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OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
VOICE CONTROL SYSTEMS, INC.
AT
$4.00 NET PER SHARE
BY
VULCAN MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
PHILIPS ELECTRONICS NORTH AMERICA CORPORATION
AND AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
KONINKLIJKE PHILIPS ELECTRONICS N.V.
(ROYAL PHILIPS ELECTRONICS)
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON FRIDAY, JUNE 11, 1999, UNLESS THE OFFER IS EXTENDED.
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THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1
HEREIN) AT LEAST A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK, PAR VALUE
$0.01 PER SHARE (THE "SHARES"), OF VOICE CONTROL SYSTEMS, INC. (THE "COMPANY")
ON A FULLY DILUTED BASIS, AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT
PURSUANT TO THE OFFER AND (2) ANY WAITING PERIOD UNDER THE XXXX-XXXXX-XXXXXX
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND THE
REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE
OFFER HAVING EXPIRED OR BEEN TERMINATED. CERTAIN OTHER CONDITIONS TO
CONSUMMATION OF THE OFFER ARE DESCRIBED IN SECTION 11.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY ADOPTED THE MERGER
AGREEMENT (AS DEFINED IN THE INTRODUCTION HERETO) AND DECLARED ITS ADVISABILITY,
APPROVED THE OFFER AND THE MERGER, DETERMINED THAT THE OFFER AND THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES AND UNANIMOUSLY
RECOMMENDS THAT THE HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should (1) complete and sign the Letter of Transmittal or a facsimile
thereof in accordance with the instructions in the Letter of Transmittal,
including any required signature guarantees, and mail or deliver the Letter of
Transmittal or such facsimile with such stockholder's certificate(s) for the
tendered Shares and any other required documents to Citibank, N.A., Depositary
for the Offer (the "Depositary") (2) follow the procedure for book-entry tender
of Shares set forth in Section 3 or (3) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
they desire to tender Shares so registered.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available, or who cannot comply with the procedure
for book-entry transfer on a timely basis, may tender such Shares by following
the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to X.X. Xxxx & Co.,
Inc., Information Agent for the Offer (the "Information Agent"), at the address
and telephone number set forth on the back cover of this Offer to Purchase.
Requests for additional copies of this Offer to Purchase and the Letter of
Transmittal may be directed to the Information Agent or to brokers, dealers,
commercial banks or trust companies.
May 14, 1999
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TABLE OF CONTENTS
SECTION PAGE
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INTRODUCTION................................................ 1
THE TENDER OFFER............................................ 2
1. Terms of the Offer................................... 2
2. Acceptance for Payment and Payment for Shares........ 3
3. Procedure for Tendering Shares....................... 4
4. Rights of Withdrawal................................. 6
5. Certain United States Federal Income Tax Consequences
of the Offer........................................... 7
6. Price Range of Shares; Dividends..................... 8
7. Effect of the Offer on the Market for the Shares;
Stock Quotation, Margin
Regulations and Exchange Act Registration......... 8
8. Certain Information Concerning the Company........... 9
9. Certain Information Concerning the Purchaser and
Parent................................................. 11
10. Background of the Offer; Contacts with the Company;
Employment Agreements.................................. 13
11. Certain Conditions of the Offer...................... 16
12. Purpose of the Offer; Plans for the Company; the
Merger................................................. 18
13. Source and Amount of Funds........................... 24
14. Dividends and Distributions.......................... 24
15. Certain Legal Matters................................ 25
16. Fees and Expenses.................................... 27
17. Miscellaneous........................................ 28
SCHEDULE A
Information Concerning the Directors and Executive
Officers of:
Koninklijke Philips Electronics N.V., Philips Holding
USA Inc., Philips Electronics North America Corporation
and Vulcan Merger Sub, Inc.............................. A-1
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TO THE HOLDERS OF SHARES OF
VOICE CONTROL SYSTEMS, INC.:
INTRODUCTION
Vulcan Merger Sub, Inc., a Delaware corporation (the "Purchaser"), and a
wholly owned subsidiary of Philips Electronics North America Corporation, a
Delaware corporation ("Parent"), and an indirect wholly owned subsidiary of
Koninklijke Philips Electronics N.V., a company incorporated under the laws of
The Netherlands ("Royal Philips"), hereby offers to purchase all of the
outstanding shares of common stock, par value $0.01 per share (the "Shares"), of
Voice Control Systems, Inc., a Delaware corporation (the "Company"), at $4.00
per Share, net to the seller in cash without interest, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which together with any amendments or supplements hereto
or thereto, collectively constitute the "Offer"). Tendering stockholders will
not be obligated to pay brokerage fees or commissions or, subject to Instruction
6 of the Letter of Transmittal, transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer. The Purchaser will pay all charges and expenses
of the Depositary and the Information Agent.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE AT LEAST A MAJORITY OF
THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS, AND (2) ANY WAITING PERIOD
UNDER THE HSR ACT AND THE REGULATIONS THEREUNDER APPLICABLE TO THE PURCHASE OF
SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. CERTAIN OTHER
CONDITIONS TO CONSUMMATION OF THE OFFER ARE DESCRIBED IN SECTION 11.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY ADOPTED THE MERGER
AGREEMENT AND DECLARED ITS ADVISABILITY, APPROVED THE OFFER AND THE MERGER,
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS
OF, THE HOLDERS OF SHARES AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF SHARES
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE FACTORS
CONSIDERED BY THE BOARD OF DIRECTORS OF THE COMPANY IN ARRIVING AT ITS DECISION
TO APPROVE THE OFFER AND THE MERGER AND TO RECOMMEND THAT STOCKHOLDERS OF THE
COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES ARE DESCRIBED IN THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9, WHICH IS BEING MAILED
TO STOCKHOLDERS OF THE COMPANY HEREWITH.
The Offer is being made pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of May 9, 1999, by and among the Company, Parent
and the Purchaser, pursuant to which, after completion of the Offer, the
Purchaser will be merged with and into the Company or, at the option of Parent,
the Company will be merged with and into the Purchaser (either such merger, the
"Merger") and each issued and outstanding Share (other than Shares owned by
Parent, Purchaser or any other subsidiary of Parent (collectively, the "Parent
Companies") or Shares held by stockholders ("Dissenting Stockholders")
exercising appraisal rights pursuant to Section 262 of the Delaware General
Corporate Law (the "DGCL")) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and represent the
right to receive an amount in cash, without interest, equal to the price paid
for each Share pursuant to the Offer.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
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THE TENDER OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth in the Offer
(including the terms and conditions set forth in Section 11 (the "Offer
Conditions") and if the Offer is extended or amended, the terms and conditions
of such extension or amendment), the Purchaser will accept for payment, and pay
for all Shares validly tendered on or prior to the Expiration Date and not
withdrawn as permitted by Section 4. The term "Expiration Date" means 12:00
midnight, New York City time, on Friday, June 11, 1999, unless and until the
Purchaser shall, subject to the terms of the Merger Agreement, have extended the
period for which the Offer is open. In such a case, the term "Expiration Date"
shall mean the latest time and date on which the Offer, as so extended by the
Purchaser, shall expire.
The Offer is conditioned on, among other things, there being validly
tendered and not withdrawn at least a majority of the outstanding Shares.
ACCORDING TO THE COMPANY, AS OF MAY 9, 1999 THERE WERE 13,742,639 SHARES
OUTSTANDING, 2,212,473 SHARES SUBJECT TO ISSUANCE UPON EXERCISE OF OUTSTANDING
STOCK OPTIONS PURSUANT TO THE COMPANY'S STOCK OPTION AND INCENTIVE PLANS AND
977,075 SHARES SUBJECT TO ISSUANCE UPON EXERCISE OF CERTAIN OUTSTANDING WARRANTS
TO PURCHASE SHARES. Based on the foregoing, the Purchaser believes that if all
of the Shares subject to issuance as set forth above are considered to be
outstanding on a fully diluted basis on the Expiration Date, this condition
would be satisfied if at least 8,466,094 Shares are validly tendered and not
withdrawn prior to the Expiration Date.
The Purchaser may, without the consent of the Company, (i) extend the
Offer, if on the scheduled expiration date of the Offer any of the conditions to
the Purchaser's obligation to purchase Shares are not satisfied, until such time
as such conditions are satisfied or waived, (ii) extend the Offer for a period
of up to 30 business days after all of the Offer Conditions have been satisfied
or waived if it reasonably determines such extension is appropriate in order to
enable it to purchase at least 90% of the outstanding Shares in the Offer and
(iii) extend the Offer for any period required by any regulation, rule,
interpretation or position of the Securities and Exchange Commission (the "SEC")
applicable to the Offer. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
right of a tendering stockholder to withdraw such stockholder's Shares. If the
Purchaser accepts any Shares for payment pursuant to the terms of the Offer, it
will accept for payment all Shares validly tendered prior to the Expiration Date
and not withdrawn, and, subject to the terms and conditions of the Offer,
including but not limited to the Offer Conditions, it will accept for payment
and promptly pay for all Shares so accepted for payment. The Purchaser's right
to delay payment for Shares which it has accepted for payment is limited by Rule
14e-1(c) under the Securities Exchange Act of 1934 (the "Exchange Act"), which
requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer. The Purchaser is not required to extend the Offer.
Subject to the applicable rules and regulations of the SEC, applicable law
and the Merger Agreement, the Purchaser may, without the consent of the Company,
terminate the Offer and not accept for payment any Shares if any of the
conditions to the Purchaser's obligation to purchase Shares are not satisfied.
Any extension, delay, termination or amendment of the Offer will be
followed as promptly as practicable by public announcement thereof. In the case
of an extension, Rule 14(e)-1(d) under the Exchange Act requires that the
announcement be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Subject to
applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act, which require that any material change in the information published, sent
or given to stockholders in connection with the Offer be promptly disseminated
to stockholders in a manner reasonably designed to inform stockholders of such
change) and without limiting the manner in which the Purchaser may choose to
make any public announcement, the Purchaser shall have no obligation to publish,
advertise or otherwise communicate any such public
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announcement other than by issuing a press release or other announcement. If it
makes a material change in the terms of the Offer or the information concerning
the Offer, or if it waives a material condition of the Offer, the Purchaser will
extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange Act.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of the Shares. This Offer to Purchase, the related Letter of Transmittal
and other relevant materials will be mailed by the Purchaser to record holders
of Shares and will be furnished by the Purchaser to brokers, dealers, banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including the
Offer Conditions and, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), the Purchaser will accept for
payment, and will pay for, Shares validly tendered and not withdrawn as soon as
practicable after the Expiration Date. In addition, subject to applicable rules
of the SEC, the Purchaser expressly reserves the right to delay acceptance for
payment of or payment for Shares in order to comply, in whole or in part, with
any applicable law including the HSR Act. Parent intends to file a Notification
and Report Form under the HSR Act on May 18, 1999 and, accordingly, unless
earlier terminated or extended by a request for additional information, the
waiting period under the HSR Act is scheduled to expire at 11:59 p.m., New York
City time, on June 2, 1999. In all cases, payment for Shares tendered and
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of certificates for such Shares (or a confirmation of
a book-entry transfer of such Shares (a "Book-Entry Confirmation") into the
Depositary's account at The Depository Trust Company (the "Book-Entry Transfer
Facility"), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by the Letter of
Transmittal.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment Shares validly tendered and not withdrawn if and when the Purchaser
gives oral or written notice to the Depositary of its acceptance for payment of
such Shares pursuant to the Offer. Payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for the tendering stockholders for
the purpose of receiving payments from the Purchaser and transmitting such
payments to the tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON
THE PURCHASE PRICE FOR SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH
PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased Shares will be
returned, without expense to the tendering stockholder (or, in the case of
Shares tendered by book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedures set forth
in Section 3, such Shares will be credited to an account maintained with the
Book-Entry Transfer Facility), as soon as practicable following expiration or
termination of the Offer.
The Purchaser reserves the right to transfer or assign in whole or in part
from time to time to one or more direct or indirect subsidiaries of Parent the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer. However, any such transfer or assignment will not relieve the Purchaser
of its obligations under the Offer and will in no way prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
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3. PROCEDURE FOR TENDERING SHARES
Valid Tender
To tender Shares pursuant to the Offer, (a) a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions of the Letter of Transmittal, with any required signature
guarantees, certificates for Shares to be tendered, and any other documents
required by the Letter of Transmittal, must be received by the Depositary prior
to the Expiration Date at one of its addresses set forth on the back cover of
this Offer to Purchase, (b) such Shares must be delivered pursuant to the
procedures for book-entry transfer described below (and a Book-Entry
Confirmation of such delivery received by the Depositary, including an Agent's
Message (as defined below) if the tendering stockholder has not delivered a
Letter of Transmittal), prior to the Expiration Date, or (c) the tendering
stockholder must comply with the guaranteed delivery procedures set forth below.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against the participant.
