1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ChoicePoint 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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
----------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(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:
------------------------------------------------------------------------
2
(CHOICEPOINT LOGO)
CHOICEPOINT INC.
1000 ALDERMAN DRIVE
ALPHARETTA, GEORGIA 30005
APRIL 13, 2000
Dear Shareholders,
You are cordially invited to attend the 2000 annual meeting of shareholders
of ChoicePoint Inc., which will be held at ChoicePoint's principal executive
offices, 1000 Alderman Drive, Alpharetta, Georgia, on Tuesday, May 16, 2000 at
11:00 a.m. local time.
At the meeting, we will ask you to vote upon the election of two directors
and to ratify the appointment of ChoicePoint's independent public accountants.
In addition to these routine matters, we will ask you to approve and adopt our
agreement on a merger transaction that will result in the acquisition of DBT
Online, Inc. by ChoicePoint.
In the merger, DBT shareholders will receive 0.525 shares of ChoicePoint
common stock for each share of DBT common stock they own. ChoicePoint
shareholders will continue to hold their existing shares of ChoicePoint common
stock after the merger.
We cannot complete the merger unless the shareholders of both companies
approve the merger agreement and, in the case of ChoicePoint, the issuance of
ChoicePoint common stock pursuant to the merger agreement. Only ChoicePoint
shareholders who hold shares at the close of business on the record date will be
entitled to vote at the meeting. The record date is April 7, 2000.
YOU SHOULD CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS" BEGINNING ON
PAGE 12 OF THIS PROXY STATEMENT/PROSPECTUS BEFORE VOTING. PLEASE REVIEW THIS
ENTIRE PROXY STATEMENT/PROSPECTUS CAREFULLY.
AFTER CAREFUL CONSIDERATION, THE CHOICEPOINT BOARD OF DIRECTORS HAS ADOPTED
THE MERGER AGREEMENT AND DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF
CHOICEPOINT AND ITS SHAREHOLDERS. THE CHOICEPOINT BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
/s/ Derek V. Smith
Derek V. Smith
Chairman, President and Chief
Executive Officer
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the ChoicePoint common stock to be issued
in connection with the merger or passed upon the adequacy or accuracy of this
proxy statement/prospectus. Any representation to the contrary is a criminal
offense.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS APRIL 13, 2000 AND IT IS
FIRST BEING MAILED TO SHAREHOLDERS ON OR ABOUT APRIL 14, 2000.
3
CHOICEPOINT INC.
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 16, 2000
---------------------
ChoicePoint Inc. will hold the annual meeting of its shareholders on
Tuesday, May 16, 2000 at 11:00 a.m. local time, for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt the merger
agreement among ChoicePoint, DBT Online, Inc. and ChoicePoint Acquisition
Corporation, a wholly owned subsidiary of ChoicePoint, which provides for
the acquisition of DBT by ChoicePoint, and to approve the issuance of
shares of ChoicePoint common stock pursuant to the merger agreement, which
provides that ChoicePoint will issue shares of ChoicePoint common stock in
the merger and will reserve shares of ChoicePoint common stock for issuance
upon exercise of outstanding DBT stock options;
(2) To elect two directors;
(3) To ratify the appointment of independent public accountants; and
(4) To transact any other business properly brought before the annual
meeting or any adjournment or postponement thereof.
The board of directors is not currently aware of any other matters that
will come before the annual meeting. Only ChoicePoint shareholders of record at
the close of business on April 7, 2000 are entitled to notice of, and to vote
at, the annual meeting and any adjournments or postponements thereof.
We cannot complete the merger unless we receive approval of a majority of
the votes cast on the proposal to approve the merger agreement and the issuance
of ChoicePoint common stock pursuant to the merger agreement.
FOR MORE INFORMATION ABOUT THE MERGER AND THE OTHER MATTERS TO BE VOTED
UPON AT THE ANNUAL MEETING, PLEASE REVIEW THE PROXY STATEMENT/PROSPECTUS
DELIVERED WITH THIS NOTICE.
Regardless of whether you plan to attend the annual meeting in person, you
are urged to vote promptly by dating, signing and returning the enclosed proxy
in the accompanying envelope.
By Order of the Board of Directors,
/s/ J. Michael de Janes
J. Michael de Janes
Corporate Secretary
Atlanta, Georgia
April 13, 2000
4
TABLE OF CONTENTS
PAGE
----
Questions and Answers About the Merger...................... 1
Who Can Help Answer Your Questions.......................... 3
Summary..................................................... 4
The Companies............................................. 4
The Meetings.............................................. 4
Record Dates; Voting Power................................ 4
Votes Required............................................ 5
Share Ownership of Management............................. 5
Recommendations........................................... 5
Opinions of Financial Advisors............................ 5
Terms of the Merger Agreement............................. 5
Expenses.................................................. 7
Interests of DBT Directors and Executive Officers in the
Merger................................................. 7
Directors of ChoicePoint Following the Merger............. 7
Material United States Federal Income Tax Consequences.... 7
Accounting Treatment...................................... 7
Resales of ChoicePoint Common Stock....................... 7
Regulatory Approvals...................................... 7
Dissenters' Rights........................................ 7
Comparison of Rights of Shareholders...................... 7
Market Price and Dividend Information..................... 8
Comparative Per Share Information......................... 8
Selected Financial Data................................... 10
Risk Factors................................................ 12
The Meetings................................................ 16
ChoicePoint Annual Meeting................................ 16
DBT Special Meeting....................................... 17
The Merger.................................................. 19
Background to the Merger.................................. 19
ChoicePoint's Reasons for the Merger...................... 20
Recommendation of the ChoicePoint Board of Directors...... 21
Opinion of ChoicePoint's Financial Advisor................ 21
DBT's Reasons for the Merger.............................. 27
Recommendation of the DBT Board of Directors.............. 29
Opinion of DBT's Financial Advisor........................ 29
Interests of DBT Directors and Executive Officers in the
Merger................................................. 34
Structure of the Merger................................... 37
Exchange of DBT Common Stock for ChoicePoint Common
Stock.................................................. 38
Terms of the Merger Agreement............................. 38
Accounting Treatment...................................... 47
Listing of ChoicePoint Common Stock to be Issued Pursuant
to the Merger Agreement................................ 47
Delisting and Deregistration of DBT Common Stock After the
Merger................................................. 47
Resales of ChoicePoint Common Stock....................... 48
Regulatory Approvals...................................... 48
Dissenters' Rights........................................ 49
Material United States Federal Income Tax Consequences.... 49
Comparative Stock Prices and Dividends...................... 51
Unaudited Pro Forma Combined Financial Data................. 52
Election of ChoicePoint Directors........................... 56
i
5
PAGE
----
ChoicePoint Security Ownership of Certain Beneficial Owners
and Management............................................ 58
ChoicePoint Section 16(a) Beneficial Ownership Reporting
Compliance................................................ 60
Executive Officers of ChoicePoint........................... 60
ChoicePoint Executive Compensation.......................... 61
Compensation Committee Interlocks and Insider
Participation............................................. 63
Certain Relationships and Related Transactions.............. 63
Employment Agreements and Change-in-Control Agreements...... 63
Management Compensation and Benefits Committee Report on
Executive Compensation.................................... 64
ChoicePoint Stock Performance Graph......................... 68
Ratification of Appointment of ChoicePoint Independent
Public Accountants........................................ 68
Description of ChoicePoint Capital Stock.................... 69
Comparison of Rights of Shareholders........................ 75
ChoicePoint Shareholder Proposals........................... 91
Experts..................................................... 91
Legal Matters............................................... 92
Where You Can Find More Information......................... 92
ANNEXES
Annex A -- Merger Agreement................................. A-1
Annex B -- Opinion of The Robinson-Humphrey Company, LLC.... B-1
Annex C -- Opinion of Credit Suisse First Boston
Corporation............................................... C-1
ii
6
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY IS THE MERGER BEING PROPOSED?
A: Both the DBT board of directors and the ChoicePoint board of directors
believe the merger is in the best interests of their respective companies and
will provide significant benefits to their respective shareholders, customers
and employees. The boards believe that the merger will create a company with
enhanced financial performance, which will position the combined company to
compete in the rapidly changing information services industry. To review the
background and reasons for the merger in greater detail, see pages 19 through 21
and pages 27 through 29.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: DBT shareholders. DBT shareholders will receive 0.525 shares of ChoicePoint
common stock in exchange for each share of DBT common stock they hold. This is
the "exchange ratio."
ChoicePoint will not issue fractional shares in the merger. Instead, DBT
shareholders will receive a cash payment, without interest, for the value of any
fraction of a share of ChoicePoint common stock that they would otherwise be
entitled to receive based upon the market value (as determined in the merger
agreement) of a share of ChoicePoint common stock at the time of the merger.
The ChoicePoint common stock and cash in lieu of fractional shares that DBT
shareholders are entitled to receive in the merger are referred to as the
"merger consideration."
ChoicePoint shareholders. Each share of ChoicePoint common stock held by
ChoicePoint shareholders will continue to represent one share of ChoicePoint
common stock following the merger. After the merger, DBT's former shareholders
will own approximately 26.4%, on a non-diluted basis, of ChoicePoint's
outstanding shares of common stock and current ChoicePoint shareholders will own
approximately 73.6%, on a non-diluted basis, of ChoicePoint's outstanding shares
of common stock. These percentages are based on the number of shares of each
company's common stock that were outstanding on December 31, 1999.
FOR EXAMPLE:
- IF YOU OWN 100 SHARES OF DBT COMMON STOCK, THEN AFTER THE MERGER YOU WILL
RECEIVE 52 SHARES OF CHOICEPOINT COMMON STOCK AND A CHECK FOR 0.5 TIMES
THE MARKET VALUE OF ONE SHARE OF CHOICEPOINT COMMON STOCK AS OF THE
CLOSING DATE OF THE MERGER.
- IF YOU OWN 10 SHARES OF DBT COMMON STOCK, THEN AFTER THE MERGER YOU WILL
RECEIVE 5 SHARES OF CHOICEPOINT COMMON STOCK AND A CHECK FOR 0.25 TIMES
THE MARKET VALUE OF ONE SHARE OF CHOICEPOINT COMMON STOCK AS OF THE
CLOSING DATE OF THE MERGER.
- IF YOU OWN 100 SHARES OF CHOICEPOINT COMMON STOCK, THEN AFTER THE MERGER
THOSE SHARES WILL CONTINUE TO REPRESENT 100 SHARES OF CHOICEPOINT COMMON
STOCK.
Q: WHAT RISKS SHOULD I CONSIDER?
A: You should review "Risk Factors" beginning on page 12.
You should also review the factors considered by each company's board of
directors. See "The Merger -- ChoicePoint's Reasons for the Merger" and
"-- DBT's Reasons for the Merger" (pages 20 through 21 and pages 27 through 29).
Q: WHAT HAPPENS AS THE MARKET PRICE OF CHOICEPOINT COMMON STOCK FLUCTUATES?
A: The exchange ratio is fixed. Since the market value of ChoicePoint common
stock may fluctuate before and after the closing of the merger, the value of the
ChoicePoint common stock that DBT shareholders will receive in the merger may
fluctuate as well and could increase or decrease. You should obtain current
market prices for shares of ChoicePoint common stock and shares of DBT common
stock.
1
7
Q: WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
A: We are working to complete the merger during the second quarter of 2000.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: DBT shareholders. We expect that the exchange of shares by DBT shareholders
generally will be tax-free for U.S. federal income tax purposes. DBT
shareholders will, however, recognize gain or loss on cash received for
fractional shares. To review the tax consequences to DBT shareholders in greater
detail, see pages 49 through 50.
Your tax consequences will depend on your personal situation. You should
consult your tax advisor for a full understanding of the tax consequences of the
merger to you.
ChoicePoint shareholders. The merger will have no tax consequences to
ChoicePoint shareholders.
Q: WHAT AM I BEING ASKED TO VOTE UPON AND WHAT IS THE REQUIRED SHAREHOLDER
VOTE?
A: DBT shareholders: You are being asked to approve the merger agreement which
provides for ChoicePoint's acquisition of DBT through a merger of a subsidiary
of ChoicePoint into DBT. Following the merger, DBT will be a wholly owned
subsidiary of ChoicePoint. Approval of the proposal requires the affirmative
vote of a majority of the votes cast at the DBT special meeting by DBT
shareholders entitled to vote on the proposal.
The DBT board of directors has unanimously approved and adopted the merger
agreement and recommends that DBT shareholders vote "FOR" the approval of the
merger agreement.
ChoicePoint shareholders: You are being asked to approve and adopt the
merger agreement and the transactions contemplated thereby, including the
issuance of ChoicePoint common stock pursuant to the merger agreement, which
provides that ChoicePoint will issue shares of ChoicePoint common stock in the
merger and will reserve shares of ChoicePoint common stock for issuance upon
exercise of outstanding DBT stock options. Approval of this proposal will
require the approval of a majority of the votes cast on the proposal at the
ChoicePoint annual meeting.
You are also being asked to ratify the appointment of Arthur Andersen LLP
as independent public accountants of ChoicePoint to serve for 2000. Approval of
this proposal will require that the number of votes cast favoring the proposal
exceed the number of votes cast opposing the proposal. In addition, you are
being asked to elect the two ChoicePoint directors listed in the accompanying
proxy statement/prospectus. Election of ChoicePoint directors requires the
affirmative vote of a plurality of the shares of ChoicePoint common stock cast
by the shareholders entitled to vote.
The ChoicePoint board of directors has unanimously approved and adopted the
merger agreement and unanimously recommends that ChoicePoint stockholders vote
"FOR" the approval of the three proposals to be presented at the ChoicePoint
annual meeting. The proposals are described in detail in the accompanying proxy
statement/prospectus.
Q: WHAT SHOULD I DO NOW?
A: Just indicate on your proxy card how you want to vote, and sign and mail it
in the enclosed envelope as soon as possible, so that your shares will be
represented at your shareholders' meeting.
If you sign and send in your proxy and do not indicate how you want to
vote, your proxy will be voted in favor of the proposal to approve and adopt the
merger agreement and, in the case of ChoicePoint shareholders, the issuance of
ChoicePoint common stock pursuant to the merger agreement, the election of two
directors and the ratification of Arthur Andersen LLP as independent public
accountants.
2
8
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: As to the merger, your broker will vote your shares of DBT common stock or
ChoicePoint common stock only if you provide instructions on how to vote. You
should instruct your broker how to vote your shares, following the directions
your broker provides. If you do not provide instructions to your broker, your
shares will not be voted.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. If you are a DBT shareholder, and the merger is completed, we will send
you written instructions for exchanging your DBT common stock certificates for
ChoicePoint common stock certificates. If you are a ChoicePoint shareholder, the
merger will not require you to take any action regarding your ChoicePoint common
stock certificates.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you want additional copies of this document, or if you want to ask any
questions about the merger, you should contact:
CHOICEPOINT SHAREHOLDERS:
ChoicePoint Inc.
1000 Alderman Drive
Alpharetta, Georgia 30005
Attention: Kelly McLoughlin
Investor Relations
Telephone: (770) 752-4050
DBT SHAREHOLDERS:
DBT Online, Inc.
4530 Blue Lake Drive
Boca Raton, Florida 33431
Attention: Richard Rogers
Vice President
Marketing
Telephone: (561) 982-5000
3
9
SUMMARY
This summary highlights selected information from this document and may not
contain all the information that is important to you. For a more complete
understanding of the merger and for a more complete description of the legal
terms of the merger, you should read this entire document carefully, as well as
the additional documents to which we refer you, including the merger agreement.
In addition, we incorporate by reference important business and financial
information about ChoicePoint into this proxy statement/prospectus. You may
obtain the information incorporated by reference into this proxy
statement/prospectus without charge by following the instructions in the section
entitled "Where You Can Find More Information" beginning on page 92 of this
proxy statement/prospectus.
THE COMPANIES
ChoicePoint Inc.
1000 Alderman Drive
Alpharetta, Georgia 30005
(770) 752-6000
ChoicePoint is a leading provider of decision-making intelligence to
businesses, individuals and government agencies. Through the identification,
retrieval, storage, analysis and delivery of data, the company serves the
information needs of the insurance market and the business and government
markets, including Fortune 1000 corporations, asset-based lenders and
professional service providers, and local, state and federal governments.
ChoicePoint is committed to the responsible use of information and the
protection of personal privacy as fundamental planks of its business model.
DBT Online, Inc.
5550 W. Flamingo Road
Suite B-5
Las Vegas, Nevada 89103
(702) 257-1112
DBT is a leading nationwide provider of organized online public records
data and other information. DBT believes that its database is one of the
country's largest depositories of public records and other public information,
containing more than 5 billion records and more than 25 terabytes of data
storage capacity. DBT's customers use its online information services to detect
fraudulent activity, assist law enforcement efforts, locate people and assets,
and verify information and identities, as well as many other purposes. DBT
currently has more than 15,000 customers, utilizing its AutoTrack(SM) services,
consisting primarily of insurance companies, law firms, private investigators,
and law enforcement and government agencies.
THE MEETINGS (PAGE 16)
ChoicePoint. The ChoicePoint annual meeting will be held at the
ChoicePoint principal executive offices, 1000 Alderman Drive, Alpharetta,
Georgia, at 11:00 a.m., local time, on May 16, 2000. At the ChoicePoint annual
meeting, ChoicePoint shareholders will be asked to consider and vote upon:
- a proposal to approve and adopt the merger agreement and to approve the
issuance of ChoicePoint common stock pursuant to the merger agreement,
- a proposal to elect two directors, and
- a proposal to ratify the appointment of Arthur Andersen LLP as
ChoicePoint's independent public accountants.
DBT. The DBT special meeting will be held at the Alpharetta Marriott
Hotel, 5750 Windward Parkway, Alpharetta, Georgia 30005, at 9:00 a.m., local
time, on May 16, 2000. At the DBT special meeting, DBT shareholders will be
asked to consider and vote upon a proposal to approve and adopt the merger
agreement.
RECORD DATES; VOTING POWER (PAGES 16 AND 17)
ChoicePoint. You are entitled to vote at the ChoicePoint annual meeting if
you owned shares on April 7, 2000, the ChoicePoint record date. As of that date,
there were 29,562,688 shares of ChoicePoint common stock issued and outstanding
held by approximately 4,874 holders of record. ChoicePoint shareholders are
entitled to one vote per share on any matter that may properly come before the
ChoicePoint annual meeting.
DBT. You are entitled to vote at the DBT special meeting if you owned
shares on April 7, 2000, the DBT record date. On such date, there were
20,212,094 shares of DBT common stock issued and outstanding held by
approximately 484 holders of record. DBT shareholders are entitled to one vote
per share on any matter that may properly come before the DBT special meeting.
4
10
VOTES REQUIRED (PAGES 16 AND 17)
ChoicePoint. Approval by the ChoicePoint shareholders of the proposal to
approve and adopt the merger agreement and the issuance of ChoicePoint common
stock pursuant to the merger agreement will require the approval of a majority
of the votes cast on the proposal. Election of directors requires the
affirmative vote of a plurality of the shares of ChoicePoint common stock cast
by the shareholders entitled to vote. Approval of the proposal to ratify its
independent public accountants will require that the number of votes cast
favoring the proposal exceed the number of votes cast opposing the proposal.
DBT. Approval by the DBT shareholders of the proposal to approve and adopt
the merger agreement will require the affirmative vote of a majority of the
votes cast by shareholders entitled to vote thereon at the DBT special meeting.
SHARE OWNERSHIP OF MANAGEMENT (PAGES 16 AND 18)
On the ChoicePoint record date, the executive officers and directors of
ChoicePoint, including their affiliates, beneficially owned an aggregate of
1,927,066 shares of ChoicePoint common stock, or approximately 6.5% of the
shares of ChoicePoint common stock then outstanding on that date.
On the DBT record date, the executive officers and directors of DBT,
including their affiliates, beneficially owned an aggregate of 2,740,946 shares
of DBT common stock, or approximately 13.6% the shares of DBT common stock then
outstanding.
We currently expect that the directors and executive officers of
ChoicePoint and DBT will vote the shares of ChoicePoint common stock and DBT
common stock, respectively, owned by them "FOR" the proposal to approve and
adopt the merger agreement and the transactions contemplated thereby, including,
in the case of ChoicePoint, the issuance of ChoicePoint common stock pursuant to
the merger agreement.
RECOMMENDATIONS (PAGES 21 AND 29)
The ChoicePoint board of directors and the DBT board of directors have each
unanimously approved and adopted the merger agreement, and each Board recommends
a vote "FOR" approval of the merger agreement and the transactions contemplated
thereby.
To review the reasons for the merger considered by the ChoicePoint board of
directors and the DBT board of directors, see pages 20 through 21 and pages 27
through 29.
The ChoicePoint board of directors further recommends that ChoicePoint
shareholders vote "FOR" approval of the proposals to elect two directors and
ratify the appointment of its independent public accountants.
OPINIONS OF FINANCIAL ADVISORS (PAGES 21 AND 29)
ChoicePoint. The Robinson-Humphrey Company, LLC, financial advisor to
ChoicePoint, rendered an opinion dated as of February 14, 2000 to the
ChoicePoint board of directors that, as of such date, the exchange ratio was
fair to the common shareholders of ChoicePoint from a financial point of view. A
copy of the fairness opinion, setting forth the information reviewed,
assumptions made and matters considered, is attached to this document as Annex
B. ChoicePoint shareholders should read the fairness opinion of
Robinson-Humphrey in its entirety. Robinson-Humphrey's opinion does not
constitute a recommendation to any shareholder as to any matter relating to the
merger.
DBT. Credit Suisse First Boston Corporation, financial advisor to DBT, has
delivered a written opinion to the DBT board of directors as to the fairness,
from a financial point of view, of the exchange ratio in the merger to the
holders of DBT common stock. The full text of Credit Suisse First Boston's
written opinion is attached to this document as Annex C. We encourage you to
read this opinion carefully in its entirety for a description of the procedures
followed, assumptions made, matters considered and limitations on the review
undertaken. Credit Suisse First Boston's opinion does not constitute a
recommendation to any shareholder as to any matter relating to the merger.
TERMS OF THE MERGER AGREEMENT (PAGE 38)
The merger agreement is attached to this document as Annex A. We encourage
you to read the merger agreement in its entirety. It is the legal document that
governs the merger.
General. The merger agreement provides that a subsidiary of ChoicePoint
will be merged with and into DBT, resulting in DBT becoming a wholly owned
subsidiary of ChoicePoint.
5
11
Exchange Ratio. As a result of the merger, DBT shareholders will receive
0.525 shares of ChoicePoint common stock for each share of DBT common stock they
own. ChoicePoint will not issue fractional shares. Instead, DBT shareholders
will receive a check equal to the value of any fractional share they would
otherwise receive.
Effective Time. The merger will become effective upon the filing of
articles of merger with the Department of State of the Commonwealth of
Pennsylvania. The merger agreement provides that the parties will file the
articles of merger as promptly as practicable following the satisfaction or
waiver of the conditions to the merger.
Conditions to the Merger. The completion of the merger depends upon the
satisfaction of a number of conditions, including:
- approval of the merger agreement by the DBT shareholders and the
ChoicePoint shareholders;
- receipt of listing approval from the New York Stock Exchange for the
ChoicePoint common stock to be issued pursuant to the merger agreement;
- receipt of all necessary authorizations, orders and consents of
governmental authorities and the expiration or termination of any
regulatory waiting periods;
- effectiveness of the registration statement of ChoicePoint, of which this
document forms a part, relating to the shares of ChoicePoint common stock
to be issued to pursuant to the merger agreement;
- receipt from ChoicePoint's and DBT's independent auditors of letters
confirming that the merger qualifies for pooling-of-interests accounting
treatment; and
- receipt by DBT and ChoicePoint of an opinion of ChoicePoint's counsel
that the merger will be treated for U.S. federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code.
Any condition may be waived by the appropriate party.
Termination and Termination Fees. Either DBT or ChoicePoint may call off
the merger under the following circumstances, among others:
- both parties consent in writing;
- the merger is not completed before September 1, 2000;
- legal restraints prevent the merger;
- the DBT shareholders or the ChoicePoint shareholders do not approve the
merger agreement;
- the other party breaches in a material manner any of the representations
or warranties or any covenant or agreement it has under the merger
agreement and such breach is not cured within 30 days of written notice
to such party; or
- any condition to such party's obligations under the merger agreement has
not been met or waived at a time when such condition could no longer be
satisfied.
In addition, in specified circumstances ChoicePoint or DBT may call off the
merger if either party (1) withdraws or modifies, or proposes publicly to
withdraw or modify, in a manner adverse to the other party, the approval or
recommendation by such party's board of directors of the merger or the merger
agreement, (2) approves or recommends, or proposes publicly to approve or
recommend, competing proposals specified in the merger agreement, which include
purchases of specified percentages of such party's or its subsidiaries'
securities or assets or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving such
party or one of its subsidiaries or (3) approves or recommends, or proposes to
approve or recommend, or execute or enter into any letter of intent, agreement
in principle, merger agreement, acquisition agreement, option agreement or other
similar agreement relating to a competing proposal. See "Terms of the Merger
Agreement -- No Solicitation, Board Action."
The merger agreement provides that, in several circumstances, DBT may be
required to pay ChoicePoint a termination fee of $12 million, and to reimburse
ChoicePoint for up to $2 million of expenses, or ChoicePoint may be required to
pay DBT a termination fee of $18 million, and to reimburse DBT for up to $2
million of expenses.
6
12
EXPENSES (PAGE 46)
ChoicePoint and DBT will pay their own fees, costs and expenses incurred in
connection with the merger agreement except that they will equally divide
printing and mailing costs associated with this document and all filing and
registration fees.
INTERESTS OF DBT DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (PAGE 34)
A number of directors and executive officers of DBT have interests in the
merger as employees or directors that are different from, or in addition to,
yours as a DBT shareholder. If the merger takes place, then certain directors
and members of the senior management of DBT will become members of the
ChoicePoint board of directors and will remain as senior management of DBT or
become members of senior management of ChoicePoint. In addition, if the merger
takes place, options to purchase DBT common stock held by DBT's directors and
officers will be converted into options to acquire shares of ChoicePoint common
stock adjusted to account for the exchange ratio. Also, indemnification
arrangements and directors' and officers' liability insurance for existing
directors and officers of DBT will be continued by ChoicePoint and by DBT after
the merger. The DBT board of directors recognized these interests and determined
that they did not affect the benefits of the merger to the DBT shareholders.
DIRECTORS OF CHOICEPOINT FOLLOWING THE MERGER (PAGE 47)
ChoicePoint has agreed, if the merger is consummated, to appoint four
persons who are currently members of the DBT board of directors to the
ChoicePoint board of directors.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES (PAGE 49)
The merger will generally be tax-free to holders of DBT common stock for
U.S. federal income tax purposes, except that holders will recognize gain or
loss upon the receipt of cash for fractional shares of ChoicePoint common stock.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN
TAX ADVISOR FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER TO
YOU.
ACCOUNTING TREATMENT (PAGE 47)
We expect the merger to be accounted for as a pooling of interests, which
means that we will treat our companies as if they had been combined for all
previous periods for accounting and financial reporting purposes.
RESALES OF CHOICEPOINT COMMON STOCK (PAGE 48)
Shares of ChoicePoint common stock received by DBT shareholders in the
merger will be freely transferable by the holders, except for those shares held
by holders who may be deemed to be "affiliates" (generally including directors,
senior officers and holders of ten percent or more of the outstanding common
stock) of DBT or ChoicePoint under applicable federal securities laws. Both DBT
and ChoicePoint have agreed to provide to the other the written agreements of
affiliates of each of them that the affiliates will not dispose of their shares
of DBT common stock and ChoicePoint common stock, except in compliance with the
Securities Act and applicable accounting rules governing pooling of interests.
REGULATORY APPROVALS (PAGE 48)
ChoicePoint and DBT are both required to make filings with or obtain
approvals from regulatory authorities to effect the merger. These consents and
approvals include approval under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
We cannot predict whether or when we will obtain all required regulatory
approvals or whether any approvals will include adverse conditions that would
cause the parties to call off the merger.
DISSENTERS' RIGHTS (PAGE 49)
Neither ChoicePoint nor DBT shareholders will have the right to dissent and
obtain the value of their shares of ChoicePoint common stock or DBT common
stock, respectively, in the merger.
COMPARISON OF RIGHTS OF SHAREHOLDERS (PAGE 75)
ChoicePoint is incorporated under the laws of the State of Georgia and DBT
is incorporated under the laws of the Commonwealth of Pennsylvania. DBT
shareholders, upon completion of the merger, will become ChoicePoint
shareholders, and their rights will be governed by Georgia law and ChoicePoint's
articles of incorporation and bylaws.
7
13
MARKET PRICE AND DIVIDEND INFORMATION
ChoicePoint common stock and DBT common stock are listed on the New York
Stock Exchange. The following table presents:
- the last reported sale price of one share of ChoicePoint common stock, as
reported on the New York Stock Exchange Composite Transaction Tape,
- the last reported sale price of one share of DBT common stock, as
reported on the New York Stock Exchange Composite Transaction Tape, and
- the market value of one share of DBT common stock on an equivalent per
share basis,
in each case as if the merger had been completed on February 11, 2000, the last
full trading day prior to the date of the public announcement of the proposed
merger, and on April 10, 2000, the last day for which such information could be
calculated prior to the date of this proxy statement/prospectus. The equivalent
price per share data for DBT common stock has been determined by multiplying the
last reported sale price of one share of ChoicePoint common stock on each of
these dates by the exchange ratio.
EQUIVALENT
PRICE PER
SHARE OF
CHOICEPOINT DBT DBT
COMMON COMMON COMMON
DATE STOCK STOCK STOCK
---- ----------- ------- ----------
February 11, 2000.... $39.75 $ 17.81 $20.87
April 10, 2000....... $37.13 $ 18.81 $19.49
ChoicePoint does not pay cash dividends and does not anticipate paying any
cash dividends in the foreseeable future. ChoicePoint currently intends to
retain future earnings to finance its operations and the expansion of its
business. Any future determination to pay cash dividends will be at the
discretion of ChoicePoint's board of directors and will be dependent upon
ChoicePoint's financial condition, operating results, capital requirements and
such other factors as the board of directors deems relevant. DBT has not paid
cash dividends to its shareholders since 1996.
COMPARATIVE PER SHARE INFORMATION
The following table sets forth selected per share information for
ChoicePoint on a historical and pro forma combined basis and for DBT on a
historical and an equivalent pro forma combined basis. Pro forma book value data
assumes the merger took place on December 31, 1999. Pro forma net income data
assumes the merger took place as of the beginning of the periods presented. The
data presented should be read together with the consolidated audited financial
statements and the related notes of ChoicePoint and DBT, which are incorporated
in this document by reference. See "Where You Can Find More Information"
beginning on page 92. You should not assume that ChoicePoint and DBT would have
achieved the unaudited pro forma results presented below if they had been
combined for the periods presented. Pro forma data are not indicative of future
results of operations of the combined companies. All per share data for
ChoicePoint give effect to a two-for-one stock split effective in November 1999.
8
14
Neither ChoicePoint nor DBT has historically paid cash dividends on its
common stock. Historically, ChoicePoint has not presented earnings per share for
years prior to 1998 since the companies that comprise ChoicePoint were
majority-owned subsidiaries of Equifax Inc. or one of its affiliates and were
recapitalized as part of the spin-off of ChoicePoint from Equifax on August 7,
1997, which we refer to as the "ChoicePoint spin-off."
CHOICEPOINT DBT EQUIVALENT
CHOICEPOINT PRO FORMA PRO FORMA
HISTORICAL COMBINED DBT HISTORICAL COMBINED(1)
----------- ----------- -------------- --------------
Book value per common share
at December 31, 1999....................... $6.98 $8.05 $5.78 $4.23
Net income per share, year ended:
December 31, 1999
Basic................................... 1.36 1.08 0.15 0.57
Diluted................................. 1.30 1.03 0.14 0.54
December 31, 1998
Basic................................... 1.22 1.08 0.36 0.57
Diluted................................. 1.18 1.05 0.35 0.55
December 31, 1997
Basic................................... -- -- 0.35 --
Diluted................................. -- -- 0.33 --
- ---------------
(1) Equivalent pro forma combined per share information for DBT is determined by
multiplying the ChoicePoint pro forma combined amounts by the exchange ratio
(0.525) to represent equivalent per share amounts to shareholders of DBT.
9
15
SELECTED FINANCIAL DATA
The following tables show historical financial results of ChoicePoint and
DBT for the periods and as of the dates presented. These are the actual results
achieved by each company for these periods. The tables also show unaudited pro
forma data. The unaudited pro forma combined balance sheet data assumes the
merger took place on December 31, 1999. The unaudited pro forma combined summary
of operations data assumes that the merger took place as of the beginning of the
periods presented.
ChoicePoint's annual historical figures are derived from the audited
financial statements of ChoicePoint. DBT's annual historical figures are derived
from the audited consolidated financial statements of DBT. The annual historical
information presented below should be read together with the consolidated
audited financial statements and the related notes of ChoicePoint and DBT
incorporated in this document by reference. See "Where You Can Find More
Information" beginning on page 92.
The selected unaudited pro forma combined financial data present the effect
of the proposed merger of ChoicePoint and DBT on a pooling-of-interests basis
and were derived by combining ChoicePoint's and DBT's consolidated financial
results and recording certain adjustments to DBT's financial data to conform to
ChoicePoint's financial statement presentation. These adjustments (1) reduce
DBT's operating revenue for motor vehicle registry revenue and reflect this
revenue as a reduction in cost, (2) reclassify DBT's patent royalty revenue into
operating revenue and (3) reclassify DBT's deferred tax liability into
ChoicePoint's deferred tax asset accounts. With the exception of the above, the
accounting policies of ChoicePoint and DBT are substantially comparable and, as
such, we did not make any additional adjustments to the unaudited pro forma
combined financial data. You should not assume that ChoicePoint and DBT would
have achieved the unaudited pro forma combined financial results if they had
been combined during the periods presented. Pro forma data are not indicative of
the future results of operations of the combined companies. The selected
financial data presented below should be read in conjunction with the unaudited
pro forma combined financial statements and the notes thereto included elsewhere
in this document and the consolidated financial statements and notes thereto.
Historically, ChoicePoint has not presented earnings per share for years
prior to 1998 since the companies that comprise ChoicePoint were majority-owned
subsidiaries of Equifax or one of its affiliates and were recapitalized as part
of the ChoicePoint spin-off.
SELECTED HISTORICAL FINANCIAL DATA OF CHOICEPOINT
YEAR ENDED OR AS OF DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS
Operating revenue.................................... $430,143 $406,475 $417,321 $366,481 $328,990
Costs and expenses................................... 350,472 341,309 365,035 318,870 287,912
-------- -------- -------- -------- --------
Operating income before unusual items................ 79,671 65,166 52,286 47,611 41,078
Unusual items........................................ 1,583 3,758 6,209 -- 9,150
-------- -------- -------- -------- --------
Operating income..................................... 78,088 61,408 46,077 47,611 31,928
Gain on sale of businesses, net...................... 2,513 8,807 14,038 -- --
Interest expense, net................................ 11,142 7,748 6,649 6,597 5,830
-------- -------- -------- -------- --------
Income before income taxes........................... 69,459 62,467 53,466 41,014 26,098
Provision for income taxes........................... 30,070 27,048 24,522 17,734 11,233
-------- -------- -------- -------- --------
Net income........................................... $ 39,389 $ 35,419 $ 28,944 $ 23,280 $ 14,865
======== ======== ======== ======== ========
EBITDA(1)............................................ $118,514 $101,247 $ 87,753 $ 66,265 $ 45,249
Earnings per share -- basic.......................... $ 1.36 $ 1.22 -- -- --
Weighted average shares -- basic..................... 28,973 29,084
Earnings per share -- diluted........................ $ 1.30 $ 1.18 -- -- --
Weighted average shares -- diluted................... 30,191 30,012
BALANCE SHEET DATA
Total assets......................................... $532,872 $534,199 $359,971 $301,824 $200,779
Long-term debt, less current maturities.............. 187,195 191,697 95,457 1,051 --
Shareholders' equity................................. 202,911 159,572 127,745 196,327 104,641
10
16
SELECTED HISTORICAL FINANCIAL DATA OF DBT
YEAR ENDED OR AS OF DECEMBER 31,
------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS
Operating revenue......................................... $ 78,992 $60,739 $44,447 $24,989 $13,142
Costs and expenses........................................ 75,506 53,055 36,666 24,177 12,285
-------- ------- ------- ------- -------
Operating income before unusual items..................... 3,486 7,684 7,781 812 857
Unusual items............................................. 817 -- -- -- 1,660
-------- ------- ------- ------- -------
Operating income (loss)................................... 2,669 7,684 7,781 812 (803)
Interest expense (income), net............................ (1,656) (2,330) (1,491) 174 76
-------- ------- ------- ------- -------
Income (loss) before income taxes......................... 4,325 10,014 9,272 638 (879)
Provision for income taxes................................ 1,517 3,118 3,171 198 239
-------- ------- ------- ------- -------
Net income (loss)......................................... $ 2,808 $ 6,896 $ 6,101 $ 440 $(1,118)
======== ======= ======= ======= =======
EBITDA(1)................................................. $ 12,481 $15,706 $13,583 $ 3,945 $ 286
Earnings (loss) per share -- basic........................ $ 0.15 $ 0.36 $ 0.35 $ 0.04 $ (0.12)
Weighted average shares -- basic.......................... 19,221 18,900 17,578 12,561 9,268
Earnings (loss) per share -- diluted...................... $ 0.14 $ 0.35 $ 0.33 $ 0.03 $ (0.12)
Weighted average shares -- diluted........................ 20,199 19,612 18,495 12,835 9,268
BALANCE SHEET DATA
Total assets.............................................. $136,488 $92,371 $86,355 $30,821 $ 7,663
Long-term debt, less current maturities................... -- -- -- 3,073 2,859
Shareholders' equity...................................... 116,398 83,893 76,583 18,932 3,074
SELECTED CHOICEPOINT AND DBT UNAUDITED
PRO FORMA COMBINED FINANCIAL DATA
YEAR ENDED OR AS OF DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS
Operating revenue........................................... $507,858 $466,132 $460,661
Costs and expenses.......................................... 424,701 393,282 400,594
-------- -------- --------
Operating income before unusual items....................... 83,157 72,850 60,067
Unusual items............................................... 2,400 3,758 6,209
-------- -------- --------
Operating income............................................ 80,757 69,092 53,858
Gain on sale of businesses, net............................. 2,513 8,807 14,038
Interest expense, net....................................... 9,486 5,418 5,158
-------- -------- --------
Income before income taxes.................................. 73,784 72,481 62,738
Provision for income taxes.................................. 31,587 30,166 27,693
-------- -------- --------
Net income.................................................. $ 42,197 $ 42,315 $ 35,045
======== ======== ========
EBITDA(1)................................................... $130,994 $116,954 $101,336
Earnings per share -- basic................................. $ 1.08 $ 1.08 --
Weighted average shares -- basic............................ 39,064 39,007
Earnings per share -- diluted............................... $ 1.03 $ 1.05 --
Weighted average shares -- diluted.......................... 40,795 40,308
BALANCE SHEET DATA
Total assets................................................ $667,780
Long-term debt, less current maturities..................... 187,195
Shareholders' equity........................................ 319,309
- ---------------
(1) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA (which is not a measure of financial performance under
generally accepted accounting principles) has been included because such
data is used by certain investors to analyze and compare companies on the
basis of operating performance, leverage and liquidity, and to determine a
company's ability to service debt. EBITDA is not presented as a substitute
for income from operations, net income or cash flows from operating
activities.
