<PAGE>
EXHIBIT (a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(including the associated stock purchase rights)
of
Splash Technology Holdings, Inc.
at
$10.00 net per Share
by
Vancouver Acquisition Corp.,
a wholly owned subsidiary
of
Electronics For Imaging, Inc.
Our offer and withdrawal rights will expire at 5:00 p.m., New York City
time, on Friday, October 13, 2000, unless we extend our offer.
We are making our offer pursuant to the terms of an Agreement and Plan of
Merger, dated as of August 30, 2000, by and among Electronics For Imaging,
Inc., Vancouver Acquisition Corp. (we are sometimes referred to as Purchaser),
and Splash Technology Holdings, Inc. If and when we purchase tendered shares,
we will merge into Splash.
Our offer is conditioned upon, among other things, (1) there will have been
validly tendered and not withdrawn prior to the expiration of our offer, not
less than that number of shares of common stock of Splash, which, together
with the shares we and EFI own as of that date, constitutes at least a
majority of the shares outstanding on a fully diluted basis (after giving
effect to the conversion or exercise of all of the then vested outstanding
options, warrants and other rights and securities exercisable or convertible
into shares, whether or not exercised or converted at the time of
determination), excluding any shares held by Splash or any subsidiary of
Splash and (2) all applicable waiting periods under the U.S. antitrust laws
having expired or been terminated prior to the expiration of our offer. Our
offer is also subject to other conditions described in this document. Please
read Sections 1 and 14, which set forth in full the conditions to our offer.
Splash's board of directors unanimously (1) determined that the merger
agreement and the transactions contemplated by it, including each of the offer
and the merger, are fair to and in the best interests of Splash and you, (2)
approved and adopted the merger agreement and the transactions contemplated by
it and (3) recommends that you accept our offer and tender your shares to us.
If you want to tender all of any portion of your shares, you should either
(1) complete and sign the accompanying Letter of Transmittal (or a manually
signed facsimile of the Letter of Transmittal) in accordance with the
instructions in the Letter of Transmittal and mail or deliver it together with
the certificate(s) evidencing any tendered shares and any other required
documents to Wilmington Trust Company, our depositary, or tender your shares
pursuant to the procedure for book-entry transfer set forth in Section 3 of
our offer or (2) request your broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for you. If your shares are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee, you must contact your broker, dealer, commercial bank, trust
company or other nominee if you intend to tender your shares.
If you intend to tender shares and your certificates evidencing your shares
are not immediately available, or you cannot comply with the procedure for
book-entry transfer on a timely basis, you may tender your shares by following
the procedure for guaranteed delivery set forth in Section 3.
Questions or requests for assistance may be directed to our Information
Agent at its addresses and telephone number set forth on the back cover of
this document. Additional copies of this document, the Letter of Transmittal
and the Notice of Guaranteed Delivery may also be obtained from our
Information Agent.
September 14, 2000
<PAGE>
SUMMARY OF OUR OFFER
This Summary of our offer highlights selected information from this document
and may not contain all of the information that is important to you. To better
understand our offer to you and for a complete description of the terms of our
offer, you should read this entire document and the accompanying Letter of
Transmittal carefully. Questions or requests for assistance may be directed to
our Information Agent at the addresses and telephone number set forth on the
back cover of this document.
Who is offering to buy my securities?
. We are Vancouver Acquisition Corp., a wholly owned subsidiary of EFI. We
have been organized in connection with our offer and have not carried on
any activities other than in connection with our offer.
. EFI was founded in 1989 by Efraim Arazi. EFI designs and markets
products that support color and black-and-white printing on a variety of
peripheral devices. Its Fiery(R) products incorporate proprietary
hardware and software technologies that transform digital copiers and
printers from many leading copier manufacturers into fast, high-quality
networked printers. EFI's two main product lines include: (1) stand-
alone servers, which are connected to digital copiers and other
peripheral devices, and (2) controllers, which are embedded in digital
copiers and desktop color laser printers. EFI sells it products
primarily to original equipment manufacturers in North America, Europe
and Japan. EFI's common stock is traded on the Nasdaq National Market
under the symbol "EFII."
What are the classes and amounts of securities sought in your offer?
. We are offering to purchase all the issued and outstanding shares of
common stock of Splash, as well as the associated stock purchase rights.
Please see the "Introduction" and Section 1.
How much are you offering to pay and what is the form of payment?
. We are offering to pay $10.00 for each share and its associated stock
purchase right, net to you in cash, less any required withholding taxes
and without interest. Please see the "Introduction" and Section 1.
What are the most significant conditions of your offer?
. We are not obligated to purchase any tendered shares unless, after the
purchase of all of the tendered shares, we would own at least a majority
of the outstanding shares (after giving effect to the conversion or
exercise of all of the then vested outstanding options, warrants and
other rights and securities exercisable or convertible into shares,
whether or not exercised or converted at the time of determination).
Please see the "Introduction" and Sections 1, 10 and 14.
. We are not obligated to purchase any shares unless and until the
applicable waiting periods under the U.S. antitrust laws have expired or
been terminated. Please see Sections 14 and 15.
. Please read Section 14 of our offer, which sets forth in full the
conditions to our offer.
Do you have enough financial resources to make payment?
. We will obtain all necessary funds to purchase the shares from EFI. EFI
will provide funds to us from its existing financial resources. For a
more detailed description of the financing of our offer and the merger,
see Section 9.
2
<PAGE>
Is your financial condition relevant to my decision to tender in your offer?
. Because the payment in our offer consists solely of cash and all of the
funding that will be needed will be provided from EFI's existing
financial resources, and also because of the lack of any relevant
historical information concerning us, we do not think our financial
condition is relevant to your decision to tender in our offer.
How long do I have to decide whether to tender in your offer?
. You will have until at least 5:00 p.m., New York City time, on Friday,
October 13, 2000 to tender your shares. If you cannot deliver everything
that is required in order to make a valid tender by that time, you may
be able to use the guaranteed delivery procedure that is described in
Section 3.
Can your offer be extended, and under what circumstances?
. We have the right, in our sole discretion, but subject to the terms of
the merger agreement and applicable law, to extend the period of time
during which our offer remains open. If, on October 13, 2000 all
conditions to our offer are not then satisfied or waived, we have agreed
that we will extend our offer from time to time until December 31, 2000
at the latest. If our offer has been extended to December 31, 2000, and
on December 31, 2000 the termination of the waiting period under the
U.S. antitrust laws is the only condition to our offer which is not then
satisfied or waived, we will extend the expiration date for our offer
from time to time until February 28, 2001. Please see Section 1.
How will I be notified if your offer is extended?
. If we decide to extend our offer, we will inform Wilmington Trust
Company, our depositary, of that fact, and will issue a press release
giving the new expiration date no later than 9:00 a.m., New York City
time, on the business day after the day on which our offer was
previously scheduled to expire. Please see Section 1.
How do I tender my shares?
To tender your shares in our offer, you must:
. complete and sign the accompanying Letter of Transmittal (or a manually
signed facsimile of the Letter of Transmittal) in accordance with the
instructions in the Letter of Transmittal and mail or deliver it
together with your stock certificates and any other required documents,
to our Depositary or tender your shares by book-entry transfer as
described in Section 3; or
. if your stock certificates are not immediately available or if you
cannot deliver your stock certificates, and any other required
documents, to Wilmington Trust Company prior to the expiration of our
offer, or you cannot complete the procedure for delivery by book-entry
transfer on a timely basis, you may still tender your shares if you
comply with the guaranteed delivery procedures described in Section 3.
Until what time can I withdraw previously tendered shares?
. Except in the case of a subsequent offering period, you may withdraw any
previously tendered shares at any time prior to the expiration of our
offer. Please see Section 4.
How do I withdraw my previously tendered shares?
. In order to withdraw your tender of shares, you must deliver a written
or facsimile notice of withdrawal with the required information to
Wilmington Trust Company while you still have the right to withdraw. If
you tendered shares by giving instructions to a broker or bank, you must
instruct the broker or bank to arrange for the withdrawal of your
shares. Please see Section 4.
3
<PAGE>
What does Splash's board of directors think of your offer?
. Splash's board of directors unanimously (1) determined that the merger
agreement and the transactions contemplated by it, including each of the
offer and the merger, are fair to and in the best interests of Splash
and you, (2) approved and adopted the merger agreement and the
transactions contemplated by it and (3) recommends that you accept our
offer and tender your shares to us.
What will happen if all the shares are not tendered?
. If we are able to acquire at least a majority of the outstanding shares
on a fully diluted basis (after giving effect to the conversion or
exercise of all of the then vested outstanding options, warrants and
other rights and securities exercisable or convertible into shares,
whether or not exercised or converted at the time of determination),
then we will merge with and into Splash, and Splash will become a wholly
owned subsidiary of EFI. Each share that is outstanding at the time of
the merger (other than any shares held in the treasury of Splash, or
owned by us, EFI or any of its other subsidiaries, and any shares held
by stockholders seeking appraisal for their shares) will be canceled and
converted automatically into the right to receive the consideration
stockholders who tendered their shares in our offer received.
. If we are not able to acquire at least a majority of the outstanding
shares on a fully diluted basis, we will either purchase those shares
which have been tendered, extend our offer or terminate our offer in the
manner specified in the merger agreement.
. If at least a majority of the outstanding shares on a fully diluted
basis (after giving effect to the conversion or exercise of all then
vested outstanding options, warrants and other rights and securities
exercisable or convertible in shares of Splash common stock, whether or
not exercised or converted at the time of determination) have been
validly tendered and all of the conditions to our offer have been
satisfied or waived, we may commence a subsequent offering period of up
to 20 business days for the purpose of securing tenders of enough shares
so that after we buy shares in the subsequent offering period, we will
own at least 90 percent of the outstanding shares of Splash common
stock. We will pay the same price per share in the subsequent offering
period as we pay in the offer.
Will Splash continue as a public company?
. Probably not. If the merger occurs, Splash will no longer be publicly
owned. Even if the merger does not occur, if we purchase all the
tendered shares, (1) there may be so few remaining stockholders and
publicly held shares that the Splash common stock may no longer be
eligible to trade on the Nasdaq National Market, (2) there may not be a
public trading market for the Splash common stock, and (3) Splash may
cease making filings with the SEC or otherwise cease being required to
comply with SEC rules relating to publicly held companies. Please see
Section 13.
If I decide not to tender, how will your offer affect my shares?
. If you decide not to tender your shares in our offer and the merger
occurs, you will receive in the merger the same amount of cash per share
as you would have received if you tendered your shares in our offer.
. If you decide not to tender your shares in our offer and the merger does
not occur, if we purchase all the tendered shares, (1) there may be so
few remaining stockholders and publicly held shares that the Splash
common stock will no longer be eligible to trade on the Nasdaq National
Market, (2) there may not be a public trading market for the Splash
common stock, or (3) Splash may cease making filings with the SEC or
otherwise cease being required to comply with SEC rules relating to
publicly held companies. Please see Section 13.
4
<PAGE>
What is the market value of my shares as of a recent date?
. On September 11, 2000, the closing price per share of Splash common
stock was $9.00. See Section 6.
With whom may I talk if I have questions about your offer?
. You can call MacKenzie Partners, Inc., our Information Agent, at (800)
322-2885. See the back cover of this document.
5
<PAGE>
To the holders of shares of Splash's common stock:
INTRODUCTION
We, Vancouver Acquisition Corp., hereby offer to purchase all the shares of
common stock of Splash that are issued and outstanding, together with the
associated stock purchase rights issued pursuant to the Rights Agreement, dated
as of January 27, 1999, between Splash and BankBoston, N.A., as Rights Agent,
for $10.00 for each share and its associated stock purchase right, net to the
seller in cash, less any required withholding taxes without interest, upon the
terms and subject to the conditions set forth in this document and in the
related Letter of Transmittal. Please read Section 8 for additional information
concerning EFI and us.
Splash's board of directors unanimously (1) determined that the merger
agreement and the transactions contemplated by it, including each of the offer
and the merger, are fair to and in the best interests of Splash and you, (2)
approved and adopted the merger agreement and the transactions contemplated by
it and (3) recommends that you accept our offer and tender your shares to us.
Splash has received the opinion of Thomas Weisel Partners LLC, or TWP, dated
August 30, 2000, to the effect that, as of August 30, 2000, the consideration
to be received in our offer and the merger by the holders of shares (other than
EFI and us) was fair to those holders from a financial point of view. A copy of
the written opinion of TWP is attached to Splash's Solicitation/Recommendation
Statement on Schedule 14D-9, which has been filed with the Securities and
Exchange Commission and was mailed to you with this document. You are urged to
read the opinion carefully and in its entirety for a description of the
assumptions made, matters considered and limits on the review undertaken by
TWP.
Our offer is conditioned upon, among other things, (1) there will have been
validly tendered and not withdrawn prior to the expiration of our offer, not
less than that number of shares of common stock of Splash, which, together with
the shares owned by EFI and us on that date, constitutes at least a majority of
the shares outstanding on a fully diluted basis (after giving effect to the
conversion or exercise of all of the then vested outstanding options, warrants
and other rights and securities exercisable or convertible into shares, whether
or not exercised or converted at the time of determination), excluding any
shares held by Splash or any subsidiary of Splash, and (2) all applicable
waiting periods under the U.S. antitrust laws having expired or been terminated
prior to the expiration of our offer. We refer to the condition described in
clause (1) as the Minimum Condition and the condition described in clause (2)
as the Antitrust Condition. Our offer is also subject to other conditions
contained in this document. We refer you to Section 14, which sets forth in
full the conditions to our offer.
We are making this offer pursuant to an Agreement and Plan of Merger, dated
as of August 30, 2000, by and among EFI, us and Splash. The merger agreement
provides, among other things, that as promptly as practicable after the
purchase of shares pursuant to our offer and the satisfaction or, if
permissible, waiver of the other conditions set forth in the merger agreement
and in accordance with the relevant provisions of the Delaware General
Corporation Law, we will be merged with and into Splash. As a result of the
merger, Splash will continue as the surviving corporation and will become a
wholly owned subsidiary of EFI. At the effective time of the merger, each share
issued and outstanding immediately prior to the effective time of the merger
(other than shares held in the treasury of Splash and other than shares held by
stockholders who will have demanded and perfected appraisal rights under
applicable law,) will be canceled and converted automatically into the right to
receive $10.00 in cash (or any higher price that may be paid per share in our
offer) without interest. The merger agreement is more fully described in
Section 10. The material federal income tax consequences of the sale of shares
pursuant to our offer and the merger are described in Section 5.
