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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
DIGITAL LINK CORPORATION
(Name of the Issuer)
DLZ CORP.
VINITA GUPTA
NARENDRA K. GUPTA
GUPTA CHILDREN'S TRUST AGREEMENT
NARENDRA AND VINITA GUPTA LIVING TRUST
THE NAREN AND VINITA GUPTA FOUNDATION
(Name of the Person(s) Filing Statement)
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class of Securities)
253856 10 8
(CUSIP Number of Class of Securities)
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VINITA GUPTA
DLZ CORP.
P.O. BOX 620154
WOODSIDE, CALIFORNIA 94062-0154
(408) 745-4550
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
COPIES TO:
CHRISTOPHER KAUFMAN, ESQ. DAVID HEALY, ESQ.
Latham & Watkins Fenwick & West LLP
135 Commonwealth Drive Two Palo Alto Square
Menlo Park, California 94025 Palo Alto, California 94306
(650) 328-4600 (650) 494-0600
This statement is filed in connection with (check the appropriate box):
a. / / The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of 1933.
c. /X/ A tender offer.
d. / / None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. /X/
CALCULATION OF FILING FEE:
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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$32,702,067.40 $6,541
</TABLE>
* For purposes of calculating the fee only. The amount assumes the purchase of
3,174,958 shares of common stock, no par value per share, of Digital Link
Corporation at $10.30 net in cash per share, which represents 90% of all
outstanding shares at September 9, 1999 not owned by the persons filing this
statement (other than The Naren and Vinita Gupta Foundation).
** The amount of the filing fee calculated in accordance with Exchange Act Rule
0-11 equals 1/50th of 1% of the value of the securities proposed to be
acquired.
/ / 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.
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Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
</TABLE>
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INTRODUCTION
This Rule 13e-3 Transaction Statement (the "Schedule 13E-3") relates to a
tender offer by DLZ Corp. ("Purchaser") to purchase all of the outstanding
shares of Common Stock, no par value per share (the "Shares"), of Digital Link
Corporation, a California corporation (the "Company"), not currently owned by
Purchaser, for a purchase price of $10.30 per share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated September 10, 1999 (the "Offer to Purchase") and
in the related Letter of Transmittal (the "Letter of Transmittal" and, together
with the Offer to Purchase, the "Offer"), copies of which are filed as exhibits
(a)(1) and (a)(2) respectively to the Tender Offer Statement on Schedule 14D-1
(the "Schedule 14D-1") filed by Purchaser with the Securities and Exchange
Commission on the date hereof. This Schedule 13E-3 is being filed by Purchaser.
The following cross-reference sheet is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Schedule 14D-1 of
the information required to be included in response to the items of this
Schedule 13E-3. The information set forth in the Schedule 14D-1, including all
exhibits thereto, is hereby expressly incorporated herein by reference and the
responses to each item of this Schedule 13E-3 are qualified in their entirety by
reference to the information contained in the Schedule 14D-1 and the exhibits
thereto. All cross references to the Schedule 14D-1 are to the Offer to
Purchase.
The information contained in this Schedule 13E-3 concerning the Company,
including, without limitation, information concerning the Company's capital
structure and historical statements, directors and executive officers, was
obtained from the Company's publicly available filings with the Securities and
Exchange Commission. None of the persons filing this statement takes
responsibility for the accuracy of such information.
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CROSS REFERENCE SHEET TO
SCHEDULE 14D-1
<TABLE>
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LOCATION IN
ITEM AND CAPTION OF SCHEDULE 13E-3 SCHEDULE 14D-1
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1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) - (c)................................................................................. 1 (a) - (c)
(d) - (f)................................................................................. *
2. IDENTITY AND BACKGROUND.
(a) - (g)................................................................................. 2
3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) - (b)................................................................................. 3
4. TERMS OF THE TRANSACTION.
(a) - (b)................................................................................. *
5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) - (g)................................................................................. 5 (a) - (g)
6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)....................................................................................... 4 (a)
(b)....................................................................................... *
(c)....................................................................................... 4 (b)
(d)....................................................................................... 4 (c)
7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.
