SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material under (S) 240.14a-12
Infodata Systems Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required
[_] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies: Common
Stock, par value $0.03 per share
2) Aggregate number of securities to which transaction applies: 4,791,210
shares (plus 153,498 shares subject to option)
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
The filing fee of $967.07 represents 1/50th of 1% of the total amount
of cash to be received by the stockholders and option holders in the
merger proposal to which this Proxy Statement relates.
4) Proposed maximum aggregate value of transaction: $4,835,346.
5) Total fee paid:
$967.07
[_] Fee paid previously by written preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
PRELIMINARY PROXY SOLICITING MATERIAL DATED JANUARY 18, 2002
[INFODATA LOGO]
January ___, 2002
Dear Fellow Shareholder:
The board of directors of Infodata Systems Inc. ("Infodata") has
unanimously approved an Agreement and Plan of Merger, dated as of January 10,
2002, by and among Infodata, Science Applications International Corporation
("SAIC") and Info Acquisition Corp., a wholly-owned subsidiary of SAIC, and is
seeking your approval of the transaction. If the merger is completed, Infodata
shareholders will receive $1.00 in cash for each share of Infodata common stock
they own and Infodata will become a wholly-owned subsidiary of SAIC.
The Infodata board of directors believes that the merger is in the best
interests of Infodata and its shareholders and unanimously recommends that you
vote "FOR" approval of the merger agreement. Investec PMG Capital, Infodata's
financial advisor, has advised the board that the merger consideration is fair
to Infodata's shareholders from a financial point of view.
Infodata has scheduled a special meeting of Infodata's shareholders to
be held on March 1, 2002 at 10:00 a.m., local time at Infodata's corporate
headquarters located at 12150 Monument Drive, Fairfax, Virginia 22033. At the
special meeting, you will be asked to consider and vote on a proposal to approve
the merger agreement. The $1.00 per share cash merger consideration represents a
premium of approximately 41% over the $.71 closing price of Infodata common
stock on January 10, 2002, which was the business day prior to public
announcement of the merger agreement.
Your participation in the special meeting, in person or by proxy, is
important. Even if you anticipate attending in person, we urge you to mark, sign
and return the enclosed proxy card promptly in the enclosed postage-paid
envelope to ensure that your shares of Infodata common stock will be represented
at the special meeting. If you do not vote, it will have the same effect as
voting against the merger.
In the materials accompanying this letter, you will find a notice of
special meeting, a proxy statement relating to the actions to be taken by
Infodata's shareholders at the special meeting and a proxy card. The proxy
statement provides you with detailed information about the merger. I encourage
you to read the notice and the entire proxy statement carefully.
Richard Bueschel
Chairman of the Board
INFODATA SYSTEMS INC.
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
----------------
TO BE HELD ON MARCH 1, 2002
To Our Shareholders:
Notice is hereby given that a special meeting of the shareholders of
Infodata Systems Inc. will be held at Infodata's corporate headquarters located
at 12150 Monument Drive, Fairfax, Virginia 22033 at 10:00 a.m., local time, on
March 1, 2002, for the following purposes:
1. To consider and vote on a proposal to approve the Agreement and Plan of
Merger, dated as of January 10, 2002, by and among Infodata Systems
Inc., Science Applications International Corporation ("SAIC") and Info
Acquisition Corp., a wholly-owned subsidiary of SAIC, providing for the
merger of Info Acquisition with and into Infodata, with Infodata
becoming a wholly-owned subsidiary of SAIC; and
2. To consider and act on any other matters properly coming before the
special meeting and any adjournment or postponement of the meeting.
The board of directors has determined that only holders of record of
Infodata common stock at the close of business on January 22, 2002 are entitled
to vote at the special meeting or any adjournment or postponement thereof.
Approval of the merger proposal at the special meeting requires the affirmative
vote of the holders of more than 66-2/3% of the outstanding shares of Infodata
common stock.
Your vote is important. Whether or not you are able to attend the
meeting, please date, sign and return the accompanying proxy card promptly in
the enclosed envelope which requires no postage if mailed in the United States.
Please do not send in any stock certificates at this time. Upon approval of the
merger, you will be sent instructions regarding the procedure to exchange your
stock certificates for the cash to be paid.
By Order of the Board of Directors
Curtis D. Carlson, Secretary
January ___, 2002
Please mark, sign, date and return your proxy card promptly,
whether or not you plan to attend the special meeting.
The Infodata board of directors unanimously
recommends that shareholders vote "FOR" the proposal to approve
the merger agreement at the special meeting.
PROXY STATEMENT
INFODATA SYSTEMS INC.
Corporate Headquarters
12150 Monument Drive
Fairfax, VA 22033
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 1, 2002
This proxy statement is being furnished to the shareholders of Infodata
Systems Inc., a Virginia corporation, in connection with the solicitation by its
board of directors of proxies to be used at a special meeting of shareholders to
be held on Friday, March 1, 2002 at 10:00 a.m., local time, at Infodata's
corporate headquarters located at 12150 Monument Drive, Fairfax, Virginia 22033
and at any adjournment or adjournments thereof.
At the special meeting, the shareholders of Infodata will be asked to
consider and vote on a proposal to approve an Agreement and Plan of Merger,
dated as of January 10, 2002 by and among Infodata Systems Inc., Science
Applications International Corporation ("SAIC") and Info Acquisition Corp., a
wholly-owned subsidiary of SAIC. A copy of the Agreement and Plan of Merger is
attached to this proxy statement as Appendix A.
Pursuant to the Agreement and Plan of Merger, (i) Info Acquisition
Corp. will be merged with and into Infodata and (ii) each outstanding share of
common stock, $0.03 par value, of Infodata, will be canceled and converted
automatically into the right to receive $1.00 in cash, payable to the
shareholder thereof, without interest. As a result of the merger, SAIC will own
all of the outstanding shares of Infodata's common stock and Infodata's
shareholders will no longer have an equity interest in Infodata.
Only Infodata shareholders at the close of business on January 22, 2002
are entitled to notice of and to vote at the special meeting or any
adjournment(s) thereof. Under Virginia law, approval of the merger agreement
requires the affirmative vote of holders of more than 66-2/3% of the outstanding
shares of common stock entitled to vote at the special meeting. Each share of
common stock is entitled to one vote on all matters to come before the special
meeting. The common stock is the only outstanding class of our capital stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the transaction, passed upon the
merits or fairness of the transaction, or passed upon the adequacy or accuracy
of the disclosure in this document. Any representation to the contrary is
unlawful.
This Proxy Statement is dated and is first being mailed
to shareholders of Infodata on or about January ___, 2002.
1
TABLE OF CONTENTS
Page
SUMMARY TERM SHEET............................................................4
QUESTIONS AND ANSWERS ABOUT THE MERGER........................................5
SUMMARY.......................................................................6
General..................................................................6
The Special Meeting......................................................7
Date, Time and Place...................................................7
Purpose................................................................7
Required Vote..........................................................7
The Merger...............................................................7
Parties To The Merger..................................................7
Reasons of Infodata for the Merger.....................................8
Recommendation of the Infodata Board of Directors......................8
Interests of Infodata's Directors and Officers in the Merger...........9
Agreements to Vote in Favor of the Merger..............................9
Material Federal Income Tax Consequences...............................9
Dissenters' Rights.....................................................9
Fairness Opinion of Infodata's Financial Advisor.......................9
Regulatory Requirements................................................9
The Merger Agreement.....................................................9
Merger Consideration...................................................9
Conditions to the Merger; Effective Date..............................10
No Solicitation of Transactions by Infodata...........................10
SAIC Option to Acquire Shares of Infodata Common Stock................10
Termination of the Merger Agreement...................................10
Termination Fees and Expenses.........................................11
THE SPECIAL MEETING..........................................................11
Meeting Date..........................................................11
Matters to be Considered at the Special Meeting.......................11
Record Date and Voting Rights and Requirements........................11
Voting of Proxies.....................................................12
Revocation of Proxies.................................................12
Solicitation of Proxies...............................................13
Other Matters.........................................................13
THE MERGER...................................................................14
Background of the Merger..............................................14
Reasons for the Merger................................................15
Recommendation of the Infodata Board of Directors.....................16
Certain Effects of The Merger.........................................17
Interests of Certain Persons in the Merger............................17
Bonus Arrangements............................................17
Stock Options.................................................17
Severance Arrangements Under Existing Employment Agreements...18
Material Federal Income Tax Consequences..............................19
Rights of Dissenting Shareholders.....................................19
Fairness Opinion of Infodata's Financial Advisor......................21
Selected Company Analysis.....................................22
Selected Transaction Analysis.................................22
Selected Premium Analysis.....................................23
Discounted Cash Flow Analysis.................................23
Stock Trading History.........................................23
Regulatory Requirements...............................................23
THE MERGER AGREEMENT.........................................................23
Description of the Merger.............................................24
Representations and Warranties........................................25
Covenants under the Merger Agreement..................................26
Conditions to the Merger..............................................28
No Solicitation of Transactions by Infodata...........................29
Termination of the Merger Agreement...................................30
2
Termination Fees and Expenses.........................................31
SAIC Option to Acquire Shares of Infodata Common Stock................32
ACQUISITION FINANCING........................................................32
PRICE RANGE OF INFODATA COMMON STOCK.........................................33
BUSINESS AND RECENT RESULTS OF OPERATIONS OF INFODATA........................33
Business..............................................................33
Recent Results of Operations..........................................34
BUSINESS OF SAIC.............................................................34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............35
ADDITIONAL INFORMATION.......................................................36
Cautionary Statement Regarding Forward-Looking Statements.............36
Other Matters.........................................................36
Infodata Shareholder Proposal.........................................36
Where You Can Find More Information...................................36
APPENDICES
- -------
APPENDIX A - Agreement and Plan of Merger, dated as of January 10, 2002
APPENDIX B - Fairness Opinion, dated January 10, 2002, of Investec PMG Capital
APPENDIX C - Article 15 of the Virginia Stock Corporation Act ("Dissenters'
Rights")
3
SUMMARY TERM SHEET
The following summary briefly describes the material terms of the
proposed merger whereby Infodata will become a wholly-owned subsidiary of SAIC.
This summary does not contain all the information that may be important for you
to consider when evaluating the merger. We encourage you to read this proxy
statement in its entirety before voting. The sections below include references
to direct you to more complete descriptions of the matters discussed in this
summary.
If the merger is completed, you will receive the cash merger
consideration of $1.00 per share, without interest, for each share of Infodata
common stock owned by you. Holders of each outstanding option to purchase
Infodata common stock with an exercise price less than $1.00 per share will be
entitled to receive cash in an amount equal to the difference between $1.00 per
share and the applicable exercise price of the option. See "Questions and
Answers About the Merger," "The Merger" and "The Merger Agreement" beginning on
pages 5, 14 and 23, respectively.
The most relevant aspects and consequences of the merger are summarized
as follows:
o Infodata shareholders and holders of options to purchase
Infodata common stock will no longer have any equity interest
in Infodata.
o All outstanding Infodata stock options and warrants will be
cancelled.
o Infodata will no longer be a public company.
o All Infodata common stock will be owned by SAIC. See "The
Merger Agreement - Description of the Merger" beginning on
page 24.
o The merger is subject to several conditions, including
obtaining the affirmative vote of the holders of more than
66-2/3% of the outstanding shares of Infodata common stock,
our entering into a new lease reducing the amount of our
office space, the continuity of a significant contract, the
updating of records relating to certain of our contracts,
maintenance of tangible net worth at least $925,000 at
December 31, 2001, and other customary closing conditions. See
"The Merger Agreement-Conditions to the Merger" beginning on
page 28.
o Our board of directors has unanimously determined that the
merger is advisable, fair to, and in the best interests of,
Infodata and its shareholders and unanimously recommends that
you approve the merger agreement. See "The Merger -
Recommendation of the Infodata Board of Directors" beginning
on page 16.
o Our board of directors has received an opinion from Investec
PMG Capital, Infodata's financial advisor, to the effect that
the cash merger consideration to be received by Infodata
shareholders is fair, from a financial point of view, to our
shareholders. See "The Merger - Fairness Opinion of Infodata's
Financial Advisor" beginning on page 21.
o The merger agreement must be approved by the affirmative vote
of the holders of more than 66-2/3% of the outstanding shares
of Infodata common stock. Current directors and officers and a
former director of Infodata holding an aggregate of
approximately 19% of Infodata's outstanding common stock have
agreed to vote in favor of the merger agreement. See "The
Special Meeting - Record Date and Voting Rights and
Requirements" beginning on page 11.
o Infodata shareholders are entitled to dissenters' rights under
Virginia law. See "The Merger - Rights of Dissenting
Shareholders" beginning on page 19.
o The receipt of the cash merger consideration by Infodata
shareholders will be a taxable transaction. See "The Merger -
Material Federal Income Tax Consequences" beginning on page
19.
4
o If the merger agreement is terminated, Infodata may be
required to pay SAIC a break-up fee and/or reimburse SAIC for
merger-related expenses, with the maximum amount of such fee
and expenses ranging between $50,000 and a maximum $400,000
depending on the circumstances. SAIC may be required under
certain circumstances if the merger agreement is terminated to
pay Infodata a break-up fee and reimburse our merger-related
expenses, with the amount of such fee and expenses limited to
a maximum of $400,000. See "The Merger Agreement - Termination
Fees and Expenses" beginning on page 31.
o Infodata has granted to SAIC an option to purchase 400,000
shares of Infodata common stock at an exercise price of $1.00
per share that will be exercisable under certain circumstances
by SAIC in the event the merger agreement is terminated. See
"The Merger Agreement - SAIC Option to Acquire Shares of
Infodata Common Stock" beginning on page 32.
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What am I being asked to vote on at the special meeting?
A: You are being asked to vote on the merger agreement that provides for
the merger of a wholly-owned subsidiary of SAIC with and into Infodata
with Infodata becoming a wholly-owned subsidiary of SAIC.
Q: What percentage vote of shareholders is required to approve the merger
proposal?
A: The merger proposal must be approved by the affirmative vote of the
holders of more than 66-2/3% of our outstanding shares of common stock.
Q: What will I receive when the merger is consummated?
A: You will receive $1.00 in cash as merger consideration in exchange for
each of your shares of Infodata common stock if the merger occurs. In
addition, the holder of each option with an exercise price less than
$1.00 per share will receive the difference between $1.00 per share and
the exercise price per share set forth in the relevant stock option
agreement.
Q: Will members of Infodata's management team receive anything different
in the merger?
A: Yes. Certain members of management will receive bonuses if the merger
occurs. These bonus arrangements are described in further detail in
"The Merger - Interests of Certain Persons in the Merger - Bonus
Arrangements." Furthermore, certain members of our management will be
entitled to severance benefits under existing employment agreements
with us if the merger is consummated and their employment is
terminated. See "The Merger - Interests of Certain Persons in the
Merger - Severance Arrangements Under Existing Employment Agreements."
Q: Why is Infodata proposing the merger?
A: Infodata is proposing the merger because its board of directors
believes that the merger is a more desirable alternative than
continuing to operate as a public company with limited resources.
Q: How does the board of directors recommend that I vote?
A: The board of directors has determined that the merger is desirable and
fair to you and in the best interests of Infodata and its shareholders,
and recommends that you vote "FOR" approval of the merger proposal. In
making this determination, the board of directors considered many
factors including the opinion of its financial advisor, Investec PMG
Capital, that the $1.00 per share to be received by you in cash in the
merger is fair to you from a financial point of view.
After carefully reading and considering the information contained in
this proxy statement, you should fill out and sign your proxy card. You
should then mail your completed, signed proxy card in the enclosed
return envelope as soon as possible so that your shares can be voted at
the special meeting.
If you intend to vote to approve the merger agreement, you should mark
the box on the proxy card to indicate that you vote "FOR" the merger
agreement. You should return your proxy card whether
5
or not you plan to attend the special meeting. If you attend the
special meeting, you may revoke your proxy at any time before it is
voted and vote in person.
Q: If my shares are held in "street name" by my broker, will my broker
vote my shares for me?
A: Your broker will not be able to vote your shares without instructions
from you. You should follow the directions provided by your broker to
vote your shares.
Q: What happens if I do not send in my proxy card, or if I abstain from
voting?
A: If you do not send in your proxy card, or do not instruct your broker
to vote your shares "FOR" the merger, or if you abstain from voting, it
will have the same effect as a vote against the merger proposal.
Q: May I change my vote after I have mailed my signed proxy card?
A: Yes. You may change your vote by sending in a later-dated, signed proxy
card or a written revocation before the special meeting or by attending
the special meeting and voting in person. Your attendance at the
meeting will not, by itself, revoke your proxy. If you have instructed
a broker to vote your shares, you must follow the directions received
from your broker to change those instructions.
Q: Should I send my stock certificates now?
A: No. If the merger is completed, we will send you written instructions
for exchanging your stock certificates for the cash payment.
Q: What are the tax consequences of the merger?
A: The merger will be a taxable transaction to you for federal income tax
purposes. See "The Merger - Material Federal Income Tax Consequences".
You should consult your tax advisor as to the tax effects of the merger
in your particular circumstances.
Q: What rights do I have to dissent from the merger?
A: If you wish, you may dissent from the merger and seek a judicial
determination of the fair value of your shares, but only if you comply
with all requirements of Virginia law which are set forth in Appendix C
and summarized on pages 9 of this proxy statement. The judicially
determined fair value of your shares may be more or less than the price
per share to be paid in the merger.
Q: When will the merger be effective?
A: The merger will be effective when articles of merger are filed with the
State Corporation Commission of Virginia, under the law of which
Infodata is incorporated, and a certificate of merger is filed with the
Secretary of State of Delaware, under the law of which Info Acquisition
Corp. is incorporated. Subject to the satisfaction or waiver of certain
closing conditions, we plan to file the articles and certificate on or
about the third business day after the merger agreement is approved by
Infodata shareholders at the special meeting.
Q: To whom should I address questions?
A: If you have questions or would like additional copies of this proxy
statement, you should contact Curtis D. Carlson, Secretary of Infodata,
at (703) 934-5205.
SUMMARY
General
The following is a summary of certain information contained elsewhere
in this proxy statement and may not contain all of the information that is
important to you. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained elsewhere in
6
this proxy statement. To understand the merger fully and for a more complete
description of the terms of the merger, you should carefully read this entire
proxy statement.
The Special Meeting
(See page 11.)
Date, Time and Place
The special meeting will be held on Friday, March 1, 2002 at 10:00
a.m., local time, at Infodata's corporate headquarters at 12150 Monument Drive,
Fairfax, Virginia 22033.
Purpose
At the meeting, you will be asked:
1. To consider and vote on a proposal to approve the Agreement
and Plan of Merger, dated as of January 10, 2002, by and among
Infodata Systems Inc., Science Applications International
Corporation and Info Acquisition Corp., a wholly-owned
subsidiary of SAIC, providing for the merger of Info
Acquisition Corp. with and into Infodata, with Infodata
becoming a wholly-owned subsidiary of SAIC.
2. To transact such other business as may properly come before
the special meeting and any adjournment or postponement
thereof.
Required Vote
Only Infodata shareholders of record as of the close of business on
January 22, 2002, will be entitled to notice of, and to vote at, the special
meeting. Virginia law requires that the merger receive the affirmative vote of
more than 66-2/3% of the shares of Infodata common stock outstanding as of the
record date and entitled to vote in order for the merger to occur. As of the
record date, there were [4,791,210] shares of Infodata common stock outstanding.
The Merger
(See page 14.)
Parties To The Merger
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
10260 Campus Point Drive
San Diego, California 92121
(858) 826-6000
SAIC, an employee-owned company, provides diversified professional and
technical services involving the application of scientific expertise to solve
complex technical problems for both commercial and government customers
worldwide. These services frequently involve computer and systems technology.
Through one of its subsidiaries, Telcordia Technologies, Inc., SAIC provides
software, engineering and consulting services, advanced research and
development, technical training and other services to the telecommunications
industry. SAIC provides technical services mainly in the national security,
health care, environment, energy, telecommunications and information technology
market areas. With annual revenues of $5.9 billion, SAIC and its subsidiaries
have more than 40,000 employees at offices in more than 150 cities worldwide.
7
INFODATA SYSTEMS INC.
12150 Monument Drive
Fairfax, Virginia 22033
(703) 934-5205
Infodata designs, develops and delivers solutions that enable
enterprises to share, maintain and retrieve electronic documents and their
components. Infodata provides consulting and systems integration services and
products in the area of knowledge management to corporate and government
workgroups, departments and enterprises.
The merger agreement provides that Info Acquisition Corp., a
wholly-owned subsidiary of SAIC, will merge with and into Infodata, with
Infodata becoming a wholly-owned subsidiary of SAIC. The merger agreement is
included in this proxy statement as Appendix A. Subject to the satisfaction or
waiver of certain closing conditions, we expect that the merger will become
effective promptly after the merger agreement is approved by Infodata
shareholders at the special meeting.
Reasons of Infodata for the Merger
Infodata's board of directors approved the merger based on its
consideration of a number of material factors, including the following:
o Infodata's future prospects and possible alternatives to the
proposed merger, including the prospects for and challenges
and risks associated with, continuing as an independent
company;
o the substantial decline in the market price of Infodata's
common stock during the past five years and the view of
Infodata's board of directors and management that it could
take a long time for the market price of Infodata's common
stock to exceed the $1.00 per share merger consideration
offered by SAIC;
o the $1.00 per share merger consideration offered by SAIC
constitutes a 41% premium over the closing sale price of the
common stock on January 10, 2002;
o the opinion of Infodata's financial adviser to the effect that
the merger consideration is fair, from a financial point of
view, to Infodata's shareholders;
o the potential to produce significant synergies for growth due
to the involvement of SAIC and Infodata in providing
information technology services to the intelligence community;
o Infodata's board and management view that it could take a long
time for Infodata to attain the minimum net tangible assets
required for its common stock to be listed again on the NASDAQ
SmallCap market; and
o Infodata is currently in default and has not paid the amount
due under its line of credit as a result of recurring
operating and net losses incurred during the past several
years.
The Infodata board also considered certain potentially adverse
consequences of the merger, including the potential disruption of Infodata's
business that could result from announcement of the merger, the uncertainties
regarding Infodata customers' and employees' perception of the merger and the
possibility that the merger might not be consummated. In the view of Infodata's
board, however, those considerations were not sufficient, individually or in the
aggregate, to outweigh the perceived favorable consequences and advantages of
the merger.
Recommendation of the Infodata Board of Directors
The Infodata board of directors believes that the merger is in the best
interests of Infodata and its shareholders and unanimously recommends that you
vote "FOR" approval of the merger.
8
Interests of Infodata's Directors and Officers in the Merger
When considering the recommendation of Infodata's board, you should be
aware that one of Infodata's directors and some of its officers have interests
in the proposed transaction that are different from, or in addition to, your
interests. In particular, if the merger is consummated, three officers of
Infodata (one of whom is also a director) will be paid bonuses, and furthermore,
four officers (one of whom is also a director) will receive severance payments
under their existing employment agreements with us if their employment is
terminated after the merger.
Agreements to Vote in Favor of the Merger
Directors and executive officers of Infodata owning an aggregate of
904,819 shares of Infodata common stock, constituting approximately 19% of the
outstanding shares, have entered into voting agreements and executed irrevocable
proxies obligating them to vote their shares in favor of the merger agreement.
Material Federal Income Tax Consequences
The disposition of shares of Infodata common stock in the merger will
be a taxable transaction for federal income tax purposes, and may also be a
taxable transaction under applicable state, local, foreign or other tax laws. In
general, each shareholder will recognize a gain or loss in 2002 equal to the
difference, if any, between the cash payment received and the shareholder's tax
basis in the shares surrendered in the merger. You should consult with your tax
advisor about the tax consequences of the merger in light of your individual
circumstances, including the application of any federal, state, local or foreign
law.
Dissenters' Rights
Infodata shareholders who do not vote to approve and adopt the merger
agreement may dissent from the merger and elect to have the fair value of their
shares, based on all relevant factors and excluding any element of value arising
from the accomplishment or expectation of the merger, judicially determined and
paid to them in cash. Such shareholders must deliver a written notice of intent
to demand payment for their shares prior to the taking of the vote on the merger
agreement and comply with the other requirements of Article 15 of the Virginia
Stock Corporation Act, the full text of which is attached to this proxy
statement as Appendix C. Any deviation from such requirements may result in a
forfeiture of dissenters' rights. See "The Merger -- Rights of Dissenting
Shareholders."
Fairness Opinion of Infodata's Financial Advisor
Investec PMG Capital, Infodata's financial advisor, delivered an
opinion to Infodata's board of directors that, as of the date of execution of
the merger agreement, the consideration to be received in the merger was fair to
Infodata shareholders from a financial point of view, subject to certain
factors, qualifications and assumptions described in its opinion. The complete
opinion of Investec PMG Capital is attached as Appendix B. You should read the
opinion in its entirety.
Regulatory Requirements
We are not aware of any material government or regulatory approvals or
actions that may be required for completion of the merger. If any governmental
or regulatory approval or action is or becomes, required, we would seek the
requisite approval or action.
The Merger Agreement
(See page 23.)
Merger Consideration
Under the merger agreement, upon consummation of the merger each share
of Infodata common stock will be converted into the right to receive $1.00 in
cash.
At the effective time of the merger, all outstanding options and
warrants to purchase shares of Infodata common stock will be cancelled. Each
holder of an option with an exercise price of
9
less than $1.00 per share will be entitled to receive cash in the amount of
$1.00 per share less the per share exercise price of the option.
Conditions to the Merger; Effective Date
Infodata's and SAIC's respective obligations to complete the merger are
subject to the satisfaction or waiver of a number of conditions, including the
following, among others:
o The holders of more than 66-2/3% of Infodata's shares vote to
approve the merger agreement;
o No law has been passed nor court order entered prohibiting the
consummation of the merger;
o The respective representations and warranties of the parties
to the merger agreement must be true and correct and there
must not have been or be threatened a material adverse effect
on Infodata or its business; and
o Each of Infodata, SAIC and Info Acquisition Corp. must have
complied with its respective obligations under the merger
agreement.
In addition, SAIC's obligation to complete the merger is subject to our
entering into a new lease reducing the amount of our office space, the
continuity of a significant contract, the updating of records relating to
certain of our contracts, our maintenance of tangible net worth of at least
$925,000 at December 31, 2001, and certain other customary conditions.
Infodata's obligation to complete the merger is also subject to certain
additional customary conditions.
No Solicitation of Transactions by Infodata
The merger agreement includes provisions that prohibit Infodata from
soliciting or encouraging submission of a third party proposal, but which permit
Infodata to negotiate with and furnish information to a third party if the
Infodata board determines that failure to negotiate with or provide the
information to the third party would be inconsistent with the board's fiduciary
duties under applicable law.
SAIC Option to Acquire Shares of Infodata Common Stock
In connection with entering into of the merger agreement, SAIC and
Infodata entered into an agreement pursuant to which Infodata has granted to
SAIC an option to purchase a total of 400,000 shares of Infodata common stock at
a price of $1.00 per share that will be exercisable by SAIC under certain
circumstances if the merger agreement is terminated.
Termination of the Merger Agreement
The merger agreement may be terminated under certain circumstances at
any time before completion of the merger, as summarized below:
o By mutual consent of the parties;
o By either Infodata or SAIC, subject to limited exceptions, if
the merger has not become effective by June 30, 2002;
o By either Infodata or SAIC, subject to limited exceptions, if
the merger is not approved by holders of more than 66-2/3% of
Infodata's shares at the special meeting;
o By either Infodata or SAIC, if there is a final court order
that cannot be appealed prohibiting the merger;
10
o By SAIC or Infodata, under certain circumstances, if the other
party has materially breached any representation, warranty,
covenant, or agreement contained in the merger agreement and
the breach is not cured within 30 business days' notice of the
commission of the breach;
o By Infodata, under certain circumstances, in order for
Infodata to accept a proposal from a party other than SAIC on
terms that would be more favorable to Infodata and its
shareholders than the merger;
o By SAIC, if the Infodata board of directors withdraws or
adversely modifies its approval or recommendation of the
merger or resolves to recommend a superior proposal from
another party, or if Infodata fails to enter into a new lease
reducing the amount of its office space, to maintain a
significant contract and customer relationship, and to update
records relating to certain of our contracts or to maintain
net tangible assets of $925,000 at December 31, 2001; or
o By SAIC, if Infodata fails (i) to enter into a new lease
reducing the amount of its office space, (ii) to maintain a
significant contract and customer relationship, (iii) to
update records relating to certain of our contracts, or (iv)
to maintain tangible net worth of $925,000 at December 31,
2001.
Termination Fees and Expenses
If the merger agreement is terminated, Infodata may be required to pay
SAIC a break-up fee and/or reimburse SAIC for merger-related expenses, with the
maximum amount of such fee and expenses ranging between $50,000 and $400,000
depending on the circumstances. SAIC may be required to pay Infodata a break-up
fee and reimburse its merger-related expenses, with the amount of such fee and
expenses limited to a maximum of $400,000, under certain circumstances if the
merger agreement is terminated. See "The Merger Agreement - Termination Fees and
Expenses" beginning on page 31.
Except as otherwise provided in the merger agreement, each party to the
merger agreement will bear its own expenses incurred in connection with the
merger agreement and the merger, whether or not the merger is consummated.
THE SPECIAL MEETING
Infodata is furnishing this proxy statement to Infodata shareholders as
part of the solicitation of proxies by the Infodata board of directors for use
at a special meeting of Infodata shareholders.
Meeting Date
The special meeting will be held at 10:00 a.m., local time, on Friday,
March 1, 2002, at Infodata's corporate headquarters located at 12150 Monument
Drive, Fairfax, Virginia 22033.
