<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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)
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
DIGITAL LINK CORPORATION
(Name of Subject Company)
DLZ CORP.
VINITA GUPTA
NARENDRA K. GUPTA
GUPTA CHILDREN'S TRUST AGREEMENT
NARENDRA AND VINITA GUPTA LIVING TRUST
THE NAREN AND VINITA GUPTA FOUNDATION
(Bidders)
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class of Securities)
253856 10 8
(CUSIP Number of Class of Securities)
------------------------
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 Bidders)
------------------------
COPY TO:
CHRISTOPHER KAUFMAN, ESQ.
LATHAM & WATKINS
135 COMMONWEALTH DRIVE
MENLO PARK, CALIFORNIA 94025
(650) 328-4600
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
<S> <C>
$32,702,067.40 $6,541
</TABLE>
* For purposes of calculating the filing fee only. The amount assumes the
purchase of 3,174,458 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.
/X/ 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.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid: $6,541 Filing Party: Bidders
Form or Registration No.: Schedule 13E-3 Date Filed: September 10, 1999
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 253856 10 8 Page 2 of 12 Pages
- --------------------------------------------------------------------------------
(1) Name of reporting persons: DLZ Corp.
I.R.S. Identification No. of above person (entities only): 77-0522035
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group (see instructions):
(a) /X/
(b) / /
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds (see instructions):
BK
- --------------------------------------------------------------------------------
(5) Check box if disclosure of legal proceedings is required pursuant to Items
2(e) or 2(f)
/ /
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization:
California
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person:
4,034,687 shares of Common Stock*
- --------------------------------------------------------------------------------
(8) Check box if the aggregate amount in Row (7) excludes certain shares (see
instructions):
/ /
- --------------------------------------------------------------------------------
(9) Percent of class represented to amount in Row (7):
50.6%
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions):
CO
- --------------------------------------------------------------------------------
* DLZ Corp. intends to enter into a Subscription Agreement with each of The
Narendra and Vinita Gupta Living Trust, the Gupta Children's Trust
Agreement, and Vinita Gupta, as custodian for her minor children immediately
following expiration of the tender offer described in the Offer to Purchase
dated September 10, 1999 (the "Offer to Purchase"). Pursuant to the
Subscription Agreements, such persons would acquire an aggregate of
4,034,687 shares of newly-issued common stock, no par value per share, of
DLZ Corp. in exchange for the 4,034,687 shares of Common Stock, no par value
per share, of Digital Link Corporation held by them. The Subscription
Agreements are described more fully under the heading "Special
Factors--Section 3. Interests of Certain Persons in the Offer and the
Merger" of the Offer to Purchase.
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 253856 10 8 Page 3 of 12 Pages
- --------------------------------------------------------------------------------
(1) Name of reporting persons: Vinita Gupta
I.R.S. Identification No. of above person (entities only):
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group (see instructions):
(a) /X/
(b) / /
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds (see instructions):
BK
- --------------------------------------------------------------------------------
(5) Check box if disclosure of legal proceedings is required pursuant to Items
2(e) or 2(f)
/ /
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization:
U.S.A.
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person:
4,076,355 shares of Common Stock* (Beneficial ownership of 925,500 of these
shares is disclaimed)
*21,668 shares are subject to options that are exercisable within 60 days of
September 10, 1999.
- --------------------------------------------------------------------------------
(8) Check box if the aggregate amount in Row (7) excludes certain shares (see
instructions):
/X/
- --------------------------------------------------------------------------------
(9) Percent of class represented to amount in Row (7):
50.9%
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions):
IN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 253856 10 8 Page 4 of 12 Pages
- --------------------------------------------------------------------------------
(1) Name of reporting persons: Narendra K. Gupta
I.R.S. Identification No. of above person (entities only):
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group (see instructions):
(a) /X/
(b) / /
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds (see instructions):
BK
- --------------------------------------------------------------------------------
(5) Check box if disclosure of legal proceedings is required pursuant to Items
2(e) or 2(f)
/ /
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization:
U.S.A.
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person:
4,076,355 shares of Common Stock* (Beneficial ownership of 925,500 of these
shares is disclaimed)
*21,668 shares are subject to options that are exercisable within 60 days of
September 10, 1999.
- --------------------------------------------------------------------------------
(8) Check box if the aggregate amount in Row (7) excludes certain shares (see
instructions):
/X/
- --------------------------------------------------------------------------------
(9) Percent of class represented to amount in Row (7):
50.9%
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions):
IN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 253856 10 8 Page 5 of 12 Pages
- --------------------------------------------------------------------------------
(1) Name of reporting persons: Gupta Children's Trust Agreement
I.R.S. Identification No. of above person (entities only):
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group (see instructions):
(a) /X/
(b) / /
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds (see instructions):
BK
- --------------------------------------------------------------------------------
(5) Check box if disclosure of legal proceedings is required pursuant to Items
2(e) or 2(f)
/ /
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization:
U.S.A.
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person:
862,500 shares of Common Stock
- --------------------------------------------------------------------------------
(8) Check box if the aggregate amount in Row (7) excludes certain shares (see
instructions):
/ /
- --------------------------------------------------------------------------------
(9) Percent of class represented to amount in Row (7):
10.8%
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions):
OO
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 253856 10 8 Page 6 of 12 Pages
- --------------------------------------------------------------------------------
(1) Name of reporting persons: Narendra and Vinita Gupta Living Trust
I.R.S. Identification No. of above person (entities only):
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group (see instructions):
(a) /X/
(b) / /
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds (see instructions):
BK
- --------------------------------------------------------------------------------
(5) Check box if disclosure of legal proceedings is required pursuant to Items
2(e) or 2(f)
/ /
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization:
U.S.A.
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person:
3,109,187 shares of Common Stock
- --------------------------------------------------------------------------------
(8) Check box if the aggregate amount in Row (7) excludes certain shares (see
instructions):
/ /
- --------------------------------------------------------------------------------
(9) Percent of class represented to amount in Row (7):
38.8%
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions):
OO
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 253856 10 8 Page 7 of 12 Pages
- --------------------------------------------------------------------------------
(1) Name of reporting persons: The Naren and Vinita Gupta Foundation
I.R.S. Identification No. of above person (entities only): 77-0388598
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group (see instructions):
(a) /X/
(b) / /
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds (see instructions):
BK
- --------------------------------------------------------------------------------
(5) Check box if disclosure of legal proceedings is required pursuant to Items
2(e) or 2(f)
/ /
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization:
U.S.A.
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person:
20,000 shares of Common Stock
- --------------------------------------------------------------------------------
(8) Check box if the aggregate amount in Row (7) excludes certain shares (see
instructions):
/ /
- --------------------------------------------------------------------------------
(9) Percent of class represented to amount in Row (7):
Less than 1.0%
- --------------------------------------------------------------------------------
(10) Type of reporting person (see instructions):
OO
- --------------------------------------------------------------------------------
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") relates
to a tender offer by DLZ Corp., a California corporation ("Purchaser"), to
purchase any and all outstanding shares of Common Stock, no par value per share
(the "Shares"), of Digital Link Corporation, a California corporation, not
currently directly or indirectly 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"), and is intended to satisfy the reporting requirements of
Section 14(d) of the Securities Exchange Act of 1934, as amended. Copies of the
Offer to Purchase and the related Letter of Transmittal are filed with this
Schedule 14D-1 as Exhibits (a)(1), and (a)(2) hereto, respectively. This
Schedule 14D-1 also constitutes the statement on Schedule 13D of 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 with
respect to certain shares which they currently beneficially own.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Digital Link Corporation, a
California corporation (the "Company"), which has its principal executive and
operating offices at 217 Humboldt Court, Sunnyvale, CA 94089-1300.
(b) The class of equity securities which are the subject of the Offer is
the Company's Common Stock, no par value, and the Offer is for any and all
outstanding Shares at a price of $10.30 per Share, net to the seller in cash,
without interest thereon. The information set forth under the heading
"Introduction" of the Offer to Purchase is incorporated herein by reference.
(c) 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.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Schedule 14D-1 is being filed by Purchaser, Vinita
Gupta, Narendra Gupta, the Gupta Children's Trust Agreement, The Narendra and
Vinita Gupta Living Trust, and the Narendra K. and Vinita Gupta Charitable
Foundation. The information set forth under the headings "Introduction,"
"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," and in Schedule II, Information Concerning the
Sole Director and Sole Executive Officer of Purchaser and Certain Members of the
Gupta Family, to the Offer to Purchase is incorporated herein by reference.
(e)-(f) During the last five years, none of Purchaser, Vinita Gupta,
Narendra Gupta, the Gupta Children's Trust Agreement, the Narendra and Vinita
Gupta Living Trust, The Naren and Vinita Gupta Foundation or any executive
officer, director or trustee of any of them has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) nor has been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which such person was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating 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)-(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.
<PAGE>
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(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.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) 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.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
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 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'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 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth under the headings "Introduction," "Special
Factors--Section 1. Background of the Offer," "Special Factors--Section 4.
Fairness of the Offer and the Merger" and "The Tender Offer--Section 13. Fees
and Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
Not applicable.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth under the headings "Special Factors--Section
3. Interests of Certain Persons in the Offer and the Merger" and "Special
Factors--Section 5. The Merger Agreement" of the Offer to Purchase is
incorporated herein by reference.
(b)-(d) The information set forth under the heading "The Tender
Offer--Section 12. Certain Regulatory and Legal Matters" of the Offer to
Purchase is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the entire Offer to Purchase and the Letter
of Transmittal, copies of which are filed with this Schedule 14D-1 as Exhibits
(a)(1) and (a)(2), respectively, is incorporated herein by reference.
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Text of Press Release issued jointly by Purchaser and by the
Company, dated September 3, 1999.
(a)(8) Summary Advertisement, dated September 10, 1999.
(b)(1) Commitment Letter dated September 9, 1999, between Comerica
Bank-California and DLZ Corp.
(b)(2) Commitment Letter dated September 9, 1999, between Comerica
Bank-California and DLZ Corp.
(c)(1) Agreement and Plan of Merger by and between Purchaser and the
Company, dated as of September 3, 1999.
(c)(2) Form of Subscription Agreement to be entered into by DLZ Corp.
and certain members of the Gupta Family.
(c)(3) Depositary Agreement dated September 9, 1999, between Harris
Trust Company of New York and DLZ Corp.
(c)(4) Agreement of Joint Filing dated September 10, 1999, among DLZ
Corp., Vinita Gupta, Narendra K. Gupta, the Gupta Children's
Trust Agreement, the Narendra and Vinita Gupta Living Trust and
The Naren and Vinita Gupta Foundation.
(d) Not applicable.
(e) Not applicable.
(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.
(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.
(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.
<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.
<TABLE>
<S> <C> <C>
Dated: September 10, 1999 DLZ CORP.
By: /s/ VINITA GUPTA
--------------------------------------
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
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Text of Press Release issued jointly by Purchaser and by the
Company, dated September 3, 1999.
(a)(8) Summary Advertisement, dated September 10, 1999.
(b)(1) Commitment Letter dated September 9, 1999, between Comerica
Bank-California and DLZ Corp.
(b)(2) Commitment Letter dated September 9, 1999, between Comerica
Bank-California and DLZ Corp.
(c)(1) Agreement and Plan of Merger by and between Purchaser and the
Company, dated as of September 3, 1999.
(c)(2) Form of Subscription Agreement to be entered into by DLZ Corp.
and certain members of the Gupta Family.
(c)(3) Depositary Agreement dated September 9, 1999, between Harris
Trust Company of New York and DLZ Corp.
(c)(4) Agreement of Joint Filing dated September 10, 1999, among DLZ
Corp., Vinita Gupta, Narendra K. Gupta, the Gupta Children's
Trust Agreement, the Narendra and Vinita Gupta Living Trust and
The Naren and Vinita Gupta Foundation.
(d) Not applicable.
(e) Not applicable.
(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.
(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.
(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.
<PAGE>
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DIGITAL LINK CORPORATION
AT
$10.30 NET PER SHARE
BY
DLZ CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, OCTOBER 15, 1999 UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF SEPTEMBER 3, 1999, BY AND BETWEEN DLZ CORP. ("PURCHASER") AND DIGITAL LINK
CORPORATION (THE "COMPANY"). THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS,
THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE
OFFER A NUMBER OF SHARES (THE "SHARES") OF COMMON STOCK, NO PAR VALUE, WHICH,
TOGETHER WITH THE 4,034,687 SHARES (NOT INCLUDING SHARES ISSUABLE UPON EXERCISE
OF OUTSTANDING OPTIONS) BENEFICIALLY OWNED BY PURCHASER AND THE GUPTA INVESTORS
(AS DEFINED HEREIN) ON THE DATE OF PURCHASE, WOULD CONSTITUTE NOT LESS THAN 90%
OF THE OUTSTANDING SHARES ON THE DATE OF PURCHASE (THE "MINIMUM CONDITION"). THE
OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS WHICH ARE CONTAINED IN THIS
OFFER TO PURCHASE. SEE "THE TENDER OFFER--SECTION 11. CERTAIN CONDITIONS OF THE
OFFER."
THE BOARD OF DIRECTORS OF THE COMPANY, ACTING ON THE UNANIMOUS
RECOMMENDATION OF A SPECIAL COMMITTEE OF INDEPENDENT DIRECTORS NOT AFFILIATED
WITH PURCHASER, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY INCLUDING THE OFFER AND THE MERGER, HAS
DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY
INCLUDING THE OFFER AND THE MERGER ARE FAIR AND IN THE BEST INTERESTS OF THE
COMPANY AND THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS ACCEPTANCE OF THE
OFFER BY SHAREHOLDERS OF THE COMPANY.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it, together with the certificate(s) evidencing
tendered Shares and any other required documents, to the Depositary (as defined
herein) or tender such Shares pursuant to the procedures for book-entry transfer
set forth in "The Tender Offer--Section 3. Procedure for Tendering Shares" or
(2) request such shareholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for such shareholder. Any shareholder
whose Shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee if such shareholder desires to tender such
Shares. A shareholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, or who cannot comply with
the procedure for book-entry transfer on a timely basis, may tender such Shares
by following the procedure for guaranteed delivery set forth in "The Tender
Offer--Section 3. Procedure for Tendering Shares."
Questions or requests for assistance may be directed to MacKenzie Partners,
Inc. (the "Information Agent") at its respective address and telephone numbers
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.
September 10, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
INTRODUCTION.......................................................................... 1
SPECIAL FACTORS....................................................................... 4
1. Background of the Offer................................................. 4
2. Purpose and Structure of the Offer and the Merger; Plans for the
Company.................................................................... 6
3. Interests of Certain Persons in the Offer and the Merger................ 8
4. Fairness of the Offer and the Merger.................................... 8
5. The Merger Agreement.................................................... 9
6. Certain United States Federal Income Tax Consequences................... 15
7. Dissenters' Rights...................................................... 16
THE TENDER OFFER...................................................................... 17
1. Terms of the Offer...................................................... 17
2. Acceptance for Payment and Payment for Shares........................... 18
3. Procedure for Tendering Shares.......................................... 20
4. Withdrawal Rights....................................................... 22
5. Price Range of Shares; Dividends........................................ 23
6. Certain Information Concerning the Company.............................. 23
7. Certain Information Concerning Purchaser and the Gupta Family........... 31
8. Source and Amount of Funds.............................................. 33
9. Dividends and Distributions............................................. 34
10. Certain Effects of the Transaction..................................... 35
11. Certain Conditions of the Offer........................................ 37
12. Certain Regulatory and Legal Matters................................... 39
13. Fees and Expenses...................................................... 41
14. Miscellaneous.......................................................... 41
SCHEDULE I--Fairness Opinion of Sutter Securities Incorporated........................ I-1
SCHEDULE II--Information Concerning the Sole Director and Sole Executive Officer of
Purchaser and Certain Members of the Gupta Family................................... II-1
SCHEDULE III--Interests of Purchaser and the Gupta Family in the Company.............. III-1
SCHEDULE IV--Chapter 13 of the California General Corporation Law..................... IV-1
</TABLE>
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To the Holders of Common Stock of
DIGITAL LINK CORPORATION:
INTRODUCTION
DLZ Corp., a California corporation ("Purchaser"), hereby offers to purchase
any and all shares (the "Shares") of common stock, no par value, of Digital Link
Corporation, a California corporation (the "Company"), at a price of $10.30 per
Share, net to the seller in cash, without interest thereon (the "Offer Price"),
upon the terms and subject to the conditions set forth in this Offer to Purchase
(the "Offer to Purchase") and in the related Letter of Transmittal (the "Letter
of Transmittal," as amended from time to time, and the Offer to Purchase, as it
may be amended from time to time, together constitute the "Offer").
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of September 3, 1999 (the "Merger Agreement"), between Purchaser and the
Company. Under the terms of the Merger Agreement, if the Minimum Condition is
satisfied, following the purchase of Shares pursuant to the Offer and the
satisfaction of other conditions set forth in the Merger Agreement and in
accordance with the relevant provisions of the California General Corporation
Law (the "CGCL"), Purchaser will be merged with and into the Company (the
"Merger"), with the Company (the "Surviving Corporation") surviving the Merger.
At the effective time of the Merger (the "Effective Time"), each outstanding
Share (other than Shares held by shareholders who properly exercise their
appraisal rights in accordance with the CGCL (the "Dissenting Shares") and
Shares owned by Purchaser) will be converted, by virtue of the Merger and
without any action on the part of the Company, into the right to receive the
Offer Price in cash (the "Merger Consideration"), without interest thereon. The
Merger is subject to a number of conditions as described under "Special
Factors--Section 5. The Merger Agreement." If the Minimum Condition is not
satisfied, the Offer will be withdrawn without the purchase of any Shares,
Purchaser and the Gupta Family (as defined below) will dispose of that number of
Shares necessary to reduce their beneficial ownership below 50% of the
outstanding Shares and the Merger will be accomplished by a long-form merger,
which will require a proxy solicitation, a special meeting of shareholders and
the affirmative vote of a majority of the outstanding Shares. A significantly
longer period of time will be required to effect a long-form merger than the
Offer and the short-form merger. By virtue of their Share ownership, Purchaser
and the Gupta Investors (as defined below) may effectively have the ability to
assure the approval of a long-form merger.
Purchaser was formed by Vinita Gupta, Chairman of the Board, President and
Chief Executive Officer of the Company, in connection with an acquisition of the
Company. Vinita Gupta is the sole director, executive officer and shareholder of
Purchaser. Vinita Gupta and her husband, Narendra K. Gupta, as trustees of the
Narendra and Vinita Gupta Living Trust and Vinita Gupta, Narendra Gupta and
Kalyan Dutta, as trustees for the Gupta Children's Trust Agreement for Vinita
and Narendra Gupta's minor children, and Vinita Gupta, as custodian for each of
her two minor children (collectively, the "Gupta Investors") beneficially own
4,034,687 shares (not including shares issuable upon exercise of outstanding
Options). The Gupta Investors together with the Narendra and Vinta Gupta
Foundation (the "Gupta Foundation") are collectively referred to as the Gupta
Family and beneficially own 4,054,687 Shares, which constituted approximately
50.6% of the outstanding Shares as of September 9, 1999. The members of the
Gupta Investors and the Gupta Family may be construed as a group within the
meaning of Rule 13d-5 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
The Board acting on the unanimous recommendation of a special committee of
independent directors not affiliated with the Purchaser (the "Special
Committee") has approved and adopted the Merger Agreement and the transactions
contemplated thereby including the Offer and the Merger, has determined that the
Merger Agreement and the transactions contemplated thereby including the Offer
and the Merger are fair and in the best interests of the Company and the
shareholders of the Company, and recommends acceptance of the offer by the
shareholders of the Company. The factors considered by the Board and the Special
Committee to approve the Offer and the Merger and to recommend that the
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shareholders of the Company accept the Offer and tender their Shares are
described in the Company's Schedule 14D-9, which is being mailed to shareholders
of the Company herewith.
Purchaser and the Gupta Investors believe the Offer is fair to the holders
of Shares (other than the Purchaser and the Gupta Investors) for the reasons
described below and under "Special Factors-- Section 4. Fairness of the Offer
and the Merger." The Company's financial advisor, Dain Rauscher Wessels, ("DRW")
has delivered to the Board and the Special Committee a written opinion, dated
September 3, 1999, to the effect that, as of such date and based upon and
subject to certain matters stated therein, the terms of the Offer and the Merger
are fair, from a financial point of view, to the Company's shareholders. A copy
of such opinion is contained in the Company's Schedule 14D-9 which is being
mailed to the Company's shareholders herewith and should be read carefully in
its entirety. Sutter Securities Incorporated ("Sutter Securities"), which has
been retained by Purchaser, has rendered a written opinion to the effect that
the Transaction (as defined therein), and the consideration to be paid in the
Offer and Merger, is fair, from a financial point of view, to the Company's
shareholders (other than Purchaser and the Gupta Investors). The fairness
opinion of Sutter Securities was also furnished to the Special Committee and the
Board. A copy of such opinion is set forth in Schedule I hereto and should be
read carefully in its entirety. The opinion is described more fully under
"Special Factors--Section 4. Fairness of the Offer and the Merger."
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer a number of
shares which, together with the 4,034,687 Shares (not including Shares issuable
upon exercise of outstanding Options) beneficially owned by Purchaser and the
Gupta Investors on the date of purchase, would constitute not less than 90% of
the outstanding Shares on the date of purchase (the "Minimum Condition"). Based
upon the 8,010,716 Shares outstanding as of September 9, 1999, assuming no other
Shares are issued pursuant to the exercise of options or otherwise prior to the
Effective Time and excluding Shares held by the Gupta Foundation (which will not
be contributed to Purchaser), the number of Shares needed to be purchased
pursuant to the Offer to satisfy the Minimum Condition would be 3,174,958. If
other Shares are issued pursuant to the exercise of Options or otherwise or the
number of Shares outstanding is adjusted, the number of Shares necessary to be
purchased pursuant to the Offer to satisfy the Minimum Condition will change.
The Offer is also subject to other terms and conditions which are contained in
this Offer to Purchase. See "The Tender Offer-- Section 11. Certain Conditions
of the Offer." Each shareholder should make its own determination as to whether
to accept or reject the Offer.
In the event the Minimum Condition is satisfied and Purchaser acquires
Shares pursuant to the Offer, Purchaser is obligated under the Merger Agreement
to effect the Merger and intends to fulfill that obligation pursuant to the
short-form merger provisions of the CGCL, without prior notice to, or any action
by, any other shareholder of the Company. See "Special Factors--Section 2.
Purpose and Structure of the Offer and the Merger; Plans for the Company."
Under the CGCL, the Merger may not be accomplished for cash paid to the
Company's shareholders if Purchaser owns directly or indirectly more than 50%
but less than 90% of the then outstanding Shares unless either all the
shareholders consent or the Commissioner of Corporations of the State of
California approves the terms and conditions of the Merger and the fairness
thereof after a hearing. In the event that the Minimum Condition is not
satisfied, the Offer will be terminated without the acceptance for payment or
payment for any Shares and the tendered Shares will be returned to shareholders
pursuant to Rule 14e-1(c) under the Exchange Act. Purchaser and the Gupta Family
will then dispose of that number of Shares necessary to reduce Purchaser's and
the Gupta Family holdings to less than 50% of the outstanding Shares. In the
event that the Offer is terminated without the purchase of Shares, Purchaser and
the Gupta Investors will take all steps necessary to effect the Merger by means
of a long-form merger in which the Purchaser will be merged with and into the
Company and each Share (other than Shares held by shareholders who properly
exercise their appraisal rights in accordance with the CGCL (the "Dissenting
Shares") and Shares beneficially owned by Purchaser and the Gupta Investors)
will be converted into the
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right to receive the Merger Consideration. The long-form merger will require a
proxy solicitation, a special meeting of shareholders and the affirmative vote
of a majority of the outstanding Shares. A significantly longer period of time
will be required to effect a long-form merger than the Offer and the short-form
merger. Purchaser and the Gupta Investors may have the ability to assure the
approval of the long-form merger. In the Merger Agreement, in the event the
Offer is terminated and the Minimum Condition has not been satisfied, the
Company has agreed to take all action necessary to convene a meeting of its
shareholders (the "Company Shareholder Meeting") as soon as practicable after
the expiration of the Offer for the purpose of voting on the approval of the
Merger Agreement. In light of any possible need to solicit the approval of the
Merger Agreement by a vote of the shareholders of the Company, the Company, at
Purchaser's request and in accordance with the terms of the Merger Agreement, is
preparing a proxy statement (the "Proxy Statement") pursuant to which the
approval of the shareholders of the Company of the Merger will be solicited in
the event the Minimum Condition is not satisfied. See "Special Factors-- Section
5. The Merger Agreement."
Purchaser intends to enter into a Subscription Agreement (the "Subscription
Agreements") following the expiration of the Offer with each member of the Gupta
Investors. Pursuant to the Subscription Agreements, the Gupta Investors,
immediately prior to the Merger, will contribute to Purchaser Shares owned by
such members in return for the common stock of Purchaser ("Purchaser Stock")
which, when combined with the one share of Purchaser Stock already owned by
Vinita Gupta, will constitute 100% of the outstanding common stock of Purchaser.
The newly-issued shares of Purchaser Stock will be issued to the Gupta Investors
in exchange for their Shares. See Schedule III with respect to beneficial
ownership of Shares. The Subscription Agreements are more fully described in
"Special Factors--Section 3. Interests of Certain Persons in the Offer and
Merger."
Purchaser is not offering to acquire the Options in the Offer. Pursuant to
the Merger Agreement, to the extent permitted under the Company's 1992 Equity
Incentive Plan (the "1992 Plan"), each Option outstanding under the 1992 Plan
will at the Effective Time be converted into the right to receive, upon
surrender of each option, an amount in cash equal to the amount by which the
Merger Consideration exceeds the exercise price for such Option, such amount to
be payable in accordance with the vesting schedule of such Option, less all
taxes required to be withheld from such payments (such payments with respect to
an Option to constitute "Option Spread Payments"). There are 1,394,694 Shares
subject to Option under the 1992 Plan. The Company also has outstanding Options
for 6,000 Shares under the 1986 Stock Option Plan (the "1986 Plan"), all of
which are presently exercisable, and Options outstanding for 95,000 Shares under
its 1994 Directors Stock Option Plan (the "Directors Plan"), of which Options
with respect to 62,084 Shares are exercisable. The Purchaser intends, following
termination of the Offer, to negotiate agreements with holders of Options under
the 1986 Plan and the Directors Plan to provide for surrender of such Options
upon the Effective Time in exchange for the Option Spread Payments. These Option
Spread Payments would be due in full promptly following the Effective Time
because all outstanding Options under the 1986 Plan and the Directors Plan would
be fully vested at the Effective Time. The Company also has a 1993 Employee
Stock Purchase Plan pursuant to which employees have Options to purchase Shares
based on amounts that employees have determined to withhold from their
compensation from the Company. The next date for exercise of Options under the
1993 Employee Stock Purchase Plan is October 31, 1999.
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of
the Harris Trust Company of New York (the "Depositary") and the Information
Agent incurred in connection with the Offer. See "The Tender Offer--Section 13.
Fees and Expenses."
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
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SPECIAL FACTORS
1. BACKGROUND OF THE OFFER.
The Company was formed by Vinita Gupta in 1985. The Company's initial public
offering of Shares was completed in January 1994. Ms. Gupta retired as Chief
Executive Officer of the Company in September 1996, but continued as a member of
the Board.
In October 1997, the Company suffered business reversals which continued
through 1998. Competition in the market for the Company's products had
intensified, resulting in declining average selling prices for its products,
while at the same time demand from certain of the Company's large domestic
carrier customers was less than expected. As a result, the Company's revenues
declined 17% from 1997 to 1998 and its profitability declined significantly in
1998, as the Company incurred a net loss of $6.5 million.
During this period, the Board considered various ways to increase
shareholder value. In addition to internal development of its technology, this
process included efforts to identify acquisition candidates.
In February 1998, the Board accepted the resignation of its then Chief
Executive Officer and asked Ms. Gupta to return as interim Chief Executive
Officer while the Company undertook a search for a new Chief Executive Officer.
Ms. Gupta served as interim Chief Executive Officer through 1998. When the Board
determined in January 1999 that the Company had been unable to attract a
suitable candidate for Chief Executive Officer, Ms. Gupta agreed to the Board's
request to remain the Company's President and Chief Executive Officer on a
full-time basis.
From June 1998 through September 1998, the Company took a number of actions
to reduce costs and return to profitability including two work force reductions
and the cancellation of two major product lines. In order to allow Ms. Gupta to
focus on strategy, research and development, marketing and sales, Stanley
Kazmierczak was promoted to Vice President, Operations and assumed
responsibility for Digital Link's operations on January 21, 1999. Mr.
Kazmierczak had been Vice President, Finance and Administration and Chief
Financial Officer and was an 11 year employee of the Company.
On April 14, 1999, the Company announced its financial results for the
quarter ended March 31, 1999, reporting net sales of $15,232,000, which
represented a 5% increase over net sales for the quarter ended March 31, 1998,
and net income of $912,000, which represented a 1,761% increase over net income
for the quarter ended March 31, 1998. These financial results exceeded the
expectations of financial analysts.
Despite the Company's efforts:
- The Company's stock price did not reflect on a sustained basis the
improved operating results in the first quarter of 1999;
- The average daily trading volume continued to be low; and
- The Company continued to have limited institutional sponsorship and was
receiving diminishing research attention from market analysts.
Ms. Gupta, Narendra Gupta and Richard Alberding, three of the five members
of the Board, met informally on April 29, 1999 to discuss the alternatives
available to the Company. They discussed the Company's inability to hire and
retain qualified personnel in light of the market performance of the Shares,
including both the stock price and limited trading activity of the Shares. They
discussed the limited prospects for improving market performance, given the
failure of the market price of the Shares to reflect on a sustained basis the
improved operating results in the first quarter of 1999. They also discussed
whether the Company should consider a transaction in which shareholders other
than the Gupta Investors would receive cash for their Shares (a "going-private
transaction") and other strategies, such as the acquisition of the Company by a
larger corporation within its industry. Mr. and Ms. Gupta indicated that they
believed that a sale of the Company to a third party would be detrimental to
implementation of the
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Company's business plan and that in any event they would not consider a
transaction in which their Shares were effectively sold.
On May 21, 1999, Ms. Gupta, Mr. Gupta and Mr. Kazmierczak discussed the
possibility of a going-private transaction.
On May 28, 1999, Mr. Kazmierczak informed Ms. Gupta of his intention to
resign from the Company. Mr. Kazmierczak indicated that he was leaving to join a
start-up company because the languishing market price of the Shares prevented
him from achieving gains from the Options he held. He emphasized his
disappointment that, despite the Company's report of results of operations for
the first quarter of 1999 significantly in excess of analyst expectations, the
market price of the Shares on the Nasdaq National Market had not responded
favorably. He also expressed frustration at the Company's inability to achieve
any significant interest in the Shares from stock analysts and institutional
investors.
At a June 7, 1999 meeting of the Board, the directors again discussed the
lack of market interest in the Shares and the Company's continued inability to
hire and retain employees because of the performance of the Shares. Mr.
Alberding indicated that a going-private transaction might be a viable
alternative.
On July 2, 1999, Ms. Gupta selected Latham & Watkins as counsel for the
Purchaser.
On July 12, 1999, Ms. Gupta and Mr. Gupta met with Mr. Alberding and Louis
Golm, two of the three independent members of the Board. Counsel for the
Purchaser also attended the meeting and described various types of going-private
transactions.
At a regularly scheduled Board meeting on August 9, 1999, Ms. Gupta
discussed the possibility of making a proposal to the Company concerning a
merger in which the holders of Shares other than the Gupta Investors would
receive $10.05 in cash. The meeting was also attended by Fenwick & West LLP,
counsel for the Company, and counsel for the Purchaser. During the discussion,
Ms. Gupta indicated that the Gupta Family was not interested in any transaction
which effectively involved the sale of Shares held by the Gupta Investors. Ms.
Gupta indicated that any agreement with the Company would be subject to the
approval of the directors of the Company other than Ms. and Mr. Gupta.
After these discussions, the Board excused Ms. Gupta, Mr. Gupta and counsel
for the Purchaser. The remaining members of the Board--Messrs. Alberding, Golm
and Von Rump--determined to form the Special Committee to consider the Company's
strategic alternatives and elected Mr. Alberding as chairman of the Special
Committee. The Special Committee, with the advice of counsel for the Company,
reviewed at length the members' fiduciary duties regarding the evaluation of any
proposal from the Gupta Investors, and consideration of the alternatives of
seeking to sell the Company to a third party and remaining a publicly held
company. The Special Committee determined that a sale to a third party was not
feasible given the Company's current situation and Ms. and Mr. Gupta's statement
that they were not interested in any transaction which effectively involved the
sale of the Shares held by the Gupta Investors. The Special Committee compared
the feasibility of a going-private transaction with remaining as an independent,
publicly-held entity. The Special Committee discussed possible structures for a
potential going-private transaction. A determination was made to seek the advice
of an independent financial adviser to assist the Special Committee.
On August 13, 1999, the Special Committee engaged DRW as financial adviser
to the Company. DRW was selected based upon its familiarity and expertise with
the Company. DRW had served as one of the managing underwriters for the
Company's initial public offering in early 1994.
On August 6, 1999, the Purchaser engaged Sutter Securities to render a
fairness opinion in the event that a going-private transaction was negotiated.
Sutter Securities had no previous relationship with the Gupta Family or the
Company.
On August 23, 1999, DRW and Sutter Securities met with members of the
Company's management to perform due diligence and discuss the Company's
prospects. The Company's management provided DRW
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and Sutter Securities access to requested information. The same information was
provided to each of DRW and Sutter Securities.
The Special Committee held meetings with counsel for the Company and DRW on
August 25, 27 and 31, 1999. During these meetings, DRW discussed the financial
condition of the Company. On August 31, 1999, counsel for the Company reviewed
in detail the status of the negotiations of the Merger Agreement. The Special
Committee questioned counsel for the Company and DRW at length and gave
instructions as to negotiating the terms of the Merger Agreement.
Between August 30, 1999 and September 2, 1999, Ms. Gupta, counsel for the
Purchaser, DRW and counsel for the Company negotiated the terms of the Merger
Agreement. In particular, on August 31, 1999, the Special Committee discussed
with DRW the possibility of receiving a proposal of $10.05 per share from the
Gupta Investors. The Special Committee instructed counsel for the Company and
its financial adviser to negotiate a price per share of $10.30 per Share. As a
result of negotiations between counsel for the Purchaser and counsel for the
Company, the Agreement was also revised substantially to reflect the comments of
the Special Committee.
On September 2, 1999, Purchaser and the Gupta Investors delivered to the
Special Committee a proposed final form of Merger Agreement and Sutter
Securities' fairness opinion. The directors were again advised of their
fiduciary duties by counsel for the Company, and DRW made a financial
presentation concerning the terms of the Offer and Merger. DRW also delivered
its oral opinion that the $10.30 per Share cash consideration to be received in
the transactions contemplated by the Merger Agreement was fair, from a financial
point of view, to the holders of Shares. The Special Committee reviewed the
final terms of the Merger Agreement and the reasons the Special Committee was
recommending approval of the Merger Agreement. The Special Committee, and the
Board (excluding Ms. Gupta and Mr. Gupta) acting on the unanimous recommendation
of the Special Committee, then approved and adopted the Merger Agreement and the
transactions contemplated thereby including the Offer and the Merger, determined
that the Merger Agreement and the transactions contemplated thereby including
the Offer and the Merger are fair and in the best interests of the Company and
the shareholders of the Company, and recommended acceptance of the Offer by the
shareholders of the Company. The Merger Agreement was executed on September 3,
1999.
On the morning of September 3, 1999, the Company issued a press release, the
text of which is attached as an exhibit the Schedule 14D-9, a copy of which is
being mailed herewith.
2. PURPOSE AND STRUCTURE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
STRUCTURE AND PURPOSE OF THE OFFER AND THE MERGER. The purpose of the Offer
and the Merger is to enable the Gupta Investors to acquire the entire public
equity interest of the Company. Upon consummation of the Merger, the Company
will be wholly-owned by the Gupta Investors. The acquisition of the public
equity interest in the Company has been structured as a cash tender offer
followed by a cash merger in order, as promptly as possible, to provide the
shareholders of the Company other than the Gupta Investors with cash for all
their Shares and to transfer all equity interests of the Company to the Gupta
Investors.
Following the Offer, Purchaser intends to acquire any remaining Shares not
acquired in the Offer by consummating the Merger. If the Minimum Condition is
satisfied, Purchaser will have the ability to approve and adopt the Merger
Agreement without the affirmative vote of any other shareholder of the Company
and intends to consummate the Merger as a short-form merger pursuant to the
CGCL. Under such circumstances, neither the approval of any holder of Shares
(other than Purchaser) nor the Board would be required.
PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER. The Shares are
currently traded on the Nasdaq National Market. See "The Tender Offer--Section
5. Price Range of Shares; Dividends." Following the consummation of the Offer
and the Merger, it is the intention of Purchaser and the Gupta Investors to
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cause the Company to file an application to withdraw the Shares from listing on
the Nasdaq National Market and to terminate the registration of the Shares under
the Exchange Act. See "The Tender Offer-- Section 10. Certain Effects of the
Transaction." In the event that the Shares are delisted from the Nasdaq National
Market, there will be no publicly traded equity securities of the Company and
the Company will no longer be required to file periodic reports with the
Commission. See "The Tender Offer--Section 10. Certain Effects of the
Transaction." If the Shares are not accepted for payment by Purchaser pursuant
to the Offer, Purchaser and the Gupta Investors will take all steps necessary to
effect the Merger by means of a long-form merger, after which Purchaser and the
Gupta Investors intend to cause the Company to file an application to withdraw
the Shares from listing on the Nasdaq National Market and to terminate the
registration of the Shares under the Exchange Act.
As a result of the Offer, Purchaser's percentage interest in the Company's
net book value and net earnings will increase in proportion to the number of
Shares acquired in the Offer. If the Merger is consummated, the interest of the
Gupta Investors in such items and in the Company's equity generally will
increase to 100% and the Gupta Investors will be entitled to all the benefits of
an increase in value and would be subject to the risks of a decrease in value of
the Company. Subsequent to the Merger, current shareholders and Option holders
of the Company will cease to have any equity interest in the Company, will not
have the opportunity to participate in the earnings and growth of the Company
and will not have any right to vote on corporate matters. Similarly, the
shareholders will not face the risk of losses generated by the Company's
operations or decline in the value of the Company after the Merger.
Pursuant to the Merger Agreement, at the Effective Time, the officers of the
Company will become the officers of the Surviving Corporation and Vinita Gupta,
the only director of Purchaser will become the director of the Surviving
Corporation. It is expected that, following the Effective Time, Narendra Gupta
will be elected as a director of the Surviving Corporation.
Under the CGCL, the Merger may not be accomplished for cash paid to the
Company's shareholders if Purchaser owns directly or indirectly more than 50%
but less than 90% of the then outstanding Shares unless either all the
shareholders consent or the Commissioner of Corporations of the State of
California approves the terms and conditions of the Merger and the fairness
thereof after a hearing. In the event that the Minimum Condition is not
satisfied, the Offer will be terminated without the acceptance for payment or
payment for any Shares and the tendered Shares will be returned to Shareholders
pursuant to Rule 14e-1(c) under the Exchange Act. Purchaser and the Gupta Family
will then dispose of that number of Shares necessary to reduce Purchaser's and
the Gupta Family holdings to less than 50% of the outstanding Shares. After the
disposition of such Shares, Purchaser and the Gupta Investors will take all
steps necessary to effect the Merger by means of a long-form merger in which the
Purchaser will be merged with and into the Company and each Share (other than
Dissenting Shares and Shares beneficially owned by Purchaser and the Gupta
Investors) will be converted into the right to receive the Merger Consideration.
The long-form Merger will require a proxy solicitation, a special meeting of
shareholders and the affirmative vote of a majority of the outstanding Shares. A
significantly longer period of time will be required to effect a long-form
merger than the Offer and the short-form merger. Purchaser and the Gupta
Investors may have the ability to assure the approval of the Merger. In the
Merger Agreement, in the event the Offer is terminated and the Minimum Condition
has not been satisfied, the Company has agreed to take all action necessary to
convene the Company Shareholder Meeting as soon as practicable after the
expiration of the Offer for the purpose of voting on the approval of the Merger
Agreement. In light of any possible need to solicit the approval of the Merger
Agreement by a vote of the shareholders of the Company, the Company, at
Purchaser's request and in accordance with the terms of the Merger Agreement, is
preparing the Proxy Statement pursuant to which the approval of the shareholders
of the Company of the Merger will be solicited in the event the Minimum
Condition is not satisfied. See "Special Factors--Section 5. The Merger
Agreement."
Except as otherwise described in this Offer to Purchase, Purchaser and the
Gupta Family have no current plans or proposals which relate to or would result
in: (a) an extraordinary corporate transaction, such as a merger, reorganization
or liquidation involving the Company; (b) a sale or transfer of a material
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amount of assets of the Company; (c) any change in the Board or management of
the Company, including, but not limited to, any plan or proposal to change the
number or term of directors, to fill any existing vacancy on the Board or any
change any material term of the employment contract of any executive officer;
(d) any material change in the present dividend rate or policy or indebtedness
or capitalization of the Company; (e) any other material change in the Company's
corporate structure or business; (f) a class of equity securities of the Company
becoming eligible for termination of registration pursuant to Section 12(g)(4)
of the Exchange Act; or (g) the suspension of the Company's obligation to file
reports pursuant to Section 15(d) of the Exchange Act.
3. INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER.
In considering whether to tender Shares pursuant to the Offer, shareholders
should be aware that certain members of the Company's management and Board have
certain interests which are discussed below and which present them with actual
or potential conflicts of interest in connection with the Offer and the Merger.
Purchaser intends to enter into a Subscription Agreement following
expiration of the Offer with each member of the Gupta Investors. Pursuant to the
Subscription Agreements, the Gupta Investors, immediately prior to the Merger,
would acquire Common Stock of the Purchaser which, when combined with the one
share of Purchaser Stock already owned by Vinita Gupta, would constitute 100% of
the Common Stock of the Purchaser outstanding. The newly-issued shares of Common
Stock of the Purchaser would be issued to Gupta Investors in exchange for their
Shares. The Gupta Family believes that, under applicable laws relating to
private charitable foundations, the Gupta Foundation is unable to enter into a
Subscription Agreement to contribute the 20,000 shares it owns due to its
charitable purposes and the provisions of the Internal Revenue Code. See
Schedule III with respect to the Shares owned by Purchaser and the Gupta Family.
As of Septebmer 9, 1999, Narendra Gupta held Options to purchase the number
of Shares at the exercise prices listed in the table below:
<TABLE>
<CAPTION>
EXERCISE
OPTIONS OPTIONS VESTED PRICE
NAME OUTSTANDING AS OF 9/8/99 PER SHARE
- --------------------------------------------- ----------- --------------- -------------
<S> <C> <C> <C>
Narendra Gupta............................... 10,000 10,000 15.125
5,000 4,792 21.25
5,000 3,542 18.25
5,000 2,292 25.75
5,000 1,042 3.5625
</TABLE>
Pursuant to the terms of the Directors Plan, the vesting of each Option
outstanding under such plan at the Effective Time will accelerate and the
Options will become fully vested.
4. FAIRNESS OF THE OFFER AND THE MERGER.
Purchaser and the Gupta Investors believe that the Transaction and the
Merger Consideration is fair to the Company's shareholders other than Purchaser
and the Gupta Investors. This belief is based upon (i) a written opinion of DRW,
dated September 3, 1999, delivered to the Special Committee to the effect that,
as of such date and based upon and subject to certain matters stated therein,
the terms of the Offer and the Merger are fair, from a financial point to view,
to the Company's shareholders and (ii) the opinion of Sutter Securities dated
September 3, 1999, to the effect that, the Transaction, and the Merger
Consideration, is fair, from a financial point of view, to the Company's
shareholders (other than Purchaser and the Gupta Investors). A copy of DRW's
opinion is contained in the Company's Schedule 14D-9 which is being mailed to
the Company's shareholders herewith and should be read carefully in its
entirety. A copy of Sutter Securities' opinion is set forth in Schedule I hereto
and should be read carefully in its entirety. Each shareholder should make its
own determination as to whether to accept or reject the Offer.
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<PAGE>
Under an engagement letter, the Company has agreed to pay DRW a fee of
$450,000 upon the rendering of its opinion. Payment of this fee to DRW is not
contingent upon the closing of the Merger. In addition, the Company agreed to
indemnify DRW against certain liabilities, including liabilities arising under
the securities laws. The terms of the engagement letter, which the Special
Committee believes are customary for transactions of this nature were negotiated
at arms' length between the Special Committee and DRW, and the Board was aware
of such fee arrangement at the time of its approval of the Merger Agreement.
Purchaser has agreed to pay Sutter Securities a fee of $100,000 for
rendering the fairness opinion described above. In addition, Purchaser has
agreed to reimburse Sutter Securities for its reasonable out-of-pocket expenses
(including legal fees) with respect to the services provided by Sutter
Securities. Purchaser has agreed to indemnify and hold harmless Sutter
Securities against certain liabilities, including liabilities under the federal
securities laws, arising out of or in connection with the services provided by
Sutter Securities.
The Company is a technology company that depends on attracting and retaining
key personnel to implement its business plan. Historically, stock option plan
performance has been a crucial element in attracting and retaining key personnel
in technology companies. Stock option plan performance for a publicly-held
company is in turn based on market performance of a company's stock. Despite
improved earnings, the market price of the Shares has not improved and key
personnel, such as Mr. Kazmierczak, have left the Company to pursue start-up
opportunities with perceived better equity incentives. The Gupta Investors
believe that if the Company were privately held, the Company would be able to
provide better equity incentives for employees. The Gupta Investors also believe
that private company status would allow the Company more effectively to execute
long term resource allocation and investment decisions and expand into other
market segments, each of which would ultimately allow the Company to compete
more favorably in the market for the Company's products. As a privately held
company, the Company's management would be able to eliminate management time
spent on matters related to the Company being public and could focus its efforts
exclusively on the operation of the Company's business. The Gupta Family
considered, but rejected, the possibility of a sale of the Company to a third
party in which the Gupta family effectively sold its Shares.