Simultaneously with the execution of the merger agreement, we and EFI
entered into a Tender and Voting Agreement with each of the directors and
several officers of Splash which obligates each of them to, among other things:
. tender all of the shares owned by them;
6
<PAGE>
. vote (a) in favor of the merger and the merger agreement, (b) against any
Acquisition Proposal (as that term is defined in the merger agreement),
(c) against any proposal for action or agreement (1) that would result in
a breach of any covenant, representation or warranty or any other
obligation or agreement of Splash under the merger agreement or (2) which
is reasonably likely to result in any of the conditions of our
obligations under the merger agreement, or any of the conditions to our
obligation to purchase and pay for tendered shares pursuant to our offer,
not being fulfilled, (d) against any change in the directors of Splash,
(e) against any change in the present capitalization of Splash, (f)
against any amendment to Splash's certificate of incorporation or bylaws
or any other material change in Splash's corporate structure or business,
(g) against any other action which could reasonably be expected to
impede, interfere with, delay, postpone or materially adversely affect
the transactions contemplated by the merger agreement or the likelihood
of those transactions being consummated and (h) in favor of any other
matter necessary for consummation of the transactions contemplated by the
merger agreement, which is considered at any meeting of stockholders or
in an action by written consent, and to execute any documents which are
necessary or appropriate in order to effectuate the voting agreement,
including the ability for us, or our nominees, to vote the shares
directly; and
. grant an irrevocable proxy to EFI and us or any of our nominees to vote
and act (by written consent or otherwise) with respect to all of the
shares owned by them at any meeting of Splash's stockholders or by
written consent in lieu of any meeting with regard to any matter covered
in (2). See Section 10.
The merger agreement provides that promptly after the later to occur of (1)
the purchase of and payment for any shares by EFI or any of its subsidiaries as
a result of which EFI and its subsidiaries own beneficially at least a majority
of then outstanding shares and (2) compliance with Section 14(f) of the
Exchange Act, and the SEC's Rule 14f, EFI will be entitled to designate the
number of directors on Splash's board of directors as will give EFI
representation proportionate to the percentage of the total outstanding number
of shares that we or any of our affiliates beneficially owns. Splash will, upon
request of EFI, use its reasonable best efforts promptly either to increase the
size of its board of directors or to secure the resignations of some of its
incumbent directors, or both as is necessary to enable EFI's designees to be so
elected or appointed to Splash's board of directors, and Splash will take all
actions available to Splash to cause EFI's designees to be elected or appointed
at that time.
We will complete the merger if conditions specified in the merger agreement
are satisfied, including the consummation of our offer, and, if necessary, the
adoption of the merger agreement by the requisite vote of Splash's
stockholders. For a more detailed description of the conditions to the merger,
please see Section 10. The affirmative vote of the holders of at least a
majority of the outstanding shares of Splash common stock is required to adopt
the merger agreement. Consequently, if we acquire (pursuant to our offer or
otherwise) at least a majority of the outstanding shares, then we will be able
to adopt the merger agreement without the affirmative vote of any other
stockholder. See Sections 10 and 11.
Under Delaware law, if we acquire, pursuant to our offer or otherwise, at
least 90% of the then outstanding shares, we will be able effect the merger
without requesting the vote or consent of Splash's other stockholders. If that
happens, we, EFI, and Splash have agreed to take, at the request of EFI, all
necessary and appropriate action to cause the merger to become effective in
accordance with Delaware law as soon as practicable after we acquire 90% of the
then outstanding shares, without a meeting of Splash's stockholders. If,
however, we do not acquire at least 90% of the then outstanding shares and a
vote of Splash's stockholders is required under Delaware law, a significantly
longer period of time will be required in order to effect the merger. See
Section 11.
Splash has advised us that as of September 11, 2000, 14,614,038 shares were
issued and outstanding, 798,452 shares were subject to outstanding vested stock
options, and no shares were held in the treasury of Splash. As a result, as of
September 11, 2000, the Minimum Condition would be satisfied if we had acquired
7,706,246 shares. Also, as of that date, we would have been able to approve the
merger without the calling a meeting of Splash's stockholders or getting the
consent or vote of any other Splash stockholder, if we had acquired 13,152,634
shares.
7
<PAGE>
No appraisal rights are available in connection with our offer; however, you
may have appraisal rights in connection with the merger. See Section 11.
1. Terms of Our Offer; Expiration Date.
Upon the terms and subject to the conditions of our offer (including any
terms and conditions of any extension or amendment), we will accept for payment
and pay for all shares validly tendered (and not withdrawn in accordance with
the procedures set forth in Section 4) on or prior to the "Expiration Date."
The "Expiration Date" means 5:00 p.m., New York City time, on Friday, October
13, 2000, unless and until we (subject to the terms and conditions of the
merger agreement) extend the period during which our offer is open, in which
case "Expiration Date" will mean the latest time and date at which our offer,
as we have extended it, will expire.
Our offer is subject to the conditions set forth in Section 14, including
the satisfaction of the Minimum Condition and the Antitrust Condition. We
expressly reserve the right to waive any condition to our offer in whole or in
part, in our sole discretion, and also expressly reserve the right to increase
the price per share payable in our offer and to make any other changes in the
terms and conditions of our offer; but, without the written consent of Splash,
we will not amend or waive the Minimum Condition. We cannot legally waive the
Antitrust Condition. We agreed that will not decrease the number of shares
sought in our offer, change the form of or decrease the amount of consideration
to be paid, impose conditions to our offer in addition to those set forth in
Section 14, make any other change in our offer which is materially adverse to
you or extend our offer (except as provided in the merger agreement).
The merger agreement provides that we may, without the consent of Splash,
extend our offer beyond October 13, 2000, if, on October 13, 2000, any of the
conditions to our offer, are not satisfied or waived, until that condition is
satisfied or waived (except that the Minimum Condition may not be waived). We
have agreed to extend our offer from time to time until December 31, 2000 if,
and to the extent that, at the Expiration Date, the conditions to our offer
have not been satisfied or waived. Furthermore, if at December 31, 2000, the
Antitrust Condition is the only condition to our offer which is not then
satisfied or waived, we agreed to extend the Expiration Date from time to time
until February 28, 2001. During an extension for these reasons, all shares
previously tendered and not withdrawn will remain subject to our offer and you
will continue to have the right to withdraw your tendered shares. See Section
4. We may extend our offer after the acceptance of shares for a further period
of time by means of a subsequent offering period under Rule 14d-11 under the
Exchange Act, of not more than twenty business days to meet the objective that
there be validly tendered and not withdrawn prior to the Expiration Date (as so
extended) a number of shares which, together with shares then owned by EFI and
us, represents at least 90% of the outstanding shares. If, during an extension
for this purpose, you have previously tendered your shares, you will not be
able to withdraw your shares. Under no circumstances will interest be paid on
the purchase price for tendered shares, whether or not our offer is extended.
We will pay for all shares validly tendered and not withdrawn promptly
following the acceptance of shares for payment pursuant to our offer. Subject
to the applicable rules of the SEC and the terms and conditions of our offer,
we also expressly reserve the right to delay payment for shares in order to
comply in whole or in part with applicable laws (any delay will be effected in
compliance with Rule 14e-1(c) under the Exchange Act, which requires us to pay
the consideration offered or to return shares deposited by or on behalf of
stockholders promptly after the termination or withdrawal of our offer).
We will, as promptly as practicable, make a public announcement of any
extension, delay, termination, waiver or amendment. If we extend our offer, we
will make the announcement no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Subject to
applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act, which require that material changes be promptly disseminated to you in a
manner reasonably designed to inform you of changes) and without limiting the
manner in which we may choose to make any public announcement, we will have no
obligation to publish, advertise or otherwise communicate any public
announcement other than by issuing a press release to Business Wire.
8
<PAGE>
If we make a material change in the terms of our offer or the information
concerning our offer, or if we waive a material condition of our offer, we will
extend our offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange Act. If, before the Expiration Date, we decide to increase
the consideration being offered our offer, the increase in the offered
consideration will be applicable to all stockholders whose shares are accepted
for payment pursuant to our offer. If at the time notice of any increase in the
offered consideration being is first published, sent or given, our offer is
scheduled to expire at any time earlier than the period ending on the tenth
business day from and including the date that the notice is first so published,
sent or given, our offer will be extended at least ten business days after that
notice.
For purposes of our offer, a "business day" means any day other than a
Saturday, a Sunday or a day on which commercial banks in New York City are
permitted by law, rule or regulation to be closed.
Splash has provided us mailing labels, security position listings and any
available listing or computer file containing the names and addresses of all
recordholders of the shares. This document and the related Letter of
Transmittal will be mailed to the recordholders whose names appeared on
Splash's stockholder list and will be furnished, for subsequent transmittal to
beneficial owners of shares, to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, 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 our offer (including, if our
offer is extended or amended, the terms and conditions of any extension or
amendment), we will accept for payment all shares validly tendered (and not
properly withdrawn in accordance with Section 4) prior to the Expiration Date
promptly after the occurrence of the Expiration Date. Additionally, we will pay
for all shares validly tendered and not withdrawn promptly following the
acceptance of shares pursuant to our offer.
In all cases, we will pay for shares tendered and accepted for payment
pursuant to our offer only after timely receipt by our Depositary of (a) the
stock certificates evidencing tendered shares or timely confirmation of a book-
entry transfer of shares into our Depositary's account at The Depository Trust
Company, or DTC, pursuant to the procedures set forth in Section 3, (b) the
Letter of Transmittal (or a manually signed facsimile of the Letter of
Transmittal), properly completed and duly executed, with any required signature
guarantees or an Agent's Message, in connection with the book-entry transfer
and (c) any other documents required by the Letter of Transmittal. An "Agent's
Message" is a message, transmitted by DTC to, and received by, our Depositary
and forming a part of the book-entry confirmation which states that DTC has
received an express acknowledgment from the participant in DTC tendering the
shares that are the subject of the book-entry confirmation, that the
participant has received and agrees to be bound by the Letter of Transmittal
and that we may enforce the agreement against that participant.
For purposes of our offer, we will be deemed to have purchased shares which
have been validly tendered and not properly withdrawn if and when we give oral
or written notice to our Depositary of our acceptance for payment of shares
pursuant to our offer. Upon the terms and subject to the conditions of our
offer, payment for the shares will be made by depositing the aggregate purchase
price with our Depositary. Under no circumstances will interest on the purchase
price for shares be paid, regardless of any delay in making payment.
If we do not accept tendered shares for payment for any reason pursuant to
the terms and conditions of our offer, or if stock certificates are submitted
evidencing more shares than are tendered, the stock certificates evidencing
unpurchased shares will be returned, without expense to the tendering
stockholder (or, in the case of shares tendered by book-entry transfer into our
Depositary's account at DTC pursuant to the procedure set forth in Section 3,
the shares will be credited to an account maintained at DTC), as promptly as
practicable following the expiration or termination of our offer.
We reserve the right to assign, in our sole discretion, any or all of our
rights, interests and obligations contained in the merger agreement to EFI or
to any direct or indirect wholly owned subsidiary of EFI, but any
9
<PAGE>
assignment will not relieve us of our obligations under our offer and will in
no way prejudice the rights of tendering stockholders to receive payment for
shares validly tendered and accepted for payment pursuant to our offer.
If you are a record owner of shares and tender directly to our Depositary,
you will not be obligated to pay brokerage fees or commissions or, except as
provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes
with respect to our purchase of shares pursuant to our offer. Nonetheless, if
you fail to complete and sign the Substitute Form W-9, which is included in
the Letter of Transmittal, you may be subject to a required back-up U.S.
federal income tax withholding of 31% of the gross proceeds payable to you.
See Section 5.
3. Procedures for Accepting Our Offer and Tendering Shares.
In order for you to tender shares validly pursuant to our offer, the Letter
of Transmittal (or a manually signed facsimile of the Letter of Transmittal),
properly completed and duly executed, together 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, must be received by
our Depositary at one of its addresses set forth on the back cover of this
document and either (1) the stock certificates evidencing tendered shares must
be received by our Depositary at its address or the shares must be tendered
pursuant to the procedure for book-entry transfer described below and a book-
entry confirmation must be received by our Depositary (including an Agent's
Message if you did not deliver a Letter of Transmittal), in each case prior to
the Expiration Date, or (2) you must comply with the guaranteed delivery
procedures described below.
The method of delivery of stock certificates and all other required
documents, including delivery through DTC, is at your option and risk, and the
delivery will be deemed made only when actually received by our Depositary. If
delivery is by mail, registered mail with return receipt requested, property
insured, is recommended. In all cases, sufficient time should be allowed to
ensure timely delivery.
Book-Entry Transfer. Our Depositary will establish an account with respect
to the shares at DTC for purposes of our offer within two business days after
the date of this document. Any financial institution that is a participant in
the system of DTC may make a book-entry delivery of shares by causing DTC to
transfer shares into our Depositary's account at DTC in accordance with DTC's
procedures. However, although delivery of shares may be effected through book-
entry transfer at DTC, the Letter of Transmittal (or a manually signed
facsimile of the Letter of Transmittal), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message, and
any other required documents, must, in any case, be received by our Depositary
at one of its addresses set forth on the back cover of this document prior to
the Expiration Date, or you must comply with the guaranteed delivery procedure
described below. Delivery of documents to DTC does not constitute delivery to
our Depositary.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a member of the Security Transfer Agent Medallion
Signature Program, or by any other "eligible guarantor institution," as the
term is defined in Rule 17Ad-15 under the Exchange Act, except in cases where
shares are tendered (1) 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 (2) for the
account of an eligible guarantor institution. If a stock certificate is
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made, or a stock certificate not accepted
for payment or not tendered is to be returned, to a person other than the
registered holder(s), then the stock certificate must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear on the stock certificate, with the
signature(s) on the stock certificate or stock powers guaranteed by an
eligible guarantor institution. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If you desire to tender shares pursuant to our offer
and the stock certificate(s) evidencing your shares are not immediately
available or you cannot deliver your stock certificate(s) and all
10
<PAGE>
other required documents to our Depositary prior to the Expiration Date, or you
cannot complete the procedure for delivery by book-entry transfer on a timely
basis, your shares may still be tendered, provided that all the following
conditions are satisfied:
. the tender is made by or through an eligible guarantor institution;
. a properly completed and duly executed Notice of Guaranteed Delivery is
received prior to the Expiration Date by our Depositary as provided
below; and
. the stock certificate(s) (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 manually signed facsimile of the Letter
of Transmittal), 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 our Depositary within three trading days after the date
of execution of the Notice of Guaranteed Delivery.