Matters to be Considered at the Special Meeting
The purpose of the special meeting is to consider and vote on a
proposal to approve the Agreement and Plan of Merger, dated as of January 10,
2002, by and among Infodata, SAIC and Info Acquisition Corp., a wholly-owned
subsidiary of SAIC, and the merger of Info Acquisition Corp. with and into
Infodata. Upon the merger of Info Acquisition Corp. into Infodata, Infodata will
become a wholly-owned subsidiary of SAIC, and each share of Infodata common
stock outstanding as of the effective time of the merger will be converted into
the right to receive $1.00 in cash. Infodata shareholders may also be asked to
consider any other business that properly comes before the special meeting. Each
copy of the proxy statement mailed to Infodata shareholders is accompanied by a
proxy card for use at the special meeting.
Record Date and Voting Rights and Requirements
Record Date For Voting. The close of business on January 22, 2002 is
the record date for determining holders of shares of Infodata common stock
entitled to vote at the special meeting. Each share of common stock will be
entitled to one vote. On the record date, there were [4,791,210] shares
outstanding and entitled to vote at the special meeting.
11
Voting Rights. Each share of Infodata common stock outstanding on the
record date entitles its holder to one vote on the proposal to approve the
merger agreement and on any other proposal that properly comes before the
special meeting.
Vote Required. Approval of the merger proposal requires the affirmative
vote of more than 66-2/3% of the outstanding shares of our common stock. Certain
directors and officers, as well as a former director of Infodata, have entered
into voting agreements with SAIC pursuant to which they have committed to vote
all shares of our common stock beneficially owned by them in favor of the merger
proposal. Collectively, these individuals beneficially own an aggregate of
904,819 shares of our common stock, or 19% of the shares outstanding.
Quorum Requirement. The presence, in person or by proxy, of shares of
Infodata common stock representing a majority of the total voting power of the
shares entitled to vote on the record date is necessary to constitute a quorum
at the special meeting.
Voting of Proxies
A form of proxy card for your use at the special meeting accompanies
this proxy statement. Infodata shareholders may use the proxy card that came
with this proxy statement if they are unable to attend the special meeting in
person or wish to have their shares voted by proxy even if they do attend the
special meeting. All properly executed proxies that are received prior to or at
the special meeting and not revoked will be voted at the special meeting in the
manner specified. If you execute and return a proxy and do not specify
otherwise, the shares represented by your proxy will be voted "FOR" approval of
the merger proposal in accordance with the recommendation of our board of
directors. In that event, you will not have the right to dissent from the merger
and exercise your dissenters' rights under Virginia law. There are no matters
other than voting on the merger agreement that are scheduled to be brought
before the special meeting. If any other business is properly brought before the
special meeting, the persons named in the proxy will vote the shares represented
by proxies as determined in their discretion.
If the special meeting is adjourned for any reason prior to the
approval of the merger, then the approval of the merger agreement may be
considered and voted on by shareholders at any subsequently reconvened meeting.
Your vote is important. Please return your proxy card promptly so your
shares can be represented, even if you plan to attend the meeting in person. You
should not send any certificates representing common stock with your proxy card.
If we complete the merger, you will be sent further information regarding the
procedure for the exchange of certificates representing Infodata common stock.
Revocation of Proxies
If you are a record holder of our common stock and you have given a
proxy pursuant to this solicitation, you may nonetheless revoke it by attending
the special meeting and giving oral notice of your intention to vote in person.
In addition, you may revoke any proxy you give at any time before the special
meeting by delivering to our Secretary a written statement revoking it or by
delivering a duly executed proxy bearing a later date. Your attendance at the
special meeting will not in and of itself constitute a revocation of your proxy.
If you have instructed a broker to vote your shares, you must follow the
directions provided by your broker to change those instructions. If you vote in
favor of the merger proposal, you will not have the right to dissent and seek
judicial determination of the fair value of your shares. If you do not send in
your proxy card or do not instruct your broker to vote your shares or if you
abstain from voting, it will have the same effect as a vote against the merger
proposal. Infodata shareholders should address any written notice of revocation
and other communications about the revocation of Infodata proxies to Infodata
Systems Inc., 12150 Monument Drive, Fairfax, Virginia, 22033, Attention:
Secretary.
Abstentions and Broker Non-Votes. Abstentions and broker non-votes
(shares held by brokers for customers which may not be voted on the merger
because the broker has not received specific instructions from the customer)
will be counted for purposes of determining whether a quorum is present to
transact business at the special meeting, but will not be counted as "cast" for
purposes of determining whether the merger has been approved and, therefore,
will have no effect with regard to the merger. Accordingly, the board of
directors of Infodata urges each Infodata shareholder to complete, sign and date
the enclosed proxy card and return it promptly in the enclosed, postage-paid
envelope.
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Solicitation of Proxies
This solicitation of proxies is made on behalf of the Infodata board of
directors. Infodata will pay all of the costs of soliciting the proxies as well
as the cost of printing and mailing this proxy statement and the cost of filing
the proxy statement with the Commission. Proxies may be solicited by officers,
directors and employees of Infodata, none of whom will receive any additional
compensation for their services, but who may be reimbursed for reasonable
out-of-pocket expenses in connection with the solicitation. Solicitations or
proxies may be made personally or by mail, telephone, facsimile or messenger.
Moreover, Infodata may pay persons holding shares of Infodata common stock in
their names or in the names of nominees, but not owning the shares beneficially,
such as brokerage houses, banks and other fiduciaries, for the expense of
forwarding soliciting materials to their principals.
Other Matters
We do not know of any matters, other than those described in this proxy
statement, which may come before the special meeting. If any other matters are
properly presented to the special meeting for action, we intend that the persons
named in the enclosed form of proxy card will vote in accordance with their best
judgment.
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THE MERGER
The following description of the merger agreement and the merger does
not purport to be complete and is qualified in its entirety by reference to the
full text of the merger agreement, a copy of which is included in this proxy
statement as Appendix A and is incorporated herein by reference.
Background of the Merger
On October 22, 2000, Infodata's board of directors engaged Investec PMG
Capital, an investment banking and advisory company, to serve as Infodata's
exclusive financial advisor to explore alternative corporate development and
shareholder value enhancement strategies.
After reviewing all courses of action, Infodata instructed Investec PMG
Capital to market Infodata to potential acquirers. Between February and October
2001, Infodata communicated in varying degrees with over 40 companies that
expressed an interest in Infodata.
On September 24, 2001, Steven M. Samowich, President and Chief
Executive Officer of Infodata, and Curtis D. Carlson, Secretary of Infodata, met
with several representatives of SAIC. On October 11, 2001, SAIC entered into a
confidentiality agreement with Infodata and on the following day, members of
Infodata's management met with acquisition officials of SAIC, who then proceeded
to engage in due diligence activities.
On October 30, 2001, Infodata received a letter of intent from another
potential acquirer with whom it had been in off and on negotiations for 2
months, offering to acquire all of Infodata's outstanding shares for a price
ranging from $4.75 million to $5.7 million. However, there was no basis to
believe that the price would exceed the low end of that range. Furthermore, the
potential acquirer was a foreign company with no prior information technology
contracting experience with Infodata's primary intelligence customer and
Infodata's board of directors and management anticipated that significant costs,
delays and uncertainty would be encountered in connection with obtaining the
required governmental regulatory approvals mandated by the provisions of federal
laws regulating the acquisition by foreign companies of U.S. companies that
contract with certain U.S. government agencies. After discussing the offer with
Infodata's board of directors, Infodata management advised the potential
acquirer that Infodata did not desire to pursue the offer in view of Infodata's
receipt of a more favorable offer from SAIC, as discussed below.
On October 30, 2001, SAIC submitted a letter of intent to Infodata
offering to acquire all of Infodata's outstanding shares of common stock for
$5.0 million. The offer was not conditioned upon the satisfaction of any
governmental regulatory approval requirement.
On October 31, 2001, another potential acquirer offered to acquire
Infodata's Intelligence Systems Division for $4.0 million, which offer was
rejected by Infodata's board of directors as inadequate, as the board believed
it would leave Infodata with an operating base that would not be viable.
On October 31, 2001, after discussing the terms of SAIC's letter of
intent with Infodata's board of directors, Infodata management advised SAIC of
its acceptance of SAIC's letter of intent and a 30-day exclusivity commenced.
SAIC continued due diligence activities and engaged in further discussions with
Infodata management.
On November 2, 2001, Infodata entered into an additional agreement with
Investec PMG Capital providing that the investment advisory firm would review
and analyze the terms of the proposed merger; investigate the business,
financial condition, results of operations and prospects of Infodata; advise and
assist Infodata's board of directors with respect to the financial implications
of proceeding with the merger; and render a written opinion as to the fairness,
from a financial point of view, of the merger to Infodata shareholders.
On November 29, 2001, Infodata received the first draft of the proposed
agreement and plan of merger from SAIC and agreed to extend the exclusivity
period for another 30 days. The November 29th draft did not quantify the amount
of consideration to be paid by SAIC in the merger. SAIC and
14
Infodata officials then engaged in negotiations regarding the amount of
consideration and on December 13, 2001, SAIC offered to pay $4.83 million for
Infodata's outstanding shares, the equivalent of $1.00 per share. SAIC and
Infodata proceeded to further negotiate terms of the agreement and plan of
merger in mid-December and on January 3, 2002, representatives of Infodata and
SAIC reached an agreement that the merger consideration would be $1.00 per share
of Infodata common stock that is outstanding at the effective time of the
merger, plus the amount necessary to cash out stock options with an exercise
price of less than $1.00 per share that are outstanding at the effective time of
the merger. Infodata's board of directors held a special meeting on January 8,
2002, which was adjourned and continued on January 10, 2002, to vote on the
proposed merger. At the meeting, the principal terms of the proposed merger were
described and discussed in detail and alternative courses of action were
considered. Investec PMG Capital made a presentation regarding its analysis of
the financial terms of the proposed transaction, discussed the results of the
negotiations and expressed its opinion that the cash merger consideration was
fair to the holders of Infodata's common stock from a financial point of view.
(A copy of Investec PMG Capital's fairness opinion, dated January 10, 2002, is
set forth as Appendix B to this proxy statement.) Infodata's board of directors
unanimously adopted the agreement and plan of merger. Following receipt of the
board of directors' approval, Infodata and SAIC executed the merger agreement on
January 10, 2002, and on January 11, 2002, Infodata issued a press release
announcing the execution of the merger agreement.
Reasons for the Merger
Infodata's board of directors approved the merger agreement and the
merger based on its consideration of a number of material factors, including the
following:
o Infodata's future financial outlook and possible alternatives
to the proposed merger, including the advantages, challenges
and risks associated with continuing as an independent
company. In this regard, the Infodata board considered the
amount and range of acquisition consideration most likely to
be offered by other prospective acquisition candidates, the
likelihood of realizing those values, the likelihood of
receiving a better financial offer from another potential
acquirer and the view of Infodata's management that the merger
represented the best strategic alternative available to
Infodata under the circumstances. The Infodata board also
considered the prospects of remaining as an independent
company, including Infodata's prospects for the success of its
business of providing complex information technology solutions
in the area of knowledge management and the information
technology services industry generally.
o The substantial decline in the market price of Infodata's
common stock during the past five years, with the average of
the closing sales prices of the shares declining from $9.22 in
1997 to $4.49 in 1998, to $2.12 in 1999, to $2.53 in 2000, to
$1.28 in the six months ended June 30, 2001 and to $0.79 in
the six months ended December 31, 2001, and the view of
Infodata's board of directors and management that it could
take a long time for the market price of Infodata's common
stock to exceed the $1.00 per share merger consideration
offered by SAIC;
o The $1.00 per share merger consideration offered by SAIC
constituted a 41% premium over the closing sale price of the
common stock on January 10, 2002, which was the business day
immediately preceding the date on which Infodata publicly
announced that the merger agreement had been entered into;
o Although Infodata's revenues increased from approximately
$10.3 million in 1999 to approximately $13.0 million in 2000,
and presently estimates that its revenues in 2001 will be
approximately $16.0 million, it incurred net losses of $5.0
million in 1999 and $2.3 million in 2000 and, without giving
effect to a non-recurring gain of $1.1 million in early 2001,
preliminarily estimates that its net loss for 2001 will be
approximately $1.0 million. Although estimated net income of
$330,000 is preliminarily expected to be recorded for the
fourth quarter of 2001, and profitability is expected in at
least the first quarter of 2002, there is no assurance such
profitability can be sustained in the future if Infodata were
to continue as an independent company.
o Investec PMG Capital, Infodata's financial adviser, expended
extensive advisory efforts over an approximate 18-month period
and rendered its opinion that as of the date of its opinion
and based upon and subject to the various considerations and
limitations set
15
forth in its opinion, the $1.00 per share merger consideration
offered by SAIC is fair, from a financial point of view, to
Infodata's shareholders;
o SAIC, like Infodata, provides information technology services
to the intelligence community and the belief of Infodata's
board and management that the companies' activities in that
area of business would produce significant synergies for
growth;
o Infodata's common stock was delisted from the NASDAQ SmallCap
market on July 19, 2001 due to Infodata's failure to comply
with that market's minimum net tangible assets requirement for
continued listing, and Infodata's board and management
determination that it could take a long time for Infodata to
become eligible to have its common stock listed again in that
market; and
o Infodata's line of credit expired on April 30, 2001, and as a
result of recurring operating and net losses incurred during
the past four years and the nine months ended September 30,
2001, and continuing negative cash flow experienced in those
periods, Infodata has not paid the amount due under the line
of credit and has not negotiated a new line of credit or
alternative financing to pay off the amount due under the line
of credit.
The Infodata board also considered certain potentially adverse
consequences of the merger, including the potential disruption of Infodata's
business that could result from the announcement of the merger, the
uncertainties regarding Infodata customers' and employees' perception of the
merger and the possibility that the merger might not be consummated. Infodata's
board, however, determined that those considerations were not sufficient,
individually or in the aggregate, to outweigh the perceived favorable
consequences and advantages of the merger.
The Infodata board of directors considered the foregoing and other
factors as a whole, and did not attempt to quantify, rank or otherwise assign
relative weights to the specific factors it considered.
Recommendation of the Infodata Board of Directors
At its meeting that concluded on January 10, 2002, Infodata's board of
directors voted unanimously to enter into the merger agreement and to recommend
that Infodata's shareholders vote to approve the merger agreement. Infodata's
board made its determination after careful consideration of, and based on, the
factors discussed above under "Reasons for the Merger," as well as the following
factors:
o the financial and valuation analyses presented to the board of
directors by Investec PMG Capital, including market prices and
financial data relating to other companies engaged in
businesses considered comparable to Infodata and the prices
and premiums paid in recent selected acquisitions of companies
engaged in businesses considered comparable to those of
Infodata;
o the likelihood that the merger would be consummated, including
the financial and operational risks to Infodata if the merger
were not consummated following its public announcement; and
o the nature of the conditions under the merger agreement to
SAIC's obligation to close the merger, the board's belief that
these conditions are expected to be satisfied and the fact
that the terms of the merger agreement should not unduly
discourage third parties from making bona fide proposals
subsequent to signing the merger agreement and, if any such
proposal were made, that Infodata's board of directors, in the
exercise of its good faith business judgment of the best
interests of Infodata and its shareholders, could authorize
Infodata to provide information to, engage in negotiations
with, and, subject to payment of the termination fee under
certain circumstances, enter into a transaction with, another
party.
In view of the number and wide variety of factors considered in
connection with its evaluation of the merger and the complexity of these
matters, Infodata's board of directors did not find it practicable to, nor did
it attempt to, quantify, rank or otherwise assign relative weights to the
specific factors it considered. In addition, the Infodata board did not
undertake to make
16
any specific determination as to whether any particular factor was favorable or
unfavorable to the board of directors' ultimate determination or assign any
particular weight to any factor, but rather conducted an overall analysis of the
factors described above, including consideration of the information, opinions,
reports and statements presented by Infodata's management and its legal and
financial advisors. In considering the foregoing factors, individual members of
the board of directors may have given different weight to different factors.
Infodata's board of directors considered all these factors as a whole, and
overall considered the factors to be favorable to, and to support, its
determination.
Infodata's board of directors believes that the terms of the merger are
fair to and in the best interests of Infodata and its shareholders and
unanimously recommends to its shareholders that they vote "FOR" the proposal to
adopt and approve the merger.
Directors and officers, as well as a former director of Infodata,
holding an aggregate of 904,819 shares of Infodata's common stock, constituting
approximately 19% of the outstanding shares, have entered into voting agreements
and irrevocable proxies with SAIC pursuant to which such persons have agreed to
vote their shares in favor of the merger agreement.
Certain Effects of The Merger
As a result of the merger, the entire equity interest in Infodata will
be beneficially owned by SAIC. Infodata's shareholders will have no further
interest in Infodata except their right to receive $1.00 per share as cash
consideration for their shares. Furthermore, holders of outstanding options to
purchase Infodata common stock at an exercise price less than $1.00 per share
will be entitled to receive cash equal to the difference between $1.00 per share
and the applicable exercise price of the options. Finally, under the terms of
the merger agreement, all Infodata options and warrants outstanding as of the
effective date of the merger will be cancelled.
In addition, Infodata common stock will no longer be traded on the OTC
Bulletin Board and price quotations with respect to sales of shares in the
public market will no longer be available. The registration of our common stock
under the Securities Exchange Act of 1934 will be terminated, and this
termination will eliminate Infodata's obligation to file periodic financial and
other information with the Securities and Exchange Commission and will make most
other provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b) and the requirements of furnishing a proxy or
information statement in connection with shareholders' meetings, no longer
applicable.
The receipt of cash pursuant to the merger will be a taxable
transaction. See " THE MERGER - Material Federal Income Tax Consequences."
Interests of Certain Persons in the Merger
In considering the recommendation of the board of directors with
respect to the merger, shareholders should be aware that certain officers and
directors of Infodata have interests in connection with the merger that present
them with actual or potential conflicts of interest. The board of directors was
aware of these matters, which are discussed below, and considered them in
connection with its consideration and approval of the merger.
Bonus Arrangements
On January 25, 2001, Infodata's board adopted a resolution to pay
bonuses to three officers and one employee of Infodata in the event of the
successful consummation of either a merger or the sale of substantially all of
Infodata's assets. Pursuant to the resolution, Steven M. Samowich (our President
and Chief Executive Officer and a director), Curtis D. Carlson (our Secretary),
Gary I. Gordon (our Chief Accounting Officer) and Eva Franklin (our Director of
Human Resources) will receive $100,000, $15,000, $15,000 and $15,000,
respectively, from Infodata if the merger is consummated.
Stock Options
Certain directors and officers of Infodata hold options to purchase
shares of Infodata common stock. All outstanding options will be cancelled as of
the effective time of the merger. Holders of those options with an exercise
price of less than $1.00 per share will be entitled upon
17
consummation of the merger to receive a cash payment equal to $1.00 per share
minus the exercise price of the option. The following list sets forth
information regarding those options held by each director and executive officer
of Infodata, and by all directors and executive officers of Infodata as a group,
that will be entitled to receive that cash payment.
Number Exercise Cash
of Shares Date of Price Payment
Subject Grant Per to be
Name Position to Option of Option Share Received
---- -------- --------- --------- ----- --------
Richard T. Bueschel Director 5,000 8/15/01 $0.82 $900.00
5,000 11/15/01 $0.70 $1,500.00
Alan S. Fisher Director 5,000 8/15/01 $0.82 $900.00
5,000 11/15/01 $0.70 $1,500.00
4,666 10/3/01 $0.74 $1,213.16
Christine Hughes Director 5,000 8/15/01 $0.82 $900.00
5,000 11/15/01 $0.70 $1,500.00
4,666 10/3/01 $0.74 $1,213.16
Robert M. Leopold Director 5,000 8/15/01 $0.82 $900.00
5,000 11/15/01 $0.70 $1,500.00
Isaac M. Pollak Director 4,000 8/15/01 $0.82 $720.00
4,000 11/15/01 $0.70 $1,200.00
4,666 10/3/01 $0.74 $1,213.16
Millard H. Pryor, Jr. Director 4,000 8/15/01 $0.82 $720.00
4,000 11/15/01 $0.70 $1,200.00
Curtis D. Carlson Secretary 6,000 8/22/01 $0.63 $2,220.00
Gary I. Gordon Chief Accounting Officer 6,000 8/22/01 $0.63 $2,220.00
All directors and executive ------ ----------
officers as a group 81,998 $21,519.48
Severance Arrangements Under Existing Employment Agreements
On April 23, 2001, Infodata entered into executive separation
agreements with Curtis D. Carlson and Gary I. Gordon. In the event that either
officer's employment is terminated involuntarily, without cause, within six
months following a change in control of Infodata and such person is not offered
an equivalent position and compensation, that officer is entitled to separation
pay equal to four months salary and benefits.
Infodata entered into a letter employment agreement with Steven M.
Samowich on October 29, 1998. Pursuant to the letter employment agreement, Mr.
Samowich is serving as Infodata's President and Chief Executive Officer, and
receives an annual base salary of $251,400 plus an annual incentive bonus based
on the achievement of certain management objectives and financial performance
measures. Mr. Samowich's employment with Infodata is terminable at will and is
not for a definite term. However, if Mr. Samowich is terminated by Infodata,
other than for cause, he will continue to be paid his base salary in monthly
increments for a period of 12 months.
During 1986, Infodata entered into executive separation agreements with
Mr. Harry Kaplowitz, Executive Vice President of Infodata and Dr. Robert J.
Loane, Senior Vice President of Infodata. In the event that either officer's
employment is terminated involuntarily, without cause, following a change in
control of Infodata, that officer is entitled to separation pay equal to two
years base
18
salary and continuation of life and health insurance coverage for two
years. Additionally, any type of pension or profit-sharing credited service will
be extended for two years.
Material Federal Income Tax Consequences
The following summarizes the material federal income tax consequences
to Infodata shareholders of consummation of the merger. This summary is based on
current law, which is subject to change at any time, possibly with retroactive
effect. This summary is not a complete description of all tax consequences of
consummation of the merger and, in particular, may not address federal income
tax consequences applicable to you if you are subject to special treatment under
federal income tax law, including, without limitation, rules relating to
Infodata shareholders (i) who are not citizens or residents of the United
States, (ii) who are financial institutions, tax-exempt organizations, insurance
companies or dealers in securities, or (iii) who acquired their shares of
Infodata common stock pursuant to the exercise of options or otherwise as
compensation. In addition, this summary does not address the tax consequences of
the merger under applicable state, local or foreign laws. This discussion
assumes you hold your shares of Infodata common stock as a capital asset within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended.
The receipt of the merger consideration by shareholders will be a
taxable transaction for federal income tax purposes. Each shareholder will
recognize gain or loss equal to the difference between the shareholder's
adjusted basis in the common stock surrendered in the merger and the amount of
cash received therefor. Such gain or loss generally will be a capital gain or
loss provided that the shareholder held the common stock as a capital asset.
Capital gain or loss will be treated as long-term capital gain or loss if the
shareholder held the common stock for more than one year at the time of the
merger. Long-term capital gain recognized by a non-corporate shareholder is
generally subject to federal income tax at a maximum rate of 20%. In addition, a
shareholder may be limited in its ability to use capital losses to offset
ordinary income.
Each Infodata shareholder should consult with his or her tax advisor
about the tax consequences of the merger in light of his or her individual
circumstances, including the application of any federal, state, local or foreign
law.
Rights of Dissenting Shareholders
Shareholders of a corporation that is proposing to merge or consolidate
with another entity are sometimes entitled to appraisal or dissenters' rights in
connection with the proposed transaction depending on the circumstances. Most
commonly, these rights confer on shareholders who oppose the merger the right to
receive the fair value for their shares as determined in a judicial appraisal
proceeding, in lieu of the consideration being offered in the merger.
Holders of record of Infodata common stock who comply with the
procedures described below will be entitled to dissenters' rights under Article
15 of the Virginia Stock Corporation Act. Where appropriate, shareholders are
urged to consult with their legal counsel to determine the appropriate
procedures for the making of a notice of intent (as described below).
A vote in favor of the merger by an eligible holder will result in a
waiver of such eligible holder's dissenters' rights.
The following discussion is only a summary and does not purport to be a
complete statement of the law pertaining to dissenters' rights under the
Virginia Stock Corporation Act. The text of Article 15 of the Virginia Stock
Corporation Act is reprinted in its entirety as Appendix C to this proxy
statement.
Under the Virginia Stock Corporation Act, eligible holders who follow
the procedures set forth in Article 15 of the Virginia Stock Corporation Act
will be entitled to receive payment of the "fair value" of such shares. Any
eligible holder who wishes to exercise dissenters' rights should review the
following discussion and Appendix C carefully because failure to comply in a
timely and proper manner with the procedures specified may result in the loss of
dissenters' rights under the Virginia Stock Corporation Act.
An eligible holder wishing to exercise dissenters' rights must deliver
to Infodata, prior to or at the shareholders' meeting (but in any event before
the vote is taken), a written notice of intent to demand payment for the
eligible holder's shares. An eligible holder delivering a notice
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of intent must not vote his shares in favor of the merger or he will lose his
dissenters' rights. All notices of intent should be sent or delivered to
Infodata Systems Inc., Attention: Secretary, 12150 Monument Drive, Fairfax,
Virginia 22033.
Within ten days after the effective date of the merger, if the
shareholders approve the merger agreement, Infodata shall deliver a dissenter's
notice in writing to all dissenting holders. The dissenter's notice shall:
o state where the dissenting holder's payment demands should be
sent and where and when stock certificates should be
deposited;
o set a date by which the surviving corporation must receive the
payment demand; and
o include such other information as required by the Virginia
Stock Corporation Act.
A dissenting holder to whom a notice is sent must demand payment within
the time specified in the dissenter's notice, deposit his stock certificates in
accordance with the terms of the dissenter's notice and make certain
certifications required by the Virginia Stock Corporation Act. Holders of
certificated shares must deposit their certificates in accordance with the
dissenter's notice. If a dissenting holder fails to take such actions, the
dissenting holder loses his dissenters' rights.
Within 30 days of Infodata's receipt of a demand for payment from a
dissenting holder, Infodata must pay the dissenting holder Infodata's estimate
of the fair value of the dissenting holder's shares plus accrued interest. With
any payment, Infodata must provide its most recent year-end and income statement
from that year, an explanation of how Infodata calculated the fair value of the
shares and interest, the procedure a dissenter may follow if he is not satisfied
with the demand payment and a copy of Article 15 of the Virginia Stock
Corporation Act. Infodata's payment obligation may be enforced by a dissenting
holder on an expedited basis in a Virginia circuit court, if necessary.
Infodata may elect to deliver your demand payment after the effective
time of the merger if you acquired your shares after the merger was announced or
publicized. In theses circumstances, Infodata will estimate the fair value of
the dissenting holder's shares plus accrued interest and shall offer to pay this
amount to each dissenter who agrees to accept it in full satisfaction of his
demand. With any such offer, Infodata must provide its most recent year-end and
income statement from that year, an explanation of how Infodata calculated the
fair value of the shares and interest, and the procedure a dissenter may follow
if he is not satisfied with the offer.
A dissenting holder who is not satisfied with the amount paid or
offered by Infodata must notify Infodata of the dissenting holder's own estimate
of the fair value of his shares and the amount of interest due (less any amount
that may have been already received by the dissenting holder from Infodata) and
demand that Infodata pay this estimated amount. This notice must be given in
writing within 30 days of the date that Infodata made or offered to make payment
for the dissenting holder's shares.
If a dissenting holder's demand for payment remains unsettled, Infodata
is obligated to commence a proceeding to determine the fair value of the shares
and accrued interest within 60 days of the receipt of the dissenting holder's
payment demand. If Infodata fails to commence such proceeding in accordance with
the Virginia Stock Corporation Act, Infodata must pay the dissenting holder the
amount demanded by the dissenting holder. The appraisal proceeding must be
brought in a Virginia circuit court.
Dissenting holders considering seeking appraisal should be aware that
the fair value of their shares of common stock, as determined under Article 15
of the Virginia Stock Corporation Act, could be more than, the same as or less
than the merger consideration that would be paid to them pursuant to the merger
agreement. The costs and expenses of the appraisal proceeding will be determined
by the court and assessed against Infodata unless the court determines that the
dissenting holder did not act in good faith in demanding payment of the fair
value of their shares, in which case such costs and expenses may be assessed
against the dissenting holder.
Dissenting holders will only be entitled to receive payment in
accordance with Article 15 of the Virginia Stock Corporation Act and will not be
entitled to vote their shares of common stock or
20
exercise any other rights of a shareholder. A dissenting holder may withdraw his
demand only with the consent of Infodata.
If any eligible holder who demands appraisal of his shares under
Article 15 fails to perfect, or effectively withdraws or loses, his right to
appraisal, as provided in the Virginia Stock Corporation Act, the shares of
Infodata stock of such holder will be converted into the right to receive the
merger consideration in accordance with the merger agreement.
Failure to follow the steps required by Article 15 of the Virginia
Stock Corporation Act for perfecting dissenters' rights may result in the loss
of dissenters' rights. The preceding discussion summarizes the dissenters'
rights provisions of Article 15 of the Virginia Stock Corporation Act.
Shareholders are urged to consult Appendix C which sets forth in full Article 15
of the Virginia Stock Corporation Act. This summary is qualified in its entirety
by a reference to Article 15 of the Virginia Stock Corporation Act.
Fairness Opinion of Infodata's Financial Advisor
Investec PMG Capital was retained by Infodata to render an opinion as
to the fairness, from a financial point of view, to Infodata's shareholders of
the consideration to be paid by SAIC in the merger. On January 8, 2002, Investec
PMG Capital rendered its oral opinion to the Infodata board of directors, and
issued a written opinion dated January 10, 2002, that as of such date, and
subject to the assumptions, factors and limitations stated in its opinion, the
consideration to be received was fair to Infodata's shareholders from a
financial point of view.