5. THE MERGER AGREEMENT.
The following is a summary of the material terms of the Merger Agreement, a
copy of which has been filed as an exhibit to the Schedule 14D-1 and the
Schedule 13E-3 filed by Purchaser and the Gupta Family, which exhibit is
incorporated by reference herein.
The Merger Agreement provides that following the satisfaction of the
conditions described below under "Conditions to the Merger," at the Effective
Time and in accordance with the CGCL, Purchaser will be merged with and into the
Company. As a result of the Merger, all of the properties, rights, privileges
and franchises of the Company and Purchaser will vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Purchaser
will become the debts, liabilities and duties of the Surviving Corporation.
At the Effective Time, by virtue of the Merger and without any action on the
part of the Company or Purchaser (i) each Share issued and outstanding
immediately prior to the Effective Time and owned by Purchaser shall be canceled
without payment of any consideration and shall cease to exist; (ii) each share
of Common Stock, no par value per share, of Purchaser then outstanding will be
converted into one share of Common Stock, no par value per share, of the
Surviving Corporation; and (iii) each Share outstanding immediately prior to the
Effective Time will, except as otherwise provided in (i) above and except for
Shares held by shareholders of the Company who shall have demanded and
perfected, and who shall not have withdrawn or otherwise lost, dissenters'
rights, if any, under the CGCL, be converted into the right to receive the
Merger Consideration, without interest.
THE OFFER. The Merger Agreement provides for the making of the Offer by
Purchaser. The obligation of Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to the satisfaction of the Minimum
Condition and certain other conditions that are described in "The Tender
9
<PAGE>
Offer--Section 11. Certain Conditions of the Offer" of this Offer to Purchase.
Purchaser has agreed that, without the written consent of the Company, it may
not reduce the number of Shares subject to the Offer, reduce the Offer Price or
extend the Offer if all of the conditions described in "The Tender Offer--
Section 11. Certain Conditions of the Offer" have been satisfied or waived.
Purchaser has also agreed that it will not, without the consent of the Company,
change the form of consideration payable in the Offer, amend, modify or add to
the conditions described in "The Tender Offer--Section 11. Certain Conditions of
the Offer", amend any other term of the Offer in a manner adverse to the holders
of the Shares, or waive the Minimum Condition. Purchaser may, without the
consent of the Company: extend the Offer if, at the scheduled expiration date of
the Offer, any of the conditions described in "The Tender Offer-- Section 11.
Certain Conditions of the Offer" have not been satisfied or waived until such
time as such are satisfied or waived; extend the Offer for any period required
by any statute, rule or regulation, and extend the Offer on one or more
occasions for an aggregate of not more than 20 business days beyond the latest
expiration date that would otherwise be permitted as set forth above in order to
obtain Shares which, together with Shares held by Purchaser, constitute 90% of
the outstanding Shares, provided, however, that (i) Purchaser shall extend the
Offer up to 20 business days following its initial expiration upon the prior
reasonable request by the Special Committee and (ii) Purchaser shall not extend
the Offer beyond 20 business days following its initial expiration without the
prior consent of the Special Committee. The conditions described in "The Tender
Offer--Section 11. Certain Conditions of the Offer" of this Offer to Purchase
are for the sole benefit of Purchaser and may be asserted by Purchaser
regardless of the circumstances giving rise to any such condition or may be
waived by Purchaser, in whole or in part at any time and from time to time, in
its sole discretion.
Purchaser is not offering to acquire the Options in the Offer. Pursuant to
the Merger Agreement, to the extent permitted under the Company's 1992 Plan,
each Option outstanding under the 1992 Plan will at the Effective Time be
converted into the right to receive, upon surrender of each Option, the Option
Spread Payment. There are 1,394,694 Shares subject to Option under the 1992
Plan. The Company also has outstanding Options for 6,000 Shares under its 1986
Plan, all of which are presently exercisable and Options outstanding for 95,000
Shares under the Directors Plan, of which Options with respect to 62,084 Shares
are exercisable. The Purchaser intends, following termination of the Offer, to
negotiate agreements with holders of Options under the 1986 Plan and the
Directors Plan to provide for surrender of such Options upon the Effective Time
in exchange for the Option Spread Payments. These Option Spread Payments would
be due in full promptly following the Effective Time because all outstanding
Options under the 1986 Plan and the Directors Plan would be fully vested at the
Effective Time. The Company also has a 1993 Employee Stock Purchase Plan
pursuant to which employees have Options to purchase Shares based on amounts
that employees have determined to withhold from their compensation from the
Company. The next date for exercise of Options under the 1993 Employee Stock
Purchase Plan is October 31, 1999.
VOTE REQUIRED TO APPROVE THE MERGER. The CGCL requires, among other things,
that the adoption of any plan of merger or consolidation of the Company must be
approved by the Board and generally by a majority of the holders of the
Company's outstanding voting securities. The Board has adopted the unanimous
recommendation of the Special Committee and has unanimously approved the Offer
and the Merger. The CGCL also provides that if a parent company owns at least
90% of each class of stock of a subsidiary, the parent company can effect a
short-term merger with that subsidiary without the action of the other
shareholders of that subsidiary. Accordingly, if, as a result of the Offer or
otherwise, Purchaser acquires or controls the voting power of at least 90% of
the outstanding Shares (which would be the case if the Minimum Condition were
satisfied and Purchaser were to accept for payment Shares tendered pursuant to
the Offer), Purchaser could, and intends to, effect the Merger without prior
notice to, or any action by, any other shareholder of the Company. If Shares are
not purchased in the Offer and the short-form merger provisions of the CGCL are
therefore not applicable, the affirmative vote of holders of a majority of the
outstanding Shares (including any Shares owned by Purchaser) in a long-form
merger is required to approve the Merger.
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<PAGE>
Under the CGCL, the Merger may not be accomplished for cash paid to the
Company's shareholders if Purchaser owns directly or indirectly more than 50%
but less than 90% of the then outstanding Shares unless either all the
shareholders consent or the Commissioner of Corporations of the State of
California approves the terms and conditions of the Merger and the fairness
thereof after a hearing. In the event that the Minimum Condition is not
satisfied, the Offer will be terminated without the acceptance for payment or
payment for any Shares and the tendered Shares will be returned to Shareholders
pursuant to Rule 14e-1(c) under the Exchange Act. Purchaser and the Gupta Family
will then dispose of that number of Shares necessary to reduce the aggregate of
the Purchaser's and the Gupta Family holdings to less than 50% of the
outstanding Shares. After the disposition of such Shares, Purchaser and the
Gupta Investors will take all steps necessary to effect the Merger by means of a
long-form merger in which the Purchaser will be merged with and into the Company
and each Share (other than Dissenting Shares) and Shares beneficially owned by
Purchaser and the Gupta Investors will be converted into the right to receive
the Merger Consideration. The long-form Merger will require a proxy
solicitation, a special meeting of shareholders and the affirmative vote of a
majority of the outstanding Shares. A significantly longer period of time will
be required to effect a long-form merger than the Offer and the short-form
merger. Purchaser and the Gupta Investors may have the ability to assure the
approval of the merger. In the Merger Agreement, in the event the Offer is
terminated and the Minimum Condition has not been satisfied, the Company has
agreed upon Purchaser's request, to take all action necessary to convene the
Company Shareholder Meeting as soon as practicable after the expiration of the
Offer for the purpose of voting on the approval of the Merger Agreement. In
light of any possible need to solicit the approval of the Merger Agreement by a
vote of the shareholders of the Company, the Company, at Purchaser's request and
in accordance with the terms of the Merger Agreement, is preparing the Proxy
Statement pursuant to which the approval of the shareholders of the Company of
the Merger will be solicited in the event the Minimum Condition is not
satisfied. The Merger Agreement further provides that the Company will cause the
Proxy Statement to be mailed to its shareholders at the earliest practicable
time in connection with the Company Shareholder Meeting.
RECOMMENDATION. The Company represents and warrants in the Merger Agreement
that (i) the Board has authorized the Merger Agreement and the transactions
contemplated thereby and (ii) the Company has received an opinion from Sutter
Securities to the effect that, as of the date of the Merger Agreement, the
Merger Consideration is fair to the Company's shareholders from a financial
point of view.
CONDITIONS TO THE MERGER. The respective obligations of Purchaser and the
Company to effect the Merger under the Merger Agreement are subject to the
satisfaction at or prior to the Effective Time of the following conditions,
unless waived by Purchaser and the Company: (i) unless Shares have been
purchased under the Offer if required by the CGCL, the Merger Agreement and the
Merger shall have been approved and adopted by the requisite vote of the
shareholders of the Company in accordance with the CGCL; (ii) no preliminary or
permanent injunction or other order shall have been issued by any court or by
any governmental or regulatory agency, body or authority which prohibits the
consummation of the Offer or the Merger and the transactions contemplated by the
Merger Agreement and which is in effect at the Effective Time; provided,
however, that, in the case of a decree, injunction or other order, each of the
parties shall have used reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any decree,
injunction or other order that may be entered; and (iii) no statute, rule or
regulation shall have been enacted, entered, promulgated or enforced by any
governmental authority that prohibits the consummation of the Offer or the
Merger or has the effect of making the purchase of the Shares illegal. The
obligations of Purchaser to effect the Merger under the Merger Agreement are
further subject to the satisfaction at or prior to the Effective Time of the
conditions, unless waived by Purchaser, that (i) the Company's representations
and warranties contained in the Merger Agreement shall be true and correct as of
the closing unless the aggregate failure of such representations and warranties
to be true and correct does not have a Material Adverse Effect (as defined
below); (ii) the Company shall have performed and complied in all material
respects with its obligations contained in the Merger Agreement required to be
performed and complied with at or prior to the Effective Time unless
11
<PAGE>
the failure of such performance or compliance does not have a Material Adverse
Effect (as defined below); (iii) there shall have been no change in the Special
Committee's recommendation that the shareholders of the Company accept the Offer
and approve the Merger; and (iv) the holders of not more than 15% of the Shares
shall have exercised, nor shall they have any continued right to exercise,
appraisal, dissenters' or similar rights under applicable law with respect to
their Shares by virtue of the Merger. The obligations of the Company to effect
the Merger under the Merger Agreement are further subject to the satisfaction at
or prior to the Effective Time of the conditions, unless waived by the Company,
that (i) Purchaser's representations and warranties contained in the Merger
Agreement shall be true and correct in all material respects at the closing; and
(ii) Purchaser shall have performed and complied in all material respects with
its obligations contained in the Merger Agreement that required to be performed
and complied with at or prior to the Effective Time. The Merger Agreement
defines "Material Adverse Effect" to mean a material adverse effect on the
business, assets, financial condition or results of operation of the Company or
on the ability of the Company or Purchaser to consummate the transactions
contemplated by the Merger Agreement, or any event or events which, individually
or in the aggregate, constitute or, with the passage of time, would constitute a
Material Adverse Effect; provided, however, that there shall not be deemed a
material adverse effect on the ability of Purchaser to consummate the
transactions contemplated by the Merger Agreement if such material adverse
effect is caused by the action or inaction of Purchaser or Purchaser's
affiliates and there shall not be deemed to be a material adverse effect on the
business, assets, financial condition results of operations of the Company or on
the ability of the Company to consummate the transactions contemplated by the
Merger Agreement if such effect is proximately caused by Purchaser or
Purchaser's affiliates to comply with the covenants set forth in the Merger
Agreement.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
and the Offer and the Merger may be abandoned at any time (notwithstanding
approval of the Merger by the shareholders of the Company) prior to the
Effective Time: (a) by mutual written consent of Purchaser and the Company; (b)
by Purchaser or the Company if any court of competent jurisdiction in the United
States or other United States governmental body shall have issued an order,
decree or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Merger or the acceptance for payment and payment for
the Shares in the Offer and such order, decree, ruling or other action is or
shall have become nonappealable; (c) by either the Company or Purchaser if the
Merger shall not have been consummated by the date which is 180 days from the
date of the Merger Agreement (the "Outside Date"); provided that this right to
terminate shall not be available to any party whose failure to fulfill any
obligation or condition under the Merger Agreement has been the cause of, or
resulted in, the failure of the Merger to occur on or before the Outside Date
and shall not be available to Purchaser if Purchaser has purchased Shares
pursuant to the Offer; (d) by Purchaser if, prior to the earlier of (A)
acceptance for payment of Shares pursuant to the Offer or (B) the closing, (i)
there shall have been a breach of any representation or warranty on the part of
the Company having a Material Adverse Effect, (ii) there shall have been a
breach of any covenant or agreement on the part of the Company resulting in a
Material Adverse Effect; (e) by the Company if (i) there shall have been a
breach of any representation or warranty on the part of Purchaser which has a
material adverse effect on the consummation of the Offer or the Merger or (ii)
there shall have been a material breach of any covenant or agreement on the part
of Purchaser which has a material adverse effect on the consummation of the
Offer or the Merger; (f) by Purchaser, prior to the purchase of Shares pursuant
to the Offer, if (i) the Special Committee shall have withdrawn or adversely
modified its recommendation of the Offer, the Merger or the Merger Agreement or
the Special Committee, upon request of Purchaser, shall fail to reaffirm such
approval or recommendation within five business dates after such request if an
Acquisition Proposal (as defined below) is pending, or shall have resolved to do
any of the foregoing; (ii) the Special Committee shall have recommended to the
shareholders of the Company that they approve an Acquisition Proposal (as
defined below) other than the transactions contemplated by this Agreement; (iii)
a tender offer or exchange offer that, if successful, would result in any Person
or "group" becoming a "beneficial owner" (such terms having the meaning in this
Agreement as is ascribed under Regulation 13D under the Exchange Act) of 15% or
more of the
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<PAGE>
outstanding Shares is commenced (other than by Purchaser or an affiliate of
Purchaser) and the Special Committee recommends that the shareholders of the
Company tender their shares in such tender or exchange offer; (iv) for any
reason the Company fails to call and hold the meeting of shareholders or (vi) if
the Company or any of its representatives or agents who are not affiliates of
Purchaser, shall willfully and materially breach the Company's obligations to
cease pending discussions or entertain new proposals concerning an Acquisition
Transaction (as defined below); or (g) by the Company, prior to the purchase of
Shares pursuant to the Offer, if the Special Committee determines, on behalf of
the Board of Directors, to accept a Superior Proposal (as defined below).
If the Merger Agreement is terminated by Purchaser for any reason prior to
the earlier of the purchase of Shares by Purchaser pursuant to the Offer or the
Effective Date, other than a termination pursuant to clauses (a), (b), (c), (d)
or (e) set forth above in this section on "Termination of Merger Agreement," the
Company shall reimburse Purchaser for Purchaser's reasonable costs and expenses
incurred by Purchaser in connection with the Offer, the Merger and the Merger
Agreement. If the Merger Agreement is terminated pursuant to clauses (f) or (g)
set forth above, the Company shall also pay to Purchaser the sum of $2,400,000.
If the Merger Agreement is terminated for any of the above reasons, the
Merger Agreement shall be of no further force or effect, except as otherwise set
forth in the Merger Agreement. Additionally, any termination of the Merger
Agreement shall not relieve any party from liability for any breach of the
Merger Agreement.
ACQUISITION TRANSACTIONS. Pursuant to the Merger Agreement, the Company has
agreed to immediately cease any existing discussions or negotiations with any
third parties conducted prior to the date of the Merger Agreement with respect
to any Acquisition Transaction (as defined below).
Unless and until the Merger Agreement has been terminated pursuant to the
terms thereof, the Company and any of the Company's officers and directors shall
not, and the Company shall direct and use its best efforts to cause its
employees, agents and representatives (including, without limitation any
investment banker, attorney or accountant retained by the Company) not to take
or cause, directly or indirectly, any of the following actions with any party
other than Purchaser or Purchaser's designees: (i) solicit, encourage, initiate,
participate in or otherwise facilitate any negotiations, inquiries or
discussions with respect to any offer, indication or proposal (each of the
foregoing, an "Acquisition Proposal") to acquire all or more than 15% of the
Company's business, assets or capital shares whether by merger, consolidation,
or other business combination, purchase of assets, reorganization, tender or
exchange offer (each of the foregoing, an "Acquisition Transaction") or (ii)
disclose, in connection with an Acquisition Proposal, any information or provide
access to its properties, books or records, except as required by law or
pursuant to a governmental request for information.
The Merger Agreement provides that, prior to the Effective Time, the Company
may participate in discussions or negotiations with, and furnish non-public
information, and afford access to the properties, books, records, officers,
employees and representatives of the Company to any Person, entity or group if
such Person, entity or group has delivered to the Company, prior to the date of
the Company's meeting of shareholders or action pursuant to the CGCL short-form
merger provisions, as applicable, and in writing, an Acquisition Proposal which
the Special Committee in its reasonable judgment determines if consummated would
be more favorable, from a financial point of view, to the Company's shareholders
than the transactions contemplated by the Merger Agreement, which determination
shall be made only after the Special Committee (i) receives a written opinion of
its legal counsel that the Special Committee would breach its fiduciary duties
if it did not accept the Acquisition Proposal and (ii) a written opinion of the
Company's financial adviser to the effect that the Acquisition Proposal is
superior, from a financial point of view, to the Company's shareholders than the
transactions contemplated by this Agreement (an Acquisition Proposal satisfying
such conditions constituting a "Superior Proposal"). In the event the company
receives a Superior Proposal, nothing contained in the Merger Agreement will
prevent the
13
<PAGE>
Special Committee from, on behalf of the Board of Directors, executing or
entering into an agreement relating to such Superior Proposal and recommending
such Superior Proposal to the shareholders of the Company, if the Special
Committee determines in accordance with the preceding sentence that its
fiduciary duties require it to do so; in such case, the Special Committee may
withdraw, modify, or refrain from makings its recommendation of the transactions
contemplated by the Merger Agreement; provided, however, that the Special
Committee shall (i) promptly notify Purchaser, and in any event within 24 hours,
if any Acquisition Proposal is received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, the Company, indicating, in connection with such notice, the
name of such person and the material terms of such Acquisition Proposal, (ii)
provide Purchaser at least 48 hours prior written notice of the Special
Committee's intention, on behalf of the Board to execute or enter into an
agreement relating to such Superior Proposal and (iii) terminate this Agreement
by written notice to Purchaser provided no sooner than 48 hours after
Purchaser's receipt of a copy of such Superior Proposal.
CONDUCT OF THE BUSINESS OF THE COMPANY. Pursuant to the Merger Agreement,
the Company has agreed that it and its subsidiaries will use their best efforts
to preserve intact their business organizations, to keep available the services
of their operating personnel and to preserve the goodwill of those having
business relationships with them, including, without limitation, suppliers.
Except as contemplated by the Merger Agreement, until the Effective Time, the
Board will not permit the Company or any of its subsidiaries to conduct its
business and operations otherwise than in the ordinary and usual course of
business consistent with past practice.
OTHER AGREEMENTS OF THE COMPANY AND PURCHASER.
In the Merger Agreement, Purchaser has agreed to cause (a) all rights to
indemnification by the Company now existing in favor of the present and former
directors of the Company as provided in the Company's articles of incorporation
and bylaws, or rights of indemnification equivalent thereto and (b) limitations
of liability in the Company's articles of incorporation, or limitations
equivalent thereto, to survive the Merger and to continue in full force and
effect in accordance with their terms.
For six years after the Effective Time, Purchaser has agreed to cause the
Surviving Corporation to, indemnify, defend and hold harmless the present and
former directors of the Company and its subsidiaries (each an "Indemnified
Party") the full extent permitted by the Company's articles of incorporation,
bylaws or indemnification agreements in effect at the date hereof provided, that
in the event any claim or claims are asserted or made within such six year
period, all rights to indemnification in respect of any such claim or claims
shall continue until disposition of any and all such claims. The Surviving
Corporation shall maintain the Company's existing officers' and directors'
liability insurance policy ("D&O Insurance") for a period of six years after the
Effective Time; provided, that the Surviving Corporation may substitute therefor
policies of substantially similar coverage and amounts containing terms no less
advantageous to such former directors or officers.
REASONABLE EFFORTS. The Merger Agreement provides that, subject to the
terms of the Merger Agreement, each of the parties thereto will use all
reasonable efforts to take, or cause to be taken, all 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 the Merger Agreement and shall use all reasonable efforts to
satisfy the conditions to the transactions contemplated thereby and to obtain
all waivers, permits, consents and approvals and to effect all registrations,
filings and notices with or to third parties or governmental or public bodies or
authorities which are necessary or desirable in connection with the transactions
contemplated by the Merger Agreement, including, but not limited to, filings to
the extent required under the Exchange Act. Without limiting the generality of
the foregoing, the Company and Purchaser will vigorously defend against any
lawsuit or proceeding, whether judicial or administrative, challenging this
Agreement or the consummation of any of the transactions contemplated hereby.
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<PAGE>
DIRECTORS AND OFFICERS. The director of Purchaser at the Effective Time
shall be the director of the Surviving Corporation, to hold office subject to
the articles of incorporation and bylaws of the Surviving Corporation, and until
her successor is duly elected and qualified. The officers of the Company at the
Effective Time shall be the initial officers of the Surviving Corporation until
his or her successor is duly appointed and qualified.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains customary
representations and warranties.
ASSIGNMENT. The Merger Agreement provides that the Purchaser may assign its
rights and obligations (including the right to purchase Shares in the Offer), in
whole or in part, to any direct or indirect subsidiary of Purchaser, but no such
assignment shall relieve Purchaser of its obligations under the Merger
Agreement.
PROCEDURE FOR AMENDMENT, EXTENSION OR WAIVER. The Merger Agreement may be
amended, modified or supplemented only by written agreement of Purchaser and the
Company at any time prior to the Effective Time with respect to any of the terms
contained therein executed by duly authorized officers of the respective
parties, except that (i) prior to the Effective Time, consent by the Company
shall require the approval of the Special Committee and (ii) after the Effective
Time, the price per Share to be paid pursuant to the Merger Agreement to the
holders of Shares shall in no event be decreased and the form of consideration
to be received by the holders of the Shares in the Merger shall in no event be
altered, and no other amendment which would adversely affect the holders of
Shares shall be made, without the approval of the applicable holders.
Any failure of Purchaser, on the one hand, or the Company, on the other
hand, to comply with any obligation, covenant, agreement or condition herein may
be waived in writing by Purchaser or the Company, respectively, but such waiver
or failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of or estoppel with respect
to any subsequent or other failure.
6. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
TENDERING SHAREHOLDERS. The following is a summary of the principal federal
income tax consequences of the Offer and the Merger to holders whose Shares are
purchased pursuant to the Offer or whose Shares are converted to cash in the
Merger (including pursuant to the exercise of appraisal rights). This summary
does not, however, purport to be a complete analysis of all the potential tax
effects of the Offer and the Merger. This summary is based on current provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), currently
applicable Treasury regulations and judicial and administrative decisions and
rulings. There can be no assurance that the Internal Revenue Service ("IRS")
will not take a contrary view, and no ruling from the IRS has been or will be
sought. Legislative, judicial or administrative changes may be forthcoming that
could alter or modify the statements and conclusions set forth herein. Any such
changes or interpretations could be retroactive and could affect the tax
consequences to holders whose Shares are purchased pursuant to the Offer. The
discussion does not purport to deal with all aspects of United States federal
income taxation that may affect any particular holder in light of such holder's
individual investment circumstances, and is not intended for certain types of
holders subject to special treatment under the United States federal income tax
law (E.G., holders of Shares in whose hands Shares are not capital assets,
holders who received their Shares pursuant to the exercise of employee stock
options or otherwise as compensation, financial institutions, broker-dealers,
insurance companies, tax-exempt organizations, non-United States persons or
persons who hold their Shares as part of a hedge, straddle, or conversion
transaction).
EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S TAX ADVISOR TO DETERMINE
THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH HOLDER AND THE
15
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PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes under the Code. In general, for
federal income tax purposes, a holder of Shares will recognize gain or loss
equal to the difference between his or her adjusted tax basis in the Shares sold
pursuant to the Offer or converted to cash in the Merger and the amount of cash
received therefor. Gain or loss must be determined separately for each block of
Shares (I.E., Shares acquired at the same cost in a single transaction) sold
pursuant to the Offer or converted to cash in the Merger. Such gain or loss
generally will be capital gain or loss provided the Shares are a capital asset
in the hands of the shareholders and will be long-term capital gain or loss if,
on the date of sale (or, if applicable, the date of the Merger), the Shares were
held for more than one year. If a holder exercises such holder's appraisal
rights and receives an amount treated as interest for federal income tax
purposes, such amount will be taxed as ordinary income.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%. Backup withholding generally applies if
the holder (a) fails to furnish such holder's social security number or tax
payer identification number ("TIN"), (b) furnishes an incorrect TIN, (c) is
subject to backup withholding due to previous failures to file a federal income
tax return including reportable interest or dividend payments, or (d) under
certain circumstances, fails to provide a certified statement, signed under
penalties of perjury, that such holder is not subject to backup withholding due
to previous failures to file a federal income tax return including reportable
interest or dividend payments. Backup withholding is not an additional tax, but
rather it is an advance tax payment that is subject to refund if and to the
extent that it results in an overpayment of tax. Certain taxpayers are generally
exempt from backup withholding, including corporations and financial
institutions. Certain penalties apply for failure to furnish correct information
and for failure to include reportable payments in income. Each holder of Shares
should consult with his or her own tax advisor as to his or her qualification
for exemption from backup withholding and the procedure for obtaining such
exemption. Tendering holders of Shares may be able to prevent backup withholding
by completing the Substitute Form W-9 included in the Letter of Transmittal. See
"The Tender Offer--Section 3. Procedure for Tendering Shares."
7. DISSENTERS' RIGHTS.
No appraisal rights are available in connection with Shares purchased in the
Offer. If the Merger is consummated, however, shareholders of the Company may
have certain rights under Chapter 13 of the CGCL to dissent and demand appraisal
of, and to receive payment in cash of the fair value of, their Shares converted
into a right to cash in the Merger. If the Surviving Corporation and a
dissenting shareholder agree that his or her Shares are Dissenting Shares and
agree upon the fair market value of the Shares, then the dissenting shareholder
is entitled to receive a cash payment equal to the agreed fair market value of
the Shares and interest thereon at the legal rate on judgments from the date of
such agreement. If, however, the Surviving Corporation denies that Shares are
Dissenting Shares, or the Surviving Corporation and a dissenting shareholder
fail to agree upon the fair market value of his or her Shares, then the
dissenting shareholder may seek to have the applicable California superior court
determine whether his or her Shares are Dissenting Shares or the fair market
value of such Shares. If the status of such Shares as Dissenting Shares is in
issue, the superior court shall determine that issue first, and if the fair
market value of the Dissenting Shares is in issue, the superior court shall
determine, or appoint one or more impartial appraisers to determine, the fair
market value of such Shares. The fair market value shall be determined as of the
day before the first announcement of the terms of the Merger, excluding any
appreciation or depreciation as a result of the transactions contemplated by the
Merger Agreement. The value so determined could be more or less than the price
per share to be paid in the Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED
16
<PAGE>
BY SHAREHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS AND IS
QUALIFIED BY REFERENCE TO THE FULL TEXT OF CHAPTER 13 OF THE CGCL, ATTACHED
HERETO AS SCHEDULE IV AND INCORPORATED BY REFERENCE HEREIN. THE PRESERVATION AND
EXERCISE OF APPRAISAL RIGHTS ARE CONDITIONED ON STRICT ADHERENCE TO THE
APPLICABLE PROVISIONS OF THE CGCL.
THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date, and not theretofore withdrawn in
accordance with "The Tender Offer--Section 4. Withdrawal Rights" of this Offer
to Purchase, as soon as legally permitted and practicable after the Expiration
Date. The term "Expiration Date" means 12:00 Midnight, New York City time, on
Friday, October 15, 1999, unless Purchaser shall have extended the period of
time for which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date as of which the Offer, as so extended by
Purchaser, shall expire. UNDER NO CIRCUMSTANCES WILL ANY INTEREST BE PAID ON THE
OFFER PRICE FOR TENDERED SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
In the Merger Agreement, Purchaser has agreed that it will not, without the
consent of the Company, waive the Minimum Condition. Purchaser expressly
reserves the right to modify the terms of the Offer, provided that, unless
previously approved by the Company in writing, no change may be made that
decreases the price per Share payable in the Offer, changes the form of
consideration payable in the Offer, reduces the number of Shares subject to the
Offer, imposes additional conditions to the Offer, changes the expiration date
of the Offer if upon the scheduled expiration date the Offer conditions have
been satisfied or otherwise amends, adds or waives any term or condition of the
Offer in any manner adverse to the holders of Shares.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, (i) extend the Offer, if at the scheduled expiration date of the Offer
any of the conditions to Purchaser's obligation to purchase Shares are not
satisfied, until such time as such conditions are satisfied or waived, (ii)
extend the Offer for any period required by any statute, rule, regulation,
interpretation or position of the Commission or any other governmental authority
or agency applicable to the Offer, or (iii) extend the Offer on one or more
occasions for an aggregate of not more than 20 business days beyond the
expiration date that would otherwise be permitted under clauses (i) and (ii) of
this sentence, provided, however, that (iv) Purchaser shall extend the Offer up
to twenty business days following its initial expiration upon the prior
reasonable request by the Special Committee and (v) Purchaser shall not extend
the Offer beyond twenty business days following its initial expiration without
the prior consent of the Special Committee.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition. If any or all of such conditions are not satisfied, or if any
or all of the other events set forth in "The Tender Offer-- Section 11. Certain
Conditions of the Offer" shall have occurred prior to the Expiration Date,
Purchaser reserves the right (but shall not be obligated) to (i) decline to
purchase any of the Shares tendered in the Offer and terminate the Offer and
return all tendered Shares to the tendering shareholders, (ii) except as set
forth above with respect to the Minimum Condition, waive or amend any or all of
the unsatisfied conditions to the Offer to the extent permitted by applicable
law and accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn, or (iii) subject to complying
with applicable rules and regulations of the Commission, purchase all Shares
validly tendered, or extend the Offer and, subject to the right of shareholders
to withdraw Shares until the Expiration Date, retain the Shares which have been
tendered during the period or periods for which the Offer is extended.
17
<PAGE>
Subject to the applicable rules and regulations of the Commission, Purchaser
also expressly reserves the right, in its sole discretion, 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 approval specified in "The Tender
Offer--Section 12. Certain Regulatory and Legal Matters," (ii) to terminate the
Offer and not accept for payment any Shares upon the occurrence of any of the
conditions specified in "The Tender Offer--Section 11. Certain Conditions of the
Offer" and (iii) to waive any condition or otherwise amend the Offer in any
respect, by giving oral or written notice of such delay, termination, waiver or
amendment to the Depositary and by making a public announcement thereof,
provided, however, that Purchaser may not waive the Minimum Condition without
the prior written consent of the Company. Purchaser acknowledges that (i) Rule
14e-l(c) under the Exchange Act requires a bidder to pay the consideration
offered or to return the securities tendered promptly after the termination or
withdrawal of a tender offer and (ii) 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 Tender Offer--Section 11. Certain Conditions of the
Offer" without extending the period of time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, such announcement in
the case of an extension to be made no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date. Subject
to applicable rules and regulations (including Rules 14d-4(c) and 14d-6(d) under
the Exchange Act, which require that material changes be promptly disseminated
to shareholders in a manner reasonably designed to inform them of such changes)
and without limiting the manner in which Purchaser may choose to make any public
announcement, Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement, other than by issuing a
press release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will disseminate additional tender offer materials and extend
the Offer if and to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange Act. The minimum period during which a tender offer must
remain open following material changes in the terms thereof or the information
concerning such tender offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the terms or information changes. In the
Commission's view, an offer should remain open for a minimum of five business
days from the date the material change is first published, sent or given to
shareholders, and, if material changes are made with respect to information that
approaches the significance of price and share levels, a minimum of ten business
days may be required to allow for adequate dissemination and investor response.
With respect to a change in price or a change in percentage of securities
sought, a minimum ten business day period is generally required to allow for
adequate dissemination to shareholders and investor response.
The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase, the related Letter of Transmittal and other
relevant materials are being mailed to record holders of Shares whose names
appear on the Company's shareholder list and are being furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the shareholder list or who are listed as participants in a
clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will accept for payment and will pay for, all Shares
validly tendered prior to the Expiration Date, and not theretofore withdrawn in
accordance with "The Tender Offer--Section 4. Withdrawal Rights" of this Offer
to
18
<PAGE>
Purchase, promptly after the later to occur of (a) the Expiration Date and (b)
subject to compliance with the applicable rules and regulations of the
Commission, including Rule 14e-1(c) under the Exchange Act, the satisfaction or
waiver of the conditions set forth in "The Tender Offer--Section 11. Certain
Conditions of the Offer" of this Offer to Purchase. Notwithstanding the
immediately preceding sentence and subject to applicable rules and regulations
of the Commission, Purchaser expressly reserves the right to delay acceptance
for payment of, or payment for, Shares pending receipt of any regulatory
approvals specified in "The Tender Offer--Section 12. Certain Regulatory and
Legal Matters" or in order to comply in whole or in part with applicable laws.
Any such delay will be effected in compliance with Rule 14e-l(c) under the
Exchange Act (which requires a bidder to pay the consideration offered or return
the securities tendered promptly after the termination or withdrawal of a tender
offer).
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) the
Share Certificates or timely confirmation (a "Book-Entry Confirmation") of a
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in "The Tender Offer--Section 3. Procedure for Tendering
Shares," (ii) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or, in the
case of a book-entry transfer, an Agent's Message (as defined below) and (iii)
any other documents required under the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation that states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that Purchaser may enforce such agreement
against such participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to the
Offer. Upon the terms and subject to the conditions of the Offer, payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payments from Purchaser and
transmitting such payments to tendering shareholders whose Shares have been
accepted for payment. Under no circumstances will interest on the purchase price
for Shares be paid, regardless of any delay in making such payment.
If Purchaser extends the Offer or if Purchaser is delayed in its acceptance
for payment of or payment for Shares (whether before or after its acceptance for
payment of Shares) or it is unable to accept for payment or pay for Shares
pursuant to the Offer for any reason, then, without prejudice to Purchaser's
rights under the Offer (but subject to compliance with Rule 14e-1(c) under the
Exchange Act, which requires that a bidder to pay the consideration offered or
return the securities tendered promptly after termination or withdrawal of a
tender offer), the Depositary may, nevertheless, on behalf of Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent
tendering shareholders are entitled to exercise withdrawal rights as described
in Section 4 below.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered or accepted for payment, Share
Certificates evidencing unpurchased Shares will be returned, without expense to
the tendering shareholder (or, in the case of Shares tendered by book-entry
transfer into the Depositary's account at the Book-Entry Transfer Facility
pursuant to the procedure set forth in "The Tender Offer--Section 3. Procedure
for Tendering Shares," such Shares will be credited to an account maintained at
the Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.
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<PAGE>
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Share pursuant to the Offer, Purchaser will pay such increased
consideration for all such Shares purchased pursuant to the Offer, whether or
not such Shares were tendered prior to such increase in consideration.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering shareholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDER OF SHARES AND RIGHTS. Except as set forth below, in order for
Shares to be validly tendered pursuant to the Offer, 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 delivery of Shares and any other documents required by the Letter of
Transmittal, must be 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 and either (i) Share Certificates representing tendered Shares must be
received by the Depositary, or such Shares must be tendered pursuant to the
procedure for book-entry transfer set forth below and a Book-Entry Confirmation
must be received by the Depositary, in each case on or prior to the Expiration
Date, or (ii) the guaranteed delivery procedures set forth below must be
complied with.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facility for purposes of the Offer within
two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of the Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing the Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at the 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 lieu of the Letter of Transmittal, and any other required documents, must, in
any case, be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
tendering shareholder must comply with the guaranteed delivery procedure
described below.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEE. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member of the Medallion Signature Guarantee
Program, or by any other "eligible guarantor institution," as such term is
defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing being
referred to as an "Eligible Institution"), except in cases where Shares are
tendered (i) by a registered holder of Shares who has not completed either the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. If a
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<PAGE>
Share is registered in the name of a person other than the signer of the Letter
of Transmittal, or if payment is to be made, or a Share Certificate is not
accepted for payment or not tendered is to be returned, to a person other than
the registered holder(s), then the tendered certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear on the certificates, with the
signature(s) on such certificates or stock powers guaranteed by an Eligible
Institution. See Instructions 1 and 5 of the Letter of Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share Certificates are not immediately
available or such shareholder cannot deliver all required documents to the
Depositary prior to the Expiration Date, or such shareholder cannot complete the
procedure for delivery by book-entry transfer on a timely basis, such Shares may
nevertheless be tendered, provided that all the following conditions are
satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by Purchaser, is received prior to the
Expiration Date by the Depositary as provided below; and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing all
tendered Shares, in proper form for transfer, in each case together with the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required by the
Letter of Transmittal are received by the Depositary within three Nasdaq
National Market trading days of 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 mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the form
of Notice of Guaranteed Delivery made available by Purchaser.
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 the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message), and any other
documents required by the Letter of Transmittal.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves the
absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity in the tender of any Shares
of any particular shareholder, whether or not similar defects or irregularities
are waived in the case of other shareholders. No tender of Shares will be deemed
to have been validly made until all defects and irregularities have been cured
or waived. None of Purchaser, the Depositary, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. 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.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
such shareholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such
21
<PAGE>
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 issued or issuable in respect of such Shares on or after the
date of this Offer to Purchase). 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 such Shares for payment.
Upon such acceptance for payment, all prior proxies given by such shareholder
with respect to such Shares (and such other Shares and securities) will be
revoked without further action, and no subsequent proxies may be given nor any
subsequent written consent executed by such shareholder (and, if given or
executed, will not be deemed to be effective) with respect thereto. The
designees of Purchaser will, with respect to the Shares for which the
appointment is effective, be empowered to exercise all voting and other rights
of such shareholder as they in their sole discretion may deem proper at any
annual or special meeting of the Company's shareholders or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. Purchaser reserves the right to require that, in order for Shares to
be deemed validly tendered, immediately upon Purchaser's payment for such
Shares, Purchaser must be able to exercise full voting rights with respect to
such Shares.
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering shareholder and Purchaser upon the terms and subject to the conditions
of the Offer.
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn at any time after November 8, 1999. 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 4. Withdrawal Rights." Any such
delay will be by an extension of the Offer to the extent required by applicable
rules and regulations.
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 page of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of such Shares, if different from that of the person who
tendered such Shares. If certificates evidencing Shares to be withdrawn 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 the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution, unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedures for book-entry transfer as set
forth in "The Tender Offer--Section 3. Procedure for Tendering Shares," any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give any such notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in "The Tender Offer--Section 3. Procedure for Tendering
Shares."
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5. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are listed and trade on the Nasdaq National Market under the
symbol "DLNK." The following table sets forth for the quarterly fiscal periods
ended March 31, June 30, September 30 and December 31 1997, 1998 and 1999, the
closing high and low last sales prices per Share as reported by the Nasdaq
National Market.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997:
First Quarter......................................................... $ 24.25 $ 12.50
Second Quarter........................................................ $ 21.75 $ 13.75
Third Quarter......................................................... $ 27.375 $ 18.875
Fourth Quarter........................................................ $ 26.25 $ 9.406
1998:
First Quarter......................................................... $ 12.50 $ 9.50
Second Quarter........................................................ $ 11.125 $ 6.750
Third Quarter......................................................... $ 7.656 $ 3.750
Fourth Quarter........................................................ $ 5.688 $ 3.234
1999:
First Quarter......................................................... $ 8.813 $ 5.00
Second Quarter........................................................ $ 8.125 $ 6.25
Third Quarter (through September 9, 1999)............................. $ 11.125 $ 7.125
</TABLE>
On September 2, 1999, the last full trading day before the first public
announcement of the execution of the Merger Agreement, the closing price per
Share as reported on the Nasdaq National Market was $8.188. On September 9,
1999, the last full trading day before the commencement of the Offer, the
closing price per Share as reported on the Nasdaq National Market was $9.9375.
HOLDERS OF SHARES ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
Purchaser has been advised by the Company that the Company has never paid
any cash dividends on the Shares.
6. CERTAIN INFORMATION CONCERNING THE COMPANY.
The information concerning the Company contained in this Offer to Purchase
has been furnished by the Company or has been taken from or is based upon
publicly available documents and records on file with the Commission and other
public sources. Purchaser and the Gupta Family do not assume any responsibility
for the accuracy or completeness of the information concerning the Company
contained in such documents and records or for any failure by the Company to
disclose events which may have occurred or may affect the significance or
accuracy of any such information but which are unknown to Purchaser and the
Gupta Family.
GENERAL. The Company is a California corporation with its principal
executive offices located at 217 Humboldt Court, Sunnyvale, California 94089.
The Company's telephone number is (408) 745-6200. The Company designs,
manufactures, markets and supports a broad range of digital wide-area network
("WAN") access products for global networks. The Company's products are used by
service providers as infrastructure equipment and by business enterprises for
connectivity to WAN services, such as leased lines, frame relay, Internet
Protocol, Switched Multimegabit Data Service, Asynchronous Transfer Mode and
Digital Subscriber Line. The Company's products allow local area network-based
internetworking devices, such as routers and switches, to access WANs and also
integrate data with digitized voice and video traffic for more efficient line
utilization. The Company's products are used both in the customer premise
equipment environment and in the networks of interexchange carriers, Internet
service providers
23
<PAGE>
and telephone companies. The Company markets and sells its products in North
America, Europe, South America and Asia primarily through its direct sales
force, value-added resellers and original equipment manufacturers.
FINANCIAL INFORMATION. Set forth below is certain selected consolidated
financial data with respect to the Company excerpted or derived in part from
financial information contained in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 and the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999. More comprehensive financial
information is included in such reports and other documents filed by the Company
with the Commission. For the periods covered by such reports, the following
summary 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 should be available for
inspection and copies thereof should be obtainable in the manner set forth below
under "Available Information."
24
<PAGE>
DIGITAL LINK CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30 DECEMBER 31
-------------------- --------------------
1999 1998 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales............................................... $ 30,855 $ 27,317 $ 54,627 $ 66,008
Cost of Sales........................................... 14,345 14,036 31,442 29,078
--------- --------- --------- ---------
Gross Profit.......................................... 16,510 13,281 23,185 36,930
Expenses:
Research and development.............................. 5,185 6,389 12,580 11,005
Selling, general and administrative................... 9,843 9,988 18,716 22,019
Purchased in-process research and development and
restructuring charges(1)(2)......................... 0 2,299 4,805 3,651
--------- --------- --------- ---------
Total operating expenses.............................. 15,028 18,676 36,101 36,675
--------- --------- --------- ---------
Operating Income (loss)............................... 1,482 (5,395) (12,916) 255
Other income............................................ 940 1,068 2,196 2,524
--------- --------- --------- ---------
Income (loss) before provision (benefit) for income
taxes............................................... 2,422 (4,327) (10,720) 2,779
Provision (benefit) for income taxes.................... 605 (1,690) (4,248) 847
--------- --------- --------- ---------
Net Income (Loss)..................................... $ 1,817 $ (2,637) $ (6,472) $ 1,932
PER SHARE DATA:
Net income (loss) per share (basic)..................... $ 0.22 $ (0.28) $ (0.71) $ 0.21
Shares used in computing per share amounts.............. 8,178 9,403 9,176 9,249
Net income (loss) per share (diluted)................... $ 0.22 $ (0.28) $ (0.71) $ 0.20
Shares used in computing per share amounts.............. $ 8,260 $ 9,403 $ 9,176 $ 9,600
</TABLE>
<TABLE>
<CAPTION>
AT AT
-------------------- ------------------------
DECEMBER DECEMBER
JUNE 30, JUNE 30, 31, 31,
1999 1998 1998 1997
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable
securities...................................... $ 36,200 $ 37,236 $ 34,730 $ 42,429
Working capital................................... 7,796 24,961 22,135 28,901
Total assets...................................... 53,754 61,443 54,906 66,056
Total shareholders' equity........................ 43,196 52,175 45,366 57,334
</TABLE>
- ------------------------
(1) ACQUISITIONS:
The Company incurred an expense of $2.3 million related to purchased
research and development for which technological feasibility had not been
achieved in the second quarter of 1998 related to the acquisition of
Semaphore. Such in-process technology was valued, along with other acquired
assets, using a discounted cash flow analysis with separate cash flow
projections for existing and in-process technology. The value of in-process
technology for which technological feasibility had not been established and
for which there was no alternative use was expensed upon acquisition in
accordance with Financial Accounting Standards ("FAS") No. 2, "Accounting
for Research and Development Costs".
The Company incurred an expense of $3.7 million related to purchased
research and development for which technological feasibility had not been
achieved in the third quarter of 1997 in connection with its acquisition of
certain assets and in-process technology for $5 million in cash from
Performance Telecom. Such in-process technology was valued, along with
other acquired assets, using a discounted cash flow analysis with separate
cash flow projections for existing and in-process technology. The value of
in-process technology for which technological feasibility had not been
established and for which there was no alternative use was expensed upon
acquisition in accordance with FAS No. 2, "Accounting for Research and
25
<PAGE>
Development Costs." This technology was designed to enable network service
providers to offer applications such as Internet access, interactive video
services, remote data access and multimedia applications at
multi-megabit-per-second speeds over standard voice-grade copper lines.
The results attributable to the acquisition of the assets of
Performance Telecom and Semaphore have been consolidated with the Company's
results since September 30, 1997 and April 3, 1998, respectively.
The following unaudited pro forma condensed combined results of
operations information has been presented to give effect to the purchase of
the Semaphore assets as if such transaction had occurred at the beginning
of each of the periods presented. The historical results of operations have
been adjusted to reflect additional depreciation and amortization expense
based on the value allocated to assets acquired in the purchase. In-process
research and development costs in the amount of $2,299,000, which were
written off immediately after the purchase was completed, have been
included in the results of both periods presented. The pro forma results of
operations information is presented for informational purposes only and is
not necessarily indicative of the operating results that would have
occurred had the acquisition been consummated as of the beginning of the
periods presented, nor is it indicative of future operating results.
