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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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PROXIMA CORPORATION
(Name of Subject Company)
PROXIMA CORPORATION
(Name of Person Filing Statement)
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COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class of Securities)
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744287103
(CUSIP Number of Class of Securities)
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KENNETH E. OLSON
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
PROXIMA CORPORATION
9440 CARROLL PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
(619) 457-5500
(Name, Address and Telephone Number of Persons Authorized to Receive
Notices and Communications on behalf of the person filing this Statement)
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Copies to:
STEVE L. CAMAHORT, ESQ.
BROBECK, PHLEGER & HARRISON LLP
SPEAR STREET TOWER, ONE MARKET
SAN FRANCISCO, CALIFORNIA 94105-1000
(415) 442-0900
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INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (this
"Schedule 14D-9" or this "Statement") relates to an offer by BD Acquisition
Corp., a Delaware corporation and wholly-owned subsidiary of ASK asa, a
Norwegian corporation, to purchase all of the Shares (as defined below) of
Proxima Corporation, a Delaware corporation. Capitalized terms used herein and
not otherwise defined shall have the meaning assigned to them in the Offer to
Purchase dated March 13, 1998.
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Proxima Corporation, a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 9440 Carroll Park Drive, San Diego, California 92121. The
title of the class of equity securities to which this statement relates is the
Company's common stock, par value $.001 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer (the "Offer") described in the
Tender Offer Statement on Schedule 14D-1 dated March 13, 1998 (as amended or
supplemented, the "Schedule 14D-1"), filed by BD Acquisition Corp., a Delaware
corporation ("Purchaser"), which is a wholly owned subsidiary of ASK asa, a
Norwegian corporation ("Parent"), and Parent with the Securities and Exchange
Commission (the "Commission") relating to an offer by Purchaser to purchase all
the issued and outstanding Shares at a price of $11.00 per Share, net to the
seller in cash, without interest thereon (the "Offer Price"), upon the terms and
subject to the conditions set forth in Purchaser's Offer to Purchase dated March
13, 1998, as amended or supplemented, and the related Letter of Transmittal
(which together constitute the "Offer Documents"). The Offer Documents indicate
that the principal executive offices of Parent and Purchaser are located at K.G.
Meldahlsvei 9, N-1602 Fredrikstad, Norway.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of March 8, 1998 (the "Merger Agreement"), among the Company, Parent and
Purchaser. A copy of the Merger Agreement is filed as Exhibit 1 to this Schedule
14D-9 and is incorporated herein by reference in its entirety. Pursuant to the
Merger Agreement, following the consummation of the Offer, upon the satisfaction
or waiver of certain conditions, Purchaser will be merged with and into the
Company (the "Merger"). In the Merger, each Share outstanding immediately prior
to the effective time of the Merger (other than Shares held in the treasury of
the Company, Shares owned by Parent, Purchaser or any other subsidiary of
Parent, or Shares held by stockholders who properly exercise their dissenters'
rights under the General Corporation Law of the State of Delaware ("Delaware
Law")) will, by virtue of the Merger and without any action by the holder
thereof, be converted into the right to receive $11.00 per Share (or any higher
price paid per Share in the Offer), net to the seller in cash, without interest
thereon (the "Merger Consideration"), upon the surrender of the certificate
formerly representing such Share. The Merger Agreement is summarized in Item 3
of this Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND.
a. The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above. Unless the context otherwise
requires, references to the Company in this Schedule 14D-9 are to the "Company"
and its direct and indirect subsidiaries, viewed as a single entity.
b. Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of its executive officers, directors
or affiliates are described in Annex A attached to this Schedule 14D-9 and
incorporated herein by reference. See "Executive Compensation and Other
Information Concerning Directors and Executive Officers" therein.
In addition, in July 1997 the Company's Board of Directors authorized, and
the Company subsequently entered into, severance agreements (the "Agreements")
with its executive officers (Messrs. Gillies, Hansen, Kampfer, Tampkin, Vogt,
Waites and Whittler). Each of the Agreements provides that, upon a termination
of the individual's employment by the Company without "Cause," the individual is
entitled to receive (i) all compensation and bonuses due prior to the date of
discharge, (ii) continuing base salary (and, in the case of Messrs. Gillies and
Vogt, commission income based on average monthly commissions during the twelve
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months preceding discharge) for the periods set forth below (the "Continuation
Periods"), (iii) continuing medical and dental benefits during the applicable
Continuation Periods and (iv) executive outplacement services. The above
entitlements are subject to mitigation and the beneficiary signing and accepting
a release of the Company. The Agreements are identical other than the length of
the applicable Continuation Period and as otherwise set forth above. The form of
such agreement is filed as Exhibit 11 to this Schedule 14D-9 and is incorporated
herein by reference.
For the purpose of the Agreements, "Cause" is defined as a major company
infraction such as theft, fraud, dishonesty, willful insubordination, threats or
harassment of any kind, illegal drug use, use of or being under the influence of
alcohol in the workplace, possession of a weapon, commission of a crime
involving moral turpitude, etc. The Continuation Periods are nine months, nine
months, seven months, nine months, nine months, six months and nine months for
Messrs. Gillies, Hansen, Kampfer, Tampkin, Vogt, Waites and Whittler,
respectively.
Except as described or incorporated by reference herein, to the knowledge
of the Company, as of the date hereof, there exists no material contract,
agreement, arrangement or understanding and no actual or potential conflict of
interest between the Company or its affiliates and (i) the Company's executive
officers, directors or affiliates or (ii) Purchaser or its executive officers,
directors or affiliates.
THE MERGER AGREEMENT
The following summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed as Exhibit 1 to
this Schedule 14D-9 and is incorporated herein by reference. The Merger
Agreement should be read in its entirety for a more complete description of the
matters summarized below.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer the Purchaser will purchase all Shares
validly tendered pursuant to the Offer. The Merger Agreement provides that the
Purchaser may modify the terms of the Offer, including without limitation,
except as provided below, extending the Offer beyond any scheduled Expiration
Date, except that, without the prior written consent of the Company, the
Purchaser will not decrease the purchase price paid in the Offer, decrease the
number of Shares sought in the Offer, change the form of consideration payable
in the Offer, make any other change which is materially adverse to the holders
of Shares or modify or add to the conditions of the Offer as described below.
Pursuant to the terms of the Merger Agreement, (i) the Purchaser may, in its
sole discretion and without the consent of the Company, (A) extend the Offer, at
any time up to May 5, 1998 (the "Outside Termination Date"), for one or more
periods of not more than ten business days each, if any condition of the Offer
has not been satisfied; (B) extend the Offer at any time (but on not more than
one occasion), for a period not to exceed ten business days if at that time the
number of Shares duly tendered pursuant to the Offer and not subsequently
withdrawn represents less than 90% of the shares of common stock of the Company,
par value $.001 per share ("Common Stock") then outstanding; or (C) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Commission or the staff thereof applicable to the Offer; and
(ii) if at any scheduled expiration date of the Offer any condition to the Offer
has not been satisfied or waived by the Purchaser, at the written request of the
Company delivered no later than the scheduled expiration date of the Offer, the
Purchaser shall, and shall continue to, extend the Offer from time to time for
one or more periods of not more than five business days each until a date not
later than the Outside Termination Date. In addition, the amount payable per
share (the "Per Share Amount") may be increased and the Offer may be extended to
the extent required by law in connection with such increase, in each case
without the consent of Company. Subject to the terms and conditions of the
Offer, the Purchaser shall pay, as soon as reasonably practicable after it is
permitted to do so under applicable law, for all Shares validly tendered and not
withdrawn.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with Delaware law, the Purchaser shall be
merged with and into the Company as soon as practicable after satisfaction or
waiver of the conditions set forth in the Merger Agreement (the "Effective
Time"). The Merger will become effective upon the filing of a Certificate of
Merger with the Secretary of State of the State of Delaware (or such later date
as is specified in the Certificate of Merger). As a result of
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the Merger, the separate corporate existence of the Purchaser will cease and the
Company will continue as the surviving corporation (the "Surviving
Corporation"). In the Merger, each issued and outstanding Share (other than
Shares owned directly or indirectly by Parent or any of its subsidiaries or by
the Company as treasury stock and Shares the holder of which has perfected
appraisal rights under Delaware law) will be converted into the right to receive
$11.00 per Share, without interest, and each issued and outstanding share of
common stock of the Purchaser will be converted into one fully paid and
non-assessable share of common stock of the Surviving Corporation (which will
constitute the only issued and outstanding capital stock of the Surviving
Corporation).
The Merger Agreement provides that the certificate of incorporation and
bylaws of the Purchaser at the Effective Time will be the certificate of
incorporation and bylaws of the Surviving Corporation, except that the name of
the Surviving Corporation will be "Proxima Corporation." The Merger Agreement
also provides that the directors of the Purchaser at the Effective Time will be
the directors of the Surviving Corporation, and the officers of the Purchaser at
the Effective Time will be the officers of the Surviving Corporation.
The Company's Board of Directors. The Merger Agreement provides that,
commencing upon the purchase of Shares pursuant to the Offer or pursuant to the
Option Agreement, and from time to time thereafter, Parent will be entitled to
designate such number of directors, rounded up to the next whole number, on the
Board of Directors of the Company as is equal to the product of (i) the total
number of directors on the Board (giving effect to any directors elected as
described in this sentence) and (ii) the percentage that (A) the aggregate
number of shares of Common Stock beneficially owned by Purchaser or any of its
affiliates (including Shares accepted for payment in the Offer, provided funds
therefor have been deposited with the Depositary, and shares of Common Stock
issued to the Purchaser under the Option Agreement) represents or (B) the total
number of Shares then outstanding. The Company has agreed to take all actions
necessary to cause the Purchaser's designees to be elected or appointed to the
Company's Board of Directors (including by increasing the size of such Board or
securing the resignations of incumbent directors or both). The Company also has
agreed to use its best efforts to cause persons designated by the Purchaser to
constitute the same percentage of each committee of the Board of Directors of
the Company, each board of directors of each subsidiary of the Company and each
committee of each such board as such persons represent on the Board of Directors
of the Company. However, the Merger Agreement further provides that until the
Effective Time, the Company will retain as members of its Board of Directors at
least two directors who are directors of the Company at the date of the Merger
Agreement ("Company Designees") and that in the event of the death, resignation
or removal of any of the Company Designees (or, if no other Company Designee
will remain on the Board, the last remaining Company Designee and, if no Company
Designee will remain on the Board, a majority of the other members of the Board)
will have the right to appoint a successor or successors to fill the vacancies
so created, which successor or successors will not be an affiliate or associate
of Parent or the Purchaser and who will be deemed to be a Company Designee for
purposes of the Merger Agreement. In the Merger Agreement, the Company has
agreed to take all actions necessary to cause the Purchaser's designees to be so
elected, including mailing to the Company's stockholders an Information
Statement containing the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, and, if necessary, seeking the
resignation of one or more existing directors. The Merger Agreement also
provides that following the election or appointment of the Purchaser's designees
to the Company's Board of Directors, any amendment of the Merger Agreement, any
termination of the Merger Agreement by the Company, any extension of time for
performance of any of the obligations of the Purchaser or Parent under the
Merger Agreement, any waiver of any condition to the obligations of the Company
or of any of the Company's rights under the Merger Agreement or other action by
the Company under the Merger Agreement may be effected only by the action of a
majority of the Company Designees.
Stockholders Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law in order to consummate the Merger, duly call and
hold a special meeting of its stockholders (the "Special Meeting") as soon as
practicable following the acceptance for payment and purchase of Shares by the
Purchaser pursuant to the Offer, for the purpose of voting upon the Merger and
the adoption of the Merger Agreement. The Merger Agreement provides that in
connection with the Special Meeting, the Company will (i) as soon as reasonably
practicable after the consummation of the Offer, prepare and file with the
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Commission a proxy statement and other proxy materials relating to the Merger
and the Merger Agreement and (ii) use its best efforts to have such proxy
statement cleared by the SEC. If the Purchaser acquires at least a majority of
the outstanding Shares (or if the number of Shares acquired by the Purchaser
together with the number of shares of Common Stock purchased under the Option
Agreement total at least a majority of the outstanding Shares), the Purchaser
will have sufficient voting power to approve the Merger, even if no other
stockholder votes in favor of the Merger. The Company has agreed, subject to the
limitations described below under the heading "No Solicitations," to include in
the proxy statement the recommendation of the Board of Directors that
stockholders of the Company vote in favor of the approval of the Merger and the
adoption of the Merger Agreement.