As part of its investment banking services, Investec PMG Capital
regularly engages in the valuation of businesses and their securities in
connection with mergers and acquisitions involving both listed and unlisted
companies and their associated securities, primarily in the information
technology/professional services industries. Investec PMG Capital has acted as
financial advisor to Infodata in connection with the merger. For its services as
financial advisor, Investec PMG Capital received a retainer fee of $90,000 and
will receive an additional fee estimated to be $240,000 contingent on
consummation of the merger plus its expenses estimated to be approximately
$10,000. In addition, Investec PMG Capital received a fee of $50,000 from
Infodata for rendering its fairness opinion. The fee rendered for its fairness
opinion is not contingent upon the results of the merger.
In arriving at its opinion, Investec PMG Capital reviewed among other
things, the final merger agreement; certain publicly available business and
financial information relating to Infodata for recent years and interim periods
to date; and certain internal financial and operating information, including
financial forecasts and projections that were provided to Investec PMG Capital
by Infodata, taking into account its growth prospects and the markets in which
it is involved. In addition, Investec PMG Capital held discussions with
management regarding the business prospects, financial outlook and operating
plans of Infodata. No limitations were imposed by Infodata on the scope of
Investec PMG Capital's investigation.
In reviewing the merger agreement, Investec PMG Capital took into
account the financial terms of the merger as set forth in the merger agreement
in relation to, among other things, (1) current and historical market prices and
trading volumes of the Infodata common stock; (2) the limited trading volume and
public float of the Infodata common stock; (3) the historical and projected
earnings of Infodata; and (4) the performance in the public market of companies
similar to Infodata. Furthermore, Investec PMG Capital utilized a discounted
cash flow analysis to analyze the present value of the future cash flow streams
that Infodata is expecting to generate. In addition to the foregoing, Investec
PMG Capital performed such other studies, analyses and investigations and
considered such other financial, economic and market criteria as it considered
appropriate in arriving at its opinion.
In rendering its opinion, Investec PMG Capital relied, without
verification, upon the accuracy and completeness of all financial information
and forecasts and other information provided to it by Infodata or through
publicly available sources. With respect to the financial projections and other
information provided by Infodata's management, Investec PMG Capital was advised
that in management's opinion such forecasts and other information were
reasonably prepared using the best currently available estimates and judgments
as to the financial and operational timing and achievability thereof.
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THE FULL TEXT OF THE WRITTEN OPINION OF Investec PMG Capital DATED
JANUARY 10, 2002, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS APPENDIX B AND
SHOULD BE READ CAREFULLY IN ITS ENTIRETY. THE OPINION OF Investec PMG Capital
WAS PREPARED FOR USE BY THE BOARD OF DIRECTORS OF INFODATA AND RELATES ONLY TO
THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE CONSIDERATION TO BE RECEIVED
BY INFODATA'S SHAREHOLDERS PURSUANT TO THE MERGER, AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
SPECIAL MEETING. THE SUMMARY OF THE OPINION OF Investec PMG Capital SET FORTH IN
THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In preparing its opinion, Investec PMG Capital performed a wide variety
of financial and comparative analyses as described below. The preparation of a
fairness opinion is subject to certain complex financial analyses, the
application of those methodologies to the circumstances at hand, and the global
economic and equity market conditions at the time such opinion is prepared and
accordingly does not lend itself to a summary description. As such, Investec PMG
Capital has told Infodata that it believes its analyses must be considered in
their totality and that selected portions of such analyses could be misleading
or create an incomplete view of the processes underlying such analyses and
opinion.
Selected Company Analysis
Investec PMG Capital compared selected historical stock market and
balance sheet data and financial ratios for Infodata to the corresponding
multiples and ratios of the following selected information technology services
companies: AnswerThink; First Consulting Group; RWD Technologies; Analysts
International; Covansys; Computer Horizons; RCM Technologies; Hall Kinion and
Assoc.; Razorfish; Sapient; CACI International; PEC Solutions; and Titan Corp.
Investec PMG Capital selected the companies used in this analysis based on a
variety of characteristics including the similarity of their size, growth,
profitability and customer base to that of Infodata. The data and ratios
Investec PMG Capital compared included, among other things, market value of
invested capital (MVIC) (current stock price multiplied by the shares
outstanding plus all indebtedness of the company plus any preferred stock
outstanding less cash and marketable securities) to last 12 months (LTM)
revenue. An analysis of MVIC to LTM revenues yielded an interquartile range of
0.25x to 1.14x with a median of 0.39x as compared to 0.30x for the contemplated
transaction. Because of Infodata's losses, as well as the losses of most of the
comparables, analyses of MVIC to LTM earnings before interest, taxes,
depreciation and amortization (EBITDA), to earnings before interest and taxes
(EBIT) and price-to-earnings ratios were not meaningful.
Selected Transaction Analysis
Using publicly available information, Investec PMG Capital analyzed the
purchase price and implied transaction value multiples paid in selected
transactions in the information technology services industry, consisting of
(acquirer/target): PEC Solutions/Troy Systems; Titan Corp./BTG; divine/Eprise;
divine/OpenMarket; Novell/Cambridge Technology Partners; divine/eshare
communications; divine/MarchFirst; Fusion Networks/Full Moon Interactive;
NCR/4Front Technologies; Perficient/Compete; Perot Systems/Solutions Consulting;
Drugmax.com/Desktop Corp.; Interliant/Soft Link; and CACI International/XEN
Corp. Investec PMG Capital selected the companies used in this analysis based
upon a variety of characteristics including the similarity of their size,
growth, profitability and customer base to that of Infodata. Investec PMG
Capital compared the purchase price paid (including total equity value plus
assumption of any liabilities and indebtedness less cash) in the selected
transactions as a multiple of LTM revenue. All of the multiples were based upon
information available at the time of the announcement of the transaction. Such
analysis indicated that for the selected transactions the interquartile range of
LTM revenue multiples was from 0.57x to 1.28x with a median of 0.83x (based on
12 of the identified transactions), as compared to 0.30x for the contemplated
transaction. Because information about each of the multiples described above was
not publicly available for all of the transactions identified, Investec PMG
Capital's computation of the mean and median multiples was based, in each case,
only on transactions for which relevant information about the multiple was
publicly available. Because of Infodata's losses, as well as the losses of
several of the comparables, analyses of purchase price paid to LTM earnings
before interest, taxes, depreciation and amortization (EBITDA), to earnings
before interest and taxes (EBIT) and price-to-earnings ratios were not
meaningful.
22
Selected Premium Analysis
Using publicly available information, Investec PMG Capital reviewed the
premiums paid in merger and acquisition transactions involving companies
providing information technology services consisting of (acquirer/target): Titan
Corp./BTG; divine/Eprise; divine/OpenMarket; Novell/Cambridge Technology
Partners; divine/eshare communications; and NCR/4Front Technologies. Investec
PMG Capital compared the premium offered in these transactions for the period of
30 and 90 days prior to the announcement of a transaction (the Stated Period)
with the premium offered by the merger consideration for Infodata. This analysis
indicated that the range of premiums offered during the Stated Period was from
- -31.8% to 152.8% for the 30-day period and -2.3% to 256.6% for the 90-day period
with a median of 44.5% and 54.3%, respectively, compared to the premium offered
to Infodata of 38.9% and 58.7%, respectively.
No company, transaction or business used in the Selected Company
Analysis, Selected Transaction Analysis, or Selected Premium Analysis as a
comparable is identical to Infodata or the merger. Accordingly, the results of
the foregoing are not entirely mathematical. Instead it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of each of the businesses, which could affect the multiples
being used for comparison.
Discounted Cash Flow Analysis
Investec PMG Capital performed a discounted cash flow analysis of
Infodata. Investec PMG Capital calculated a net present value of discounted free
cash flows for fiscal years 2002 through 2004 using discount rates ranging from
20% to 26%. Investec PMG Capital calculated the terminal multiples in fiscal
year 2004 to range from 5.5x EBITDA to 7.0x EBITDA. These terminal values were
then discounted to their net present value using discount rates ranging from 20%
to 26%. Using the foregoing terminal values and discount rates for Infodata, the
equity value per share ranged from $0.81 to $1.10 per share as compared to the
equity value implied by the merger consideration of $1.00.
Stock Trading History
Investec PMG Capital examined the history of the trading prices and
volumes for the shares of Infodata common stock. This analysis showed that
during the three-month period from September 7, 2001 to December 7, 2001, the
trading price of Infodata common stock ranged from $0.88 to $0.57 with an
average price of $0.73. The merger consideration represents a premium of 37.0%
to the average stock price during that period. In addition this examination
showed that during the same period, the average daily trading volume for the
Infodata common stock was less than 1% of the outstanding shares. Further,
approximately 19% of the outstanding Infodata common stock was, at the time of
Investec PMG Capital's analysis, held by directors and executive officers of
Infodata.
As described above, Investec PMG Capital's opinion to the board of
directors of Infodata was one of many factors taken into consideration by the
board of directors in making its determination to approve the merger agreement.
The foregoing summary of the analyses performed by Investec PMG Capital does not
purport to be a complete description of those analyses and is qualified by the
full written opinion set forth in Appendix B. Investec PMG Capital has consented
to the inclusion of its opinion as Appendix B and of the description of its
opinion in this proxy statement.
Regulatory Requirements
We are not aware of any material government or regulatory approvals or
actions that may be required for completion of the merger. If any governmental
or regulatory approval or action is or becomes required, we would seek the
approval or action.
THE MERGER AGREEMENT
The following description of the merger agreement does not purport to
be complete and is qualified in its entirety by reference to the full text of
the merger agreement, a copy of which is included in this proxy statement as
Appendix A and is incorporated herein by reference.
23
Description of the Merger
Form of Merger. Infodata, SAIC and Info Acquisition Corp. have entered
into a merger agreement, which provides that, if all of the conditions set forth
in the merger agreement are satisfied or waived, Info Acquisition Corp. will
merge with and into Infodata. Infodata will be the surviving corporation in the
merger and will become a wholly-owned subsidiary of SAIC.
Consideration to be received by Infodata shareholders in the Merger;
Cancellation of Certificates. On the date the merger becomes effective, each
issued and outstanding share of Infodata common stock will be converted into,
and become exchangeable for, the right to receive the merger consideration in
the amount of $1.00 in cash. Certificates representing shares of Infodata common
stock immediately prior to the merger will, after the merger is effective,
represent only the right to receive, upon surrender of the certificate, the
merger consideration of $1.00 per share. Infodata shareholders will cease to
have an equity interest in, or possess any rights as shareholders of Infodata.
Each share of common stock in Info Acquisition Corp. outstanding immediately
before closing of the merger will be converted into and exchangeable for a share
of common stock in Infodata as the surviving corporation immediately after the
merger occurs.
Treatment of Infodata Stock Options and Warrants. No later than the
effective time of the merger, each unexpired and unexercised option granted by
Infodata to purchase shares of Infodata common stock with an exercise price of
less than $1.00 per share will be cancelled in exchange for the right to receive
in cash the amount by which the $1.00 per share merger consideration exceeds the
per share exercise price of such option. All other options and warrants granted
by Infodata to purchase shares of Infodata common stock with an exercise price
of $1.00 per share or more will be canceled no later than the effective time of
the merger.
The Effective Time. The merger will be effected by the filing of: (i)
articles of merger to the State Corporation Commission of the Commonwealth of
Virginia in accordance with the provisions of the Virginia Stock Corporation Act
and (ii) a certificate of merger with the Secretary of State of the State of
Delaware in accordance with the provisions of the Delaware General Corporation
Law promptly after the closing of the merger. The merger will become effective
at the time the articles of merger are filed with and accepted by the State
Corporation Commission of the Commonwealth of Virginia and the certificate of
merger is filed with the Secretary of the State of Delaware.
The closing of the merger will take place as soon as practicable, and
no later than the fifth business day following satisfaction or waiver of all of
the conditions to consummation of the merger unless another date is agreed to by
Infodata, Info Acquisition Corp. and SAIC. See "The Merger Agreement--Conditions
to the Merger."
Payment of Merger Consideration. On or prior to the date that the
merger becomes effective, SAIC will deposit into an exchange fund with a
disbursing agent the cash to be paid as the merger consideration. Promptly after
the effective time of the merger, SAIC will cause the disbursing agent to mail a
letter of transmittal to each Infodata shareholder and each holder of an option
to purchase shares of Infodata common stock with an exercise price less than
$1.00 per share. The letter of transmittal will contain instructions on how to
receive cash from the disbursing agent in exchange for outstanding shares of
Infodata common stock and/or shares purchasable under such stock option with an
exercise price of less than $1.00 per share.
Any merger consideration deposited with the disbursing agent that has
remained unclaimed by Infodata shareholders or holders of an option to purchase
shares of Infodata common stock with an exercise price less than $1.00 per share
for one year after the effective date of the merger will be paid to SAIC upon
demand. Thereafter, record holders of Infodata common stock or holders of an
option to purchase shares of Infodata common stock with an exercise price less
than $1.00 per share that have not previously complied with the exchange
procedures pursuant to the merger agreement may look only to SAIC for payment of
any merger consideration, without interest. Any undisbursed merger consideration
shall become the property of SAIC after a period of five years following the
effective time of the merger or immediately before any payment of the merger
consideration to the record holder of Infodata common stock and/or the holder of
an option to purchase shares of Infodata common stock with an exercise price
less than $1.00 per share would become the property of any governmental agency.
SAIC, or the disbursing agent appointed by SAIC, will be entitled to
deduct and withhold from the merger consideration any amounts that they are
required to deduct and withhold under applicable tax laws. Any amounts so
withheld will be treated for all purposes of the merger agreement as
24
having been paid to the record holder of Infodata common stock and/or the holder
of an option to purchase shares of Infodata common stock with an exercise price
less than $1.00 per share in respect of which the deduction and withholding has
been made.
Representations and Warranties
The merger agreement contains representations and warranties made by
each of the parties to the agreement. None of these representations and
warranties will survive beyond the time the merger becomes effective.
The merger agreement contains customary representations and warranties
of Infodata and each of SAIC and Info Acquisition Corp. as to, among other
things:
o due organization and good standing;
o corporate authorization of the merger agreement and
authorization to enter into the transactions contemplated
thereby;
o the binding effect of the merger agreement;
o pending litigation, actions and proceedings;
o compliance with laws;
o governmental approvals and consents;
o conflicts, violations and defaults under its charter and
bylaws, any other agreements or instruments, or any judgments,
orders or laws as a result of the transactions contemplated by
the merger agreement; and
o brokers fees, commissions or similar fees.
In addition, the merger agreement contains representations and
warranties by Infodata as to, among other things:
o capitalization;
o liens on outstanding capital stock;
o obligations to repurchase, redeem or acquire shares of
Infodata or its subsidiaries;
o options, rights, subscriptions, warrants, preemptive rights,
calls or commitments relating to Infodata stock;
o issuance of outstanding shares of Infodata stock;
o vote by Infodata's shareholders necessary to approve the
merger;
o receipt of a fairness opinion from its financial advisor;
o Securities and Exchange Commission reporting;
o financial statements;
o conduct of business and material adverse changes or effects
since September 30, 2001;
o ownership and condition of tangible assets;
25
o compliance with laws and permits;
o rights to intellectual property and other intangible assets;
o employee benefit plans;
o material contracts;
o tax matters and compliance with relevant tax laws;
o environmental matters;
o real property and leases;
o insurance;
o conflicts of interests;
o labor matters;
o customers and suppliers;
o suspension or debarment from bidding on contracts with
governmental agencies;
o security clearances held by Infodata and its affiliates;
o fixed price contracts;
o full disclosure with no false or misleading statements; and
o confidentiality agreements.
In addition, SAIC represents and warrants in the merger agreement that
at all times through the effective time of the merger, it will have sufficient
funds to pay the merger consideration to be paid to record holders of Infodata
common stock and holders of options to purchase shares of Infodata common stock
with an exercise price less than $1.00 per share at the effective time of the
merger.
The representations and warranties in the merger agreement are
complicated and not easily summarized. You are urged to read carefully the
sections of the merger agreement entitled "Representations and Warranties of the
Company" and "Representations and Warranties of Parent and Merger Sub."
Covenants under the Merger Agreement
Conduct of Infodata's Business. Infodata has agreed that until the
effective time of the merger, or unless SAIC consents in writing, that it will,
and will cause each of its subsidiaries to, conduct its operations according to
its ordinary course of business, consistent with past practice. Unless permitted
or disclosed under the merger agreement, Infodata has agreed to operate its
business, and to cause each of its subsidiaries to conduct its business, in
compliance with certain restrictions relating to the following:
o amendment of articles of incorporation or bylaws;
o issuance, grant, pledge, creation, disposition, redemption or
encumbrance of capital stock, securities convertible into
shares of capital stock, or rights to acquire capital stock;
o redemption, purchase, retirement of shares of capital stock;
26
o splits, dividends, re-combinations or reclassification of
shares of its capital stock;
o entering into, amending, modifying or terminating certain
contracts;
o certain capital expenditures or purchase of fixed assets;
o incurrence of indebtedness;
o compensation of officers, employees and directors;
o accounting principles, policies and procedures;
o acquisitions of certain assets or businesses;
o liens;
o liquidation, dissolution, restructuring, or other
reorganization of Infodata or any of its subsidiaries;
o payment of certain claims, liabilities and obligations;
o settlement of litigation or material claims;
o lease of certain real property;
o tax filings, audits, examinations and claims; and
o termination of Infodata's stock purchase plan and employees'
rights to purchase common stock.
The merger agreement also contains covenants of Infodata relating to
(i) access to information about Infodata; (ii) obtaining shareholder approval of
the merger agreement, (iii) assisting SAIC in obtaining certain third party
consents to the merger, (iv) treatment of existing stock option and stock
purchase plans, (v) the non-solicitation of acquisition proposals from entities
other than SAIC, and (vi) filing of tax returns. Additionally, if any
anti-takeover statute or regulation is or may become applicable to the
transactions contemplated by the merger agreement, Infodata has agreed to take
the actions necessary to minimize the effects of the statute or regulation on
the merger and other transactions.
The covenants in the merger agreement relating to the conduct of
Infodata's business are complicated and not easily summarized. You are urged to
read carefully the section of the merger agreement entitled "Additional
Agreements of the Parties."
Mutual Covenants. The merger agreement contains a number of mutual
covenants of Infodata and SAIC, including covenants relating to:
o cooperation in the execution and delivery of all documents
necessary to consummate the merger;
o confidentiality of the merger agreement;
o cooperation in the preparation and filing of the proxy
statement relating to the merger;
o accuracy of information to be supplied for inclusion in this
proxy statement; and
o notification of matters related to defaults or events that may
become defaults under the merger agreement, consents,
covenants, material adverse events, litigation and certain
communications received from governmental and other third
parties relating to the merger.
27
In addition, the merger agreement contains covenants requiring each of
the parties to:
o use all reasonable efforts to do, or cause to be done, all
things required to consummate and make effective the
transactions contemplated by the merger agreement, including
satisfying the conditions to the merger and obtaining required
governmental authorizations and consents;
o consult with each other before issuing any press release or
public statements with respect to the merger; and
o take actions to supplement securities filings relating to this
proxy statement as appropriate or required by law.
Under the merger agreement, SAIC and Info Acquisition Corp. have agreed
that Infodata, as the surviving entity, will honor certain commitments, benefits
accrued and other arrangements regarding various employment, severance,
executive, change in control and other similar agreements that Infodata
currently has with its employees.
Conditions to the Merger
The parties' respective obligations to complete the merger are subject
to the satisfaction of each of the following conditions:
o no statute, rule or regulation having been enacted or
promulgated which restricts or otherwise prohibits the
consummation of the merger;
o no court order or injunction being in effect precluding or
restricting consummation of the merger; and
o all consents, approvals, authorizations, and action of any
governmental body required to permit the consummation of the
merger shall have been obtained and shall be in full force and
effect.
The obligations of SAIC and Info Acquisition Corp. to consummate the
merger are further subject to the following conditions:
o Infodata's representations and warranties in the merger
agreement must be true and correct at the time the merger is
to become effective (except as to any representation or
warranty which speaks to a specific date, which must be true
and correct as of the specific date);
o Infodata must have performed all of its obligations and
complied with all covenants necessary to be complied with
under the merger agreement required to be performed before the
effective time of the merger;
o approval of the merger by more than 66-2/3% of outstanding
shares of Infodata common stock;
o no more than 5% of Infodata's outstanding shares shall be
dissenting shares;
o during the period from the date of the merger agreement to the
date of the closing of the merger, there must not have
occurred any material adverse effect on the business,
financial condition, results of operations, assets or
liabilities of Infodata and its subsidiaries, taken as a
whole;
o resignation of Infodata's directors as of the effective date
of the merger;
o exercise or termination of all outstanding options and
warrants to acquire Infodata common stock;
28
o termination of Infodata's employee stock purchase plan as of
the effective time of the merger;
o termination of the engagement letter between Infodata and
Investec PMG Capital, its financial advisor, as of the
effective date of the merger including a release or
satisfaction of any and all obligations of Infodata to
Investec PMG Capital;
o no material adverse change in Infodata's IPMS contract, which
has been defined to include not more than a 10% decrease in
that contract's maximum award fee potential and not more than
a 10% decrease of the billable hours allowable under that
contract as compared to the volume of billable hours during
the last three months of 2001;
o the updating by Infodata of the resume files submitted to
certain contract customers in connection with five of
Infodata's contracts;
o the amendment of Infodata's office lease to reduce the total
square footage under such lease to result in a lease expense
savings of at least $425,000 over the remaining term of such
lease; and
o Infodata's having maintained tangible net worth of at least
$925,000 as of December 31, 2001 with the inclusion of certain
merger related expenses.
The obligation of Infodata to consummate the merger is subject to the
satisfaction of the following express conditions:
o The representations and warranties made by SAIC and Info
Acquisition Corp. in the merger agreement must be true and
correct at the time the merger is to become effective (except
as to any representation or warranty which speaks as of a
specific date, which must be true as of that date); and
o SAIC and Info Acquisition Corp. must have performed all of
their obligations and complied with all covenants necessary to
be performed by or complied with by either of them before the
effective time of the merger.
No Solicitation of Transactions by Infodata
Prior to the time the merger becomes effective, Infodata has agreed to
certain limitations on its ability to take action with respect to any
acquisition proposal. Notwithstanding these limitations, Infodata may respond to
a superior acquisition proposal. As more fully defined in the merger agreement,
o the term "acquisition proposal" means any proposal or offer
regarding: (i) an acquisition of at least 50% of the net
revenue, net income or assets of Infodata and its
subsidiaries' business, taken as a whole, or at least 50% of
any shares of Infodata's capital stock or any of its
subsidiaries' capital stock, or (ii) any merger,
consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving
Infodata or any of its subsidiaries that constitutes at least
50% of the net revenues, net income or assets of Infodata and
its subsidiaries, taken as a whole; and
o the term "superior proposal" means any written proposal by a
third party to acquire for consideration consisting of cash or
securities, more than 50% of the Infodata common stock then
outstanding or at least 50% of the assets of Infodata and its
subsidiaries taken together and otherwise on terms which the
board of directors of Infodata, after receiving advice from
its financial advisor, determines in good faith to be more
favorable from a financial point of view to Infodata
shareholders than the merger.
Infodata and each of its subsidiaries have ceased all discussions and
negotiations with third parties regarding any acquisition proposal. Prior to the
merger becoming effective, Infodata has agreed not to solicit, initiate, or
encourage or disclose directly or indirectly any information not customarily
disclosed concerning its business and properties, or afford any access to its
properties, books and records, to any person or group in connection with an
acquisition proposal
29
and has agreed not to enter into any agreement with respect to any acquisition
proposal or approve any acquisition proposal.
Prior to the special meeting of Infodata shareholders, Infodata may,
however, engage in discussions with and furnish information to a third party in
response to an unsolicited superior proposal if the board of directors of
Infodata determines in good faith, based on the advice of its outside legal
counsel that the failure to participate in those discussions or negotiations or
to furnish such information would be inconsistent with the fiduciary duties of
the Infodata board of directors under applicable law.
Infodata has also agreed to provide SAIC with detailed information
about any inquiries or proposals, or indications of desire to make a proposal
that it receives with respect to an acquisition proposal from a third party. If
Infodata determines that it is required to provide any information to a third
party as described above or receives an acquisition proposal, Infodata must
promptly inform SAIC in writing that information is to be provided by Infodata
to such third-party, and Infodata will then furnish to SAIC the identity of the
recipient of the information or the person who submitted the acquisition
proposal and the terms of the acquisition proposal. Infodata has agreed to keep
SAIC fully informed of the status of any acquisition proposal.
Infodata has agreed that its board of directors will not withdraw or
modify or propose to withdraw or modify, in any manner adverse to SAIC, the
board's approval or recommendation by the Infodata board of directors of the
merger agreement, the merger, or approve or recommend, or propose to approve or
recommend, any letter of intent, agreement in principle or acquisition proposal.
However, prior to the special meeting of Infodata shareholders,
Infodata may enter into an acquisition agreement based on an unsolicited
superior proposal and concurrently terminate the merger agreement if the board
of directors determines after consultation with its outside legal counsel that
the failure to terminate the merger agreement and accept the superior proposal
would be inconsistent with the Infodata board's fiduciary duties under
applicable law. In such a circumstance, Infodata must notify SAIC in writing
that it is terminating the merger agreement to accept a superior proposal. If
the merger agreement is terminated by Infodata in order to accept a superior
proposal, Infodata is required to pay to SAIC a termination fee of $250,000 and
actual merger-related expenses up to $150,000. See "-- Termination of the Merger
Agreement."
Termination of the Merger Agreement
The merger agreement may be terminated, and the transactions
contemplated by the merger agreement abandoned, at any time prior to the closing
of the merger, whether before or after approval of the merger agreement by
Infodata shareholders:
o by mutual written agreement of the parties;
o by either SAIC or Infodata, if the merger has not become
effective on or before June 30, 2002, except that the right to
terminate the merger agreement for that reason is not
available to any party responsible for the delay;
o by either SAIC or Infodata, if any court of competent
jurisdiction has issued a final and nonappealable order,
judgment or decree restraining or otherwise prohibiting the
merger;
o by Infodata, if SAIC or Info Acquisition Corp. has materially
breached any representation, warranty, covenant, or agreement
contained in the merger agreement and the breach is not cured
within 30 business days' following notice of the breach;
however, Infodata will not be able to terminate the merger
agreement in this instance if it is in material breach of any
representation, warranty, covenant or agreement under the
merger agreement;
o by SAIC, if Infodata has materially breached any
representation, warranty, covenant, or agreement contained in
the merger agreement and the breach is not cured within 30
business days' following notice of the commission of the
breach; however, SAIC will not be allowed to terminate the
merger agreement in this instance if it is in material breach
of any representation, warranty, covenant or agreement under
the merger agreement;
30
o by either SAIC or Infodata, if the merger agreement fails to
receive the requisite vote by Infodata shareholders at the
special meeting, except that the right to terminate the merger
agreement in this instance is not available to any party if
such failure to receive the requisite vote is caused by or
results from the failure by that party to perform any
obligation under the merger agreement;
o by Infodata, prior to the special meeting of Infodata
shareholders, in order for Infodata to accept a superior
proposal;
o by SAIC if, at any time prior to the effective time of the
merger, the board of directors of Infodata has withdrawn,
modified or changed in any manner adverse to SAIC or Info
Acquisition Corp. its approval or recommendation of the merger
agreement and/or the merger; or
o by SAIC if, before the effective time of the merger, (i)there
is a material adverse change in the IPMS contract, which has
been defined to include not more than a 10% decrease in that
contract's maximum award fee potential and not more than a 10%
decrease of the billable hours allowable under that contract
as compared to the volume of billable hours during the last
three months of 2001; (ii) Infodata does not satisfactorily
update the resume files submitted to certain contract
customers in connection with five of Infodata's contracts;
(iii) Infodata is unable to obtain an amendment to its office
lease to reduce the total square footage under such lease to
result in a lease expense savings of at least $425,000 over
the remaining term of such lease; or (iv) Infodata does not
have tangible net worth of at least $925,000 as of December
31, 2001 with the inclusion of certain merger-related
expenses.
In the event of termination of the merger agreement by SAIC, Info
Acquisition Corp. or Infodata as described above, no provision of the merger
agreement will survive other than (i) rights relating to obligations to keep
confidential, not to use, and return certain information obtained from the other
party; (ii) rights of either SAIC or Infodata to pursue legal action in
connection with breaches of representations, warranties, covenants or other
agreements contained in the merger agreement; and (iii) the obligation to pay a
termination fee and/or expenses in certain circumstances as described below.
Termination Fees and Expenses
Pursuant to the merger agreement, Infodata or SAIC may be required to
pay a termination payment and/or expenses to the other party in the following
amounts and in the following events:
o In the event SAIC terminates the merger agreement due to (i)
the failure by Infodata to obtain the necessary approval of
the merger agreement by Infodata shareholders at the special
meeting, (ii) the failure by Infodata, on or before three
business days after the special meeting of its shareholders,
to obtain an amendment of its office lease to reduce the total
square footage under such lease to result in a lease expense
savings of at least $425,000 over the remaining term of such
lease, (iii) any expiration, termination or material adverse
change, as defined in the merger agreement, occurring in the
IPMS contract, or (iv) the failure by Infodata to
satisfactorily update the resume records submitted to contract
customers in connection with five contracts, then in any such
event, Infodata will be required to pay to SAIC the expenses
incurred by SAIC in this transaction up to a maximum amount of
$50,000; provided, however, that if within 12 months following
the termination of the merger agreement with SAIC, Infodata
executes an agreement to be acquired by another entity, then
Infodata will be required to pay to SAIC an additional fee
equal to the lesser of (A) the sum of a termination fee of
$250,000 and expenses incurred by SAIC up to $150,000 or (B)
the product of the amount determined under the preceding
clause (A) multiplied by a fraction, the numerator of which is
the aggregate acquisition consideration to be paid by SAIC.