UNAUDITED PRO FORMA CONDENSED COMBINED RESULTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Revenue............................................................................ $ 55,113 $ 69,992
Net loss........................................................................... (7,857) (3,345)
Earnings per share (Basic)
Net loss per share............................................................... (0.83) (0.35)
Shares used in per share calculation............................................. 9,467(a) 9,540(a)
Earnings per share (Diluted)
Net loss per share............................................................... (0.83) (0.35)
Shares used in per share calculation............................................. 9,467(a) 9,540(a)
</TABLE>
Shares used in pro forma earnings per share basic and diluted
calculations for the twelve months ended December 31, 1998 are as follows
(in thousands):
<TABLE>
<CAPTION>
Shares issued in asset acquisition............................................................. 291(b)
<S> <C>
Existing Shares................................................................................ 9,176
---------
9,467
---------
</TABLE>
Shares used in pro forma earnings per share basic and diluted
calculations for the twelve months ended December 31, 1997 are as follows
(in thousands):
<TABLE>
<S> <C>
Shares issued in asset acquisition............................................................. 291(b)
Existing shares................................................................................ 9,249
---------
9,540
---------
</TABLE>
-----------------------------------
(a) Shares used in the per share calculation reflect Shares issued to
Semaphore as if they were outstanding from the beginning of each period
presented and existing Shares.
(b) The number of shares issued was determined by dividing $3,200 by the
volume-weighted average price per share (as reported by Bloomberg
Financial Services) at which the Company's common stock traded on the
five business days immediately preceding the execution of the asset
sale agreement by the parties.
(2) RESTRUCTURING CHARGES:
The Company incurred an expense of $2.5 million in the third quarter of
1998 related to the termination of its DL7100 and VPN product lines,
including termination of 25 project employees, abandonment of a leased
facility and related fixed assets. Since the products included use of, or
planned integration of, technologies and other assets acquired through the
Company's acquisitions of Semaphore and Performance Telecom, the Company
also evaluated those acquired assets, which had no alternative future use,
for realizability. The restructuring expense of $2.5 million consisted
primarily of severance costs of $500,000, legal and lease commitment costs
of $500,000 and the write-off of goodwill and fixed assets of $1.5 million
related to the aforementioned acquisitions. In addition to these costs the
Company reflected $3.2 million of restructuring related costs in cost of
sales for inventory write-downs and warranty reserves.
All 25 project employees were notified of their termination severance
benefits by September 30, 1998 and 84% of these benefits were actually paid
by the end of December 1998. The Company's leased facility was exited in
the first quarter of 1999. Remaining accrued restructuring charges amounted
to $1.2 million as of December 31, 1998, primarily for legal product claims
and warranty expenses associated with the termination of the aforementioned
product lines.
26
<PAGE>
BOOK VALUE PER SHARE. The Company's book value per Share was $5.34 as of as
of December 31, 1998 and $6.08 as of June 30, 1999.
AVAILABLE INFORMATION. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is required to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company's shareholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be
available for inspection at the Commission's regional offices located at Seven
World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. The
Commission also maintains an Internet site on the World Wide Web at
http://www.sec.gov that contains reports, proxy statements and other
information. Copies of such materials may also be obtained by mail, upon payment
of the Commission's customary fees, by writing to its principal office at 450
Fifth Street, N.W., Washington, D.C. 20549. The information should also be
available for inspection at the Nasdaq Stock Market, 1735 K Street, N.W.,
Washington, D.C. 20006.
CERTAIN FINANCIAL FORECASTS
GENERAL. The financial forecast set forth below was derived from the
Company's internal business plan. The financial forecast does not give effect to
the Offer or the Merger and does not reflect any benefits that might be realized
by the Company upon consummation of the Merger. Copies of the projections were
provided to each of DRW and Sutter Securities in connection with their
engagements by the Company or Purchaser.
CERTAIN IMPORTANT CAVEATS AND LIMITATIONS. Financial forecasts involve
estimates as to the future that, notwithstanding the fact that they are
presented with numeric specificity, may or may not prove to be accurate. The
financial forecast set forth below reflects numerous assumptions as to industry
performance, general business and economic conditions, regulatory and legal
requirements, taxes and other matters, many of which are beyond the control of
the Company. Similarly, the financial forecast assumes certain future business
decisions which are subject to change. Moreover, PricewaterhouseCoopers LLP,
independent auditors for the Company, have not examined, compiled or applied
agreed-upon procedures to the financial forecast set forth below and,
consequently, assume no responsibility therefor.
THERE CAN BE NO ASSURANCE THAT THE RESULTS PREDICTED BY THE FINANCIAL
FORECAST SET FORTH BELOW WILL BE REALIZED. ACTUAL RESULTS WILL VARY FROM THOSE
REPRESENTED BY THE FINANCIAL FORECAST, AND THOSE VARIATIONS MAY BE MATERIAL. THE
INCLUSION OF THE FINANCIAL FORECAST SHOULD NOT BE REGARDED AS A REPRESENTATION
BY THE COMPANY OR ANY OTHER PERSON THAT THE FORECASTED RESULTS WILL BE ACHIEVED.
RECIPIENTS OF THIS OFFER TO PURCHASE ARE CAUTIONED TO CONSIDER CAREFULLY THE
FOREGOING AND THE ASSUMPTIONS SET FORTH BELOW WHILE REVIEWING THE FINANCIAL
FORECAST. IN ADDITION, EXCEPT AS NOTED ABOVE, THE COMPANY HAS NOT UPDATED THE
FORECAST TO REFLECT DEVELOPMENTS OCCURRING AFTER AUGUST 23, 1999, THE DATE THE
FORECAST WAS PREPARED. THE COMPANY DOES NOT INTEND TO UPDATE OR PUBLICLY REVISE
THE FORECAST.
27
<PAGE>
SUMMARY OF SIGNIFICANT ASSUMPTIONS
FOR THE FINANCIAL FORECAST
1. Summary of Significant Assumptions for the Financial Forecast.
(a) The financial forecast assumes that, during all relevant time
periods, (1) the Company does not obtain additional sources of
financing and (2) the Company has sufficient cash for working capital
and other purposes and (3) will have interest income of approximately
$2 million annually.
(b) The financial forecast assumes revenue growth at a rate of 17.2%,
12.5%, 15.3%, 10.0%, and 10.0% in each of the fiscal years ended
December 31, 1999, 2000, 2001, 2002 and 2003, respectively.
(c) The financial forecast assumes gross margin to be 54% of net sales in
each of the fiscal years ended December 31, 1999, 2000, 2001, 2002
and 2003, respectively.
(d) The financial forecast assumes research and development expenditures
to be approximately 17% of net sales in each of the fiscal years
ended December 31, 1999, 2000, 2001, 2002 and 2003, respectively.
(e) The financial forecast assumes selling, general and administrative
expense as a percentage of net sales is assumed to be 30.6%, 29.2%,
28.4%, 28.0% and 27.5% in each of the fiscal years ended December 31,
1999, 2000, 2001, 2002 and 2003, respectively.
(f) The financial forecast assumes income taxes at an effective tax rate
to be 25%, 25%, 34%, 34% and 34% in each of the fiscal years ended
December 31, 1999, 2000, 2001, 2002 and 2003, respectively, and all
tax expense is assumed to have been paid in the year in which it is
due.
(g) The financial forecast assumes no significant impact of Y2K slow down
on the Company's customer base, which may adversely impact the
revenues in the fourth quarter of 1999.
(h) The financial forecast assumes maintaining a book to bill ratio in a
fiscal year of at least one.
(i) The financial forecast assumes the Company's business with its
carrier customers continuing at current levels. As in the past, the
Company's carrier business has limited visibility.
(j) The financial forecast does not include any new products that the
Company may conceive and elect to develop in the future.
(k) The financial forecast assumes price reductions in the Company's
products over a period of time.
28
<PAGE>
INCOME STATEMENT DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net Sales................................................. $ 64,000 $ 72,000 $ 83,000 $ 91,300 $ 100,430
Cost of sales............................................. 29,300 33,120 38,180 41,998 46,198
--------- --------- --------- --------- ----------
Gross profit............................................ 34,700 38,880 44,820 49,302 54,232
Operating expenses:
Research and development................................ 10,900 12,000 14,200 15,521 17,073
Sales, general and administrative....................... 19,600 21,000 23,600 25,564 27,618
--------- --------- --------- --------- ----------
Total operating expense............................... 30,500 33,000 37,800 41,085 44,691
--------- --------- --------- --------- ----------
Operating income.................................... 4,200 5,880 7,020 8,217 9,541
Other income:
Interest/other income (expense)......................... 2,016 2,000 2,000 2,000 2,000
--------- --------- --------- --------- ----------
Total other income.................................... 2,016 2,000 2,000 2,000 2,000
--------- --------- --------- --------- ----------
Pretax income....................................... 6,216 7,880 9,020 10,217 11,541
Income taxes........................................ 1,554 1,970 3,067 3,474 3,924
--------- --------- --------- --------- ----------
Net income........................................ $ 4,662 $ 5,910 $ 5,953 $ 6,743 $ 7,617
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
Weighted Average Shares outstanding..................... 8,011 8,011 8,011 8,011 8,011
Earnings per share...................................... $ 1.58 $ 0.73 $ 0.74 $ 0.84 $ 0.95
Effective Tax Rate.................................... 25.00% 25.00% 34.00% 34.00% 34.00%
Depreciation and amortization............................. $ 1,656 $ 1,556 $ 1,400 $ 1,300 $ 1,200
Earnings before interest, taxes, depreciation and
amortization............................................ $ 5,856 $ 7,436 $ 8,420 $ 9,517 $ 10,741
</TABLE>
29
<PAGE>
BALANCE SHEET DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1999 2000 2001 2002 2003
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash......................................... $ 7,867 $ 13,777 $ 19,730 $ 25,489 $ 31,830
Accounts receivable, net..................... 6,488 7,299 8,414 9,257 10,182
Inventories.................................. 3,800 3,800 3,800 4,200 4,620
Prepaid expenses............................. 1,000 1,000 1,000 1,000 1,000
Deferred Taxes............................... 3,069 3,069 3,069 3,000 3,000
Short term marketable securities.............
--------- --------- --------- --------- ---------
Total current assets....................... 22,223 28,944 36,012 42,945 50,632
Plant, property and equipment (gross)........ 9,291 10,947 12,447 13,947 15,447
Accumulated depreciation..................... 6,991 8,547 9,947 11,247 12,447
--------- --------- --------- --------- ---------
Net property, plant & equipment............ 2,300 2,400 2,500 2,700 3,000
--------- --------- --------- --------- ---------
Other assets................................. 1,938 1,938 1,938 1,938 1,938
Long term investments........................ 31,179 31,179 31,179 31,179 31,179
--------- --------- --------- --------- ---------
Total Assets............................. $ 57,640 $ 64,460 $ 71,629 $ 78,762 $ 86,748
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
LIABILITIES & EQUITY
Accounts payable............................. $ 3,049 $ 3,710 $ 4,175 $ 4,565 $ 4,185
Accrued payroll.............................. 2,800 2,800 2,800 2,800 2,800
Accrued liabilities.......................... 5,000 5,000 5,500 5,500 6,000
Income tax payable........................... 750 1,000 1,250 1,250 1,500
--------- --------- --------- --------- ---------
Total current liabilities.................. 11,599 12,510 13,725 14,115 14,485
Common stock................................. 31,069 31,069 31,069 31,069 31,069
Retained earnings............................ 14,972 20,882 26,835 33,578 41,195
--------- --------- --------- --------- ---------
Total shareholders' equity................. 46,040 51,950 57,904 64,647 72,264
--------- --------- --------- --------- ---------
Total liabilities & equity............... $ 57,640 $ 64,460 $ 71,629 $ 78,762 $ 86,748
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
30
<PAGE>
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 4,662 $ 5,910 $ 5,953 $ 6,743 $ 7,617
Adjustments to reconcile net income to
Depreciation and amortization............................. 1,656 1,556 1,400 1,300 1,200
Changes in working capital:
Accounts receivable..................................... (1,721) (811) (1,115) (843) (926)
Inventories............................................. 506 -- -- (400) (420)
Prepaid expenses........................................ (2) -- -- -- --
Deferred taxes.......................................... 2,501 -- -- 69 --
Accounts payable........................................ 684 661 465 390 (380)
Accrued liabilities..................................... 868 -- 500 -- 500
Income taxes payable.................................... 507 250 250 -- 250
--------- --------- --------- --------- ---------
Net cash from operations.............................. $ 9,661 $ 7,566 $ 7,453 $ 7,259 $ 7,841
INVESTING ACTIVITIES
Short term marketable securities........................ 15,738 -- -- -- --
Long term investments and other assets.................. (10,530) -- -- -- --
Other Assets............................................ (1,938) -- -- -- --
Capital expenditures.................................... (1,374) (1,656) (1,500) (1,500) (1,500)
--------- --------- --------- --------- ---------
Net cash from investing............................... $ 1,897 $ (1,656) $ (1,500) $ (1,500) $ (1,500)
FINANCING ACTIVITIES
Revolver................................................ -- -- -- -- --
Long term debt.......................................... -- -- -- -- --
Stock, net.............................................. (3,987) -- -- -- --
--------- --------- --------- --------- ---------
Net cash from financing............................... ($ 3,987) $ 0 $ 0 $ 0 $ 0
Net change in cash.......................................... 7,571 5,910 5,953 5,759 6,341
Cash, beginning of period................................... $ 296 $ 7,867 $ 13,777 $ 19,730 $ 25,489
--------- --------- --------- --------- ---------
Cash, end of period....................................... 7,867 13,777 19,730 25,489 31,830
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net change in cash.......................................... 7,571 5,910 5,953 5,759 6,341
Cash, beginning of period................................... 296 7,867 13,777 19,730 25,489
--------- --------- --------- --------- ---------
Cash, end of period....................................... $ 7,867 $ 13,777 $ 19,730 $ 25,489 $ 31,830
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
7. CERTAIN INFORMATION CONCERNING PURCHASER AND THE GUPTA FAMILY.
GENERAL. Purchaser is a California corporation organized in September 1999,
at the direction of Vinita Gupta as described in "Special Factors--Section 1.
Background of the Offer." Purchaser has never conducted any business operations.
The principal executive offices of Purchaser are located at P.O. Box 620154,
Woodside, California 94062-0154 and Purchaser's telephone number is (408)
745-4550. It is not anticipated that Purchaser will have any significant assets
or liabilities (other than those arising in connection with the Merger,
including its financing) or engage in any activities other than those incident
to Purchaser's formation and capitalization, the Merger and the arrangement of
financing for the Merger. Vinita Gupta is currently the sole director, executive
officer and stockholder of Purchaser. The name, business address, present
principal occupation or employment, material occupations during the past five
years and citizenship of Vinita Gupta, the sole director and sole executive
officer of Purchaser and
31
<PAGE>
Narendra Gupta, are set forth in Schedule II hereto. The relative equity
interests of the members of the Gupta Family in Purchaser after the contribution
of the Gupta Investors' Shares to Purchaser (and in the Company following the
consummation of the Merger) are set forth in Schedule III.
During the past five years neither Purchaser nor any members of the Gupta
Family has been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) nor has Purchaser or such person been 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 or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
OTHER INFORMATION. Except as described in this Offer to Purchase and in
Schedule III hereto, (i) neither Purchaser nor any member of the Gupta Family or
any associate or majority-owned subsidiary of Purchaser or any member of the
Gupta Family, beneficially owns or has any right to acquire, directly or
indirectly, any equity security of the Company and (ii) neither Purchaser nor,
to the knowledge of Purchaser, any of the persons or entities referred to above
nor any director, executive officer or subsidiary of any of the foregoing has
effected any transaction in any equity security of the Company during the past
60 days.
Vinita Gupta is Chairman of the Board, Chief Executive Officer and President
of the Company and Narendra Gupta is a director of the Company. Vinita Gupta and
Narendra Gupta are married.
Effective December 14, 1998, Vinita Gupta entered into an Executive
Retention and Severance Agreement (the "Severance Agreement") with the Company.
Pursuant to the Severance Agreement, in the event of a Termination Upon Change
of Control (as defined below) of Ms. Gupta's employment with the Company, Ms.
Gupta is entitled to (i) a lump sum payment in the amount of 100% of her annual
salary of $250,000 and target bonus of $150,000; (ii) a bonus payment equal to
Ms. Gupta's full target bonus prorated though the date of termination; (iii) all
salary and accrued vacation earned through the date of termination; (iv)
reimbursement of all expenses; (v) all benefits to which Ms. Gupta is entitled
under the Company's benefits plans; and (vi) continued medical and welfare
coverage for a period of twelve months after the date of termination. In
addition, upon a Change of Control (as defined below), Ms. Gupta is entitled to
acceleration of vesting of 100% of her outstanding Options or, at the Company's
election, a cash payment equal to the difference between the aggregate exercise
price of all unexercised Options and the value of consideration deliverable for
an equivalent number of shares as a result of the change of control transaction.
For the purposes of the Severance Agreement, "Termination Upon Change of
Control" means (a) any termination of Ms. Gupta's employment by the Company
without cause during the period commencing thirty days prior to the earlier of
(1) the date that the Company first publicly announces it is conducting
negotiations leading to a Change of Control (as defined below) or (2) the date
that the Company enters into a definitive agreement what would result in a
Change of Control and ending six months after the Change of Control; or (b) any
resignation by Ms. Gupta after the occurrence of any Change of Control. The
Severance Agreement defines "Change of Control" to mean (a) any person other
than employees of the Company becoming the beneficial owner of securities of the
Company representing more than 50% of (x) the outstanding Shares or (y) the
combined voting power of the then-outstanding securities; (b) the Company is a
party to a merger or consolidation which results in the holders of voting
securities of the Company outstanding immediately prior thereto failing to
continue to represent more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; (c) the sale or disposition of all or
substantially all of the Company's assets; (d) there occurs a change in the
composition of the Board of Directors within a six month period, as a result of
which fewer than a majority of the directors are incumbent directors; or (e) the
dissolution or winding up of the Company. The Offer and the Merger will not
constitute a Change of Control for the purposes of the Severance Agreement.
32
<PAGE>
In fiscal 1998, the Company paid $61,700 to lease office space from
Integrated Systems, Inc., an entity that is approximately 20% owned by Narendra
Gupta and of which Mr. Gupta is Chairman of the Board. Vinita Gupta is also a
director of Integrated Systems, Inc. In fiscal 1996, the Company purchased
$114,100 worth of software licenses and maintenance from Integrated Systems,
Inc. In addition, in fiscal 1996, the Company purchased $243,691 worth of ASIC
design services from Doctor Design, a subsidiary of Integrated Systems, Inc.
Each of the above transactions were at rates that approximate the rates that
would have been obtained in arms length transactions.
Except as otherwise described in this Offer to Purchase, neither Purchaser
nor any member of the Gupta Family has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or voting of such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, since January 1, 1996, neither Purchaser nor
any member of the Gupta Family has had any business relationship or transaction
with the Company or any of its executive officers, directors or affiliates that
is required to be reported under the applicable rules and regulations of the
Commission. Except as set forth in this Offer to Purchase, since January 1,
1996, there have been no contacts, negotiations or transactions between
Purchaser or any member of the Gupta Family, on the one hand, and the Company or
its affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
8. SOURCE AND AMOUNT OF FUNDS.
Purchaser and the Gupta Family estimate that the total amount of funds
required by Purchaser to purchase all of the Shares pursuant to the Offer and to
pay fees and expenses related to the Offer and Merger will be approximately $43
million (which includes approximately $1.7 million for the payment of estimated
costs and expenses).
Purchaser has received a commitment letter dated September 9, 1999 (the
"Bridge Loan Commitment Letter") from Comerica Bank--California ("Comerica").
Pursuant to the Bridge Loan Commitment Letter, Comerica has committed to provide
Purchaser with a $43 million bridge loan (the "Bridge Loan"), subject to the
terms and conditions stated in the Bridge Loan Commitment Letter. A copy of the
Bridge Loan Commitment Letter is filed as an exhibit to the Schedule 14D-1 and
the Schedule 13E-3, and is incorporated herein by reference.
The Company has received a commitment letter dated August 31, 1999 (the
"Permanent Loan Commitment Letter") from Comerica. Pursuant to the Permanent
Loan Commitment Letter, Comerica has committed to provide the Surviving
Corporation with a $4 million revolving accounts receivable line of credit (the
"Revolving Line of Credit") and a $7 million term loan (the "Term Loan," and
together with the Revolving Line of Credit collectively, the "Permanent Loans"),
subject to the terms and conditions stated in the Permanent Loan Commitment
Letter. A copy of the Permanent Loan Commitment Letter is filed as an exhibit to
the Schedule 14D-1 and the Schedule 13E-3, and is incorporated herein by
reference.
In addition, the Gupta Family has extended to the Company a loan in the
principal amount of $2 million (the "Gupta Family Loan"). Proceeds from the
Gupta Family loan will initially be used to pay cash to existing Option holders
as their Options become exercisable and as working capital.
The closing of the Bridge Loan is subject to the satisfaction of the
following conditions as well as other conditions customary for the closing of
loan facilities: (i) the negotiation, execution and delivery of loan and
security documentation reasonably satisfactory to Comerica and Purchaser; (ii)
the Company will have unencumbered cash, cash equivalent or marketable
securities with a market value of not less than $35 million, held at an
institution acceptable to Comerica in its discretion; (iii) the establishment of
an escrow arrangement with the Trust Department at Comerica to coordinate the
timing of payments and the holding
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of shares tendered to Purchaser, which escrow arrangement shall be satisfactory
to Purchaser and Comerica; (iv) the execution of a put agreement by Vinita Gupta
to purchase 100% of the Bridge Loan from Comerica upon certain conditions
including, without limitation, the failure to pay the Bridge Loan; and (v) the
perfection of a lien on all assets of Purchaser which shall serve as collateral
for the Bridge Loan (which shall, subject to compliance with margin regulations
of the Federal Reserve Board, be all assets of Purchaser).
The proceeds of the Bridge Loan will be available for use in the purchase of
the Shares. The Bridge Loan will bear interest at a rate equal to the prime rate
for Comerica. The documentation for the Bridge Loan will contain customary
representations, warranties, covenants (including that while the Bridge Loan is
outstanding, Purchaser will not pledge assets to any party other than Comerica,
borrow or lend money or enter into guaranties or enter into any merger or
acquisition other than the Merger), events of default and other provisions
customary in loan documents.
The Bridge Loan is to be repaid upon the closing of the Merger, but not
later than two weeks after the submission with the State of the California of
the certificate of merger for the Merger. The Purchaser anticipates that the
Bridge Loan will be repaid with approximately $36 million of cash of the
Surviving Corporation and with the proceeds of the Permanent Loans.
The closing of the Permanent Loans is subject to the satisfaction of the
following conditions as well as other conditions customary for the closing of
loan facilities: (i) the negotiation, execution and delivery of loan and
security documentation reasonably satisfactory to Comerica and Purchaser; (ii) a
satisfactory accounts receivable and inventory audit by Comerica; (iii)
satisfactory completion of a Y2K assessment of the Company by Comerica; (iv) the
consummation of the Merger; (v) execution by Vinita Gupta of a guarantee of up
to $2 million of the Permanent Loans until the Surviving Corporation meets
certain conditions; and (vi) the perfection of a lien on all assets of the
Surviving Corporation.
The proceeds of the Revolving Line of Credit will be available for operating
needs and letters of credit, and the proceeds of the Term Loan will be available
to repay the Bridge Loan. The loans outstanding under the Revolving Line of
Credit will bear interest at a rate equal to the prime rate for Comerica plus
one percent, and the Term Loan will bear interest at a rate equal to the prime
rate for Comerica plus one and one-half percent. As of September 9, 1999, the
prime rate for Comerica was 8.25%. Documentation for the Permanent Loans will
contain customary representations, warranties, financial covenants (including a
quick ratio, a total liabilities to net worth ratio, a minimum tangible net
worth, a funded debt to earnings before interest, taxes, depreciation and
amortization ratio and a minimum cash flow), covenants (including restrictions
on the granting of liens, the borrowing or lending of money, the execution of
guarantees, mergers and acquisitions and the repurchase of stock or the payment
of dividends), events of default and other provisions customary in loan
documents.
The Revolving Line of Credit will expire 364 days from the closing of the
Offer and the principal amount of the Term Loan will be repaid in 48 equal
monthly installments of principal commencing with the first day of the first
calendar month which occurs at least 20 days after the Expiration Date. The
Purchaser anticipates that the Permanents Loans will be repaid with internally
generated funds of the Surviving Corporation.
9. DIVIDENDS AND DISTRIBUTIONS.
If, on or after the date of this Offer to Purchase, the Company should (i)
split, combine or otherwise change the Shares or its capitalization, (ii)
acquire or otherwise cause a reduction in the number of outstanding Shares or
(iii) issue or sell any additional Shares, shares of any other class or series
of capital stock, other voting securities or any securities convertible into, or
options, rights or warrants, conditional or otherwise, to acquire, any of the
foregoing, then, without prejudice to Purchaser's rights under "The Tender
Offer--Section 11. Certain Conditions of the Offer," Purchaser, in its sole
discretion, may make
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such adjustments to the purchase price and other terms of the Offer (including
the number and type of securities to be purchased) as it deems appropriate to
reflect such split, combination or other change.
If, on or after the date of this Offer to Purchase, the Company should
declare or pay any dividend on the Shares or make any other distribution
(including the issuance of additional shares of capital stock pursuant to a
stock dividend or stock split, the issuance of other securities or the issuance
of rights for the purchase of any securities) with respect to the Shares that is
payable or distributable to shareholders of record on a date prior to the
transfer to the name of Purchaser or its nominee or transferee on the Company's
stock transfer records of the Shares purchased pursuant to the Offer, then,
without prejudice to Purchaser's rights under "The Tender Offer--Section 11.
Certain Conditions of the Offer," (i) the purchase price per Share payable by
Purchaser pursuant to the Offer will be reduced to the extent any such dividend
or distribution is payable in cash and (ii) any non-cash dividend, distribution
or right shall be received and held by the tendering shareholder 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. Pending such remittance
and subject to applicable law, Purchaser will be entitled to all the rights and
privileges as owner of any such non-cash dividend, distribution or right and may
withhold the entire purchase price or deduct from the purchase price the amount
or value thereof, as determined by Purchaser in its sole discretion.
10. CERTAIN EFFECTS OF THE TRANSACTION.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and could reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of any remaining Shares held by the public. Moreover, under the Merger
Agreement, if Purchaser purchases Shares in the Offer, Purchaser is obligated to
effect the short-form merger. In the event the Merger is consummated, the Gupta
Investors would own all of the outstanding Shares. At the Effective Time of the
Merger, Vinita Gupta, the sole director of Purchaser, would become the sole
director of the Surviving Corporation. It is expected that, following the
Effective Time, Narendra Gupta would be elected as a director of the Surviving
Corporation.
MARKET FOR THE SHARES. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public. In the
event that the Minimum Condition is satisfied, Purchaser is obligated pursuant
to the Merger Agreement to conduct a short-form merger under the provisions of
the CGCL, in which outstanding Shares not held by Purchaser will be converted
into the Merger Consideration. In such an event, the Shares would not longer be
listed on the Nasdaq National Market and the liquidity and market value of any
remaining Shares would be adversely affected.
STOCK QUOTATION. Depending upon the number of Shares purchased pursuant to
the Offer and the aggregate market value of any Shares not purchased pursuant to
the Offer, the Shares may no longer meet the standards for continued listing on
the Nasdaq National Market and may be delisted from the Nasdaq National Market.
The published guidelines of the Nasdaq National Market indicate that the Nasdaq
National Market would consider delisting the Shares if, among other things, (1)
there should be fewer than two registered and active market makers providing
quotations for the Shares; (2) the net tangible assets of the Company should
fall below $2,000,000, and the market capitalization of the Company should fall
below $35,000,000, and the net income of the Company should fall below $500,000
in the most recently completed fiscal year and in more than one of the last
three most recently completed fiscal years; (3) the minimum bid price for Shares
should fall below $1 per Share; (4) in the case of common stock, the number of
round lot holders of Shares should fall below 300; (5) in the case of common
stock, the number of publicly held Shares should fall below 500,000, or the
aggregate market value of publicly held Shares should fall below $1,000,000. If
the foregoing standards are not met, the Shares would no longer be
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admitted to quotation on the Nasdaq National Market. Moreover, under the Merger
Agreement, if Purchaser purchases Shares in the Offer, Purchaser is obligated to
effect the short-form merger.
To the extent the Shares are delisted from the Nasdaq National Market, the
market for the Shares could be adversely affected. If the Nasdaq National Market
were to delist the Shares, it is possible that the Shares would continue to
trade in the over-the-counter market and that price quotations for the Shares
would be reported by other sources. The extent of the public market for the
Shares and the availability of such quotations would, however, depend on the
number of holders of Shares remaining at such time, the interest in maintaining
a market in the Shares on the part of securities firms, the possible termination
of registration of the Shares under the Exchange Act (as described below) and
other factors. Purchaser and the Gupta Family cannot predict whether the
reduction in the number of Shares that might otherwise trade publicly, if any,
effected by the Offer would have an adverse or beneficial effect on the market
price for or marketability of the Shares or whether it would cause future market
prices to be greater or less than the Offer Price.
Once the Offer is consummated, if permitted by the NASD and the Exchange
Act, it is the intention of Purchaser to cause the Company to file applications
to withdraw the Shares from listing on the Nasdaq National Market and to
terminate the registration of the Shares under the Exchange Act. See "The Tender
Offer--Section 10. Certain Effects of the Transaction." In the event that the
Shares are delisted from the Nasdaq National Market, it is possible that the
Shares would continue to trade in the over-the-counter market and that price
quotations for the Shares would be reported by other sources. The extent of the
public market for the Shares and the availability of such quotations would,
however, depend on the number of holders of Shares remaining at such time, the
interest in maintaining a market in the Shares on the part of securities firms,
the possible termination of registration of the Shares under the Exchange Act,
as described below, and other factors. To the extent the Shares are delisted
from the Nasdaq National Market, the market for the Shares could be adversely
affected. Purchaser and the Gupta Family cannot predict whether the reduction in
the number of Shares that might otherwise trade publicly, if any, effected by
the Offer would have an adverse or beneficial effect on the market price for or
marketability of the Shares or whether it would cause future market prices to be
greater or less than the Offer Price.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application by the Company to the Commission if the Shares are
not listed on a "national securities exchange," quoted on an automated inter-
dealer quotation system or held by 300 or more holders of record. It is the
intention of Purchaser to seek to cause an application for such termination to
be made as soon after consummation of the Offer as the requirements for
termination of registration of the Shares are met. The termination of the
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to holders of Shares and to
the Commission and would make certain provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with shareholders' meetings and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Shares. In addition,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant to
Rule 144 under the Securities Act. Purchaser intends to seek to cause the
Company to apply for termination of registration of the Shares under the
Exchange Act as soon after completion of the Offer as the requirements for such
termination are met.
If public quotation and registration of the Shares is not terminated prior
to the Merger, then the Shares will no longer by quoted and the registration of
the Shares under the Exchange Act will be terminated following the consummation
of the Merger.
MARGIN REGULATIONS. The Shares are currently "margin securities," as such
term is defined under the rules of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), which has
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the effect, among other things, of allowing brokers to extend credit on the
collateral of such securities. Depending upon factors similar to those described
above regarding listing and market quotations, following the Offer it is
possible that the Shares might no longer constitute "margin securities" for
purposes of the margin regulations of the Federal Reserve Board, in which event
such Shares could no longer be used as collateral for loans made by brokers. In
any event, the Shares will cease to be "margin securities" if the security is no
longer designated as qualified for trading in the national market system of
Nasdaq.
11. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, and in addition to (and
not in limitation of) Purchaser's rights to extend and amend the Offer at any
time, in its sole discretion, Purchaser shall not be required to accept for
payment, purchase or pay for any Shares tendered pursuant to the Offer, and may
terminate, or, subject to the terms of the Merger Agreement, amend the Offer and
may postpone the acceptance for payment of and payment for any Shares tendered
if (i) the Minimum Condition shall not have been satisfied or (ii) at any time
on or after September 3, 1999 and before the acceptance for payment of Shares,
any of the following conditions exists:
(a) there shall have been threatened, instituted or be pending any action or
proceeding before any court or governmental, administrative or regulatory
authority or agency, domestic or foreign (each, a "GOVERNMENTAL ENTITY"), or by
any other person, domestic or foreign, before any court or Governmental Entity,
(i) challenging or seeking to, or which is reasonably likely to, make illegal,
materially delay or otherwise directly or indirectly restrain or prohibit or
seeking to, or which is reasonably likely to, impose voting, procedural, price
or other requirements, including any such requirements under California law, in
addition to those required by federal securities laws, in connection with the
making of the Offer, the acceptance for payment of, or payment for, any Shares
by Purchaser or the consummation by Purchaser of the Merger or other business
combination with the Company, or seeking to obtain material damages in
connection therewith; (ii) seeking to prohibit or limit materially the ownership
or operation by the Company, Purchaser or any of their respective subsidiaries
of all or any material portion of the business or assets of the Company,
Purchaser or any of their respective subsidiaries, or to compel the Company,
Purchaser or any of their respective subsidiaries to dispose of or hold separate
all or any material portion of the business or assets of the Company, Purchaser
or any of their respective subsidiaries; (iii) seeking to impose or confirm
limitations on the ability of Purchaser to exercise effectively full rights of
ownership of any Shares, including, without limitation, the right to vote any
Shares acquired by Purchaser pursuant to the Offer or otherwise on all matters
properly presented to the Company's shareholders; (iv) seeking to require
divestiture by Purchaser of any Shares; (v) seeking any material diminution in
the benefits expected to be derived by Purchaser as a result of the transactions
contemplated by the Offer or the Merger or any other similar business
combination with the Company; (vi) otherwise directly or indirectly relating to
the Offer or which otherwise, in the reasonable judgment of Purchaser, might
materially adversely affect the Company or Purchaser or the value of the Shares;
or (vii) which otherwise, in the reasonable judgment of Purchaser, is likely to
materially adversely affect the business, operations (including, without
limitation, results of operations), properties (including, without limitation,
intangible properties), condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) or prospects
of either the Company or any of its subsidiaries or Purchaser;
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(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to (i)
Purchaser, the Company or any subsidiary or affiliate of Purchaser or the
Company or (ii) the Offer or the Merger, by any legislative body, court,
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, other than the routine application of the waiting period
provisions of the HSR Act to the Offer or the Merger, which, in the reasonable
judgment of Purchaser, is likely to result, directly or indirectly, in any of
the consequences referred to in clauses (i) through (vii) of paragraph (a)
above;
(c) there shall have occurred any change, condition, event or development
that constitutes a Material Adverse Effect (as such term is defined in the
Merger Agreement);
(d) there shall have occurred (i) any general suspension of, or limitation
on prices for, trading in securities on the Nasdaq National Market, (ii) any
material adverse change in United States currency exchange rates or a suspension
of, or limitation on, currency exchange markets, (iii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iv) any limitation (whether or not mandatory) by any government
or governmental, administrative or regulatory authority or agency, domestic or
foreign, on, or other event that, in the reasonable judgment of Purchaser, might
affect the extension of credit by banks or other lending institutions, or (v) a
commencement of a war or armed hostilities or other national or international
calamity directly or indirectly involving the United States;
(e) the Company or any of its subsidiaries, joint ventures or partners or
other affiliates shall have, directly or indirectly, (i) split, combined or
otherwise changed, or authorized or proposed a split, combination or other
change of, the Shares or its capitalization, (ii) acquired or otherwise caused a
reduction in the number of, or authorized or proposed the acquisition or other
reduction in the number of, outstanding Shares or other securities (other than
as aforesaid), (iii) issued or sold, or authorized or proposed the issuance,
distribution or sale of, additional Shares (other than the issuance of Shares
under Option prior to the date of the Merger Agreement, in accordance with the
terms of such Options as such terms have been publicly disclosed prior to the
date of the Merger Agreement), 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, (iv)
declared or paid, or proposed to declare or pay, any dividend or other
distribution, whether payable in cash, securities or other property, on or with
respect to any shares of capital stock of the Company, (v) altered or proposed
to alter any material term of any outstanding security, (vi) incurred any debt
other than in the ordinary course of business or any debt containing burdensome
covenants, (vii) authorized, recommended, proposed or entered into an agreement,
agreement in principle or arrangement or understanding with respect to any
merger, consolidation, liquidation, dissolution, business combination,
acquisition of assets, disposition of assets, release or relinquishment of any
material contractual or other right of the Company or any of its subsidiaries or
any comparable event not in the ordinary course of business, (viii) entered into
or amended any employment, change in control, severance, executive compensation
or similar agreement, arrangement or plan with or for the benefit of any of its
employees, consultants or directors, or made grants or awards thereunder, other
than in the ordinary course of business or entered into or amended any
agreements, arrangements or plans so as to provide for increased or accelerated
benefits to any such persons, (ix) except as may be required by law, taken any
action to terminate or amend any employee benefit plan (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended) of the
Company or any of its subsidiaries, or (x) amended or authorized or proposed any
amendment to the Company's articles of incorporation or bylaws;
(f) any required approval, permit, authorization or consent of any
governmental authority or agency shall not have been obtained on terms
reasonably satisfactory to Purchaser;
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(g) any of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified shall not be true and correct or any
such representations and warranties that are not so qualified shall not be true
and correct unless the effect of all such failures to be true or correct does
not constitute a Material Adverse Effect (as such term is defined in the Merger
Agreement);
(h) the Company shall have failed to perform any obligation or to comply
with any agreement or covenant of the Company to be performed or complied with
by it under the Merger Agreement unless the effect of all such failures does not
constitute a Material Adverse Effect (as such term is defined in the Merger
Agreement);
(i) the Board or any committee thereof shall have withdrawn or modified in a
manner adverse to Purchaser its approval or recommendation of the Offer, the
Merger or the Merger Agreement or (ii) the Board or any committee thereof shall
have resolved to take the foregoing action; or
(j) the Merger Agreement shall have been terminated in accordance with its
terms.
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 or may be waived by Purchaser in whole or in part at any time and from
time to time in Purchaser's discretion. 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.
12. CERTAIN REGULATORY AND LEGAL MATTERS.
Except as described below, based upon its examination of publicly available
information with respect to the Company, Purchaser is not aware of any license
or other regulatory permit that appears to be material to the business of the
Company and its subsidiaries, taken as a whole, which might be adversely
affected by the acquisition of Shares by Purchaser pursuant to the Offer or of
any approval or other action by any domestic (federal or state) or foreign
governmental, administrative or regulatory authority or agency which would be
required prior to the acquisition of Shares by Purchaser pursuant to the Offer
and the Merger. Should any such approval or other action be required, it is
Purchaser's present intention to seek such approval or action. Purchaser does
not currently intend, however, to delay the purchase of Shares tendered pursuant
to the Offer pending the outcome of any such action or the receipt of any such
approval (subject to Purchaser's right to decline to purchase Shares if any of
the conditions in "The Tender Offer--Section 11. Certain Conditions of the
Offer" shall have occurred). There can be no assurance that any such approval or
other action, if needed, would be obtained without substantial conditions or
that adverse consequences might not result to the businesses of the Company or
Purchaser or that certain parts of the businesses of the Company or Purchaser
might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or other action or in
the event that such approval was not obtained or such other action was not
taken. If certain types of adverse action are taken with respect to the matters
discussed below, Purchaser could, subject to the terms and conditions of the
Merger Agreement, decline to accept for payment or pay for any Shares tendered.
See "The Tender Offer--Section 11. Conditions of the Offer."
STATE TAKEOVER LAWS. The Company is incorporated under the laws of the
State of California and operations are conducted throughout the United States. A
number of states throughout the United States 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 principal 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. V. DYNAMICS
CORP. OF AMERICA, however, the Supreme Court of the United
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States held that a state may, as a matter of corporate law and, in particular,
those laws concerning corporate governance, constitutionally disqualify a
potential acquirer 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. Subsequently, a number of Federal
courts ruled that various state takeover statutes were unconstitutional insofar
as they apply to corporations incorporated outside the state of enactment.
Purchaser has not attempted to comply with any state takeover statutes other
than the CGCL in connection with the Offer. Purchaser reserves the right to
challenge the validity or applicability of any state law allegedly applicable to
the Offer and nothing in this Offer to Purchase nor any action taken in
connection herewith is intended as a waiver of that right. In the event that any
state takeover statute is found applicable to the Offer, Purchaser might be
unable to accept for payment or purchase Shares tendered pursuant to the Offer
or be delayed in continuing or consummating the Offer. In such case, Purchaser
may not be obligated to accept for purchase, or pay for, any Shares tendered.
See "The Tender Offer--Section 11. Certain Conditions of the Offer."
DISSENTERS' RIGHTS. No appraisal rights are available in connection with
Shares purchased in the Offer. If the Merger is consummated, however,
shareholders of the Company may have certain rights under Chapter 13 of the CGCL
to dissent and demand appraisal of, and to receive payment in cash of the fair
value of, their Shares. If the Surviving Corporation and a dissenting
shareholder agree that his or her Shares are Dissenting Shares and agree upon
the fair market value of the Shares, then the dissenting shareholder is entitled
to receive a cash payment equal to the agreed fair market value of the Shares
and interest thereon at the legal rate on judgments from the date of such
agreement. If, however, the Surviving Corporation denies that Shares are
Dissenting Shares, or the Surviving Corporation and a dissenting shareholder
fail to agree upon the fair market value of his or her Shares, then the
dissenting shareholder may seek to have the applicable California superior court
determine whether his or her Shares are Dissenting Shares or the fair market
value of such Shares. If the status of such Shares as Dissenting Shares is in
issue, the superior court shall determine that issue first, and if the fair
market value of the Dissenting Shares is in issue, the superior court shall
determine, or appoint one or more impartial appraisers to determine, the fair
market value of such Shares. The fair market value shall be determined as of the
day before the first announcement of the terms of the Merger, excluding any
appreciation or depreciation as a result of the transactions contemplated by the
Merger Agreement. The value so determined could be more or less than the price
per share to be paid in the Merger. See "Special Factors--Section 7. Dissenters'
Rights" and Schedule IV to this Offer to Purchase.
FOREIGN LAWS. According to publicly available information, the Company also
owns property and conducts businesses in a number of other jurisdictions. In
connection with the acquisition of the Shares pursuant to the Offer, the laws of
certain foreign countries and jurisdictions may require the filing of
information with, or the obtaining of the approval of, governmental authorities
in such countries and jurisdictions. In addition, the waiting period prior to
consummation of the Offer associated with such filings or approvals may extend
beyond the scheduled Expiration Date. The governments in such countries and
jurisdictions might attempt to impose additional conditions on the Company's
operations conducted in such countries and jurisdictions as a result of the
acquisition of Shares pursuant to the Offer or the Proposed Merger.
GOING PRIVATE TRANSACTIONS. The Offer constitutes a "going private"
transaction under Rule 13e-3 of the Exchange Act. Consequently, Purchaser and
the Gupta Family have filed with the Commission the Schedule 13E-3, together
with exhibits, in addition to filing with the Commission a Schedule 14D-1.
Pursuant to Rule 13d-3, this Offer to Purchase contains information relating to,
among other matters, the fairness of the Offer to the Company's shareholders.
LEGAL PROCEEDINGS. Since the public announcement of the Merger Agreement on
September 3, 1999, three purported class actions have been filed in the Superior
Court of Santa Clara County, California. The
40
<PAGE>
complaints allege that the Company's directors breached their fiduciary duties
by failing to maximize the value of the Shares, that the value of the Shares is
materially greater than the Offer Price and, in one action, that the director
defendants failed to disclose material non-public information concerning the
Company's financial condition and prospects. Each complaint seeks certification
of a plaintiff class, declaratory and injunctive relief preventing the Offer and
the Merger, unspecified compensatory damages, and attorneys' fees and costs.
Purchaser, the defendant members of the Gupta Family, the Company and the
members of the Special Committee believe that the actions are without merit, and
intend to defend them vigorously. The three class actions are: EDWARD ABOFF ET
AL. V. RICHARD C. ALBERDING ET AL., filed on September 3, 1999; WILLIAM LEVY ET
AL. V. DIGITAL LINK CORPORATION ET AL., filed on September 7, 1999; and ANDREW
CURTIS WRIGHT ET AL. V. DIGITAL LINK CORPORATION ET AL., filed on September 7,
1999.
Except as set forth elsewhere in this Offer to Purchase, neither Purchaser
nor the Gupta Family is aware of any pending or overtly threatened legal
proceedings which would affect the Offer or the Merger. If any such matters were
to arise, Purchaser could decline to accept for payment or pay for any Shares
tendered in the Offer. See "The Tender Offer--Section 11. Certain Conditions of
the Offer."
13. FEES AND EXPENSES.
Except as set forth below, Purchaser will not pay any fees or commissions to
any broker, dealer or other person for soliciting tenders of Shares pursuant to
the Offer.
Purchaser has retained MacKenzie Partners, Inc. as the Information Agent and
the Harris Trust Company of New York as the Depositary, in connection with the
Offer. The Information Agent may contact holders of Shares by mail, telephone,
telex, telecopy, telegraph and personal interview and may request banks,
brokers, dealers and other nominee shareholders to forward materials relating to
the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, MacKenzie Partners, Inc. will be paid a reasonable and customary fee for
its services. and will also be reimbursed for certain out-of-pocket expenses and
may be indemnified against certain liabilities and expenses in connection with
the Offer, including certain liabilities under the federal securities laws.
Purchaser will pay the Depositary reasonable and customary compensation for its
services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and will indemnify the Depositary against certain liabilities and
expenses in connection therewith, including certain liabilities under the
federal securities laws. Brokers, dealers, commercial banks and trust companies
will be reimbursed by Purchaser for customary handling and mailing expenses
incurred by them in forwarding material to their customers.