(a)....................................................................................... 5
(b) - (d)................................................................................. *
8. FAIRNESS OF THE TRANSACTION.
(a) - (f)................................................................................. *
9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) - (c)................................................................................. *
10. INTEREST IN SECURITIES OF THE ISSUER.
(a) - (b)................................................................................. 6
11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S SECURITIES......... 7
12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO THE TRANSACTION.
(a) - (c)................................................................................. *
13. OTHER PROVISIONS OF THE TRANSACTION.
(a) - (c)................................................................................. *
14. FINANCIAL INFORMATION.
(a)....................................................................................... 9
(b)....................................................................................... *
15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a)....................................................................................... *
(b)....................................................................................... 8
16. ADDITIONAL INFORMATION.................................................................... 10 (f)
17. MATERIAL TO BE FILED AS EXHIBITS.......................................................... Separately
filed with this
Schedule 13E-3.
</TABLE>
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* The Item is not required by Schedule 14D-1 of the Securities and Exchange
Act, of 1934, as amended, is inapplicable or the answer thereto is in the
negative.
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a)-(c) The answers to Items 1 (a) - (c) of the Schedule 14D-1 are
incorporated herein by reference. Information concerning the approximate number
of holders of record of the Shares is set forth under the heading "Introduction"
of the Offer to Purchase and is incorporated herein by reference.
(d) The information set forth under the heading "The Tender
Offer--Section 5. Price Range of Shares; Dividends" of the Offer to Purchase is
incorporated herein by reference.
(e) Not applicable.
(f) The information set forth under the headings "Special
Factors--Section 1. Background of the Offer," "Special Factors--Section 3.
Interests of Certain Persons in the Offer and the Merger," "The Tender
Offer--Section 7. Certain Information Concerning Purchaser and the Gupta Family"
of the Offer to Purchase and in Schedule III, Interests of the Gupta Family in
the Company, to the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(g) This Schedule 13E-3 is being filed by Purchaser, Vinita Gupta,
Narendra Gupta, the Gupta Children's Trust Agreement, the Narendra and Vinita
Gupta Living Trust and The Naren and Vinita Gupta Foundation. The answers to
Item 2 of the Schedule 14D-1 are incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)-(b) The information set forth under the headings "Introduction,"
"Special Factors--Section 1. Background of the Offer," "Special Factors--Section
3. Interests of Certain Persons in the Offer and the Merger," "Special
Factors--Section 5. The Merger Agreement" and "The Tender Offer--Section 7.
Certain Information Concerning Purchaser and the Gupta Family" of the Offer to
Purchase and in Schedule III, Interests of the Gupta Family in the Company, to
the Offer to Purchase is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a)-(b) The information set forth under the headings "Introduction,"
"Special Factors--Section 2. Purposes and Structure of the Offer and the Merger;
Plans for the Company," "Special Factors-- Section 3. Interests of Certain
Persons in the Offer and the Merger," "Special Factors--Section 5. The Merger
Agreement," "The Tender Offer--Section 1. Terms of the Offer," "The Tender
Offer-- Section 8. Source and Amount of Funds," "The Tender Offer--Section 11.
Certain Conditions of the Offer," and "The Tender Offer--Section 12. Certain
Regulatory and Legal Matters" of the Offer to Purchase is incorporated herein by
reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(g) The information set forth under the headings "Introduction,"
"Special Factors--Section 2. Purposes and Structure of the Offer and the Merger;
Plans for the Company," "Special Factors-- Section 5. The Merger Agreement" and
"The Tender Offer--Section 10. Certain Effects of the Transaction" of the Offer
to Purchase is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth under the heading "The Tender Offer--Section
8. Source and Amount of Funds" of the Offer to Purchase is incorporated herein
by reference.
(b) The information set forth under the heading "The Tender Offer--Section
13. Fees and Expenses" of the Offer to Purchase is incorporated herein by
reference.
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(c) The information set forth under the heading "The Tender Offer--Section
8. Source and Amount of Funds" of the Offer to Purchase is incorporated herein
by reference.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) The information set forth under the headings "Introduction," "Special
Factors--Section 2. Purpose and Structure of the Offer and the Merger; Plans for
the Company" and "The Tender Offer-- Section 10. Certain Effects of the
Transaction" of the Offer to Purchase is incorporated herein by reference.