You may deliver your Notice of Guaranteed Delivery by hand or mail or by
facsimile transmission to our Depositary. Your Notice of Guaranteed Delivery
must include a guarantee by an eligible guarantor institution in the form set
forth in the Notice of Guaranteed Delivery.
In all cases, we will pay for shares tendered and accepted pursuant to our
offer only after timely receipt by our Depositary of the stock certificate(s)
evidencing shares, or a book-entry confirmation of the delivery of shares, and
the Letter of Transmittal (or a manually signed facsimile of the Letter of
Transmittal), 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. We will determine, in our sole discretion, all
questions as to the form of documents and the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of shares.
Our determination will be final and binding on all parties. We reserve the
absolute right to reject any and all tenders determined by us not to be in
proper form or the acceptance for payment of which may be unlawful. We also
reserve the absolute right to waive any condition of our offer to the extent
permitted by applicable law and the merger agreement or any defect or
irregularity in the tender of any shares of any particular stockholder, whether
or not similar defects or irregularities are waived in the case of other
stockholders. A tender of shares will not have been validly made until all
defects and irregularities have been cured or waived. Neither we, EFI nor any
of EFI's or our respective affiliates or assigns, our Depositary, our
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 notification. Our interpretation of the terms and
conditions of our offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
If you tender your shares pursuant to any of the procedures described above,
it will constitute your acceptance of the terms and conditions of our offer, as
well as your representation and warranty to us that (1) you have the full power
and authority to tender, sell, assign and transfer the tendered shares (and any
and all other shares or other securities issued or issuable in respect of your
shares), and (2) when we accept your shares for payment, we will acquire good
and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claims.
Our acceptance of your shares pursuant to any of the procedures described
above will constitute a binding agreement between you and us upon the terms and
subject to the conditions of our offer.
Appointment as Proxy. By executing the Letter of Transmittal, you
irrevocably appoint our designees as your agents, attorneys-in-fact and
proxies, each with full power of substitution, in the manner set forth in the
Letter of Transmittal, to the full extent of your rights with respect to the
shares you tendered and we accepted for payment (and with respect to any and
all other shares or other securities issued or issuable in respect of the
shares on or after August 30, 2000). These powers of attorney and proxies will
be considered irrevocable and coupled with an interest in the tendered shares.
The appointment will be effective when, and only to the extent
11
<PAGE>
that, we accept your shares for payment. Upon our acceptance for payment, all
prior powers of attorney and proxies given by you with respect to your shares
(and your other shares and securities) will be revoked, without further action,
and no subsequent powers of attorney or proxies may be given nor any subsequent
written consent executed by you (and, if given or executed, will not be deemed
to be effective). Our designees will, with respect to the shares for which the
appointment is effective, be empowered to exercise all of your voting and other
rights as they in their sole discretion may deem proper at any annual or
special meeting of Splash's stockholders or any adjournment or postponement of
that meeting, by written consent in lieu of any meeting or otherwise. We
reserve the right to require that, in order for shares to be deemed validly
tendered, immediately upon our payment for the shares, we must be able to
exercise full voting rights with respect to the shares (and the other shares
and securities).
4. Withdrawal Rights.
Tenders of shares made pursuant to our offer are irrevocable except that
tendered shares may be withdrawn at any time prior to the Expiration Date. If
we extend our offer, are delayed in our acceptance for payment of shares or are
unable to accept shares for payment pursuant to our offer for any reason, then,
without prejudice to our rights under our offer, our Depositary may,
nevertheless, on behalf of us, retain tendered shares, and those shares may not
be withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as described in this Section 4. Any delay will be by an
extension of our offer to the extent required by law.
We may, without the consent of Splash, extend our offer beyond October 13,
2000, if, on October 13, 2000, any of the conditions to our offer, are not
satisfied or waived, until that condition is satisfied or waived (except that
the Minimum Condition may not be waived). We have agreed to extend our offer
from time to time until December 31, 2000 if, and to the extent that, at the
Expiration Date, the conditions to our offer have not been satisfied or waived.
Furthermore, if at December 31, 2000, the Antitrust Condition is the only
condition to our offer which is not then satisfied or waived, we agreed to
extend the Expiration Date from time to time until February 28, 2001. During an
extension for these reasons, all shares previously tendered and not withdrawn
will remain subject to our offer and you will continue to have the right to
withdraw your tendered shares. See Section 4.
We may extend our offer after the acceptance of shares for a further period
of time by means of a subsequent offering period under Rule 14d-11 under the
Exchange Act, of not more than twenty business days to meet the objective that
there be validly tendered and not withdrawn prior to the Expiration Date (as so
extended) a number of shares which, together with shares then owned by EFI and
us, represents at least 90% of the outstanding shares. If, during an extension
for this purpose, you have previously tendered your shares, you will not be
able to withdraw your shares. Under no circumstances will interest be paid on
the purchase price for tendered shares, whether or not our offer is extended.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by our Depositary at one of its addresses
set forth on the back cover page of this document. Any 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
the shares, if different from that of the person who tendered the shares. If
stock certificates evidencing shares to be withdrawn have been delivered or
otherwise identified to our Depositary, then, prior to the physical release of
the stock certificates, the serial numbers shown on the stock certificates must
be submitted to our Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an eligible guarantor institution, unless the shares have
been tendered for the account of an eligible guarantor institution. If shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in Section 3, any notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawn shares.
We will determine, in our sole discretion, all questions as to the form and
validity (including time of receipt) of any notice of withdrawal. Our
determination will be final and binding. Neither we, EFI nor any of EFI's or
our respective affiliates or assigns, our Depositary, our Information Agent, or
any other
12
<PAGE>
person will be under any duty to give any notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any notification.
Withdrawals of shares may not be rescinded. If you have properly withdrawn
shares they will be deemed not to have been validly tendered for purposes of
our offer. However, withdrawn shares may be re-tendered at any time prior to
the Expiration Date by following one of the procedures described in Section 3.
5. Material Federal Income Tax Consequences.
The following is a summary of the principal U.S. federal income tax
consequences of our offer and the merger to holders whose shares are purchased
pursuant to our offer or whose shares are converted into the right to receive
cash in the merger (whether upon receipt of the merger consideration or
pursuant to the proper exercise of dissenter's rights). The discussion applies
only to holders of shares in whose hands shares are capital assets, and may not
apply to shares received pursuant to the exercise of employee stock options or
otherwise as compensation, or to holders of shares who are not citizens or
residents of the United States of America, who hold their shares as part of an
integrated investment (including a "straddle"), who are subject to alternative
minimum tax or who are subject to special rules, such as financial institutions
or insurance companies.
The tax discussion set forth below is included for general information
purposes only and is based upon present law. Because individual circumstances
may differ, you should consult your own tax advisor to determine the
applicability of the rules discussed below to you and the particular tax
effects of our offer and the merger, including the application and effect of
other federal, state, local and other tax laws.
The receipt of payment for shares accepted in our offer and the receipt of
cash pursuant to the merger (whether as merger consideration or pursuant to the
proper exercise of dissenter's rights) will be a taxable transaction for
federal income tax purposes (and also may be a taxable transaction under
applicable state, local and other income tax laws). In general, for federal
income tax purposes, a holder of shares will recognize gain or loss equal to
the difference between the holder's adjusted tax basis in the shares sold
pursuant to our 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 our offer or converted to cash in the merger. The gain or loss will
be capital gain or loss. Individual holders generally will be subject to tax on
the net amount of the gain at a maximum rate of 20% if the holder's holding
period for the shares exceeds 12 months. The deduction of capital losses is
subject to limitations.
Payments in connection with our offer or the merger may be subject to backup
withholding at a 31% rate. Backup withholding generally applies if you (1) fail
to properly furnish a social security number or taxpayer identification number,
or (2) furnish an incorrect social security number or taxpayer identification
number. Backup withholding is not an additional tax but merely an advance
payment of tax, which may be refunded to the extent it results in an
overpayment. Some persons, including corporations and financial institutions
generally, are exempt from backup withholding. Penalties apply for failure to
furnish correct information and for failure to include the reportable payments
in income. You should consult with your own tax advisor as to your
qualifications for exemption from withholding and the procedure for obtaining
such exemption.
13
<PAGE>
6. Price Range of Splash's Common Stock.
Shares of common stock, par value $0.001 per share, of Splash, are listed
and principally traded on the Nasdaq National Market. The following table sets
forth, for the quarters indicated, the high and low sales prices per share on
the Nasdaq National Market.
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
1998:
First Quarter.................................................. $23.81 $11.00
Second Quarter................................................. 21.38 15.00
Third Quarter.................................................. 25.13 13.13
Fourth Quarter................................................. 14.25 6.50
1999:
First Quarter.................................................. 10.31 6.00
Second Quarter................................................. 9.63 5.56
Third Quarter.................................................. 7.88 5.67
Fourth Quarter................................................. 9.50 5.44
2000:
First Quarter.................................................. 18.00 7.88
Second Quarter................................................. 14.50 7.25
Third Quarter (through September 11, 2000)..................... 9.81 6.63
</TABLE>
On August 30, 2000, the last full trading day prior to the announcement of
the execution of the merger agreement and of our intention to commence our
offer, the closing price per share, as reported on the Nasdaq National Market,
was $7.0625. On September 11, 2000, the closing price per share, as reported on
the Nasdaq National Market, was $9.00. As of September 11, 2000, the
approximate number of recordholders of the shares was 134.
You are urged to obtain a current market quotation for the shares.
7. Information Concerning Splash.
Except as otherwise set forth in this document, all of the information
concerning Splash contained in this document, including financial information,
has been furnished by Splash or has been taken from or based upon publicly
available documents and records on file with the SEC and other public sources.
Neither we nor EFI assume any responsibility for the accuracy or completeness
of the information concerning Splash furnished by Splash or contained in those
documents and records or for any failure by Splash to disclose events which may
have occurred or may affect the significance or accuracy of any of that
information but which are unknown to us or EFI.
General. Splash, through its wholly-owned subsidiaries, develops, produces
and markets color servers, which consist of computer hardware and software
systems that provide an integrated link between desktop computers and digital
color copiers and enable such copiers to provide high speed and quality
networked color printing and scanning. Splash sells, through its wholly owned
subsidiaries substantially all of its color servers through two original
equipment manufacturers which integrate Splash's color servers into connected
digital color photocopier systems, which are sold to end users in North and
South America, Europe, Asia, Australia, Japan, New Zealand, Africa and the
Middle East. Splash operates in one business segment.
Splash's executive offices are located at 555 Del Rey Avenue, Sunnyvale, CA
94085, and its telephone number is (408) 328-6300.
Available Information. Splash 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 SEC
relating to its business, financial condition and other matters. Information as
of particular dates concerning Splash's directors and executive officers, their
remuneration, stock options granted to them, the principal holders of Splash's
securities and any
14
<PAGE>
material interest of such persons in transactions with Splash is required to be
disclosed in proxy statements distributed to Splash's stockholders and filed
with the SEC. Such reports, proxy statements and other information should be
available for inspection at the public reference facilities maintained by the
SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet
site (http://www.sec.gov) that contains reports, proxy and information
statements, and other information regarding Splash. You can also get
information about Splash from Splash's website at http://www.splashtech.com.
8. Information Concerning Us and EFI.
The Purchaser. We are a newly incorporated Delaware corporation organized in
connection with our offer and the merger, and we have not carried on any
activities other than in connection with our offer and the merger. We are a
wholly owned subsidiary of EFI. Until immediately prior to the time that we
will purchase shares pursuant to our offer, it is not anticipated that we will
have any significant assets or liabilities or engage in activities other than
those incident to our formation and capitalization and the transactions
contemplated by our offer and the merger. Because we are a newly formed and
have minimal assets and capitalization, no meaningful financial information
regarding us is available.
EFI. EFI is a Delaware corporation that was founded in 1989 by Efraim Arazi.
EFI designs and markets products that support color and black-and-white
printing on a variety of peripheral devices. Its Fiery(R) products incorporate
proprietary hardware and software technologies that transform digital copiers
and printers from many leading copier manufacturers into fast, high-quality
networked printers. EFI's two main product lines include: (1) stand-alone
servers, which are connected to digital copiers and other peripheral devices,
and (2) controllers, which are embedded in digital copiers and desktop color
laser printers. EFI sells it products primarily to original equipment
manufacturers in North America, Europe and Japan. EFI's common stock is traded
on the Nasdaq National Market under the symbol "EFII." Our and EFI's principal
offices are located at 303 Velocity Way, Foster City, California, 94404 and
their telephone number is (650) 357-3500. You can get additional information
about EFI from EFI's website at http://www.efi.com. Information on the website
is not part of this document.
Directors and Executive Officers of EFI. The following table sets forth the
name, current business address, and present principal occupation or employment,
and material occupations, positions, offices or employments and business
addresses thereof for the past five years of each director and executive
officer of EFI. With the exception of Jean-Louis Gassee, who is a citizen of
France, each of these people is a citizen of the United States of America. The
current business address of each person is in care of EFI, 303 Velocity Way,
Foster City, California 94404.
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Material Positions Held During the Past Five Years
Name and Age and Business Addresses
------------ ----------------------------------------------------
<S> <C>
Gill Cogan, 47............. Mr. Cogan is currently a director of EFI. Mr. Cogan
has been a managing director of Weiss, Peck & Greer,
L.L.C., an investment company located in San
Francisco, California since 1992, and has also been
a general partner of Weiss, Peck & Greer Venture
Partners, L.P located in San Francisco, California
since 1991. Mr. Cogan is currently a director of
Airgate PCS and several privately held companies.