Expenses estimated to be incurred by Purchaser in connection with the Offer
are as follows:
<TABLE>
<S> <C>
Financial Advisor fees and expenses............................... $ 100,000
Depositary........................................................ $ 15,000
Information Agent................................................. $ 15,000
Legal Fees........................................................ $ 350,000
Printing, mailing and distribution expenses....................... $ 170,000
Commission filing fee............................................. $ 6,500
Miscellaneous fees and expenses................................... $ 200,000
---------
Total......................................................... $ 856,500
---------
---------
</TABLE>
14. MISCELLANEOUS.
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid 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 any such state statute. If, after such
good faith
41
<PAGE>
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. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 14d-3 of Regulation 14D under the Exchange Act, Purchaser
and the Gupta Family have filed with the Commission the Schedule 14D-1, together
with exhibits, furnishing certain additional information with respect to the
Offer. In addition, the Company has filed the Schedule 14D-9 pursuant to Rule
14d-9 under the Exchange Act, together with exhibits, setting forth its
recommendation with respect to the Offer and the reasons for such recommendation
and furnishing certain additional related information. Such Schedules and any
amendments thereto, including exhibits, may be inspected at, and copies may be
obtained from, the same places and in the same manner as set forth in "The
Tender Offer--Section 6. Certain Information Concerning the Company," except
that they will not be available at the regional offices of the Commission.
DLZ CORP.
NARENDRA AND VINITA GUPTA LIVING TRUST
GUPTA CHILDREN'S TRUST AGREEMENT
THE NAREN AND VINITA GUPTA FOUNDATION
VINITA GUPTA
NARENDRA K. GUPTA
September 10, 1999
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<PAGE>
SCHEDULE I
FAIRNESS OPINION OF SUTTER SECURITIES, INCORPORATED
[SUTTER SECURITIES INCORPORATED LETTERHEAD]
September 3, 1999
Ms. Vinita Gupta
Chief Executive Officer
DLZ Corp.
P.O. Box 620154
Woodside California 94062-0154
Dear Ms. Gupta:
We understand that DLZ Corp. ("DLZ"), a recently formed corporation which is
controlled by Ms. Vinita Gupta, intends to enter into a Transaction (as defined
below), pursuant to which it will acquire all of the shares of Digital Link
Corporation ("Digital Link") not owned by DLZ or Ms. Gupta. Ms. Gupta is the
Chairperson of the Board, Chief Executive Officer and President of Digital Link.
The terms of the Transaction are set forth in the Agreement and Plan of
Merger (the "Merger Agreement") dated as of September 3, 1999, by and between
Digital Link and DLZ. The Transaction contemplated by the Merger Agreement
consists of (i) a tender offer (the "Tender Offer") for all shares of Digital
Link's common stock not owned by DLZ for $10.30 per share in cash (the
"Consideration"), to be followed, if the Tender Offer results in DLZ being the
beneficial owner of that number of shares which, together with the shares then
beneficially owned by DLZ, would constitute not less than 90% of the shares
outstanding (the "Minimum Condition"), by (ii) a short-form merger of DLZ with
and into Digital Link in which each share not owned by DLZ or Ms. Gupta will be
converted into the right to receive the Consideration. In the event the Minimum
Condition is not satisfied, the Merger Agreement provides that the Tender Offer
will be terminated with no acceptance of or payment for shares, and DLZ will
dispose of that number of shares which is necessary to reduce the beneficial
ownership of shares by DLZ and Ms. Gupta to below 50% of the outstanding shares.
Such disposition will be followed as soon as practical by a long-form merger of
DLZ with and into Digital Link in which each share not owned by DLZ or Ms. Gupta
will be converted into the right to the Consideration. The Transaction is
defined as (i) the Tender Offer and the short-form merger taken together, if the
Minimum Condition is satisfied and (ii) the long-form merger, if the Minimum
Condition is not satisfied.
You have provided us with the Merger Agreement in substantially final form
and with a draft of the offer to purchase to be sent to shareholders and related
documents (the "Draft Tender Documents").
You have asked us to render our opinion as to whether the Transaction is
fair, from a financial point of view, to the shareholders of Digital Link (other
than DLZ and Ms. Gupta).
In the course of our analyses for rendering this opinion we have:
1. reviewed the Merger Agreement and Draft Tender Documents;
2. reviewed Digital Link's Annual Report to Shareholders and Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, and its
Quarterly Reports on Form 10-Q for the periods ended March 31 and June
30, 1999;
3. reviewed certain operating and financial information, including
projections, provided to us by management relating to Digital Link's
business and prospects;
I-1
<PAGE>
4. met with certain members of Digital Link's senior management to discuss
its operations, historical financial statements, competitive position and
future prospects;
5. reviewed the historical market prices and trading volume of the common
shares of Digital Link;
6. reviewed publicly available financial data and stock market performance
data of companies which we deemed generally comparable to Digital Link;
and
7. conducted such other studies, analyses, inquires and investigations as
we deemed appropriate
In the course of our review, we have relied upon and assumed the accuracy
and completeness of the financial and other information provided to us by
Digital Link. With respect to Digital Link's projected financial results, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgement of the management of Digital
Link as to its expected future performance. We have not assumed any
responsibility for the information or projections provided to us and we have
further relied upon the assurances of the management of Digital Link that it is
unaware of any facts that would make the information or projections provided to
us incomplete or misleading. In arriving at our opinion, we have not performed
or obtained any independent appraisal of the assets of Digital Link. Our opinion
is necessarily based on economic, market and other conditions, and the
information made available to us, as the date hereof.
Based on the foregoing, it is our opinion that the Transaction, including
the Consideration, is fair, from a financial point of view, to the shareholders
of Digital Link (other than DLZ and Ms. Gupta).
It is understood that this opinion can be furnished to the Board of
Directors of Digital Link to satisfy the requirements of Section 1203 of the
General Corporation Law of the State of California and may be included in its
entirety in any filing made by Digital Link, DLZ or Ms. Gupta with the
Securities and Exchange Commission or the California Department of Corporations.
We will receive a fee for this opinion from DLZ.
Very truly yours,
SUTTER SECURITIES INCORPORATED
By: /s/ G.E. MATTHEWS
--------------------------------------
SENIOR MANAGING DIRECTOR
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<PAGE>
SCHEDULE II
INFORMATION CONCERNING THE SOLE DIRECTOR AND EXECUTIVE OFFICER OF
PURCHASER AND CERTAIN MEMBERS OF THE GUPTA FAMILY
The following table sets forth the name, current business address,
citizenship and present principal occupation or employment and material
occupations, positions, offices or employments and business addresses thereof
for the past five years of the sole director and executive officer of Purchaser.
The business address of Vinita Gupta and Narendra Gupta is P.O. Box 620154,
Woodside, California 94062-0154. Such director and executive officer is a
citizen of the United States of America.
<TABLE>
<CAPTION>
PRESENT FIVE YEAR
POSITIONS WITH PRINCIPAL EMPLOYMENT
NAME PURCHASER OCCUPATION HISTORY
- --------------- ------------------------ ------------------------ -------------------------------------------
<S> <C> <C> <C>
Vinita Gupta Director, President, Chairman of the Board, Chairman of the Board of the Company since
Treasurer and Chief Executive May 1985, Chief Executive Officer of the
Secretary Officer and President Company from May 1985 to September 1996
of the Company and from January 1999 to present, and
President of the Company from May 1985 to
March 1995, from October 1995 to
September 1996 and from January 1999 to
present. From March 1998 to January 1999,
Ms. Gupta was interim Chief Executive
Officer and President of the Company.
Narendra Gupta n/a Chairman of the Board, Director of the Company since 1985, founder
Integrated Systems, and Chairman of the Board of Directors of
Inc. and Director of Integrated Systems, Inc.
the Company
</TABLE>
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<PAGE>
SCHEDULE III
INTERESTS OF PURCHASER AND THE GUPTA FAMILY IN THE COMPANY
INTERESTS OF PURCHASER AND THE GUPTA FAMILY IN THE COMPANY(1)
<TABLE>
<CAPTION>
NUMBER OF SHARES POWER TO DISPOSE(3)
BENEFICIALLY PERCENTAGE POWER TO VOTE(3)
OWNED OF CLASS SOLE SHARED SOLE SHARED
----------------- ------------ --- ---------- --- ----------
<S> <C> <C> <C> <C> <C> <C>
Vinita Gupta(2).......................... 4,076,355 50.9% -0- 4,076,355 -0- 4,076,355
Narendra Gupta(2)........................ 4,076,355 50.9% -0- 4,076,355 -0- 4,076,355
</TABLE>
- ------------------------
(1) The relative equity interests of the Gupta Investors in the Company
following consummation of the Offer and the Merger would be identical to
their interests in Purchaser after the contribution of their Shares to
Purchaser.
(2) Represents 3,109,187 shares of Common Stock held of record by Vinita Gupta
and Narendra K. Gupta, as trustees for the Narendra and Vinita Gupta Living
Trust, 862,500 shares held of record by Vinita Gupta and Narendra K. Gupta,
together with a third party, as trustees for their minor children, an
aggregate of 63,000 Shares held of record by Mrs. Gupta as custodian for
each of her two minor children (31,500 on behalf of each child) and 20,000
Shares held of record by The Naren and Vinita Gupta Foundation with respect
to which Vinita Gupta and Narendra Gupta are trustees and share voting
power. Narendra Gupta holds options to purchase 30,000 Shares, 21,668 of
which are exerciseable as of the date hereof or will become exercisable
within 60 days after the date hereof, which he received in his capacity as a
director of the Company. Vinita Gupta holds Options to purchase 100,000
Shares, none of which is exercisable or will become exercisable prior to the
Expiration Date, which she received in her capacity as President and Chief
Executive Officer of the Company. Vinita Gupta and Narendra Gupta each
disclaim beneficial ownership of the 862,500 Shares held in the trust for
their minor children and the 63,000 Shares held of record by Vinita as
custodian for her two minor children. All of these Shares are subject to
Subscription Agreements.
(3) Vinita Gupta and Narendra Gupta share power to vote and dispose of all
4,076,355 Shares beneficially owned by the Gupta Family. With respect to the
862,500 Shares held of record by Vinita Gupta and Narendra K. Gupta,
together with a third party, as trustees for the Gupta's minor children,
voting and dispositive power is shared with such third trustee, Kalyan
Dutta. Mr. Dutta is a citizen of the United States of America. Mr. Dutta's
business address is c/o Lockheed Martin Corporation, Advanced Technology
Center, 3251 Hanover Street, Palo Alto, California 94304. Mr. Dutta has been
an engineer with Lockheed Martin Corporation for the past five years.
TRANSACTIONS IN SHARES BY PURCHASER OR MEMBERS OF THE GUPTA FAMILY SINCE JANUARY
1, 1997
On January 13, 1999, the Company granted to Vinita Gupta options to purchase
100,000 shares of Common Stock at an exercise price of $5.50 per share. Such
options vest as follows: 33% on the first anniversary of the date of grant and
approximately 2.8% on each monthly anniversary of the date of grant thereafter.
Ms. Gupta received these options in her capacity as President and Chief
Executive Officer of the Company.
On December 31, 1998, Vinita Gupta and Narendra Gupta, as trustees of the
Gupta Children's Trust Agreement, gifted 4,500 shares of Common Stock held by
the trust to each of their minor children.
On March 9, 1998, Vinita Gupta transferred 2,857,387 Shares to the Narendra
and Vinita Gupta Living Trust, dated December 2, 1994.
On October 13, 1997, the Company granted to Narendra Gupta options to
purchase 5,000 Shares at an exercise price of $25.75 per share. On October 12,
1998, the Company granted to Narendra Gupta options to purchase 5,000 Shares at
an exercise price of $3.56 per share. Such options vest 2.08% on each monthly
anniversary of the date of grant. Mr. Gupta received these options in his
capacity as a director of the Company.
III-1
<PAGE>
SCHEDULE IV
CHAPTER 13 OF THE CGCL
Set forth below is Chapter 13 of the California General Corporation Law
regarding dissenters rights, which rights will only be available in connection
with the Merger.
CHAPTER 13. DISSENTERS' RIGHTS
SECTION 1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES; CORPORATE
PURCHASE AT FAIR MARKET VALUE; DEFINITIONS
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each shareholder of the corporation entitled to vote
on the transaction and each shareholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares as defined
in subdivision (b). The fair market value shall be determined as of the day
before the first announcement of the terms of the proposed reorganization or
short-form merger, excluding any appreciation or depreciation in consequence of
the proposed action, but adjusted for any stock split, reverse stock split, or
share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the list of OTC margin stocks issued by the Board of Governors
of the Federal Reserve System, and the notice of meeting of shareholders to
act upon the reorganization summarizes this section and Sections 1301, 1302,
1303 and 1304; provided, however, that this provision does not apply to any
shares with respect to which there exists any restriction on transfer
imposed by the corporation or by any law or regulation; and provided,
further, that this provision does not apply to any class of shares described
in subparagraph (A) or (B) if demands for payment are filed with respect to
5 percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in... subparagraph (A)
or (B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case where
the approval required by Section 1201 is sought by written consent rather
than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the record
holder of dissenting shares and includes a transferee of record.
SECTION 1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS; DEMAND
FOR PURCHASE; TIME; CONTENTS.
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
IV-1
<PAGE>
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval accompanied by a copy of Sections
1300, 1302, 1303, 1304 and this section, a statement of the price determined by
the corporation to represent the fair market value of the dissenting shares, and
a brief description of the procedure to be followed if the shareholder desires
to exercise the shareholder's right under such sections. The statement of price
constitutes an offer by the corporation to purchase at the price stated any
dissenting shares as defined in subdivision (b) of Section 1300, unless they
lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
SECTION 1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT; UNCERTIFICATED
SECURITIES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
SECTION 1303 PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR MARKET
VALUE; FILING; TIME OF PAYMENT
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments form the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
IV-2
<PAGE>
SECTION 1304 ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR FAIR
MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION; DETERMINATION OF ISSUES;
APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall first determine that issue. If the fair market value of
the dissenting shares is in issue, the court shall determine, or shall appoint
one or more impartial appraisers to determine, the fair market value of the
hares.
SECTION 1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT;
JUDGMENT; PAYMENT; APPEAL; COSTS
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time as
may be allowed by the court or the report is not confirmed by the court, the
court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301, and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
SECTION 1306 PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS;
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together
IV-3
<PAGE>
with interest at the legal rate on judgments until the date of payment, but
subordinate to all other creditors in any liquidation proceeding, such debt to
be payable when permissible under the provisions of Chapter 5.
SECTION 1307. DIVIDENDS ON DISSENTING SHARES
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
SECTION 1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL OF
DEMAND FOR PAYMENT
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholders may not withdraw a demand for payment unless the corporation
consents thereto.
SECTION 1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to the submission for endorsement in
accordance with Section 1302 or are surrendered for conversion into shares of
another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
SECTION 1310. SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OR SHAREHOLDERS' APPROVAL
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
SECTION 1311. EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect to
such shares in the event of a reorganization or merger.
SECTION 1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND
MERGER OR REORGANIZATION; RESTRAINING ORDER OR INJUNCTION; CONDITIONS
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or
IV-4
<PAGE>
rescinded, except in an action to test whether the number of shares required to
authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
IV-5
<PAGE>
Facsimile copies (with manual signatures) of the Letter of Transmittal will
be accepted. The Letter of Transmittal and certificates for Shares and any other
required documents should be sent or delivered by each shareholder of the
Company or such shareholder's broker, dealer, commercial bank, trust company or
other nominee to the Depositary at one of the addresses set forth below:
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
WALL STREET STATION RECEIVE WINDOW
P.O. BOX 1023 WALL STREET PLAZA
NEW YORK, NEW YORK 10268-1023 88 PINE STREET, 19TH FLOOR
NEW YORK, NEW YORK 10005
</TABLE>
BY FACSIMILE TRANSMISSIONS:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(212) 701-7636
FOR INFORMATION (CALL COLLECT):
(212) 701-7624
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the related Letter of Transmittal, and other tender offer
materials, may be directed to the Information Agent at its respective address
and telephone number 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:
MACKENZIE PARTNERS, INC.
156 5th Avenue
New York, New York 10010
Banks and Brokers Call Collect: (212) 929-5500
All Others Call Toll Free: (800) 322-2885
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
of
DIGITAL LINK CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 10, 1999
of
DLZ CORP.
- --------------------------------------------------------------------------------
THIS OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
Wall Street Station Receive Window
P.O. Box 1023 Wall Street Plaza
New York, New York 10268-1023 88 Pine Street, 19th Floor
New York, New York 10005
</TABLE>
BY FACSIMILE TRANSMISSIONS:
(for Eligible Institutions only)
(212) 701-7636
FOR INFORMATION (CALL COLLECT):
(212) 701-7624
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED
BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders of Digital
Link Corporation (the "Company") if certificates representing Shares (as defined
below) ("Share Certificates") are to be forwarded herewith or, unless an Agent's
Message (as defined in the Offer to Purchase (as defined below)) is utilized, if
delivery of Shares is to be made by book-entry transfer to the Depositary's
account at The Depository Trust Company ("DTC") (hereinafter referred to as the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in Section
3 of the Offer to Purchase.
Shareholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other documents required hereby
to the Depositary prior to the Expiration Date (as defined in the Offer to
Purchase), or who cannot comply with the book-entry transfer procedures on a
timely basis, may nevertheless tender their Shares pursuant to the guaranteed
delivery procedure set forth under the heading "The Tender Offer-- Section 3.
Procedure for Tendering Shares" of the Offer to Purchase. See Instruction 2.
Delivery of documents to the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures does not constitute delivery to
the Depositary.
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT
THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
<C> <S>
Name of Tendering Institution
Account Number Transaction Code Number
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY
SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
Window Ticket No. (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which Guaranteed Delivery
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
----------------------------------------------------------------------------------------------------
Share Certificate(s) and Share(s) Tendered
(Attach additional list, if necessary)
----------------------------------------------------------------------------------------------------
Total Number
of Shares
Name(s) and Address(es) of Holder(s) Share Evidenced by Number of
(Please fill in, if blank, exactly as Certificate Share Shares
name(s) appear(s) on Share Certificate(s) Number(s)* Certificate(s) Tendered
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
Total Shares
- ----------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by shareholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by each Share Certificate delivered to the Depositary are being rendered
hereby. See Instruction 4.
/ / CHECK HERE IF CERTIFICATES HAVE BEEN LOST OR MUTILATED. SEE SECTION 11.
- --------------------------------------------------------------------------------
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to DLZ Corp., a California corporation
("Purchaser"), the above-described shares of Common Stock, no par value per
share (the "Shares"), of Digital Link Corporation, a California corporation (the
"Company"), pursuant to Purchaser's offer to purchase any and all outstanding
Shares at a purchase price of $10.30 per Share (the "Offer Price"), 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"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, together with the Offer to Purchase, as each may
be amended and supplemented from time to time, constitute the "Offer"). The
Offer is being made in connection with the Agreement and Plan of Merger, dated
as of September 3, 1999 (the "Merger Agreement"), between Purchaser and the
Company.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, the undersigned hereby sells, assigns and transfers to or
upon the order of 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 issued or issuable in respect thereof on or after September 2, 1999
(a "Distribution") and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares (and any
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
Share Certificates (and any Distributions), or transfer ownership of such Shares
(and any Distributions) on the account books maintained by the Book-Entry
Transfer Facility, together, in any such case, with all accompanying evidences
of transfer and authenticity, to or upon the order of Purchaser, (b) present
such Shares (and any Distributions) for transfer on the books of the Company,
and (c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and any Distributions), all in accordance with the
terms and subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints designees of Purchaser as the
attorneys and proxies of the undersigned, each with full power of substitution,
to exercise all voting and other rights of the undersigned in such manner as
each such attorney and proxy or his substitute shall in his sole judgment deem
proper, with respect to all of the Shares tendered hereby which have been
accepted for payment by Purchaser prior to the time of any vote or other action
(and any Distributions), at any meeting of shareholders of the Company (whether
annual or special and whether or not an adjourned meeting) or otherwise. This
power of attorney and proxy are irrevocable, are coupled with an interest in the
Shares tendered hereby, and are granted in consideration of, and effective upon,
the acceptance for payment of such Shares by Purchaser in accordance with the
terms of the Offer. Such acceptance for payment shall revoke any other proxy or
written consent granted by the undersigned at any time with respect to such
Shares (and any Distributions), and no subsequent proxies will be given or
written consents executed by the undersigned (and if given or executed, will not
be deemed effective).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any Distributions) and that when the same are accepted for payment
by Purchaser, Purchaser will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claims. The undersigned will, upon request, execute and deliver
any additional documents deemed by the Depositary or Purchaser to be necessary
or desirable to complete the sale, assignment and transfer of the Shares
tendered hereby (and any Distributions). All authority herein conferred or
agreed to be conferred shall survive the death or incapacity of the undersigned,
and any obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Except as
stated in the Offer, this tender is irrevocable.
The undersigned understands that the tender of Shares pursuant to any one of
the procedures described under the heading "The Tender Offer--Section 3.
Procedure for Tendering Shares" of the Offer to Purchase and in the instructions
hereto will constitute an agreement between the undersigned and Purchaser upon
the terms and subject to the conditions of the Offer. The undersigned
acknowledges that no interest will be paid on the Offer Price for tendered
Shares regardless of any extension of the Offer or any delay in making such
payment.
Unless otherwise indicated in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of any Shares
purchased, and return any Share Certificates evidencing any Shares not tendered
or not purchased, in the name(s) of the undersigned (and, in the case of Shares
tendered by book-entry transfer, by credit to the account at the Book-Entry
Transfer Facility). Similarly, unless otherwise indicated in the box entitled
"Special Delivery Instructions," please mail the check for the purchase price of
any Shares purchased and return any Share Certificates evidencing any Shares not
tendered or not purchased (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In the
event that the boxes entitled "Special Payment Instructions" and "Special
Delivery Instructions" are both completed, please issue the check for the
<PAGE>
purchase price of any Shares purchased and return any Share Certificates
evidencing any Shares not tendered or not purchased in the name(s) of, and mail
said check and Share Certificates to, the person(s) so indicated. The
undersigned acknowledges that Purchaser has no obligation, pursuant to the
"Special Payment Instructions," to transfer any Shares from the name of the
registered holder(s) thereof if Purchaser does not accept for payment any of the
Shares so tendered.
<PAGE>
- ------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not
purchased are to be issued in the name of someone other than the
undersigned, or if Shares tendered hereby and delivered by book-entry
transfer which are not purchased are to be returned by credit to an account
at the Book-Entry Transfer Facility other than that designated above.
Issue: / / Check / / Share / / Certificate(s) to:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
__________________________________________________________________________
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
/ / Credit Shares delivered by book-entry transfer and not purchased to the
account set forth below:
Account Number _____________________________________________________________
- ------------------------------------------------
- ------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not
purchased are to be mailed to someone other than the undersigned, or to the
undersigned at an address other than that shown under the undersigned's
signature.
Mail: / / Check / / Share Certificate(s) to:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(ZIP CODE)
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
----------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT
SHAREHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
____________________________________________________________________________
____________________________________________________________________________
SIGNATURE(S) OF HOLDER(S)
Dated: ___________________
(Must be signed by the registered holder(s) exactly as such holder(s)
name(s) appear(s) on the Share Certificate(s) or on a security position
listing or by a person(s) authorized to become the registered holder(s) of
such Share Certificate(s) by certificates and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person 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.: ____________________________
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: ______________________________________________________
Name: ______________________________________________________________________
(PLEASE TYPE OR PRINT)
Title: _____________________________________________________________________
Name of Firm: ______________________________________________________________
Address: ___________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _______________________________________________
Dated: _____________________________________________________________________
- --------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Medallion Signature Guarantee Program or by any
other bank, broker, dealer, credit union, savings association or other entity
which is an "eligible guarantor institution," as such term is defined in Rule
17Ad-5 under the Securities Exchange Act of 1934, as amended (each of the
foregoing constituting an "Eligible Institution"), except in cases where Shares
are tendered (i) by a registered holder of Shares who has not completed either
the box labeled "Special Payment Instructions" or the box labeled "Special
Delivery Instructions" on this Letter of Transmittal or (ii) for the account of
an Eligible Institution. See Instruction 5. If Share Certificates are registered
in the name of a person or persons other than the signer of this Letter of
Transmittal, or if payment is to be made, or a Share Certificate is not accepted
for payment or not tendered are to be returned to, a person other than the
registered holder(s), then the tendered Share Certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear on the Share Certificates, with the
signatures on such Share Certificates or stock powers guaranteed by an Eligible
Institution as provided herein. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter
of Transmittal is to be used if Share Certificates are to be forwarded herewith
or, unless an Agent's Message is utilized, if the delivery of Shares is to be
made by book-entry transfer pursuant to the procedures set forth under the
heading "The Tender Offer--Section 3. Procedure for Tendering Shares" of the
Offer to Purchase. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of all Shares delivered electronically, as well as
a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) and any other documents required by this Letter of
Transmittal, or an Agent's Message in the case of a book-entry transfer, must be
received by the Depositary at one of its addresses set forth on the front page
of this Letter of Transmittal by the Expiration Date (as defined in the Offer to
Purchase). Shareholders who cannot deliver their Share Certificates and all
other required documents to the Depositary by the Expiration Date must tender
their Shares pursuant to the guaranteed delivery procedure set forth under the
heading "The Tender Offer--Section 3. Procedure for Tendering Shares" of the
Offer to Purchase. Pursuant to such procedure: (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 Purchaser,
must be received by the Depositary prior to the Expiration Date; and (c) the
Share Certificates evidencing all tendered Shares, in proper form for tender, or
a confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of all Shares delivered electronically, in each
case together with a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message), and any other
documents required by this Letter of Transmittal, must be received by the
Depositary within three Nasdaq National Market trading days of the date of
execution of such Notice of Guaranteed Delivery, all as provided under the
heading "The Tender Offer--Section 3. Procedure for Tendering Shares" of the
Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY, INCLUDING IN
THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted. By
execution of this Letter of Transmittal (or a manually signed facsimile
thereof), all tendering shareholders waive any right to receive any notice of
the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the Share
Certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS. If fewer than all of the Shares represented by any
Share Certificate delivered to the Depositary are to be tendered, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered." In such case, a new Share Certificate for the remainder of the Shares
represented by the old Share Certificate will be sent to the person(s) signing
this Letter of Transmittal, unless otherwise provided in the box entitled
"Special Delivery Instructions," as promptly as practicable following the
expiration or termination of the Offer. All Shares represented by Share
Certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificate(s) without alteration, enlargement or any
other change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different Share Certificates, it will be necessary to complete, sign and submit
as many separate Letters of Transmittal as there are different registrations of
Share Certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificate(s) or separate
stock powers are required, unless payment of the purchase price is to be made,
or Share Certificate(s) evidencing Shares not tendered or not purchased are to
be returned, in the name of any person other than the registered holder(s).
Signatures on any such Share Certificate(s) 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 the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signature(s) on any
such Share Certificate(s) or stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing and proper evidence
satisfactory to Purchaser of the authority of such person to so act must be
submitted.
6. STOCK TRANSFER TAXES. Purchaser will pay any stock transfer taxes with
respect to the sale and transfer of any Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or Share
Certificates evidencing Shares not tendered or not purchased are to be returned
in the name of, any person other than the registered holder(s) of such Shares,
then the amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) 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 SHARE CERTIFICATE(S) LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
purchase price of any Shares purchased is to be issued, or any Share
Certificate(s) evidencing Shares not tendered or not purchased are to be
returned, in the name of a person other than the person(s) signing this Letter
of Transmittal or if the check or any Share Certificate(s) evidencing Shares not
tendered or not purchased are to be mailed to someone other than the person(s)
signing this Letter of Transmittal or to the person(s) signing this Letter of
Transmittal at an address other than that shown above, the appropriate boxes on
this Letter of Transmittal should be completed. Shareholders tendering Shares by
book-entry transfer may request that Shares not purchased be credited to such
account at the Book-Entry Transfer Facility as such shareholder may designate in
the box entitled "Special Payment Instructions." If no such instructions are
given, any such Shares not purchased will be returned by crediting the account
at the Book-Entry Transfer Facility.
8. SUBSTITUTE FORM W-9. The tendering holder of Shares is required to
provide the Depositary with such holder's correct taxpayer identification number
("TIN") on Substitute Form W-9, which is provided below, unless an exemption
applies. In the case of any holder who has completed the box entitled "Special
Payment Instructions," however, the correct TIN on Substitute Form W-9 should be
provided for the recipient of the payment pursuant to such instructions. Failure
to provide the information on the Substitute Form W-9 may subject the tendering
holder of Shares to a $50 penalty and to 31% federal income tax backup
withholding on the payment of the purchase price for the Shares.
9. FOREIGN HOLDERS. Foreign holders must submit a completed IRS Form W-8
to avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting the
Depositary at its address on the face of this Letter of Transmittal.
10. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent at its
address and telephone number set forth on the back cover of the Offer to
Purchase. Additional copies of the Offer to Purchase, the Letter of Transmittal,
the Notice of Guaranteed Delivery and other related materials may be obtained
from the Information Agent or from brokers, dealers, commercial banks and trust
companies.
<PAGE>
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the shareholder should
promptly notify the Depositary. The shareholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed certificates have been followed.
THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY HEREOF
(TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY
THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO
PURCHASE).
<PAGE>
IMPORTANT TAX INFORMATION
Under the federal income tax law, a holder of Shares whose tendered Shares
are accepted for payment is required by law to provide the Depositary (as payer)
with such holder's correct TIN on Substitute Form W-9 below. The holder of
Shares must also state that (i) such holder has not been notified by the
Internal Revenue Service that such holder is subject to backup withholding as a
result of a failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified such holder that such holder is no longer subject
to backup withholding. If the Depositary is not provided with the correct TIN,
the holder of Shares may be subject to a $50 penalty imposed by the Internal
Revenue Service and payments made to such holder may be subject to backup
withholding.
Certain holders of Shares (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, such individual must submit a statement, signed under
penalties of perjury, attesting to such individual's exempt status. Forms of
such statements can be obtained from the Depositary. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the holder of Shares. Backup withholding is not an
additional tax. Rather, the tax withheld pursuant to backup withholding rules
will be available as a credit against such holder's tax liabilities. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
WHAT NUMBER TO GIVE THE DEPOSITARY
If the holder of Shares is an individual, the correct TIN is his or her
social security number. In other cases, the correct TIN may be the employer
identification number of the record holder of the Shares tendered hereby. 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.
If the tendering holder of Shares has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future, the holder should
write "Applied For" in the space provided for the TIN in Part I of the
Substitute Form W-9, and sign and date the Substitute Form W-9 and the
Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is
written in Part I of the Substitute Form W-9 and the Depositary is not provided
with a TIN within thirty (30) days, the Depositary may withhold 31% of all
payments of the purchase price to such holder until a TIN is provided to the
Depositary.
<PAGE>
PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------------------------------------------------
SUBSTITUTE PART I--Taxpayer Identification Social Security Number
FORM W-9 Number-- for all accounts, OR ------------------------
Department of the Treasury enter taxpayer identification Employer Identification Number
Internal Revenue Service number in the box at right.
(For most individuals this is
your social security number. If
you do not have a number, see
Obtaining a Number in the
enclosed GUIDELINES.) Certify
by signing and dating below.
Note: If the account is in more (If awaiting TIN write
than one name, see chart in the "Applied For")
enclosed GUIDELINES to
determine which number to give
the payer
-----------------------------------------------------------------
Payer's Request for Taxpayer PART II--For Payees exempt from backup withholding, see the
Identification Number (TIN) enclosed GUIDELINES and complete as instructed therein.
- ---------------------------------------------------------------------------------------------------
PART III--CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting
for a number to be issued to me); and
(2) I am not subject to backup withholding either because (a) I have not been notified by the
Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (b) the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest or dividends on your
tax return. However, if, after being notified by the IRS that you were subject to backup
withholding, you received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines.)
SIGNATURE ------------------------------------------------------------- DATE--------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN THE
SPACE PROVIDED IN PART I AND YOU ARE AWAITING (OR WILL SOON APPLY FOR) A
TAXPAYER IDENTIFICATION NUMBER
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal
Revenue Service Center or Social Security Administration Office or (b) I
intend to mail or deliver an application in the near future. I understand
that, notwithstanding the information I provided in Part I of the Substitute
Form W-9 (and the fact that I have completed this Certificate of Awaiting
Taxpayer Identification Number), if I do not provide a correct taxpayer
identification number to the Depositary within thirty (30) days, 31% of all
reportable payments made to me pursuant to the Offer may be withheld.
SIGNATURE
-------------------------------------------------------------- DATE
---------------------
- --------------------------------------------------------------------------------
<PAGE>
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number listed below. Additional copies of the
Offer to Purchase, the Letter of Transmittal and other tender offer materials
may be obtained from the Information Agent as set forth below, and will be
furnished promptly at the Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll-Free (800) 322-2885
<PAGE>
NOTICE OF GUARANTEED DELIVERY
for
TENDER OF SHARES OF COMMON STOCK
of
DIGITAL LINK CORPORATION
----------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) if certificates evidencing
shares of Common Stock, no par value per share (the "Shares"), of Digital Link
Corporation, a California corporation (the "Company"), are not immediately
available, or if the procedure for book-entry transfer 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 (as defined in the Offer to
Purchase, dated September 10, 1999 (the "Offer to Purchase")). Such form may be
delivered by hand or facsimile transmission or mail to the Depositary. See the
information under the heading "The Tender Offer--Section 3. Procedure for
Tendering Shares" of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
Wall Street Station Receive Window
P.O. Box 1023 Wall Street Plaza
New York, New York 10268-1023 88 Pine Street, 19th Floor
New York, New York 10005
</TABLE>
BY FACSIMILE TRANSMISSIONS:
(for Eligible Institutions only)
(212)701-7636
FOR INFORMATION (CALL COLLECT):
(212)701-7624
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" (AS DEFINED IN THE OFFER TO PURCHASE)
UNDER THE INSTRUCTION THERETO, SUCH SIGNATURE GUARANTEES MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message (as defined in the Offer to Purchase) and certificates for
Shares to the Depositary within the time period shown herein. Failure to do so
could result in a financial loss to such Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
Ladies and Gentlemen:
<PAGE>
The undersigned hereby tenders to DLZ Corp., a California corporation, upon
the terms and subject to the conditions set forth in the Offer to Purchase and
the related Letter of Transmittal (which, as amended and supplemented from time
to time, together constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Shares specified below pursuant to the guaranteed
delivery procedures described under the heading "The Tender Offer--Section 3.
Procedure for Tendering Shares" of the Offer to Purchase.
- -------------------------------------------
Signature(s): ______________________________________________________________
_____________________________________
Name(s) of
Record Holder(s): __________________________________________________________
Please Type or Print
__________________________________________________________________________
Certificate Nos.
(if available): __________________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
Zip Code
Area Code and
Tel. No.: ________________________________________________________________
- -------------------------------------------
- -------------------------------------------
If Shares will be delivered by book-entry transfer, provide the following
information:
Account Number: ____________________________________________________________
/ / The Depository Trust Company
Date:_______________________________________________________________________
- ------------------------------------------
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
THE UNDERSIGNED, A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS ASSOCIATION
OR OTHER EQUITY WHICH IS A MEMBER IN GOOD STANDING OF THE SECURITIES TRANSFER
AGENTS MEDALLION PROGRAM OR A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS
ASSOCIATION OR OTHER ENTITY WHICH IS AN "ELIGIBLE GUARANTOR INSTITUTION," AS
SUCH TERM IS DEFINED IN RULE 17AD-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED (EACH OF THE FOREGOING CONSTITUTING AN "ELIGIBLE INSTITUTION"),
GUARANTEES THE DELIVERY TO THE DEPOSITARY OF THE SHARES TENDERED HEREBY,
TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL (OR A
MANUALLY SIGNED FACSIMILE THEREOF) AND ANY OTHER REQUIRED DOCUMENTS, OR AN
AGENT'S MESSAGE (AS DEFINED IN THE OFFER TO PURCHASE) IN THE CASE OF A
BOOK-ENTRY TRANSFER OF SHARES, ALL WITHIN THREE NASDAQ NATIONAL MARKET TRADING
DAYS OF THE DATE HEREOF.
- -------------------------------------------
Name of Firm: ______________________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
Zip Code
Area Code and
Tel. No.: ________________________________________________________________
- -------------------------------------------
- -------------------------------------------
____________________________________________________________________________
Authorized Signature
Name: ______________________________________________________________________
Please Print
Title: _____________________________________________________________________
Date: ______________________________________________________________________
- ------------------------------------------
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS FORM. CERTIFICATES
FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
of
DIGITAL LINK CORPORATION
at
$10.30 NET PER SHARE
by
DLZ CORP.
----------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
September 10, 1999
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
MacKenzie Partners, Inc. is acting as Information Agent to DLZ Corp., a
California corporation ("Purchaser"), in connection with Purchaser's offer to
purchase any and all outstanding shares of Common Stock, no par value per share
(the "Shares"), of Digital Link Corporation, a California corporation (the
"Company"), at 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 (which, as amended and supplemented
from time to time, together constitute the "Offer") enclosed herewith. All
capitalized terms used but not defined herein shall have the meaning ascribed to
them in the Offer to Purchase.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of September 3, 1999 (the "Merger Agreement"), between Purchaser and the
Company. Under the terms of the Merger Agreement, if the Minimum Condition is
satisfied, following the purchase of Shares pursuant to the Offer and the
satisfaction of other conditions set forth in the Merger Agreement and in
accordance with the relevant provisions of the California General Corporation
Law, Purchaser will be merged with and into the Company, with the Company
surviving the Merger.
The Board acting on the unanimous recommendation of a special committee of
independent directors not affiliated with the Purchaser has approved and adopted
the Merger Agreement and the transactions contemplated thereby including the
Offer and the Merger, has determined that the Merger Agreement and the
transactions contemplated thereby including the Offer and the Merger are fair
and in the best interests of the Company and the shareholders of the Company,
and recommends acceptance of the offer by the shareholders of the Company.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated September 10, 1999.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
(with manual signatures) may be used to tender Shares.
3. A letter to shareholders of the Company from Richard C. Alberding,
Chairman of Special Committee of the Board of Directors of the Company,
together with a Solicitation/Recommendation Statement on Schedule 14D-9
filed with the Securities and Exchange Commission by the Company and mailed
to the shareholders of the Company, each recommending that the Company's
shareholders accept the Offer and tender their Shares.
<PAGE>
4. The Notice of Guaranteed Delivery to be used to tender Shares
pursuant to the Offer if none of the procedures for tendering Shares set
forth in the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to Harris Trust Company of New York, as
Depositary (the "Depositary").
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON OCTOBER 15, 1999, UNLESS THE OFFER IS
EXTENDED.
------------------------
Please note the following:
1. The tender price is $10.30 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for any and all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on October 15, 1999, unless the Offer is extended.
4. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE HAVING
BEEN VALIDLY TENDERED, AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF
THE OFFER A NUMBER OF SHARES WHICH, TOGETHER WITH THE 4,034,687 SHARES
BENEFICIALLY OWNED BY PURCHASER AND THE GUPTA INVESTORS (AS DEFINED IN THE
OFFER TO PURCHASE) ON THE DATE OF PURCHASE, WOULD CONSTITUTE NOT LESS THAN
90% OF THE OUTSTANDING SHARES ON THE DATE OF PURCHASE (THE "MINIMUM
CONDITION"), AND (II) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS
SET FORTH IN THE OFFER TO PURCHASE.
5. The Offer is being made pursuant to the Agreement and Plan of Merger
dated as of September 3, 1999 (the "Merger Agreement"), between Purchaser
and the Company. Under the terms of the Merger Agreement, if the Minimum
Condition is satisfied, following the purchase of Shares pursuant to the
Offer and the satisfaction of other conditions set forth in the Merger
Agreement and in accordance with the relevant provisions of the California
General Corporation Law, Purchaser will be merged with and into the Company,
with the Company surviving the Merger.
6. The Board acting on the unanimous recommendation of a special
committee of independent directors not affiliated with the Purchaser has
approved and adopted the Merger Agreement and the transactions contemplated
thereby including the Offer and the Merger, has determined that the Merger
Agreement and the transactions contemplated thereby including the Offer and
the Merger are fair and in the best interests of the Company and the
shareholders of the Company, and recommends acceptance of the offer by the
shareholders of the Company.
7. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in the Letter of Transmittal, stock
transfer taxes on the transfer of Shares pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered and not properly withdrawn on or prior to the Expiration Date (as
defined in the Offer to Purchase). In order to take advantage of the Offer, (i)
a duly executed and properly completed Letter of Transmittal (or a manually
signed facsimile thereof) and any required signature guarantees or, in the case
of a book-entry transfer, an Agent's Message, and any other required
<PAGE>
documents should be sent to the Depositary and (ii) certificates representing
the tendered Shares (the "Share Certificates") or a timely Book-Entry
Confirmation should be delivered to the Depositary in accordance with the
instructions set forth in the Offer to Purchase and the Letter of Transmittal.
Holders of Shares whose Share Certificates are not immediately available or
who cannot deliver their Share Certificates and all other required documents to
the Depositary or complete the procedures for book-entry transfer prior to the
Expiration Date must tender their Shares according to the guaranteed delivery
procedures set forth under the heading "The Tender Offer--Section 3. Procedure
for Tendering Shares" of the Offer to Purchase.
None of Purchaser, nor any officer, director, shareholder, agent or other
representative of Purchaser will pay any fees or commissions to any broker,
dealer or other person (other than the Depositary and the Information Agent as
described in the Offer to Purchase) for soliciting tenders of Shares pursuant to
the Offer. Purchaser will, however, upon request, reimburse you for customary
mailing and handling expenses incurred by you in forwarding any of the enclosed
materials to your clients. Purchaser will pay or cause to be paid any stock
transfer taxes payable on the transfer of Shares to it, except as otherwise
provided in Instruction 6 to the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
MacKenzie Partners, Inc. (the "Information Agent"), 156 Fifth Avenue, New York,
New York 10010.
Requests for copies of the enclosed materials may be directed to the
Information Agent at the above address and telephone number.
Very truly yours,
MacKenzie Partners, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF PARENT, PURCHASER, THE DEPOSITARY, THE
INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF
THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
<PAGE>
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
of
DIGITAL LINK CORPORATION
at
$10.30 NET PER SHARE
by
DLZ CORP.
----------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
September 10, 1999
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated September
10, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal
(which, as amended or supplemented from time to time, together constitute the
"Offer") relating to an offer by DLZ Corp., a California corporation
("Purchaser"), to purchase any and all outstanding shares of Common Stock, no
par value per share (the "Shares"), of Digital Link Corporation, a California
corporation (the "Company"), at 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.
This material is being forwarded to you as the beneficial owner of Shares
carried by us in your account but not registered in your name.
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 BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any or
all of the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer to Purchase.
Please note the following:
1. The tender price is $10.30 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for any and all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on October 15, 1999, unless the Offer is extended.
4. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE HAVING
BEEN VALIDLY TENDERED, AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF
THE OFFER A NUMBER OF SHARES WHICH, TOGETHER WITH THE 4,034,687 SHARES
BENEFICIALLY OWNED BY PURCHASER AND THE GUPTA INVESTORS (AS DEFINED IN THE
OFFER TO PURCHASE) ON THE DATE OF PURCHASE, WOULD CONSTITUTE NOT LESS THAN
90% OF THE OUTSTANDING SHARES ON THE DATE OF PURCHASE (THE "MINIMUM
CONDITION"), AND (II) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS
SET FORTH IN THE OFFER TO PURCHASE.
5. The Offer is being made pursuant to the Agreement and Plan of Merger
dated as of September 3, 1999 (the "Merger Agreement"), between Purchaser
and the Company. Under the terms of the Merger Agreement, if the Minimum
Condition is satisfied, following the purchase of Shares pursuant to the
Offer and the satisfaction of other conditions set forth in the Merger
Agreement and in accordance with the relevant provisions of the California
General Corporation Law, Purchaser will be merged with and into the Company,
with the Company surviving the Merger.
6. The Board acting on the unanimous recommendation of a special
committee of independent directors not affiliated with the Purchaser has
approved and adopted the Merger Agreement and the transactions contemplated
thereby including the Offer and the Merger, has determined that the Merger
Agreement and the transactions contemplated thereby including the Offer and
the Merger are fair and in the best interests of the Company and the
shareholders of the Company, and recommends acceptance of the offer by the
shareholders of the Company.
7. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in the Letter of Transmittal, stock
transfer taxes on the transfer of Shares pursuant to the Offer.
<PAGE>
The Offer is made solely pursuant to the Offer to Purchase and the related
Letter of Transmittal and any supplements or amendments thereto. The Offer is
not being made to, nor will tenders be accepted from or on behalf of, holders of
Shares residing in any jurisdiction in which the making of the Offer or
acceptance thereof would not be in compliance with the securities laws of such
jurisdiction.
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
contained in this letter. An envelope to return your instruction to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. PLEASE FORWARD
YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER
YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
of
DIGITAL LINK CORPORATION
by
DLZ CORP.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated September 10, 1999 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer") in connection with
the offer by DLZ Corp., a California corporation ("Purchaser"), to purchase any
and all outstanding shares of Common Stock, no par value per share (the
"Shares"), of Digital Link Corporation, a California corporation.
This will instruct you to tender to Purchaser the number of Shares indicated
below (or if no number is indicated below, all Shares) which are held by you for
the account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer to Purchase.
Number of Shares to be Tendered:* ____________
SIGN HERE
--------------------------------------
--------------------------------------
Signature(s)
Account Number:
- ---------------------------
Date:
- --------------------------------, 1999
--------------------------------------
--------------------------------------
(Print Name(s))
--------------------------------------
--------------------------------------
(Print Address(es))
--------------------------------------
(Area Code and Telephone Number(s))
--------------------------------------
--------------------------------------
(Taxpayer Identification or Social
Security Number(s))
* Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
THIS FORM MUST BE RETURNED TO THE BROKERAGE FIRM MAINTAINING YOUR ACCOUNT.
<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.