11
17
RISK FACTORS
In addition to the other information included and incorporated by reference
in this document, DBT shareholders and ChoicePoint shareholders should consider
the matters described below carefully in determining whether to approve the
merger agreement and the transactions contemplated thereby.
RISKS RELATING TO THE MERGER
The exchange ratio will not be adjusted, even if there is an increase or
decrease in the price of DBT common stock or the price of ChoicePoint common
stock.
The exchange ratio will not be adjusted if there is an increase or decrease
in the price of DBT common stock or ChoicePoint common stock. The prices of DBT
common stock and ChoicePoint common stock when the merger takes place may vary
from their prices at the date of this document and at the date of the meetings.
Variations in the prices of ChoicePoint common stock and DBT common stock may
result from changes in the business, operations or prospects of DBT, ChoicePoint
or the combined company, market assessments of the likelihood that the merger
will be consummated and the timing thereof, regulatory considerations, general
market and economic conditions and other factors. At the time of the meetings
the holders of DBT common stock and ChoicePoint common stock will not know the
exact value of the ChoicePoint common stock that DBT shareholders will receive
when the merger is completed. We urge you to obtain current market quotations
for ChoicePoint common stock and DBT common stock.
If ChoicePoint is unable successfully to integrate DBT's business operations,
it will not realize enhanced earnings as a result of the merger and its
business could be adversely affected.
The merger involves the integration of two companies that have previously
operated independently. Successful integration of DBT's operations will depend
on ChoicePoint's ability to consolidate operations, systems and procedures and
to eliminate redundancies and costs. If ChoicePoint is unable to do so, its
business and results of operations could be adversely affected. Difficulties
could include the loss of key employees and customers, the disruption of the
ongoing businesses of ChoicePoint and DBT and possible inconsistencies in
standards, controls, procedures and policies. Additionally, in determining that
the merger is in the best interests of ChoicePoint, the ChoicePoint board of
directors considered that enhanced earnings may result from the merger,
primarily through the realization of operating efficiencies and cost savings.
Realization of efficiencies and cost savings could be affected by a number of
factors beyond ChoicePoint's control and may not materialize after the merger.
See "-- General -- This proxy statement/prospectus contains forward-looking
statements that may differ materially from future results of ChoicePoint and/or
DBT" on page 15.
RISKS RELATING TO CHOICEPOINT
ChoicePoint's use of personal and public record information could make it
vulnerable to government regulations concerning these uses and adverse
publicity.
Many types of data and services provided by ChoicePoint are subject to
regulation by the Federal Trade Commission under the Federal Fair Credit
Reporting Act, and to a lesser extent, by various other federal, state and local
regulatory authorities. These laws and regulations are designed to protect the
privacy of the public from the misuse of personal information in the
marketplace. Future laws or restrictions which further restrict the use of
personal or public record information could result in a loss of revenue for
ChoicePoint. For example, if laws were enacted that restrict ChoicePoint's use
of social security numbers, ChoicePoint's ability to conduct its business would
be adversely affected. Adverse publicity concerning ChoicePoint's commercial use
of data could adversely affect the market price of ChoicePoint common stock and
could result in a loss of revenues for ChoicePoint.
12
18
If ChoicePoint loses its insurance services customers, its business and
financial condition could be adversely affected.
Approximately 62% of ChoicePoint's revenue in 1999 was derived from its
insurance services customers. ChoicePoint has no long-term agreements with those
customers or with any of its other customers. Although ChoicePoint's management
believes that the quality of its products and services should permit it to
maintain its relationship with its customers, there can be no assurance that
ChoicePoint will do so. Any loss of a significant number of ChoicePoint's
insurance services customers would have a material adverse effect on
ChoicePoint's revenues, financial condition and results of operations.
ChoicePoint faces significant competition.
ChoicePoint operates in a number of geographic and product and service
markets, all of which are highly competitive. If ChoicePoint is unable to
respond effectively to its competitors, many of which have greater financial
resources than ChoicePoint, its business and results of operations will be
materially adversely affected. In the insurance services market, ChoicePoint's
competitors include Trans Union Corporation, American Insurance Services Group,
a unit of Insurance Services Office, Inc., Insurance Information Exchange,
L.L.C., a subsidiary of AMS Services, Inc. and LabOne, Inc. with respect to
insurance laboratory services. In the business and government services market,
ChoicePoint's competitors in the automated public records market include the
Lexis-Nexis service of Reed Elsevier PLC, Online Professional Electronic Network
LLC, Dallas Computer Services, Inc. and InfoUSA Inc., while its competitors in
the pre-employment screening and drug testing services market include various
security companies and clinical laboratories, including Pinkertons Inc., Avert,
Inc. and Laboratory Corporation of America Holdings. Its competitors in other
information services offerings include Acxiom Corporation and Harte-Hanks
Communications, Inc. With respect to its offerings of consumer benefit services
such as those provided by its subsidiary EquiSearch Services, Inc., ChoicePoint
competes with Keane Tracers, Inc. and Shareholder Communications Corporation. In
each of its markets, ChoicePoint competes on the basis of responsiveness to
customer needs, price and the quality and range of products and services
offered.
ChoicePoint could lose some of its data supply sources, which could have a
material adverse effect on its business and results of operations.
ChoicePoint's operations depend upon information derived from a wide
variety of automated and manual sources. ChoicePoint obtains data from external
sources including public records information companies, governmental
authorities, competitors, and customers. ChoicePoint's agreements with its data
suppliers are generally short-term agreements, and some of ChoicePoint's
suppliers are competitors of ChoicePoint, which may make ChoicePoint vulnerable
to unpredictable price increases or non-renewal. ChoicePoint has no reason to
anticipate the termination of any significant relationships with these data
suppliers, and believes that in most cases substitute suppliers could be
arranged if any termination occurred. However, such a termination could have a
material adverse effect on its business or results of operations if ChoicePoint
were unable to arrange for substitute sources.
ChoicePoint currently maintains databases that contain information provided
and used by insurance underwriters. The information in these databases is not
owned by ChoicePoint, and the participating organizations could discontinue
contributing information to the databases. If this were to occur, ChoicePoint's
business and results of operations would be materially adversely affected.
ChoicePoint believes, however, that such an event is unlikely because
contributors to the databases depend upon the aggregated information in such
databases to conduct their business operations.
RISKS RELATING TO DBT
DBT has a limited operating history on the Internet. If DBT is unable to
respond to the unpredictable nature of operating over the Internet, its business
will be materially adversely affected.
The Internet marketplace is characterized by rapidly changing customer
preferences, low barriers to entry for competitors and rapidly changing
technologies. DBT has recently launched and acquired Internet
13
19
products and does not have a long operating history on the Internet. DBT may be
unable effectively to use Internet technology or adapt to its rapid changes.
Failure to recognize or respond to these factors may result in a material
adverse effect on DBT's business and prospects. For example, expanding the
KnowX.com and AutoTrack Internet products and increasing the market awareness of
DBT's Internet Services may be complicated, time-consuming and could be more
expensive than we anticipate. In addition, the provision of information services
over the Internet may not develop into a profitable market. New and evolving
trends on the Internet, including a trend toward free and low-cost services and
increasing access to public information from government agencies, may limit our
ability to generate revenues and hinder the growth of our market.
Efficient use of DBT databases depends on DBT's access to social security
numbers.
DBT uses social security numbers to generate its reports. Social security
numbers could become unavailable to DBT in the future because of changes in the
law or because data suppliers decide not to supply them to DBT. If DBT cannot
obtain social security numbers in the future, its ability to generate reports
efficiently will be reduced. DBT can and does use names, addresses and dates of
birth to generate its reports. However, without the use of social security
numbers, DBT believes that those reports would not be as complete or accurate as
the reports generated with social security numbers. DBT would also incur
significant expense to revise the software it uses to generate reports. Less
complete or less accurate reports could adversely affect DBT's business, results
of operations and financial condition.
If federal and state laws relating to privacy and the use of personal
information become more restrictive, DBT could have less information to supply
to customers, which could have a material adverse effect on its business and
results of operations.
Many privacy and consumer advocates and federal regulators have become
increasingly concerned with the use of personal information, particularly social
security numbers, motor vehicle reports and dates of birth. DBT uses personal
information to search its databases and to access information in the databases
of others. Various federal regulators and organized groups have lobbied and are
expected to continue to lobby for the adoption of new or additional federal and
state legislation to regulate the widespread dissemination or commercial use of
personal information. If federal or state laws are amended or enacted in the
future to further restrict access and use of personal information, DBT could
have less information to provide to its customers, which could have a material
adverse effect on its business and results of operations.
DBT relies on two suppliers for the credit header data in its database.
DBT obtains the credit header data in its database from two consumer credit
reporting agencies. The data consists of names, addresses, social security
numbers and dates of birth. The two consumer credit agencies are Experian
Information Solutions, Inc. and Trans Union Corporation. One or both of these
suppliers could stop supplying this data to DBT or could substantially increase
their prices. This would materially adversely affect DBT's business, results of
operations and financial condition.
DBT may experience service disruptions as a result of natural disasters.
DBT's ability to receive and complete search requests depends on the
efficient and uninterrupted operation of its computer and communications
systems. Substantially all of the hardware for these systems is located in
southern Florida, which is an area susceptible to hurricanes. Hurricanes and any
accompanying fires, floods or power loss could result in telecommunications
failures, break-ins or similar events that interrupt the operation of DBT's
computer and communications systems. In addition, events such as hurricanes and
floods could prevent DBT employees from attending work or carrying out their
responsibilities and could cause interruptions to the computer and communication
services and data provided to DBT by third parties. Any of these events could
have a material adverse effect on DBT's business and results of operations.
14
20
DBT's Patlex subsidiary depends exclusively on the exploitation and enforcement
of laser patents expiring in 2004 and 2005.
DBT's Patlex subsidiary partially owns two significant laser patents, which
generated revenues of approximately $6.2 million for the year ended December 31,
1999. These laser patents are Patlex's only significant assets. Because Patlex's
revenues are solely derived from the royalties it receives under its license
agreements, any advance in technology which would render the laser patents
obsolete could adversely affect Patlex's future revenues, which could have an
adverse effect on DBT's financial condition or results of operations. Although
DBT does not believe that any recent advances in laser technology exist that may
materially adversely affect Patlex's future patent royalty revenues, there has
been a gradual advancement in laser technologies that has adversely affected
Patlex's revenues.
The patent generating substantially all of Patlex's revenues expires in
November 2004. The other patent expires in May 2005. Upon the expiration of the
laser patents, Patlex will lose its right to prevent others from exploiting
these inventions and to receive royalty payments. DBT does not expect to derive
any revenue from the patent exploitation and enforcement business following the
expiration of the laser patents.
GENERAL
This proxy statement/prospectus contains forward-looking statements that may
differ materially from future results of ChoicePoint and/or DBT.
ChoicePoint and DBT have each made forward-looking statements in this
document (and in documents that are incorporated by reference in this document)
that are subject to risks and uncertainties. These statements are based on the
beliefs and assumptions of the respective company's management and on
information currently available to such management. Forward-looking statements
include the information concerning possible or assumed future results of
operations of ChoicePoint and/or DBT set forth in these documents and statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "intends," "plans," "estimates" or similar expressions. These
statements and others that are not statements about historical facts are hereby
identified as "forward-looking statements" for the purpose of the safe harbor
provided by Section 21E of the Exchange Act and Section 27A of the Securities
Act.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and shareholder value
of ChoicePoint following completion of the merger may differ materially from
those expressed in these forward-looking statements. Many of the factors that
will determine these results and values are beyond ChoicePoint's and DBT's
ability to control or predict. Important factors that could cause actual results
to differ materially from those stated in forward-looking statements include the
factors described in this "Risk Factors" section. In addition, ChoicePoint and
DBT do not have any intention or obligation to update forward-looking statements
after they distribute this document, even if new information, future events or
other circumstances have made them incorrect or misleading.
15
21
THE MEETINGS
The board of directors of ChoicePoint is furnishing this document to
shareholders of ChoicePoint in connection with the solicitation of proxies for
use at the annual meeting of ChoicePoint shareholders, including any
adjournments or postponements of the meeting. The board of directors of DBT is
furnishing this document to shareholders of DBT in connection with the
solicitation of proxies for use at the special meeting of DBT shareholders,
including any adjournments or postponements of the meeting.
The purpose of the meetings is to consider and vote upon the Agreement and
Plan of Merger, dated as of February 14, 2000, among ChoicePoint, DBT and
ChoicePoint Acquisition Corporation, a wholly owned subsidiary of ChoicePoint.
We refer to ChoicePoint Acquisition Corporation as "the subsidiary." The merger
agreement is attached to this document as Annex A and is incorporated in this
document by this reference. For a description of the material terms of the
merger agreement, see "The Merger -- Terms of the Merger Agreement." ChoicePoint
shareholders will also be asked to vote for directors and to ratify accountants.
The merger agreement provides that the subsidiary will merge with and into
DBT. We use the term "the merger" to refer to this merger and the other
transactions contemplated by the merger agreement.
CHOICEPOINT ANNUAL MEETING
General. The ChoicePoint annual meeting will be held on May 16, 2000 at
11:00 a.m., local time, at ChoicePoint's principal executive offices, 1000
Alderman Drive, Alpharetta, Georgia.
Record Date; Voting Power. Only holders of record of shares of ChoicePoint
common stock at the close of business on April 7, 2000, the ChoicePoint record
date, are entitled to notice of and to vote at the ChoicePoint annual meeting.
On that date, there were 29,562,688 issued and outstanding shares of ChoicePoint
common stock held by approximately 4,874 holders of record. Holders of record of
ChoicePoint common stock on the ChoicePoint record date are entitled to one vote
per share on any matter that may properly come before the ChoicePoint annual
meeting. Shareholders do not have cumulative voting rights. Brokers who hold
shares of ChoicePoint common stock as nominees will not have discretionary
authority to vote shares on the merger in the absence of instructions from the
beneficial owners of the shares. Any shares of ChoicePoint common stock for
which a broker has submitted an executed proxy but for which the beneficial
owner has not given instructions on voting to the broker are referred to as
"broker non-votes."
Vote Required. The approval and adoption of the merger agreement and the
issuance of ChoicePoint common stock pursuant to the merger agreement will
require that we receive approval of a majority of the votes cast on the
proposal.
Election of directors requires the affirmative vote of a plurality of the
shares of ChoicePoint common stock cast by the shares entitled to vote. Approval
of the proposal to ratify the independent public accountants will require that
the number of votes cast favoring the proposal exceed the number of votes cast
opposing the proposal.
Abstentions and broker non-votes will not count as votes for or against any
of the proposals expected to be voted upon at the ChoicePoint annual meeting.
The presence at the ChoicePoint annual meeting, in person or represented by
proxy, of a majority of the issued and outstanding shares of ChoicePoint common
stock will constitute a quorum for the transaction of business. Broker non-votes
and abstentions will be counted for purposes of establishing the presence of a
quorum at the ChoicePoint annual meeting.
On the ChoicePoint record date, the executive officers and directors,
including their affiliates, beneficially owned an aggregate of 1,927,066 shares
of ChoicePoint common stock which such persons are entitled to vote, or
approximately 6.5% of the shares of ChoicePoint common stock then outstanding.
We currently expect that the directors and officers will vote all those shares
in favor of the approval of the merger agreement and the issuance of ChoicePoint
common stock pursuant to the merger agreement. On the ChoicePoint record date,
the directors and executive officers of DBT beneficially owned no shares of
ChoicePoint common stock.
16
22
Solicitation and Revocation of Proxies. A form of proxy is enclosed with
this document. All shares of ChoicePoint common stock represented by properly
executed proxies will, unless these proxies have been previously revoked, be
voted in accordance with the instructions indicated on the proxies. If no
instructions are indicated, the shares will be voted "FOR" approval and adoption
of the merger agreement and the issuance of ChoicePoint common stock pursuant to
the merger agreement, "FOR" the proposals to elect directors and ratify the
appointment of accountants, and in the discretion of the proxy holder as to any
other matter which may properly come before the ChoicePoint annual meeting.
Any ChoicePoint shareholder that has previously delivered a properly
executed proxy may revoke the proxy at any time before its exercise. A proxy may
be revoked either by (1) filing with the secretary of ChoicePoint prior to the
ChoicePoint annual meeting, at ChoicePoint's principal executive offices, a
written revocation of the proxy or a duly executed proxy bearing a later date or
(2) attending the ChoicePoint annual meeting and voting in person. Presence at
the ChoicePoint annual meeting will not revoke a shareholder's proxy unless the
shareholder votes in person.
ChoicePoint has retained Morrow & Co., Inc. to aid in the solicitation of
proxies. ChoicePoint estimates the cost of these services to be approximately
$7,000, plus out-of-pocket expenses. The cost of soliciting proxies will be
borne by ChoicePoint. Proxies may be solicited by personal interview, mail or
telephone. In addition, ChoicePoint may reimburse brokerage firms and other
persons representing beneficial owners of shares of ChoicePoint common stock for
their expenses in forwarding solicitation materials to beneficial owners.
Proxies may also be solicited by ChoicePoint's executive officers, directors and
regular employees, without additional compensation, personally or by telephone
or facsimile transmission.
Other Matters. ChoicePoint is unaware of any matter to be presented at the
ChoicePoint annual meeting other than as described in this section. If other
matters are properly presented at the ChoicePoint annual meeting, the persons
named in the enclosed form of proxy will have authority to vote all properly
executed proxies in accordance with their judgment on any such matter,
including, without limitation, any proposal to adjourn or postpone the
ChoicePoint annual meeting. However, no proxy that has been designated to vote
against approval and adoption of the merger agreement and the issuance of
ChoicePoint common stock pursuant to the merger agreement will be voted in favor
of any proposal to adjourn or postpone the ChoicePoint annual meeting for the
purpose of soliciting additional proxies to approve and adopt the merger
agreement and the issuance of ChoicePoint common stock pursuant to the merger
agreement.
DBT SPECIAL MEETING
General. The DBT special meeting will be held on May 16, 2000 at 9:00
a.m., local time, at the Alpharetta Marriott Hotel, 5750 Windward Parkway,
Alpharetta, Georgia 30005.
Record Date; Voting Power. Only holders of record of shares of DBT common
stock at the close of business on April 7, 2000, the DBT record date, are
entitled to notice of and to vote at the DBT special meeting. As of that date,
there were 20,212,094 issued and outstanding shares of DBT common stock held by
approximately 484 holders of record. Holders of record of DBT common stock on
the DBT record date are entitled to one vote per share on any matter that may
properly come before the DBT special meeting. Brokers who hold shares of DBT
common stock as nominees will not have discretionary authority to vote such
shares in the absence of instructions from the beneficial owners of the shares.
Any shares of DBT common stock for which a broker has submitted an executed
proxy but for which the beneficial owner has not given instructions on voting to
the broker are referred to as "broker non-votes."
Vote Required. The approval of the proposal to approve the merger
agreement requires the affirmative vote of a majority of the votes cast by DBT
shareholders entitled to vote.
Abstentions and broker non-votes will not count as votes for or against any
of the proposals expected to be voted upon at the DBT special meeting.
The presence in person or by proxy of the holders of a majority of the
shares of DBT common stock outstanding on the DBT record date will constitute a
quorum for the transaction of business at the DBT
17
23
special meeting. Abstentions and broker non-votes will be counted for purposes
of establishing the presence of a quorum at the DBT special meeting.
On the DBT record date, the executive officers and directors of DBT,
including their affiliates, owned an aggregate of 2,740,946 shares of DBT common
stock which such persons are entitled to vote, or approximately 13.6% of the
shares of DBT common stock then outstanding. We currently expect that such
directors and officers will vote all of these shares in favor of the proposal to
approve the merger agreement. In addition, on the DBT record date, the directors
and executive officers of ChoicePoint beneficially owned no shares of DBT common
stock.
Solicitation and Revocation of Proxies. A form of proxy is enclosed with
this document. All shares of DBT common stock represented by properly executed
proxies (whether through the return of the enclosed proxy card or by telephone)
will, unless these proxies have been previously revoked, be voted in accordance
with the instructions indicated on the proxies. If no instructions are
indicated, the shares will be voted "FOR" approval of the merger agreement and
in the discretion of the proxy holder as to any other matter which may properly
come before the DBT special meeting.
Any DBT shareholder that has previously delivered a properly executed proxy
(whether through the return of the enclosed proxy card or by telephone) may
revoke the proxy at any time before its exercise. A proxy may be revoked either
by (1) filing with the secretary of DBT prior to the DBT special meeting, at
DBT's principal executive offices, either a written revocation of the proxy or a
duly executed proxy bearing a later date or (2) attending the DBT special
meeting and voting in person. Presence at the DBT special meeting will not
revoke a shareholder's proxy unless the shareholder votes in person.
DBT has retained D. F. King & Co. to aid in the solicitation of proxies.
DBT estimates the cost of these services to be approximately $7,500, plus
out-of-pocket expenses. The cost of soliciting proxies will be borne by DBT.
Proxies may be solicited by personal interview, mail or telephone. In addition,
DBT may reimburse brokerage firms and other persons representing beneficial
owners of shares of DBT common stock for their expenses in forwarding
solicitation materials to beneficial owners. Proxies may also be solicited by
DBT's executive officers, directors and regular employees, without additional
compensation, personally or by telephone or facsimile transmission.
Other Matters. DBT is unaware of any matter to be presented at the DBT
special meeting other than the proposal to approve the merger agreement. If
other matters are properly presented at the DBT special meeting, the persons
named in the enclosed form of proxy will have authority to vote all properly
executed proxies in accordance with their judgment on any such matter,
including, without limitation, any proposal to adjourn or postpone the DBT
special meeting. However, no proxy that has been designated to vote against
approval of the merger agreement will be voted in favor of any proposal to
adjourn or postpone the DBT special meeting for the purpose of soliciting
additional proxies to approve the merger agreement.
18
24
THE MERGER
The following discussion describes the more important aspects of the merger
and the material terms of the merger agreement. This description is qualified in
its entirety by reference to the merger agreement. We encourage you to read
carefully the merger agreement in its entirety a copy of which is attached as
Annex A.
BACKGROUND TO THE MERGER
On December 9, 1999, a representative from The Robinson-Humphrey Company,
LLC, ChoicePoint's financial advisor, hosted a breakfast meeting with Derek V.
Smith, Chairman, President and Chief Executive Officer of ChoicePoint, and
Kenneth G. Langone, a director of DBT, in New York. The representative of
Robinson-Humphrey introduced the parties, who discussed whether there was a
mutual interest in exploring whether the two companies could better execute
their businesses by working together, either in a joint venture, other
contractual relationship, by combining or otherwise. The parties agreed to meet
again on January 10, 2000 in Florida.
On December 16, 1999, the ChoicePoint executive committee of the board of
directors held a regular meeting. Mr. Smith said that he recently had initial
discussions in New York with Mr. Langone and a Robinson-Humphrey representative
regarding a potential merger with DBT. Another meeting was planned to further
discuss the transaction and Mr. Smith stated that the executive committee would
be kept apprised of the status of the discussions.
On January 10, 2000, Mr. Smith, Douglas C. Curling, Chief Operating Officer
of ChoicePoint, Ronald A. Fournet, President and Chief Executive Officer of DBT,
Mr. Langone, Bernard Marcus, a director of DBT, Frank Borman, Chairman of the
board of directors of DBT, and a representative from Robinson-Humphrey met at
DBT's offices in Boca Raton, Florida and had preliminary discussions concerning
ChoicePoint's possible interest in merging with DBT. Discussions focused on
long-term vision, values and cultural fit of the two companies, along with
high-level parameters for a possible business combination.
On January 11, 2000, Mr. Curling and a representative of Robinson-Humphrey
met with Mr. Fournet at DBT's offices to discuss due diligence. Mr. Smith, Mr.
Langone, Mr. Marcus and another representative from Robinson-Humphrey met
off-site to discuss strategic issues such as management philosophies for
maximizing shareholder value and governance issues such as structure of the
board of directors for a combined company.
On January 14, 2000, Mr. Smith called Mr. Langone and indicated that
ChoicePoint was interested in moving forward with the merger. Thereafter, DBT
determined to engage Credit Suisse First Boston to act as its financial advisor
in connection with the proposed merger.
On January 19, 2000, the ChoicePoint executive committee held a special
meeting to discuss the DBT transaction. The executive committee received a
report on the market and competitive overview, key industry trends, estimated
financial analysis and the organizational structure of DBT, with comparisons to
ChoicePoint. The committee was presented with an overview of DBT's board of
directors and its current management team, its technological capabilities as
compared to ChoicePoint's, its secondary offering completed in 1999, the
suspension of use of DBT services by the Drug Enforcement Agency and FBI and its
product development. The committee also discussed various acquisition methods
and discussed potential financial performance for a combined company and the
potential structure of the combined companies.
On January 20 and 21, 2000, a team of ChoicePoint management
representatives, an attorney from King & Spalding and a representative of
Robinson-Humphrey went to Boca Raton, Florida to begin conducting due diligence
on DBT.
On January 21, 2000, representatives of DBT visited a data room in
Alpharetta, Georgia to conduct due diligence on ChoicePoint. On January 24,
2000, representatives of DBT, including Mr. Fournet, and representatives of
Credit Suisse First Boston visited the data room in Alpharetta, Georgia to
conduct additional due diligence.
19
25
On January 24, 2000, representatives of DBT, including Mr. Fournet, and
representatives of Credit Suisse First Boston returned to the data room in
Alpharetta, Georgia to conduct additional due diligence.
On January 25, 2000, the ChoicePoint board of directors met and received
comprehensive presentations from the ChoicePoint management team and its
financial advisors relating to DBT and the acquisition. The board of directors
discussed the background and history of DBT, its management team and board of
directors, its financial performance, potential synergies between the companies
and potential terms and conditions of the transaction.
On January 25, 2000, the DBT board of directors met and approved the
engagement agreement with Credit Suisse First Boston, discussed various aspects
of the proposed merger with Credit Suisse First Boston, received a presentation
from legal counsel with respect to the merger and, after discussion, authorized
management and DBT's advisors to continue negotiations with ChoicePoint.
On January 29, 2000, Mr. Smith, Mr. Curling and Mr. Fournet had lunch in
Atlanta. At that meeting, they discussed management and leadership retention and
transition governance should agreement on terms for a merger be reached.
During the week of January 31, 2000, the parties held several conference
calls to discuss the merger. The issues discussed included ensuring business
continuity through the transition, key leadership retention, and a preliminary
framework for pre-merger planning, assuming that agreement on terms for a merger
was reached.
On February 7, 2000, Mr. Langone and Mr. Smith agreed, subject to approval
of the respective companies' boards of directors and pending the completion of
due diligence, upon the exchange ratio for the merger. They also agreed, subject
to these matters, on the structure of the board of directors of the combined
company, which would include four outside directors from DBT, four outside
directors from ChoicePoint and two ChoicePoint management directors.
From February 9 through February 11, 2000, representatives of ChoicePoint
visited DBT's facility in Boca Raton, Florida to conduct additional due
diligence on DBT.
From February 7 through February 14, 2000, representatives of the parties
negotiated various terms of the merger agreement, including termination fees.
On February 14, 2000, the boards of directors of ChoicePoint and DBT held
meetings. Both boards of directors approved the merger and the merger agreement
and authorized their respective representatives to execute the merger agreement.
Later in the day on February 14, 2000, the parties executed and delivered the
merger agreement.
CHOICEPOINT'S REASONS FOR THE MERGER
The ChoicePoint board of directors believes that the terms of the merger
agreement and the transactions contemplated thereby, including the stock
issuance, are fair from a financial point of view to, and are in the best
interests of, ChoicePoint and its shareholders. Accordingly, the ChoicePoint
board of directors has unanimously approved and adopted the merger agreement and
the transactions contemplated thereby, including the stock issuance, and
recommends approval and adoption of the merger agreement and the stock issuance
by the ChoicePoint shareholders. In reaching its decision, the ChoicePoint board
of directors consulted with ChoicePoint's management and legal counsel and
Robinson-Humphrey, its financial advisor. The principal reasons for the
ChoicePoint board of director's approval and adoption of the merger agreement
and the transactions contemplated thereby, including the stock issuance, and its
recommendation to the ChoicePoint shareholders are as follows:
- the enhancement of ChoicePoint's staff through the addition of
approximately 90 programmers and technology personnel;
- the ChoicePoint board of directors' belief that the integration of DBT
will create cost savings and operating efficiencies relating to
technology content management expenses and sales, new product
20
26
development, marketing expenses and public company filing and compliance
expenses, creating opportunities for improved earnings for the combined
company;
- the ChoicePoint board of directors' review of the nonfinancial terms of
the merger, including information about the terms of the merger agreement
and the addition of four DBT directors to the ChoicePoint board of
directors;
- the ChoicePoint board of directors' expectation that DBT's expertise in
the on-line civil public record business will enhance ChoicePoint's
current product offerings and provide a complementary customer base;
- the ChoicePoint board of directors' belief that DBT has a respected and
capable management team with a compatible approach to customer service
and shareholder value;
- the presentation of Robinson-Humphrey to the ChoicePoint board of
directors and the opinion of Robinson-Humphrey (including the assumptions
and limitations) rendered on February 14, 2000 that, as of that date, the
exchange ratio was fair to the common shareholders of ChoicePoint from a
financial point of view. See "-- Opinion of ChoicePoint's Financial
Advisor"; and
- the ChoicePoint board of directors' expectation that the merger would be
accounted for as a "pooling of interests" for accounting and financial
reporting purposes. See "Accounting Treatment."
The ChoicePoint board of directors also discussed other factors in
connection with the merger. These included, among others:
- the potential difficulties of integrating DBT's operations into
ChoicePoint;
- the substantial time and effort of ChoicePoint management required to
implement the merger, integrate the business of DBT into ChoicePoint, and
manage the increased size of the combined business; and
- the risk that the anticipated benefits of the merger might not be fully
realized.
The ChoicePoint board of directors believes that the benefits and
advantages of the merger outweigh these factors.
The foregoing discussion of the information and factors considered by the
ChoicePoint board of directors is not intended to be exhaustive but is believed
to include all material factors considered by the ChoicePoint board of
directors. In reaching its determination to approve and adopt the merger
agreement and the transactions contemplated thereby, including the stock
issuance, the ChoicePoint board of directors did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to different factors.
RECOMMENDATION OF THE CHOICEPOINT BOARD OF DIRECTORS
The ChoicePoint board of directors has unanimously approved and adopted the
merger agreement and the transactions contemplated thereby, including the
issuance of ChoicePoint common stock pursuant to the merger agreement. THE
CHOICEPOINT BOARD OF DIRECTORS BELIEVES THAT THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE OF CHOICEPOINT COMMON
STOCK PURSUANT TO THE MERGER AGREEMENT, ARE FAIR TO AND IN THE BEST INTERESTS OF
CHOICEPOINT AND THE CHOICEPOINT SHAREHOLDERS AND RECOMMENDS THAT THE CHOICEPOINT
SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
ISSUANCE OF CHOICEPOINT COMMON STOCK PURSUANT TO THE MERGER AGREEMENT.
OPINION OF CHOICEPOINT'S FINANCIAL ADVISOR
General
Robinson-Humphrey acted as financial advisor to ChoicePoint in connection
with its proposed merger with DBT. At the February 14, 2000 meeting of the
ChoicePoint board of directors, Robinson-Humphrey delivered a written opinion
that, as of that date, the exchange ratio in the proposed merger with DBT was
fair,
21
27
from a financial point of view, to the common shareholders of ChoicePoint.
Robinson-Humphrey also made a presentation to the ChoicePoint board of directors
describing the basis for its opinion, including the analyses described below. No
limitations were imposed by the ChoicePoint board of directors upon Robinson-
Humphrey with respect to the investigation made or the procedures followed by
Robinson-Humphrey upon rendering its opinion.
The full text of the written opinion of Robinson-Humphrey, dated February
14, 2000, which sets forth the assumptions made, procedures followed, limits of
the review undertaken in connection with the opinion and other matters
considered by Robinson-Humphrey, appears as Annex B to this proxy
statement/prospectus. ChoicePoint's shareholders are urged to read this opinion
in its entirety. ROBINSON-HUMPHREY'S OPINION IS DIRECTED ONLY TO THE FAIRNESS,
FROM A FINANCIAL POINT OF VIEW, OF THE EXCHANGE RATIO TO THE HOLDERS OF COMMON
STOCK OF CHOICEPOINT, AND DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW ANY
SHAREHOLDER SHOULD VOTE IN RELATION TO THE MERGER. This summary of the opinion
of Robinson-Humphrey is qualified in its entirety by reference to the full text
of the opinion.
Material and Information Considered with Respect to the Merger
In arriving at its opinion, Robinson-Humphrey:
- reviewed the merger agreement;
- reviewed and analyzed publicly available information concerning
ChoicePoint and DBT which Robinson-Humphrey believed to be relevant to
its inquiry;
- reviewed and analyzed financial and operating information with respect to
the business, operations and prospects of ChoicePoint and DBT furnished
to Robinson-Humphrey by ChoicePoint and DBT;
- conducted discussions with members of ChoicePoint's and DBT's management
concerning their respective businesses, operations, assets, present
conditions and prospects;
- reviewed the trading history of the common stock of DBT from February 7,
1997 to February 14, 2000;
- reviewed the trading history of the common stock of ChoicePoint from
August 8, 1997 to February 14, 2000;
- reviewed the historical market prices and trading activity for the common
stock of ChoicePoint and DBT and compared them with those of publicly
traded companies which were deemed relevant;
- compared the historical financial results and present financial condition
of ChoicePoint and DBT with those of publicly traded companies which were
deemed relevant;
- reviewed the financial terms of the merger with the financial terms of
other recent merger and acquisition transactions which were deemed
relevant;
- reviewed historical data relating to percentage premiums paid in
acquisitions of publicly traded companies; and
- performed financial analyses with respect to ChoicePoint's and DBT's pro
forma financial condition and projected future operating performance.
In rendering its opinion, Robinson-Humphrey assumed and relied upon the
accuracy and completeness of the financial and other information used by
Robinson-Humphrey in arriving at its opinion without independent verification.
With respect to the financial forecasts of ChoicePoint and DBT, Robinson-
Humphrey assumed that such forecasts had been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of ChoicePoint and DBT as to the future financial performance of
ChoicePoint and DBT, respectively, and the cost savings and other potential
synergies (including the amount, timing, and achievability thereof) anticipated
to result from the merger, and Robinson-Humphrey expressed no opinion with
respect to such forecasts or the assumptions on which the forecasts were based.
In arriving at its opinion, Robinson-Humphrey did not make or obtain any
evaluations or appraisals of the assets (including properties and facilities) or
liabilities of ChoicePoint or DBT.
