parent shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer. The Schedule 14D-1 shall contain
or shall incorporate by reference an offer to purchase (the "Offer to Purchase")
and forms of the related letter of transmittal and any related summary
advertisement (which Schedule 14D-1, Offer to Purchase and other documents,
together with any further supplements or amendments thereto, are referred to
herein collectively as the "Offer Documents"). The Company and its counsel
shall be given the opportunity to review and comment on the Offer Documents
before they are filed with the SEC or first published, sent or given to
shareholders, and shall be given copies of any comment letters from the SEC
regarding the Schedule 14D-1 and, to the extent practicable, the opportunity to
participate in conversations with the SEC staff. The Schedule 14D-1 and all
amendments thereto will comply in all material respects with the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder. Parent, Purchaser and the Company each
agrees promptly to correct any information provided by it for use in the Offer
Documents that shall have become false or misleading in any material respect,
and Parent and Purchaser 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.
SECTION 1.2 Company Action. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that: (i) its Board of
Directors, at a meeting duly called and held on July 13-14, 1997, has
unanimously (A) determined that this Agreement and the transactions contemplated
hereby, including each of the Offer, the Axiohm Exchange, the Acquisition of
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<PAGE>
Purchaser and the Merger, are fair to and in the best interests of the holders
of Shares, (B) approved and adopted this Agreement and the transactions
contemplated hereby and (C) resolved to recommend that the shareholders of the
Company accept the Offer and tender their Shares to Purchaser thereunder
(provided, however, that subject to the provisions of Section 6.3 such
recommendation may be withdrawn, modified or amended in connection with a
Superior Proposal (as defined in Section 6.3)); and (ii) Prudential Securities
Incorporated (the "Financial Adviser"), has delivered to the Board of Directors
of the Company its written opinion that the consideration to be received by
holders of shares of Company Common Stock (other than Parent and its
affiliates), consisting of the cash consideration to be received by such holders
pursuant to the Offer and the shares of Company Common Stock to be retained by
such holders following the consummation of the Axiohm Exchange, the Acquisition
of Purchaser and the Merger, is fair to such holders from a financial point of
view. The Company has been authorized by the Financial Adviser to permit,
subject to prior review and consent by the Financial Adviser, the inclusion of
such fairness opinion (or a reference thereto) in the Offer Documents and in the
Schedule 14D-9 referred to below. The Company hereby consents to the inclusion
in the Offer Documents of the recommendations of the Company's Board of
Directors described in this Section 1.2(a).
(b) As soon as reasonably practicable on the date of filing by Parent and
Purchaser of the Offer Documents with the SEC, the Company shall file with the
SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9"), containing the
recommendations of the Company's Board of Directors described in Section 1.2(a)
and shall promptly mail the Schedule 14D-9 to the shareholders of the Company.
Parent and its counsel shall be given the opportunity to review and comment on
the Schedule 14D-9 before it is filed with the SEC, and shall be given copies of
any comment letters from the SEC regarding the Schedule 14D-9 and, to the extent
practicable, the opportunity to participate in conversations with the SEC staff.
The Schedule 14D-9 and all amendments thereto will comply in all material
respects with the Exchange Act and the rules and regulations promulgated
thereunder. The Company, Parent and Purchaser each agrees promptly to correct
any information provided by it for use in the Schedule 14D-9 that shall have
become false or misleading in any material respect, and the Company further
agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and disseminated to 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 shall promptly furnish
Purchaser with mailing labels, security position listings, any non-objecting
beneficial owner lists and any available listings or computer files containing
the names and addresses of the record holders of Shares, each as of a recent
date, and shall promptly furnish Purchaser with such additional information
(including but not limited to updated lists of shareholders, mailing labels,
security position listings and non-objecting beneficial owner lists) and such
other assistance as Parent, Purchaser or their agents may reasonably require in
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable laws and except for such steps as are
necessary to
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disseminate the Offer Documents and any other documents necessary to consummate
the Offer, the Axiohm Exchange, the Acquisition of Purchaser and the Merger, as
applicable, Parent and Purchaser (and their agents) shall hold in confidence the
information contained in any of such labels and lists and, if this Agreement
shall be terminated, will upon request promptly deliver to the Company or
destroy all copies of such information then in their possession or control.
ARTICLE II
AXIOHM EXCHANGE, ACQUISITION OF PURCHASER AND MERGER
SECTION 2.1 The Axiohm Exchange. (a) Upon the terms and subject to the
conditions of this Agreement, as soon as practicable after the date hereof,
Purchaser shall commence the Axiohm Exchange by seeking to enter into stock
purchase agreements ("Axiohm Purchase Agreements") with all holders of Parent
Shares (the "Parent Holders"). Pursuant to the Axiohm Purchase Agreements,
Purchaser shall attempt to purchase from the Parent Holders all Parent Shares
held by such Parent Holders for an aggregate of 5,518,524 Shares of the Company
Common Stock purchased by Purchaser in the Offer (the "Exchange Shares") plus an
aggregate of $12,197,900 in cash (the "Exchange Cash") (the Exchange Shares and
the Exchange Cash are hereinafter referred to collectively as the "Exchange
Consideration"). The payment of the Exchange Shares shall be pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Act"). The aggregate value of the Exchange Consideration to be
paid by Purchaser to each Parent Holder shall be in proportion to the percentage
of outstanding Parent Shares which are held by such Parent Holder, provided,
however, that Purchaser reserves the right to vary the relative amount of
Exchange Shares and Exchange Cash to be received by each Parent Holder as a part
of such Exchange Consideration. In the event that at the Axiohm Exchange
Closing (as defined below) Purchaser does not have available the financing
necessary to pay the entire amount of the Exchange Cash to the Parent Holders,
then the aggregate Exchange Cash to be paid by Purchaser shall be reduced to
$4,317,700 and the number of Exchange Shares to be transferred by Purchaser to
the Parent Holders in the Axiohm Exchange shall be increased to an aggregate of
5,833,732 Shares. Except as set forth above, neither Parent nor Purchaser shall
distribute or transfer any other amounts to the Parent Holders in connection
with the transactions contemplated by this Agreement.
(b) Effective Time of Axiohm Exchange. No later than 45 days after the
satisfaction or waiver of the conditions set forth in Section 7.1 and
immediately prior to the Effective Time, Purchaser and Parent shall cause the
Axiohm Exchange to be consummated (the "Axiohm Exchange Closing").
(c) Reduction in Exchange Consideration. Notwithstanding anything to the
contrary contained herein, in the event that less than all of the Parent Shares
are delivered to Purchaser
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pursuant to the Axiohm Exchange (whether directly or indirectly pursuant to
Section 2.1(e)), the Exchange Consideration to be issued in the Axiohm Exchange
shall be reduced proportionately.
(d) Treatment of Parent Outstanding Options. At the Axiohm Exchange
Closing, the Company shall cause all of the 1,583 Parent Outstanding Options (as
defined in Section 4.2), all of which are held by one individual (the "Parent
Option Holder"), to be replaced by an option to purchase an aggregate of 231,118
shares of Company Common Stock at an exercise price of $7.15 per share (the
"Replacement Options"). The Replacement Options shall be issued to the Parent
Option Holder pursuant to the Company's 1992 Stock Option Plan, as amended, or
will otherwise be exempt under Rule 16b-3 promulgated under Section 16 of the
Securities Exchange Act of 1934, as amended and, except as provided herein,
shall contain such general provisions as are typically contained in the Company
Outstanding Options. The options represented by the Replacement Option shall
become exercisable ratably over four years, with 20% of such options exercisable
upon the issuance thereof and an additional 20% to become exercisable on January
1 of each year thereafter, beginning with January 1, 1998. As soon as
practicable after the issuance of the Replacement Options, the Company shall
take all necessary actions to cause the shares of Company Common Stock to be
issued upon exercise of the Replacement Options to be registered under the Act.
(e) Indirect Exchange of Parent Shares. Notwithstanding anything to the
contrary contained herein, Parent, Purchaser and the Company acknowledge and
agree that (i) certain Parent Shares are owned by Dardel Technologies, S.A., a
French corporation which is wholly-owned by two individuals (the "Dardel
Holders") and (ii) provided that (A) Dardel has no liabilities other than
liabilities which are offset by cash remaining in Dardel and no assets other
than the Parent Shares and such cash, if any, and (B) the Company shall have
received from the Dardel Holders indemnification with respect to any undisclosed
liabilities of Dardel and any tax that arises from Purchaser's purchase of
Dardel Shares rather than Parent Shares in the Axiohm Exchange, then, at the
option of the Dardel Holders, Purchaser shall receive in the Axiohm Exchange all
of the capital stock of Dardel (the "Dardel Shares") in exchange for Exchange
Consideration, rather than receiving the Parent Shares directly from Dardel. In
the event that the Dardel Holders elect to have Purchaser receive the Dardel
Shares in place of the Parent Shares owned by Dardel, then (x) such Parent
Shares shall not be exchanged in the Axiohm Exchange but rather will be
beneficially owned by Purchaser following the Axiohm Exchange by virtue of
Purchaser's ownership of the Dardel Shares, (y) the Dardel Holders, rather than
Dardel, shall be considered "Parent Holders" for purposes of the Axiohm
Exchange, and (z) the distribution of the Exchange Consideration to the Dardel
Holders shall be, in the aggregate, based upon the number of Parent Shares owned
by Dardel and will be divided among such Dardel Holders in proportion to their
ownership of Dardel Shares immediately prior to the Axiohm Exchange.
(f) Registration of Resales of Exchange Shares. (i) As soon as
practicable following the Axiohm Exchange Closing, the Company shall (A) cause
to be filed with the SEC, a registration
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statement on Form S-3 (the "Registration Statement") under the Act relating to
the resale by the Parent Holders of the Exchange Shares, (B) use their
reasonable best efforts to cause such Registration Statement to become effective
at the earliest possible time, (C) in connection with the foregoing, file (I)
all pre-effective amendments to such Registration Statement as may be necessary
in order to cause such Registration Statement to become effective and (II) if
applicable, a post-effective amendment to such Registration Statement pursuant
to Rule 430A under the Act, (D) take any action (other than qualifying to do
business in any jurisdiction in which it is not now qualified) required to be
taken under any applicable state securities laws in connection with the resale
of the Exchange Shares; and (E) prepare all documents, notices and announcements
required in connection with the resale of such Exchange Shares, including the
prospectus included in the Registration Statement (the "Prospectus"), and cause
the Prospectus to be mailed to and otherwise made available to the Parent
Holders.
(ii) The Company shall cause the Registration Statement relating to the
resale of the Exchange Shares to be continuously effective for a period of not
less than two years.
SECTION 2.2 Acquisition of Purchaser. Simultaneously with the Axiohm
Exchange Closing, the Company and Parent hereby agree that the Company shall
purchase from IPB and Parent shall cause IPB to sell to the Company all shares
of the capital stock of Purchaser which are owned by IPB in exchange for the
assumption by the Company, on a joint and several basis with Purchaser, of any
and all obligations with respect to indebtedness incurred, or preferred stock
issued, by Purchaser or IPB in connection with the Offer and the Axiohm
Exchange, which obligations shall not exceed $199 million. The transactions
contemplated by this Section 2.2 are referred to herein as the "Acquisition of
Purchaser."
SECTION 2.3 The Merger. (a) Upon the terms and subject to the conditions
of this Agreement and in accordance with the CGCL, at the Effective Time (as
defined in Section 2.3(b)), Purchaser shall be merged with and into the Company.
As a result of the Merger, the separate corporate existence of Purchaser shall
cease and the Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation"), with the name Axiohm Inc.
(b) Effective Time of the Merger. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, the parties
hereto shall cause the Merger to be consummated by filing an Agreement of Merger
(the "Agreement of Merger") with the Secretary of State of the State of
California, in such form as required by and executed in accordance with the
relevant provisions of the CGCL (the date and time of the filing of the
Agreement of Merger with the Secretary of State of the State of California (or
such later time as is specified in the Agreement of Merger) being the "Effective
Time").
(c) Effects of the Merger. The Merger shall have the effects set forth in
the applicable provisions of the CGCL. Without limiting the generality of the
foregoing and subject thereto, at the
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Effective Time all the property, rights, privileges, immunities, powers and
franchises of the Company and Purchaser shall vest in the Surviving Corporation,
and all debts, liabilities and duties of the Company and Purchaser shall become
the debts, liabilities and duties of the Surviving Corporation.
(d) Articles of Incorporation; By-Laws. (i) At the Effective Time and
without any further action on the part of the Company and Purchaser, the
Articles of Incorporation of the Company as in effect immediately prior to the
Effective Time, until thereafter amended as provided therein and under the CGCL,
shall be the Articles of Incorporation of the Surviving Corporation; provided,
that, upon the consummation of the Merger, such Articles of Incorporation shall
be amended in accordance with Section 1110(d) of the CGCL to change the name of
the Surviving Corporation to Axiohm Inc.
(ii) At the Effective Time and without any further action on the part of
the Company and Purchaser, the By-Laws of Purchaser shall be the By-Laws of the
Surviving Corporation and thereafter may be amended or repealed in accordance
with their terms or the Articles of Incorporation of the Surviving Corporation
and as provided by law.
(e) Directors and Officers. Subject to Section 6.1, the directors of the
Company immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation, each to hold office in accordance with the
Articles of Incorporation and By-Laws of the Surviving Corporation, and, subject
to Section 6.1, the officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed (as the case may
be) and qualified.
(f) Cancellation of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Purchaser, the Company or the
holders of any of the following securities:
(i) Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than any Shares to be cancelled pursuant to
Section 2.3(f)(ii)) shall remain outstanding.
(ii) Each share of Company Common Stock owned by Purchaser or any other
direct or indirect wholly-owned subsidiary of Parent or of the Company, in each
case immediately prior to the Effective Time but after the Axiohm Exchange
Closing, shall be cancelled and retired without any conversion thereof and no
payment or distribution shall be made with respect thereto.
(iii) Each share of common, preferred or other capital stock of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
cancelled, since such shares are then owned by the Company.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser and Parent that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure schedule delivered by the Company to Purchaser and
Parent on or before the date of this Agreement (the "Company Disclosure
Schedule"). The Company Disclosure Schedule shall be arranged in sections
corresponding to the numbered and lettered sections contained in this Article
III.
SECTION 3.1 Organization and Standing; Subsidiaries. (a) Each of the
Company and its subsidiaries whose business or assets are material to the
Company (collectively, the "Company Subsidiaries," and, together with the
Company, collectively the "Corporation") is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its businesses as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a Material Adverse
Effect on the Corporation. When used in connection with the Company or any of
its subsidiaries, the term "Material Adverse Effect" means any change or effect
that would be materially adverse to the business, assets (whether tangible or
intangible), financial condition, results of operations of the Company and its
subsidiaries taken as a whole. The Company has heretofore delivered to
Purchaser accurate and complete copies of the Articles of Incorporation and By-
Laws (or equivalent organization documents), as currently in effect, of the
Company and each of the Company Subsidiaries. The Company Disclosure Schedule
includes a list of each of the Company's subsidiaries, together with the
jurisdiction of incorporation of each subsidiary and the percentage of each
subsidiary's outstanding capital stock or other equity interests owned by the
Company or its subsidiaries, as the case may be.
(b) Each of the Company and the Company Subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect on the Corporation.
SECTION 3.2 Capitalization of the Company. (a) The Company's entire
authorized capital stock consists of 29,500,000 shares, of which 28,500,000
shares are classified as Company Common Stock, and 1,000,000 of which are
classified as Preferred Stock, no par value (the "Preferred Stock"). As of the
date hereof, there are no shares of Preferred Stock issued and outstanding,
7,994,402 shares of Company Common Stock issued and outstanding and 1,811,721
shares reserved
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for issuance in connection with the Company's stock option plans (of which
options to purchase 315,825, 1,006,375 and 56,250 shares are outstanding under
the Company's 1983 Stock Option Plan, 1992 Stock Plan and the Director Warrant
Plan, respectively (the "Company Outstanding Options")). Except as set forth
above or as contemplated in connection with the Financing (as defined herein) or
by Annex B hereto, there are outstanding (i) no shares of capital stock or other
voting securities of the Company, (ii) no securities of the Company or any of
the Company Subsidiaries convertible into or exchangeable for shares of capital
stock or other voting securities of the Company, (iii) no options, warrants or
other rights to acquire from the Company or any of the Company Subsidiaries
(including any rights issued or issuable under a shareholders rights plan or
similar arrangement), and no obligations of the Company or any of the Company
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, (iv) no equity equivalents, interests in the ownership or earnings of
the Company or any of the Company Subsidiaries or other similar rights (with the
securities listed in clauses (i) through (iv) referred to collectively as the
"Corporation's Securities"), and (v) no outstanding obligations of the Company
or any of the Company Subsidiaries to repurchase, redeem or otherwise acquire
any of the Corporation's Securities or to make any investment (by loan, capital
contribution or otherwise) in any other entity. The Company Disclosure Statement
sets forth a list of all Company Outstanding Options and which such options are
currently vested.