Book-Entry Delivery
The Depositary will establish accounts with respect to the Shares at the
Book-Entry Transfer Facility for purposes of the Offer within two business days
after the date of this Offer to Purchase. Any financial institution that is a
participant in the Book-Entry Transfer Facility's systems may make book-entry
transfer of Shares by causing the Book-Entry Transfer Facility to transfer such
Shares into the Depositary's account in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer, either the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message in lieu of the Letter of
Transmittal, and any other required documents, must, in any case, be transmitted
to and received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase by the Expiration Date, or the tendering
stockholder must comply with the guaranteed delivery procedures described below.
The confirmation of a book-entry transfer of Shares into the Depositary's
account at a Book-Entry Transfer Facility as described above is referred to
herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
IT IS RECOMMENDED THAT THE STOCKHOLDER USE PROPERLY INSURED REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Signature Guarantees
Except as otherwise provided below, all signatures on a Letter of
Transmittal must be guaranteed by a financial institution (including most
commercial banks, savings and loan associations and brokerage houses) that is a
participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution"). Signatures on a Letter of
Transmittal need not be guaranteed (a) if the Letter of Transmittal is signed by
the registered holders (which term, for purposes of this section, includes any
participant in any of the Book-Entry Transfer Facilities' systems whose name
appears on a security
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position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on the Letter
of Transmittal or (b) if such Shares are tendered for the account of an Eligible
Institution. See Instructions 1 and 5 of the Letter of Transmittal. If the
certificates for Shares are registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made or certificates
for Shares not tendered or not accepted for payment are to be returned to a
person other than the registered holder of the certificates surrendered, then
the tendered certificates must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name or names of the registered
holders or owners appear on the certificates, with the signatures on the
certificates or stock powers guaranteed as described above. See Instructions 1
and 5 of the Letter of Transmittal.
Guaranteed Delivery
A stockholder who desires to tender Shares pursuant to the Offer and whose
certificates for Shares are not immediately available, or who cannot comply with
the procedure for book-entry transfer on a timely basis, or who cannot deliver
all required documents to the Depositary prior to the Expiration Date, may
tender such Shares by following all of the procedures set forth below:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser, is received by
the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for transfer
(or a Book-Entry Confirmation with respect to all such Shares,
together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal), and any other required
documents, are received by the Depositary within three trading days
after the date of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the New York Stock Exchange, Inc.
(the "NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
Other Requirements
Notwithstanding any provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (a) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares (b) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal) and (c) any other documents
required by the Letter of Transmittal. Accordingly, tendering stockholders may
be paid at different times depending upon when certificates for Shares or
Book-Entry Confirmations with respect to Shares are actually received by the
Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE OF THE
SHARES BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
Tender Constitutes an Agreement
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering stockholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
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Appointment
By executing a Letter of Transmittal as set forth above, the tendering
stockholder irrevocably appoints designees of the Purchaser as such
stockholder's proxies, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after May 14, 1999. All such proxies will be considered coupled
with an interest in the tendered Shares. Such appointment is effective when, and
only to the extent that, the Purchaser deposits the payment for such Shares with
the Depositary. Upon the effectiveness of such appointment, all prior powers of
attorney, proxies and consents given by such stockholder will be revoked, and no
subsequent powers of attorney, proxies and consents may be given (and, if given,
will not be deemed effective). The Purchaser's designees will, with respect to
the Shares for which the appointment is effective, be empowered to exercise all
voting and other rights of such stockholder as they, in their sole discretion,
may deem proper at any annual, special or adjourned meeting of the stockholders
of the Company, by written consent in lieu of any such meeting or otherwise. The
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, the Purchaser must be able to exercise full voting rights with
respect to such Shares immediately upon the Purchaser's payment for such Shares.
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of any tender of Shares will be determined by the
Purchaser in its sole discretion, which determination will be final and binding.
The Purchaser reserves the absolute right to reject any and all tenders
determined by it not to be in proper form or the acceptance for payment of or
payment for which may, in the opinion of the Purchaser's counsel, be unlawful.
The Purchaser also reserves the absolute right to waive any defect or
irregularity in the tender of any Shares of any particular stockholder whether
or not similar defects or irregularities are waived in the case of other
stockholders. No tender of Shares will be deemed to have been validly made until
all defects and irregularities relating thereto have been cured or waived. None
of the Purchaser, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and instructions thereto) will be final and binding.
4. RIGHTS OF WITHDRAWAL
Tenders of Shares made pursuant to the Offer are irrevocable except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Purchaser
pursuant to the Offer, may also be withdrawn at any time after July 13, 1999.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase. Any such notice
of withdrawal must specify the name of the person having tendered the Shares to
be withdrawn, the number of Shares to be withdrawn and the names in which the
certificate(s) evidencing the Shares to be withdrawn are registered, if
different from that of the person who tendered such Shares. The signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution, unless
such Shares have been tendered for the account of any Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry tender as
set forth in Section 3, any notice of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares and otherwise comply with the Book-Entry Transfer
Facility's Procedures. If certificates for Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, the name of the registered
holder and the serial numbers of the particular certificates evidencing the
Shares to be withdrawn must also be furnished to the Depositary as aforesaid
prior to the physical release of such certificates. All questions as to the form
and validity (including time of
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receipt) of any notice of withdrawal will be determined by the Purchaser, in its
sole discretion, which determination shall be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give such
notification. Withdrawals of tender for Shares may not be rescinded, and any
Shares properly withdrawn will be deemed not to have been validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by following
one of the procedures described in Section 3 at any time prior to the Expiration
Date.
If the Purchaser extends the Offer, is delayed in its acceptance for
payment of Shares, or is unable to accept for payment Shares pursuant to the
Offer, then for any reason, without prejudice to the Purchaser's rights under
this Offer, the Depositary may, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as set forth in this Section 4.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER
General
Sales of Shares pursuant to the Offer and the exchange of Shares for cash
pursuant to the Merger will be taxable transactions for U.S. federal income tax
purposes and may also be taxable under applicable state, local, foreign and
other tax laws. For U.S. federal income tax purposes, a stockholder whose Shares
are purchased pursuant to the Offer or who receives cash as a result of the
Merger will realize gain or loss equal to the difference between the adjusted
basis of the Shares sold or exchanged and the amount of cash received therefor.
Such gain or loss will be capital gain or loss if the Shares are held as capital
assets by the stockholder and will be long-term capital gain or loss if the
stockholder's holding period in such Shares for U.S. federal income tax purposes
is more than one year at the time of the sale or exchange. Long-term capital
gain of a non-corporate stockholder is generally subject to a maximum tax rate
of 20%. In addition, a stockholder's ability to use capital losses to offset
ordinary income is limited.
Backup Withholding
In order to avoid "backup withholding" of U.S. federal income tax on
payments of cash pursuant to the Offer or the Merger, a stockholder surrendering
Shares in the Offer or the Merger must, unless an exemption applies, provide the
Depositary with such stockholder's correct taxpayer identification number
("TIN") on a Substitute Form W-9 included as part of the Letter of Transmittal
and certify under penalties of perjury that such TIN is correct and that such
stockholder is not subject to backup withholding. If a stockholder does not
provide such stockholder's correct TIN or fails to provide the certifications
described above, the Internal Revenue Service (the "IRS") may impose a penalty
on such stockholder and payment of cash to such stockholder pursuant to the
Offer or the Merger may be subject to backup withholding tax of 31%. All
stockholders surrendering Shares pursuant to the Offer or the Merger should
complete and sign the main signature form and the Substitute Form W-9 included
as part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to Purchaser and the
Depositary). Certain stockholders (including, among others, all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
Foreign stockholders should complete and sign the main signature form and Form
W-8, Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS IN SPECIAL SITUATIONS
SUCH AS STOCKHOLDERS WHO RECEIVED THEIR SHARES UPON THE EXERCISE OF EMPLOYEE
STOCK OPTIONS OR OTHERWISE AS COMPENSATION AND STOCKHOLDERS WHO ARE NOT UNITED
STATES PERSONS. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE SPECIFIC TAX CONSEQUENCES TO THEM, IN THEIR PARTICULAR CIRCUMSTANCES, OF
THE
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OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE,
LOCAL, FOREIGN OR OTHER TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are traded on the Nasdaq Stock Market's National Market under
the symbol "VCSI." The following table sets forth, for the calendar quarters
indicated, the high and low per share sales prices for the Shares on the Nasdaq
National Market:
SALES PRICE
--------------
CALENDAR YEAR HIGH LOW
------------- ----- -----
1997:
First Quarter............................................. $9.00 $5.50
Second Quarter............................................ 5.88 4.38
Third Quarter............................................. 5.94 3.63
Fourth Quarter............................................ 4.22 2.50
1998:
First Quarter............................................. 7.50 2.25
Second Quarter............................................ 7.53 3.09
Third Quarter............................................. 3.31 1.56
Fourth Quarter............................................ 3.00 1.50
1999:
First Quarter............................................. 5.00 1.75
Second Quarter (through May 13, 1999)..................... 3.91 2.88
On May 7, 1999, the last full trading day prior to the public announcement
of the terms of the Offer and the Merger, the reported closing price for the
Shares on the Nasdaq National Market was $3.1875 per Share. On May 13, 1999 the
last full trading day prior to commencement of the Offer, the reported closing
price for the Shares on the Nasdaq National Market was $3.875 per Share.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
The Purchaser has been advised by the Company that the Company did not pay
dividends on its Shares during the years ended December 31, 1997 or 1998 and has
not paid any dividends in 1999. The Merger Agreement prohibits the Company from
declaring or paying any dividends without the consent of Parent.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION, MARGIN
REGULATIONS AND EXCHANGE ACT REGISTRATION
Market for Shares
The purchase of Shares by the Purchaser pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and may reduce the
number of stockholders, which could adversely affect the liquidity and market
value of the remaining Shares held by the public.
Stock Quotation
The Shares are traded on the Nasdaq National Market. According to published
guidelines of the Nasdaq National Market, the Shares might no longer be eligible
for quotation on the Nasdaq National Market if, among other things, either (i)
the number of Shares publicly held was less than 750,000, there were fewer than
400 holders of round lots, the aggregate market value of publicly held Shares
was less than $5,000,000, net tangible assets were less than $4,000,000 and
there were fewer than two registered and active market makers for the Shares, or
(ii) the number of Shares publicly held was less than 1,100,000, there were
fewer than 400 holders of round lots, the aggregate market value of publicly
held Shares was less than $15,000,000, and either (x) the Company's market
capitalization was less than
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$50,000,000 or (y) the total assets and total revenue of the Company for the
most recently completed fiscal year or two of the last three most recently
completed fiscal years did not exceed $50,000,000 and there were fewer than four
registered and active market makers. Shares held directly or indirectly by
directors, officers or beneficial owners of more than 10% of the outstanding
Shares are not considered as being publicly held for this purpose. According to
the Company's 1998 Annual Report on Form 10-KSB, there were 1,838 holders of
record of Shares as of March 17, 1999.
If the Shares were to cease to be quoted on the Nasdaq National Market, the
market for the Shares could be adversely affected. It is possible that the
Shares would be traded or quoted on other securities exchanges or in the
over-the-counter market, and that price quotations would be reported by such
exchanges, or through NASDAQ or other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend
upon the number of stockholders and/or the aggregate market value of the Shares
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration of the
Shares under the Exchange Act and other factors.
Exchange Act Registration
The Shares are currently registered under the Exchange Act. Registration of
the Shares may be terminated by the Company upon application to the SEC if the
Shares are not listed on a national securities exchange, quoted on an automated
inter-dealer quotation system or held by 300 or more holders of record.
Termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
its stockholders and to the SEC and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b) and the requirement to furnish a proxy statement in connection with
stockholders' meetings pursuant to Section 14(a) and the related requirement to
furnish an annual report to stockholders, no longer applicable with respect to
the Shares. Furthermore, the ability of "affiliates" of the Company and persons
holding "restricted securities" of the Company to dispose of such securities
pursuant to Rule 144 under the Securities Act of 1933, as amended, may be
impaired or eliminated. The Purchaser intends to seek to cause the Company to
apply for termination of registration of the Shares as soon as possible after
consummation of the Offer if the requirements for termination of registration
are met.
