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EXHIBIT 17
DENTSPLY International Inc.
570 College Avenue
P.O. Box 872
York, PA 17405
December 24, 1996
Mr. Dewey Edmunds, President
New Image Industries, Inc.
2283 Cosmos Court
Carlsbad, CA 92009
Gentlemen:
This will confirm our discussions with respect to the proposed acquisition of
New Image Industries, Inc., a Delaware corporation ("New Image"), by DENTSPLY
International Inc., a Delaware corporation ("Dentsply").
1. Structure and Price. Subject to the conditions set forth below, the
transaction will be accomplished by means of either (i) a tender offer (the
"Tender Offer") to be made by a wholly-owned subsidiary of Dentsply (the
"Acquisition Subsidiary") for all of the issued and outstanding shares of
Common Stock of New Image (the "New Image Common Stock"), conditioned on the
tender of at least 51% of such shares, for a price of $2.00 per share in cash
(the "Offer Consideration"), and, following completion of the Tender Offer, the
merger of Acquisition Subsidiary with and into New Image pursuant to which each
share of the outstanding Common Stock of New Image then owned by Acquisition
Subsidiary will be exchanged for the Offer Consideration, and each option,
warrant and other right to acquire a share of the Common Stock of New Image
will be exchanged for the Offer Consideration less the exercise price of such
option, warrant or right; or (ii) an all-cash merger of Acquisition Subsidiary
with and into New Image for the price set forth above.
2. Certain Fundamental Conditions. Consummation of the proposed acquisition or
the proposed tender will be subject to the following fundamental conditions:
(i) There are on the date hereof and there will be, at all
times between the date hereof and the closing, no more than
5,479,908 outstanding shares of New Image Common Stock (plus
any shares issued upon the exercise of options or other
rights outstanding on the date hereof as set forth below),
and no outstanding shares or rights to acquire any other
class of New Image capital stock, and outstanding stock
options,
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warrants and other rights to acquire no more than 2,045,201
shares of New Image Common Stock, and no more than 950,000 of
such options, warrants and rights having an exercise price of
less than $2.00, and the average of the exercise prices of
such 950,000 options, warrants and other rights being not
less than approximately $1 9/16;
(ii) due diligence review, to Dentsply's sole satisfaction,
by Dentsply and its legal and financial advisors, of the
business, assets, operations and liabilities of New Image,
including, without limitation, environmental conditions and
contingencies, pending or threatened patent and other
litigation matters, accounting matters, employee benefits and
other contingent liabilities;
(iii) negotiation and execution of definitive documentation
mutually acceptable in form and substance;
(iv) approval of such documentation by the Boards of
Directors of Dentsply and New Image;
(v) negotiation and execution of a Stockholder Agreement
between Dentsply and each of the directors and officers of
New Image who collectively own approximately 13.8% of the
outstanding New Image Common Stock and options (each, a
"Stockholder"), pursuant to which, among other things, such
Stockholder will agree to tender his or her shares of New
Image Common Stock in the Tender Offer or, if the acquisition
is accomplished by means of a merger without a Tender Offer
to vote such shares in favor of such merger, as the case may
be, and, pending consummation of the proposed acquisition,
not to sell or otherwise transfer shares of New Image Common
Stock owned of record or beneficially by him or her;
(vi) receipt of all approvals, consents or waivers from third
parties, the absence of which would, in Dentsply's reasonable
judgment, be reasonably likely to be materially adverse to
New Image or to the transactions contemplated by this letter;
(vii) receipt of all material regulatory and governmental
approvals and compliance with all applicable regulatory or
governmental requirements;
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(viii) the business and operations of New Image are conducted
in the ordinary course between the date hereof and the
closing date; (ix) if the proposed acquisition is
accomplished by means of a Tender Offer, tender of no fewer
than the number of shares representing at least 51% of the
issued and outstanding shares of New Image Common Stock;
(x) there having been no dividends or other distributions
paid with respect to the New Image Common Stock, and no
increases in compensation, bonuses, loans or other payments
outside the ordinary course made to any officers, directors
or management employees of New Image, and no consulting,
brokers', finders' or investment banking or advisory fees
paid to any director or any person affiliated with New Image
or affiliated with any of its directors, officers or
management employees;
(xi) negotiation and execution of an employment agreement
with Dewey F. Edmunds, mutually acceptable in form and
substance;
(xii) the definitive documentation referred to in clause
(iii) above shall include covenants from Dentsply to continue
complying with the agreements covered by Paragraph 5 hereof
for the time period set forth therein; and
(xiii) the conditions set forth in subparagraphs (ii), (iii)
and (v) of this Paragraph 2 will be satisfied or waived at
the time the parties enter into definitive documentation.
3. Negotiation in Good Faith. Dentsply and New Image will negotiate in good
faith to execute definitive documentation evidencing the proposed transaction
as promptly as practicable and will cooperate fully with each other in
preparing all such documentation, obtaining all necessary approvals, consents
or waivers from third parties and taking reasonable steps to comply with all
governmental and regulatory requirements.