22
28
Robinson-Humphrey's opinion is necessarily based upon market, economic and
other conditions as they may have existed and could be evaluated as of February
14, 2000. In connection with the preparation of its fairness opinion,
Robinson-Humphrey performed financial and comparative analyses, the material
portions of which are summarized below. The summary set forth below includes the
financial analyses used by Robinson-Humphrey and deemed to be material, but does
not purport to be a complete description of the analyses performed by
Robinson-Humphrey in arriving at its opinion. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances, and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. In addition,
Robinson-Humphrey believes that its analyses must be considered as an integrated
whole, and that selecting portions of such analyses and the factors considered
by it, without considering all of such analyses and factors, could create a
misleading or incomplete view of the process underlying its analyses set forth
in the opinion. In performing its analyses, Robinson-Humphrey made numerous
assumptions with respect to industry and economic conditions, many of which are
beyond the control of ChoicePoint. Any estimates contained in such analyses are
not necessarily indicative of actual past or future results or values, which may
be significantly more or less favorable than as set forth therein. Estimates of
values of companies do not purport to be appraisals or necessarily to reflect
the price at which such companies may actually be sold, and such estimates are
inherently subject to uncertainty. No public company utilized as a comparison is
identical to ChoicePoint or DBT, and no merger and acquisition transaction
involved companies identical to ChoicePoint or DBT. An analysis of the results
of such comparisons is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and transactions and other factors
that could affect the values of companies to which ChoicePoint or DBT is being
compared.
The following is a summary of the material factors considered and principal
financial analyses performed by Robinson-Humphrey to arrive at its opinion. Some
of the financial analyses summarized below include information presented in
tabular format. In order to understand fully Robinson-Humphrey's analyses, the
tables must be read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses. Considering the
data set forth below without considering the full narrative description of the
financial analyses, including the methodologies and assumptions underlying the
analyses, could create a misleading or incomplete view of Robinson-Humphrey's
analyses.
Analysis of Selected Comparable Public Companies
Robinson-Humphrey reviewed and compared selected publicly available
financial data, market information and trading multiples for DBT with other
selected publicly traded companies in the information gathering industry which
Robinson-Humphrey deemed comparable to DBT. This group of 13 other publicly
traded companies included eight information management companies and five
Internet data providers as follows:
INFORMATION MANAGEMENT COMPANIES INTERNET DATA PROVIDERS
- -------------------------------- -----------------------
- - ACNielsen Corp. - Edgar Online, Inc.
- - Acxiom Corporation - FactSet Research Systems, Inc.
- - ASI Solutions, Inc. - Hoovers, Inc.
- - Avert Inc. - OneSource Information Services
- - ChoicePoint Inc. - US SEARCH.com, Inc.
- - Dun & Bradstreet Corp.
- - Equifax Inc.
- - Thomson Corp.
For the comparable companies in both categories, Robinson-Humphrey
compared, among other things, firm values as a multiple of latest twelve months,
which is referred to as "LTM" revenues; LTM earnings before interest, taxes,
depreciation and amortization, which is referred to as "EBITDA"; LTM earnings
before interest and taxes, which is referred to as "EBIT"; equity value as a
multiple of calendar 1999 earnings
23
29
per share, which is referred to as "EPS"; and calendar 2000 EPS for the
comparable companies. All multiples were based on closing stock prices as of
February 10, 2000. Revenue, EBITDA and EBIT estimates for the comparable
companies were based on historical financial information available in public
filings of the comparable companies. EPS estimates were based on the First Call
consensus estimates as of February 9, 2000, except for ChoicePoint Inc. and
Equifax Inc., whose estimates were obtained from Robinson-Humphrey research. The
following table sets forth the multiples indicated by this analysis for the
comparable companies as of February 10, 2000:
PRICE/LTM PRICE/LTM PRICE/LTM PRICE/1999 PRICE/2000
REVENUES EBIT EBITDA EPS EPS
--------- --------- --------- ---------- ----------
Information Management Companies.......... 2.47x 14.6x 9.5x 22.7x 20.6x
Internet Data Providers................... 8.55 59.3 43.9 50.5 40.3
Overall Average........................... 4.81 19.6 13.3 25.8 22.8
DBT Acquisition Price Using 1999
Results................................. 5.06x 192.9x 40.3x 296.7x --
DBT Acquisition Price Using Estimated 2000
results................................. 3.53 25.5 13.6 -- 39.2
In arriving at its opinion, Robinson-Humphrey noted that, for each category
of valuation multiple, the implied valuation multiple for DBT based on the
exchange ratio and 1999 results was generally above the average for the
comparable companies while the implied valuation multiple for DBT based on the
exchange ratio and using estimated 2000 results was generally in line with the
average for the comparable companies.
Analysis of Selected Merger & Acquisition Transactions
Robinson-Humphrey reviewed the financial terms, to the extent publicly
available, of 14 proposed, pending or completed merger and acquisition
transactions since January 1994 involving companies Robinson-Humphrey deemed to
be comparable based on operating characteristics of the target, referred to
hereafter as the "selected acquisition transactions". Robinson-Humphrey
calculated various financial multiples based on publicly available information
for each of the selected acquisition transactions and compared them to
corresponding financial multiples for the merger, based on the exchange ratio.
The transactions reviewed (and the effective dates) were:
DATE
EFFECTIVE TARGET NAME ACQUIROR NAME
- --------- ----------- -------------
11/14/94............. Information America Inc. West Publishing Co.
09/25/95............. DataQuick Information Systems Acxiom Corp.
05/01/96............. Direct Media/DMI Inc. Acxiom Corp.
08/12/96............. Yankee Group Primark Corp.
09/03/96............. Risk Data Corporation HNC Software Inc.
09/04/96............. CDB Infotek ChoicePoint Inc.
01/06/97............. Baseline Financial Services Primark Corp.
02/07/97............. WEFA Holdings Primark Corp.
11/05/98............. Customer Development Corporation ChoicePoint Inc.
02/05/99............. A-T Financial Information Inc. Primark Corp.
06/17/99............. Background America Inc. Kroll-O'Gara Co.
07/23/99............. Donnelley Marketing Inc. infoUSA Inc.
09/24/99............. Information America Inc. DBT Online, Inc.
Pending.............. R.L. Polk & Co. (Consumer Group) Equifax Inc.
24
30
Robinson-Humphrey compared, among other things, firm values as a multiple
of LTM revenues, LTM EBIT and LTM EBITDA. The mean multiples indicated by this
analysis are as follows:
PRICE/
PRICE/LTM PRICE/LTM LTM
REVENUES EBIT EBITDA
--------- --------- ------
Comparable Merger and Acquisition Transactions......... 2.40x 17.3x 11.0x
DBT Acquisition Price Using 1999 Results............... 5.06x 192.9x 40.3x
DBT Acquisition Price Using Estimated 2000 Results..... 3.53 25.5 13.6
In arriving at its opinion, Robinson-Humphrey noted that for each category
of valuation multiple, the implied valuation multiple for DBT based on the
exchange ratio was above the average for the comparable transactions.
Contribution Analysis
Robinson-Humphrey reviewed the relative contribution that DBT and
ChoicePoint would be making to the combined business in terms of revenues, EBIT,
EBITDA, pre-tax income, assets and shareholders' equity. Robinson-Humphrey
analyzed relative contribution based on 1999 results as well as the estimated
2000 results for each company. The relative contribution of DBT to the combined
entity's pro forma combined financial results ranged from a high of 36.6% (based
on shareholders' equity as of December 31, 1999) to a low of 6.3% (based on 1999
EBIT). The 26.4% ownership of the combined entity that DBT shareholders are
expected to represent based upon the exchange ratio was within the overall range
of relative contribution that DBT will provide to the combined business in terms
of revenues, EBIT, EBITDA, pre-tax income, assets and shareholders' equity.
Discounted Cash Flow Analysis
Robinson-Humphrey performed a discounted cash flow analysis using financial
projections for 2000 through 2004 to estimate the net present equity value per
share of DBT. Robinson-Humphrey derived ranges of net present equity value per
share for DBT on a stand-alone basis that were based upon the discounted cash
flows of DBT from 2000 to 2004 plus a terminal value calculated using a range of
multiples of its projected year 2004 EBITDA. Robinson-Humphrey applied discount
rates ranging from 10% to 15% and multiples of 2004 EBITDA ranging from 10.0x to
15.0x. This analysis resulted in a range of net present equity values per share
of $16.87 to $27.18.
Historical Stock Price Analysis
Robinson-Humphrey analyzed the exchange ratio relative to historical
trading prices of DBT. The following table illustrates how the implied per share
price of DBT based on the exchange ratio compares to the historical share prices
of DBT common shares:
AVERAGE DBT STOCK PRICE
--------------------------------------------------
LAST LAST LAST LAST LAST
PRICE PER 7 DAYS 30 DAYS 90 DAYS 180 DAYS YEAR
CHOICEPOINT SHARE ------ ------- ------- -------- ------
STOCK PRICE PAID TO DBT $17.69 $19.44 $21.55 $24.29 $26.57
- ----------- ----------- ------ ------- ------- -------- ------
$36.00.................... $18.90 6.9% (2.8)% (12.3)% (22.2)% (28.9)%
37.00.................... 19.43 9.8 (0.1) (9.9) (20.0) (26.9)
38.00.................... 19.95 12.8 2.6 (7.4) (17.9) (24.9)
39.00.................... 20.48 15.8 5.3 (5.0) (15.7) (22.9)
40.00.................... 21.00 18.7 8.0 (2.5) (13.6) (21.0)
As part of its opinion, Robinson-Humphrey noted that the acquisition price for
DBT implied by the exchange ratio represented a modest premium to DBT's most
recent trading price and a discount to its historical average trading range.
25
31
Premiums Paid Analysis
Robinson-Humphrey analyzed the transaction premiums paid in 34
stock-for-stock merger transactions of publicly-traded companies with
transaction values between $250 and $500 million, effected since January 1,
1999, based on the target company's stock price one day, one week and four weeks
prior to public announcement of the transaction. Robinson-Humphrey also reviewed
the premiums paid for all stock-for-stock acquisitions of publicly-traded
companies in 1999. This analysis indicated the following premiums paid in the
selected transactions:
PURCHASE PRICE PREMIUM
PRIOR TO ANNOUNCEMENT
--------------------------
1 DAY 1 WEEK 4 WEEKS
----- ------ -------
Mean...................................................... 22.0% 27.8% 43.2%
Median.................................................... 22.0 25.6 40.0
High...................................................... 77.3 83.0 146.5
Low....................................................... (51.0) (48.2) (51.6)
Total Median(1)........................................... 18.0 36.1 15.9
Implied Premium Paid for DBT(2)........................... 14.9 15.8 5.3
- ---------------
(1) Source: MERGERSTAT. Represents the median for all acquisitions with stock
consideration in 1999.
(2) Assumes ChoicePoint stock price of $39.00 per share.
As part of its opinion, Robinson-Humphrey noted that the premium being paid
to DBT based on the exchange ratio was generally below the average premiums paid
in similar transactions.
Pro Forma Impact On Projected Financial Statements
Robinson-Humphrey reviewed the impact of the merger on ChoicePoint's
projected financial statements. After performing due diligence on DBT,
ChoicePoint's management prepared three sets of financial projections for DBT
that included a "base case", "downside case" and "upside case" for the years
2000 and 2001. ChoicePoint management also prepared "base case" and "upside
case" stand-alone forecasts for ChoicePoint for the same periods.
Robinson-Humphrey analyzed the pro forma impact of the merger on ChoicePoint's
projected earnings per share using the DBT projections and the ChoicePoint
stand-alone forecasts provided by ChoicePoint management. When analyzing the
impact of the merger on ChoicePoint's "base case" stand-alone forecast,
Robinson-Humphrey's analyses showed that the impact of the merger on
ChoicePoint's 2000 EPS ranged from 13.9% dilutive to 1.3% accretive. The impact
of the merger on ChoicePoint's 2001 "base case" stand-alone EPS ranged from 4.8%
dilutive to 19.1% accretive. When analyzing the impact of the merger on
ChoicePoint's "upside case" stand-alone forecast, Robinson-Humphrey's analyses
showed that the impact of the merger on ChoicePoint's 2000 EPS ranged from 14.2%
dilutive to 0.6% accretive. The impact of the merger on ChoicePoint's 2001
"upside case" stand-alone 2001 EPS ranged from 5.2% dilutive to 18.1% accretive.
Robinson-Humphrey's analyses also showed that the merger had a deleveraging
effect on ChoicePoint's balance sheet, reducing debt-to-total capitalization on
a pro forma basis as of December 31, 1999 from 48% to 37% and increasing cash
and cash equivalents from $40.1 million to $73.1 million.
The summary set forth above does not purport to be a complete description
of the analyses conducted or data presented by Robinson-Humphrey. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or summary description. Robinson-Humphrey
believes that the summary set forth above and their analyses must be considered
as a whole and that selecting only portions thereof, without considering all of
its analyses, could create an incomplete view of the processes underlying its
analyses and opinion. Robinson-Humphrey based its analyses on assumptions that
it deemed reasonable, including assumptions concerning general business and
economic conditions and industry-specific factors. The preparation of fairness
opinions does not involve mathematical weighing of the results of the individual
analyses performed, but requires Robinson-Humphrey to exercise its professional
judgment, based on its experience and expertise, in considering a wide variety
of analyses taken as a whole. Each of the analyses
26
32
conducted by Robinson-Humphrey was carried out in order to provide a different
perspective on the transaction and to add to the total mix of information
available. Robinson-Humphrey did not form a conclusion as to whether any
individual analysis, considered in isolation, supported or failed to support an
opinion as to fairness. Rather, in reaching its conclusion, Robinson-Humphrey
considered the results of the analyses in light of each other and ultimately
reached its conclusion based on the results of all analyses taken as a whole.
Information Concerning ChoicePoint's Financial Advisor
Robinson-Humphrey is a nationally recognized investment banking firm and,
as a customary part of its investment banking activities, is regularly engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, private placements, and valuations
for corporate and other purposes. ChoicePoint selected Robinson-Humphrey because
of its expertise, reputation in the information services industry and
familiarity with ChoicePoint. Robinson-Humphrey regularly publishes research
reports regarding the businesses and securities of ChoicePoint. In the ordinary
course of business, Robinson-Humphrey and its affiliates may actively trade or
hold the securities and other instruments and obligations of ChoicePoint for
their own account and for the accounts of customers and, accordingly, may at any
time hold long or short positions in such securities, instruments or
obligations. In addition, Robinson-Humphrey has performed various investment
banking services for ChoicePoint, including acting as financial advisor on
merger and acquisition transactions, and has received customary fees for such
services.
Pursuant to an engagement letter dated February 10, 2000, ChoicePoint
agreed to pay Robinson-Humphrey a fee of $500,000 in connection with the
preparation and delivery of its fairness opinion. If the merger is consummated,
an additional fee equal to 0.875% of the aggregate consideration to be paid for
DBT, including liabilities assumed, will be paid to Robinson-Humphrey.
ChoicePoint has also agreed to reimburse Robinson-Humphrey for its out-of-pocket
expenses incurred in connection with the engagement, and to indemnify
Robinson-Humphrey against specified liabilities, including specified liabilities
under federal securities laws.
DBT'S REASONS FOR THE MERGER
In reaching its decision to approve and adopt the merger agreement and to
recommend unanimously that DBT shareholders approve the merger agreement, DBT's
board of directors identified reasons why the merger should be beneficial to DBT
and its shareholders. These potential benefits include the following:
- DBT's board of director's belief that combining with ChoicePoint will
increase the business services, advertising and e-commerce relationships
and opportunities available to DBT and will also give DBT the opportunity
to expand its client base;
- the opportunity for DBT shareholders to receive a significant premium
over the market price for shares of DBT common stock existing before the
public announcement of the merger. Specifically, the exchange ratio in
the merger represented a premium of 18.6% over the closing price for DBT
common stock on February 14, 2000, the day that DBT and ChoicePoint
reached final agreement on the merger agreement;
- the ability of DBT shareholders to continue to participate in the growth
of the business conducted by ChoicePoint and DBT following the merger and
to benefit from the potential appreciation in value of shares of
ChoicePoint common stock;
- the larger public float of shares of ChoicePoint common stock compared to
the public float of shares of DBT common stock, which would provide DBT
shareholders with the opportunity to gain greater liquidity in their
investment; and
- the ability to create the largest provider of on-line and on-demand
public records in the United States through a combined technology
infrastructure while complementing new product development efforts.
27
33
In the course of deliberations, DBT's board of directors also reviewed with
its executive management team and its legal and financial advisors a number of
additional factors relevant to the merger, including:
- the terms and conditions of the merger agreement, including termination
fees and closing conditions;
- the likelihood that the merger would be completed;
- the expected qualification of the merger as a tax-free reorganization
under Section 368(a) of the Internal Revenue Code;
- DBT's board of directors' expectation that the merger would be accounted
for as a "pooling of interests" for accounting and financial reporting
purposes. See "Accounting Treatment";
- the financial presentation of Credit Suisse First Boston, including its
opinion that the exchange ratio was fair to the holders of DBT common
stock from a financial point of view, as described below under the
caption "-- Opinion of DBT's Financial Advisor";
- information relating to the business, assets, management, competitive
position, operating performance, trading performance and prospects of
each of DBT and ChoicePoint, including the prospects of DBT if it were to
continue as an independent company;
- current economic and financial market conditions and historical market
prices, volatility and trading information for DBT common stock and
ChoicePoint common stock;
- the belief, based on presentations by DBT's legal advisors, that the
terms of the merger agreement, including the limited conditions to
ChoicePoint's obligation to close the merger and the ability of DBT to
consider proposed alternative business combinations under specified
circumstances, are generally customary for transactions such as the
merger;
- the belief that the merger would result in significant cost savings for
both DBT and ChoicePoint;
- whether strategic alternatives to the merger would enhance long-term
shareholder value; and
- discussions with management and Credit Suisse First Boston as to their
due diligence investigations of ChoicePoint.
DBT's board of directors also considered and balanced against the potential
benefits of the merger a number of potentially negative factors, including,
without limitation, the following:
- the risk that the merger would not be consummated and the effect of the
public announcement of the merger on DBT's operating revenues and
operating results and DBT's ability to attract and retain key management,
marketing, technical, sales and other personnel;
- the possibility that the market value of ChoicePoint common stock might
decrease, causing less aggregate value to be paid to DBT shareholders;
- a recognition that ChoicePoint common stock is traded near its all-time
high, and the risk that such price level might not be sustained in the
future;
- the fact that shareholders of DBT will not receive the full benefit of
any future growth in the value of their equity that DBT may have achieved
as an independent company, and the potential disadvantage to DBT
shareholders who receive ChoicePoint common stock in the event that
ChoicePoint does not perform as well in the future as DBT may have
performed as an independent company; and
- the possibility that some provisions of the merger agreement, including
the no-solicitation and termination fee payment provisions, might have
the effect of discouraging other persons potentially interested in
merging with or acquiring DBT from pursuing such an opportunity; and
other matters described in the section entitled "Risk Factors" on page
12.
DBT's board of directors concluded that overall these risks were outweighed
by the potential benefits of the merger, and determined that the merger was fair
to and in the best interests of DBT and its shareholders.
28
34
The above discussion does not include all of the information and factors
considered by DBT's board of directors but is believed to include all material
factors considered by the DBT board of directors. In view of the variety of
factors considered in connection with its evaluation of the merger agreement,
DBT's board of directors did not find it practicable to and did not quantify or
otherwise assign relative weight to the specific factors considered in reaching
its determination. In addition, individual members of DBT's board of directors
may have given different weight to different factors.
RECOMMENDATION OF THE DBT BOARD OF DIRECTORS
The DBT board of directors has unanimously approved and adopted the merger
agreement and the transactions contemplated thereby. THE DBT BOARD OF DIRECTORS
BELIEVES THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE
FAIR TO AND IN THE BEST INTERESTS OF DBT AND THE DBT SHAREHOLDERS AND RECOMMENDS
THAT THE DBT SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
OPINION OF DBT'S FINANCIAL ADVISOR
On January 25, 2000, DBT's board of directors approved the engagement of
Credit Suisse First Boston to act as DBT's exclusive financial advisor in
connection with the merger. DBT selected Credit Suisse First Boston based on
Credit Suisse First Boston's experience, expertise and reputation, and
familiarity with DBT's business. Credit Suisse First Boston is an
internationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, DBT requested
that Credit Suisse First Boston evaluate the fairness, from a financial point of
view, to the holders of DBT common stock of the exchange ratio provided for in
the merger agreement. On February 14, 2000, at a meeting of the DBT board of
directors held to evaluate the merger, Credit Suisse First Boston rendered to
the DBT board of directors an oral opinion, which opinion was confirmed by
delivery of a written opinion dated February 14, 2000, the date of the merger
agreement, to the effect that, as of the date of the opinion and based upon and
subject to the matters described in the opinion, the exchange ratio was fair,
from a financial point of view, to the holders of DBT common stock.
The full text of Credit Suisse First Boston's written opinion dated
February 14, 2000 to the DBT board of directors, which sets forth the procedures
followed, assumptions made, matters considered and limitations on the review
undertaken, is attached as Annex C and is incorporated into this document by
reference. Holders of DBT common stock are urged to, and should, read this
opinion carefully and in its entirety. Credit Suisse First Boston's opinion is
addressed to the DBT board of directors and relates only to the fairness of the
exchange ratio from a financial point of view, does not address any other aspect
of the proposed merger or any related transaction, and does not constitute a
recommendation to any stockholder as to any matter relating to the merger. The
summary of Credit Suisse First Boston's opinion in this document is qualified in
its entirety by reference to the full text of the opinion.
In connection with its opinion, Credit Suisse First Boston, among other
things:
- reviewed publicly available business and financial information relating
to DBT and ChoicePoint, as well as the merger agreement;
- reviewed other information relating to DBT and ChoicePoint, including
financial forecasts, which DBT and ChoicePoint provided to or discussed
with Credit Suisse First Boston;
- met with the managements of DBT and ChoicePoint to discuss the businesses
and prospects of DBT and ChoicePoint;
- considered financial and stock market data of DBT and ChoicePoint and
compared those data with similar data for other publicly held companies
in businesses it deemed similar to DBT and ChoicePoint;
29
35
- considered, to the extent publicly available, the financial terms of
other business combinations and other transactions which have recently
been effected; and
- considered other information, financial studies, analyses and
investigations and financial, economic and market criteria that it deemed
relevant.
In connection with its review, Credit Suisse First Boston did not assume
any responsibility for independent verification of any of the information that
was provided to or otherwise reviewed by it and relied on that information being
complete and accurate in all material respects. With respect to financial
forecasts, Credit Suisse First Boston was advised, and assumed, that the
forecasts were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of DBT and ChoicePoint as
to the future financial performance of DBT and ChoicePoint and the potential
synergies and strategic benefits anticipated to result from the merger,
including the amount, timing and achievability of those synergies and benefits.
Credit Suisse First Boston also assumed, with the consent of the DBT board of
directors, that the merger will be treated as a pooling of interests in
accordance with generally accepted accounting principles and as a tax-free
reorganization for federal income tax purposes.
Credit Suisse First Boston was not requested to make, and did not make, an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of DBT or ChoicePoint, and was not furnished with any evaluations or
appraisals. Credit Suisse First Boston's opinion was necessarily based on
information available to, and financial, economic, market and other conditions
as they existed and could be evaluated by, Credit Suisse First Boston on the
date of its opinion. Credit Suisse First Boston did not express any opinion as
to the actual value of the ChoicePoint common stock when issued in the merger or
the prices at which the ChoicePoint common stock will trade after the merger. In
connection with the preparation of its opinion, Credit Suisse First Boston was
not authorized by DBT or the DBT board of directors to solicit, nor did Credit
Suisse First Boston solicit, third-party indications of interest for the
acquisition of all or any part of DBT. Although Credit Suisse First Boston
evaluated the exchange ratio from a financial point of view, Credit Suisse First
Boston was not requested to, and did not, recommend the specific consideration
payable in the merger, which consideration was determined in negotiations
between DBT and ChoicePoint.
In preparing its opinion to the DBT board of directors, Credit Suisse First
Boston performed a variety of financial and comparative analyses, including
those described below. The summary of Credit Suisse First Boston's analyses
described below is not a complete description of the analyses underlying Credit
Suisse First Boston's opinion. The preparation of a fairness opinion is a
complex analytical process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, a fairness opinion
is not readily susceptible to partial analysis or summary description. In
arriving at its opinion, Credit Suisse First Boston made qualitative judgments
as to the significance and relevance of each analysis and factor that it
considered. Accordingly, Credit Suisse First Boston believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
factors or focusing on information presented in tabular format, without
considering all analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the processes
underlying its analyses and opinion.
In its analyses, Credit Suisse First Boston considered industry
performance, regulatory, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of DBT and
ChoicePoint. No company, transaction or business used in Credit Suisse First
Boston's analyses as a comparison is identical to DBT or ChoicePoint or the
proposed merger, and an evaluation of the results of those analyses is not
entirely mathematical. Rather, the analyses involve complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies, business segments or transactions being analyzed. The estimates
contained in Credit Suisse First Boston's analyses and the ranges of valuations
resulting from any particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by the analyses. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which
30
36
businesses or securities actually may be sold. Accordingly, Credit Suisse First
Boston's analyses and estimates are inherently subject to substantial
uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one
of many factors considered by the DBT board of directors in its evaluation of
the proposed merger and should not be viewed as determinative of the views of
the DBT board of directors or management with respect to the merger or the
exchange ratio.
The following is a summary of the material financial analyses performed by
Credit Suisse First Boston in connection with the preparation of its opinion and
reviewed with the board of directors at a meeting of the DBT board of directors
held on February 14, 2000. The financial analyses summarized below include
information presented in tabular format. In order to fully understand Credit
Suisse First Boston's financial analyses, the tables must be read together with
the text of each summary. The tables alone do not constitute a complete
description of the financial analyses. Considering the data set forth in the
tables below without considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying the analyses,
could create a misleading or incomplete view of Credit Suisse First Boston's
financial analyses.
Discounted Cash Flow Analysis
DBT. Credit Suisse First Boston estimated the present value of the
stand-alone, unlevered, after-tax free cash flows that DBT could produce over
the fiscal years 2000 through 2004 based on two operating scenarios provided by
the management of DBT. The first scenario, management case one, was based on the
successful execution of DBT management's fiscal year 2000 operating plan. The
second scenario, management case two, assumed a lesser degree of execution of
the fiscal year 2000 operating plan, both in terms of forecasted revenues and
operating margins achieved. Credit Suisse First Boston also estimated a range of
estimated terminal values calculated based on terminal multiples of estimated
calendar year 2004 earnings before interest, taxes, depreciation and
amortization, commonly referred to as EBITDA, of 7.0x to 8.0x. The free cash
flows for fiscal years 2000 to 2004, as well as the estimated terminal values,
were then discounted to present value using a discount rate range of 14% to 15%,
which was based on DBT's estimated weighted average cost of capital. Based on
synergy estimates of $7.5 million in estimated calendar year 2000 and $20.0
million in estimated calendar year 2001 provided by the management of DBT,
Credit Suisse First Boston also estimated the present value of synergies
expected to result from the merger. This analysis indicated an overall implied
equity reference range for DBT of approximately $15.60 to $18.60 per share,
excluding synergies, and approximately $20.00 to $23.85 per share, including
synergies.
ChoicePoint. Credit Suisse First Boston estimated the present value of the
stand-alone, unlevered, after-tax free cash flows that ChoicePoint could produce
over the fiscal years 2000 through 2004 based on two scenarios. The first
scenario, the forecast case, was based on estimates of the management of
ChoicePoint. The second scenario, the sensitivity case, was based on adjustments
to the forecast case to reflect lower margins and revenue growth than the
forecast case. Credit Suisse First Boston also estimated a range of estimated
terminal values calculated based on terminal multiples of estimated calendar
year 2004 EBITDA of 7.0x to 8.0x. The free cash flows, along with the terminal
values, were then discounted to present value using a discount rate range of 11%
to 12%, based on ChoicePoint's estimated weighted average cost of capital. This
analysis indicated an overall implied equity reference range for ChoicePoint of
approximately $37.00 to $45.00 per share.
Summary. Credit Suisse First Boston compared the implied per share equity
reference ranges for DBT and ChoicePoint described above in order to derive an
implied overall exchange ratio reference range for DBT and ChoicePoint, both
with and without synergies expected to result from the merger. Based on Credit
Suisse First Boston's analysis, the implied exchange ratio range was 0.35x to
0.50x without synergies and 0.44x to 0.64x with synergies.
31
37
Selected Companies Analysis
Credit Suisse First Boston compared financial, operating and stock market
data of DBT and ChoicePoint to corresponding data of the following publicly
traded online public records and database services companies:
- - Acxiom Corporation - infoUSA Inc.
- - Dun & Bradstreet Corporation - Fair, Isaac & Company, Incorporated
- - Equifax Inc. - US SEARCH.com, Inc.
- - FactSet Research Systems, Inc.
Credit Suisse First Boston reviewed equity value as a multiple of net
income for estimated fiscal year 2000, and enterprise value as a multiple of
estimated fiscal year 2000 revenues, EBITDA, and earnings before interest and
taxes, commonly referred to as EBIT. All multiples were based on closing stock
prices on February 11, 2000. Estimated financial data for the selected companies
was based on publicly available securities analysts' estimates, estimated
financial data for DBT was based on DBT's management case one financial
projections and estimated financial data for ChoicePoint was based on
ChoicePoint's forecast case financial projections. Credit Suisse First Boston
applied a range of selected multiples for the selected companies to
corresponding financial data of DBT and ChoicePoint. This analysis indicated an
implied equity reference range for DBT of approximately $15.60 to $18.60 per
share and an implied equity reference range for ChoicePoint of approximately
$35.00 to $42.00 per share. Credit Suisse First Boston then compared the implied
per share equity reference ranges for DBT and ChoicePoint described above in
order to derive an implied overall exchange ratio reference range for DBT and
ChoicePoint of 0.37x to 0.53x.
None of the selected companies is identical to DBT or ChoicePoint.
Accordingly, an analysis of the results of the selected companies analysis
involves complex considerations of the selected companies and other factors that
could affect the public trading value of DBT, ChoicePoint and the selected
companies.
Selected Merger and Acquisition Analysis
Using publicly available information, Credit Suisse First Boston analyzed
the implied transaction multiples paid in selected merger and acquisition
transactions in the online public records and database services industry:
ACQUIROR TARGET
-------- ------
- - Equifax Inc. R.L. Polk Consumer Data Unit
- - DBT I.R.S.C., Inc.
- - Reed Elsevier plc MDL Information Systems Inc.
- - Snyder Communications, Inc. American List Corporation
- - Bain Capital, Inc. TRW Information Systems and
Services Division (division of TRW, Inc.)
- - Thomson Corporation West Publishing
- - Wolters Kluwer NV CCH Incorporated
- - Reed Elsevier plc Mead Data Central (Lexis/Nexis)
Credit Suisse First Boston compared enterprise values in the selected
transactions as multiples of latest 12 months sales, EBITDA, and EBIT and equity
values in the selected transactions as a multiple of latest twelve months net
income. All multiples were based on financial information available at the time
the relevant transaction was announced. Credit Suisse First Boston applied a
range of selected multiples for the selected transactions to corresponding
financial data of DBT and ChoicePoint. This analysis indicated an implied equity
reference range for DBT of approximately $17.60 to $23.10 per share and an
implied equity reference range for ChoicePoint of approximately $38.00 to $49.00
per share. Credit Suisse First Boston compared the implied per share equity
reference ranges for DBT and ChoicePoint described above in order to derive an
implied overall exchange ratio reference range for DBT and ChoicePoint of 0.36x
to 0.61x.
32
38
No company or transaction used in the above analysis is identical to DBT,
ChoicePoint or the proposed merger. Accordingly, an analysis of the results of
the selected merger and acquisition analysis involves complex considerations of
the companies involved and the transactions and other factors that could affect
the acquisition value of the companies and DBT.
Merger Consequences Analysis
Credit Suisse First Boston analyzed the potential pro forma effect of the
merger on ChoicePoint's estimated earnings per share in fiscal years 2000 and
2001, based on estimates provided by DBT's management cases one and two and
ChoicePoint's forecast case. Credit Suisse First Boston considered a range of
estimated synergies expected to result from the merger for fiscal year 2000 of
$5.0 million to $10.0 million and a range of estimated synergies for fiscal year
2001 of $20.0 million to $30.0 million. Based on the exchange ratio of 0.525x in
the merger and closing stock prices for DBT and ChoicePoint as of February 11,
2000, this analysis indicated that, after giving effect to the range of
estimated synergies described above, the proposed merger would be (1) dilutive
to ChoicePoint's estimated fiscal year 2000 earnings under all management case
two scenarios, as well as the management case one scenario based on $5.0 million
of synergies and (2) accretive to ChoicePoint's estimated fiscal year 2001
earnings under all scenarios reviewed. The actual results achieved by the
combined company may vary from projected results and the variations may be
material.
Contribution Analysis
Using DBT's management case one and ChoicePoint's forecast case financial
projections, Credit Suisse First Boston analyzed the relative contributions of
DBT and ChoicePoint to the estimated fiscal years 2000 and 2001 revenue, EBITDA,
EBIT and net income of the combined company. This analysis indicated the
following:
DBT CHOICEPOINT
---- -----------
REVENUE
2000...................................................... 17.8% 82.2%
2001...................................................... 19.6 80.4
EBITDA
2000...................................................... 18.5 81.5
2001...................................................... 21.4 78.6
EBIT
2000...................................................... 15.0 85.0
2001...................................................... 19.0 81.0
NET INCOME
2000...................................................... 16.3 83.7
2001...................................................... 20.6 79.4
Credit Suisse First Boston noted that DBT's and ChoicePoint's relative
contributions to the combined company, based on the above analysis, indicated an
implied exchange ratio range of approximately 0.40x to 0.45x.
Other Factors
In the course of preparing its opinion, Credit Suisse First Boston also
reviewed and considered other information and data, including:
- DBT's and ChoicePoint's historical financial information;
- historical market prices and trading volumes for DBT common stock and
ChoicePoint common stock;
- the relative exchange ratio of DBT and ChoicePoint over the last twelve
months; and
33
39
- ChoicePoint's actual reported earnings per share compared with First Call
Consensus earnings per share expectations for each quarter beginning in
March 1998.
Miscellaneous
DBT has agreed to pay Credit Suisse First Boston for its financial advisory
services a fee of 1.0% of the aggregate consideration payable in the merger. DBT
also has agreed to reimburse Credit Suisse First Boston for its out-of-pocket
expenses, including fees and expenses of legal counsel and any other advisor
retained by Credit Suisse First Boston, and to indemnify Credit Suisse First
Boston and related parties against liabilities, including liabilities under the
federal securities laws, arising out of its engagement. Credit Suisse First
Boston and its affiliates have in the past provided financial services to DBT
unrelated to the merger, for which services Credit Suisse First Boston and its
affiliates have received customary compensation. In the ordinary course of
business, Credit Suisse First Boston, its affiliates and its employees may
actively trade the debt and equity securities of both DBT and ChoicePoint for
their own accounts and for the accounts of customers and, accordingly, may at
any time hold long or short positions in such securities.
INTERESTS OF DBT DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER
In considering the recommendation of the DBT board of directors in favor of
the merger and the merger agreement, DBT shareholders should be aware that
directors and executive officers of DBT have interests in the merger that differ
from, or are in addition to, their interests as DBT shareholders.
These additional interests relate to, among other things, the effect of the
merger on employment and benefit arrangements to which directors and executive
offices are parties or under which they have rights. These interests, to the
extent material, are described below. The DBT board of directors recognized
these interests and determined that the interests neither supported nor
detracted from the fairness of the merger to the holders of DBT common stock.
Board of Directors
ChoicePoint and DBT have agreed that the ChoicePoint board of directors,
promptly after the completion of the merger, will consist of 10 members, 4 of
whom will initially be designated by DBT from the existing directors of DBT. See
"-- Terms of the Merger Agreement -- Board of Directors."
Ownership of DBT Capital Stock
As of April 7, 2000, directors and executive officers of DBT beneficially
owned an aggregate of 3,468,425 shares of DBT common stock (or approximately
16.6% of the then outstanding DBT common stock) including 727,479 shares of DBT
common stock that may be acquired upon the exercise of outstanding options.