Interim Operations. In the Merger Agreement, the Company has agreed that,
except as expressly permitted by the Merger Agreement or the Option Agreement or
agreed to in writing by Parent, prior to the Effective Time the business of the
Company and its subsidiaries shall be conducted only in the ordinary course, in
substantially the same manner as previously conducted and in substantial
compliance with all applicable laws and regulations, and, to the extent
consistent therewith, the Company and each of its subsidiaries will use
reasonable efforts to preserve intact their present business organizations and
reputation, keep available the services of their present officers and employees,
maintain their assets and properties in good working order and condition,
ordinary wear and tear excepted, maintain insurance on their tangible assets and
businesses in such amounts and against such risks and losses as are currently in
effect, and preserve their relationships with customers, suppliers, licensors,
licensees, distributors, and others having business relationships with them. In
addition, except as expressly contemplated by the Merger Agreement or agreed to
in writing by Parent, each of the Company and its subsidiaries will not:
(i) adopt or amend in any material respect any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation
right, pension, retirement, employment or other employee benefit agreement,
trust plan or other arrangement for the benefit or welfare of any director,
officer or employee of the Company or any of its subsidiaries or increase
in any manner the compensation or fringe benefits of any director, officer
or employee of the Company or any of its subsidiaries or pay any benefit
not required by any existing agreement or place any assets in any trust for
the benefit of any director, officer or employee of the Company or any of
its subsidiaries;
(ii) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, or make any loans, advances or
capital contributions to, or investments in, any other person, other than
to the Company or any direct or indirect wholly owned subsidiary of the
Company;
(iii) expend funds for capital expenditures or research and
development, which in the aggregate exceed $1,100,000;
(iv) sell, lease, license, mortgage or otherwise encumber or subject
to any lien or otherwise dispose of any of its properties or assets except
for disposition of inventory or immaterial assets, in either case, in the
ordinary course of business consistent with past practice;
(v) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock (except for dividends
paid by subsidiaries to the Company with respect to capital stock), (y)
split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (z) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(vi) authorize for issuance, issue, deliver, sell or agree to commit
to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise), pledge or otherwise encumber any shares of its capital stock or
the capital stock of any of its
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subsidiaries, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities or any other securities or
equity equivalents (including without limitation stock appreciation rights)
(other than issuances upon exercise of Company Stock Options (as
hereinafter defined) outstanding on the date hereof);
(vii) amend its Certificate of Incorporation, Bylaws or equivalent
organizational documents or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of any material subsidiary of the Company;
(viii) acquire or agree to acquire, including, without limitation, by
merging or consolidating with, or by purchasing a substantial equity
interest in or substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof;
(ix) settle or compromise any stockholder derivative suits arising out
of the transactions contemplated by the Merger Agreement or any other
litigation (whether or not commenced prior to the date of the Merger
Agreement) or settle, pay or compromise any claims not required to be paid,
other than in consultation and cooperation with Parent, and, with respect
to any such settlement, with the prior written consent of Parent (except
such consent shall not be required for payments to be made under any such
agreements existing on the date of the Merger Agreement and described in
connection with the Merger Agreement), which consent shall not be
unreasonably withheld;
(x) make any material tax election or settle or compromise any
material tax liability (whether with respect to amount or timing);
(xi) except in the ordinary course of business, materially modify,
amend or terminate any material contract or waive or release or assign any
material rights or claims; or
(xii) (A) fail to pay in the ordinary course of business consistent
with past practice any amount ("Payable") due owing or payable to any trade
creditor or supplier or (B) other than in the ordinary course of business
consistent with past practice, alter the terms or scheduled payment dates
of any Payable; or
(xiii) take or agree to take any action that would make any
representation and warranty of the Company contained in the Merger
Agreement inaccurate at, or as of any time prior to, the Effective Time, or
omit or agree to omit to take any action necessary and prudent to prevent
any such representation or warranty from being inaccurate at any such time.
Employee Benefits. Parent has agreed to cause the Surviving Corporation to
honor the Company's employee benefit plans or policies (other than those based
on shares of Common Stock) in effect at the date of the Merger Agreement until
the second anniversary of the Effective Time or, to the extent such plans or
policies (other than those based on shares of Common Stock) are not continued,
Parent will maintain or cause the Surviving Corporation to maintain until such
date benefit plans or policies for the benefit of the employees of the Company
which are no less favorable, in the aggregate, than the plans and policies
existing at the date of the Merger Agreement. All benefit plans under which the
employees' interests are based on shares of Common Stock will be terminated
immediately prior to the Effective Time. The Company's employees shall be given
credit, for purposes of any service requirements for participation in the Parent
employee benefit plans for which they become eligible, if any, for their period
of service with the Company prior to the Effective Time, and the Company
employees shall also, with respect to participation in any such Parent plans or
programs for which they may become eligible, which have co-payment, deductible
or other co-insurance features, receive credit for any amounts such employees
have paid to date in 1998 in co-payments, deductibles or co-insurance under
comparable programs maintained by the Company prior to the Effective Time. In
addition, no employee of the Company who participates in any medical/health plan
of the Company at the Effective Time shall be denied coverage under any Parent
medical/health plan for which they may become eligible, by reason of any
preexisting condition exclusions, to the extent applicable subsequent to the
Effective Time. Parent has agreed (and has agreed to cause the Surviving
Corporation) to honor without modification all employee severance plans (or
policies) and employment and severance agreements of the Company or any
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of its subsidiaries in existence on the date of the Merger Agreement as such
agreements shall be in effect in accordance with the terms of the Merger
Agreement at the Effective Time.
No Solicitations. In the Merger Agreement, the Company has agreed that,
except as provided below, until the earlier of the termination of the Merger
Agreement or the Effective Date, neither the Company nor any of its subsidiaries
shall, nor shall they authorize or permit or any of their respective officers,
directors, employees, financial advisors, investment bankers, attorneys,
accountants or other advisors or representatives to directly or indirectly, (i)
take any action to knowingly solicit, initiate, continue, facilitate or
encourage (including by way of furnishing or disclosing non-public information)
any offer or proposal for a merger, consolidation or other business combination
involving the Company or any of its subsidiaries or any proposal or offer to
acquire in any manner, directly or indirectly, 15% or more of the shares of any
class of voting securities of the Company or any of its subsidiaries or a
substantial portion of the assets of the Company or any of its subsidiaries,
other than the transactions contemplated by the Merger Agreement or the Option
Agreement (any of the foregoing being referred to as an "Acquisition Proposal"),
or (ii) knowingly engage in negotiations, discussions or communications
regarding or disclose any information relating to the Company or any of its
subsidiaries or afford access to the properties, books or records of the Company
or any of its subsidiaries to any person, corporation, partnership or other
entity or group (a "Potential Acquiror") that may be considering making, or has
made, an Acquisition Proposal. In addition, the Merger Agreement prohibits the
Board of Directors of the Company (including any committee thereof) from
withdrawing or modifying in a manner adverse to Parent the approval and
recommendation of the Offer, the Merger Agreement, the Option Agreement or the
Merger or approving or recommending any Acquisition Proposal. Notwithstanding
the foregoing, the Merger Agreement provides that (i) the Company may
participate in discussions or negotiations with or furnish information to any
third party which makes a written Acquisition Proposal which either (x) is not
subject to a financing contingency and involves the purchase for cash of 100% of
the Common Stock at a price per share greater than the purchase price of the
Offer or (y) provides for the acquisition of 100% of the Common Stock for
consideration, not consisting entirely of cash, which the Company's Board of
Directors determines, based on the advice of its financial advisor, is
financially superior to the purchase price of the Offer (in the case of either
(x) or (y), a "Superior Proposal"), and (ii) the Board of Directors or any
committee thereof may withdraw or modify in a manner adverse to Parent the
approval or recommendation of the Merger Agreement, the Offer or the Merger and
may approve or recommend any such Superior Proposal, if, in the case of either
(i) or (ii), the Board of Directors of the Company determines (and is advised by
its outside legal counsel) that the failure to take such action would constitute
a breach of its fiduciary duties and the Company enters into a confidentiality
agreement with the Potential Acquiror with respect to any non-public information
relating to the Company or its subsidiaries upon terms substantially the same as
(and in no event more beneficial to the Potential Acquiror than) those contained
in the Confidentiality Agreement dated July 21, 1997 between Parent and the
Company. The Company has agreed to (i) notify Parent promptly (and in any event
within one business day) after receipt of any Acquisition Proposal (or any
indication that any person is considering making an Acquisition Proposal) or any
request for non-public information relating to the Company or any of its
subsidiaries or for access to the properties, books or records of the Company or
any of its subsidiaries by any person that may be considering making, or has
made, an Acquisition Proposal, (ii) notify Parent promptly of any material
change to any such Acquisition Proposal, indication or request and (iii) upon
reasonable request by Parent, provide Parent with all material information about
any such Acquisition Proposal, indication or request. The Merger Agreement
further provides that the Company will not, and will cause its affiliates not
to, enter into an agreement with respect to a Superior Proposal unless Parent
has been advised in writing of the identity of the parties making the Superior
Proposal and the material terms thereof at least two business days prior to the
entering into of such agreement.
Directors' and Officers' Insurance; Indemnification. The Merger Agreement
provides that until the sixth anniversary of the Effective Time, Parent and the
Surviving Corporation (each an "Indemnifying Party") shall indemnify, defend and
hold harmless each person who was an officer or director of the Company or any
of its subsidiaries on the date of the Merger Agreement or any time prior to the
date thereof ("Indemnified Parties") against all losses, claims, damages, costs,
expenses (including attorneys' fees and expenses), liabilities or judgments or
amounts that are paid in settlement with the approval of the indemnifying party
(which approval shall not be unreasonably withheld) of or in connection with any
threatened or actual claim,
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action, suit, proceeding or investigation (whether civil, criminal,
administrative or investigative and whether asserted or claimed prior to, at or
after the Effective Time) based in whole or in part on, or arising in whole or
in part out of, the fact that such Indemnified Party is or was a director or
officer, of the Company or any of its subsidiaries (including service as a
fiduciary of any employee benefit plan), whether pertaining to any matter
existing or occurring at or prior to the Effective Time, to the fullest extent
permitted by Delaware law, or based in whole or in part on the Merger Agreement
or the transactions contemplated by the Merger Agreement ("Indemnified
Liabilities"). However, in the event any claims are asserted or made within such
six-year period, all rights to indemnification in respect of any such claims
shall continue until disposition of any and all such claims. Without limiting
the foregoing, in the event that any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Party (whether arising prior to
or after the Effective Time), (w) the Indemnifying Parties will pay expenses in
advance of the final disposition of any such claim, action, suit, proceeding or
investigation to each Indemnified Party to the full extent permitted by
applicable law provided that the person to whom expenses are advanced provides
an undertaking to repay such advance if it is ultimately determined that such
person is not entitled to indemnification; (x) the Indemnified Parties shall
retain counsel reasonably satisfactory to the Indemnifying Parties; (y) the
Indemnifying Parties shall pay all reasonable fees and expenses of such counsel
for the Indemnified Parties (subject to the final sentence of this paragraph)
promptly as statements therefor are received; and (z) the Indemnifying Parties
shall use all commercially reasonable efforts to assist in the vigorous defense
of any such matter. Any Indemnified Party wishing to claim indemnification under
the Merger Agreement as described above, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Indemnifying
Parties, but the failure so to notify an Indemnifying Party shall not relieve it
from any liability which it may have as described above except to the extent
such failure materially and irreparably prejudices such party.
The Merger Agreement also provides that the Surviving Corporation shall (i)
until the sixth anniversary of the Effective Time, cause to be maintained in
effect, to the extent available, the policies of directors' and officers'
liability insurance maintained by the Company and its subsidiaries as of the
date of the Merger Agreement (or policies of at least the same coverage and
amounts containing terms that are no less advantageous in any material respect
to the insured parties) or (ii) purchase a policy of directors' and officers'
liability insurance of at least the same coverage and amounts and containing
terms that are no less advantageous in any material respect to the insured
parties and for a term of six years after the Effective Time, in each case with
respect to claims arising from facts or events that occurred prior to the
Effective Time. The Merger Agreement further provides, however, that in no event
will the Surviving Corporation be obligated to expend in order to maintain or
procure insurance coverage pursuant to clause (i) of this paragraph any amount
per annum in excess of 125% of the last premium paid by the Company prior to the
date of the Merger Agreement, and if the annual premium of such insurance
coverage exceeds that amount, the Surviving Corporation shall purchase as much
coverage as possible for such amount.
Company Stock Options. Pursuant to the Merger Agreement, immediately prior
to the Effective Time, each of the then outstanding employee stock options to
purchase Common Stock (the "Company Stock Options") granted under any employee
stock option or compensation plan or arrangement of the Company (the "Company
Stock Plans"), whether or not then vested or exercisable, automatically shall be
cancelled, and each holder of any such Company Stock Option shall be paid by the
Company at the Effective Time for each such Company Stock Option an amount in
cash (subject to any applicable withholding taxes) determined by multiplying (i)
the excess, if any, of the price per Share paid in the Offer over the applicable
exercise price of such Company Stock Option by (ii) the number of shares of
Common Stock such holder could have purchased (assuming full vesting of all
Company Stock Options) had such holder exercised such Company Stock Option in
full immediately prior to the Effective Time. Prior to the Effective Time, the
Company will use its best efforts to obtain any necessary consents and make any
amendments to the terms of the Company Stock Plans to the extent such consents
or amendments are necessary to give effect to the foregoing. Payment by the
Company may be withheld in respect of any Company Stock Option until necessary
consents are obtained.