Jean-Louis Gassee, 56...... Mr. Gassee is currently a director of EFI. Mr.
Gassee is currently chief executive officer of Be
Inc., a personal computer technology company located
in Menlo Park, California, which he joined in 1990.
Mr. Gassee is a director of Logitech and 3Com
Corporation.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Material Positions Held During the Past Five Years
Name and Age and Business Addresses
------------ ----------------------------------------------------
<S> <C>
Guy Gecht, 35............. Mr. Gecht is currently a director of EFI. Mr. Gecht
was appointed Chief Executive Officer of EFI as of
January 1, 2000. From July 1999 to January 2000, he
served as President of EFI. From January 1999 to
July 1999, he was Vice President and General Manager
of Server Products of EFI. From October 1995 through
January 1999, he served as Director of Software
Engineering of EFI.
James S. Greene, 46....... Mr. Greene is currently a director of EFI. Mr.
Greene has been President and CEO of
perksatwork.com., a privately held enterprise
solution software company located in San Francisco,
California since February 2000. Mr. Greene was with
Andersen Consulting from August 1979 until February
2000. In the last three years he served as managing
partner of Andersen's ".com" business in the
Americas. In addition, he was the managing partner
of Andersen's Western Region business. Mr. Greene
serves on the advisory board of five start-ups
including Achex, OnePage.com, PlanetRX, Billpoint
and PurpleTie.com.
Dan Maydan, 64............ Dr. Maydan is currently a director of EFI. Dr.
Maydan has been President of Applied Materials Inc.,
a semiconductor manufacturing equipment company
located in Santa Clara, California since January
1994 and a member of its board of directors since
June 1992. Dr. Maydan currently serves on the board
of directors of Drexler Technology, and Komatsu
Electronics' advisory board. In addition, he serves
on the board of directors of the San Jose Symphony.
Fred Rosenzweig, 44....... Mr. Rosenzweig is currently a director of EFI. Mr.
Rosenzweig was appointed President of EFI as of
January 1, 2000. From July 1999 to January 2000, he
served as Chief Operating Officer of EFI. From
August 1998 to July 1999, Mr. Rosenzweig served as
Executive Vice President of EFI. From January 1995
to August 1998, Mr. Rosenzweig served as Vice
President, Manufacturing and Support of EFI.
Thomas I. Unterberg, 69... Mr. Unterberg is currently a director of EFI. Mr.
Unterberg is the co-founder and has served as a
managing director of C.E. Unterberg Towbin, an
investment banking firm located in New York, New
York, since June 1989. Mr. Unterberg is also a
director of AES Corporation, Systems & Computer
Technology Corporation and ECCS, Inc.
Joseph Cutts, 37.......... Mr. Cutts was appointed Chief Financial Officer and
Corporate Secretary of EFI in April 2000. From
January 1999 until April 2000, Mr. Cutts served as
EFI's Vice President of Finance. From March 1997 to
January 1999, Mr. Cutts served as Director of
Finance of EFI. Mr. Cutts served as the Director of
Finance for the Nestle Beverage Company from June
1994 until he joined EFI in March 1997.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Material Positions Held During the Past Five Years
Name and Age and Business Addresses
------------ ----------------------------------------------------
<S> <C>
Janice Smith, 36........... Ms. Smith has served as Vice President, Marketing
and Human Resources of EFI since May 1998. From
October 1995 to May 1998, Ms. Smith served as Vice
President, Human Resources of EFI. From May 1993 to
October 1995, Ms. Smith served as Director of Human
Resources of EFI.
</TABLE>
Our Directors and Executive Officers. The following table sets forth the
name, age, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments and business addresses thereof for the past five years of each of
our directors and executive officers. All of our directors and executive
officers are citizens of the United States. Unless otherwise indicated, the
current business address of each person is Vancouver Acquisition Corp., 303
Velocity Way, Foster City, California 94404. Each occupation set forth opposite
an individual's name refers to employment with us, unless otherwise noted.
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Material Positions Held During the Past Five Years
Name and Age and Business Addresses
------------ ----------------------------------------------------
<S> <C>
Guy Gecht, 35.............. Mr. Gecht is the President of the Purchaser. Mr.
Gecht is currently a director of EFI and was
appointed Chief Executive Officer of EFI as of
January 1, 2000. From July 1999 to January 2000, he
served as President of EFI. From January 1999 to
July 1999, he was Vice President and General Manager
of Server Products of EFI. From October 1995 through
January 1999, he served as Director of Software
Engineering of EFI.
James Etheridge, 41........ Mr. Etheridge is the Vice President, Secretary and
General Counsel of the Purchaser. Mr. Etheridge has
served as Director of Strategic Relations and
General Counsel of EFI since June 1999. From October
1995 to June 1999, Mr. Etheridge held several
positions within the Strategic Relations department
of EFI.
</TABLE>
Except as described in this document, neither we nor EFI nor, to the best of
our and EFI's knowledge, any of our or EFI's directors or executive officers
has during the last five years (1) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (2) been a party to
any judicial or administrative proceeding (except for matters that were
dismissed without sanction or settlement) that resulted in a judgment, decree
or final order enjoining the person from future violations of, or prohibiting
activities subject to, federal or state securities laws or a finding of any
violation of such laws.
Current Ownership of Shares. Except as described in this document, (1)
neither we nor EFI nor, to the best of our and EFI's knowledge, any of our or
EFI's directors or executive officers or any associate or majority owned
subsidiary of ours or EFI's, beneficially owns or has any right to acquire any
shares and (2) neither we nor EFI nor, to the best of our and EFI's knowledge,
any of the persons or entities referred to above nor any director, executive
officer or subsidiary of any of these listed persons has effected any
transaction in the Splash's common stock during the past 60 days. Mr. Gecht
owns less than one percent of the outstanding shares. Please see Section 10 for
a description of the merger agreement and the voting agreement.
Past Contacts. Except as provided in the merger agreement and the voting
agreement and as otherwise described in this document, neither we nor EFI nor,
to the best of our and EFI's knowledge, any of our or EFI's directors or
executive officers, has any agreement, arrangement, understanding, whether or
not legally enforceable, with any other person with respect to any securities
of Splash, including, but not limited to, 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, consents or authorizations.
17
<PAGE>
Except as set forth in this document, since January 1, 1998, neither we nor
EFI nor, to the best of our and EFI's knowledge, any of our or EFI's directors
or executive officers, has had any transaction with Splash or any of its
executive officers, directors or affiliates that is required to be reported
under the rules and regulations of the SEC.
In early 1999, representatives from EFI and Splash briefly met to discuss a
potential transaction, but no meetings were held subsequently until July 2000,
when EFI and Splash began discussing a business combination which led to this
transaction. Except as set forth in the previous sentence, since January 1,
1998, there have been no other negotiations, transactions or material contacts
between us, EFI, or any of our or EFI's subsidiaries or, to the best of our and
EFI's knowledge, any of our or EFI's directors or executive officers, on the
one hand, and Splash or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer for or other acquisition of any
class of Splash's securities, an election of Splash's directors or a sale or
other transfer of a material amount of assets of Splash.
9. Financing of Our Offer and the Merger.
We estimate our total funds required to consummate our offer and the merger
is approximately $146 million. We estimate our related fees and expenses to be
approximately $800,000. We will obtain all funds from EFI. EFI will provide the
funds from its existing resources, and therefore, there are no financing
conditions which must be met prior to our receipt of the necessary funds.
10. Background of Our Offer; Contacts With Splash; Merger Agreement; Tender and
Voting Agreement; Exclusivity Agreement; Confidentiality Agreement;
Employment Offer Letters.
In June 2000, Mr. Joseph Cutts, EFI's chief financial officer, and Mr. Kevin
Macgillivray, Splash's chief executive officer, met each other for the first
time at a conference. In late July 2000, Mr. Cutts contacted Mr. Macgillivray
regarding a possible combination or acquisition. Both Splash and EFI sell color
server products, and each is very familiar with the other's business and
technologies.
To facilitate discussions between the parties, on August 9, 2000, Splash and
EFI entered into a mutual confidentiality and standstill agreement.
On August 14, 2000, representatives of Splash and EFI and their respective
counsel met formally for the first time to explore whether there was a possible
transaction between the parties. At this time, both companies acknowledged
their familiarity with each other's business and management exchanged limited
financial and other information.
During the weeks of August 14 and August 21, there were numerous discussions
and meetings between Splash's and EFI's management regarding a possible
transaction. At these meetings Splash's management indicated an interest in
receiving EFI's stock in a potential transaction and EFI indicated its
preference to pay cash for shares of Splash's stock.
On August 18, 2000, Mr. Macgillivray advised Mr. Guy Gecht, EFI's chief
executive officer, and Mr. Cutts of Splash's upcoming board of directors
meeting at which the board of directors would be reviewing with representatives
of TWP and Wilson Sonsini Goodrich & Rosati, P.C., Splash's outside counsel,
the status of its strategic options review. Among other things, Mr.
Macgillivray advised Mr. Gecht that he believed EFI should submit a term sheet
indicating the terms of any proposed transaction including a price range and
other material terms.
On August 22, 2000, EFI and its internal and outside legal counsel commenced
their due diligence of Splash.
On the afternoon of August 24, 2000, Mr. Gecht called Mr. Macgillivray
indicating that, subject to consummation of its ongoing due diligence and
negotiation of other satisfactory terms, EFI was interested in a cash
acquisition at a price range of $9 to $10 per share of Splash's common stock.
18
<PAGE>
Early in the morning of August 25, 2000, Mr. Macgillivray contacted Mr.
Gecht indicating that Splash's board of directors was not prepared to proceed
with discussions unless EFI delivered a more definitive proposal at a higher
acquisition price. He also advised Mr. Gecht that the economic terms of any
possible transaction were to be negotiated on behalf of the board of directors
by representatives of TWP with the assistance of Wilson Sonsini. Mr. Gecht
later informed Mr. Macgillivray that Mr. Thomas Unterburg, an EFI director, was
to be the individual with whom TWP's representative was to speak regarding the
possible transaction.
On the evening of August 25, 2000, EFI provided Splash's management with a
non-binding proposal indicating a cash price of $10 per share. The term sheet
also provided for, among other things, a 5% "break-up fee" (approximately
$7,350,000) required to be paid by Splash if Splash entered into an agreement
with respect to an acquisition proposal superior to EFI's offer or the board of
directors changed its recommendation in favor of EFI's offer in favor of a
competing transaction; a Splash "lock-up option" in favor of EFI to acquire
19.9% of the outstanding common stock at $10 per share; and an option by
Splash's officers and directors granting to EFI the right to acquire their
shares of common stock. The EFI proposal was conditioned on, among other
conditions, EFI's satisfactory completion of its due diligence and Splash's
agreement to negotiate any potential acquisition of Splash exclusively with EFI
until September 8, 2000, a roughly two-week period.
On August 26, 2000, a representative of TWP communicated to Mr. Unterburg,
EFI's representative, Splash's desire for a higher acquisition price comprised
of EFI stock and Splash's willingness to agree to an exclusivity period ending
on August 30, 2000. The TWP representative also indicated that the 5% break-up
fee, the 19.9% lock-up option and certain other provisions in the term sheet
were unacceptable from Splash's perspective. In response, Mr. Unterburg
indicated to the TWP representative that EFI was unwilling to pursue a stock
transaction and that $10 per share was the highest price that EFI was willing
to pay. Without agreeing to the terms of a possible acquisition, the parties
agreed to an exclusive negotiating period ending August 30, 2000.
During the night of August 26, 2000, the parties entered into the
exclusivity agreement.
On August 28, 2000, EFI's outside counsel, Brobeck, Phleger & Harrison LLP,
delivered a draft merger agreement. The draft agreement provided for $10 per
share in cash, extensive representations and warranties to be made by Splash;
numerous conditions to EFI's offer; an agreement by Splash not to solicit
third-party proposals to acquire the company; a 5% break-up fee; a 19.9% lock-
up option; and an option by Splash's officers and directors granting to EFI the
right to acquire their shares.
On August 28 and 29, 2000, Splash's and EFI's respective outside counsel
negotiated a number of the terms of the merger agreement making progress on the
scope of Splash's representations and warranties and the conditions to EFI's
proposed offer. The parties, however, did not progress on the break-up fee, the
19.9% lock-up option or the director/officer option.
During the day on August 30, 2000, Splash's and EFI's respective outside
counsel continued to negotiate the terms of the merger agreement. Early in the
evening on August 30th, representatives of Splash, EFI, TWP, Brobeck and Wilson
Sonsini met telephonically to negotiate and resolve outstanding issues on the
merger agreement and assist EFI in concluding its due diligence investigation
of Splash. During this meeting, the parties agreed to reduce the break-up fee
to $5,500,000, or approximately 3.75% of the transaction price, and EFI dropped
its requirements for the 19.9% lock-up and director/officer options.
During the evening of August 30, 2000, EFI's board of directors met
telephonically twice to discuss the proposed acquisition. During the meeting,
the board received presentations from management and Brobeck. After careful
consideration, EFI's board approved the proposed transactions.
During the night of August 30, 2000, we, Splash, and EFI executed the merger
agreement and simultaneously, we, EFI, the directors and several officers of
Splash executed the tender and voting agreement.
On September 14, 2000, we commenced our offer.
19
<PAGE>
The Merger Agreement
The following is a summary of the material provisions of the merger
agreement. This summary is qualified in its entirety by reference to the Merger
Agreement, which we incorporate by reference, and has been filed as an exhibit
to the Tender Offer Statement on Schedule TO filed with the SEC by us and EFI
in connection with our offer. The merger agreement may be examined and copies
may be obtained at the places set forth in Section 7 or downloaded at
http://www.sec.gov. Defined terms used in this discussion and not defined will
have the meanings given to those terms in the merger agreement.