As of March 1, 2000, the following directors and executive officers owned
the number of shares of DBT common stock including options to purchase shares of
DBT common stock shown in the table below. Assuming completion of the merger,
their continued employment until the completion of the merger and no change in
their share and option ownership, the directors and executive officers would own
the number of
34
40
shares of ChoicePoint common stock including options to purchase the number of
shares of ChoicePoint common stock shown in the table below:
SHARES OF DBT SHARES OF
COMMON STOCK CHOICEPOINT COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED TO BE BENEFICIALLY OWNED
- ------------------------ ------------------ ------------------------
Kenneth G. Langone...................................... 2,561,094(1) 1,344,574(2)
Gary E. Erlbaum......................................... 417,962(3) 219,430(4)
Frank Borman............................................ 200,000(5) 105,000(6)
Bernard Marcus.......................................... 78,453(7) 41,187(8)
J. Henry Muetterties.................................... 49,820(9) 26,155(10)
Andrall E. Pearson...................................... 30,538(7) 16,032(8)
Eugene L. Step.......................................... 30,436(11) 15,978(12)
Ron A. Fournet.......................................... 21,250(13) 11,156(14)
Kevin A. Barr........................................... 20,000(15) 10,500(16)
C. Garry Betty.......................................... 10,538(17) 5,532(18)
Jerold E. Glassman...................................... 10,000(17) 5,250(18)
All Officers and Directors as a Group (12 persons)...... 3,468,425(19) 1,820,919(20)
- ---------------
(1) Includes (a) 900,000 shares owned by Invemed Associates, Inc., (b) 200
shares owned by Mr. Langone's spouse, (c) 200,000 shares issuable upon
exercise of presently exercisable options and (d) 660,894 shares owned by
Invemed Catalyst Fund. Mr. Langone is Chairman of the Board, Chief
Executive Officer and President of Invemed and the principal shareholder of
Invemed's parent corporation. The address of this shareholder is 375 Park
Avenue, Suite 2205, New York, NY 10152.
(2) Includes (a) 472,500 shares to be owned by Invemed Associates, Inc., (b)
105 shares to be owned by Mr. Langone's spouse, (c) 105,000 shares to be
issuable upon exercise of presently exercisable options and (d) 346,969
shares to be owned by Invemed Catalyst Fund.
(3) Includes (a) 29,420 shares owned by SPSP Corporation of which Mr. Erlbaum
is a director, President and 36.7% shareholder, (b) 3,750 shares held by
trusts for which Mr. Erlbaum serves as trustee or co-trustee, (c) 139,360
shares owned by Erlbaum Family L.P., of which Mr. Erlbaum is President of
the general partner, (d) 2,922 shares owned by Mr. Erlbaum's son and (e)
200,000 shares issuable upon exercise of presently exercisable options.
(4) Includes (a) 15,445 shares to be owned by SPSP Corporation of which Mr.
Erlbaum is a director, President and 36.7% shareholder, (b) 1,968 shares to
be held by trusts for which Mr. Erlbaum serves as trustee or co-trustee,
(c) 73,164 shares to be owned by Erlbaum Family L.P., of which Mr. Erlbaum
is President of the general partner, (d) 1,534 shares to be owned by Mr.
Erlbaum's son and (e) 105,000 shares to be issuable upon exercise of
presently exercisable options.
(5) Includes 157,895 shares issuable pursuant to currently exercisable stock
options.
(6) Includes 82,894 shares to be issuable pursuant to currently exercisable
stock options.
(7) Includes 20,000 shares issuable pursuant to currently exercisable stock
options but does not include 30,000 shares issuable pursuant to stock
options which vest upon the completion of the merger.
(8) Includes 10,500 shares to be issuable pursuant to currently exercisable
stock options but does not include 15,750 shares issuable pursuant to stock
options which vest upon the completion of the merger.
(9) Includes 0 shares issuable pursuant to currently exercisable stock options
but does not include 30,000 shares issuable pursuant to stock options which
vest upon the completion of the merger.
(10) Includes 0 shares issuable pursuant to currently exercisable stock options
but does not include 15,750 shares issuable pursuant to stock options which
vest upon the completion of the merger.
(11) Includes 30,000 shares issuable pursuant to currently exercisable stock
options but does not include 20,000 shares issuable pursuant to stock
options which vest upon the completion of the merger.
(12) Includes 15,750 shares to be issuable pursuant to currently exercisable
stock options but does not include 10,500 shares issuable pursuant to stock
options which vest upon the completion of the merger.
(13) Includes 21,250 shares issuable pursuant to currently exercisable stock
options but does not include 178,750 shares issuable pursuant to stock
options which vest upon the completion of the merger.
(14) Includes 11,156 shares to be issuable pursuant to currently exercisable
stock options but does not include 93,844 shares issuable pursuant to stock
options which vest upon the completion of the merger.
(15) Includes 20,000 shares issuable pursuant to currently exercisable stock
options but does not include 50,000 shares issuable pursuant to stock
options which vest upon the completion of the merger.
(16) Includes 10,500 shares issuable pursuant to currently exercisable stock
options but does not include 26,250 shares issuable pursuant to stock
options which vest upon the completion of the merger.
(17) Includes 10,000 shares issuable pursuant to currently exercisable stock
options but does not include 40,000 shares issuable pursuant to stock
options which vest upon the completion of the merger.
(18) Includes 5,250 shares to be issuable pursuant to currently exercisable
stock options but does not include 21,000 shares issuable pursuant to stock
options which vest upon the completion of the merger.
(19) Includes 727,479 shares issuable pursuant to currently exercisable stock
options but does not include 460,416 shares issuable pursuant to stock
options which vest upon the completion of the merger.
(20) Includes 381,926 shares to be issuable pursuant to currently exercisable
stock options but does not include 241,718 shares issuable pursuant to
stock options which vest upon the completion of the merger.
35
41
Employment Agreements
DBT currently has employment agreements with Ron Fournet, Kevin A. Barr, J.
Henry Muetterties and Pam Rendine-Cook. Messrs. Fournet, Barr and Muetterties
and Ms. Rendine-Cook have entered into agreements with ChoicePoint which are to
be effective as of the date of closing of the merger agreement. These agreements
with ChoicePoint provide that ChoicePoint will enter into employment agreements
with Messrs. Fournet, Barr and Muetterties and Ms. Rendine-Cook which will
supersede their employment agreements with DBT and will provide, in material
part, as follows:
- Messrs. Fournet, Barr and Muetterties and Ms. Rendine-Cook will receive
base salaries in the amounts of $250,000, $185,000, $160,000 and
$175,000, respectively.
- Messrs. Fournet, Barr and Muetterties and Ms. Rendine-Cook will receive
payments as soon as practical after the closing in the amounts of
$200,000, $148,000, $64,000 and $140,000, respectively.
- If Messrs. Fournet, Barr, Muetterties or Ms. Rendine-Cook notify
ChoicePoint of their intent to terminate on or prior to September 30,
2000 and such employee remains an active employee through September 30,
2000, or if ChoicePoint unilaterally determines to terminate the employee
prior to or on September 30, 2000, Mr. Fournet will receive a termination
payment in an amount equal to 150% of his current base salary and Messrs.
Barr and Muetterties and Ms. Rendine-Cook will receive termination
payments in amounts equal to 140% of their current base salaries with
ChoicePoint.
- If still employed by ChoicePoint on October 1, 2000, Messrs. Fournet,
Barr and Muetterties and Ms. Rendine-Cook will receive payments of
$75,000, $75,000, $25,000 and $75,000, respectively.
- Messrs. Fournet, Barr and Muetterties and Ms. Rendine-Cook will be
eligible to receive, subject to approval at ChoicePoint's next management
compensation committee meeting, options to purchase shares of ChoicePoint
common stock for 45,000 shares, 12,500 shares, 5,000 shares and 12,500
shares. These options will vest twenty-five percent per year on each
anniversary date of the grant.
- Messrs. Fournet, Barr and Muetterties and Ms. Rendine-Cook will be
eligible to receive, subject to approval at ChoicePoint's management
compensation committee meeting in January 2001, shares of restricted
stock equal in value to $620,000, $280,000, $45,000 and $280,000,
respectively. These shares of restricted stock will vest one third in
July 2001, one third in July 2002 and one third in July 2003.
- If their employment with ChoicePoint is terminated by ChoicePoint without
cause on or after October 1, 2000 but before May 17, 2001, Messrs.
Fournet, Barr and Muetterties and Ms. Rendine-Cook will receive payments
in amounts equal to one year of their then-current salaries with
ChoicePoint.
DBT also has an employment agreement with Mr. Frank Borman which is for a
three-year term that commenced on April 1, 1997. The employment agreement
provides for an automatic one-year extension at the expiration of each year
within the term (as extended) unless otherwise terminated. The current annual
salary set is $160,000 for Mr. Borman. The employment agreement of Mr. Borman
includes a non-competition provision which precludes him from associating with a
competitor of DBT for a three-year period following termination of employment.
Stock Options
For a description of the treatment in the merger of options to acquire
shares of DBT common stock that are also applicable to directors and executive
officers of DBT, See "-- Structure of the Merger -- Stock Options."
Indemnification; Directors' and Officers' Insurance
Under the merger agreement, ChoicePoint has agreed that it will assume the
same obligations with respect to indemnification of directors and officers of
DBT and its subsidiaries as were contained in the articles of incorporation or
bylaws of DBT or its subsidiaries and any indemnification or other agreements at
the effective time of the merger. In addition, ChoicePoint will maintain the
directors' and officers' liability insurance coverage currently maintained by
DBT on terms no less favorable than those of such policies for a
36
42
period of at least five years following the effective time of the merger;
however, ChoicePoint will not be required to spend an amount more than 150% of
the annual premiums currently paid by DBT in any one year.
STRUCTURE OF THE MERGER
General
The merger agreement provides that, after its approval by the ChoicePoint
shareholders and the DBT shareholders and the satisfaction or waiver of the
other conditions to the merger, the subsidiary will merge with and into DBT,
which will survive the merger as a wholly owned subsidiary of ChoicePoint.
Merger Consideration
At the completion of the merger, each issued and outstanding share of DBT
common stock (other than any shares held by ChoicePoint or the subsidiary and
each share of DBT common stock and DBT preferred stock that is owned by DBT as
treasury stock) will be converted into the right to receive from ChoicePoint
0.525 shares of ChoicePoint common stock.
Fractional Shares
ChoicePoint will not issue any fractional shares of its common stock in the
merger. Each holder of DBT common stock will instead receive cash equal to the
product of:
- the per share closing price on the New York Stock Exchange of the
ChoicePoint common stock on the date the articles of merger are filed;
and
- the fraction of a share to which the shareholder would otherwise be
entitled.
DBT shareholders and ChoicePoint shareholders are urged to obtain current
market quotations for ChoicePoint common stock and DBT common stock. It is
expected that the market price of ChoicePoint common stock will fluctuate
between the date of this document and the date on which the merger is completed
and thereafter. Because the number of shares of ChoicePoint common stock to be
received by DBT shareholders in the merger is fixed and the market price of
ChoicePoint common stock is subject to fluctuation, the value of the shares of
ChoicePoint common stock that DBT shareholders will receive in the merger may
increase or decrease prior to and after the merger. See "Risk Factors -- Risks
Relating to the Merger."
Stock Options
At the time the merger becomes effective, each outstanding option to
purchase shares of DBT common stock, whether issued under DBT's stock option
plans or otherwise, will be amended and, on the same terms and conditions as
were applicable under DBT's stock options plans, converted into an option to
acquire shares of ChoicePoint common stock. As a result of the merger, an option
to purchase a share of DBT common stock will be exercisable for the number of
shares of ChoicePoint common stock equal to the product (rounded down to the
nearest whole share) of:
- the number of shares of DBT common stock subject to the original DBT
option and
- the exchange ratio.
The exercise price per share of ChoicePoint common stock under the option
will be equal to the price (rounded up to the nearest whole cent) obtained by
dividing:
- the exercise price set forth in the original DBT stock option by
- the exchange ratio.
Prior to the effective time of the merger, ChoicePoint has agreed to take
all necessary actions to, as of the effective time of the merger, amend and
convert the outstanding options to purchase DBT stock to options to purchase
ChoicePoint common stock.
37
43
EXCHANGE OF DBT COMMON STOCK FOR CHOICEPOINT COMMON STOCK
The conversion of each share of DBT common stock into the ChoicePoint
common stock as described above under "Structure of the Merger -- Merger
Consideration," will occur automatically at the completion of the merger.
As soon as reasonably practicable after the merger, SunTrust Bank, the
exchange agent, will send a transmittal letter to each former DBT shareholder.
The transmittal letter will contain instructions on how to obtain the merger
consideration in exchange for shares of DBT common stock. DBT shareholders
should not send stock certificates with the enclosed proxy.
Holders of certificates previously representing DBT common stock will not
be paid dividends or other distributions declared or made with respect to shares
of ChoicePoint common stock into which their DBT common stock has been converted
with a record date after the merger and will not be paid cash for any fractional
shares of ChoicePoint common stock until their certificates are surrendered to
the exchange agent for exchange. When their certificates are surrendered, any
unpaid dividends and any cash instead of fractional shares will be paid without
interest.
TERMS OF THE MERGER AGREEMENT
Effective Time of the Merger
The merger will become effective upon the filing of the articles of merger
with the Department of State of the Commonwealth of Pennsylvania, or a later
time agreed upon by the parties and specified in the articles of merger. The
merger agreement provides that the parties will file the articles of merger as
soon as practicable following the satisfaction or waiver of the conditions to
the merger.
Representations and Warranties
The merger agreement contains customary representations and warranties of
ChoicePoint and DBT relating to, among other things:
- organization and standing;
- capitalization;
- authorization, execution, delivery and performance of the merger
agreement;
- required consents, approvals, authorizations and permits of government
authorities relating to the merger agreement;
- documents filed with the Securities and Exchange Commission, the accuracy
of information and the financial statements contained in those documents
and the absence of undisclosed liabilities;
- absence of material changes or events;
- filing of tax returns and payment of taxes;
- title to assets and the existence of liens on assets;
- change-of-control agreements;
- pending litigation;
- employee benefits, labor relations and environmental matters;
- intellectual property and year 2000 matters; and
- "pooling-of-interest" matters.
38
44
Conditions to the Merger
Each party's obligation to effect the merger is subject to the satisfaction
or waiver of conditions, which include, in addition to other closing conditions,
the following:
- approval of the merger agreement by the ChoicePoint shareholders and the
DBT shareholders;
- absence of any temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction
or other legal restraint or prohibition preventing the consummation of
the merger; provided, however, that the parties invoking this condition
shall use all commercially reasonable efforts to have any order or
injunction vacated;
- receipt of all necessary authorizations, orders and consents of
governmental authorities and the expiration or termination of any
regulatory waiting periods;
- receipt of listing approval from the New York Stock Exchange for the
shares of ChoicePoint common stock to be issued pursuant to the merger
agreement;
- effectiveness of the registration statement of ChoicePoint, of which this
proxy statement/prospectus forms a part, relating to the shares of
ChoicePoint common stock to be issued to DBT shareholders pursuant to the
merger agreement;
- receipt from ChoicePoint's and DBT's independent auditors of letters
concurring with each company's conclusion that the merger qualifies for
pooling-of-interests accounting treatment;
- receipt by DBT and ChoicePoint of an opinion from ChoicePoint's counsel
that the merger will be treated for U.S. federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code;
- accuracy, as of the effective time of the merger, of the other party's
representations and warranties in all material respects;
- performance in all material respects by the other party of its
obligations under the merger agreement; and
- absence of any change, condition, event or development that has resulted
in, or would reasonably be expected to result in, a material adverse
effect on either DBT or ChoicePoint.
ChoicePoint's obligation to effect the merger is further conditioned upon
DBT not entering into any employment, consulting or severance agreements with
any director, officer or employee (whose annual compensation is over $75,000)
and Mr. Fournet continuing to serve as Chief Executive Officer of DBT until the
effective time of the merger.
The merger agreement provides that a "material adverse effect" means, when
used with respect to DBT, that any change, event or effect has occurred or been
threatened that, when taken together with all other adverse changes, events or
effects that have occurred or, to the knowledge of DBT, been threatened
(exclusive, however, of (1) any of these changes, events, or effects that occur
as a result of conditions affecting the information services or public records
database businesses as a whole or affecting the stock markets and capital
markets generally or the United States economy as a whole; and (2) any of these
changes, events, or effects which occurred prior to February 14, 2000 and were
disclosed to ChoicePoint in writing prior to February 14, 2000) which is or is
reasonably likely to:
- be materially adverse to the business, results of operations, properties,
prospects, condition (financial or otherwise), assets, liabilities
(including, without limitation, contingent liabilities) of either DBT and
its subsidiaries taken as a whole; or
- prevent or materially delay the performance by DBT of any of its
obligations under the merger agreement or the consummation of the merger
or the other transactions contemplated by the merger agreement.
39
45
The merger agreement provides that a "material adverse effect" means, when
used with respect to ChoicePoint, any change, event or effect has occurred or,
to the knowledge of ChoicePoint, been threatened that, when taken together with
all other adverse changes, events or effects that have occurred or been
threatened (exclusive, however, of (1) any changes, events, or effects that
occur as a result of conditions affecting the information services or public
records database businesses as a whole or affecting the stock markets and
capital markets generally or the United States economy as a whole; and (2) any
of these changes, events, or effects which have occurred prior to February 14,
2000 and were disclosed to DBT in writing prior to February 14, 2000) which is
or is reasonably likely to:
- be materially adverse to the business, results of operations, properties,
prospects, condition (financial or otherwise), assets, liabilities
(including, without limitation, contingent liabilities) of ChoicePoint
and its subsidiaries taken as a whole; or
- prevent or materially delay the performance by ChoicePoint or the
subsidiary of any of its obligations under the merger agreement or the
consummation of the merger or the other transactions contemplated by the
merger agreement.
No Solicitation; Board Action
DBT. In the merger agreement, DBT has agreed that it will not, nor will it
permit any of its subsidiaries to, nor will it authorize or permit any of its
directors, officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly through another person:
- solicit, initiate or knowingly encourage (including by way of furnishing
information) the making of any DBT competing proposal, as described
below; or
- participate in any discussions or negotiations regarding any DBT
competing proposal.
However, if, at any time prior to the DBT special meeting, the board of
directors of DBT determines in good faith, after consultation with outside
counsel, that to do otherwise would not be in the best interests of the DBT
shareholders, DBT and its representatives may, in response to a DBT competing
proposal which did not result from a breach of the foregoing covenants and which
could reasonably be expected to constitute, if consummated, a DBT superior
proposal, as described below:
- furnish information on DBT and its subsidiaries to any person making a
DBT competing proposal pursuant to a customary confidentiality agreement
(as determined by DBT after consultation with its outside counsel); and
- participate in discussions or negotiations regarding a DBT competing
proposal.
The merger agreement provides that:
- the term "DBT competing proposal" means any bona fide inquiry, proposal
or offer from any person relating to any direct or indirect acquisition
or purchase of 30% or more of the assets of DBT and its subsidiaries
taken as a whole, or 30% or more of the combined voting power of the
shares of DBT common stock, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 30% or more of
the combined voting power of the shares of DBT common stock or any
merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving DBT or any of
its subsidiaries in which the other party thereto or its stockholders
will own 30% or more of the combined voting power of the parent entity
resulting from any such transaction and other than the transactions
contemplated by the merger agreement; and
- the term "DBT superior proposal" means any proposal made by a third party
relating to any direct or indirect acquisition or purchase of 50% or more
of the assets of DBT and its subsidiaries, taken as a whole, or 50% or
more of the combined voting power of the shares of DBT common stock and
any tender offer or exchange offer that if consummated would result in
any person beneficially owning 50% or more of the combined voting power
of the shares of DBT common stock, or any merger,
40
46
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving DBT or any of its
subsidiaries in which the other party thereto or its stockholders will
own 40% or more of the combined voting power of the parent entity
resulting from any such transaction and, otherwise on terms which the DBT
board of directors determines in its good faith judgment (based on the
advice of a financial advisor of nationally recognized reputation),
taking into account legal, financial, regulatory and other aspects of the
proposal deemed appropriate by the DBT board of directors (1) to be more
favorable from a financial point of view than the merger to DBT's
shareholders taken as a whole, (2) is reasonably capable of being
completed and (3) for which financing, to the extent required, is then
committed or is reasonably capable of being obtained by the third party.
DBT has further agreed that neither its board of directors nor any
committee thereof shall (1) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to ChoicePoint, the approval or recommendation by
the DBT board of directors or a committee thereof of the merger or the merger
agreement, (2) approve or recommend, or propose publicly to approve or
recommend, any DBT competing proposal or (3) approve or recommend, or propose to
approve or recommend, or execute or enter into, any letter of intent, agreement
in principle, merger agreement, acquisition agreement, option agreement or other
similar agreement, each referred to as a "DBT acquisition agreement", or propose
publicly or agree to enter into any DBT acquisition agreement related to any DBT
competing proposal. However, prior to the DBT special meeting, in response to a
DBT superior proposal which did not result from a breach of any of the non-
solicitation covenants, if the DBT board of directors determines in good faith,
after consultation with outside counsel, that to do otherwise would not be in
the best interests of the DBT shareholders, the DBT board of directors may take
any action specified in clauses (1), (2) or (3) of the preceding sentence, but
only at a time that is prior to the DBT special meeting and is after the fifth
business day following ChoicePoint's receipt of notice advising ChoicePoint that
the DBT board of directors is prepared to accept a DBT superior proposal (or any
material amendment thereto), specifying the material terms and conditions of
such DBT superior proposal (or any material amendment thereto).
ChoicePoint. In the merger agreement, ChoicePoint has agreed that it will
not, nor will it permit any of its subsidiaries to, nor will it authorize or
permit any of its directors, officers or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by it
or any of its subsidiaries to, directly or indirectly through another person:
- solicit, initiate or knowingly encourage (including by way of
furnishing information), the making of any ChoicePoint competing
proposal, as described below; or
- participate in any discussions or negotiations regarding any
ChoicePoint competing proposal;
However, if, at any time prior to the ChoicePoint annual meeting, the
ChoicePoint board of directors determines in good faith, after consultation with
outside counsel, that to do otherwise would not be in the best interests of
ChoicePoint's shareholders, ChoicePoint and its representatives may, in response
to a ChoicePoint competing proposal which did not result from a breach of the
foregoing and which could reasonably be expected to constitute, if consummated,
a ChoicePoint superior proposal, as described below:
- furnish information on ChoicePoint and its subsidiaries to any person
making a ChoicePoint competing proposal pursuant to a customary
confidentiality agreement (as determined by ChoicePoint after
consultation with its outside counsel); and
- participate in discussions or negotiations regarding a ChoicePoint
competing proposal.
The merger agreement provides that:
- the term "ChoicePoint competing proposal" means any bona fide inquiry,
proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 30% or more of the assets of ChoicePoint
and its subsidiaries, taken as a whole, or 30% or more of any class or
series of equity securities of ChoicePoint or any of its subsidiaries,
any tender offer or exchange offer that if consummated would result in
any person beneficially owning 30% or more of any class or series of
41
47
equity securities of ChoicePoint or any of its subsidiaries, or any
merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving ChoicePoint
or any of its subsidiaries in which the other party thereto or its
shareholders will own 30% or more of any class or series of equity
securities of the entity resulting from any such transaction, other
than the transactions contemplated by the merger agreement; and
- the term a "ChoicePoint superior proposal" means any proposal made by
a third party relating to any direct or indirect acquisition or
purchase of 50% or more of the assets of ChoicePoint and its
subsidiaries, taken as a whole, or 50% or more of any class or series
of equity securities of ChoicePoint or any of its subsidiaries, any
tender offer or exchange offer that if consummated would result in any
person beneficially owning 50% or more of any class or series of
equity securities of ChoicePoint or any of its subsidiaries, or any
merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving ChoicePoint
or any of its subsidiaries in which the other party thereto or its
shareholders will own 40% or more of any class or series of equity
securities of the parent entity resulting from any such transaction,
and otherwise on terms which the ChoicePoint board of directors
determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation), taking into
account legal, financial, regulatory and other aspects of the proposal
deemed appropriate by the ChoicePoint board of directors, (1) to be
more favorable from a financial point of view than the merger to
ChoicePoint's shareholders taken as a whole, (2) is reasonably capable
of being completed and (3) for which financing, to the extent
required, is then committed or is reasonably capable of being obtained
by such third party.
ChoicePoint has further agreed that neither the ChoicePoint board of
directors nor any committee thereof shall (1) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to ChoicePoint, the approval
or recommendation by such ChoicePoint board of directors or such committee of
the merger or the merger agreement, (2) approve or recommend, or propose
publicly to approve or recommend, any ChoicePoint competing proposal, or (3)
approve or recommend, or propose to approve or recommend, or execute or enter
into, any letter of intent, agreement in principle, merger agreement,
acquisition agreement, option agreement or other similar agreement, each
referred to as a "ChoicePoint acquisition agreement," or propose publicly or
agree to enter into any ChoicePoint acquisition agreement related to any
ChoicePoint competing proposal. However, prior to the ChoicePoint annual
meeting, in response to a ChoicePoint superior proposal which did not result
from a breach of any of the non-solicitation covenants, if the ChoicePoint board
of directors determines in good faith, after consultation with outside counsel,
that to do otherwise would not be in the best interests of ChoicePoint
shareholders, the ChoicePoint board of directors may take any action specified
in clauses (1), (2) or (3) of the preceding sentence, but only at a time that is
prior to the ChoicePoint annual meeting and is after the fifth business day
following DBT's receipt of notice advising DBT that the ChoicePoint board of
directors is prepared to accept a ChoicePoint superior proposal (or any material
amendment thereto), specifying the material terms and conditions of such
ChoicePoint superior proposal (or any material amendment thereto).
Termination
The merger agreement may be terminated at any time prior to the effective
time of the merger, whether before or after approval by the DBT shareholders:
(1) by mutual written consent of the ChoicePoint board of directors and
the DBT board of directors;
(2) by either ChoicePoint or DBT if the effective time of the merger
shall not have occurred on or before September 1, 2000;
(3) by either ChoicePoint or DBT if (a) any governmental entity shall
have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the merger agreement, and such order, decree,
ruling or other action shall have become final and nonappealable or (b) any
governmental entity shall have failed to issue an order,
42
48
decree or ruling or to take any other action, in each case which is
necessary to permit the consummation of the merger, and the denial of a
request to issue such order, decree, ruling or take these other actions
shall have become final and nonappealable; provided, however, that the
right to terminate the merger agreement under this provision will not be
available to any party whose failure to use best efforts has caused or
resulted in these actions or inactions;
(4) by either ChoicePoint or DBT if the merger agreement is not approved
at the DBT shareholder meeting or the ChoicePoint shareholder meeting, in
each case because of a failure to obtain the required vote;
(5) by ChoicePoint or DBT if pursuant to the circumstances described
under "-- No Solicitation; Board Action -- DBT" section, DBT (a) withdraws
or modifies, or proposes publicity to withdraw or modify, in a manner
adverse to ChoicePoint, the approval or recommendation of the DBT board of
directors of the merger agreement or the merger or (b) approves or
recommends, or proposes publicity to approve or recommend, any DBT
competing proposal or (c) approves or recommends, or proposes to approve or
recommend, or execute or enter into, any DBT acquisition agreement;
(6) by either ChoicePoint or DBT, if pursuant to the circumstances
described under "-- No Solicitation; Board Action -- ChoicePoint",
ChoicePoint (a) withdraws or modifies, or proposes publicly to withdraw or
modify, in a manner adverse to DBT, the approval or recommendation by
ChoicePoint's board of directors of the merger or the merger agreement, (b)
approves or recommends, or proposes publicly to approve or recommend, any
ChoicePoint competing proposal or (c) approves or recommends, or proposes
to approve or recommend, or execute or enter into, any ChoicePoint
acquisition agreement;
(7) by DBT, if ChoicePoint shall have breached or failed to perform any
representation, warranty, covenant or other agreements contained in the
merger agreement, which breach or failure to perform would cause (a)
ChoicePoint's representations and warranties not to be accurate in all
material respects at the effective time of the merger, (b) ChoicePoint's
obligations under the merger agreement not to be performed in all material
respects at the effective time of the merger, or (c) a change, condition,
event or development that has resulted in, or is reasonably expected to
result in, a ChoicePoint material adverse effect; and any of the events
described in (a) - (c) above has not been or is incapable of being cured by
ChoicePoint within 30 calendar days after its receipt of written notice
thereof from DBT; or
(8) by ChoicePoint, if DBT shall have breached or failed to perform any
representation, warranty, covenant or other agreements contained in the
merger agreement, which breach or failure to perform would cause (a) DBT's
representations and warranties not to be accurate in all material respects
at the effective time of the merger, (b) DBT's obligations under the merger
agreement not to be performed in all material respects at the effective
time of the merger, (c) a change, condition, event or development that has
resulted in, or is reasonably expected to result in, a DBT material adverse
effect, or (d) Ron Fournet to cease acting as chief executive officer of
DBT prior to the effective time of the merger or DBT to enter into or amend
specific employment arrangements; and any of the events described in
(a) - (d) above has not been or is incapable of being cured by DBT within
30 calendar days after its receipt of written notice thereof from
ChoicePoint.
Conduct of Business Pending the Merger
DBT. Under the merger agreement, DBT has agreed that, from the date of the
merger agreement until the completion of the merger, except (1) to the extent
expressly contemplated or permitted by the merger agreement, (2) as otherwise
indicated on the DBT disclosure letter related to the merger agreement, or (3)
to the extent that ChoicePoint shall otherwise consent in writing, which consent
shall not be unreasonably withheld or delayed, DBT will and will cause its
subsidiaries to carry on its business in the usual, regular and ordinary course,
in substantially the same manner as conducted prior to execution of the merger
agreement, and will use all reasonable efforts to maintain its rights and
franchises and preserve its relationships with customers, suppliers and others
having business dealings with it; provided, however, that no action by DBT or
its subsidiaries with respect to matters specifically addressed in the bullet
points listed below or in DBT's
43
49
disclosure letter will be deemed a breach of this paragraph unless the action
would constitute a breach of one or more of the matters specifically addressed
in the bullet points listed below.
In addition, DBT has agreed that, from the date of the merger agreement
until the completion of the merger, subject to specified exceptions and except
as set forth above, neither it nor any of its subsidiaries may:
- declare or pay any dividends on or make other distributions in respect of
any of its capital stock, split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of
its capital stock, except for any of these transactions by a wholly owned
subsidiary of DBT which remains a wholly owned subsidiary after
consummation of the transaction, or repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock;
- issue, deliver or sell, or authorize or propose the issuance, delivery or
sale of, any shares of its capital stock of any class or any securities
convertible into or exercisable for, or any rights, warrants or options
to acquire, any of these shares, or enter into any agreement with respect
to any of the foregoing, other than the issuance of DBT common stock upon
the exercise of stock options or warrants or in connection with rights
under other stock-based benefits plans, to the extent these options or
rights were outstanding on February 14, 2000 in accordance with their
present terms or issuances by a wholly owned subsidiary of DBT of capital
stock to the subsidiary's parent;
- amend DBT's articles of incorporation or DBT's bylaws or other governing
documents;
- acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of a
material amount of assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets,
other than in the ordinary course of business consistent with past
practice;
- sell, lease, encumber or otherwise dispose of, or agree to sell, lease,
encumber or otherwise dispose of (including by way of a spin-off or
similar transaction), any material amount of assets;
- incur or commit to any capital expenditures other than capital
expenditures incurred or committed to in the ordinary course of business
consistent with past practice and which, in the aggregate, are not in
excess of $1,000,000;
- take any action that would prevent or impede the merger from qualifying
as a reorganization under Section 368 of the Internal Revenue Code or
which would disqualify the merger as a "pooling of interests" for
accounting purposes;
- take any action that would, or that could reasonably be expected to,
result in any of the conditions to the merger not being satisfied or a
material delay in the satisfaction of these conditions;
- except as required by a governmental entity, make any material change to
its methods of accounting in effect at December 31, 1998, except as
required by changes in generally accepted accounting principles as
concurred with by DBT's accountants;
- change its fiscal year;
- take any action that would cause any of its representations and
warranties set forth in the merger agreement to no longer be true and
correct; or
- permit any of its subsidiaries to authorize, commit or agree to take any
of the foregoing actions.
ChoicePoint. Under the merger agreement, ChoicePoint has agreed that, from
the date of the merger agreement until the completion of the merger, except (1)
to the extent expressly contemplated or permitted by the merger agreement, (2)
as otherwise indicated on the ChoicePoint disclosure letter related to the
merger agreement, or (3) to the extent that DBT shall otherwise consent in
writing, which consent shall not be unreasonably withheld or delayed,
ChoicePoint will and will cause its subsidiaries to carry on its business in the
usual, regular and ordinary course, in substantially the same manner as
conducted prior to execution of
44
50
the merger agreement, and will use all reasonable efforts to maintain its rights
and franchises and preserve its relationships with customers, suppliers and
others having business dealings with it; provided, however, that no action by
ChoicePoint or its subsidiaries with respect to matters specifically addressed
in the bullet points listed below or in ChoicePoint's disclosure letter will be
deemed a breach of this paragraph unless such action would constitute a breach
of one or more of the matters specifically addressed in the bullet points listed
below.
In addition, ChoicePoint has agreed that, from the date of the merger
agreement until the completion of the merger, subject to specified exceptions
and except as set forth above, neither it nor any of its subsidiaries may:
- declare or pay any dividends on or make other distributions in respect of
any of its capital stock, split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of
its capital stock, except for any of these transactions by a wholly owned
subsidiary of ChoicePoint which remains a wholly owned subsidiary after
consummation of such transaction, or repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock except for the
purchase from time to time by ChoicePoint of ChoicePoint common stock in
the ordinary course of business consistent with past practice;
- issue, deliver or sell, or authorize or propose the issuance, delivery or
sale of, any shares of its capital stock of any class or any securities
convertible into or exercisable for, or any rights, warrants or options
to acquire, any such shares or enter into any agreement with respect to
any of the foregoing, other than (1) the issuance of ChoicePoint common
stock upon the exercise of stock options or in connection with rights
under other stock-based benefits plans, to the extent such options or
rights were outstanding on February 14, 2000 in accordance with their
present terms or upon the exercise of the stock options issued pursuant
to clause (4) below, (2) issuances by a wholly owned subsidiary of
ChoicePoint of capital stock to such subsidiary's parent, (3) issuances
in accordance with the ChoicePoint rights agreement, (4) issuances of
stock options in connection with annual option grants by ChoicePoint or
for new hires in the ordinary course of business and consistent with past
practice pursuant to ChoicePoint's benefit plans not to exceed the
aggregate amounts set forth on the ChoicePoint disclosure schedule, or
(5) the issuance of ChoicePoint common stock pursuant to acquisitions;
- amend the ChoicePoint articles of incorporation or the ChoicePoint
bylaws, or other governing documents;
- take any action that would prevent or impede the merger from qualifying
as a reorganization under Section 368 of the Internal Revenue Code or
which would disqualify the merger as a "pooling of interests" for
accounting purposes;
- take any action that would, or that could reasonably be expected to,
result in any of the conditions to the merger not being satisfied or a
material delay in the satisfaction of such conditions;
- except as required by a governmental entity, make any material change to
its methods of accounting in effect at December 31, 1999, except as
required by changes in generally accepted accounting principles as
concurred with by ChoicePoint's independent auditors;
- change its fiscal year;
- take any action that would cause any of its representations and
warranties set forth in the merger agreement to no longer be true and
correct; or
- permit any of its subsidiaries to authorize, commit or agree to take any
of the foregoing actions.
45
51
Fees and Expenses
All out-of-pocket expenses incurred in connection with or related to the
authorization, preparation, negotiation, execution and performance of the merger
agreement and the transactions contemplated thereby will be paid by the party
incurring the expense. However, the parties will equally divide expenses
incurred in connection with the filing, printing and mailing of this document
(including Securities and Exchange Commission filing fees) and the filing fees
for the pre-merger notification and report forms under the Hart-Scott-Rodino Act
and registration fees. In addition, the parties have agreed to reimburse each
other upon the termination of the merger agreement under specific circumstances
as described below.
DBT must pay ChoicePoint a $12 million termination fee if:
- a DBT competing proposal shall have been made to DBT or any of its
subsidiaries or shall have been made directly to the shareholders of DBT
generally or any person shall have publicly announced an intention
(whether or not conditional) to make a DBT competing proposal and
thereafter the merger agreement is terminated by either ChoicePoint or
DBT because the requisite vote of the DBT shareholders required for the
consummation of the merger shall not have been obtained at the DBT
shareholders meeting, and within 12 months of this termination DBT or any
of its subsidiaries enters into an acquisition agreement with respect to,
or approves or consummates, any DBT competing proposal;
- the merger agreement is terminated by DBT or ChoicePoint because DBT
withdraws or modifies, or proposes publicly to withdraw or modify, in a
manner adverse to ChoicePoint, the approval or recommendation by DBT's
board of directors of, the merger or the merger agreement and within 12
months of this termination DBT or any of its subsidiaries enters into an
acquisition agreement with respect to, or approves or consummates, any
DBT competing proposal; or
- the merger agreement is terminated by DBT or ChoicePoint because DBT
approves or recommends, or proposes publicly to approve or recommend, any
DBT competing proposal or approves or recommends, or proposes to approve
or recommend, or execute or enter into, any acquisition agreement.
If DBT is obligated to pay the termination fee to ChoicePoint, then in
addition DBT would be obligated to reimburse ChoicePoint for all out-of-pocket
fees and expenses actually incurred by or on behalf of ChoicePoint in connection
with the merger agreement up to a maximum of $2 million.