Margin Regulations
The Share are presently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve Board (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares. Depending upon factors similar to those
described above regarding listing and market quotations, the Shares might no
longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations in which event the Shares would be ineligible as
collateral for margin loans made by brokers. In any event, the Shares will cease
to be "margin securities" if registration of the Shares under the Exchange Act
is terminated.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
General
The Company is a Delaware corporation with its principal executive offices
located at 00000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000.
The Company is a leading supplier of speech recognition and related speech
input technologies. It offers a selection of speech recognition and speaker
verification products and vocabulary libraries. These products employ a
proprietary phonetic approach to speech recognition developed by the Company
over the past 20 years. The Company has distributed more than 2.5 million speech
recognizers in 30 countries. The Company markets its technologies to systems
integrators and original
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equipment manufacturers (OEMs) in the telecommunications, desktop computing and
consumer electronics markets. The Company's technology has been used in many
applications worldwide, including telephone network automation, telephone
banking, government services, network-based cellular telephone voice dialing and
automotive-based cellular voice dialing.
Financial Information
Set forth below is certain summary consolidated financial information for
each of the Company's last three fiscal years for the period ended December 31,
1998 as contained in the Company's 1997 Annual Report on Form 10-KSB for the
year ended December 31, 1997 and its 1998 Annual Report on Form 10-KSB for the
year ended December 31, 1998 and for the three months ended March 31, 1998 and
March 31, 1999 as contained in the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999. More comprehensive financial information is
included in such reports (including management's discussion and analysis of
financial condition and results of operation) and other documents filed by the
Company with the SEC, and the following summary is qualified in its entirety by
reference to such reports and other documents and all of the financial
information and notes contained therein. Copies of such reports and other
documents may be examined at or obtained from the SEC and NASDAQ in the manner
set forth below.
VOICE CONTROL SYSTEMS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ------------ ----------- -----------
INCOME STATEMENT DATA:
Sales.................... $13,577,420 $14,429,867 $ 14,225,691 $ 3,772,067 $ 2,768,043
Gross profit............. 10,855,486 11,208,238 11,522,009 3,039,730 2,489,952
Net loss................. (2,794,573) (439,258) (16,216,791) (456,303) (1,286,161)
Basic and diluted net
loss per share......... (0.34) (0.04) (1.25) (.04) (.09)
AT DECEMBER 31, AT MARCH 31,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
BALANCE SHEET DATA:
Total assets.............. $19,804,470 $19,033,515 $11,827,578 $18,507,825 $10,735,116
Working capital........... 14,683,595 15,648,857 7,156,841 15,099,481 6,265,048
Long-term debt............ -- -- 18,283 -- 18,283
Stockholders' equity...... 16,203,210 17,327,602 10,089,763 16,764,926 8,952,520
Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase has been taken from or based upon
publicly available documents and records on file with the SEC and other public
sources and is qualified in its entirety by reference thereto. Although Parent,
the Purchaser and the Information Agent have no knowledge that would indicate
that any statements contained herein based on such documents and records are
untrue, Parent, the Purchaser and the Information Agent do not take
responsibility for the accuracy or completeness of the information contained in
such documents and records, or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Parent, the Purchaser or the Information
Agent.
During the course of the due diligence conducted by Royal Philips and
Parent of the Company in April 1999 and the negotiations between Royal Philips
and Parent and the Company, the Company made available to representatives of
Royal Philips and Parent certain non-public information regarding
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the Company's projected operating performance and financial position for the
twelve months ended December 31, 1999. Specifically, the Company projected total
sales for 1999 of $19.6 million, a 37.9% increase from 1998 sales, gross profit
of $17.9 million, a 55.7% increase from 1998 gross profit, and a net loss for
1999 of $916,000 compared to a net loss of $16.2 million for 1998. The
projections further indicated that stockholders' equity would be approximately
$9.3 million at December 31, 1999, an approximate 7.7% decrease from the level
at December 31, 1998.
The Company has advised the Purchaser that it does not as a matter of
course make public any projections as to future performance or earnings and the
foregoing projections are included in this Offer to Purchase only because this
information was provided to Royal Philips and Parent. The projections were not
prepared with a view to public disclosure or compliance with the published
guidelines of the SEC or the guidelines established by the American Institute of
Certified Public Accountants regarding projections or forecasts. The projections
were based on estimates and assumptions that are inherently subject to
significant economic and competitive uncertainties, all of which are difficult
to predict and many of which are beyond the Company's control. Accordingly,
there can be no assurance that the projected results can be realized or that
actual results will not be materially higher or lower than those projected. None
of the Company, Royal Philips, Parent or the Purchaser or their respective
advisors assumes any responsibility for the accuracy of the projections. The
inclusion of the foregoing projections should not be regarded as an indication
that the Company, Royal Philips, Parent, the Purchaser or any other person who
received such information considers it an accurate prediction of future events.
Neither the Company, Royal Philips, Parent nor the Purchaser intends to update,
revise or correct such projections if they become inaccurate.
Available Information
The Company is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is obligated to file reports and other
information with the SEC relating to its business, financial condition and other
matters. Information concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities, any material interests of such persons in transactions
with the Company and other matters is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the SEC.
Such reports, proxy statements and other information are available for
inspection at the public reference room at the SEC's offices at 000 Xxxxx
Xxxxxx, X.X., Xxxxxxxxxx, X.X., 00000 and also should be available for
inspection and copying at the regional offices of the SEC located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 000 Xxxx
Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000. Copies may be obtained by
mail, upon payment of the SEC's customary charges, by writing to its principal
office at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxx Xxxxx, Xxxxxxxxxx, X.X. 00000 and
can be obtained electronically through the SEC's website at xxxx://xxx.xxx.xxx.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT
General
The Purchaser is a Delaware corporation and a wholly owned subsidiary of
Parent. To date it has engaged in no activities other than those incident to its
formation and the commencement of the Offer. The principal offices of the
Purchaser are located at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
Parent is a Delaware corporation, a wholly owned subsidiary of Philips
Holding USA Inc. ("Philips Holding") and an indirect wholly-owned subsidiary of
Royal Philips. Parent's activities vary from integrated manufacturing and
marketing entities to marketing organizations that sell products imported from
Royal Philips and its affiliates or third parties. Based upon sales, Parent's
largest businesses are consumer electronics, lighting, semiconductors and
components. Parent's principal offices are located at 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
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Philips Holding is a Delaware corporation and a wholly owned subsidiary of
Royal Philips. Philips Holding does not engage in any activities other than
those incident to its role as a holding company of Royal Philips. Philips
Holding's principal offices are located at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000.
Royal Philips is a company incorporated under the laws of The Netherlands
and is the parent company of the Philips Group. The activities of the Philips
Group are organized into product divisions which are responsible for Royal
Philips' worldwide business policy. Royal Philips has manufacturing and sales
organizations in over 60 countries. Royal Philips delivers products, systems and
services in the fields of lighting, consumer electronics and communications,
domestic appliances and personal care, components, semiconductors, medical
systems, business electronics and information technology. Royal Philips'
principal executive offices are located at Rembrandt Xxxxx, Xxxxxxxxxxx 0, 0000
XX Xxxxxxxxx, Xxx Xxxxxxxxxxx.
Financial Information
Set forth below is certain summary consolidated financial information of
Royal Philips derived from its Annual Report on Form 20-F for the year ended
December 31, 1998. The complete set of financial statements of Royal Philips for
the year ended December 31, 1998 as well as the notes thereto and additional
comprehensive financial information (including management's discussion and
analysis of financial condition and results of operations) is included in the
Royal Philips Form 20-F for the year ended December 31, 1998 and other documents
filed by Royal Philips with the SEC. The summary set forth below is qualified in
its entirety by reference to the Philips Form 20-F and such other documents and
all of the financial information and notes contained therein. Copies of such
other documents may be examined at or obtained from the SEC and the NYSE in the
manner set forth in Section 8 above.
KONINKLIJKE PHILIPS ELECTRONICS N.V.
SELECTED CONSOLIDATED FINANCIAL INFORMATION(1)
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1997 1998 1998(2)
NLG NLG NLG US$
------ ------ ------ -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
(Dutch GAAP)
Sales.............................................. 59,707 65,358 67,122 35,514
Income from continuing operations.................. 278 2,712 1,192 631
Net income......................................... (590) 5,733 13,339 7,058
Basic net income per common share.................. (1.73) 16.41 37.05 19.60
Diluted net income per common share................ (1.73) 16.09 36.75 19.44
(U.S. GAAP)
Net income (loss).................................. (866) 5,881 13,090 6,926
Basic net income per common share.................. (2.53) 16.83 36.36 19.24
Diluted net income per common share................ (2.53) 16.51 36.06 19.08
BALANCE SHEET DATA:
(Dutch GAAP)
Total assets....................................... 48,278 51,394 62,041 32,826
Working capital.................................... 788 3,471 1,785 944
Long-term debt..................................... 7,512 7,072 6,140 3,249
Other group equity................................. 616 1,232 533 282
Stockholders' equity............................... 13,956 19,457 31,292 16,557
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YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1997 1998 1998(2)
NLG NLG NLG US$
------ ------ ------ -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
(U.S. GAAP)
Total assets....................................... 48,387 51,634 62,289 32,957
Stockholders' equity............................... 15,003 20,735 32,362 17,123
---------------
(1) Restated to reflect the sale of PolyGram N.V. and to present the Philips
Group accounts on a continuing basis for all years presented.
(2) Dutch Guilders (NLG) are translated into U.S. Dollars ($) at a rate of NLG
1.89 = $1.00, the Noon Buying Rate of the Federal Reserve Bank of New York
on December 31, 1998. The presentation of the U.S. Dollar amounts should not
be construed as a representation that the Dutch Guilder amounts could be so
converted into U.S. Dollars at the rate indicated or at any other rate.
Royal Philips' financial statements are prepared in accordance with
generally accepted accounting principles in The Netherlands ("Dutch GAAP"),
which differ in certain significant respects from generally accepted accounting
principles in the U.S. ("U.S. GAAP"). Royal Philips, however, believes that the
differences between Dutch GAAP and U.S. GAAP are not material to a decision by a
holder of Shares whether to sell, tender or hold the Shares.
Other Information
The name, citizenship, business address, present principal occupation and
material positions held during the past five years of each of the directors and
executive officers of Royal Philips, Philips Holding, Parent and the Purchaser
are set forth in Schedule A to this Offer to Purchase.
None of the Purchaser, Philips Holding, Parent or Royal Philips, or, to the
best of their knowledge, any of the persons listed in Schedule A hereto nor any
associate or majority-owned subsidiary of any of the foregoing, beneficially
owns or has a right to acquire any equity securities of the Company. In
addition, none of the Purchaser, Philips Holding, Parent or Royal Philips, or,
to the best of their knowledge, any of the persons or entities referred to
above, nor any director, executive officer or subsidiary of any of the
foregoing, has effected any transaction in such equity securities during the
past 60 days.
None of the Purchaser, Philips Holding, Parent or Royal Philips, or, to the
best of their knowledge, any of the persons listed in Schedule A hereto, has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company, including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies. Except as set forth in Sections 10 and 12, there have
been no contacts, negotiations or transactions since January 1, 1996 between
Royal Philips, Philips Holding, Parent or the Purchaser, or, to the best of
their knowledge, any of the persons listed in Schedule A hereto, on the one
hand, and the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors, or a sale or other transfer of a material amount of
assets. None of the Purchaser, Parent or Royal Philips, or, to the best of their
knowledge, any of the persons listed in Schedule A hereto, has since January 1,
1996 had any transaction with the Company or any of its executive officers,
directors or affiliates that would require disclosure under the rules and
regulations of the SEC applicable to the Offer.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; EMPLOYMENT AGREEMENTS
Background of the Offer and Contacts with the Company
In August 1998, representatives of Royal Philips and Parent identified the
Company as an acquisition target which would assist it in developing its speech
recognition technology business. In Septem-
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ber 1998, Xxxxx Xxxxxxxxx, Treasurer of Philips Business Electronics, a product
division of Royal Philips, and other on his behalf, contacted Xxxxx X. Xxxxxx,
the then Chief Executive Officer of the Company, about the possible benefits and
principal objectives of a business combination in which Royal Philips (or one of
its affiliates) would acquire the Company. After an introductory meeting on
October 16, 1998, the Company and Royal Philips entered into a nondisclosure
agreement to govern the exchange of nonpublic information between them.
In November and December of 1998, Xx. Xxxxxxxxx and Xxxxxx Xxxxxx, Strategy
Planning Manager of Philips Business Electronics, and other representatives of
Royal Philips and Parent held additional discussions with Xx. Xxxxxx and Xxx X.
