EXHIBIT (a)(1)(B)
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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ALPNET, INC.
(Name of Subject Company)
ALPNET, INC.
(Name of Persons Filing Statement)
COMMON SHARES, NO PAR VALUE
(Title of Class of Securities)
021089 10 7
(CUSIP Number of Class of Securities)
XXXXXXX X. XXXXXXX, CHIEF EXECUTIVE OFFICER
AND
XXXX X. XXXXXXX, CHIEF FINANCIAL OFFICER
ALPNET, INC.
0000 XXXXX XXXXXXXX XXXXX, XXXXX 000
XXXX XXXX XXXX, XXXX 00000-0000
TELEPHONE: (000) 000-0000
(Name, address and telephone number of person authorized
to receive notices and communications on behalf of the persons filing statement)
Copy to:
XXXXXX X. XXXX, ESQ.
XXXXXXX X. XXXXX, ESQ.
XXXXXXXXX XXXXXXX & XXXXXXXXXX
GATEWAY TOWER EAST SUITE 000
XXXX XXXX XXXX, XXXX 00000
TELEPHONE: (000) 000-0000
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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ITEM 1. SUBJECT COMPANY INFORMATION
The name of the subject company is ALPNET Inc., a Utah corporation (the
"Company"). The address of its principal executive offices is 0000 Xxxxx
Xxxxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000-0000. The telephone number
of the Company at its principal executive offices is (000) 000-0000.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Statement")
relates is the Company's common shares, no par value (the "Common Shares" or the
"Shares"). As of October 31, 2001, there were 32,519,558 Shares issued and
outstanding.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON
The filing person is the Company. The Company's name, business address and
business telephone number are set forth in Item 1 above.
This Statement relates to the cash tender offer by Arctic, Inc., a Utah
corporation ("Purchaser") and a wholly owned subsidiary of SDL plc, a company
organized under the laws of England and Wales ("Parent") (Parent and Purchaser
are sometimes collectively referred to herein as the "S Group"), to purchase
each issued and outstanding Share for $0.21 per Share, net to the seller in
cash, without interest thereon (the "Per Share Offer Price"). The Offer is
described in the Offer to Purchase, dated December 13, 2001 (the "Offer to
Purchase"), included in the S Group's Tender Offer Statement on Schedule TO
filed with the Securities and Exchange Commission on December 13, 2001 (as
amended or supplemented from time to time, the "Schedule TO"), and the related
Letter of Transmittal (which together collectively constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 12, 2001 (the "Merger Agreement"), among the Company, Parent and
Purchaser. The Merger Agreement provides that, subject to the satisfaction or
waiver of certain conditions, following completion of the Offer, and in
accordance with the Utah Revised Business Corporation Act (the "URBCA"),
Purchaser will be merged with and into the Company (the "Merger"), with the
Company surviving as a wholly owned subsidiary of Parent (the "Surviving
Corporation"). At the effective time of the Merger (the "Effective Time"), each
Share outstanding (other than Shares owned by Parent, the Purchaser or the
Company or any subsidiary of Parent or the Company or by shareholders, if any,
who are entitled to and properly exercise dissenters rights in accordance with
the URBCA) will be converted into the right to receive the Per Share Offer
Price. The summary of the Merger Agreement contained in Item 3 hereof is
qualified in its entirety by reference to the Merger Agreement, which is filed
as Exhibit (e)(10) hereto. The Merger Agreement should be read in its entirety
for a more complete description of the matters summarized above.
As set forth in the Schedule TO, the principal executive offices and
telephone number of Purchaser and Parent is Xxxxxx House, Market Street,
Maidenhead, Berkshire S16 8AA, United Kingdom, telephone no. x00.000.0000.000.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS, AND AGREEMENTS
Each material contract, agreement, arrangement or understanding and any
actual or potential conflict of interest between the Company or its affiliates
and (i) its executive officers, directors and affiliates or (ii) Parent or the
Purchaser and their executive officers, directors and affiliates, is set forth
below or in "Item 4. The Solicitation or Recommendation--Reasons for the
Recommendation of the Board of Directors." The Board of Directors of the Company
(the "Board" or the "Board of Directors") was aware of these contracts,
agreements, arrangements or understandings and any actual or potential conflicts
of interest and considered them along with the other matters described below in
"Item 4. The Solicitation or Recommendation--Reasons for the Recommendation of
the Board of Directors."
(a) Except as disclosed above in this Item 3(a), during the past two years,
there have been no transactions that would be required to be disclosed under
this Item 3(a) between any of the Purchaser or Parent or, to the best knowledge
of the Purchaser and Parent, any of the persons listed on Schedule I to the
Offer to Purchase, and the Company or any of its executive officers, directors
or affiliates.
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(b) Except as set forth herein, there have been no material contacts,
negotiations or transactions during the past two years which would be required
to be disclosed under this Item 3(b) between any of the Purchaser or Parent or
any of their respective subsidiaries or, to the best knowledge of the Purchaser
and Parent, any of those persons listed on Schedule I to the Offer to Purchase
and the Company or its affiliates concerning a merger, consolidation or
acquisition, a tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are described in the Company's Proxy Statement, dated March 27, 2001 (the "Proxy
Statement"), under the headings "Executive Compensation," "Summary Compensation
Table," and "Option Grants In Last Fiscal Year." Such portions of the Proxy
Statement are incorporated herein by reference.
NOTES DUE TO CERTAIN OFFICERS, DIRECTORS AND SHAREHOLDERS
During 1999, the Company acquired EP Electronic Publishing Partners GmbH
("EP"), a German corporation. In connection with this acquisition, the Company
issued approximately $133,000 of convertible unsecured notes to former
shareholders of EP who are affiliates of the Company. These notes bear an
interest rate of 8 percent and are repayable in three equal installments due 36,
48 and 60 months from the date of the notes, June 30, 1999. The outstanding
principal may be converted, at the option of the lender, into restricted common
shares of the Company at any time after June 30, 2000. The beginning conversion
price is $1.78 (based on the average market value of the Company's shares for
the five trading days prior to the note date, June 30, 1999) and increases by 10
percent per year beginning June 30, 2001. The Company has the right to repay the
outstanding principal of the notes at any time without penalty. Such summary and
description are qualified in their entirety by reference to a form of the
Convertible Unsecured Notes, which is filed as Exhibit (e)(1) hereto.
During 1999, the Company issued approximately $1.8 million of convertible
notes to private investors, $490,000 of which were issued to related parties.
These notes have a variable interest rate of US prime plus 2% (11.5% and 10.25%
as of December 31, 2000 and 1999, respectively), and are repayable in three
equal installments due 36, 48 and 60 months from the date of issuance. The
outstanding principal is convertible, at the option of the lender, into
restricted common shares of the Company at any time after issuance. The
conversion price is the average market value of the Company's common shares for
the five trading days prior to issuance of the notes. The conversion price of
the notes ranges from $1.72 to $2.73. One of the private investors with a
convertible note in the amount of $150,000, who was a related party in 1999,
ceased to be a related party in 2000. The Company has the right to prepay the
notes at any time prior to maturity, upon 30 days' notice. Such summary and
description are qualified in their entirety by reference to a form of the
Convertible Unsecured Notes, which is filed as Exhibit (e)(1) hereto.
During 2000, the Company issued approximately $2.0 million of convertible
notes to private investors some of whom are affiliates of the Company. These
notes have a variable interest rate of US prime plus 2%, and are repayable in
three equal installments due 36, 48 and 60 months from the date of issuance. The
outstanding principal is convertible, at the option of the lender, into common
shares of the Company's common stock at any time after issuance. The conversion
price of each note is the average market value of the Company's stock for the
five trading days prior to issuance of the notes. The conversion price of the
notes ranges from $2.22 to $5.29. The Company has the right to prepay the notes
at any time prior to maturity. In connection with approximately $1.7 million of
the notes, the Company issued warrants for approximately 385,000 additional
shares at an exercise price of $3.33 which are immediately exercisable and
expire two years from the date of grant. Such summary and description are
qualified in their entirety by reference to a form of the Convertible Unsecured
Notes, which is filed as Exhibit (e)(1) and a form of the Warrants, which is
filed as Exhibit (e)(2) hereto.
In May 2001, the Company finalized a financing transaction with a major
shareholder. The major shareholder made a direct loan of $500,000 which is
repayable in full, along with accrued interest at 11%, on December 31, 2001. The
loan is guaranteed by the Company and its Netherlands holding company and is
also collateralized by all of the shares of stock of the Company's Netherlands
operating company. Such summary and
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description are qualified in their entirety by reference to the Loan Agreement,
which is filed as Exhibit (e)(3) hereto.