ChoicePoint must pay DBT an $18 million termination fee if:
- a ChoicePoint competing proposal shall have been made to ChoicePoint or
any of its subsidiaries or shall have been made directly to the
shareholders of ChoicePoint generally or any person shall have publicly
announced an intention (whether or not conditional) to make a ChoicePoint
competing proposal and thereafter the merger agreement is terminated by
either DBT or ChoicePoint because the requisite vote of the ChoicePoint
shareholders required for the consummation of the merger shall not have
been obtained at the ChoicePoint shareholders meeting, and within 12
months of this termination ChoicePoint or any of its subsidiaries enters
into an acquisition agreement with respect to, or approves or
consummates, any ChoicePoint competing proposal;
- the merger agreement is terminated by ChoicePoint or DBT because
ChoicePoint withdraws or modifies, or proposes publicly to withdraw or
modify, in a manner adverse to DBT, the approval or recommendation by
ChoicePoint's board of directors of, the merger or the merger agreement
and within 12 months of this termination ChoicePoint or any of its
subsidiaries enters into an acquisition agreement with respect to, or
approves or consummates, any ChoicePoint competing proposal; or
- the merger agreement is terminated by ChoicePoint or DBT because
ChoicePoint approves or recommends, or proposes publicly to approve or
recommend, any ChoicePoint competing proposal or approves or recommends,
or proposes to approve or recommend, or execute or enter into, any
acquisition agreement.
46
52
If ChoicePoint is obligated to pay the termination fee to DBT, then in
addition ChoicePoint would be obligated to reimburse DBT for all out-of-pocket
fees and expenses actually incurred by or on behalf of DBT in connection with
the merger agreement up to a maximum of $2 million.
For purposes of determining the termination fee, "DBT competing proposal"
and "ChoicePoint competing proposal" have the meanings set forth in "-- No
Solicitation; Board Action," except that references to "30%" in the definition
of each competing proposal shall be deemed to be references to 50%.
Board of Directors
The merger agreement provides for changes to the ChoicePoint board of
directors as a result of the merger. The ChoicePoint board of directors
currently has eight members and is divided into three classes, with each class
elected for a three-year term.
Under the terms of the merger agreement, promptly following completion of
the merger, the ChoicePoint board of directors will increase its size from eight
to ten members, and three members of the ChoicePoint board of directors, Tinsley
H. Irvin, Ned C. Lautenbach and Alan J. Taetle, will retire. This will leave
five vacancies on the ChoicePoint board, which, pursuant to the merger
agreement, will be filled with four current members of the DBT board, Charles G.
Betty, Frank Borman, Kenneth G. Langone and Bernard Marcus, and one current
member of the ChoicePoint management team, Douglas C. Curling.
Amendment
The merger agreement may be amended by the parties in writing at any time
prior to approval by the DBT shareholders and the ChoicePoint shareholders.
After the shareholders of DBT and ChoicePoint have approved the merger, the
merger agreement may not be amended if the law or the rules of any relevant
stock exchange require further shareholder approval.
ACCOUNTING TREATMENT
The merger is expected to qualify as a pooling of interests for accounting
and financial reporting purposes. Accordingly, after the merger, the assets,
liabilities and stockholders' equity of DBT will be added to the corresponding
balance sheet categories of ChoicePoint at their recorded book values, subject
to any adjustments required to conform the accounting policies and financial
statement classifications of the two companies. In future financial statements,
the results of operations of ChoicePoint will include the results of both DBT
and ChoicePoint for the entire fiscal year in which the merger occurs and all
prior fiscal periods presented therein. ChoicePoint must treat specified
expenses incurred to effect the merger as current charges against income rather
than as adjustments to its balance sheet.
The unaudited pro forma condensed combined financial information contained
in this document has been prepared using the pooling-of-interests accounting
method to account for the merger. See "Summary -- Selected Unaudited Pro Forma
Combined Financial Data" and "Unaudited Pro Forma Combined Financial Data."
LISTING OF CHOICEPOINT COMMON STOCK TO BE ISSUED PURSUANT TO THE MERGER
AGREEMENT
The shares of ChoicePoint common stock to be issued pursuant to the merger
agreement have been approved for listing on the New York Stock Exchange, subject
to shareholder approval and official notice of issuance.
DELISTING AND DEREGISTRATION OF DBT COMMON STOCK AFTER THE MERGER
If the merger is completed, the DBT common stock will be delisted from the
New York Stock Exchange and will be deregistered under the Exchange Act.
47
53
RESALES OF CHOICEPOINT COMMON STOCK
DBT Shareholders
The shares of ChoicePoint common stock to be issued to DBT shareholders in
the merger have been registered under the Securities Act. These shares may be
traded freely and without restriction by those shareholders not deemed to be
"affiliates" of DBT as that term is defined under the Securities Act. An
affiliate of a corporation, as defined by the rules promulgated under the
Securities Act, is a person who directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
that corporation. Any subsequent transfer by an affiliate of DBT must be one
permitted by the resale provisions of Rule 145 promulgated under the Securities
Act or as otherwise permitted under the Securities Act.
Affiliates of ChoicePoint and DBT
Securities and Exchange Commission guidelines regarding qualifying for the
pooling-of-interests method of accounting also limit sales of shares of the
acquiring company and acquired company by affiliates of either company in a
business combination like the merger. These guidelines indicate that the
pooling-of-interests method of accounting will generally not be challenged on
the basis of sales by these affiliates if these persons do not dispose of any of
the shares of the corporation they own or any shares of the corporation they
receive in connection with a merger during the restricted period beginning 30
days prior to the merger and ending when financial results covering at least 30
days of post-merger operations of the combined entity have been published.
DBT has agreed to deliver to ChoicePoint not less than 30 days prior to the
effective time of the merger, for each of its affiliates, an agreement that
these persons will not dispose of (1) any ChoicePoint common stock in violation
of the Securities Act or (2) any DBT common stock or ChoicePoint common stock
during the restricted pooling period referenced above.
ChoicePoint has agreed to deliver to DBT not less than 30 days prior to the
effective time of the merger, for each of its affiliates, an agreement that
these persons will not dispose of (1) any ChoicePoint common stock or (2) DBT
common stock during the restricted pooling period referenced above.
REGULATORY APPROVALS
Under the merger agreement, ChoicePoint and DBT agreed to make as promptly
as practicable an appropriate filing of a Notification and Report Form pursuant
to the Hart-Scott-Rodino Act with respect to the transactions contemplated
hereby and all necessary filings with other governmental entities relating to
the merger. In addition, the parties agreed to supply as promptly as practicable
any additional information and documentary material that may be requested and to
use its best efforts to cause the expiration or termination of the applicable
waiting periods under the Hart-Scott-Rodino Act and the receipt of required
approvals under any other applicable law as soon as practicable.
Under the Hart-Scott-Rodino Act and the rules promulgated thereunder by the
Federal Trade Commission, the merger may not be completed until notifications
have been given and information furnished to the FTC and the Antitrust Division
of the U.S. Department of Justice and the specified waiting period has been
terminated or has expired. ChoicePoint and DBT each filed notification and
report forms under the Hart-Scott-Rodino Act with the FTC and the Antitrust
Division with respect to the merger. The waiting period for these filings has
expired. A significant shareholder of DBT made a separate filing relating to the
acquisition of ChoicePoint common stock by the shareholder in the merger. The
waiting period for that filing has not expired.
The closing of the merger is conditioned on the receipt of all approvals of
regulatory authorities required for the merger without ChoicePoint or DBT being
required to dispose of or hold separate all or any portion of the business or
assets of ChoicePoint or any of its subsidiaries or of DBT or any of its
subsidiaries in order to address the concerns of any governmental entity under
the Hart-Scott-Rodino Act or any other antitrust statute.
48
54
The merger will not proceed in the absence of the requisite regulatory
approvals. There can be no assurance that these regulatory approvals will be
obtained, and if the merger is approved, there can be no assurance as to the
date of any of these approvals. There can also be no assurance that these
approvals will not contain any adverse condition or requirement which causes the
parties to abandon the merger because the approval fails to satisfy the
conditions set forth in the merger agreement and described in this document. See
"-- Terms of the Merger Agreement -- Conditions to the Merger." There can
likewise be no assurance that the United States Department of Justice will not
challenge the merger, or if a challenge is made, as to the outcome thereof.
DISSENTERS' RIGHTS
DBT
The Pennsylvania Business Corporation Law of 1988 generally provides
shareholders with dissenters' rights in connection with mergers that require
shareholder approval. These rights, however, are not recognized for shareholders
of a Pennsylvania corporation when it has more than 2,000 record shareholders or
its shares are listed on a national securities exchange. DBT's common stock is
listed on the New York Stock Exchange. Therefore, DBT shareholders do not have
dissenters' rights with respect to the proposal to approve and adopt the merger
agreement. See "Comparison of Rights of Shareholders -- Dissenters' Rights."
ChoicePoint
The Georgia Business Corporation Code generally provides shareholders with
dissenters' rights in connection with mergers that require shareholder approval.
These rights, however, are not recognized for shareholders of a Georgia
corporation when it has more than 2,000 record shareholders or its shares are
listed on a national securities exchange. ChoicePoint has more than 2,000 record
shareholders, and ChoicePoint common stock is listed on the New York Stock
Exchange. Therefore, ChoicePoint shareholders do not have dissenters' rights
with respect to the proposal to approve and adopt the merger agreement. See
"Comparison of Rights of Shareholders -- Dissenters' Rights."
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material anticipated U.S.
federal income tax consequences of the merger to a DBT shareholder who holds
shares of DBT common stock as a capital asset at the effective time of the
merger. The discussion is based on laws, regulations, rulings and decisions in
effect on the date hereof, all of which are subject to change (possibly with
retroactive effect) and to differing interpretations. This discussion does not
address all aspects of U.S. federal income taxation that may be relevant to
particular holders in light of their personal circumstances or to holders
subject to special treatment under the Internal Revenue Code, including, without
limitation, banks, tax-exempt organizations, insurance companies, dealers in
securities or foreign currency, traders in securities that elect to mark to
market, holders who received their DBT common stock through the exercise of
employee stock options or otherwise as compensation, holders who are not U.S.
persons (as defined in Section 7701(a)(30) of the Internal Revenue Code) and
holders who hold DBT common stock as part of a hedge, straddle or conversion
transaction. In addition, the discussion does not address any state, local or
foreign tax consequences of the merger.
Each holder of DBT common stock is urged to consult its tax advisor with
respect to the particular tax consequences of the merger to such holder.
Tax Opinions
In the opinion of King & Spalding, counsel to ChoicePoint, subject to the
assumptions, limitations, qualifications and other considerations described
below under "-- Considerations with Respect to Opinions," the merger will be
treated as a "reorganization" for U.S. federal income tax purposes within the
meaning of Section 368(a) of the Internal Revenue Code.
49
55
The merger is conditioned upon counsel to ChoicePoint reaffirming their tax
opinion by delivering a closing tax opinion at the effective time of the merger.
If ChoicePoint or DBT is unable to obtain the closing tax opinion, ChoicePoint
or DBT, as applicable, is permitted under the merger agreement to waive the
receipt of the closing tax opinion as a condition to the party's obligation to
consummate the merger. As of the date of this document, neither ChoicePoint nor
DBT intends to waive the receipt of the closing tax opinion as a condition to
the consummation of the merger. If either ChoicePoint or DBT fails to obtain the
closing tax opinion and decides to waive the condition to the consummation of
the merger, it will resolicit the vote of its shareholders to approve the merger
agreement.
In accordance with the tax opinion regarding the treatment of the merger as
a "reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code, and subject to the assumptions, limitations, qualifications and other
considerations described below under "-- Considerations with Respect to
Opinions," the anticipated U.S. federal income tax consequences of the merger
can be summarized as follows: (1) no gain or loss will be recognized by
ChoicePoint, the subsidiary or DBT as a result of the merger; (2) no gain or
loss will be recognized by the holders of DBT common stock who exchange all of
their shares of DBT common stock in the merger solely for shares of ChoicePoint
common stock, except with respect to cash, if any, received in lieu of
fractional shares of ChoicePoint common stock; (3) the tax basis of the shares
of ChoicePoint common stock received by a holder of DBT common stock will be the
same as the tax basis of the shares of DBT common stock surrendered in exchange
therefor (reduced by any amount allocable to a fractional share of ChoicePoint
common stock for which cash is received); (4) the holding period of the shares
of ChoicePoint common stock received in the merger by a holder of DBT common
stock (including a fractional share of ChoicePoint common stock for which cash
is received) will include the holding period of the shares of DBT common stock
surrendered in exchange therefor; and (5) cash received by a holder of DBT
common stock in lieu of a fractional share of ChoicePoint common stock will be
treated as received in exchange for the fractional share, and capital gain or
loss will be recognized by the holder in an amount equal to the difference
between the amount of cash received and the portion of the tax basis of the
holder's shares of DBT common stock allocable to the fractional interest.
Considerations with Respect to Opinions
The tax opinion, the closing tax opinion and the foregoing summary of the
anticipated U.S. federal income tax consequences of the merger are based upon
and are subject to assumptions, limitations and qualifications, including
representations made by the respective managements of DBT, ChoicePoint and the
subsidiary. If any of these representations or assumptions are inconsistent with
the actual facts, the U.S. federal income tax consequences of the merger could
be adversely affected. In addition, no ruling from the Internal Revenue Service
with respect to the tax consequences of the merger has been, or will be,
requested and the tax opinion and closing tax opinion are not binding on the
Internal Revenue Service or the courts and do not preclude the Internal Revenue
Service from adopting a contrary position and a court sustaining the position.
50
56
COMPARATIVE STOCK PRICES AND DIVIDENDS
The following table sets forth for the calendar quarters indicated the high
and low sales prices per share of ChoicePoint common stock as reported on the
New York Stock Exchange. We urge you to obtain current market quotations for
ChoicePoint common stock and DBT common stock. We expect that the market price
of ChoicePoint common stock will fluctuate between the date of this document and
the date on which the merger is completed and thereafter. Because the number of
shares of ChoicePoint common stock to be received by DBT shareholders in the
merger is fixed and the market price of ChoicePoint common stock is subject to
fluctuation, the value of the shares of ChoicePoint common stock that DBT
shareholders will receive in the merger may increase or decrease prior to and
after the merger. See "Risk Factors -- Risks Relating to the Merger."
ChoicePoint. ChoicePoint common stock is listed on the New York Stock
Exchange under the symbol "CPS." On the ChoicePoint record date, there were
approximately 4,874 holders of record of ChoicePoint common stock.
DBT. DBT common stock is listed on the New York Stock Exchange under the
symbol "DBT." On the DBT record date, there were approximately 484 holders of
record of DBT common stock.
CHOICEPOINT(1) DBT
--------------- ---------------
PERIOD HIGH LOW HIGH LOW
------ ------ ------ ------ ------
1998:
First quarter............................................. $28.25 $20.88 $33.38 $21.50
Second quarter............................................ 29.38 23.66 28.25 21.25
Third quarter............................................. 25.25 18.69 28.50 12.38
Fourth quarter............................................ 32.25 20.50 25.94 12.63
1999:
First quarter............................................. 32.09 22.69 25.25 18.75
Second quarter............................................ 34.13 24.00.. 39.94 22.75
Third quarter............................................. 35.63 29.50 33.00 24.94
Fourth quarter............................................ 41.94 30.19 26.38 17.38
2000:
First quarter............................................. 42.06 33.00 23.81 16.75
Second quarter (through April 7, 2000).................... 37.31 34.50 18.81 17.25
(1) ChoicePoint stock prices have been adjusted for a two-for-one stock split
effective in November 1999.
ChoicePoint does not pay cash dividends and does not anticipate paying any
cash dividends in the foreseeable future. ChoicePoint currently intends to
retain future earnings to finance its operations and the expansion of its
business. Any future determination to pay cash dividends will be at the
discretion of ChoicePoint's board of directors and will be dependent upon
ChoicePoint's financial condition, operating results, capital requirements and
such other factors as the board of directors deems relevant. DBT has not paid
cash dividends to its shareholders.
51
57
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data present the
effect of the proposed merger on a pooling of interests basis. The unaudited pro
forma combined statements of income assume that the merger took place as of the
beginning of the periods presented. The unaudited pro forma combined balance
sheet assumes the merger took place on December 31, 1999. In the opinion of
management, the unaudited pro forma combined financial data include all material
adjustments necessary to reflect, on a pro forma basis, the combined financial
results and combined financial position for the periods presented. The
adjustments included in the unaudited pro forma combined financial data are
described in the notes to the unaudited pro forma combined financial data.
The unaudited pro forma combined financial data should be read in
conjunction with the consolidated financial statements and notes thereto
included in ChoicePoint's and DBT's Annual Reports on Form 10-K for the fiscal
year ended December 31, 1999, which are incorporated by reference in this
document. You should not assume that ChoicePoint and DBT would have achieved the
unaudited pro forma results presented below if they had been combined for the
periods presented. Pro forma data are not indicative of future results of
operations of the combined companies. All per share data for ChoicePoint give
effect to a two-for-one stock split effective in November 1999.
CHOICEPOINT AND DBT
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME (NOTE 1)
YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
Operating revenue (Note 2).................................. $507,858 $466,132 $460,661
Costs and expenses:
Cost of services (Note 2)................................. 306,273 296,256 299,979
Selling, general and administrative....................... 118,428 97,026 100,615
Unusual items (Note 3).................................... 2,400 3,758 6,209
-------- -------- --------
Total costs and expenses.......................... 427,101 397,040 406,803
-------- -------- --------
Operating income............................................ 80,757 69,092 53,858
Gain on sale of businesses, net (Note 4).................... 2,513 8,807 14,038
Interest expense............................................ 9,486 5,418 5,158
-------- -------- --------
Income before income taxes.................................. 73,784 72,481 62,738
Provision for income taxes.................................. 31,587 30,166 27,693
-------- -------- --------
Net income.................................................. $ 42,197 $ 42,315 $ 35,045
======== ======== ========
Earnings per share -- basic (Note 5)........................ $ 1.08 $ 1.08 --
Weighted average shares -- basic.......................... 39,064 39,007
Earnings per share -- diluted (Note 5)...................... $ 1.03 $ 1.05 --
Weighted average shares -- diluted........................ 40,795 40,308
52
58
CHOICEPOINT AND DBT
UNAUDITED PRO FORMA COMBINED BALANCE SHEET (NOTE 1)
AS OF
DECEMBER 31, 1999
--------------------
(IN THOUSANDS EXCEPT
PAR VALUES)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 73,101
Accounts receivable, net of allowance for doubtful
accounts of $4,676..................................... 111,459
Short-term investments.................................... 16,500
Deferred income tax assets (Note 7)....................... 8,595
Other current assets...................................... 13,508
--------
Total current assets.............................. 223,163
Property and equipment, net................................. 85,928
Goodwill, net............................................... 284,123
Deferred income tax assets (Note 7)......................... 13,582
Other....................................................... 60,984
--------
Total assets...................................... $667,780
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Other current liabilities................................. $ 46,064
Short-term debt and current maturities of long-term
debt................................................... 595
Accounts payable.......................................... 41,177
Accrued salaries and bonuses.............................. 19,036
--------
Total current liabilities......................... 106,872
Long-term debt less, current maturities..................... 187,195
Postretirement benefit obligation........................... 47,782
Other long-term liabilities................................. 6,622
--------
Total liabilities................................. 348,471
--------
Shareholders' equity:
Preferred stock, $.01 par value; 10,000 shares authorized,
no shares issued or outstanding........................ 0
Common stock, $.10 par value; shares
authorized -- 100,000; issued -- 40,110 (Note
6)..................................................... 4,011
Paid-in capital (Note 6).................................. 223,388
Retained earnings......................................... 103,804
Stock held by employee benefit trusts, at cost, 468
shares................................................. (11,418)
Accumulated other comprehensive loss...................... (476)
--------
Total shareholders' equity........................ 319,309
--------
Total liabilities and shareholders' equity........ $667,780
========
53
59
CHOICEPOINT AND DBT
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
NOTE 1. The accompanying unaudited pro forma combined financial data reflects
all adjustments that, in the opinion of management, are necessary to
present fairly the pro forma combined financial position and pro forma
combined results of operations of ChoicePoint and DBT. This information
should be read in conjunction with the consolidated financial statements
and notes thereto and the management discussion and analysis included in
ChoicePoint's and DBT's Annual Reports on Form 10-K for the fiscal year
ended December 31, 1999, which are incorporated by reference in this
document.
NOTE 2. Following are the pro forma adjustments to operating revenue in the
accompanying unaudited pro forma combined financial data:
(a) Motor vehicle records registry revenue, the fee charged by states
for motor vehicle records which is passed on by ChoicePoint to its
customers, is excluded from revenue and recorded as a reduction in cost
in ChoicePoint's consolidated financial statements. Historically, DBT
has recorded this fee as revenue in DBT's consolidated financial
statements. As a result, the unaudited pro forma combined financial data
include adjustments to eliminate this fee from DBT's revenue and include
this fee as a reduction in DBT's cost. The amounts adjusted are $1.3
million, $1.1 million and $1.1 million in 1999, 1998 and 1997,
respectively. These adjustments do not affect operating income.
(b) Historically, DBT has presented revenue from patent royalties as a
separate component of operating revenue in DBT's consolidated financial
statements. The unaudited pro forma combined financial data include
patent royalty revenue of $6.2 million, $6.6 million and $6.7 million in
1999, 1998 and 1997, respectively, in operating revenue.
NOTE 3. Unusual items of $2.4 million in 1999 relate primarily to $817,000 of
one-time merger costs recorded by DBT and $732,000 of asset impairments,
$451,000 of severance and $400,000 of other one-time costs recorded by
ChoicePoint. Unusual items of $3.8 million recorded by ChoicePoint in
1998 include $2.1 million for the write-down of a non-compete agreement
and $1.7 million for the write-down of certain software and database
assets and severance expenses. Unusual items of $6.2 million in 1997
included approximately $1.8 million of charges related to expenses of
the ChoicePoint spin-off and approximately $4.4 million for the
write-downs of certain assets in the ChoicePoint's labor intensive field
business and its commercial property and casualty software company.
NOTE 4. In December 1998, ChoicePoint recognized a pre-tax gain of $8.8 million
on the sale of its life and health insurance field underwriting services
and insurance claim investigating services to PMSI Services, Inc. In
March 1999, PMSI prepaid a note receivable held by ChoicePoint and
repurchased certain outstanding warrants. As a result, ChoicePoint
recognized an additional pre-tax gain of $2.5 million. In December 1997,
ChoicePoint sold is paramedical examination business to PSA and
recognized a pre-tax gain of $14.0 million.
NOTE 5. Historically, ChoicePoint has not presented earnings per share for years
prior to 1998 since the companies that comprise ChoicePoint were
majority-owned subsidiaries of Equifax or one of its affiliates and were
recapitalized as part of the ChoicePoint spin-off. As a result, the
unaudited pro forma combined financial data do not present pro forma
earnings per share for 1997. The basic and diluted pro forma combined
earnings per share are based on the sum of (1) ChoicePoint's weighted
average number of shares outstanding and (2) DBT's weighted average
number of shares outstanding multiplied by the exchange ratio contained
in Agreement and Plan of Merger dated February 14, 2000 of 0.525 shares
of ChoicePoint common stock for each share of DBT common stock.
NOTE 6. The unaudited pro forma combined balance sheet includes an adjustment to
restate DBT's common stock amount as of December 31, 1999. The restated
amount equals the number of shares of DBT common stock outstanding as of
December 31, 1999 multiplied by 0.525 and then multiplied by
54
60
the pro forma combined par value per common share of $.10. DBT's paid-in
capital was also adjusted accordingly.
NOTE 7. DBT has historically recorded its net deferred tax liability ($1.6
million in 1999) as a long-term liability. The unaudited pro forma
financial data includes an adjustment for the period presented to net
this amount with ChoicePoint's current and non-current deferred tax
asset accounts as appropriate.
55
61
ELECTION OF CHOICEPOINT DIRECTORS
The ChoicePoint board of directors has fixed the number of ChoicePoint
directors at eight. The ChoicePoint board of directors is divided into three
classes, with each class elected for a three-year term. Terms are staggered so
that one class is elected each year. The terms of James M. Denny and Charles I.
Story will expire at the ChoicePoint annual meeting. The ChoicePoint board of
directors has nominated Messrs. Denny and Story to stand for reelection as
directors at the ChoicePoint annual meeting. Each of those individuals is
currently a director of ChoicePoint and has consented to continue to serve as a
director if reelected. Julia B. North recently retired from the ChoicePoint
board of directors, for reasons unrelated to the merger. Upon her retirement,
the ChoicePoint board reduced the number of directors from nine to eight.
If any nominee for director shall be unable to serve, the persons named in
the proxy may vote for a substitute nominee. There are no family relationships
between any director, person nominated to be a director or any executive officer
of ChoicePoint or its subsidiaries.
Proxies in the accompanying form will be voted for the two nominees listed
below to serve for three years or until their successors are elected and have
qualified. Each nominee must receive the affirmative vote of a plurality of the
shares of ChoicePoint common stock cast by the shares entitled to vote.
Set forth below is information about the director nominees and about the
directors whose terms will expire in 2001 and 2002.
NOMINEES FOR TERMS EXPIRING IN 2003
James M. Denny, 67, has served as a director of ChoicePoint since June
1997. Mr. Denny has been a Managing Director of William Blair Capital Partners,
L.L.C., a private equity investment company, since September 1995. He served as
Vice Chairman of Sears, Roebuck & Co. from 1992 until his retirement in 1995. He
also serves as a director of The Allstate Corporation, GATX Corporation and
Gilead Sciences, Inc.
Charles I. Story, 45, has served as a director of ChoicePoint since June
1997. Mr. Story has been President, Chief Executive Officer and a director of
INROADS, Inc., an international non-profit training and development
organization, since January 1993. He also serves as a director of Briggs &
Stratton Corporation and as an advisory director to First National American
Bank.
INCUMBENT DIRECTORS WHOSE TERMS WILL EXPIRE IN 2001
Ned C. Lautenbach, 56, has served as a director of ChoicePoint since
October 1998. Mr. Lautenbach has been a partner at Clayton, Dubilier & Rice, an
investment firm, since 1998 and Chairman of the Board, President and Chief
Executive Officer of Dynatech Corporation, a provider of communication equipment
and network technology services, since May 1999. From 1995 to 1998, he served as
Senior Vice President and Group Executive of IBM-Worldwide Sales and Services
and from 1993 to 1995 he served as Senior Vice President of IBM and Chairman of
IBM World Trade Corporation. He also serves as a director of Eaton Corporation.
C.B. Rogers, Jr., 70, has served on the board of directors of ChoicePoint
since May 1997, serving as Chairman from May 1997 until May 1999. Mr. Rogers
served as Chairman of the Board of Equifax for more than five years until May
1999 and as an executive officer of Equifax for more than five years prior to
retiring on December 31, 1995 as Chief Executive Officer. He also serves as a
director of Lanier Worldwide, Inc., Morgan Stanley, Dean Witter & Co., Briggs &
Stratton Corporation and Oxford Industries, Inc.
Derek V. Smith, 45, has served as President, Chief Executive Officer and a
director of ChoicePoint since May 1997, and has served as Chairman since May
1999. Mr. Smith served as Executive Vice President of Equifax and Group
Executive of the Insurance Services Group of Equifax from 1993 until the
ChoicePoint spin-off. From 1991 to 1993, he served as Senior Vice President and
Chief Financial Officer of Equifax. He also serves as a director of Metris
Companies Inc.
56
62
INCUMBENT DIRECTORS WHOSE TERMS WILL EXPIRE IN 2002
Ron D. Barbaro, 68, has served as a director of ChoicePoint since July
1997. Mr. Barbaro has served as Chairman and Chief Executive Officer of the
Ontario Casino Corporation since June 1998 and of the Ontario Lottery
Corporation since November 1998. Since his retirement as President of The
Prudential Insurance Company of America in 1992, he has served as a director of
various corporations. He currently serves as a director of Prudential of America
Life Insurance Company (Canada), The Thomson Corporation, Flow International
Corporation, Westcam Inc. and VoxCom Inc.
Tinsley H. Irvin, 66, has served as a director of ChoicePoint since July
1997. Mr. Irvin is the retired Chairman and Chief Executive Officer of Alexander
& Alexander Services Inc., an international insurance brokerage company. Prior
to his retirement in 1994, Mr. Irvin served in various executive positions with
Alexander & Alexander Services Inc. or its subsidiaries for more than five
years.
Alan J. Taetle, 36, has served as a director of ChoicePoint since October
1999. Mr. Taetle has served as a general partner with Noro-Moseley Partners, a
venture capital firm, since 1998. He served as Executive Vice President of
Mindspring Enterprises, Inc. from 1997 to 1998, as Vice President of marketing
from 1996 to 1997 and as Vice President of business development from 1995 to
1996. He currently serves as a director of Amplified.com, Inc., SciQuest.com,
Inc., Novient, Inc., OpenSite Technologies, Inc., eGulliver, Inc., Sidetalk,
Inc. and Secureworks, Inc.
THE CHOICEPOINT BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
JAMES M. DENNY AND CHARLES I. STORY AS DIRECTORS TO HOLD OFFICE UNTIL THE 2003
MEETING OF SHAREHOLDERS OR UNTIL THEIR RESPECTIVE SUCCESSORS ARE ELECTED AND
HAVE QUALIFIED.
ChoicePoint agreed in the merger agreement to make changes to the
ChoicePoint board of directors upon completion of the merger. See "The
Merger -- Terms of the Merger Agreement -- Board of Directors".
BOARD MEETINGS AND COMMITTEES
The board of directors of ChoicePoint met four times during 1999. The board
of directors has established several standing committees, which met at various
intervals as indicated below. Nominees for election to the board of directors
are selected and nominated by the executive committee of the board of directors,
which is authorized to perform the functions of a nominating committee.
ChoicePoint currently has no procedure whereby nominations are solicited from
shareholders. All directors attended at least 75% of the meetings of the board
of directors and the various committees of which they were members.
Executive Committee
The members of the executive committee are Messrs. Rogers (Chairman), Irvin
and Smith. The executive committee met five times during 1999. This committee,
in general, is authorized to exercise the powers of the board of directors in
the management of all of the affairs of ChoicePoint during the intervals between
board of directors meetings, subject to board of directors direction. The
executive committee also establishes salaries for all executive officers of
ChoicePoint other than those officers who are members of the executive
committee. In addition, the executive committee is authorized to perform the
functions of a nominating committee.
Management Compensation and Benefits Committee
The members of the management compensation and benefits committee, referred
to as the "compensation committee," are Messrs. Irvin (Chairman) and Barbaro
and, until her retirement, Ms. North. The compensation committee met four times
during 1999. This committee is responsible for all decisions regarding
compensation of the chief executive officer and incentive compensation awards
for ChoicePoint's executive officers. The compensation committee is also
responsible for establishing and approving compensation policies, management
incentive compensation plans and other material benefit plans, including the
ChoicePoint Inc. 1997 Omnibus Stock Incentive Plan, referred to as the "stock
incentive plan."
57
63
Audit Committee
The members of the audit committee are Messrs. Denny (Chairman), Barbaro,
Lautenbach and Story. The audit committee met three times during 1999. This
committee is responsible for reviewing and recommending to the board of
directors the engagement or discharge of independent auditors, reviewing with
independent auditors the scope, plan for and results of the audit engagement,
reviewing the scope and results of ChoicePoint's internal audit department,
reviewing the adequacy of ChoicePoint's system of internal accounting controls,
reviewing the status of material litigation and corporate compliance, and prior
to 2000, reviewing ChoicePoint's progress on Year 2000 readiness, and any other
matters the audit committee deems appropriate.
Privacy Committee
The members of the privacy committee are Messrs. Taetle (Chairman) and
Smith. The privacy committee was established in October 1999 and did not meet
before year-end. This committee is responsible for reviewing and monitoring
legislation and recommending policies to the board of directors as to privacy
matters affecting ChoicePoint.
DIRECTOR COMPENSATION
Directors who are salaried officers or employees of ChoicePoint receive no
additional compensation for services as a director or as a member of a committee
of the board of directors. Each director who is not a salaried officer or
employee of ChoicePoint is compensated as follows. The chairman of the board of
directors is paid an annual fee of $30,000 for his services and an additional
fee of $2,500 for attendance at each meeting of the board of directors or a
committee thereof. C. B. Rogers, Jr. was Chairman of the board of directors
until May 1999 and received this compensation during his tenure as Chairman.
Derek V. Smith became Chairman of the board of directors in May 1999 and,
because he is a salaried officer of ChoicePoint, does not receive this
compensation. Each other ChoicePoint non-employee director is paid an annual fee
of $15,000 for services as a director, an additional fee of $1,000 for
attendance at each meeting of the board of directors, and $1,000 (or $2,500 if
designated as chairman) for attendance at each committee meeting.
In addition, upon initial election to the board of directors, each
ChoicePoint non-employee director receives a one-time grant of restricted
ChoicePoint common stock with a market value of $25,000, which vests after 36
months or upon death or retirement from the board of directors, whichever occurs
first. ChoicePoint non-employee directors also receive annual stock option
awards of 3,000 shares of ChoicePoint common stock and the chairman of the board
of directors receives annual stock option awards of 5,000 shares. The stock
option awards vest after 24 months or upon the director's earlier death or
retirement from the board of directors. Restricted stock and stock option awards
are issued under the ChoicePoint stock incentive plan.
ChoicePoint non-employee directors are eligible for participation in
ChoicePoint's deferred compensation plan, pursuant to which each ChoicePoint
non-employee director may elect to defer up to 100% of earned director
compensation into accounts that are credited with earnings or losses based upon
imputed investments in one or more of the following, as selected by the
individual director: (a) the market value of, and any dividends on, the
ChoicePoint common stock ("common share equivalents"), (b) a short-term income
fund, (c) an equity index fund, or (d) a fixed income fund. Funds invested in
common share equivalents may be redeemed only for cash on a fixed date or upon
termination of service as a director, as elected in advance by the director. No
director has voting or investment power with respect to the common share
equivalents.
CHOICEPOINT SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table reflects information, as of January 1, 2000, with
respect to the beneficial ownership of the outstanding ChoicePoint common stock
by (1) persons known to ChoicePoint to be the beneficial owners of more than
five percent of the ChoicePoint common stock in accordance with Section 13(d) or
13(g) of the Exchange Act, (2) each of the executive officers of ChoicePoint
named in the summary compensation
58
64
table which follows, (3) each director of ChoicePoint, and (4) all of the
directors and executive officers of ChoicePoint as a group. Share ownership
information represents those shares as to which the individual holds sole voting
and investment power, except as otherwise indicated. The number of outstanding
shares of ChoicePoint common stock as of January 1, 2000 was 29,538,561. Share
amounts have been adjusted to reflect the two-for-one stock dividend that was
distributed to shareholders on November 24, 1999.
NUMBER OF PERCENT OF
NAME AND ADDRESS SHARES(1) CLASS
- ---------------- ----------------------- ----------------
Baron Capital Group, Inc............................... 5,084,800(2) 17.2%
BAMCO, Inc.
Baron Capital Management, Inc.
Baron Asset Fund
Ronald Baron
767 Fifth Avenue
New York, NY 10153
Brahman Partners II, L.P............................... 1,546,300(3) 5.2
Brahman Institutional Partners, L.P.
BY Partners, L.P.
Brahman Management, L.L.C
Brahman Capital Corp.
277 Park Avenue, 26th Floor
New York, NY 10172
Ron D. Barbaro......................................... 2,772 *
James M. Denny......................................... 1,456 *
Tinsley H. Irvin....................................... 3,456 *
Ned C. Lautenbach...................................... 3,098 *
C. B. Rogers, Jr....................................... 200,900(4) *
Derek V. Smith......................................... 982,603(5)(6) 3.3
Charles I. Story....................................... 1,456 *
Douglas C. Curling..................................... 263,125(5) *
Dan H. Rocco........................................... 280,333(5) *
David T. Lee........................................... 129,561 *
J. Michael de Janes.................................... 66,602
Alan J. Taetle......................................... 766
Julia B. North......................................... 1,516 *
All Executive Officers and Directors as a Group (13
persons)............................................. 1,937,644 6.6
- ---------------
* Represents beneficial ownership of less than 1% of the outstanding
ChoicePoint common stock.
(1) Includes shares issuable pursuant to stock options exercisable on January 1,
2000, or within 60 days thereafter, as follows: Mr. Smith -- 719,242 shares;
Mr. Curling -- 188,446 shares; Mr. Rocco -- 207,071 shares; Mr.
Lee -- 103,704 shares; and Mr. de Janes -- 56,746 shares.
(2) This information is based upon a Schedule 13G filed with the Securities and
Exchange Commission on February 15, 2000. According to the Schedule 13G, the
holders listed own the shares of ChoicePoint common stock directly or
indirectly, and collectively have shared voting and dispositive power with
respect to an aggregate of 5,084,800 shares of ChoicePoint common stock.