<TABLE>
<CAPTION>
- -------------------------------------------------------
GIVE THE NAME AND
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -------------------------------------------------------
<C> <S> <C>
1. Individual The individual
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Husband and wife The actual owner of
(joint account) the account, or, if
joint funds, either
person(1)
4. Custodian account of The minor(2)
a minor (Uniform Gift
to Minors Act)
5. Adult and minor The adult, or, if the
(joint account) minor is the only
contributor, the
minor(1)
6. Account in the name The ward, minor, or
of guardian or incompetent person(3)
committee for a
designated ward,
minor or incompetent
person
7. a. The usual The
revocable savings grantor-trustee(1)
trust (grantor is
also trustee)
b. So-called trust The actual owner(1)
account that is not a
legal or valid trust
under state law
8. Sole proprietorship The owner(4)
<CAPTION>
- -------------------------------------------------------
- -------------------------------------------------------
GIVE THE NAME AND
EMPLOYER
IDENTIFICATION NUMBER
FOR THIS TYPE OF ACCOUNT: OF--
- -------------------------------------------------------
<C> <S> <C>
9. A valid trust, estate The legal entity (Do
or pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(5)
10. Corporate The corporation
11. Religious, charitable The organization
or education
organization
12. Partnership account The partnership
held in the name of
the business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or The broker or nominee
registered nominee
15. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
governmental, school
district, or prison)
that receives
agricultural program
payments
<CAPTION>
- -------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a Social Security Number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) 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.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), or Form W-7 for Individual Taxpayer Identification Number (for alien
individuals required to file U.S. tax returns), at an office of the Social
Security Administration or the Internal Revenue Service.
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.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
- 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 during the tax year 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 on nonresident alien partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made 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.
- Mortgage interest paid to you.
- Payments made to a nominee.
Exempt payees described above should file a Substitute 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, 6041 A(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 the 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 correct 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) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) 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.
(4) 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>
Contact: Larry Dennedy, MacKenzie Partners, Inc. (212) 929-5239
DIGITAL LINK AND DIGITAL LINK FOUNDER EXECUTE MERGER AGREEMENT TO CASH OUT
PUBLIC SHAREHOLDERS AT $10.30 PER SHARE
SUNNYVALE, CA (September 3, 1999) - Digital Link Corporation (Nasdaq: DLNK)
and DLZ Corp., a corporation formed by Vinita Gupta, the founder, chief
executive officer and holder of approximately 50% of the outstanding shares of
Digital Link, announced that they have executed a definitive merger agreement.
Under the terms of the merger agreement, DLZ will commence a tender offer for
all outstanding shares of the Digital Link common stock not owned by DLZ for
$10.30 per share in cash.
The tender offer will commence on September 10, 1999 and will be scheduled
to expire at 12:00 midnight New York City time on October 15, 1999. The merger
and the tender offer are subject to certain conditions including a minimum
condition in the tender offer that DLZ own an aggregate of 90% of the
outstanding stock following the tender offer.
The merger agreement was negotiated on behalf of Digital Link by a special
committee of the Board of Directors composed of directors not affiliated with
DLZ. The special committee's financial adviser, Dain Rauscher Wessels, provided
a fairness opinion to the special committee concerning the $10.30 cash
consideration. DLZ's financial adviser, Sutter Securities Incorporated, also
rendered a fairness opinion for delivery to the special committee and board of
directors. MacKenzie Partners, Inc. will be the Information Agent for the Tender
Offer.
Digital Link Corporation is a leading provider of high-performance,
cost-effective, digital network access products for both narrowband and
broadband applications. The company offers access solutions that increase the
level of intelligence at the demarcation point where LANs and WANs meet. These
products are used by Internet service providers and carriers as infrastructure
equipment, and by enterprises for connectivity to WAN services. Digital Link is
headquartered in Sunnyvale, Calif., and offers its products worldwide.
Additional information is available at Digital Link's website:
http://www.dl.com.
<PAGE>
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
SEPTEMBER 10, 1999 AND THE RELATED LETTER OF TRANSMITTAL, AND ANY AMENDMENTS
OR SUPPLEMENTS THERETO, 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 OR ONE
OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH
JURISDICTION.
NOTICE OF OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DIGITAL LINK CORPORATION
AT
$10.30 NET PER SHARE IN CASH
BY
DLZ CORP.
DLZ Corp., a California corporation ("Purchaser"), hereby offers to
purchase any and all shares (the "Shares") of common stock, no par value, of
Digital Link Corporation, a California corporation (the "Company"), at a
price of $10.30 per Share, net to the seller in cash, without interest
thereon (the "Offer Price"), upon the terms and subject to the conditions set
forth in the Offer to Purchase (the "Offer to Purchase") and in the related
Letter of Transmittal (the "Letter of Transmittal," as amended from time to
time, and the Offer to Purchase, as it may be amended from time to time,
together constitute the "Offer"). All capitalized terms used but not
otherwise defined herein shall have the meaning ascribed to them in the Offer
to Purchase.
-----------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON OCTOBER 15, 1999, UNLESS THE OFFER IS EXTENDED.
-----------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH THE 4,054,687 SHARES (NOT INCLUDING SHARES
ISSUABLE UPON EXERCISE OF ANY OUTSTANDING OPTIONS) BENEFICIALLY OWNED BY
PURCHASER AND THE GUPTA FAMILY (AS DEFINED BELOW) ON THE DATE OF PURCHASE,
WOULD CONSTITUTE NOT LESS THAN 90% OF THE OUTSTANDING SHARES ON THE DATE OF
PURCHASE (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO OTHER TERMS
AND CONDITIONS WHICH ARE CONTAINED IN THE OFFER TO PURCHASE.
The Board of Directors of the Company acting on the unanimous
recommendation of a special committee not affiliated with Purchaser has
approved and adopted the Agreement and Plan of Merger dated as of September
3, 1999 (the "Merger Agreement"), between Purchaser and the Company and the
transactions contemplated thereby including the Offer and the Merger, has
determined that the Merger Agreement and the transactions contemplated
thereby including the Offer and the Merger are fair and in the best interests
of the Company and the shareholders of the Company, and recommends acceptance
of the Offer by shareholders of the Company.
The Offer is being made pursuant to the Merger Agreement. Under the
terms of the Merger Agreement, if the Minimum Condition is satisfied,
following the purchase of Shares pursuant to the Offer and the satisfaction
of other conditions set forth in the Merger Agreement and in accordance with
the relevant provisions of the California General Corporation Law (the
"CGCL"), Purchaser will be merged with and into the Company (the "Merger"),
with the Company (the "Surviving Corporation") surviving the Merger. At the
effective time of the Merger (the "Effective Time"), each outstanding Share
(other than Shares held by shareholders who properly exercise their appraisal
rights in accordance with the CGCL (the "Dissenting Shares") and Shares
beneficially owned by Purchaser) will be converted, by virtue of the Merger
and without any action on the part of the Company, into the right to receive
the Offer Price in cash (the "Merger Consideration"), without interest
thereon. The Merger is subject to a number of conditions as described in the
Offer to Purchase. If the Minimum Condition is not satisfied, the Offer will
be withdrawn without the purchase of any Shares, Purchaser and the Gupta
Family will dispose of that number of Shares necessary to reduce their
beneficial ownership below 50% of the outstanding Shares and the Merger will
be accomplished by a long-form merger, which will require a proxy
solicitation, a special meeting of shareholders and the affirmative vote of a
majority of the outstanding Shares. A significantly longer period of time
will be required to effect a long-form merger than the Offer and the
short-form merger. By virtue of their Share ownership, Purchaser and Vinita
Gupta and her husband, Narendra K. Gupta, as trustees for the Narendra and
Vinita Gupta Living Trust, and the Narendra K. and Vinita Gupta Charitable
Foundation, and Vinita Gupta, Narendra K. Gupta and Kalyn Dutta, as trustees
of the Gupta Children's Trust Agreement, and Vinita Gupta, as custodian for
each of her two minor children (all of the foregoing persons in such
capacities, collectively the "Gupta Family") may effectively have the ability
to assure the approval of the Merger.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Harris Trust Company of New York (the "Depositary") of Purchaser's acceptance
for payment of such Shares pursuant to the Offer. Upon the terms and subject
to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering shareholders for
the purpose of receiving payments from Purchaser and transmitting such
payments to tendering shareholders whose Shares have been accepted for
payment. Under no circumstances will interest on the purchase price for
Shares be paid, regardless of any delay in making such payment. In all cases,
payment for Shares tendered and accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities (as defined in the Offer to Purchase) pursuant to the procedures
set forth in "The Tender Offer--Section 3. Procedure for Tendering Shares" of
the Offer to Purchase, (ii) the Letter of Transmittal (or a manually signed
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 under the
Letter of Transmittal. The term "Agent's Message" means a message transmitted
by a Book-Entry Transfer Facility to, and received by, the Depositary and
forming a part of a Book-Entry Confirmation, which states that such
Book-Entry Transfer Facility has received an express acknowledgment from the
participant in such Book-Entry Transfer Facility tendering the Shares that
are the subject of such Book-Entry Confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that Purchaser may enforce such agreement against such participant.
Subject to the terms and conditions of the Offer and the applicable
rules and regulations of the Securities and Exchange Commission, Purchaser
also expressly reserves the right, in its sole discretion, 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 approval specified in "The Tender
Offer--Section 12. Certain Regulatory and Legal Matters," of the Offer to
Purchase, (ii) to terminate the Offer and not accept for payment any Shares
upon the occurrence of any of the conditions specified in "The Tender
Offer--Section 11. Certain Conditions of the Offer" of the Offer to Purchase
and (iii) to waive any condition or otherwise amend the Offer in any respect,
by giving oral or written notice of such delay, termination, waiver or
amendment to the Depositary and by making a public announcement thereof,
provided, however, that Purchaser may not waive the Minimum Condition without
the prior written consent of the Company. Purchaser acknowledges that (i)
Rule 14e-l(c) under the Securities Exchange Act of 1934, as amended (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 (ii) 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 Tender Offer--Section 11. Certain Conditions of the Offer" of the
Offer to Purchase without extending the period of time during which the Offer
is open.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer,
may also be withdrawn at any time after November 8, 1999. If Purchaser
extends the Offer, is delayed in its acceptance for payment of Shares or is
unable to accept Shares for payment pursuant to the Offer for any reason,
then, without prejudice to Purchaser's rights under the Offer, the Depositary
may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such
Shares may not be withdrawn except to the extent that tendering shareholders
are entitled to withdrawal rights as described in "The Tender Offer--Section
4. Withdrawal Rights" of the Offer to Purchase. Any such delay will be by an
extension of the Offer to the extent required by applicable rules and
regulations.
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 page of the Offer to
Purchase. Any such notice of withdrawal must specify the name of the person
who tendered the Shares to be withdrawn, the number of Shares to be withdrawn
and the name of the registered holder of such Shares, if different from that
of the person who tendered such Shares. If certificates evidencing Shares to
be withdrawn 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 the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution, unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer as set forth in "The Tender Offer--Section 3.
Procedure for Tendering Shares," of the Offer to Purchase, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Exchange Act is contained in the
Offer to Purchase and is incorporated herein by reference.
The Company is providing Purchaser with the Company's shareholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares whose names appear on
the Company's stockholder 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 stockholder list or, if applicable,
who are listed as participants in a clearing agency's security position
listing for subsequent transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE 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 copies of the Offer to
Purchase and the related Letter of Transmittal, and other Offer materials,
may be directed to 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 for soliciting tenders of Shares
pursuant to the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[MacKenzie logo]
156 Fifth Avenue
New York, New York 10010
Banks and Brokers Call Collect (212) 929-5500
ALL OTHERS CALL TOLL-FREE (800) 322-2885
September 10, 1999
<PAGE>
[LETTERHEAD]
September 9, 1999
Vinita Gupta
Chief Executive Officer
DLZ Corp.
217 Humboldt Court
Sunnyvale, CA 94089
Dear Vinita,
Comerica Bank-California ("Bank") is pleased to commit the following to DLZ
Corp. ("Borrower").
FACILITY #1
TYPE/AMOUNT: $4,000,000 revolving accounts receivable line of credit
including a within line facility for letters of credit up to
$1,000,000.
PURPOSE: For short term operating needs and for letters of credit.
ADVANCE: Including letters of credit the availability on the line of
credit is the lesser of the commitment amount or 80% of
eligible receivables plus $500,000. Ineligible accounts are
contra, foreign not covered by a letter of credit acceptable
to the Bank or credit insurance, affiliated, employee,
consignment, C.O.D., over 90 day accounts, all accounts from
companies which have more than 25% of its accounts over 90
days past due as well as account concentrations in excess of
20% of the total. Concentration and foreign receivables
exceptions may be considered with approval by bank on a case
by case basis. Foreign receivables may be up to $500,000 of
the borrowing base. Foreign receivables to be insured within
90 days of funding. Bell Canada may be considered as an
eligible receivable.
Borrower is keep a minimum of $2 million of availability
reserve on the revolving line of credit borrowing base,
which reserve will reduce by the disbursements made by
Borrower for employees exercising stock options.
PRICING: Prime rate plus 1%.
.375% p.a. up front commitment fee. ($15,000)
REPAYMENT: Interest is to be paid monthly. Principal is limited to the
borrowing base and is due at maturity.
EXPIRATION: 364 day facility from date of closing but not to exceed
September 30, 2000. Documentary and Standby Letters of
Credit are not to expire after the line expiration.
<PAGE>
Page 2
SECURITY: Perfected first security interest in accounts receivable,
inventory, unencumbered fixed assets and intellectual
property. Borrower is not to allow a second lien to exist on
any corporate asset.
GUARANTEE: Partial guarantee covering all Bank debt of principal owner
(Vinita Gupta) of $2,000,000 to be released when Borrower
meets the maximum 2.0 Total Liabilities to Tangible Net
Worth covenant and is in compliance with all other terms and
conditions of the agreement.
FACILITY #2
TYPE/AMOUNT: $7,000,000 term loan for the funding of the Management
Buyout of Digital Link Corporation.
PURPOSE: To finance repurchase of Borrower's shares or to refinance
loans to repurchase Borrower's shares.
PRICING: Prime rate plus 1.5%
1% up front fee on commitment amount ($70,000).
REPAYMENT: a) Advance is to be made upon the buyout and is to be
repaid in 48 equal monthly principal payments with
interest added.
b) Cash Flow Recapture: Beginning with the quarter
ending 12/31/99, recapture 25% of quarterly cash
flow (NPAT+Depreciation+Amortization) within 45 days
of quarter end, to be applied to principal reduction.
c) Additional Capital Recapture: 25% of the new
subordinated debt or equity raised, at Bank's option.
SECURITY: First lien position on all of Borrower's assets. Facility
#2 is to be cross collateralized and cross defaulted to
Facility #1.
EXPENSES: Reasonable out of pocket, legal, document preparation,
filing expenses etc. for all Bank facilities are for the
account of the Borrower.
INSURANCE: Borrower shall provide general liability and hazard
insurance in the amount of all Bank debt with the Bank named
as loss payee.
SUBJECT TO:
* Satisfactory Bank Accounts Receivable and Inventory audit of Digital
Link Corporation.
<PAGE>
PAGE 3
- - Satisfactory completion of Bank's Y2K Assessment
- - Merger between Digital Link Corporation and DLZ Corp., the newly formed
corporation by management to acquire Digital Link, has become effective.
- - Financial statement from the guarantor indicating sufficient liquidity
- - Company prepared opening financial statement and compliance certificate
indicating Borrower is in compliance with financial covenants
- - Guptas are to put $2 million of subordinated debt into the merged company
at closing.
OTHER CONDITIONS:
This credit facility will be governed by a loan agreement that will include but
will not be limited to the following:
1) Borrower is to maintain the following financial covenants at all times:
a) Minimum monthly quick ratio of 0.30; increasing to 0.50 at 9/30/00.
b) Maximum monthly total liabilities to tangible net worth of 2.0
starting 9/30/00.
c) Minimum monthly tangible net worth of $1 at closing, increase to
$500,000 on 12/31/99 and $1,000,000 on 9/30/00 and thereafter; TNW to
increase by 40% of quarterly net income after tax beginning 10/1/00,
and 90% of any new equity or subordinated debt raised minus any
capital recaptured. (The $2 million Gupta subordinated debt is to be
subordinated on bank form in a manner satisfactory to Bank and will be
counted as equity for Bank ratio calculation purposes).
d) Maximum funded debt to EBITDA (rolling three quarters) of 3.0 till
9/30/00.
e) Minimum cash flow (rolling three quarters) of 1.50.
CF=(NPAT+Depreciation+Amortization/Current portion of long term
debt (CPLTD))
2) Borrower to provide Bank with:
a) Monthly financial statements within 30 days of month end.
b) Annual unqualified CPA audited financial statements with 120 days of
FYE.
c) Monthly accounts receivable and payable agings within 15 days of month
end.
d) Monthly borrowing base certificate within 15 days of month end.
e) Monthly covenant compliance certificate within 15 days of month end.
f) Budgets, projections or other financial exhibits which Bank may
reasonably request.
3) Without Bank's prior written approval, Borrower will not:
a) Pledge assets other than to the Bank except for purchase money (lease)
transactions.
b) Enter into any other direct borrowings, lend money (except for
non-cash employee stock loans not to exceed $250,000) or enter into
guarantees (except for Borrower's foreign subsidiaries which are not
to exceed $500,000 on a cumulative basis).
c) Enter into any merger or acquisition.
d) Repurchase stock or declare or pay cash dividends.
e) Make capital expenditures or finance equipment in excess of $2,500,000
per fiscal year.
<PAGE>
PAGE 4
4) Bank will have the right to audit the Borrower's financial records. Audit
costs are for the account of the Borrower.
5) Borrower is to provide evidence of full risk insurance covering all assets
pledged to the Bank and loss payable endorsement naming Bank as loss
payee.
6) There shall be a cross default provision between this credit and any
existing or future credit arrangements.
7) Borrower is to reimburse bank for legal fees, document preparation, out of
pocket costs, filing fees and reasonable expenses related are for the
account of the Borrower.
8) Borrower is to maintain its primary depository accounts and treasury
management services with the Bank.
9) Any Commitment by Bank will be subject to Borrower's demonstration to the
satisfaction of Bank that Borrower has taken and is taking all necessary
and appropriate steps to ensure the Borrower, its businesses, and its
material customers, suppliers and vendors are year 2000 Compliant in a
timely manner.
If the above commitment is acceptable please sign, date and return this
commitment letter along with a good faith deposit of $10,000 by September 20,
1999 at which time this commitment will expire. The remainder of the commitment
fees will be due at closing. We are pleased to offer these credit facilities
and to assist Digital Link Corporation in its growth plans. We anticipate a
long term relationship of providing financial solutions to you in the future.
If the commitment is accepted, it shall remain effective until December 15,
1999.
Sincerely,
/s/ Alan Jepsen
- ----------------------------------------
Alan Jepsen
Vice President and Assistant Manager
Comerica Bank - California
High Technology Division
Agreed to and accepted by:
/s/ Naresh Kapahi
- -----------------------------------------
Naresh Kapahi
Chief Financial Officer
Digital Link Corporation
<PAGE>
[LETTERHEAD]
September 9, 1999
Vinita Gupta
Chief Executive Officer
DLZ Corp
217 Humboldt Court
Sunnyvale, CA 94089
Dear Vinita,
Comerica Bank - California ("Bank") is pleased to commit to DLZ Corp.
("Borrower") the following amended credit facility which supersedes the
letter dated September 1, 1999:
BORROWER: DLZ Corp. (Corporation to be formed by management for the
purpose of the Management Buyout of Digital Link
Corporation)
TYPE/AMOUNT: $43,000,000 bridge loan.
PURPOSE: For purchases of Digital Link Corporation stock related to
the Management Buyout.
ADVANCE: Not to exceed 100% of liquid cash assets of Digital Link
Corporation and Bank's commitment for long term funding to
Borrower after the merger.
PRICING: Prime rate
$90,000 flat commitment fee.
REPAYMENT: Approximately $36 million of the principal is to be repaid
at closing but not later than two weeks after submission of
the merger certificate. The difference of approximately $7
million will be the funded post-merger financing provided by
Bank. Digital Link Corporation will have unencumbered
cash, cash equivalents or marketable securities with a
market value of not less than $35 million, held at an
institution acceptable to Bank in its discretion and
available to be used for repayment.
EXPIRATION: This loan is to be repaid upon the closing of the merger
between DLZ Corp. and Digital Link Corporation but not later
than two weeks after
<PAGE>
Page 2
the submission of the merger certificate. Bank's commitment
to fund the transaction expires December 15, 1999.
SECURITY: Pledge of the tendered shares and those owned by the Guptas
(which shall constitute a sufficient quantity of Digital
Link Corporation shares to effect the merger) and subject to
compliance with Regulation U of the Federal Reserve Board.
Blanket filing (first lien position) on all assets of
Borrower.
SUPPORT: Put agreement executed by Vinita Gupta to purchase 100% of
Bank's note in this transaction.
ESCROW: Escrow agreement to be satisfactory to Bank and Borrower.
Escrow is to be at the Trust Department at Comerica Bank to
coordinate timing of payments, hold shares pledged by Guptas
and shares acquired via a tender offer, oversee filings,
coordinate the $2 million subordinated debt by Guptas,
oversee execution of merger certificate, solvency
certificate, opinion of borrower's counsel, and loan
agreements and other documents as needed to the satisfaction
of Bank and Borrower.
OTHER CONDITIONS:
This credit facility will be governed by a loan agreement that will include but
will not be limited to the following conditions prior to and immediately after
funding:
1) The Merger Agreement between Digital Link Corporation and DLZ Corp. is to
contain language satisfactory to Bank that Digital Link Corporation will
cooperate in consummating the merger and comply with all merged company
obligations. Bank funding is conditioned upon evidence of a sufficient
number of shares of Digital Link Corporation being tendered and/or voted
via proxy to support the going private transaction (Sufficient shares under
either the short form or long form merger).
2) Proceeds of this loan are to be paid to the escrow and immediately be
applied to the purchase of Digital Link Corporation stock (either tendered
or voted via proxy) not owned by the Guptas.
3) DLZ Corp. is required to open an escrow at the Trust Department at Comerica
Bank. The escrow is to act as an independent agent in coordinating
documentation, payments, notifications and other documents necessary to
close the merger and repay this note as noted above.
4) Financial exhibits that Bank may reasonably request of DLZ Corp. and Vinita
Gupta.
<PAGE>
5) Borrower is to reimburse bank for legal fees, document preparation, out of
pocket costs, filing fees, escrow fees etc. and reasonable expenses.
6) Without Bank's prior written approval, Borrower will not:
a) Pledge assets other than to the Bank.
b) Enter into any other direct borrowings, lend money or enter into
guarantees.
c) Enter into any merger or acquisition other than with Digital Link
Corporation.
Comerica Bank - California is pleased to present this commitment and assist in
your financing requirements. We hope to be able to assist in this transaction
and build a relationship for your future financial needs. If this commitment is
satisfactory to you please acknowledge your acceptance by signing, dating and
returning this commitment letter along with a good faith deposit of $10,000 by
September 20, 1999 at which time this commitment expires. The remainder of the
fee would be due at closing. If the commitment is accepted, the ability fund
shall remain effective until December 15, 1999.
Sincerely,
/s/ Alan Jepsen
- ----------------------
Alan Jepsen
Vice President and Assistant Group Manager
High Technology Group
Accepted and Acknowledged by:
/s/ Vinita Gupta
- ----------------------
Vinita Gupta
Chief Executive Officer
DLZ Corp.
<PAGE>
Exhibit 99(c)(1)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated September 3,
1999, by and between DLZ Corp., a California corporation ("PURCHASER"), and
Digital Link Corporation, a California corporation (the "COMPANY").
WHEREAS, pursuant to this Agreement, Purchaser will commence a tender
offer to purchase all outstanding shares (the "SHARES") of common stock, no par
value, of the Company (the "COMPANY COMMON STOCK"), at a 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 (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 filed by Purchaser (together with all supplements or
amendments thereto, the "SCHEDULE 14D-1") and (b) the Transaction Statement on
Schedule 13E-3 filed by Purchaser (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 (the "SEC");
WHEREAS, each of the Board of Directors of the Company (the "COMPANY
BOARD") and a special committee of the Company Board consisting of the
disinterested directors of the Company Board, none of whom is affiliated with
Purchaser (the "SPECIAL COMMITTEE"), has (i) determined that the consideration
to be paid for each Share in the Offer and in the Merger (as defined) is fair
and in the best interests of the shareholders of the Company, (ii) approved this
Agreement and the transactions contemplated hereby and (iii) resolved to
recommend acceptance of the Offer and the Merger and approval of this Agreement
by such shareholders;
WHEREAS, the sole director of Purchaser and the sole shareholder of
Purchaser have each approved the Offer and the subsequent merger of Purchaser
with the Company in accordance with the terms of this Agreement and the
California General Corporation Law (the "CGCL").
NOW, THEREFORE, in consideration of the representations, warranties and
agreements herein contained, and subject to the terms and conditions herein
contained, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. For purposes of this Agreement and in addition to any
and all definitions and interpretations otherwise provided throughout this
Agreement, the following terms shall have the meanings set forth below. Any of
such terms, unless the context otherwise requires, may be used in the singular
or plural, depending on reference.
"Articles of Incorporation" shall mean the Articles of Incorporation of
the Company.
"California Agreement of Merger" shall have the meaning set forth in
Section 3.2.
"Certificate" or "Certificates" shall mean the certificates that,
immediately prior to the Effective Time, represent issued and outstanding
Shares.
"Closing" shall have the meaning set forth in Section 9.1.
<PAGE>
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Constituent Corporations" shall mean Purchaser and the Company.
"Director" shall mean a member of the Company Board as of the date
hereof.
"Dissenting Shares" shall mean Shares that are not voted in favor of
the approval and adoption of the Merger and with respect to which appraisal
rights are demanded and perfected in accordance with Section 1300 of the CGCL
and not withdrawn.
"Dissenting Shareholders" shall mean the shareholders of the Company
who hold Dissenting Shares.
"Effective Time" shall have the meaning set forth in Section 3.2.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Expiration Date" shall mean the scheduled expiration date and the time
the Offer is, from time to time, set to expire.
"Funds" shall have the meaning set forth in Section 4.2.1.
"HSR Act" means the Hart-Scott-Rodino" Antitrust Improvements Act of
1976.
"Indemnified Parties" shall mean each present and former director of
the Company.
"Material Adverse Effect" shall mean a material adverse effect on the
business, assets, financial condition or results of operation of the Company or
on the ability of the Company or Purchaser to consummate the transactions
contemplated by this Agreement, or any event or events which, individually or in
the aggregate, constitute or, with the passage of time, would constitute a
Material Adverse Effect; provided, however, that there shall not be deemed a
material adverse effect on the ability of Purchaser to consummate the
transactions contemplated by this Agreement if such material adverse effect is
caused by the action or inaction of Purchaser or Purchaser's affiliates and
there shall not be deemed to be a material adverse effect on the business,
assets, financial condition results of operations of the Company or on the
ability of the Company to consummate the transactions contemplated by Agreement
if such effect is proximately caused by breach of Section 7.8.
"Merger" shall have the meaning set forth in Section 3.1.
"Merger Consideration" shall have the meaning set forth in Section
4.1.1.
"Offer Conditions" shall have the meaning set forth in Section 2.1.1.
"Offer Documents" shall mean the documents pursuant to which the Offer
will be made, including all materials required to be transmitted to shareholders
pursuant to Regulation 14D-1 and Regulation 13E-3 of the Exchange Act, together
with any supplements or amendments thereto.
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"Other Filings" shall have the meaning set forth in Section 3.9.
"Paying Agent" shall have the meaning set forth in Section 4.2.1.
"Proxy Statement" shall mean any proxy statement distributed to the
Company's shareholders in connection with the Merger, including any amendments
or supplements thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Staff" shall mean the employees, representatives and other staff of
the SEC.
"Shareholders' Meeting" shall mean any special meeting of the
shareholders of the Company held for the purpose of approving and adopting this
Agreement, the Merger and the transactions contemplated hereby and thereby.
"Special Committee" shall mean a committee of the Board of Directors
composed of all directors of the Company who are not affiliated with Purchaser.
"Surviving Corporation" shall mean the Company after the Merger.
"Transfer Agent" shall mean the transfer agent selected by the Company.
ARTICLE II.
THE TENDER OFFER
2.1 THE OFFER.
2.1.1 TERMS OF OFFER. As promptly as practicable following the
execution hereof, Purchaser will file the Schedule 14D-1 and the Offer to
Purchase as an exhibit thereto setting forth the terms of the Offer and
providing (i) for a purchase price per Share of $10.30 (the "PER SHARE PRICE")
(ii) that the initial expiration of the Offer shall be no earlier than 12:00
midnight on October 15, 1999 and (iii) for the consummation of the Offer to be
subject only to the conditions (the "OFFER CONDITIONS") set forth on ANNEX A
attached hereto. Without the prior written consent of the Company, Purchaser
shall not (i) reduce the number of Shares subject to the Offer, (ii) reduce the
Per Share Price, (iii) extend the Offer if all of the Offer Conditions have been
satisfied or waived, (iv) change the form of consideration payable in the Offer,
(v) amend, modify or add to the Offer Conditions, (vi) amend any other term of
the Offer in a manner adverse to the holders of the Shares, or (vii) waive the
Minimum Condition. Notwithstanding the foregoing, Purchaser may, without the
consent of the Company, (A) extend the Offer, if at the scheduled expiration
date of the Offer any of the Offer Conditions shall not have been satisfied or
waived, until such time as such conditions are satisfied or waived, (B) extend
the Offer for any period required by any statute, rule, regulation,
interpretation or position of the SEC or any other governmental authority or
agency (domestic, foreign or supranational) applicable to the Offer, and (C)
extend the Offer on one or more occasions for an aggregate of not more than 20
business days beyond the latest expiration date that would otherwise be
permitted under clauses (A) and (B) of this sentence in order to obtain Shares
which, together with Shares previously held by Purchaser, constitute at least
ninety percent (90%) of the outstanding Shares; provided, however, that (i)
Purchaser shall extend the Offer up to twenty business days following its
initial expiration upon the prior reasonable request by the Special Committee
and (ii) Purchaser shall not extend the offer beyond twenty business days
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<PAGE>
following its initial expiration without the prior consent of the Special
Committee. It is agreed that the conditions set forth in ANNEX A are for the
sole benefit of Purchaser and may be asserted by Purchaser regardless of the
circumstances giving rise to any such condition (including any action or
inaction by Purchaser) or may be waived by Purchaser, in whole or in part at any
time and from time to time, in Purchaser's discretion. The failure by Purchaser
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time. Any reasonable determination by
Purchaser with respect to any of the foregoing conditions (including, without
limitation, the satisfaction of such conditions) shall be final and binding on
the parties. Purchaser will promptly pay for all Shares tendered and not
withdrawn pursuant to the Offer as soon as practicable after the expiration of
the Offer.
2.1.2 SCHEDULE 14D-1 AND SCHEDULE 13E-3. As promptly as reasonably
practicable following execution of this Agreement, Purchaser shall file with the
SEC a Schedule 14D-1 and a Schedule 13E-3, which shall reflect the terms of the
Offer. The Offer Documents shall comply as to form in all material respects with
the requirements of the Exchange Act, and the rules and regulations promulgated
thereunder and, on the date filed with the SEC and on the date first published,
sent or given to the holders of Shares, shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation will be made by Purchaser with respect to information supplied by
the Company in writing specifically for inclusion in the Offer Documents, and
the Offer Documents may contain a disclaimer to such effect. Each of Purchaser
and the Company agrees promptly to correct any information supplied by it
specifically for inclusion in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
Purchaser further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given the
opportunity to the extent practicable to review and comment upon the Offer
Documents and all amendments and supplements to the Offer Documents prior to
their filing with the SEC or dissemination to the shareholders of the Company.
2.2 COMPANY ACTION.
2.2.1 APPROVAL OF OFFER. The Company hereby approves of and
consents to the Offer and the Merger and represents and warrants that each of
the Special Committee and the Company Board, at a meeting duly called and held,
has unanimously adopted resolutions (i) determining that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, are fair
to, and in the best interests of, the shareholders of the Company, (ii)
approving this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, in all respects and taking all other action necessary to
render any state takeover statutes inapplicable to the Offer, the Merger and the
transactions contemplated thereby and (iii) recommending without qualification
that the shareholders of the Company accept the Offer, tender their Shares
thereunder to Purchaser and approve and adopt this Agreement and the Merger.
2.2.2 [intentionally blank]
2.2.3 FAIRNESS OPINIONS. The Company represents that the Special
Committee has received the opinion of Dain Rauscher Wessels (the "Company's
Financial Adviser") that the consideration to be received by holders of Shares
pursuant to the Offer and the Merger is fair to such holders from a financial
point of view, and the Company will provide a copy of such opinion to
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<PAGE>
Purchaser prior to the filing of the Schedule 14D-1 and the Schedule 13E-3 and
any Schedule 14D-9 contemplated thereby. The Company has been authorized by the
Company's Financial Adviser to permit, subject to prior review and consent by
the Company's Financial Adviser (such consent not to be unreasonably withheld),
the inclusion of the fairness opinion (or a reference thereto) in the Offer
Documents, the Schedule 14D-9 and the Proxy Statement. In addition, the Company
acknowledges receipt from Sutter Securities Incorporated, which has been
retained by Purchaser, of an opinion that the Offer and the Merger is fair to
the holders of the Shares (other than Purchaser) from a financial point of view
pursuant to Section 1203 of the CGCL.
2.2.4 SCHEDULE 14D-9. The Special Committee shall file with the
SEC, on the date the Offer Documents are filed with the SEC, a Schedule 14D-9
which contains the recommendations described in Sections 2.2.1, and shall mail
the Schedule 14D-9 to the shareholders of the Company. The Schedule 14D-9 shall
comply in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder on the date filed with the SEC
and on the date first published, sent or given to the Company's shareholders,
and shall not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except that no representation is made by the Company with
respect to information supplied in writing by Purchaser specifically for
inclusion or incorporation by reference in the Schedule 14D-9, and may contain a
disclaimer to such effect. Each of the Company and Purchaser agrees promptly to
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that such information shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so
amended or supplemented to be filed with the SEC and disseminated to the
Company's shareholders, in each case as and to the extent required by applicable
federal securities laws. Purchaser and its counsel shall be given the
opportunity to the extent practicable to review and comment upon the Schedule
14D-9 and all amendments and supplements thereto prior to their filing with the
SEC or dissemination to shareholders of the Company.
2.2.5 MAILING LABELS. In connection with the Offer, the Company
shall cause its Transfer Agent to furnish Purchaser promptly with mailing labels
containing the names and addresses of the record holders of Shares as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of shareholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Company Common Stock,
and shall furnish to Purchaser such information and assistance (including
updated lists of shareholders, security position listings and computer files) as
Purchaser may reasonably request in communicating the Offer to the Company's
shareholders. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Purchaser and its agents shall
hold in confidence the information contained in any such labels, listings and
files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will, upon request, deliver,
and will use their best efforts to cause their agents to deliver, to the Company
all copies of and any extracts or summaries from such information then in their
possessions or control.
ARTICLE III.
THE MERGER
3.1 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, Purchaser shall merge (the "MERGER") with
and into the Company and the separate
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<PAGE>
corporate existence of Purchaser shall thereupon cease. The Company shall be the
surviving corporation in the Merger and shall be governed by the laws of the
State of California, and the separate corporate existence of the Company, with
all its rights, privileges, immunities, powers and franchises, of a public as
well as of a private nature, shall continue unaffected by the Merger. Purchaser
may, upon notice to the Company, modify the structure of the Merger if Purchaser
determines it is advisable to do so because of tax or other considerations so
long as such modification causes no adverse effect on the transaction from the
perspective of the shareholders of the Company other than Purchaser, and the
Company shall promptly enter into any amendment to this Agreement necessary or
desirable to accomplish such modification. From and after the Effective Time,
the Merger shall have the effects specified in the CGCL.
3.2 EFFECTIVE TIME. At the Closing contemplated in Section 9.1, the
Company and Purchaser will cause an Agreement of Merger or Certificate of
Ownership pursuant to Section 1110 of the CGCL implementing the terms of this
Agreement (in either case, the "CALIFORNIA AGREEMENT OF MERGER") to be filed
with the Secretary of State of the State of California as provided in the CGCL.
The Merger shall become effective as of the date and at the time the California
Agreement of Merger is duly filed by the Secretary of State of the State of
California (or such later time as may be specified therein), and such time is
hereinafter referred to as the "EFFECTIVE TIME."
3.3 ARTICLES OF INCORPORATION. The Articles of Incorporation of the
Company as in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Company, until duly amended in
accordance with the terms thereof and the CGCL.
3.4 BY-LAWS. The By-Laws of Purchaser as in effect immediately prior to
the Effective Time shall be the By-Laws of Surviving Corporation, until duly
amended in accordance with the terms thereof and the CGCL.
3.5 DIRECTORS AND OFFICERS. At the Effective Time, the directors of
Purchaser immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each of such directors to hold office, subject to the
applicable provisions of the Articles of Incorporation and By-Laws of the
Surviving Corporation, until their respective successors shall be duly elected
or appointed and qualified. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of Surviving Corporation, in each
case until their resignation or removal or until their respective successors are
duly elected or appointed and qualified.
3.6 FURTHER ASSURANCES. If at any time after the Effective Time,
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper: (a) to vest, perfect or confirm, of record or otherwise, in
Surviving Corporation, its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of either of the
Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the proper officers and directors of Surviving Corporation are hereby
authorized on behalf of the respective Constituent Corporations to execute and
deliver, in the name and on behalf of the respective Constituent Corporations,
all such deeds, bills of sale, assignments and assurances and do, in the name
and on behalf of the Constituent Corporations, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of the Constituent Corporations and otherwise to carry out
the purposes of this Agreement.
6
<PAGE>
3.7 PROXY STATEMENT. As soon as practicable after the execution of this
Agreement, the Company and Purchaser shall promptly prepare and file a
preliminary Proxy Statement with the SEC with respect to the Merger, which Proxy
Statement shall include the recommendation of the Special Committee that
shareholders of the Company vote in favor of the approval and adoption of this
Agreement and the Merger and the other transactions contemplated hereby and
thereby and the determination of the Special Committee that this Agreement and
the transactions contemplated hereby, including the Offer and the Merger, are
fair to, and in the best interests of, the shareholders of the Company. Each of
the parties hereto shall notify the other parties hereto promptly of the receipt
by it of any comments from the SEC or its Staff and of any request of the SEC
for amendments or supplements to the Proxy Statement or for additional
information and will supply the other parties hereto with copies of all
correspondence between it and its representatives, on the one hand, and the SEC
or the members of its Staff or any other governmental officials, on the other
hand, and will provide the other parties and their counsel with the opportunity
to participate, including by way of discussions with the SEC or its Staff, in
the response of such party to such comments, with respect to the Proxy
Statement. Subject to the foregoing sentence, the Company shall, after
consultation with Purchaser, respond promptly to any comments made by the SEC
with respect to the Proxy Statement and any preliminary version thereof. The
Company and Purchaser each shall use its reasonable efforts to obtain and
furnish the information required to be included in the Proxy Statement. If at
any time prior to the time of approval and adoption of this Agreement by the
Company's shareholders there shall occur any event that should be set forth in
an amendment or supplement to the Proxy Statement, the Company shall promptly
prepare and mail to its shareholders such amendment or supplement. The Company
shall not mail the Proxy Statement or, except as required by the Exchange Act or
the rules and regulations promulgated thereunder, any amendment or supplement
thereto, to the Company's shareholders unless the Company has first obtained the
consent of Purchaser to such mailing.
3.8 APPROVAL OF MERGER BY SHAREHOLDERS.
3.8.1 SHORT-FORM MERGER. In the event that, pursuant to the Offer,
Purchaser purchases Shares that, together with Shares previously held by
Purchaser, constitute at least ninety percent (90%) of the outstanding Shares,
the parties hereto shall take all necessary and appropriate action to cause the
Merger to become effective, in accordance with Section 1110 of the CGCL, as soon
as reasonably practicable after such purchase of Shares pursuant to the Offer
and satisfaction or waiver of the conditions of Article VIII (other than the
conditions in Sections 8.1.4 and 8.1.5), without a meeting of the shareholders
of the Company.
3.8.2 SHAREHOLDERS' MEETING. In the event that, pursuant to the
Offer, Purchaser does not purchase Shares, the Company shall (i) if requested by
Purchaser, duly call, give notice of, convene and hold the Shareholders' Meeting
as soon as practicable; and (ii) cause the Proxy Statement to be mailed to its
shareholders at the earliest practicable time after responding to all such
comments to the satisfaction of the Staff of the SEC and to obtain the necessary
approvals by its shareholders of this Agreement.
3.8.3 VOTE OF SHARES BY PURCHASER. At the Shareholders' Meeting or
in any written consent in lieu of a meeting, Purchaser and its affiliates will
vote all Shares owned by them and will exercise all voting rights or proxies
held by them in favor of approval and adoption of this Agreement, the Merger,
and the transactions contemplated hereby and thereby.
3.8.4 ACQUISITION TRANSACTIONS. Without limiting the generality of
the foregoing, other than as specifically set forth in Section 3.7, the Company
agrees that its obligations
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pursuant to this Section 3.8 shall not be affected by either the commencement,
public proposal, public disclosure or other communication to the Company by any
third party of any offer to acquire some or all of the Shares or all or any
substantial portion of the assets of the Company or any change in the
recommendation of the Company Board.
3.9 OTHER FILINGS. The Company and Purchaser, as the case may be, shall
promptly prepare and file any other filings required under the Exchange Act or
any other Federal or state securities or corporate laws relating to the Merger
and the transactions contemplated herein (the "OTHER FILINGS"). Each of the
parties hereto shall notify the other parties hereto promptly of the receipt by
it of any comments from the SEC or its Staff and of any request of the SEC or
any other governmental officials with respect to any Other Filings or for
additional information and will supply the other parties hereto with copies of
all correspondence between it and its representatives, on the one hand, and the
SEC or the members of its Staff or any other governmental officials, on the
other hand, and will provide the other parties and their counsel with the
opportunity to participate, including by way of discussions with the SEC or its
Staff, in the response of such party to such comments, with respect to any Other
Filings or the Merger. The Company and Purchaser each shall use its reasonable
efforts to obtain and furnish the information required to be included in any
Other Filings or the Merger.
ARTICLE IV.
CONVERSION OR CANCELLATION OF SHARES; STOCK RIGHTS
4.1 CONVERSION OR CANCELLATION OF SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof:
4.1.1 CONVERSION OF SHARES INTO CASH. Each Share issued and
outstanding immediately prior to the Effective Time (other than Shares owned by
Purchaser and Shares held by the Dissenting Shareholders) shall be converted
into and represent the right to receive, without interest, an amount in cash
equal to the greater of $10.30 net or the amount per share which may be paid
pursuant to the Offer as it may be amended (the "MERGER Consideration"), payable
to the holder thereof, upon surrender of the Certificates. As of the Effective
Time, all such Shares shall no longer be outstanding, shall be automatically
canceled and shall cease to exist, and each holder of a Certificate which
formerly represented any such Shares shall thereafter cease to have any rights
with respect to such Shares, except the right to receive the Merger
Consideration for such Shares upon the surrender of such Certificate or
Certificates in accordance with Section 4.2.
4.1.2 CANCELLATION OF SHARES. Each Share issued and outstanding
immediately prior to the Effective Time and owned by Purchaser shall no longer
be outstanding, shall be canceled without payment of any consideration therefor
and shall cease to exist, and each holder of a Certificate representing any such
Shares shall thereafter cease to have any rights with respect to such Shares.
4.1.3 SHARES OF PURCHASER. Each Share of Purchaser issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully-paid and non-assessable share of common stock, no par value, of
the Surviving Corporation.
4.2 EXCHANGE OF CERTIFICATES; PAYING AGENT
4.2.1 PAYING AGENT AND FUNDS. Prior to the Closing, Purchaser shall
select a bank or trust company to act as paying agent (the "PAYING AGENT") for
the payment of the Merger Consideration specified in Section 4.1 pursuant to
irrevocable instructions from Purchaser upon
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surrender of Certificates converted into the right to receive cash pursuant to
the Merger. Prior to the Effective Time, Purchaser shall make available to the
Paying Agent immediately available funds in the amount of the Merger
Consideration multiplied by the number of outstanding Shares converted into the
right to receive the Merger Consideration (the "FUNDS"), it being understood
that any and all interest earned on the Funds shall be paid over to Purchaser by
the Paying Agent as Purchaser shall direct. The Funds shall be held as a
separate fund and not used for any purpose except as provided herein.
4.2.2 LETTER OF TRANSMITTAL; STOCK CERTIFICATES. Promptly after the
Effective Time, the Paying Agent shall mail to each person who was, at the
Effective Time, a holder of record of a Certificate or Certificates, other than
the Company or any of the Purchaser Entities, a letter of transmittal and
instructions for use in effecting the surrender, in exchange for payment in cash
therefor, of the Certificates. The letter of transmittal shall specify that
delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery to and receipt of such Certificates by the Paying Agent and
shall be in such form and have such provisions as Purchaser shall reasonably
specify. Upon surrender to the Paying Agent of such Certificates, together with
the letter of transmittal, duly executed and completed in accordance with the
instructions thereto and such other documents as may be reasonably required by
the Paying Agent, the Paying Agent shall promptly pay to the persons entitled
thereto, out of the Funds, a check in the amount to which such persons are
entitled pursuant to Section 4.1.1, after giving effect to any required tax
withholdings, and such Certificate shall forthwith be canceled. No interest will
be paid or will accrue on the amount payable upon the surrender of any such
Certificates. If payment is to be made to a person other than the registered
holder of the Certificates surrendered, it shall be a condition of such payment
that the Certificates so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the person requesting such payment shall pay
any transfer or other taxes required by reason of the payment to a person other
than the registered holder of the Certificates surrendered or establish to the
satisfaction of the Surviving Corporation or the Paying Agent that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 4.2, each Certificate (other than Certificates representing Shares held
by Purchaser or by the Dissenting Shareholders) shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 4.1.
4.2.3 TRANSFER OF FUNDS TO PURCHASER. Six months following the
Effective Time, the Surviving Corporation shall be entitled to cause the Paying
Agent to deliver to it any Funds (including any interest, dividends, earnings or
distributions received with respect thereto which shall be paid as directed by
Purchaser) made available to the Paying Agent by Purchaser which have not been
disbursed, and thereafter holders of Certificates who have not theretofore
complied with the instructions for exchanging their Certificates shall be
entitled to look only to the Surviving Corporation for payment as general
creditors thereof with respect to the cash payable upon due surrender of their
Certificates.
4.2.4 FEES OF PAYING AGENT. Except as otherwise provided herein,
Purchaser shall pay all charges and expenses, including those of the Paying
Agent, in connection with the exchange of the Merger Consideration for
Certificates.