(b) All of the outstanding capital stock of, or other ownership interests
in, each of the Company Subsidiaries, is owned by the Company, directly or
indirectly, free and clear of any Lien or any other limitation or restriction
(including any restriction on the right to vote or sell the same, except as may
be provided as a matter of law). For purposes of this Agreement, "Lien" means,
with respect to any asset (including, without limitation, any security) any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset. There are no securities of the Company or any of the
Company Subsidiaries convertible into or exchangeable for, no options or other
rights to acquire from the Company or any of the Company Subsidiaries, and no
other contract, understanding, arrangement or obligation (whether or not
contingent) providing for the issuance or sale, directly or indirectly, of, any
capital stock or other ownership interests in, or any other securities of, any
of the Company Subsidiaries. There are no outstanding contractual obligations
of the Company or any of the Company Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company.
(c) All issued and outstanding shares of the capital stock of the Company
and each of the Company Subsidiaries (i) have been duly authorized and validly
issued and are fully paid and non-assessable, free of any preemptive rights and
(ii) were issued in compliance with all applicable federal and state securities
laws. The Company Outstanding Options have been duly authorized and validly
issued and are in full force and effect.
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SECTION 3.3 Financial Statements; Exchange Act Filings. (a) The Company
has heretofore delivered to the Purchaser copies of: (i) the Company's
consolidated financial statements as of and for the years ended December 31,
1994, 1995 and 1996, which have been audited by KPMG Peat Marwick LLP,
independent public accountants (the "Company Audited Financial Statements"), and
(ii) the Company's unaudited consolidated financial statements as of and for the
three months ended March 31, 1997, (the "Company Unaudited Financial
Statements"). The Company Audited Financial Statements and the Company
Unaudited Financial Statements (collectively, the "Company Financial
Statements") fairly present, in conformity with US GAAP (as defined in Section
9.3 hereof) applied on a consistent basis by the Company (except as may be
indicated in the notes thereto) and in conformity with the SEC's Regulation S-X,
the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject in the case of any
unaudited financial statements to normal recurring year-end audit adjustments,
which are not expected to be material in amount). Since December 31, 1996, the
Company has not made any changes in the accounting policies applied to the
Company Audited Financial Statements, and no such changes are currently
contemplated nor, to the best of the Company's knowledge, required under US GAAP
or the SEC's Regulation S-X.
(b) The Company has heretofore delivered to the Purchaser complete copies
of all periodic reports, statements and other documents (including Exhibits
thereto) that the Company has filed with the SEC under the Exchange Act since
January 1, 1993 (collectively, the "Company SEC Reports"). All Company SEC
Reports required to be filed with the SEC by the Company during such period were
filed in a timely manner and complied in all material respects with the
applicable requirements of the Exchange Act and the rules and regulations
promulgated thereunder. At the time filed with the SEC (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), no Company SEC Report contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
SECTION 3.4 No Undisclosed Liabilities. Except as and to the extent
reflected or reserved against in the Company's consolidated balance sheet dated
as of March 31, 1997, the Corporation had no material liabilities or obligations
(whether accrued, absolute or contingent), including without limitation, any
liabilities resulting from failure to comply with any law or any federal, state,
local or foreign tax liabilities due or to become due whether (i) incurred in
respect of or measured by income for any period ending on or prior to the close
of business on such date, or (ii) arising out of transactions entered into, or
any state of facts existing, on or prior thereto.
SECTION 3.5 Absence of Certain Changes, Events or Conditions. Since
January 1, 1997, other than as disclosed in the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997, (i) the Company has not incurred
any liabilities of any nature, whether or not accrued, contingent or otherwise,
which would have a Material Adverse Effect on the Corporation,
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and (ii) there have been no events, changes or effects with respect to the
Company and the Company Subsidiaries having or which could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Corporation, and (iii) the Company and the Company Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with prior practice.
SECTION 3.6 No Default. Neither the Company nor any of the Company
Subsidiaries is in default or violation (and no event has occurred which with
notice or the lapse of time or both would constitute a default or violation) of
any term, condition or provision of (i) its Articles of Incorporation or By-Laws
(or similar governing documents), (ii) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of the Company Subsidiaries is now a party or by which any of
them or any of their respective properties or assets may be bound, or (iii) any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
the Company, any of the Company Subsidiaries or any of their respective
properties or assets, except in the case of (ii) or (iii) for violations,
breaches or defaults that would not, individually or in the aggregate, have a
Material Adverse Effect on the Corporation.
SECTION 3.7 Litigation, Etc. (i) There is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company or any of the Company Subsidiaries or any of
their respective properties or assets before any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") which, individually or in the aggregate, could have a Material Adverse
Effect on the Corporation if decided adversely to the Corporation or could
prevent or delay the consummation of the transactions contemplated by this
Agreement, and (ii) neither the Company nor any of the Company Subsidiaries is
subject to any outstanding order, writ, injunction or decree which, insofar as
can be reasonably foreseen, individually or in the aggregate, in the future
could have a Material Adverse Effect on the Corporation or could prevent or
delay the consummation of the transactions contemplated hereby.
SECTION 3.8 Intellectual Property. (a) The Company or one of the Company
Subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights,
and any applications for such patents, trademarks, trade names, service marks
and copyrights, processes, formulae, methods, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material that are necessary to conduct the business
of the Corporation as currently conducted, or proposed to be conducted, the
absence of which would be reasonably likely to have a Material Adverse Effect on
the Corporation (the "Company Intellectual Property Rights"). The Company
Disclosure Schedule lists (i) all patents and patent applications and all
trademarks, registered copyrights, trade names and service marks which the
Company considers to be material to the business of the Corporation and which
are included in the Company Intellectual Property Rights, including the
jurisdictions in which each such Company Intellectual Property Right has been
issued or registered or in which any such application for such issuance and
registration has been
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filed, (ii) all material licenses, sublicenses and other agreements as to which
the Company or any of the Company Subsidiaries is a party and pursuant to which
any person is authorized to use any Company Intellectual Property Rights, and
(iii) all material licenses, sublicenses and other agreements as to which the
Company or any of the Company Subsidiaries is a party and pursuant to which the
Company or any of the Company Subsidiaries is authorized to use any third party
patents, trademarks or copyrights, including software ("Company Third Party
Intellectual Property Rights") which are incorporated in or form a part of any
Corporation product that is material to its business.
(b) Neither the Company nor any of the Company Subsidiaries is, nor will
any of them be as a result of the execution and delivery of this Agreement or
the performance of its obligations under this Agreement, in breach of any
license, sublicense or other agreement relating to the Company Intellectual
Property Rights or Company Third Party Intellectual Property Rights, the breach
of which could have a Material Adverse Effect on the Corporation.
(c) To the Company's knowledge, all patents, registered trademarks,
service marks and copyrights held by the Company or any of the Company
Subsidiaries are valid and subsisting. Neither the Company nor any of the
Company Subsidiaries (i) has been sued (or threatened with suit or notified of a
claim) involving a claim of infringement of any patents, trademarks, service
marks, copyrights or violation of any trade secret or other proprietary right of
any third party; and (ii) has any knowledge that the manufacturing, marketing,
licensing or sale of its products or services infringes any patent, trademark,
service mark, copyright, trade secret or other proprietary right of any third
party.
SECTION 3.9 No Excess Parachute Payments; Section 162(m) of the Code. (i)
The acceleration of the vesting of certain of the Company Outstanding Options
which are owned by Walter S. Sobon, the Company's Chief Financial Officer, as a
result of any of the transactions contemplated by this Agreement will not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the
"Code")) and (ii) the disallowance of a deduction under Section 162(m) of the
Code for employee remuneration will not apply to any amount paid or payable by
the Company or any Company Subsidiary under any contract, benefit plan, program,
arrangement or understanding currently in effect.
SECTION 3.10 Environmental Laws and Regulations. (i) The Company and
each of the Company Subsidiaries is in compliance with all applicable Federal,
state, foreign and local laws and regulations relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata)
(collectively, "Environmental Laws"), except for non-compliance that
individually or in the aggregate would not have a Material Adverse Effect on the
Corporation, which compliance includes, but is not limited to, the possession by
the Company and the Company Subsidiaries of all material
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permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof and
(ii) neither the Company nor any of the Company Subsidiaries has received
written notice of, or is the subject of, any action, cause of action, claim,
investigation, demand or notice by any person or entity alleging liability under
or non-compliance with any Environmental Law (an "Environmental Claim") that
individually or in the aggregate would have a Material Adverse Effect on the
Corporation.
SECTION 3.11 Compliance. (i) The Company and each of the Company
Subsidiaries holds all licenses, permits, variances, exemptions, orders,
approvals and other authorizations of all Governmental Entities necessary for
the lawful conduct of their respective businesses (the "Company Permits"),
except for failures to hold such permits, licenses, variances, exemptions,
orders, approvals and other authorizations which would not, individually or in
the aggregate, have a Material Adverse Effect on the Corporation; (ii) the
Company and the Company Subsidiaries are in compliance with the terms of each of
the Company Permits, except where the failure so to comply would not have a
Material Adverse Effect on the Corporation, (iii) the businesses of the Company
and the Company Subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for violations or
possible violations which individually or in the aggregate do not, and, insofar
as reasonably can be foreseen, in the future will not, have a Material Adverse
Effect on the Corporation, and (iv) no investigation or review by any
Governmental Entity with respect to the Company or any of the Company
Subsidiaries is pending or, to the best knowledge of the Company, threatened,
nor, to the best knowledge of the Company, has any Governmental Entity indicated
an intention to conduct the same, other than, in each case, those which the
Company reasonably believes will not have a Material Adverse Effect on the
Corporation.
SECTION 3.12 Offer Documents; Registration Statement and Exchange
Documents. (a) Neither the Schedule 14D-9, nor any of the information supplied
by the Company in writing for inclusion in the Offer Documents, shall, at the
respective times such Schedule 14D-9, the Offer Documents or any amendments or
supplements thereto are filed with the SEC or are first published, sent or given
to shareholders, as the case may be, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Neither the Registration Statement nor the Exchange Documents, shall,
at the respective times such Registration Statement or Exchange Documents or any
amendments or supplements thereto are filed with the SEC and later become
effective or are first published, sent or given to the holders of Parent Shares,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading or necessary to correct any statement in any earlier communication
with respect to the registration of Company Common Shares or the
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exchange by the holders of Parent Shares of such Parent Shares for the Exchange
Consideration which has become false or misleading.
Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to any information supplied by Parent or Purchaser or any
of their respective representatives in writing which is contained in the
Schedule 14D-9, the Registration Statement or the Exchange Documents. The
Schedule 14D-9 will comply in all material respects as to form with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder.
SECTION 3.13 No Conflict With Other Documents. Neither the execution,
delivery or performance of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective Articles of
Incorporation or By-Laws (or similar governing documents) of the Company or of
any of the Company Subsidiaries; (ii) trigger the rights of the Company or any
of the Company Subsidiaries or any holder of the Corporation's Securities under
any shareholder rights plan or similar arrangement; (iii) restrict any business
combination between the Purchaser or any of its subsidiaries and the Company or
any of its subsidiaries under the laws of the United States; (iv) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, or result in the material modification of,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of the Company Subsidiaries is a party or by which
any of them or any of their respective properties or assets may be bound; or (v)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company or any of the Company Subsidiaries or any of their
respective properties or assets, except in the case of (iv) or (v) for
violations, breaches or defaults which could not, individually or in the
aggregate, have a Material Adverse Effect on the Corporation.
SECTION 3.14 Authority; Consents. (a) The Company has all necessary
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
the Company's Board of Directors and no other corporate proceedings on the part
of the Company or any of the Company Subsidiaries are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
(b) Upon the satisfaction of all other conditions contained herein and the
filing of the Agreement of Merger with the Secretary of State of the State of
California, this Agreement will
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result in the valid, legally binding and enforceable statutory merger of
Purchaser with and into the Company.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with (i) any Governmental Entity or (ii) any individual,
corporation or other entity (including any holder of the Corporation's
Securities) is required by or with respect to the Company in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (A) the filing of the Registration Statement
with the SEC in accordance with the Exchange Act, (B) the filing of the
Agreement of Merger with the California Secretary of State, (C) satisfaction of
all information and waiting period requirements of HSR and any regulations
promulgated thereunder, (D) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state "blue sky" or securities laws and the securities laws of any foreign
country, (E) those set forth in the Company Disclosure Schedule, and (F) such
other consents, authorizations, filings, approvals and registrations which, if
not obtained or made, would not be reasonably likely to have a Material Adverse
Effect on the Corporation.
SECTION 3.15 Contracts. Neither the Company nor any of the Company
Subsidiaries is a party to or subject to: (i) any employment contract or
independent contractor arrangements with any officer, consultant, director or
employee or former employee or any other person; (ii) any plan or contract or
arrangement providing for bonuses, pensions, options, deferred compensation,
retirement payments, profit sharing, or the like; (iii) any contract or
agreement with any labor union; (iv) any contract, agreement, instrument or
other document that would be required to be filed as an exhibit to a
Registration Statement on Form S-1 were the Company or any of the Company
Subsidiaries to file such a Registration Statement on the date of this
Agreement; (v) any contract, agreement, instrument or other document not entered
into by the Company or any of the Company Subsidiaries in the ordinary course of
business, under which the Company or any of the Company Subsidiaries is required
to make annual payments to any third party in excess of $100,000; or (vi) any
agreement, voting trust, understanding or arrangement, written or oral,
concerning the election of directors. Neither the Company nor any of the
Company Subsidiaries has breached, or received in writing any claim or threat
that it has breached, any of the terms or conditions of any agreement, contract
or commitment referred to in the prior sentence ("Company Material Contracts")
in such a manner as would permit any other party to cancel or terminate the same
or would permit any other party to seek material damages from the Company or any
of the Company Subsidiaries under any Company Material Contract. Each Company
Material Contract that has not expired or been terminated is in full force and
effect and is not subject to any material default thereunder of which the
Company is aware by any party obligated to the Company or any of the Company
Subsidiaries pursuant to the Company Material Contract.
SECTION 3.16 Customers and Suppliers. Neither the Company nor any of the
Company Subsidiaries has received notice that, nor do any of them have knowledge
or any reason to believe that, any customer that represented 5% or more of the
Company's consolidated revenues in any of
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the past three years will not continue to do business with the Company or the
Company Subsidiaries at volumes consistent with past practices subsequent to the
Offer, the Axiohm Exchange, the Acquisition of Purchaser and the Merger. No
entity which is now supplying, or during 1996 supplied, to the Company or the
Company Subsidiaries products and services has reduced or otherwise
discontinued, or threatened to reduce or discontinue, supplying such items to
the Company or the Company Subsidiaries on reasonable terms, except for such
reductions or discontinuations which would not have a Material Adverse Effect on
the Corporation.
SECTION 3.17 Tax Matters. (a) For the purposes of this Agreement, a "Tax"
or, collectively, "Taxes," means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person or entity with respect to such amounts and including any
liability for taxes of a predecessor entity.
(b) The Company and the Company Subsidiaries have accurately prepared and
timely filed or will accurately prepare and timely file all material federal,
state, local and foreign returns, estimates, information statements and reports
required to be filed at or before the Effective Time ("Returns") relating to any
and all Taxes concerning or attributable to the Company, any of the Company
Subsidiaries or any of their operations or assets, and such Returns are and will
be true and correct in all material respects and have been or will be completed
in all material respects in accordance with applicable law; and copies of all
Returns of the Company and the Company Subsidiaries for the past three years
have been or will be provided by the Company to Purchaser.
(c) The Company and each of the Company Subsidiaries as of the Effective
Time: (i) will have paid all Taxes any of them is required to pay prior to the
Effective Time (other than those being contested in good faith); (ii) will have
properly reflected on its books and records an accrual for all Taxes payable at
the Effective Time; (iii) will have withheld with respect to their employees all
federal and state income taxes, FICA, FUTA and other Taxes required to be
withheld; and (iv) will have collected all sales and use taxes on account of
sales by the Company or any Company Subsidiary or use of any of their products,
except in each instance where any failure to make such payment or withholding
would not be reasonably likely to have a Material Adverse Effect on the
Corporation.