(3) This information is based upon a Schedule 13G, filed with the Securities and
Exchange Commission on February 9, 2000. The holders listed own the shares
of ChoicePoint common stock directly or indirectly, and collectively have
shared voting and dispositive power with respect to an aggregate of
1,546,300 shares of ChoicePoint common stock. According to the filings with
the Securities and Exchange Commission, Peter A. Hochfelder, Robert J. Sobel
and Mitchell A. Kuflik are the executive officers and directors of Brahman
Capital Corp., and the sole members of Brahman Management, L.L.C., and have
shared voting and dispositive power over all of such shares of ChoicePoint
common stock.
(4) Includes 147,894 shares held in trust and 40,970 shares held in a family
partnership.
59
65
(5) Subsequent to January 1, 2000, the compensation committee canceled certain
outstanding restricted stock awards in order to pay taxes on such grant. The
executive officers affected by such action (and the number of shares that
were canceled) are as follows: Mr. Smith (25,051); Mr. Curling (7,013); and
Mr. Rocco (7,013).
(6) Includes 200 shares held by his wife, and 49,500 shares held in two trusts.
CHOICEPOINT SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and the regulations of the Securities and
Exchange Commission require ChoicePoint's executive officers, directors and
persons who beneficially own more than 10% of the ChoicePoint common stock to
file initial reports of ownership and changes in ownership of the ChoicePoint
common stock with the Securities and Exchange Commission and the New York Stock
Exchange. Executive officers, directors and ChoicePoint 10% shareholders are
required by the regulations of the Securities and Exchange Commission to furnish
ChoicePoint with copies of all reports that they file pursuant to Section 16(a).
In addition, Item 405 of Regulation S-K requires ChoicePoint to identify in its
Proxy Statement each reporting person that failed to file on a timely basis
reports required by Section 16(a) during the most recent fiscal year or prior
fiscal years. The Form 4s for Mr. Ned C. Lautenbach, a director of ChoicePoint,
and Mr. Derek V. Smith, Chairman, President and Chief Executive Officer of
ChoicePoint, relating to 1,000 and 5,700 shares, respectively, owned by virtue
of purchases made in the open market and through a charitable trust,
respectively, were not filed on a timely basis during 1999. To ChoicePoint's
knowledge, based upon a review of the copies of such forms furnished to
ChoicePoint and written representations from ChoicePoint's executive officers
and directors, all other filing requirements applicable to ChoicePoint's
executive officers, directors and persons who beneficially own more than 10% of
the ChoicePoint common stock were complied with for 1999.
EXECUTIVE OFFICERS OF CHOICEPOINT
Derek V. Smith, 45, has served as President, Chief Executive Officer and a
director of ChoicePoint since May 1997 and as Chairman of ChoicePoint since May
1999. Mr. Smith served as Executive Vice President of Equifax and Group
Executive of the Insurance Services Group of Equifax from 1993 until the
ChoicePoint spin-off. From 1991 to 1993, he served as Senior Vice President and
Chief Financial Officer of Equifax. He also serves as a director of Metris
Companies Inc.
Douglas C. Curling, 45, has served as Chief Operating Officer and Treasurer
since May 1999. He served as Executive Vice President, Chief Financial Officer
and Treasurer of ChoicePoint from the ChoicePoint spin-off until May 1999. He
served as Senior Vice President -- Finance and Administration of the Insurance
Services Group of Equifax from 1993 until the ChoicePoint spin-off.
Dan H. Rocco, 60, has served as Executive Vice President of ChoicePoint
since the ChoicePoint spin-off. He served as Senior Vice President -- Operations
of the Insurance Services Group of Equifax from 1993 until the ChoicePoint
spin-off.
David T. Lee, 40, has served as Executive Vice President of ChoicePoint
since May 1999 and served as Senior Vice President of ChoicePoint from the
ChoicePoint spin-off until May 1999. He served as Vice President -- Property and
Casualty Marketing and Sales of the Insurance Services Group of Equifax from
1991 until the ChoicePoint spin-off. He currently is responsible for the
Personal Lines Insurance Services Group and ChoicePoint Direct.
J. Michael de Janes, 42, has served as General Counsel of ChoicePoint since
the ChoicePoint spin-off and as Secretary of ChoicePoint since April 1998. He
served as Vice President and Counsel of the Insurance Services Group of Equifax
from 1993 until the ChoicePoint spin-off.
Michael S. Wood, 45, has served as Chief Financial Officer since February
2000. From 1997 until January 2000 he served as Chief Financial Officer of Lane
Bryant, Inc., a division of The Limited, Inc. and from 1995 to 1997 he served as
Vice President -- Finance of Lane Bryant, Inc.
60
66
There are no family relationships among the officers of ChoicePoint, nor
are there any arrangements or understandings between any of the officers and any
other persons pursuant to which they were selected as officers. The board of
directors may elect an officer or officers at any meeting of the board of
directors. Each officer is elected to serve until his successor has been elected
and has duly qualified. Elections of officers generally occur each year at the
board of directors meeting held in conjunction with ChoicePoint's annual meeting
of shareholders.
CHOICEPOINT EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table shows, for the fiscal years ended December 31, 1999,
1998 and 1997, the compensation awarded to, earned by or paid to ChoicePoint's
chief executive officer and the four other most highly compensated executive
officers of ChoicePoint, referred to as the "named officers" in all capacities
in which they served during such fiscal years. Prior to the ChoicePoint
spin-off, the named officers were employees of, and received their compensation
and benefits from, Equifax, rather than from ChoicePoint. Accordingly, all
amounts and awards identified in the table below reflect payments or awards made
by Equifax prior to the ChoicePoint spin-off and by ChoicePoint subsequent to
the ChoicePoint spin-off.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- ------------------------------------
AWARDS PAYOUTS
----------------------- ----------
RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) OPTIONS(#) PAYOUTS(4) COMPENSATION(5)
- ------------------ ---- -------- -------- --------------- ---------- ---------- ---------- ---------------
Derek V. Smith.......... 1999 $465,867 $917,000 $1,585,815 220,000 $2,702,898 $501,892
Chairman, President 1998 382,794 700,000 -- 200,000 4,306,134 413,787
and CEO 1997 314,270 603,119 -- 1,942,002 290,100 1,001,501 219,256
Douglas C. Curling...... 1999 280,405 465,000 726,626 110,000 756,585 171,490
Chief Operating 1998 230,583 325,000 -- -- 72,000 650,676 137,799
Officer and Treasurer 1997 193,319 284,548 -- 570,184 94,636 456,943 79,354
Dan H. Rocco............ 1999 216,917 245,000 -- 310,657 44,000 756,585 119,913
Executive Vice 1998 200,761 215,000 -- 54,000 650,676 111,310
President 1997 200,761 200,000 -- 638,036 87,748 375,568 58,132
David T. Lee............ 1999 196,494 235,000 171,282 55,000 -- 83,869
Executive Vice 1998 177,544 200,000 -- -- 27,000 -- 64,186
President 1997 163,110 171,945 -- 90,404 65,482 -- 32,775
J. Michael de Janes..... 1999 153,624 125,000 -- 97,875 19,200 -- 22,075
General Counsel and 1998 137,403 115,000 -- -- 16,000 -- 16,594
Secretary 1997 109,242 87,579 -- 39,990 39,734 -- 3,579
- ---------------
(1) Represents an annual cash incentive award earned upon achievement of
specified performance measurements and determined as a percentage of salary.
(2) Unless otherwise indicated, the aggregate amount of such compensation is the
lesser of $50,000 or 10% of the total annual salary and bonus reported for
each named officer.
(3) ChoicePoint granted restricted stock during 1999 to a selected group of key
officers to assure the key officers are retained for the next three years.
Restricted stock awards made prior to the ChoicePoint spin-off were in
shares of common stock of Equifax and those made subsequent to the
ChoicePoint spin-off were in shares of ChoicePoint common stock. In
connection with the ChoicePoint spin-off, all outstanding shares of
restricted stock of Equifax, and outstanding awards under the Equifax
performance share plans, held by the named officers were canceled and
replaced with restricted shares of ChoicePoint common stock that were
subject to performance or vesting criteria designed to be consistent with
those of the canceled awards. Following the ChoicePoint spin-off,
ChoicePoint made a one-time grant of restricted shares of ChoicePoint common
stock to key members of management as an incentive to retain and motivate
those executives over the long term. Those shares of restricted ChoicePoint
common stock vest on October 6, 2001. In the event that any dividends are
paid with respect to the ChoicePoint
61
67
common stock in the future, dividends will be paid on the shares of
restricted ChoicePoint common stock at the same rate. The value of
restricted stock awards shown in the table is as of the date of grant. As of
December 31, 1999 the total number of restricted stock awards outstanding
and related fair market value were as follows: Mr. Smith -- 192,474 shares
($7,963,612); Mr. Curling -- 60,694 shares ($2,511,214); Mr. Rocco -- 47,196
shares ($1,952,735); Mr. Lee -- 11,666 shares ($482,681); and Mr. de
Janes -- 6,064 shares ($250,898).
(4) The amounts listed hereunder for 1997 were paid by Equifax pursuant to
Equifax long-term incentive plans prior to the ChoicePoint spin-off. Amounts
included for 1998 represent the value of long-term incentive compensation
originally awarded by Equifax in 1995 and 1996 and which vested on December
31, 1998 and was paid by ChoicePoint. The amounts for 1999 represent the
final long-term incentive payment pursuant to Equifax long-term incentive
plans prior to the ChoicePoint spin-off.
(5) For 1999, these amounts include: for Mr. Smith $19,299 in contributions
under the ChoicePoint Inc. 401(k) profit sharing plan, referred to as the
"401(k) Plan", $468,933 accrued under ChoicePoint's deferred compensation
plan, referred to as the "DCP", $10,302 in term life insurance premiums,
referred to as the "Life Premiums" and $3,359 for employer contributions for
the salaried employee health-related benefit plan, referred to as the
"Health Plan Contributions"; for Mr. Curling, $15,225 in contributions under
the 401(k) Plan, $142,466 accrued under the DCP, $10,440 in Life Premiums,
and $3,359 in Health Plan Contributions; for Mr. Rocco, $24,610 in
contributions under the 401(k) Plan, $92,780 under the DCP and $2,524 in
Health Plan Contributions; for Mr. Lee, $19,973 in contributions under the
401(k) Plan, $56,374 accrued under the DCP, $4,164 in Life Premiums and
$3,359 in Health Plan Contributions; and for Mr. de Janes, $14,957 in
contributions under the 401(k) Plan, $3,484 accrued under the DCP, $2,040 in
Life Premiums and $1,595 in Health Care Contributions.
STOCK OPTIONS
The following table sets forth information concerning the grants to the
named officers of options to purchase ChoicePoint common stock during the fiscal
year ended December 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE VALUE
AT ASSUMED RATES OF STOCK
PRICE APPRECIATION FOR
NUMBER OPTION TERM
OF SHARES --------------------------
OF PERCENT OF
COMMON TOTAL
STOCK OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED(1)(3) 1999 SHARE DATE 5%(2) 10%(2)
---- ------------- ------------ --------- ---------- ---------- ----------
Derek V. Smith.................. 220,000 15.04 $27.875 1/25/2009 $3,856,696 $9,773,626
Douglas C. Curling.............. 110,000 7.52 27.875 1/25/2009 1,928,348 4,886,813
Dan H. Rocco.................... 44,000 3.01 27.875 1/25/2009 771,339 1,954,725
David T. Lee.................... 55,000 3.76 27.875 1/25/2009 964,174 2,443,406
J. Michael de Janes............. 19,200 1.31 27.875 1/25/2009 336,584 852,971
- ---------------
(1) All options were granted pursuant to the stock incentive plan. Except as
described in footnote (3) below, all options were granted as incentive stock
options that vest 100% on the third anniversary of the date of grant.
(2) These amounts represent assumed rates of appreciation only. Actual gains, if
any, realized upon exercises of stock options are dependent on future
performance of the ChoicePoint common stock and overall market conditions.
There can be no assurance that the amounts reflected in these columns will
be achieved or, if achieved, will be realized at the time of any option
exercise.
(3) The number of options reported includes options to purchase 100,000, 50,000,
25,000 and 20,000 shares of ChoicePoint common stock by Messrs. Smith,
Curling, Rocco and Lee, respectively, pursuant to non-
62
68
qualified performance-based, fair market value stock options. Such options
will vest 100% on the ninth anniversary of the grant or upon certification
the performance criteria have been met.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information, with respect to each named
officer, concerning any exercise of options to purchase ChoicePoint common stock
during the fiscal year ended, and the fiscal year-end value of outstanding
unexercised options to purchase ChoicePoint common stock held at, December 31,
1999.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT
SHARES FISCAL YEAR-END(#) VALUE OF UNEXERCISED
ACQUIRED --------------------------- IN-THE-MONEY OPTIONS AT
ON FISCAL YEAR-END(1)
EXERCISE VALUE ---------------------------
NAME (#) RECEIVED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
Derek V. Smith........................ -- $ -- 657,154 577,136 $19,585,021 $10,700,669
Douglas C. Curling.................... -- -- 166,916 232,846 4,566,827 4,135,966
Dan H. Rocco.......................... 22,387 728,820 185,486 149,959 5,429,355 2,931,444
David T. Lee.......................... 2,750 93,884 93,493 111,451 2,823,906 1,968,267
J. Michael de Janes................... -- -- 50,274 53,538 1,415,913 1,009,256
- ---------------
(1) The value of unexercised options equals the fair market value per share of
ChoicePoint common stock as of December 31, 1999, less the exercise price,
multiplied by the number of shares underlying the stock options. The closing
price of the ChoicePoint common stock on the New York Stock Exchange on
December 31, 1999 was $41.375 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee consists of Messrs. Irvin (Chairman) and Barbaro
and, until her retirement, Ms. North. The executive committee, which is
responsible for establishing salaries for the executive officers other than the
chief executive officer, consists of Messrs. Rogers (Chairman), Irvin, and
Smith. Mr. Smith is the Chairman, President and Chief Executive Officer of
ChoicePoint.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the ChoicePoint spin-off, ChoicePoint purchased products and
services from Equifax and Equifax purchased products and services from
ChoicePoint. In addition, prior to the ChoicePoint spin-off, ChoicePoint
subleased facilities from, or shared space with, Equifax. In connection with the
ChoicePoint spin-off, ChoicePoint entered into agreements that formalized the
arrangements regarding the provision of data and products for use in each of
ChoicePoint's and Equifax's respective operations and regarding the leasing,
subleasing and sharing of facilities. Effective August 1998 Equifax and
ChoicePoint entered into a new agreement regarding the purchase and sale of data
between the respective companies which was the result of arm's-length
negotiations and on substantially the same terms of the 1997 agreement. During
1999, ChoicePoint paid an aggregate of approximately $5.6 million to Equifax,
and Equifax paid an aggregate of approximately $382,000 to ChoicePoint, pursuant
to the foregoing arrangements.
Mr. Rogers, a director of ChoicePoint, also served as Chairman of the Board
of Equifax until May 1999 and as a director until October 1999.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL AGREEMENTS
ChoicePoint currently has in effect employment agreements with Messrs.
Smith, Curling, Lee and de Janes. The employee agreements set forth minimum base
salary amounts and provide for participation in ChoicePoint's employee and
executive benefit plans and certain perquisites. The employee agreements vary in
duration, but all provide for automatic extensions if not otherwise terminated.
The employee agreements may be terminated by either ChoicePoint or by the
executive. The employee agreements provide that, under
63
69
specified circumstances, in the event of a termination, the executive would be
entitled to severance pay for a period of up to two years from the date of
termination.
The employee agreements also contain provisions for severance pay and
specified benefits upon the occurrence of a "change in control" of ChoicePoint.
A "change in control" is defined by the employee agreements to mean: (1) a
merger, consolidation or other reorganization of ChoicePoint that results in the
shareholders of ChoicePoint holding less than a majority of the voting power of
the resulting entity after such a transaction; (2) a sale or transfer of all or
substantially all of ChoicePoint's assets to an entity in which the shareholders
of ChoicePoint hold less than a majority of the voting power of such entity
immediately following such sale or transfer; (3) the filing of a report with the
Securities and Exchange Commission pursuant to the provisions of the Exchange
Act disclosing that a person or entity beneficially owns shares representing at
least 30% of ChoicePoint's voting power; (4) disclosure by ChoicePoint, pursuant
to the requirements of the Exchange Act that a change in control (as defined in
the Exchange Act) has occurred or may occur pursuant to a then-existing
agreement; or (5) in specified circumstances, the failure to reelect a majority
of the members of ChoicePoint's board of directors. In the event that the
executive's employment is terminated under conditions within five years after
the date of a change in control, then the executive is entitled to severance pay
and other benefits. The amount of the severance payment is based upon the
executive's annual compensation, with specified components of such compensation
multiplied by a factor ranging from 1.5 to 3 times.
In addition, Mr. Rocco is a party to a compensation agreement entered into
with Equifax in 1996, the obligations of which have been assumed by ChoicePoint.
Pursuant to this agreement, subject to specified conditions, since Mr. Rocco
remained continuously employed by ChoicePoint's subsidiary ChoicePoint Services
Inc. (f/k/a Equifax Services Inc.) through January 1, 1999, Mr. Rocco is
entitled to severance benefits in a lump sum of $150,000 upon leaving
ChoicePoint.
MANAGEMENT COMPENSATION AND BENEFITS COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The compensation of ChoicePoint's executive officers is determined by two
committees of the board of directors. The compensation committee was established
by the board of directors and is composed entirely of directors who are not, and
have never been, officers or employees of ChoicePoint. The board of directors
designates the members and the chairman of this committee. The compensation
committee is responsible for all decisions regarding the compensation of the
chief executive officer and for establishing and administering ChoicePoint's
compensation and benefit policies and practices for the executive officers. The
compensation committee is also responsible for the administration of the stock
incentive plan. The executive committee, the members and chairman of which are
also designated by the board of directors, is responsible for establishing
salaries for executive officers other than those executive officers who are
members of the executive committee, pursuant to guidelines prescribed by the
compensation committee.
The following report summarizes the philosophies and methods that the
compensation committee uses in establishing and administering ChoicePoint's
executive compensation and incentive programs, including the development of
compensation programs designed to provide key employees with immediate ownership
interests in ChoicePoint and motivation to build shareholder value.
Executive Compensation Policies
ChoicePoint's executive compensation policies are designed to attract and
retain qualified executives, to reward individual achievement appropriately and
to enhance the financial performance of ChoicePoint, and thus shareholder value,
by significantly aligning the financial interests of ChoicePoint's executives
with those of its shareholders. To accomplish these objectives, the executive
compensation program, as administered by the compensation committee, is
comprised of (1) annual cash compensation, the components of which are base
salary and an annual variable cash incentive award payable pursuant to
ChoicePoint's annual incentive compensation plan, (2) long-term incentive
compensation, consisting of restricted stock and fair market value stock options
awarded pursuant to the stock incentive plan, and (3) other benefits that are
intended to provide
64
70
competitive capital accumulation opportunities and health, welfare and other
fringe benefits. Base salary and annual bonuses are designed to recognize both
individual performance and the achievement of corporate business objectives each
year. The value of long-term incentives is directly linked to the financial
performance of ChoicePoint and to the performance of the ChoicePoint common
stock. Executive officers also are eligible to participate in a variety of other
benefit plans, including a deferred compensation plan, supplemental life and
disability plans available to key officers and benefit plans available to
employees generally, including the 401(k) Plan and health-related plans.
Decisions regarding the compensation of executive officers are based upon
(1) the policies described above, (2) ChoicePoint's operating performance, (3)
competitive practices at comparable companies, and (4) the individual
performance of the executive. In order to assist the compensation committee in
developing ChoicePoint's executive compensation programs and determining
appropriate compensation levels for executives, the compensation committee
continued to engage a national compensation consulting firm to advise on peer
group pay practices and long-term incentive compensation policies for executives
holding specified positions. Comparative compensation information was drawn from
a broad range of companies, including, but not limited to, certain of the
companies included in the industry index used in the stock performance graph
included in this proxy statement/prospectus. The compensation committee's
policy, which is taken into consideration by the executive committee, is to
provide ChoicePoint's officers with a base salary that is generally below the
market median for comparable companies and to offer variable performance-based
elements that provide the executive officers with the opportunity to achieve
total compensation packages that, at the target opportunity levels, are
generally within the range of the 50th to 60th percentile of the groups of
comparable companies studied.
Annual Salary and Incentive Bonuses
In determining the base salaries for ChoicePoint's named officers, the
compensation committee and executive committee took into consideration each
executive's experience and the responsibilities attendant to his position, as
well as the base salaries paid to executives in comparable positions at the
companies identified in the above-described compensation study. Base salaries
for the named officers will be reviewed annually. In evaluating whether an
adjustment to an executive's base salary is appropriate, factors such as the pay
levels at the surveyed companies, the scope of the individual's job
responsibilities and his performance over the past year, as well as an
assessment of how well the individual performed in meeting or exceeding the
personal goals set for that individual for the applicable period, will be
considered.
The purpose of ChoicePoint's annual incentive compensation plan is to unite
the interests of ChoicePoint's management employees with those of its
shareholders through annual payment of cash incentive awards to management
employees based upon attainment of (1) annually established corporate economic
value added goals and (2) individual performance goals. Target incentive cash
opportunities under the ChoicePoint annual incentive compensation plan for the
named officers other than the chief executive officer can range from 30% to 60%
of base salary, and for the chief executive officer represent 70% of his base
salary. Actual annual cash bonuses are determined by measuring corporate and
individual performance against goals established for the applicable period. The
goals take into account, depending upon the responsibility level of the
individual, one or more factors, including the individual's performance, the
performance of the functional group or unit with which the individual is
associated (primarily based upon the economic value added objective of such
unit), and the overall performance of ChoicePoint (primarily based upon economic
value added goals). Such goals may or may not be equally weighted and may vary
from one executive officer to another. Bonus awards under the ChoicePoint annual
incentive compensation plan, even in the event that ChoicePoint's maximum
economic value added goals are exceeded, also take into account an assessment of
the performance of the individual executive officer. For 1999, the economic
value added goals and individual performance goals were exceeded, and each of
the named officers, therefore, was awarded a total compensation package that
exceeded the target opportunity level.
65
71
Long-Term Incentive Compensation
ChoicePoint's long-term incentive compensation program for its executive
officers consists of a combination of fair market value stock options which vest
100% on the third anniversary of the grant, as well as fair market value stock
options which are performance-based, pursuant to the stock incentive plan. The
compensation committee's current philosophy is to grant fair market value stock
options, rather than restricted stock, as the primary type of award under the
stock incentive plan. The stock incentive plan is intended to provide a means of
encouraging an ownership interest in ChoicePoint by those employees who have
contributed, or are determined to be in a position to contribute, materially to
the success of ChoicePoint, thereby increasing their motivation for, and
interest in the achievement of, ChoicePoint's long-term success. Because the
value of a stock option bears a direct relationship to the price of shares of
the ChoicePoint common stock, the compensation committee believes that stock
options are a means of encouraging executives and other key management employees
to increase long-term shareholder value. In determining awards of stock options
under the stock incentive plan, the compensation committee has no specific
formula but rather makes grants based upon such factors as individual
contribution to corporate performance, market practices and management
recommendations. Consistent with the philosophy of the compensation committee
described above, in January 1999 ChoicePoint granted options under the stock
incentive plan to the named officers (including the chief executive officer) and
a number of employees. Additionally, ChoicePoint granted restricted stock to a
select group of key officers. Such grant is based on continued employment and is
intended to assure the continuity of management through April 9, 2002.
ChoicePoint also established a cash incentive for such officers which may be
paid in the event specified performance criteria are met. In the event the
performance targets are not met, the cash incentive will be canceled.
Compensation of the Chief Executive Officer
The compensation committee generally applies the same compensation
philosophy described above for executive officers in order to determine the
compensation for Derek V. Smith, ChoicePoint's Chairman, President and Chief
Executive Officer. In setting both the cash-based and equity-based elements of
Mr. Smith's compensation, the compensation committee's objective was to
establish a compensation package at target levels that were within the range of
the 50th to 60th percentile of total compensation paid to chief executive
officers of the companies analyzed in the consultant's study. The compensation
committee determined that the base salary for the Chief Executive Officer was
below the median base salary of the peer group studied and that the total target
compensation was within the established range. Factors considered in evaluating
Mr. Smith's performance included exceeding the financial targets established by
the board of directors, executing strategic direction, and augmenting the
current key officer team with additional talent. No specific weighting was
assigned to these factors in the evaluation process.
Included in Mr. Smith's compensation for 1999 is $2,137,563, which
represents the value attributable to the last year of a three-year,
performance-based award pursuant to the restricted stock granted as a
replacement of the Equifax performance share plan. The award was earned based
upon satisfaction of performance criteria previously established by Equifax,
and, in accordance with agreements reached in connection with the ChoicePoint
spin-off, was paid by ChoicePoint upon certification that the performance
criteria had been satisfied. The performance criteria for the replacement
restricted stock awards include operating income and target stock price goals
that are designed to be consistent with the goals and objectives that had been
established at the time the original awards were made under the Equifax
performance share plan. In addition, Mr. Smith's compensation for 1999 includes
$565,335, which represents the value attributable to the award granted in
January 1995. This grant of restricted stock was made in lieu of a cash
incentive earned for the year ending December 31, 1994.
The compensation committee believes that the compensation program should
serve to achieve its intended objectives while also minimizing any effect on
ChoicePoint of Section 162(m) of the Internal Revenue Code, which section
provides for an annual $1,000,000 limitation on the deduction that an employer
may claim for compensation of executives. Section 162(m) provides exceptions to
the deduction limitation, and it is the intent of the compensation committee to
qualify for these exceptions to the extent feasible and in the best interests of
ChoicePoint, including the exceptions with respect to performance-based
compensation.
66
72
While it is the compensation committee's intention to maximize the
deductibility of compensation payable to ChoicePoint's executive officers,
deductibility will be only one among a number of factors used by the
compensation committee in ascertaining appropriate levels or modes of
compensation. ChoicePoint intends to maintain the flexibility to compensate
executive officers based upon an overall determination of what it believes to be
in the best interests of ChoicePoint and its shareholders.
To the extent that this report pertains to the determination of salaries
for executive officers other than the chief executive officer, it is jointly
submitted by the executive committee.
MANAGEMENT COMPENSATION AND BENEFITS COMMITTEE EXECUTIVE COMMITTEE
Tinsley H. Irvin (Chairman) C. B. Rogers, Jr. (Chairman)
Ron D. Barbaro Tinsley H. Irvin
Derek V. Smith
67
73
CHOICEPOINT STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return on the ChoicePoint
common stock with a cumulative total return on the Russell 2000 Index and the
S&P 600 Services (Data Processing) Index, for the period from August 8, 1997
(the date on which the ChoicePoint common stock commenced trading on the New
York Stock Exchange) through December 31, 1999. The comparison assumes an
original investment of $100 on August 8, 1997, and assumes the reinvestment of
any dividends.
(PERFORMANCE GRAPH)
CHOICEPOINT INC. RUSSELL 2000 S&P 600 SERVICES S&P 600
---------------- ------------ (DATA PROCESSING) -------
INDEX
-----------------
Aug-97 100 100 100 100
Dec-97 136 106 101 106
Jun-98 145 111 122 112
Dec-98 184 103 134 105
Jun-98 192 113 127 110
Dec-99 236 125 117 118
RATIFICATION OF APPOINTMENT OF
CHOICEPOINT INDEPENDENT PUBLIC ACCOUNTANTS
The ChoicePoint board of directors has selected Arthur Andersen LLP as
ChoicePoint's independent public accountants for the fiscal year ending December
31, 2000, and recommends that the shareholders vote for the ratification of such
appointment. Notwithstanding the selection, the board of directors, in its
discretion, may direct the appointment of new independent public accountants at
any time during the year if the board of directors determines that such a change
would be in the best interests of ChoicePoint and its shareholders.
THE CHOICEPOINT BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS CHOICEPOINT'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
68
74
DESCRIPTION OF CHOICEPOINT CAPITAL STOCK
The following is a summary of the material terms of the capital stock of
ChoicePoint under its existing articles of incorporation, bylaws and rights
agreement. The following also summarizes relevant provisions of the Georgia
Business Corporation Code, which we refer to as Georgia law. The terms of the
ChoicePoint articles of incorporation, bylaws and rights agreement, as well as
the terms of Georgia law, are more detailed than the general information
provided below. Therefore, you should carefully consider the actual provisions
of those documents. If you would like to read the existing ChoicePoint articles
of incorporation, bylaws or rights agreement, these documents are on file with
the Securities and Exchange Commission, as described under the heading "Where
You Can Find More Information" beginning on page 92. Additional information
regarding the capital stock of ChoicePoint is contained under the heading
"Comparison of Rights of Shareholders."
GENERAL
The authorized capital stock of ChoicePoint consists of one hundred million
shares of ChoicePoint common stock, par value $0.10 per share, and ten million
shares of preferred stock, par value $0.01 per share.
ChoicePoint Common Stock
Subject to all of the rights of the preferred stock under the provisions of
the ChoicePoint articles of incorporation, by operation of law or by action of
the board of directors pursuant to the ChoicePoint articles of incorporation,
holders of ChoicePoint common stock are entitled to: (1) one vote per share on
all matters required to be voted on by shareholders, including the election of
directors, (2) such dividends as may be declared or set apart for payment from
assets or funds legally available therefore, and (3) in the event of
liquidation, dissolution or winding-up of ChoicePoint, a pro rata distribution
of the net assets of ChoicePoint available for distribution in accordance with
their respective rights and interests. The ChoicePoint articles of incorporation
do not provide for cumulative voting in the election of directors. Additionally,
the holders of ChoicePoint common stock have no preemptive, conversion or other
subscription rights, and there are no redemption or sinking fund provisions
applicable to the ChoicePoint common stock.
ChoicePoint Preferred Stock
The ChoicePoint articles of incorporation further provide that, in
accordance with the provisions of Georgia law, the board of directors may
determine the preferences, limitations and relative rights of: (1) any class of
shares before the issuance of any shares of that class or (2) one or more series
within a class, and designate the number of shares within that series, before
the issuance of any shares of that series.
No shares of preferred stock are currently designated, and there is no
current plan to designate or issue any class or series of preferred stock.
However, because the terms of the preferred stock may be fixed by the
ChoicePoint board of directors without shareholder action, preferred stock could
be issued quickly with terms calculated to defeat a proposed takeover of
ChoicePoint or to make the removal of the management of ChoicePoint more
difficult. In addition, the issuance of preferred stock could decrease the
amount of earnings and assets available for distribution to holders of
ChoicePoint common stock. In some circumstances, these factors could have the
effect of decreasing the market price of the ChoicePoint common stock.
Shareholder Vote Required for Action
Except as provided in the ChoicePoint articles of incorporation or pursuant
to the terms of any authorized series of preferred stock or by action of the
board of directors pursuant to Georgia law, the vote required for shareholder
action on all matters shall be the minimum vote required by Georgia law.
ANTI-TAKEOVER PROVISIONS OF GEORGIA LAW AND THE CHOICEPOINT ARTICLES AND BYLAWS
Provisions of Georgia law and the ChoicePoint articles of incorporation and
bylaws are described elsewhere in this document.
69
75
Provisions of Georgia Law
Unless otherwise provided by the articles of incorporation or bylaws or by
resolution of the board of directors (by conditioning its submission of a
proposed merger or share exchange), Georgia law generally requires the
affirmative vote of a majority of all votes entitled to be cast, by all shares
entitled to vote, voting as a single class, to approve mergers and share
exchanges. Shareholders of the corporation surviving a merger need not approve a
merger if: (1) the articles of incorporation of the surviving corporation will
not differ from its articles before the merger; (2) each share of stock of the
surviving corporation outstanding immediately before the effective date of the
merger is to be an identical outstanding or reacquired share immediately after
the merger; and (3) the number and kind of shares outstanding immediately after
the merger, plus the number and kind of shares issuable as a result of the
merger and by the conversion of securities issued pursuant to the merger or the
exercise of rights and warrants issued pursuant to the merger, will not exceed
the total number and kind of shares of the surviving corporation authorized by
its articles of incorporation immediately before the merger. The ChoicePoint
bylaws do not contain a provision which alters Georgia law voting requirements
with respect to mergers.
ChoicePoint has elected to be covered by two provisions of Georgia law that
restrict business combinations with interested shareholders. These provisions do
not apply to a Georgia corporation unless its bylaws specifically make the
statute applicable, and once adopted, in addition to any other vote required by
the corporation's articles of incorporation or bylaws to amend the bylaws, such
a bylaw may be repealed only by the affirmative vote of at least two-thirds of
the continuing directors and a majority of the votes entitled to be cast by the
voting shares of such corporation, other than shares beneficially owned by an
interested shareholder and, with the respect to the fair price provisions
explained below, his, her or its associates and affiliates.
Prohibition on Certain Business Combinations with Interested Shareholders
The provisions of Georgia law concerning business combinations with
interested shareholders generally prohibit certain resident Georgia corporations
from entering into certain business combination transactions with any
"interested shareholder" for a period of five years from the date that person
became an interested shareholder, unless: (1) prior to becoming an interested
shareholder, the board of directors of the corporation approved either the
business combination or the transaction by which the shareholder became an
interested shareholder, (2) in the transaction in which the shareholder became
an interested shareholder, the interested shareholder became the beneficial
owner of at least 90% of the voting stock outstanding (excluding, for purposes
of determining the number of shares outstanding, insider shares), at the time
the transaction commenced, or (3) subsequent to becoming an interested
shareholder, such shareholder acquired additional shares resulting in the
interested shareholder being the beneficial owner of at least 90% of the
outstanding voting shares (excluding, for purposes of determining the number of
shares outstanding, insider shares) and the transaction was approved at an
annual or special meeting of shareholders by the holders of a majority of the
voting stock entitled to vote thereon (excluding from such vote, insider shares
and voting stock beneficially owned by the interested shareholder). For the
purposes of these provisions, an interested shareholder is generally defined as
any person other than the corporation or its subsidiaries beneficially owning at
least 10% of the outstanding voting stock of the corporation, and an insider
shares refer generally to shares owned by: (a) persons who are directors or
officers of the corporation, their affiliates or associates, (b) subsidiaries of
the corporation, and (c) any employee stock plan under which participants do not
have the right (as determined exclusively by reference to the terms of such plan
and any trust which is part of such plan) to determine confidentially the extent
to which shares held under such plan will be tendered in a tender or exchange
offer. A Georgia corporation's bylaws must specify that all requirements of
these provisions apply to the corporation in order to apply. Once adopted, a
bylaw providing for applicability of the interested-shareholder provisions can
be repealed only by (1) the affirmative vote of at least two-thirds of the
continuing directors and (2) a majority of the votes entitled to be cast by
voting shares of the corporation, other than shares beneficially owned by an
interested shareholder, in addition to any other vote required by the articles
of incorporation or bylaws to amend the bylaws. Additionally, any action to
repeal such a bylaw becomes effective eighteen months after the shareholder vote
to effect the repeal, and the bylaw will continue to apply
70
76
to a person who becomes an interested shareholder on or prior to repeal of the
bylaw. The ChoicePoint bylaws contain a provision stating that all of the
requirements of these provisions (and any successor provisions thereto) apply to
ChoicePoint.
Fair Price Requirements
Georgia law also contains provisions concerning fair price requirements
which impose certain requirements on business combinations between a Georgia
corporation and any person who is an interested shareholder of that corporation.
In addition to any vote otherwise required by law or the corporation's articles
of incorporation, under these fair price provisions, business combinations with
an interested shareholder must meet one of the three following criteria designed
to protect a corporation's minority shareholders: (1) the transaction must be
unanimously approved by the continuing directors of the corporation, provided
that the continuing directors constitute at least three members of the board of
directors at the time of such approval, (2) the transaction must be recommended
by at least two-thirds of the continuing directors and approved by a majority of
the votes entitled to be cast by holders of voting shares, other than voting
shares beneficially owned by the interested shareholder who is, or whose
affiliate is, a party to the business combination, or (3) the terms of the
transaction must meet the fair pricing criteria and certain other tests
specified under Georgia law. For the purposes of these provisions, an interested
shareholder is generally defined as any person other than the corporation or its
subsidiaries beneficially owning at least 10% of the outstanding voting stock of
the corporation, which is a party to, or an affiliate of which is a party to,
the business combination in question, and continuing directors are generally
directors who served prior to the time an interested shareholder acquired 10%
ownership and who are unaffiliated with such interested shareholder. A Georgia
corporation's bylaws must specify that all requirements of the fair price
provisions apply to the corporation in order to apply. Once adopted, a bylaw
providing for applicability of the fair-price provisions can be repealed only by
(1) the affirmative vote of two-thirds of the continuing directors and (2) a
majority of the votes entitled to be cast by voting shares of the corporation,
other than shares beneficially owned by any interested shareholder and
affiliates and associates of any interested shareholder, in addition to any
other vote required by the articles of incorporation or bylaws to amend the
bylaws. The ChoicePoint bylaws contain a provision stating that all requirements
of the fair price provisions (and any successor provisions thereto) apply to
ChoicePoint.