Our Offer. The merger agreement provides for the commencement of our offer
within ten business days after the public announcement of the execution and
delivery of the merger agreement. Our obligation to accept for payment shares
tendered pursuant to our offer is subject to the satisfaction of the Minimum
Condition, the Antitrust Condition and the other conditions that are described
in Section 14. Subject to the applicable law and the terms and conditions of
the merger agreement, we and EFI expressly reserve the right to waive any of
these conditions in whole or in part, in our sole discretion, and also
expressly reserve the right to increase the price per share payable in our
offer and to make any other changes in the terms and conditions of our offer;
provided, however, that, without the written consent of Splash, we will not
amend or waive the Minimum Condition and will not decrease the number of shares
sought in our offer, change the form of or decrease the amount of consideration
to be paid, impose conditions to our offer in addition to those set forth in
Section 14, make any other change in our offer which is materially adverse to
you or extend our offer (except as permitted by the merger agreement).
The Merger. The merger agreement provides that, upon its terms and subject
to its conditions, and in accordance with Delaware law, we will merge with and
into Splash. As a result of the merger, our separate corporate existence will
cease and Splash will continue as the surviving corporation and will become a
wholly owned subsidiary of EFI. Upon consummation of the merger, each issued
and then outstanding share (other than any shares held in the treasury of
Splash, or owned by us, EFI or any direct or indirect wholly owned subsidiary
of EFI or of Splash and any shares that are held by stockholders who have not
voted in favor of the merger or consented thereto in writing and who will have
demanded appraisal in accordance with Delaware law) will be canceled and
converted automatically into the right to receive the merger consideration,
which will be equal to the consideration paid pursuant to our offer.
Pursuant to the merger agreement, each share of our common stock which is
issued and outstanding immediately prior to the effective time of the merger
will be converted into and exchanged for one validly issued, fully paid and
non-assessable share of common stock, par value $.001 per share, of Splash, the
surviving corporation.
The merger agreement provides that our directors and officers will be the
directors and officers of Splash after the merger. Subject to the merger
agreement, our certificate of incorporation, as in effect immediately prior to
the effective time of the merger, will be the certificate of incorporation of
Splash after the merger. Subject to the merger agreement, our bylaws, as in
effect immediately prior to the effective time of the merger, will be the
bylaws of Splash after the merger.
Stockholders' Meeting. If required by applicable law in order to consummate
the merger, Splash, acting through its board of directors, will, in accordance
with applicable law, duly call, give notice of, convene and hold a special
meeting of its stockholders as promptly as practicable following our acceptance
for payment and purchase of shares pursuant to our offer for the purpose of
considering and taking action upon the adoption of the merger agreement. If we
acquire at least a majority of the outstanding shares in our offer, we will
have sufficient voting power to approve the merger without needing other
stockholders to vote in favor of the merger. We and EFI have agreed to vote all
shares then owned by us and our subsidiaries in favor of adoption of the merger
agreement. The merger agreement provides that, in the event that we acquire at
least 90% of the then outstanding shares, we, EFI and Splash will take all
necessary and appropriate action to cause the merger to become effective, in
accordance with Delaware law, as promptly as reasonably practicable after our
acquisition of 90% of the then outstanding shares, without a meeting of
Splash's stockholders.
20
<PAGE>
Proxy Statement. If required by applicable law in order to consummate the
merger, Splash, acting through its board of directors, will, in accordance with
applicable law,
. prepare and file with the SEC a preliminary proxy or information
statement relating to the merger and the merger agreement;
. after consultation with EFI, respond promptly to any comments made by the
SEC or its staff;
. mail the proxy statement to its stockholders;
. use its best efforts to solicit proxies in favor of the adoption of the
merger agreement; and
. take all other action necessary or advisable to secure any vote or
consent of stockholders required by Delaware law to effect the merger.
Splash has agreed to include in the proxy statement the recommendation of
its board of directors of Splash that you vote in favor of the adoption of the
merger agreement.
Conduct of Business by Splash pending the Merger. In the merger agreement,
Splash agreed that between August 30, 2000 and the date on which EFI appoints a
majority of the members of the board of directors of Splash, except as
expressly contemplated by the merger agreement or as agreed in writing by EFI
(which agreement will not be unreasonably withheld or delayed):
. the business of Splash and each of the subsidiaries of Splash will be
conducted only in the ordinary course and substantially in the same
manner as previously conducted, and Splash and each subsidiary of Splash
will use its commercially reasonable efforts to preserve its business
organization intact, keep available the services of its current officers
and employees and maintain its existing relations with franchisees,
customers, suppliers, creditors, business partners and others having
business dealings with it;
. neither Splash nor any subsidiary of Splash will: (1) amend its
certificate of incorporation or by-laws or similar organizational
documents, (2) issue, sell, transfer, pledge, dispose of or encumber any
shares of any class or series of its capital stock or voting debt, or
securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of any
class or series of its capital stock or any voting debt, other than
shares reserved for issuance on August 30, 2000 pursuant to the exercise
of options and purchase rights under Splash's Employee Stock Purchase
Plan outstanding on August 30, 2000, (3) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with
respect to any shares of any class or series of its capital stock, (4)
split, combine or reclassify any shares of any class or series of its
stock or (5) redeem, purchase or otherwise acquire directly or indirectly
any shares of any class or series of its capital stock, or any instrument
or security which consists of or includes a right to acquire such shares
(other than repurchases of restricted stock at cost pursuant to
agreements outstanding on August 30, 2000 or entered into after August
30, 2000 in compliance with the provisions of the merger agreement);
. neither Splash nor any subsidiary of Splash will (1) incur or modify any
indebtedness or other liability, other than in the ordinary and usual
course of business and consistent with past practice or (2) modify, amend
or terminate any of its material contracts or waive, release or assign
any material rights or claims, except in the ordinary course of business
and consistent with past practice;
. neither Splash nor any subsidiary of Splash will (1) incur or assume any
long-term debt, or except in the ordinary course of business, incur or
assume any short-term indebtedness in amounts not consistent with past
practice; (2) modify the terms of any indebtedness or other liability,
other than modifications of short term debt in the ordinary and usual
course of business and consistent with past practice; (3) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
Person, except in certain circumstances; (4) make any loan, advance or
capital contribution to, or investment in, any other person (other than
to or in wholly owned subsidiary of Splash); or (5) enter into any
material commitment or transaction (including any capital expenditure or
purchase, sale or lease of assets or real estate) with a value of
$250,000 for any individual commitment or transaction or an aggregate
value of $1,500,000 for all commitments or transactions;
21
<PAGE>
. neither Splash nor any subsidiary of Splash will transfer, lease,
license, sell, mortgage, pledge, dispose of, or encumber any assets which
are material, individually or in the aggregate, to the business of Splash
and subsidiary of Splash, taken as a whole, other than in the ordinary
and usual course of business and consistent with past practice;
. except as otherwise specifically provided in the merger agreement or in
the Schedule 14D-9, neither Splash nor any subsidiary of Splash will make
or offer to make any change in the compensation payable or to become
payable to any of its officers, directors, employees, agents or
consultants (other than normal recurring increases in wages to employees
who are not officers or directors or affiliates in the ordinary course of
business and consistent with past practice) or to persons providing
management services, or enter into or amend any employment, severance,
consulting, termination or other agreement or employee benefit plan or
make any loans to any of its officers, directors, employees, affiliates,
agents or consultants or make any change in its existing borrowing or
lending arrangements for or on behalf of any of such persons pursuant to
a benefit plan of Splash or otherwise;
. except as otherwise specifically contemplated by the merger agreement or
by the Schedule 14D-9, neither Splash nor any subsidiary of Splash will
(1) pay or make any accrual or arrangement for payment of any pension,
retirement allowance or other employee benefit pursuant to any existing
plan, agreement or arrangement to any officer, director, employee or
affiliate (except payments and accruals made in the ordinary course of
business consistent with past practice), (2) pay, offer to pay or agree
to pay or make any accrual or arrangement for payment to any officers,
directors, employees or affiliates of Splash or any subsidiary of Splash
of any amount relating to unused vacation days (except payments and
accruals made in the ordinary course of business consistent with past
practice), (3) adopt or pay, grant, issue, accelerate or accrue salary or
other payments or benefits pursuant to any benefit plan, agreement or
arrangement, or amend in any material respect any existing plan,
agreement or arrangement in a manner inconsistent with the foregoing;
. except as may be required by applicable law, neither Splash nor any
subsidiary of Splash will enter into, adopt or amend or terminate any
benefit plan, agreement or arrangement;
. neither Splash nor any subsidiary of Splash will exercise its discretion
or otherwise voluntarily accelerate the vesting of any option as a result
of the merger or any other "change in control" of Splash or otherwise;
. neither Splash nor any subsidiary of Splash will revalue in any material
respect any of its assets, including writing down the value of inventory
or writing-off notes or accounts receivable, other than in the ordinary
course of business consistent with past practice or as required by
generally accepted accounting principles;
. neither Splash nor any subsidiary of Splash will settle or compromise any
pending or threatened suit, action or claim that (1) relates to the
transactions contemplated by the merger agreement or (2) the settlement
or compromise of which would involves more than $250,000 and does not
obligate Splash to take or refrain from taking any action other than the
payment of the sum or that would otherwise be material to Splash and the
subsidiaries of Splash, taken as a whole, or that relates to any
intellectual property matters;
. neither Splash nor any subsidiary of Splash will pay, purchase, discharge
or satisfy any of its claims, liabilities or obligations, other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice, of claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the financial
statements or incurred, after August 30, 2000, in the ordinary course of
business;
. neither Splash nor any subsidiary of Splash will adopt a plan of complete
or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of Splash or any
subsidiary of Splash (other than the merger);
22
<PAGE>
. neither Splash nor any subsidiary of Splash will (1) change any of the
accounting methods used by it unless required by GAAP or (2) make any
material election relating to taxes, change any material election
relating to taxes already made, adopt any material accounting method
relating to taxes, change any material accounting method relating to
taxes unless required by generally accepted accounting principles or
change in the U.S. tax laws, enter into any closing agreement relating to
taxes, settle any claim or assessment relating to taxes or consent to any
claim or assessment relating to taxes or any waiver of the statute of
limitations for any such claim or assessment;
. neither Splash nor any subsidiary of Splash will take, or agree to commit
to take, any action that could or would be reasonably likely to result in
any of the conditions to our offer or any of the conditions to the merger
not being satisfied, or that would materially impair the parties' ability
to consummate our offer or the merger in accordance with its terms or
materially delay such consummation; and
. neither Splash nor any subsidiary of Splash will enter into an agreement,
contract, commitment, understanding or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention
to do any of the foregoing.
Board Representation. The merger agreement provides that promptly after the
later to occur of (1) the purchase of and payment for any shares by EFI or any
of its subsidiaries as a result of which EFI and its subsidiaries own
beneficially at least a majority of the then outstanding shares and (2)
compliance with Section 14(f) of the Exchange Act, and Rule 14f thereunder, EFI
will be entitled to designate up to the number of directors, rounded up to the
next whole number, on Splash's board of directors as will give EFI
representation proportionate to the percentage of the total outstanding number
of shares that we or any of our affiliates beneficially owns. Splash will, upon
request of EFI, use its reasonable best efforts promptly either to increase the
size of its board of directors or to secure the resignations of some of its
incumbent directors, or both as is necessary to enable EFI's designees to be so
elected or appointed to Splash's board of directors, and Splash will take all
actions available to Splash to cause EFI's designees to be so elected or
appointed at that time. At that time, Splash will, if requested by EFI, also
take all action necessary to cause EFI's designees to have the same percentage
representation on each committee of Splash's board of directors; each board of
directors (or similar body) of each subsidiary of Splash; and each committee
(or similar body) of each its and its subsidiaries' board of directors.
If EFI's designees are elected or appointed to Splash's board of directors,
the board must (until the effective time of the merger) include at least two
directors who are independent, and the affirmative vote of a majority of those
independent directors is required after the acceptance for payment of shares
pursuant to our offer and prior to the effective time of the merger, before
Splash (1) amends or terminates the merger agreement, (2) exercises or waives
any of its rights, benefits or remedies contained in the merger agreement if
the exercise or waiver adversely affects stockholders (other than EFI or us) or
(3) takes any other action under or in connection with the merger agreement if
the action adversely affects stockholders (other than EFI or us).
Access to Information. Splash has agreed to (and will cause each of its
subsidiaries to) give the officers, employees, accountants, counsel and other
representatives of EFI, full access to all its properties, books, contracts,
commitments and records, and, during the period, Splash will (and will cause
each of its subsidiaries to) furnish promptly to EFI a copy of each report,
schedule, registration statement and other document filed or received by it
during the period pursuant to the requirements of federal securities laws and
all other information concerning its business, properties and personnel as EFI
reasonably requests. We and EFI have agreed to keep such information
confidential, except in certain circumstances.
No Solicitation of Transactions. In the merger agreement, Splash agreed to
immediately cease any and all existing activities, discussions or negotiations
with any and all parties conducted prior to August 30, 2000 with respect to any
Acquisition Proposal.
An "Acquisition Proposal" means any proposal or offer to acquire (i) all or
greater than 15% of the business or properties of Splash or any subsidiary of
Splash, whether by merger, tender offer, exchange offer, sale of assets,
consolidation, other business combination, recapitalization, reorganization,
liquidation,
23
<PAGE>
dissolution or other transactions involving Splash, any subsidiary of Splash,
any division or operating or principal business unit of Splash or any
subsidiary of Splash or (ii) 15% or more of the capital stock or other equity
interests in Splash or any subsidiary of Splash.
As a general rule, Splash agreed that neither Splash nor any subsidiary of
Splash or affiliate of Splash will (and that Splash would cause the officers,
directors, employees, representatives and agents of Splash, each subsidiary of
Splash and each affiliate of Splash, including investment bankers, attorneys
and accountants, not to), directly or indirectly, encourage, solicit,
participate in or initiate or resume (including by way of furnishing or
disclosing non-public information) or facilitate any discussions, inquiries,
negotiations or the making of any proposals with respect to or concerning any
Acquisition Proposal.