In August 2001, the Company finalized a direct loan with a second major
shareholder in the amount of $500,000 which is repayable in full, along with
accrued interest at 11%, on December 31, 2001. This loan is guaranteed by the
Company and is collateralized by all of the ownership interests in the Company's
German subsidiaries. Such summary and description are qualified in their
entirety by reference to the Loan and Security Agreement, which is filed as
Exhibit (e)(4) hereto.
LEASE OF FACILITY FROM SHAREHOLDER
The Company leases its Hengelo, Netherlands facility from a major
shareholder. The annual rent is approximately $200,000 (depending on currency
exchange rates.)
INSURANCE ISSUED BY AFFILIATE OF DIRECTOR/OFFICER
A son of a director and officer of the Company is the managing partner of
the insurance agency issuing insurance policies to the Company and one of its
subsidiaries. The annual premiums total approximately $199,235.
NOTE DUE TO PURCHASER
On November 13, 2001, Purchaser loaned $1 million to the Company. This loan
is required to be repaid on or before May 13, 2002 and is secured by the capital
stock of the Canadian subsidiaries of the Company and an intercompany payable
owed to the Company by one of its Canadian subsidiaries. Interest on the loan
accrues at a rate of 8% per annum. Under the terms of the promissory note
relating to the loan, Purchaser can, in its sole discretion, lend an additional
amount of up to $1 million on the same terms and secured by the same assets as
the first loan. In addition to other customary events of default, a merger, sale
of substantially all assets or other business combination involving the Company
and any party other than Purchaser or an affiliate of Purchaser constitutes an
event of default under the loan following which the loan is immediately
repayable. Such summary and description are qualified in their entirety by
reference to the Secured Convertible Promissory Note, Security and Pledge
Agreement, the two Pledge Agreements and the Guarantee Agreement, which are
filed as Exhibits (e)(5) through (e)(9) hereto.
The Company has employment agreements with 14 key management employees that
contain severance obligations in the event of their termination without cause.
These employment agreements were entered into in the ordinary course of business
and were entered into prior to any discussions regarding this transaction.
MERGER AGREEMENT
The Merger Agreement provides that, following the satisfaction or waiver of
the conditions described below under "-- Conditions to the Merger", the
Purchaser will be merged with and into the Company, with the Company being the
surviving corporation (the "Surviving Corporation"), and each issued Share
(other than Shares owned by Parent, the Purchaser or the Company or any wholly
owned subsidiary of Parent or by shareholders, if any, who are entitled to and
who properly exercise dissenters' rights under the URBCA) will be converted into
the right to receive $0.21 in cash, without interest thereon.
VOTE REQUIRED TO APPROVE MERGER. The URBCA requires, among other things,
that the Merger Agreement must be approved by the holders of a majority of the
shares entitled to vote thereon. Other than the Shares, there are no shares of
any class of the Company outstanding. Consequently, the Company will call and
hold a meeting of its shareholders promptly following the consummation of the
Offer for the purposes of voting upon the approval of the Merger Agreement. At
such meeting all Shares then owned by Parent or the Purchaser will be voted in
favor of the approval of the Merger Agreement. If the Purchaser acquires --
through the Offer, the Merger Agreement or otherwise -- at least a majority of
the Shares (which would be the case if the Minimum Tender Condition were
satisfied and the Purchaser were to accept for payment Shares tendered pursuant
to the Offer), it would have sufficient voting power to effect the Merger even
if no other shareholders of the Company
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vote in favor of the Merger. If the Purchaser acquires Shares representing at
least 90% of the total outstanding shares of the Company pursuant to the Offer
or otherwise (including pursuant to the Stock Option Agreement described below)
the Purchaser would be able to effect the Merger pursuant to the "short-form"
merger provisions of Section 16-10a-1104 of the URBCA, without any action by any
other shareholder of the Company. In such event, the Purchaser intends to effect
the Merger as promptly as practicable following the purchase of Shares in Offer.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the
respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver of certain conditions, including the following: (a) the
holders of at least a majority of the Shares shall have approved the Merger
Agreement at a meeting of the Company's shareholders (the "Company Shareholders
Approval") and a majority of the shareholders of Parent have approved the Merger
Agreement and the transactions contemplated thereby (the "Parent Shareholders
Approval"); (b) no government, court, tribunal, arbitrator, authority, agency,
commission, stock exchange, self-regulatory organization, official or other
instrumentality of the United States, any foreign country, supranational
organization or any domestic or foreign state, county, city or other political
subdivision, including, without limitation, the Commission or the Internal
Revenue Service (a "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
Merger; (c) the Purchaser shall have previously accepted for payment and paid
for the Shares pursuant to the Offer; (d) the Company's net external debt shall
not exceed $14 million; (e) the net assets of the Company and its subsidiaries
on a consolidated basis shall not be less than $5 million; (f) each of the
representations and warranties made by the Company shall be true and correct in
all material respects; and (g) the parties shall have performed and complied
with, in all material respects, each agreement, covenant and obligation required
in the Merger Agreement.
Net external debt shall include all overdrafts, borrowings, indebtedness
for borrowed money, loans, debt, hire purchase, finance leases and similar
commitments to third parties (other than trade payables, accrued payroll and
related benefits, accrued charges related to the restructuring or related
activities, other accrued expenses and income taxes payable, incurred in the
ordinary course of business consistent with past practice) owed by the Company
or its subsidiaries to any person other than the Company or its subsidiaries
less all cash balances held by the Company or its subsidiaries with any person
other than the Company or its subsidiaries. Any reduction in cash balances
arising from restructuring actions taken prior to the effective time of the
Merger (the "Effective Time"), upon the mutual agreement of Company and Parent,
evidenced by the prior written consent of Parent that such actions are to be
excluded from the calculation of net external debt, shall be excluded from the
calculation of net external debt.
Any reduction in net assets arising from restructuring actions taken prior
to the Effective Time, upon the mutual agreement of the Company and Parent,
shall be excluded from the calculation of net assets.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be
terminated, and the Offer and the Merger may be abandoned, at any time prior to
the Effective Time:
(a) by mutual written agreement of Parent and the Company;
(b) by either Parent or the Company:
(i) if (A) as of the result of the failure of any of the conditions
set forth under Section 14, the Offer shall have terminated or
expired in accordance with its terms without the Purchaser having
purchased any Shares pursuant to the Offer or (B) the Purchaser
shall not have accepted for payment any Shares pursuant to the
Offer prior to the Outside Date; provided, however, that this
right to terminate the Merger Agreement is not available to any
party whose failure to perform any of its obligations under the
Merger Agreement results in the failure of the Offer to be
consummated by such time;
(ii) if the Company Shareholders Approval is not obtained by reason of
the failure to obtain the requisite vote upon a vote held at a
meeting of such shareholders, or any adjournment thereof,
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called therefor, provided that the Company shall have no right to
terminate the Merger Agreement if such failure is due to delay or
default on the part of the Company;
(iii) if there has been a material breach of any representation,
warranty, covenant or agreement set forth in the Merger
Agreement, on the part of the non-terminating party which breach
has not been cured within thirty (30) days following receipt by
the non-terminating party of written notice of such breach from
the terminating party;
(iv) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order
making illegal or otherwise restricting, preventing or prohibiting
the Merger and such order shall have become final and
nonappealable; or
(v) if the Parent Shareholders Approval shall not be obtained by
reason of the failure to obtain the requisite vote upon a vote
held at a meeting of such shareholders, or any adjournment
thereof, called therefor, unless such failure is due to delay or
default on the part of Parent.
(c) by the Company if the Board of Directors of the Company shall have
determined in good faith, based upon the advice of Xxxxxxxxx, Xxxxxxx &
XxXxxxxxxx, that failure to terminate the Merger Agreement is reasonably
likely to result in the Board of Directors breaching its fiduciary
duties to shareholders under applicable law by reason of the pendency of
an unsolicited, bona fide proposal for a Superior Company Transaction
(as defined below), but only if the Company and its subsidiaries and
other representatives of the Company shall have complied with their
obligations pursuant to the provisions under "-- No Solicitation" below;
provided, however, that this right to terminate shall not apply unless
five business days shall have elapsed after delivery to Parent of a
written notice of such determination by such Board of Directors;
(d) by Parent:
(i) if the Board of Directors of the Company or any committee thereof
shall have (x) failed to recommend or withdrawn or modified in a
manner adverse to Parent its approval or recommendation of the
Merger Agreement, the Offer and the Merger, (y) recommended or
taken no position with respect to a proposal for a Company
Alternative Transaction (as defined below) or (z) following the
announcement or making of a proposal for a Company Alternative
Transaction, failed to reconfirm its recommendation of the Merger
Agreement and the Merger within 96 hours following a written
request for such reconfirmation by Parent; or
(ii) there shall have occurred the entry by a court having
jurisdiction in the premises of (x) a decree or order for relief
in respect of the Company or any subsidiary in an involuntary
case or proceeding under any applicable federal or state or
foreign bankruptcy, insolvency, reorganization or other similar
law or (y) a decree or order adjudging the Company or any
subsidiary a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company or any subsidiary
under any applicable federal or state or foreign law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any
subsidiary or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs.