4.2.5 ESCHEAT. Notwithstanding anything to the contrary in this
Section 4.2, none of the Paying Agent, the Company, the Surviving Corporation or
Purchaser shall be liable to a holder of a Certificate formerly representing
Shares for any amount properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If Certificates are not
surrendered prior to two years after the Effective Time (or immediately prior to
such earlier date on which any payment pursuant to this Article IV would
otherwise escheat or become the property of any
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Federal, state or local government agency or authority, court or commission),
unclaimed funds payable with respect to such Certificates shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
4.3 DISSENTERS' RIGHTS. Notwithstanding the provisions of Section 4.1
or any other provision of this Agreement to the contrary, Dissenting Shares
shall not be converted into the right to receive the Merger Consideration at or
after the Effective Time, but such Shares shall become the right to receive such
consideration as may be determined to be due to holders of Dissenting Shares
pursuant to the laws of the State of California, unless and until the holder of
such Dissenting Shares withdraws his or her demand for such appraisal in
accordance with the CGCL or becomes ineligible for such appraisal. If a holder
of Dissenting Shares shall withdraw his or her demand for such appraisal or
shall become ineligible for such appraisal (through failure to perfect or
otherwise), then, as of the Effective Time or the occurrence of such event,
whichever last occurs, such holder's Dissenting Shares shall automatically be
converted into and represent the right to receive the Merger Consideration,
without interest, as provided in Section 4.1.1 and in accordance with the CGCL.
The Company shall give Purchaser (i) prompt notice of any demands for appraisal
of Shares received by the Company and (ii) the opportunity to participate in and
direct all negotiations and proceedings with respect to any such demands. The
Company shall not, without the prior written consent of Purchaser, make any
payment with respect to, or settle, offer to settle or otherwise negotiate, any
such demands.
4.4 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME. No transfers of Shares
shall be made in the stock transfer books of the Surviving Corporation at or
after the Effective Time. If, after the Effective Time, Certificates formerly
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the Merger Consideration in accordance with the
provisions set forth in Article IV.
4.5 STOCK OPTIONS UNDER 1992 EQUITY PLAN. To the extent permitted under
the Company's 1992 Equity Plan, each option granted under such plan shall at the
Effective Time become the right to receive, upon surrender of such option, an
amount in cash per share subject to such option equal to the amount by which the
Merger Consideration exceeds the per share exercise price of such option, such
amount to be payable, less an amount equal to all taxes required to be withheld
from such payment, if and to the extent that such option "vests" as provided in
the option agreement pursuant to which such option was granted.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents, warrants, covenants to Purchaser that:
5.1 AUTHORITY. The Company has full corporate power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly approved by the
Company Board, and 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 Board and, except for the approval of the
Merger by the holders of the Shares in accordance as required by the CGCL, no
other corporate actions on the part of the Company are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby, including
the acquisition of Shares pursuant to the Offer and the Merger. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
due
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authorization, execution and delivery by Purchaser, constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
5.2 PROXY STATEMENT; OFFER DOCUMENTS. Any Proxy Statement or similar
materials distributed to the Company's shareholders in connection with the
Merger, including any amendments or supplements thereto, will comply in all
material respects with applicable federal securities laws and will not contain
any untrue statements of a material fact required to be stated therein or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by the Company
with respect to information supplied by Purchaser in writing for inclusion in
the Proxy Statement. None of the information supplied by the Company in writing
for inclusion in the Offer Documents or provided by the Company in the Schedule
14D-9 will, at the respective times that the Offer Documents and the Schedule
14D-9 or any amendments or supplements thereto are filed with the SEC and are
first published or sent or given to holders of Shares, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
5.3 BROKERS AND FINDERS. Neither the Company nor any of its respective
officers, directors or employees has employed any broker, finder or investment
banker or incurred any liability for any brokerage fees, commissions, finders'
fees or investment banking fees in connection with the transactions contemplated
herein, other than the Company's Financial Adviser pursuant to that certain
Letter Agreement between the Company and the Company's Financial Adviser, a copy
of which has been delivered to Purchaser.
5.4 STATE TAKEOVER STATUTES. To the Company's knowledge, no state
takeover statute or similar statute or regulation other than Chapters 11, 12 and
13 of the CGCL applies or purports to apply to the Offer, the Merger, this
Agreement or any of the transactions contemplated by this Agreement.
5.5 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of the Company's Financial Adviser to the effect that, as of the date of this
Agreement, the consideration to be received in the Offer and the Merger by the
Company's shareholders is fair to the Company's shareholders from a financial
point of view.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF
PURCHASER
Purchaser hereby represents and warrants to the Company that:
6.1 ORGANIZATION. Purchaser is a corporation duly organized and validly
existing and in good standing under the laws of the State of California.
Purchaser has all requisite corporate power and authority to own its assets and
carry on its business as now being conducted or proposed to be conducted.
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6.2 AUTHORIZED CAPITAL. The authorized capital stock of Purchaser will
at the Effective Time consist of forty million (40,000,000) shares of common
stock, no par value, of which all shares outstanding as of the Effective Time
will be owned, beneficially or of record, by Vinita Gupta or affiliates of
Vinita Gupta. The issued and outstanding share of capital stock of Purchaser is
validly issued, fully paid, nonassessable and free of preemptive rights and all
liens.
6.3 AUTHORITY. Purchaser has the necessary corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement by Purchaser, the
performance by Purchaser of its obligations hereunder and the consummation by
Purchaser of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of its Board of Directors and
approved by Vinita Gupta as sole shareholder of Purchaser, and no other
corporate proceeding on the part of Purchaser is necessary for the execution and
delivery of this Agreement by Purchaser and the performance by Purchaser of its
obligations hereunder and the consummation by Purchaser of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Purchaser and, assuming the due authorization, execution and delivery hereof by
the Company, is a legal, valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
6.4 NO PRIOR ACTIVITIES. Purchaser has not incurred nor will it incur,
directly or indirectly, any liabilities or obligations, except those incurred in
connection with its incorporation or with the negotiation of this Agreement, the
Offer Documents and the consummation of the transactions contemplated hereby and
thereby. Purchaser has not engaged, directly or indirectly, in any business or
activity of any type or kind, or entered into any agreement or arrangement with
any person or entity, and is not subject to or bound by any obligation or
undertaking, that is not contemplated by or in connection with this Agreement,
the Offer Documents and the transactions contemplated hereby and thereby.
6.5 BROKERS AND FINDERS. Neither Purchaser nor any of its officers,
directors or employees has employed any broker, finder or investment banker or
incurred any liability for any brokerage fees, commissions, finders fees or
investment banking fees in connection with the transactions contemplated herein,
except that Purchaser has employed and will pay the fees and expenses of Sutter
Securities Incorporated.
6.6 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for any required
approval of the Merger by Vinita Gupta as the sole shareholder of Purchaser, the
filing of the California Agreement of Merger in accordance with the CGCL and any
required filing pursuant to, and the expiration or termination of any applicable
waiting periods under, the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, neither the execution, delivery and performance of this Agreement by
Purchaser nor the consummation by either of them of the transactions
contemplated hereby will (i) conflict with or result in any breach of any
provision of their respective articles of incorporation or bylaws; (ii) require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except in connection
with the Exchange Act; (iii) result in a violation or breach of, or constitute a
default under, or give rise to any right of termination, amendment, cancellation
or acceleration under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, agreement or other instrument or
obligation of any kind to which Purchaser is a party or by which Purchaser or
any of its assets may be bound; or (iv) assuming Purchaser's compliance with the
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CGCL as provided in this Agreement, violate any order, writ, injunction,
judgment, decree, law, statute, rule, regulation or governmental permit or
license applicable to Purchaser or any of its assets.
6.7 OFFER DOCUMENTS; PROXY STATEMENT; OTHER INFORMATION. None of the
information included in the Offer Documents (including any amendments or
supplements thereto) or any schedules required to be filed with the SEC in
connection therewith and described therein as being supplied by Purchaser will,
at the respective times that the Offer Documents or any amendments or
supplements thereto or any such schedules are filed with the SEC, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. None of
the information supplied in writing by Purchaser specifically for inclusion in
the Proxy Statement, Schedule 14D-9 or any statement required pursuant to
Section 14(f) of the Exchange Act or any other schedules or statements required
to be filed with the SEC in connection therewith will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein in light of
the circumstances under which they were made, not misleading.
6.8 POST-CLOSING MATTERS. The Merger and the transactions contemplated
by this Agreement will not cause the Company to be unable to pay its existing
debts as they mature.
ARTICLE VII.
COVENANTS OF THE PARTIES
7.1 CONDUCT OF BUSINESS OF THE COMPANY. The Company and its
subsidiaries shall use their best efforts to preserve intact their business
organizations, to keep available the services of their operating personnel and
to preserve the goodwill of those having business relationships with them,
including, without limitation, suppliers. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Effective
Time, the Company Board will not permit the Company or any of its subsidiaries
to conduct its business and operations otherwise than in the ordinary and usual
course of business consistent with past practice.
7.2 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Purchaser of: (i) any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement; (ii) any notice
or other communication from any regulatory authority in connection with the
transactions contemplated by this Agreement; and (iii) the occurrence of any
event having, or which insofar as can be reasonably foreseen would have, a
Material Adverse Effect.
7.3 FURTHER INFORMATION. Each of the Company and Purchaser shall give
prompt written notice to the other of (i) any representation or warranty made by
it contained in this Agreement becoming untrue or inaccurate in any material
respect or (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification shall cure
such breach or non-compliance or shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement or limit or otherwise affect the remedies
available hereunder.
7.4 REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use all reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
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consummate and make effective the transactions contemplated by this Agreement
and shall use all reasonable efforts to satisfy the conditions to the
transactions contemplated hereby and to obtain all waivers, permits, consents
and approvals and to effect all registrations, filings and notices with or to
third parties or governmental or public bodies or authorities which are
necessary or desirable in connection with the transactions contemplated by this
Agreement, including, but not limited to, filings to the extent required under
the Exchange Act. Without limiting the generality of the foregoing, the Company
and Purchaser will vigorously defend against any lawsuit or proceeding, whether
judicial or administrative, challenging this Agreement or the consummation of
any of the transactions contemplated hereby. Subject to the terms and conditions
of this Agreement, from time to time after the date hereof, without further
consideration, the Company will, at its own expense, execute and deliver such
documents to Purchaser as Purchaser may reasonably request in order to
consummate the transactions contemplated by this Agreement. Subject to the terms
and conditions of this Agreement, Purchaser will, from time to time after the
date hereof, without further consideration, at its own expense, execute and
deliver such documents to the Company as the Company may reasonably request in
order to consummate the transactions contemplated by this Agreement.
7.5 PUBLIC ANNOUNCEMENTS. Purchaser and the Company shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated hereby 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 any listing agreement with a
national securities exchange or the Nasdaq Stock Market. No director shall make
any press release or public announcement concerning the transactions
contemplated hereby and shall make no other statement inconsistent with the
Schedule 14D-9 and the Schedule 14D-1.
7.6 INDEMNITY.
7.6.1 Purchaser shall cause (i) all rights to indemnification by
the Company now existing in favor of the Indemnified Parties as provided in the
Company's Articles of Incorporation and By-Laws, or rights of indemnification
equivalent thereto, and (ii) limitations of liability in the Company's Articles
of Incorporation, or limitations equivalent thereto, to survive the Merger and
to continue in full force and effect as rights to indemnification and
limitations on liability, respectively, by the Surviving Corporation for a
period of six years following the Effective Time, and shall cause to remain in
full force and effect and cause the Surviving Corporation to fully perform all
indemnity agreements with Indemnified Parties in effect on the date hereof (the
"INDEMNITY AGREEMENTS").
7.6.2 Subject to the terms set forth herein, the Surviving
Corporation shall indemnify and hold harmless, to the fullest extent permitted
under applicable law (and shall also advance expenses as incurred by an
Indemnified Party to the extent permitted under applicable law, provided the
person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification), each Indemnified Party against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action, alleged action,
omission or alleged omission occurring on or prior to the Effective Time in
their capacity as director, officer or employee (including, without limitation,
any claims, actions, suits, proceedings and investigations which arise out of or
relate to the transactions contemplated by this Agreement) for a period of six
years after the Effective Time, provided that, in the event any claim or claims
are asserted or made within such six year period, all rights to indemnification
in respect of any such claim or claims shall continue until final disposition of
any and all such claims.
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7.6.3 Any Indemnified Party wishing to claim indemnification under
this Section 7.6, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Surviving Corporation thereof, but the
failure to so notify shall not relieve the Surviving Corporation of any
obligation to indemnify such Indemnified Party or of any other obligation
imposed by this Section 7.6 unless and to the extent that such failure
materially prejudices the Surviving Corporation; it being understood that it
shall be deemed to materially prejudice the Surviving Corporation, as the case
may be, if, as a result of such failure to notify, the Surviving Corporation is
not given an opportunity to assume the defense of such claim, action, suit,
proceeding or investigation within a reasonably prompt time after such claim,
action, suit, proceeding or investigation is asserted or initiated. In the event
of any such claim, action, suit, proceeding or investigation, (i) the Surviving
Corporation shall have the right to assume the defense thereof and shall not be
liable to such Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by such Indemnified Party in connection
with the defense hereof, except that if the Surviving Corporation elects not to
assume such defense or counsel for the Indemnified Party advises that there are
issues which raise conflicts of interest between the Surviving Corporation and
the Indemnified Party, the Indemnified Party may retain counsel satisfactory to
it, and the Surviving Corporation shall pay all reasonable fees and expenses of
such counsel for the Indemnified Party promptly as statements therefore are
received; provided, however, that in no event shall the Surviving Corporation be
required to pay fees and expenses, including disbursements and other charges,
for more than one firm of attorneys in any one legal action or group of related
legal actions unless (A) counsel for the Indemnified Party advises that there is
a conflict of interest that requires more than one firm of attorneys, or (B)
local counsel of record is needed in any jurisdiction in which any such action
is pending, (ii) the Surviving Corporation and the Indemnified Party shall
cooperate in the defense of any such matter, and (iii) the Surviving Corporation
shall not be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld); and provided,
further, that the Surviving Corporation shall not have any obligation hereunder
to any Indemnified Party if and to the extent a court of competent jurisdiction
ultimately determines, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
7.6.4 For six years after the Effective Time, the Surviving
Corporation shall maintain the officers' and directors' liability insurance
covering the Indemnified Parties who are presently covered by the Company's
officers' and directors' liability insurance, with respect to acts or omissions
occurring at or prior to the Effective Time, on terms no less favorable than
those in effect on the date hereof or at the Effective Time.
7.6.5 In the event that any of the provisions of Section 7.6.1,
7.6.2. 7.6.3 or 7.6.4 above would conflict with any of the provisions of the
Company's By-Laws, Articles of Incorporation or Indemnity Agreements in a manner
that, if held applicable, would limit or restrict, or impose conditions or
obligations on the exercise by any of the Indemnified Parties of, any of the
indemnification rights or limitations of liability granted to them under the
Company's By-Laws, Articles of Incorporation or Indemnity Agreements, then, in
any such event or circumstance the applicable provisions of the Company's
By-Laws, Articles of Incorporation or Indemnity Agreements shall control, as it
is the intention of the parties that the Indemnified Parties shall have
indemnification rights or limitations of liability no less favorable than those
which they have under the Company's By-Laws, Articles of Incorporation or
Indemnity Agreements, as in effect on the date hereof.
7.6.6 The covenants contained in this Section 7.6 shall survive the
Effective Time until fully discharged, are intended to benefit each of the
Indemnified Parties and shall be binding on all successors and assignees of the
Surviving Corporation.
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7.7 OTHER TRANSACTIONS.
7.7.1 CEASE PENDING DISCUSSIONS. The Company on behalf of itself
and its affiliates and their respective officers, directors, employees,
investment bankers, attorneys and other representatives and agents, shall
immediately cease any existing discussions or negotiations, if any, with any
parties (other than Purchaser) conducted heretofore with respect to any
Acquisition Transaction (as defined below).
7.7.2 NEW PROPOSALS. Unless and until this Agreement has been
terminated pursuant to Article X hereof, the Company and any of the Company's
officers and directors shall not, and the Company shall direct and use its best
efforts to cause its employees, agents and representatives (including, without
limitation any investment banker, attorney or accountant retained by the
Company) not to take or cause, directly or indirectly, any of the following
actions with any party other than Purchaser or Purchaser's designees: (i)
solicit, encourage, initiate, participate in or otherwise facilitate any
negotiations, inquiries or discussions with respect to any offer, indication or
proposal to acquire all or more than 15% of the Company's business, assets or
capital shares whether by merger, consolidation, or other business combination,
purchase of assets, reorganization, tender or exchange offer (each of the
foregoing, an "Acquisition Proposal") or (ii) disclose, in connection with an
Acquisition Proposal, any information or provide access to its properties, books
or records, except as required by law or pursuant to a governmental request for
information. The Company will take the necessary steps to promptly inform the
individuals or entities referred to in the first sentence of this Section 7.7.2
of the obligations undertaken in this Section 7.7.2.
7.7.3 SUPERIOR PROPOSALS. Notwithstanding anything to the contrary
contained in Sections 7.7.1 and 7.7.2 or elsewhere in this Agreement, prior to
the Effective Time, the Company may participate in discussions or negotiations
with, and furnish non-public information, and afford access to the properties,
books, records, officers, employees and representatives of the Company to any
Person, entity or group if such Person, entity or group has delivered to the
Company, prior to the date of the Company's meeting of shareholders or action
pursuant to Section 1110 of the CGCL, as applicable, and in writing, an
Acquisition Proposal which the Special Committee in its reasonable judgment
determines if consummated would be more favorable, from a financial point of
view, to the Company's shareholders than the transactions contemplated by this
Agreement, which determination shall be made only after the Special Committee
(i) receives a written opinion of its legal counsel that the Special Committee
would breach its fiduciary duties if it did not accept the Acquisition Proposal
and (ii) a written opinion of the Company's Financial Adviser to the effect that
the Acquisition Proposal is superior, from a financial point of view, to the
Company's shareholders than the transactions contemplated by this Agreement (an
Acquisition Proposal satisfying such conditions constituting a "Superior
Proposal"). In the event the company receives a Superior Proposal, nothing
contained in this Agreement (but subject to this Section 7.7.3) will prevent the
Special Committee from, on behalf of the Board of Directors, executing or
entering into an agreement relating to such Superior Proposal and recommending
such Superior Proposal to the shareholders of the Company, if the Special
Committee determines in accordance with the preceding sentence that its
fiduciary duties require it to do so; in such case, the Special Committee may
withdraw, modify, or refrain from makings its recommendation of the transactions
contemplated by this Agreement; provided, however, that the Special Committee
shall (i) promptly notify Purchaser, and in any event within 24 hours, if any
Acquisition Proposal is received by, any such information is requested from, or
any such negotiations or discussions are sought to be initiated or continued
with, the Company, indicating, in connection with such notice, the name of such
person and the material terms of such Acquisition Proposal, (ii) provide
Purchaser at least 48 hours prior written notice of the Special Committee's
intention, on behalf of the Board of Directors of the Company, to
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execute or enter into an agreement relating to such Superior Proposal and
(iii) terminate this Agreement by written notice to Purchaser provided no sooner
than 48 hours after Purchaser's receipt of a copy of such Superior Proposal.
7.8 PURCHASER AFFILIATES. Purchaser shall cause Purchaser's affiliates
to take actions in such affiliates' capacities as officers, directors or
employees of the Company to comply with the Company's covenants under this
Article VII (provided, however, that Purchaser's affiliates may, by reason of
conflict of interest, decline to participate in activities under Section 7.7.3)
and shall cause Purchaser's affiliates not to take any willful action or
inaction that causes the representations and warranties contained in Article V
to be untrue.
ARTICLE VIII.
CONDITIONS OF THE MERGER
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to consummate the Merger
shall be subject to the following conditions, which have not been waived at or
prior to the Closing:
8.1.1 SHAREHOLDER APPROVAL OF MERGER. This Agreement and the Merger
shall have been approved and adopted by the requisite vote or consent of the
shareholders of the Company required by the Company's Articles of Incorporation
and By-Laws and the CGCL; provided, however, that this condition shall not apply
in the event that Shares are purchased pursuant to the Offer;
8.1.2 LEGAL ACTIONS. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Offer or the Merger and the transactions contemplated by this Agreement and
which is in effect at the Effective Time; provided, however, that, in the case
of a decree, injunction or other order, each of the parties shall have used
reasonable efforts to prevent the entry of any such injunction or other order
and to appeal as promptly as possible any decree, injunction or other order that
may be entered; and
8.1.3 LAW MAKING ILLEGAL. No statute, rule or regulation shall have
been enacted, entered, promulgated or enforced by any governmental authority
that prohibits the consummation of the Offer or the Merger or has the effect of
making the purchase of the Shares illegal.
8.2 CONDITIONS TO THE OBLIGATIONS OF PURCHASER TO EFFECT THE MERGER.
The obligation of Purchaser to effect the Merger shall be further subject to
satisfaction of the following conditions, which have not been waived at or prior
to the Closing:
8.2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Each of the
Company's representations and warranties contained in Article V shall be true
and correct as of the Closing Date unless the aggregate failure of such
representations and warranties to be true and correct does not have a Material
Adverse Effect;
8.2.2 COMPANY PERFORMANCE. The Company shall have performed and
complied with the agreements and obligations contained in this Agreement
required to be performed and complied with by it at or prior to the Effective
Time unless the failure of such performance or compliance does not have a
Material Adverse Effect;
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8.2.3 NO CHANGE IN RECOMMENDATION. There shall have been no change
in the Special Committee's recommendation that the stockholders of the Company
accept the Offer and approve the Merger, all as provided in Section 2.2; and
8.2.4 DISSENTERS' RIGHTS. The holders of not more than 15% of the
outstanding Shares shall have exercised, nor shall they have any continued right
to exercise, appraisal, dissenters' or similar rights under applicable law with
respect to their Shares by virtue of the Merger.
8.3 CONDITION TO THE OBLIGATIONS OF THE COMPANY TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger shall be further subject to
satisfaction of the following conditions, which have not been waived at or prior
to the Closing:
8.3.1 Representations and Warranties of Purchaser. Each of
Purchaser's representations and warranties contained in Article VI shall be true
and correct in all material respects as of the Closing Date; and
8.3.2 PURCHASER PERFORMANCE. Purchaser shall have performed and
complied in all material respects with the agreements and obligations contained
in this Agreement required to be performed and complied with by it at or prior
to the Effective Time.
ARTICLE IX.
CLOSING
9.1 TIME AND PLACE. The closing of the Merger (the "CLOSING") shall
take place at the offices of Latham & Watkins, 135 Commonwealth Drive, Menlo
Park, California at 9:00 a.m. local time on a date to be specified by the
parties which shall be no later than the third business day after the date on
which the last of the closing conditions set forth in Article VIII is satisfied
or waived unless another time, date or place is agreed upon in writing by the
parties hereto.
9.2 FILINGS AT THE CLOSING. At the Closing, Purchaser shall cause the
California Agreement of Merger to be filed and recorded with the Secretary of
State of the State of California in accordance with the provisions of Section
1103 of the CGCL, and shall take any and all other lawful actions and do any and
all other lawful things necessary to cause the Merger to become effective.
ARTICLE X.
TERMINATION; AMENDMENT; WAIVER
10.1 TERMINATION. This Agreement may be terminated and the Offer (if
Purchaser has not accepted Shares for payment) and the Merger may be abandoned
at any time prior to the Effective Time:
10.1.1 MUTUAL CONSENT. By mutual written consent of Purchaser and
the Company;
10.1.2 COURT OR GOVERNMENTAL RESTRAINT. By Purchaser or the
Company if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued an order, decree or ruling or
taken any other final action restraining, enjoining or otherwise prohibiting the
Merger or the acceptance for payment and payment for the Shares in the Offer and
such order, decree, ruling or other action is or shall have become
nonappealable;
18
<PAGE>
10.1.3 BY EITHER PARTY AFTER OUTSIDE DATE. By either the Company
or Purchaser if the Merger shall not have been consummated by the date which is
180 days from the date of this Agreement (the "Outside Date"); provided that the
right to terminate this Agreement under this Section 10.1.3 shall not be
available to any party whose failure to fulfill any obligation or condition
under this Agreement has been the cause of, or resulted in, the failure of the
Merger to occur on or before the Outside Date and shall not be available to
Purchaser if Purchaser has purchased Shares pursuant to the Offer.
10.1.4 BY PURCHASER FOR COMPANY BREACH. By Purchaser if, prior to
the earlier of (a) acceptance for payment of Shares pursuant to the Offer or (b)
the Closing, (i) there shall have been a breach of any representation or
warranty on the part of the Company having a Material Adverse Effect, (ii) there
shall have been a breach of any covenant or agreement on the part of the Company
resulting in a Material Adverse Effect.
10.1.5 BY COMPANY FOR PURCHASER BREACH. By the Company if (i)
there shall have been a breach of any representation or warranty on the part of
Purchaser which has a material adverse effect on the consummation of the Offer
or the Merger or (ii) there shall have been a material breach of any covenant or
agreement on the part of Purchaser which has a material adverse effect on the
consummation of the Offer or the Merger.
10.1.6 BY PURCHASER FOR CERTAIN ACTIONS OF THE COMPANY. By
Purchaser, prior to the purchase of Shares pursuant to the Offer, if (i) the
Special Committee shall have withdrawn or adversely modified its recommendation
of the Offer, the Merger or this Agreement or the Special Committee , upon
request of Purchaser, shall fail to reaffirm such approval or recommendation
within five business dates after such request if an Acquisition Proposal is
pending, or shall have resolved to do any of the foregoing; (ii) the Special
Committee shall have recommended to the shareholders of the Company that they
approve an Acquisition Proposal other than the transactions contemplated by this
Agreement; (iii) a tender offer or exchange offer that, if successful, would
result in any Person or "group" becoming a "beneficial owner" (such terms having
the meaning in this Agreement as is ascribed under Regulation 13D under the
Exchange Act) of 15% or more of the outstanding Shares is commenced (other than
by Purchaser or an affiliate of Purchaser) and the Special Committee recommends
that the shareholders of the Company tender their shares in such tender or
exchange offer; (iv) for any reason the Company fails to call and hold the
meeting of shareholders contemplated by Section 3.8.2 (provided, however, that
this clause (iv) shall be ineffective if Purchaser purchases Shares pursuant to
the Offer) or (vi) if the Company or any of the Persons described in Section
7.7.1 or 7.7.2 who are not affiliates of Purchaser, shall willfully and
materially breach Section 7.7.1 or 7.7.2;
10.1.7 BY THE COMPANY UPON ACCEPTING A SUPERIOR OFFER. By the
Company, prior to the purchase of Shares pursuant to the Offer, if the Special
Committee determines, on behalf of the Board of Directors, to accept a Superior
Proposal.
10.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement and the abandonment of the Offer and the Merger pursuant to Section
10.1, this Agreement shall forthwith become void and have no effect, without any
liability on the part of any party hereto or its affiliates, directors, officers
or shareholders, other than the provisions of this Section 10.2 and 10.3 hereof.
Notwithstanding the foregoing, nothing contained in this Section 10.2 shall
relieve any party from liability for any breach of this Agreement.
19
<PAGE>
10.3 FEES AND EXPENSES UPON TERMINATION. Upon the termination of this
Agreement for any reason prior to the earlier of (a) the purchase of Shares by
Purchaser pursuant to the Offer or (b) the Effective Time (other than
termination by Purchaser and/or the Company pursuant to Sections 10.1.1,
10.1.2., 10.1.3., 10.1.4. or 10.1.5. hereof) the Company shall reimburse
Purchaser and its affiliates for all actual documented out-of-pocket fees and
expenses actually and reasonably incurred by Purchaser or on Purchaser's behalf
in connection with the Offer and the Merger and the consummation of all
transactions contemplated by this Agreement (including, without limitation, fees
payable to financing sources, investment bankers, counsel to any of the
foregoing, and accountants). Upon the termination of this Agreement pursuant to
Section 10.1.6 or 10.1.7, the Company shall pay to Purchaser the sum of
$2,400,000. All amounts payable pursuant to this Section 10.3 shall be due
within three business days after termination of this Agreement and shall be
payable by wire transfer of immediately available funds.
ARTICLE XI.
MISCELLANEOUS
11.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time or, in the
case of the Company, shall survive the earlier of (i) acceptance for payment of,
and payment for, the Shares by Purchaser pursuant to the Offer and (ii) the
Effective Time. This Section 11.1 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Effective Time
of the Merger.
11.2 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
Purchaser and the Company at any time prior to the Effective Time with respect
to any of the terms contained herein executed by duly authorized officers of the
respective parties, except that (i) prior to the Effective Time, consent by the
Company shall require the approval of the Special Committee and (ii) after the
Effective Time, the price per Share to be paid pursuant to this Agreement to the
holders of Shares shall in no event be decreased and the form of consideration
to be received by the holders of the Shares in the Merger shall in no event be
altered, and no other amendment which would adversely affect the holders of
Shares shall be made, without the approval of the applicable holders.
11.3 WAIVER OF COMPLIANCE; CONSENTS. At any time prior to the Effective
Time, the parties hereto may extend the time for performance of any of the
obligations or other acts or waive any inaccuracies in the representations and
warranties contained herein or in the documents delivered pursuant hereto. Any
failure of Purchaser, on the one hand, or the Company, on the other hand, to
comply with any obligation, covenant, agreement or condition herein may be
waived in writing by Purchaser or the Company, respectively, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of or estoppel with respect
to any subsequent or other failure. Whenever this Agreement requires or permits
consent by or on behalf of any party hereto or any extensions, such consent or
extension shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 11.3.
11.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
11.5 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of California
without regard to its conflicts of
20
<PAGE>
laws rules. Each party hereto hereby (i) irrevocably and unconditionally submits
in any legal action or proceeding relating to this Agreement, or for recognition
and enforcement of any judgment in respect thereof, to the exclusive general
jurisdiction of the state and federal courts in the state of California, and
appellate courts from any thereof and (ii) consents that any action or
proceeding may be brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or proceeding in any such
court or that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same.
11.6 NOTICES.
(a) All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy; the day after it is sent, if sent
for next day delivery to a domestic address by recognized overnight delivery
service (E.G., Federal Express); and upon receipt, if sent by certified or
registered mail, return receipt requested, as follows:
(b) If to the Company, to:
Prior to the Effective Time,
Digital Link Corporation
217 Humboldt Court
Sunnyvale, CA 94089-1300
Attention: Special Committee of Board of Directors
Telecopier: (408) 745-6250
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: David W. Healy
Telecopier: (650) 494-1417
After the Effective Time,
Digital Link Corporation
217 Humboldt Court
Sunnyvale, CA 94089-1300
Attention: Vinita Gupta
Telecopier: (408) 745-6250
(c) if to Purchaser, to:
DLZ Corp.
217 Humboldt Court
Sunnyvale, CA 94089-1300
Attention: Vinita Gupta
21
<PAGE>
Telecopier: (408) 745-6250
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, California 94025
Attention: Christopher L. Kaufman
Telecopier: (650) 463-2600
11.7 ENTIRE AGREEMENT, ASSIGNMENT ETC. This Agreement, including the
exhibits hereto, embodies the entire agreement and understanding of the parties
hereto in respect of the subject matter hereof and is not intended to confer
upon any other person any rights or remedies hereunder. This Agreement
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, and (except for Indemnified
Parties) no other person shall have any right, benefit or obligation under this
Agreement as a third party beneficiary or otherwise. Neither this Agreement nor
any of the rights, interest or obligations hereunder shall be assigned by any
party hereto without the prior written consent of the other parties hereto,
except that Purchaser shall have the right to assign its rights to any (directly
or indirectly) wholly owned subsidiary of Purchaser without the prior written
consent of the Company, provided that Purchaser shall remain fully responsible
for and shall cause such subsidiary to duly and timely perform, all of
Purchaser's obligations hereunder.
11.8 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
11.9 HEADINGS; CERTAIN DEFINITIONS. The Articles and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not affect in any way the meaning
or interpretation of this Agreement. Every reference herein to the word "days,"
if not preceded by the word "business," shall mean calendar days, and every
reference herein to the words "business days" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday that is not a day on which banking institutions
in the city of New York are authorized or obligated by law to close.
11.10 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any state or federal court in
the state of California, this being in addition to any other remedy to which
they are entitled at law or in equity.
22
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first above
written.
DLZ CORP.
By: /s/ Vinita Gupta
------------------------------------------
Name: Vinita Gupta
Title: President and Chief Executive Officer
DIGITAL LINK CORPORATION
By: /s/ Vinita Gupta
------------------------------------------
Name: Vinita Gupta
Title: President and Chief Executive Officer
23
<PAGE>
ANNEX A
The capitalized terms used herein and not otherwise defined herein have
the meanings set forth in the Agreement and Plan of Merger to which this Annex A
is attached.
Notwithstanding any other provision of the Agreement and Plan of Merger
to which this ANNEX A is attached (the "AGREEMENT") or the Offer, Purchaser
shall not be required to accept for payment, purchase or pay for any Shares of
the Company tendered, and may terminate or, subject to the terms of the
Agreement, amend the Offer and may postpone the acceptance for payment of and
payment for any Shares if there shall not have been validly tendered and not
withdrawn prior to the expiration of the Offer that number of shares of Company
Common Stock which, together with the Shares owned by Purchaser, would represent
ninety percent (90%) of the outstanding shares of the Company on the date of
purchase (the "MINIMUM CONDITION"). Furthermore, notwithstanding any other term
of the Offer or this Agreement, Purchaser shall not be required to accept for
payment or, subject as aforesaid, to pay for any Shares not theretofore accepted
for payment or paid for, and may terminate the Offer if, at any time on or after
the date of this Agreement and before the acceptance of such Shares for payment
or the payment therefor, any of the following conditions exists:
(a) LEGAL PROCEEDINGS. There shall have been threatened, instituted or
be pending any action or proceeding before any court or governmental,
administrative or regulatory authority or agency, domestic or foreign (each, a
"GOVERNMENTAL ENTITY"), or by any other person, domestic or foreign, before any
court or Governmental Entity, (i) challenging or seeking to, or which is
reasonably likely to, make illegal, materially delay or otherwise directly or
indirectly restrain or prohibit or seeking to, or which is reasonably likely to,
impose voting, procedural, price or other requirements, including any such
requirements under California law, in addition to those required by federal
securities laws, in connection with the making of the Offer, the acceptance for
payment of, or payment for, any Shares by Purchaser or the consummation by
Purchaser of the Merger or other business combination with the Company, or
seeking to obtain material damages in connection therewith; (ii) seeking to
prohibit or limit materially the ownership or operation by the Company,
Purchaser or any of their respective subsidiaries of all or any material portion
of the business or assets of the Company, Purchaser or any of their respective
subsidiaries, or to compel the Company, Purchaser or any of their respective
subsidiaries to dispose of or hold separate all or any material portion of the
business or assets of the Company, Purchaser or any of their respective
subsidiaries; (iii) seeking to impose or confirm limitations on the ability of
Purchaser to exercise effectively full rights of ownership of any Shares,
including, without limitation, the right to vote any Shares acquired by
Purchaser pursuant to the Offer or otherwise on all matters properly presented
to the Company's shareholders; (iv) seeking to require divestiture by Purchaser
of any Shares; (v) seeking any material diminution in the benefits expected to
be derived by Purchaser as a result of the transactions contemplated by the
Offer or the Merger or any other similar business combination with the Company;
(vi) otherwise directly or indirectly relating to the Offer or which otherwise,
in the reasonable judgment of Purchaser, might materially adversely affect the
Company or Purchaser or the value of the Shares; or (vii) which otherwise, in
the reasonable judgment of Purchaser, is likely to materially adversely affect
the business, operations (including, without limitation, results of operations),
properties (including, without limitation, intangible properties), condition
(financial or otherwise), assets or liabilities (including, without limitation,
contingent liabilities) or prospects of either the Company or any of its
subsidiaries or Purchaser;
(b) OTHER LEGAL ACTIONS. There shall have been any action taken, or any
statute, rule, regulation, legislation, interpretation, judgment, order or
injunction enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Purchaser, the Company or any subsidiary or
A-1
<PAGE>
affiliate of Purchaser or the Company or (ii) the Offer or the Merger, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, other than the routine
application of the waiting period provisions of the HSR Act to the Offer or the
Merger, which, in the reasonable judgment of Purchaser, is likely to result,
directly or indirectly, in any of the consequences referred to in clauses (i)
through (vii) of paragraph (a) above;
(c) MATERIAL ADVERSE CHANGE. There shall have occurred any change,
condition, event or development that constitutes a Material Adverse Effect;
(d) STOCK MARKET AND RELATED MATTERS. There shall have occurred (i) any
general suspension of, or limitation on prices for, trading in securities on the
Nasdaq National Market, (ii) any material adverse change in United States
currency exchange rates or a suspension of, or limitation on, currency exchange
markets, (iii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iv) any limitation (whether
or not mandatory) by any government or governmental, administrative or
regulatory authority or agency, domestic or foreign, on, or other event that, in
the reasonable judgment of Purchaser, might affect the extension of credit by
banks or other lending institutions, or (v) a commencement of a war or armed
hostilities or other national or international calamity directly or indirectly
involving the United States;
(e) CORPORATE CHANGES. The Company or any of its subsidiaries, joint
ventures or partners or other affiliates shall have, directly or indirectly, (i)
split, combined or otherwise changed, or authorized or proposed a split,
combination or other change of, the Shares or its capitalization, (ii) acquired
or otherwise caused a reduction in the number of, or authorized or proposed the
acquisition or other reduction in the number of, outstanding Shares or other
securities (other than as aforesaid), (iii) issued or sold, or authorized or
proposed the issuance, distribution or sale of, additional Shares (other than
the issuance of Shares under option prior to the date of this Agreement, in
accordance with the terms of such options as such terms have been publicly
disclosed prior to the date of this Agreement), 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, (iv) declared or paid, or proposed to declare or pay, any dividend or
other distribution, whether payable in cash, securities or other property, on or
with respect to any shares of capital stock of the Company, (v) altered or
proposed to alter any material term of any outstanding security, (vi) incurred
any debt other than in the ordinary course of business or any debt containing
burdensome covenants, (vii) authorized, recommended, proposed or entered into an
agreement, agreement in principle or arrangement or understanding with respect
to any merger, consolidation, liquidation, dissolution, business combination,
acquisition of assets, disposition of assets, release or relinquishment of any
material contractual or other right of the Company or any of its subsidiaries or
any comparable event not in the ordinary course of business, (viii) entered into
or amended any employment, change in control, severance, executive compensation
or similar agreement, arrangement or plan with or for the benefit of any of its
employees, consultants or directors, or made grants or awards thereunder, other
than in the ordinary course of business or entered into or amended any
agreements, arrangements or plans so as to provide for increased or accelerated
benefits to any such persons, (ix) except as may be required by law, taken any
action to terminate or amend any employee benefit plan (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended) of the
Company or any of its subsidiaries, or (x) amended or authorized or proposed any
amendment to the Company's Articles of Incorporation or Bylaws;
(f) [intentionally omitted];
A-2
<PAGE>
(g) REQUIRED APPROVALS. Any required approval, permit, authorization or
consent of any governmental authority or agency shall not have been obtained on
terms reasonably satisfactory to Purchaser;
(h) COMPANY'S REPRESENTATIONS AND WARRANTIES. Any of the
representations and warranties of the Company set forth in this Agreement that
are qualified shall not be true and correct unless the effect of all such
failures to be true or correct does not constitute a Material Adverse Effect;
(i) COMPANY'S COVENANTS. The Company shall have failed to perform any
obligation or to comply with any agreement or covenant of the Company to be
performed or complied with by it under this Agreement unless the effect of all
such failures does not constitute a Material Adverse Effect;
(j) MODIFICATION OF RECOMMENDATION. The Company Board or any committee
thereof shall have withdrawn or modified in a manner adverse to Purchaser its
approval or recommendation of the Offer, the Merger or this Agreement, or (ii)
the Company Board or any committee thereof shall have resolved to take the
foregoing action; or
(l) TERMINATION OF AGREEMENT. This Agreement shall have been terminated
in accordance with its terms;
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 or may be waived by Purchaser in whole or in part at any time and from
time to time in Purchaser's discretion. 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>
AGREEMENT AND PLAN OF MERGER
by and among
DLZ CORP.,
and
DIGITAL LINK CORPORATION
Dated as of September 3, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I. DEFINITIONS.............................................................................1
1.1 DEFINITIONS......................................................................1
ARTICLE II. THE TENDER OFFER.......................................................................3
2.1 THE OFFER........................................................................3
2.2 COMPANY ACTION...................................................................4
ARTICLE III. THE MERGER............................................................................6
3.1 THE MERGER.......................................................................6
3.2 EFFECTIVE TIME...................................................................6
3.3 ARTICLES OF INCORPORATION........................................................6
3.4 BY-LAWS..........................................................................6
3.5 DIRECTORS AND OFFICERS...........................................................7
3.6 FURTHER ASSURANCES...............................................................7
3.7 PROXY STATEMENT..................................................................7
3.8 APPROVAL OF MERGER BY SHAREHOLDERS...............................................8
3.9 OTHER FILINGS....................................................................8
ARTICLE IV. CONVERSION OR CANCELLATION OF SHARES; STOCK RIGHTS.....................................9
4.1 CONVERSION OR CANCELLATION OF SHARES.............................................9
4.2 EXCHANGE OF CERTIFICATES; PAYING AGENT...........................................9
4.3 DISSENTERS'RIGHTS...............................................................11
4.4 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME.....................................11
4.5 STOCK OPTIONS UNDER 1992 EQUITY PLAN............................................11
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................11
5.1 AUTHORITY.......................................................................11
5.2 PROXY STATEMENT; OFFER DOCUMENTS................................................12
5.3 BROKERS AND FINDERS.............................................................12
5.4 STATE TAKEOVER STATUTES.........................................................12
5.5 OPINION OF FINANCIAL ADVISOR....................................................12
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF PURCHASER...........................................13
6.1 ORGANIZATION....................................................................13
6.2 AUTHORIZED CAPITAL..............................................................13
6.3 AUTHORITY.......................................................................13
6.4 NO PRIOR ACTIVITIES.............................................................13
6.5 BROKERS AND FINDERS.............................................................13
6.6 CONSENTS AND APPROVALS; NO VIOLATIONS...........................................14
6.7 OFFER DOCUMENTS; PROXY STATEMENT; OTHER INFORMATION.............................14
ARTICLE VII. COVENANTS OF THE PARTIES.............................................................14
7.1 CONDUCT OF BUSINESS OF THE COMPANY..............................................14
7.2 NOTIFICATION OF CERTAIN MATTERS.................................................15
7.3 FURTHER INFORMATION.............................................................15
7.4 REASONABLE EFFORTS..............................................................15
7.5 PUBLIC ANNOUNCEMENTS............................................................15
7.6 INDEMNITY.......................................................................16
i
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7.7 OTHER TRANSACTIONS..............................................................17
7.8 PURCHASER AFFILIATES............................................................18
ARTICLE VIII. CONDITIONS OF THE MERGER............................................................19
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER......................19
8.2 CONDITIONS TO THE OBLIGATIONS OF PURCHASER TO EFFECT THE MERGER.................19
8.3 CONDITION TO THE OBLIGATIONS OF THE COMPANY TO EFFECT THE MERGER................20
ARTICLE IX. CLOSING...............................................................................20
9.1 TIME AND PLACE..................................................................20
9.2 FILINGS AT THE CLOSING..........................................................20
ARTICLE X. TERMINATION; AMENDMENT; WAIVER.........................................................21
10.1 TERMINATION.....................................................................21
10.2 EFFECT OF TERMINATION...........................................................22
10.3 FEES AND EXPENSES UPON TERMINATION..............................................22
ARTICLE XI. MISCELLANEOUS.........................................................................22
11.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.......................22
11.2 AMENDMENT AND MODIFICATION......................................................23
11.3 WAIVER OF COMPLIANCE; CONSENTS..................................................23
11.4 COUNTERPARTS....................................................................23
11.5 GOVERNING LAW; SUBMISSION TO JURISDICTION.......................................23
11.6 NOTICES.........................................................................23
11.7 ENTIRE AGREEMENT, ASSIGNMENT ETC................................................24
11.8 VALIDITY........................................................................25
11.9 HEADINGS; CERTAIN DEFINITIONS...................................................25
11.10 SPECIFIC PERFORMANCE............................................................25
ANNEX A..........................................................................................A-1
</TABLE>
ii
<PAGE>
Exhibit (c)(2) to
Sch. 14D-1
DLZ CORP.
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is dated as of _________________, between
DLZ CORP., a California corporation ("DLZ"), and __________ ("SUBSCRIBER"), a
shareholder of Digital Link Company, a California corporation (the "COMPANY").
BACKGROUND
A. DLZ has entered into a Merger Agreement (the "MERGER
AGREEMENT") with the Company pursuant to which DLZ will merge with and into
the Company with the Company surviving the merger as the "Surviving
Corporation." All capitalized terms not defined in this Subscription
Agreement shall have the meanings set forth in the Merger Agreement.
B. DLZ has authorized capital stock of 30,000,000 shares of
common stock, no par value, each share of which is entitled to one vote (the
"DLZ COMMON"). As of the date hereof, 1 share of DLZ Common is outstanding
and held by Vinita Gupta.
C. In connection with the transactions contemplated by the Merger
Agreement, the parties desire that shares of DLZ COMMON be issued to the
Subscriber in consideration of the contribution of the Subscriber's shares of
the common stock, no par value per share, of the Company (the "COMPANY
SHARES") to DLZ.
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
ARTICLE I.
STOCK SUBSCRIPTION
1.1 CONTRIBUTION OF STOCK. At the Closing (as hereinafter defined), DLZ
shall deliver to the Subscriber certificates representing shares of DLZ Common
(the "SHARES") in the amounts set forth in Schedule 1.1 to this Subscription
Agreement ("SCHEDULE 1.1").
1.2 CONSIDERATION FOR SHARES. Concurrently with the issuance of DLZ
Common to be purchased by the Subscriber, the Subscriber shall deliver to DLZ in
exchange therefor certificates duly endorsed in blank or with stock powers
attached representing the number of Company Shares set forth in Schedule 1.1.