However, prior to the time of acceptance of shares for payment pursuant to
our offer, Splash may furnish information concerning its business, properties
or assets to any person or group pursuant to appropriate confidentiality
agreements, and may negotiate and participate in discussions and negotiations
with the entity or group concerning an Acquisition Proposal if the entity or
group has, on an unsolicited basis, submitted a bona fide Acquisition Proposal
in writing to the board of directors of Splash which:
(1) the board of directors of Splash determines in good faith,
consistent with advice of an independent investment banker (a) is capable
of being and likely to be funded on the disclosed terms and (b) is likely
to be consummated in accordance with its terms; and
(2) the board of directors of Splash determines in good faith (a) after
consultation with outside legal counsel, that failure to take action would
likely be contrary to its fiduciary duties to Splash's stockholders under
applicable law and (b) that the Acquisition Proposal is superior, from a
financial point of view, to the transactions with EFI and us, after taking
into account, and consistent with advice, of TWP as to superiority of the
Acquisition Proposal.
Splash will promptly, and in any event within twenty-four hours, notify EFI
of the receipt of any proposal, discussion, negotiation or inquiry received by
Splash, any subsidiary of Splash or any of their respective representatives,
and Splash will promptly, and in any event within twenty-four hours,
communicate to EFI the terms of any proposal, discussion, negotiation or
inquiry which it, any subsidiary of Splash or any of their respective
representatives may receive (and will promptly, and in any event within twenty-
four hours, provide to EFI copies of any written materials received by Splash,
any subsidiary of Splash or their respective representatives in connection with
the proposal, discussion, negotiation or inquiry) and the identity of the party
making the proposal or inquiry or engaging in a discussion or negotiation.
Splash will promptly provide to EFI any non-public information concerning
Splash provided to any other party which was not previously provided to EFI.
As a general rule, neither Splash's board of directors, nor any committee of
the board, can:
(1) withdraw or modify, or propose to withdraw or modify, or take any
action in furtherance of the withdrawal or modification, in a manner
adverse to EFI or us, the approval or recommendation of our offer, the
merger agreement or the merger,
(2) approve or recommend or propose to approve or recommend or take any
action in furtherance of approval of recommendation of, any Acquisition
Proposal or
(3) enter into any agreement with respect to any Acquisition Proposal.
However, prior to the time of acceptance for payment of shares pursuant to
our offer, Splash's board of directors may withdraw or modify its approval or
recommendation of our offer, the merger agreement or the merger, approve or
recommend a Superior Proposal, or enter into an agreement with respect to a
Superior Proposal, in each case at any time after the second business day
following EFI's receipt of written notice from Splash advising EFI that the
board of directors of Splash has received a Superior Proposal which it intends
to accept, specifying the terms and conditions of the Superior Proposal and
identifying the Person making the Superior Proposal.
24
<PAGE>
A "Superior Proposal" means an unsolicited Acquisition Proposal (but
changing the 15% amount in clause (a)(ii) of the definition of Acquisition
Proposal to 50%) not resulting from, arising out of or otherwise by virtue of
any breach of the non-solicitation provisions of the merger agreement which (1)
has been submitted, in writing, to the board of directors of Splash which the
board of directors of Splash determines in good faith, consistent with advice
of an independent investment banker, (A) is capable of being and likely to be
funded on the disclosed terms and (B) is likely to be consummated in accordance
with its terms; and (2) the board of directors of Splash determines in good
faith (a) after consultation with outside legal counsel, that failure to take
action would likely be contrary to its fiduciary duties to Splash's
stockholders under applicable law and (b) that the Acquisition Proposal is
superior, from a financial point of view, to the transactions with EFI and us,
after taking into account and consistent with advice of TWP as to superiority
of the Acquisition Proposal.
Splash agreed not to (1) enter into any agreement, arrangement or
understanding with any third party providing for the payment of fees or
reimbursement of expenses in the event EFI makes a proposal in response to the
Superior Proposal or (2) enter into any agreement with respect to a Superior
Proposal unless and until the merger agreement is terminated and Splash has
paid the termination fee due to EFI.
The merger agreement does not prohibit Splash or Splash's board of directors
from (1) taking and disclosing to Splash's stockholders a position with respect
to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-
2 under the Exchange Act, or (2) making disclosure to Splash's stockholders if,
as and when the board of directors of Splash determines in good faith, after
consultation with outside counsel, that disclosure is required in order to
comply with their fiduciary duties to Splash's stockholders under applicable
law; provided, however, that Splash will not, except as permitted by the merger
agreement, withdraw or modify, or propose to withdraw or modify, its position
with respect to our offer or the merger or approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal, or enter into any
agreement with respect to any Acquisition Proposal.
Treatment of Stock Options. The merger agreement provides that at the
effective time of the merger or, if less than 90% of the outstanding shares on
a fully-diluted basis are accepted for purchase in our offer, upon our purchase
of shares pursuant to our offer, each stock option of Splash which is then
outstanding and unexercised will be converted into options to purchase common
stock of EFI; provided, however, that the terms of the option will be adjusted
as follows:
. the number of shares of common stock purchasable upon exercise of the
assumed option will be equal to the number of shares that were
purchasable under the assumed option multiplied by the number obtained
when dividing our offer price by the average of the closing prices of EFI
common stock during the ten consecutive trading days ending on and
including the third trading day immediately prior to the day during which
the closing of the merger occurs, and rounded down to the nearest whole
share, and
. the per share exercise price under each the assumed option will be
adjusted by dividing the per share exercise price of each the assumed
option by the number obtained when dividing our offer price by the
average of the closing prices of EFI common stock during the ten
consecutive trading days ending on and including the third trading day
immediately prior to the day during which the closing of the merger
occurs, and rounding up to the nearest cent.
EFI has agreed to register the shares of its common stock subject to the
assumed options under the Securities Act pursuant to a registration statement
on Form S-8.
Directors' and Officers' Indemnification. In the merger agreement, EFI
agreed that for six years after the effective time of the merger, EFI will, and
will cause Splash to, as a surviving corporation (or any successor), indemnify,
defend and hold harmless each present and former officer and director of Splash
or the subsidiaries of Splash against all losses arising out of actions or
omissions occurring at or prior to the effective time of the merger to the full
extent required under applicable Delaware law, the terms of Splash's
certificate of incorporation, Splash's indemnification agreements, or Splash's
by-laws, as in effect on August 30, 2000, but, if any claim or claims are
asserted or made within the six-year period, all rights to indemnification in
respect of the claim or claims will continue until disposition of any and all
claims.
25
<PAGE>
EFI or Splash, as the surviving corporation, will maintain Splash's existing
officers' and directors' liability insurance for the six years following the
effective date of the merger. EFI may substitute policies with substantially
equivalent coverage and amounts which contain terms no less favorable to the
former directors or officers. In no event will EFI or Splash be required to pay
aggregate annual directors and officers insurance premiums in excess of 150% of
the aggregate premiums paid by Splash in the twelve months prior to August 30,
2000, on an annualized basis; but if EFI or Splash is unable to obtain the
amount of insurance required by the merger agreement for the aggregate annual
premium, EFI or Splash will obtain as much insurance as can be obtained for an
annual premium not in excess of 150% of the aggregate directors and officers
insurance premiums paid by Splash in the twelve months prior to August 30,
2000, on an annualized basis.
Representations and Warranties. The merger agreement contains various
customary representations and warranties of the parties thereto including
representations by Splash as to its organization and qualification, its
subsidiaries, capitalization, authorization of the execution of the merger
agreement, receipt of board approval, the vote required for adoption of the
merger agreement, the necessary consents and approvals, reports it filed with
the SEC, its financial statements, undisclosed liabilities, interim operations,
absence of changes since December 31, 1999, litigation, employee benefit plans,
tax matters, leases, environmental issues, intellectual property, employment
matters, compliance with laws, contracts, opinion of TWP, brokers and finders,
the absence of questionable payments, the information contained in its Schedule
14D-9 and the Rights Agreement, dated as of January 27, 1999, between Splash
and BankBoston, N.A.
Conditions to the Merger. Under the merger agreement, the respective
obligations of each party to effect the merger are subject to the satisfaction,
at or prior to the effective time of the merger, of the following conditions:
. the merger agreement has been adopted by the requisite vote of the
stockholders, if required by applicable law, in order to consummate the
merger;
. no statute, rule or regulation has been enacted or promulgated by any
governmental entity which prohibits the consummation of the merger, and
there is no order or injunction of a court of competent jurisdiction in
effect precluding consummation of the merger;
. We, EFI, or any of our affiliates has purchased the shares pursuant to
our offer;
. any governmental or regulatory notices, approvals or other requirements
necessary to consummate the transactions contemplated by the merger
agreement and to operate the business of Splash and the subsidiaries of
Splash after the effective time of the merger in all material respects as
it was operated prior thereto has been given, obtained or complied with,
as applicable;
. the applicable waiting period under the U.S. antitrust laws have expired
or been terminated; and
. the proxy statement, if required to be prepared and disseminated to
Splash's stockholders, have been cleared by the SEC and not be the
subject of any stop order.
Termination. The transactions contemplated by the merger agreement may be
terminated or abandoned at any time prior to the effective time of the merger,
whether before or after stockholder approval is obtained:
. by the mutual written consent of EFI and Splash;
. by either of Splash or EFI:
. if either our offer expired and we did not purchase any shares or we
did not accept any shares pursuant to our offer prior to December 31,
2000 (or February 28, 2001, if extended by Splash or EFI in accordance
with the merger agreement); or
. if any governmental entity has issued an order, decree or ruling or
taken any other action (which order, decree, ruling or other action the
parties hereto will use their reasonable efforts to lift), which
permanently restrains, enjoins or otherwise prohibits the acceptance
for payment of, or payment for,
26
<PAGE>
shares pursuant to our offer or the merger and such order, decree,
ruling or other action has become final and non-appealable.
. by Splash:
. if our offer is not commenced within ten business days following the
date of the initial public announcement of our offer (unless Splash is
at that time in material breach of its obligations under the merger
agreement);
. if Splash's board of directors withdraws or modifies its approval or
recommendation of our offer, the merger agreement or the merger,
approves or recommends a Superior Proposal, or enters into an agreement
with respect to a Superior Proposal, in each case at any time after the
second business day following EFI's receipt of written notice from
Splash advising EFI that the board of directors of Splash has received
a Superior Proposal which it intends to accept, specifying the terms
and conditions of the Superior Proposal and identifying the person
making the Superior Proposal, but only if Splash makes simultaneous
payment to EFI of the termination fee; or
. if we or EFI has breached in any material respect any of our respective
representations, warranties, covenants or other agreements contained in
the merger agreement and (1) the breach is not curable or (2) ten
business days have elapsed subsequent to notice to EFI or us of the
breach and the breach has not been cured within that ten business day
period.
. by EFI (on behalf of itself and us):
. if, due to an occurrence, not involving a breach by EFI or us of our
obligations under the merger agreement, which makes it impossible to
satisfy any of the conditions to our offer, our offer is not commenced
within ten business days following the date of the initial public
announcement of our offer;
. if, prior to our purchase of shares pursuant to our offer, Splash's
board of directors withdraws, modifies or changes in a manner adverse
to EFI or us its approval or recommendation of our offer, the merger
agreement or the merger or recommends an Acquisition Proposal or
executes a letter of intent, agreement in principle or definitive
agreement relating to an Acquisition Proposal; or
. if, prior to the purchase of shares pursuant to our offer, Splash has
breached any representation, warranty, covenant or other agreement
contained in the merger agreement which would give rise to the failure
of the conditions to our offer and (1) the breach is not curable or (2)
ten business days have elapsed subsequent to the date on which Splash
received notice of the breach and the breach has not been cured within
that ten business day period.
Effect of Termination. In the event of the termination or abandonment of the
transactions contemplated by the merger agreement pursuant to the terms of the
merger agreement, there will be no liability on the part of EFI or Splash
except (1) for fraud or for willful material breach of the merger agreement
prior to the termination or abandonment and (2) for fees, as described below,
or (3) for Splash's breach of the access and confidentiality covenant outlined
in the merger agreement.
Fees. The merger agreement provides that Splash must pay EFI $5,500,000:
. concurrently with the execution of an agreement or acceptance of a
Superior Proposal, if Splash or EFI terminates or abandons the
transactions contemplated by the merger agreement because (1) either our
offer expired and we did not purchase any shares or we did not accept any
shares pursuant to our offer prior to December 31, 2000 (or February 28,
2001, if extended by either Splash or EFI in accordance with the merger
agreement) and (2) at a time of the termination the only condition not
satisfied is the Minimum Condition and there has been publicly announced
and not withdrawn another Acquisition Proposal and (3) within twelve
months of the termination Splash either (a) consummates a transaction
contemplated by an Acquisition Proposal or (b) enters into an agreement
with respect to an Acquisition Proposal which transaction is consummated
within six months of entering into the agreement (but changing, in any
case, the 15% amount in clause (a)(ii) of the definition of Acquisition
Proposal to 50%).
27
<PAGE>
. concurrently with the entering into of the agreement implementing the
Acquisition Proposal, if Splash terminates or abandons the transactions
contemplated by the merger agreement because, prior to the time of
acceptance for payment of shares pursuant to our offer, Splash's board of
directors withdraws or modifies its approval or recommendation of our
offer, the merger agreement or the merger, approves or recommends a
Superior Proposal, or enters into an agreement with respect to a Superior
Proposal, in each case at any time after the second business day
following EFI's receipt of written notice from Splash advising EFI that
the board of directors of Splash has received a Superior Proposal which
it intends to accept, specifying the terms and conditions of the Superior
Proposal, identifying the person making the Superior Proposal; or
. within two business days of a termination or abandonment, if EFI
terminates or abandons the transactions contemplated by the merger
agreement because, prior to our purchase of shares pursuant to our offer,
Splash's board of directors withdraws, modifies or changes in a manner
adverse to EFI or us its approval or recommendation of our offer, the
merger agreement or the merger or recommends an Acquisition Proposal or
executes a letter of intent, agreement in principle or definitive
agreement relating to an Acquisition Proposal.
The Tender and Voting Agreement
The following is a summary of the material provisions of the Tender and
Voting Agreement, dated as of August 30, 2000, by and among us, EFI and Kevin
K. MacGillivray, John Ritchie, Sally Cabbel, David Emmett, Mark Hill, Peter Y.
Chung, Charles W. Berger, Jan L. Gullet, and Harold L. Covert, who are Splash's
directors and several of its officers. The aggregate number of shares covered
by the voting agreement is 193,663, representing approximately 1.3% of the
total outstanding shares as of September 11, 2000.