NO SOLICITATION. Prior to the Effective Time, the Company has agreed:
(i) that neither it nor any of its subsidiaries or other affiliates
shall, and they shall use their reasonable best efforts to cause
their respective representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without
limitation, any proposal or offer to the Company's shareholders) with
respect to a merger, consolidation or other business combination
including the Company or any of its subsidiaries, or any acquisition
or similar transaction (including, without limitation, a tender or
exchange offer) involving the purchase of all or any significant
portion of the assets of the Company and its subsidiaries taken as a
whole or 10% or more of the outstanding Shares (any such transaction,
other than the transactions
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contemplated by the Merger Agreement, being hereinafter referred to as a
"Company Alternative Transaction"), or engage in any negotiations to (v)
provide any confidential information or data to (w) have any discussions
with any person relating to, (x) enter into any contract agreement,
understanding or arrangement relating to, (y) consummate or (z)
otherwise facilitate any effort or attempt to make or implement, a
Company Alternative Transaction;
(ii) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any person
with respect to any of the foregoing, and it will take the necessary
steps to inform such person with respect to any of the foregoing;
and
(iii) that it will notify Parent immediately if any such inquiries,
proposals or offers are received by, any such information is
requested from, or any such negotiations or discussions are sought
to be initiated or continued with it by any person.
However, the Company is not prohibited from furnishing information to or
entering into discussions or negotiations with any person with sufficient
financial resources to consummate the applicable proposed Company Alternative
Transaction that makes a bona fide unsolicited written proposal not subject to
any financing condition for a Company Alternative Transaction if, and only to
the extent that:
(i) the Board of Directors of the Company concludes in good faith that
such proposal if consummated is reasonably likely to result in a
Superior Company Transaction (as defined below), and that such
Company Alternative Transaction is reasonably likely to be
consummated;
(ii) the Board of Directors of the Company, based upon the advice of
Xxxxxxxxx, Xxxxxxx & XxXxxxxxxx, determines in good faith that the
failure to so act is reasonably likely to result in the Board of
Directors breaching its fiduciary duties to shareholders imposed by
law;
(iii) the Company shall have entered into a confidentiality and standstill
agreement with such person in customary form which names Parent and
the Purchaser as an intended beneficiary and which is reasonably
acceptable to Parent;
(iv) prior to furnishing such information to, or entering into discussions
or negotiations with, such person, the Company provides written
notice to Parent to the effect that it is furnishing information to,
or entering into discussions or negotiations with, such person, which
notice shall identify such person and the proposed terms of such
Company Alternative Transaction in reasonable detail; and
(v) the Company keeps Parent informed of the status and all material
information with respect to any such discussions or negotiations; and
provided; that the foregoing shall not (x) permit the Company to terminate the
Merger Agreement (except in accordance with the provisions of the Merger
Agreement described under "-- Termination of the Merger Agreement" above), (y)
permit the Company to enter into any agreement with respect to a Company
Alternative Transaction for so long as the Merger Agreement remains in effect
(other than a confidentiality agreement under the circumstances described
above), or (z) affect any other obligation of the Company under the Merger
Agreement.
The Company is also not prevented from complying, to the extent required,
with Rule 14e-2 under the Exchange Act with regard to any proposal relating to a
Company Alternative Transaction.
"Superior Company Transaction" is defined in the Merger Agreement to mean
any Company Alternative Transaction which:
(i) relates to 50% of the outstanding Shares or all or substantially all
of its and its subsidiaries' assets taken as a whole;
(ii) is not conditioned on the receipt of financing;
(iii) is made by a person who the Board of Directors of the Company has
reasonably concluded in good faith will have adequate financial
resources to, and will not encounter significant regulatory
obstacles in order to, consummate such Company Alternative
Transaction;
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(iv) involves only the payment of cash; and
(v) is on terms that the Board of Directors of the Company determines in
its good faith judgment, taking into account all relevant factors,
(including the advice of X.X. Xxxxxxxx & Co. or a successor approved
by Parent, which approval shall not be unreasonably withheld, and all
the terms and conditions of the Company Alternative Transaction,
including any break-up fees, expense reimbursement provisions and
conditions to consummation) are more favorable and provide greater
value to all of the Company's shareholders than the Merger Agreement
and the Merger taken as a whole.
The Merger Agreement provides that the Company will advise Parent
immediately that a Superior Company Transaction or a Company Alternative
Transaction is received. Prior to furnishing such information to, or entering
into discussions or negotiations with, such person, the Company must provide
written notice to Parent to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person, which notice shall
identify such person and the proposed terms of such Company Alternative
Transaction in reasonable detail, and that the Company will keep Parent informed
of the status and all material information with respect to any such discussions
or negotiations.
FEES AND EXPENSES. All fees and expenses incurred in connection with the
preparation, execution and performance of the Merger Agreement and the
consummation of the Merger will be paid by the party incurring such fees and
expenses except that the expenses incurred in connection with printing and
mailing the proxy statement as well as any filing fees relating thereto, shall
be shared equally by Parent and Company.
TERMINATION FEE. If the Merger Agreement is terminated:
(i) by the Company because the Board of Directors of the Company shall
have determined in good faith, based on the advice of Xxxxxxxxx,
Xxxxxxx & XxXxxxxxxx, that failure to terminate the Merger Agreement
is reasonably likely to result in the Board of Directors breaching
its fiduciary duties to shareholders under applicable law by reason
of the pendency of an unsolicited, bona fide proposal for a Superior
Company Transaction; or
(ii) by the Parent due to a material breach of a representation, warranty
covenant or agreement which has not been cured for 30 days or due to
the fact that the Board of Director of the Company shall have (a)
failed to recommend or withdrawn or modified in a manner adverse to
Parent its approval or recommendation of the Merger; (b) recommended
or taken no position with respect to a proposal for a Company
Alternative Transaction; or (c) following the announcement or making
of a proposal for a Company Alternative Transaction, failed to
reconfirm in writing its recommendation of the Merger and within 96
hours
the Company has agreed to pay the Parent a termination fee equal to $300,000
prior to any such termination.
Further, following the public announcement of a proposal for a Company
Alternative Transaction the Company shall have terminated the Merger Agreement
pursuant to the provisions described in either clause (b)(i) or (b)(ii) under
"-- Termination of the Merger Agreement" and, within twelve (12) months after
any termination described above, the Company or any of its subsidiaries shall
have entered into a binding agreement providing for the consummation of, or have
consummated a Company Alternative Transaction, then, in any of such cases, the
Company shall pay the Parent a termination fee equal to $300,000.
In the event the Merger Agreement is terminated, no provision of the Merger
Agreement survives, except for the provisions relating to termination, brokers'
expenses, liabilities relating to pre-termination breaches and miscellaneous
provisions of general application.
CONDUCT OF BUSINESS. The Merger Agreement provides that, except as
expressly contemplated or permitted by the agreement, or to the extent that
Parent shall otherwise previously consent in writing, at all times from and
after the date of the Merger Agreement until the Effective Time, the Company and
each of its subsidiaries shall conduct their respective businesses only in, and
none of the Company, and such subsidiaries shall take any action except in, the
ordinary course consistent with past practice.