(b)-(d) The information set forth under the headings "Special
Factors--Section 2. Purposes and Structure of the Offer and the Merger; Plans
for the Company," "Special Factors--Section 4 Fairness of the Offer and Merger,"
"Special Factors--Section 5. The Merger Agreement," "Special Factors-- Section
6. Certain United States Federal Income Tax Consequences," and "The Tender
Offer-- Section 10. Certain Effects of the Transaction" of the Offer to Purchase
is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(b) The information set forth under the headings "Introduction" and
"Special Factors-- Section 4. Fairness of the Offer" of the Offer to Purchase is
incorporated herein by reference.
(c)-(e) The information set forth under the headings "Introduction,"
"Special Factors--Section 1. Background of the Offer," "Special Factors--Section
2. Purposes and Structure of the Offer and Merger and the Merger; Plans for the
Company," "Special Factors--Section 4. Fairness of the Offer," "Special
Factors--Section 5. The Merger Agreement," and "Tender Offer--Section 1. Terms
of the Offer" of the Offer to Purchase is incorporated herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth under the headings "Introduction" and
"Special Factors-- Section 4. Fairness of the Offer" of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) The information set forth under the headings "Introduction,"
"Special Factors--Section 1. Background of the Offer," "Special Factors--Section
3. Interests of Certain Persons in the Offer and the Merger" and "The Tender
Offer--Section 7. Certain Information Concerning Purchaser and the Gupta Family"
of the Offer to Purchase and in Schedule III, Interests of the Gupta Family in
the Company to the Offer to Purchase is incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth under the headings "Introduction," "Special
Factors--Section 1. Background of the Offer," "Special Factors--Section 3.
Interests of Certain Persons in the Offer and the Merger," "Special
Factors--Section 5. The Merger Agreement" and "The Tender Offer--Section 7.
Certain Information Concerning Purchaser and the Gupta Family" of the Offer to
Purchase and in Schedule III, Interests of the Gupta Family in the Company, to
the Offer to Purchase is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) The information set forth under the heading "Introduction" of the Offer
to Purchase is incorporated herein by reference.
<PAGE>
(b) The information set forth under the headings "Introduction," "Special
Factors--Section 1. Background of the Offer," "Special Factors--Section 3.
Interests of Certain Persons in the Offer and the Merger," "Special
Factors--Section 4. Fairness of the Offer," and "Special Factors--Section 5. The
Merger Agreement" of the Offer to Purchase is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the sections entitled "Special
Factors--Section 7. Dissenters' Rights" and "The Tender Offer--Section 12.
Certain Regulatory and Legal Matters" of the Offer to Purchase and in Schedule
IV, Chapter 13 of the California General Corporation Law, to the Offer to
Purchase is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The audited financial statements of the Company set forth on pages 26
through 47 in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 are incorporated herein by reference. The unaudited financial
statements of the Company set forth in the Company's Quarterly Reports on Form
10Q for the quarterly periods ended March 31, 1999 and June 30, 1999,
respectively, are incorporated herein by reference. The information set forth in
the section entitled "The Tender Offer--Section 6. Certain Information
Concerning the Company" of the Offer to Purchase is incorporated herein by
reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in the section entitled "The Tender
Offer--Section 8. Source and Amount of Funds" of the Offer to Purchase is
incorporated herein by reference.
(b) Not applicable.
ITEM 16. ADDITIONAL INFORMATION.
The answer to Item 10(f) of the Schedule 14D-1 is incorporated herein by
reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Commitment Letter dated September 9, 1999, between Comerica
Bank-California and DLZ Corp. (filed as exhibit (b)(1) to the Schedule 14D-1 and
incorporated herein by reference).
(a)(2) Commitment Letter dated September 9, 1999, between Comerica
Bank-California and DLZ Corp. (filed as exhibit (b)(2) to the Schedule 14D-1 and
incorporated herein by reference).
(b)(1) Fairness Opinion of Sutter Securities Incorporated, dated as of
September 3, 1999 (attached as Schedule I to the Offer to Purchase and
incorporated herein by reference).
(b)(2) Fairness Opinion of Dain Rauscher Wessels, dated as of September 3,
1999.