Conditions to the Merger. The Merger Agreement provides that the respective
obligations of the Company, Parent and the Purchaser to consummate the Merger
are subject to the satisfaction of the following
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conditions: (i) the Merger Agreement shall have been adopted by the requisite
vote of the stockholders of the Company, if required by applicable law, in order
to consummate the Merger; (ii) any applicable waiting period (and any extension
thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended ("HSR Act"), and the rules that have been promulgated thereunder by the
Federal Trade Commission (the "FTC") relating to the Merger shall have expired
or been terminated; (iii) no court of competent jurisdiction or other
governmental or regulatory authority shall have enacted, issued, promulgated,
enforced or entered any law or order (whether temporary, preliminary or
permanent) which is then in effect and has the effect of making illegal or
otherwise restricting, preventing or prohibiting consummation of the Offer or
the Merger or the transactions contemplated by the Merger Agreement, the Option
Agreement or the Stockholders Agreement; and (iv) the Purchaser or its permitted
assignee shall have purchased all Shares validly tendered and not withdrawn
pursuant to the Offer.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Purchaser with
respect to, among other things, its organization, capitalization, financial
statements, public filings, labor relations, conduct of business, employee
benefit plans, insurance, compliance with laws, litigation, environmental
matters, tax matters, property, contracts and agreements, non-contravention,
consents and approvals, opinions of financial advisors, undisclosed liabilities
and the absence of certain changes with respect to the Company since December
31, 1997.
Termination; Fees. The Merger Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval by the stockholders of
the Company: (i) by the mutual written consent of the Company and Parent; (ii)
by the Company (A) if there has been a material breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in the Merger
Agreement which breach has not been cured, in the case of a representation or
warranty, prior to the Effective Time or, in the case of a covenant or
agreement, within 30 days following receipt by Parent of notice of such breach
(provided that such right to terminate shall expire on the date on which Parent
or the Purchaser beneficially owns a majority of the outstanding Shares), or (B)
if there shall be any law or regulation that makes consummation of the Merger
illegal or if any judgment, injunction or other order of a court or other
authority having jurisdiction preventing the consummation of the Merger shall
have become final and non-appealable; (iii) by Parent (A) (i) if any
representation or warranty of the Company shall not be true and correct (x) in
all material respects as of the date of the Merger Agreement or (y) as of the
time of termination of the Merger Agreement, and, in a case described in this
subclause (y), the failure of such representation or warranty to be true and
correct (1) has a material adverse effect on the Company, (2) if capable of
being made true and correct within 30 days following receipt by the Company of
notice of such representation or warranty not being true and correct is not in
fact made true and correct within such 30-day period and (3) did not result from
the announcement of the Merger Agreement or the transactions contemplated
thereby or (ii) if there has been a material breach of any covenant or agreement
on the part of the Company set forth in the Merger Agreement or the Option
Agreement which breach of a covenant or agreement has not been cured within 30
days following receipt by the Company of notice of such breach (provided that
such right to terminate shall expire on the date on which Parent or the
Purchaser beneficially owns a majority of the outstanding shares of Common Stock
and Parent's designees constitute or shall have been afforded the opportunity,
without the imposition by the Company of adverse conditions, to constitute the
requisite percentage (but not less than a majority) of the members of the Board
of Directors of the Company specified in the Merger Agreement), (B) if there
shall be any law or regulation that makes consummation of the Merger illegal or
if any judgment, injunction or other order of a court or other competent
authority preventing the consummation of the Merger shall have become final and
non-appealable or (C) if the Offer shall have expired or been terminated without
any Shares being purchased as a result of the occurrence of any of the
conditions to the Offer; (iv) by either the Company or Parent if the Offer has
not been consummated by the Outside Termination Date, provided that the
terminating party is not then in material breach of any provision of the Merger
Agreement; (v) by Parent upon the occurrence of a Trigger Event (as defined
below), provided that such right to terminate shall expire on the date on which
Parent or the Purchaser beneficially owns a majority of the outstanding shares
of Common Stock and Parent's designees constitute the requisite percentage (but
not less than a majority) of the members of the Board of Directors of the
Company specified in the Merger Agreement; and (vi) by Parent, if the FTC or the
Antitrust Division has initiated litigation or an administrative proceeding
challenging
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the transactions contemplated by the Merger Agreement under U.S. antitrust laws,
which litigation or administrative proceeding will include a motion seeking an
order or injunction prohibiting the consummation of any of the transactions
contemplated by the Merger Agreement.
In the event that Parent terminates the Merger Agreement pursuant to clause
(iii)(A)(i), (iii)(A)(ii) or (v) of the previous paragraph, then the Company
shall pay to Parent (x) a termination fee in the amounts and at the times
specified in the next paragraph and (y) an amount (not to exceed $500,000 in the
aggregate) equal to all out-of-pocket expenses and fees certified by Parent to
have been incurred by Parent and its subsidiaries in connection with the Merger
Agreement and the transactions contemplated thereby. In the event that Parent
terminates the Merger Agreement pursuant to clause (iii)(C) of the previous
paragraph, then the Company shall pay to Parent a termination fee in the amount
and at the time specified in the next paragraph.
The termination fee payable pursuant to the preceding paragraph shall be as
follows: (i) if the termination of the Merger Agreement occurred pursuant to
clause (v) of the second preceding paragraph based on a Trigger Event described
in clause (i) or (v) of the following paragraph, a termination fee of $3,000,000
shall be payable immediately upon such termination; (ii) if the termination of
the Merger Agreement occurred pursuant to clause (iii)(A) of the second
preceding paragraph or pursuant to clause (v) of the second preceding paragraph
based on a Trigger Event described in clause (ii), (iii) or (iv) of the
following paragraph, a termination fee of $1,500,000 (the "Initial Termination
Fee") shall be payable immediately upon such termination, and an additional
termination fee of $1,500,000 shall be payable immediately upon the occurrence
during the 12 months following the receipt of the Initial Termination Fee of a
Trigger Event described in clause (i) or (v) of the following paragraph; and
(iii) if (A) the termination of this Agreement occurred pursuant to clause
(iii)(C) of the second preceding paragraph, (B) at any time prior to termination
of the Merger Agreement pursuant to clause (iii)(c) of the second preceding
paragraph, the Company shall have received an Acquisition Proposal and (C)
within 12 months of termination of the Merger Agreement pursuant to clause
(iii)(c) of the second preceding paragraph, the Company shall have entered into,
or shall have publicly announced its intention to enter into, an agreement or
agreement in principle with respect to, or consummated any business combination
or transaction with any person or entity that made the Acquisition Proposal
referred to in the immediately preceding subclause (B) or with any affiliate of
such person or entity, a termination fee of $3,000,000 shall be payable
immediately upon such termination. Notwithstanding anything to the contrary in
the Merger Agreement, any termination fees otherwise payable as described herein
shall be reduced to the extent such payment otherwise would cause the Total
Profit (as defined below under "-- The Option Agreement") to exceed $4,500,000.
A "Trigger Event" means any of the following events: (i) the Company shall
have entered into, or shall have publicly announced its intention to enter into,
an agreement or agreement in principle with respect to, or, at any time within
12 months after the termination of the Merger Agreement, consummated any
Acquisition Proposal or similar business combination or transaction other than
the transactions contemplated by the Merger Agreement; (ii) the Board of
Directors of the Company or any committee thereof shall have withdrawn its
approval or recommendation of the Offer, the Merger Agreement or the Merger, or
modified its approval or recommendation in a manner adverse to Parent or the
Purchaser; (iii) the Board of Directors of the Company or any committee thereof
shall have made any recommendation with respect to an Acquisition Proposal by
any person (other than Parent or the Purchaser) other than a recommendation
rejecting or against such Acquisition Proposal; (iv) the Company receives any
Acquisition Proposal by any person (other than Parent or the Purchaser), and the
Company's Board of Directors takes a neutral position or makes no recommendation
with respect to such Acquisition Proposal after a reasonable amount of time (and
in no event more than five business days) has elapsed for the Company's Board of
Directors to review and make a recommendation with respect to such Acquisition
Proposal consistent with the Board's fiduciary duties; or (v) (x) any
corporation, partnership or other entity or "person" (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
other than Parent, the Company or any of their respective affiliates shall have,
at any time prior to the termination of the Merger Agreement, commenced, or
announced an intention to commence, (A) a "solicitation" of "proxies" or become
a "participant" in such a solicitation (as such terms are defined in Regulation
14A under the Exchange Act)
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or (B) a tender offer, exchange offer or other extraordinary transaction (in
each case with respect to Shares) and as a result thereof, if the Merger
Agreement were not terminated promptly thereafter, Parent or the Purchaser would
be required to incur substantial expenditures in addition to those otherwise
required for the transactions contemplated by the Merger Agreement and (y) such
corporation, partnership or other entity or "person" or its affiliates and
associates (as defined in the Exchange Act) collectively shall be or become the
beneficial owners (determined pursuant to Rule 13d-3 under the Exchange Act) of
at least 15% of any class of shares of capital stock of the Company (including
the shares of Common Stock) or shall have acquired, directly or indirectly, at
least 15% of the assets or earning power of the Company.
Appraisal Rights. Stockholders do not have dissenters' rights as a result
of the Offer. However, if the Merger is consummated, stockholders of the Company
at the time of the Merger who do not vote in favor of or consent in writing to
the Merger will have the right under the Delaware Law to dissent and demand
appraisal of their Shares in accordance with Section 262 of the Delaware Law.
Under the Delaware Law, dissenting stockholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) and to receive payment of such fair
value in cash, together with a fair rate of interest, if any. Any such judicial
determination of the fair value of the Shares could be based upon considerations
other than or in addition to the price paid in the Offer (or the Merger) and the
market value of the Shares. Stockholders should recognize that the value so
determined could be higher or lower than the price per Share paid pursuant to
the Offer or the Merger. Moreover, Parent or Purchaser may argue in an appraisal
proceeding that, for purposes of such a proceeding, the fair value of the Shares
is less than the price paid in the Offer (or the Merger). THE FOREGOING SUMMARY
OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT PURPORT TO BE A COMPLETE
STATEMENT OF PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE
THEIR DISSENTERS' RIGHTS.
THE OPTION AGREEMENT
The following summary of the option agreement, by and between the Parent,
Purchaser and the Company (the "Option Agreement") is qualified in its entirety
by reference to the Option Agreement, a copy of which is filed as Exhibit 2
hereto. The Option Agreement should be read in its entirety for a more complete
description of the matters summarized below.
As a condition and inducement to Parent and the Purchaser entering into the
Merger Agreement, concurrently with the execution of the Merger Agreement
Parent, the Purchaser and the Company entered into the Option Agreement.
Pursuant to the Option Agreement, the Company granted to the Purchaser an
irrevocable option (the "Option") to purchase 1,427,914 newly issued shares of
Common Stock (representing 19.9% of the Company's issued and outstanding Shares
at the date of the Option Agreement). The number of shares of Common Stock
issuable on exercise of the Option is subject to adjustment under certain
circumstances. Among other things, if the number of issued and outstanding
shares of Common Stock increases prior to the exercise of the Option, the number
of shares of Common Stock issuable on exercise of the Option will be increased
to a number equal to 19.9% of the number of shares of Common Stock issued and
outstanding following the increase. The Option is exercisable, in whole or in
part, if (i) any corporation, partnership, individual, trust, unincorporated
association, or other entity or "person" (as defined in Section 13(d)(3) of the
Exchange Act) other than Parent, the Company or any of their respective
"affiliates" (as defined in the Exchange Act) shall have solicited "proxies" in
a "solicitation" subject to the proxy rules under the Exchange Act, executed any
written consent or become a "participant" in any "solicitation" (as such terms
are defined in Regulation 14A under the Exchange Act), in each case with respect
to the Shares; (ii) the Company shall have received an Acquisition Proposal; or
(iii) any of the events described in clause (c) under the first paragraph of
"-- The Merger Agreement -- Termination; Fees" above or any Trigger Event shall
have occurred, unless a termination fee would not be paid or payable if the
Merger Agreement were terminated as a result of such event (but without the
necessity of Parent having terminated the Merger Agreement). If prior to the
expiration of the Option any of the events described in the preceding sentence
shall have occurred, then the Purchaser (or its designee) shall have the right,
in lieu of exercising the
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Option, at any time thereafter (for so long as the Option is exercisable) to
request in writing that the Company pay, and promptly (but in any event not more
than five business days) after the giving by the Purchasers (or its designee) of
such request, the Company shall pay to the Purchasers (or its designee), in
cancellation of the Option, an amount in cash equal to (i) the excess over the
$11.00 of the greater of (A) the last sale price of a Share as reported on the
Nasdaq National Market (or any national or other exchange on which the Common
Stock may be traded) on the last trading day prior to the date of the notice, or
(B) (1) the highest price per Share offered to be paid or paid pursuant to or in
connection with an Acquisition Proposal that involves Shares and that has not
been terminated or withdrawn prior to the date of the notice or (2) the
aggregate consideration offered to be paid or paid in an Acquisition Proposal
that involves the assets of the Company and that has not been terminated or
withdrawn prior to the notice, divided by the number of shares then outstanding,
multiplied by (ii) the number of shares of Common Stock then covered by Option.