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Without limiting the generality of the foregoing, (a) the Company and its
subsidiaries shall comply in all material respects with all laws and orders of
all Governmental or Regulatory Authorities applicable to them; and (b) the
Company shall not, nor shall it permit any of its subsidiaries to, except as
otherwise expressly provided for in the Merger Agreement, or as required, at
Parent's request, to cancel outstanding employee stock options:
(i) amend or propose to amend its certificate or articles of
incorporation or bylaws (or other comparable corporate charter
documents);
(ii) (w) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock (x) split,
combine, reclassify or take similar action with respect to any of
its capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, (y) adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (z) directly or
indirectly redeem, repurchase or otherwise acquire any shares of its
capital stock or any option with respect thereto;
(iii) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any option
with respect thereto (other than (y) the issuance of Shares pursuant
to options outstanding on the date of the Merger Agreement and in
accordance with their present terms, and (z) the issuance by a
wholly-owned subsidiary of its capital stock to its parent
corporation or to another wholly-owned subsidiary of its parent
corporation);
(iv) modify or amend any right of any holder of outstanding shares of
capital stock or options with respect thereto;
(v) acquire (by merging or consolidating with, or by purchasing any
equity interest in or assets (with a fair market value of $10,000
individually or in the aggregate of, or by any other manner) any
business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or
agree to acquire any such assets;
(vi) sell, lease, grant any security interest in or otherwise dispose of
or encumber any of its material assets or properties or any shares of
capital stock or equity or other interests in any subsidiaries or
investments;
(vii) except to the extent required by applicable law, (x) permit any
material change in (A) any pricing (except in the ordinary course of
business consistent with past practice), marketing, purchasing,
investment, accounting, financial reporting, inventory, credit
(except in the ordinary course of business consistent with past
practice), allowance or tax practice or policy or (B) any method of
calculating any bad debt, contingency or other reserve for
accounting, financial reporting or tax purposes, or (y) make any
material tax election or settle or compromise any material income tax
liability with any Governmental or Regulatory Authority;
(viii) (x) incur (which shall be deemed to include entering into credit
agreements, lines of credit or similar arrangements until borrowings
are made under such arrangements) any indebtedness for borrowed
money or guarantee any such indebtedness or (y) voluntarily
purchase, cancel, prepay or otherwise provide for a complete or
partial discharge in advance of a scheduled repayment date with
respect to, or waive any right under, any indebtedness for borrowed
money other than in the ordinary course of its business consistent
with past practice;
(ix) enter into, adopt, amend in any material respect (except as may be
required by applicable law) or terminate any Company plan or, as the
case may be, or other agreement, arrangement, plan or policy between
such party or one of its subsidiaries and one or more of its
directors, officers or employees, or, increase in any manner the
compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any agreement, arrangement, plan
or policy in effect as of the date hereof, other than in respect to
an employee who is not a director or officer in the ordinary course
of business consistent with past practice;
9
(x) enter into any note, bond, mortgage, security agreement, indenture,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind (a "Contract") or
amend or modify any existing Contract, or engage in any new
transaction with (a) any person not an affiliate of the Company which
such Contract obligates the Company to expend $5,000, other than
Contracts with any customer which obligate the Company to expend
$100,000 and (b) any affiliate of the Company or any of its
subsidiaries;
(xi) make any capital expenditures or commitments for additions to plant,
property or equipment constituting capital assets in excess of $5,000
individually or $25,000 in the aggregate;
(xii) incur any indebtedness for borrowed money with respect to Automated
Language Processing Systems Ltd. or Alpnet Canada Inc. other than
utilizing the existing CIBC bank line for amounts up to C$2 million
in the aggregate. For any use of the CIBC bank line over and above
such aggregate amount the prior written consent of Parent must be
obtained by Company;
(xiii) make any material change in the lines of business in which it
participates or is engaged; or
(xiv) enter into any Contract, commitment or arrangement to do or engage in
any of the foregoing.
REGULATORY AND OTHER APPROVALS. Subject to the terms and conditions of the
Merger Agreement, prior to the Effective Time the Company will, as promptly as
practicable:
(i) obtain all consents, approvals or actions of, make all filings with
and give all notices to Governmental or Regulatory Authorities or any
other public or private third parties as identified in the Merger
Agreement required of the Company or any of its subsidiaries to
consummate the Merger or the Offer and the other matters contemplated
hereby; and
(ii) provide such other information and communications to such
Governmental or Regulatory Authorities or other public or private
third parties as the other party or such Governmental or Regulatory
Authorities or other public or private third parties may request in
connection therewith. In addition to and not in limitation of the
foregoing, each of the parties, as applicable, will (x) take
promptly all actions necessary to make any filings required of
Parent and the Company or their affiliates under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
("HSR Act"), (y) comply at the earliest practicable date with any
request for additional information received by such party or its
affiliates from the Federal Trade Commission (the "FTC") or the
Antitrust Division of the Department of Justice (the "Antitrust
Division") pursuant to the HSR Act, and (z) cooperate with the other
party in connection with such party's filings under the HSR Act and
in connection with resolving any investigation or other inquiry
concerning the Merger or the other matters contemplated by the
Merger Agreement commenced by either the FTC or the Antitrust
Division or state attorneys general; provided, however, that nothing
in the Merger Agreement shall obligate Parent to agree to hold
separate, sell or otherwise dispose of any subsidiary or Investment
of Parent or of the Company or any assets or properties thereof.
STOCK OPTIONS. At the effective time of the Merger, each of the employee
stock option plans shall terminate and each option to purchase shares of the
Company's common stock under the Company stock option plan will be terminated;
provided however that any holder of such options will have the right immediately
prior to the Merger to exercise such option, in whole or in part, whether or not
applicable vesting requirements have been satisfied.
DIRECTOR AND OFFICER INSURANCE AND INDEMNIFICATION. Until the third
anniversary of the Effective Time and for so long thereafter as any claim for
indemnification asserted on or prior to such date has not been fully
adjudicated, the Company shall indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, a director or officer of the Company or any of its
subsidiaries (the "Indemnified Parties") against:
(i) all losses, claims, damages, costs and expenses (including reasonable
attorneys' fees), liabilities, judgments and settlement amounts that
are paid or incurred in connection with any claim, action, suit,
proceeding or investigation (whether civil, criminal, administrative
or investigative and whether
10
asserted or claimed prior to, at or after the Effective Time) that is based on,
or arises out of, the fact that such Indemnified Party is or was a director or
officer of the Company or any of its subsidiaries and relates to or arises out
of any action or omission occurring at or prior to the Effective Time
("Indemnified Liabilities"); and
(ii) all Indemnified Liabilities based on, or arising out of, or
pertaining to the Merger Agreement or the transactions contemplated
by the Merger Agreement, in each case to the full extent a
corporation is permitted under applicable law to indemnify its own
directors or officers, as the case may be;
provided that the Surviving Corporation shall not be liable for any
settlement of any claim effected without its written consent, which
consent shall not be unreasonably withheld; and provided, further, that
the Surviving Corporation shall not be liable for any Indemnified
Liabilities which occur as a result of the Indemnified Party's criminal
or fraudulent actions.
Subject to the provisions of the Merger Agreement, the Company will pay an
Indemnified Party's expenses in advance of the final disposition provided that
the claiming party provides an undertaking to repay such advanced expenses
should it be determined that such person is not entitled to such
indemnification, and retains counsel reasonably satisfactory to the Company. The
Company shall use all commercially reasonable efforts to assist in the defense
of any such matter. For three years after the Effective Time of the Merger, the
Company will maintain in effect the policies of directors' and officers'
liability insurance maintained by the Company provided that the Company is not
obligated to spend more than 115% of the aggregate insurance premiums paid by
the Company for such directors' and officers' liability insurance.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties, including representations relating to
corporate existence and power; subsidiaries; capitalization; corporate
authorizations; government authorizations; Commission filings; absence of
undisclosed liabilities; accuracy of certain disclosures; absence of certain
changes; litigation; compliance with laws; environmental matters; employment
matters; ERISA compliance; taxes; shareholder voting requirements; state
takeover statutes; opinion of the Company's financial advisor; intellectual
property; contracts; assets; insurance; affiliate arrangements; vote required
for approval of the Merger; ownership of Parent equity; bankruptcy; internal
controls; and Investment Company Act.
Certain representations and warranties in the Merger Agreement made by the
Company and Parent are qualified by concepts of "material," "materially
adverse," and "material adverse effect," which are defined to mean any event,
change or effect that is material or materially adverse, as the case may be, to
the business, assets, liabilities, condition (financial or otherwise), results
of operations or prospects of such entity (or of such group of entities taken as
a whole), provided, that, to be deemed "material" or "materially adverse" or
having a "materially adverse effect" the damages must exceed $300,000.
AMENDMENT, EXTENSION AND WAIVER. The respective boards of Parent, the
Company and Purchaser may amend the Merger Agreement by written agreement at any
time prior to, or after, shareholder approval of the Merger Agreement, but after
such adoption and approval, only to the extent permitted by applicable law. At
any time prior to the Effective Time of the Merger, to the extent legally
allowed, Parent, the Company and Purchaser may:
(i) extend the time for performance of any of the obligations or other
acts of the other parties to the Merger Agreement;
(ii) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or in any document delivered in
connection with the Merger Agreement; and
(iii) waive compliance with any of the agreements or conditions contained
in the Merger Agreement.
Extensions or waivers must be in writing and signed by the party granting
the extension or waiver.
The foregoing summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed as Exhibit
(e)(10) hereto. The Merger Agreement should be read in its entirety for a more
complete description of the matters summarized above.
11
SHARE OPTION AGREEMENT
The Company and the Purchaser entered into a Share Option Agreement, dated
as of December 12, 2001 (the "Share Option Agreement") pursuant to which the
Purchaser is entitled to purchase Shares, at a price of $0.21 per share, so that
the Purchaser, following the purchase of Shares under the Share Option
Agreement, shall then own 90.1% of the Shares; provided that to purchase Shares
under the Share Option Agreement, Purchaser must own at least 75% of the Shares
prior to exercising the option.
Such summaries are qualified in their entirety by reference to the Merger
Agreement and the Share Option Agreement, copies of which are filed as Exhibit
(e)(10) and (e)(12) hereto, respectively. The Merger Agreement and the Share
Option Agreement should be read in their entirety for a more complete
description of the matters summarized above.