(c)(1) Agreement and Plan of Merger dated as of September 3, 1999, between
DLZ Corp. and Digital Link Corporation (filed as exhibit (c)(1) to the Schedule
14D-1 and incorporated herein by reference).
(c)(2) Form of Subscription Agreement to be entered into by DLZ Corp. and
certain members of the Gupta Family (filed as exhibit (c)(2) to the Schedule
14D-1 and incorporated herein by reference).
<PAGE>
(c)(3) Depositary Agreement dated September 9, 1999, between Harris Trust
Company of New York and DLZ Corp. (filed as exhibit (c)(3) to the Schedule 14D-1
and incorporated herein by reference).
(d)(1) Offer to Purchase (filed as exhibit (a)(1) to the Schedule 14D-1 and
incorporated herein by reference).
(d)(2) Letter of Transmittal (filed as exhibit (a)(2) to the Schedule 14D-1
and incorporated herein by reference).
(d)(3) Notice of Guaranteed Delivery (filed as exhibit (a)(3) to the
Schedule 14D-1 and incorporated herein by reference).
(d)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees (filed as exhibit (a)(4) to the Schedule 14D-1 and incorporated
herein by reference).
(d)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees (filed as exhibit (a)(5) to the Schedule
14D-1 and incorporated herein by reference).
(d)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 (filed as exhibit (a)(6) to the Schedule 14D-1 and
incorporated herein by reference).
(d)(7) Text of Press Release issued jointly by Purchaser and by the
Company, dated September 3, 1999 (filed as exhibit (a)(7) to the Schedule 14D-1
and incorporated herein by reference).
(d)(8) Summary Advertisement, dated September 10, 1999 (filed as exhibit
(a)(8) to the Schedule 14D-1 and incorporated herein by reference).
(e)(1) Appraisal Rights of Dissenting Stockholders Under Chapter 13 of the
California General Corporation Law (attached as Schedule IV to the Offer to
Purchase and incorporated herein by reference).
(f) Not applicable.
(g)(1) Complaint in EDWARD ABOFF, ET AL. V. RICHARD C. ALBERDING, ET. AL.,
Case No. CV784389, filed with the Superior Court of the State of California for
the County of Santa Clara (filed as exhibit (g)(1) to the Schedule 14D-1 and
incorporated herein by reference).
(g)(2) Complaint in WILLIAM LEVY, ET. AL. V. DIGITAL LINK CORPORATION, ET.
AL., Case No. CV784407, filed with the Superior Court of the State of California
for the County of Santa Clara (filed as exhibit (g)(2) to the Schedule 14D-1 and
incorporated herein by reference).
(g)(3) Complaint in ANDREW CURTIS WRIGHT, ET. AL. V. DIGITAL LINK
CORPORATION, ET. AL., Case No. CV784405, filed with the Superior Court of the
State of California for the County of Santa Clara (filed as exhibit (g)(3) to
the Schedule 14D-1 and incorporated herein by reference).
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
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Dated: September 10, 1999 DLZ CORP.
By: /s/ VINITA GUPTA
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Name: Vinita Gupta
President and Chief Executive
Title: Officer
GUPTA CHILDREN'S TRUST AGREEMENT
By: /s/ VINITA GUPTA
--------------------------------------
Name: Vinita Gupta
Title: Trustee
By: /s/ NARENDRA K. GUPTA
--------------------------------------
Name: Narendra K. Gupta
Title: Trustee
NARENDRA AND VINITA GUPTA LIVING TRUST
By: /s/ VINITA GUPTA
--------------------------------------
Name: Vinita Gupta
Title: Trustee
By: /s/ NARENDRA K. GUPTA
--------------------------------------
Name: Narendra K. Gupta
Title: Trustee
THE NAREN AND VINITA GUPTA FOUNDATION
By: /s/ VINITA GUPTA
--------------------------------------
Name: Vinita Gupta
Title: Trustee
By: /s/ NARENDRA GUPTA
--------------------------------------
Name: Narendra Gupta
Title: Trustee
/s/ VINITA GUPTA
---------------------------------------------
Vinita Gupta
/s/ NARENDRA K. GUPTA
---------------------------------------------
Narendra K. Gupta
</TABLE>
<PAGE>
EXHIBIT INDEX
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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(a)(1) Commitment Letter dated September 9, 1999, between Comerica Bank-California and DLZ Corp. (filed as
exhibit (b)(1) to the Schedule 14D-1 and incorporated herein by reference).