If all or a portion of the price per Share offered, paid or payable or the
aggregate consideration offered, paid or payable for the assets of the Company,
each as contemplated by the preceding sentence, consists of non-cash
consideration, such price or aggregate consideration shall be the cash
consideration, if any, plus the fair market value of the non-cash consideration
as determined by the investment bankers of the Purchaser (or its designee) and
the investment bankers of the Company. The Option Agreement terminates, and the
Option expires on , the earliest of (1) the Effective Time, (ii) the termination
of the Merger Agreement as described in clause (i), (ii), (iii)(B) or (iii)(C)
(other than a termination as described in clause (iii)(C) after an Acquisition
Proposal is made or an intent to make an Acquisition Proposal is publicly
announced), (iv) or (v) of the first paragraph of "-- The Merger
Agreement -- Termination; Fees" above and (iii) to the extent that no notice of
exercise of the Option has therefore been given by the Purchaser three months
after any other termination of the Merger Agreement as described in clause (i),
(ii), (iii)(B) or (iii) (C) of the first paragraph of "-- The Merger
Agreement -- Termination; Fees."
The Option Agreement provides that in no event shall the Purchaser's (or
its designee's) Total Profit (as defined below) exceed $4,500,000 and, if it
otherwise would exceed such amount, the Purchaser (or its designee) at its sole
election, must either (a) reduce the number of Shares subject to the Option, (b)
deliver to the Company for cancellation Shares previously purchased by the
Purchaser (or its designee), (c) pay cash to the Company or (d) take any actions
described in any one or more of the preceding clauses (a), (b) and (c), so that
the Purchaser's (or its designee's) Total Profit will not exceed $4,500,000
after taking into account the foregoing actions.
"Total Profit" means (i) except in the case of the cancellation of the
Option as described in the preceding paragraph, the sum of (A) (x) the aggregate
net cash amounts (before taxes) received by the Purchaser (or its designee)
pursuant to the sale of Shares (or any other securities into which such Shares
are converted or exchanged) to any unaffiliated party, less (y) the Purchaser's
(or its designee's) purchase price of such Shares and (B) the aggregate amount
of termination fees paid under the Merger Agreement or (ii) in the case of the
cancellation of the Option as described in the preceding paragraph, the sum (A)
net cash amount (before taxes) received by the Purchaser (or its designee) as
described in the preceding paragraph and (B) the aggregate amount of termination
fees paid under the Merger Agreement.
THE STOCKHOLDERS AGREEMENT
The following summary of the stockholders agreement, by and between the
Parent, Purchaser and the stockholders listed on Schedule I thereto (each a
"Stockholder") (the "Stockholders Agreement") is qualified in its entirety by
reference to the Stockholders Agreement, a copy of which is filed as Exhibit 3
hereto. The Stockholders Agreement should be read in its entirety for a more
complete description of the matters summarized below.
As a condition and inducement to Parent and the Purchaser's entering into
the Merger Agreement, the Stockholders, who have voting power and dispositive
power with respect to an aggregate of 219,796 Shares, representing approximately
3.1% of the Shares outstanding on March 8, 1998, concurrently with the execution
and delivery of the Merger Agreement, entered into the Stockholders Agreement.
The Stockholders are Patrick Arrington, Richard E. Belluzzo, Robert W. Johnson,
Jeffrey M. Nash, Kenneth E. Olson, and John M. Seiber and comprise the Board of
Directors of the Company. Pursuant to the Stockholders
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Agreement, each of the Stockholders has agreed to tender all of his Shares into
the Offer promptly, and in no event later than 10 business days after the date
of this Offer to Purchase. Each Stockholder agreed not to withdraw his Shares so
tendered unless the Offer is terminated or expired. The Purchaser has agreed to
purchase all the Shares so tendered at a price per Share equal to $11.00 per
Share or any higher price that may be paid in the Offer; however, Purchaser's
obligation to accept for payment and pay for such Shares in the Offer is subject
to all the terms and conditions of the Offer set forth in the Stockholders
Agreement and in the Merger Agreement.
Each of the Stockholders has granted Parent an irrevocable proxy with
respect to the voting of such Shares in favor of the Merger and against any
action or agreement which would impede, interfere with or prevent the Merger,
including any Acquisition Proposal.
Each of the Stockholders has agreed that, prior to the termination of the
Stockholders Agreement pursuant to its terms, he will not (i) transfer, or
consent to the transfer, of any or all of his Shares or any interest therein;
(ii) enter into any contract, option or other agreement or understanding with
respect to any transfer of any or all of his Shares or any interest therein;
(iii) grant any proxy, power-of-attorney or other authorization in or with
respect to his Shares; (iv) deposit his Shares into a voting trust or enter into
a voting agreement or arrangement with respect to his Shares; or (v) take any
other action that would in any way restrict, limit or interfere with the
performance of such Stockholder's obligations under the Stockholders Agreement.
Each of the Stockholders has granted to Parent and Purchaser an
irrevocable, exclusive option (the "Stockholder Option") to purchase all Shares
of such Stockholder at a price of $11.00 per Share, net to such Stockholder in
cash, subject to any amounts required to be withheld under applicable income tax
laws and regulations. The Stockholder Option shall be exercisable by Parent or
Purchaser at any time after consummation of the Offer and prior to the
termination of the Stockholders Agreement.
The Stockholders Agreement, and all rights and obligations of the parties
thereto, shall terminate immediately upon the earlier of (i) the acquisition by
Parent, through the Purchaser or otherwise of the Shares that are the subject of
the Stockholders Agreement, (ii) the termination of the Merger Agreement in
accordance with its terms or (iii) the Effective Time.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Recommendation of the Board of Directors
The Company's Board of Directors has by a unanimous vote of those present
(one member being absent) approved the Merger Agreement and determined that the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, taken together, are fair to and in the best interests of the
stockholders of the Company and recommends that all stockholders of the Company
accept the Offer and tender all their Shares pursuant to the Offer. This
recommendation is based in part upon an opinion, dated March 8, 1998, received
by the Company from Broadview Associates LLC ("Broadview"), financial advisor to
the Company, that, as of such date, the proposed cash consideration to be
received by the Company's stockholders in the Offer and the Merger is fair to
the stockholders from a financial point of view. The full text of the fairness
opinion received by the Company from Broadview is filed as Exhibit 4 to this
Schedule 14D-9 and is also attached hereto as Annex B. Stockholders are urged to
read such opinion in its entirety.
As set forth in the Offer Documents, Purchaser will purchase Shares
tendered prior to the close of the Offer if there shall have been validly
tendered and not withdrawn a majority of Shares outstanding on a fully diluted
basis (the "Minimum Condition") by that time and if all other conditions to the
Offer have been satisfied (or waived). Stockholders considering not tendering
their Shares in order to wait for the Merger should note that if the Minimum
Condition is not satisfied or any of the other conditions to the Offer are not
satisfied, Purchaser is not obligated to purchase any Shares, and can terminate
the Offer and the Merger Agreement and not proceed with the Merger. Under the
Delaware Law, the approval of the Company's Board of Directors and the
affirmative vote of the holders of a majority of the outstanding Shares are
required to approve the Merger. Accordingly, if the Minimum Condition is
satisfied, Purchaser will have sufficient voting power to cause the approval of
the Merger without the affirmative vote of any other stockholder. Further,
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under the Delaware Law, if Purchaser acquires at least 90% of the outstanding
shares, Purchaser will be able to approve the Merger without a vote of the
Company's stockholders.
The Offer is scheduled to expire at 12:00 Midnight, New York City time, on
Thursday, April 9, 1998, unless Parent, in its sole discretion, elects to extend
the period of time for which the Offer is open. A copy of the press release
issued by the Company and Parent on March 8, 1998 announcing the Merger and the
Offer is filed as Exhibit 5 to this Schedule 14D-9 and is incorporated herein by
reference in its entirety.
Background of the Offer
The market for multimedia projection products is characterized by rapidly
evolving technology and short product lives with intense price competition. In
addition, the Company competes against some of the largest electronics
manufacturers in the world (such as Epson, Hitachi, 3M, Polaroid, Matsushita,
Philips, NEC, Sanyo, Sharp, Sony, Toshiba and others) and many of these
competitors have greater financial, technical, manufacturing and marketing
resources than the Company. The Company believes that these market conditions
and other factors have caused the Company to experience volatility in its
financial results from quarter-to-quarter during the last two fiscal years.
As a result of the foregoing market conditions and other factors, in
February 1997, the Company sought to retain a financial adviser to assist
management and the Company's Board of Directors in the analysis of potential
strategic opportunities. On February 20, 1997, Broadview, an investment banking
firm, was retained. Over the following year Broadview conducted a review of
opportunities available to the Company and Broadview and the Company had
discussions with approximately fifteen different potential alliance partners.
These contacts included many of the world's leading manufacturers of multimedia
projection equipment, including the Company's primary sourced product suppliers.
With the exception of Parent, none of these contacts resulted in any offer
regarding a business combination with the Company.
On April 18, 1997, Broadview contacted Parent indicating that it
represented a client which offered a strategic opportunity for Parent. Mr. Ole
Fredriksen, president of Parent, responded by indicating that Parent would be
interested in further discussions. On May 7, 1997, Broadview replied to Mr.
Fredriksen disclosing the identity of its client as the Company and suggesting
continued discussions.
On June 5 and 6, 1997, while attending an industry trade show in Los
Angeles, CA, Mr. Fredriksen met with Mr. Kenneth E. Olson, chairman, president
and CEO of the Company, to generally discuss each company and a potential
business combination or alliance.
On June 9, 1997, Mr. Richard Dalton, Managing Director, and Ms. Maryfrances
Galligan, Principal, of Broadview met in San Francisco, CA with Mr. Fredriksen,
Mr. John Rehfeld, the Company's former CEO who had been retained by Parent at
the time as a consultant, and Mr. Robert Meshel, legal advisor to Parent at the
time. At this meeting, both parties provided a general corporate overview to the
other. At the conclusion of the meeting, Mr. Fredriksen indicated that Parent
might be interested in acquiring the Company for a price equal to the Company's
book value, as estimated by Parent. Broadview suggested that this valuation
would likely be inadequate; however, representatives of Parent were encouraged
to visit with Company management at the Company's headquarters in San Diego,
California to further understand the Company's prospects.
Parent and the Company executed a confidentiality agreement with customary
terms effective as of July 24, 1997.
On July 30, 1997, Broadview wrote to Mr. Fredriksen suggesting the
potential benefits of a business combination transaction. This letter was sent
in anticipation of an August 7 and 8, 1997 meeting at the Company's headquarters
in San Diego, California. On said dates, management representatives of the
Company met with Mr. Fredriksen, Mr. Svein Jacobsen, Chairman of the Board of
Parent, and Mr. Jorn Eriksen, Vice President of Technology and Development.
Company representatives covered a general overview of the Company including
financial results, sales and business plans, manufacturing capabilities and a
status on then-pending securities litigation. At the conclusion of the meeting
Mr. Fredriksen extended an invitation to Mr. Dalton to make a presentation to
Parent's Board in Norway.
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During the time period of June 1997 through August 20, 1997, Bain & Company
("Bain"), an international management consulting firm, conducted an analysis of
the Company in order to recommend various strategic options for the Company.
After extensive analysis, Bain made presentations to the Company's Board on July
23, 1997 and August 20, 1997, concluding that a sale of the Company offered the
best opportunity for maximizing stockholder value.
On August 27, 1997, Mr. Dalton made a presentation to Parent's Board in
Fredrikstad, Norway providing an overview of the Company, an analysis and
forecast of combined results, and potential transaction structures. On September
8, 1997, the Company received a letter from Alfred Berg Norge A/S, an investment
banking firm retained by Parent at the time, which provided an indication of
interest to offer to purchase the stock of the Company for $7.00 cash per share.