(d) There is no Tax deficiency outstanding, proposed or assessed against
the Company or any of the Company Subsidiaries that is not reflected as a
liability on the Company Financial Statements nor has the Company or any of the
Company Subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
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SECTION 3.18 Pension and Employee Benefit Plans. (a) The Company has set
forth on the Company Disclosure Schedule all employee benefit plans (including
"employee benefit plans" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), whether or not subject to
ERISA, and all bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and all other programs or
arrangements intended to provide employee benefits, and all unexpired severance
agreements, written or otherwise, for the benefit of, or relating to, any
current or former employee of the Company or any of the Company Subsidiaries or
any trade or business (whether or not incorporated) which is a member or which
is under common control with the Company within the meaning of Section 414 of
the Code (an "ERISA Affiliate") (together, the "Company Employee Plans").
(b) With respect to each Company Employee Plan, the Company has made or
will make available to Parent, a true and correct copy of (i) the most recent
annual report (Form 5500) filed with the Internal Revenue Service ("IRS"), (ii)
such Company Employee Plan, (iii) each trust agreement and group annuity
contract, if any, relating to such Company Employee Plan and (iv) the most
recent actuarial report or valuation relating to a Company Employee Plan subject
to Title IV of ERISA.
(c) With respect to the Company Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of the Company there
exists no condition or set of circumstances, in connection with which the
Company or any subsidiary of the Company could be subject to any liability under
ERISA, the Code or any other applicable law that is reasonably likely to have a
Material Adverse Effect on the Corporation.
(d) With respect to the Company Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with US GAAP on the Company Financial Statements.
(e) Except as set forth on the Company Disclosure Schedule, neither the
Company nor any of the Company Subsidiaries is a party to any oral or written
(i) union or collective bargaining agreement, (ii) agreement with any officer or
other key employee of the Company or any of the Company Subsidiaries, the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving the Company of the nature
contemplated by this Agreement, (iii) agreement with any officer providing any
term of employment or compensation guarantee extending for a period longer than
one year from the date hereof, providing for the payment of compensation in
excess of $100,000 per annum or providing for severance benefits or other
benefits upon or following termination of employment, or (iv) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
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the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(f) Each of the Company Employee Plans which is intended to qualify under
Section 401 of the Code is designated on the Company Disclosure Schedule as
being a qualified plan (the Plans so designated being hereinafter referred to as
the "Company Qualified Plans"). Each Company Qualified Plan is qualified under
Section 401(a) of the Code and, unless the Company Qualified Plan is a
standardized form or paired plan (as defined in Revenue Procedure 97-6) each
Parent Qualified Plan is the subject of a currently effective determination
letter from the IRS confirming such qualification. True and correct copies of
the most recent determination letters from the IRS with respect to the Company
Qualified Plans which were issued after the effective date of ERISA have been or
will be delivered to the Purchaser. With respect to each Company Qualified Plan,
the Company has not obtained a waiver of any minimum funding requirements
imposed by ERISA or the Code in respect of such Company Qualified Plan, and has
not incurred any liability to the Pension Benefit Guaranty Corporation in
connection with any such Company Qualified Plan. As of the date hereof, the
funding of all Parent Qualified Plans complies with ERISA and all applicable
laws. No "reportable event," as such term is defined in ERISA and in regulations
issued thereunder, has occurred with respect to any of the Company Qualified
Plans since the effective date of ERISA (other than as a result of this
Agreement).
(g) The Company has identified to the Purchaser which, if any, of the
Company Employee Plans are multi-employer pension plans (as defined by ERISA)
and the number of employees of the Corporation who participated in multi-
employer plans during the year ended December 31, 1996. Since April 29, 1980,
neither the Company nor any of the Company Subsidiaries has, with respect to any
multi-employer plan, suffered or otherwise caused a "complete withdrawal" or
"partial withdrawal" (as such terms are defined by ERISA) nor has the Company
engaged in any transaction that would be deemed to avoid or evade liabilities
related to such withdrawal.
SECTION 3.19 Foreign Corrupt Practices Act. Neither the Company nor any of
the Company Subsidiaries, nor, to the Company's knowledge, any director,
officer, agent, employee, consultant, or any other person associated with or
acting on behalf of any of them, has engaged or is engaged in any course of
conduct, or is a party to any agreement or involved in any transaction, which
has or would give rise to a violation of the Foreign Corrupt Practices Act of
1977 or any other United States statute or regulation governing the conduct of
business abroad by United States corporations and their subsidiaries.
SECTION 3.20 No Pending Transactions. (a) Except for the transactions
contemplated by this Agreement and the acquisition agreements or negotiations
described on the Company Disclosure Statement or in the Company's SEC Reports,
neither the Company nor any of the Company Subsidiaries is a party to or bound
by or the subject of any agreement, undertaking, commitment or discussion with
another party with respect to a proposal or offer for a merger, consolidation,
business
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combination, or a sale of substantial assets, or sale or acquisition of at least
15% of the outstanding of shares of capital stock of the Company or a Company
Subsidiary (including without limitation by way of a tender offer or similar
transactions involving the Company, other than the transactions contemplated by
this Agreement) (any of the foregoing transactions being referred to in this
Agreement as an "Acquisition Transaction").
(b) Neither of the Company nor any of the Company Subsidiaries has entered
into or effectuated any new or amended agreements with any other person or
entity or otherwise has taken any action, including, without limitation, the
declaration or payment of any dividend or distribution on the Company Common
Stock, which would have the effect of impairing the ability of Purchaser or the
Company to consummate the Offer, the Axiohm Exchange, the Acquisition of
Purchaser or the Merger or otherwise diminishes the expected economic value to
Purchaser of the transactions contemplated by this Agreement.
SECTION 3.21 Transactions with Affiliates. Neither the Company nor any of
the Company Subsidiaries is a party to any transaction with any (i) current or
former officer or director of the Company or any of the Company Subsidiaries, or
(ii) any parent, spouse, child, brother, sister or other family relation of any
such officer or director or (iii) any corporation, partnership or other entity
of which any such officer or director or any such family relation is an officer,
director, partner or greater than 10% shareholder (based on percentage ownership
of voting stock) or (iv) any "affiliate" or "associate" of any such persons or
entities (as such terms are defined in the rules and regulations promulgated
under the Act), including, without limitation, any transaction involving a
contract, agreement or other arrangement providing for the employment of,
furnishing of materials, products or services by, rental of real or personal
property from, or otherwise requiring payments to, any such person or entity.
SECTION 3.22 Opinion of Financial Advisor. Prudential Securities
Incorporated has delivered to the Company its written opinion dated the date of
this Agreement that the consideration to be received by the holders of shares of
Company Common Stock (other than Parent or its affiliates), consisting of the
cash consideration to be received by such holders pursuant to the Offer and the
shares of Company Common Stock to be retained by such holders following the
consummation of the Axiohm Exchange, the Acquisition of Purchaser and the Merger
is fair to such holders from a financial point of view.
SECTION 3.23 Brokers. No broker, finder or investment banker (other than
Prudential Securities Incorporated, the engagement letter with which is attached
as Section 3.23 of the Company Disclosure Schedule) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of the Company.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent and warrant
to the Company that the statements contained in this Article IV are true and
correct, except as set forth in the disclosure schedule delivered by Parent and
Purchaser to the Company on or before the date of this Agreement (the "Parent
Disclosure Schedule"). The Parent Disclosure Schedule shall be arranged in
sections corresponding to the numbered and lettered sections contained in this
Article IV.
SECTION 4.1 Organization and Standing; Subsidiaries. (a) Each of Parent,
and its subsidiaries whose business or assets are material to Parent
(collectively, the "Parent Subsidiaries", and, together with Parent,
collectively "Axiohm") is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its businesses as now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power and authority would not have a Material Adverse Effect on Axiohm. When
used in connection with Parent or any of its subsidiaries, the term "Material
Adverse Effect" means any change or effect that would be materially adverse to
the business, assets (whether tangible or intangible), financial condition,
results of operations of Parent and its subsidiaries taken as a whole. Parent
has heretofore delivered to the Company accurate and complete copies of the
Articles of Incorporation and By-Laws (or equivalent organization documents), as
currently in effect, of Parent and each of the Parent Subsidiaries. The Parent
Disclosure Schedule includes a list of each of Parent's subsidiaries, together
with the jurisdiction of incorporation of each subsidiary and the percentage of
each subsidiary's outstanding capital stock or other equity interests owned by
Parent or its subsidiaries, as the case may be.
(b) Each of Parent, and the Parent Subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect on Axiohm.
SECTION 4.2 Capitalization of Parent. (a) Parent's entire authorized
capital stock consists of 42,723 shares which are classified as common stock,
with a par value of 500 French Francs per share ("Parent Common"). As of the
date hereof, there are 41,140 shares of Parent Common issued and outstanding and
1,583 shares reserved for issuance in connection with options awarded under that
certain Plan for Application for Shares in Axiohm (all of which options are
outstanding (the "Parent Outstanding Options")). Except as set forth above,
there are outstanding (i) no shares of
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capital stock or other voting securities of Parent, (ii) no securities of Parent
or any of the Parent Subsidiaries convertible into or exchangeable for shares of
capital stock or other voting securities of Parent (iii) no options, warrants or
other rights to acquire from Parent or any of the Parent Subsidiaries (including
any rights issued or issuable under a shareholders rights plan or similar
arrangement), and no obligations of Parent or any of the Parent Subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Parent, (iv) no equity
equivalents, interests in the ownership or earnings of Parent or any of the
Parent Subsidiaries or other similar rights (with the securities listed in
clauses (i) through (iv) referred to collectively as "Axiohm's Securities"), and
(v) no outstanding obligations of Parent or any of the Parent Subsidiaries to
repurchase, redeem or otherwise acquire any of Axiohm's Securities or to make
any investment (by loan, capital contribution or otherwise) in any other entity.
The Parent Disclosure Statement sets forth a list of all Parent Outstanding
Options, which such options are currently vested and which such options will
vest as a result of the transactions contemplated by this Agreement.
(b) All of the outstanding capital stock of, or other ownership interests
in, each of the Parent Subsidiaries, is owned by Parent, directly or indirectly,
free and clear of any Lien or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be provided as
a matter of law). Except as contemplated in connection with the Financing, there
are no securities of Parent or any of the Parent Subsidiaries convertible into
or exchangeable for, no options or other rights to acquire from Parent or any of
the Parent Subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly, of, any capital stock or other ownership interests in,
or any other securities of, any of the Parent Subsidiaries. There are no
outstanding contractual obligations of Parent or any of the Parent Subsidiaries
to repurchase, redeem or otherwise acquire any outstanding shares of capital
stock or other ownership interests in any subsidiary of Parent.
(c) All issued and outstanding shares of the capital stock of Parent and
each of the Parent Subsidiaries have been duly authorized and validly issued and
are fully paid and non-assessable, free of any preemptive rights. The Parent
Outstanding Options have been duly authorized and validly issued and are in full
force and effect.
SECTION 4.3 Financial Statements. Parent has heretofore delivered to the
Purchaser copies of: (i) Parent's consolidated financial statements as of and
for the years ended December 31, 1995 and 1996, which have been audited by Price
Waterhouse, LLP, independent public accountants (the "Parent Audited Financial
Statements"), and (ii) Parent's unaudited consolidated financial statements as
of and for the three months ended March 31, 1997, (the "Parent Unaudited
Financial Statements"). The Parent Audited Financial Statements and Parent
Unaudited Financial Statements (collectively, the "Parent Financial Statements")
fairly present, in conformity with US GAAP, applied on a consistent basis by
Parent (except as may be indicated in the notes thereto), the consolidated
financial position of Parent and its consolidated subsidiaries as of the dates
thereof and
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their consolidated results of operations and cash flows for the periods then
ended (subject in the case of any unaudited financial statements to normal
recurring year-end audit adjustments, which are not expected to be material in
amount). Since December 31, 1996, Parent has not made any changes in the
accounting policies applied to the Parent Audited Financial Statements, and no
such changes are currently contemplated nor, to the best of Parent's knowledge,
required under US GAAP.
SECTION 4.4 No Undisclosed Liabilities. (a) Except as and to the extent
reflected or reserved against in Parent's consolidated balance sheet dated as of
March 31, 1997, at the date of such statements, Axiohm had no material
liabilities or obligations (whether accrued, absolute or contingent), including
without limitation, any liabilities resulting from failure to comply with any
law or any federal, state, local or foreign tax liabilities due or to become due
whether (i) incurred in respect of or measured by income for any period ending
on or prior to the close of business on such date, or (ii) arising out of
transactions entered into, or any state of facts existing, on or prior thereto.
SECTION 4.5 Absence of Certain Changes, Events or Conditions. Since
January 1, 1997, other than as described on Parent's consolidated balance sheet
dated as of March 31, 1997, (i) Parent has not incurred any liabilities of any
nature, whether or not accrued, contingent or otherwise, which would have a
Material Adverse Effect on Parent, and (ii) there have been no events, changes
or effects with respect to Parent and the Parent Subsidiaries having or which
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent, and (iii) Parent and the Parent Subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with prior practice.
SECTION 4.6 No Default. Neither Parent nor any of the Parent Subsidiaries
is in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its Articles of Incorporation or By-Laws (or
similar governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Parent
or any of the Parent Subsidiaries is now a party or by which any of them or any
of their respective properties or assets may be bound, or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to Parent, any
of the Parent Subsidiaries or any of their respective properties or assets,
except in the case of (ii) or (iii) for violations, breaches or defaults that
would not, individually or in the aggregate, have a Material Adverse Effect on
Axiohm.
SECTION 4.7 Litigation, Etc. (i) There is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of Parent, threatened
against Parent or any of the Parent Subsidiaries or any of their respective
properties or assets before any Governmental Entity which, individually or in
the aggregate, could have a Material Adverse Effect on Axiohm if decided
adversely to Axiohm or could prevent or delay the consummation of the
transactions contemplated by this Agreement, and (ii) neither Parent nor any of
the Parent Subsidiaries is subject to any outstanding order, writ, injunction or
decree which, insofar as can be reasonably foreseen, individually or in the
aggregate,
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in the future could have a Material Adverse Effect on Axiohm or could prevent or
delay the consummation of the transactions contemplated hereby.
SECTION 4.8 Intellectual Property. (a) Parent or one of the Parent
Subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights,
and any applications for such patents, trademarks, trade names, service marks
and copyrights, processes, formulae, methods, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material that are necessary to conduct the business
of Axiohm as currently conducted, or proposed to be conducted, the absence of
which would be reasonably likely to have a Material Adverse Effect on Axiohm
(the "Parent Intellectual Property Rights"). The Parent Disclosure Schedule
lists (i) all patents and patent applications and all trademarks, registered
copyrights, trade names and service marks which Parent considers to be material
to the business of Axiohm and which are included in the Parent Intellectual
Property Rights, including the jurisdictions in which each such Parent
Intellectual Property Right has been issued or registered or in which any such
application for such issuance and registration has been filed, (ii) all material
licenses, sublicenses and other agreements as to which Parent or any of the
Parent Subsidiaries is a party and pursuant to which any person is authorized to
use any Parent Intellectual Property Rights, and (iii) all material licenses,
sublicenses and other agreements as to which Parent or any of the Parent
Subsidiaries is a party and pursuant to which Parent or any of the Parent
Subsidiaries is authorized to use any third party patents, trademarks or
copyrights, including software ("Parent Third Party Intellectual Property
Rights") which are incorporated in or form a part of any Axiohm product that is
material to its business.
(b) Neither Parent nor any of the Parent Subsidiaries is, nor will any of
them be as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in breach of any license,
sublicense or other agreement relating to the Parent Intellectual Property
Rights or Parent Third Party Intellectual Property Rights, the breach of which
could have a Material Adverse Effect on Axiohm.
(c) To Parent's knowledge, all patents, registered trademarks, service
marks and copyrights held by Parent or any of the Parent Subsidiaries are valid
and subsisting. Neither Parent nor any of the Parent Subsidiaries (i) has been
sued (or threatened with suit or notified of a claim) involving a claim of
infringement of any patents, trademarks, service marks, copyrights or violation
of any trade secret or other proprietary right of any third party; and (ii)
has any knowledge that the manufacturing, marketing, licensing or sale of its
products or services infringes any patent, trademark, service mark, copyright,
trade secret or other proprietary right of any third party.