(a)(2) Commitment Letter dated September 9, 1999, between Comerica Bank-California and DLZ Corp. (filed as
exhibit (b)(2) to the Schedule 14D-1 and incorporated herein by reference).
(b)(1) Fairness Opinion of Sutter Securities Incorporated, dated as of September 3, 1999 (attached as Schedule
I to the Offer to Purchase and incorporated herein by reference).
(b)(2) Fairness Opinion of Dain Rauscher Wessels, dated as of September 3, 1999.
(c)(1) Agreement and Plan of Merger dated as of September 3, 1999, between DLZ Corp. and Digital Link
Corporation (filed as exhibit (c)(1) to the Schedule 14D-1 and incorporated herein by reference).
(c)(2) Form of Subscription Agreement to be entered into by DLZ Corp. and certain members of the Gupta Family
(filed as exhibit (c)(2) to the Schedule 14D-1 and incorporated herein by reference).
(c)(3) Depositary Agreement dated September 9, 1999, between Harris Trust Company of New York and DLZ Corp.
(filed as exhibit (c)(3) to the Schedule 14D-1 and incorporated herein by reference).
(d)(1) Offer to Purchase (filed as exhibit (a)(1) to the Schedule 14D-1 and incorporated herein by reference).
(d)(2) Letter of Transmittal (filed as exhibit (a)(2) to the Schedule 14D-1 and incorporated herein by
reference).
(d)(3) Notice of Guaranteed Delivery (filed as exhibit (a)(3) to the Schedule 14D-1 and incorporated herein by
reference).
(d)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (filed as exhibit
(a)(4) to the Schedule 14D-1 and incorporated herein by reference).
(d)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
(filed as exhibit (a)(5) to the Schedule 14D-1 and incorporated herein by reference).
(d)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (filed as exhibit
(a)(6) to the Schedule 14D-1 and incorporated herein by reference).
(d)(7) Text of Press Release issued jointly by Purchaser and by the Company, dated September 3, 1999 (filed as
exhibit (a)(7) to the Schedule 14D-1 and incorporated herein by reference).
(d)(8) Summary Advertisement, dated September 10, 1999 (filed as exhibit (a)(8) to the Schedule 14D-1 and
incorporated herein by reference).
(e)(1) Appraisal Rights of Dissenting Stockholders Under Chapter 13 of the California General Corporation Law
(attached as Schedule IV to the Offer to Purchase and incorporated herein by reference).
(f) Not applicable
(g)(1) Complaint in EDWARD ABOFF, ET AL. V. RICHARD C. ALBERDING, ET. AL., Case No. CV784389, filed with the
Superior Court of the State of California for the County of Santa Clara (filed as exhibit (g)(1) to the
Schedule 14D-1 and incorporated herein by reference).
(g)(2) Complaint in WILLIAM LEVY, ET. AL. V. DIGITAL LINK CORPORATION, ET. AL., Case No. CV784407, filed with
the Superior Court of the State of California for the County of Santa Clara (filed as exhibit (g)(2) to
the Schedule 14D-1 and incorporated herein by reference).
(g)(3) Complaint in ANDREW CURTIS WRIGHT, ET. AL. V. DIGITAL LINK CORPORATION, ET. AL., Case No. CV784405,
filed with the Superior Court of the State of California for the County of Santa Clara (filed as exhibit
(g)(3) to the Schedule 14D-1 and incorporated herein by reference).
</TABLE>
<PAGE>
[DAIN RAUSCHER WESSELS LETTERHEAD]
September 3, 1999
The Special Committee of the Board of Directors
Digital Link Corporation
217 Humboldt Court
Sunnyvale, CA 94089-1300
Directors:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders of Digital Link Corporation, a California corporation
(the "Company"), of the consideration to be received by the stockholders
pursuant to the terms of the proposed Agreement and Plan of Merger (the
"Agreement") dated as of September 3, 1999, by and between DLZ Corporation, a
California corporation (the "Purchaser") and the Company. Capitalized terms used
herein shall have the meanings used in the Agreement unless otherwise defined
herein.