Tender of shares. On or before September 27, 2000, each of these directors
and officers have agreed to tender all of his or her shares to us pursuant to
our offer.
Voting. Each of these directors and officers further agreed that from August
30, 2000 until either the effective time of the merger or the time the parties
later agree to, at any meeting of Splash's stockholders, however called, and in
any action by consent of Splash's stockholders, he or she will vote his or her
shares (1) in favor of the merger and the merger agreement, (2) against any
Acquisition Proposal, (3) against any proposal for action or agreement (a) that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of Splash under the merger agreement or (b) which
is reasonably likely to result in any of the conditions of our obligations
under the merger agreement, or any of the conditions to our obligation to
purchase and pay for tendered shares pursuant to our offer, not being
fulfilled, (4) against any change in the directors of Splash, (5) any change in
the present capitalization of Splash, (6) against any amendment to Splash's
certificate of incorporation or bylaws or any other material change in Splash's
corporate structure or business, (7) against any other action which could
reasonably be expected to impede, interfere with, delay, postpone or materially
adversely affect the transactions contemplated by the merger agreement or the
likelihood of the transactions being consummated and (8) in favor of any other
matter necessary for consummation of the transactions contemplated by the
merger agreement. These directors and officers agreed that they will execute
any documents which are necessary or appropriate in order to effectuate the
foregoing, including the ability for us or our nominees to vote shares owned by
the executive officers and directors directly.
Irrevocable Proxy. Pursuant to the voting agreements, these directors and
officers (1) revoked all prior proxies or powers of attorney governing the
shares owned by them and (2) granted an irrevocable proxy to EFI and us or any
nominee to vote and act (by written consent or otherwise) with respect to all
of the shares owned by them at any meeting of Splash's stockholders or by
written consent in lieu of any meetings with regard to any matter covered in
the paragraph above.
No Disposition or Encumbrance of Shares. Except as contemplated by the
voting agreement and the merger agreement, these directors and officers agreed
not to (1) transfer or agree to transfer shares or any
28
<PAGE>
interest in their shares, or create or permit to exist any encumbrance on their
shares, (2) enter into any agreement or understanding with respect to any
transfer of any or all of their shares or any interest therein, (3) grant any
proxy, power-of-attorney or other authorization in or with respect to their
shares, (4) deposit their shares into a voting trust or enter into a voting
agreement or arrangement with respect to their shares, or (5) take any other
action that would in any way restrict, limit or interfere with the performance
of its obligations hereunder or the transactions contemplated hereby or by the
merger agreement.
Termination. The voting agreement will terminate and be of no further force
and effect (1) by the written mutual consent of the parties hereto or (2)
automatically upon the effective time of the merger.
Exclusivity Agreement
The following is a summary of provisions of the exclusivity agreement, dated
August 26, 2000, between Splash and EFI. This summary is qualified in its
entirety by reference to the exclusivity agreement, which we incorporate by
reference, and a copy of which has been filed with the SEC as an exhibit to the
Schedule TO. The exclusivity agreement may be examined and copies may be
obtained at the places set forth in Section 7.
In the exclusivity agreement, Splash agreed that between August 26, 2000 and
11:59 p.m. on August 30, 2000 (or, if earlier, the date EFI and Splash execute
definitive agreements or EFI notifies Splash that it does not intend to
continue discussions), Splash would not, directly or indirectly, solicit,
initiate, seek, encourage, support or entertain any proposal to sell itself or
any material portion of itself to anyone other than EFI. Splash also agreed to
discontinue any current discussions it was having about such a transaction and
agreed not to furnish information about itself or its business to any third
party other than EFI.
In the exclusivity agreement, Splash and EFI agreed that, unless disclosure
was required by law, they would not publicly announce their discussions. The
exclusivity agreement expired in accordance with its terms on August 30, 2000
at 11:59 p.m.
Confidentiality Agreement
The following is a summary of the material provisions of the confidentiality
agreement, dated August 9, 2000, between Splash and EFI. This summary is
qualified in its entirety by reference to the confidentiality agreement, which
is incorporated herein by reference, and a copy of which has been filed with
the SEC as an exhibit to the Schedule TO. The confidentiality agreement may be
examined and copies may be obtained at the places set forth in Section 7.
Pursuant to the terms of the confidentiality agreement, Splash and EFI
agreed to provide one another some of its non-public confidential and
proprietary information, and each agreed, on behalf of itself and any of its
representatives that received any of the confidential information, among other
things: (1) to keep the disclosed information confidential, except in specific
situations, (2) not to use the confidential information for any purpose other
than to evaluate a possible transaction between the parties, and (3) for a
period of one year following the terminations of negotiations between the
parties, neither will directly or indirectly solicit for hire any employee of
the other with whom it has met or been made aware of during negotiations.
The confidentiality agreement also provides that, between August 9, 2000 and
August 9, 2001, neither party nor its affiliates would, directly or indirectly,
unless the other party's board of directors requests, (1) acquire or offer or
agree to acquire any securities (or direct or indirect rights to acquire any
securities) or assets of the other party, its subsidiaries, successor or
control person, (2) make or participate in a solicitation of proxies or try to
influence the voting of the other party's securities, (3) publicly propose an
extraordinary transaction with the other party, (4) try to control or influence
the management, board of directors or policies of the other party or (5) take
any action that could reasonably be expected to require the other party to make
a public announcement regarding the possibility of any of the events described
in (1) - (4).
29
<PAGE>
Employment Offer Letters
In connection with the execution and delivery of the merger agreement, EFI
and Splash agreed that EFI would offer employment, after consummation of the
merger, to Kevin Macgillivray, Splash's chief executive officer, John Ritchie,
Splash's chief financial officer, David Emmett, Splash's vice president of
engineering, and Sally Cabbell, Splash's director of human resources. The offer
letters are currently under negotiation. The offer letters provide for
continued employment for 90 days after the merger is completed, except for Mr.
Ritchie's which provides for his continued employment for 90 days or January
31, 2001, whichever is later. The offer letters supercede all existing bonus
programs, compensation, stock purchase and option plans and employment
agreements with Splash. The offer letters also provide for acceleration of a
portion of each employee's stock options at the end of the employment period,
targeted bonuses based on revenues of Splash during the employment period, and
base salary levels. We can not assure you of the final terms of the offer
letters and, once they are finalized, Splash will file them as exhibits to an
amendment to its Schedule 14D-9 filed with the SEC.
11. Purpose of Our Offer; Plans for Splash after Our Offer and the Merger.
Purpose of Our Offer. We are making our offer pursuant to the merger
agreement. The purpose of our offer and the merger is for EFI to gain control
of, and purchase the entire equity interest in, Splash. The purpose of the
merger is for EFI to acquire all shares not purchased pursuant to our offer.
Upon consummation of the merger, Splash will become a wholly owned subsidiary
of EFI.
Under Delaware law, the approval of Splash's board of directors and the
affirmative vote of the holders of a majority of the outstanding shares is
required to approve and adopt the merger agreement and the transactions
contemplated by it, including the merger. Unless the merger is consummated
pursuant to the short-form merger provisions under Delaware law as described
below, the only remaining required corporate action of Splash is the approval
and adoption of the merger agreement and the merger by the affirmative vote of
the holders of at least a majority of the shares. If we purchase tendered
shares pursuant to our offer, we will have sufficient voting power to adopt the
merger agreement without the affirmative vote of any other stockholder.
Short-form Merger. Under Delaware law, if we acquire, pursuant to our offer
or otherwise, at least 90% of the then outstanding shares, we will be able to
approve the merger without a vote of Splash's other stockholders. If that
happens, we, EFI and Splash have agreed in the merger agreement to take, at our
request, all necessary and appropriate action to cause the merger to become
effective as promptly as reasonably practicable after we acquire 90% of the
then outstanding shares, without a meeting of Splash's stockholders. If,
however, we do not acquire at least 90% of the outstanding shares pursuant to
our offer or otherwise and a vote of Splash's stockholders is required under
Delaware law, Splash will need to solicit votes which will take a significantly
longer period of time than would be required to effect the merger if we could
do a short-form merger without the vote of other stockholders.
Appraisal Rights. We and EFI do not believe that appraisal rights are
available in connection with our offer. If the merger is consummated,
stockholders who have not tendered their shares may have the right under
Delaware law to dissent from the merger and demand appraisal of, and to receive
payment in cash of the fair value of, their shares. Stockholders who perfect
appraisal rights by complying with the procedures set forth in Section 162 of
the DGCL will be entitled to an appraisal by the Delaware Court of Chancery of
the fair value of the shares exclusive of any element of value arising from the
accomplishment or expectation of the merger. In addition, dissenting
stockholders may be entitled to receive payment of a fair rate of interest from
the date of consummation of the merger on the amount determined to be the fair
value of their shares.
EFI does not intend to object, assuming the proper procedures are followed,
to the exercise of appraisal rights by any stockholder and the demand for
appraisal of, and payment in cash for the fair value of, the shares. EFI
intends, however, to cause Splash, as the surviving corporation, to argue in an
appraisal proceeding that, for purposes of the proceeding, the fair value of
each share is less than or equal to the merger consideration.
30
<PAGE>
You should be aware that opinions of investment banking firms (including TWP's)
as to the fairness from a financial point of view are not necessarily opinions
as to "fair value" under Delaware law.
This summary of the rights of dissenting stockholders under Delaware law is
not a complete statement of the procedures to be followed by stockholders
desiring to exercise any dissenters' rights under Delaware law. The
preservation and exercise of dissenters' rights require strict adherence to the
applicable provisions of Delaware law.
Going Private Transactions. The SEC has adopted Rule 13e-3 under the
Exchange Act which is applicable to "going private" transactions and which may
under certain circumstances be applicable to the merger or another business
combination following the purchase of shares pursuant to our offer in which we
seek to acquire the remaining shares not held by it. We believe that Rule 13e-3
will not be applicable to the merger. Rule 13e-3 requires, among other things,
that financial information concerning Splash and information relating to the
fairness of the proposed transaction and the consideration offered to minority
stockholders in the transaction be filed with the SEC and disclosed to
stockholders prior to consummation of the transaction.
Plans for Splash. Following the merger, EFI expects to continue to evaluate
the business and operations of Splash and will take actions as it deems
appropriate under circumstances then existing. EFI will continue to seek
additional information about Splash and employ consultants to aid it in its
evaluation during the pendency of our offer and after consummation of our
offer. Thereafter, EFI intends to review such information as part of a
comprehensive review of Splash's business, operations, capitalization and
management with a view to optimizing exploitation of Splash's potential in
conjunction with EFI's businesses, including, but not limited to, aligning
Splash's businesses with the businesses within EFI. It is expected that the
business and operations of Splash will form an important part of EFI's future
business plans.
12. Dividends and Distributions.
Splash has never declared or paid cash dividends on its common stock. The
merger agreement provides that Splash will not, between the date of the merger
agreement and the time EFI appoints a majority of the member of Splash's board
of directors, without the prior written consent of EFI, which consent will not
be unreasonably withheld, (1) issue, sell, transfer, pledge, dispose of or
encumber any shares of any class or series of its capital stock or voting debt,
or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of any class or
series of its capital stock or any voting debt, other than shares reserved for
issuance on August 30, 2000 pursuant to the exercise of options and purchase
rights under Splash's Employee Stock Purchase Plan outstanding on August 30,
2000, (2) declare, set aside or pay any dividend or other distribution payable
in cash, stock or property with respect to any shares of any class or series of
its capital stock, (3) split, combine or reclassify any shares of any class or
series of its stock or (4) redeem, purchase or otherwise acquire directly or
indirectly any shares of any class or series of its capital stock, or any
instrument or security which consists of or includes a right to acquire shares
(other than repurchases of restricted stock at cost pursuant to agreements
outstanding on August 30, 2000 or entered into after August 30, 2000 in
compliance with the provisions of the merger agreement). See Section 10.
13. Possible Effects of Our Offer on the Market for Shares, NASDAQ Listing,
Exchange Act Registration, Margin Regulations.
Possible Effects of Our Offer on the Market for Shares. Our purchase of
shares pursuant to our 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.
Nasdaq Listing. Depending upon the number of shares purchased pursuant to
our offer, the Splash common stock may no longer meet the standards for
continued listing on the Nasdaq National Market. According to Nasdaq's
published guidelines, the shares would not be eligible to be included for
listing if, among other things, the number of shares that are not held directly
or indirectly by any officer or director of Splash and by any other person who
is the beneficial owner of more than 10% of the total shares outstanding is
31
<PAGE>
less than 750,000, or the number of holders of shares falls below 400. If, as a
result of the purchase of shares pursuant to our offer, the merger, the merger
agreement or otherwise, the Splash common stock no longer meet the requirements
of the Nasdaq National Market for continued listing, the listing of the shares
will be discontinued. If that happens, the market for the shares would be
adversely affected. If the shares were no longer eligible for listing on the
Nasdaq National Market, quotations might still be available from other sources.
The extent of the public market for the shares and the availability of
quotations would, however, depend upon the number of stockholders remaining at
the 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. Assuming we acquire the
requisite number of shares to effect a delisting of the shares, we intend to
cause the delisting of the shares from Nasdaq following consummation of our
offer.
Exchange Act Registration. The shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by Splash to
the SEC if Splash has fewer than 300 record holders. The termination of the
registration of the shares under the Exchange Act would substantially reduce
the information required to be furnished by Splash to holders of shares and to
the SEC and would make provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement in connection with stockholders'
meetings pursuant to Section 14(a) or 14(c) of the Exchange Act and the related
requirements of an annual report, 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, once Splash ceases to make its public filings,
affiliates of Splash and persons holding "restricted securities" of Splash may
have difficulty selling their shares pursuant to Rule 144 promulgated under the
Securities Act. We currently intend to seek to cause Splash to terminate the
registration of the Splash common stock under the Exchange Act as soon after
consummation of our offer as the requirements for termination of registration
are met.
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, which has 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 our offer it is possible that the shares might no longer constitute
"margin securities" for purposes of the margin regulations of the Board of
Governors of the Federal Reserve Board, with the effect that shares could no
longer be used as collateral for loans made by brokers. In addition, if
registration of the shares under the Exchange Act were terminated, the shares
would no longer constitute "margin securities."