4. Regulatory Filings. Dentsply and New Image will cooperate in making as
promptly as practicable after the date hereof all filings and seeking all
approvals which may be determined to be necessary in connection with the
transactions contemplated hereby, including, without limitation, filings under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
5. Standstill. In the event that the proposed acquisition is not consummated,
Dentsply hereby agrees that, for a period of one year from the date of this
Agreement, unless New Image shall (i)
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otherwise agree in writing, (ii) apply for or consent to the appointment of a
receiver, trustee or liquidator of itself or of its property, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt
or insolvent, (v) file a voluntary petition in bankruptcy, or a petition or
answer seeking reorganization or an arrangement with creditors to take
advantage of any insolvency law, or an answer admitting the material
allegations of a bankruptcy, reorganization or insolvency petition filed
against it, (vi) take corporate action for the purpose of effecting any of the
foregoing, (vii) have an order for relief entered against it in any proceeding
under the United States Bankruptcy Code, (viii) have an order, judgment or
decree entered, without the application, approval or consent of New Image, by
any court of competent jurisdiction, approving a petition seeking
reorganization of New Image or appointing a receiver, trustee or liquidator of
New Image or of all or a substantial part of its assets, and such order,
judgment or decree shall continue unstayed and in effect for a period of 60
consecutive days, or (ix) solicit Acquisition Proposals (as defined in
Paragraph 7 hereof), neither Dentsply nor any of its affiliates (as such term
is defined under the Securities Exchange Act of 1934, as amended (the "1934
Act")) will in any manner, directly or indirectly, (a) effect or seek, offer or
propose (whether publicly otherwise) to effect, offer or participate in (A) any
acquisition of any securities (or beneficial ownership thereof) or assets of
New Image or any of its subsidiaries; (B) any tender or exchange offer, merger
or other business combination involving New Image or any of its subsidiaries;
(C) any recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to New Image or any of its subsidiaries;
or (D) any "solicitation" of "proxies" (as such terms are used in the proxy
rules of the Securities and Exchange Commission) or consents to vote any voting
securities of New Image; (b) form, join or in any way participate in a "group"
(as defined under the 1934 Act) formed to accomplish any of the foregoing; (c)
otherwise act, alone or in concert with others, to seek to control the
management or Board of Directors of New Image; (d) take any action which might
force New Image to make a public announcement regarding any of the types of
matters set forth in (a) above; or (e) enter into any discussions or
arrangements with any third party with respect to any of the foregoing.
Dentsply also agrees during such period not to request New Image (or its
directors, officers, employees or agents), directly or indirectly, to amend or
waive any provision of this paragraph (including this sentence).
6. Information. During the period from the date hereof and until the earlier of
the expiration of this letter as provided in Paragraph 11 below or its prior
termination, Dentsply shall be provided full opportunity to examine the
financial records and reports of New Image in connection with its due diligence
investigation (including, without limitation, the work papers of independent
certified public accountants, the financial statements for the fiscal year
ended June 30, 1996 and financial projections for fiscal year 1997), leases,
properties, books of account, corporate records, legal opinions and
litigation-related documents and other materials and information of any kind
relating to the business, assets, operations and liabilities of New Image, and
the officers and
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employees of New Image shall cooperate with such examination. All information
delivered pursuant to this letter shall be subject to the Confidentiality
Agreement of even date herewith executed by the parties.
7. Exclusive Dealing. From the date hereof and until the earlier of the
expiration of this letter as provided in Paragraph 11 below or its prior
termination, New Image agrees that neither it nor any of its subsidiaries,
officers, directors, or the directors and officers of its subsidiaries, nor any
of its other affiliates (each, an "Affiliate") shall, and New Image shall cause
its and its respective subsidiaries' and Affiliates' employees, agents and
representatives (including, without limitation, any investment banking, legal
or accounting firm retained by New Image or any of its subsidiaries or
Affiliates and any individual member or employee of the foregoing) (each, an
"Agent") not to (a) initiate, solicit or seek, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders or any of them)
with respect to a merger, acquisition, consolidation, recapitalization,
liquidation, dissolution or similar transaction involving, or any purchase of
all or a substantial portion of the assets or any equity securities of, it or
any of its subsidiaries (any such proposal or offer being hereinafter referred
to as an "Acquisition Proposal"), or (b) engage in any negotiations concerning,
or provide any confidential information or data to, or have any discussions
with, any person relating to an Acquisition Proposal, or (c) otherwise
cooperate in any effort or attempt to make, implement or accept an Acquisition
Proposal; provided, however, that New Image may, if it receives an Acquisition
Proposal which was not directly or indirectly initiated, solicited or otherwise
sought by New Image or by any of the individuals or entities referred to in the
first sentence of this Paragraph 7, and which in the written opinion of its
outside financial advisor, is superior from a financial point of view to the
transactions contemplated by this letter (a "Superior Acquisition Proposal"),
respond to such Superior Acquisition Proposal, if New Image has received a
written opinion of its outside counsel that such response is required in order
to satisfy the fiduciary duties imposed under applicable law on its Board of
Directors. New Image shall immediately cease and cause to be terminated any
existing activities, including discussions or negotiations with any parties,
conducted heretofore with respect to any of the foregoing and shall take the
necessary steps to inform the individuals and entities referred to in the first
sentence hereof of the obligations undertaken in this Paragraph 7. If New Image
or any of its Affiliates or Agents has provided any person (other than
Dentsply) with any confidential information or data relating to an Acquisition
Proposal, it shall request the immediate return thereof. New Image shall notify
Dentsply immediately if any inquiries, proposals or offers related to an
Acquisition Proposal are received by, any confidential information or data is
requested from, or any negotiations or discussions related to an Acquisition
Proposal are sought to be initiated or continued with, it or any individual or
entity referred to in the first sentence of this Paragraph 7, and of the terms
and other details of any such Acquisition Proposal or request.