A Company Board meeting was held on September 10, 1997 to discuss the indication
of interest. The Company's Board of Directors determined during the meeting that
it was in the best interests of the Company and its stockholders to reject the
$7.00 per share indication as inadequate and to seek to negotiate further the
terms of a potential transaction. The Company's Board of Directors' position was
communicated to Mr. Fredriksen on September 11, 1997.
On September 28, 1997, Mr. Jacobsen contacted Mr. Dalton and stated that
the Parent would defer further analysis of a potential transaction until the
Company had publicly released its financial results for its second quarter of
fiscal 1998 (ending September 28, 1997).
On October 20, 1997, the Company publicly released its second quarter
financial results. On November 6, 1997, Mr. Fredriksen informed Mr. Olson that
Parent continued to be interested in pursuing a business combination with the
Company.
On December 3, 1997, while returning from a European business trip, Mr.
Olson arranged to meet with Mr. Fredriksen in Fredrikstad, Norway. Mr.
Fredriksen reiterated his interest in a potential business combination and
committed to revisit the matter with Parent's Board.
On December 16, 1997, Mr. Fredriksen contacted Mr. Dalton and stated that
Parent's Board had a serious interest in a possible business combination and
that Parent intended to retain financial and legal advisors to assist it in
evaluating the Company. Mr. Dalton indicated that any purchase of the Company
would need to be at a higher price than may have been possible in the fall of
1997 because the Company's financial performance and the trading price of its
common stock recently had improved. On January 14, 1998, Mr. Dalton was
contacted by a representative of BT Alex. Brown Incorporated ("BT Alex. Brown")
who stated that BT Alex. Brown had been retained to assist Parent in evaluating
a possible business combination with the Company. On January 20, 1998, Mr.
Fredriksen contacted Mr. Olson and repeated that BT Alex. Brown had been
retained, and Broadview informed representatives of BT Alex. Brown that the
Company was discussing a possible acquisition by means of a stock-for-stock
merger with a privately held company. On January 21, 1998, representatives from
BT Alex. Brown visited the Company for the purpose of conducting a limited
business review. Various financial data was provided to BT Alex. Brown.
On February 2, 1998, Parent submitted a written acquisition proposal to the
Company proposing a purchase price of $10.50 cash per share, subject to
negotiation of definitive documentation and other conditions.
On February 6, 1998, the Company's Board met with management and its
financial advisors to discuss the acquisition proposal. Broadview presented
various valuation arguments and suggested various negotiation strategies, all of
which, as well as other options, were discussed by the Board. After extensive
deliberation, the Board determined during the meeting that it was in the best
interests of the Company and its stockholders to seek to negotiate further the
terms of a potential transaction.
On February 9, 1998, representatives from both companies and their
financial advisors met in New York, NY to discuss the acquisition proposal.
After a period of intense negotiations, Parent agreed to increase its proposal
to $11.00 cash per share, but subjected such offer to a number of conditions
including the payment of a termination fee and the grant of an issuer stock
option on which the parties were not able to agree.
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During the period from February 10 through March 8, 1998, representatives
of the parties exchanged drafts, and met via teleconference to discuss and
negotiate the terms, of the definitive merger agreement, including the terms of
the issuer stock option, if any, the terms of the Stockholders Agreement,
provisions imposing restrictions on the Company's ability to enter into a
competing transaction and the conditions to the Offer. During this period,
representatives of the parties also met in connection with conducting due
diligence and discussing integration plans. Near the end of this period, the
Company's negotiating team ultimately agreed to recommend the Option Agreement
to the Company's Board only when Parent made it clear that it would not proceed
with the transaction without such concession.
On March 8, 1998, the Company's Board held a special meeting at the
Company's offices to consider the Merger Agreement, the Offer, the Merger, the
Option Agreement and the transactions contemplated thereby. Mr. Belluzzo could
not attend the meeting due to an unavoidable international travel conflict. At
the meeting, the Company's Board of Directors reviewed the Merger Agreement, the
Offer, the Merger, the Option Agreement, and the transactions contemplated
thereby with the Company's management, representatives of Brobeck, Phleger &
Harrison, LLP, legal advisors to the Company, and representatives of Broadview.
The Company's Board of Directors heard a presentation by its legal counsel and
by representatives of Broadview with respect to the financial terms of the
proposed Offer and the Merger. The Board discussed among themselves and with the
Company's management and advisors alternatives reasonably available to the
Company. At the conclusion of their presentation, representatives of Broadview
delivered their written opinion to the Company's Board of Directors that, as of
such date, the proposed cash consideration to be received by the stockholders of
the Company pursuant to the Offer and the Merger is fair to such stockholders
from a financial point of view.
Based upon such discussions, presentations and opinion, the members of the
Company's Board of Directors in attendance unanimously (i) approved the Offer,
the Merger, the Merger Agreement and the Option Agreement, in the form presented
to the Board, and the transactions contemplated by the Merger Agreement and the
Option Agreement, and (ii) recommended that the Company's stockholders accept
the Offer and tender their Shares pursuant to the Offer and approve and adopt
the Merger Agreement and the transactions contemplated thereby. Later that same
day, (i) representatives of the Company, Parent and Purchaser signed the Merger
Agreement, (ii) representatives of the Company, Parent and Purchaser signed the
Option Agreement, (iii) the stockholders and representatives of Parent and
Purchaser signed the Stockholders Agreement and (iv) the Company and Parent
issued separate press releases with respect to the Offer and the Merger.
Board Considerations
In reaching its conclusions described above, the Company's Board of
Directors considered a number of factors, including, without limitation, the
following:
1. the financial and other terms and conditions of the Offer, the Merger
Agreement and the Option Agreement;
2. the Company's business, financial condition, results of operations,
assets, liabilities, business strategy and prospects, as well as various
uncertainties associated with those prospects, including the view of the
Company's management that the Company would likely face increasing difficulties
as a stand-alone company in its changing competitive environment because, among
other things, the Company lacks proprietary technology, faces intense
competition from much larger entities, and has become increasingly reliant on
sourced product suppliers which sell substantially the same product in direct
competition with, and can sell such product at lower prices than, the Company;
3. the facts that the $11.00 per Share price to be received by the
Company's stockholders in both the Offer and the Merger represents a 32.3%
premium over the closing market price of $8.31 per Share on March 6, 1998, the
last full trading day prior to the approval of the Merger Agreement by the
Company's Board of Directors, a premium of 23.9% over the closing market price
of $8.88 per share on February 6, 1998, the 20th full trading day prior to the
approval of the Merger Agreement by the Company's Board of Directors, and a
premium of 30.4% over the average closing prices for the 20-trading-day period
preceding March 8, 1998, and that such price would be payable in cash, thus
eliminating any uncertainties in valuing the consideration to be received by the
Company's stockholders;
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4. the opinion of Broadview, dated March 8, 1998, that, as of such date,
the proposed cash consideration to be received by the Company's stockholders
pursuant to the Offer and the Merger was fair to such stockholders from a
financial point of view; a copy of Broadview's written opinion is attached to
this Schedule 14D-9 as Annex B and is incorporated herein by reference. Such
opinion should be read in its entirety for a description of the procedures
followed, assumptions and qualifications made, matters considered and
limitations of the review undertaken by Broadview. In connection with delivering
its opinion, Broadview made a presentation to the Company's Board of Directors
at its meeting on March 8, 1998, as to various financial and other matters
underlying such opinion including, among other things, (a) a review of the
public market value and trading multiples of certain publicly traded information
technology hardware distribution companies; (b) a review of certain transactions
in the information technology hardware distribution market segment with revenue
between $50 million and $300 million; (c) a review of premiums paid in merger
and acquisition transactions involving hardware vendors with values between $20
million and $250 million since January 1, 1995; and (d) a review of the present
value of the Company's potential future share price;
5. the results of the process undertaken by Broadview beginning in
February 1997 to approach and contact potential transaction candidates and the
fact that, despite these contacts, only Parent had made an offer regarding a
business combination with the Company;
6. the fact that the Offer and the Merger would not be subject to any
financing condition and that Parent has represented that it has sufficient cash
and/or available credit facilities to acquire all of the Shares in the Offer and
the Merger and to make all necessary payments or fees and expenses in connection
with the Merger Agreement;
7. the likelihood that the proposed Merger would be consummated,
including the terms of the Merger Agreement related thereto and the reputation
and experience of Parent;
8. the opinion of the Company's management that the strategic fit
between Parent and the Company would likely yield business and operational
synergies, a portion of which is being passed on to the Company's current
stockholders in the form of a premium over the preexisting market price for the
Shares;
9. the requirement by Parent, as a condition to entering into the Merger
Agreement, that the Company enter into the Option Agreement and the Stockholders
Agreement, the extent to which those agreements might deter competing takeover
proposals and the likelihood of any competing tender offer being made; and
10. the fact that, to the extent required by the fiduciary obligations
of the Company's Board of Directors to the stockholders under the Delaware Law,
the Company's Board of Directors may withdraw its recommendation with respect to
the Offer and the Merger in order to approve a tender offer or exchange offer
for the Shares or other business combination that might be made or proposed by a
third party on terms more favorable to the Company's stockholders than the Offer
and the Merger taken together, and the fact that under the Merger Agreement,
following such action by the Company's Board of Directors, Parent would have the
right to terminate the Merger Agreement and receive from the Company up to a
$3.0 million termination fee and up to $0.5 million of Parent's expenses
associated with the Offer and the Merger and exercise the option granted under
the Option Agreement, subject to the limitation that in no event may the
aggregate of the termination fee and profits realized upon exercise of the
option exceed $4.5 million. See Item 3. "Identity and Background -- The Merger
Agreement -- Termination; Fees."
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained Broadview as its financial advisor in connection with
the Offer and the Merger. Pursuant to its agreements with the Company, dated
February 19, 1997, Broadview became entitled to receive a fee of (i) $35,000
upon execution of the agreements; (ii) $350,000 upon delivery of a fairness
opinion and (iii) is entitled to upon consummation of the Merger an amount equal
to $1,050,000 (less amounts paid pursuant to (ii) above). In addition, the
Company has agreed to reimburse Broadview monthly for its reasonable
out-of-pocket expenses incurred in connection with the Merger. In addition, the
Company has agreed to indemnify Broadview, its affiliates, and each of
Broadview's and its affiliates and their respective
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members, directors, officers, agents, employees and legal representatives, and
each person, if any, controlling Broadview or any of its affiliates against
certain liabilities (and certain related expenses) relating to or arising out of
its engagement.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on its
behalf with respect to the Offer and the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past sixty days, no transactions in the Shares have been
effected by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate, or subsidiary of the Company.
(b) To the best knowledge of the Company, all of its executive officers and
directors currently intend to tender pursuant to the Offer all Shares held of
record or beneficially owned by them.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth herein, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that relates
to or would result in one or more of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
SECTION 203
As a Delaware corporation, the Company is subject to Section 203 ("Section
203") of the Delaware Law. Section 203 would prevent an "Interested Shareholder"
(generally defined as a person beneficially owning 15% or more of a
corporation's voting stock) from engaging in a "Business Combination" (as
defined in Section 203) with a Delaware corporation for three years following
the date such person became an Interested Shareholder unless: (i) before such
person became an Interested Shareholder, the board of directors of the
corporation approved the transaction in which the Interested Shareholder became
an Interested Shareholder or approved the Business Combination, (ii) upon
consummation of the transaction which resulted in the Interested Shareholder
becoming an Interested Shareholder, the Interested Shareholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding for purposes of determining the number of
shares of outstanding stock held by directors who are also officers and by
employee stock ownership plans that do not allow plan participants to determine
confidentially whether to tender shares), or (iii) following the transaction in
which such person became an Interested Shareholder, the Business Combination is
(x) approved by the board of directors of the corporation and (y) authorized at
a meeting of shareholders by the affirmative vote of the holders of at least
66 2/3% of the outstanding voting stock of the corporation not owned by the
Interested Shareholder. In accordance with the provisions of the Company's
Certificate of Incorporation and Section 203, the Company's Board of Directors
has approved the Merger Agreement, the Option Agreement and the Stockholders
Agreement and Purchaser's acquisition of Shares pursuant to the Offer and the
Merger and the transactions contemplated by the Merger Agreement and, therefore,
the restrictions of Section 203 are inapplicable to the Merger, the Offer and
the related transactions.
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ANTITRUST
Under the HSR Act certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division of the
United States Department of Justice (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. The acquisition of
Shares by Purchaser pursuant to the Offer is subject to such requirements.