31
o In the event SAIC terminates the merger agreement due to a
breach by Infodata of the merger agreement, which breach is
not cured by Infodata within 30 business days following notice
from SAIC to Infodata of such breach or in the event
Infodata's board withdraws, modifies, or changes, in a manner
adverse to SAIC or Info Acquisition Corp., its approval or
recommendation of the merger agreement and/or the transactions
contemplated by the merger agreement, or in the event Infodata
terminates the merger agreement in order to accept a superior
proposal, or in the event Infodata does not satisfy the
tangible net worth condition, then in any such event Infodata
will be required to pay SAIC a termination fee equal to
$250,000 and expenses incurred by SAIC up to $150,000.
o In the event Infodata terminates the merger agreement due to a
breach by SAIC of the merger agreement, which breach is not
cured by SAIC within 30 business days following notice from
Infodata to SAIC of such breach, then SAIC will be required to
pay to Infodata a termination fee of $250,000 and expenses
incurred by Infodata up to $150,000.
o In each case, any termination fee and/or expenses which are
required to be paid under the merger agreement must be paid
not later than five business days after the termination of the
merger agreement, or if Infodata enters into a definitive
acquisition agreement with another party within 12 months
after the termination of the merger agreement with SAIC and
consummates such other transaction, within five business days
after consummation of such other business transaction.
Except as provided above, the merger agreement provides that if the
merger agreement is not consummated, SAIC and Info Acquisition Corp., on the one
hand, and Infodata, on the other hand, will bear their respective fees and
expenses relating to the merger.
SAIC Option to Acquire Shares of Infodata Common Stock
In connection with the entering into of the merger agreement, SAIC and
Infodata entered into a stock option agreement pursuant to which Infodata has
granted to SAIC an option to purchase a total of 400,000 shares of Infodata
common stock at a price of $1.00 that will be exercisable by SAIC under certain
circumstances if the merger agreement is terminated. SAIC will be entitled to
have that option cashed out if Infodata enters into a definitive acquisition
agreement with another company within 12 months after such termination and
subsequently consummates such transaction.
ACQUISITION FINANCING
SAIC intends to use internal funds to finance the purchase of Infodata
common stock in the merger. SAIC has advised Infodata that as of the date of
this proxy statement, SAIC's available cash resources exceed $400 million. Under
the terms of the merger agreement, SAIC is obligated to continue to maintain
sufficient funds to pay the cash consideration required under the merger
agreement.
32
PRICE RANGE OF INFODATA COMMON STOCK
Infodata common stock currently trades on the OTC Bulletin Board under
the ticker symbol "INFD". Prior to July 19, 2001, Infodata common stock traded
on the NASDAQ SmallCap Market. On, and subsequent to, that date, Infodata's
shares have been quoted on the OTC Bulletin Board. The following table sets
forth, for the periods indicated, the range of high and low closing sale prices
of Infodata common stock on the NASDAQ SmallCap Market (prior to July 19, 2001)
and the OTC Bulletin Board (on and after July 19, 2001).
HIGH LOW
---- ---
2000:
1st Quarter...........................................$7.25 $1.50
2nd Quarter........................................... 3.69 1.50
3rd Quarter........................................... 2.94 1.75
4th Quarter........................................... 2.25 0.55
2001:
1st Quarter........................................... 1.88 0.75
2nd Quarter........................................... 2.00 1.00
3rd Quarter........................................... 1.66 0.57
4th Quarter .......................................... 1.00 0.52
2002:
1st Quarter (through January 10, 2002)................ 0.84 0.70
On January 10, 2002, the last trading date prior to the public
announcement of the merger agreement, the closing price of the common stock was
$0.71 per share. On January __, 2002, the last trading day before the printing
of this proxy statement, the closing price of the common stock was $________ per
share. As of January 11, 2002, there were 4,791,210 shares of common stock
outstanding held by approximately 660 record holders of common stock, as shown
on our transfer agent's records. That number does not reflect the number of
persons or organizations who may hold their shares in nominee or "street" name
through brokerage firms.
BUSINESS AND RECENT RESULTS OF OPERATIONS OF INFODATA
Business
Infodata designs, develops and delivers solutions that enable
enterprises to share, maintain, and retrieve electronic documents and their
components. Infodata provides consulting and systems integration services and
products in the area of knowledge management to corporate and government
workgroups, departments and enterprises.
Revenues are generated from three segments, including (i) consulting
services, systems integration and application frameworks ("Solutions"), (ii)
sales of proprietary products ("Proprietary Products"), and (iii) the sale of
third party software and hardware ("Third Party Products").
The Solutions business consists of designing, developing and
implementing web-based knowledge management (KM), content management, and
e-Commerce systems solutions for commercial and government clients. Solutions
represent the largest segment of Infodata's business. Proprietary Products
include INQUIRE(R)/Text, WebINQUIRE(R), Infodata's Adobe Acrobat plug-in
products Compose(R) and Aerial(R), AnnoDoc(TM), eHub(TM) and the annual support
arrangements associated with each of these products. Third Party Products refers
to software and hardware that is 1) manufactured by a third party, 2) purchased
by Infodata, and 3) resold by Infodata to its customer. Due to the low gross
margins typically associated with the sale of Third Party Products, Infodata
engages in such transactions only when they are coupled with Solutions
engagements or when the customer is of strategic importance.
33
Recent Results of Operations
Infodata's revenues and net loss for the year ended December 31, 2000
were approximately $13.0 million and $2.3 million, respectively, compared to
revenues and a net loss of $10.3 million and $5.0 million, respectively, in
1999. Revenues of $11.8 million were recorded in the nine months ended September
30, 2001, compared to revenues $10.0 million in the first nine months of 2000.
Without giving effect to a non-recurring gain of $1.1 million from the sale of
an investment in the first quarter of 2001, Infodata would have recorded a net
loss of approximately $1.3 million for the nine months ended September 30, 2001.
Management of Infodata expects that Infodata's revenues for the quarter ended
December 31, 2001, will approximate $4.2 million, as compared to approximately
$3.1 million in the fourth quarter of 2000. Furthermore, management
preliminarily estimates that Infodata will record net income of approximately
$330,000 in the fourth quarter of 2001, compared to a net loss of $1.3 million
for the fourth quarter of 2000. As a result, Infodata expects that its revenues
for the full year ended December 31, 2001, will be approximately $16.0 million,
and preliminarily estimates that a net loss (without giving effect to the
non-recurring gain of $1.1 million) for 2001 will be approximately $1.0 million.
BUSINESS OF SAIC
SAIC, an employee-owned company, provides diversified professional and
technical services involving the application of scientific expertise to solve
complex technical problems for both commercial and government customers
worldwide. These services frequently involve computer and systems technology.
Through one of its subsidiaries, Telcordia Technologies, Inc., SAIC provides
software, engineering and consulting services, advanced research and
development, technical training and other services to the telecommunications
industry. SAIC provides technical services mainly in the national security,
health care, environment, energy, telecommunications and information technology
market areas. With annual revenues of $5.9 billion, SAIC and its subsidiaries
have more than 40,000 employees at offices in more than 150 cities worldwide.
34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of shares of Infodata common stock owned on January 22,
2002, by each of Infodata's directors and by all directors and executive
officers as a group. Except as set forth below, Infodata knows of no other
persons or organizations that own more than 5% of Infodata's outstanding common
stock. Each of the following persons has sole voting and investment power with
respect to his or her shares, unless otherwise specified below. The number of
shares reported below as "beneficially owned," and the percent of outstanding
shares represented by such number, includes shares underlying outstanding stock
options. Excluding such shares underlying stock options, all directors and
executive officers as a group own a total of 825,918 shares, representing 17.24%
of the outstanding shares.
Amount and Nature of Percent
Name of Individual Beneficial Ownership of Class
- --------------------------------------------------------------------------------
Richard T. Bueschel 242,435(1) 4.82%
Curtis D. Carlson 11,979(2) 0.25%
Alan S. Fisher 492,470(3) 9.32%
Gary I. Gordon 7,719(4) 0.16%
Christine Hughes 57,833(5) 1.19%
Harry Kaplowitz 114,392(6) 2.33%
Robert M. Leopold 159,658(7) 3.22%
Isaac M. Pollak 214,749(8) 4.29%
Millard H. Pryor, Jr. 94,157(9) 1.93%
Steven M. Samowich 188,750(10) 3.79%
All directors and executive
officers as a group (10 persons) 1,584,142(11) 24.85%
(1) Includes 168,718 shares subject to presently exercisable stock options,
of which options for 10,000 shares are exercisable at a price of less
than $1.00 per share.
(2) Includes 6,980 shares subject to presently exercisable stock options or
stock options exercisable within 60 days, of which options for 6,000
shares are exercisable at a price of less than $1.00 per share.
(3) Includes 429,075 shares owned by The Fisher Trust u/d/t 10/21/1999 for
which Mr. Fisher has sole voting and investment power. Includes 63,395
shares subject to presently exercisable stock options, of which options
for 14,666 shares are exercisable at a price of less than $1.00 per
share.
(4) Includes 7,719 shares subject to presently exercisable stock options or
stock options exercisable within 60 days, of which options for 6,000
shares are exercisable at a price of less than $1.00 per share.
(5) Includes 52,333 shares subject to presently exercisable stock options,
of which options for 14,666 shares are exercisable at a price of less
than $1.00 per share.
(6) Includes 62,366 shares subject to presently exercisable stock options.
(7) Includes 83,333 shares subject to presently exercisable stock options
or stock options exercisable within 60 days, of which options for
10,000 shares are exercisable at a price of less than $1.00 per share.
(8) Includes 67,772 shares subject to presently exercisable stock options,
of which options for 12,666 shares are exercisable at a price of less
than $1.00 per share.
(9) Includes 50,664 shares subject to presently exercisable stock options,
of which options for 10,000 shares are exercisable at a price of less
than $1.00 per share.
(10) Includes 188,750 shares subject to presently exercisable stock options.
35
(11) Includes 758,224 shares subject to presently exercisable stock options
or stock options exercisable within 60 days, of which options for
81,998 shares are exercisable at a price of less than $1.00 per share.
The options referred to in the above note refer to all options
regardless of their exercise prices. For information regarding those options
with an exercise price below $1.00 per share, see "The Merger - Interests of
Certain Persons in the Merger - Stock Options".
ADDITIONAL INFORMATION
Cautionary Statement Regarding Forward-Looking Statements
This proxy statement contains certain forward-looking statements. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. The words "believe,"
"expect," "anticipate" and other similar expressions generally identify
forward-looking statements. You are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of their dates. These
forward-looking statements are based largely on Infodata's current expectations
and are subject to a number of risks and uncertainties. Infodata undertakes no
obligation to revise the forward-looking statements publicly to reflect any
future events or circumstances.
Other Matters
We know of no other matter to be presented at the special meeting.
However, if other matters should properly come before the special meeting, it is
the intention of the persons named in the enclosed proxy to vote the proxy with
respect to such matters in accordance with their best judgment.
Infodata Shareholder Proposal
We do not currently expect to hold a 2002 annual meeting of
shareholders, as Infodata will be wholly-owned by SAIC if the merger is
completed. At such point, we would no longer have public shareholders or any
public participation in our shareholder meetings.
If the merger is not completed, the annual meeting will be held, and
shareholder proposals for inclusion in our proxy statement for such 2002 annual
meeting would have to be submitted to our secretary in writing and received by
us at our corporate headquarters at 12150 Monument Drive, Fairfax, Virginia
22033, Curtis D. Carlson, Secretary of Infodata a reasonable time before we
begin to print and mail our proxy materials. Shareholder proposals must also
meet the other requirements of the SEC rules relating to shareholders proposals.
Where You Can Find More Information
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Infodata's SEC filings are available to the
public over the Internet at the SEC's website at http://www.sec.gov. You may
also read and copy any document Infodata files at the SEC's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information about the public reference room.
BY ORDER OF THE BOARD OF DIRECTORS
Curtis D. Carlson
Secretary
January ___, 2002
36
INFODATA SYSTEMS INC.
PROXY
The undersigned hereby appoints STEVEN M. SAMOWICH and CURTIS D.
CARLSON, or either of them individually, with full power of substitution, to act
as proxy and to represent the undersigned at the special meeting of shareholders
and to vote all shares of common stock of Infodata Systems Inc. which the
undersigned is entitled to vote and would possess if personally present at said
meeting to be held at Infodata's corporate headquarters, 12150 Monument Drive,
Fairfax, Virginia, on Friday, March 1, 2002, at 10:00 a.m. and at all
adjournments thereof upon the following matters:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY
WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL LISTED ON THE
REVERSE SIDE. PROXIES ARE GRANTED THE DISCRETION TO VOTE ON ALL OTHER MATTERS
THAT MAY PROPERLY BE BROUGHT BEFORE THE MEETING.
(Continued, and to be signed on the reverse side)
----------------------------------------------------
Please mark your vote as in this example: [X]
Proposal: To approve the Agreement and Plan of Merger, dated as of
January 10, 2002, by and among Infodata Systems Inc., Science Applications
International Corporation and Info Acquisition Corp. whereby:
o Info Acquisition Corp. will merge with and into Infodata Systems Inc.,
which will become a wholly-owned subsidiary of SAIC;
o Each outstanding share of Infodata Systems Inc. common stock will be
converted into the right to receive $1.00 from SAIC; and
o The holder of each outstanding option to purchase Infodata common stock
with an exercise price less than $1.00 per share will be entitled to
receive cash equal to the difference between $1.00 per share and the
exercise price of the option and all outstanding options and warrants
to purchase Infodata common stock will be cancelled.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
---------------------
In their discretion, the proxies are authorized to vote on such other
business as may come before the meeting or any adjournment or postponement
thereof.
The Board of Directors recommends a vote "FOR" the above proposal.
Change of address [ ]
I plan to attend the meeting [ ]
I do not plan to attend the meeting [ ]
Signature(s) Date ,2002
----------------------------- ------------------
Note: Please sign exactly as your name appears hereon. Joint owners
should each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title.
37
APPENDIX A
AGREEMENT AND PLAN OF MERGER
by and among
INFODATA SYSTEMS, INC.,
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION,
and
INFO ACQUISITION CORP.
Dated as of January 10, 2002
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER..........................................................1
1.1 The Merger....................................................1
1.2 Closing; Effective Time.......................................2
1.3 Effects of Merger.............................................2
1.4 Articles of Incorporation.....................................2
1.5 Bylaws........................................................2
1.6 Directors and Officers........................................2
ARTICLE II EFFECT OF THE MERGER ON CAPITAL STOCK..............................3
2.1 Conversion of Capital Stock...................................3
2.2 Merger Consideration..........................................3
2.3 Treatment of Options..........................................4
2.4 Exchange......................................................4
2.5 Withholdings; Net Payments....................................6
2.6 Dissenting Shares.............................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................7
3.1 Organization and Qualification; Subsidiaries..................7
3.2 Authority to Execute and Perform Agreement....................8
3.3 Binding Effect................................................8
3.4 Capitalization................................................8
3.5 Vote Required; Board Approval.................................9
3.6 SEC Reports and Financial Statements..........................9
3.7 No Material Adverse Change...................................10
3.8 Litigation...................................................10
3.9 Title to Properties; Absence of Liens........................11
3.10 Compliance with Laws; Permits................................11
3.11 Intellectual Property........................................11
3.12 Non-Contravention............................................12
3.13 Consents and Approvals.......................................12
3.14 Employee Benefit Plans; ERISA................................12
3.15 Material Contracts...........................................13
3.16 Taxes........................................................14
3.17 Environmental Matters........................................16
3.18 Real Property................................................17
3.19 Broker's Fees................................................18
3.20 Insurance....................................................18
3.21 Potential Conflicts of Interest..............................18
3.22 Labor Matters................................................19
3.23 Customers and Suppliers......................................19
3.24 Suspension or Debarment......................................19
3.25 Technical Data...............................................20
3.26 Clearances...................................................20
3.27 Fixed Price Contracts........................................20
3.28 Full Disclosure..............................................21
3.29 Confidentiality..............................................21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...........21
4.1 Organization and Qualification; Subsidiaries.................21
4.2 Authority to Execute and Perform Agreement...................21
4.3 Binding Effect...............................................21
4.4 Vote Required; Board Approval................................22
4.5 Litigation...................................................22
4.6 Compliance with Laws.........................................22
4.7 Non-Contravention............................................22
4.8 Consents and Approvals.......................................22
4.9 Broker's Fees................................................22
4.10 Financing....................................................23
ARTICLE V ADDITIONAL AGREEMENTS OF THE PARTIES...............................23
5.1 Actions of the Company Pending Closing.......................23
5.2 Stockholder Approval.........................................25
5.3 Efforts; Consents............................................25
5.4 Filing of Tax Returns........................................26
5.5 Access to Records; Confidentiality...........................26
5.6 Notification of Certain Matters..............................27
5.7 Non-Solicitation.............................................28
5.8 Further Assurances...........................................30
5.9 Benefit Plans; Employee Matters..............................30
5.10 Public Disclosure............................................30
5.11 Satisfaction of Conditions Precedent.........................31
5.12 Proxy Statement..............................................31
5.13 Other Obligations of the Company.............................31
5.14 Anti-takeover Statutes.......................................32
ARTICLE VI CONDITIONS TO CLOSING.............................................32
6.1 Conditions to Each Party's Obligations to Consummate
the Transactions.............................................32
6.2 Conditions to Obligations of the Company to Consummate
the Transactions.............................................32
6.3 Conditions to Obligations of Parent and Merger Sub to
Consummate the Transactions..................................33
ARTICLE VII TERMINATION......................................................35
ii
7.1 Termination..................................................35
7.2 Effect of Termination........................................37
7.3 Expenses; Termination Fees...................................37
ARTICLE VIII MISCELLANEOUS...................................................38
8.1 Certain Definitions; Rules of Construction...................38
8.2 No Survival of Representation and Warranties.................43
8.3 Waivers and Amendments.......................................43
8.4 GOVERNING LAW................................................44
8.5 CONSENT TO JURISDICTION AND SERVICE OF PROCESS...............44
8.6 WAIVERS OF JURY TRIAL........................................44
8.7 Notices......................................................44
8.8 Section Headings.............................................45
8.9 Counterparts.................................................46
8.10 Assignments..................................................46
8.11 Entire Agreement; Enforceability.............................46
8.12 Severability.................................................46
SCHEDULES
Schedule 3.1 Subsidiaries
Schedule 3.4 Capitalization
Schedule 3.6 Liabilities
Schedule 3.7 Absence of Certain Changes
Schedule 3.8 Litigation
Schedule 3.9 Title to Properties; Absence of Liens
Schedule 3.10 Compliance with Laws; Permits
Schedule 3.11 Intellectual Property
Schedule 3.12 Non-Contravention
Schedule 3.13 Consents and Approvals
Schedule 3.14 Employee Benefit Plans; ERISA
Schedule 3.15 Material Contracts
Schedule 3.16 Taxes
Schedule 3.17 Environmental Matters
Schedule 3.18 Real Property
Schedule 3.19 Broker's Fees
Schedule 3.20 Insurance
Schedule 3.21 Potential Conflicts of Interest
Schedule 3.23 Customers and Suppliers
Schedule 3.24 Suspension or Debarment
Schedule 3.25 Technical Data
Schedule 3.26 Clearances
Schedule 3.27(a) Fixed Price Contracts
iii
Schedule 3.27(b) Fixed Price Bids and Proposals
Schedule 3.29 Confidentiality
Schedule 4.8 Consents and Approvals
Schedule 5.13(c) Option Holders
Schedule 6.3(e)(ix) Specified Contracts
EXHIBITS
Exhibit A Form of Voting Agreement
Exhibit B Form of Stock Option Agreement
iv
INDEX OF DEFINED TERMS
Term Section
Acquisition Agreement 5.7
Acquisition Proposal 5.7
Acquisition Transaction 5.7
Additional Fee 7.3(c)
Affected Employee 5.9(b)
Affiliate 8.1
Aggregate Acquisition Consideration 7.3
Aggregate Merger Consideration 8.1
Agreement Preamble
Applicable Laws 3.10
Articles of Merger 1.2
Audited Financials 8.1
Benefit Plan 8.1
Blue Sky Laws 3.13
Business Day 8.1
Certificate of Merger 1.2
Claim 8.1
Closing 1.2
Closing Date 1.2
Code 2.5
Commission 1.2
Company Preamble
Company Common Stock 2.1
Company Material Adverse Effect 3.1
Company Options 2.3(a)
Company Proposal 5.2
Company Required Vote 3.5
Company Stockholders Meeting 5.2
Company Stock Purchase Plan 2.3
Company Subsidiaries 3.1
DGCL Recitals
Disbursing Agent 2.4
Dissenting Shares 2.6
Effective Time 1.2
Environmental Costs 8.1
Environmental Laws 8.1
Environmental Matter 8.1
ERISA 3.14
ESPP Right 2.3
Exchange Act 3.6
v
Term Section
Exchange Documentation 2.4
Exchange Fund 2.4
Expenses 7.3
Facilities 8.1
FAR 3.23
Financial Advisor 5.7
GAAP 3.6
Governmental Body 8.1
Government Agency 8.1
Hazardous Substances 8.1
In-the-Money Optionholder 2.4
In-the-Money Options 2.3
Intellectual Property 8.1
IPMS Contract 6.3(e)
IRS 3.14
Knowledge 8.1
Leased Real Property 3.18(b)
Legal Proceedings 3.8
Liabilities 3.6(c)
Lien 8.1
Material Contracts 8.1
Merger Recitals
Merger Sub Preamble
Notice 5.7
Option Grant Values 8.1
Option Holder 2.2(b)
Option Holders 2.2(b)
Orders 3.10
Out-of-the-Money Options 2.3
Parent Preamble
Parent Subsidiaries 2.1(b)
Per Share Merger Consideration 8.1
Permits 3.10
Permitted Liens 3.9
Person 8.1
Real Property Leases 3.18(b)
Representatives 5.7
SEC 3.6
SEC Reports 3.6
Securities Act 3.6
Stock Option Agreement Recitals
Stockholder 2.1
Stockholders 2.1
vi
Term Section
Subsidiary 8.1
Superior Proposal 5.7(d)
Surviving Corporation 1.1
Tangible Net Worth 8.1
Tax 8.1
Tax Return 8.1
Termination Fee 7.3
Termination Payment 7.3
Transaction Documents 8.1
Transactions 3.2
Voting Agreement Recitals
Voting Stockholders Recitals
VSCA Recitals
Weighted Average Exercise Price 8.1
vii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January 10,
2002, by and among SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, a Delaware
corporation ("Parent"), INFODATA SYSTEMS INC., a Virginia corporation (the
"Company"), and INFO ACQUISITION CORP., a Delaware corporation and direct,
wholly-owned subsidiary of Parent ("Merger Sub").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the respective Boards of Directors of the Company and Merger Sub
have each approved the merger of Merger Sub with and into the Company, with the
Company surviving as a wholly-owned subsidiary of Parent (the "Merger"), on the
terms and conditions contained herein and in accordance with the Virginia Stock
Corporation Act (the "VSCA") and the Delaware General Corporation Law (the
"DGCL"), and have determined that the Merger and the transactions contemplated
herein are advisable and in the best interest of their respective corporations
and stockholders.
WHEREAS, as a condition and inducement to Parent's willingness to enter
into this Agreement, (i) Parent, the Company and certain of the Company's
stockholders (the "Voting Stockholders") are entering into a voting agreement
and irrevocable proxy, dated as of the date hereof, substantially in the form as
that attached hereto as Exhibit A (the "Voting Agreement"), pursuant to which
the Voting Stockholders have agreed, among other things, to vote the shares of
Company Common Stock held by them in favor of the adoption of this Agreement;
and (ii) Parent and the Company are entering into a stock option agreement,
dated as of the date hereof, substantially in the form as that attached hereto
as Exhibit B (the "Stock Option Agreement"), pursuant to which the Company is
granting to Parent an option to purchase shares of Company Common Stock.
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and to
prescribe various conditions to the Merger.
NOW THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, Merger Sub shall be merged with and into the
Company in accordance with the applicable provisions of the VSCA and the DGCL
and in accordance with this Agreement, and the separate existence of Merger Sub
shall cease. The Company shall be the
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surviving corporation in the Merger (hereinafter sometimes referred to as the
"Surviving Corporation"), and shall continue under the laws of Virginia. As a
result of the Merger, the Company shall become a direct, wholly-owned subsidiary
of Parent.
1.2 Closing; Effective Time. Subject to the satisfaction or waiver of all
of the conditions to Closing contained in Article VI, the closing of the Merger
(the "Closing"), shall take place at the offices of Fried, Frank, Harris,
Shriver & Jacobson, 1001 Pennsylvania Avenue, N.W., Washington, D.C. 20004, as
soon as practicable (but not later than 5 business days) after the satisfaction
or waiver of the conditions to Closing contained in Article VI (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the fulfillment or waiver of those conditions), unless another date or place
is agreed to in writing by the parties hereto. The date on which the Closing
actually occurs is hereinafter referred to as the "Closing Date." As soon as is
practicable after the Closing, the parties hereto shall cause the Merger to be
consummated by delivering to (i) the State Corporation Commission of the
Commonwealth of Virginia (the "Commission") articles of merger (the "Articles of
Merger") and (ii) the Secretary of State of the State of Delaware a certificate
of merger (the "Certificate of Merger"), in each case, in such form as required
by, and executed and acknowledged in accordance with, the relevant provisions of
the VSCA and DGCL, as applicable. The Merger shall become effective as of the
date and at such time (the "Effective Time") as (i) the Certificate of Merger is
filed with the Secretary of State of the State of Delaware and (ii) the Articles
of Merger are filed with and accepted by the Commission, in each case, with
respect to the Merger.
1.3 Effects of Merger. The Merger shall have the effects set forth in the
applicable provisions of the VSCA and DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Articles of Incorporation. The Articles of Incorporation of the
Company in effect immediately prior to the Effective Time shall become, from and
after the Effective Time, the Articles of Incorporation of the Surviving
Corporation, until amended or repealed in accordance with the terms thereof and
with Applicable Laws.
1.5 Bylaws. The Bylaws of the Company in effect immediately prior to the
Effective Time shall become, from and after the Effective Time, the Bylaws of
the Surviving Corporation, until thereafter amended or repealed in accordance
with the terms thereof and with Applicable Laws.
1.6 Directors and Officers. The directors and officers of Merger Sub
immediately prior to the Effective Time shall become, from and after the
Effective Time, the directors and officers of the Surviving Corporation, each to
hold office from the Effective Time in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualify, or they resign or are
removed.
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ARTICLE II
EFFECT OF THE MERGER ON CAPITAL STOCK
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the parties or the registered
holders of any shares of capital stock of the Company (each a "Stockholder," and
collectively, the "Stockholders"):
(a) Each issued and outstanding share of common stock, par value $0.01
per share, of Merger Sub shall be converted into and become one fully paid and
non-assessable share of common stock, par value $0.03 per share, of the
Surviving Corporation.
(b) Each issued and outstanding share of the Company's Common Stock, par
value $0.03 per share (the "Company Common Stock"), held by the Company or any
Company Subsidiary as treasury stock, and each issued and outstanding share of
Company Common Stock owned by Parent, Merger Sub or any other Subsidiary of
Parent (collectively, the "Parent Subsidiaries") shall automatically be canceled
and retired and shall cease to exist, and no other consideration shall be
delivered in exchange therefor.
(c) Each issued and outstanding share of Company Common Stock, other than
(i) Company Common Stock to be canceled in accordance with clause (b) above, and
(ii) Dissenting Shares (as defined in Section 2.6), shall be converted into the
right to receive an amount in cash, without interest, equal to the Per Share
Merger Consideration, payable to the registered holder thereof, upon
satisfaction of the exchange procedures set forth in this Article II. At the
Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each registered holder of shares of Company Common Stock shall cease
to have any rights with respect thereto, except the right to receive the merger
consideration, without interest.
(d) The parties shall accomplish the foregoing by means of the Merger,
and the amount, timing, and form of consideration to be paid to Stockholders,
and the manner of such payment, shall be as set forth in this Article II.
2.2 Merger Consideration. Immediately subsequent to the Effective Time on
the Closing Date, upon complying with the procedures set forth in Section 2.4,
Parent shall pay, or cause the Surviving Corporation or other Company Subsidiary
to pay, to:
(a) Each Stockholder entitled to receive a payment pursuant to Section
2.1(c), an amount in cash, without interest, equal to (i) the number of shares
of Company Common Stock registered in the name of such Stockholder immediately
prior to the Effective Time multiplied by (ii) the Per Share Merger
Consideration; and
(b) Each holder of a Company Option (each an "Option Holder" and,
collectively, the "Option Holders") entitled to receive a payment pursuant to
Section 2.3, an amount in cash equal to (i) the number of shares of Company
Common Stock issuable pursuant to In-the-Money Options held by such Option
Holder immediately prior to the Effective Time,
A-3
multiplied by (ii) the difference of (A) the Per Share Merger Consideration
minus (B) the Weighted Average Exercise Price of the In-the-Money Options held
by such Option Holder.
2.3 Treatment of Options.
(a) The Company shall use its reasonable best efforts, subject to any
necessary consents being received from the subject Option Holder, to cause: (i)
each option and warrant granted by the Company to purchase shares of Company
Common Stock (the "Company Options") with an exercise price per share equal to
or greater than $1.00 (the "Out-of-the-Money Options") to be irrevocably
cancelled as of the Effective Time; and (ii) each Company Option outstanding
with an exercise price per share less than $1.00 (the "In-the-Money Options") to
be fully vested and converted immediately prior to the Effective Time into the
right to receive an amount in cash, without interest, equal to (x) the excess of
the Per Share Merger Consideration over such exercise price per share of Company
Common Stock subject to such In-the-Money Option multiplied by (y) the number of
shares of Company Common Stock subject to such In-the-Money Option immediately
prior to the Effective Time. The Company shall use its reasonable best efforts
to take all action necessary to attempt to give effect to this Section 2.3 in
full (including, without limitation, using its reasonable best efforts to
attempt to obtain consents from the holders of Company Options to the
cancellation or conversion thereof, as applicable, in accordance with this
Section 2.3).