SECTION 4.9 Environmental Laws and Regulations. (i) Parent and each of
the Parent Subsidiaries is in compliance with all applicable Environmental Laws,
except for non-compliance that individually or in the aggregate would not have a
Material Adverse Effect on Axiohm, which compliance includes, but is not limited
to, the possession by Parent and the Parent Subsidiaries of
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all material permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof and (ii) neither Parent nor any of the Parent Subsidiaries has received
written notice of, or is the subject of, any Environmental Claim that
individually or in the aggregate would have a Material Adverse Effect on Axiohm.
SECTION 4.10 Compliance. (i) Parent and each of the Parent Subsidiaries
holds all licenses, permits, variances, exemptions, orders, approvals and other
authorizations of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Parent Permits"), except for failures to hold
such permits, licenses, variances, exemptions, orders, approvals and other
authorizations which would not, individually or in the aggregate, have a
Material Adverse Effect on Axiohm; (ii) Parent and the Parent Subsidiaries are
in compliance with the terms of each of the Parent Permits, except where the
failure so to comply would not have a Material Adverse Effect on Axiohm; (iii)
the businesses of Parent and the Parent Subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity, except
for violations or possible violations which individually or in the aggregate do
not, and, insofar as reasonably can be foreseen, in the future will not, have a
Material Adverse Effect on Axiohm, and (iv) no investigation or review by any
Governmental Entity with respect to Parent or any of the Parent Subsidiaries is
pending or, to the best knowledge of Parent, threatened, nor, to the best
knowledge of Parent, has any Governmental Entity indicated an intention to
conduct the same, other than, in each case, those which Parent reasonably
believes will not have a Material Adverse Effect on Axiohm.
SECTION 4.11 Offer Documents; Registration Statement and Exchange
Documents. Neither the Schedule 14D-1, nor the Offer Documents, shall, at the
respective times such Schedule 14D-1, the Offer Documents or any amendments or
supplements thereto are filed with the SEC or are first published, sent or given
to shareholders, as the case may be, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of the
information supplied in writing by Parent or Purchaser for inclusion in the
Registration Statement or the Exchange Documents, shall, at the respective times
such Registration Statement or Exchange Documents or any amendments or
supplements thereto are filed with the SEC and later become effective or are
first published, sent or given to the holders of Parent Shares, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading or
necessary to correct any statement in any earlier communication with respect to
the subject matter thereof which has become false or misleading.
Notwithstanding the foregoing, Parent makes no representation or warranty
with respect to any information supplied by the Company or any of its
representatives in writing which is contained in the Schedule 14D-1 or the Offer
Documents. The Schedule 14D-1 will comply in all material
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respects as to form with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
SECTION 4.12 No Conflict With Other Documents. Neither the execution,
delivery or performance of this Agreement by Parent nor the consummation by
Parent of the transactions contemplated hereby will (i) conflict with or result
in any breach of any provision of the respective Articles of Incorporation or
By-Laws (or similar governing documents) of Parent or of any of the Parent
Subsidiaries; (ii) trigger the rights of Parent or any of the Parent
Subsidiaries or any holder of Axiohm's Securities under any shareholder rights
plan or similar arrangement; (iii) restrict any business combination between the
Purchaser or any of its subsidiaries and Parent or any of its subsidiaries; (iv)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, or result in the material
modification of, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent or any of the Parent Subsidiaries is a party or by
which any of them or any of their respective properties or assets may be bound;
or (v) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to Parent or any of the Parent Subsidiaries or any of
their respective properties or assets, except in the case of (iv) or (v) for
violations, breaches or defaults which could not, individually or in the
aggregate, have a Material Adverse Effect on Axiohm.
SECTION 4.13 Authority; Consents. (a) Each of Parent and Purchaser has
all necessary corporate power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by each of Parent's and Purchaser's Board of Directors and no
other corporate proceedings on the part of Parent, Purchaser or any of the other
Parent Subsidiaries are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and constitutes a legal, valid and binding
obligation of each of Parent and Purchaser, enforceable against each of Parent
and Purchaser in accordance with its terms.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with (i) any Governmental Entity or (ii) any individual,
corporation or other entity (including any holder of Axiohm's Securities) is
required by or with respect to Parent in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (A) the filing of the Registration Statement with the SEC in
accordance with the Exchange Act, (B) the filing of the Agreement of Merger with
the California Secretary of State, (C) satisfaction of all information and
waiting period requirements of the HSR Act and any regulations promulgated
thereunder, (D) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state "blue sky" or
securities laws and the securities laws
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of any foreign country, (E) those set forth in the Parent Disclosure Schedule,
and (F) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
have a Material Adverse Effect on Axiohm.
SECTION 4.14 Contracts. Neither Parent nor any of the Parent Subsidiaries
is a party to or subject to: (i) any employment contract or independent
contractor arrangements with any officer, consultant, director or employee or
former employee or any other person; (ii) any plan or contract or arrangement
providing for bonuses, pensions, options, deferred compensation, retirement
payments, profit sharing, or the like; (iii) any contract or agreement with any
labor union; (iv) any contract, agreement, instrument or other document that
would be required to be filed as an exhibit to a Registration Statement on Form
S-1 were Parent or any of the Parent Subsidiaries to file such a Registration
Statement on the date of this Agreement; (v) any contract, agreement, instrument
or other document not entered into by Parent or any of the Parent Subsidiaries
in the ordinary course of business, under which Parent or any of the Parent
Subsidiaries is required to make annual payments to any third party in excess of
$100,000; or (vi) any agreement, voting trust, understanding or arrangement,
written or oral, concerning the election of directors. Neither Parent nor any
of the Parent Subsidiaries has breached, or received in writing any claim or
threat that it has breached, any of the terms or conditions of any agreement,
contract or commitment referred to in the prior sentence ("Parent Material
Contracts") in such a manner as would permit any other party to cancel or
terminate the same or would permit any other party to seek material damages from
Parent or any of the Parent Subsidiaries under any Parent Material Contract.
Each Parent Material Contract that has not expired or been terminated is in full
force and effect and is not subject to any material default thereunder of which
Parent is aware by any party obligated to Parent or any of the Parent
Subsidiaries pursuant to the Parent Material Contract.
SECTION 4.15 Customers and Suppliers. Neither Parent nor any of the
Parent Subsidiaries has received notice that, nor do any of them have knowledge
or any reason to believe that, any customer that represented 5% or more of
Parent's consolidated revenues in any of the past three years will not continue
to do business with Parent or the Parent Subsidiaries at volumes consistent with
past practices subsequent to the Offer, the Axiohm Exchange, the Acquisition of
Purchaser and the Merger. No entity which is now supplying, or during 1996
supplied, to Parent or the Parent Subsidiaries products and services has reduced
or otherwise discontinued, or threatened to reduce or discontinue, supplying
such items to Parent or the Parent Subsidiaries on reasonable terms, except for
such reductions or discontinuations which would not have a Material Adverse
Effect on Axiohm.
SECTION 4.16 Tax Matters. (a) Parent and the Parent Subsidiaries have
accurately prepared and timely filed or will accurately prepare and timely file
all material federal, state, local and foreign Returns, required to be filed at
or before the Effective Time relating to any and all Taxes concerning or
attributable to Parent, any of the Parent Subsidiaries or any of their
operations or assets, and such Returns are and will be true and correct in all
material respects and have been or will be completed in all material respects in
accordance with applicable law; and copies of all Returns
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of Parent and the Parent Subsidiaries for the past three years have been or will
be provided by Parent to the Company.
(b) Parent and each of the Parent Subsidiaries as of the Effective Time:
(i) will have paid all Taxes any of them is required to pay prior to the
Effective Time (other than those being contested in good faith); (ii) will have
properly reflected on its books and records an accrual for all Taxes payable at
the Effective Time; (iii) will have withheld with respect to their employees all
applicable foreign, federal and state income taxes including, if applicable,
FICA and FUTA, and other Taxes required to be withheld; and (iv) will have
collected all sales and use taxes on account of sales by Parent or any Parent
Subsidiary or use of any of their products, except in each instance where any
failure to make such payment or withholding would not be reasonably likely to
have a Material Adverse Effect on Axiohm.
(c) There is no Tax deficiency outstanding, proposed or assessed against
Parent or any of the Parent Subsidiaries that is not reflected as a liability on
the Parent Financial Statements nor has Parent or any of the Parent Subsidiaries
executed any waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.
SECTION 4.17 Pension and Employee Benefit Plans. (a) Parent has set
forth on the Parent Disclosure Schedule all employee benefit plans (including
"employee benefit plans" as defined in Section 3(3) of ERISA, whether or not
subject to ERISA, and all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and all other programs
or arrangements intended to provide employee benefits, and all unexpired
severance agreements, written or otherwise, for the benefit of, or relating to,
any current or former employee of Parent or any of the Parent Subsidiaries or
any trade or business (whether or not incorporated) which is an ERISA Affiliate
(together, the "Parent Employee Plans").
(b) With respect to each Parent Employee Plan, Parent has made or will
make available to Parent, a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS for benefit plans subject to ERISA, (ii)
such Parent Employee Plan, (iii) each trust agreement and group annuity
contract, if any, relating to such Parent Employee Plan and (iv) the most recent
actuarial report or valuation relating to a Parent Employee Plan subject to
Title IV of ERISA.
(c) With respect to Parent Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Parent there exists no
condition or set of circumstances, in connection with which Parent or any
subsidiary of Parent could be subject to any liability under ERISA, the Code or
any other applicable law that is reasonably likely to have a Material Adverse
Effect on Axiohm.
(d) With respect to the Parent Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and
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there are no unfunded benefit obligations which have not been accounted for by
reserves, or otherwise properly footnoted in accordance with local accounting
principles and practices.
(e) Except as set forth on the Parent Disclosure Schedule, provided for in
this Agreement, neither Parent nor any of the Parent Subsidiaries is a party to
any oral or written (i) union or collective bargaining agreement, (ii) agreement
with any officer or other key employee of Parent or any of the Parent
Subsidiaries, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Parent of the
nature contemplated by this Agreement, (iii) agreement with any officer
providing any term of employment or compensation guarantee extending for a
period longer than one year from the date hereof, providing for the payment of
compensation in excess of $100,000 per annum or providing for severance benefits
or other benefits upon or following termination of employment, or (iv) agreement
or plan, including any stock option plan, stock appreciation right plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
(f) Each of the Parent Employee Plans which is intended to qualify under
Section 401 of the Code is designated on the Parent Disclosure Schedule as being
a qualified plan (the Plans so designated being hereinafter referred to as the
"Parent Qualified Plans"). Each Parent Qualified Plan is qualified under
Section 401(a) of the Code and, unless the Parent Qualified Plan is a
standardized form of paired plan (as defined in Revenue Procedure 97-6) each
Parent Qualified Plan is the subject of a currently effective determination
letter from the IRS confirming such qualification. True and correct copies of
the most recent determination letters from the IRS with respect to the Parent
Qualified Plans which were issued after the effective date of ERISA have been or
will be delivered to the Purchaser. With respect to each Parent Qualified Plan,
Parent has not obtained a waiver of any minimum funding requirements imposed by
ERISA or the Code in respect of such Parent Qualified Plan, and has not incurred
any liability to the Pension Benefit Guaranty Corporation in connection with any
such Parent Qualified Plan. As of the date hereof, the funding of all Parent
Qualified Plans complies with ERISA and all applicable laws. No "reportable
event," as such term is defined in ERISA and in regulations issued thereunder,
has occurred with respect to any of the Parent Qualified Plans since the
effective date of ERISA (other than as a result of this Agreement).
(g) Parent has identified to the Purchaser which, if any, of the Parent
Employee Plans are multi-employer pension plans (as defined by ERISA) and the
number of employees of Axiohm who participated in multi-employer plans during
the year ended December 31, 1996. Since April 29, 1980, neither Parent nor any
of the Parent Subsidiaries has, with respect to any multi-employer plan,
suffered or otherwise caused a "complete withdrawal" or "partial withdrawal" (as
such terms are defined by ERISA) nor has Parent engaged in any transaction that
would be deemed to avoid or evade liabilities related to such withdrawal.
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SECTION 4.18 Foreign Corrupt Practices Act. Neither Parent nor any of the
Parent Subsidiaries, nor to Parent's or Purchaser's knowledge, any director,
officer, agent, employee, consultant, or any other person associated with or
acting on behalf of any of them, has engaged or is engaged in any course of
conduct, or is a party to any agreement or involved in any transaction, which
has or would give rise to a violation of the Foreign Corrupt Practices Act of
1977 or any other United States statute or regulation governing the conduct of
business abroad by United States corporations and their subsidiaries.
SECTION 4.19 No Pending Transactions. (a) Except for the transactions
contemplated by this Agreement and the acquisition agreements or negotiations
described on the Parent Disclosure Statement, neither Parent nor any of the
Parent Subsidiaries is a party to or bound by or the subject of any Acquisition
Transaction.
(b) Neither of Parent nor any of the Parent Subsidiaries has entered into
or effectuated any new or amended agreements with any other person or entity or
otherwise has taken any action including, without limitation, the declaration or
payment of any dividend or distribution on the Parent Shares, which would have
the effect of impairing the ability of Purchaser or Parent to consummate the
Offer, the Axiohm Exchange, the Acquisition of Purchaser or the Merger or
otherwise diminishes the expected economic value to the Company of the
transactions contemplated by this Agreement.
SECTION 4.20 Transactions with Affiliates. Except as disclosed on the
Parent Disclosure Schedule, neither Parent nor any of the Parent Subsidiaries is
a party to any transaction with any (i) current or former officer or director of
Parent or any of the Parent Subsidiaries, or (ii) any parent, spouse, child,
brother, sister or other family relation of any such officer or director or
(iii) any corporation, partnership or other entity of which any such officer or
director or any such family relation is an officer, director, partner or greater
than 10% shareholder (based on percentage ownership of voting stock) or (iv) any
"affiliate" or "associate" of any such persons or entities (as such terms are
defined in the rules and regulations promulgated under the Act) including,
without limitation, any transaction involving a contract, agreement or other
arrangement providing for the employment of, furnishing of materials, products
or services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity.
SECTION 4.21 Brokers. No broker, finder or investment banker (other than
Lehman Brothers, a copy of the engagement letter with which Parent has
heretofore delivered to the Company) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of Parent or Purchaser.
SECTION 4.22 Financing. Parent and Purchaser have received, and have
furnished to the Company true and complete copies of, financing commitment
letters from Lehman Brothers Inc. and
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its affiliates (collectively, "Lehman Brothers") dated July 11, 1997 (such
letters being referred to collectively herein as the "Financing Letter" and the
financings contemplated thereby being referred to collectively herein as the
"Financing"). The aggregate proceeds of the Financing will be sufficient to
acquire the Specified Number of Shares in the Offer (as amended pursuant to
Section 1(a) hereof) and to pay the Exchange Cash in the Axiohm Exchange. The
Financing Letter has not been amended, modified or revoked as of the date
hereof.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending the Merger. Except
as contemplated by this Agreement, during the period from the date hereof to the
earlier of termination of this Agreement or the Effective Time, the Company
agrees to conduct its business and that of its subsidiaries only in the ordinary
course of business consistent with past practice and to use all reasonable
efforts consistent with past practices and policies to preserve intact its
present business organization (including the services of its existing employees)
and preserve its relationships with customers, suppliers and others having
business dealings with it, to the end that its goodwill and ongoing business
shall be unimpaired at the Effective Date. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in this Agreement,
neither the Company nor any of its subsidiaries will, without the prior written
consent of the Purchaser:
(a) amend or propose to amend its Articles of Incorporation or By-Laws;
(b) (i) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities or equity equivalents (including, without
limitation, any stock options or stock appreciation rights) except shares of
Company Common Stock issuable upon exercise of the Company Outstanding Options
or (ii) amend any of the terms of any such securities or agreements outstanding
as of the date hereof, except as specifically contemplated by this Agreement;
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, or redeem
or otherwise acquire any of its securities or any securities of the Company's
subsidiaries;
(d) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under existing lines of credit in the
ordinary course of business; (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or
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otherwise) for the obligations of any other person or entity except in the
ordinary course of business consistent with past practice, and except for
obligations of wholly-owned subsidiaries of it; (iii) make any loans, advances
or capital contributions to, or investments in, any other person or entity
(other than to wholly-owned subsidiaries of it or advances to employees in the
ordinary course of business consistent with past practice and in amounts not
material to the maker of such loan or advance); (iv) pledge or otherwise
encumber shares of its capital stock or any of its subsidiaries; or (v) mortgage
or pledge any of its material assets, tangible or intangible, or create or
suffer to exist any material Lien thereupon;
(e) except as may be required by law or as contemplated by this Agreement
or described on the Company Disclosure Schedule, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any director,
officer, employee or former employee or independent contractor in any manner, or
(except for normal increases in the ordinary course of business consistent with
past practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to it and as required under existing
agreements) increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock appreciation rights or performance units);
(f) acquire, sell, lease, license to others or dispose of any assets
outside the ordinary course of business which individually or in the aggregate
are material to the Corporation, or enter into any commitment or transaction
outside the ordinary course of business consistent with past practice which
would be material to the Corporation;
(g) except as may be required as a result of a change in law or in US
GAAP, change any of the accounting principles or practices used by it;
(h) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business;
(i) (i) acquire or agree to acquire (by merger, consolidation, acquisition
of stock or assets or otherwise) any corporation, partnership or other business
organization or division thereof or any equity interest therein, other than as
specifically described on the Company Disclosure Schedule; (ii) enter into any
contract or agreement other than in the ordinary course of business consistent
with past practice which would be material to it; (iii) authorize any new
capital expenditure or expenditures which, individually, is in excess of
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$250,000 or, in the aggregate, are in excess of $2,500,000; or (iv) enter into
or amend any contract, agreement, commitment or arrangement providing for the
taking of any action that would be prohibited hereunder;
(j) make any tax election or settle or compromise any income tax liability
material to the Company;
(k) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in, or contemplated by the Company
Financial Statements and the Company Subsidiaries or incurred in the ordinary
course of business consistent with past practice or customary fees and expenses
relating to the transactions contemplated by this Agreement;
(l) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby; or
(m) take, or agree in writing or otherwise to take, any of the actions
described in this Section 5.1(a) through 5.1(l) or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect as of the date when made.