Pursuant to the Agreement, each outstanding share of common stock, $.01 par
value per share, of the Company is proposed to be purchased at a price of $10.30
per Share, net to seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase (the "Offer to
Purchase") of Purchaser and the related Letter of Transmittal (collectively, the
"Offer"), which will be filed as exhibits to each of (a) the Tender Offer
Statement on Schedule 14D-1 (together with all supplements or amendments
thereto, the "Schedule 14D-1") and (b) the Transaction Statement on Schedule
13E-3 (together with all supplements or amendments thereto, the "Schedule
13E-3") in respect of the Offer to be filed by Purchaser with the Securities and
Exchange Commission.
Dain Rauscher Wessels, a division of Dain Rauscher Incorporated ("Dain
Rauscher Wessels"), as part of its investment banking services, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, corporate restructurings, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
We are acting as financial advisor to the Special Committee of the Board of
Directors of the Company, in connection with providing a fairness opinion (the
"Opinion") to the Board of Directors of the Company, and will receive a fee for
our services. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of our engagement. In the ordinary course of business,
Dain Rauscher Wessels acts as a market maker and broker in the publicly traded
securities of the Company and receives customary compensation in connection
therewith, and also provides research coverage for the Company for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities.
In connection with our review of the Offer, and in arriving at our opinion,
we have: (i) reviewed and analyzed the financial terms of the Agreement; (ii)
reviewed and analyzed certain publicly available financial and other data with
respect to the Company and certain other historical relevant operating data
relating to the Company made available to us from published sources and from the
internal records of the Company; (iii) conducted discussions with members of the
senior management of the Company with respect to the business prospects and
financial outlook of the Company; (iv) reviewed the reported prices and trading
activity for the Company's Common Stock; (v) compared the financial performance
of the Company and the prices of the Company's Common Stock with that of certain
other publicly-traded companies which we have deemed comparable to the Company
and their securities; and (vi) reviewed the financial terms, to the extent
publicly available, of certain merger transactions which we have deemed
comparable to the Offer. In addition, we have conducted such other analyses and
examinations and considered such other financial, economic and market criteria
as we have deemed necessary in arriving at our opinion.
<PAGE>
With respect to the data and discussions relating to the business prospects
and financial outlook of the Company, upon advice of the Company we have assumed
that such data has been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company and that the Company will
perform substantially in accordance with such financial data and estimates. We
express no opinion as to such financial data and estimates or the assumptions on
which they were based. We have assumed the Offer will be consummated upon the
terms set forth in the Agreement without material alteration thereof.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial, legal, tax, operating and other information
provided to us by the Company (including without limitation the financial
statements and related notes thereto of the Company), and have not assumed
responsibility for independently verifying and have not independently verified
such information. We have not assumed any responsibility to perform, and have
not performed, an independent evaluation or appraisal of any of the respective
assets or liabilities of the Company, and we have not been furnished with any
such valuations or appraisals. In addition, we have not assumed any obligation
to conduct, and have not conducted, any physical inspection of the books and
records or property or facilities of the Company. We have not been asked to, and
did not, solicit third-party indications of interest for the acquisition of the
Company, or evaluate the merits of any alternative transaction to the Offer.
Additionally, we have not been asked to and did not consider the possible
effects of any litigation, other legal claims or any other contingent matters.
Our opinion speaks only as of the date hereof, is necessarily based on the
conditions as they exist and information which we have been supplied as of the
date hereof, and is without regard to any market, economic, financial, legal or
other circumstances or event of any kind or nature which may exist or occur
after such date. Our advisory services and the opinion expressed herein are
provided for the information and assistance of the Special Committee of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute a
recommendation to any stockholder as to how such stockholder should vote with
respect to such transaction. Further, our opinion does not address the merits of
the underlying decision by the Company to engage in such transaction.
Based on our experience as investment bankers and subject to the foregoing,
including the various assumptions and limitations set forth herein, it is our
opinion that, as of the date hereof, the consideration to be received by the
holders of the Company's Common Stock pursuant to the Agreement is fair, from a
financial point of view, to the holders of the Company's Common Stock.
Very truly yours,
/s/ Dain Rauscher Wessels
Dain Rauscher Wessels
a division of Dain Rauscher
Incorporated