Xxxxx, Vice President Finance of the Company, to exchange information regarding
potential strategic opportunities between the companies. As a result of these
discussions, in early December 1998, Xx. Xxxxxx, Xx. Xxxxx and the then
newly-appointed Chief Executive Officer of the Company, Xxxxxx X. Xxxxxx,
traveled to Aachen, Germany to visit Philips' speech technology research
laboratories and to meet with representatives of Philips Electronics' speech
processing business unit, Philips Speech Processing.
Discussions among the parties continued into 1999. In mid-January 1999, the
parties agreed that Philips would conduct preliminary due diligence of the
Company later that month. On February 10, 1999, Xx. Xxxxxxxxx and Xxxxx Xxxxxxx,
New Business Development Manager for the Philips Speech Processing business
unit, met in London with Xxx Xxxx Xxxxx-Xxxxx, member of the board of directors
of the Company, to discuss general information about the Company, how the
Company would fit into the long-term strategy of Philips Business Electronics,
the potential synergies of a transaction and how next to proceed towards an
acquisition transaction.
During March and early April of 1999, representatives of Royal Philips and
Parent continued discussions with Xxx Xxxx Xxxxx-Xxxxx, Xxxx X. Xxxxxxxx,
Chairman of the Board of Directors of the Company, and Xx. Xxxx Xxxxxxxxx, a
member of the board of directors of the Company, regarding a potential
acquisition of the Company. In a conversation on April 14, 1999, Xx. Xxxxxxxx
indicated that the Company would be interested in pursuing a transaction with
Philips but that any steps would have to be taken quickly. In that conversation,
Xx. Xxxxxxxx and Xxxxxxx Xxxxxxxx, Deputy Director of Corporate Mergers and
Acquisitions for Royal Philips, agreed that representatives of Royal Philips and
Parent would be invited to Dallas, Texas to conduct a one-week due diligence
investigation of the Company's business. They further agreed that if Royal
Philips and Xxxxxx remained interested at the conclusion of the week, Royal
Philips and Parent would present an informal proposal containing material terms
of an acquisition of the Company by Royal Philips.
From April 19 to April 23, 1999, representatives of Royal Philips and
Parent met with Company representatives in Dallas to conduct a due diligence
investigation of the Company. At the conclusion of these meetings on April 23,
Xx. Xxxxxxxxx, Mr. Xxxxxxxx, Xxxx Xxxxxxxx, Director of the Corporate Legal
Department at Royal Philips, and other internal and external legal advisors met
with Xx. Xxxxxxxx in Williamsburg, Virginia to discuss the terms of a potential
transaction. At this meeting, Mr. Xxxxxxxx proposed that Parent would acquire
the Company in a cash tender offer at a price of $4.00 per Share.
Between April 24 and April 28, 1999, Xx. Xxxxxxxx and Mr. Xxxxxxxx had
various discussions regarding the terms of the proposal. On April 28, 1999, Xx.
Xxxxxxxx briefed each of the directors of the Company individually regarding the
status of the negotiations.
On May 3, 1999, Mr. Xxxxxxxx and other representatives of Royal Philips and
Parent presented the acquisition proposal to the Board of Management of Royal
Philips. During this meeting, the Board of Management approved proceeding with
the acquisition of the Company on the terms proposed, subject to the completion
of additional due diligence and satisfactory terms and conditions of a
definitive agreement to be negotiated. On May 4, 1999, Xxxxxx's counsel sent to
the Company and its counsel a proposed merger agreement setting forth the basis
upon which Parent would be prepared to proceed with a transaction to acquire the
Company.
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The Board of Directors of the Company met on May 4, 1999. In this meeting,
the Board authorized a committee composed of certain directors and officers of
the Company to continue negotiating a transaction in which Royal Philips or
Parent would acquire the Company at a purchase price of $4.00 per Share, subject
to the further review by the Board of all of the material terms of the
transaction.
Between May 6 and May 8, 1999, Mr. Xxxxxxxx, Xx. Xxxxxxxx and the legal
advisors of Parent and the Company negotiated the terms of the Merger Agreement.
In addition, during this period, Mr. Xxxxxxxx and representatives of the Royal
Philips Business Electronics division, Philips Speech Processing business unit
and Parent met with Xx. Xxxxxx, Xx. Xxxxx, Xx. Xxxxxx and Xx. Xxxxxx Xxxxxx,
Chief Technical Officer of the Company, regarding their employment with the
Company after an acquisition by Parent and the Purchaser.
On May 9, 1999, the negotiations of the Merger Agreement were completed and
the Merger Agreement was finalized. In addition, the negotiations regarding the
terms of employment of each of Xx. Xxxxxx, Xx. Xxxxxx and Xx. Xxxxx were
completed and final terms were agreed upon. Later on May 9, 1999, the Board of
Directors of the Company unanimously adopted the Merger Agreement and approved
the transactions contemplated therein. Shortly thereafter, the Merger Agreement
was executed and delivered. A short time later, the employment agreements with
Xx. Xxxxxx, Xx. Xxxxxx and Xx. Xxxxx were executed and delivered.
Employment Agreements
Prior to the execution of the Merger Agreement, the Company had entered
into a severance agreement with its former chief executive officer, Xx. Xxxxx X.
Xxxxxx, and an employment agreement with Xx. Xxxxxx X. Xxxxxx which provided
for, among other things, the payment of severance amounts and benefits upon
certain terminations of employment in connection with a change in control of the
Company. Pursuant to Xx. Xxxxxx'x xxxxxxxxx agreement, Xx. Xxxxxx will receive a
payment of $75,000 upon the successful purchase of Shares pursuant to the Offer
(the "Effective Date") in consideration for his services in the negotiations
with Royal Philips relating to the Offer.
As of the Effective Date, any prior agreements between the Company and Xx.
Xxxxxx and Xx. Xxxxxx, respectively, will be superseded by new employment
agreements entered into with Parent in connection with the Merger (except with
respect to any amounts that remain due and owing under such agreements based on
events occurring prior to the Effective Date). In connection with the Merger,
Xx. Xxx X. Xxxxx also entered into an employment agreement with Parent on
similar terms. The defined term "Parent" as used in this description of
employment agreements includes the subsidiary of Parent with which the executive
is employed during the employment term. The new employment agreements have
two-year terms (the "Term") commencing on the Effective Date. Copies of the new
employment agreements are filed as Exhibits (c)(2), (c)(3) and (c)(4) to the
Tender Offer Statement on Schedule 14D-1 to which this Offer to Purchase is an
exhibit and are incorporated herein by reference and the following summary is
qualified in its entirety by reference to such agreements.
Pursuant to the new employment agreements, Xx. Xxxxxx will serve as Senior
Vice President of the surviving company in the Merger, Xx. Xxxxxx will serve as
Senior Vice President and Chief Technical Officer of the surviving company in
the Merger and Xx. Xxxxx will serve as the Vice President-Operations and Finance
of the surviving company in the Merger, with base salaries of $230,000, $180,000
and $160,000, respectively. Each of them will be entitled to an annual bonus
upon achievement of certain targets with a target bonus opportunity of $90,000
for Xx. Xxxxxx and 30% of the base salary for Xx. Xxxxxx and Xx. Xxxxx. The
actual bonus paid may be higher or lower than the target bonus (subject to a
minimum of $20,000 for Xx. Xxxxxx in the first year of the term) depending upon
performance. Xx. Xxxxxx will also receive a discretionary expense account of up
to $30,000 for each 12-month period during the Term for expenses relating to his
position.
Each of these three executive officers will be eligible to participate in a
long-term incentive plan (the "LTIP") during the Term of his or her employment.
Under the LTIP, each executive will receive a guaranteed payment equal to 50% of
$260,000 for Xx. Xxxxxx and 50% of the applicable base salary as
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of June 1999 for Xx. Xxxxxx and Xx. Xxxxx, payable in three substantially equal
installments if the officer is actively employed by Parent on the date which is
(A) six months following the Effective Date, (B) 12 months following the
Effective Date and (C) 18 months following the Effective Date, respectively, one
such installment to be paid following each of the dates described in clauses
(A), (B) and (C) above if the employment condition has been satisfied on such
date. Under the LTIP, each officer will have the opportunity to earn an
additional long-term incentive payment equal of to 25% of $260,000 for Xx.
Xxxxxx and 25% of the applicable base salary as of June 1999 for Xx. Xxxxxx and
Xx. Xxxxx if certain business synergies and objectives are achieved during the
18-month period following the Effective Date and the executive remains actively
employed by Parent 18 months following the Effective Date.
Under the employment agreements, if an executive's employment is terminated
by Parent without cause or if the executive terminates his or her employment
upon a material breach (as those terms are defined in employment agreements),
Parent will pay to the executive (A) base salary accrued through the date of
termination and (B) a payment equal to his or her base salary payable for the
greater of (i) the remainder of the Term, or (ii) 12 months (18 months, in the
case of Xx. Xxxxxx) (the "Coverage Period"), and (C) a payment equal to the sum,
pro-rated through the date of termination, of (i) the Target Bonus for the
calendar year in which the termination occurs, and (ii) the guaranteed payment
under the LTIP. Xx. Xxxxxx will continue to receive his discretionary expense
account during the Coverage Period. In consideration of these payments, the
executive officers have agreed, among other things, not to engage in competition
with the Company for a period of 12 months (24 months in the case of Xx. Xxxxxx)
following the termination of such executive's employment.
Effect of the Merger on Employee Benefit and Stock Plans
In addition to the provisions relating to employment agreements described
above, the Merger Agreement contemplates that certain additional actions will be
taken in respect of employee benefit and stock plans in which executive officers
of the Company are eligible to participate. Parent shall cause the Company (or
if the Purchaser is the surviving entity in the Merger, the Purchaser) for a
period of one year following the Merger to provide benefits (other than
stock-related benefits) to Company employees that are in the aggregate
substantially comparable to those provided by the Company prior to the Merger.
In accordance with the Merger Agreement, the Company will take all
necessary action to cause each option to purchase Shares (whether or not
exercisable) to be surrendered and canceled as of the effective time of the
Merger for a cash payment equal to the excess, if any, of the consideration paid
in the Merger (which is the same amount per Share to be paid in the Offer) over
the per Share exercise price of the option multiplied by the number of Shares
subject to the option. Notwithstanding the foregoing, 200,000 options held by
Xx. Xxxxxx shall be canceled and surrendered without consideration therefor.
11. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, but subject to the terms
and conditions of the Merger Agreement (and provided that the Purchaser shall
not be obligated to accept for payment any Shares until expiration or
termination of all applicable waiting periods under the HSR Act), the Purchaser
(x) shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the
Exchange Act (relating to the Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay for,
and (y) may delay the acceptance for payment of or (subject to such rules and
regulations, including Rule 14e-1(c)) payment for, any tendered Shares, in each
case if a majority of the total Shares outstanding on a fully diluted basis and
as will permit the Purchaser to effect the Merger without the vote of any person
other than the Purchaser shall not have been properly and validly tendered
pursuant to the Offer and not withdrawn prior to the expiration of the Offer
(the "Minimum Condition"), or, if on or
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after the date of the Merger Agreement, and at or before the time of acceptance
for payment of any of such Shares, any of the following events shall occur:
(a) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements under the
Merger Agreement;
(b)(i) any of the representations and warranties of the Company set
forth in this Agreement that are qualified by materiality or by Material
Adverse Effect (as defined in the Merger Agreement) shall not have been
true and correct as of the date of the Merger Agreement or shall not be
true and correct on the Expiration Date of the Offer (and any extensions
thereof) as though made on and as of such date or (ii) except for such
inaccuracies as, individually or in the aggregate, have not had and would
not be reasonably likely to have a Material Adverse Effect, the
representations and warranties of the Company set forth in the Merger
Agreement that are not qualified by materiality or by Material Adverse
Effect, shall not have been true and correct as of the date of the Merger
Agreement or shall not be true and correct as of the expiration date of the
Offer (and any extensions thereof) as though made on and as of such date;
(c) there shall be threatened, instituted or pending any action,
litigation or proceeding (hereinafter, an "Action") by any governmental
entity: (i) challenging the acquisition by Parent or the Purchaser of
Shares or seeking to restrain or prohibit the consummation of the Offer or
the Merger; (ii) seeking to prohibit or impose any material limitations on
Parent's, the Purchaser's or any of their respective affiliates' ownership
or operation of all or any material portion of the business or assets of
the Company and its subsidiaries taken as a whole or the business or assets
of any significant subsidiary of Royal Philips, or to compel Parent or the
Purchaser to dispose of or hold separate all or any portion of Parent's or
the Purchaser's or the Company's business or assets (including the business
or assets of their respective affiliates and subsidiaries) as a result of
the Offer or the Merger; (iii) seeking to impose material limitations on
the ability of Parent or the Purchaser effectively to acquire or hold, or
to exercise full rights of ownership of, the Shares including, without
limitation, the right to vote the Shares purchased by them on an equal
basis with all other Shares on all matters properly presented to the
stockholders of the Company; or (iv) that, in any event, would,
individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect;
(d) any statute, rule, regulation, order or injunction shall be
enacted, promulgated, entered, enforced or deemed to or become applicable
to the Offer or the Merger, or any other action shall have been taken,
proposed or threatened, by any court or other governmental entity, that is
reasonably expected to result in any of the effects of, or have any of the
consequences sought to be obtained or achieved in, any Action referred to
in clauses (i) through (iv) of paragraph (c) above;
(e)(i) the Company's stockholders' equity as determined on a
consolidated basis in accordance with U.S. GAAP shall be less than
$6,000,000 or (ii) Parent shall not have received a certificate signed by
the Chief Executive Officer and the Vice President Finance of the Company,
dated the Expiration Date of the Offer, certifying that the Company's
stockholders' equity determined on consolidated basis in accordance with
U.S. GAAP is greater than or equal to $6,000,000;
(f) any change or development shall have occurred that, individually
or in the aggregate, is reasonably likely to have a Material Adverse
Effect; or
(g) the Merger Agreement shall have been terminated by the Company or
Parent or the Purchaser in accordance with its terms;
which, in the reasonable judgment of Parent and the Purchaser, in any such case,
and regardless of the circumstances (including any action or inaction by Parent
or the Purchaser) giving rise to any such conditions, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment for
Shares.