Pursuant to the requirements of the HSR Act, Parent intends to file the
required Notification and Report Forms (the "Forms") with the Antitrust Division
and the FTC on March 13, 1998, and the Company expects to file the Forms with
such agencies on March 13, 1998. The statutory waiting period applicable to the
purchase of Shares pursuant to the Offer is to expire at 11:59 P.M., New York
City time, on Friday, March 28, 1998. However, prior to such date, the Antitrust
Division or the FTC may extend the waiting periods by requesting additional
information or documentary material relevant to the acquisition. If such a
request is made, the waiting period will be extended until 11:59 P.M., New York
City time, on the tenth day after substantial compliance by Parent with such
request. Thereafter, such waiting periods can be extended only by court order. A
request is being made pursuant to the HSR Act for early termination of the
applicable waiting period. There can be no assurance, however, that the waiting
period will be terminated early. The Merger Agreement provides that, if by the
expiration of the Offer, the applicable waiting period under the HSR Act shall
not have expired or been terminated, Parent may, without the consent of the
Company, extend the Offer from time to time until the date that such waiting
period has expired or been terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions. At any time before or after the consummation
of any such transactions, the Antitrust Division or the FTC could,
notwithstanding termination of the waiting period, take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or
seeking divestiture of the Shares so acquired or divestiture of substantial
assets of Parent or the Company. Private parties may also bring legal actions
under the antitrust laws. There can be no assurance that a challenge to the
Offer on antitrust grounds will not be made, or if such a challenge is made,
what the result will be. See Item 3, "Identity and Background -- The Merger
Agreement -- Conditions to the Merger."
CERTAIN LITIGATION
On March 9, 1998, a purported class action lawsuit was initiated in the
Court of Chancery of Delaware by Marc Tisch, who purports to bring the action
individually and on behalf of other stockholders of the Company similarly
situated against the Company, its directors and Parent. The lawsuit is styled
Marc Tisch v. Kenneth E. Olson et. al. (C.A.No.16234-NC) and seeks, among other
things, a preliminary and permanent injunction against the Offer and the Merger,
rescission of the Offer and the Merger if they are consummated, and compensatory
damages. The complaint asserts, among other things, that (i) the directors of
the Company breached fiduciary duties owed to the public stockholders of the
Company; (ii) the intrinsic value of the Company is far greater than that
reflected in the market price of the Company's stock; (iii) the terms of the
proposed Merger and Offer were not the result of an auction process or active
market check and were arrived at without a full and thorough investigation by
the individual defendants and are intrinsically unfair and inadequate from the
stand point of the Company's stockholders; and (iv) the individual defendants
failed to make an informed decision, as no market check of the Company's value
was obtained, and in agreeing to the Merger, the individual defendants failed to
properly inform themselves of the Company's highest transactional value. The
complaint also alleges that the individual defendants' fiduciary obligations
under these circumstances require them to (i) undertake an appropriate
evaluation of the Company's net worth as a merger/acquisition candidate; and
(ii) engage in a meaningful auction with third parties in an attempt to obtain
the best value for the Company's public stockholders. The Company believes that
the putative class action suit is without merit and intends to defend it
vigorously.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
1 Agreement and Plan of Merger dated as of March 8, 1998 among
Parent, Purchaser and the Company
2 Option Agreement dated as of March 8, 1998 among Parent,
Purchaser and the Company
3 Stockholders Agreement dated as of March 8, 1998 among
Parent, Purchaser and Patrick Arrington, Richard E.
Belluzzo, Robert W. Johnson, Jeffrey M. Nash, Kenneth E.
Olson and John M. Seiber as selling stockholders.
4 Opinion of Broadview Associates L.L.C., dated March 8, 1998
(Attached to Schedule 14D-9 mailed to stockholders as Annex
B)
5 Press Release of the Company, issued March 8, 1998
6 Press Release of Parent, issued March 9, 1998
7 Article Ninth of the Amended and Restated Certificate of
Incorporation of the Company
8 Article Six of the By-Laws of the Company
9 Letter dated March 13, 1998 from Kenneth E. Olson to the
stockholders of the Company (Included with Schedule 14D-9
mailed to stockholders)
10 Complaint in Tisch v. Proxima Corporation, et al., Civil
Action No. 16234NC, Court of Chancery in the State of
Delaware.
11 Form of Severance Agreement between the Company and each of
its Executive Officers.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
PROXIMA CORPORATION
By: /s/ KENNETH E. OLSON
-----------------------------------
Chairman of the Board,
President and Chief Executive
Officer
March 13, 1998
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ANNEX A
PROXIMA CORPORATION
9440 CARROLL PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
(619) 457-5500
---------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
---------------
GENERAL
This Information Statement is being mailed on or about March 13, 1998, with
the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") of Proxima Corporation (the "Company") with respect to the Offer to
Purchase dated March 13, 1998 (as supplemented, the "Offer to Purchase") of BD
Acquisition Corp. ("Purchaser"), a Delaware corporation and a wholly owned
subsidiary of ASK asa ("Parent"). Purchaser is offering to purchase all
outstanding shares of Common Stock, par value $.001 per share (the "Common
Stock") of the Company at a price of $11.00 per share, net to the seller in cash
(the "Offer"). The Offer is being made pursuant to the Agreement and Plan of
Merger, dated as of March 8, 1998 (the "Merger Agreement"), by and among Parent,
Purchaser and the Company. You are receiving this Information Statement in
connection with the possible election of persons designated by Purchaser (the
"Purchaser Designees") to at least a majority of the seats on the Board of
Directors (the "Board") of the Company pursuant to the Merger Agreement. The
Merger Agreement is more fully described under Item 3 of the Schedule 14D-9, to
which this Information Statement is attached as Annex A. Capitalized terms used
and not defined herein have the meanings assigned to them in the Schedule 14D-9.
The information with respect to the Purchaser Designees has been supplied
to the Company by Purchaser for inclusion or incorporation by reference herein,
and the Company assumes no responsibility for the accuracy or completeness of
such information.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action.
THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement and subject to compliance with applicable
law, commencing upon the purchase by Purchaser of Shares pursuant to the Offer
or the Option Agreement, Purchaser shall be entitled to designate the number of
directors, rounded up to the next whole number, on the Board of Directors of the
Company that equals that percentage of the total number of directors on the
Board of Directors (giving effect to the election of any such directors) equal
to the percentage of then outstanding Shares owned by Parent or Purchaser. The
foregoing notwithstanding, the Merger Agreement provides that until the
effectiveness of the Merger, the Company shall retain as members of its Board of
Directors at least two directors who are directors of the Company on the date of
the Merger Agreement (the "Company Designees"). In the event of the death,
resignation or removal of any of the Company Designees, any remaining Company
Designee (or, if no other Company Designee shall remain on the Board of
Directors, the last remaining Company Designee and, if no Company Designee shall
remain on the Board of Directors, a majority of the other members of the Board)
shall have the right to appoint a successor or successors to fill the vacancies
so created, which successor shall not be an affiliate or associate (as those
terms are defined in Section 203 of the Delaware Law) of Purchaser or Parent.
The Company has agreed to take all actions necessary to cause Purchaser's
designees to be elected
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or appointed as directors of the Company, including, without limitation, by
increasing the size of the Board of Directors of the Company or securing the
resignations of incumbent directors or both.
Purchaser has informed the Company that it will choose the Purchaser
Designees from the directors and executive officers listed in Schedule I to the
Purchaser's Offer to Purchase, a copy of which is being mailed to the Company's
stockholders together with the Schedule 14D-9. Purchaser has informed the
Company that each of the directors and executive officers listed in Schedule I
to Purchaser's Offer to Purchaser has consented to act as a director, if so
designated. The business address of each such person is as set forth in Schedule
I to Purchaser's Offer to Purchase.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by Parent or Purchaser, as applicable, of the specified
minimum number of shares of Common Stock pursuant to the Offer, which purchase
cannot be earlier than 12:00 midnight, April 9, 1998.
CERTAIN INFORMATION CONCERNING THE COMPANY
The authorized stock of the Company consists of (a) 40,000,000 shares of
Common Stock and (b) 5,000,000 shares of preferred stock, $.001 par value. The
shares of Common Stock constitute the only class of voting securities of the
Company. As of the close of business on March 8, 1998, there were 7,175,445
shares of Common Stock outstanding. Each share of Common Stock entitles its
record holder to one vote. Stockholders of the Company do not have cumulative
voting rights. None of the Company's 5,000,000 authorized shares of preferred
stock have been issued. The Board currently consists of six members.
THE CURRENT MEMBERS OF THE BOARD AND EXECUTIVES OFFICERS OF THE COMPANY
To the extent the Board will consist of persons who are not Purchaser
Designees, the Board is expected to continue to consist of those persons who are
currently directors of the Company who do not resign. The current directors and
executive officers of the Company, their ages, and their positions and terms of
office with the Company are set forth below.
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- --------
Kenneth E. Olson................. 61 Chairman of the Board, President and 1984
Chief Executive Officer
Ronald J. Gillies................ 38 Vice President, North American Sales
Gerald Hansen.................... 62 Vice President, Display Products
Thomas D. Kampfer................ 34 General Counsel and Secretary
Michael S. Tamkin................ 56 Vice President, Manufacturing
Michael Vogt..................... 56 Vice President, International Sales
Nigel Waites..................... 32 Vice President, Product Development
Dennis Whittler.................. 47 Vice President, Finance and Chief Financial Officer
Patrick Arrington(1)(3)(4)....... 55 Director 1994
Richard E. Belluzzo(4)........... 44 Director 1995
Robert W. Johnson(1)(2).......... 48 Director 1985
Jeffrey M. Nash(2)(4)............ 50 Director 1993
John M. Seiber(2)(3)............. 63 Director 1988
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Finance Committee
(4) Member of the Nominating Committee
Mr. Olson has served as Chairman of the Board since 1984. In March 1997,
the Board appointed him Interim President and Chief Executive Officer. Prior to
leaving the Company in 1996, he had been Chief
A-2
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Executive Officer from December 1990 to February 1996 and was also President of
the Company from April 1995 to February 1996. Mr. Olson is a director of LIDAK
Pharmaceuticals and Applied Digital Access, Inc.
Mr. Gillies has been Vice President, North American Sales since July 1997.
Mr. Gillies joined the Company in September 1984 and during that time has served
in various sales positions in both Europe and the United States.
Mr. Hansen has been Vice President, Display Products since September 1997.
Mr. Hansen joined the Company in December 1991 and prior to his current position
served in various product management positions.
Mr. Kampfer has been General Counsel and Secretary since June 1997. Mr.
Kampfer joined the Company as Director of Legal Affairs in January 1996 and was
named General Counsel and Secretary in June 1997. He was with IBM Corporation
from 1985 to 1995 where he held a variety of positions in engineering,
contracting and IBM's legal department, most recently as Counsel.
Mr. Tamkin has been Vice President, Manufacturing since 1994. From 1992
through March 1994, Mr. Tamkin was V.P., Operations, at Midwestco Enterprises,
Inc. From 1990 to 1992, he was V.P., Manufacturing and Quality, with Motorola
Lighting, Inc., a manufacturer of electronic ballasts. From 1963 to 1990, he was
with Zenith Electronics Corporation, most recently as V.P. and General Manager
of the Video Display Division.
Mr. Vogt has been Vice President, International Sales since 1995. From
January 1984 to December 1989, he served in a variety of senior management
positions with the Company, including V.P., Finance, CFO and Secretary of the
Company.
Mr. Waites has been Vice President, Product Development since November
1997. Mr. Waites joined the Company as Manager of Hardware Engineering in March
1996. He was Manager of Test Engineering at Polycom, Inc., from 1995 to 1996,
and Hardware Manager Entry Level PowerBook Division at Apple Computer, Inc.,
from 1994 to 1995. From 1988 to 1994 he held a variety of engineering positions
at National Instruments, Inc.
Mr. Whittler has been Vice President, Finance and Chief Financial Officer
of the Company since December 1989. From 1980 to December 1989, Mr. Whittler
held a variety of financial positions with Topaz, Inc., including Chief
Financial Officer and Controller.
Mr. Arrington has been engaged in the practice of law since 1968 and is a
member of the law firm of Brobeck, Phleger and Harrison LLP, Newport Beach,
California.
Mr. Belluzzo is the Chairman and Chief Executive Officer at Silicon
Graphics, Inc. Prior to joining Silicon Graphics, Inc., Mr. Belluzzo held
various positions at Hewlett-Packard during the last twenty years.
Mr. Johnson has been a private venture capital investor since July 1988.
Mr. Johnson is a director of STAC Electronics, Inc. and of ViaSat, Inc.
Mr. Nash is a private investor. From August 1995 to December 1997 he was
the President of TransTech Information Management Systems, Inc., a software
development company. From June 1994 to July 1995, Mr. Nash served as President
of Digital Perceptions, Inc., a software development company. From 1989 to June
1994, he was President of VISqUS Corporation, a computer disk drive/magnetic
recording technology development company which he co-founded and which is a
subsidiary of Conner Peripherals, a disk drive company. Mr. Nash is a director
of Remec, Inc. and of ViaSat, Inc.