SECTION 5.2 Maintenance of Cash. From the date hereof until the
consummation of the Offer, the Company shall cause approximately $45 million to
be maintained in its existing investments and, upon maturity of such
investments, to invest such sums in municipal instruments with a rating of BBB
or better (together, "Company Investments"). From the consummation of the Offer
until the Effective Time, the Company shall cause approximately $33 million to
be maintained in Company Investments.
SECTION 5.3 Conduct of Business of Parent Pending the Merger. Except as
contemplated by this Agreement, during the period from the date hereof to the
earlier of termination of this Agreement or the Effective Time, Parent agrees to
conduct its business and that of its subsidiaries only in the ordinary course of
business consistent with past practice and to use all reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization (including the services of its existing employees) and
preserve its relationships with customers, suppliers and others having business
dealings with it, to the end that its goodwill and ongoing business shall be
unimpaired at the Effective Date. Without limiting
the generality of the foregoing, and except as otherwise expressly provided in
this Agreement, neither Parent nor any of its subsidiaries will, without the
prior written consent of the Company:
(a) amend or propose to amend its Articles of Incorporation or By-Laws (or
equivalent organizational documents); provided, however, that IPB may amend its
Articles of Incorporation or
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By-Laws in any manner as may be necessary in connection with the transactions
contemplated hereby or by Financing Letter;
(b) except as contemplated in connection with the Financing, (i) authorize
for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities or equity equivalents (including, without limitation, any stock
options or stock appreciation rights) except shares of Company Common Stock
issuable upon exercise of the Parent Options or (ii) amend any of the terms of
any such securities or agreements outstanding as of the date hereof, except as
specifically contemplated by this Agreement;
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, or redeem
or otherwise acquire any of its securities or any securities of Parent's
subsidiaries, except as otherwise contemplated in the Financing Letter;
(d) except for the Financing contemplated by the Financing Letter, (i)
incur or assume any long-term or short-term debt or issue any debt securities
except for borrowings under existing lines of credit in the ordinary course of
business; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person or entity except in the ordinary course of business consistent
with past practice, and except for obligations of wholly-owned subsidiaries of
it; (iii) make any loans, advances or capital contributions to, or investments
in, any other person or entity (other than to wholly-owned subsidiaries of it or
advances to employees in the ordinary course of business consistent with past
practice and in amounts not material to the maker of such loan or advance); (iv)
pledge or otherwise encumber shares of its capital stock or any of its
subsidiaries; or (v) mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any material Lien thereupon;
(e) except as may be required by law or as contemplated by this Agreement
or described on the Parent Disclosure Schedule, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any director,
officer, employee or former employee or independent contractor in any manner, or
(except for normal increases in the ordinary course of business consistent with
past practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to it and as required under existing
agreements) increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock appreciation rights or performance units);
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(f) acquire, sell, lease, license to others or dispose of any assets
outside the ordinary course of business which individually or in the aggregate
are material to Axiohm, or enter into any commitment or transaction outside the
ordinary course of business consistent with past practice which would be
material to Axiohm;
(g) except as may be required as a result of a change in law or in US
GAAP, change any of the accounting principles or practices used by it;
(h) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business;
(i) (i) acquire or agree to acquire (by merger, consolidation, acquisition
of stock or assets or otherwise) any corporation, partnership or other business
organization or division thereof or any equity interest therein, other than as
specifically described on the Parent Disclosure Schedule; (ii) enter into any
contract or agreement other than in the ordinary course of business consistent
with past practice which would be material to it; (iii) authorize any new
capital expenditure or expenditures which, individually, is in excess of
$250,000 or, in the aggregate, are in excess of $2,500,000; or (iv) enter into
or amend any contract, agreement, commitment or arrangement providing for the
taking of any action that would be prohibited hereunder;
(j) make any tax election or settle or compromise any income tax liability
material to Parent;
(k) except as contemplated in the Financing Letter and the engagement
letters between Parent, Purchaser, IPB and Lehman Brothers dated May 22, 1997
and dated July 11, 1997, (collectively, the "Engagement Letter") pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities reflected or
reserved against in, or contemplated by the Parent Financial Statements or
incurred in the ordinary course of business consistent with past practice, or
customary fees and expenses relating to the transactions contemplated by this
Agreement;
(l) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby; or
(m) take, or agree in writing or otherwise to take, any of the actions
described in this Section 5.2(a) through 5.2(l) or any action which would make
any of the representations or warranties of Parent or Purchaser contained in
this Agreement untrue or incorrect as of the date when made.
SECTION 5.4 Conduct of Business of Purchaser Pending the Merger. During
the period from the date of this Agreement to the Effective Time, Purchaser
shall not engage in any activities
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of any nature except as provided in or contemplated by this Agreement, the
Financing Letter or the Engagement Letter.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Company Board Representation; Co-Chairmen of the Board of
Directors; Section 14(f). (a) Promptly upon the purchase by Purchaser of
Shares pursuant to the Offer, the Company shall use all reasonable efforts (i)
to cause its Bylaws to be amended to increase the number of directors of the
Company from five (5) to seven (7); (ii) to cause three individuals designated
by Purchaser to be elected to the Board of Directors of the Company, including
securing the resignation of an incumbent director; (iii) to cause two of such
Purchaser's designees as Purchaser shall identify to be Co-Chairmen of the
Company's Board of Directors, including securing the resignation of the
Company's current Chairman of the Board of Directors from such position.
Additionally, at such time, the Company will use all reasonable efforts to cause
the persons designated by Purchaser to be appointed to (x) each committee of the
Board of Directors of the Company (including the Compensation Committee), (y)
each board of directors of each domestic subsidiary of the Company and (z) each
committee of each such board, in each case to the extent permitted by law or as
may be required to comply with Rule 16b-3 promulgated under Section 16 of the
Securities Exchange Act of 1934 as amended, Nasdaq requirements or Section
162(m) of the Code and other applicable IRS regulations. Until the Effective
Time and except as otherwise required hereby, the Company shall use all
reasonable efforts to ensure that all the members of the Board of Directors of
the Company as of the date hereof who are not employees of the Company shall
remain members of the Board of Directors of the Company.
(b) The Company's obligations to appoint Purchaser's designees to its
Board of Directors shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder. The Company shall promptly take all actions
required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under this Section 6.1 and shall include in the Schedule 14D-9 or a
separate Rule 14f-1 information statement provided to shareholders such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill its obligations under
this Section 6.1. Parent or Purchaser will supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by Section 14(f) and Rule
14f-1.
(c) Following the election or appointment of Purchaser's designees
pursuant to this Section 6.1 and prior to the Effective Time, any amendment (or
recommendation thereof) by the Board of Directors of the Company of this
Agreement or the Articles of Incorporation or By-Laws of the Company, any
termination of this Agreement by the Company, any extension by the Company of
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the time for the performance of any of the obligations or other acts of
Purchaser or waiver of any of the Company's rights hereunder, and any other
consent or action by the Board of Directors of the Company hereunder, will
require the concurrence of a majority of the directors of the Company then in
office who are not designated by Purchaser.
SECTION 6.2 Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, each of the Company and Parent shall, and shall
cause its subsidiaries, officers, directors, employees, auditors and other
agents to, afford the officers, employees, auditors and other agents of the
other, reasonable access at all reasonable times to its officers, employees,
agents, properties, offices, plants and other facilities and to all books and
records, and shall furnish such with such financial, operating and other data
and information as the Parent or the Company, as the case may be, through its
officers, employees or agents may from time to time reasonably request.
(b) Each of Parent and Purchaser will hold and will cause its officers,
employees, auditors and other agents to hold in confidence, unless compelled to
disclose by judicial or administrative process or, in the written opinion of its
legal counsel, by other requirements of law, all documents and information
concerning the Company and its subsidiaries furnished to Parent or Purchaser in
connection with the transactions contemplated in this Agreement in accordance
with the provisions of the letter dated April 2, 1997 between Parent and the
Company (the "Parent Confidentiality Agreement").
(c) The Company will hold and will cause its officers, employees, auditors
and other agents to hold in confidence, unless compelled to disclose by judicial
or administrative process or, in the written opinion of its legal counsel, by
other requirements of law, all documents and information concerning Parent and
its subsidiaries (including Purchaser) furnished to the Company in connection
with the transactions contemplated in this Agreement in accordance with the
provisions of the letter dated May 6, 1997 between the Company and the Parent
(the "Company Confidentiality Agreement").
(d) No investigation pursuant to this Section 6.2 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
(e) The Company will use reasonable efforts to cause its executive
officers and employees to assist the proposed lenders, underwriters or initial
purchasers (the "Proposed Financiers") of the permanent financing proposed to be
incurred or assumed by the Company and/or its subsidiaries at or following the
Effective Time. Such assistance shall be reasonably requested by the Proposed
Financiers and shall include, without limitation: (i) assistance in preparing
offering memoranda, syndication materials or other selling or marketing
materials, (ii) attendance at meetings with prospective investors, including a
customary "roadshow" as may be determined by the Proposed Financiers and (iii)
making available or directing the assistance of the Company's auditors, counsel
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and/or other advisors or agents, including the preparation of financial
statements and "comfort letters."
SECTION 6.3 No Solicitation of Transactions. From and after the date of
this Agreement until the earlier of the Effective Time of the Merger or the
termination of this Agreement in accordance with its terms, the Company, its
affiliates and their respective officers, directors, employees, representatives
and agents (i) shall cease (and not reopen except as permitted herein) any
existing discussions or negotiations, if any, with any parties with respect to
any acquisition (other than the transactions contemplated by this Agreement) of
all or any material portion of the assets of, or any equity interest in, the
Company or any of the Company Subsidiaries or any business combination with the
Company or any of the Company Subsidiaries and (ii) shall not, directly or
indirectly, (A) solicit or initiate discussions, or, except with respect to a
Superior Proposal (as defined below) received by the Company, engage in
negotiations with any person or, except with respect to a Superior Proposal
received by the Company, take any other action intended, designed or reasonably
likely to facilitate the efforts of any person, other than Parent and Purchaser,
relating to the possible acquisition of the Company or any of the Company
Subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any material portion of its or their capital stock or
assets, (B) except with respect to a Superior Proposal received by the Company,
and provided that the Company has required the party submitting the Superior
Proposal to execute a non-disclosure agreement comparable to the Confidentiality
Agreement, provide non-public information with respect to the Company or any of
the Company Subsidiaries to any person, other than Parent and Purchaser,
relating to the possible acquisition of the Company or any of the Company
Subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any material portion of its or their capital stock or
assets, (C) enter into an agreement with any person, other than Parent and
Purchaser, providing for the possible acquisition of the Company or any of the
Company Subsidiaries (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise) or any material portion of its or their capital
stock or assets or (D) except with respect to a Superior Proposal received by
the Company, make or authorize any statement, recommendation or solicitation in
support of any possible acquisition of the Company or any of the Company
Subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any portion of its or their capital stock or assets by
any person, other than by Parent and Purchaser or withdraw or modify the
recommendation by the Company's Board or Directors with respect to the Offer,
this Agreement, the Axiohm Exchange, the Acquisition of Purchaser and the
Merger. A "Superior Proposal" shall mean a written proposal that has not been
solicited by the Company following the date of this Agreement relating to the
possible acquisition of the Company or any of the Company Subsidiaries (whether
by way of merger, purchase of capital stock, purchase of assets or otherwise) or
any material portion of its or their capital stock or assets by any person other
than by Parent or Purchaser, which proposal is, in the reasonable good faith
judgment of the Board of Directors of the Company, after consultation with its
legal and financial advisors, on financial and other terms more favorable to the
shareholders of the Company than the terms of the Offer, the Axiohm Exchange,
the Acquisition of Purchaser and the Merger, collectively,
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and which is made by a party that can reasonably be expected to consummate the
transaction on the terms proposed. If the Company or any of its subsidiaries
receives any offer or proposal to enter negotiations relating to any of the
above, the Company shall as promptly as practicable, notify Parent or Purchaser
thereof, including information as to the identity of the party making any such
offer or proposal and the specific terms of such offer or proposal, as the case
may be, and provide Parent or Purchaser with the same information (if any) the
Company provides to the party making the Superior Proposal. Notwithstanding the
foregoing, following the receipt of an offer or proposal that the Board of
Directors of the Company, in the exercise of its reasonable good faith
judgement, after consultation with its legal and financial advisors, deems to be
a Superior Proposal, the Company may terminate this Agreement under Section
8.1(d) (subject to the Company's obligations pursuant to Section 8.3) and accept
such Superior Proposal, and the Board of Directors of the Company may approve or
recommend (and, in connection therewith, withdraw or modify its approval and
recommendation of the Offer, this Agreement, the Axiohm Exchange, the
Acquisition of Purchaser and the Merger).
SECTION 6.4 Stock Options. The parties hereto agree to take all actions
with respect to the Company Outstanding Options as are described on Annex B
hereto and to cause each of the following executives of the Company
(collectively, the "Executives") to execute the agreements contemplated by Annex
B, which are in a form reasonably acceptable to Parent and the Company, with
respect to the Company Outstanding Options which each owns (the "Option
Agreements"). For purposes of this Section 6.4, "Executives" shall mean William
Gibbs, Walter Sobon, Janet Shanks and David Ledwell.
SECTION 6.5 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or non-
occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company, Parent or Purchaser, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.5 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 6.6 Further Action; All Reasonable Efforts. Upon the terms and
subject to the conditions of this Agreement, each of the parties hereto shall
use all reasonable efforts to take, or cause to be taken, all appropriate
action, and to do or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including but not limited to (i)
cooperation in the preparation and filing of the Offer Documents, the Schedule
14D-9, the Registration Statement, the Exchange Documents, any required filings
under the HSR Act, any required foreign filings and any amendments to any
thereof and (ii) using all reasonable efforts to make all required regulatory
filings and applications and to obtain all licenses, permits, consents,
approvals, authorizations,
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qualifications and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries and Parent and its subsidiaries, as the
case may be, as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Offer, the
Axiohm Exchange, the Acquisition of Purchaser and the Merger. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors of
each party to this Agreement shall use all reasonable efforts to take all such
necessary action.
SECTION 6.7 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Offer, the Axiohm Exchange, the Acquisition of
Purchaser, the Merger or this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or pursuant to the rules of the SEC or any listing
agreement with the Nasdaq National Market. On or prior to the date hereof, the
Company and Parent shall have agreed to the final text of the press release
announcing the execution of this Agreement and the commencement of the Offer by
Purchaser.
SECTION 6.8 Disposition of Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any shareholder
litigation against the Company and its directors relating to any of the
transactions contemplated by this Agreement until the purchase of Company Common
Stock pursuant to the Offer, and thereafter until the Effective Time of the
Merger, shall give Parent the opportunity to direct the defense of such
litigation and, if Parent so chooses to direct such litigation, Parent shall
give the Company and its directors an opportunity to participate in such
litigation; provided, however, that no settlement of such litigation shall be
agreed to without Parent's consent; and provided further that no settlement
requiring a payment by a director shall be agreed to without such director's
consent.