SHAREHOLDERS' AGREEMENT
In connection with the Merger Agreement, the Chairman of the Board and the
President of the Company have entered into Shareholders' Agreements, each dated
as of December 12, 2001 (the "Shareholders' Agreement"), with Parent and the
Purchaser. The Chairman owns 1,403,886 of the Company's Common Shares and also
owns options exercisable for 60,000 additional Shares at a price of $2.42 per
share. The President owns 1,170,246 of the Company's Common Shares and also owns
options exercisable for 250,000 additional Shares at a price of $2.42 per share.
Pursuant to the Shareholders' Agreement, the Chairman and the President each
agreed, among other things: (i) to tender in the Offer all Shares beneficially
owned by him; (ii) agreed to vote such Shares in favor of the Merger; and (iii)
granted to Parent a proxy with respect to voting such Shares. Such summary is
qualified in its entirety by reference to the Shareholders' Agreements copies of
which are filed as Exhibit (e)(11) hereto.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS
A special meeting of the Board of Directors of the Company was held on
December 11, 2001 at which (two directors were absent). All members of the Board
were present except for Xxxx Xxx and Xxxxxx Xxxxxxx. The Board members present
unanimously: (i) determined that the Merger and tender offer are fair to, and in
the best interests of, the shareholders of the Company; (ii) approved the tender
offer contemplated in the Merger Agreement and recommended to the shareholders
of the Company that they accept the tender offer and tender their Common Shares
pursuant thereto; (iii) recommended that the shareholders of the Company vote in
favor of adoption of the Merger Agreement at any meeting of shareholders of the
Company that may be called to consider adopting the Merger Agreement; and (iv)
approved and declared advisable each of the Merger Agreement, the Shareholders'
Agreement and the Share Option Agreement.
ACCORDINGLY, THE BOARD RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY
TENDER THEIR SHARES PURSUANT TO THE OFFER. A copy of a letter to the
shareholders of the Company communicating the Board's recommendations is filed
as Exhibit (a)(1) hereto.
BACKGROUND FOR THE RECOMMENDATION OF THE BOARD OF DIRECTORS
On November 29, 2000, Xxxx Xxxxxxxxx, Chairman and CEO of Parent, Xxxxx
Xxxxxxx, a shareholder of Parent, and the Chairman of the Company met in London
to discuss in general a possible transaction between the Company and Parent.
On December 4, 2000, Xx. Xxxxxxxxx and the Chairman discussed the need for
further information. Public information was disclosed to Parent.
On February 21, 2001, the Board of Directors met telephonically with all
directors present. Xxxxxxx Xxxxx, the Chief Operating Officer of the Company,
was also present at this meeting and all Board meetings set forth in this
section. A potential transaction with Xxxxxx was discussed and the decision was
made not to pursue the matter.
12
On March 22, 2001, Xx. Xxxxxxxxx and the Chairman met in London to again
discuss a possible transaction between Parent and the Company.
On March 28, 2001, the Company discussed a potential transaction with
another third party in the industry (this party and other potential buyers are
referred to as a "Competing Purchaser") and, on April 16, 2001, received an
expression of interest to negotiate a transaction with a total enterprise value,
including assumption of outstanding debt, of between $15,000,000 and
$45,000,000.
Sometime during April or early May, Xx. Xxxxxxxxx and the Chairman
discussed the potential sale of the Company on the basis of stock in Parent
being exchanged for the shares of the Company.
On May 23, 2001, the Board of Directors met with all directors present. The
Board discussed falling margins and the negative impact on cash flow. Xxxxxx's
interest was discussed and the decision was made not to pursue a transaction
with Xxxxxx. The Board also discussed the retention of an investment banker.
On July 3, 2001, the Board of Directors met telephonically with all
directors present. The Board noted lower than projected sales revenue and the
inability to improve margins in the second quarter. The Board discussed the
general downturn in the economy and client's orders being reduced to only
essential services. Potential transactions with three companies who had
approached the Company, including Parent were discussed. It was determined that
the Chairman should continue preliminary discussions with all three companies.
On August 13, 2001 the Company received a preliminary non-binding proposal
regarding the acquisition of the Company from a Competing Purchaser. The
proposal was for the purchase of newly-issued shares by the Company equal to 51%
of the Company's outstanding common shares for 12,000,000 Euros (approximately
US$10.8 million) taking into consideration the Company's debt at a level of
US$10.5 million.
On August 15, 2001, the Board of Directors met in the Company offices in
Croydon, England. The Board discussed the Company's financial situation,
continued deterioration in market conditions, and the need to find a solution
through a cash infusion or merger or sale of the Company or a combination of
such. Alternate possibilities and inquiries by potential buyers were discussed.
The Chairman discussed the inquiries and proposals from Competing Purchasers.
The need to maximize shareholder value was discussed and the Board approved the
retaining of an investment banker to assist in the process to get the highest
value for shareholders.
From August 16, 2001 through September 7, 2001, Xx. Xxxxxxx and Xx. Xxxxxx
interviewed and discussed with selected investment bankers the possible
engagement of such bankers to represent the Company. Representatives of
Xxxxxxxxx Xxxxxxx & XxXxxxxxxx, the Company's outside legal counsel,
participated in the process.
On September 7, 2001, the Board of Directors met telephonically with all,
but Xx. Xxxxxxxx (who had resigned from the Board), present. The continuing
market for the Company's clients and deteriorating financial condition of the
Company were discussed. Interim financing possibilities were discussed. The
expressions of interest by third parties in the industry and potential financing
alternatives were discussed. The possibility of seeking protection and other
benefits under a Chapter 11 bankruptcy filing was discussed. The continued need
for and status of the search for an investment banker was discussed. Five
proposed investment bankers were discussed and the terms of engagement were
outlined. The Board approved the selection of X.X. Xxxxxxxx & Co ("Davidson").
On September 7, 2001, the Company and Xxxxxxxx entered into an engagement
letter whereby Xxxxxxxx agreed to advise the Company with respect to any
proposed acquisition of the Company. Xxxxxxxx commenced a due diligence review
of the Company and assisted the Company in the preparation of a Company business
overview which was completed on September 27, 2001. Numerous telephone
conference calls were held between Company officers and Xxxxxxxx representatives
through out the period including a review and discussion regarding potential
candidates for the purchase of the Company including Parent.
On September 17, 2001, the Board met telephonically. Xx. Xxxxxxx reported
that the Company had entered into an engagement letter with Xxxxxxxx.
Discussions with a Competing Purchaser were continuing and the Board was updated
on the status. The need for a formal opinion and an orderly process to secure
maximum value for shareholders was discussed.
13
On September 21, 2001, the Company received an unsolicited offer from a
Competing Purchaser for newly-issued shares by the Company equal to 51% of the
Company's outstanding common shares for 8,000,000 Euros (approximately US$7.3
million at such date).
On September 24, 2001, the Company received a proposal from Parent offering
the shareholders $10,000,000 in cash and/or Parent's shares. The proposal
required a reduction of the consideration, on a dollar for dollar basis, for any
debt in the Company over $8,000,000. Xxxxxxxx'x analysis of the proposal placed
the actual consideration at a range of $4,000,000 to $5,000,000, contingent on
actual debt and working capital needs of the Company.
On September 25, 2001, the Company announced in a press release that an
unsolicited offer had been received from a third party and that the Company had
retained Xxxxxxxx to assist in analyzing alternatives.
From September 27, 2001 through October 11, 2001, Xxxxxxxx, on behalf of
the Company, conducted a survey of potential buyers, contacted parties that
expressed an interest and provided information to approximately 22 potential
buyers. Packages of information about the Company were sent to such parties.
During such period, Xxxxxxxx followed up with such parties with telephone calls.
Between September 25, 2001 and October 11, 2001, Xx. Xxxxxxxxx and
representatives of Xxxxxxxx held telephone conversations regarding the terms of
a potential transaction.
On October 1, 2001, the Board of Directors met telephonically. All
directors were present along with outside legal counsel, two Davidson
representatives, and for a portion of the meeting, a representative of a
Competing Purchaser. The Competing Purchaser made a proposal to purchase certain
assets of the Company and then left the meeting. Marketing efforts of Xxxxxxxx
were discussed. Other Competing Purchasers were discussed and Xxxxxx's proposal
was discussed. Xxxxxxxx analyzed the proposals and instructed the Board that
Xxxxxx's proposal was more favorable to the shareholders based, among other
factors, upon proposed price per share and availability of financial resources
to complete a cash transaction. The Board instructed the Chairman to negotiate
with Parent and Competing Purchasers to clarify proposals and seek the best
price possible for shareholders.