The foregoing conditions may be asserted by Parent or the Purchaser
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser) giving rise to such condition. The
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conditions set forth in paragraphs (a) through (g) above are for the sole
benefit of Parent and the Purchaser and may be waived by Parent or the
Purchaser, by express and specific action to that effect, in whole or in part at
any time and from time to time in their sole discretion.
A public announcement will be made of a material change in, or waiver of,
such conditions, and the Offer may, in certain circumstances, be extended in
connection with any such change or waiver.
Even if all of the Offer Conditions have been satisfied pursuant to the
Merger Agreement, the Purchaser has the right, without the consent of the
Company, to extend the Offer for a period of up to 30 business days if it
reasonably determines that such an extension is appropriate in order to enable
it to purchase at least 90% of the outstanding Shares in the Offer.
12. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; THE MERGER
Purpose of the Offer
The purpose of the Offer is to acquire for cash as many outstanding Shares
as possible as a first step in acquiring the entire equity interest in the
Company.
If the Purchaser acquires over 50% of the outstanding Shares (on a
fully-diluted basis) pursuant to the Offer, it will have the vote necessary
under Delaware law to approve the Merger of the Purchaser with and into the
Company, or at the option of Parent, of the Company with and into the Purchaser.
Therefore, if at least 8,466,094 Shares are acquired pursuant to the Offer or
otherwise, the Purchaser will be able to and intends to effect the Merger
without a meeting of stockholders. Under the DGCL, if the Purchaser owns at
least 90% of the outstanding Shares, the Purchaser could effect the Merger using
the "short-form" merger procedures without prior notice to, or any action by,
any other stockholder of the Company.
If the Purchaser acquires Shares pursuant to the Offer, the Purchaser
intends to conduct a detailed review of the Company and its assets, business,
operations, properties, policies, corporate structure, capitalization and the
responsibilities and qualification of the Company's management and personnel and
consider what, if any, changes the Purchaser deems desirable in light of the
circumstances which then exist. The Purchaser does not presently contemplate any
major changes in the operations of the Company.
The Merger
The Merger Agreement provides that the closing of the Merger will take
place on the first business day on which the last to be satisfied or waived of
the conditions set forth in the Merger Agreement shall be satisfied or waived,
or at such other place and time and/or on such other date as the Company and
Parent may agree. Upon consummation of the Merger, each Share issued and
outstanding immediately prior to the effective time of the Merger (other than
Shares owned by the Parent Companies or Shares held by Dissenting Stockholders)
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive, without interest, an amount in
cash equal to the price paid per Share pursuant to the Offer.
The description of the Merger and the Merger Agreement included herein is
qualified by reference to the Merger Agreement which is filed as an exhibit to
the Tender Offer Statement on Schedule 14D-1 to which this Offer to Purchase is
an exhibit.
Vote Required to Approve Merger
The DGCL requires, among other things, that the adoption of any plan of
merger or consolidation of the Company must be approved by the Board of
Directors of the Company and, if the "short form" merger procedure described
above is not available, by the holders of a majority of the Company's
outstanding Shares. The Board of Directors of the Company has approved the
Offer, the Merger and the Merger Agreement; consequently, the only additional
action of the Company that may be necessary to
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effect the Merger is adoption of the Merger Agreement by such stockholders if
the "short form" merger procedure described above is not available. Under the
DGCL, the affirmative vote of holders of a majority of the outstanding Shares
(including any Shares owned by the Purchaser) is generally required to adopt the
Merger Agreement. If the Purchaser acquires, through the Offer or otherwise,
voting power with respect to at least a majority of the outstanding Shares
(which would be the case if the Minimum Condition were satisfied and the
Purchaser were to accept for payment Shares tendered pursuant to the Offer), it
would have sufficient voting power to effect the Merger without the vote of any
other stockholder of the Company.
THE MERGER AGREEMENT PROVIDES THAT IF ANY TAKEOVER STATUTE IS OR SHALL
BECOME APPLICABLE TO THE TRANSACTIONS CONTEMPLATED THEREBY, THE COMPANY AND THE
BOARD OF DIRECTORS OF THE COMPANY MUST GRANT SUCH APPROVALS AND TAKE SUCH
ACTIONS AS ARE NECESSARY SO THAT THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT MAY BE CONSUMMATED AS PROMPTLY AS PRACTICABLE ON THE TERMS
CONTEMPLATED THEREBY AND OTHERWISE ACT TO ELIMINATE THE EFFECTS OF SUCH STATUTE
OR REGULATION ON THE TRANSACTIONS CONTEMPLATED THEREBY.
Conditions to the Merger
The obligations of the Company, the Purchaser and Parent to effect the
Merger are subject to the satisfaction or waiver of certain conditions set forth
in the Merger Agreement, including (i) the purchase by the Purchaser, Parent or
their affiliates of Shares pursuant to the Offer, (ii) the receipt of
stockholder approval, if required, (iii) no statute, rule or regulation shall
have been enacted or promulgated by any federal, state, local or foreign court,
arbitral tribunal, administrative agency or commission or other governmental or
regulatory authority or administrative agency which prohibits the consummation
of the Merger, and there shall be no order or injunction of a court of competent
jurisdiction in effect precluding consummation of the Merger; and (iv) clearance
from the appropriate agencies pursuant to the HSR Act shall have been obtained
or the waiting period thereby shall have expired or been terminated. In
addition, Parent and the Purchaser's obligations to effect the Merger are
subject to the further conditions that (i) the representations and warranties
contained in the Merger Agreement are true in all material respects as of the
time of the Merger, except with respect to changes permitted by the Merger
Agreement, (ii) the Company shall have fulfilled its obligations under the
Merger Agreement with respect to employee benefits and benefit plans and (iii)
holders of not more than five percent of the outstanding Shares shall have
exercised appraisal rights under Section 262 of the DGCL.
Acquisition Proposals
The Merger Agreement provides that neither the Company nor any of its
subsidiaries nor any of the respective officers and directors of the Company or
its subsidiaries shall, and the Company shall direct and use its best efforts to
cause its employees, agents and representatives not to, directly or indirectly
initiate, solicit, encourage or otherwise facilitate, any inquiries or the
making of any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation or similar transaction involving the Company, or any
purchase of more than 15% (on a fair market value basis) of the assets of the
Company and its subsidiaries on a consolidated basis, or any purchase of, or
tender offer for, more than 15% of any equity securities of the Company (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal"), except that the Company shall have the right, if, and only to the
extent that, the Company's Board of Directors concludes in good faith after
consultation with outside legal counsel that such actions are required to comply
with the fiduciary duties of the Company's Board of Directors under applicable
law in response to a bona fide, written Acquisition Proposal not solicited on or
after the date of the Merger Agreement, to engage in negotiations concerning,
provide confidential information or data to, or have discussions with, any
person relating to an Acquisition Proposal. The Company has agreed to notify
Parent immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with the Company or any of its subsidiaries.
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Termination of the Merger Agreement
The Merger Agreement may be terminated and the transactions contemplated
thereby abandoned at any time prior to the Merger, before or after approval by
holders of Shares: (a) by the mutual consent of Parent (also acting on behalf of
the Purchaser) and the Company, by action of their respective Boards of
Directors; or (b) by action of the Board of Directors of either Parent or the
Company if (i) the Purchaser shall not have accepted for payment any Shares
pursuant to the Offer prior to September 15, 1999; provided, however, that such
right to terminate the Merger Agreement shall not be available to any party
whose failure to perform any of its obligations under the Merger Agreement
results in the failure of any Offer Condition or (ii) any governmental entity
shall have issued an Order which shall have become final and non-appealable.
In addition, the Merger Agreement may be terminated by action of the Board
of Directors of Parent, if (x) (i) the Company shall have failed to comply in
any material respect with any of the covenants or agreements under the Merger
Agreement or (ii) a representation or warranty of the Company set forth in the
Merger Agreement shall have been inaccurate when made or shall thereafter become
inaccurate, except for such inaccuracies which, when taken together (in each
case without regard to any qualification as to materiality or a Material Adverse
Effect contained in the applicable representations and warranties) would not
reasonably be likely to have a Material Adverse Effect, and, with respect to any
such breach, failure to perform or inaccuracy that can be remedied, the breach,
failure or inaccuracy is not remedied within 15 business days after the giving
of written notice of such breach, failure or inaccuracy to the Company; (y) the
Board of Directors of the Company shall have withdrawn or modified in a manner
adverse to Parent or the Purchaser its approval or recommendation of the Offer,
the Merger Agreement or the Merger or shall have adopted or recommended any
Acquisition Proposal, or the Board of Directors of the Company, upon request by
Parent, shall fail to reaffirm such approval or recommendation within 10
business days after such request if an Acquisition Proposal is pending, or shall
have resolved to do any of the foregoing; or (z) if the Company or any of the
other persons or entities shall have initiated, solicited or otherwise
facilitated another Acquisition Proposal for the Company other than solely to
fulfill fiduciary obligations under applicable law as advised in writing by
counsel.
The Merger Agreement may also be terminated by action of the Board of
Directors of the Company, (x) if Parent or the Purchaser (or another Parent
Company) (i) shall have breached in any material respect any of the
representations, warranties, covenants or agreements contained in the Merger
Agreement (other than any immaterial covenants or agreements) and, with respect
to any such breach that can be remedied within 15 business days after the
Company has provided Parent with written notice of such breach, or (ii) shall
have failed to commence the Offer within the time agreed upon in the Merger
Agreement or (y) if (i) the Board of Directors of the Company receives a written
offer not solicited on or after the date of the Merger Agreement, with respect
to a merger, reorganization, share exchange, consolidation or sale of all or
substantially all of the Company's assets or a tender or exchange offer not
solicited on or after the date hereof for more than 50% of the outstanding
Shares is commenced, and with respect to which the Board of Directors of the
Company concludes in good faith, after consultation with an independent
financial advisor and its outside counsel, that approval, acceptance or
recommendation of such transaction is required by the fiduciary duties of the
Company's Board of Directors under applicable law (any such transaction, a
"Superior Proposal") and (ii) the Company has given Parent three business days'
prior written notice of its intention to terminate the Merger Agreement to
accept the Superior Proposal, which notice shall indicate the name of the person
making such Superior Proposal and the material terms of such Superior Proposal,
and Parent shall have failed to offer to amend the Offer so that it is at least
as favorable to the stockholders of the Company as the Superior Proposal.