SECTION 6.9 Officer's and Directors' Indemnification.
(a) Parent and Purchaser agree that all rights to indemnification for acts
or omissions occurring prior to the Effective Time now existing in favor of the
current or former directors or officers (the "Indemnified Parties") of the
Company and its subsidiaries as provided in their respective articles of
incorporation or by-laws (or similar organizational documents) or existing
indemnification contracts in the form filed with the SEC shall survive the
Offer, the Axiohm Exchange, the Acquisition of Purchaser and the Merger and
shall continue in full force and effect in accordance with their terms.
(b) For six years from the Effective Time, the Company shall use all
reasonable efforts to maintain in effect the Company's current directors' and
officers' liability insurance covering those persons who are currently covered
by the Company's directors' and officers' liability insurance policy (a copy of
which has been heretofore delivered to Parent); provided, however, that in no
event shall
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the Company be required to expend in any one year an amount in excess of 150% of
the annual premiums currently paid by the Company for such insurance which the
Company represents is not more than $145,350; and provided, further, that if the
annual premiums of such insurance coverage exceed such amount, the Company shall
be obligated to obtain a policy with the greatest coverage available for a cost
not exceeding such amount.
(c) This Section 6.9 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, Parent, the Surviving
Corporation and the Indemnified Parties, and shall be binding on all successors
and assigns of Parent and the Surviving Corporation.
(d) The Surviving Corporation shall pay all expenses, including attorney's
fees, that may be incurred by any Indemnified Party in enforcing the indemnity
and other obligations provided for in this Section 6.9.
SECTION 6.10 Issuance of Company Warrants and Roll-Over Notes. The
Company hereby agrees, in accordance with the Financing Letter, (i) upon the
closing of the Offer and in accordance with the instructions of Parent, to issue
warrants, exercisable into an aggregate of 10% of the outstanding capital stock
of the Company (calculated after giving effect to the exercise of such warrants
and all other outstanding warrants, options or other convertible securities) and
containing such other terms and provisions as are contemplated in the Financing
Letter, and to cause such warrants to be placed into an escrow account until
such warrants are released to Lehman Brothers in accordance with the Financing
Letter and (ii) at the Effective Time, to issue the "Roll-Over Notes"
contemplated by the Financing Letter, in redemption of the preferred stock
issued by IPB.
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ARTICLE VII
CONDITIONS TO AXIOHM EXCHANGE,
ACQUISITION OF PURCHASER AND MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect the Axiohm
Exchange. The respective obligations of each party to effect the Axiohm
Exchange shall be subject to the satisfaction at or prior to the Axiohm Exchange
Closing of the following conditions:
(a) No statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent) shall
have been enacted, entered, promulgated or enforced by any United States federal
or state court or governmental authority, or any French national or provincial
court or governmental authority, as the case may be, which prohibits, restrains,
enjoins or restricts the consummation of the Axiohm Exchange.
(b) Any waiting period applicable to the Axiohm Exchange under the HSR Act
and French law, if applicable, shall have terminated or expired.
(c) Purchaser shall own Shares representing at least the Minimum Condition
(whether purchased pursuant to the Offer or otherwise acquired).
(d) Parent Holders owning at least a majority of the then outstanding
Parent Shares shall have executed and delivered or shall have agreed to execute
and deliver to Purchaser Axiohm Purchase Agreements.
SECTION 7.2 Conditions to Obligation of Each Party to Effect the
Acquisition of Purchaser. The respective obligations of each party to effect
the Acquisition of Purchaser shall be subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) No statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent) shall
have been enacted, entered, promulgated or enforced by any United States federal
or state court or governmental authority, or any French national or provincial
court or governmental authority, as the case may be, which prohibits, restrains,
enjoins or restricts the consummation of the Acquisition of Purchaser.
(b) Any waiting period applicable to the Acquisition of Purchaser under
the HSR Act and French law, if applicable, shall have terminated or expired.
(c) Purchaser shall own Shares representing at least the Minimum Condition
(whether purchased pursuant to the Offer or otherwise acquired), less the
Exchange Shares.
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(d) The Axiohm Exchange Closing shall have occurred.
SECTION 7.3 Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) No statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent) shall
have been enacted, entered, promulgated or enforced by any United States federal
or state court or governmental authority, or any French national or provincial
court or governmental authority, as the case may be, which prohibits, restrains,
enjoins or restricts the consummation of the Merger.
(b) Any waiting period applicable to the Merger under the HSR Act and
French law, if applicable, shall have terminated or expired.
(c) Purchaser shall own Shares representing at least the Minimum Condition
(whether purchased pursuant to the Offer or otherwise acquired), less the
Exchange Shares.
(d) The Axiohm Exchange Closing shall have occurred.
(e) The Acquisition of Purchaser shall have occurred.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the Axiohm
Exchange, the Acquisition of Purchaser and the Merger contemplated hereby may be
abandoned at any time prior to the Effective Time, notwithstanding any approval
thereof by the shareholders of the Company:
(a) By mutual written consent of Parent, Purchaser and the Company;
(b) By Parent or the Company if any court of competent jurisdiction or
other governmental body located or having jurisdiction within the United States,
France or any country or economic region in which either the Company or Parent,
directly or indirectly, has material assets or operations, shall have issued a
final order, decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Offer, the Axiohm Exchange, the
Acquisition of Purchaser or the Merger and such order, decree, ruling or other
action is or shall have become final and
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nonappealable, except if the party relying on this clause (c) to terminate this
Agreement is in breach of any of its material obligations under this Agreement;
(c) By Parent if, (i) due to a failure of any of the Offer Conditions,
Purchaser shall have (A) terminated the Offer or (B) failed to pay for Shares
pursuant to the Offer within 60 days (or 90 days if there has been a second
request under the HSR Act) following the date hereof, unless such termination or
failure has been caused by or results from (x) a breach of any representation or
warranty on the part of Parent or Purchaser contained in this Agreement that has
a Material Adverse Effect on Parent or Purchaser or (y) there shall have been
any breach of any covenant or agreement on the part of Parent or Purchaser
contained in this Agreement that has a Material Adverse Effect on Parent or
Purchaser or (ii) the Company's Board of Directors shall have withdrawn or
modified (including by amendment of the Schedule 14D-9) in a manner adverse to
Purchaser its approval or recommendation of the Offer, this Agreement, the
Axiohm Exchange, the Acquisition of Purchaser or the Merger or shall have
approved or recommended another offer or transaction, or shall have resolved to
effect any of the foregoing; or
(d) By the Company (i) if Purchaser shall not have commenced the Offer
within five days of the date on which Purchaser's intention to make the Offer is
publicly announced; (ii) if the Offer shall not have been consummated within 60
days (or 90 days if there has been a second request under the HSR Act) following
the date hereof; (iii) if due to a failure of any of the Offer Conditions,
Purchaser shall have terminated the Offer, unless such termination has been
caused by or results from (A) a breach of any representation or warranty on the
part of the Company contained in this Agreement that has a Material Adverse
Effect on the Company or could reasonably be expected to materially adversely
affect (or materially delay) the consummation of the Offer or (B) there shall
have been any breach of any covenant or agreement on the part of the Company
contained in this Agreement that has a Material Adverse Effect on the Company or
could reasonably be expected to materially adversely affect (or materially
delay) the consummation of the Offer; or (iv) in connection with its
determination to pursue a Superior Proposal pursuant to Section 6.3 hereof;
provided that such termination under clause (iv) hereof shall not be effective
until the Company has made payment of the Initial Fee required by Section 8.3
hereof.
SECTION 8.2 Effect of Termination. In the event of the termination of
this Agreement by any party pursuant to Section 8.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto or their respective officers, directors, shareholders or affiliates,
except as set forth in Section 6.2(b), Section 6.2(c), this Section 8.2, Section
8.3 and Section 9.1 hereof; provided, however, that nothing herein shall relieve
any party from liability for any breach hereof; provided, further, that neither
Parent nor Purchaser shall be entitled to any punitive damages in the event of
any breach hereof if the fees referred to in Section 8.3 have been paid in full
to Parent.
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SECTION 8.3 Fees. (a) (i) In the event that this Agreement is terminated
pursuant to Section 8.1(d)(iv), the Company shall pay to Parent, in same day
funds, upon demand, an amount equal to $2.6 million (the "Initial Fee").
(ii) In addition, in the event that (x) a proposal with respect to an
Acquisition Transaction is commenced by the Company, publicly proposed, publicly
disclosed or communicated to the Company or any representative or agent thereof
after the date of this Agreement and prior to the date of termination of this
Agreement, (y) this Agreement is thereafter terminated pursuant to Section
8.1(c) or 8.1(d), and (z) within six (6) months following such termination, an
Acquisition Transaction is consummated or the Company enters into an agreement
relating thereto, then, in any such event, the Company shall pay Parent, in same
day funds, promptly (but in no event later than one business day after the first
of such events shall have occurred) an additional fee of $3.9 million (the
"Subsequent Fee"). For purposes of this Section 8.3(a)(ii), an "Acquisition
Transaction" shall not include any merger, consolidation or business combination
involving the Company or any Company Subsidiary if (A) the Company or such
Company Subsidiary is the surviving company in such transaction, (B) the
shareholders of the Company before the transaction continue to own at least 50%
of the outstanding capital stock of the Company following such transaction, and
(C) no more than 15% of the outstanding capital stock of the Company becomes
beneficially owned by any person as a result of such transaction.
(b) In the event that the Company shall fail to pay either the Initial Fee
or the Subsequent Fee, the terms "Initial Fee" and/or "Subsequent Fee" shall be
deemed to include the costs and expenses actually incurred or accrued by Parent,
Purchaser and their respective shareholders and affiliates (including, without
limitation, fees and expenses of counsel) in connection with the collection
under and enforcement of this Section 8.3, together with interest on such unpaid
Fee, commencing on the date that the applicable Fee became due, at a rate equal
to the rate of interest publicly announced by Citibank, N.A., from time to time,
in The City of New York, as such bank's Prime Rate plus 2.00%.
(c) In the event that Parent or Purchaser shall have terminated the Offer
due solely to a failure of the Offer Condition contained in subsection (c) of
Annex A hereto and the failure of such Offer Condition was not a result,
directly or indirectly, of (i) any event or condition having a Material Adverse
Effect on the Company or (ii) any misrepresentation made by any of Parent,
Purchaser or IPB to Lehman Brothers which was based upon information provided by
the Company to Parent, Purchaser or IPB, then Parent shall reimburse the Company
for the out-of-pocket expenses incurred by the Company in connection with this
Agreement and the transactions contemplated hereby, provided, however, that the
reimbursement required hereby shall not exceed an aggregate of $1.0 million.
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(d) Except as set forth in this Section 8.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not any
such transaction is consummated.
SECTION 8.4 Amendment. Subject to Section 6.1, this Agreement may be
amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 8.5 Waiver. Subject to Section 6.1, at any time prior to the
Effective Time, any party hereto may, but shall not be required to, (a) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall terminate
at the Effective Time or upon the termination of this Agreement pursuant to
Section 8.1, as the case may be, except that the agreements set forth in Article
II, Section 6.7, Section 6.9 and this Article IX shall survive the Effective
Time and those set forth in Section 6.2(b), Section 6.2(c), Section 8.3 and this
Article IX shall survive termination of this Agreement.
SECTION 9.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
if to Parent or Purchaser:
Axiohm S.A.
BP 675-1 a rue D'Arceuil
92542 Montrouge Cedex, FRANCE
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Facsimile: 11-33-1-49-65-94-13
Attention: Patrick Dupuy
with a copy to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, IL 60606
Facsimile: (312) 984-3669
Attention: Helen R. Friedli, P.C.
if to the Company:
DH Technology, Inc.
15070 Avenue of Science
San Diego, CA 92128
Facsimile: (619) 451-0326
Attention: William H. Gibbs
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Facsimile: (415) 493-6811
Attention: Henry P. Massey, Jr.
SECTION 9.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) "beneficial owner" with respect to any shares means a person who shall
be deemed to be the beneficial owner of such shares (i) which such person or any
of its affiliates or associates (as such term is defined in Rule 12b-2 of the
Exchange Act) beneficially owns, directly or indirectly, (ii) which such person
or any of its affiliates or associates has, directly or indirectly, (A) the
right to acquire (whether such right is exercisable immediately or subject only
to the passage of time), pursuant to any agreement, arrangement or understanding
or upon the exercise of consideration rights, exchange rights, warrants or
options, or otherwise, or (B) the right to vote pursuant to any agreement,
arrangement or understanding or (iii) which are beneficially owned, directly or
indirectly,
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by any other persons with whom such person or any of its affiliates or person
with whom such person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in Section
13(d)(3) of the Exchange Act); and
(e) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
50% or more of the stock or other equity interests the holder of which is
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity; and
(f) "US GAAP" shall mean the generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession in the United States.
SECTION 9.4 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.
SECTION 9.5 Entire Agreement; Assignment. This Agreement, together with
the Parent Confidentiality Agreement and the Company Confidentiality Agreement,
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof. This Agreement shall not be assigned by operation of law or otherwise,
except that Parent and Purchaser may assign all or any of their respective
rights and obligations
-48-
<PAGE>
hereunder to any direct or indirect wholly owned subsidiary or subsidiaries of
Parent, provided, that no such assignment shall relieve the assigning party of
its obligations hereunder.
SECTION 9.6 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and, except as provided in Section 6.9 hereof, nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 9.7 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.8 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.9 United States Currency. All amounts described under this
Agreement and all transactions between the parties in connection with this
Agreement shall be paid in U.S. dollars.
SECTION 9.10 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.11 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
AXIOHM S.A.
By:__________________________________
Name:________________________________
Title:_______________________________
Attest:
By:____________________________
Name:__________________________
Title: Secretary
AX ACQUISITION CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
Attest:
By:____________________________
Name:__________________________
Title: Secretary
DH TECHNOLOGY, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
Attest:
By:____________________________
Name:__________________________
Title: Secretary
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<PAGE>
Annex A
Offer Conditions
The capitalized terms used in this Annex A have the meanings set forth in
the attached Agreement, except that the term "Merger Agreement" shall be deemed
to refer to the attached Agreement.