(b) Promptly after the date of this Agreement, the Company shall cause
the adoption and approval of appropriate changes to the Company 1997 Employee
Stock Purchase Plan (the "Company Stock Purchase Plan") in order to result in no
Company stock purchase rights (each, an "ESPP Right") granted under the Company
Stock Purchase Plan to be in effect as of January 10, 2002.
2.4 Exchange.
(a) Prior to the Effective Time, Parent shall appoint a bank or trust
company reasonably satisfactory to the Company to act as disbursing agent (the
"Disbursing Agent") for the payment of the Aggregate Merger Consideration in
accordance with this Section 2.4 to the Stockholders and In-the-Money
Optionholders. At or prior to the Effective Time, Parent shall deposit or cause
to be deposited with the Disbursing Agent in trust for the benefit of the
Stockholders and In-the-Money Optionholders an amount in cash equal to the
Aggregate Merger Consideration (such amount being hereinafter referred to as the
"Exchange Fund").
(b) The Disbursing Agent shall invest the Exchange Fund, as the Parent
directs, in direct obligations of the United States of America, obligations for
which the full faith and credit of the United States of America is pledged to
provide for the payment of all principal and interest or commercial paper
obligations receiving the highest rating from either Moody's Investors Service,
Inc. or Standard & Poor's, a division of The McGraw Hill Companies, or a
combination thereof, provided that, in any such case, no such instrument shall
have a maturity exceeding three months. Any net profit resulting from, or
interest or income produced by, such investments shall be payable to Parent. The
Exchange Fund shall not be used for any other purpose except as provided in this
Agreement.
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(c) Promptly after the Effective Time, Parent shall cause the Disbursing
Agent to mail to each person who was a Stockholder as of the Effective Time, and
whose shares were converted into the right to receive merger consideration
pursuant to Section 2.2, and/or a holder of an In-the-Money Option (an
"In-the-Money Optionholder"), whose interests in each such option was converted
into the right to receive merger consideration pursuant to Section 2.2, a form
of letter of transmittal (which shall specify that legal delivery of their
shares of Common Stock and interests in the In-the-Money Options shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
the letter of transmittal and other evidence of ownership specified therein (the
"Exchange Documentation") to the Disbursing Agent) and instructions for use in
effecting the surrender thereof in exchange for payment of the merger
consideration. Upon delivery to the Disbursing Agent of the Exchange
Documentation, together with such other documents as may be reasonably required
by the Disbursing Agent, the exchanging person or entity shall be paid promptly
in exchange therefor cash in an amount equal to (i) in the case of Common Stock,
the product of the number of shares of Company Common Stock represented by such
Exchange Documentation delivered to the Disbursing Agent, multiplied by the Per
Share Merger Consideration, and (ii) in the case of In-the-Money Options, the
number of shares of Company Common Stock issuable pursuant to In-the-Money
Options represented by Exchange Documentation delivered to the Disbursing Agent,
multiplied by the difference of (A) the Per Share Merger Consideration minus (B)
the Weighted Average Exercise Price of such In-the-Money Options. Any Company
Common Stock or Company Options tendered to the Disbursing Agent pursuant to
this Section 2.4 shall forthwith be canceled. No interest will be paid or
accrued on the cash payable upon the surrender of the Exchange Documentation.
(d) If payment is to be made to a Person other than a registered
Stockholder or an In-the-Money Optionholder, then it shall be a condition of
payment of the merger consideration to that Person that the Exchange
Documentation be properly endorsed or otherwise be in proper form for transfer
of the securities represented thereby and that the Person requesting such
payment pay any transfer or other Taxes required by law to be paid as a result
of the payment to a Person other than the registered Stockholder or the
In-the-Money Optionholder or establish to the satisfaction of the Surviving
Corporation that such Tax has been paid or is not otherwise applicable.
(e) At and after the Effective Time, there shall be no registration of
transfers of shares of Company Common Stock which were outstanding immediately
prior to the Effective Time on the stock transfer books of the Surviving
Corporation. At the close of business on the day of the Effective Time, the
stock ledger of the Company shall be closed.
(f) At any time more than one (1) year after the Effective Time, Parent
shall be entitled to require the Disbursing Agent to deliver to it any funds
which had been made available to the Disbursing Agent and not disbursed in
exchange for the securities represented by the Exchange Documentation
(including, without limitation, all interest and other income received by the
Disbursing Agent in respect of all such funds). Thereafter, Stockholders and
In-the-Money Optionholders shall look only to Parent (subject to the terms of
this Agreement, abandoned property, escheat and other similar laws) as general
creditors thereof with respect to any merger consideration that may be payable,
without interest, upon due surrender of the
A-5
Exchange Documentation held by them. If the Exchange Documentation shall not
have been surrendered prior to five (5) years after the Effective Time (or
immediately prior to such time on which any payment in respect hereof would
otherwise escheat to or become the property of any governmental unit or agency),
the payment in respect of such Exchange Documentation shall, to the extent
permitted by applicable law, become the property of Parent, free and clear of
all claims or interest of any Person previously entitled thereto.
Notwithstanding the foregoing, none of Parent, the Company, the Surviving
Corporation nor the Disbursing Agent shall be liable for any merger
consideration properly delivered to a public official pursuant to any applicable
abandoned property, escheat or other similar law.
2.5 Withholdings; Net Payments. Notwithstanding anything in this
Agreement to the contrary, any amount paid to Stockholders or Option Holders
pursuant to this Agreement that are not United States Persons, as defined in
Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the "Code"), shall be net of all
applicable Federal, state and local withholding Taxes, as determined by the
Surviving Corporation. Parent or Surviving Corporation shall withhold and remit,
and the Parent shall cause the Disbursing Agent to withhold and remit, to the
appropriate taxing authority all such withholding Taxes due in connection with
the payments made by it, and such remittance shall be deemed a payment of
amounts owed to any Person entitled to payment pursuant to this Agreement. Any
payment to non-employee Option Holders shall be at the minimum withholding
amount required by Applicable Laws. Prior to the Effective Time, the Company
shall use its reasonable best efforts to take such actions as shall be necessary
to allow Parent or the Disbursing Agent to comply with this Section 2.5.
2.6 Dissenting Shares.
(a) Notwithstanding anything contained in this Agreement to the contrary,
shares of Company Common Stock that are held by any Stockholder who has not
voted in favor of the Merger or consented thereto in writing, and who has
demanded appraisal rights in accordance with the VSCA (the "Dissenting Shares")
shall not be converted into the right to receive the merger consideration, but
shall become the right to receive such consideration as may be determined to be
due in respect of such Dissenting Shares pursuant to the VSCA; provided,
however, that any holder of Dissenting Shares who shall have failed to perfect
or shall have withdrawn or lost his or her rights to appraisal of such
Dissenting Shares, in each case under the VSCA, shall forfeit the right to
appraisal of such Dissenting Shares, and such Dissenting Shares shall be deemed
to have been converted into the right to receive, as of the Effective Time, cash
in an amount equal to the product of the number of such Dissenting Shares
multiplied by the Per Share Merger Consideration, without interest.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal, and any withdrawals of such demands, received by the Company and any
other related instruments served pursuant to the VSCA and received by the
Company, and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the VSCA. The Company shall not,
except with the prior written consent of Parent, make any payment with respect
to any demands for appraisal or offer to settle or settle any such demands.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
3.1 Organization and Qualification; Subsidiaries.
(a) The Company and each Subsidiary of the Company (collectively, the
"Company Subsidiaries") is a corporation, partnership or other legal entity duly
incorporated or organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has requisite power and
authority and governmental approvals to own, lease and operate its properties
and to carry on its business as currently conducted. The Company and each
Company Subsidiary is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the ownership or leasing of its property
or the conduct of its business requires such qualification or licensing, except
where the failure to be so qualified or licensed or in good standing would not,
individually or in the aggregate, have a Company Material Adverse Effect.
"Company Material Adverse Effect," as used in this Agreement, shall mean any
change, effect, event or occurrence that is materially adverse to the condition
(financial or otherwise), assets, properties, business or operations of the
Company and the Company Subsidiaries, taken as a whole. The copies of the
Articles of Incorporation and Bylaws (or equivalent organizational documents) of
the Company and each Company Subsidiary previously delivered to Parent or its
counsel are complete and correct.
(b) Schedule 3.1 sets forth the name, type of entity, jurisdiction, date
of incorporation, formation or organization, the officers and directors, the
authorized stock, partnership capital or equivalent ownership interests, the
number and type of issued and outstanding shares of capital stock, partnership
interests or similar ownership interests, the current owners of the equity and
their respective ownership interests therein of each Company Subsidiary and each
other corporation or entity in which the Company directly or indirectly owns or
has the power to vote capital stock or other ownership interests, and the
jurisdictions in which each entity is qualified to do business as a foreign
corporation or other foreign entity, each as of the date of the Agreement. The
Company does not directly or indirectly own any interest in any other person or
entity. The respective minute books, or comparable records, of the Company and
each of the Company Subsidiaries contain true and complete records of all
meetings and consents in lieu of meetings of their Boards of Directors or
similar governing bodies (and any committees thereof) and of their stockholders
(or partners or members) since the times of their respective incorporation or
formation, and accurately reflect all transactions referred to in such minutes
and consents in lieu of meeting in all material respects. The stock books (or
analogous ownership records) of the Company and each of the Company Subsidiaries
are true and complete. True and complete copies of all of the foregoing, have
been delivered to, or, to the extent not requested to be delivered, have been
made available for inspection by, Parent.
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3.2 Authority to Execute and Perform Agreement. The Company has the
requisite power and all authority required to enter into, execute and deliver
this Agreement and the Transaction Documents to which it is a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby (collectively, the "Transactions"). The
execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the Transactions have been duly authorized by all
necessary corporate action.
3.3 Binding Effect. This Agreement has been validly executed and
delivered by the Company and, assuming the due execution and delivery hereof by
Parent and Merger Sub, constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except to
the extent such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general applicability
affecting or relating to enforcement of creditors' rights generally, and (ii)
general equitable principles (regardless of whether such enforceability is
considered in equity or at law).
3.4 Capitalization.
(a) As of the date hereof, (i) 12,000,000 shares of Company Common Stock,
par value $0.03 per share, are authorized, of which 4,791,210 shares of Company
Common Stock are issued and outstanding, all of which are validly issued, fully
paid and non-assessable and which are owned of record by the Persons and in the
amounts set forth on Schedule 3.4, (ii) 340,000 shares of Preferred Stock, par
value $1.00 per share, are authorized, of which no shares of Preferred Stock are
outstanding, and (iii) 2,261,000 shares of Company Common Stock are reserved for
issuance upon the exercise of the Company Options by the Persons and in the
amounts set forth in Schedule 3.4. The Company has no other authorized, issued
or outstanding class of capital stock.
(b) Immediately after giving effect to the Merger, Parent will own free
and clear of any Liens all of the outstanding capital stock of the Surviving
Corporation (except for Liens that may attach by reason of the Surviving
Corporation's ownership thereof). Except as set forth in Schedule 3.4, there are
no obligations, contingent or otherwise, of the Company or a Company Subsidiary,
to repurchase, redeem or acquire shares of the Company or a Company Subsidiary.
(c) Except as set forth on Schedule 3.4, there are no existing options,
rights, subscriptions, warrants, unsatisfied preemptive rights, calls or
commitments relating to (i) the authorized and unissued capital stock of the
Company or any Company Subsidiary, or (ii) any securities or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire from the Company or any Company Subsidiary, any shares
of capital stock of the Company or any Company Subsidiary and no such
convertible or exchangeable securities or obligations are outstanding.
(d) Each outstanding share of capital stock of each Company Subsidiary is
validly issued, fully paid and non-assessable and each such share owned by the
Company or
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another Company Subsidiary is free and clear of Liens. All outstanding shares of
Company Common Stock were issued in compliance with all applicable federal and
state securities laws.
3.5 Vote Required; Board Approval. (a) The only vote of the holders of
any class or series of the Company's capital stock necessary to approve the
Merger is the affirmative vote of the holders of more than two-thirds of the
outstanding shares of Company Common Stock (the "Company Required Vote"). The
Board of Directors of the Company, by resolutions duly adopted at a meeting duly
called and held at which a quorum was present or by the unanimous written
consent in lieu of such a meeting, has approved this Agreement, the Merger and
the Transactions in accordance with the requirements of the VSCA which approval
satisfies in full the requirement in Section 13.1-725.1 of the VSCA that the
Merger be approved by the affirmative vote of a majority (but not less than two)
of the disinterested directors and the requirement of Section 13.1-718 of the
VSCA that the Merger be adopted by the Board of Directors.
(b) Investec PMG Capital has delivered a "fairness opinion" to the
Company to the effect that the Per Share Merger Consideration to be received by
the Stockholders pursuant to this Agreement is fair from a financial point of
view to such Persons.
3.6 SEC Reports and Financial Statements.
(a) Each form, report, schedule, registration statement, definitive proxy
statement, exhibit and any other document filed by the Company with the
Securities and Exchange Commission (the "SEC") since January 1, 1997 (as such
documents have been amended prior to the date hereof, the "SEC Reports"), as of
their respective dates, complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act") and the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act"). None of the SEC Reports, as of their respective
dates, contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except for such statements, if any, as have been modified or
superseded by subsequent filings prior to the date hereof. The Company has made
available to Parent true, accurate and complete copies of all of the SEC
Reports.
(b) The consolidated financial statements of the Company and the Company
Subsidiaries included in such SEC Reports and any notes related thereto comply
as to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited interim financial statements, as permitted by Form 10-QSB of the SEC)
and fairly present in all material respects (subject, in the case of the
unaudited interim financial statements, to normal, recurring year-end
adjustments none of which are or will be material in amount, individually or in
the aggregate) the consolidated financial position of the Company and the
Company
A-9
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended. Since January 1, 1997, the
Company has timely filed with the SEC all forms, reports and other documents
required to be filed prior to the date hereof, and no Company Subsidiary has
filed, or been required to file, any form, report or other document with the
SEC, in each case, pursuant to the Securities Act or the Exchange Act.
(c) Except as set forth on Schedule 3.6, neither the Company nor any of
the Company Subsidiaries have any direct or indirect indebtedness, liability,
claim, loss, damage, deficiency or obligation or responsibility, known or
unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated,
secured or unsecured, accrued, absolute, contingent or otherwise, whether or not
of a kind required by GAAP to be set forth on a financial statement or in the
notes thereto ("Liabilities"), that were not fully and adequately reflected or
reserved against on the balance sheet or described in the notes to the Audited
Financials, including, without limitation, those relating to environmental and
occupational safety and health matters, that, alone or in the aggregate, could
result in claims against, obligations of or liabilities to the Company or any of
the Company Subsidiaries which are reasonably likely to have a Company Material
Adverse Effect. Except as set forth on Schedule 3.6, neither the Company nor any
Company Subsidiary has any Knowledge of any circumstance, condition, event or
arrangement that may hereafter give rise to any Liabilities which are reasonably
likely to have a Company Material Adverse Effect.
3.7 No Material Adverse Change. Except as set forth on Schedule 3.7,
since September 30, 2001, the Company and the Company Subsidiaries have
conducted their respective businesses in the ordinary course, consistent with
past practice, and there has been no change in the business, properties, assets,
reasonably anticipated prospects, operations or condition (financial or
otherwise) of the Company or any of the Company Subsidiaries which has resulted
or reasonably could be expected to result in or which the Company or any Company
Subsidiary has reason to believe could reasonably be expected to result in a
Company Material Adverse Effect, and neither the Company nor any of the Company
Subsidiaries has any Knowledge of any such change that is threatened, nor has
there been any damage, destruction or loss affecting the assets, properties,
business, reasonably anticipated prospects, operations or condition (financial
or otherwise) of the Company or any of the Company Subsidiaries, whether or not
covered by insurance which has resulted or reasonably could be expected to
result in or which the Company or any Company Subsidiary has reason to believe
could reasonably be expected to result in a Company Material Adverse Effect.
Except as set forth on Schedule 3.7, from September 30, 2001, neither the
Company nor any of the Company Subsidiaries has taken, directly or indirectly,
any of the actions identified in Section 5.1.
3.8 Litigation. Except as set forth on Schedule 3.8 or in any SEC Report,
there are no judicial, governmental, administrative or arbitral actions, suits
or proceedings or investigations (collectively, "Legal Proceedings") pending or,
to the Knowledge of the Company or any Company Subsidiary, threatened against or
involving the Company, any Company Subsidiary, or any of their respective
property or assets. Except as set forth on Schedule 3.8, there are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
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governmental or regulatory body or arbitration tribunal against or involving the
Company or any Company Subsidiary.
3.9 Title to Properties; Absence of Liens. The Company and each Company
Subsidiary have good title to all of their respective assets and properties,
whether real, personal or fixed, free and clear of all Liens, except (i) for
Liens set forth on Schedule 3.9 hereto, (ii) for Liens for Taxes not yet due and
payable or which the Company or any Company Subsidiary is contesting in good
faith and for which adequate reserves have been established, (iii) for such
properties and assets as may have been sold since the date hereof in the
ordinary course of business, and (iv) for Liens not securing debt that do not
materially detract from the value or materially interfere with the use of the
property subject thereto (collectively, "Permitted Liens").
3.10 Compliance with Laws; Permits. Neither the Company nor any Company
Subsidiary is in violation of, default under, or conflict with, any applicable
order, judgment, injunction, award, decree or writ of any Governmental Body or
court of competent jurisdiction (collectively, "Orders") or any applicable
Federal, state or local law, regulation, code, statute, rule, Order, judgment,
decree or other requirement of a Governmental Body applicable to their
businesses, properties, assets and operations (including, without limitation,
those relating to wages and hours, record keeping, customs, export control,
possession of classified information or zoning) (collectively, "Applicable
Laws"), except for any such violations that would not, individually or in the
aggregate, have a Company Material Adverse Effect. Schedule 3.10 correctly lists
all licenses, franchises, permits, authorizations, orders, registrations and
approvals of, and all required registrations with, any Governmental Bodies which
are material to or necessary for the lawful conduct of the businesses of the
Company and each of the Company Subsidiaries or material to or necessary for the
intended use of any properties of the Company or any of the Company Subsidiaries
(collectively, "Permits"). Except as set forth on Schedule 3.10, the Company and
each Company Subsidiary are in compliance with the terms of such Permits, except
where the failure to have, or to comply with, such Permits would not,
individually or in the aggregate, have a Company Material Adverse Effect. Such
Permits are in full force and effect; no material violations are or have been
recorded in respect of any Permit; and no proceeding is pending or, to the
Knowledge of the Company and the Company Subsidiaries, threatened, to revoke or
limit any Permit.
3.11 Intellectual Property. Schedule 3.11 sets forth all material
Intellectual Property owned by the Company or any Company Subsidiary, all
applications for any of the foregoing, and all material permits, grants and
licenses relating to any of the foregoing under which the Company or any Company
Subsidiary is a licensee or a licensor, except such licenses, sublicenses and
other agreements relating to off-the-shelf software which is commercially
available on a retail basis. Except as set forth on Schedule 3.11: (i) none of
the Intellectual Property, products or services owned, used, sold or licensed by
the Company or any Company Subsidiary infringes upon or otherwise violates any
intellectual property rights of others and to the Knowledge of the Company and
the Company Subsidiaries, no other person's, firm's or corporation's operations
conflict with the use and registration of the Intellectual Property; (ii) as of
the date hereof, no litigation is pending, neither the Company nor any Company
Subsidiary has received written notice of any Claim contesting the right of the
Company or any Company Subsidiary to use or sell, license or make available to
any Person any of the Company's products
A-11
or services, and to the Knowledge of the Company and the Company Subsidiaries,
threatened against or by the Company or any Company Subsidiary claiming a
conflict by the Company or any of the Company Subsidiaries with the Intellectual
Property; (iii) neither the Company nor any of the Company Subsidiaries has
notice of any adversely held patent, invention, copyright, trademark, service
mark or trade name of any other person or notice of any claim of any other
person relating to any of the Intellectual Property listed on Schedule 3.11, and
neither the Company nor any of the Company Subsidiaries has any Knowledge of any
reasonable basis for any such charge or claim, and (iv) the Company and the
Company Subsidiaries own the Intellectual Property free and clear of all Liens.
3.12 Non-Contravention. The execution and delivery of this Agreement and
the Transaction Documents by the Company, the performance by the Company of its
obligations hereunder and thereunder, and the consummation of the Transactions
by the Company will not (i) violate or conflict with any provision of the
Articles of Incorporation or Bylaws of the Company or equivalent organizational
documents of any other Company Subsidiary, (ii) except as set forth on Schedule
3.12 and subject to obtaining the consents, approvals and authorizations or
making such filings or giving such notices referred to in Section 3.13 and on
Schedule 3.13, materially violate, conflict with or result in the breach of any
provision of, or result in a modification of or otherwise entitle any party to
terminate, accelerate, amend, cancel or constitute (whether after the filing of
notice or lapse of time or both) a default under or impair or alter the rights
of the Company, any Company Subsidiary or any third party under, any Material
Contract or Company Option to which the Company or any Company Subsidiary is a
party or by which or to which any of the Company's or any of the Company
Subsidiaries' assets or properties may be bound or subject, (iii) subject to the
exceptions set forth in Section 3.13 and on Schedule 3.13, materially violate
any Applicable Laws, (iv) materially violate or result in the revocation or
suspension of any Permit or (v) result in the creation or imposition of any
material Lien upon any of the property or assets of the Company or any of the
Company Subsidiaries pursuant to any provision of, any contract or Lien.
3.13 Consents and Approvals. Except for (i) those consents, approvals,
authorizations, filings or notices set forth on Schedule 3.13, (ii) applicable
requirements of the Securities Act, the Exchange Act or state securities or
"blue sky" laws ("Blue Sky Laws"), and (iii) the Articles of Merger, no consent,
approval or authorization of, filing with, or notice to, any Governmental Body
is required by the Company or any Company Subsidiary in connection with the
execution, delivery and performance by the Company of this Agreement, each and
every agreement contemplated hereby, and the consummation by the Company of the
Transactions.
3.14 Employee Benefit Plans; ERISA. Set forth on Schedule 3.14 is a true
and complete list of each Benefit Plan sponsored, maintained, or contributed to,
or required to be contributed to by the Company or any Company Subsidiary, in
which present or former employees of the Company or any Company Subsidiary
participate, or with respect to which the Company or any of the Company
Subsidiaries has any liability, whether direct or indirect, actual or
contingent, whether formal or informal, and whether legally binding or not.
Except as disclosed on Schedule 3.14: (A) each of the Company's Benefit
Plans and each Company Subsidiary's Benefit Plans have been maintained and are
in compliance with
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the terms of such Benefit Plans and all Applicable Laws, including, without
limitation, the Code and the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); (B) each of the Company's Benefit Plans and each Company
Subsidiary's Benefit Plans intended to be "qualified" within the meaning of
Section 401(a) of the Code have been determined by the Internal Revenue Service
(the "IRS") to be so qualified and, to the Knowledge of the Company, and the
Company Subsidiaries, no event or circumstance has occurred since the date of
such determination which would jeopardize the qualification of any of the
Company's Benefit Plans or any Company Subsidiary's Benefit Plans; and (C) none
of the Company's Benefit Plans or Company Subsidiary's Benefit Plans is subject
to Title IV of ERISA.
3.15 Material Contracts.
(a) Set forth on Schedule 3.15 is a true and complete list of all
Material Contracts, in each case as amended to date. All Material Contracts have
been delivered to, or, to the extent not requested to be delivered, have been
made available for inspection by, the Parent.
(b) Except as set forth on Schedule 3.15, each Material Contract
constitutes a valid and binding obligation of the Company or a Company
Subsidiary, as the case may be, is in full force and effect and is enforceable
against the Company or a Company Subsidiary, as the case may be, in accordance
with its terms, except to the extent such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other laws relating to or affecting creditors' rights, and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Company and each of the Company
Subsidiaries have either paid in full all amounts due thereunder which are due
and payable or accrued in accordance with GAAP, all amounts due to others
thereunder (and have properly recognized revenues due from others thereunder),
and have satisfied in full or accrued all of their liabilities and obligations
thereunder which are due and payable, except amounts or liabilities disputed in
good faith by the Company or any of the Company Subsidiaries for which adequate
reserves have been set aside. Neither the Company nor any Company Subsidiary is
in default under any Material Contract, nor to the Knowledge of the Company and
the Company Subsidiaries, does any condition exist that, with notice or lapse of
time or both, would constitute a default thereunder. To the Knowledge of the
Company and the Company Subsidiaries, no other party to any such Material
Contract is in default thereunder, nor does any condition exist that with notice
or lapse of time or both would constitute a default thereunder. Neither the
Company nor any of the Company Subsidiaries has Knowledge that any person
intends to terminate (whether for cause or convenience) or default under any
Material Contract before its stated term, if any. Except as set forth on
Schedule 3.15, neither the Company nor any of the Company Subsidiaries has any
Knowledge of a claim for non-performance of any Material Contract, pending or
threatened, by any Governmental Body. There are no pending renegotiations of,
attempts to renegotiate or outstanding rights to renegotiate any material
amounts paid or payable under any Material Contract, and no person has made a
written demand for any such renegotiation. Except as separately identified on
Schedule 3.15, no approval or consent of any person is needed in order that the
contracts and other agreements set forth or required to be set forth on Schedule
3.15 or on any other Schedule
A-13
continue in full force and effect following the consummation of the transactions
contemplated by this Agreement.
3.16 Taxes. Except as set forth in Schedule 3.16:
(a) Filing of Tax Returns. The Company and each Company Subsidiary have
timely filed, or have had timely filed on their behalf, with the appropriate
Taxing authorities all Tax Returns in respect of Taxes required to be filed by
them. The Tax Returns filed (including any amendments thereof) are complete and
accurate in all material respects. The Company and each Company Subsidiary have
not requested any extension of time within which to file any Tax Return in
respect of any Taxes, which Tax Return has not since been filed in a timely
manner. To the Knowledge of the Company, no claim has ever been made by any
Taxing authority in a jurisdiction where the Company or any Company Subsidiary
does not file Tax Returns, or has Tax Returns filed on their behalf, that they
are or may be subject to taxation by that jurisdiction, or liable for Taxes
owing to that jurisdiction. Schedule 3.16 lists all federal, state, local and
foreign income Tax Returns filed (including, but not limited to, income,
franchise, capital, net worth, sales, use, payroll, excise and ad valorem tax)
with respect to the Company and each Company Subsidiary for taxable periods
ended on or after December 31, 1997. The Company and each Company Subsidiary
have delivered to the Parent complete, correct and accurate copies of their
foreign, federal, state and local Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company and each
Company Subsidiary for the years ended December 31, 1997, 1998, 1999 and 2000.
(b) Payment of Taxes. All Taxes owed by the Company and each Company
Subsidiary (whether or not shown as due on any Tax Returns) have been paid in
full or adequate reserves on their respective books and/or records have been
established. The Company and each Company Subsidiary have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party. The Company has made all required estimated Tax payments sufficient
to avoid any underpayment penalties. The unpaid Taxes of the Company and each
Company Subsidiary (A) do not, as of the Closing Date, exceed the reserve for
Tax liability (rather than any reserve for deferred Taxes established to reflect
the timing differences between book and Tax income) set forth on the face of the
Company's and each Company Subsidiary's most recent balance sheets (rather than
any notes thereto) and (B) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Company and each Company Subsidiary in filing, or having filed
on their behalf, their Tax Returns. The charges, accruals and reserves on the
books of the Company and each Company Subsidiary in respect of any liability for
Taxes (x) based on or measured by net income for any years not finally
determined, (y) with respect to which the applicable statute of limitations has
not expired or (z) that has been previously deferred, are adequate to satisfy
any assessment for such Taxes for any such years.
(c) Audits, Investigations or Claims. There is no dispute or claim which
has not been resolved concerning any Tax liability of the Company or any Company
Subsidiary either (A) claimed or raised by any Taxing authority in writing or
(B) as to which any of the
A-14
directors and officers (and employees responsible for Tax matters) of the
Company or any Company Subsidiary has knowledge based upon personal contact with
any agent of such Taxing authority. Audits of foreign, federal, state and local
Tax Returns by the relevant Taxing authorities are currently ongoing where
indicated for the periods set forth on Schedule 3.16 and, except as set forth in
such Schedule, the Company and each Company Subsidiary have not been notified in
writing that any of these Taxing authorities intends to audit a Tax Return for
any other period. Neither the Company nor any Company Subsidiary has executed
any outstanding waivers or consents regarding the application of the statute of
limitations with respect to any Taxes or Tax Returns.
(d) Lien. There are no encumbrances for Taxes (other than for current
Taxes not yet due and payable) on any assets of the Company or any Company
Subsidiary.
(e) Tax Elections. The Company and each Company Subsidiary (i) have not
agreed, or are required, to make any adjustment under Section 481(a) of the Code
by reason of a change in accounting method or otherwise; (ii) have not made an
election pursuant to Code Sections 338 or 336(e) or the regulations thereunder
or any comparable provisions of any foreign or state or local income tax law;
(iii) are not subject to any constructive elections under Code Section 338 or
the regulations thereunder; (iv) have not made any payments, are obligated to
make any payments, or are a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under ss.280G and ss.162(m) of the Code; and (v) have not made any of the
foregoing elections or are required to apply any of the foregoing rules under
any comparable state or local income Tax provision.