Termination Payments
The Merger Agreement provides that if (x)(i)(A) the Offer shall have
remained open for a minimum of at least 20 business days, (B) after the date of
the Merger Agreement, any corporation, partnership, person, other entity or
group other than Parent or the Purchaser or any of their respective subsidiaries
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or affiliates shall have become the beneficial owner of 15% or more of the
outstanding Shares or made any Acquisition Proposal, and (C)(1) the Minimum
Condition shall not have been satisfied or (2) the Offer is terminated by Parent
due to a breach of the Company's obligations with respect to initiating or
soliciting other Acquisition Proposals or because September 15, 1999 has passed
without the purchase of any Shares pursuant to the Offer; or (ii) Parent shall
have terminated the Merger Agreement as a result of the board of directors of
the Company having withdrawn or modified in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, the Merger Agreement or
the Merger or having adopted or recommended another Acquisition Proposal or
having failed to reaffirm its approval or recommendation within 10 business days
after a request if an Acquisition Proposal is pending; or (iii) the Company
shall have terminated the Merger Agreement after having received a Superior
Proposal and having given Parent three days' notice of its intent to terminate
and Parent shall have failed to amend the Offer to match the Superior Proposal;
and (y) within 18 months of such termination (or the Expiration Date of the
Offer in the case of (C)(1) above), the Company consummates an Acquisition
Proposal, then, upon consummation of such Acquisition Proposal, the Company
shall promptly, but in no event later than five business days after the date of
a request by Parent for payment of such fee, pay Parent a fee of $2,000,000,
plus all documented fees and expenses incurred by Parent or the Purchaser in
connection with the Merger Agreement, the Offer and the Merger up to a maximum
amount of $1,000,000.
Treatment of Stock Options
The Merger Agreement provides that prior to the Merger, the Company shall
take all actions as may be necessary such that at the effective time of the
Merger, each stock option outstanding pursuant to the Company's stock option
plans ("Option"), whether or not then exercisable, shall be canceled and only
entitle the holder thereof, upon surrender thereof, to receive an amount in cash
equal to the excess, if any, of the per Share consideration paid in the Merger
over the exercise price per Share of such Option multiplied by the number of
Shares previously subject to such Option, less all applicable withholding taxes.
Such payment shall be made by the Company as soon as administratively feasible
after the Merger.
Treatment of Warrants
In the Merger, each outstanding warrant to purchase Shares which has not
been exercised at the time of the Merger will be treated in accordance with the
terms of each individual warrant.
Treatment of Other Employee Benefits
The Merger Agreement provides that, for a period of one year following the
Merger, it will cause the Company to continue to provide employees with benefits
under employee benefit plans (other than stock option or other plans involving
the potential issuance of securities of the Company) which in the aggregate are
substantially comparable to the benefits provided by the Company to such
employees immediately prior to the Merger, provided that employees covered by
collective bargaining agreements need not be provided such benefits.
Composition of the Board of Directors
If requested by Parent, the Company will, subject to compliance with
applicable law, immediately following the acceptance for payment of, and payment
by the Purchaser for, more than 50% of the outstanding Shares (on a fully
diluted basis) pursuant to the Offer, take all actions necessary to cause
persons designated by Parent to become directors of the Company so that the
total number of such persons (after all such actions have been taken) equals at
least that number of directors, rounded up to the next whole number, which
represents the product of (x) the total number of directors on the Board of
Directors multiplied by (y) the percentage that the number of Shares so accepted
for payment and paid for plus any Shares beneficially owned by Parent or its
affiliates on the date of the Merger Agreement bears to the number of Shares
outstanding at the time of such payment. In furtherance thereof, if
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requested by Parent, the Company will increase the size of the Board, or use its
best efforts to secure the resignation of directors, or both, as is necessary to
permit Xxxxxx's designees to be elected to the Company's Board of Directors;
provided, however, that prior to the effective time of the Merger, the Company's
Board of Directors shall always have at least one member who is not an officer,
designee, stockholder or affiliate of Parent or Parent's affiliates.
Conduct of Business of the Company
Pursuant to the Merger Agreement, the Company has agreed that, prior to the
Merger, unless consented to in writing by Parent, it and each of its
subsidiaries will conduct its business only in the ordinary and usual course and
will use its best efforts to preserve its business organization intact and
maintain its existing relations with customers, suppliers, employees and
business associates.
Prohibited Actions by the Company
Under the Merger Agreement, the Company has agreed that, prior to the
Merger, unless consented to in writing by Xxxxxx, neither it nor any of its
subsidiaries will:
(a) (i) sell or pledge or agree to sell or pledge any stock owned by
it in any of its subsidiaries; (ii) amend its certificate of incorporation
or by-laws; (iii) split, combine or reclassify the outstanding Shares; or
(iv) declare, set aside or pay any dividend payable in cash, stock or
property with respect to the Shares;
(b) (i) issue, sell, pledge, dispose of or encumber any additional
shares of, or securities convertible or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares
of its capital stock of any class of the Company or its subsidiaries or any
other property or assets other than, in the case of the Company, Shares
issuable pursuant to options outstanding on the date hereof under the
Company stock option plans, Shares issuable upon exercise of warrants to
purchase Shares or Shares issuable pursuant to the terms of the Company's
Stock Purchase Plan; (ii) transfer, lease, license, guarantee, sell,
mortgage, pledge, dispose of or encumber any assets or incur or modify any
indebtedness or other liability other than in the ordinary and usual course
of business; (iii) acquire directly or indirectly by redemption or
otherwise any shares of the capital stock of the Company; or (iv) authorize
capital expenditures individually or in the aggregate in excess of $200,000
or make any acquisition of, or investment in, assets or stock of any other
person or entity;
(c) other than (i) the employment agreements entered into in
connection with the Merger Agreement, (ii) as required by law, (iii) as
required under a plan existing as of the date of the Merger Agreement, (iv)
as specifically provided in the Merger Agreement, (A) grant any severance
or termination pay to, or enter into any employment or severance agreement
with any director, officer or other employee of the Company or such
subsidiaries; or (B) establish, adopt, enter into, make any new grants or
awards (or accelerate the vesting or increase the value of any benefit)
under or amend, any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, employee
stock ownership, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any directors, officers or employees;
(d) settle or compromise any material claims or litigation or, except
in the ordinary and usual course of business, modify, amend or terminate
any of its material contracts or waive, release or assign any material
rights or claims;
(e) make any tax election or permit any insurance policy naming it as
a beneficiary or a loss payable payee to be canceled or terminated without
notice to Parent, except in the ordinary and usual course of business;
(f) (i) terminate the employment of any employee who is covered by a
change in control, employment, termination or similar agreement, except for
Cause (as defined in such agreements)
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or (ii) permit circumstances to exist that would provide such employee with
Good Reason (as defined in such agreements) to terminate employment;
(g) hire any new employees except in the ordinary and usual course of
business;
(h) permit any person not participating in the Company's Stock
Purchase Plan as of the date of the Merger Agreement to participate in such
plan or permit any present participant in the Company's Stock Purchase Plan
to increase his or her percentage contribution under such plan; or
(i) authorize or enter into an agreement to do any of the foregoing.
Indemnification of Officers and Directors
The Merger Agreement provides that from and after the Merger, Xxxxxx agrees
that it will indemnify and hold harmless each present and former director and
officer of the Company, determined as of the effective time of the Merger (the
"Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in such person's capacity as a director or officer of the Company in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Merger, whether asserted or claimed
prior to, at or after the Merger, to the fullest extent that the Company would
have been permitted under Delaware law and its certificate of incorporation or
by-laws in effect on the date of the Merger Agreement to indemnify such person.
The Merger Agreement also provides that the surviving corporation in the Merger
shall maintain the Company's existing officers' and directors' liability
insurance ("D&O Insurance") for a period of two years after the Merger so long
as the annual premium therefor is not in excess of the last annual premium paid
prior to the date hereof (the "Current Premium"); provided, however, if the
existing D&O Insurance expires, is terminated or canceled during such two year
period, the surviving corporation in the Merger will use its best efforts to
obtain as much D&O Insurance as can be obtained for the remainder of such period
for a premium not in excess (on an annualized basis) of the Current Premium. In
the Merger Agreement, the Company represented to Parent that the Current Premium
is $75,000. Notwithstanding the foregoing, the Surviving Corporation may replace
the D&O Insurance with coverage provided by Xxxxxx's D&O insurer with respect to
events occurring on or prior to the Merger so long as the coverage provided by
Xxxxxx's D&O policy with respect to such events are, in the aggregate,
substantially the same as, or more favorable than, the D&O Insurance with
respect to such events.
Appraisal Rights
Holders of Shares do not have appraisal rights as a result of the Offer.
However, if the Merger is consummated, each holder of Shares who has neither
voted in favor of the Merger nor consented thereto in writing will be entitled
to an appraisal by the Delaware Court of Chancery of the fair value of such
holder's Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid. In determining such fair value, the Court may
consider all relevant factors. The value so determined could be more or less
than the consideration to be paid in the Offer and the Merger. Any judicial
determination of the fair value could be based upon considerations other than or
in addition to the market value of the Shares, including, among other things,
asset values and earning capacity.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses such holder's right to
appraisal as provided in the DGCL, each Share of such stockholder will be
converted into the right to receive the per Share amount paid by the Purchaser
in the Offer in accordance with the Merger Agreement. A stockholder may withdraw
his demand for appraisal by delivery to Parent of a written withdrawal of such
holder's demand for appraisal and acceptance of the Merger.
The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 of the DGCL.
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FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
Rule 13e-3
The Merger would have to comply with any applicable federal law operative
at the time of its consummation. Rule 13e-3 under the Exchange Act is applicable
to certain "going private" transactions. The Purchaser does not believe that
Rule 13e-3 will be applicable to the Merger unless the Merger is consummated
more than one year after the termination of the Offer. If applicable, Rule 13e-3
would require, among other things, that certain financial information concerning
the Company and certain information relating to the fairness of the Merger and
the consideration offered to minority stockholders be filed with the SEC and
disclosed to minority stockholders prior to consummation of the Merger.
13. SOURCE AND AMOUNT OF FUNDS
The Purchaser estimates that the total amount of funds required to purchase
all of the outstanding Shares (other than those already owned by Parent)
pursuant to the Offer and the Merger and to pay related fees and expenses will
be approximately $60 million. The Purchaser will obtain these funds from Royal
Philips, either directly or indirectly, or via other subsidiaries of Royal
Philips, through loans, advances or capital contributions. Any loan from Royal
Philips to the Purchaser, its indirect wholly owned subsidiary, would be made at
arm's length interest rates that Royal Philips customarily uses for its
intercompany transactions. It is currently anticipated that such funds will be
generated internally from cash reserves of Royal Philips and its subsidiaries.
No final decisions have been made, however, concerning the method Royal Philips
will employ to obtain such funds. Such decisions, when made, will be based on
Royal Philips' review from time to time of the advisability of particular
actions, as well as on prevailing interest rates and financial and other
economic conditions.
14. DIVIDENDS AND DISTRIBUTIONS
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in Section 12 without the consent of
Parent. Nothing herein shall constitute a waiver by the Purchaser or Parent of
any of its rights under the Merger Agreement or a limitation of remedies
available to the Purchaser or Parent for any breach of the Merger Agreement,
including termination thereof.
If, on or after the date of the Merger Agreement, the Company should (1)
split, combine or otherwise change the Shares or its capitalization, (2) acquire
currently outstanding Shares or otherwise cause a reduction in the number of
outstanding Shares or (3) issue or sell additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or options, to acquire any of the foregoing, other
than Shares issued pursuant to the exercise of stock options and warrants
outstanding as of the date of the Merger Agreement or Shares issuable pursuant
to the Company Stock Purchase Plan, then, subject to the provisions of Section
11 above, the Purchaser, in its sole discretion, may make such adjustments as it
deems appropriate in the Merger Consideration and other terms of the Offer,
including, without limitation, the number or type of securities offered to be
purchased.
If, on or after the date of the Merger Agreement, the Company should
declare or pay any cash dividend on the Shares or other distribution on the
Shares, or issue with respect to the Shares any additional Shares, shares of any
other class of capital stock other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, payable or distributable to stockholders of
record on a date prior to the transfer of the Shares purchased pursuant to the
Offer to the Purchaser or its nominee or transferee on the Company's stock
transfer records, then, subject to the provisions of Section 11 above, (1) the
per Share price to be paid in the Offer may, in the sole discretion of the
Purchaser, be reduced by the amount of any such cash dividend or cash
distribution and (2) the whole of any such noncash dividend, distribution or
issuance to be
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received by the tendering stockholders will (a) be received and held by the
tendering stockholders for the account of the Purchaser and will be required to
be promptly remitted and transferred by each tendering stockholder to the
Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer, or (b) at the direction of the Purchaser, be
exercised for the benefit of the Purchaser, in which case the proceeds of such
exercise will promptly be remitted to the Purchaser. Pending such remittance and
subject to applicable law, the Purchaser will be entitled to all rights and
privileges as owner of any such noncash dividend, distribution, issuance or
proceeds and may withhold the entire per Share price to be paid in the Offer or
deduct from such price the amount or value thereof, as determined by the
Purchaser in its sole discretion.