Throughout the period from October 1, 2001 to October 15, 2001, Company
officers met telephonically on a regular basis with legal counsel and Xxxxxxxx
representatives to update the Company on Parent's proposed timing and process
for completion of the proposed acquisition of the Company.
On October 8, 2001, all directors but Xxxxxx Xxxxxxx were present by
telephone at a Board meeting. A representative from Davidson was also present.
The extensive search by Xxxxxxxx was discussed. Other potential interests in the
Company were discussed and a Competing Purchaser's and Xxxxxx's offers were
discussed. The Board instructed the Chairman and the Davidson representative to
seek a more favorable price. The Board also discussed potential bankruptcy
issues in the event that a sale transaction could not be completed on a timely
basis.
On October 8 and 9, 2001, Xxxxxxxx held discussions with Xxxxxx and a
Competing Purchaser regarding their offers. The Competing Purchaser indicated
that it was unable to increase its offer.
On October 10, 2001, Xx. Xxxxxxxxx and the Chairman met in London to
further negotiate terms and price of a potential transaction.
On October 12, 2001, the Company received a new proposal from Parent
offering $6,500,000 in cash and shares of Parent and limiting the Company's debt
to $14,000,000 excluding potential compensation for certain investors' due to
alleged breaches of obligations by the Company.
On October 14, 2001, Xx. Xxxxx and Xx. Xxxxxxxxx met to review general
operations of the Company.
On October 15, 2001, the Board of Directors met telephonically. All
directors were present, except Xx. Xxx and Xx. Xxxxxxx, along with outside legal
counsel, Xxxxxxxx representatives and Xx. Xxxxx. The Board discussed the
deteriorating cash position of and market conditions for the Company. The Board
discussed Xxxxxxxx'x search for potential buyers. The representatives of
Xxxxxxxx summarized the results of its activities and discussions with those
that had expressed a preliminary interest in acquiring the Company and with
other possible purchasers of the Company. The Davidson representatives stated
that, based on such discussions, no other competitive offers had been made other
than the proposals of Parent and one Competing Purchaser. The Board
14
then had an extensive discussion of the two proposals. The Board authorized its
officers and Xxxxxxxx to negotiate the final terms of a proposed transaction
with Parent and the Competing Purchaser.
On October 15, 2001, Xxxxxxxx requested that a Competing Purchaser clarify
certain aspects of its offer.
On October 16, 2001, a Competing Purchaser notified Xxxxxxxx that it was
withdrawing from negotiations to acquire the Company, citing concerns about the
Company's working capital needs and the amount of time required to close a
potential transaction.
On October 17, 2001, Xxxxxxxx received written confirmation of Competing
Purchaser's withdrawal from negotiations.
From October 16, 2001 through October 26, 2001, the Company and Parent
discussed the complications in timing and expense added by the issuance of
Parent's shares to Company shareholders. Messrs. Xxxxxxxxx and Xxxxxxxx Xxxxxx,
Xxxxxx's Chief Financial Officer, discussed pricing issues and a potential
short-term loan to the Company to sustain the Company's working capital pending
consummation of a business combination transaction.
During the next several days, representatives of the Company and Parent and
their respective attorneys negotiated the terms of a proposal for the basic
structure and terms of the proposed transaction. Discussion of the Company
undertaking due diligence of Parent in connection with the possible receipt of
shares of Parent was discussed.
On October 19, 2001, Xxxxxx proposed offering the Company's shareholders
$3,500,000 in cash and $3,500,000 in Parent's shares.
On October 22, 2001, following further discussion and negotiation, Xxxxxx
agreed to make an all cash offer for $7,000,000. All directors, along with
outside legal counsel and a Davidson representative met for a telephonic Board
of Director's meeting. The Board discussed the increased need for working
capital, which was the result of decreasing new sales and cancellations of
projects, indicating continuing deteriorating market conditions. Xxxxxxxx
reported that the Competing Purchaser had withdrawn its offer and no new
interest had been expressed by any third parties. Xxxxxxxx made a presentation
analyzing Parent's proposal. The Board discussed with Xxxxxxxx the Company's
business, the nature and results of Xxxxxxxx'x discussions with Competing
Parties that had either previously expressed an interest in acquiring the
Company or who may have strategic reasons for acquiring the Company, and
discussed whether there may be other competitive bidders in addition to those
contacted by Xxxxxxxx. The Board discussed the proposal from Parent. The
representative from Xxxxxxxx indicated that, because of the process the firm had
followed in order to generate interest in potential acquirers and the results of
that effort, and given the current financial condition of the Company, Xxxxxxxx
recommended that the Company proceed with exclusive negotiations with Parent
On October 26, 2001, the Company and Xxxxxx executed a non-binding letter
of intent regarding Purchaser's intention to acquire the Company. The parties
agreed that a number of issues, including those involving potential creditor
claims, needed to be resolved in order for any transaction to proceed.
From October 26, 2001 to December 12, 2001, the parties continued with the
due diligence process and had various telephone conversations regarding the
potential Merger.
On November 6, 2001, Xx. Xxxxxxx and outside legal counsel, and
representatives from Xxxxxxxx discussed the change in legal counsel for Parent
and the change in the format of the deal to include a tender offer prior to the
Merger. The status of the short term loan was also discussed.
On November 7, 2001, all directors, and outside legal counsel met in a
meeting of the Board of Directors by telephone. The loan for up to $2 million
from Parent and the required security was approved by the Board. The market
conditions for the Company's business, the economic downturn, the resulting
impact on the Company's clients and the Company's deteriorating cash position
were discussed.
On November 8, 2001, Xx. Xxxxxxxxx and Xxxxxx's attorneys, along with
Xxxxxx'x. Xxxxxxx, Xxxxxx and the Company's outside legal counsel, discussed the
status of loan documents and the Company's Form 10-Q.
15
During November 2001, representatives of the parties exchanged information
and held a number of conversations, both in person and by teleconference,
regarding due diligence matters. During this period, a representative of Parent
visited the Company's facilities in most of its locations throughout the world,
to meet with the management of the Company and conduct additional due diligence.
On November 9, 2001, Xx. Xxxxxxxxx and Xx. Xxxxxxx discussed the debt
situation of the Company and possible restructuring of obligations and debt of
the Company. Thereafter, representatives of Parent and the Company and their
respective attorneys began negotiating the terms and conditions of the
definitive agreements.
On November 13, 2001, the letter of intent was amended to, among other
things, accelerate the timing on the proposal. The promissory note for up to
$2,000,000 was executed by the Company and $1,000,000 was advanced by Purchaser
to the Company. The Company released its third quarter results and then held a
conference call for investors.
On November 16, 2001, Messrs. Xxxxxxx, Xxxxxxx, Xxxxxx, outside counsel and
Xxxxxxxx representatives met telephonically to discuss additional inquiries
regarding acquisition interest that Davidson and the Company had received from
third parties. Xxxxxxxx was instructed to let such third parties know that any
offer would be considered by the Board in accordance with its fiduciary
obligations.
On November 16 and 17, 2001, Xxxxxxxx notified such third parties that the
Board would consider any offer to acquire the Company, that any offer would need
to be based upon publicly available information and that any such offer would
need to be received no later than November 21, 2001.
On November 19, 2001, Xxxx Xxx, a Director of the Company and an employee
of an affiliate of the Company, and Xx. Xxxxx met with Xx. Xxxxxxxxx at the
Company's Hengelo office to discuss the loan made by the affiliate Company.
On November 28, 2001, Messrs. Xxxxxxxxx and Xxxxxx and the Chairman and Xx.
Xxxxxxx had a telephone conference which was followed up on the 29th in writing
proposing a lowering of the price and a further adjustment to the deal by
requiring specific debt reduction.
On December 1, 2001, Xx. Xxxxxxxxx and the Chairman met in London to
discuss the price reduction proposed by Xx. Xxxxxxxxx on November 28th. They
agreed there would be no reduction in the price of the proposal.
A special meeting of the Board of Directors of the Company was held on
December 11, 2001. All members of the Board were present except for Xxxx Xxx and
Xxxxxx Xxxxxxx. The Board members present considered the terms of the
transaction, the reasons therefore and an oral opinion of Xxxxxxxx (subsequently
confirmed in writing) that the proposed transaction was fair to the shareholders
of the Company from a financial point of view. Those directors present then
unanimously: (i) determined that the Merger is fair to, and in the best
interests of, the shareholders of the Company; (ii) approved the tender offer
contemplated in the Merger Agreement and recommended to the shareholders of the
Company that they accept the tender offer and tender their Common Shares
pursuant thereto; (iii) recommended that the shareholders of the Company vote in
favor of adoption of the Merger Agreement at any meeting of shareholders of the
Company that may be called to consider adopting the Merger Agreement; and (iv)
approved and declared advisable each of the Merger Agreement and the Option
Agreement.
On December 12, 2001, the Merger Agreement and the Option Agreement were
each executed and delivered.