Removal of Directors
In addition to the business combinations prohibitions and the fair price
provisions, Georgia law contains a provision concerning the removal of directors
by shareholders which, among other things, limits the ability of shareholders of
a Georgia corporation to remove the directors of such corporation if such
corporation's directors serve staggered terms. This provision generally provides
that: (1) directors having staggered terms may be removed only for "cause,"
unless the corporation's articles of incorporation or a bylaw adopted by the
corporation's shareholders provides otherwise; (2) directors may be removed only
by a majority vote of the shares entitled to vote for the removal of directors;
and (3) a director may be removed by a corporation's shareholders only at a
meeting called for the purpose of removing him or her and the meeting notice
must state that the purpose, or one of the purposes, of the meeting is removal
of the director. Neither the ChoicePoint articles of incorporation nor bylaws
contain provisions permitting the removal of members of the ChoicePoint board of
directors other than for "cause." Accordingly, the existence of a staggered
terms for directors could have the effect of restricting the ability of
ChoicePoint shareholders to remove incumbent directors and fill the vacancies
created by such removal with their own nominees. See "-- Articles of
Incorporation and Bylaws -- Staggered Board of Directors."
ARTICLES OF INCORPORATION AND BYLAWS
Staggered Board of Directors
The ChoicePoint articles of incorporation and bylaws provide that the
ChoicePoint board of directors will consist of not less than seven but no more
than fifteen directors. The current board of directors has eight directors.
However, after the merger, the board of directors shall be comprised of ten
members as
71
77
contemplated in the merger agreement. See Annex A -- Section 7.1(b). The
ChoicePoint board of directors is divided into three classes of directors
serving staggered three-year terms, with each class consisting, as nearly as
possible, of one-third of the total number of directors. If the number of
directors is increased or decreased, such increase or decrease will be
apportioned among the classes so as to maintain, as nearly as possible, an equal
number of directors in each class; however, no decrease in the number of
directors for a class shall shorten the term of an incumbent director. Any
directorship to be filled by reason of an increase in the number of directors
may be filled by a majority of the remaining members of the ChoicePoint board of
directors, even if by less than a quorum, or by the sole remaining director but
only for a term of office continuing until the next election of directors by
shareholders and until the election and qualification of a successor. Any
additional director elected by the shareholders to fill a vacancy resulting from
an increase in the size of the ChoicePoint board of directors shall hold office
for a term that coincides with the remaining term of the staggered class to
which such director is elected, unless otherwise required by law. Georgia law
provides that a bylaw establishing staggered terms for directors may only be
adopted, amended or repealed by the shareholders.
Having staggered directors has the effect of making it more difficult for
shareholders to change the composition of the ChoicePoint board of directors. At
least two annual meetings of shareholders, instead of one, generally will be
required to effect a change in the majority of the ChoicePoint board of
directors. The classification provisions could also have the effect of
discouraging a third party from initiating a proxy contest, making a tender
offer or otherwise attempting to obtain control of ChoicePoint, even though such
an attempt might be beneficial to ChoicePoint and its shareholders.
Filling Vacancies
The ChoicePoint articles of incorporation and bylaws provide that any
vacancy on the ChoicePoint board of directors that results from the prior death,
resignation, retirement, disqualification or removal from office of any director
shall be filled by a majority of the remaining members of the ChoicePoint board
of directors, even if by less than a quorum, or by the sole remaining director.
Any director so appointed by the board of directors or elected by shareholders
to fill a vacancy resulting from the prior death, resignation, retirement,
disqualification or removal from office of a director shall have the same
remaining term as his or her predecessor. Accordingly, the ChoicePoint board of
directors could temporarily prevent any shareholder from enlarging the
ChoicePoint board of directors and filling the new directorships with such
shareholder's own nominees.
Shareholder Proposals at Annual Meeting; Director Nominations
The ChoicePoint bylaws provide that, in order to bring certain matters
before a meeting of shareholders, including nominations of directors,
shareholders must give notice to ChoicePoint containing certain information
within the time period specified in Securities and Exchange Commission Rule
14a-8. Shareholders making proposals, other than those that appear in a proxy
statement after compliance with Securities and Exchange Commission Rule 14a-8,
must file written notice with the ChoicePoint board of directors setting forth
certain information required by the ChoicePoint bylaws.
Special Meetings of Shareholders
Georgia law provides that a Georgia corporation shall hold a special
meeting of shareholders: (1) on the call of the corporation's board of directors
or the person or persons authorized by the corporation's articles of
incorporation or bylaws; (2) in the case of a corporation having more than one
hundred (100) shareholders of record, upon the written demand of the holders of
at least twenty five percent (25%), or such greater or lesser percentage as may
be provided in the corporation's articles of incorporation or bylaws, of all the
votes entitled to be cast on any issue proposed to be considered at the proposed
special meeting; or (3) in the case of a corporation having one hundred (100) or
fewer shareholders of record, upon the written demand of the holders of at least
twenty five percent (25%), or such lesser percentage as may be provided in the
corporation's articles of incorporation or bylaws, of all the votes entitled to
be cast on any issue to be considered at the proposed special meeting. The
ChoicePoint bylaws provide that a special meeting of
72
78
shareholders may be called by: (1) the chairman or vice chairman of the
ChoicePoint board of directors, (2) the chief executive officer of ChoicePoint,
(3) the president of ChoicePoint, (4) the ChoicePoint board of directors by vote
at a meeting, (5) a majority of the ChoicePoint board of directors in writing
without a meeting, or (6) the unanimous call of the ChoicePoint shareholders.
The ChoicePoint bylaws provide that in order to bring certain matters before a
special meeting of shareholders, including the nomination of directors,
shareholders must give notice to the secretary of ChoicePoint containing certain
information no later than the close of business on the earlier of (A) the 30th
day following the public announcement that a matter will be submitted to a vote
of the shareholders at a special meeting or (B) the 15th day following the day
on which notice of the special meeting was given.
Amendment of ChoicePoint Articles of Incorporation
Under Georgia law, in general and except as otherwise provided by the
ChoicePoint articles of incorporation, amendments to the ChoicePoint articles of
incorporation must be recommended to the shareholders by the ChoicePoint board
of directors and approved at a properly called shareholder meeting by a majority
of the votes entitled to be cast on the amendment by each voting group entitled
to vote on the amendment. The ChoicePoint articles of incorporation require the
affirmative vote of the holders of not less than two-thirds of the votes
entitled to be cast by the holders of all then outstanding shares of voting
stock, voting together as a single class, to make, alter, amend, change, add to
or repeal any provision of the ChoicePoint articles of incorporation or bylaws
where such creation, alteration, amendment, change, addition or repeal would be
inconsistent with the provisions of the ChoicePoint articles of incorporation
relating to: (1) the number of members of the ChoicePoint board of directors,
(2) the classification of the ChoicePoint board of directors, or (3) the filling
of vacancies on the ChoicePoint board of directors. However, this two-thirds
vote is not required for any alteration, amendment, change, addition or repeal
recommended by a majority of the ChoicePoint board of directors. See
"-- Articles of Incorporation and Bylaws -- Amendment of ChoicePoint Bylaws."
Amendment of ChoicePoint Bylaws
Under Georgia law, in general and subject to the requirements of the
business combinations prohibitions mentioned above, the fair price provisions
mentioned above and the ChoicePoint articles of incorporation, the ChoicePoint
bylaws may be altered, amended or repealed by the ChoicePoint board of directors
or by the shareholders when the holders of a majority of the shares of
ChoicePoint common stock entitled to vote actually voted on such matter and a
majority thereof vote affirmatively. See "Articles of Incorporation and
Bylaws -- Amendment of ChoicePoint Articles of Incorporation."
CHOICEPOINT RIGHTS PLAN
The ChoicePoint board of directors adopted a rights agreement by and
between ChoicePoint and SunTrust Bank, Atlanta, dated October 29, 1997. The
rights agreement was subsequently amended on June 21, 1999 and February 14,
2000. Under this agreement, as amended, discriminating actions could be taken by
the board of directors against a holder of a substantial amount of ChoicePoint
securities to, among other reasons, protect ChoicePoint's shareholders in the
event of an unsolicited offer to acquire ChoicePoint, including offers that do
not treat all shareholders equally, the acquisition in the open market of shares
constituting control without offering fair value to all shareholders, and other
coercive, unfair or inadequate takeover bids and practices that could impair the
ability of the ChoicePoint board of directors to represent shareholders'
interests fully.
The rights plan was effected by the declaration of a dividend distribution
of one ChoicePoint right for each outstanding share of ChoicePoint common stock.
ChoicePoint rights also attach to all shares of ChoicePoint common stock issued
by ChoicePoint prior to the distribution date, as described below, and the final
expiration date, as described below, unless the ChoicePoint board of directors
determines otherwise at the time of issuance. Each ChoicePoint right, when
exercisable, entitles the holder to purchase from ChoicePoint one common share
at a purchase price of $90, subject to adjustment. The description and terms
73
79
of the ChoicePoint rights are set forth in the ChoicePoint rights agreement,
filed as an exhibit to the registration statement of which this proxy
statement/prospectus forms a part.
The ChoicePoint rights will separate from the common stock, referred to as
the "distribution date," upon the earliest of:
- the close of business on the tenth calendar day following a public
announcement that a person or group of affiliated or associated persons,
referred to as the "acquiring person," has acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the outstanding
ChoicePoint common shares, referred to as the "share acquisition date";
provided, however, by amendment to the rights agreement, Baron Capital
Group, Inc. and its affiliates and associates, under circumstances
specified in the amendment, are excluded from the definition of
"acquiring person";
- the close of business on the tenth business day following the
commencement of a tender offer or exchange offer that would result in a
person or group beneficially owning 15% or more of the outstanding
ChoicePoint common shares, or
- the close of business on the tenth calendar day following the first date
of public announcement of the first occurrence of a triggering event, as
described below.
A distribution date did not occur as a result of the merger agreement.
Until the distribution date, the ChoicePoint rights will be evidenced by the
certificates representing ChoicePoint common shares. The ChoicePoint rights will
expire at the close of business on November 14, 2007, referred to as the "final
expiration date", unless earlier exchanged or redeemed by ChoicePoint as
described below.
The ChoicePoint rights agreement provides that if (1) any acquiring person
merges into or consolidates with ChoicePoint and ChoicePoint is the surviving
corporation, (2) during the time as there is an acquiring person, there shall be
any reclassification of securities or recapitalization or reorganization of
ChoicePoint which has the effect of increasing by more than 1% the proportionate
share of the outstanding shares of any class of equity securities of ChoicePoint
or any of its subsidiaries beneficially owned by the acquiring person, or (3)
any person or group of affiliated or associated persons becomes the beneficial
owner of 20% or more of the outstanding common shares, then each ChoicePoint
right holder, other than ChoicePoint rights owned by the acquiring person, will
have the right to receive, upon exercise and payment of the purchase price, that
number of common shares (or, depending upon the circumstances, an economically
equivalent ChoicePoint security or securities) having a market value equal to
twice the amount of the purchase price.
If, at any time following the share acquisition date, (1) ChoicePoint is
acquired in a consolidation, merger or statutory share exchange in which
ChoicePoint is not the surviving corporation, (2) any person consolidates with
or merges with or into ChoicePoint and ChoicePoint is the surviving corporation
but its common shares are exchanged, (3) ChoicePoint effects a share exchange
with another person or (4) 50% or more of ChoicePoint's assets or earning power
is sold or transferred, each ChoicePoint right holder will thereafter have the
right to receive, upon exercise of the then current exercise price of the
ChoicePoint right, that number of shares of common stock (or, depending upon the
circumstances, an economically equivalent security or securities) of the other
person having a market value equal to twice the exercise price of the
ChoicePoint right. The events set forth in this paragraph and in the preceding
paragraph are referred to as the "triggering events." Notwithstanding this
paragraph and the preceding paragraph or anything in the ChoicePoint rights
agreement to the contrary, these triggering events shall not arise as a result
of the merger agreement or the transactions contemplated by the merger
agreement.
At any time after the later of the distribution date and the first
occurrence of a triggering event and prior to the acquisition by any person of
50% or more of the outstanding common shares, ChoicePoint may exchange all or
part of the ChoicePoint rights for common shares, referred to as an "exchange,"
at an exchange ratio of one common share per ChoicePoint right, as appropriately
adjusted to reflect any stock split, stock dividend or similar transaction.
At any time prior to the later of the distribution date and the share
acquisition date, ChoicePoint may redeem all, but not less than all, the
ChoicePoint rights at a price of $0.01 per ChoicePoint right subject to
74
80
adjustment to reflect any stock split, stock dividend or similar transaction.
Immediately upon the action of the ChoicePoint board of directors ordering
redemption of the ChoicePoint rights, the right to exercise the ChoicePoint
rights shall terminate and the only right thereafter of the holders of the
ChoicePoint rights shall be to receive $0.01.
The ChoicePoint rights may have anti-takeover effects. The ChoicePoint
rights will cause substantial dilution to a person or group that acquires more
than 15% of the outstanding shares of ChoicePoint common stock if a triggering
event thereafter occurs without the ChoicePoint rights having been redeemed or
in the event of an exchange. However, the ChoicePoint rights should not
interfere with any merger or other business combination approved by the
ChoicePoint board of directors and the ChoicePoint shareholders because the
ChoicePoint rights are redeemable under the circumstances specified in the
ChoicePoint rights agreement.
LISTING
ChoicePoint common stock is listed on the New York Stock Exchange under the
symbol "CPS."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the ChoicePoint common stock is
SunTrust Bank.
COMPARISON OF RIGHTS OF SHAREHOLDERS
Georgia law, the ChoicePoint articles of incorporation and the ChoicePoint
bylaws govern the rights of ChoicePoint shareholders. Pennsylvania law, the DBT
articles of incorporation and the DBT bylaws govern the rights of DBT
shareholders. Upon completion of the merger, DBT shareholders will become
ChoicePoint shareholders, and Georgia law, the ChoicePoint articles of
incorporation and the ChoicePoint bylaws will govern their shareholder rights.
The following summarizes the material differences between the rights of
ChoicePoint shareholders and DBT shareholders. This summary does not purport to
be a complete discussion of, and is qualified in its entirety by reference to,
the governing law and the articles of incorporation and bylaws of each
corporation.
CAPITALIZATION
ChoicePoint
ChoicePoint has authority to issue 100,000,000 shares of ChoicePoint common
stock, with a par value of $0.10 per share, and 10,000,000 shares of ChoicePoint
preferred stock, with a par value of $0.01 per share. As of the record date of
the ChoicePoint annual meeting, 29,562,688 shares of ChoicePoint common stock
and no shares of ChoicePoint preferred stock were outstanding.
DBT
DBT has authority to issue 100,000,000 shares of DBT common stock, with a
par value of $0.10 per share, and 5,000,000 shares of DBT preferred stock, with
a par value of $0.10 per share. As of the record date of the DBT special
meeting, 20,212,094 shares of DBT common stock and no shares of DBT preferred
stock were outstanding.
VOTING RIGHTS
ChoicePoint
Each ChoicePoint shareholder is entitled to one vote for each share of
ChoicePoint common stock held of record by him or her. ChoicePoint shareholders
do not have cumulative voting rights.
75
81
DBT
Each DBT shareholder is entitled to one vote for each share of DBT common
stock held of record by him or her. DBT shareholders do not have cumulative
voting rights.
SIZE OF THE BOARD OF DIRECTORS
ChoicePoint
Georgia law provides that a board of directors must consist of at least one
person, with the number specified in or fixed in accordance with the articles of
incorporation or bylaws. Georgia law permits the articles of incorporation or
the bylaws to authorize the shareholders or the board of directors to fix or
change the number of directors or to establish a variable range for the size of
the board of directors by fixing a minimum and maximum number of directors.
Georgia law further specifies that if a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or, if the articles of incorporation or
bylaws so provide, by the board of directors. The ChoicePoint articles provide
for a range of directors between seven and fifteen, with the number fixed from
time to time by resolution of the ChoicePoint board of directors. The
ChoicePoint board of directors currently has fixed the number of directors at
eight.
DBT
Pennsylvania law allows a corporation to have one or more directors on its
board of directors. If neither the articles of incorporation nor the bylaws
provide for the size of the board of directors, Pennsylvania law fixes the
number of directors on the board at three. The DBT bylaws provide for a range of
directors between three and nine, with the number fixed from time to time by
resolution of the DBT board of directors. The DBT board of directors currently
has fixed the number of directors at nine.
ELECTION OF DIRECTORS
ChoicePoint
Under Georgia law, unless otherwise provided in the articles of
incorporation, directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present. The ChoicePoint articles of incorporation do not contain a contrary
provision with respect to the vote for the election of directors.
DBT
Pennsylvania law provides, unless otherwise restricted in the bylaws,
directors are elected by the affirmative vote of a majority of the votes cast by
the shares entitled to vote for the election of directors. The DBT bylaws
provide that candidates receiving the highest number of votes shall be elected.
CLASSIFICATION OF THE BOARD OF DIRECTORS
ChoicePoint
Generally, Georgia law provides that the terms of directors expire at the
next annual shareholders' meeting following their election unless their terms
are staggered. Under Georgia law, the articles of incorporation or a bylaw
adopted by the shareholders may provide for staggering the terms of the
directors by dividing the total number of directors into two or three groups,
with each group containing one-half or one-third of the total, as near as may
be. Georgia law requires that all classes must be as nearly equal number as
possible, the term of office of at least one class must expire in each year and
the members of a class may not be elected for a period longer than three years.
Georgia law further provides that a decrease in the number of directors does not
shorten an incumbent director's term. In accordance with Georgia law, the
ChoicePoint articles of incorporation and bylaws divide the ChoicePoint board of
directors into three classes with each as nearly equal in size as possible and
with three-year terms.
76
82
DBT
Generally, under Pennsylvania law each director is selected for the term of
office provided in the bylaws, which shall be one year and until such director's
successor has been selected and qualified or until his earlier death,
resignation or removal, unless the board of directors is classified.
Pennsylvania law provides that, unless otherwise specified in the articles of
incorporation, a corporation's board of directors may be divided into various
classes with staggered terms of office. Pennsylvania law requires that all
classes must be as nearly equal in number as possible, the term of office of at
least one class must expire in each year and the members of a class may not be
elected for a period longer than four years. Pennsylvania law further provides
that a decrease in the number of directors shall not have the effect of
shortening the term of any incumbent director. In accordance with Pennsylvania
law, the DBT articles of incorporation and bylaws provide for the division of
the DBT board of directors into three classes with each as nearly equal in size
as possible and with three year terms.
VACANCIES ON THE BOARD OF DIRECTORS
ChoicePoint
Under Georgia law, unless the articles of incorporation or a bylaw approved
by the shareholders provides otherwise, a vacancy or newly created directorship
may be filled by the shareholders, the board of directors or, if the directors
remaining in office constitute fewer than a quorum, by the affirmative vote of a
majority of the remaining directors, though fewer than a quorum. Georgia law
provides that a director elected to fill a vacancy shall serve for the unexpired
term of his or her predecessor in office, or, in the case of a new directorship,
regardless of whether the board of directors is classified, for a term of office
continuing until the next election of directors by the shareholders and until
the election and qualification of the successor. The ChoicePoint articles of
incorporation and bylaws provide that a vacancy or newly created directorship
shall be filled by a majority of the ChoicePoint board of directors then in
office, though less than a quorum, or by the sole remaining director.
DBT
Pennsylvania law provides, except as otherwise provided in the bylaws, that
a majority of the directors then in office, even if less than a quorum, may fill
all vacancies and newly created directorships and that a director selected to
fill a vacancy or newly created directorship serves only the balance of the
unexpired term, or, in the case of a classified board, until the next selection
of the class for which such director has been chosen and until a successor has
been selected and qualified or until his or her earlier death, resignation or
removal. The provisions of Pennsylvania law with respect to vacancies on the
board of directors are subject to the bylaws. The DBT bylaws do not contain any
provisions contrary to Pennsylvania law with respect to vacancies.
REMOVAL OF THE BOARD OF DIRECTORS
ChoicePoint
Georgia law provides that one or more directors may be removed by the
shareholders with or without cause by a majority of the votes entitled to be
cast, except as follows:
- the articles of incorporation or a bylaw adopted by the shareholders
provides that the directors may be removed only for cause;
- if a director is elected by a voting group of shareholders, only the
shareholders of that voting group may participate in the vote to remove
him or her;
- if cumulative voting is authorized, a director may not be removed if the
number of votes sufficient to elect him or her under cumulative voting is
voted against his or her removal; and
- if the directors have staggered terms, then directors may be removed only
for cause, unless the articles of incorporation or a bylaw adopted by the
shareholders provides otherwise.
77
83
The ChoicePoint board of directors is staggered, and neither the ChoicePoint
articles nor the ChoicePoint bylaws contain a provision with respect to removal
of directors.
DBT
With two exceptions, under Pennsylvania law, unless otherwise provided in a
bylaw adopted by the shareholders, the holders of a majority of the shares
entitled to vote at an election of directors may remove any director with or
without cause. Those two exception are as follows:
- if the corporation has a classified board, shareholders may remove a
director only for cause, unless otherwise provided in the articles of
incorporation; and
- if the corporation has cumulative voting, and less than the entire board
of directors is to be removed, then no director may be removed without
cause if the votes cast against his or her removal would be sufficient to
elect him or her if cumulatively voted at an election of the entire board
of directors, or, in the case of a classified board, at an election of
the class of directors of which he or she is a part.
DBT has a classified board of directors, and the DBT bylaws provide that a
director may be removed from office only for cause by vote of a majority of the
shareholders entitled to vote on the removal of directors.
In addition, Pennsylvania law permits, unless otherwise provided in a bylaw
adopted by the shareholders, the board of directors to declare vacant the office
of a director who has been judicially declared of unsound mind or who has been
convicted of an offense punishable by imprisonment for a term of more than one
year or for any other proper cause which the bylaws may specify or if, within 60
days or such other time as the bylaws may specify after notice of his or her
selection, he or she does not accept the office either in writing or by
attending a meeting of the board of directors and fulfill such other
requirements of qualification as the bylaws may specify. The DBT bylaws do not
contain a provision contrary to Pennsylvania law with respect to declaration of
a vacant directorship.
AMENDMENTS TO ARTICLES OF INCORPORATION
ChoicePoint
Generally, under Georgia law, unless the articles of incorporation, the
board of directors or Georgia law provides for a greater vote, adoption of a
proposed amendment to the articles of incorporation requires the affirmative
vote of a majority of the votes entitled to be cast on the amendment by each
voting group entitled to vote on the amendment. The ChoicePoint articles of
incorporation require, unless a majority of the ChoicePoint board of directors
recommend the amendment, the affirmative vote of at least two-thirds of the
votes entitled to be cast, voting together as a single class, to adopt, amend or
repeal any provision of the ChoicePoint articles of incorporation which are
inconsistent with the current provisions of the ChoicePoint articles of
incorporation with respect to the rights, powers, duties, rules and procedures
of the ChoicePoint board of directors.
Georgia law makes an exception to the general rule by permitting, unless
otherwise provided in the articles of incorporation, the board of directors to
adopt an amendment to the articles of incorporation without shareholder action
to effect nonmaterial changes. The ChoicePoint articles of incorporation
authorize the ChoicePoint board of directors to amend the ChoicePoint articles
of incorporation without shareholder approval to create and establish the
rights, preferences and limitations of additional classes and series of stock.
DBT
Generally, Pennsylvania law provides that, unless the articles of
incorporation specify a greater vote, adoption of a proposed amendment to the
articles of incorporation requires the affirmative vote of a majority of the
votes cast by the shareholders entitled to vote on the amendment and, if any
class or series of shares is entitled to vote on the amendment as a class, the
affirmative vote of a majority of the votes cast in the class vote. Regardless
of board submission of the proposed amendment to the articles of incorporation
for action by the shareholders, it will not be deemed to have been adopted by a
corporation unless the board of directors
78
84
has also approved the amendment. The DBT articles of incorporation do not
specify a greater vote to adopt a proposed amendment to the DBT articles of
incorporation.
Under Pennsylvania law, unless otherwise restricted in the articles of
incorporation, an amendment to the articles of incorporation does not require
the approval of the shareholders if shares have not been issued or to effect
nonmaterial changes. The DBT articles of incorporation permit the DBT board of
directors to authorize and issue the DBT preferred stock in one or more series
and to establish the rights, preferences and limitations of each series of DBT
preferred stock.
AMENDMENT TO BYLAWS
ChoicePoint
Pursuant to Georgia law, the board of directors and shareholders have
concurrent power to adopt, amend or repeal bylaws unless:
- the articles of incorporation or Georgia law reserves this power
exclusively to the shareholders in whole or in part; or
- the shareholders in amending or repealing a particular bylaw provide
expressly that the board of directors may not amend or repeal that bylaw.
The ChoicePoint articles of incorporation and the ChoicePoint bylaws
provide that the ChoicePoint board of directors has the right to adopt, amend or
repeal the ChoicePoint bylaws. The ChoicePoint bylaws further state that the
ChoicePoint shareholders may alter, amend or repeal any bylaw adopted by the
ChoicePoint board of directors and adopt new bylaws. The ChoicePoint articles of
incorporation require, unless a majority of the ChoicePoint board of directors
recommends the amendment, the affirmative vote of at least two-thirds of the
votes entitled to be cast, voting together as a single class, to adopt, amend or
repeal any provision of the ChoicePoint bylaws which are inconsistent with the
current provisions of the ChoicePoint articles of incorporation with respect to
the rights, powers, duties, rules and procedures of the ChoicePoint board of
directors. The ChoicePoint articles of incorporation further provide that the
ChoicePoint shareholders shall not impair or impede the implementation of the
right of the ChoicePoint board of directors to amend, alter or repeal the
ChoicePoint bylaws and to establish its rights, powers, duties, rules and
procedures.
DBT
Under Pennsylvania law, the power to adopt, amend or repeal bylaws resides
exclusively in the shareholders unless the bylaws confer a concurrent power on
the board of directors. However, pursuant to Pennsylvania law, even if the
shareholders confer concurrent power on the board of directors, the directors
have no authority to adopt or change a bylaw on any subject that is committed
expressly to the shareholders by Pennsylvania law, and any action effected by
such concurrent power remains subject to the power of the shareholders to change
such action.
The DBT bylaws provide that the affirmative vote of a majority of all the
shares of stock issued and outstanding and entitled to vote at a shareholders'
meeting or a majority of the DBT board of directors may adopt, amend or repeal
the DBT bylaws.
ACTION BY WRITTEN CONSENT
ChoicePoint
Georgia law provides that any action required or permitted to be taken at a
shareholders' meeting may be taken without a meeting if the action is taken by
all the shareholders entitled to vote on the action or, if so provided in the
articles of incorporation, by persons who would be entitled to vote at a meeting
shares having voting power to cast not less than the minimum number (or numbers,
in the case of voting by groups) of votes that would be necessary to authorize
or take the action at a meeting at which all shareholders entitled to vote were
present and voted. The ChoicePoint articles of incorporation do not contain a
provision with respect to shareholder action by written consent.
79
85
DBT
Pennsylvania law provides that, unless otherwise restricted by the bylaws,
shareholders may act without a meeting as long as all of the shareholders who
would be entitled to vote at a meeting for such purpose consent to the action.
Under Pennsylvania law, in the case of a corporation with shares entitled to
vote in elections of directors registered under the Exchange Act, if the
articles of incorporation so provide, shareholders may act without a meeting as
long as the minimum number of votes that would be necessary to authorize the
action at a meeting at which all shareholders entitled to vote thereon were
present consented to the action. The DBT articles of incorporation do not
contain a provision with respect to shareholder action by written consent.
SPECIAL MEETING OF SHAREHOLDERS
ChoicePoint
Under Georgia law, a special meeting of the shareholders may be called by:
- the board of directors;
- any person authorized by the articles of incorporation or bylaws; or
- by the written demand of at least 25% percent, or such greater or lesser
percentage as may be provided in the articles of incorporation or bylaws,
of all the votes entitled to be cast on any issue proposed to be
considered.
The ChoicePoint bylaws provide that a special meeting of the shareholders
may be called by the chairman of the board of directors, the vice chairman, the
chief executive officer, the president, the board of directors by vote at a
meeting, a majority of the directors in writing without a meeting or by
unanimous call of ChoicePoint shareholders.
DBT
Pennsylvania law provides that special meetings of the shareholders may be
called by:
- the board of directors;
- any person authorized by the bylaws; or
- in the case of a corporation with shares entitled to vote in the election
of directors registered under the Exchange Act, a shareholder who
beneficially owns or owned within the five-year period prior to the date
in question 20% of the shares entitled to vote in an election of
directors for the purpose of obtaining statutorily prescribed approval of
transactions between this shareholder and the corporation.
The DBT bylaws authorize its president and the board of directors to call a
special meeting of the shareholders.
DIRECTOR NOMINATIONS
ChoicePoint
The ChoicePoint bylaws provide that only persons who are selected and
recommended by the ChoicePoint board of directors or the committee thereof
designated to make nominations, or who are nominated by ChoicePoint shareholders
in accordance with the procedures set forth in the ChoicePoint bylaws, shall be
eligible for election, or qualified to serve, as directors. The ChoicePoint
bylaws further provide that nominations of individuals for election to the
ChoicePoint board of directors at any annual meeting or any special meeting of
ChoicePoint shareholders at which directors are to be elected may be made by any
ChoicePoint shareholder entitled to vote for the election of directors at that
meeting by compliance with the procedures set forth in ChoicePoint bylaws.
80
86
The procedures set forth in the ChoicePoint bylaws require nominations by
ChoicePoint shareholders to be made by written notice, which shall set forth, as
to each individual nominated, the following:
- name, date of birth, business address and residence address;
- business experience during the past five years, including his or her
principal occupations and employment during that five-year period, the
name and principal business of any corporation or other organization in
which those occupations and employment were carried on, and other
information as to the nature of his or her responsibilities and level of
professional competence as may be sufficient to permit assessment of
prior business experience;
- whether the nominee is or has ever been at any time a director, officer
or owner of five percent or more of any class of capital stock,
partnership interests or other equity interest of any corporation,
partnership or other entity;
- any directorships held by the nominee in any company with a class of
securities registered pursuant to Section 12 of the Exchange Act, or
subject to the requirements of Section 15(d) of the Exchange Act or any
company registered as an investment company under the Investment Company
Act of 1940; and
- whether the nominated individual has ever been convicted in a criminal
proceeding or has ever been subject to a judgment, order, finding or
decree of any federal, state or other governmental entity, concerning any
violation of federal, state or other law, or any proceeding in
bankruptcy, which conviction, order, finding, decree or proceeding may be
material to an evaluation of the ability or integrity of the nominee.
The ChoicePoint bylaws require the written notice also to set forth information,
as to the author of the written notice and any person acting in concert with him
or her, as follows:
- name and business address;
- name and address as they appear on the ChoicePoint books (if they so
appear); and
- class and number of shares of ChoicePoint that are beneficially owned by
him or her.
The ChoicePoint bylaws further require that a written consent to being named in
a proxy statement as a nominee, and to serve as a director if elected, signed by
the nominee, shall be filed with any written notice respecting nominations. If
the presiding officer at any meeting of the ChoicePoint shareholders determines
that a nomination was not made in accordance with the procedures prescribed by
the ChoicePoint bylaws, such officer shall so declare to the meeting, and the
defective nomination shall be disregarded.
With respect to shareholder notice, the ChoicePoint bylaws specify that if
written notice respecting nominations is to be submitted at an annual meeting of
ChoicePoint shareholders, it shall be delivered to the secretary of ChoicePoint
at the principal executive office of ChoicePoint within the time period
specified in Securities and Exchange Commission Rule 14a-8. Subject to notice
requirements as to matters that may be acted upon at a special meeting of the
ChoicePoint shareholders, if a written notice respecting nominations is to be
submitted at a special meeting of the ChoicePoint shareholders, it shall be
delivered to the secretary of ChoicePoint at the principal executive office of
ChoicePoint no later than the close of business on the earlier of (1) the 30th
day following the public announcement that a matter will be submitted to a vote
of the ChoicePoint shareholders at a special meeting or (2) the 15th day
following the day on which notice of the special meeting was given.
DBT
Neither the DBT bylaws nor the DBT articles of incorporation contain a
provision with respect to director nominations.
81
87
SHAREHOLDER PROPOSALS
ChoicePoint
The ChoicePoint bylaws provide that no shareholder proposal for a
shareholder vote (other than a proposal that appears in ChoicePoint's proxy
statement after compliance with the procedures set forth in the Securities and
Exchange Commission Rule 14a-8) shall be submitted by a shareholder to the other
shareholders unless the shareholder submitting the shareholder proposal shall
have filed a written notice setting forth with particularity:
- the names and business addresses of the author of the shareholder
proposal and all natural persons, corporations, partnerships, trusts or
any other type of legal entity or recognized ownership vehicle acting in
concert with him or her;
- the name and address of the author of the shareholder proposal and other
persons identified in the first bullet point above, as they appear on the
ChoicePoint books (if they so appear);
- the class and number of ChoicePoint shares beneficially owned by the
author of the shareholder proposal and other persons identified in the
first bullet point above;
- a description of the shareholder proposal containing all material
information relating thereto; and
- such other information as the ChoicePoint board of directors reasonably
determines is necessary or appropriate to enable the ChoicePoint board of
directors and ChoicePoint shareholders to consider the shareholder
proposal.
The ChoicePoint bylaws further provide that the presiding officer at any meeting
of the shareholders may determine that any shareholder proposal was not made in
accordance with the procedures prescribed in the ChoicePoint bylaws or is
otherwise not in accordance with Georgia law, and, if it is so determined, he or
she shall so declare at the meeting and the shareholder proposal shall be
disregarded.
The same provision of the ChoicePoint bylaws with regard to written notice
regarding director nominations as described above under "-- Director
Nominations -- ChoicePoint" applies to written notice respecting shareholder
proposals.
DBT
Pennsylvania law, in the case of a corporation with shares entitled to vote
in the election of directors registered under the Exchange Act, does not entitle
shareholders to propose an amendment to the articles of incorporation. Neither
the DBT articles of incorporation nor the DBT bylaws contain a provision with
respect to shareholder proposals.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
ChoicePoint
Georgia law provides that the articles of incorporation may include a
provision eliminating or limiting the liability of a director to the corporation
or its shareholders for monetary damages for any act or omission as a director
except for liability arising from any of the following:
- an appropriation, in violation of such director's duties, of any business
opportunity of the corporation;
- an act or omission which involves intentional misconduct or a knowing
violation of law;
- an unlawful distribution; and
- a transaction from which the director received an improper personal
benefit.
The ChoicePoint articles of incorporation limit liability of directors to
ChoicePoint and its shareholders to the fullest extent permitted by Georgia law.
82
88
DBT
Pennsylvania law permits a corporation to limit a director's exposure to
monetary liability for breach of fiduciary duty if the limitation is set forth
in a bylaw adopted by the shareholders. Under Pennsylvania law, a director may
not be relieved of monetary liability for the following:
- a breach or failure to perform a director's statutory duties of care and
good faith to the corporation and its shareholders;
- a breach or failure to perform constituting self-dealing, willful
misconduct or recklessness;
- a violation of criminal statutes; or
- the nonpayment of federal, state or local taxes.
The DBT bylaws limit liability of directors to DBT and its shareholders to
the fullest extent permitted by Pennsylvania law.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
ChoicePoint
Georgia law permits a corporation to indemnify an officer or director who
is a party to a proceeding because he or she is or was a director or officer
against liability incurred in the proceeding. Before a corporation may provide
this indemnification to a director or officer, Georgia law requires a
determination be made that the director or officer has met the applicable
standard of conduct which is that he or she acted in good faith and reasonably
believed:
- in the case of conduct in his or her official capacity, that the conduct
was in the best interests of the corporation;
- in all other cases, that the conduct was at least not opposed to the best
interests of the corporation; and
- in the case of any criminal proceeding, that he or she had no reasonable
cause to believe the conduct was unlawful.
Georgia law limits indemnification in connection with a derivative proceeding to
reasonable expenses incurred in connection with the proceeding and disallows any
indemnification in connection with a proceeding in which the director or officer
was adjudged liable on the basis of an improperly received personal benefit.
Under Georgia law, the determination of whether indemnification is
permissible based upon the fulfillment of the applicable standard of conduct
must be made by:
- if there are two or more disinterested directors, by the board of
directors by a majority vote of disinterested directors or by a majority
vote of a committee consisting of two or more disinterested directors
appointed by the board of directors by a majority vote of disinterested
directors;
- by special legal counsel selected in the manner set forth above or, if
there are fewer than two disinterested directors, by the board of
directors (in which selection directors who do not qualify as
disinterested directors may participate); or
- by the shareholders, excluding from the vote any shares owned by or under
the control of a director or officer who at the time of the vote was not
a disinterested director or officer.
Georgia law defines a disinterested director or officer for these purposes as a
director or officer who is not a party to the proceeding with respect to which
indemnification is sought and does not have a financial, professional or
employment relationship with the director or officer seeking indemnification
which would reasonably be expected to exert an influence on the director's or
officer's judgement when voting on the proposed action. Under Georgia law, the
determination to authorize indemnification is made in a similar manner as the
determination of whether indemnification is permissible except that special
counsel may not make that determination.