15. CERTAIN LEGAL MATTERS
General
Except as otherwise disclosed herein, based upon an examination of publicly
available filings with respect to the Company, Parent and the Purchaser are not
aware of any licenses or other regulatory permits which appear to be material to
the business of the Company and which might be adversely affected by the
acquisition of Shares by the Purchaser pursuant to the Offer or of any approval
or other action by any governmental, administrative or regulatory agency or
authority which would be required for the acquisition or ownership of Shares by
the Purchaser pursuant to the Offer. Should any such approval or other action be
required, it is currently contemplated that such approval or action would be
sought or taken. There can be no assurance that any such approval or action, if
needed, would be obtained or, if obtained, that it will be obtained without
substantial conditions or that adverse consequences might not result to the
Company's or Parent's business or that certain parts of the Company's or
Parent's business might not have to be disposed of in the event that such
approvals were not obtained or such other actions were not taken, any of which
could cause the Purchaser to elect to terminate the Offer without the purchase
of the Shares thereunder. The Purchaser's obligation under the Offer to accept
for payment and pay for Shares is subject to certain conditions set forth in
Section 11.
Antitrust Compliance
Under the HSR Act and the rules that have been promulgated thereunder by
the Federal Trade Commission ("FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. The acquisition of
Shares by the Purchaser is subject to these requirements.
Pursuant to the HSR Act, Parent intends to file a Notification and Report
Form with respect to the acquisition of Shares pursuant to the Offer and the
Merger with the Antitrust Division and the FTC on May 18, 1999. Under the
provisions of the HSR Act applicable to the purchase of Shares pursuant to the
Offer, such purchases may not be made until the expiration of a 15-calendar day
waiting period following the filing by Parent. Accordingly, the waiting period
under the HSR Act will expire at 11:59 p.m., New York City time, on June 2,
1999, unless early termination of the waiting period is granted or Parent
receives a request for additional information or documentary material prior
thereto. If either the FTC or the Antitrust Division were to request additional
information or documentary material from Parent, the waiting period would expire
at 11:59 p.m., New York City time, on the tenth calendar day after the date of
substantial compliance by Parent with such request unless the waiting period is
sooner terminated by the FTC or the Antitrust Division. Thereafter, the waiting
period could be extended only by agreement or by court order. Only one extension
of such waiting period pursuant to a request for additional information is
authorized by the rules promulgated under the HSR Act, except by agreement or by
court order. Any such extension of the waiting period will not give rise to any
withdrawal rights not otherwise provided for by applicable law. Although the
Company is required to file certain information and documentary material with
the Antitrust Division and the FTC in connection with the Offer, neither the
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28
Company's failure to make such filings nor a request from the Antitrust Division
or the FTC for additional information or documentary material made to the
Company will extend the waiting period.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the Purchaser's
purchase of Shares, the Antitrust Division or the FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or seeking divestiture of Shares acquired by the Purchaser or the
divestiture of substantial assets of Parent, the Company or any of their
respective subsidiaries. Private parties may also bring legal action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if a challenge
is made, what the result will be. Section 11 of this Offer to Purchase contains
a description of certain conditions to the Offer that could become applicable in
the event of such a challenge.
Neither Parent, the Purchaser nor the Company believes that the antitrust
and competition laws of certain other foreign jurisdictions require notification
of the transaction or the observance of pre-consummation waiting periods.
State Takeover Laws
A number of states have adopted laws and regulations applicable to offers
to acquire securities of corporations which are incorporated in such states
and/or which have substantial assets, stockholders, principal executive offices
or principal places of business therein. In Xxxxx x. MITE Corporation, the
Supreme Court of the United States held that the Illinois Business Takeover
Statute, which made the takeover of certain corporations more difficult, imposed
a substantial burden on interstate commerce and was therefore unconstitutional.
In CTS Corporation v. Dynamics Corporation of America, the Supreme Court held
that as a matter of corporate law, and in particular, those laws concerning
corporate governance, a state may constitutionally disqualify an acquiror of
"control shares" (ones representing ownership in excess of certain voting power
thresholds e.g. 20%, 33% or 50%) of a corporation incorporated in its state and
meeting certain other jurisdictional requirements from exercising voting power
with respect to those shares without the approval of a majority of the
disinterested stockholders.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined
generally as any beneficial owner of 15% or more of the outstanding voting stock
of the corporation) unless, among other things, the corporation's board of
directors has given its prior approval to either the business combination or the
transaction which resulted in the stockholder becoming an "interested
stockholder." The Company's Board of Directors has approved the Merger Agreement
and the Purchaser's acquisition of Shares pursuant to the Offer and, therefore,
Section 203 of the DGCL is inapplicable to the Offer and the Merger.
Based on information supplied by the Company, the Purchaser does not
believe that any state takeover laws purport to apply to the Offer or the
Merger. Neither the Purchaser nor Parent has currently complied with any state
takeover statute or regulation. The Purchaser reserves the right to challenge
the applicability or validity of any state law purportedly applicable to the
Offer or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Offer or the Merger is intended as a waiver of such right.
If it is asserted that any state takeover statute is applicable to the Offer or
the Merger and if an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer or the Merger, the Purchaser
might be required to file certain information with, or to receive approvals
from, the relevant state authorities, and the Purchaser might be unable to
accept for payment or pay for Shares tendered pursuant to the Offer, or be
delayed in consummating the Offer or the Merger. In such case, the Purchaser may
not be obliged to accept for payment or pay for any Shares tendered pursuant to
the Offer.
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29
If it is asserted that one or more state takeover laws applies to the Offer
and it is not determined by an appropriate court that such act or acts do not
apply or are invalid as applied to the Offer, the Purchaser might be required to
file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, the Purchaser might be unable to accept
for payment any Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer. In such case, the Purchaser may not be obligated to
accept for payment any Shares tendered.
Exon-Xxxxxx
Under Section 721 of Title VII of the United States Defense Production Act
of 1950, as amended by Section 5021 of the Omnibus Trade and Competitiveness Act
of 1988 ("Exon-Xxxxxx"), the President of the United States is authorized to
prohibit or suspend acquisitions, mergers or takeovers by foreign persons of
persons engaged in interstate commerce in the United States if the President
determines, after investigation, that such foreign persons in exercising control
of such acquired persons might take action that threatens to impair the national
security of the United States and that other provisions of existing law do not
provide adequate authority to protect national security. Pursuant to
Exon-Xxxxxx, notice of an acquisition by a foreign person is to be made to the
Committee on Foreign Investment in the United States ("CFIUS"), which is
comprised of representatives of the Departments of the Treasury, State,
Commerce, Defense and Justice, the Office of Management and Budget, the United
States Trade Representative's Office and the Council of Economic Advisors and
which has been selected by the President to administer Exon-Xxxxxx, either
voluntarily by the parties to such proposed acquisition, merger or takeover or
by any member of CFIUS.
A determination that an investigation is called for must be made within 30
days after notification of a proposed acquisition, merger or takeover is first
filed with CFIUS. Any such investigation must be completed within 45 days of
such determination. Any decision by the President to take action must be
announced within 15 days of the completion of the investigation. Although
Exon-Xxxxxx does not require the filing of a notification, nor does it prohibit
the consummation of an acquisition, merger or takeover if notification is not
made, such an acquisition, merger or takeover thereafter remains indefinitely
subject to divestment should the President subsequently determine that the
national security of the United States has been threatened or impaired. Neither
Royal Philips nor the Purchaser believes that the Offer or the Merger threatens
to impair the national security of the United States and neither Royal Philips
nor the Purchaser intends to notify CFIUS of the proposed transaction.
16. FEES AND EXPENSES
The Purchaser has retained X.X. Xxxx & Co., Inc. to act as Information
Agent in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, telex, telegraph and personal interviews and may
request brokers, dealers and other nominee stockholders to forward materials
relating to the Offer to beneficial owners of Shares. The Information Agent will
receive reasonable and customary compensation for such services, plus
reimbursement of out-of-pocket expenses and the Purchaser will indemnify the
Information Agent against certain liabilities and expenses in connection with
the Offer, including liabilities under the federal securities laws.
The Purchaser will pay the Depositary reasonable and customary compensation
for its services in connection with the Offer, plus reimbursement for
out-of-pocket expenses, and will indemnify the Depositary against certain
liabilities and expenses in connection therewith, including liabilities under
the federal securities laws. Brokers, dealers, commercial banks and trust
companies will be reimbursed by the Purchaser for customary mailing and handling
expenses incurred by them in forwarding material to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance
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with the laws of such jurisdiction. However, the Purchaser may, in its sole
discretion, take such action as it may deem necessary to make the Offer in any
such jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
Neither the Purchaser nor Parent is aware of any jurisdiction in which the
making of the Offer or the acceptance of Shares in connection therewith would
not be in compliance with the laws of such jurisdiction.
The Purchaser and Parent have filed with the SEC a Statement on Schedule
14D-1 pursuant to Rule l4d-3 of the General Rules and Regulations under the
Exchange Act, furnishing certain additional information with respect to the
Offer, and may file amendments thereto. Such Statement and any amendments
thereto, including exhibits, may be examined and copies may be obtained from the
principal office of the SEC in Washington, D.C. in the manner set forth in
Section 8.
No person has been authorized to give any information or make any
representation on behalf of Parent or the Purchaser not contained in this Offer
to Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been authorized.
VULCAN MERGER SUB, INC.
May 14, 1999
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SCHEDULE A
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF
ROYAL PHILIPS, PHILIPS HOLDING, PARENT AND THE PURCHASER
The following tables set forth the name, business address, present
principal occupation and material positions held within the past five years of
each director and executive officer of Royal Philips, Philips Holding, Parent
and the Purchaser.
DIRECTORS AND EXECUTIVE OFFICERS OF KONINKLIJKE PHILIPS ELECTRONICS N.V.
(ROYAL PHILIPS ELECTRONICS)*
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
-------------------------- --------- ----------------------------------------------
Cor Xxxxxxxx.............. President; Chairman of President, Chairman of the Board of Management
the Board of Management and the Group Management Committee of Royal
and Group Management Philips Electronics. Chairman of Philips
Committee Lighting Division from 1994 to 1995. Prior to
1999, Member of the Supervisory Board of
PolyGram N.V. Currently, Member of the
Supervisory Board of Xxxx Xxx DE N.V., Vendex
International N.V., Xxxxxx Xxxxxxx
International N. V., Technical University
Eindhoven. Member of the Board of Directors of
The Seagram Company Ltd.
Xxx X.X. Xxxxxx........... Executive Vice-President; Executive Vice-President, Member of the Board
Member of the Board of of Management and the Group Management
Management and the Group Committee and Chief Financial Officer of Royal
Management Committee; Philips Electronics. Prior to 1997, Chief
Chief Financial Officer Financial Officer of Alcoa International
Holdings Co. From 1997 to 1999, Member of the
Supervisory Board of PolyGram N.V.
Adri Baan................. Executive Vice-President; Executive Vice-President, Member of the Board
Member of the Board of of Management, the Group Management Committee,
Management and the Group and Chairman of The Consumer Electronics
Management Committee; Division of Royal Philips Electronics. Prior
Chairman of the Consumer to 1998, Chairman of the Philips Business
Electronics Division Electronics Division of Royal Philips
Electronics.
Xxxxxx P.M. van der
Xxxx.................... Executive Vice-President; Executive Vice-President, Member of the Board
Member of the Board of of Management, Member of the Group Management
Management and the Group Committee and Chairman of the Semiconductors
Management Committee; Division of Royal Philips Electronics. Member
Chairman of the of the Board of Directors of Taiwan
Semiconductors Division Semiconductor Manufacturing Company Ltd.
---------------
* Each person has a business address at Rembrandt Xxxxx, Xxxxxxxxxxx 0, 0000 XX
Xxxxxxxxx, Xxx Xxxxxxxxxxx and is a citizen of The Netherlands, unless a
different address and/or citizenship is indicated under his or her name.
A-1
32
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
-------------------------- --------- ----------------------------------------------
Y.C. Lo................... Executive Vice-President; Executive Vice-President, Member of the Board
Republic of China Member of the Board of of Management, Member of the Group Management
Management and the Group Committee and, prior to 1999, Chairman of the
Management Committee Components Division of Royal Philips
Electronics. Prior to 1996, Chairman of the
Board of Directors of Philips Taiwan Ltd and
Member of the Board of Directors of Taiwan
Semiconductor Manufacturing Company Ltd.
