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ANNEX A
XXXXXX XXXXXX PARTNERS
MERCHANT BANKING
October 3, 2000
Board of Directors
ZapMe! Corporation
0000 Xxxxxxxxx Xxxxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
Ladies and Gentlemen:
We understand that ZapMe! Corporation, a Delaware corporation (the
"Company"), Gilat Networks Ltd., an Israeli corporation (the "Buyer") and the
stockholders of the Company identified in the agreement described herein, have
entered into a Tender Offer Agreement, a draft of which has been provided to us
(the "Tender Offer Agreement"), pursuant to which the Buyer has agreed to make a
cash tender offer for up to 51% (the "Maximum Number of Shares") of the
Company's outstanding shares of common stock, $.0l par value per share, (the
"Company Common Stock"), as calculated in the Tender Offer Agreement (the
"Offer"). Pursuant to the Offer, as more fully described in the Tender Offer
Agreement and as further described to us by management of the Company, we
understand that the Buyer will offer to purchase each outstanding share of
Company Common Stock (other than those shares belonging to certain members of
the Company's management and certain other shareholders identified in the Tender
Offer Agreement who, in the aggregate, hold at least 35% of the outstanding
shares of Company Common Stock) up to the Maximum Number of Shares for $2.32 per
share (the "Consideration"). The terms and conditions of the Offer are set forth
in more detail in the Tender Offer Agreement.
You have asked for our opinion as investment bankers as to whether the
Consideration to be received by the shareholders of the Company (other than the
Buyer, the Identified Stockholders (as defined in the Tender Offer Agreement)
and their respective affiliates) pursuant to the Offer is fair to such
shareholders from a financial point of view, as of the date hereof.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to the Company
and the Buyer, including the consolidated financial statements for recent years
and interim periods to June 30, 2000 and certain other relevant financial and
operating data relating to the Company and the Buyer made available to us from
published sources; (ii) reviewed the financial terms and conditions of the
Tender Offer Agreement; (iii) reviewed certain publicly available information
concerning the trading of, and trading market for, the Company Common Stock;
(iv) compared the Company from a financial point of view with certain other
companies which we deemed to be relevant; (v) considered the financial terms, to
the extent publicly available, of selected recent business combinations which we
deemed to be comparable, in whole or in part, to the Offer; (vi) reviewed and
discussed with representatives of the management of the Company certain
information of a business and financial nature regarding the Company and the
Buyer, furnished to us by the Company, including information regarding the
business, financial condition and prospects of the Company and the Buyer; (vii)
made inquiries regarding and discussed the Offer and the Tender Offer Agreement
and other matters related thereto with the Company's counsel; and (viii)
performed such other analyses and examinations as we have deemed appropriate.
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In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
information for the Company provided to us by its management, upon its advice
and with your consent we have assumed for purposes of our opinion that the
information (including the information regarding the business, financial
condition and prospects of the Company and the Buyer) provided to us by the
Company verbally and in writing reflect the best available estimates and
judgments of the Company's management at the time of preparation as to the
future prospects of the Company and the Buyer and that they provide a reasonable
basis upon which we can form our opinion. We have also assumed that there have
been no material changes in the Company's or the Buyer's assets, financial
condition or results of operations since the respective dates of their last
financial statements made available to us. We have relied on advice of counsel
and independent accountants to the Company as to all legal and financial
reporting matters with respect to the Company, the Offer and the Tender Offer
Agreement, including the legal status and financial reporting of litigation
involving the Company. We have assumed that the Offer will be consummated in a
manner that complies in all respects with the applicable provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934 and all other applicable federal and state statutes, rules
and regulations. In addition, we have not assumed responsibility for making an
independent evaluation, appraisal or physical inspection of any of the assets or
liabilities (contingent or otherwise) of the Company or the Buyer, nor have we
been furnished with any such appraisals. You have informed us, and we have
assumed, that the Offer will be recorded as a purchase under generally accepted
accounting principals. We have also, at the Company's direction, relied upon the
Company's representation to us that after the consummation of the Offer the
Company Common Stock will continue to be traded on the NASDAQ National Market
System. Finally, our opinion is based on economic, monetary and market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Accordingly, although subsequent developments may affect this
opinion, we have not assumed any obligation to update, revise or reaffirm this
opinion.
We have further assumed with your consent that the Offer will be
consummated in accordance with the terms described in the Tender Offer
Agreement, without any further amendments thereto, and without waiver by the
Company of any of the conditions to its obligations thereunder. We have also
assumed that in the course of obtaining the necessary regulatory approvals for
the Offer, no restrictions, including any divestiture requirements, will be
imposed that could have a meaningful effect on the Offer.
We have acted as financial advisor to the Company in connection with the
Offer and will receive a fee for our services, including rendering this Opinion,
a significant portion of which is contingent upon the consummation of the Offer.
In the ordinary course of our business, we may actively trade the equity
securities of the Company and the Buyer for our own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities. We have also acted as an underwriter in connection with
offerings of securities of the Company and performed, and may in the future
perform, various investment banking services for Company and the Buyer.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the shareholders of
the Company (other than the Buyer, the Identified Stockholders and their
respective affiliates) pursuant to the Offer is fair to such shareholders from a
financial point of view, as of the date hereof.
This opinion is directed to the Board of Directors of the Company in its
consideration of the Offer and is not a recommendation to any shareholder as to
whether such shareholder should tender their share in the Offer. Further, this
opinion addresses only the financial fairness of the Consideration to the
shareholders and does not address the relative merits of the Offer and any
alternatives to the Offer, the Company's underlying decision to proceed with or
effect the Offer, or any other aspect of the Offer. We express no opinion as to
the actual value of the Company Common Stock after consummation of the Offer or
to the price at which the Company Common Stock will trade at any time including
after the consummation of the Offer. This opinion may not be used or referred to
by the Company, or quoted or disclosed to any person in any manner, without our
prior written consent, which consent is hereby given to the inclusion of this
opinion in any tender offer statement or prospectus filed with the Securities
and Exchange Commission in connection with the Offer. In
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finishing this opinion, we do not admit that we are experts within the meaning
of the term "experts" as used in the Securities Act and the rules and
regulations promulgated thereunder, nor do we admit that this opinion
constitutes a report or valuation within the meaning of Section 11 of the
Securities Act.
Very truly yours,
/s/ Xxxxxx Xxxxxx Partners LLC
XXXXXX XXXXXX PARTNERS LLC