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8. Expenses. Except as provided below, each of New Image and Dentsply will
separately bear its own expenses, including the fees and disbursements of
counsel, investment bankers and accountants, incurred in connection with this
letter of intent and the transactions contemplated hereby. If New Image or any
Affiliate or Agent of New Image shall fail to fulfill the obligations under
Paragraph 7 above, and shall sell, or enter into an agreement which
contemplates the sale of, all or any material portion of the assets or equity
interests in, New Image to a third party, or the Stockholders or any of them
shall enter into an agreement which contemplates such a transaction, then, in
any such case, New Image shall immediately pay to Dentsply an amount equal to
the out-of-pocket expenses incurred by Dentsply in connection with the
transaction contemplated hereby.
9. Publicity. Upon the execution of this letter of intent, an appropriate
public announcement of the proposed transaction, the form and substance of
which shall have been agreed to by Dentsply and New Image, shall be made.
Neither party shall make any other press release or other written public
statement concerning the matters covered by this letter without the approval of
the other party hereto; provided, however, that either party may, without such
approval, make such press releases or other written public statements required
by law, and shall consult with the other party with respect to the form and
substance of such statements.
10. Non-Binding Nature. Other than Paragraphs 5, 6, 7, 8, 9, 10 and 11 hereof,
this letter does not constitute a binding agreement of the parties hereto. It
is understood that, promptly hereafter, the parties will strive to negotiate
and execute definitive and binding documentation which will contain such terms,
provisions, representations, warranties, covenants and conditions of each
party, in addition to those set forth herein, (including an agreement by
Dentsply to provide directors' and officers' insurance coverage for the current
directors and officers of New Image with coverage limits similar to those
currently in effect for the six-year period commencing on the closing of the
transactions contemplated hereby) as are appropriate and customary in
transactions of this nature and mutually satisfactory to Dentsply and New Image
and their respective counsel.
11. Termination. This letter shall terminate on March 25, 1997, or, if earlier,
on the occurrence of: (i) an event of default set forth in that certain Amended
and Restated Loan and Security Agreement, dated May 22, 1996 (the "Loan
Agreement"), between New Image and Coast Business Credit, a division of
Southern Pacific Thrift & Loan Association ("Coast"), as to which event of
default Coast has not given a written waiver or is not required to forbear
under the terms of a letter agreement of even date herewith between Dentsply
and Coast; (ii) the failure by New Image or any of its Affiliates or Agents to
comply with the obligations set forth in Paragraph 7 hereof; or (iii) the date
on which New Image shall (a) apply for or consent to the appointment of a
receiver, trustee or liquidator of itself or of its property, (b) make a
general assignment for the benefit of creditors, (c) be adjudicated a bankrupt
or insolvent, (d) file a voluntary petition in bankruptcy, or a petition or
answer seeking reorganization or an arrangement with creditors to
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take advantage of any insolvency law, or an answer admitting the material
allegations of a bankruptcy, reorganization or insolvency petition filed
against it, (e) take corporate action for the purpose of effecting any of the
foregoing, or (f) have an order for relief entered against it in any proceeding
under the United States Bankruptcy Code; (iv) the date on which an order,
judgment or decree shall be entered, without the application, approval or
consent of New Image by any court of competent jurisdiction, approving a
petition seeking reorganization of New Image or appointing a receiver, trustee
or liquidator of New Image or of all or a substantial part of its assets, and
such order, judgment or decree shall continue unstayed and in effect for any
period of 30 consecutive days; or (v) the date on which Dentsply informs New
Image in writing that it is terminating this letter of intent because it is not
satisfied with its due diligence review of New Image.
12. Governing Law; Amendment. This letter shall be governed by the laws of the
State of Delaware applicable to contracts made therein, without giving effect
to the conflict of law provisions thereof. This letter of intent may be
amended, modified, or extended only by a written agreement signed by both of
the parties hereto.
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This letter is submitted in duplicate and has been executed by Dentsply. If the
foregoing properly sets forth our understanding, please so indicate by signing
both copies of this letter in the space provided, then retain one executed copy
for your files and return the second copy to us.
Very truly yours,
DENTSPLY International Inc.
By: /s/ Edward Yates
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Senior Vice President
Accepted and agreed to this 24th
day of December, 1996.
New Image Industries, Inc.
By: /s/ Dewey F. Edmunds
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President and CEO