On December 13, 2001, Parent and the Company issued a joint press release
announcing the execution of the Merger Agreement, Parent and Purchaser filed a
Schedule TO and the Company filed a Schedule 14D-9 with the Securities and
Exchange Commission, each incorporating the joint press release.
REASONS FOR THE RECOMMENDATION OF THE BOARD OF DIRECTORS
In making the determinations and recommendations set forth above, the Board
considered a number of factors, including, without limitation, the following:
16
- The Company's Board of Directors considered the current and historical
financial condition and results of operations of the Company, as well as
the current need for capital and strategic objectives, and the current
and expected conditions in the industry in which the Company operates.
The Company's significant and continued deterioration in its financial
condition is not sustainable without a significant infusion of capital.
The Company would not likely be able to meet its debt obligations and
other obligations as they come due. Anticipated continuing losses
further put pressure on the Company's limited financial resources.
- The Company's clients have been impacted by the current economic
conditions causing sales of the Company to weaken. The industry in which
the Company operates is experiencing a general slow down.
- The historic and current price of the Company's Common Shares.
- The amount of consideration to be received by the Company's shareholders
in the Offer and that the Per Share Offer Price represents a substantial
premium over the closing price of the Company's Common Shares of $.115
on December 10, 2001 (the last trading day prior to the meeting of the
Board).
- The representations of Parent that Parent has sufficient financial
resources to consummate the Offer and the Offer is not subject to any
financing condition.
- The fact that the structure of the acquisition of the Company by Parent
as provided for in the Merger Agreement involves an all cash tender
offer for all outstanding Shares to be commenced promptly after the
public announcement of the Merger Agreement and to be followed as
promptly as practicable by a merger for the same consideration, thereby
enabling the Company's shareholders to obtain cash for their Shares at
the earliest possible time.
- The Board's belief, based upon presentations by the Company's management
and financial advisors, that the Per Share Offer Price was fair in light
of the financial condition, results of operations, business and
prospects of the Company.
- In the case of the Board's determination and recommendation, the opinion
of Xxxxxxxx to the Board, dated December 11, 2001, that, as of the date
of the opinion and based on and subject to certain assumptions and
qualifications stated in the opinion, the consideration to be received
by the shareholders of the Company in the Offer and the Merger is fair
to such shareholders from a financial point of view. A copy of the
Davidson opinion is attached hereto as Xxxxx A and shareholders are
urged to read such opinion in its entirety.
- The provision of the Merger Agreement permitting the Company, subject to
certain conditions, to negotiate with third parties that make
unsolicited bona fide written offers of Superior Company Transactions
(as defined in the Merger Agreement) not subject to any financing
condition if the Board determines in good faith, based on the advice of
its outside counsel, that the failure to take such action is reasonably
likely to result in a breach of the Board's fiduciary obligations to the
Company's shareholders imposed by law. The Board also considered the
terms of the Merger Agreement permitting the Company to terminate the
Merger Agreement and accept a Superior Company Transaction under certain
conditions, including that the Company pay Parent a $300,000 termination
fee. The Board considered the possible effect of these provisions of the
Merger Agreement on third parties who might be interested in exploring
an acquisition of the Company. In this regard, the Board recognized that
the provisions of the Merger Agreement relating to the termination fee
and the non-solicitation of takeover proposals were insisted upon by
Parent as a condition to entering into the Merger Agreement.
- The contacts that the Company and Xxxxxxxx had with third parties
regarding a potential transaction involving the Company, and discussions
with management and Xxxxxxxx regarding the absence of the likelihood
that a third party would be prepared to pay a higher price for the
Shares than the Per Share Offer Price in a transaction that could be
completed on a timely basis.
- The likelihood that the Offer and the Merger will be consummated in
light of the fact that the Offer and the Merger are not subject to any
financing or diligence condition and that the other conditions to the
Offer and the Merger are customary in nature.
17
- The possibility of continuing to operate the Company as an independent
entity and the risks and benefits inherent therein, including the
likelihood that the Company would not be able to repay its debts which
come due at the end of this year.
- Information with regard to the financial condition, results of
operations, business and prospects of the Company, as well as current
economic and market conditions (including current conditions in the
industry in which the Company competes).
- The terms of the Merger Agreement, including the parties'
representations, warranties and covenants and the conditions to their
respective obligations.
The foregoing discussion of the information and factors considered by the
Board is not intended to be exhaustive, but includes the material factors
considered by the Board. In view of the variety of factors considered in
connection with their evaluation of the Offer and the Merger, the Board did not
find it practicable to, and did not, quantify or otherwise assign relative
weights to the above factors or determine that any factor was of particular
importance. Rather, the Board viewed its position and recommendations as being
based on the totality of the information presented to and considered by it. In
addition, it is possible that different members of the Board assigned different
weights to the various factors described above.
INTENT TO TENDER
Pursuant to the Shareholders' Agreement, the Chairman and the President of
the Company have agreed to tender all of the Shares beneficially owned by them
to Parent in the Offer, and to vote their Shares in favor of the Merger and
against approval of any proposal made in opposition to, or in competition with,
the Merger and the Merger Agreement. Such directors and executive officers own
an aggregate of 2,574,132 of the Company's Common Shares, representing
approximately 7.92% of the issued and outstanding Common Shares, as well as
options to purchase 310,000 Shares at a price of $2.42 per share.
ITEM 5. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED
The Company retained Xxxxxxxx as its financial advisor for the transaction
and to determine whether the terms of the Offer and the Merger are fair to the
Company's shareholders from a financial point of view. Pursuant to the terms of
Xxxxxxxx'x engagement, to date, the Company has paid Davidson for its services
and fairness opinion an aggregate financial advisory fee equal to $100,000. In
addition, the Company has agreed to pay Xxxxxxxx $300,000 upon the closing of
the successful Offer and reimburse Davidson for its reasonable out-of-pocket
expenses in connection with its services to the Company. All fees and expenses
payable to Davidson by the Company are not contingent on the consummation of the
Offer or the Merger. The Company also has agreed to indemnify Davidson and
certain related parties against certain liabilities, including liabilities under
the Federal securities laws, arising out of Xxxxxxxx'x engagement.
Except as set forth above, neither the Company nor anyone acting on its
behalf has employed, retained or compensated, or currently intends to employ,
retain or compensate, any person to make solicitations or recommendations to the
shareholders of the Company on its behalf with respect to the Offer or the
Merger.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
No transactions in the Shares have been effected during the past 60 days by
the Company or, to the best of the Company's knowledge, by any executive
officer, director or affiliate of the Company.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
Except for the Company's obligations pursuant to the Merger Agreement, the
Company is not undertaking or engaged in any negotiations in response to the
Offer that relate to (i) a tender offer for or other acquisition of the
Company's securities by the Company, any of its subsidiaries, or any other
person; (ii) any extraordinary transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries; (iii) any
purchase, sale or transfer of a material amount of assets of the Company or any
of its subsidiaries; or (iv) any material change in the present dividend rate or
policy, or indebtedness or capitalization, of the Company.
18
There are no transactions, board resolutions, agreements in principle or
signed contracts entered into in response to the Offer that relate to one or
more of the matters referred to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION
None.
ITEM 9. EXHIBITS
The following Exhibits are filed herewith:
EXHIBIT
NO. DESCRIPTION
------- -----------
(a)(1) Letter to the Company's Shareholders, dated as of December
13, 2001 (included in this Statement and being mailed to
Stockholders).
(a)(2) Opinion of D.A. Davidson, dated December 11, 2001 (included
as Annex A hereto).
(a)(3) Joint Press Release of the Company and Parent, dated
December 13, 2001 (included in this Statement as Annex B).
(a)(4) The Offer to Purchase, dated December 13, 2001 (incorporated
herein by reference to Exhibit (a)(1)(A) to the Schedule TO
of the Purchaser filed on December 13, 2001).
(a)(5) The Letter of Transmittal (incorporated herein by reference
to Exhibit (a)(1)(C) to the Schedule TO of the Purchaser
filed on December 13, 2001).
(e)(1) Form of Convertible Unsecured Note.
(e)(2) Form of Warrant.
(e)(3) May 2001 Loan Agreement with major shareholder.
(e)(4) August 2001 Loan and Security Agreement with major
shareholder.
(e)(5) November 13, 2001, Secured Convertible Promissory Note
issued by the Company in favor of Purchaser.
(e)(6) November 13, 2001, Security and Pledge Agreement between the
Company and Purchaser.
(e)(7) November 30, 2001, Pledge Agreement between the Company and
Purchaser.
(e)(8) November 30, 2001, Pledge Agreement between the Company's
Canadian holding company and Purchaser.
(e)(9) November 30, 2001, Guarantee Agreement between the Company's
Canadian holding company and Purchaser.