Xxxx X. Xxxxxxx........... Executive Vice-President; Executive Vice-President, Member of the Board
United Kingdom Member of the Board of of Management, Member of the Group Management
Management and the Group Committee and Chairman of the Lighting
Management Committee; Division of Royal Philips Electronics. Since
Chairman of the Lighting 1997, Director of Wolseley PLC.
Division
Xxxx Xxxxxx............... Executive Vice-President; Executive Vice-President, Member of the Board
Member of the Board of of Management and Member of the Group
Management and the Group Management Committee. Chief Executive Officer
Management Committee of Tandem Computers from 1996 to 1997 and
Chief Executive Officer of Ungermaan-Bass from
1993 to 1995.
Ad X.X. Xxxxxxx........... Member of the Group Member of the Group Management Committee,
Management Committee; Chairman of the Domestic Appliances and
Chairman of the Domestic Personal Care Division of Royal Philips
Appliances and Personal Electronics. Prior to 1996, Member of the
Care Division Management of Philips Consumer Electronics.
Xxxx X. Xxxxxxx........... Member of the Group Member of the Group Management Committee of
Management Committee; Royal Philips Electronics. Chairman and Member
Chairman of the Medical of the Management Committee of the Medical
Systems Division Systems Division of Royal Philips Electronics.
Xxxx X. Xxx............... Member of the Group Member of the Group Management Committee and
Management Committee; Chairman of the Business Electronics Division
Chairman of the Business of Royal Philips Electronics. Member of the
Electronics Division Board of Directors of FEI Company of the
United States and Member of the Supervisory
Board of Toolex International B.V. Prior to
April 1998, Chairman of the Philips Industrial
Electronics Division.
Xxxxxx X. Xxxxxxxxxxx..... Member of the Group Member of the Group Management Committee and
Management Committee; Chairman of the Components Division of Royal
Chairman of the Philips Electronics. Member of the Board of
Components Division Directors of Taiwan Semiconductor
Manufacturing Company Ltd. Prior to January 1,
1999, Chairman of the Philips Taiwan Ltd.
Xxx X. Xxxxxxxxxx......... Member of the Group Member of the Group Management Committee and
Management Committee; Senior Director of Corporate Strategy of Royal
Senior Director of Philips Electronics. Prior to 1997, Management
Corporate Strategy. of Philips Key Modules.
A-2
33
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
-------------------------- --------- ----------------------------------------------
Xxxx Xxxxxxxxxxx.......... Member of the Group Member of the Group Management Committee,
Management Committee; General Secretary, Chief Legal Officer and
General Secretary; Chief Secretary to the Board of Management of Royal
Legal Officer; Secretary Philips Electronics. Member of the Supervisory
to the Board of Board of ASM Lithography Holding N.V. From
Management 1990 to 1994, Chief Legal Officer of DAF N.V.
Xxxx X. Xxxxxxx........... Member of the Group Member of the Group Management Committee
Management Committee responsible for Corporate Human Resources
responsible for Corporate Management of Royal Philips Electronics.
Human Resources Member of the Supervisory Board of Business
Management Creation Europe B.V. Prior to July 1998,
General Management of Philips Japan. Prior to
1996, Management of Philips Lighting Division.
Xx Xxxxxxx................ Member of the Group Member of the Group Management Committee and
Management Committee and Head of Corporate Research of Royal Philips
Head of Corporate Electronics. Prior to 1999, Managing Director
Research of Philips Research Coordination. Prior to
1998, Manager of Philips Multimedia Center.
Prior to 1996, Chairman of the Management
Committee of the Philips Research
Laboratories.
L.C. van Wachem........... Chairman of the Retired. Member of the Supervisory Board of
Supervisory Board Royal Philips Electronics since 1993. Member
of the Supervisory Boards of N.V. Koninklijke
Nederlandsche Petroleum Maatschappij, ABB Asea
Brown Boveri Ltd., Xxxx Xxxxx X.X., Xxxxx XX,
BMW AG, and Zurich Versicherungs-Gruppe;
Member of the Board of Directors of IBM
Corporation, ATCO Ltd, and Credit Suisse
Holding.
X. xx Xxxxxxx............. Vice-Chairman and Retired. Member of the Supervisory Board of
Secretary of the Royal Philips Electronics since 1998. Prior to
Supervisory Board September 1998, Executive Vice-President,
Member of the Board of Management and the
Group Management Committee of Royal Philips
Electronics. Prior to 1996, Member of the
Group Management Committee and Chairman of the
Components Division of Royal Philips
Electronics.
X. Xxxxxx................. Member of the Supervisory Retired. Member of the Supervisory Board of
Germany Board Royal Philips Electronics since 1990. Prior to
1994, Chairman of the Board of Management of
Hoechst A.G. Currently, Member of the
Supervisory Boards of Dresdner Bank A.G.,
Mannesmann AG, Alusuisse Lonza, Xxxx XX, IBM
Deutschland GmbH; Chairman of the Supervisory
Boards of Xxxxxxxx Xxxxxxxxxxxx AG and
Victoria Lebensversicherung AG.
A-3
34
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME AND BUSINESS ADDRESS OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
-------------------------- --------- ----------------------------------------------
X.X. Xxxx................. Member of the Supervisory Retired. Member of the Supervisory Board of
Board Royal Philips Electronics since 1995. Chairman
of the Supervisory Boards of Royal Dutch
Airlines KLM and the Robeco group; Member of
the Supervisory Boards of KPN Koninklijke PTT
Nederland (KPN and TPG since June 26, 1998),
Northern Telecom International Finance, BCE
Telecom International Holdings, BCE Tele-
Direct Publications International, Hoogenbosch
Retail Group; Member of the Board of Stichting
HBG, Stichting Koninklijke Nedlloyd, Stichting
Koninklijke van Ommeren; Advisory Board Member
of Price Waterhouse (the Netherlands). Prior
to 1995, Professor of Economics, University of
Maastricht.
X. Xxxxxxxxxx............. Member of the Supervisory Member of the Supervisory Board of Royal
00 Xxxx xx Xxxxx du Jour Board Philips Electronics since 1997. Chairman and
BP 103 92109 Chief Executive Officer of La Regie Nationale
Boulogne des Usines Renault; Member of the Boards of
Bilancourt Pechiney, Banque Nationale de Paris, Credit
Cedex, France National, and I.F.R.I.
France
Xxx Xxxxxxx Xxxxxxxxx..... Member of the Supervisory Member of the Supervisory Board of Royal
United Kingdom Board Philips Electronics since 1998. Chairman and
CEO of Marks & Xxxxxxx plc and former
non-executive member of the Board of Directors
of Lloyds TSB, ICI and Zeneca.
X.X. Xxxxxxx.............. Member of the Supervisory Member of the Supervisory Board of Royal
Board Philips Electronics since 1999. Chief
Executive Officer of Vendex International N.V.
Member of the Supervisory Boards of
Koninklijke Van Ommeren N.V., Amsterdam
Exchanges N.V., Amsterdam Airport Schiphol
N.V., Staal Bankiers N.V. and BAM Holding N.V.
A-4
35
DIRECTORS AND EXECUTIVE OFFICERS OF PHILIPS HOLDING USA INC.*
NAME, BUSINESS ADDRESS AND PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
CITIZENSHIP OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
-------------------------- --------- ----------------------------------------------
Xxxx X. Xxxxxx............ Chairman of the Board; President and Chief Executive Officer of
President; Director Philips Electronics North America Corporation
since November 1, 1998. Prior to that time,
Vice President of Global Accounts at Compaq
and Senior Vice President of Worldwide Sales,
Marketing, Services and Support at Tandem
Computers.
Xxxxxxx X. Xxxxxx......... Senior Vice President -- Senior Vice President and Chief Financial
Finance; Treasurer Officer of Philips Electronics North America
Corporation since February, 1996. Prior to
that time, Vice President, Chief Operating
Officer and Chief Financial Officer of Philips
Medical Systems.
Xxxxxxx X. Xxxx........... Senior Vice President; Senior Vice President, General Counsel and
Secretary Secretary of Philips Electronics North America
Corporation since January 1999. Prior to that
time, General Counsel of Philips Consumer
Communications L.P. Prior to October 1997,
Counsel of Philips Electronics North America
Corporation.
Xxxx X. Xxxxxxxxxxx....... Assistant Secretary Vice President, Tax and Customs Administration
of Philips Electronics North America
Corporation.
---------------
* Each person has a business at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000
and is a citizen of U.S.A., unless a different address and /or citizenship is
indicated under his or her name.
A-5
36
DIRECTORS AND EXECUTIVE OFFICERS OF PHILIPS ELECTRONICS NORTH AMERICA
CORPORATION*
NAME, BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
AND CITIZENSHIP OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
---------------------- --------- ----------------------------------------------
Xxxx X. Xxxxxx Chairman of the Board; President and Chief Executive Officer of
President; Chief Philips Electronics North America Corporation
Executive Officer; since November 1, 1998. Prior to that time,
Director Vice President of Global Accounts at Compaq
and Senior Vice President of Worldwide Sales,
Marketing, Services and Support at Tandem
Computers.
Xxxxxxx X. Xxxxxx Senior Vice President Senior Vice President and Chief Financial
and Chief Financial Officer of Philips Electronics North America
Officer; Director Corporation since February 1996. Prior to that
time, Vice President, Chief Operating Officer
and Chief Financial Officer of Philips Medical
Systems.
Xxxxxxx X. Xxxx Senior Vice President; Senior Vice President, General Counsel and
Secretary; General Secretary of Philips Electronics North America
Counsel Corporation since January 1999. Prior to that
time, General Counsel of Philips Consumer
Communications L.P. Prior to October 1997,
Counsel of Philips Electronics North America
Corporation.
Xxxxxxx X. Xxxxx Senior Vice President, Senior Vice President, Business Development
Business Development and Process Improvement of Philips Electronics
and Process North America Corporation. Prior to January
Improvement 1998, President of Philips Electronic
Instruments Company, a division of Philips
Electronics North America Corporation.
Xxxxxx X. Xxxxxxxx Senior Vice President, Senior Vice President, Human Resources of
Human Resources Philips Electronics North America Corporation.
Prior to July 1994, Manager, Financial
Leadership Development and Human Resources of
General Electric Company.
---------------
* Each person has a business at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000
and is a citizen of U.S.A., unless a different address and/or citizenship is
indicated under his or her name.
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37
DIRECTORS AND EXECUTIVE OFFICERS OF VULCAN MERGER SUB, INC.*
PRESENT PRINCIPAL OCCUPATION
NAME, BUSINESS ADDRESS OR EMPLOYMENT AND
AND CITIZENSHIP OFFICE(S) FIVE-YEAR EMPLOYMENT HISTORY
---------------------- --------- ----------------------------
Xxxxxxx X. Xxxxxx....... President and Chief Executive Senior Vice President and Chief Financial
Officer; Director Officer of Philips Electronics North
America Corporation since February, 1996.
Prior to that time, Vice President, Chief
Operating Officer and Chief Financial
Officer of Philips Medical Systems.
Xxxxxxx X. Xxxx......... Vice President and Secretary; Senior Vice President, General Counsel and
Director Secretary of Philips Electronics North
America Corporation since 1999. Prior to
that time, General Counsel of Philips
Consumer Communications L.P. Prior to
October 1997, Counsel of Philips
Electronics North America Corporation.
Xxxx X. Xxxxxxxx........ Vice President and Treasurer Director of the Corporate Legal Department
Rembrandt Tower at Royal Philips Electronics.
Amstelplein 1
1096 HA
Amsterdam
The Netherlands
---------------
* Each person has a business at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000
and is a citizen of U.S.A., unless a different address and/or citizenship is
indicated under his or her name.
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38
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal, certificates for the Shares and any other required documents
should be sent by each stockholder of the Company or his broker-dealer,
commercial bank, trust company or other nominee to the Depositary as follows:
The Depositary for the Offer is:
CITIBANK, N.A.
By Hand: By Mail: By Overnight Courier:
CITIBANK, N.A. CITIBANK, N.A. CITIBANK, N.A.
Corporate Trust Window P.O. Box 000 000 Xxxxxxxx
000 Xxxx Xxxxxx, 5th Floor Old Chelsea Station 5th Floor
New York, New York 00000 Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
By Facsimile Transmission (For Eligible Institutions Only):
(000) 000-0000
Confirm Receipt of Facsimile by Telephone Only:
(000) 000-0000
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal may be directed to the Information
Agent at the telephone number and location listed below. You may also contact
your broker, dealer, commercial bank or trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
X.X. XXXX & CO., INC.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Bankers and Brokers call collect: (000) 000-0000
All Others Call Toll Free: (000) 000-0000