1.3 CLOSING. The delivery and transfer of DLZ Common to the Subscriber
and in exchange therefor the delivery and transfer of the shares of Company
Common by the Subscriber (the "CLOSING") shall take place immediately prior to
the Effective Time.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF DLZ
DLZ represents and warrants to the Subscriber that:
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2.1 ORGANIZATION AND AUTHORITY. DLZ is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has all requisite corporate power and authority to enter into this
Subscription Agreement and to consummate the transactions contemplated hereby.
DLZ has all requisite corporate power and authority to issue and sell the DLZ
Common contemplated hereby and otherwise to carry out the transactions
contemplated hereby.
2.2 CAPITALIZATION. DLZ has authorized capital stock of 30,000,000
shares of DLZ Common, of which 1 share is outstanding. All of the
outstanding shares of DLZ Common shall be validly issued fully paid and
nonassessable and when delivered by DLZ at the Closing.
2.3 VALID, BINDING AGREEMENT. This Subscription Agreement is a valid and
binding agreement of DLZ, enforceable against DLZ in accordance with its terms.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER
The Subscriber hereby represents and warrants as follows:
3.1 ACCESS TO INFORMATION. DLZ has made available to the Subscriber, for
a reasonable time prior to the date hereof, an opportunity to ask questions and
receive answers concerning the terms and conditions of the Subscriber's
investment in the DLZ Common and to obtain any additional information which DLZ
possesses or can acquire without unreasonable effort or expense, and the
Subscriber has received all additional information requested by the Subscriber.
The Subscriber has had access to such financial and other information as is
necessary in order for the Subscriber to make a fully-informed decision as to
his or her investment in DLZ Common.
3.2 NO REGISTRATION. The Subscriber has been advised that the shares of
DLZ Common have not been registered under the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "1933 ACT") and,
therefore, cannot be resold unless they are registered under the 1933 Act or
unless an exemption from registration is available.
3.3 PURCHASE FOR INVESTMENT. The Subscriber, with respect to all the
shares of DLZ Common to be purchased by the Subscriber, is purchasing the DLZ
Common for such Subscriber's own account, in each case for investment and not
with a view to, or for resale in connection with, the distribution thereof or
with any present intention of distributing or reselling any thereof.
3.4 BUSINESS AND FINANCIAL EXPERIENCE, ETC. The Subscriber has such
knowledge and experience in financial and business matters that the Subscriber
is capable of evaluating the merits and risks of Subscriber's investment in DLZ
Common and is aware that the Subscriber must bear the economic risk of such
investment for an indefinite period of time.
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3.5 TAX ADVICE. DLZ has made no warranties or representations to the
Subscriber with respect to the income tax consequences of the transactions
contemplated by this Subscription Agreement and the Subscriber is in no manner
relying on DLZ or its representatives or agents for an assessment of such tax
consequences.
ARTICLE IV.
RESTRICTIONS ON TRANSFER OF DLZ COMMON
The Subscriber hereby agrees that each outstanding certificate representing
shares of DLZ Common to be delivered at the Closing shall bear endorsements
reading substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE SUCH A
REGISTRATION IS IN EFFECT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SAID ACT."
ARTICLE V.
CONDITIONS TO CLOSING
5.1 SUBSCRIBER'S OBLIGATION. The Subscriber's obligation to purchase and
deliver the consideration for the shares of DLZ Common to be sold by DLZ at the
Closing is subject to the fulfillment on or prior to the Closing of the
following conditions:
5.1.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of DLZ contained in this Subscription Agreement, and those otherwise
made in writing in other documents, and letters or other statements addressed in
whole or in part to the Subscriber by or on behalf of DLZ in connection with the
transactions contemplated by this Subscription Agreement shall be true and
correct when made and at and as of the time of the Closing.
5.1.2 PERFORMANCE. DLZ shall have performed and complied with all
agreements and conditions contained in this Subscription Agreement required to
be performed or complied with by it prior to or at the Closing.
5.1.3 NO IMPEDIMENTS TO MERGER. All conditions to the Merger
shall have been satisfied or waived.
5.1.4 NO ORDERS. As of the Closing, there shall not be
outstanding any order of any court, administrative agency or governmental body
which in any way restrains or prevents the carrying out of the transactions
contemplated by this Subscription Agreement, including, without limitation, the
Transaction.
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ARTICLE VI.
MISCELLANEOUS PROVISIONS
6.1 GOVERNING LAW; AMENDMENT. This Subscription Agreement shall be
construed and enforced in accordance with the laws of the State of California.
This Subscription Agreement cannot be changed orally, and can be changed only by
an instrument in writing signed by the parties hereto.
6.2 NOTICES. All notices, statements, instructions or other documents
required to be given hereunder shall be in writing and shall be given either
personally or by mailing the same in a sealed envelope, first-class mail,
postage prepaid and either certified or registered, return receipt requested,
addressed to DLZ at its principal offices and to the Subscriber at such
Subscriber's address reflected in the stock records of DLZ. The Subscriber,
by written notice given to DLZ in accordance with this Section 6.2 may change
the address to which notices, statements, instructions or other documents are
to be sent to such Subscriber. All notices, statements, instructions and
other documents hereunder that are mailed shall be deemed to have been given
on the date of mailing. Whenever pursuant to this Subscription Agreement any
notice is required to be given by any stockholder to any other stockholder,
such stockholder may request from DLZ a list of addresses of all stockholders
of DLZ, which list shall be promptly furnished to such stockholder.
6.3 COMPLETE AGREEMENT; COUNTERPARTS. This Subscription Agreement
constitutes the entire agreement and supersedes all other agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof. This Subscription Agreement may be
executed by any one or more of the parties hereto in any number of counterparts,
each of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument.
6.4 ASSIGNMENT. This Subscription Agreement is not assignable by the
parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Subscription
Agreement as of the day and year first written above.
DLZ CORP.
BY:
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Vinita Gupta
President
SUBSCRIBER
[NAME]
BY:
--------------------------------------
[Name]
[Title]
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SCHEDULE 1.1
SHARES OF COMMON STOCK HELD BY SUBSCRIBER
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DLZ CORP.
P.O. BOX 620154
WOODSIDE, CALIFORNIA 94062-0154
Depositary Agreement
September 9, 1999
Harris Trust Company of New York
430 Park Avenue - 14th Floor
New York, NY 10022
Attention: Mark B. Zimkind
Vice President
RE: OFFER TO PURCHASE
Ladies and Gentlemen:
DLZ Corp., a California corporation (the "Purchaser"), is offering to purchase
all shares of Digital Link Corporation Common Stock, no par value (the
"Shares"), at $10.30 per Share net to the seller in cash, upon the terms and
conditions set forth in its Offer to Purchase dated September 10, 1999 (the
"Offer to Purchase") and in the related Letter of Transmittal (which shall
include the Internal Revenue Service Form W-9), copies of which are attached
hereto as Exhibits A and B, respectively, and which together, as they may be
amended from time to time, constitute the "Offer." The "Expiration Date" for the
Offer shall be 12:00 midnight, New York City Time, on October 15, 1999, unless
and until the Purchaser shall have extended the period of time for 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 the Purchaser from time to
time shall expire. All terms not defined herein shall have the same meaning as
in the Offer.
The Purchaser hereby agrees with you as follows:
1) Subject to the terms and conditions of this Agreement and the Offer to
Purchase, you will act as Depositary in connection with the Offer and in such
capacity are authorized and directed to accept tenders of Shares.
2) (a)Tenders of Shares may be made only as set forth under the heading
"The Tender Offer - Section 3. Procedure for Tendering Shares" of the Offer to
Purchase, and Shares shall be considered validly tendered to you only if:
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(i) you receive prior to the Expiration Date (X) certificates for such
Shares (or a Confirmation (as defined in paragraph (b) below) relating to such
Shares) and (Y) a properly completed and duly executed letter of Transmittal (or
facsimile thereof) or an Agent's Message (as defined in paragraph (b) below)
relating thereto, or
(ii) you receive (X) a Notice of Guaranteed Delivery (as defined in
paragraph (b) below) relating to such Shares prior to the Expiration Date and
(Y) certificates for such Shares (or a Confirmation relating to such Shares) and
either a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) or an Agent's Message relating thereto within three trading
days after the date of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which The New York Stock Exchange is open for
business; and
(iii) in the case of either clause (i) or (ii) above, a final
determination of the adequacy of the items received, as provided in Section 4
hereof, has been made by the Purchaser.
(b) For the purpose of this Agreement: (i) a "Confirmation" shall be a
confirmation of book-entry transfer of Shares into your account at The
Depository Trust Company (the "Book-Entry Transfer Facility") to be
established and maintained by you in accordance with Section 3 hereof; (ii) a
"Notice of Guaranteed Delivery" shall be a notice of guaranteed delivery
substantially in the form attached as Exhibit C hereto or a telegram,
facsimile transmission or letter substantially in such form, or if sent by a
Book-Entry Transfer Facility, a message transmitted through electronic means
in accordance with the usual procedures of such Book-Entry Transfer Facility
and the Depositary, substantially in such form; provided, however, that if
such notice is sent by a Book-Entry Transfer Facility through electronic
means, it must state that such Book-Entry Transfer Facility has received an
express acknowledgment from the participant on whose behalf such notice is
given that such participant has received and agrees to become bound by the
form of such notice; (iii) an "Eligible Institution" is a firm or other
entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and which is a member in good standing in
the Security Transfer Agent Medallion Signature Program; and (iv) an "Agent's
Message" shall be a message transmitted through electronic means by a
Book-Entry Transfer Facility, in accordance with the normal procedures of
such Book-Entry Transfer Facility and the Depositary, to and received by the
Depositary and forming part of a Confirmation, which states that such
Book-Entry Transfer Facility has received an express acknowledgment from the
participant in such Book-Entry Transfer Facility tendering the Shares which
are the subject of such Book-Entry Confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal,
and that the Purchaser may enforce such agreement against such participant.
The term Agent's Message shall also include any hard copy printout
evidencing such message generated by a computer terminal maintained at the
Depositary's office.
(c) We acknowledge that in connection with the Offer you may enter into
agreements or arrangements with a Book-Entry Transfer Facility which, among
other things, provide that (i) delivery of an Agent's Message will satisfy the
terms of the Offer with respect to the delivery of a Letter of Transmittal, (ii)
such agreements or arrangements are enforceable against the Purchaser by such
Book-Entry Transfer Facility or participants therein and (iii) you, as
Depositary, are authorized to enter into such agreements or arrangements on
behalf of the Purchaser. Without limiting any other provision of this Agreement,
you are expressly authorized to enter into any such agreements or arrangements
on behalf of the Purchaser and to make any
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necessary representations or warranties in connection therewith, and any
such agreements or arrangements shall be enforceable against the Purchaser.
3) You shall take steps to establish and, subject to such establishing,
maintain an account at each Book-Entry Transfer Facility for book-entry
transfers of Shares, as set forth in the Letter of Transmittal and the Offer to
Purchase, and you shall comply with the provisions of Rule 17Ad-14 under the
Exchange Act.
4) (a) You are authorized and directed to examine any certificate
representing Shares, Letter of Transmittal (or facsimile thereof), Notice of
Guaranteed Delivery or Agent's Message and any other document required by the
Letter of Transmittal received by you to determine whether you believe any
tender may be defective. In the event you conclude that any Letter of
Transmittal, Notice of Guaranteed Delivery, Agent's Message or other document
has been improperly completed, executed or transmitted, any of the
certificates for Shares is not in proper form for transfer (as required by
the aforesaid instructions) or if some other irregularity in connection with
the tender of Shares exists, you are authorized subject to Section 4(b)
hereof to advise the tendering stockholder, or transmitting Book-Entry
Transfer Facility, as the case may be, of the existence of the irregularity,
but you are not authorized to accept any tender of fractional Shares, any
tender not in accordance with the terms and subject to the conditions set
forth in the Offer, or any other tender which you deem to be defective,
unless you shall have received from the Purchaser the Letter of Transmittal
which was surrendered (or if the tender was made by means of a Confirmation
containing an Agent's Message, a written notice), duly dated and signed by an
authorized officer of the Purchaser, indicating that any defect or
irregularity in such tender has been cured or waived and that such tender has
been accepted by the Purchaser.
(b) Promptly upon your concluding that any tender is defective, you
shall, after consultation with and on the written instructions of the
Purchaser, use reasonable efforts in accordance with your regular procedures
to notify the person tendering such Shares, or Book-Entry Transfer Facility
transmitting the Agent's Message, as the case may be, of such determination
and, when necessary, return the certificates involved to such person in the
manner described in Section 11 hereof. The Purchaser shall have full
discretion to determine whether any tender is complete and proper and shall
have the absolute right to reject any or all tenders of any particular Shares
determined by it not to be in proper form and to determine whether the
acceptance of or payment for such tenders may, in the opinion of counsel for
the Purchaser, be unlawful; it being specifically agreed that you shall have
neither discretion nor responsibility with respect to these determinations.
To the extent permitted by applicable law, the Purchaser also reserves the
absolute right to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any particular Shares. The interpretation by
the Purchaser of the terms and conditions of the Offer to Purchase, the
Letter of Transmittal and the instructions thereto, a Notice of Guaranteed
Delivery or an Agent's Message (including without limitation the
determination of whether any tender is complete and proper) shall be final
and binding.
(c) All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of any tender of Shares, including questions as to the
proper completion or execution of any Letter of Transmittal (or facsimile
thereof), Notice of Guaranteed Delivery or other required documents and as to
the proper form for transfer of any certificate of Shares, shall be
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resolved by the Purchaser, whose determination shall be final and binding.
The Purchaser shall have the absolute right to determine whether to reject
any or all tenders not in proper or complete form or to waive any
irregularities or conditions, and the Purchaser's interpretation of the Offer
to Purchase, the Letter of Transmittal and the instructions thereto and the
Notice of Guaranteed Delivery (including without limitation the determination
of whether any tender is complete and proper) shall be final and binding.
(d) You agree to maintain accurate records as to all Shares tendered
prior to or on the Expiration Date.
5) You are authorized and directed to return to any person tendering
Shares, in the manner described in Section 11 hereof, any certificates
representing Shares tendered by such person but duly withdrawn pursuant to
the Offer to Purchase. To be effective, a written, telegraphic, or facsimile
transmission notice of withdrawal must be received by you within the time
period specified for withdrawal in the Offer to Purchase at your address set
forth on the back-page of the offer to Purchase. Any notice of withdrawal
must specify the name of the person having deposited the Shares to be
withdrawn, the number of Shares to be withdrawn and, if the certificates
representing such Shares have been delivered or otherwise identified to you,
the name of the registered holder(s) of such Shares as set forth in such
certificates. If the certificates have been delivered to you, then prior to
the release of such certificates the tendering stockholder must also submit
the serial numbers shown on the particular certificates evidencing such
Shares and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedure
for book-entry transfer, any notice of withdrawal must also specify the name
and number of the account at the appropriate Book-Entry Transfer Facility to
be credited with the withdrawn Shares and otherwise comply with such
Book-Entry Transfer Facility's procedures. You are authorized and directed to
examine any notice of withdrawal to determine whether you believe any such
notice is defective. In the event you conclude that any such notice may be
defective you shall, after consultation with and on the instructions of the
Purchaser, use reasonable efforts in accordance with your regular procedures
to notify the person delivering such notice of such determination. All
questions as to the form and validity (including time of receipt) of notices
of withdrawal will be determined by the Purchaser in its sole discretion,
whose determination shall be final and binding. Any Shares so withdrawn shall
no longer be considered to be properly tendered unless such Shares are
re-tendered prior to the Expiration Date pursuant to the Offer to Purchase.
6) Subject to Sections 17 and 26 hereof, any amendment to or extension
of the Offer, as the Purchaser shall from time to time determine, shall be
effective when made, provided that Purchaser will give you oral notice prior
to the time the Offer would otherwise have expired, which notice shall be
promptly confirmed by the Purchaser in writing; provided that you may rely on
and shall be authorized and protected in acting or failing to act upon any
such notice even if such notice is not confirmed in writing or such
confirmation conflicts with such notice. If at any time the Offer shall be
terminated as permitted by the terms thereof, the Purchaser shall promptly
notify you of such termination. If such termination shall occur, all Shares
tendered to you prior to the time of such termination (except such of the
Shares as shall have been paid for by the Purchaser prior to the
effectiveness of such termination) and all items then or thereafter in your
possession which relate to such Shares shall be returned promptly to, or upon
the order of, the respective holders of such Shares.
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7) At 11:00 a.m., New York City time, or as promptly as practicable
thereafter, on each business day or more frequently if reasonably requested
as to major tally figures, you shall advise each of the parties named below
by telephone as to, based upon your preliminary review (and at all times
subject to final determination by Purchaser), as of the close of business on
the preceding day or the most recent practicable time prior to such request,
as the case may be: (i) the number of Shares duly tendered on such day; (ii)
the number of Shares duly tendered represented by certificates physically
held by you on such day; (iii) the number of Shares represented by Notices of
Guaranteed Delivery on such day; (iv) the number of Shares withdrawn on such
day; and (v) the cumulative totals of Shares in categories (i) through (iv)
above through 12:00 noon, New York City time, on such day:
(a) to the Purchaser:
DLZ Corp.
P.O. Box 620154
Woodside, California 94062-0154
Tel No. (408) 745-4550
(b) to the Purchaser's counsel:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, California 94025
Attention: Christopher Kaufman, Esq.
Tel. No. (650) 328-4600
(c) to such other person(s), by such means, as any of the foregoing
may designate.
You shall also furnish to each of the above named persons a written
report confirming the above information which has been communicated orally on
the day following such oral communication. You shall furnish to the Information
Agent (as defined in the Offer to Purchase) and the Purchaser, such reasonable
information, to the extent such information has been furnished to you, relating
to the tendering stockholders as may be requested from time to time.
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You shall furnish to the Purchaser, upon request, master lists of
Shares tendered for purchase, including an A-to-Z list of the tendering
stockholders.
You are also authorized and directed to provide the persons listed
above or any other persons approved by the Purchaser with such other
information relating to the Shares, Offer to Purchase, Letters of
Transmittal, Agent's Messages or Notices of Guaranteed Delivery as the
Purchaser may reasonably request from time to time.
You shall not provide persons other than those mentioned in (or
designated in accordance with the provisions of) paragraphs (a), (b) and (c)
above with any information not contained in the Offer to Purchase and the
Letter of Transmittal. IN NO EVENT SHALL YOU MAKE ANY RECOMMENDATION, EITHER
DIRECTLY OR INDIRECTLY REGARDING THE ADVISABILITY OF TENDERING SHARES
PURSUANT TO THE OFFER. If you receive requests for copies of the Offer to
Purchase, Letter of Transmittal, or other tender offer materials, you shall
advise persons making such requests that copies of such documents can be
obtained from the Information Agent at the address set forth on the back
cover of the Offer to Purchase.
You shall provide to the Purchaser, and such other persons as any of
them may designate, with access to your offices and to those persons on your
staff who are responsible for receiving tenders in order to ensure that,
immediately prior to any Expiration Date, the Purchaser shall receive
sufficient information to enable it to decide whether to extend the Offer.
8) Letters of Transmittal, Notices of Guaranteed Delivery, Agent's
Messages, telegrams, telexes, facsimile transmissions, notices and letters
submitted to you pursuant to the Offer shall be stamped by you to indicate
the date and time of the receipt thereof and these documents, or copies
thereof, shall be preserved by you for a reasonable time not to exceed one
year or the term of this Agreement, whichever is longer, and thereafter shall
be delivered by you to the Purchaser. Thereafter, any inquiries relating to
or requests for any of the foregoing shall be directed solely to the
Purchaser and not the Depositary.
9) (a) If under the terms and conditions set forth in the Offer to Purchase
the Purchaser becomes obligated to accept and pay for Shares tendered, upon
instruction by the Purchaser and as promptly as practicable but no later than
three business days after the latest of: (i) the Expiration of the period for
the delivery of Notices of Guaranteed Delivery pursuant to the Offer to
Purchase; and (ii) the physical receipt by you of a certificate or certificates
representing tendered Shares (in proper form for transfer by delivery), a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) or a Confirmation including an Agent's Message and any other documents
required by the Letter of Transmittal; and (iii) the deposit by the Purchaser
with you of sufficient federal or other immediately available funds to pay,
subject to the terms and conditions of the Offer, all stockholders for whom
checks representing payment for Shares are to be drawn, less any adjustments
required by the terms of the Offer, and all applicable tax withholdings, you
shall, subject to Section 15 hereof, deliver or cause to be delivered to the
tendering stockholders and designated payees, consistent with this Agreement and
the Letter of Transmittal, official bank checks of the Depositary, in the amount
of the applicable purchase price specified in the Offer (less any applicable tax
withholdings) for the Shares theretofore properly tendered and purchased under
the terms and conditions of the Offer. The Purchaser will also deposit with you
on your request federal or other immediately available
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funds in an amount equal to the total stock transfer taxes or other
governmental charges, if any, payable in respect of the transfer or issuance
to the Purchaser or its nominee or nominees of all Shares so purchased. Upon
request by the Purchaser you will apply to the proper authorities for the
refund of money paid on account of such transfer taxes or other governmental
charges. On receipt of such refund, you will promptly pay over to the
Purchaser all money refunded and no such funds shall be used to set off any
other amounts which may be due to you or your affiliates.
10) (a) On or prior to the Expiration Date, the Purchaser shall instruct
you in writing whether payments for tendered shares should be reported on
Forms 1099-B.
(b) On or before January 31st of the year following the year in which
the Purchaser accepts Shares for payment, you will prepare and mail to each
tendering stockholder whose Shares were accepted, other than Foreign
Stockholders, a Substitute Form 1099-B, as instructed in writing by the
Purchaser, in accordance with Treasury Regulations. If the Purchaser provides
you with a letter to be sent to tendering stockholders explaining the
possible tax consequences of the tender of Shares, you shall include a copy
of such letter with the Substitute Forms 1099-B sent to each stockholder. You
will also prepare and file copies of such Substitute Forms 1099-B by magnetic
tape with the Internal Revenue Service in accordance with Treasury
Regulations on or before February 28th of the year following the year in
which Shares are accepted for payment.
(c) You will deduct and withhold 31% backup withholding tax from the
purchase price payable with respect to Shares tendered by any stockholder,
other than a Foreign Stockholder, who has not properly provided you with his
taxpayer identification number, in accordance with Treasury Regulations.
(d) Should any issue arise regarding federal income tax reporting or
withholding, you will take such action as the Purchaser instructs you in
writing.
11) If, pursuant to the terms and conditions of the Offer, the Purchaser
has notified you that it does not accept certain of the Shares tendered or
purported to be tendered or a stockholder withdraws any tendered Shares, you
shall promptly return the deposited certificates for such Shares, together
with any other documents received, to the persons who deposited the same,
without expense to such person. Certificates for such unpurchased Shares
shall be forwarded by you at your option by: (i) first class mail under a
blanket surety bond protecting you and the Purchaser from loss or liabilities
arising out of the non-receipt or non-delivery of such Shares; or (ii)
registered mail insured separately for the value of such Shares. If any such
shares were tendered or purported to be tendered by means of a Confirmation
containing an Agent's Message, you shall notify the Book-Entry Transfer
Facility that transmitted said Confirmation of the Purchaser's decision not
to accept the Shares.
12) At such time as you shall be notified by the Purchaser, you shall
request the transfer agent for the Shares to effect the transfer of all
Shares purchased pursuant to the Offer and to issue certificates for such
Shares so transferred, in accordance with written instructions from the
Purchaser, and upon your receipt thereof notify the Purchaser. The Purchaser
shall be responsible to arrange for delivery of the certificates.
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13) You shall take all reasonable action with respect to the Offer as
may from time to time be requested by the Purchaser, or the Information
Agent. You are authorized to cooperate with and furnish information to the
Information Agent, any of its representatives or any other organization (or
its representatives) designated, in writing, from time to time by the
Purchaser, in any manner reasonably requested by any of them in connection
with the Offer and tenders thereunder.
14) Whether or not any Shares are tendered or the Offer is consummated,
for your services as Depositary hereunder, we shall pay to you compensation
of $12,500.00, together with reimbursement for out-of-pocket expenses,
including reasonable fees and disbursements of your counsel. Fees shall be
payable on the day the Shares are purchased by the Purchaser.
15) As Depositary hereunder you:
(a) shall have no duties or obligations other than those specifically set
forth herein or in Exhibits A, B, and C hereto, or as may subsequently
be agreed to in writing by you and the Purchaser and no implied duties
or obligations shall be read into this agreement against you;
(b) shall have no obligation to make any payment for any tendered Shares
unless the Purchaser shall have provided the necessary federal or
other immediately available funds to pay in full amounts due and
payable with respect thereto;
(c) shall be regarded as making no representations and having no
responsibilities as to the legality, validity, sufficiency, value, or
genuineness of any certificates or the Shares represented thereby
deposited with you or tendered through an Agent's Message hereunder
and will not be required to and will make no representations as to or
be responsible for the legality, validity, sufficiency, value or
genuineness of the Offer;
(d) shall not take any legal action hereunder, without the prior written
approval of Purchaser, and where the taking of such action might be in
your sole judgment subject or expose you to any expense or liability,
you shall not be required to act unless you shall have been furnished
with an indemnity reasonably satisfactory to you;
(e) may rely on and shall be authorized and protected in acting or failing
to act upon any certificate, instrument, opinion, notice, letter,
telegram, telex, facsimile transmission, Agent's Message or other
document or security delivered to you and believed by you to be
genuine and to have been signed by the proper party or parties;
(f) may rely on and shall be authorized and protected in acting or failing
to act upon the written, telephonic, electronic and oral instructions,
with respect to any matter relating to your actions as Depositary
covered by this Agreement (or supplementing or qualifying any such
actions) of officers of the Purchaser;
8
<PAGE>
(g) may consult counsel satisfactory to you and the written advice of such
counsel shall be full and complete authorization and protection in
respect of any action taken, suffered, or omitted by you hereunder in
good faith and in accordance with such advice of such counsel;
(h) shall not at any time advise any person tendering or considering
tendering pursuant to the Offer as to the wisdom of making such tender
or as to the market value of any security tendered thereunder;
(i) may perform any of your duties hereunder either directly or through
agents or attorneys and you shall not be responsible for any
misconduct or negligence on the part of any agent or attorney
appointed with reasonable care by you hereunder;
(j) shall not be liable or responsible for any recital or statement
contained in the Offer or any other documents relating thereto;
(k) shall not be liable or responsible for any failure of the Purchaser to
comply with any of its obligations relating to the Offer, including
without limitation obligations under applicable securities laws;
(l) are not authorized, and shall have no obligation, to pay any brokers,
dealers, or soliciting fees to any person, including without
limitation the Information Agent, and
(m) shall not be liable or responsible for any delay, failure,
malfunction, interruption or error in the transmission or receipt of
communications or messages through electronic means to or from a
Book-Entry Facility, or for the actions of any other person in
connection with any such message or communication.
16) The Purchaser covenants to indemnify and hold you and your officers,
directors, employees, agents, contractors, subsidiaries and affiliates harmless
from and against any loss, liability, damage or expense (including without
limitation any loss, liability, damage or expense incurred for submitting for
transfer Shares tendered without a signature guarantee pursuant to the Letter of
Transmittal, or in connection with any communication or message transmitted
through electronic means to or from a Book-Entry Transfer Facility, and the fees
and expenses of counsel) incurred (a) without negligence or willful misconduct
or (b) as a result of your acting or failing to act in accordance with the terms
of this Agreement or upon the instructions of the Purchaser, or the Information
Agent arising out of or in connection with the Offer, this Agreement or the
administration of your duties hereunder, including without limitation the costs
and expenses of defending and appealing against any action, proceeding, suit or
claim in the premises. In the event of the assertion against any indemnified
party of any such claim or the commencement of any such action or proceeding you
shall promptly after receiving notice of any assertion or the commencement of
any such action or proceeding, notify the Purchaser by letter (or facsimile
confirmed by letter) of the fact of such assertion and/or commencement and
failure to so notify shall not relieve the Purchaser of any liability for
indemnification with respect to such assertion or claim except to the extent the
9
<PAGE>
Purchaser is prejudiced by such failure. The Purchaser shall be entitled to
participate at its own expense in the defense of any such action, proceeding,
suit or claim and if the Purchaser so elects, assume the defense of such claim.
Notwithstanding the Purchaser's election to assume the defense or investigation
of such claim, action or proceeding, you shall have the right to employ separate
counsel at the Purchaser's expense, if in the opinion of counsel to you, use of
counsel of the Purchaser's choice could reasonably be expected to give rise to a
conflict of interest. You agree not to settle any claim or litigation in
connection with any claim or liability with respect to which you may seek
indemnification from the Purchaser without the prior consent of the Purchaser.
17) Unless terminated earlier by the parties hereto, this Agreement shall
terminate upon (a) Purchaser's termination or withdrawal of the Offer, or (b) if
Purchaser does not terminate or withdraw the Offer, the date which is six months
after the later of (i) your sending of checks to tendering stockholders in
accordance with Section 9 (a) hereof and (ii) your delivery of Certificates to
the Purchaser in accordance with Section 12 hereof. Upon any termination of this
Agreement, you shall promptly deliver to the Purchaser any certificates, funds
or other property then held by you as Depositary under this Agreement, and after
such time any party entitled to such certificates, funds or property shall look
solely to the Purchaser and not the Depositary therefor, and all liability of
the Depositary with respect thereto other than liabilities relating to periods
prior to such termination shall cease, provided, however, that the Depositary,
before being required to make such delivery to the Purchaser, may at the expense
of the Purchaser cause to be published in a newspaper of general circulation in
the City of New York, or mail to each person who has tendered Shares but not
received payment, or both, notice that such certificates, funds or property
remain unclaimed and that after a date specified therein, which shall not be
less than 30 days from the date of publication or mailing, any unclaimed balance
of such certificates, funds or property will be repaid to the Purchaser.
Sections 10(b), 14, 15 and 16 shall survive any termination of this Agreement.
18) In the event that any claim of inconsistency between this Agreement and
the terms of the Offer arise, as they may from time to time be amended, the
terms of the Offer shall control, except with respect to the duties, liabilities
and rights, including without limitation compensation and indemnification, of
you as Depositary, which shall be controlled by the terms of this Agreement.
19) If any provision of this Agreement shall be held illegal, invalid, or
unenforceable by any court, this Agreement shall be construed and enforced as if
such provision had not been contained herein and shall be deemed an Agreement
among us to the full extent permitted by applicable law.
20) Purchaser represents and warrants that (a) it is duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, (b) the making and consummation of the Offer and the execution,
delivery and performance of all transactions contemplated thereby (including
without limitation this Agreement) have been duly authorized by all necessary
corporate action and will not result in a breach of or constitute a default
under the certificate of incorporation or by-laws of the Purchaser or any
indenture, agreement, or instrument to which it is a party or by which it is
bound, and (c) this Agreement has been duly
10
<PAGE>
executed and delivered by the Purchaser and constitutes a legal, valid and
binding obligation of the Purchaser.
21) Except as expressly set forth elsewhere in this Agreement, all
notices, instructions and communication under this Agreement shall be in
writing, shall be effective upon receipt and shall be addressed, if to the
Purchaser, to its address set forth beneath its signature on this Agreement,
or, if to the Depositary, to Harris Trust Company of New York, Wall Street
Plaza, 88 Pine Street-19th Floor, New York, New York 10005, Attention: Vice
President, or to such other address as a party hereto shall notify the other
parties.
22) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to conflict of laws,
rules or principles, and shall inure to the benefit of and be binding upon
the successors and assigns of the parties hereto; provided that this
Agreement may not be assigned by any party without the prior written consent
of the other party and any purported assignment without such consent shall be
null and void.
23) It is understood and agreed that the securities, money or property
to be deposited with or received by you as Depositary (the "Property")
constitute a special, segregated account, held solely for the benefit of the
Purchaser and stockholders tendering Shares, as their interests may appear,
and the Property shall not be commingled with the money, assets or properties
of you or any other person, firm or corporation. You hereby waive any and all
rights of lien, attachment or set-off whatsoever, if any, against the
Property so to be deposited, whether such rights arise by reason of the
statutory common law of New York, contract or otherwise.
24) Set forth in Exhibit D hereto is a list of the names and specimen
signature of the persons authorized to act for the Purchaser under this
Agreement. The Secretary of the Purchaser shall, from time to time, certify
to you the names and signatures of any other persons authorized to act for
the Purchaser under this Agreement.
25) No provision of this Agreement may be amended, modified and waived,
except in writing signed by all of the parties hereto.
26) Any instructions given to you orally, as permitted by any provision
of this Agreement, shall be confirmed in writing by the Purchaser, or the
Information Agent, as the case may be, as soon as practicable. You shall not
be liable or responsible and shall be fully protected for acting, or failing
to act, in accordance with any oral instructions which do not conform with
the written confirmation received in accordance with this Section.
11
<PAGE>
Please acknowledge receipt of this Letter, the Offer to Purchase, the Letter of
Transmittal, and the Notice of Guaranteed Delivery, and confirm the arrangements
herein provided by signing and returning the enclosed copy hereof, whereupon
this Agreement and your acceptance of the terms and conditions herein provided
shall constitute a binding Agreement between us.
Very truly yours,
DLZ CORP.
By: /s/ Vinita Gupta
---------------------------------
Its: President
Accepted as of the date first above written:
HARRIS TRUST COMPANY OF NEW YORK,
By: /s/ Richard Campbell
---------------------------------
Its: Vice President
12
<PAGE>
Harris Trust Company of New York
Exhibit A Offer to Purchase
Exhibit B Letter of Transmittal
Exhibit C Notice of Guaranteed Delivery
<PAGE>
EXHIBIT D
(Company's Letterhead)
<TABLE>
<CAPTION>
Name Specimen Signatures Position
- ---------------------- -------------------------------- -------------------------
<S> <C> <C>
Vinita Gupta /s/ Vinita Gupta Chief Executive Officer,
President, Secretary and
Treasurer
</TABLE>
<PAGE>
EXHIBIT (C)(4)
AGREEMENT OF JOINT FILING
In accordance with Rule 13d-1(f) promulgated under the Securities
Exchange Act of 1934, as amended, the undersigned hereby agree to the joint
filing with all other Reporting Persons (as such term is defined in the Schedule
13D referred to below) on behalf of each of them of a statement on Schedule 13D
(including amendments thereto) with respect to the Common Stock of beneficial
interest, no par value per share, of Digital Link Corporation, a California
corporation, and that this Agreement may be included as an Exhibit to such joint
filing. This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as
of the 10th day of September, 1999.
DLZ CORP.
By: /s/ VINITA GUPTA
---------------------------------
Name: Vinita Gupta
Title: President and Chief Executive 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
THE 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 NARENDRA K. AND VINITA GUPTA
CHARITABLE FOUNDATION
By: /s/ VINITA GUPTA
---------------------------------
Name: Vinita Gupta
Title: Trustee
<PAGE>
By: /s/ NARENDRA K. GUPTA
---------------------------------
Name: Narendra K. Gupta
Title: Trustee
/s/ VINITA GUPTA
-------------------------------------
Vinita Gupta
/s/ NARENDRA K. GUPTA
-------------------------------------
Narendra K. Gupta
<PAGE>
Exhibit 99(g)(1)
FILED
Kevin J. Yourman (147159)
Vahn Alexander (167373) SEP-3 PM 3:45
Behram V. Parekin (180361)
WEISS & YOURMAN STEPHEN M. LOVE
10940 Wilshire Boulevard, 24th Floor COUNTY CLERK
Los Angeles, CA 90024 SANTA CLARA COUNTY
(310) 208-2800
Sandy Liebhard
BERNSTEIN, LIEBHARD &
LIFSHITZ LLP
10 East 40th Street
New York, NY 10016
(212) 779-1414
ATTORNEYS FOR PLAINTIFF
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SANTA CLARA
EDWARD ABOFF, On Behalf Of Himself And All ) CASE NO.:
Others Similarly Situated, )
) CLASS ACTION
Plaintiff, )
) COMPLAINT FOR BREACH
vs. ) OF FIDUCIARY DUTIES AND
) INJUNCTIVE RELIEF
RICHARD C. ALBERDING, LOUIS GOLM, )
NARENDRA K. GUPTA, VINITA GUPTA, STEPHEN ) JURY TRIAL DEMAND
L. VON RUMP, DIGITAL LINK CORPORATION and )
DOES 1-50 inclusive, )
)
Defendants. )
- ---------------------------------------------
1
- --------------------------------------------------------------------------
COMPLAINT FOR BREACH OF FIDUCIARY DUTIES AND INJUNCTIVE RELIEF
[ILLEGIBLE] CASE MANAGEMENT SYSTEM
TEAM: Sponkler CMC DATE: JAN 04 2000 @ 10 AM
CMC NOTICE: BY: [ILLEGIBLE]
------------------ --------------
<PAGE>
Plaintiff, by his undersigned attorneys, for his complaint against
defendants, alleges upon knowledge as to himself and his own acts, and upon
information and belief, as to all other matters, as follows:
1. Plaintiff brings this action, individually and as a class action on
behalf of all persons, other than defendants, who own the common stock of
Digital Link Corporation ("Digital Link" or the "Company") and who are
similarly situated, to enjoin the consummation of the proposed acquisition of
Digital Link by defendant Vinita Gupta ("Gupta"), through DLZ Corporation
("DLZ"). Defendant Gupta, Digital Link's founder and chief executive
officer, currently owns approximately 50% of the Company. In a definitive
merger agreement, defendant Gupta has offered to purchase the remaining
shares of Digital Link, which she does not already own, for $10.30 a share in
cash in an attempt to take the Company private. The deal is valued at
approximately $41.2 million and is to take place through a tender offer
commencing on September 10, 1999. Alternatively, in the event that the
transaction is consummated, plaintiff seeks to recover damages caused by the
breach of fiduciary duties of care, candor and loyalty, described herein,
owed by all defendants.
2. The proposed transaction and the acts of defendants constitute a
breach of defendants' fiduciary duties to plaintiff and the class to take all
necessary and appropriate steps to obtain the maximum value realizable for the
shareholders of Digital Link.
PARTIES
3. Plaintiff Edward Aboff is, and has been since prior to the
announcement of the proposed transaction described herein, the owner of shares
of common stock of Digital Link.
4. Defendant Digital Link is a California corporation headquartered at
217 Humboldt Court, Sunnyvale, CA 94089. The Company was incorporated in May of
1985 and trades on the NASDAO under the ticker symbol "DLNK." Digital Link
makes, markets and supports products that provide access to private wide area
networks ("WANs") based on dedicated leased lines and public WANs based on
centralized switching networks such as Internet, Frame Relay, Switched
Multimegabit Data Service and Asynchronous Transfer Mode. Digital Link's
products allow
2
<PAGE>
local area network ("LAN") based internetworking devices, such as routers to
access WANs and also integrate data with digitized voice and video traffic for
more efficient line utilization. The Company's products are used both in the
customer premise equipment environment and in the networks of interexchange
carriers, Internet service providers and telephone companies. Digital Link's
products are sold in North America, Europe, South America and Asia mainly
through its direct sales force, value added resellers and original equipment
manufacturers.
5. Defendant Vinita Gupta ("Gupta") is the founder of the Company and has
served as Chairman of the Board since its formation in May of 1985. She has
also served as Chief Executive Officer of the Company from May 1985 to September
1996 and from January 1999 to the present. Defendant Gupta has further served
as President of the Company from May 1985 to March 1995, from October 1995 to
September 1996 and from January 1999 to the present. From March 1998 to January
1999, defendant Gupta was interim Chief Executive Officer and President of the
Company. Currently, defendant Gupta owns approximately 50% of the shares of
Digital Link.
6. Defendant Richard C. Alberding ("Alberding") has served as a director
of the Company since December of 1994.
7. Defendant Louis Golm ("Golm") has served as a director of the Company
since November of 1998.
8. Defendant Narendra K. Gupta ("N. Gupta") has served as a director of
the Company since 1985.
9. Defendant Stephen L. Von Rump ("Von Rump") has served as a director of
the Company since November of 1998.
10. The true names and capacities of defendants sued herein under
CALIFORNIA CODE OF CIVIL PROCEDURE Section 474 as Does 1 through 50, inclusive,
are presently not known to plaintiff, who therefore sues these defendants by
such fictitious names. Plaintiff will seek to amend this Complaint and include
these Doe defendants' true names and capacities when they are
3
<PAGE>
ascertained. Each of the fictitiously named defendants is responsible in some
manner for the conduct alleged herein and for the injuries suffered by the
Class.
11. Standing committees of the Board of Directors include an Audit
Committee and a Compensation Committee. The Board of Directors does not have a
nominating committee or any committee performing similar functions. From
January 1998 to November 1998, defendant Alberding and Mr. Greg Avis (a former
director) served on the Company's Audit Committee and since November 1998,
defendants Alberding and Golm have served on such Committee. The Audit
Committee met three times during fiscal 1998. The Audit Committee meets with
the Company's independent accountants to review the adequacy of the Company's
internal control systems and financial reporting procedures, reviews the general
scope of the Company's annual audit and the fees charged by the independent
accountants, reviews and monitors the performance of non-audit services by the
Company's auditors, reviews the fairness of any proposed transaction between any
officer, director or other affiliate of the Company and the Company, and after
such review, makes recommendations to the full Board of Directors and performs
such further functions as may be required by any stock exchange or
over-the-counter market upon which the Company's Common Stock is listed.
12. From January 1998 to July 1998, Mr. Alberding and Lance B. Boxer (a
former director) served on the Company's Compensation Committee. From July 1998
to November 1998, defendant Alberding, Boxer and Alan I. Fraser (also a former
director) served on this committee. From November 1998 to January 1999,
defendant Alberding and Boxer served on such committee and since January 1999,
defendants Alberding and Von Rump have served on the Compensation Committee.
The Compensation Committee met six times and acted by written consent one time
during fiscal 1998. The Compensation Committee administers the Company's 1992
Equity Incentive Plan and 1993 Employee Stock Purchase Plan and determines the
salaries and other compensation for officers and certain other employees of the
Company except that during the period over which the Stock Option Committee
existed, the administration
4
<PAGE>
of such plans and determinations regarding stock-based compensation were made by
the Stock Option Committee.
13. In July 1998, the Company established a Stock Option Committee. While
it was in effect, the Stock Option Committee was responsible for decisions
regarding the grant of all forms of stock compensation provided to officers,
directors, employees, consultants, independent contractors and advisors of the
Company and for the administration of the Company's 1992 Equity Incentive Plan
and the 1993 Employee Stock Purchase Plan. From July 1998 to December 1998,
defendant Alberding and Boxer served on the Company's Stock Option Committee.
The Stock Option Committee was combined with the Company's Compensation
Committee effective December 1998.
14. Defendants Gupta, Alberding, Golm, N. Gupta and Von Rump (collectively
the "Individual Defendants"), by reason of their corporate directorship and/or
executive positions, stand in a fiduciary position relative to Digital Link's
shareholders, which fiduciary relationship, at all times relevant herein,
required the Individual Defendants to exercise their best judgment and to act
in a prudent manner and in the best interests of Digital Link's shareholders. A
director is not permitted to act in his/her own self-interest to the detriment
of the shareholders.
15. Defendant Gupta, as a controlling shareholder of the Company, also
stands in a fiduciary position relative to Digital Link's other shareholders,
which fiduciary relationship, at all times relevant herein, required Gupta to
exercise her best judgment and to act in a prudent manner and in the best
interests of all of Digital Link's shareholders. A controlling shareholder is
not permitted to act in its own self-interest to the detriment of the
shareholders.
16. Each defendant herein is sued individually as a conspirator and
aider and abettor, as well as in such defendant's capacity as an officer
and/or director or majority shareholder of Digital Link, and the liability of
each arises from the fact that he, she, or it has engaged in all or part of
the unlawful acts, plans, schemes, or transactions complained of herein.
5
<PAGE>
JURISDICTION AND VENUE
17. This Court has proper jurisdiction over this action pursuant to
Section 410.10 of the CALIFORNIA CODE OF CIVIL PROCEDURE. The violations of law
complained of herein occurred in this county. Furthermore, the amounts in
controversy exceed the jurisdictional minimum of this Court.
18. Venue is proper in the Superior Court of the County of Santa Clara
pursuant to CALIFORNIA CODE OF CIVIL PROCEDURE Sections 395 and 395.5
CLASS ACTION ALLEGATIONS
19. Plaintiff brings this action individually on his own behalf and as a
class action, on behalf of all stockholders of Digital Link (except defendants
herein, and any person, firm, trust, corporation, or other entity related to or
affiliated with any of the defendants) and their successors in interest, who are
or will be threatened with injury arising from defendants' actions as more fully
described herein (the "Class").
20. This action is properly maintained as a class action.
21. The class is so numerous that joinder of all members is impracticable.
As of September 1999, there were over 8,000,000 shares of Digital Link common
stock outstanding. The disposition of their claims in a class action will be of
benefit to the parties and the Court. The record holders of Digital Link's
common stock can be easily determined from the stock transfer journals
maintained by Digital Link or its agents.
22. A class action is superior to other methods for the fair and efficient
adjudication of the claims herein asserted, and no unusual difficulties are
likely to be encountered in the management of this action as a class action.
23. There is a well-defined community of interests in the questions of law
and fact involved affecting the members of the Class. Among the questions of
law and fact which are common to the Class, which predominate over questions
affecting any individual class member are, INTER ALIA, the following:
6
<PAGE>
a. whether the proposed transaction is fair or unfair to the public
stockholders of Digital Link;
b. whether defendants have failed to disclose all material facts
relating to the proposal including the potential positive future financial
benefits which they expect to derive from Digital Link;
c. whether defendants willfully and wrongfully failed or refused to
obtain or attempt to obtain a purchaser for the assets of Digital Link at a
higher price than the DLZ proposal;
d. whether plaintiff and the other members of the Class would be
irreparably damaged were the transaction complained of herein consummated;
e. whether defendants have breached or aided and abetted the breach of
the fiduciary and other common law duties owed by them to plaintiff and the
members of the Class; and
f. whether plaintiff and the members of the Class have been damaged
and what is the proper measure of damages.
24. Plaintiff is a member of the Class and is committed to prosecuting
this action and has retained competent counsel experienced in litigation of this
nature. Plaintiff's claims are typical of the claims of the other members of
the Class and plaintiff has the same interests as the other members of the
Class. Plaintiff does not have interests antagonistic to or in conflict with
those they seek to represent. Plaintiff is an adequate representative of the
Class.