(e)(10) Agreement and Plan of Merger, dated as of December 11, 2001,
among the Company, Parent and Purchaser (incorporated by
reference to Exhibit (d)(1) to the Schedule To of the
Purchaser filed on December 13, 2001).
(e)(11) Shareholders' Agreements, dated December 12, 2001, among
Parent, Purchaser, the Company, Xxxxxxx Xxxxxxx and Xxxx xxx
xxx Xxxx.
(e)(12) Share Option Agreement, dated as of December 12, 2001,
between the Company and Purchaser (incorporated by reference
to Exhibit (d)(2) to the Schedule TO of the Purchaser filed
on December 13, 2001).
19
SIGNATURE
After due 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.
ALPNET Inc.
/s/ XXXX X. XXXXXXX
By:
--------------------------------------
Xxxx X. Xxxxxxx
Chief Financial Officer
Dated: December 13, 2001
20
ANNEX A
D.A.DAVIDSON LHEAD
December 11, 2001
Board of Directors
A Inc.
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000-0000
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of ALPNET, Inc. ("ALPNET") of the consideration to be
delivered to such shareholders in connection with the proposed Tender Offer and
Merger (each as defined below) pursuant to the Agreement and Plan of Merger (the
"Agreement") by and among SDL plc and its wholly owned subsidiary, Arctic Inc.
(collectively "SDL") and ALPNET. We have assumed that the terms of the
Transaction are as set forth in the December 10, 2001 draft Agreement.
SUBJECT TO THE TERMS OF THE AGREEMENT, SDL WILL COMMENCE A TENDER OFFER FOR ALL
THE SHARES OF ALPNET (THE "SHARES") AT A PRICE EQUAL TO $0.21 PER SHARE IN CASH
FOR EACH SHARE ACCEPTED (THE "TENDER OFFER"). THE AGREEMENT FURTHER PROVIDES
THAT, FOLLOWING PURCHASE OF THE SHARES PURSUANT TO THE TENDER OFFER, SDL WILL BE
MERGED WITH AND INTO ALPNET (THE "MERGER" AND TOGETHER WITH THE TENDER OFFER,
THE "TRANSACTION") AND EACH OUTSTANDING SHARE NOT ACQUIRED BY SDL IN THE TENDER
OFFER WILL BE CONVERTED INTO THE RIGHT TO RECEIVE $0.21 IN CASH. IN ADDITION,
ALPNET WILL ISSUE TO SDL AN OPTION TO PURCHASE ALPNET SHARES AT $0.21 PER SHARE
(THE "OPTION"). THE OPTION WILL BE EXERCISABLE ONLY IF SDL HAS ACQUIRED 75% OR
MORE OF ALPNET'S SHARES PURSUANT TO THE TENDER OFFER AND WILL EXPIRE ON THE
EARLIER OF THE MERGER OR TERMINATION OF THE AGREEMENT.
In arriving at our opinion, we have reviewed various financial and operating
information relating to ALPNET, including, and without limitation, historical
financial reports of ALPNET, reports filed with the SEC, internal operating
reports and analyses, and related information. We have also held discussions
with ALPNET's management regarding the business, its recent operating results,
its financial condition and future prospects.
We have additionally examined and considered financial and stock market data for
similar public companies, the publicly available financial terms of certain
other similar business combinations, and other analyses and considerations that
we deemed relevant.
In conducting our review and arriving at our opinion, we have relied, without
independent investigation, upon the accuracy and completeness of all financial
and other information publicly available or provided to us by ALPNET. We have
also assumed the reasonableness of and relied upon the estimates and judgments
of management of ALPNET as to the future business and financial prospects. We
have not made an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of ALPNET, nor have we been furnished with
any such evaluations or appraisals. Our opinion is necessarily based upon
economic, market, financial and other conditions as they exist and can be
evaluated on the date hereof and the information provided to us through the date
hereof.
X.X. Xxxxxxxx & Co. is engaged in the valuation of companies and their
securities in the course of its business as an investment firm. We have been
engaged by XXXXXX to render various financial advisory and investment banking
services. For our services, including rendering this opinion, we will receive a
fee from ALPNET.
A-1
Board of Directors
December 10, 2001
Page Two
It is understood that this letter is intended solely for the benefit and use of
the Board of Directors of ALPNET in its consideration of the Transaction and is
not intended to be and does not constitute a recommendation to any shareholder
as to whether or not any holder of Shares should tender such Shares or how such
shareholder should vote with respect to the Merger. This letter may be reprinted
in full in ALPNET's
Schedule 14D-9 (or successor form) with respect to the
Tender Offer and ALPNET's proxy statement or information statement, if any, with
respect to the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be delivered to the shareholders of ALPNET in
connection with the Transaction is fair, from a financial point of view, to such
shareholders.
Very truly yours,
X.X. XXXXXXXX & CO.
By: /s/ X.X. Xxxx
----------------------------------
X.X.XXXX
Xxxxx X. Xxxx
Managing Director
A-2
ANNEX B
The following press release was disseminated on December 13, 2001 with
respect to the proposed acquisition by SDL plc (LSE: SDL) of
ALPNET Inc.,
(OTCBB: AILP.OB).
ALPNET INC. AND SDL PLC ANNOUNCE MERGER AGREEMENT WITH CASH TENDER OFFER
Salt Lake City, UTAH and LONDON, December 13 /Dow Xxxxx News Service/ --
ALPNET Inc., (OTCBB: AILP.OB) ("ALPNET") and SDL plc (listed on the London stock
exchange ticker: SDL) ( "SDL") today announced that they have entered into a
merger agreement to enable SDL to acquire all of the outstanding shares of
ALPNET pursuant to a cash tender offer at $0.21 per share for all of the
outstanding Common Shares of ALPNET, representing an approximately 62 percent
premium over yesterday's last reported sale price of $0.13.
The ALPNET Board of Directors approved this transaction and received a
favorable fairness opinion from D.A. Davidson, its financial advisor.
Following completion of the cash tender offer and necessary approvals, the
merger agreement provides that SDL will consummate a merger in which all of the
remaining ALPNET shareholders will receive the same price paid in the tender
offer in cash. The transaction is subject to approval by SDL's shareholders, net
external debt of ALPNET not exceeding $14 million, ALPNET having at least $5
million of net assets and to other customary conditions.
"We look forward to combining our businesses for the benefit of our
customers, employees and shareholders," said Xxxx Xxxxxxxxx, SDL's Chairman and
Chief Executive Officer. Xxxxxxx Xxxxxxx, Chairman of ALPNET commented,
"Considering the difficult economic conditions and the resulting effect on
ALPNET's financial condition and continuing cash shortage we are pleased we have
been able to attain a transaction that allows ALPNET shareholders to get cash
for their shares at a substantial premium to recent market prices."
SDL is a public limited company organized under the laws of England and
Wales. For more information on SDL, see our Web site at xxx.xxxxxxx.xxx.
ALPNET is one of the largest, publicly owned, dedicated providers of
complete multilingual information management solutions, with a worldwide network
of offices and resources. ALPNET helps corporations deploy into international
markets faster and more efficiently, through intelligent use and reuse of
multilingual informational assets. ALPNET offers an extensive range of services
based on innovative, proven technologies, including strategic InfoCycle(TM)
consulting, Web and software localisation, and document translation and
publishing. Visit our Web site at xxx.xxxxxx.xxx for more information on our
services and solutions. For additional information on FastTrackXML from ALPNET,
please contact us at xxxxxxxxxx@xxxxxx.xxx.
The description contained herein is neither an offer to purchase nor a
solicitation of an offer to sell shares of ALPNET. At the time the tender offer
is commenced, SDL will file a Tender Offer Statement and ALPNET will file a
Solicitation/Recommendation Statement with respect to the offer. The Tender
Offer Statement (including an offer to purchase, a related letter of transmittal
and other offer documents) and the Solicitation/Recommendation Statement will
contain important information that should be read carefully before any decision
is made with respect to the offer. The offer to purchase, the related letter of
transmittal and certain other documents, as well as the
Solicitation/RecommendationStatement, will be made available to all shareholders
of ALPNET, at no expense to them. The Tender Offer Statement (including an offer
to purchase, a related letter of transmittal and other offer documents) and the
Solicitation/Recommendation Statement will also be available at no charge at the
SEC's website at xxx.xxx.xxx.
This release contains forward-looking statements, which are made pursuant
to the safe-harbour provisions of the private securities litigation reform act
of 1995. Expressions of future goals and similar expressions reflecting
something other than historical fact are intended to identify forward-looking
statements, but are not the exclusive means of identifying such statements.
These forward-looking statements involve a number of risks and uncertainties,
some of which are out of the control of ALPNET and SDL. None of the companies
undertakes any obligations to revise or update any forward-looking statements in
order to reflect events or circumstances that may arise after the date of this
release.
B-1