(f) Prior Affiliated Groups. The Company and each Company Subsidiary (A)
have never been a member of an affiliated group of corporations within the
meaning of Section 1504 of the Code (other than a group the common parent of
which was the Company) and (B) do not have any liability for the Taxes of any
person (other than any of the Company and the Company Subsidiaries) under Treas.
Reg. ss.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise. Neither the Company nor any
Company Subsidiary is a successor to any other person by way of merger,
reorganization or similar transaction.
(g) Tax Sharing Agreements. Neither the Company nor any Company
Subsidiary is a party to any Tax allocation, indemnity or sharing or similar
agreement.
(h) Net Operating Losses and General Business Credit. As of September 30,
2001, the net operating loss carryforward of the Company for federal income Tax
purposes was not less than $13,100,000, and, as of December 31, 2000, the
General Business Credit carryforward was not less than $170,792, and except as
set forth on Schedule 3.16, to the Knowledge of the Company, the Company is not
subject to any limitations, under Sections 382, 383 and 384 of the Code and
restrictions under the consolidated return regulations pursuant to Section 1502
of the Code or provisions of state laws affecting such net operating loss
carryforwards for state income tax or state franchise tax purposes, on its
ability to use the net operating loss carryforward other than those under the
Code or otherwise that may arise as a result of the Transactions.
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(i) Section 355. Neither the Company nor any Company Subsidiary has
distributed the stock of a "controlled corporation" (within the meaning of that
term as used in Section 355(a) of the Code) in a transaction subject to Section
355 of the Code within the past two years.
(j) Partnerships. Neither the Company nor any Company Subsidiary owns an
interest in a partnership for Tax purposes.
(k) Neither the Company nor any Company Subsidiary will be required to
include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of any: (A) change in any method of accounting for a taxable period
ending on or prior to the Closing Date under Code Section 481(c) (or any
corresponding or similar provision of state, local or foreign income Tax law);
(B) closing agreement as described in Code Section 7121 (or any corresponding or
similar provision of state, local or foreign income Tax law) executed on or
prior to the Closing Date; (C) deferred intercompany gain or any excess loss
account described in Treasury Regulations under Code Section 1502 (or any
corresponding or similar provision of state, local or foreign income Tax law);
(D) installment sale or open transaction disposition made on or prior to the
Closing Date; or (E) prepaid amount received on or prior to the Closing Date.
3.17 Environmental Matters. Except as set forth on Schedule 3.17: (i) the
Company and each Company Subsidiary are in compliance in all material respects
with applicable Environmental Laws; (ii) the Company and each Company Subsidiary
have all Permits required pursuant to Environmental Laws and are in compliance
in all material respects with the terms thereof; (iii) to the Knowledge of the
Company and the Company Subsidiaries, there are no past or present events,
activities, practices, incidents, actions or plans in connection with the
operations of the Company or any Company Subsidiary which have given rise to or
are reasonably likely to give rise to any material liability on the part of the
Company or any Company Subsidiary under any Environmental Law; (iv) neither the
Company nor any Company Subsidiary has generated, used, transported, treated,
stored, released or disposed of, or has suffered or permitted anyone else to
generate, use, transport, treat, store, release or dispose of any Hazardous
Substance in violation of any Environmental Laws; (v) there has not been any
generation, use, transportation, treatment, storage, release or disposal of any
Hazardous Substance in connection with the conduct of the business of the
Company or any Company Subsidiary or the use of any property or facility by the
Company or any Company Subsidiary, or to the Knowledge of Company and all
Company Subsidiaries, any nearby or adjacent properties, in each case, which has
created or might reasonably be expected to create any material liability under
any Environmental Law or which would require reporting to or notification of any
Governmental Body; and (vi) to the Knowledge of the Company and the Company
Subsidiaries, no asbestos containing materials or polychlorinated biphenyl or
underground storage tank is contained in or located at any facility now or
previously owned or leased by the Company or any Company Subsidiary.
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3.18 Real Property.
(a) Neither the Company nor any Company Subsidiary owns, or has owned,
any real property or any interest in any real property.
(b) Schedule 3.18 sets forth a true, correct and complete list of all
leases, subleases, licenses and other agreements (collectively, the "Real
Property Leases") under which the Company or any Company Subsidiary uses or
occupies or has the right or obligation to use or occupy or pay rent or other
fees for use thereof, now or in the future, any real property (the land,
buildings and other improvements covered by the Real Property Leases being
hereinafter referred to as the "Leased Real Property") which Schedule includes
the true, correct and complete property address, square footage and lease
expiration date of each respective Real Property Lease, together with details of
any security deposit and other prepaid amounts owing in respect of each Real
Property Lease. The Company has heretofore delivered or made available to Parent
true, correct and complete copies of all Real Property Leases, including all
modifications, amendments and supplements thereto. Each Real Property Lease is
valid, binding and in full force and effect, and as of the Closing, all amounts
owing pursuant to the Real Property Leases will have been paid in full. Neither
the Company nor any Company Subsidiary has received notice of, or to the
Knowledge of the Company or the Company Subsidiaries, have there been any,
threatened defaults by any landlord or tenant under any Real Property Lease or
under any subordinate transfer under a Real Property Lease. All required
consents, approvals or authorization of, filing with, or notice to, any party to
any of the Real Property Leases in connection with the Transactions have been
completed. All of the land, buildings, structures, plants, facilities and other
improvements used by the Company and any Company Subsidiary in the conduct of
their respective businesses are included in the Leased Real Property.
(c) Except as set forth on Schedule 3.18, neither the Company nor any
Company Subsidiary has received notice of any pending, or to the Knowledge of
the Company and the Company Subsidiaries, are there any threatened,
condemnation, eminent domain or similar proceedings affecting the Leased Real
Property, any improvements thereon or any portion thereof. Neither the Company
nor any Company Subsidiary has received notice that there are any pending, or to
the Knowledge of the Company and the Company Subsidiaries, have there been any,
threatened requests, applications or proceedings to alter or restrict any zoning
or other use restrictions applicable to the Leased Real Property, any
improvements thereon or any portion thereof. There are no adverse parties in
possession of the Leased Real Property or any portion or portions thereof, and
on the Closing Date the Company and the Company Subsidiaries' interests in the
Leased Real Property will be free and clear of any and all leases, licenses,
occupants or tenants except as set forth in Schedule 3.18.
(d) All buildings, structures, fixtures and other improvements on the
Leased Real Property are in good repair, free of defects (latent or patent), and
fit for the uses to which they are currently devoted. All such buildings,
structures, fixtures and improvements on the Leased Real Property conform to all
Applicable Laws. The buildings, structures, fixtures and improvements on each
parcel of the Leased Real Property lie entirely within the boundaries of
A-17
such parcel of the Leased Real Property as specified in the legal description
set forth in Schedule 3.18, and no structures of any kind encroach on the Leased
Real Property.
(e) None of the Leased Real Property is subject to any agreement or other
restriction of any nature whatsoever (recorded or unrecorded) preventing or
limiting Company's or the Company Subsidiary's right to convey or to use it.
(f) The Leased Real Property has direct and unobstructed access to
adequate electric, gas, water, sewer and telephone lines, all of which are
adequate for the uses to which the Leased Real Property is currently devoted and
intended to be devoted.
3.19 Broker's Fees. Except as set forth on Schedule 3.19, no broker,
finder, agent or similar intermediary has acted on behalf of the Company or any
Company Subsidiary in connection with this Agreement or the Transactions, and
there are no brokerage commissions, finders' fees or similar fees or commissions
payable in connection therewith based on any agreement, arrangement or
understanding with the Company or Company Subsidiary.
3.20 Insurance. Schedule 3.20 sets forth a list of all insurance policies
and fidelity, performance or surety bonds maintained by the Company and the
Company Subsidiaries. The Company and the Company Subsidiaries maintain
insurance policies against all risks and liabilities to an extent and in a
manner customarily insured against by persons operating comparable properties,
assets or businesses in the same geographic locations. The Company has made
available to the Parent with respect to each policy a list and brief description
of all claims (exclusive of claims under medical and dental policies) made by
the Company or any of the Company Subsidiaries during the Company's past two
fiscal years and the amount paid out under each policy with respect to such
claims. Neither the Company nor any of the Company Subsidiaries has any
Knowledge of any facts or of the occurrence of any event that is reasonably
likely to form the basis for any material claim against the Company or any of
the Company Subsidiaries which will not be fully covered by such policies.
Neither the Company nor any of the Company Subsidiaries has received any notice
from any of its insurance carriers that any insurance premiums will be
materially increased in the future.
3.21 Potential Conflicts of Interest. Except as set forth on Schedule
3.21 (a) no officer, director or affiliate of the Company or any of the Company
Subsidiaries, (b) no immediate family member of any such officer, director or
affiliate, and (c) no entity controlled by any one or more of the foregoing: (i)
owns, directly or indirectly, any interest in (excepting not more than 5% stock
holdings for investment purposes in securities of publicly held and traded
companies), or is an officer, director, employee or consultant of, any person or
entity which is, or is engaged in business as, a competitor, lessor, lessee,
customer, distributor, sales agent, or supplier of the Company or any of the
Company Subsidiaries; (ii) owns, directly or indirectly, in whole or in part,
any tangible or intangible property that the Company or any of the Company
Subsidiaries uses or the use of which is necessary or desirable for the conduct
of their respective businesses; (iii) has any cause of action or other claim
whatsoever against, or owes any amount to, the Company or any of the Company
Subsidiaries, except for claims in the ordinary course of business, such as for
accrued vacation pay, accrued benefits under employee benefit plans, and similar
matters and agreements existing on the date hereof; or (iv) on behalf of
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the Company or any of the Company Subsidiaries, has made any payment or
commitment to pay any commission, fee or other amount to, or purchase or obtain
or otherwise contract to purchase or obtain any goods or services from, any
corporation or other person of which any officer or director of the Company or
any of the Company Subsidiaries, or an immediate family member of the foregoing,
is a partner or stockholder (excepting stock holdings solely for investment
purposes in securities of publicly held and traded companies).
3.22 Labor Matters. The Company and each of the Company Subsidiaries is
not now, and has not been in the last five years, bound by or party to any
collective bargaining agreement and, to the Knowledge of the Company and the
Company Subsidiaries, no application for certification of a collective
bargaining agent is pending. The Company and each of the Company Subsidiaries is
in compliance with all Applicable Laws applicable to the Company and each of the
Company Subsidiaries affecting employment practices and terms and conditions of
employment. As of the Closing Date neither the Company nor any of the Company
Subsidiaries has incurred any liability or obligation under the Worker
Adjustment and Retraining Notification Act, as it may be amended from time to
time, or similar applicable state law; nor has the Company or any of the Company
Subsidiaries taken any action prior to the Closing Date which could result in
any such liability or obligation to the Company or any of the Company
Subsidiaries within the six-month period immediately following the Closing Date
if, during such six-month period, only terminations of employment in the normal
course of operations occur. The Company and each of the Company Subsidiaries do
not employ and have not knowingly employed any illegal aliens.
3.23 Customers and Suppliers. Neither the Company nor any Company
Subsidiary is currently in, and, except as set forth in Schedule 3.23, the
execution and delivery of this Agreement by the Company and the consummation of
the transactions contemplated by this Agreement by the Company will not result
in, any material violation, breach or default of any term or provision of (i)
any contract with any Government Agency, (ii) any subcontract issued at any tier
under a prime contract with any Government Agency, or (iii) any bid, proposal,
offer or quotation relating to a contract with any Government Agency or a
subcontract issued under a contract with any Government Agency. Neither the
Company nor any Company Subsidiary is in any material violation, breach or
default of any provision of any federal order, statute, rule or regulation
(including the Federal Acquisition Regulation ("FAR"), agency supplements to the
FAR, the Arms Export Control Act (22 U.S.C. 277 et. seq), and agency export
regulations) or any similar state or local law or regulation governing any
contract, subcontract, bid, proposal, offer, quote, arrangement or transaction
of any kind with any Government Agency, as applicable. Neither the Company nor
any Company Subsidiary has received a cure notice, a show cause notice, a stop
work notice, been threatened with termination for default, or has a reasonable
basis to believe that cause exists for a termination for default under any
contract or subcontract with any Government Agency. Neither the Company nor any
Company Subsidiary has Knowledge of any claims or requests for equitable
adjustments by any of their vendors, suppliers or subcontractors, against them
relating to contracts or subcontracts involving any Government Agency.
3.24 Suspension or Debarment. Neither the Company nor any Company
Subsidiary has been suspended or debarred from bidding on contracts or
subcontracts with any
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Government Agency in connection with the conduct of its business; no such
suspension or debarment has been initiated or, to the Knowledge of the Company
and each Company Subsidiary, threatened, and neither the Company nor any Company
Subsidiary has any reasonable basis to believe that one will be initiated.
Neither the Company nor any Company Subsidiary is aware of any ongoing
Government investigations, prosecutions, civil or administrative proceedings or
settlement negotiations, or internal investigations, relating to the contracts
or subcontracts with any Government Agency or the violation of any federal,
state or local order, statute, rule, or regulation relating to Government
contracts, subcontracts, or export controls. Schedule 3.24 sets forth all
material governmental reviews, audits or investigations of a similar nature,
whether pending, threatened or completed within the three-year period preceding
the date hereof, relating to the performance or administration of government
contracts or subcontracts by the Company or any Company Subsidiary.
3.25 Technical Data. Except for the "data" items described in Schedule
3.25, no Government Agency has any rights with respect to any "technical data"
or "computer software" that are material to the Company's business.
3.26 Clearances. Schedule 3.26 sets forth all security clearances
(including facility clearances) held by the Company, any Company Subsidiary and
any of their officers, directors, managers or employees.
3.27 Fixed Price Contracts.
(a) Except for the contracts listed in Schedule 3.27(a), as of the date
of this Agreement and as of the Closing Date, neither the Company nor any
Company Subsidiary holds or is performing under any fixed-price contract or
subcontract, including performance under any option provision thereof, with any
Government Agency for which performance has not been completed, final payment
has not been received, or warranty, support, or maintenance obligations have
been retained, where the costs to the Company or Company Subsidiary of
completing performance of the fixed price component of the contract or
subcontract and/or fulfilling all contractual obligations, have exceeded or are
reasonably expected to exceed the fixed price amount of the contract or
subcontract (i.e., the Company or Company Subsidiary is in a loss position or
expects to incur a loss with respect to the fixed price component of the
contract or subcontract).
(b) Except for the bids and proposals listed in Schedule 3.27(b), as of
the date of this Agreement and as of the Closing Date, there are no pending bids
or proposals for the award of any fixed-price contract or subcontract to be
performed in connection with any Government contract, submitted to any
Government Agency or potential prime contractor by the Company or any Company
Subsidiary, where the proposed fixed price of the bid or proposal exceeds the
estimated costs to the Company or Company Subsidiary of completing performance
of the fixed price component of such contract or subcontract
(c) For the purposes of this Section 3.27, the term "costs" means all
costs attributable to a particular contract or subcontract in accordance with
GAAP consistent with the Company's past practices, including all allocations of
general and administrative expenses to
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such contract or subcontract, and the term "fixed price" with respect to
contracts and subcontracts includes the following: firm-fixed-price contracts;
fixed-price contracts with economic price adjustment; fixed-price incentive
contracts; fixed-price contracts with prospective price redetermination,
fixed-ceiling price contracts with retroactive price redetermination;
firm-fixed-price, level-of-effort term contracts; all contracts or delivery
orders issued pursuant to a General Services Administration (GSA) schedule
contract or other agency multiple award schedule contract; and all variations or
combinations of the above listed contract types.
3.28 Full Disclosure. This Agreement (including the disclosure schedules)
and the SEC Reports, do not (i) contain any representation, warranty or
information that is false or misleading with respect to any material fact, or
(ii) omit to state any material fact necessary in order to make the
representations, warranties and information contained herein, in the context in
which made or provided, not false or misleading.
3.29 Confidentiality. Neither the Company nor any Company Subsidiary has
provided confidential information regarding the Company or any Company
Subsidiary to any third-party in connection with or relating to a possible sale
of the Company except to the Persons listed on Schedule 3.29. Each of the
Persons identified on Schedule 3.29 has entered into a confidentiality agreement
directly with the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company as follows:
4.1 Organization and Qualification; Subsidiaries. Each of Parent and
Merger Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, has requisite
power and authority and governmental approvals to own, lease and operate their
respective properties and to carry on their respective businesses as currently
conducted. Merger Sub is a wholly-owned Subsidiary of Parent and, except for
activities incident to or contemplated by this Agreement, Merger Sub has not
engaged, in any business activities of any type or kind whatsoever.
4.2 Authority to Execute and Perform Agreement. Parent and Merger Sub
each have the requisite power and authority to enter into, execute and deliver
this Agreement and the Transaction Documents to which they are party, to perform
their respective obligations hereunder and thereunder and to consummate the
Transactions. The execution, delivery and performance by Parent and Merger Sub
of this Agreement and the consummation by Parent and Merger Sub of the
Transactions have been duly authorized by all necessary corporate action.
4.3 Binding Effect. This Agreement has been validly executed and
delivered by Parent and Merger Sub and, assuming the due execution and delivery
hereof by the Company,
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will constitute a valid and binding obligation of Parent and Merger Sub
enforceable against Parent and Merger Sub in accordance with its terms, except
to the extent such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general applicability
affecting or relating to enforcement of creditors' rights generally, and (ii)
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.4 Vote Required; Board Approval. No vote of the holders of any class or
series of Parent's capital stock is necessary to adopt this Agreement and
approve the Transactions. The Board of Directors of Merger Sub, by resolutions
duly adopted at a meeting duly called and held or by the unanimous written
consent in lieu of a meeting, has approved this Agreement, the Merger and the
other Transactions.
4.5 Litigation. As of the date hereof, there are no Legal Proceedings
pending or, to the Knowledge of Parent, threatened against Parent or Merger Sub
that would, individually or in the aggregate, prevent or delay the consummation
of, or materially adversely affect the ability of Parent or Merger Sub to
consummate, the Merger or the Transactions.
4.6 Compliance with Laws. Neither Parent nor Merger Sub is in violation
of any applicable Order or Applicable Law, except for any such violations that
would not, individually or in the aggregate, prevent or delay the consummation
of, or materially adversely affect the ability of Parent or Merger Sub to
consummate, the Merger or the Transactions.
4.7 Non-Contravention. The execution and delivery of this Agreement by
Parent and Merger Sub, the performance by Parent and Merger Sub of their
respective obligations hereunder and the consummation of the Transactions by
Parent and Merger Sub will not (i) violate any provision of the Certificate of
Incorporation or Bylaws of Parent or Merger Sub or (ii) subject to the
exceptions set forth in Section 4.8 and on Schedule 4.8, violate any Applicable
Law, except for such violations which would not, individually or in the
aggregate, prevent or delay the consummation of, or materially adversely affect
the ability of Parent or Merger Sub to consummate, the Merger or the
Transactions.
4.8 Consents and Approvals. Except for (i) those consents, approvals,
authorizations, filings or notices set forth on Schedule 4.8, (ii) applicable
requirements of the Securities Act, the Exchange Act and Blue Sky Laws and (iii)
the Articles of Merger, no consent, approval or authorization of, filing with,
or notice to, any Governmental Body is required by Parent or Merger Sub in
connection with the execution, delivery and performance by Parent and Merger Sub
of this Agreement and the consummation by Parent and Merger Sub of the
Transactions, except where the failure to obtain such consent, approval or
authorization or to make such filing or give such notice would not, individually
or in the aggregate, prevent or delay the consummation of, or materially
adversely affect the ability of Parent or Merger Sub to consummate, the Merger
or the Transactions.
4.9 Broker's Fees. No broker, finder, agent or similar intermediary has
acted on behalf of Parent or Merger Sub in connection with this Agreement or the
Transactions, and there are no brokerage commissions, finders' fees or similar
fees or commissions payable in
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connection therewith based on any agreement, arrangement or understanding with
Parent or Merger Sub.
4.10 Financing. Parent has, and all times from the date of this Agreement
through the Effective Time will have, sufficient funds to pay the Aggregate
Merger Consideration.
ARTICLE V
ADDITIONAL AGREEMENTS OF THE PARTIES
5.1 Actions of the Company Pending Closing. From the date hereof until
the Effective Time, unless otherwise agreed to in writing by Parent or Merger
Sub, the Company agrees, and will cause each Company Subsidiary, to conduct its
business and operations only in the ordinary course and in substantially the
same manner as heretofore conducted. From the date hereof through the earlier of
the Effective Time or the termination of this Agreement in accordance with its
terms, the Company shall, and will cause each Company Subsidiary to, use its
reasonable best efforts to preserve its business organizations intact, and to
retain its present officers and key employees, to preserve the goodwill of
customers, suppliers and all other persons having business relationships with
the Company and the Company Subsidiaries and to pay its obligations to its
creditors in the ordinary course of business. Without limiting the generality of
the foregoing, prior to the Effective Time, the Company shall not, and will not
permit any Company Subsidiary to, without the prior written consent of Parent or
Merger Sub, which consent shall not be unreasonably withheld, conditioned or
delayed, directly or indirectly do any of the following:
(a) except to the extent required by Applicable Law, amend or otherwise
change the Articles of Incorporation or Bylaws of the Company or the equivalent
organizational documents of any Company Subsidiary;
(b) issue or authorize or propose the issuance of, sell, pledge or
dispose of, grant or otherwise create, or agree to issue or authorize or propose
the issuance, sale, pledge, disposition, grant or creation of any additional
shares of, or any options, warrants, convertible securities or other rights of
any kind to acquire any shares of, its capital stock or any debt or equity
securities convertible into or exchangeable for such capital stock, other than
(i) the exercise of Company Options granted prior to the date hereof in
accordance with their terms, as in effect on the date hereof, (ii) the issuance
of shares of capital stock of a Company Subsidiary to the Company or any
wholly-owned Company Subsidiary, or (iii) the issuance of Company Options
granted under the Stock Option Agreement;
(c) purchase, redeem or otherwise acquire or retire, or offer to
purchase, redeem or otherwise acquire or retire, other than in accordance with
the terms of a stock option plan, any shares of its capital stock (including any
Company Options with respect to its capital stock and any security convertible
or exchangeable into its capital stock);
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(d) enter into or amend any Material Contract other than in the ordinary
course of business; or authorize any new capital expenditures or purchase of
fixed assets which are, in the aggregate, in excess of $10,000 for the Company
and the Company Subsidiaries taken as a whole;
(e) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock (other than a dividend or distribution between the Company and any
wholly-owned Company Subsidiary), reclassify, recapitalize, split, combine or
exchange any of its shares of capital stock;
(f) incur or become contingently liable with respect to any indebtedness
for borrowed money or guarantee any such indebtedness or issue any debt
securities;
(g) except as may be required by Applicable Laws or as contemplated by
this Agreement or as set forth in Schedule 5.1 to this Agreement, (i) increase
the compensation payable or to become payable to, or enter into any employment
agreement with, its executive officers or employees, except in the ordinary
course of business consistent with past practice, (ii) grant any severance or
termination pay to any director, officer or employee, (iii) enter into any
severance agreement with any director, officer or employee, or (iv) establish,
adopt, enter into, terminate, withdraw from or amend in any material respect or
take action to accelerate any rights or benefits under any collective bargaining
agreement, any stock option plan or any employee Benefit Plan or policy, except
in the ordinary course of business consistent with past practice;
(h) take any action, other than reasonable actions in the ordinary course
of business and consistent with past practice, with respect to accounting
policies or procedures, except as may be required by GAAP;
(i) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other means, any business or any corporation, partnership,
association or other business entity;
(j) mortgage or otherwise encumber, subject to any Lien, or sell,
transfer or otherwise dispose of, any of its properties or assets that are
material, individually or in the aggregate, to the Company and the Company
Subsidiaries, taken as a whole, other than sales, transfers and dispositions in
the ordinary course of business and consistent with past practice and
encumbrances and Liens that are incurred in the ordinary course of business and
consistent with past practice or Permitted Liens;
(k) adopt a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization of the Company or any
Company Subsidiary;
(l) except as set forth in Schedule 5.1 to this Agreement, pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in the financial
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statements of the Company or incurred in the ordinary course of business and
consistent with past practice;
(m) take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1(a) through (l) above, or any action which would make
any of the representations or warranties of the Company or the Company
Subsidiaries contained in this Agreement untrue or incorrect in any material
respect or prevent the Company or the Company Subsidiaries from performing or
cause the Company or the Company Subsidiaries not to perform their respective
covenants under this Agreement in any material respect;
(n) waive, release, assign, settle or compromise any material rights,
claims or litigation (including any confidentiality agreement), except as
reasonably may be required to fulfill the Company's fiduciary duties to its
shareholders;
(o) enter into a sublease or assignment with respect to any of the
Company's Leased Real Property;
(p) authorize any of, or commit or agree to take any of, the foregoing
actions; or
(q) make or change any Tax election, settle any audit, claim or
examination of Taxes, adopt or apply to change any method of accounting or
accounting practice for Tax purposes, file any amended Tax Return, enter into
any closing agreement or request a Tax ruling from a Tax authority, settle any
claims for Taxes, surrender any right to claim a refund of Taxes, consent to any
extension or waiver of the limitation period applicable to any Taxes, Tax Return
or claim for Taxes, or take any action or fail to take any action that would
have a material adverse effect on the Tax liability of the Company or any of the
Company Subsidiaries.
5.2 Stockholder Approval. As soon as practicable, the Company will take
all steps necessary to duly call, give notice of, convene and hold a meeting of
its Stockholders (the "Company Stockholders Meeting") for the purpose of
approving this Agreement and the Merger and the transactions contemplated hereby
and for such other purposes as may be consented to by Parent (whose consent
shall not be unreasonably withheld) and the Company in connection with
effectuating the transactions contemplated hereby (the "Company Proposal").
Except as otherwise contemplated by this Agreement and subject to the exercise
of the fiduciary duties of the Company's directors, the Board of Directors of
the Company (i) shall recommend to the Stockholders of the Company that they
approve the Company Proposal, and (ii) shall use its reasonable best efforts to
obtain any necessary approval by the Company's Stockholders of the Company
Proposal.
5.3 Efforts; Consents. Each party hereto agrees to use, and shall cause
its respective Subsidiaries to use, reasonable best efforts to take or cause to
be taken all actions necessary, proper or advisable to consummate the Merger and
the Transactions, and agrees to make, and shall cause its respective
Subsidiaries to make, a good faith effort to effect the Closing by February 28,
2002. Without limiting the generality of the foregoing, each of the parties
hereto shall use, and shall cause its respective Subsidiaries to use, reasonable
best efforts to
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obtain all authorizations, consents, orders and approvals of Federal, state, and
local regulatory bodies, that are or may become necessary for the performance of
its respective obligations pursuant to this Agreement, the Transactions
Documents and the consummation of the Transactions, and shall cooperate fully in
promptly seeking to obtain such authorizations, consents, orders and approvals
as may be necessary for the performance of its respective obligations pursuant
to this Agreement, the Transaction Documents and the Transactions. The parties
shall not take, and shall cause their respective Subsidiaries not to take, any
action which would have the effect of delaying, impairing or impeding the
receipt of any required regulatory approvals, and the parties shall use, and
shall cause their respective Subsidiaries to use, reasonable best efforts to
secure such approvals as promptly as possible. The parties shall use, and shall
cause their respective Subsidiaries to use, reasonable best efforts not to take
any action or enter into any transaction which would result in a breach of any
covenant made by such party in this Agreement.
5.4 Filing of Tax Returns. The Company and each Company Subsidiary will
prepare in a manner consistent with past practice of the Company and each
Company Subsidiary, and timely file all Tax Returns required to be filed by the
Company and each of the Company Subsidiaries, the due date of which (without
extensions) occurs on or before the Closing Date and the Company and Company
Subsidiaries shall pay all Taxes due with respect to any such Tax Returns. At
least 30 days prior to the due date for filing such Tax Returns, the Company and
each Company Subsidiary shall make available to Parent a draft of such Tax
Returns as the Company or such Company Subsidiary proposes to file. Parent shall
have the opportunity to review and comment on the draft of such Tax Returns.
5.5 Access to Records; Confidentiality.
(a) Prior to the Closing Date, each of Parent and Merger Sub shall be
entitled, through their respective employees and representatives, to make such
investigation of the assets, properties, business and operations of the Company
and the Company Subsidiaries and such examination of the books, records and
financial condition of the Company and Company Subsidiaries as the Parent and
Merger Sub may request. Any such investigation and examination shall be
conducted at reasonable times after providing reasonable prior notice and under
reasonable circumstances and the Company shall cooperate, and shall cause the
Company Subsidiaries to cooperate, reasonably therewith. In order that the
Parent and Merger Sub may have the opportunity to make such business, accounting
and legal review, examination or investigation as it reasonably requests of the
business and affairs of the Company and the Company Subsidiaries, the Company
and the Company Subsidiaries shall furnish the representatives of the
investigating or examining party, during such period, with all such information
and copies of such documents as such representatives may reasonably request,
shall make available its officers and employees (and those of its Subsidiaries)
as such representatives may reasonably request, and shall cause its officers and
employees (and those of its Subsidiaries) to, and use reasonable efforts to
cause its consultants, agents, accountants and attorneys (and those of its
Subsidiaries) to, cooperate fully with such representatives in connection with
such review and examination. Notwithstanding anything to the contrary in this
Section 5.5, neither party shall be required to disclose any classified
information in violation of Applicable Law.