14. Conditions of Our Offer.
Notwithstanding any other provision of our offer, we will not be required to
accept for payment any shares tendered pursuant to our offer, and may extend,
terminate or amend our offer, if (1) any applicable waiting periods under the
U.S. antitrust laws has not expired or been terminated, (2) the Minimum
Condition has not been satisfied, or (3) at any time on or after the date of
the merger agreement and before the Expiration Date (as then extended), any of
the following events occur or we determine that any have occurred and have not
been cured:
(a) there is a suit, action or proceeding by any governmental entity
threatened or pending that (i) seeks to prohibit or impose any material
limitations on EFI's or our ownership or operation (or that of any of their
respective subsidiaries or affiliates) of all or a material portion of the
business or assets of either of them, Splash or any subsidiary of Splash,
or to compel EFI or us or our subsidiaries and affiliates to dispose of or
hold separate any material portion of the business or assets of Splash, any
subsidiary of Splash, EFI or any of its subsidiaries, (ii) challenges the
acquisition by EFI or us of any shares under our offer or pursuant to the
voting agreement, seeks to restrain or prohibit the making or consummation
of our offer or the merger or the performance of any of the other
transactions contemplated by the merger agreement, or seeks to obtain from
Splash, EFI or us any damages that are material in relation to Splash and
Splash subsidiaries, taken as a whole, (iii) seeks to impose material
limitations on our ability, or
32
<PAGE>
rendering us unable, to accept for payment, pay for or purchase some or all
of the shares pursuant to our offer or the merger, (iv) seeks to impose
material limitations on our ability or the ability of EFI to exercise full
rights of ownership of the shares, including the right to vote the shares
purchased by it or (v) which otherwise is reasonably likely to have a
Company Material Adverse Effect; or
(b) there is a statute, rule, regulation, judgment, order or injunction
enacted, entered, enforced, promulgated or deemed applicable to our offer
or the merger, or any other action will be taken by any governmental
entity, other than the application to our offer or the merger of applicable
waiting periods under the U.S. antitrust laws, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above; or
(c) a Company Material Adverse Effect has occurred; or
(d) Splash's board of directors or any of its committee (i) withdraws,
modifies or changes in a manner adverse to EFI or us its approval or
recommendation of our offer, the merger agreement or the merger,
(ii) recommends the approval or acceptance of an Acquisition Proposal from,
or similar business combination with, a person other than EFI, us or one of
our affiliates or (iii) executes an agreement in principal or definitive
agreement relating to an Acquisition Proposal from a person other than EFI,
us or one of our affiliates; or
(e) any of the representations and warranties of Splash contained in the
merger agreement are not true and correct as of August 30, 2000 or as of
the scheduled Expiration Date (taking such representations and warranties
with the same effect as if made on and as of the scheduled Expiration
Date), except for representations and warranties specifically made as of an
earlier date, which are only be required to be true and correct as of that
earlier date, and except to the extent that the aggregate of all breaches
of representations and warranties of Splash could not reasonably be
expected to have a Company Material Adverse Effect; or
(f) Splash fails to perform in any material respect any material
obligation or to comply in any material respect with any agreement or
covenant of Splash to be performed or complied with by it prior to the
scheduled Expiration Date under the merger agreement and the failure is not
be capable of being cured or has not been cured within ten business days;
or
(g) Splash has not delivered to EFI and us a certificate to the effect
set forth in the immediately preceding clauses (e) and (f), executed by two
executive officers of Splash; or
(h) all consents from governmental entities necessary for the
consummation of our offer or the merger have not been obtained or are not
in full force and effect, other than consents the failure to obtain which
would not reasonably be expected to have a Company Material Adverse Effect;
or
(i) the merger agreement has been terminated.
These conditions are for the sole benefit of EFI and us and may be waived by
EFI or us, in whole or in part, at any time and from time to time in the sole
discretion of EFI or us. The failure by EFI or us at any time to exercise any
of these rights will not be deemed a waiver of any right and each right will be
deemed an ongoing right which may be asserted at any time and from time to
time.
15. Legal Matters and Regulatory Approvals.
General. Based upon its examination of publicly available information with
respect to Splash and the review of information furnished by Splash to EFI and
discussions between representatives of EFI with representatives of Splash
during EFI's investigation of Splash, except to the extent set forth below,
neither we nor EFI is aware of any approval or other action by any domestic
(federal or state) or foreign governmental authority, which in either case
would be required prior to our acquisition of shares pursuant to our offer.
Should any approval or other action be required, it is our present intention to
seek the approval or action. We do not currently intend, however, to delay the
purchase of shares tendered pursuant to our offer pending the outcome of any
action or the receipt of any approval (subject to our right to decline to
purchase shares if any of the conditions in Section 14 will have occurred).
There can be no assurance that any approval or other action, if
33
<PAGE>
needed, would be obtained without substantial conditions or that adverse
consequences might not result to our business or the business of Splash or EFI
or that parts of our business or the businesses of Splash or EFI 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. Our obligation
under our offer to accept for payment and pay for shares is subject to
conditions, including conditions relating to the legal matters discussed in
this Section 15. See Section 14 for the conditions of our offer.
EFI and Splash conduct operations in a number of jurisdictions where other
regulatory filings or approvals may be required or advisable in connection with
the completion of the merger. EFI and Splash are currently in the process of
reviewing whether filings or approvals may be required or desirable in these
jurisdictions which may be material to EFI and Splash and its subsidiaries. It
is possible that one or more of these filings may not be made, or one or more
of these approvals, which are not as a matter of practice required to be
obtained prior to effectiveness of a merger transaction, may not be obtained,
prior to the merger.
State Takeover Laws. Splash is incorporated under the laws of the State of
Delaware. In general, Section 203 of the General Corporation Law of the State
of Delaware prevents an "interested stockholder" (generally a person who owns
or has the right to acquire 15% or more of a corporation's outstanding voting
stock, or is an affiliate or associate of the corporation and was the owner of
15% or more of the outstanding voting stock of the corporation within the prior
3 years) from engaging in a "business combination" (defined to include mergers
and similar transactions) with a Delaware corporation for a period of three
years following the time the person became an interested stockholder unless,
among other things, prior to the time the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder. On August 30, 2000, prior
to the execution of the merger agreement, Splash's board of directors
unanimously (1) determined that the merger agreement and the transactions
contemplated by it, including each of the offer and the merger, are fair to and
in the best interests of Splashand you, (2) approved and adopted the merger
agreement and the transactions contemplated by it and (3) recommends that you
accept our offer and tender your shares to us. Accordingly, Section 203 is
inapplicable to our offer and the merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. Splash, directly or through its subsidiaries,
conducts business in a number of states throughout the United States, some of
which have enacted takeover laws. We do not know whether any of these laws
will, by their terms, apply to our offer or the merger and has not complied
with any such laws. Should any person seek to apply any state takeover law, we
will take any action as then appears desirable, which may include challenging
the validity or applicability of any such statute in appropriate court
proceedings. In the event it is asserted that one or more state takeover laws
is applicable to our offer or the merger, and an appropriate court does not
determine that it is inapplicable or invalid as applied to our offer, we might
be required to file information with, or receive approvals from, the relevant
state authorities. In addition, if enjoined, we might be unable to accept for
payment any shares tendered pursuant to our offer, or be delayed in continuing
or consummating our offer, and the merger. In such case, we may not be
obligated to accept for payment any shares tendered. See Section 14.
Antitrust. Under U.S. antitrust laws and the rules that have been
promulgated thereunder by the FTC, some acquisition transactions may not be
consummated unless information has been furnished to the Antitrust Division and
the FTC and waiting period requirements have been satisfied. Our acquisition of
shares pursuant to our offer is subject to these requirements. See Section 2.
Pursuant to U.S. antitrust laws, on September 13, 2000 EFI filed a Premerger
Notification and Report Form in connection with the purchase of shares pursuant
to our offer with the Antitrust Division and the FTC.
34
<PAGE>
Under the applicable provisions of U.S. antitrust laws, the purchase of shares
pursuant to our offer may not be consummated until the expiration of a 15 day
waiting period following the filing by EFI. Accordingly, the waiting period
under U.S. antitrust laws applicable to the purchase of shares pursuant to our
offer will expire at 11:59 p.m., New York City time, on September 28, 2000,
unless the waiting period is earlier terminated by the FTC and the Antitrust
Division or extended by a request from the FTC or the Antitrust Division for
additional information or documentary material prior to the expiration of the
waiting period. EFI has requested early termination of the waiting period
applicable to the transaction. There can be no assurance, however, that the
15-day antitrust waiting period will be terminated early. If either the FTC or
the Antitrust Division were to request additional information or documentary
material from EFI, Splash or both companies with respect to our acquisition of
shares, the waiting period by EFI, Splash or both companies would expire at
11:59 p.m., New York City time, on the 10th day after the date of substantial
compliance with the request(s). Thereafter, the waiting period could be
extended only by court order or with the consent of EFI. If the acquisition of
shares is delayed pursuant to a request by the FTC or the Antitrust Division
for additional information or documentary material pursuant to U.S. antitrust
laws, our offer will be extended and, in any event, the purchase of and payment
for shares will be deferred until 10 days after the request is substantially
complied with, unless the waiting period is sooner terminated by the FTC and
the Antitrust Division. Only one extension of the waiting period pursuant to a
request for additional information is authorized by U.S. antitrust laws and the
rules promulgated thereunder, except by court order. Any extension of the
waiting period will not give rise to any withdrawal rights not otherwise
provided for by applicable law. See Section 4. It is a condition to our offer
that the waiting period applicable under U.S. antitrust laws to our offer
expire or be terminated. See Section 2 and Section 14.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as our proposed acquisition of shares
pursuant to our offer. At any time before or after our purchase of shares
pursuant to our offer, the FTC or the Antitrust Division could take any action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of shares pursuant to our
offer or seeking the divestiture of shares purchased by us or the divestiture
of substantial assets of EFI, Splash or their respective subsidiaries. The
merger agreement provides that in connection with the receipt of any necessary
approvals under the U.S. antitrust laws, neither Splash nor any of Splash's
subsidiaries can divest or hold separate or otherwise take or commit to take
any action that limits EFI's or our freedom of action with respect of, or their
ability to retain, Splash or any of Splash's subsidiaries or any material
portions thereof or any of the businesses, product lines, properties or assets
of Splash or any of its subsidiaries, without EFI's prior written consent
(which may be withheld in EFI's sole and absolute discretion).
Private parties and state attorneys general may also bring legal action
under federal or state antitrust laws under certain circumstances. Based upon
an examination of information available to EFI relating to the businesses in
which EFI, Splash and their respective subsidiaries are engaged, we and EFI
believe that our offer will not violate the antitrust laws. Nevertheless, there
can be no assurance that a challenge to our offer on antitrust grounds will not
be made or, if a challenge is made, what the result would be. See Section 14
for the conditions to our offer, including conditions with respect to
litigation.
On August 31, 2000, a class action complaint was filed in the Superior Court
of the State of California, in and for the County of Santa Clara, by Gerald W.
Burr against Splash and certain of its current and former directors. The
complaint alleges that defendants breached their fiduciary duties to Splash's
stockholders in connection with the negotiation and execution of the merger
agreement. The complaint seeks declaratory and injunctive relief, including
enjoining the merger, rescinding the merger agreement and related documents,
directing the individual defendants to obtain a transaction in the best
interest of Splash's stockholders until the process for the sale or auction of
Splash is completed, and costs and attorneys' fees. A copy of the complaint has
been filed as an exhibit to the Schedule 14D-9.
35
<PAGE>
16. Fees and Expenses.
We will not pay any fees or commissions to any broker, dealer or other
person for soliciting tenders of shares pursuant to our offer.
EFI has retained MacKenzie Partners, Inc., as our Information Agent, and
Wilmington Trust Company, as our Depositary, in connection with our 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 stockholders to forward materials relating to our
offer to beneficial owners. As compensation for acting as Information Agent in
connection with our offer, MacKenzie Partners, Inc. will be paid a reasonable
and customary fee for its services and will also be reimbursed for out-of-
pocket expenses and may be indemnified against liabilities and expenses in
connection with our offer, including liabilities under the federal securities
laws.
We will pay our Depositary reasonable and customary compensation for its
services in connection with our offer, plus reimbursement for out-of-pocket
expenses, and will indemnify our Depositary against liabilities and expenses in
connection therewith, including under federal securities laws. We will
reimburse brokers, dealers, commercial banks and trust companies for customary
handling and mailing expenses incurred by them in forwarding material to their
customers.
17. Miscellaneous.
We are making our offer to Splash stockholders solely through this document
and the related Letter of Transmittal. We are not aware of any jurisdiction
where the making of our offer is prohibited by any administrative or judicial
action pursuant to any valid state statute. If we become aware of any valid
state statute prohibiting the making of our offer or the acceptance of shares
pursuant thereto, we will make a good faith effort to comply with that state
statute. If, after a good faith effort, we cannot comply with that state
statute, our offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of shares in that state. In any jurisdiction where the
securities, blue sky or other laws require our offer to be made by a licensed
broker or dealer, our offer will be deemed to be made on our behalf 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 us or EFI not contained in this document 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 under the Exchange Act, we and EFI have filed with
the SEC the Schedule TO, together with exhibits, furnishing additional
information with respect to our offer. The Schedule TO 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 Section 7 (except
that they will not be available at the regional offices of the SEC).
36
<PAGE>
The Depositary for our offer is:
[LOGO OF WILMINGTON TRUST]
By Hand/ By Facsimile
Overnight Courier: Transmission: By Mail:
(302) 651-1079
Wilmington Trust Company Corporate Trust Operations
1105 North Market Street, Wilmington Trust Company
First Floor Confirm by Telephone: P.O. Box 8861
Wilmington, Delaware 19801 (302) 651-8869 Wilmington, Delaware
Attn: Corporate Trust 19899-8861
Operations
The Information Agent for our offer is:
[LOGO OF MACKENZIE PARTNERS, INC.]
156 Fifth Avenue
New York, New York 10010
Call Collect (212) 929-5500
or
Call Toll Free (800) 322-2885