25. The likelihood of individual class members prosecuting separate
individual actions is remote due to the relatively small loss suffered by each
Class member as compared to the burden and expense of prosecuting litigation of
this nature and magnitude. Absent a class action, defendants are likely to
avoid liability for their wrongdoing, and Class members are unlikely to obtain
redress for their wrongs alleged herein. This Court is an appropriate forum for
this dispute.
///
7
<PAGE>
SUBSTANTIVE ALLEGATIONS
26. Digital Link is a leading provider of high-performance,
cost-effective, digital network access products for both narrowband and
broadband applications. The Company offers access solutions that increase the
level of intelligence at the demarcation point where LANs and WANs meet. These
products are used by Internet Service Providers and carriers as infrastructure
equipment, and by enterprises for connectivity to WAN services. Digital Link
was founded in 1985 by Vinita Gupta, who is currently its Chairman and CEO.
27. In 1998, Digital Link announced that it had made a commitment to
rebuild itself with the goal of enhancing shareholder value, with it being a
company priority to take the necessary actions to improve earnings, revenue, and
market share for the long term.
28. The Company was successful, returning to profitability in the fourth
quarter of fiscal 1998, and seeing its stock price increase steadily from a 52
week low of $3.06 set in October, 1998.
29. At close of business on January 20, 1999, Digital Link announced its
fourth quarter and year end 1998 results. EPS for the fourth quarter was $.05
per share as compared to a $.05 loss the previous year. Vinita Gupta, the
Chairperson & CEO, stated that "[w]e are pleased with the progress made in the
last three months. We need to focus on strong and consistent execution for the
long-term success of the Company."
30. The stock price of Digital Link skyrocketed from a close of $6 on
January 20, 1999 to reach a new record high of $10.25 on the news. On the same
day, industry analyst Dain Rauscher upgraded Digital Link from a Neutral to a
Bury rating.
31. At close of business on April 14, 1999, Digital Link announced first
quarter results with increased revenue and earnings. The press release stated
that:
For the first quarter 1999, net sales increased 5% over the first
quarter of 1998 to $15,232,000 compared to $14,519,000 for the same
period of the prior year.
Net income for the first quarter of 1999 was $912,000 compared to
$49,000 for the same period in 1998, AN INCREASE OF 1761%. Earnings
per
8
<PAGE>
share for the quarter were $0.11 compared to $0.01 for the
same period in 1998.
"It was a tremendous quarter with revenue and profit growth,"
said Vinita Gupta, chief executive officer and chairman of the
board of Digital Link. "We experienced strong revenue growth
both in our broadband products and our international
market." (1)
32. On that same day, Digital Link announced that its board had
authorized a repurchase of up to 500,000 shares for cash. The press release
stand that:
Vinita Gupta, chief executive officer and chairman of the
board of directors of Digital Link noted that the Board
decided to pursue this course of action after a review of the
Company's financial position and investment alternatives. Ms.
Gupta said, "With current market conditions, we have an
opportunity to buy back our shares at what we believe are very
attractive levels. Our current strong cash position allows us
to implement this repurchase plan without adversely impacting
our internal investment programs."
33. On July 13, 1999, Digital Link announced financial results for
its second quarter ended June 30, 1999. The Press Release stated that:
For the second quarter 1999, net sales increased 22% to
$15,623,000, compared to net sales of $12,797,000 for the same
period of the prior year. Year-to-date, net sales were
$30,855,000 from $27,317,000 for the same period of the prior
year, an increase of 13%.
Net income for the second quarter of 1999 was $904,000
compared to a net loss of $2,686,000 for the second quarter of
1998. Net income for the first six months of 1999 was
$1,817,000 as compared to a net loss of $2,637,000 for the
same period of the prior year.
Earnings per share for the quarter were $0.11, compared to a
$0.29 loss per share for the same period in 1998.
Year-to-date, earnings per share were $0.22, compared to a
$0.28 loss per share for the first six months in 1998.
"I AM PLEASED WITH THE PROGRESS MADE OVER THE LAST SIX
MONTHS. IN ADDITION TO IMPROVED REVENUES AND PROFITS, WE
INTRODUCED SEVERAL NEW SIGNIFICANT PRODUCTS DURING THE
QUARTER," SAID VINITA GUPTA, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIGITAL LINK. "ALSO, WE HAVE A NEW
MANAGEMENT TEAM IN PLACE WHICH IS FOCUSED ON AGGRESSIVELY
EXECUTING OUR STRATEGY."
- -----------------------
(1) Emphasis added unless otherwise indicated.
9
<PAGE>
34. Shares of Digital Link again skyrocketed on the news, going
from $9.25 on the previous day to a 52 week high of $12.125 the following day.
Further, this was the second quarter in a row where Digital Link had bent
analysis estimates.
35. On September 3, 1999, Digital Link announced that it had
executed a definitive merger agreement with DLZ Corporation, a closely held
corporation formed by Vinita Gupta, Digital Link's Chairman of the Board, CEO,
and controlling shareholder. Under the terms of the agreement, DLZ will commence
a tender offer for all Digital Link common stock for $10.30 in cash.
36. Digital Link and the Individual Defendants are effectively
unloading the Company at bargain prices to the detriment of Digital Link's
minority shareholders and to the benefit of Vinita Gupta, owner of approximately
50% of Digital Link's outstanding shares and the Company's controlling
shareholder. Defendants' intention to pursue the merger transaction is in
breach of their fiduciary duties of care, candor, and loyalty owed to Digital
Link's stockholders to take all necessary steps to ensure that Digital Link's
stockholders will receive the maximum value realizable for their shares in any
extraordinary transaction involving the Company.
37. The intrinsic value of the equity of the Company is materially
greater than the consideration proposed, taking into account, INTER ALIA,
Digital Link's asset value, liquidation value, expected growth, full extent of
its future earnings potential, expected increase in profitability, strength of
its business, its revenues, cash flow, and earnings power. Digital Link is a
very valuable, growing and desirable communications company and defendants,
specifically Gupta, are attempting to exclude the minority shareholders from
these future gains.
38. The defendants' willingness to entertain the proposed offer
requires them to take all reasonable steps to assure the maximization of
stockholder value, including the implementation of a bidding mechanism to foster
a fair auction of the Company to the highest bidder or the exploration of
strategic alternatives which will return greater or equivalent short-term value
to the plaintiff and the Class.
10
<PAGE>
39. Defendants, knowing all of the above, have failed to take the
necessary and appropriate steps to obtain the maximum value realizable for the
public shareholders of Digital Link.
40. There is no indication that Digital Link's board of directors has
taken any steps to ensure that the interests of Digital Link's stockholders, in
maximizing the value of their holdings, were protected by conducting an auction
for Digital Link, soliciting other offers, otherwise seeking out other potential
purchasers or the highest possible bid for the Company, or exploring strategic
alternatives which will obtain the highest possible price for Digital Link's
stockholders or return greater or equivalent value to the plaintiff and the
class.
41. Further, by accepting the merger proposal without seeking out other
purchasers, defendants have inhibited the chances of receiving competing offers.
If the transaction is consummated, Digital Link's shareholders will be deprived
of the opportunity for substantial gains which the Company may have realized.
42. By reason of the foregoing, defendants herein have willfully
participated in unfair dealing toward plaintiff and the other members of the
Class and have engaged in and substantially assisted and aided and abetted each
other in breach of the fiduciary duties owed by them to the Class.
43. Defendants have violated fiduciary and other common law duties owed to
the plaintiff and the other members of the Class in that they have not and are
not exercising independent business judgment, and have acted and are acting to
the detriment of the Class.
44. As a result of the actions of defendants, plaintiff and the Class have
been and will be damaged in that they are not receiving the fair value of their
Digital Link shares.
45. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the Class, and will succeed in
excluding the Class from its fair proportionate share of Digital Link's assets
and businesses, all to the irreparable harm of the Class.
46. Plaintiff and the Class have no adequate remedy of law.
11
<PAGE>
FIRST CAUSE OF ACTION
AGAINST ALL DEFENDANTS
FOR BREACH OF FIDUCIARY DUTIES OF CARE, CANDOR, AND LOYALTY
47. Plaintiff hereby incorporates by reference the foregoing paragraphs as
though fully set forth herein.
48. By virtue of plaintiff's purchase of Digital Link's common stock, and
the defendants' positions as directors and/or officers and majority shareholder
of the Company, and because plaintiff reposed trust and confidence in them, the
defendants owed to plaintiff fiduciary duties of care, candor and loyalty of the
highest good faith, integrity and fair dealing.
49. In taking and/or failing to take the actions heretofore alleged,
defendants violated their fiduciary obligations to plaintiff.
50. As a proximate result of defendants' aforesaid conduct, plaintiff was
damaged by injury to his property, lost profits, loss of future income, and
other general and specific damages.
WHEREFORE, plaintiff prays for judgment and relief as follows:
(1) declaring that this lawsuit is properly maintainable as a class
action and certifying plaintiff as representative of the Class;
(2) declaring that the defendants and each of them have committed or
aided and abetted in a breach of their fiduciary duties to plaintiff and the
other members of the Class;
(3) declaring the transaction to be a nullity;
(4) preliminarily and permanently enjoining defendants and all
persons acting under, in concert with, or for them, from proceeding with,
consummating or closing the transaction;
(5) in the event the transaction is consummated rescinding it and
setting it aside;
(6) ordering defendants, jointly and severally, to account to
plaintiff and the Class for all profits realized and to be realized by them as a
result of the transaction complained of and, pending such accounting, to hold
such profits in a constructive trust for the benefit of plaintiff and other
members of the Class;
12
<PAGE>
39. Defendants, knowing all of the above, have failed to take the
necessary and appropriate steps to obtain the maximum value realizable for the
public shareholders of Digital Link.
40. There is no indication that Digital Link's board of directors has
taken any steps to ensure that the interests of Digital Link's stockholders, in
maximizing the value of their holdings, were protected by conducting an auction
for Digital Link, soliciting other offers, otherwise seeking out other potential
purchasers or the highest possible bid for the Company, or exploring strategic
alternatives which will obtain the highest possible price for Digital Link's
stockholders or return greater or equivalent value to the plaintiff and the
class.
41. Further, by accepting the merger proposal without seeking out other
purchasers, defendants have inhibited the chances of receiving competing offers.
If the transaction is consummated, Digital Link's shareholders will be deprived
of the opportunity for substantial gains which the Company may have realized.
42. By reason of the foregoing, defendants herein have willfully
participated in unfair dealing toward plaintiff and the other members of the
Class and have engaged in and substantially assisted and aided and abetted each
other in breach of the fiduciary duties owed by them to the Class.
43. Defendants have violated fiduciary and other common law duties owed to
the plaintiff and the other members of the Class in that they have not and are
not exercising independent business judgment, and have acted and are acting to
the detriment of the Class.
44. As a result of the actions of defendants, plaintiff and the Class have
been and will be damaged in that they are not receiving the fair value of their
Digital Link shares.
45. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the Class, and will succeed in
excluding the Class from its fair proportionate share of Digital Link's assets
and businesses, all to the irreparable harm of the Class.
46. Plaintiff and the Class have no adequate remedy of law.
11
<PAGE>
FIRST CAUSE OF ACTION
AGAINST ALL DEFENDANTS
FOR BREACH OF FIDUCIARY DUTIES OF CARE, CANDOR, AND LOYALTY
47. Plaintiff hereby incorporates by reference the foregoing paragraphs as
though fully set forth herein.
48. By virtue of plaintiff's purchase of Digital Link's common stock, and
the defendants' positions as directors and/or officers and majority shareholder
of the Company, and because plaintiff reposed trust and confidence in them, the
defendants owed to plaintiff fiduciary duties of care, candor and loyalty of the
highest good faith, integrity and fair dealing.
49. In taking and/or failing to take the actions heretofore alleged,
defendants violated their fiduciary obligations to plaintiff.
50. As a proximate result of defendants' aforesaid conduct, plaintiff was
damaged by injury to his property, lost profits, loss of future income, and
other general and specific damages.
WHEREFORE, plaintiff prays for judgment and relief as follows:
(1) declaring that this lawsuit is properly maintainable as a class
action and certifying plaintiff as representative of the Class;
(2) declaring that the defendants and each of them have committed or
aided and abetted in a breach of their fiduciary duties to plaintiff and the
other members of the Class;
(3) declaring the transaction to be a nullity;
(4) preliminarily and permanently enjoining defendants and all
persons acting under, in concert with, or for them, from proceeding with,
consummating or closing the transaction;
(5) in the event the transaction is consummated rescinding it and
setting it aside;
(6) ordering defendants, jointly and severally, to account to
plaintiff and the Class for all profits realized and to be realized by them as a
result of the transaction complained of and, pending such accounting, to hold
such profits in a constructive trust for the benefit of plaintiff and other
members of the Class;
12
<PAGE>
(7) ordering defendants to permit a stockholders' committee comprised
of class members and their representatives only to ensure a fair procedure,
adequate procedural safe-guards, and independent input by plaintiff and the
Class in connection with any transaction for the shares of Digital Link;
(8) awarding compensatory damages against defendants, jointly and
severally, in the amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law;
(9) awarding plaintiff and the Class their costs and disbursements
and reasonable allowances for plaintiff's counsel and experts' fees and
expenses; and
(10) granting such other and further relief as may be just and proper.
Dated: September 3, 1999
Kevin J. Yourman
Vahn Alexander
Behram B. Parekh
WEISS & YOURMAN
By: /s/ Vahn Alexander
----------------------
Vahn Alexander
10940 Wilshire Blvd., 24th Floor
Los Angeles, California 90024
Tel: (310) 208-2800
Sandy Liebhard
BERNSTEIN, LIEBHARD &
LIFSHITZ LLP
10 East 40th Street
New York, NY 10016
(212) 779-1414
ATTORNEYS FOR PLAINTIFF
13
<PAGE>
JURY DEMAND
Plaintiff demands a trial by jury of all issues so triable.
Dated: September 3, 1999
Kevin J. Yourman
Vahn Alexander
Behram V. Parekh
WEISS & YOURMAN
By: /s/ Vahn Alexander
----------------------
Vahn Alexander
10940 Wilshire Blvd, 24th Floor
Los Angeles, California 90024
Tel: (310) 208-2800
Sandy Liebhard
BERNSTEIN, LIEBHARD &
LIFSHITZ LLP
10 East 40th Street
New York, NY 10016
(212) 779-1414
ATTORNEYS FOR PLAINTIFF
14
<PAGE>
MILBERG WEISS BERSHAD FILED
HYNES & LERACH LLP
WILLIAM S. LERACH (68581) SEP-7 PM 12:26
DARREN J. ROBBINS (168593)
RANDALL J. BARON (150796) [ILLEGIBLE]
RANDALL H. STEINMEYER
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
SCHIFFRIN & BARROWAY, LLP
ANDREW L. BARROWAY
MARC A. TOPAZ
GREGORY M. CASTALDO
Three Bala Plaza East, Suite 400
Bala Cynwyd, PA 19004
Telephone: 610/667-7706
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SANTA CLARA
WILLIAM LEVY, on Behalf of Himself and ) Case No. CV784407
All Others Similarly Situated, )
) CLASS ACTION
Plaintiff, )
) COMPLAINT FOR BREACH OF
vs. ) FIDUCIARY DUTY
)
DIGITAL LINK CORPORATION; VINITA GUPTA; )
RICHARD C. ALBERDING; LOUIS GOLM; )
NARENDRA K. GUPTA; STEPHEN L. VON RUMP )
and DOES 1-100, inclusive; )
)
Defendants. )
) DEMAND FOR JURY TRIAL
- ----------------------------------------- ---------------------
- -------------------------------------------------------------------------------
COMPLAINT FOR BREACH OF FIDUCIARY DUTY
<PAGE>
Plaintiff, William Levy, by his attorneys, alleges upon information and
belief, except as to Paragraph 1 which is alleged upon personal knowledge, as
follows:
THE PARTIES
1. Plaintiff William Levy ("plaintiff") is the owner of common stock of
Digital Link Corporation ("Digital Link" or the "Company") and has been the
owner of such shares continuously since prior to the wrongs complained of
herein.
2. Defendant Digital Link is a corporation duly existing and organized
under the laws of the State of California, with its principal executive
offices located at 217 Humboldt Court, Sunnyvale, California. The Company
designs, manufactures, markets, and supports digital wide-area network access
products for global networks. Digital Link's products are used by Internet
service providers and carriers as infrastructure equipment and by businesses
for connectivity to wide-area networks.
3. Defendant Vinita Gupta ("Gupta") is and at all times relevant hereto
has been President, Chief Executive Officer, and Chairman of the Board of
Directors of Digital Link. Gupta founded the Company and currently owns
approximately 50% of outstanding Digital Link common shares.
4. Defendant Narendra K. Gupta is ("Narendra Gupta") at all times
relevant hereto has been a director of Digital Link. Narendra Gupta is the
husband of defendant Gupta.
5. Defendants Richard C. Alberding, Louis Golm, and Stephen L. Von Rump
are and at all times relevant hereto have been directors of Digital Link.
6. The defendants referred to in paragraphs 3 through 5 are
collectively referred to herein as the "Individual Defendants."
7. By reason of the above Individual Defendants' positions with the
Company as officers and/or directors, said individuals are in a fiduciary
relationship with plaintiff and other public stockholders of Digital Link,
and owe plaintiff and the other members of the class the higher obligations
of good faith, fair dealing, due care, loyalty and full, candid and adequate
disclosure.
8. The true names and capacities of defendants sued herein under
California Code of Civil Procedure Section 474 as Does 1 through 100,
inclusive, are presently not known to plaintiff, who
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<PAGE>
therefore sue these defendants by such fictitious names. Plaintiff will seek to
amend this Complaint and include these Doe defendants' true names and capacities
when they are ascertained. Each of the fictitiously named defendants is
responsible in some manner for the conduct alleged herein and for the injuries
suffered by the Class.
CLASS ACTION ALLEGATIONS
9. Plaintiff brings this action on his own behalf and as a class action,
pursuant to Section 382 of the California Code of Civil Procedure, on behalf of
himself and holders of Digital Link common stock (the "Class"). Excluded from
the Class are defendants herein and any person, firm, trust, corporation or
other entity related to or affiliated with any of the defendants.
10. This action is properly maintainable as a class action.
11. The Class is so numerous that joinder of all members is impracticable.
As of September 7, 1999, there were approximately 8.07 million shares of Digital
Link common stock outstanding.
12. There are questions of law and fact which are common to the Class and
which predominate over questions affecting any individual Class members. The
common questions include, INTER ALIA, the following:
(a) whether the merger is grossly unfair to the Class;
(b) whether plaintiff and the other members of the Class would be
irreparably damaged were the transactions complained of herein consummated; and
(c) whether defendants have breached their fiduciary and other common
law duties owed by them to plaintiff and the other members of the Class.
13. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. Plaintiff's claims
are typical of the claims of the other members of the Class and plaintiff has
the same interests as the other members of the Class. Accordingly, plaintiff is
an adequate representative of the Class and will fairly and adequately protect
the interests of the Class.
14. Plaintiff anticipates that there will be no difficulty in the
management of this litigation.
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<PAGE>
15. Defendants have acted on grounds generally applicable to the Class
with respect to the matters complained of herein, thereby making appropriate the
relief sought herein with respect to the Class as a whole.
SUBSTANTIVE ALLEGATIONS
16. On September 3, 1999, Digital Link announced that it had signed a
definitive merger agreement with DLZ Corp., whereby DLZ Corp. will commence a
tender offer for all of the outstanding shares of Digital Link it already does
not own for $10.30 per share (the "Merger"). DLZ CORP. IS A PRIVATE COMPANY
FORMED AND CONTROLLED BY DEFENDANT GUPTA.
17. Under the terms of the Merger Agreement, the tender offer will
commence on September 10, 1999 and will be scheduled to expire at 12:00
midnight New York City time on October 15, 1999. The Merger is contingent
upon DLZ Corp. owning an aggregate of 90% of the outstanding stock of Digital
Link following completion of the tender offer.
18. The merger consideration to be paid to Class members is
unconscionable, unfair and grossly inadequate because, among other things:
(a) The consideration agreed upon did not result from an appropriate
consideration of the value of Digital Link as the Individual Defendants were
presented with, and asked to evaluate, the proposed merger without any attempt
to sufficiently ascertain the true value of Digital Link through open bidding or
a "market check" mechanism; and
(b) Digital Link common stock traded as high as $12.125 per share as
recently as July 14, 1999.
19. In agreeing to the proposed transaction, the defendants have violated
their fiduciary duties owed to the public shareholders of Digital Link and have
acted to put their personal interests ahead of those of Digital Link's public
stockholders. Defendant Gupta is taking advantage of Digital Link's depressed
stock price to buy out the Company's public shareholders for less than fair
value.
20. The Individual Defendants have thus far failed to announce any active
auction or open bidding procedures best calculated to maximize shareholder value
and have, instead, agreed to the merger which will only serve to inhibit the
maximization of shareholder value.
21. The individual Defendants were and are under a duty:
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<PAGE>
(a) to fully inform themselves of the market value of Digital Link
before taking, or agreeing to refrain from taking, action:
(b) to act in the interests of the equity owners;
(c) to maximize shareholder value;
(d) to obtain the best financial and other terms when the Company's
independent existence will be materially altered by a transaction; and
(e) to act in accordance with their fundamental duties of due care
and loyalty.
22. By the acts, transactions and courses of conduct alleged herein,
defendants, individually and as part of a common plan and scheme or in breach of
their fiduciary duties to plaintiff and the other members of the Class, are
attempting unfairly to deprive plaintiff and other members of the Class of the
true value of their investment in Digital Link.
23. Digital Link shareholders will, if the transaction is consummated, be
deprived of the opportunity for substantial gains which the Company may realize.
24. By reason of the foregoing acts, practices and course of conduct,
defendants have failed to exercise ordinary care and diligence in the exercise
of their fiduciary obligations toward plaintiff and the other Digital Link
public stockholders.
25. As a result of the actions of defendants, plaintiff and the other
members of the Class have been and will be damaged in that they have not and
will not receive their fair proportion of the value of the Company's assets and
businesses and will be prevented from obtaining appropriate consideration for
their shares of Digital Link common stock.
26. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the other members of the Class,
and may consummate the proposed transaction which will exclude the Class from
its fair proportionate share of the Company's valuable assets and businesses,
and/or benefit them in the unfair manner complained of herein, all to the
irreparable harm of the Class, as aforesaid.
27. Plaintiff and the Class have no adequate remedy at law.
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<PAGE>
PRAYER FOR RELIEF
WHEREFORE, plaintiff demands judgment and preliminary and permanent relief,
including injunctive relief, in his favor and in favor of the Class and against
defendants as follows:
A. Declaring that this action is properly maintainable as a class action;
B. Declaring and decreeing that the Merger Agreement was entered into in
breach of the fiduciary duties of the Individual Defendants and is therefore
unlawful and unenforceable;
C. Enjoining defendants from proceeding with the Merger Agreement;
D. Enjoining defendants from consummating the Merger, or a business
combination with a third party, unless and until the Company adopts and
implements a procedure of process, such as an auction, to obtain the highest
possible price for the Company;
E. Directing the Individual Defendants to exercise their fiduciary duties
to obtain a transaction which is in the best interests of shareholders until the
process for the sale or auction of the Company is completed and the highest
possible price is obtained;
F. Rescinding, to the extent already implemented, the Merger Agreement or
any of the terms thereof;
G. Awarding plaintiff and the Class appropriate damages;
H. Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys' and experts' fees; and
I. Granting such other and further relief as this Court may deem just and
proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED this 7th day of September, 1999.
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
DARREN J. ROBBINS
RANDALL J. BARON
RANDALL H. STEINMEYER
/s/ Darren J. Robbins
-------------------------------
DARREN J. ROBBINS
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<PAGE>
[STAMP]
MILBERG WEISS BERSHAD FILED
HYNES & LERACH LLP
WILLIAM S. LERACH (68581) SEP-7 PM 12:28
DARREN J. ROBBINS (168593)
RANDALL J. BARON (150796) [ILLEGIBLE]
RANDALL H. STEINMEYER
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SANTA CLARA
ANDREW CURTIS WRIGHT, On Behalf of ) Case No. CV784405
Himself and All Others Similiarly Situated, )
) CLASS ACTION
Plaintiff, )
) CLASS ACTION COMPLAINT BASED
vs. ) UPON SELF DEALING AND BREACH OF
) FIDUCIARY DUTY
DIGITAL LINK CORPORATION, VINITA )
GUPTA, RICHARD C. ALBERDING, LOUIS )
GOLM, NARENDRA K. GUPTA, )
STEPHEN L. VON RUMP, DLZ )
CORPORATION and DOES 1-100, inclusive )
)
Defendants. )
) DEMAND FOR JURY TRIAL
- -------------------------------------------------------------------
[STAMP]
- -------------------------------------------------------------------
CLASS ACTION COMPLAINT
<PAGE>
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
SCHIFFRIN & BARROWAY, LLP
ANDREW L. BARROWAY
MARC A. TOPAZ
GREGORY M. CASTALDO
Three Bala Plaza East, Suite 400
Bala Cynwyd, PA 19004
Telephone: 610/667-7706
Attorneys for Plaintiff
<PAGE>
Plaintiff, by his attorneys, alleges as follows:
SUMMARY OF THE ACTION
1. This is a stockholder class action brought by plaintiff on behalf
of the holders of Digital Link Corporation ("Digital" or the "Company") common
stock against Digital and its directors arising out of defendants' efforts to
complete a management-led buyout of Digital at a grossly inadequate and unfair
price and their efforts to provide certain insiders and directors with
preferential treatment at the expense of, and which is unfair to, the public
shareholders.
2. On September 3, 1999, Digital announced that its CEO and Chairman
Vinita Gupta together with DLZ Corporation had submitted an offer to the Digital
Board (which is controlled by Vinita Gupta and her husband, who control
approximately 50% of Digital's stock) to purchase the outstanding shares of
Digital for $10.30 per share (the "Acquisition").
3. In pursuing the unlawful plan to cash out Digital's public
stockholders for grossly inadequate consideration, each of the defendants
violated the laws of the State of California by directly breaching and/or aiding
the other defendants' breaches of their fiduciary duties of loyalty, due care,
independence and good faith and fair dealing.
4. In fact, instead of attempting to obtain the highest price
reasonably available for Digital for shareholders, the Individual Defendants
spent a substantial effort tailoring the structural terms of the Acquisition to
meet the specific needs of the Guptas.
5. In essence, the proposed Acquisition is the product of a
hopelessly flawed process that was designed to ensure the sale of Digital to one
buyer and one buyer only on terms preferential to the Guptas and to subvert the
inerests of plaintiff and the other public stockholdes of Digital. Plaintiff
seeks to enjoin the proposed transaction or, alternatively, rescind the
transaction and/or recover damages in the event that the transaction is
consummated.
JURISDICTION AND VENUE
6. This Court has jurisdiction over the cause of action asserted
herein pursuant to the California Constitution, Article VI, Section 10, because
this case is a cause not given by statute to other trial courts.
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<PAGE>
7. This Court has jurisdiction over Digital because Digital conducts
business in California and is a citizen of California as it is incorporated in
California and has its principal place of business at 217 Humboldt Court,
Sunnyvale, California. Digital is a citizen of California. Likewise, plaintiff
and certain of the Individual Defendants, including defendants Vinita Gupta and
Narendra K. Gupta, are citizens of California. This action is not removable.
8. Venue is proper in this Court because the conduct at issue look
place and had an effect in this County.
PARTIES
9. Plaintiff Andrew Curtis Wright is, and at all times relevant
hereto was, a shareholder of Digital and is a citizen of the State of
California.
10. Defendant Digital is a corporation organized and existing under
the laws of the State of California, with its principal place of business
located at 217 Humboldt Court, Sunnyvale, California. Digital operates in this
County as a designer, manufacturer and marketer of digital wide-area network
access products for global networks. Digital's common shares are listed and
publicly traded on NASDAQ. As of April 28, 1999, Digital had 8.1 million shares
outstanding held by thousands of shareholders.
11. Defendant Vinita Gupta is the founder, President, CEO and Chairman
of the Board of Directors of Digital. Vinita Gupta is the wife of defendant
Narendra K. Gupta -- also a director of Digital. Vinita Gupta beneficially owns
and/or controls approximately 50% of Digital's outstanding shares. The Gupta
family, together with DLZ Corporation are attempting to take Digital private in
a management led buyout (the "MBO").
12. Defendant Narendra K. Gupta ("Narendra Gupta") is a director of
the Company. Narendra Gupta is the husband of defendant Vinita Gupta, the
President, CEO and Chairman of the Board of Directors. Narendra Gupta
beneficially owns and/or controls approximately 50% of Digital's outstanding
shares.
13. Defendant Louis Golm ("Golm") has served as a director and Senior
Vice President of the Company since November 1993.
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<PAGE>
14. Defendant Richard Alberding ("Alberding") has served as a director
of Digital since December 1994.
15. Defendant Stephen L. Von Romp ("Von Romp"), has served as a
director of Digital since November 1998.
16. The true names and capacities of defendants sued herein under
California Code of Civil Procedure SECTION 474 as Does 1 through 100, inclusive,
are presently not known to plaintiff, who therefore sue these defendants by such
fictitious names. Plaintiff will seek to amend this Complaint and include these
Doe defendants' true names and capacities when they are ascertained. Each of the
fictitiously named defendants is responsible in some manner for the conduct
alleged herein and for the injuries suffered by the Class.
17. The defendants named above, Vinita Gupta, Narendra Gupta
(collectively the "Guptas"), Alberding, Golm, and Von Romp are sometimes
collectively referred to herein as the "Individual Defendants." As a result of
their positions with Digital and/or their ownership of Digital shares, the
Guptas' control the other Individual Defendants.
18. Defendant DLZ Corporation ("DLZ") is a corporation formed by
defendant Vinita Gupta for the purposes of facilitating her efforts to acquire
the remaining shares of Digital.
DEFENDANTS' FIDUCIARY DUTIES
19. In any situation where the directors of a publicly traded
corporation undertake a transaction that will result in either (i) a change in
corporate control or (ii) a break-up of the corporation's assets, the directors
have an affirmative fiduciary obligation to obtain the highest value reasonably
available for the corporation's shareholders, and if such transaction will
result in a change of corporate control, the shareholders are entitled to
receive a significant premium. To diligently comply with these duties, the
directors may not take any action that:
(a) adversely affects the value provided to the corporation's
shareholders;
(b) will discourage or inhibit alternative offers to purchase
control of the corporation or its assets;
(c) contractually prohibits them from complying with fiduciary
duties.
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<PAGE>
(d) will otherwise adversely affect their duty to search and
secure the best value reasonably available under the circumstances for the
corporation's shareholders; and/or
(e) will provide themselves with preferential treatment at the
expense of, or separate from, the public shareholders.
20. In accordance with his/her duties of loyalty and good faith, the
defendants as directors and/or officers of Digital are obligated to refrain
from:
(a) participating in any transaction where the director's or
officer's loyalties are divided;
(b) participating in any transaction where the directors or
officers receive or are entitled to receive a personal financial benefit not
equally shared by the public shareholders of the corporation; and/or
(c) unjustly enriching themselves at the expense or to the
detriment of the public shareholders.
21. Plaintiff alleges herein that the Individual Defendants, separately
and together, in connection with the Acquisition, violated the fiduciary
duties owed to plaintiff and the other public shareholders of Digital
including their duties of loyalty, good faith and independence, insofar as
they stood on both sides of the transaction and engaged in self dealing and
obtained for themselves personal benefits, including personal financial
benefits not shared equally by plaintiff or the Class. As a result of the
Individual Defendants' self-dealing and divided loyalties, neither plaintiff
nor the Class will receive adequate or fair value for their Digital common
stock in the proposed Acquisition.
22. Because the Individual Defendants have breached their duties of
loyalty, good faith and independence in connection with the Acquisition, the
burden of proving the inherent or entire fairness of the Acquisition, including
all aspects of its negotiation, structure, price and terms, is placed upon the
Individual Defendants as a matter of law.
CLASS ACTION ALLEGATIONS
23. Plaintiff brings this action pursuant to Section 382 of the
California Code of Civil Procedure on their own behalf and as a class action on
behalf of all holders of Digital stock who are being and will be harmed by
defendants' actions described below (the "Class"). Excluded from the Class are
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<PAGE>
defendants herein and any other person, firm, trust, corporation, or other
entity related to or affiliated with any defendants, or DLZ and its principals
or affiliates.
24. This action is properly maintainable as a class action.
25. The Class is so numerous that joinder of all members is
impracticable. According to Digital's SEC filings, there were more than 8.1
million shares of Digital common stock outstanding, as of April 28, 1999.
26. There are questions of law and fact which are common to the Class
and which predominate over questions affecting any individual Class member. The
common questions include, INTER ALIA, the following:
(a) whether defendants have breached their fiduciary duty of
undivided loyalty, independence or due care with respect to plaintiffs and the
other members of the Class in connection with the Acquisition;
(b) whether the Individual Defendants are engaging in
self-dealing connection with the Acquisition;
(c) whether the Individual Defendants have breached their
fiduciary duty to secure and obtain the best price reasonable under the
circumstances for the benefit of plaintiff and the other members of the Class in
connection with the Acquisition;
(d) whether the Individual Defendants are unjustly enriching
themselves and other insiders or affiliates of Digital;
(e) whether defendants have breached any of their other
fiduciary duties to plaintiffs and the other members of the Class in connection
with the Acquisition, including the duties of good faith, diligence, honesty,
and fair dealing;
(f) whether the defendants, in bad faith and for improper
motives, have impeded or erected barriers to discourage other offers for
the Company or its assets;
(g) whether the Acquisition compensations payable to plaintiff
and the Class is unfair and inadequate; and
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(h) whether plaintiff and the other members of the Class would
be irreparably damaged were the transactions complained of herein consummated or
alternatively whether they have suffered compensable damages.
27. Plaintiff's claims are typical of the claims of the other members
of the Class and plaintiff does not have any interest adverse to the Class.
28. Plaintiff is an adequate representative of the Class, has
retained competent counsel experienced in litigation of this nature and will
fairly and adequately protect the interests of the Class.
29. The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying adjudications with respect
to individual members of the Class which would establish incompatible standards
of conduct for the party opposing the Class.
30. Plaintiff anticipates that there will be no difficulty in the
management of this litigation. A class action is superior to other available
methods for the fair and efficient adjudication of this controversy.
31. Defendants have acted on grounds generally applicable to the Class
with respect to the matters complained of herein, thereby making appropriate
the relief sought herein with respect to the Class as a whole.
THE PROPOSED ACQUISITION
32. Digital is a California corporation that operated as a designer,
manufacturer and marketer of digital wide-area network access for global
network. Defendants Vinita Gupta and Narendra Gupta control the Digital Board
owning approximately 50% of Digital's outstanding shares. In addition to
being directors of Digital, the Guptas are also director and founders of
Integrated Systems, Inc. Since 1998, the Company, under the control of the
Guptas, has paid Integrated Systems tens of thousands of dollars to lease
office space.
33. On July 13, 1999, the Company revealed that its net sales had
increased 22% to $15.6 million compared with $12.7 million for the same period
the prior year. More significantly, the Company in its July 13, 1999 press
release revealed that the Company's earnings had taken a turn
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for the better. The Company then also revealed that compared with its second
quarter loss for 1998 of $2.6 million, the Company had earned $900,000 for the
second quarter 1999.
34. On September 3, 1999, Digital announced that defendant Vinita
Gupta and her husband Narendra Gupta, who control approximately 50% of the
outstanding shares of Digital, had submitted an offer to the Digital Board
(which is controlled by the Guptas) to purchase the outstanding shares of
Digital for $10.30 per share.
35. Under the terms of the merger agreement, DLZ, under the control
and direction of Vinita Gupta, will commence a tender offer for all outstanding
shares of Digital for $10.30 per share. The tender offer is scheduled to
commence on September 10, 1999 and is scheduled to expire on October 15, 1999.
SELF DEALING
36. The self dealing, conflicts of interest and conduct harmful to the
interests of the shareholders results from at least the following:
(a) The $10.30 price offered to the public shareholders is
inadequate;
(b) Since the Guptas are partners in buying Digital, it is in
their interest to buy the public's shares at the lowest possible price, $10.30.
The realizable value from growth and a recovery of the Company's historic
performance is far in excess of $10.30 per share. The $10.30 per share price
does not reflect this fact nor the fact that the offer is a substantial
discount to where Digital stock traded in the last two months.
(c) The Digital Board is fraught with conflicts. It consists
of, and is controlled by, President Vinita Gupta as Chairman and CEO, and her
husband Narendra Gupta, also a director. Combined the Guptas control
approximately 50% of the outstanding shares.
(d) While Vinita Gupta was exploring personal opportunities to
buy out Digital the conflicted Board did not search for competitive suitors.
37. The Aquisition is designed to essentially freeze Digital's public
stockholders out of a large portion of the valuable assets which have
produced, and defendants expect will continue to produce, substantial revenue
and earnings and these assets are being sold for grossly inadequate
consideration to the Guptas/DLZ.
.
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38. The price of $10.30 per share which DLZ and the Guptas' propose to
pay to Class members is grossly unfair and inadequate because, among other
things:
(a) The announcement of the proposed MBO was made at a time
when the Company's stock price was trading almost 20% below where it had traded
less than two months prior; and
(b) The Guptas timed the announcement of the MBO to place an
artificial cap on the price for Digital's stock to enable them to acquire the
stock at the lowest possible price.
39. If the Acquisition is consummated, plaintiff and the other members
of the Class will no longer own shares in a "growth" company, but rather will be
cashed out of their Digital shares for just $10.30 per share.
40. The shareholders have been denied the fair process and
arm's-length negotiated terms to which they are entitled in a sale of their
Company. The officers and directors are obligated to maximize shareholder value,
not structure a preferential deal for themselves.
41. The director defendants are obligated to maximize the value of
Digital to the shareholders. The Class members are being deprived of their
right to a fair and unbiased process to sell the Company, and the opportunity
to obtain maximum value and terms for their interests, without preferential
treatment to the insiders.
42. By reason of their positions with Digital, the individual
Defendants are in possession of non-public information concerning the financial
condition and prospects of Digital, and especially the true value and expected
increased future value of Digital and its assets, which they have not disclosed
to Digital's public stockholders, including, but not limited to Digital's
preliminary third quarter 1999 results. Moreover, despite their duty to maximize
shareholder value, the defendants have clear and material conflicts of interest
and are acting to better their own interests at the expense of Digital's public
shareholders.
43. The Board members and advisors identified herein have irremediable
positions of conflict and cannot be expected to act in the best interest of
Digital's public stockholders in connection with this proposed MBO, as they are
beholden to Vinita Gupta. Vinita Gupta, alone,
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could vote each of them out of office if the other directors did not acquiesce
with Vinita Gupta's plan to acquire Digital.
44. The proposed MBO is wrongful, unfair and harmful to Digital's
public stockholders, and represents an effort by the Guptas to aggrandize their
own financial position and interests at the expense of and to the detriment of
Class members. The MBO is an attempt to deny plaintiff and the other members of
the Class their right to share proportionately in the true value of Digital's
valuable assets, and future growth in profits and earnings, while usurping the
same for the benefit of DLZ and Vinita Gupta on unfair and inadequate terms.
45. As a result of defendants' unlawful actions, plaintiff and the
other members of the Class will be damaged in that they will not receive their
fair portion of the value of Digital's assets and business and will be prevented
from obtaining the real value of their equity ownership of the Company.
46. In light of the foregoing, the Individual Defendants must, as
their fiduciary obligations require:
- Undertake an appropriate evaluation of Digital's worth as an
acquisition candidate.
- Act independently so that the interests of Digital's public
stockholders will be protected, including, but not limited to, the
retention of truly independent advisors and/or the appointment of a
truly independent Special Committee.
- Adequately ensure that no conflicts of interest exist between
defendants' own interests and their fiduciary obligation to maximize
stockholder value or, if such conflicts exist, to ensure that all
conflicts be resolved in the best interests of Digital's public
stockholders.
- If an acquisition transaction is to go forward, require that it
be approved by a majority of Digital's minority stockholders and require
that Digital's third quarter 1999 results be revealed to the
shareholders.
47. Vinita Gupta and Narendra Gupta, Vinita's husband, designed the
Acquisition in a manner that best serves the interests of the Guptas and DLZ in
order to secure for themselves personal benefits which will not be shared
equally by plaintiff and the Class.
48. The Individual Defendants have also approved the Acquisition so
that, in steps, it transfers 90+% of Digital's revenues and profits to Digital
and the Guptas, thus the majority of Digital's operations will now accrue to
the personal benefit of the Guptas and Digital. By contrast,
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plaintiff and the Class will be frozen out from all but a minuscule portion of
these revenues, earnings and profits.
COUNT 1
(CLAIM FOR BREACH OF FIDUCIARY DUTIES)
49. Plaintiff repeats and realleges each allegation set forth herein.
50. The defendants have violated fiduciary duties of care, loyalty,
candor and independence owed to the public shareholders of Digital and have
acted to put their personal interests ahead of the interests of Digital
shareholders.
51. By the acts, transactions and courses of conduct alleged herein,
defendants, individually and acting as a part of a common plan, are attempting
to unfairly deprive plaintiff and other members of the Class of the true value
of their investment in Digital.
52. The Individual Defendants have violated their fiduciary duties
by entering into a transaction with Digital without regard to the fairness of
the transaction to Digital shareholders Defendants Digital and DLZ directly
breached and/or aided and abetted the other defendants' fiduciary duties to
plaintiff and the other holders of Digital stock.
53. As demonstrated by the allegations above, the defendant directors
failed to exercise the care required, and breached their duties of loyalty, good
faith, candor and independence owed to the shareholders of Digital because,
among other reasons:
(a) they failed to take steps to maximize the value of
Digital to its public shareholders and they took steps to avoid competitive
bidding, to cap the price of Digital's stock and to give the Guptas/DLZ an
unfair advantage, by, among other things, failing to solicit other potential
acquirors or alternative transactions;
(b) they failed to properly value Digital;
(c) they ignored or did not protect against the numerous
conflicts of interest resulting from the directors own interrelationships, or
connection with the Gupta/DLZ transaction;
54. Because the Individual Defendants dominate and control the
business and corporate affairs of Digital, and are in possession of private
corporate information concerning Digital's assets (including Digital's
preliminary third quarter 1999 results) business and future prospects, there
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exists an imbalance and disparity of knowledge and economic power between them
and the public shareholders of Digital which makes it inherently unfair for them
to pursue any proposed transaction wherein they will reap disproportionate
benefits to the exclusion of maximizing stockholder value.
55. By reason of the foregoing acts, practices and course of
conduct, the defendants have failed to exercise ordinary care and diligence
in the exercise of their fiduciary obligations toward plaintiff and the other
members of the Class.
56. As a result of the actions of defendants, plaintiff and the Class
have been and will be irreparably damaged in that they have not and will not
receive their fair portion of the value of Digital's assets and businesses and
have been and will be prevented from obtaining a fair price for their common
stock.
57. Unless enjoined by this Court, the defendants will continue to
breach their fiduciary duties owed to plaintiff and the Class, and may
consummate the proposed Acquisition which will exclude the Class from its fair
share of Digital's valuable assets and businesses, and/or benefit them in
the unfair manner complained of herein, all to the irreparable harm of the
Class, as aforesaid.
58. Defendants are engaging in self-dealing, are not acting in good
faith toward plaintiff and the other members of the Class, and have breached
and are breaching their fiduciary duties to the members of the Class.
59. As a result of the defendants unlawful actions, plaintiff and the
other members of the Class will be irreparably harmed in that they will not
receive their fair portion of the value of Digital's assets and business and
will be prevented from obtaining the real value of their equity ownership of the
Company. Unless the proposed Acquisition is enjoined by the Court, defendants
will continue to breach their fiduciary duties owed to plaintiff and the members
of the Class, will not engage in arm's-length negotiations on the Acquisition
terms, and will not supply to Digital's minority stockholders sufficient
information to enable them to cast informed votes on the proposed Acquisition
and may consummate the proposed Acquisition, all to the irreparable harm of the
members of the Class.
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60. Plaintiff and the members of the Class have no adequate remedy at
law. Only through the exercise of this Court's equitable powers can plaintiff
and the Class be fully protected from the immediate and irreparable injury which
defendants' actions threaten to inflict.
COUNT II
(CLAIM FOR DAMAGES)
61. Plaintiff repeats and realleges each allegation set forth herein.
62. Alternatively, in the event the Acquisition transaction is
consummated, plaintiff claims he has suffered monetary damages in an amount to
be determined at trial.
PRAYER FOR RELIEF
WHEREFORE, plaintiff demands judgment and preliminary and permanent
relief, including injunctive relief, in his favor and in favor of the Class and
against defendants as follows:
A. Declaring that this action is properly maintainable as a class
action;
B. Declaring and decreeing that the Acquisition agreement was
entered into in breach of the fiduciary duties of the defendants and is
therefore unlawful and unenforceable,
C. Enjoining defendants, their agents, counsel, employees and all
persons acting in concert with them from consummating the Acquisition, unless
and until the Company adopts and implements a procedure or process to obtain the
highest possible price for shareholders;
D. Directing the Individual Defendants to exercise their fiduciary
duties to obtain a transaction which is in the best interests of Digital's
shareholders until the process for the sale or auction of the Company is
completed and the highest possible price is obtained;
E. Rescinding, to the extent already implemented, the MBO or any of
the terms thereof;
F. In the event the Acquisition is consummated, awarding compensatory
damages against defendants, jointly and severally, in an amount to be determined
at trial, together with pre-judgment interest at the maximum rate allowable by
law;
G. Imposition of a constructive trust, in favor of plaintiff, upon
any benefits improperly received by defendants as a result of their wrongful
conduct;
H. Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys' and experts' fees; and
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I. Granting such other and further relief as this Court may deem just
and proper.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED this 7th day of September, 1999.
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
WILLIAM S. LERACH
DARREN J. ROBBINS
RANDALL J. BARON
RANDALL H. STEINMEYER
/s/ Darren J. Robbins
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DARREN J. ROBBINS
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
Attorneys for Plaintiff
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