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(b) Unless (i) otherwise expressly provided in this Agreement, (ii)
required by Applicable Law, (iii) necessary to secure any required consents as
to which the other party has been advised, or (iv) consented to in writing by
Parent and the Company, this Agreement and any information or documents
furnished in connection herewith shall be kept strictly confidential by the
Company and the Company Subsidiaries, Parent and the Parent Subsidiaries, and
their respective officers, directors, employees and agents. Prior to any
disclosure pursuant to the preceding sentence, the party intending to make such
disclosure shall consult with the other party to the extent practicable
regarding the nature and extent of the disclosure. Subject to the preceding
sentence, nothing contained herein shall preclude disclosures to the extent
necessary to comply with accounting, SEC and other disclosure obligations
imposed by Applicable Law. In the event the Merger is not consummated, Parent
and the Company shall return to the other all documents furnished by the other
and all copies thereof made by such party and will hold in absolute confidence
all information obtained from the other party except to the extent (i) such
party is required to disclose such information by Law or such disclosure is
necessary in connection with the pursuit or defense of a claim, (ii) such
information was known by such party prior to such disclosure or was thereafter
developed or obtained by such party independent of such disclosure, (iii) such
party received such information on a non-confidential basis from a source, other
than the other party, which is not known by such party to be bound by a
confidentiality obligation with respect thereto or (iv) such information becomes
generally available to the public or is otherwise no longer confidential. Prior
to any disclosure of information pursuant to the exception in clause (i) of the
preceding sentence, the party intending to disclose the same shall so notify the
party which provided the same to the extent practicable in order that such party
may seek a protective order or other appropriate remedy should it choose to do
so.
5.6 Notification of Certain Matters. The Company shall give prompt notice
to Parent if any of the following occurs after the date of this Agreement: (i)
any notice of, or other communication relating to, a default, or event which
with notice or lapse of time or both would become a default, under any Material
Contract; (ii) receipt of any notice or other communication in writing from any
person alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement, other than a
consent disclosed pursuant to Section 3.13 above or not required to be disclosed
pursuant to the terms thereof; (iii) receipt of any notice or other
communication from any Governmental Authority (including, but not limited to,
the NASD or any securities exchange) in connection with the transactions
contemplated by this Agreement; (iv) the occurrence or non-occurrence of any
fact or event which could reasonably be expected to cause any covenant,
condition or agreement hereunder not to be complied with or satisfied in any
material respect; (v) the commencement or threat of any material litigation
involving or affecting the Company or any Company Subsidiary, or any of their
respective properties or assets; (vi) the occurrence or non-occurrence of any
fact or event that causes or is reasonably likely to cause a breach by the
Company of any provision of this Agreement, and (vii) the occurrence of any
event that, had it occurred prior to the date of this Agreement without any
additional disclosure hereunder, would have constituted a Company Material
Adverse Effect.
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5.7 Non-Solicitation.
(a) Neither the Company nor any Company Subsidiary, nor any of their
respective officers, directors, employees, agents, affiliates, accountants,
counsel, investment bankers, financial advisors or other representatives
(collectively, "Representatives") shall, (i) directly or indirectly, initiate,
solicit or encourage, or take any action to facilitate the making of, any
Acquisition Proposal, or (ii) directly or indirectly engage in any discussions
or negotiations with, or provide any information or data to, or afford any
access to the properties, books or records of the Company or any Company
Subsidiary to, or otherwise assist, facilitate or encourage, any person (other
than Parent or any affiliate or associate thereof) relating to any Acquisition
Proposal; provided, however, that at any time prior to the Company Stockholders
Meeting, the Company may, in response to a Superior Proposal (as defined below)
which was not solicited by it and which did not otherwise result from a breach
of this Section 5.7(a), and subject to providing prior written notice of its
decision to take such action to Parent (the "Notice") and compliance with
Section 5.7(c), following delivery of the Notice (x) furnish information with
respect to the Company, or the Company Subsidiaries to any person making a
Superior Proposal pursuant to a customary confidentiality agreement and (y)
participate in discussions and negotiations regarding such Superior Proposal
but, in each case, only if the Company's Board of Directors determines, after
consultation with its outside counsel, that failure to furnish such information
or to participate in such discussions or negotiations would be inconsistent with
the compliance by the Company's Board of Directors with its fiduciary duties to
stockholders imposed by Applicable Law. The Company shall keep Parent apprised
of any such discussions and negotiations promptly after they occur.
(b) Except as set forth below, neither the Board of Directors of the
Company, nor any committee thereof, shall (x) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent, the Board of Directors'
approval or recommendation of the Merger or this Agreement, (y) approve any
letter of intent, agreement in principle, acquisition agreement or similar
agreement (other than a confidentiality agreement in connection with a Superior
Proposal which is executed by the Company in accordance with Section 5.7(a))
relating to any Acquisition Proposal (each, an "Acquisition Agreement"), or (z)
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal. Notwithstanding the foregoing, in response to a Superior Proposal
which was not solicited by the Company, and which did not otherwise result from
a breach of Section 5.7(a), the Board of Directors of the Company may terminate
this Agreement pursuant to and subject to the terms of Section 7.1(g) and,
concurrently with such termination, cause the Company, to execute an Acquisition
Agreement with respect to a Superior Proposal, but only if the Company's Board
of Directors determines, after consultation with its outside counsel, that
failure to terminate this Merger Agreement and accept the Superior Proposal
would be inconsistent with the compliance by the Company's Board of Directors
with its fiduciary duties to stockholders imposed by Applicable Law.
(c) The Company promptly shall advise the Parent orally and in writing of
any Acquisition Proposal with respect to or that could reasonably be expected to
lead to any Acquisition Proposal, the identity of the person making any such
Acquisition Proposal and the
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material terms of any such Acquisition Proposal. The Company shall keep the
Parent fully informed of the status and material terms of any such Acquisition
Proposal.
(d) The Company and each Company Subsidiary and each of their
Representatives shall immediately cease and cause to be terminated all existing
discussions and negotiations, if any, with any other persons conducted
heretofore with respect to any Acquisition Proposal.
For purposes of this Agreement, an "Acquisition Proposal" means any
inquiry, proposal or offer from any person relating to (i) any direct or
indirect acquisition or purchase of a business that constitutes 50% or more of
the net revenues, net income or assets of the Company and the Company
Subsidiaries, taken as a whole, or 50% or more of the common stock or voting
power (or of securities or rights convertible into or exercisable for such
common stock or voting power) of the Company, (ii) any tender offer or exchange
offer that if consummated would result in any person beneficially owning 50% or
more of the common stock or voting power (or of securities or rights convertible
into or exercisable for such common stock or voting power) of the Company, or
(iii) any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company, or any of
its Subsidiaries that constitutes 50% or more of the net revenues, net income or
assets of the Company, and its Subsidiaries taken as a whole, in each case other
than the transactions contemplated by this Agreement. Each of the transactions
referred to in clauses (i) - (iii) of the foregoing definition of Acquisition
Proposal, other than the Merger proposed by this Agreement, is referred to
herein as an "Acquisition Transaction."
For purposes of this Agreement, a "Superior Proposal" means any written
proposal made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction,
for consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Company Common Stock then outstanding or
more than 50% of the assets of the Company and its Subsidiaries, taken together,
with respect to which (x) the Board of Directors of the Company determines in
its good faith judgment (based on the advice of a financial advisor of
nationally recognized reputation (the "Financial Advisor") and such other
matters as the Board of Directors of the Company deems relevant, which shall
include without limitation the likelihood of consummation and the trading market
and liquidity of any securities offered in connection with the Superior
Proposal) that the terms of the proposal are more favorable to the Company's
stockholders from a financial point of view as compared to the Merger, and (y)
if the proposal (1) is subject to a financing condition or (2) involves
consideration that is not entirely cash or does not permit stockholders to
receive the payment of the offered consideration in respect of all shares at the
same time, the Company's Board of Directors has been furnished with a written
opinion of the Financial Advisor to the effect that (in the case of clause (1))
the proposal is readily financeable and (in the case of clause (2)) that such
proposal provides a higher value per share than the consideration per share
pursuant to the Merger.
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5.8 Further Assurances. At any time and from time to time after the
Closing, each party to this Agreement agrees to cooperate with each other party
and to execute and deliver such other documents, instruments of transfer or
assignment, files, books and records and do all such further acts as may be
reasonably required to consummate the Transactions.
5.9 Benefit Plans; Employee Matters.
(a) Parent and Merger Sub agree that the Surviving Corporation shall
honor, from and after the Closing, all obligations under the terms of the
employment, severance, executive, change of control (including, without
limitation, any transaction completion bonus payments) and other similar
agreements to which the Company or any Company Subsidiary is a party and all
benefits earned or accrued under the Benefit Plans of the Company and each
Company Subsidiary, except as may otherwise be agreed to in writing by the
parties thereto.
(b) To the extent that any individual employed by the Company or any
Company Subsidiary immediately prior to the Closing Date (each, an "Affected
Employee") becomes a participant in any Benefit Plan maintained by Parent or any
Subsidiary or Affiliate of Parent, Parent shall, or shall cause such Subsidiary
or Affiliate of Parent to, give such Affected Employee full credit, solely for
the purposes of determining eligibility and vesting under such Benefit Plan, for
such Affected Employee's service with the Company or any Company Subsidiary, to
the extent such service was recognized by the Company or any Company Subsidiary
immediately prior to the Closing Date. Notwithstanding the foregoing, with
respect to any Benefit Plan maintained by Parent or any Subsidiary or Affiliate
of Parent which constitutes a pension or retirement benefit plan, the entry date
for Affected Employees who otherwise meet the eligibility criteria of such
Benefit Plan shall be the first day of the calendar quarter immediately
following the later of (i) the Closing, and (ii) receipt by Parent from the
Company of all data deemed necessary by Parent regarding such Affected
Employees' hours of service with the Company and each Company Subsidiary. Parent
shall recognize each Affected Employee's hours of service worked for the Company
or any Company Subsidiary in the calculation of retirement plan eligibility and
service according to computation rules for similarly situated Parent employees.
(c) After the Closing, Parent shall, or shall cause the Surviving
Corporation and its Subsidiaries to, provide Affected Employees with benefits
that are no less favorable in the aggregate than benefits provided to similarly
situated employees of Parent and its Subsidiaries and Affiliates.
(d) Prior to the Closing Date, the Board of Directors of the Company
shall adopt resolutions (certified copies of which shall be delivered to Parent)
terminating each Benefit Plan maintained by the Company or any Company
Subsidiary which constitutes an employee pension benefit plan within the meaning
of Section 3(2) of ERISA effective immediately prior to the Closing.
5.10 Public Disclosure. Each party to this Agreement shall consult with
each other party before issuing any press release or otherwise making any public
statements, announcements or communications with respect to this Agreement or
any of the Transactions
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and shall not issue any such press release or make any such public statement,
announcement or communication without the prior consent of the other parties,
which consent shall not be unreasonably withheld. If any public statement,
announcement or communication is required by Applicable Law to be made by any
party to this Agreement, prior to making such statement, announcement or
communication, such party will deliver a draft thereof to the other parties and
shall give the other parties an opportunity to comment thereon.
5.11 Satisfaction of Conditions Precedent. During the term of the
Agreement, the parties hereto will use reasonable best efforts to satisfy (or
cause to be satisfied) all the conditions precedent to their respective
obligations.
5.12 Proxy Statement. As promptly as practicable after execution of this
Agreement, the Company shall prepare the Proxy Statement, file it with the SEC
under the Exchange Act, and use all reasonable best efforts to have the Proxy
Statement cleared by the SEC. The Company shall cause the Proxy Statement to
comply as to form in all material respects with the applicable provisions of the
Exchange Act and the rules and regulations thereunder. Parent, Merger Subsidiary
and the Company shall cooperate with each other in the preparation of the Proxy
Statement, and the Company shall notify Parent of the receipt of any comments of
the SEC with respect to the Proxy Statement and of any requests by the SEC for
any amendment or supplement thereto or for additional information and shall
provide to Parent promptly copies of all correspondence between the Company or
any representative of the Company and the SEC. The Company shall give Parent and
its counsel the opportunity to review the Proxy Statement prior to its being
filed with the SEC and shall give Parent and its counsel the opportunity to
review all amendments and supplements to the Proxy Statement and all responses
to requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of the Company, Parent and Merger
Subsidiary agrees to use its reasonable best efforts, after consultation with
the other parties hereto to respond promptly to all such comments of and
requests by the SEC. As promptly as practicable after the Proxy Statement has
been cleared by the SEC, the Company shall mail the Proxy Statement to the
stockholders of the Company. Prior to the date of approval of the Merger by the
Company's stockholders, each of the Company, Parent and Merger Subsidiary shall
correct promptly any information provided by it to be used specifically in the
Proxy Statement that shall have become false or misleading in any material
respect and the Company shall take all steps necessary to file with the SEC and
cleared by the SEC any amendment or supplement to the Proxy Statement so as to
correct the same and to cause the Proxy Statement as so corrected to be
disseminated to the stockholders of the Company, in each case to the extent
required by applicable law.
5.13 Other Obligations of the Company (a) Promptly after the date hereof,
the Company shall approve and adopt appropriate changes to the Company Stock
Purchase Plan in order to result in no ESPP Rights being in effect after January
10, 2002.
(b) The Company shall terminate the Company Stock Purchase Plan and all
ESPP Rights effective as of the Effective Time. No amounts shall be credited to
employee accounts under the Company Stock Purchase Plan subsequent to December
31, 2001, and from and after January 10, 2002 there shall not be any funds in
the Company Stock Purchase Plan.
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(c) The Company shall use its reasonable best efforts, consistent with
United States and foreign laws, to attempt to cause the termination or exercise
of all Company Options as of the Effective Time. In connection therewith, the
Company shall (i) use its reasonable best efforts to enter into consent
agreements with the Persons listed on Schedule 5.13(c), providing for the
termination of any Out-of-the-Money Options and the exercise of any In-the-Money
Options held by such Persons, in each case, as of the Effective Time, and (ii)
designate an exercise period under the Company's 1995 Stock Option Plan ending
not more than 10 days prior to the Closing Date. The Company shall promptly
notify Parent of any failure or prospective failure to obtain any such consents,
and shall use its reasonable best efforts to take all action reasonably
requested by Parent to attempt to obtain such consents.
5.14 Anti-takeover Statutes. If, notwithstanding the actions taken
pursuant to Section 3.5, any "fair price," "moratorium," "control share
acquisition" or other form of anti-takeover statute is or shall become
applicable to the Merger or Transactions contemplated hereby, the Company and
the members of the Board of Directors, to the extent permitted by Applicable
Laws, shall grant such approvals and take such actions as are necessary and are
reasonably practicable to be granted or taken so that the Merger and other
Transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of any such anti-takeover statute on the Transactions contemplated
hereby.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to Each Party's Obligations to Consummate the
Transactions. The respective obligations of each party to this Agreement to
consummate the Transactions shall be subject to the following conditions, unless
waived in writing prior to the Closing Date by such party:
(a) All consents, approvals, authorizations, orders and action of any
Governmental Body required to permit the consummation of the Transactions shall
have been obtained or made and shall be in full force and effect.
(b) No action shall have been taken, and no statute, rule, regulation,
executive order, judgment, decree, or injunction shall have been enacted,
entered, promulgated or enforced (and not repealed, superseded, lifted or
otherwise made inapplicable), by any court or governmental or regulatory agency
of competent jurisdiction which restrains, enjoins or otherwise prohibits the
consummation of the Transactions (each party agreeing to use its reasonable best
efforts to avoid the effect of any such statute, rule, regulation or order or to
have any such order, judgment, decree or injunction lifted).
6.2 Conditions to Obligations of the Company to Consummate the
Transactions. The obligation of the Company to consummate the Transactions shall
be subject to the satisfaction of the following conditions, unless waived in
writing prior to the Closing Date by the Company:
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(a) The representations and warranties of Parent and Merger Sub contained
herein that are qualified as to materiality (or similar concept) shall be true
and correct, and those not so qualified shall be true and correct in all
material respects, in each case at and as of the Effective Time with the same
force and effect as though made at and as of the Effective Time (except to the
extent a representation or warranty speaks specifically as of an earlier date,
in which case as of such date).
(b) Parent and Merger Sub shall have performed, in all material respects,
all obligations and complied with all covenants required by this Agreement to be
performed or complied with, in all material respects, by each of them prior to
the Effective Time.
(c) Parent and Merger Sub shall have executed and delivered to the
Company a certificate, dated the date of Closing and signed by an officer of
Parent and Merger Sub, evidencing compliance with Sections 6.2(a) and (b)
hereof.
6.3 Conditions to Obligations of Parent and Merger Sub to Consummate the
Transactions. The obligation of Parent and Merger Sub to consummate the
Transactions shall be subject to the satisfaction of the following conditions,
unless waived in writing prior to the Closing Date by Parent and Merger Sub:
(a) The representations and warranties of the Company contained herein
that are qualified as to materiality or a Company Material Adverse Effect (or
similar concept) shall be true and correct, and those not so qualified shall be
true and correct in all material respects , in each case at and as of the
Effective Time with the same force and effect as though made at and as of the
Effective Time (except to the extent a representation or warranty speaks
specifically as of an earlier date, in which case as of such date).
(b) The Company shall have performed, in all material respects, all
obligations and complied with all covenants required by this Agreement to be
performed or complied with, in all material respects, by it prior to the
Effective Time.
(c) This Agreement and the Merger shall have been duly approved by the
requisite vote of the Stockholders of the Company in accordance with the VSCA.
(d) To the extent dissenter's rights are available, fewer than five
percent (5%) of the outstanding shares of Company Common Stock shall be
Dissenting Shares.
(e) Parent shall have received the following agreements and documents,
each of which shall be in full force and effect:
(i) a certificate executed on behalf of the Company, dated the
date of Closing and signed by an executive officer of the Company,
evidencing compliance with Sections 6.3(a) through (d) and (f) hereof.
(ii) written resignations of all directors of the Company,
effective as of the Effective Time.
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(iii) evidence satisfactory to Parent of the exercise or
termination, effective as of the Effective Time, of all Company Options
such that immediately after the Effective Time, each Option Holder shall
cease to have any rights under the option plan or agreement pursuant to
which it acquired its Company Options (other than to receive the payments
provided for in Section 2.2, if any).
(iv) evidence satisfactory to Parent of the approval of the
termination of the Company Stock Purchase Plan, effective as of the
Effective Time.
(v) evidence satisfactory to Parent of the termination of the
engagement letter between the Company and Investec PMG Capital, effective
as of the Effective Time, including a release or satisfaction of any and
all obligations to Investec PMG Capital under the engagement letter.
(vi) with respect to the IPMS contract with the Company (the "IPMS
Contract"), evidence satisfactory to Parent that as of such date:
(A) the IPMS Contract (x) has not expired or been
terminated or cancelled and remains in full force
and effect, and (y) has not been modified or
amended, or if it has been modified or amended, the
terms of such modified or amended contract is not
materially less favorable to the Company than the
current IPMS contract;
(B) there has been no material adverse change with
respect to the IPMS Contract and to the knowledge of
the Company, no event has occurred or is reasonably
likely to occur that would reasonably likely lead to
a material adverse change with respect to the IPMS
Contract;
(C) the total contract hours available to be billed for
services rendered under the IPMS Contract during the
calendar month immediately preceding such date, was
not less than 90% of the average of the total
contract hours available to be billed for October,
November and December 2001; and
(D) the award fee rate under the IPMS Contract is at
least 90% (i.e., 8.8%) of the award fee rate as of
December 31, 2001 (i.e., 9.8%).
(vii) evidence satisfactory to Parent of the termination of the
Company's current lease for 25,950 square feet of office space at 12150
Monument Drive, Fairfax, Virginia 22033, and the subsequent lease by the
Company of approximately 13,950 square feet of office space at the same
location with the following terms:
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(A) the term of the lease ends no later than July 31,
2003; and
(B) aggregate lease payments by the Company under such new
lease for the period ended July 31, 2003 (after the inclusion of
aggregate lease payments received by the Company pursuant to the
sublease with Premier Mortgage Company LLC for the same period),
shall be less than the aggregate lease payments that would have
been payable under the current lease by at least $425,000.
(viii) evidence satisfactory to Parent that as of December
31, 2001, the Company had a Tangible Net Worth of $925,000,
determined in accordance with GAAP consistently applied; provided,
however, that in calculating Tangible Net Worth, the Company will
include payments or accruals of at least $140,000 of non-recurring
merger related expenses as set forth in Schedule 6.3(e),
regardless of whether such accrual is in accordance with GAAP.
(ix) evidence satisfactory to Parent that with respect to
those contracts listed on Schedule 6.3(e)(ix), either (A) the
Company has obtained acknowledgement from the customer that the
employees who provide or have provided services under such
contracts are recognized as qualified for the labor category
descriptions for which they have been or will be billed, or (B)
the personnel resumes for the employees who provide or have
provided services under such contracts accurately reflect
qualifications equivalent to the contract labor category
qualification criteria set forth in the relevant contract and in
those instances where the individuals do not specifically qualify,
the Company has obtained a waiver from the customer that permits
billing such individuals at a labor category for which they are
not qualified.
(f) There shall not have occurred after the date hereof any event or
events that, individually or in the aggregate, constitute a Company Material
Adverse Effect.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of this Agreement and the
Merger by the Stockholders of the Company:
(a) by the mutual written consent of the parties to this Agreement;
(b) by either the Company or Parent, by written notice to the other if,
for any reason, the Closing has not occurred prior to the close of business on
or before June 30, 2002; provided, however, that (i) the right to terminate this
Agreement pursuant to this Section 7.1(b)
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shall not be available to the Company or Parent, as applicable, if the party
seeking to terminate the Agreement is responsible for the delay;
(c) by either the Company or Parent, by written notice to the other, if
any court of competent jurisdiction shall have issued an order, judgment or
decree (other than a temporary restraining order) restraining, enjoining or
otherwise prohibiting the Merger and such order, judgment or decree shall have
become final and nonappealable;
(d) at the election of the Company, if either Parent or Merger Sub has
materially breached any representation, warranty, covenant or agreement
contained in this Agreement, which breach has not been cured on or before thirty
(30) Business Days following delivery of written notice of such breach by the
Company to Parent or Merger Sub; provided, however, that the right to terminate
this Agreement pursuant to this Section 7.1(d) shall not be available to the
Company if the Company at such time, is in material breach of any
representation, warranty, covenant or agreement set forth in this Agreement;
(e) at the election of Parent, if the Company has materially breached any
representation, warranty, covenant or agreement contained in this Agreement,
which breach has not been cured on or before thirty (30) Business Days following
delivery of written notice to the Company of such breach by Parent or Merger
Sub; provided, however, that the right to terminate this Agreement pursuant to
this Section 7.1(e) shall not be available to Parent if either Parent or Merger
Sub, at such time, is in material breach of any representation, warranty,
covenant or agreement set forth in this Agreement;
(f) by either Parent or the Company if the transactions contemplated by
this Agreement shall fail to receive the Company Required Vote at the Company
Stockholders Meeting or any adjournment or postponement thereof; provided that
the right to terminate this Agreement under this Section 7.1(f) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of such approval to
have been obtained;
(g) by the Company if, prior to the Company Stockholders Meeting, the
Company receives a Superior Proposal, resolves to accept such Superior Proposal,
and the Company shall have given Parent two days' prior written notice of its
intention to terminate pursuant to this provision; provided, however, that such
termination shall not be effective until such time as the payment requirement by
Section 7.3(b) shall have been received by Parent; or
(h) by Parent, if the Board of Directors of the Company shall have
withdrawn, or modified or changed, in a manner adverse to Parent or Merger Sub,
its approval or recommendation of the Merger and/or the Company Proposal.
(i) by Parent, if the Company fails to comply with Sections 6.3(e)(vi),
(vii) and/or (ix) on or prior to the third Business Day following the Company
Stockholders Meeting.
(j) by Parent, if the Company fails to comply with Section 6.3(e)(viii)
on or prior to the third Business Day following the Company Stockholders
Meeting.
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7.2 Effect of Termination. In the event of the termination of this
Agreement by either the Company or Parent pursuant to Section 7.1, (i) this
Agreement shall forthwith become void and have no further force or effect, and
(ii) there shall be no liability under this Agreement on the part of Parent or
the Company, other than the provisions of Section 5.5(b), this Section 7.2 and
Section 7.3, and except to the extent that such termination results from the
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
7.3 Expenses; Termination Fees. (a) Except as set forth in this Section
7.3, all costs and expenses incurred in connection with this Agreement and the
Transaction shall be paid by the party incurring such costs and expenses,
whether or not the Merger is consummated.
(b) The Company agrees to pay Parent a fee equal to $250,000 (the
"Termination Fee"), together with the Expenses of Parent (not to exceed
$150,000), if (i) Parent terminates this Agreement pursuant to Sections 7.1(e),
(h) or (j), or (ii) the Company terminates this Agreement pursuant to Section
7.1 (g). The Parent agrees to pay the Company the Termination Fee, together with
the Expenses of the Company (not to exceed $150,000), if the Company terminates
this Agreement pursuant to Section 7.1(d). The Termination Fee and Expenses
required to be paid pursuant to Section 7.3(b) shall be paid not later than five
(5) Business Days after the termination of this Agreement.
(c) If (i) Parent terminates this Agreement pursuant to Section 7.1(i),
or (ii) Parent or the Company terminate this Agreement pursuant to Section
7.1(f), the Company agrees to pay Parent the Expenses of Parent (not to exceed
$50,000), such amount to be paid not later than five (5) Business Days after the
termination of this Agreement. In addition, if the Company executes a definitive
agreement with respect to an Acquisition Transaction with any Person within 12
months of the termination of this Agreement pursuant to Sections 7.1(f) or (i),
upon the closing of such Acquisition Transaction, the Company shall pay to
Parent an amount (the "Additional Fee") equal to the lesser of (A) the sum of
the Termination Fee and the Expenses of Parent (not to exceed $150,000, net of
any expenses paid pursuant to the first sentence of this Section 7.3(c))
(collectively, the "Termination Payment"), and (B) the product of the
Termination Payment, multiplied by a fraction, the numerator of which is the
Aggregate Acquisition Consideration, and the denominator of which is the
Aggregate Merger Consideration. For purposes of this Section 7.3(c), "Aggregate
Acquisition Consideration" means the aggregate consideration paid by a third
party in connection with an Acquisition Transaction. Such Additional Fee shall
be paid by the Company not later than five (5) Business Days after the closing
of such Acquisition Transaction. If the Aggregate Acquisition Consideration
includes any property other than cash, the Aggregate Acquisition Consideration
shall be the sum of (i) the fixed cash amount, if any, included in the Aggregate
Acquisition Consideration plus (ii) the fair market value of such other property
(which, in the case of publicly traded securities, shall equal to the average
closing price for the ten trading days commencing on the 12th trading day
immediately preceding the closing of the Acquisition Transaction).
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(d) All payments under this Section 7.3 shall be made by wire transfer of
immediately available funds to an account designated by the party to whom such
payment will be made.
(e) The term "Expenses" shall mean, with respect to a party, all
out-of-pocket expenses incurred by such party and its affiliates in connection
with this Agreement and the transactions contemplated hereby, including, without
limitation, fees and expenses of accountants, attorneys and financial advisors.
(f) The parties acknowledge that the agreements contained in this Section
7.3 are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, neither Parent nor the Company would not enter
into this Agreement. Accordingly, if either party fails to promptly pay any
amounts owing pursuant to this Section 7.3 when due, then the party from whom
such payment is due shall in addition thereto pay to the other party all costs
and expenses (including fees and disbursements of counsel) incurred in
collecting such amounts, together with interest on such amounts (or any unpaid
portion thereof) from the date such payment was required to be made until the
date such payment is received by the party entitled to such payment hereunder at
the prime rate of Chase Manhattan as in effect from time to time during such
period.
ARTICLE VIII
MISCELLANEOUS
8.1 Certain Definitions; Rules of Construction. Definitions shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. All references herein to Articles, Sections, Exhibits
and Schedules shall be deemed to be references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. All Exhibits and Schedules attached hereto shall be deemed incorporated
herein as if set forth in full herein and, unless otherwise defined therein, all
terms used in any Exhibit or Schedule shall have the meaning ascribed to such
term in this Agreement. The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation." The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. Unless otherwise expressly provided herein, any agreement, plan,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, plan, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. For the purposes of
this Agreement, the following terms shall have the following meanings:
"Affiliate" shall mean, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, such first Person. The
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term "control" means possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Aggregate Merger Consideration" shall mean the sum of (i) the Per Share
Merger Consideration multiplied by the total number of shares of Company Common
Stock outstanding as of the Effective Time, and (ii) the product of (A) the
number of shares of Company Common Stock issuable pursuant to In-the-Money
Options outstanding as of the Effective Time, and (B) the difference of the Per
Share Merger Consideration minus the Weighted Average Exercise Price of such
In-the-Money Options.
"Audited Financials" shall mean the consolidated balance sheet of the
Company and the Company Subsidiaries as of December 31, 2000, and the related
consolidated statements of income, shareholders' equity and changes in financial
position for the three year period then ended, including the footnotes thereto,
audited by PricewaterhouseCoopers LLP, independent certified public accountants.
"Benefit Plan" shall mean each deferred compensation, executive
compensation, incentive compensation, stock purchase or other stock-based
compensation plan, severance or termination pay, holiday, vacation or other
bonus plan or practice, hospitalization or other medical, life or other
insurance, supplemental unemployment benefits, profit sharing, pension, or
retirement plan, program, agreement, commitment or arrangement, and each other
employee Benefit Plan, program, agreement or arrangement, including, without
limitation, each "employee Benefit Plan" as such term is defined under Section
3(3) of ERISA.
"Business Day" shall mean any day other than Saturday or Sunday or any
other day on which banks in the State of New York are permitted or obligated to
be closed for business.
"Claim" shall mean any action, suit, claim, complaint, demand, litigation
or similar proceeding.