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for any Shares tendered pursuant to
the Offer, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered pursuant to the
Offer, and may amend or terminate the Offer in accordance with the Merger
Agreement if, prior to the expiration of the Offer, (i) at least 6.5 million
Shares shall not have been validly tendered and not properly withdrawn prior to
the expiration of the Offer (the "Minimum Condition") or (ii) at any time on or
after the date hereof and prior to the acceptance for payment of or payment for
Shares, any one or more of the following conditions occurs or has occurred:
(a) there shall have been instituted or pending any action or proceeding
brought by any governmental authority before any federal or state court, or any
order or preliminary or permanent injunction entered in any action or proceeding
before any federal or state court or governmental, administrative or regulatory
authority or agency, or any other action taken, or statute, rule, regulation,
legislation, interpretation, judgment or order enacted, entered, enforced,
promulgated, amended, issued or deemed applicable to Parent, Purchaser, the
Company or any subsidiary or affiliate of Purchaser or the Company or the Offer,
the Axiohm Exchange, the Acquisition of Purchaser or the Merger, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency that would reasonably be expected to have the
effect of: (i) making illegal, materially delaying or otherwise directly or
indirectly restraining or prohibiting the making of the Offer, the acceptance
for payment of, or payment for, some of or all the Shares by Purchaser or any of
its affiliates or the consummation of any of the transactions contemplated by
the Merger Agreement or materially delaying the Axiohm Exchange, the Acquisition
of Purchaser or the Merger; (ii) prohibiting or materially limiting the
ownership or operation by the Company or any of its subsidiaries or Parent,
Purchaser or any of Parent's affiliates of all or any material portion of the
business or assets of the Company or any of its subsidiaries or Parent, or any
of its affiliates, or compelling Parent, Purchaser or any of Parent's affiliates
to dispose of or hold separate all or any material portion of the business or
assets of the Company or any of its subsidiaries or Parent, or any of its
affiliates, as a result of the transactions contemplated by the Offer, the
Axiohm Exchange, the Acquisition of Purchaser or the Merger Agreement; (iii)
imposing or confirming limitations on the
A-1
<PAGE>
ability of Parent, Purchaser or any of Parent's affiliates or shareholders
effectively to acquire or hold or to exercise full rights of ownership of
Shares, including without limitation the right to vote any Shares acquired or
owned by Parent or Purchaser or any of its affiliates or shareholders on all
matters properly presented to the shareholders of the Company, including without
limitation the adoption and approval of the Merger Agreement, the Axiohm
Exchange, the Acquisition of Purchaser and the Merger or the right to vote any
shares of capital stock of any subsidiary directly or indirectly owned by the
Company; or (iv) requiring divestiture by Parent or Purchaser or any of their
affiliates of any Shares; provided, that Parent and Purchaser shall have used
all reasonable efforts to cause any such judgment, order or injunction to be
vacated or lifted;
(b) there shall have occurred any event that is reasonably likely to have
a Material Adverse Effect on the Corporation;
(c) Purchaser shall not have received the financing sufficient to acquire
the Specified Number of the Shares tendered in the Offer (as amended pursuant to
Section 1(a) hereof) and to pay the anticipated expenses in connection therewith
and with the Axiohm Exchange, the Acquisition of Purchaser and the Merger;
(d) the Company shall not have taken all actions with respect to the
Company Outstanding Options contemplated by Annex B hereto or the Executives
shall not have executed the Option Agreements;
(e) there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or in
the over-the-counter market in the United States, (ii) a material disruption of
or material adverse change in financial, banking or capital market conditions in
the United States or France or a declaration of a banking moratorium by French,
United States or New York State banking officials, (iii) a commencement of a war
or armed hostilities or other national or international calamity directly or
indirectly materially adversely affecting (or materially delaying) the
consummation of the Offer or (iv) in the case of any of the foregoing existing
at the time of commencement of the Offer, a material acceleration or worsening
thereof;
(f) (i) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of this
paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of more
than 20% of the outstanding Shares has been acquired by any corporation
(including the Company or any of its subsidiaries or affiliates), partnership,
person or other entity or group (as defined in Section 13(d)(3) of the Exchange
Act), other than Parent or any of its affiliates, or (ii) (A) the Board of
Directors of the Company or any committee thereof shall have withdrawn or
modified in a manner adverse to Parent or Purchaser the approval or
recommendation of the Offer, the Axiohm Exchange, the Acquisition of Purchaser,
the Merger or the Merger Agreement, or approved or recommended any takeover
proposal or any other acquisition of more than 5% of the outstanding Shares
other than the Offer, the Axiohm Exchange,
A-2
<PAGE>
the Acquisition of Purchaser and the Merger, (B) any corporation, partnership,
person or other entity or group shall have entered into a definitive agreement
or an agreement in principle with the Company with respect to a tender offer or
exchange, offer for any Shares or a merger, consolidation or other business
combination with or involving the Company or any of its subsidiaries, or (C) the
Board of Directors of the Company or any committee thereof shall have resolved
to do any of the foregoing;
(g) any of the representations and warranties of the Company set forth in
the Merger Agreement shall not be true and correct, as if such representations
and warranties were made at the time of such determination, and the failure of
all such representations and warranties, together in their entirety, to be true
and correct has a Material Adverse Effect on the Corporation;
(h) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or covenant
of the Company to be performed or complied with by it under the Merger
Agreement, and (i) the Company fails to cure any such failure within ten
business days after written notice from the Purchaser and (ii) the failure to
comply with such agreement or covenant has a Material Adverse Effect on the
Corporation;
(i) the Merger Agreement shall have been terminated in accordance with its
terms or the Offer shall have been terminated with the consent of the Company;
or
(j) any waiting periods under the HSR Act applicable to the purchase of
Shares pursuant to the Offer shall not have expired or been terminated, or any
material approval, permit, authorization or consent of any domestic or foreign
governmental, administrative or regulatory agency (federal, state, local,
provincial or otherwise) shall not have been obtained on terms satisfactory to
the Parent in its reasonable discretion and the failure to obtain such approval,
permit, authorization or consent has a Material Adverse Effect on the
Corporation.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition (except for any action or inaction by Purchaser or any of its
affiliates constituting a breach of the Merger Agreement) or may be waived by
Purchaser in whole or in part at any time and from time to time in its sole
discretion (subject to the terms of the Merger Agreement). The failure by
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances, and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
A-3
<PAGE>
ANNEX B
COMPANY OUTSTANDING OPTIONS
AND EMPLOYMENT AGREEMENTS
1. Vested Options: Upon acceptance for payment of Shares by Purchaser
pursuant to the Offer ("Consummation of the Offer"), all Vested Company
Outstanding Options (as defined below), other than Company Outstanding Options
held by the individuals designated by the Company and reasonably acceptable to
Axiohm (the "Listed Individuals"), shall be cancelled and each holder thereof
shall thereupon be paid by the Company an amount, in cash, equal to the product
of (i) the number of Shares subject to Vested Company Outstanding Options held
by such holder and (ii) the Per Share Amount minus the exercise price
applicable to such Vested Company Outstanding Options (the "Option Spread"),
less applicable taxes. Listed Individuals may elect not later than 10 days
prior to the Consummation of the Offer, as to all or a portion of the
individual's Vested Company Outstanding Options, to be covered under the
preceding sentence or to receive the Option Spread on a deferred basis. The
amounts subject to deferred payment ("Deferred Amounts") shall be distributed
in accordance with a payment schedule selected by the individual from among
alternative schedules specified by the Company over a period not to exceed
seven years following the Effective Time, subject to earlier distribution upon
termination of the individual's employment for any reason. The Company shall
fund its obligation with respect to Deferred Amounts by transferring funds
equal to the Deferred Amounts into a rabbi trust. While in trust the Deferred
Amounts may be invested in the same investments as are available under the
Company's 401(k) plan (other than Company stock) and shall be credited with
earnings accordingly. The Company shall also pay to Listed Individuals who
remain employed by the Company through the Consummation of the Offer, tax
subsidy payments with respect to the Option Spread (the "Tax Subsidy"). The
Company shall pay the Tax Subsidy to the Employee at the time (or times) that
the Employee receives payment of the Option Spread, and shall consist of (i) a
payment to reflect the federal and state tax rate differential between long-
term capital gains and ordinary income in effect on the date (or dates) of
payment of the Option Spread, and (ii) a payment to reimburse the individual
for taxes due as a result of the rate differential payment at the rate in
effect on the date (or dates) of the Tax Subsidy, provided that the Tax Subsidy
shall be limited so as to avoid triggering the golden parachute excise tax
under Sections 280G and 4999 of the Internal Revenue Code (the "Excise Tax").
Prior to the Consummation of the Offer, the Company and each of the Listed
Individuals shall execute an Option Cancellation Agreement in a form reasonably
acceptable to the parties hereto.
Vested Company Outstanding Options shall mean: (i) all Company Outstanding
Options that are vested as of the date of acceptance for payment of Shares by
Purchaser pursuant to the Offer or that would have vested through September 6,
1997; (ii) one-half of Company Outstanding Options issued to Walter Sobon; and
(iii) all warrants outstanding under the Company's Director Warrant Plan.
2. Unvested Options: All Company Outstanding Options other than Vested
Company Outstanding Options ("Unvested Company Outstanding Options") shall
remain outstanding and subject to the terms and conditions of the applicable
Company option plan and option agreement, but shall be modified to provide for
full vesting acceleration in the event the employee's employment is terminated
(i) by the Company other than for cause, or (ii) as the result of the
employee's death or disability. Unvested Outstanding Company Options held by
William Gibbs and Walter Sobon shall be also be modified to provide for
acceleration upon an Involuntary Termination of employment (as defined in the
Employment Agreements). In the event the Company engages in a transaction prior
to April 1, 2001, as a result of which the Company's Shares are no longer
registered under the Securities Act of 1934, as amended, each holder of
Unvested Outstanding Company Options shall be entitled to receive from the
Company a cash payment equal to the product of (i) the number of Shares subject
to Unvested Company Outstanding Options held by such holder and (ii) the Per
Share Amount minus the exercise price applicable to such Unvested Company
Outstanding Options, less applicable taxes; provided, however, that in the
event such payment triggers the Excise Tax, the Company and the holders subject
to such Excise Tax shall negotiate, in
<PAGE>
good faith, an alternative arrangement intended to minimize or eliminate such
Excise Tax. Prior to the Consummation of the Offer, the Company and each of the
employees (other than Gibbs and Sobon) holding Unvested Outstanding Company
Options shall execute an Option Amendment in a form reasonably acceptable to
the parties hereto.
3. New Options: The Company will grant 350,000 new options to management and
employees under the Company's 1992 Stock Plan on a date specified by Gibbs and
the Compensation Committee of the Company's Board of Directors within the first
two full fiscal quarters after the Effective Time at an option price equal to
the fair market value of the Common Stock on the specified date. Such new
options shall be allocated by the Compensation Committee, shall have an 8-year
term and, except as otherwise provided in the Employment Agreements (as
applicable), shall vest cumulatively as to 50% on the second anniversary of the
grant date, 25% on the third anniversary and 25% on the fourth anniversary.
4. Employment Agreements: The Company on the one hand and each of Gibbs and
Sobon on the other hand shall execute agreements in the form attached hereto as
Annex B-1 with the severance payments specified below which shall be payable
upon termination of employment as an Involuntary Termination (as defined in the
Employment Agreements). All severance payments shall be limited so as to avoid
the golden parachute excise tax of Sections 280G and 4999 of the Internal
Revenue Code:
Gibbs: 2 years' Current Compensation if terminated in the first year, 1
1/2 years' if terminated in second year, 1 year thereafter. For this
purpose, "Current Compensation" means the Employee's average annual base
salary and annual bonus over the three preceding fiscal years.
Sobon: 1 year's Current Compensation (as defined), provided (i) one and
one-half years' Current Compensation in the first year following the
Effective Time if Gibbs ceases to be an employee of the Company for any
reason in such year; and (ii) one and one-quarter years' Current
Compensation in the second year following the Effective Time if Gibbs
ceases to be an employee of the Company for any reason in such year.
2
<PAGE>
LIST OF ATTACHMENTS
ANNEX B-1: Form of Employment Agreement
3
<PAGE>
DH TECHNOLOGY, INC.
EMPLOYMENT AGREEMENT
This Agreement is entered into as of , by and among DH
Technology, Inc. (the "Company"), Axiohm SA (the "Acquiror") and Janet Shanks
(the "Employee").
WHEREAS, the Company is proposing to enter into a negotiated business
combination with the Acquiror and a subsidiary of the Acquiror which will
result in the Acquiror becoming a wholly-owned subsidiary of the Company (the
"Transaction"); and
WHEREAS, the Acquiror and the Company desire to retain the Employee on a
full-time basis in the capacity of [title] of the Company following the
Transaction, and the Employee desires to accept such employment; and
WHEREAS the parties desire and agree to enter into an employment relationship
by means of this Agreement;
NOW THEREFORE in consideration of the promises and mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually covenanted and
agreed by and among the parties as follows:
1. CONDITION PRECEDENT. This Agreement shall become effective upon the
closing of the Transaction (the "Effective Date") and shall supersede any prior
agreement or understanding between the Employee and the Company relating to the
Employee's employment by the Company. Prior to the Effective Date, this
Agreement shall be of no force or effect.
2. POSITION AND DUTIES. The Employee shall be employed, as of the Effective
Date, as [title] of the Company, reporting to the Chief Executive Officer of
the Company and assuming and discharging such responsibilities as are
commensurate with the Employee's position. In performing her basic duties, the
Employee shall work out at her current location, although the Employee
acknowledges that frequent travel may be necessary in carrying out her duties
hereunder. The Employee shall perform her duties faithfully and to the best of
her ability and shall devote her full business time and effort to the
performance of her duties hereunder; provided, however, that the foregoing
shall not preclude the Employee from engaging in civic, charitable or religious
activities, from devoting a reasonable amount of time to private investments,
or from being employed by, rendering services to or serving on the boards of
directors of other entities, so long as such activities, employment and/or
service do not materially interfere or conflict with her responsibilities to
the Company.
3. EMPLOYMENT RELATIONSHIP. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
policies at the time of termination.
4. COMPENSATION.
(A) BASE SALARY. For all services to be rendered by the Employee pursuant to
this Agreement, the Employee shall receive a minimum annual base salary of
$ , payable monthly in accordance with the Company's normal payroll
practices, increased from time to time by the Board of the Company (the
"Board") consistent with past practices.
4
<PAGE>
(B) BONUS. Beginning with the Company's current fiscal year, and for each
fiscal year thereafter during the term of this Agreement, the Employee shall be
eligible to receive a target bonus of $ based on performance of the Company
as set forth in the Company's annual operating plan established by the Chief
Executive Officer of the Company and the Board (the "Target Bonus").
(C) OPTION. Within six (6) months after the closing of the Transaction, the
Company shall grant an option to the Employee for a number of shares of the
Company's Common Stock to be determined by the Compensation Committee of the
Company's Board (the "Shares"), at a per Share purchase price equal to the then
current fair market value of a Share, pursuant to the Company's 1992 Stock Plan
(the "1992 Plan") and standard form of stock option agreement. Subject to the
terms of the 1992 Plan, fifty percent (50%) of the Shares shall vest on the
date twenty-four (24) months after the date of grant, and an additional twenty-
five percent (25%) of the Shares shall vest at the end of each year thereafter.
(D) AUTOMOBILE ALLOWANCE. During the term of this Agreement, the Company
shall provide the Employee with an automobile allowance of not less than
$ per month. The Employee agrees to have available for business use a four-
door automobile suitable for clients and customers.
5. OTHER BENEFITS. The Employee shall be entitled to participate in the
employee benefit plans and programs of the Company, if any, to the extent that
her position, tenure, salary, age, health and other qualifications make her
eligible to participate in such plans or programs, subject to the rules and
regulations applicable thereto. The Company reserves the right to cancel or
change the benefit plans and programs it offers to its employees at any time.
6. EXPENSES. The Company shall reimburse the Employee for reasonable travel,
entertainment or other expenses incurred by the Employee in the furtherance of
or in connection with the performance of the Employee's duties hereunder, in
accordance with the Company's expense reimbursement policy as in effect from
time to time.
7. TERMINATION.
(A) INVOLUNTARY TERMINATION. If the Employee's employment with the Company
terminates in an Involuntary Termination, then, subject to Section 9: (i) the
Employee shall be entitled to receive a severance payment equal to one times
the Employee's Current Compensation (one-half times the Employee's Current
Compensation if such Termination occurs after the first anniversary of the
Effective Date); and (ii) the vesting and exercisability of all outstanding
stock options that were granted to the Employee by the Company prior to the
Effective Date shall accelerate in full. Any severance payments to which the
Employee is entitled pursuant to this Section 7(a) shall be paid to the
Employee in a lump sum within fifteen (15) days of the Employee's Involuntary
Termination.
(B) DISABILITY. If the Employee's employment with the Company terminates as a
result of Disability, the Company shall make available to the Employee and the
Employee's spouse and dependents group health, life and other similar insurance
plans substantially comparable to the group health, life and other similar
insurance plans in which the Employee or such dependents participated on the
date of such termination (the "Company Coverage"). The Company Coverage shall
be at the Company's expense for twelve (12) months following such termination.
In addition, the Employee's stock options shall vest in full as provided in
clause (ii) of Section 7(a) above.
(C) DEATH. In the event of the Employee's death, this Agreement, to the
extent it has not already terminated, shall terminate on the last day of the
calendar month of the Employee's death. In addition (i) the Employee's estate
or beneficiaries shall be eligible for those benefits (if any) as may then be
established under the Company's severance and benefits plans and policies
existing at the time of the Employee's death, and (ii) the Employee's stock
options shall vest in full as provided in clause (ii) of Section 7(a) above.
5
<PAGE>
(D) OTHER TERMINATION. If the Employee's employment terminates other than in
an Involuntary Termination, or upon the Employee's Death or Disability, then
the Employee shall not be entitled to receive severance or other benefits
pursuant to this Agreement, but may be eligible for those benefits (if any) as
may then be established under the Company's severance and benefits plans and
policies existing at the time of such termination.
8. DEFINITIONS.
(A) CAUSE. "Cause" shall mean the occurrence of any one or more of the
following: (i) the Employee's conviction by, or entry of a plea of guilty or
nolo contendere in, a court of final jurisdiction for any crime which
constitutes a felony in the jurisdiction involved (other than a felony traffic
offense), which felony materially injures the Company; (ii) the Employee's
misappropriation of funds or commission of a material act of fraud, whether
prior or subsequent to the date hereof, upon the Company; (iii) gross
negligence by the Employee in the scope of the Employee's services to the
Company; (iv) a willful breach by the Employee of a material provision of this
Agreement; or (v) a willful failure of the Employee to substantially perform
his duties hereunder. Notwithstanding the foregoing, the Employee shall not be
deemed to have been terminated for Cause without (i) reasonable notice to the
Employee setting forth the reasons for Company's intention to terminate for
Cause, and (ii) an opportunity for the Employee, together with his counsel, if
any, to be heard before the Board.