Mr. Seiber is a Senior Vice President of PaineWebber, Inc., an investment
company. He has served in a variety of positions with PaineWebber, Inc. since
1962.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eight meetings during
the fiscal year ended March 31, 1997.
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The Audit Committee, currently consisting of directors Arrington and
Johnson, met once during the last fiscal year. This Committee recommends
engagement of the Company's independent public accountants and is primarily
responsible for approving the services performed by such accountants and for
reviewing and evaluating the Company's accounting principles and its system of
internal accounting controls.
The Compensation Committee, currently consisting of directors Johnson, Nash
and Seiber, met once during the last fiscal year. This Committee establishes the
salary and incentive compensation of the executive officers of the Company and
administers the Company's employee benefit plans.
The Finance Committee, which during the fiscal year ended March 31, 1997
consisted of directors Seiber and Olson, held two meetings during the last
fiscal year. The Finance Committee reviews matters concerning financing
strategies and strategic alliances.
The Nominating Committee, currently consisting of directors Nash, Arrington
and Belluzzo, met once during the last fiscal year. The Nominating Committee
reviews candidates and makes recommendations for nominees to serve on the Board
of Directors. The Committee will consider recommendations by stockholders for
vacancies on the Board. Suggestions may be submitted to the Secretary of the
Company. In addition, the Committee also reviews the criteria for the position
of CEO and President and interviews the final candidates.
During fiscal year 1997, all directors attended at least 75% of the
meetings of the Board of Directors and meetings of Committees on which such
director served with the exception of Mr. Arrington, who attended 50% of the
Board meetings held.
BOARD COMPENSATION
Non-employee directors are compensated at the rate of $1,000 per meeting of
the Board of Directors and $500 per meeting of a committee that is held on a day
when a meeting of the entire Board is not held. Non-employee directors also
receive a $1,000 quarterly retainer.
Directors may be compensated for special assignments from time to time on
an hourly, per diem or per project basis. During the period Mr. Olson was a
non-employee director, he was engaged to provide services to the Company
principally in connection with its business relationship with its affiliate,
Laser Power Corporation. He was compensated in the amount of $18,814, which is
included in the Summary Compensation Table under the heading "All Other
Compensation."
In addition, all directors are eligible to receive options to purchase
stock under the Company's Amended and Restated 1996 Stock Plan.
A-4
26
REPORT OF THE COMPENSATION COMMITTEE
The following is the Report of the Compensation Committee of the Company,
describing the compensation policies and rationale applicable to the Company's
officers with respect to the compensation paid to the officers for the year
ended March 31, 1997.
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for reviewing and evaluating the compensation of the Company's
officers. The duties of the Compensation Committee include reviewing and making
recommendations regarding salaries, bonuses and equity-based compensation to the
Board. All recommendations by the Committee submitted to the Board are reviewed
and approved by the non-employee directors. The Committee is composed of Messrs.
Robert Johnson, Jeffrey Nash and John Seiber, all of whom are independent,
outside directors of the Company.
Base Salaries
The Committee establishes the base salaries of the officers by considering
the salaries of officers in similar positions at comparably sized companies in
the electronics industry using survey information contained in the Radford
Associates Management Total Compensation Report. The Committee benchmarks
salaries to the 50th percentile of the survey range and also considers the
Company's performance over the past year in such areas as profitability and
progress toward long-term goals. The base salaries are reviewed annually.
Annual Bonuses
The Committee establishes target bonus levels which vary between 20% and
50% of base salary for officers. The Committee also predetermines a minimum
performance level below which no bonus is earned and the performance goal at
which the full target bonus is earned. Additional bonus amounts are earned for
achievement of results above the targets. The target bonus is prorated for
achievement of results between the minimum level and the performance goal. For
fiscal 1997, annual bonuses were based upon earnings goals, individual goal
achievements and also upon revenue goals for certain officers who are primarily
involved with selling. No performance bonuses were paid during fiscal 1997.
Equity-Based Compensation
The Committee views stock options as an important part of the Company's
long-term performance-based compensation plan. The Committee bases grants of
stock options to the officers upon its estimation of each executive's potential
contribution to the long-term growth and profitability of the Company. The
program is intended to provide additional incentives to the officers to maximize
stockholder value. An extensive review of industry practices was conducted
during fiscal 1997 which served as the basis for equity-based compensation in
fiscal 1997. All options are granted at the fair market value of the Company's
Common Stock at the date of grant. The stock options vest over time to encourage
key employees to remain with the Company.
Chief Executive Officer Compensation
The compensation of the Company's Chief Executive Officer was based upon
the same criteria described above. Specifically, the Committee considered (i)
salaries of chief executive officers for comparably sized companies in the
electronics industry, (ii) the profitability goals of the Company and the
performance of similar companies, and (iii) the Company's performance for fiscal
year 1997.
Section 162(m) of the United States Internal Revenue Code of 1986 (the
"Code") limits deductibility of compensation in excess of $1 million paid to a
company's chief executive officer and four other highest paid executive officers
unless such compensation qualifies as "performance based." The Company will not
be affected by this limitation for the 1997 fiscal tax year. The Compensation
Committee intends to review this issue periodically to determine whether further
changes to the Company's compensation policies and practices are advisable in
order to preserve deductibility.
A-5
27
SPECIAL REPORT ON THE FISCAL YEAR 1997 REPRICING OF OPTIONS
In fiscal year 1997, the Committee determined that factors affecting the
stock price of the Company's shares made it necessary to consider a program to
reprice certain options to purchase common stock of the Company. Stock options
are intended to incentivize employees, and they form a major component of an
employee's compensation package. The Committee believes that stock options
strengthen the Company's ability to attract and retain key employees who
contribute to the Company's success. The Committee deemed it necessary to
reprice specific outstanding stock options held by employees, including the
Company's executive officers. Prior to this action, the Company's stock price
had been depressed. In order to retain key employees, the Committee concluded it
was important that out-of-the-money options be repriced to reflect the current
market value. Option grants to directors were not eligible for participation in
this program.
After consideration and upon recommendation of the Compensation Committee,
on July 10, 1996, the Board of Directors approved the repricing of all
outstanding options for non-officer employees and directed management to convey
the information to the employees. A repricing program was implemented and
communicated to the affected employees. Under the program, non-officer employees
holding outstanding options with an exercise price higher than the closing price
of a share of Proxima Corporation common stock on the repricing date of August
14, 1996 were eligible to participate in the repricing program. Each optionee
holding an out-of-the-money option was offered the opportunity to either retain
the existing option or to accept a repricing of the affected option at an
exercise price of $11.50. No change was made in the number of options granted,
but employees who accepted the repricing offer agreed to a new vesting schedule.
Under the new vesting schedule options vest over a period of four years at the
rate of 25% per annum commencing on the first anniversary of the date of the
repricing.
On September 25, 1996, the Board of Directors approved the repricing of all
options held by officers with prices exceeding the closing price of Proxima
Corporation common stock on September 26, 1996. Such closing price was $12.00.
The program for officers was consistent with that offered to the general
employees with the exception of the exercise price which was governed by the
market price of the stock at the repricing date specified in the Board
resolution.
The Committee and the Board of Directors believe that with the repricing
program, employees will continue to view their options as a valuable part of
their total compensation. The Company believes that this will aid it in
retaining critical employees. It will, however, be necessary for the employees
who elected to participate in the repricing program to continue employment with
the Company for another four years in order to receive the maximum benefit from
the repriced options, and then only if the market value of the stock rises above
the stated option price.
Following the close of the fiscal year, and as the price of the common
stock continued to decrease, the Committee again reviewed the value of the
outstanding stock options and recommended a second repricing program. On April
24, 1997, the Board approved this second repricing program for all employees and
executive officers. All employees have the opportunity to accept a lower
exercise price in exchange for the commencement of a new vesting period, so that
only employees remaining with the Company for a minimum of four years would have
an opportunity to take full advantage of the repricing program. The amended
price of the options was $5.19.
COMPENSATION COMMITTEE:
ROBERT W. JOHNSON, Chairman
JEFFREY M. NASH, Committee Member
JOHN M. SEIBER, Committee Member
A-6
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee was or is an officer or employee of
the Company or any of its subsidiaries.
There is no family relationship between any director or executive officer
of the Company.
PRINCIPAL HOLDERS OF VOTING SECURITIES
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the only persons
who (to the Company's knowledge) beneficially owned more than 5% of the Shares
of the Company as of March 8, 1998.
BENEFICIAL AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF PERCENT OF CLASS
------------------------------------ ---------- -------------------
Dimensional Fund Advisors, Inc.............................. 521,300 6.9%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
SC Fundamental, Inc......................................... 704,600 9.8%
712 5th Ave. 19th floor
New York, NY 10019
A-7
29
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 11, 1998, for each of (i) each
member of the Board, any person acting as the Company's Chief Executive Officer
during the last completed fiscal year and each of the next four most highly
compensated executive officers of the Company who were serving as executive
officers at the end of the last completed fiscal year and (ii) all directors and
executive officers as a group the number of shares and percentage of outstanding
Common Stock of the Company beneficially owned. Each person named in the table
has sole investment power and sole voting power with respect to the shares of
the Common Stock set forth opposite such person's name, except as otherwise
indicated.
PERCENTAGE OF
NAME OF INDIVIDUAL OR SHARES BENEFICIALLY COMMON STOCK
NUMBER OF PERSONS IN GROUP(1) OWNED(2)(3) OUTSTANDING(2)
----------------------------- ------------------- --------------
Kenneth E. Olson.............................. 319,472 4.5%
Philip G. Baker(4)............................ 1,075 *
Michael H. Chaffin, Jr.(5).................... 282 *
John E. Rehfeld(6)............................ 1,075 *
Michael S. Tamkin............................. 13,291 *
Dennis Whittler............................... 47,451 *
Patrick Arrington............................. 15,156 *
Richard E. Belluzzo........................... 9,154 *
Robert W. Johnson............................. 25,280 *
Jeffrey M. Nash............................... 16,476 *
John M. Seiber................................ 23,126 *
All Executive Officers and Directors as a
Group
(13 Persons excluding officers and directors
who are listed but no longer employed by the
Company).................................... 534,013 7.6%
- ---------------
* Less than 1%
(1) Unless otherwise indicated, the address of each individual named in the
table is c/o Proxima Corporation, 9440 Carroll Park Drive, San Diego,
California 92121.
(2) The shares listed on the table include the following stock options
exercisable on or within 60 days after March 11, 1998: Mr. Olson -- 115,842;
Mr. Tamkin -- 11,750; Mr. Whittler -- 20,124; Mr. Arrington -- 15,156; Mr.
Belluzzo -- 9,154; Mr. Johnson -- 16,020; Mr. Nash -- 16,476; Mr.
Seiber -- 16,020; and all directors and executive officers as a
group -- 251,401.
(3) The shares shown as beneficially owned by Messrs. Arrington, Belluzzo,
Johnson, Nash, Olson and Seiber are the subject of a Stockholders Agreement
dated March 8, 1998, between Parent and those stockholders, pursuant to
which beneficial ownership may be deemed shared with Parent. The Stockholder
Agreement is more fully described in the Schedule 14D-9.
(4) Mr. Baker's employment with the Company terminated on May 9, 1997.
(5) Mr. Chaffin's employment with the Company terminated on May 9, 1997.
(6) Mr. Rehfeld's employment with the Company terminated on March 30, 1997.
A-8
30
EXECUTIVE COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the three most recently ended fiscal years,
the compensation paid or accrued for those years to any person acting as Chief
Executive Officer of the Company and to each of the four most highly compensated
executive officers of the Company other than the Chief Executive Officer who
were serving as executive officers at the end of the last fiscal year whose
aggregate annual salary and bonus paid in compensation for services rendered in
all the capacities in which they served exceeded $100,000 for the Company's last
fiscal year (the "Named Executives"):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
FISCAL -------------------- OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS(#) ($)(1)
--------------------------- ------ --------- -------- ------------ ------------
Kenneth E. Olson.......................... 1997(2) 54,221 6,160 2,500 95,040
President and CEO; Chairman of 1996 221,538 -- -- 17,278
the Board 1995 220,000 220,000 37,000 13,865
Philip G. Baker........................... 1997 160,000 50,000 47,000(3) 36,314
Vice President, Product Development 1996(2) 31,597 15,000 40,000 30,422
1995 -- -- -- --
Michael H. Chaffin, Jr.................... 1997 207,392 -- 67,500(3) 14,450
Executive Vice President, 1996(2) 115,822 -- 60,000 37,895
Business Development 1995 -- -- -- --
John E. Rehfeld........................... 1997(2) 311,312 75,000 215,000(3) 580,937
Former President and CEO 1996(2) 55,386 25,000 200,000 3,068
1995 -- -- --
Michael S. Tamkin......................... 1997 161,000 -- 26,000(3) 8,301
Vice President, Manufacturing 1996 155,000 -- 20,000 5,833
1995(2) 136,635 68,345 30,000 52,617
Dennis A. Whittler........................ 1997 158,461 3,060 15,500(3) 6,322
Vice President, Finance; 1996 149,000 -- -- 5,041
Chief Financial Officer 1995 129,000 81,041 10,000 4,962
- ---------------
(1) Includes for fiscal year 1997: Key executive insurance premiums
(Olson -- $2,670; Baker -- $255; Chaffin -- $670; Rehfeld -- $3,958;
Tamkin -- $818; Whittler -- $191); Matching contributions to Company's
401(k) plan (Olson -- $3,661; Baker -- $7,177; Chaffin -- $5,128;
Rehfeld -- $10,313; Tamkin -- $5,151; Whittler -- $6,131); Relocation
expenses (Baker -- $28,587; Chaffin -- $2,352; Rehfeld -- $257,066); Change
in status or termination payments (Olson -- $60,000; Rehfeld -- $300,000);
Automobile allowances (Olson -- $1,255; Chaffin -- $6,300;
Rehfeld -- $9,600; Tamkin -- $2,332); Amounts as a non-employee director
(Olson -- $18,814 consulting fees and $8,640 director's fees).