"Environmental Costs" means, without limitation, any actual or potential
investigation, cleanup, remediation, removal, or other response costs (which
without limitation shall include costs to cause the Company or any of the
Company Subsidiaries to come into compliance with Environmental Laws), expenses
(including without limitation fees and disbursements of consultants, counsel,
and other experts in connection with any environmental investigation, testing,
audits or studies, response actions, or litigation), losses, liabilities or
obligations (including without limitation, liabilities or obligations under any
lease or other contract), payments, damages (including without limitation any
actual, punitive or consequential damages under any statutory laws, common law
cause of action or contractual obligations or otherwise, including without
limitation damages (i) of third parties for personal injury or property damage,
or (ii) to natural resources), civil or criminal fines or penalties, judgments,
and amounts paid in settlement arising out of or relating to or resulting from
any Environmental Matter.
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"Environmental Laws" means all applicable statutes, rules, regulations,
ordinances, orders, decrees, judgments, permits, licenses, consents, approvals,
authorizations, and governmental requirements or directives or other obligations
lawfully imposed by Governmental Body under federal, state, local or common law,
indemnity agreements or other contractual obligations, in each case, pertaining
to the protection of the environment, protection of public health, protection of
worker health and safety, the treatment, emission and/or discharge of gaseous,
particulate and/or effluent pollutants, and/or the handling of hazardous
materials, including without limitation, the Clean Air Act, 42 U.S.C.ss. 7401,
et seq., the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), 42 U.S.C.ss. 9601, et seq., the Federal Water Pollution
Control Act, 33 U.S.C.ss. 1321, et seq., the Hazardous Materials Transportation
Act, 49 U.S.C.ss. 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C.ss. 6901, et seq. ("RCRA"), and the Toxic Substances Control Act, 15
U.S.C.ss. 2601, et seq.
"Environmental Matter" means any matter arising out of, relating to, or
resulting from pollution, contamination, protection of the environment, human
health or safety, health or safety of employees, sanitation, and any matters
relating to emissions, discharges, disseminations, releases or threatened
releases, of Hazardous Substances into the air (indoor and outdoor), surface
water, groundwater, soil, land surface or subsurface, buildings, facilities,
real or personal property or fixtures or otherwise arising out of, relating to,
or resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, handling, release or threatened release of
Hazardous Substances.
"Facilities" means all real property owned, leased, operated or
controlled by the Company or any of the Company Subsidiaries and any buildings,
facilities, machinery, equipment, furniture, leasehold and other improvements,
fixtures, vehicles, structures, any related capital items and other tangible
property located on, in, under, or above the real property of the Company or any
Company Subsidiary.
"Governmental Body" shall mean any court, administrative or regulatory
agency or commission or other governmental authority of competent jurisdiction.
"Government Agency" means (i) the United States Government, including all
departments and agencies of any branch of the United States Government, all
independent agencies or instrumentalities and all non-appropriated fund
activities within the United States Government and United States Government
corporations, and (ii) any state or local government, including all departments,
agents, agencies, branches, independent agencies or instrumentalities,
activities, and non-appropriated fund activities of or within a state or local
government and all state or local government corporations.
"Hazardous Substances" means any pollutants, contaminants, toxic or
hazardous or extremely hazardous substances, materials, wastes, constituents,
compounds, chemicals (including, without limitation, petroleum or any
by-products or fractions thereof, any form of natural gas, Bevill Amendment
materials, lead, asbestos and asbestos-containing materials ("ACM"), building
construction materials and debris, polychlorinated biphenyls ("PCBs") and
PCB-containing equipment, radon and other radioactive elements, ionizing
radiation,
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electromagnetic field radiation and other non-ionizing radiation, sonic forces
and other natural forces, infectious, carcinogenic, mutagenic, or etiologic
agents, pesticides, defoliants, explosives, flammables, corrosives and urea
formaldehyde foam insulation) that are regulated by any Environmental Laws.
"Intellectual Property" shall mean all of the following as they are used
in connection with the business of the Company and Company Subsidiaries as
presently conducted or contemplated in its business plan and as they exist in
all jurisdictions throughout the world, in each case, to the extent owned by the
Company and Company Subsidiaries:
(a) patents, patent applications and inventions, designs and improvements
described and claimed therein, patentable inventions and other patent rights
(including any divisions, continuations, continuations-in-part, substitutions,
or reissues thereof, whether or not patents are issued on any such applications
and whether or not any such applications are modified, withdrawn, or
resubmitted);
(b) trademarks, service marks, trade dress, trade names, brand names,
designs, logos, or corporate names, whether registered or unregistered, and all
registrations and applications for registration thereof;
(c) copyrights and mask works, including all renewals and extensions
thereof, copyright registrations and applications for registration thereof;
(d) trade secrets, confidential business information and other
proprietary information, concepts, ideas, designs, research or development
information, processes, procedures, techniques, technical information,
specifications, operating and maintenance manuals, engineering drawings,
methods, know-how, technical data and databases, discoveries, inventions,
modifications, extensions, improvements, and other proprietary rights (whether
or not patentable or subject to copyright, mask work, or trade secret
protection);
(e) computer software programs, including, without limitation, all source
code, object code, and documentation related thereto; and
(f) Internet addresses, domain names, web sites, web pages and similar
rights and items.
"Knowledge," with respect to any Person, shall mean the actual knowledge
of any of the officers of such Person after diligent inquiry.
"Lien" shall mean any mortgage, pledge, lien, charge, easement,
restrictive covenant, encumbrance, voting or transfer restriction, or security
interest.
"Material Contracts" shall mean all of the following contracts,
agreements, understandings or arrangements, whether or not in writing, to which
the Company or any of the Company Subsidiaries is a party or by or to which any
of them or any of their assets or properties are bound or subject, with respect
to: (i) any current or former officer, director, stockholder,
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employee, consultant, agent or other representative or with an entity in which
any of the foregoing is a contracting person; (ii) any labor union or
association representing any employee; (iii) the purchase or sale of materials,
supplies, equipment, merchandise or services that contain an escalation,
renegotiation or redetermination clause calling for an aggregate purchase or
sale price or payments of more than $5,000 in any one case (or in the aggregate,
in the case of any related series of contracts and other agreements); (iv) the
sale of any of its assets or properties other than in the ordinary course of
business or for the grant to any person of any preferential rights to purchase
any of its assets or properties; (v) joint ventures, strategic alliances or
partnerships; (vi) an indemnity or sharing of any tax liability of any third
party; (vii) the purchase or sale price or payments of more than $5,000 in any
one case (or in the aggregate, in the case of any related series of contracts
and other agreements) that cannot be canceled by the Company or any of the
Company Subsidiaries with less than ninety days' notice without incurring
liability, premium or penalty; (viii) the sharing of fees, the rebating of
charges or other similar arrangements; (ix) obligations or liabilities of any
kind to holders of the Company's or any of the Company Subsidiaries' securities
as such; (x) covenants of the Company or any of the Company Subsidiaries not to
compete in any line of business or with any person in any geographical area or
covenants of any other person not to compete with the Company or any of the
Company Subsidiaries in any line of business or in any geographical area; (xi)
the acquisition by the Company or any of the Company Subsidiaries of any
operating business, including the assets or the capital stock of any other
person; (xii) options for the purchase of any asset, tangible or intangible,
requiring the payment to any person of a commission or fee; (xiii) the payment
of fees or other consideration on behalf of any officer or director of the
Company or any of the Company Subsidiaries or to any other entity in which any
of the foregoing has an interest; (xiv) the borrowing of money; (xv) any
purchase price or sale price or payments of more than $5,000 in any one case (or
in the aggregate, in the case of any related series of contracts and other
agreements) whether or not made in the ordinary course of business; (xvi) the
purchase or sale of material, supplies, equipment, merchandise, intellectual
property, real property, assets (whether tangible or intangible) or services
where the purchase or sale price, the estimated purchase or sale price, the
maximum order price, the maximum contract price, or the ceiling price (whether
in one case or in the aggregate, in the case of a related series of contracts or
other agreements) is more than $5,000, and a party to the contract or the known
end or ultimate user, seller, or purchaser is any Government Agency; and (xvii)
any schedule contracts with the United States General Services Administration or
any multiple award schedule contracts, basic agreements, basic ordering
agreements, or blanket purchase agreements with any Government Agency.
"Option Grant Values," with respect to each grant of Company Options to
an Option Holder, shall mean a dollar amount equal to the product of (i) the
exercise price (per share of Company Common Stock) of such grant multiplied by
(ii) the number of shares of Company Common Stock covering such Company Option
grant.
"Per Share Merger Consideration" shall mean one dollar ($1.00).
"Person" shall mean any individual, corporation, partnership, limited
liability company or partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government (including any agency
or political subdivision thereof).
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"Subsidiary" of any Person shall mean any corporation, partnership, joint
venture or other legal entity of which such Person (either directly or through
or together with any other Subsidiary of such Person), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or similar governing body of such corporation, partnership, joint venture or
other legal entity.
"Tangible Net Worth" means, with respect to the Company, the total assets
of the Company, less (i) goodwill and other intangibles, and (ii) total
liabilities.
"Tax" or "Taxes" shall mean any taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, franchise,
profits, gross receipts, capital, sales, use, ad valorem, value added, transfer,
transfer gains, inventory, capital stock, license, withholding, payroll,
employment, social security (or similar), unemployment, excise, severance,
stamp, occupation, real or personal property, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), customs duties,
registration, alternative or add-on minimum,, and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, together with any
interest and any penalties, fines, additions to tax or additional amounts
thereon whether disputed or not, imposed by any taxing authority (Federal,
state, local or foreign) and shall include any transferee liability in respect
of Taxes.
"Tax Return" shall mean any returns, declarations, reports, estimates,
information returns or statements relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Transaction Documents" shall mean this Agreement, the Voting Agreement,
the Stock Option Agreement, and each of the agreements and instruments
contemplated hereby or thereby, including, without limitation, the Articles of
Merger, the officer's certificate to be delivered by Parent and Merger Sub
pursuant to Section 6.2(c), the officer's certificate to be delivered by the
Company pursuant to Section 6.3(f), and all documents, instruments or agreements
attached to or contemplated by any of the foregoing.
"Weighted Average Exercise Price," with respect to the In-the-Money
Options held by an Option Holder, shall mean the quotient of (i) the sum of all
Option Grant Values for all In-the-Money Options held by such Option Holder
divided by (ii) the aggregate number of shares of Company Common Stock covering
all In-the-Money Options held by such Option Holder.
8.2 No Survival of Representation and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Merger or the termination of this
Agreement pursuant to Article VII.
8.3 Waivers and Amendments. Subject to the applicable provisions of the
VSCA and DGCL, this Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by or on behalf of the
party waiving compliance. No delay on
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the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege.
8.4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS OF SUCH STATE, APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
8.5 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
(a) ANY CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
TRANSACTION DOCUMENTS OR THE TRANSACTIONS MAY BE INSTITUTED IN ANY FEDERAL COURT
OF THE EASTERN DISTRICT OF VIRGINIA OR ANY STATE COURT LOCATED IN FAIRFAX
COUNTY, COMMONWEALTH OF VIRGINIA, AND EACH PARTY AGREES NOT TO ASSERT, BY WAY OF
MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH CLAIM, THAT IT IS NOT SUBJECT
PERSONALLY TO THE JURISDICTION OF SUCH COURT, THAT THE CLAIM IS BROUGHT IN AN
INCONVENIENT FORUM, THAT THE VENUE OF THE CLAIM IS IMPROPER OR THAT THIS
AGREEMENT AND THE TRANSACTION DOCUMENTS MAY NOT BE ENFORCED IN OR BY SUCH COURT.
EACH PARTY FURTHER IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURT IN ANY
SUCH CLAIM.
(b) ANY AND ALL SERVICE OF PROCESS AND ANY OTHER NOTICE IN ANY SUCH CLAIM
SHALL BE EFFECTIVE AGAINST ANY PARTY IF GIVEN PERSONALLY OR BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY ANY OTHER MEANS OF MAIL OR
NATIONAL OVERNIGHT DELIVERY SERVICE (E.G., FEDERAL EXPRESS) THAT REQUIRES A
SIGNED RECEIPT, POSTAGE PREPAID, MAILED OR DELIVERED TO SUCH PARTY AS HEREIN
PROVIDED. NOTHING HEREIN CONTAINED SHALL BE DEEMED TO AFFECT THE RIGHT OF ANY
PARTY TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OTHER PARTY IN ANY OTHER
JURISDICTION.
8.6 WAIVERS OF JURY TRIAL. THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
8.7 Notices. Any notices or other communications required under this
Agreement shall be in writing and be effective upon delivery if given by hand
delivery or facsimile transmission or on the next day after given if delivered
by overnight courier, and shall be given at the addresses or facsimile numbers
set forth below, with copies provided as follows:
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(a) if to the Company:
c/o Infodata Systems, Inc.
12150 Monument Drive
Fairfax, VA 22033
Attn: Steven M. Samowich
Fax: President and Chief Executive Officer
with a copy to:
Foley & Lardner
3000 K Street, N.W.
Washington, D.C. 20007
Attn: Jay W. Freedman, Esq.
Fax: 202-672-5399
(b) if to Parent, Merger Sub or Surviving Corporation:
Science Applications International Corporation
1200 Prospect Street, MS L3-B
La Jolla, CA 92037
Attn: Kevin E. Murphy
Fax: 858-826-4121
with copies to:
Science Applications International Corporation
10260 Campus Point Drive, MS F-3
San Diego, CA 92121
Attn: Cindy S. Pittman, Esq.
Fax: 858-826-4037
and
Fried, Frank, Harris, Shriver & Jacobson
1001 Pennsylvania Avenue, NW
Washington, D.C. 20004
Attn: Andrew P. Varney, Esq.
Fax: 202-639-7003
or at such other place or places or to such other person or persons as shall be
designated in writing by the parties to this Agreement in the manner herein
proved.
8.8 Section Headings. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
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8.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which,
together, shall constitute one and the same instrument.
8.10 Assignments. This Agreement, by operation of law or otherwise, shall
be binding upon and inure to the benefit of successors and legal representatives
of the parties hereto.
8.11 Entire Agreement; Enforceability. This Agreement and the Transaction
Documents, including the Exhibits and Schedules attached hereto and thereto: (i)
constitute the entire agreement among the parties with respect to the
Transactions and supersedes all prior agreements and understandings, both
written and oral, among the parties, with respect to the subject matter hereof
and thereof; and (ii) shall be binding upon, and are solely for the benefit of
each party hereto and nothing in this Agreement is intended to confer upon any
other Person any rights or remedy of any nature whatsoever hereunder or by
reason of this Agreement or any of the Transaction Documents.
8.12 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and
Plan of Merger to be duly executed as of the date first above written.
INFODATA SYSTEMS, INC.
By:
---------------------------------------
Name:
Title:
INFO ACQUISITION CORP.
By:
---------------------------------------
Name:
Title:
SCIENCE APPLICATIONS INTERNATIONAL
CORPORATION
By:
---------------------------------------
Name:
Title:
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APPENDIX B
Investec PMG Capital
Four Falls Corporate Center
INVESTEC
PMG CAPITAL West Conshohocken, PA 19428-2961
Telephone (610) 260 6231
Facsimile (610) 260 6285
Website www.investec.com
January 10, 2002
The Board of Directors
Infodata Systems, Inc.
12150 Monument Drive
Fairfax, VA 22033-4063
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, par value $0.03 per share (the "Company
Common Stock") of Infodata Systems, Inc. ("Infodata" or the "Company") of the
consideration to be received by such holders pursuant to the terms of the draft
Agreement and Plan of Merger (the "Agreement"), dated December 13, 2001, by and
among the Company, Science Applications International Corporation ("Parent") and
Info Acquisition Corp., a wholly-owned subsidiary of Parent ("Merger Sub"). As
more fully described in the Agreement, (i) Merger Sub will be merged with and
into Infodata (the "Merger") and (ii) each outstanding share of common stock of
Infodata ("Shares") will be converted into the right to receive $1.00 per share
in cash (the Per Share Merger Consideration).
The Agreement further provides that each holder of an Infodata stock option with
an exercise price less than $1.00 per share (the "In-the-Money Options") will
receive a cash payment equal to the excess of (a) the Per Share Merger
Consideration over (b) such exercise price per share of Company Common Stock
subject to such In-the-Money Option multiplied by (c) the number of shares of
Company Common Stock subject to such In-the-Money Option.
In arriving at our opinion, we interviewed management regarding the business
prospects, financial outlook and operating plans of the Company, and reviewed
certain publicly available business and financial information relating to the
Company for recent years and
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interim periods to date. We also reviewed certain internal financial and
operating information, including financial forecasts and projections that were
provided to us by the Company taking into account the growth prospects of the
Company and the marketplaces in which Infodata is involved. Additionally, we
reviewed a copy of the Agreement.
We also compared certain financial data from the Company to similar data for
certain other companies, the securities of which are publicly traded, which we
believe are comparable to the Company, and we considered the financial terms of
recent acquisitions and business combination transactions in the information
technology industry specifically.
We utilized a discounted cash flow analysis to analyze the present value of the
future cash flow streams that the Company is expecting to generate. In addition,
we reviewed certain publicly available information concerning the trading of,
and the trading market for, the Shares, including without limitation the average
trading price of Infodata over the past three (3) months. We have also
considered the limited trading volume and public float of the Shares in
evaluating the Per Share Merger Consideration. We have also reviewed the
premiums paid in comparable merger and acquisition transactions in relation to
the premium represented by the Per Share Merger Consideration to the market
price of the shares at different times prior to the execution of the Agreement.
We have also performed such other studies, analyses and investigations as we
considered appropriate.
In soliciting offers, we marketed the Company to a broad spectrum of potential
acquirers, including both strategic and financial buyers in the United States
and abroad. The marketing process was conducted over a twelve (12) month period.
During the marketing period, we contacted several hundred companies and provided
many with the confidential offering memorandum. Multiple potential buyers were
provided the opportunity to meet with management, review detailed financial and
operating information about the Company, and perform due diligence.
In our review and analysis and in formulating our opinion, we have assumed and
relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available, and we have not attempted to
independently verify any of such information. We have assumed, with your
consent, that the financial forecasts and projections provided to us by the
Company were prepared in good faith and on the basis reflecting the best
currently available judgments and estimates of the Company's management. We have
also assumed that there have been no material changes in the Company's assets,
financial condition, results of operations, business or prospects since the most
recent financial statements made available to us. In addition, we have not
conducted a physical inspection of the properties and facilities of the Company
and have not made or obtained an independent valuation or appraisal of the
assets or liabilities (contingent or otherwise) of the Company. Our opinion is
necessarily based on the economic and market conditions and other circumstances
as they exist and are evaluated by us on the date hereof. Although subsequent
developments may affect this opinion, we have not assumed any obligation to
update, revise or reaffirm this opinion.
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We have relied on advice of the counsel and independent accountants to the
Company as to all legal and financial reporting matters with respect to the
Company, the Merger and the Agreement. We have assumed that the Merger will be
consummated in a manner that complies in all respects with the applicable
provisions of the Securities Exchange Act of 1934, as amended, and all other
applicable federal and state statutes, rules and regulations. We have further
assumed with your consent that the Merger will be consummated in accordance with
the terms described in the Agreement, without any further material amendments
thereto, and without waiver by the Company of any of the conditions to Parent's
and Merger Sub's obligations thereunder.
As part of our investment banking services, we engage in the valuation of
businesses and their securities in connection with mergers and acquisitions
involving both listed and unlisted companies and their associated securities, in
the information technology services and other technology related industries. We
have acted as financial advisor to the Company in connection with the Merger and
will receive a fee for our services upon consummation of the Merger. We will
also receive a fee from the Company for rendering this opinion. The fee rendered
for this opinion is not contingent upon the results of the Merger.
It is understood that this letter is for the benefit and use of the Board of
Directors of the Company in its consideration of the Agreement and may not be
used by any other person, used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose without our prior written consent or as required under applicable law or
by the Securities and Exchange Commission (SEC). This letter may be included in
the proxy statement you file with the SEC and you distribute to your
shareholders with respect to the Merger. This letter does not constitute a
recommendation to any shareholder to vote in favor of the Merger and should not
be relied upon by any shareholder as such a recommendation. Further, this
opinion addresses only the financial fairness as of the date hereof of the Per
Share Merger Consideration to be received by the shareholders of the Company,
and it does not address any other aspect of the Merger.
Based upon and subject to the foregoing, including the various assumptions and
limitations set forth herein, it is our opinion that the Per Share Merger
Consideration to be received by the shareholders of the Company pursuant to the
Agreement is fair from a financial point of view to such shareholders as of the
date hereof.
Very truly yours,
INVESTEC PMG CAPITAL
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APPENDIX C
Article 15.
Dissenters' Rights.
ss. 13.1-729. Definitions.
In this article:
"Corporation" means the issuer of the shares held by a dissenter before
the corporate action, except that (i) with respect to a merger, "corporation"
means the surviving domestic or foreign corporation or limited liability company
by merger of that issuer, and (ii) with respect to a share exchange,
"corporation" means the acquiring corporation by share exchange, rather than the
issuer, if the plan of share exchange places the responsibility for dissenters'
rights on the acquiring corporation.
"Dissenter" means a shareholder who is entitled to dissent from
corporate action under ss. 13.1-730 and who exercises that right when and in the
manner required by sections 13.1-732 through 13.1-739.
"Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
"Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
"Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
"Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
"Shareholder" means the record shareholder or the beneficial
shareholder.
ss. 13.1-730. Right to dissent.
A. A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
1. Consummation of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by ss. 13.1-718 or the
articles of incorporation and the shareholder is entitled to vote on the merger
or (ii) if the corporation is a subsidiary that is merged with its parent under
ss. 13.1-719;
2. Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
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3. Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation if the shareholder was entitled to vote on the
sale or exchange or if the sale or exchange was in furtherance of a dissolution
on which the shareholder was entitled to vote, provided that such dissenter's
rights shall not apply in the case of (i) a sale or exchange pursuant to court
order, or (ii) a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale;
4. Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
B. A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
C. Notwithstanding any other provision of this article, with respect to
a plan of merger or share exchange or a sale or exchange of property there shall
be no right of dissent in favor of holders of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at the meeting at which the plan of merger or
share exchange or the sale or exchange of property is to be acted on, were (i)
listed on a national securities exchange or on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) or (ii) held by at least
2,000 record shareholders, unless in either case:
1. The articles of incorporation of the corporation issuing such shares
provide otherwise;
2. In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange to
accept for such shares anything except:
a. Cash;
b. Shares or membership interests, or shares or membership interests
and cash in lieu of fractional shares (i) of the surviving or acquiring
corporation or limited liability company or (ii) of any other corporation or
limited liability company which, at the record date fixed to determine the
shareholders entitled to receive notice of and to vote at the meeting at which
the plan of merger or share exchange is to be acted on, were either listed
subject to notice of issuance on a national securities exchange or held of
record by at least 2,000 record shareholders or members; or
c. A combination of cash and shares or membership interests as set
forth in subdivisions 2 a and 2 b of this subsection; or
3. The transaction to be voted on is an "affiliated transaction" and is
not approved by a majority of "disinterested directors" as such terms are
defined in ss.13.1-725.
D. The right of a dissenting shareholder to obtain payment of the fair
value of his shares shall terminate upon the occurrence of any one of the
following events:
1. The proposed corporate action is abandoned or rescinded;
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2. A court having jurisdiction permanently enjoins or sets aside the
corporate action; or
3. His demand for payment is withdrawn with the written consent of the
corporation.
E. Notwithstanding any other provision of this article, no shareholder
of a corporation located in a county having a county manager form of government
and which is exempt from income taxation under ss. 501 (c) or ss. 528 of the
Internal Revenue Code and no part of whose income inures or may inure to the
benefit of any private share holder or individual shall be entitled to dissent
and obtain payment for his shares under this article.
ss.13.1-731. Dissent by nominees and beneficial owners.
A. A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
B. A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
1. He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
2. He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
ss.13.1-732. Notice of dissenters' rights.
A. If proposed corporate action creating dissenters' rights under ss.
13.1-730 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
B. If corporate action creating dissenters' rights under ss. 13.1-730
is taken without a vote of shareholders, the corporation, during the ten-day
period after the effectuation of such corporate action, shall notify in writing
all record shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in ss. 13.1-734.
ss.13.1-733. Notice of intent to demand payment.
A. If proposed corporate action creating dissenters' rights under ss.
13.1-730 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (i) shall deliver to the corporation before
the vote is taken written notice of his intent to demand payment for his shares
if the proposed action is effectuated and (ii) shall not vote such shares in
favor of the proposed action.
B. A shareholder who does not satisfy the requirements of subsection A
of this section is not entitled to payment for his shares under this article.
ss. 13.1-734. Dissenters' notice.
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A. If proposed corporate action creating dissenters' rights under ss.
13.1-730 is authorized at a shareholders' meeting, the corporation, during the
ten-day period after the effectuation of such corporate action, shall deliver a
dissenters' notice in writing to all shareholders who satisfied the requirements
of ss. 13.1-733.
B. The dissenters' notice shall:
1. State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited;
2. Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
3. Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not he acquired beneficial ownership of the shares before or
after that date;
4. Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty nor more than sixty days after the date
of delivery of the dissenters' notice; and
5. Be accompanied by a copy of this article.
ss.13.1-735. Duty to demand payment.
A. A shareholder sent a dissenters' notice described in ss. 13.1-734
shall demand payment, certify that he acquired beneficial ownership of the
shares before or after the date required to be set forth in the dissenters'
notice pursuant to subdivision 3 of subsection B of ss. 13.1-734, and, in the
case of certificated shares, deposit his certificates in accordance with the
terms of the notice.
B. The shareholder who deposits his shares pursuant to subsection A of
this section retains all other rights of a shareholder except to the extent that
these rights are canceled or modified by the taking of the proposed corporate
action.
C. A shareholder who does not demand payment and deposits his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
ss. 13.1-736. Share restrictions.
A. The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received.
B. The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder except to the
extent that these rights are canceled or modified by the taking of the proposed
corporate action.
ss. 13.1-737. Payment.
A Except as provided in ss. 13.1-738, within thirty days after receipt
of a payment demand made pursuant to ss. 13.1-735, the corporation shall pay the
dissenter the amount the corporation estimates to be the fair value of his
shares, plus accrued interest. The obligation of the corporation under this
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paragraph may be enforced (i) by the circuit court in the city or county where
the corporation's principal office is located, or, if none in this Commonwealth,
where its registered office is located or (ii) at the election of any dissenter
residing or having its principal office in the Commonwealth, by the circuit
court in the city or county where the dissenter resides or has its principal
office. The court shall dispose of the complaint on an expedited basis.
B. The payment shall be accompanied by:
1. The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the effective date of the corporate
action creating dissenters' rights, an income statement for that year, a
statement of changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;
2. An explanation of how the corporation estimated the fair value of
the shares and of how the interest was calculated;
3. A statement of the dissenters' right to demand payment underss.13.1-
739; and
4. A copy of this article.
ss.13.1-738. After-acquired shares.
A. A corporation may elect to withhold payment required by ss. 13.1-737
from a dissenter unless he was the beneficial owner of the shares on the date of
the first publication by news media or the first announcement to shareholders
generally, whichever is earlier, of the terms of the proposed corporate action,
as set forth in the dissenters' notice.
B. To the extent the corporation elects to withhold payment under
subsection A of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
offer to pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares and of how the
interest was calculated, and a statement of the dissenter's right to demand
payment under ss. 13.1-739.
ss.13.1-739. Procedure if shareholder dissatisfied with payment or
offer.
A. A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and demand
payment of his estimate (less any payment under ss. 13.1-737), or reject the
corporation's offer under ss. 13.1-738 and demand payment of the fair value of
his shares and interest due, if the dissenter believes that the amount paid
under ss. 13.1-737 or offered under ss. 13.1-738 is less than the fair value of
his shares or that the interest due is incorrectly calculated.
B. A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection A
of this section within thirty days after the corporation made or offered payment
for his shares.
ss. 13.1-740. Court action.
A. If a demand for payment under ss. 13.1-739 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the circuit court in the city or county described
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in subsection B of this section to determine the fair value of the shares and
accrued interest. If the corporation does not commence the proceeding within the
sixty-day period, it shall pay each dissenter whose demand remains unsettled the
amount demanded.
B. The corporation shall commence the proceeding in the city or county
where its principal office is located, or, if none in this Commonwealth, where
its registered office is located. If the corporation is a foreign corporation
without a registered office in this Commonwealth, it shall commence the
proceeding in the city or county in this Commonwealth where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.
C. The corporation shall make all dissenters, whether or not residents
of this Commonwealth, whose demands remain unsettled parties to the proceeding
as in an action against their shares and all parties shall be served with a copy
of the petition. Nonresidents may be served by registered or certified mail or
by publication as provided by law.
D. The corporation may join as a party to the proceeding any
shareholder who claims to be a dissenter but who has not, in the opinion of the
corporation, complied with the provisions of this article. If the court
determines that such shareholder has not complied with the provisions of this
article, he shall be dismissed as a party.
E. The jurisdiction of the court in which the proceeding is commenced
under subsection B of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
F. Each dissenter made a party to the proceeding is entitled to
judgment (i) for the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation or (ii)
for the fair value, plus accrued interest, of his after-acquired shares for
which the corporation elected to withhold payment under ss. 13.1-738.
ss.13.1-741. Court costs and counsel fees.
A. The court in an appraisal proceeding commenced under ss. 13.1-740
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters did not act in good faith in demanding
payment under ss. 13.1-739.
B. The court may also assess the reasonable fees and expenses of
experts, excluding those of counsel, for the respective parties, in amounts the
court finds equitable:
1. Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
ofss.ss.13.1-732 through 13.1-739; or
2. Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed did not act in good faith with respect to the rights provided by this
article.
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C. If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, the court
may award to these counsel reasonable fees to be paid out of the amounts awarded
the dissenters who were benefited.
D. In a proceeding commenced under subsection A of ss. 13.1-737 the
court shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court finds
that such parties did not act in good faith in instituting the proceeding.
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