(B) CURRENT COMPENSATION. "Current Compensation" shall mean an amount equal
to the greater of (i) the Employee's base salary and bonus earned in the fiscal
year immediately preceding the current fiscal year; or (ii) the Employee's
annual base salary for, and any bonus earned at any time during, the current
fiscal year.
(C) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean (i) without
the Employee's express written consent, a reduction of the Employee's duties,
position or responsibilities relative to the Employee's duties, position or
responsibilities in effect immediately prior to such reduction, or the removal
of the Employee from such position, duties and responsibilities, unless the
Employee is provided with comparable duties, position and responsibilities;
(ii) without the Employee's express written consent, a reduction of the
facilities and perquisites (including office space and location) available to
the Employee immediately prior to such reduction; (iii) a reduction by the
Company of the Employee's base salary or Target Bonus (as set forth in Section
4) in effect immediately prior to such reduction; (iv) a reduction by the
Company in the kind or level of employee benefits to which the Employee is
entitled immediately prior to such reduction with the result that the
Employee's overall benefits package is significantly reduced; (v) without the
Employee's express written consent, the relocation of the Employee to a
facility or a location more than thirty-five (35) miles from his current
location; (vi) any purported termination of the Employee by the Company which
is not effected for Cause or for which the grounds relied upon are not valid;
or (vii) the failure of the Acquiror or the Company to obtain the assumption of
this Agreement by any successors contemplated in Section 11 below.
9. GOLDEN PARACHUTE EXCISE TAX.
(A) BENEFITS CAP. In the event that the benefits under this Agreement, when
aggregated with any other payments or benefits received by the Employee, or to
be received by the Employee, would (i) constitute "parachute payments" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), and (ii) but for this provision, would be subject to the excise
tax imposed by Section 4999 of the Code or any similar or successor provision,
then the Employee's benefits shall be reduced to such lesser amount or degree
as would result in no portion of such benefits being subject to the excise tax
under Section 4999 of the Code.
(B) DETERMINATION. Unless the Company and the Employee otherwise agree in
writing, any determination required under this Section shall be made in writing
by the Company's primary independent public accounting firm (the
"Accountants"), whose determination shall be conclusive and binding upon the
Employee and the
6
<PAGE>
Company for all purposes. For purposes of making the calculations required by
this Section, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999 of
the Code. The Company and the Employee shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make its determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section.
10. RIGHT TO ADVICE OF COUNSEL. The Employee acknowledges that she has had
the right to consult with counsel and is fully aware of her rights and
obligations under this Agreement.
11. SUCCESSORS.
(A) COMPANY'S SUCCESSORS. Any successor to the Acquiror or the Company
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Acquiror's or the Company's business and/or assets shall assume the obligations
under this Agreement and agree expressly to perform the obligations under this
Agreement in the same manner and to the same extent as the Acquiror or the
Company would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term "Acquiror" or
"Company," as applicable, shall include any successor to the Acquiror's or the
Company's business and/or assets which executes and delivers the assumption
agreement described in this subsection (a) or which becomes bound by the terms
of this Agreement by operation of law.
(B) EMPLOYEE'S SUCCESSORS. Without the written consent of the Acquiror and
the Company, the Employee shall not assign or transfer this Agreement or any
right or obligation under this Agreement to any other person or entity.
Notwithstanding the foregoing, the terms of this Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
12. NOTICE CLAUSE.
(A) MANNER. Any notice hereby required or permitted to be given shall be
sufficiently given if in writing and upon mailing by registered or certified
mail, postage prepaid, to either party at the address of such party or such
other address as shall have been designated by written notice by such party to
the other party.
(B) EFFECTIVENESS. Any notice or other communication required or permitted to
be given under this Agreement will be deemed given on the day when delivered in
person, or the third business day after the day on which such notice was mailed
in accordance with Section 12(a).
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal substantive laws, but not the choice of law rules,
of the state of California.
14. SEVERABILITY. The invalidity or unenforceability of any provision of this
Agreement, or any terms hereof, shall not affect the validity or enforceability
of any other provision or term of this Agreement.
15. INTEGRATION. This Agreement represents the entire agreement and
understanding between the parties as to the subject matter herein and
supersedes all prior or contemporaneous agreements whether written or oral. No
waiver, alteration, or modification of any of the provisions of this Agreement
shall be binding unless in writing and signed by duly authorized
representatives of the parties hereto.
16. TAXES. All payments made pursuant to this Agreement shall be subject to
withholding of applicable income and employment taxes.
7
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Acquiror and the Company by their duly authorized officers, as of
the day and year first above written.
DH Technology, Inc.
By: _________________________________
Title: ______________________________
AXIOHM SA
By: _________________________________
Title: ______________________________
Employee:
-------------------------------------
Name
8
<PAGE>
DH TECHNOLOGY, INC.
EMPLOYMENT AGREEMENT
This Agreement is entered into as of , by and among DH
Technology, Inc. (the "Company"), Axiohm SA (the "Acquiror") and David Ledwell
(the "Employee").
WHEREAS, the Company is proposing to enter into a negotiated business
combination with the Acquiror and a subsidiary of the Acquiror which will
result in the Acquiror becoming a wholly-owned subsidiary of the Company (the
"Transaction"); and
WHEREAS, the Acquiror and the Company desire to retain the Employee on a
full-time basis in the capacity of [title] of the Company following the
Transaction, and the Employee desires to accept such employment; and
WHEREAS the parties desire and agree to enter into an employment relationship
by means of this Agreement;
NOW THEREFORE in consideration of the promises and mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually covenanted and
agreed by and among the parties as follows:
1. CONDITION PRECEDENT. This Agreement shall become effective upon the
closing of the Transaction (the "Effective Date") and shall supersede any prior
agreement or understanding between the Employee and the Company relating to the
Employee's employment by the Company. Prior to the Effective Date, this
Agreement shall be of no force or effect.
2. POSITION AND DUTIES. The Employee shall be employed, as of the Effective
Date, as [title] of the Company, reporting to the Chief Executive Officer of
the Company and assuming and discharging such responsibilities as are
commensurate with the Employee's position. In performing his basic duties, the
Employee shall work at his present location, although the Employee acknowledges
that frequent travel may be necessary in carrying out his duties hereunder. The
Employee shall perform his duties faithfully and to the best of his ability and
shall devote his full business time and effort to the performance of his duties
hereunder; provided, however, that the foregoing shall not preclude the
Employee from engaging in civic, charitable or religious activities, from
devoting a reasonable amount of time to private investments, or from being
employed by, rendering services to or serving on the boards of directors of
other entities, so long as such activities, employment and/or service do not
materially interfere or conflict with his responsibilities to the Company.
3. EMPLOYMENT RELATIONSHIP. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
policies at the time of termination.
4. COMPENSATION.
(A) BASE SALARY. For all services to be rendered by the Employee pursuant to
this Agreement, the Employee shall receive a minimum annual base salary of
$ , payable monthly in accordance with the Company's normal payroll
practices, increased from time to time by the Board of the Company (the
"Board") consistent with past practices.
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<PAGE>
(B) BONUS. Beginning with the Company's current fiscal year, and for each
fiscal year thereafter during the term of this Agreement, the Employee shall be
eligible to receive a target bonus of $ based on performance of the Company
as set forth in the Company's annual operating plan established by the Chief
Executive Officer of the Company and the Board (the "Target Bonus").
(C) OPTION. Within six (6) months after the closing of the Transaction, the
Company shall grant an option to the Employee for a number of shares of the
Company's Common Stock to be determined by the Compensation Committee of the
Company's Board (the "Shares"), at a per Share purchase price equal to the then
current fair market value of a Share, pursuant to the Company's 1992 Stock Plan
(the "1992 Plan") and standard form of stock option agreement. Subject to the
terms of the 1992 Plan, fifty percent (50%) of the Shares shall vest on the
date twenty-four (24) months after the date of grant, and an additional twenty-
five percent (25%) of the Shares shall vest at the end of each year thereafter.
(D) AUTOMOBILE ALLOWANCE. During the term of this Agreement, the Company
shall provide the Employee with a automobile allowance of not less than $
per month. The Employee agrees to have available for business use a four-door
automobile suitable for customers and clients.
5. OTHER BENEFITS. The Employee shall be entitled to participate in the
employee benefit plans and programs of the Company, if any, to the extent that
his position, tenure, salary, age, health and other qualifications make his
eligible to participate in such plans or programs, subject to the rules and
regulations applicable thereto. The Company reserves the right to cancel or
change the benefit plans and programs it offers to its employees at any time.
6. EXPENSES. The Company shall reimburse the Employee for reasonable travel,
entertainment or other expenses incurred by the Employee in the furtherance of
or in connection with the performance of the Employee's duties hereunder, in
accordance with the Company's expense reimbursement policy as in effect from
time to time.
7. TERMINATION.
(A) INVOLUNTARY TERMINATION. If the Employee's employment with the Company
terminates in an Involuntary Termination, then, subject to Section 9: (i) the
Employee shall be entitled to receive a severance payment equal to two times
the Employee's Current Compensation (one times the Employee's Current
Compensation if such Termination occurs after the first anniversary of the
Effective Date); and (ii) the vesting and exercisability of all outstanding
stock options that were granted to the Employee by the Company prior to the
Effective Date shall accelerate in full. Any severance payments to which the
Employee is entitled pursuant to this Section 7(a) shall be paid to the
Employee in a lump sum within fifteen (15) days of the Employee's Involuntary
Termination.
(B) DISABILITY. If the Employee's employment with the Company terminates as a
result of Disability, the Company shall make available to the Employee and the
Employee's spouse and dependents group health, life and other similar insurance
plans substantially comparable to the group health, life and other similar
insurance plans in which the Employee or such dependents participated on the
date of such termination (the "Company Coverage"). The Company Coverage shall
be at the Company's expense for twenty-four (24) months following such
termination. In addition, the Employee's stock options shall vest in full as
provided in clause (ii) of Section 7(a) above.
(C) DEATH. In the event of the Employee's death, this Agreement, to the
extent it has not already terminated, shall terminate on the last day of the
calendar month of the Employee's death. In addition (i) the Employee's estate
or beneficiaries shall be eligible for those benefits (if any) as may then be
established under the Company's severance and benefits plans and policies
existing at the time of the Employee's death, and (ii) the Employee's stock
options shall vest in full as provided in clause (ii) of Section 7(a) above.
10
<PAGE>
(D) OTHER TERMINATION. If the Employee's employment terminates other than in
an Involuntary Termination, or upon the Employee's Death or Disability, then
the Employee shall not be entitled to receive severance or other benefits
pursuant to this Agreement, but may be eligible for those benefits (if any) as
may then be established under the Company's severance and benefits plans and
policies existing at the time of such termination.
8. DEFINITIONS.
(A) CAUSE. "Cause" shall mean the occurrence of any one or more of the
following: (i) the Employee's conviction by, or entry of a plea of guilty or
nolo contendere in, a court of final jurisdiction for any crime which
constitutes a felony in the jurisdiction involved (other than a felony traffic
offense), which felony materially injures the Company; (ii) the Employee's
misappropriation of funds or commission of a material act of fraud, whether
prior or subsequent to the date hereof, upon the Company; (iii) gross
negligence by the Employee in the scope of the Employee's services to the
Company; (iv) a willful breach by the Employee of a material provision of this
Agreement; or (v) a willful failure of the Employee to substantially perform
his duties hereunder. Notwithstanding the foregoing, the Employee shall not be
deemed to have been terminated for Cause without (i) reasonable notice to the
Employee setting forth the reasons for Company's intention to terminate for
Cause, and (ii) an opportunity for the Employee, together with his counsel, if
any, to be heard before the Board.
(B) CURRENT COMPENSATION. "Current Compensation" shall mean an amount equal
to the greater of (i) the Employee's base salary and bonus earned in the fiscal
year immediately preceding the current fiscal year; or (ii) the Employee's
annual base salary for, and any bonus earned at any time during, the current
fiscal year.
(C) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean (i) without
the Employee's express written consent, a reduction of the Employee's duties,
position or responsibilities relative to the Employee's duties, position or
responsibilities in effect immediately prior to such reduction, or the removal
of the Employee from such position, duties and responsibilities, unless the
Employee is provided with comparable duties, position and responsibilities;
(ii) without the Employee's express written consent, a reduction of the
facilities and perquisites (including office space and location) available to
the Employee immediately prior to such reduction; (iii) a reduction by the
Company of the Employee's base salary or Target Bonus (as set forth in Section
4) in effect immediately prior to such reduction; (iv) a reduction by the
Company in the kind or level of employee benefits to which the Employee is
entitled immediately prior to such reduction with the result that the
Employee's overall benefits package is significantly reduced; (v) without the
Employee's express written consent, the relocation of the Employee to a
facility or a location more than thirty-five (35) miles from his current
location; (vi) any purported termination of the Employee by the Company which
is not effected for Cause or for which the grounds relied upon are not valid;
or (vii) the failure of the Acquiror or the Company to obtain the assumption of
this Agreement by any successors contemplated in Section 11 below.
9. GOLDEN PARACHUTE EXCISE TAX.
(A) BENEFITS CAP. In the event that the benefits under this Agreement, when
aggregated with any other payments or benefits received by the Employee, or to
be received by the Employee, would (i) constitute "parachute payments" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), and (ii) but for this provision, would be subject to the excise
tax imposed by Section 4999 of the Code or any similar or successor provision,
then the Employee's benefits shall be reduced to such lesser amount or degree
as would result in no portion of such benefits being subject to the excise tax
under Section 4999 of the Code.
(B) DETERMINATION. Unless the Company and the Employee otherwise agree in
writing, any determination required under this Section shall be made in writing
by the Company's primary independent public accounting firm (the
"Accountants"), whose determination shall be conclusive and binding upon the
Employee and the Company for all purposes. For purposes of making the
calculations required by this Section, the Accountants
11
<PAGE>
may make reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith interpretations concerning the
application of Sections 280G and 4999 of the Code. The Company and the Employee
shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make its determination under
this Section. The Company shall bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this Section.
10. RIGHT TO ADVICE OF COUNSEL. The Employee acknowledges that he has had the
right to consult with counsel and is fully aware of his rights and obligations
under this Agreement.
11. SUCCESSORS.
(A) COMPANY'S SUCCESSORS. Any successor to the Acquiror or the Company
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Acquiror's or the Company's business and/or assets shall assume the obligations
under this Agreement and agree expressly to perform the obligations under this
Agreement in the same manner and to the same extent as the Acquiror or the
Company would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term "Acquiror" or
"Company," as applicable, shall include any successor to the Acquiror's or the
Company's business and/or assets which executes and delivers the assumption
agreement described in this subsection (a) or which becomes bound by the terms
of this Agreement by operation of law.
(B) EMPLOYEE'S SUCCESSORS. Without the written consent of the Acquiror and
the Company, the Employee shall not assign or transfer this Agreement or any
right or obligation under this Agreement to any other person or entity.
Notwithstanding the foregoing, the terms of this Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
12. NOTICE CLAUSE.
(A) MANNER. Any notice hereby required or permitted to be given shall be
sufficiently given if in writing and upon mailing by registered or certified
mail, postage prepaid, to either party at the address of such party or such
other address as shall have been designated by written notice by such party to
the other party.
(B) EFFECTIVENESS. Any notice or other communication required or permitted to
be given under this Agreement will be deemed given on the day when delivered in
person, or the third business day after the day on which such notice was mailed
in accordance with Section 12(a).
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal substantive laws, but not the choice of law rules,
of the state of California.
14. SEVERABILITY. The invalidity or unenforceability of any provision of this
Agreement, or any terms hereof, shall not affect the validity or enforceability
of any other provision or term of this Agreement.
15. INTEGRATION. This Agreement represents the entire agreement and
understanding between the parties as to the subject matter herein and
supersedes all prior or contemporaneous agreements whether written or oral. No
waiver, alteration, or modification of any of the provisions of this Agreement
shall be binding unless in writing and signed by duly authorized
representatives of the parties hereto.
16. TAXES. All payments made pursuant to this Agreement shall be subject to
withholding of applicable income and employment taxes.
12
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Acquiror and the Company by their duly authorized officers, as of
the day and year first above written.
DH Technology, Inc.
By: _________________________________
Title: ______________________________
AXIOHM SA
By: _________________________________
Title: ______________________________
Employee:
-------------------------------------
Name
13