(2) Employed for a portion of the last completed fiscal year.
(3) See also "Special Report on the Fiscal Year 1997 Repricing of Options" and
"Information Regarding Repricing, Cancellation or Regrant of Options."
A-9
31
STOCK OPTION GRANTS
The following table sets forth each grant of stock options made during the
fiscal year ended March 31, 1997, to each of the executive officers named in the
Summary Compensation Table:
INDIVIDUAL GRANTS
-----------------------
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED
GRANTED ANNUAL RATES OF
SECURITIES TO STOCK APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(1)
OPTIONS IN FISCAL OR BASE ----------------------
NAME GRANTED YEAR PRICE EXPIRATION 5% 10%
---- ---------- ----------- -------- ---------- -------- ----------
Kenneth E. Olson.......... 2,500 .7 $ 11.50 8-14-03 $ 11,704 $ 27,276
Philip G. Baker........... 7,000 2.0 11.50 8-14-03 32,772 76,372
40,000 (2) 12.00 9-25-03 195,408 455,384
Michael H. Chaffin, Jr.... 7,500 2.2 11.50 8-14-03 35,112 81,827
60,000 (2) 12.00 9-25-03 283,112 683,076
John E. Rehfeld........... 15,000 4.4 11.50 8-14-03 70,225 163,654
200,000 (2) 12.00 9-25-03 977,041 2,276,921
Michael S. Tamkin......... 6,000 1.7 11.50 8-14-03 28,090 65,461
20,000 (2) 12.00 9-25-03 97,704 227,692
Dennis A. Whittler........ 5,500 1.6 11.50 8-14-03 25,749 60,006
10,000 (2) 12.00 9-25-03 48,852 113,846
- ---------------
(1) Potential realizable value is based on an assumption that the stock price
appreciates at the annual rate shown (compounded annually) from the date of
grant until the end of the seven year option term. These numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission and do not reflect the Company's estimate of future
stock price growth.
(2) These options were repriced during fiscal 1997, but were granted in prior
years and, therefore, are not included in the calculations for this column.
STOCK OPTION EXERCISES
This table sets forth, for each of the executive officers named in the
Summary Compensation Table, each exercise of stock options during the fiscal
year ended March 31, 1997, and the year-end value of unexercised options:
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON OPTIONS AT YEAR-END(#): AT YEAR-END:
NAME EXERCISE(#) VALUE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
---- ----------- ----------------- --------------------------- ------------------------------
Kenneth E. Olson..... 176,414 $1,282,481 500 2,000 -- --
Philip G. Baker...... -- -- -- 47,000 -- --
Michael H. Chaffin,
Jr................. -- -- -- 67,500 -- --
John E. Rehfeld...... -- -- -- 215,000 -- --
Michael S. Tamkin.... -- -- 8,589 38,411 -- --
Dennis A. Whittler... -- -- 37,037 23,462 -- --
- ---------------
(1) Market value of underlying securities minus exercise price at time of
exercise.
(2) None of these options were in-the-money.
A-10
32
INFORMATION REGARDING REPRICING, CANCELLATION OR REGRANT OF OPTIONS
As set out above in the Special Report on Fiscal 1997 Repricing of Options,
the Company implemented an option repricing program for executive officers and
other employees holding out-of-the-money options. The repricing was effective
August 14, 1996 as to employees and September 26, 1996 as to executive officers.
At the employee's election, each option was repriced to the fair market value of
the common stock pursuant to the criteria established in the Board's resolutions
($11.50 on August 14, 1996 for employees and $12.00 on September 26, 1996 for
executive officers) and became subject to a new vesting schedule.
The following table sets forth (i) information with respect to each of the
Company's Named Executive Officers who participated in the option repricing
program effected September 26, 1996, and (ii) information with respect to all
former or current executive officers of the Company concerning their
participation in any option repricing programs implemented by the Company during
the last ten fiscal years.
NUMBER OF MARKET EXERCISE LENGTH OF
SECURITIES PRICE PRICE AT ORIGINAL OPTION
UNDERLYING OF STOCK AT TIME OF TERM REMAINING
OPTIONS/SARS TIME OF REPRICING NEW AT DATE OF
REPRICED OR REPRICING OR OR EXERCISE REPRICING OR
NAME AND POSITION DATE AMENDED(#) AMENDMENT AMENDMENT PRICE AMENDMENT
----------------- ------- ------------ ------------ --------- -------- ---------------
Philip G. Baker............ 9-26-96 40,000 $21.00 $ 20.75 $12.00 76 of 84 months
Vice President, Product
Development
Michael H. Chaffin, Jr..... 9-26-96 60,000 12.00 18.63 12.00 71 of 84 months
Executive Vice President,
Business Development
Charles Chestnutt.......... 9-26-96 10,000 12.00 25.875 12.00 66 of 84 months
Former Vice President and
Controller
Frank Drdek................ 9-26-96 10,000 12.00 25.875 12.00 66 of 84 months
Vice President, Human
Resources
Donald Houston............. 9-26-96 30,000 12.00 25.875 12.00 66 of 84 months
Former Vice President, 10,000 12.00 19.75 12.00 71 of 84 months
Sales
John Rehfeld............... 9-26-96 200,000 12.00 20.75 12.00 76 of 84 months
Former President and CEO
Michael Tamkin............. 9-26-96 10,000 12.00 35.875 12.00 62 of 84 months
Vice President, 10,000 12.00 25.875 12.00 66 of 84 months
Manufacturing
Dennis Whittler............ 9-26-96 10,000 12.00 25.875 12.00 66 of 84 months
Vice President, Finance,
CFO
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company is required to indemnify its
officers and directors to the maximum extent and in the manner permitted by
Delaware law. Further, the Company has entered into indemnification agreements
with its officers and directors. The Company believes that its charter and bylaw
provisions and indemnification agreements are necessary to attract and retain
qualified persons as directors and officers.
A-11
33
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership on Form 3 and changes in ownership on
Form 4 or Form 5 with the Securities and Exchange Commission (the "SEC"). Such
officers, directors and ten percent stockholders are also required by SEC rules
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, the
Company believes that, during the fiscal year ended March 31, 1997, all Section
16(a) filing requirements applicable to its officers, directors and ten percent
stockholders were complied with except for one former officer, Donald Houston,
who filed a late Form 4 regarding one open market purchase in May 1996.
COMPARATIVE STOCK PERFORMANCE GRAPH
The following is a graph comparing the cumulative total return to
stockholders of the Company's Common Stock to two indices: (i) the Nasdaq Stock
Market (U.S. Companies) Index and (ii) the Nasdaq Computer Manufacturers Stock
Index. Information contained in the Performance Graph shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act or the Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing.
COMPARISON OF 50-MONTH CUMULATIVE TOTAL RETURN
LOGO
The Performance Graph shows the cumulative total return on investment
assuming an investment of $100 on February 4, 1993, in the Company, the Nasdaq
Stock Market (U.S. Companies) Index and the Nasdaq Computer Manufacturers Stock
Index. The return on investment includes the reinvestment of dividends, although
dividends have never been paid on Company stock.
A-12
34
ANNEX B
LOGO LOGO
LOGO
March 8, 1998
CONFIDENTIAL
Board of Directors
Proxima Corporation
9440 Carroll Park Drive
San Diego, CA 92121-9639
Dear Members of the Board:
We understand that Proxima Corporation ("Proxima" or the "Company"), ASK a.s.
("ASK") and BD Acquisition Corp., a wholly owned subsidiary of ASK (the "Sub"),
propose to enter into an Agreement and Plan of Merger (the "Agreement") pursuant
to which the Sub will offer to purchase (the "Offer") all of the outstanding
shares of Proxima common stock, $0.001 par value per share ("Proxima Common
Stock"), for $11.00 cash per share (the "Consideration") and subsequently merge
with and into Proxima (the "Merger"). Pursuant to the Merger, each issued and
outstanding share of Proxima not acquired in the Offer will be converted into
the right to receive an amount of cash equal to the Consideration. The terms and
conditions of the above described Offer and Merger (together the "Transaction")
are more fully detailed in the Agreement.
You have requested our opinion as to whether the Consideration to be received by
Proxima shareholders in the Transaction is fair, from a financial point of view,
to Proxima shareholders.
Broadview Associates focuses on providing merger and acquisition advisory
services to information technology ("IT") companies. In this capacity, we are
continually engaged in valuing such businesses, and we maintain an extensive
database of IT mergers and acquisitions for comparative purposes. We are
currently acting as financial advisor to Proxima's Board of Directors and will
receive a fee from Proxima upon the successful conclusion of the Transaction.
In rendering our opinion, we have, among other things:
1.) reviewed the terms of the Agreement and the associated exhibits thereto in
the form of the draft dated March 7, 1998 furnished to us by Rogers & Wells
LLP on March 7, 1998 (which, for the purposes of this opinion, we have
assumed, with your permission, to be identical in all material respects to
the agreement to be executed);
2.) reviewed Proxima's annual report and Form 10-K for the fiscal year ended
March 31, 1997, including the audited financial statements included
therein, and Proxima's Form 10-Q for the nine months ended December 31,
1997, including the unaudited financial statements included therein;
3.) reviewed certain internal financial and operating information relating to
Proxima, including certain projections through December 31, 1998, prepared
and provided to us by Proxima management;
4.) participated in discussions with Proxima management concerning the
operations, business strategy, financial performance and prospects for
Proxima;
5.) reviewed the recent reported closing prices and trading activity for
Proxima Common Stock;
LOGO
B-1
35
6.) compared certain aspects of the financial performance of Proxima with
public companies we deemed comparable;
7.) analyzed available information, both public and private, concerning other
mergers and acquisitions we believe to be comparable in whole or in part to
the Transaction;
8.) reviewed recent equity research analyst reports covering Proxima;
9.) assisted in negotiations and discussions related to the Transaction among
Proxima, ASK and their financial and legal advisors; and
10.) conducted other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied, without independent verification, on
the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by Proxima. With
respect to the financial projections examined by us, we have assumed that they
were reasonably prepared and reflected the best available estimates and good
faith judgments of the management of Proxima as to the future performance of
Proxima. We have neither made nor obtained an independent appraisal or valuation
of any of Proxima's assets.
Based upon and subject to the foregoing, we are of the opinion that the
Consideration to be received by Proxima shareholders in the Transaction is fair,
from a financial point of view, to Proxima shareholders.
For purposes of this opinion, we have assumed that Proxima is not currently
involved in any material transaction other than the Transaction and those
activities undertaken in the ordinary course of conducting its business. Our
opinion is necessarily based upon market, economic, financial and other
conditions as they exist and can be evaluated as of the date of this opinion,
and any change in such conditions may impact this opinion.
This opinion speaks only as of the date hereof. It is understood that this
opinion is for the information of the Board of Directors of Proxima in
connection with its consideration of the Transaction and does not constitute a
recommendation to any Proxima shareholder as to whether such shareholder should
tender its shares in the Offer or as to how such shareholder should vote on the
Merger. Broadview Associates does not believe that any other person other than
the Board of Directors of Proxima has the legal right under state law to rely on
this opinion, and, in the absence of any governing precedents, we would resist
any assertion otherwise by any such person. This opinion may not be published or
referred to, in whole or part, without our prior written permission, which shall
not be unreasonably withheld. Broadview Associates hereby consents to references
to and the inclusion of this opinion in its entirety in the Schedule 14D-9 to be
distributed to Proxima shareholders in connection with the Transaction.
Sincerely,
/s/ BROADVIEW ASSOCIATES LLC
Broadview Associates LLC
B-2