83
89
Georgia law obligates a company to indemnify a director or officer who was
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which he or she was a party because he or she was a director or officer of
the corporation against reasonable expenses incurred by the director or officer
in connection with the proceeding.
Georgia law allows a corporation, prior to the final disposition of a
proceeding, to advance funds to pay or reimburse reasonable expenses incurred by
a director or officer who is a party to a proceeding because he or she is a
director or officer if he or she delivers to the corporation:
- a written affirmation of his or her good faith belief that he or she has
met the applicable standard of conduct or that the proceeding involves
conduct for which liability has been eliminated under the provisions of
the articles of incorporation as described above under "-- Limitation of
Personal Liability of Directors -- ChoicePoint"; and
- a written undertaking to repay any funds advanced if it is ultimately
determined that the director is not entitled to indemnification.
Georgia law provides that an authorization of advance and an evaluation of the
reasonableness of expenses must be approved in a similar manner as the
determination of whether indemnification is permissible except that special
counsel is not entitled to grant the authorization or make the evaluation.
In spite of the above limitations with respect to indemnification and
advance of funds permissible by the corporation, Georgia law provides that a
court may order indemnification or advance for expenses if it determines, in
view of all the relevant circumstances, that it is fair and reasonable to
indemnify or advance expenses to the director or officer, even if the director
or officer has not met the relevant standard of conduct described above, failed
to comply with Georgia law with respect to the advance of expenses or was
adjudged liable in a derivative proceeding or in any proceeding based on an
improperly received personal benefit. Georgia law limits the indemnification to
reasonable expenses incurred in connection with the proceeding if the officer or
director is adjudged liable in this manner.
Under Georgia law, a corporation may indemnify a director or officer made a
party to a proceeding without regard to the above limitations with respect to
indemnification and advance of funds if authorized by the articles of
incorporation or a bylaw, contract or resolution approved or ratified by a
majority of holders of shares entitled to vote, excluding any shareholder who at
the time of the authorization would not qualify as a disinterested party with
respect to a threatened or existing proceeding subject to the authorization.
Georgia law applies this same exception to an officer who is a party to a
proceeding because he or she is an officer of the corporation but is not also a
director except that in this instance shareholder approval is not necessary to
authorize the indemnification. However, in either instance, Georgia law still
does not permit a corporation to indemnify a director adjudged liable to the
corporation or subjected to injunctive relief in favor of the corporation on the
basis of liability arising from any of the exceptions to the corporation's
ability to eliminate or limit the personal monetary liability of a director as
described above under "-- Limitation of Personal Liability of
Directors -- ChoicePoint". Georgia law provides that with this authorization, a
corporation may advance or reimburse expenses incurred in advance of final
disposition of the proceeding if the director or officer delivers an undertaking
similar to the type delivered in the case of indemnification allowed within the
limitations imposed by Georgia law except that he or she need not give a written
affirmation as to his or her good faith belief that she or he has met a specific
standard of conduct.
Georgia law also permits a corporation to indemnify and advance expenses to
an employee or agent to the extent, consistent with public policy, that may be
provided by the articles of incorporation, the bylaws, an action of the board of
directors or a contract.
Under Georgia law, a corporation may purchase and maintain insurance on
behalf of an individual who is a director, officer, employee or agent of the
corporation or who, while a director, officer, employee or agent of the
corporation, serves at the corporation's request as a director, officer,
partner, trustee, employee or agent of another entity against liability asserted
against or incurred by him or her in that capacity or arising from his or her
status as a director, officer, employee or agent, whether or not the corporation
would have power to indemnify or advance expenses to him or her against the same
liability under the provisions of Georgia law
84
90
with respect to indemnification. In accordance with Georgia law, the ChoicePoint
articles of incorporation permit the company to purchase and maintain liability
insurance.
Georgia law provides that a corporation may, by a provision in its articles
of incorporation or bylaws or in a resolution adopted or a contract approved by
its board of directors or shareholders, obligate itself in advance of the act or
omission giving rise to a proceeding to provide indemnification or advance funds
to pay for or reimburse expenses consistent with the provisions of Georgia law
with respect to indemnification. Georgia law further provides that this
obligatory provision satisfies the requirements for the authorization of
expenses, the authorization of indemnification and an evaluation of the
reasonableness of the expenses. Under Georgia law, the inclusion of this
obligatory provision does not obligate the corporation to indemnify or advance
expenses to a director of a predecessor of the corporation, pertaining to
conduct with respect to the predecessor, unless otherwise specifically provided.
Georgia law also provides that a corporation may, by a provision in its articles
of incorporation, limit the rights to indemnification or advance for expenses
created by or pursuant to the provisions of Georgia law with respect to
indemnification.
The ChoicePoint bylaws authorize indemnification of officers and directors
to the fullest extent permitted under Georgia law except that they require an
evaluation of the reasonableness of expenses in accordance with Georgia law
unless those expenses are not evaluated by the appropriate parties within 60
days following the written request for the advance or reimbursement. Neither the
ChoicePoint articles of incorporation nor the ChoicePoint bylaws expressly
assume an obligation to indemnify or advance expenses to a director of a
predecessor of the corporation, pertaining to conduct with respect to the
predecessor. The ChoicePoint bylaws provide that ChoicePoint may indemnify its
employees and agents without regard to the limitations on indemnification
imposed by Georgia law to the extent authorized by the ChoicePoint articles of
incorporation, the ChoicePoint bylaws, action by the ChoicePoint board of
directors or contract or to any lesser extent (or greater extent if permitted by
Georgia law) determined by the chief executive officer, in each case consistent
with public policy.
DBT
Pennsylvania law, unless otherwise restricted in the bylaws, permits a
corporation to indemnify any person against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred in a third-party
action or proceeding by reason of being a representative of the corporation or,
at the request of the corporation, a representative of another entity. In a
derivative action, Pennsylvania law, unless otherwise restricted in the bylaws,
limits this indemnification to expenses actually and reasonably incurred.
Pennsylvania law permits a corporation to advance to its representatives
expenses incurred in defending a third-party or derivative action or proceeding
upon receipt of an undertaking by him or her to repay the amount advanced if it
is ultimately determined that he or she is not entitled to indemnification.
Under Pennsylvania law, unless ordered by a court, indemnification may be
provided by a corporation only upon a determination that indemnification is
proper in the circumstances made by the board of directors by a majority vote of
a quorum who are not parties to the action or proceeding, or, if such a quorum
is unobtainable or a majority vote of such a quorum directs, by independent
legal counsel in a written opinion or by the shareholders. Under Pennsylvania
law, the standard of conduct by which indemnification is judged to be proper is
as follows:
- with respect to a third party or derivative action or proceeding, the
person must have acted in good faith and reasonably believed that his or
her actions were in, or not opposed to, the best interests of the
corporation; and
- with respect to a criminal action or proceeding, the person must have had
no reasonable cause to believe that his or her conduct was unlawful.
Even though with respect to a derivative action the person meets the standard of
conduct, Pennsylvania law does not permit him or her to receive any
indemnification from the corporation if he or she is found liable to the
corporation unless a court so orders.
85
91
If a person has been successful on the merits or otherwise in defense of a
third party or derivative action or proceeding, Pennsylvania law obligates the
corporation to indemnify him or her for expenses actually and reasonably
incurred in connection with the action or proceeding.
Unless the basis of a claim for indemnification is found by a court to
constitute willful misconduct or recklessness, the provisions of Pennsylvania
law with respect to indemnification are nonexclusive as to any other rights,
such as contractual rights under a bylaw, agreement or vote of shareholders or
disinterested directors, to which a person seeking indemnification may be
entitled. Pennsylvania law further authorizes a corporation's purchase of
indemnification insurance for the benefit of its officers, directors, employees,
agents and other corporate representatives whether or not the corporation would
have the power to indemnify against the liability covered by the policy, unless
the corporation's bylaws otherwise prohibit the purchase of such insurance. The
DBT bylaws do not prohibit the purchase of liability insurance.
The DBT bylaws provide for indemnification of its directors, officers and
other representatives designated by the DBT board of directors to the fullest
extent permitted by Pennsylvania law except where the conduct of the director,
officer or other representative designated by the DBT board of directors has
been finally determined by a panel of arbitrators or otherwise:
- to constitute willful misconduct or recklessness;
- to be based upon or attributable to the receipt by him or her from DBT of
a personal benefit to which he or she is not legally entitled; or
- to be unlawful.
The DBT bylaws further provide that even if indemnification is unavailable
pursuant to its bylaws or otherwise, the corporation shall contribute to the
liabilities to which the person to whom indemnification is unavailable in an
appropriate amount to reflect the intent of the indemnification provisions
contained in the DBT bylaws or otherwise.
DIVIDENDS AND OTHER DISTRIBUTIONS
ChoicePoint
Georgia law provides that, subject to the articles of incorporation, the
board of directors may authorize the corporation to make distributions to the
shareholders unless after giving effect to the distribution:
- the corporation would not be able to pay its debts as they become due in
the usual course of business; or
- the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed, if the corporation were
to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of shareholders whose preferential
rights are superior to those receiving the distribution.
DBT
Pennsylvania law is substantially similar to Georgia law with respect to
distributions. As permitted by Pennsylvania law, the DBT bylaws provide that the
DBT board of directors may authorize the corporation to pay dividends in cash or
property, other than its own shares, only from the unreserved and unrestricted
earned surplus of DBT unless the payment of the dividend would cause DBT to be
insolvent. Subject to express permission in the articles of incorporation or the
affirmative vote of the holders of a majority of shares of the class in which
the distribution is to be made, the DBT bylaws permit the DBT board of directors
to authorize the corporation to distribute pro rata to holders of any class or
classes of its issued shares, treasury shares and authorized but unissued
shares.
86
92
DISSENTERS' RIGHTS
ChoicePoint
Under Georgia law a record shareholder may dissent from and obtain payment
of the fair value of his or her shares in the event of consummation of:
- a plan of merger to which the corporation is a party if (1) approval of
the shareholders of the corporation is required and the shareholders are
entitled to vote on the merger or (2) the corporation is a subsidiary
that is merged with its parent which owns at least 90% of the outstanding
shares of the subsidiary;
- a plan of share exchange to which the corporation is a party as the
corporation whose shares will be acquired and on which the shareholder is
entitled to vote;
- a sale or exchange of all or substantially all of the property of the
corporation if a shareholder vote is required, except for a sale pursuant
to a court order or a sale for cash in which all the proceeds will be
distributed to the shareholders within one year after the sale;
- an amendment of the article of incorporation that materially and
adversely affects rights in respect of a dissenter's shares; or
- any other action taken pursuant to a shareholder vote to the extent that
Georgia law, the articles of incorporation, bylaws or a resolution of the
board of directors provides that shareholders are entitled to dissent and
obtain payment for their shares.
However, Georgia law further provides that no shareholder shall be entitled to
dissenters' rights for shares of any class or series which at the effective date
of the merger or share exchange are either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
- in the case of a merger or share exchange, shareholders are required to
accept for their shares anything except shares of the surviving
corporation or another publicly held corporation which at the effective
date of the merger or share exchange are either listed on a national
securities exchange or held of record by more than 2,000 shareholders,
except for cash payments in lieu of fractional shares; or
- the articles of incorporation or a resolution of the board of directors
approving the transaction provides otherwise.
DBT
Pennsylvania law provides rights to the following shareholders to dissent
from, and receive payment of the fair value of their shares:
- shareholders who are members of a subgroup of a class with identifiable
characteristics accorded special treatment pursuant to a plan (including
a plan of asset transfer, plan of merger, plan of consolidation, plan of
exchange and plan of division) or amendment which was not approved by a
vote of this subgroup voting as a special class;
- shareholders of a corporation to be a party to a merger or consolidation
except where the merger or consolidation does not require shareholder
approval because the surviving corporation is a domestic corporation with
identical articles of incorporation to those of the constituent
corporation except for any provisions therein not subject to shareholder
vote;
- shareholders of shares to be acquired pursuant to a plan of share
exchange;
- shareholders of a corporation which adopt a plan of division unless
shareholder approval of such plan was not required;
- shareholders of a corporation which adopt a plan of conversion into a
nonprofit corporation or a management corporation; and
87
93
- shareholders granted dissenters' rights pursuant to the bylaws or a
resolution of the board of directors in connection with a corporate
action or other transaction which would not otherwise trigger statutory
dissenters' rights.
However, with limited exceptions no dissenters' rights are available in the case
of a merger, consolidation, plan of exchange or plan of division with respect to
shares which, at the applicable record date, were either listed on a national
securities exchange or held of record by more than 2,000 shareholders. Those
exceptions are as follows:
- the holders of the shares are required by the terms of the merger or
consolidation to accept any consideration other than shares of the
acquiring, surviving, new or other corporation or cash in lieu of
fractional shares;
- the shares constitute a preferred or special class and such class was not
entitled to vote on the proposed transaction or plan and effectuation of
the proposed transaction or the plan was not conditioned upon the
approval by the affirmative vote of a majority of all share within the
class; or
- shareholders who are members of a subgroup of a class with identifiable
characteristics accorded special treatment pursuant to a plan of asset
transfer, plan of merger, plan of consolidation, plan of exchange or plan
of division which was not approved by a vote of such subgroup voting as a
special class.
PREEMPTIVE RIGHTS
ChoicePoint
Under Georgia law, shareholders do not have preemptive rights to acquire a
corporation's unissued or treasury shares, if any, except if:
- the articles of incorporation so provide;
- the corporation has elected statutory close corporation status; or
- the corporation existed on July 1, 1989 and either the shareholders had
preemptive rights as of July 1, 1989 or the articles of incorporation
were amended on or after July 1, 1989 with notice to the shareholders
that the restatement or amendment would cause the shareholders of the
corporation to have preemptive rights.
The ChoicePoint articles of incorporation do not contain a provision with
respect to preemptive right, and ChoicePoint does not otherwise qualify under
the other two categories described above. The ChoicePoint common stock does not
have preemptive rights.
DBT
Under Pennsylvania law, shareholders do not have preemptive rights unless
otherwise provided in the articles of incorporation. The DBT articles of
incorporation do not contain a provision with respect to preemptive rights. The
DBT common stock does not have preemptive rights.
RIGHTS PLANS
ChoicePoint
ChoicePoint has adopted a shareholder rights plan pursuant to a rights
agreement with SunTrust Bank as rights agent. For a discussion of the
shareholder rights plan, see "Description of ChoicePoint Capital Stock --
ChoicePoint Rights Plan."
DBT
DBT has not adopted a shareholder rights plan.
88
94
EXTRAORDINARY TRANSACTIONS
ChoicePoint
Generally, under Georgia law, a sale or other disposition of all or
substantially all of the corporation's assets, a merger, a share exchange or a
dissolution of the corporation must be adopted by the board of directors and,
unless the articles of incorporation or the board of director require a greater
vote or vote by voting group, approved by a majority of all votes entitled to be
cast thereon, except in limited circumstances.
DBT
Generally, under Pennsylvania law, a sale or other disposition of all or
substantially all of the corporation's assets, a merger, a consolidation, a
share exchange or a dissolution of the corporation must be adopted by the board
of directors and, unless the articles of incorporation or the board of director
requires a greater vote or vote by voting group, approved by a majority of the
votes cast by all shareholders entitled to vote thereon, except in limited
circumstances.
STATE ANTI-TAKEOVER STATUTES
Interested Shareholder Transactions
ChoicePoint. Georgia law does not contain a provision with respect to
interested shareholder transaction equivalent to these provisions of
Pennsylvania law.
DBT. Under Pennsylvania law, unless a corporation has opted out of the
applicable statutory provisions in its articles of incorporation, specified
proposed transactions to which the corporation is a party require the
affirmative vote of the holders of shares representing at least a majority of
the votes that all shareholders are entitled to cast with respect to the
proposed transaction, excluding any shares held by a shareholder (including his
or her associates and affiliates) who is a party to the proposed transaction or
who receives special treatment. Those specified proposed transactions include
transactions where that shareholder would:
- be a party to a merger or consolidation, a share exchange or certain
sales of assets involving the corporation or one of its subsidiaries;
- receive a disproportionate amount of any of the securities of any
corporation which survives or results from a division of the corporation;
- be treated differently from others holding shares of the same class in a
voluntary dissolution of the corporation; or
- have his or her percentage of voting or economic share interest in the
corporation materially increased relative to substantially all other
shareholders in a reclassification.
This special voting requirement does not apply if:
- the transaction being proposed has been approved by a majority of the
corporation's board of directors, excluding directors affiliated with or
nominated by that shareholder;
- the consideration received for each class of stock owned by that
shareholder is at least as high as the highest consideration paid for
that class by that shareholder; or
- the transaction involves a parent corporation which owns at least 80% of
the stock.
The DBT articles of incorporation do not except DBT from these provisions
of Pennsylvania law with respect to interested shareholder transactions.
Control Transactions
ChoicePoint. Georgia law does not contain a provision with respect to
control transaction equivalent to these provisions of Pennsylvania law.
89
95
DBT. Under Pennsylvania law, unless a corporation has opted out of the
applicable statutory provisions, when a person or group of persons acting
together holds 20% of the shares entitled to vote in the election of directors,
any other shareholder of the corporation who objects may, within a reasonable
time after such person or group of persons acquires the 20% stake, under certain
prescribed procedures, require such person or group of persons to purchase his
or her shares at a fair value.
The DBT bylaws and the DBT articles of incorporation provide that these
provisions of Pennsylvania law with respect to control transactions shall not
apply to DBT.
Business Combinations; Fair Pricing
ChoicePoint. Under some circumstances, Georgia law prohibits a Georgia
corporation from entering into business combinations with an interested
shareholder. For a discussion of Georgia's interested-shareholder statute and
its applicability to ChoicePoint, see "Description of ChoicePoint Capital
Stock -- Anti-Takeover Provisions of Georgia Law and the ChoicePoint Articles
and Bylaws -- Prohibition on Certain Business Combinations with Interested
Shareholders."
Georgia law also contains provisions concerning fair price requirements
which impose certain requirements on business combinations between a Georgia
corporation and an interested shareholder. For a discussion of Georgia's
fair-price statute and its applicability to ChoicePoint, see "Description of
ChoicePoint Capital Stock -- Anti-Takeover Provisions of Georgia Law and the
ChoicePoint Articles and Bylaws -- Fair Price Requirements."
DBT. Pennsylvania law, unless a corporation has opted out of the
applicable statutory provisions, prohibits a corporation from engaging in a
business combination (such as a merger, consolidation, share exchange, division,
sale or other disposition of property or issuance of shares for a specified
percentage of the value of the corporation) with a 20% shareholder for five
years from the time he or she acquired the stock to become a 20% shareholder
except where one of the following conditions is met:
- the 20% shareholder's stock purchase was approved by the corporation's
board of directors before the share acquisition date;
- the business combination itself was approved by the corporation's board
of directors before the share acquisition date;
- the business combination is approved by the affirmative vote of the
majority of shareholders, excluding the 20% shareholder, no earlier than
three months after the share acquisition date, provided the 20%
shareholder is the beneficial owner of 80% of the voting shares of the
corporation and provided the price paid to all shareholders meets
statutory criteria establishing a formula price; or
- the business combination is approved by the affirmative vote of all of
the holders of all of the outstanding common shares.
After the expiration of the five-year period, the business combination will
be permitted if:
- approved by a majority of shareholders, excluding the 20% shareholder; or
- approved by a majority vote of the shareholders provided the price to be
paid meets the formula price.
The DBT bylaws and the DBT articles of incorporation provide that the
provisions of Pennsylvania law with respect to business combinations and fair
pricing shall not apply to DBT.
Control-Share Acquisitions
ChoicePoint. Georgia law does not contain a provision with respect to
control-share acquisitions equivalent to Pennsylvania law.
DBT. Under Pennsylvania law, unless a corporation has opted out of the
applicable statutory provisions, shares of a corporation acquired in an
acquisition by any person with voting power of a corporation that would, when
added to all other voting power of him or her, entitle him or her to cast for
the first time, an amount of
90
96
voting power in a range equal to 20% but less than 33 1/3% or equal to 33 1/3%
but less than 50% or at least 50% shall not be entitled to any voting rights
unless they are restored by a resolution approved by a vote of shareholders
unrelated to him or her. The DBT bylaws and the DBT articles of incorporation
provide that the provisions of Pennsylvania law with respect to control-share
acquisitions shall not apply to DBT.
Disgorgement
ChoicePoint. Georgia law does not contain a provision with respect to
disgorgement equivalent to Pennsylvania law.
DBT. Pennsylvania law provides that, unless a corporation has opted out of
the applicable statutory provisions, any profit realized by any person or group
that acquires voting control over at least 20% of a corporation whose shares are
registered under the Exchange Act pursuant to the disposition of equity
securities of the corporation is recoverable by the corporation if the
disposition of the equity securities was made within 18 months after the person
or group became a 20% shareholder and if the acquisition of the equity
securities was made within 24 months prior to or 18 months after the person or
group became a 20% shareholder. The DBT bylaws and the DBT articles of
incorporation provide that the provisions of Pennsylvania law with respect to
disgorgement shall not apply to DBT.
CHOICEPOINT SHAREHOLDER PROPOSALS
A shareholder proposal intended for inclusion in the proxy statement for
ChoicePoint's 2001 annual meeting of shareholders must be received by
ChoicePoint at its principal executive offices on or before December 16, 2000.
For a shareholder proposal to be properly brought before ChoicePoint's 2001
annual meeting of shareholders (other than a proposal to be considered for
inclusion in the proxy statement for ChoicePoint's 2001 annual meeting of
shareholders), it must be received by ChoicePoint at its principal executive
offices on or before December 16, 2000. In accordance with the rules of the
Securities and Exchange Commission and ChoicePoint's bylaws, ChoicePoint may
exercise discretionary authority to vote proxies with respect to any shareholder
proposal to be presented at ChoicePoint's 2001 annual meeting of shareholders,
but not included in ChoicePoint's proxy statement for such meeting, if the
shareholder making the proposal has not given notice to ChoicePoint by February
28, 2001.
EXPERTS
The consolidated financial statements of ChoicePoint incorporated by
reference into this registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
The consolidated financial statements of DBT Online, Inc. and subsidiaries
(except I.R.S.C., Inc. and subsidiaries as of December 31, 1998 and for the two
years then ended) as of December 31, 1999 and 1998 and for each of the three
years in the period ended December 31, 1999 and the related financial statement
schedules incorporated in this prospectus by reference from DBT Online, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1999, have been
audited by Deloitte & Touche LLP, as stated in their reports, which are
incorporated herein by reference. The consolidated financial statements of
I.R.S.C., Inc. and subsidiaries (consolidated with those of DBT Online, Inc.) as
of December 31, 1998 and for the two years then ended have been audited by
Corbin & Wertz, as stated in their report which is incorporated herein by
reference. The consolidated financial statements of DBT Online, Inc. and
subsidiaries are incorporated by reference in this prospectus in reliance upon
the respective reports of such firms in each case given upon their authority as
experts in accounting and auditing. Deloitte & Touche LLP and Corbin & Wertz are
independent auditors.
Representatives of Arthur Andersen LLP are expected to be present at the
ChoicePoint shareholders meeting, and representatives of Deloitte & Touche LLP
are expected to be present at the DBT shareholders
91
97
meeting. In each case, such representatives will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
LEGAL MATTERS
The validity of the shares of ChoicePoint common stock to be issued
pursuant to the terms of the merger agreement will passed upon for ChoicePoint
by King & Spalding. Legal matters in connection with the federal income tax
consequences of the merger will also be passed upon by King & Spalding.
WHERE YOU CAN FIND MORE INFORMATION
ChoicePoint and DBT file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that the
companies file at the Securities and Exchange Commission's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further information
on the public reference rooms. ChoicePoint and DBT's public filings are also
available to the public from commercial document retrieval services and at the
Internet World Wide Web site maintained by the Securities and Exchange
Commission at "www.sec.gov." Reports, proxy statements and other information
concerning ChoicePoint and DBT also may be inspected at the offices of the NYSE,
20 Broad Street, New York, New York 10005.
ChoicePoint has filed the registration statement to register with the
Securities and Exchange Commission the shares of ChoicePoint common stock to be
issued to DBT shareholders in the merger. This document is a part of the
registration statement and constitutes a prospectus of ChoicePoint, a proxy
statement of ChoicePoint for the ChoicePoint annual meeting and a proxy
statement of DBT for the DBT special meeting.
As allowed by Securities and Exchange Commission rules, this document does
not contain all the information that shareholders can find in the registration
statement or the exhibits to the registration statement.
The Securities and Exchange Commission allows ChoicePoint and DBT to
"incorporate by reference" information into this document, which means that the
companies can disclose important information to you by referring you to another
document filed separately with the Securities and Exchange Commission. The
information incorporated by reference is deemed to be a part of this document,
except for any information superseded by information contained directly in this
document. This document incorporates by reference the documents set forth below
that ChoicePoint and DBT have previously filed with the Securities and Exchange
Commission. These documents contain important business information about the
companies and their financial condition.
CHOICEPOINT COMMISSION FILINGS (FILE NO. 001-13069) PERIOD OR DATE FILED
- --------------------------------------------------- --------------------
Annual Report on Form 10-K...................... Year ended December 31, 1999
Current Report on Form 8-K...................... Filed February 15, 2000
Registration Statement on Form 8-A.............. Filed July 21, 1997, setting forth a
description of the ChoicePoint common stock
(including any amendments or reports filed
for the purpose of updating such information)
DBT COMMISSION FILINGS (FILE NO. 001-13333) PERIOD OR DATE FILED
- ------------------------------------------- --------------------
Annual Report on Form 10-K................... Year ended December 31, 1999
Quarterly Report on Form 10-Q/A.............. Quarter ended September 10, 1999 (filed on
March 7, 2000)
Current Report on Form 8-K................... Filed February 15, 2000
Registration Statement on Form 8-A........... Filed June 30, 1993, setting forth a
description of the DBT common stock
(including any amendments or reports filed
for the purpose of updating such information)
92
98
ChoicePoint and DBT incorporate by reference additional documents that
either company may file with the Securities and Exchange Commission between the
date of this document and the date of the ChoicePoint annual meeting and the DBT
special meeting, respectively. These include periodic reports, such as Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K, as well as proxy statements.
ChoicePoint has supplied all information contained or incorporated by
reference in this document relating to ChoicePoint, and DBT has supplied all
such information relating to DBT.
If you are a shareholder of ChoicePoint or DBT, ChoicePoint or DBT, as the
case may be, may have sent to you some of the documents incorporated by
reference, but you can obtain any of them through ChoicePoint or DBT, as the
case may be, or the Securities and Exchange Commission or the Securities and
Exchange Commission's Internet World Wide Web site described above. Documents
incorporated by reference are available from the companies without charge,
excluding all exhibits unless specifically incorporated by reference as an
exhibit to this document. Shareholders of ChoicePoint or DBT may obtain
documents incorporated by reference in this document by requesting them in
writing or by telephone from the appropriate company at the following addresses:
ChoicePoint Inc.
1000 Alderman Drive
Alpharetta, Georgia 30005
Telephone: (770) 752-4050
Attention: Kelly McLoughlin
Investor Relations
DBT Online, Inc.
4530 Blue Lake Drive
Boca Raton, Florida 33431
Telephone: (800) 279-7710
Attention: Richard Rogers
Vice President Marketing
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM EITHER COMPANY, PLEASE DO SO AT
LEAST FIVE BUSINESS DAYS BEFORE THE DATE OF THE MEETINGS IN ORDER TO RECEIVE
TIMELY DELIVERY OF SUCH DOCUMENTS PRIOR TO THE MEETINGS.
You should rely only on the information contained or incorporated by
reference in this document to vote your shares at the ChoicePoint annual meeting
and/or the DBT special meeting. ChoicePoint and DBT have not authorized anyone
to provide you with information that is different from what is contained in this
document. This document is dated April 13, 2000. You should not assume that the
information contained in this document is accurate as of any date other than
that date, and neither the mailing of this document to shareholders nor the
issuance of ChoicePoint common stock in the merger creates any implication to
the contrary.
93
99
ANNEX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CHOICEPOINT INC.
CHOICEPOINT ACQUISITION CORPORATION
AND
DBT ONLINE, INC.
DATED AS OF FEBRUARY 14, 2000
- --------------------------------------------------------------------------------
100
TABLE OF CONTENTS
ARTICLE I THE MERGER.......................................................... A-1
Section 1.1. The Merger.................................................. A-1
Section 1.2. Effective Time; Closing..................................... A-1
Section 1.3. Effect of the Merger........................................ A-2
Section 1.4. Conversion of Company Common Stock.......................... A-2
Section 1.5. Tax-Free Reorganization..................................... A-2
ARTICLE II EXCHANGE OF CERTIFICATES........................................... A-3
Section 2.1. Exchange Agent.............................................. A-3
Section 2.2. Exchange Procedures......................................... A-3
Section 2.3. Distributions with Respect to Unexchanged Shares............ A-3
Section 2.4. No Further Ownership Rights in the Company Common Stock..... A-3
Section 2.5. No Fractional Shares of Parent Common Stock................. A-4
Section 2.6. No Liability................................................ A-4
Section 2.7. Lost Certificates........................................... A-4
Section 2.8. Withholding Rights.......................................... A-4
Section 2.9. Stock Transfer Books........................................ A-4
Section 2.10. Shares held by the Company Affiliates....................... A-5
ARTICLE III THE SURVIVING CORPORATION......................................... A-5
Section 3.1. Certificate of Incorporation................................ A-5
Section 3.2. Bylaws...................................................... A-5
Section 3.3. Directors and Officers...................................... A-5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................... A-5
Section 4.1. Organization and Standing................................... A-5
Section 4.2. Capitalization.............................................. A-6
Section 4.3. Authority for Agreement..................................... A-6
Section 4.4. No Conflict................................................. A-7
Section 4.5. Required Filings and Consents............................... A-7
Section 4.6. Compliance.................................................. A-8
Section 4.7. SEC Filings, Financial Statements........................... A-8
Section 4.8. Absence of Certain Changes or Events........................ A-9
Section 4.9. Taxes....................................................... A-9
Section 4.10. Title to Assets............................................. A-9
Section 4.11. Change of Control Agreements................................ A-10
Section 4.12. Litigation.................................................. A-10
Section 4.13. Contracts and Commitments................................... A-10
Section 4.14. Information Supplied........................................ A-10
Section 4.15. ERISA and Related Matters................................... A-11
Section 4.16. Labor and Employment Matters................................ A-13
Section 4.17. Environmental Compliance and Disclosure..................... A-14
Section 4.18. Intellectual Property....................................... A-15
Section 4.19. Year 2000 Compliance........................................ A-17
Section 4.20. Brokers..................................................... A-18
Section 4.21. Insurance Policies.......................................... A-18
Section 4.22. Notes and Accounts Receivable............................... A-18
Section 4.23. Transactions with Affiliates................................ A-18
Section 4.24. No Existing Discussions..................................... A-19
Section 4.25. Pooling; Tax Matters........................................ A-19
Section 4.26. Disclosure.................................................. A-19
A-i
101
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB................................................................ A-19
Section 5.1. Organization and Standing................................... A-19
Section 5.2. Capitalization.............................................. A-19
Section 5.3. Authority for Agreement..................................... A-20
Section 5.4. No Conflict................................................. A-21
Section 5.5. Required Filings and Consents............................... A-21
Section 5.6. Compliance.................................................. A-22
Section 5.7. SEC Filings, Financial Statements........................... A-22
Section 5.8. Absence of Certain Changes or Events........................ A-22
Section 5.9. Taxes....................................................... A-23
Section 5.10. Title to Assets............................................. A-23
Section 5.11. Litigation.................................................. A-23
Section 5.12. Information Supplied........................................ A-24
Section 5.13. Environmental Compliance and Disclosure..................... A-24
Section 5.14. Year 2000 Compliance........................................ A-25
Section 5.15. Insurance Policies.......................................... A-25
Section 5.16. ERISA and Related Matters................................... A-25
Section 5.17. Transactions with Affiliates................................ A-27
Section 5.18. No Existing Discussions..................................... A-27
Section 5.19. Brokers..................................................... A-27
Section 5.20. Pooling; Tax Matters........................................ A-28
Section 5.21. Disclosure.................................................. A-28
ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS.......................... A-28
Section 6.1. Covenants of the Company.................................... A-28
Section 6.2. Covenants of Parent......................................... A-29
ARTICLE VII ADDITIONAL AGREEMENTS............................................. A-30
Section 7.1. Preparation of the Form S-4 and the Joint Proxy
Statement/Prospectus; Stockholders Meetings................. A-30
Section 7.2. Access to Information....................................... A-31
Section 7.3. Best Efforts................................................ A-32
Section 7.4. No Solicitation by the Company.............................. A-33
Section 7.5. No Solicitation by Parent................................... A-34
Section 7.6. Company Options............................................. A-36
Section 7.7. Fees and Expenses........................................... A-37
Section 7.8. Indemnification, Exculpation and Insurance.................. A-39
Section 7.9. Public Announcements........................................ A-39
Section 7.10. Listing..................................................... A-39
Section 7.11. Affiliate Letter............................................ A-39
Section 7.12. Tax Treatment............................................... A-39
Section 7.13. Further Assurances.......................................... A-40
Section 7.14. Notices of Certain Events................................... A-40
Section 7.15. Shareholder Litigation...................................... A-40
ARTICLE VIII CONDITIONS....................................................... A-40
Section 8.1. Conditions to the Obligation of Each Party.................. A-40
Section 8.2. Conditions to Obligations of Parent and Merger Sub to Effect
the Merger.................................................. A-41
Section 8.3. Conditions to Obligations of the Company to Effect the
Merger...................................................... A-41
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.................................. A-42
Section 9.1. Termination................................................. A-42
Section 9.2. Effect of Termination....................................... A-43
A-ii
102
Section 9.3. Amendments.................................................. A-43
Section 9.4. Waiver...................................................... A-43
ARTICLE X GENERAL PROVISIONS.................................................. A-43
Section 10.1. No Third Party Beneficiaries................................ A-43
Section 10.2. Entire Agreement............................................ A-43
Section 10.3. Succession and Assignment................................... A-43
Section 10.4. Counterparts................................................ A-43
Section 10.5. Headings.................................................... A-44
Section 10.6. Governing Law............................................... A-44
Section 10.7. Severability................................................ A-44
Section 10.8. Specific Performance........................................ A-44
Section 10.9. Construction................................................ A-44
Section Non-Survival of Representations, Warranties and
10.10. Agreements.................................................. A-44
Section Certain Definitions......................................... A-44
10.11.
Section Notices..................................................... A-45
10.12.
EXHIBITS:
Exhibit A -- Persons to be Nominated For Parent's Board of Directors
Exhibit B -- Persons to Resign from Parent's Board of Directors Following
Effective Time
Exhibit C -- Persons to Be Elected to Parent's Board of Directors Following
Effective Time
Exhibit D -- Affiliates Letter -- Parent
Exhibit E -- Affiliates Letter -- Company
Exhibit F -- Tax Opinion
A-iii
103
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
14, 2000, by and among CHOICEPOINT INC., a Georgia corporation ("Parent"),
CHOICEPOINT ACQUISITION CORPORATION, a Pennsylvania corporation ("Merger Sub")
and wholly owned subsidiary of Parent, and DBT ONLINE, INC., a Pennsylvania
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of each of Parent, Merger Sub
and the Company deem it advisable and in the best interests of each corporation
and its respective shareholders, that Parent and the Company combine in order to
advance the long-term business strategies of Parent and the Company;
WHEREAS, the Board of Directors of the Company has unanimously determined
that the merger of Merger Sub with and into the Company (the "Merger") and this
Agreement are fair to, and in the best interests of, the Company and the holders
of the common stock of the Company, par value $.10 per share (the "Company
Common Stock");
WHEREAS, the Board of Directors of Parent has unanimously determined that
the Merger and this Agreement are fair to, and in the best interests of, Parent
and the holders of the common stock of Parent, par value $.10 per share (the
"Parent Common Stock");
WHEREAS, the respective Boards of Directors of each of Parent, Merger Sub
and the Company have approved this Agreement and the merger on the terms and
conditions contained in this Agreement;
WHEREAS, Parent, as the sole shareholder of Merger Sub, has approved this
Agreement, the Merger and the transactions contemplated by this Agreement
pursuant to action taken by unanimous written consent in accordance with the
requirements of the Business Corporation Law of 1988 of the Commonwealth of
Pennsylvania (the "PBCL") and the Articles of Incorporation and Bylaws of Merger
Sub;
WHEREAS, for federal income tax purposes, it is intended by the parties
hereto that the Merger shall qualify as a "reorganization" within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall
qualify for "pooling-of-interests" treatment.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions of
this Agreement, and in accordance with the PBCL, at the Effective Time (as
hereinafter defined), Merger Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Merger Sub shall cease
and the Company shall continue as the surviving corporation following the Merger
(the "Surviving Corporation"). The corporate existence of the Company, with all
its purposes, rights, privileges, franchises, powers and objects, shall continue
unaffected and unimpaired by the Merger and, as the Surviving Corporation, it
shall be governed by the laws of the Commonwealth of Pennsylvania.
Section 1.2. Effective Time; Closing. As promptly as practicable (and in
any event within five (5) business days) after the satisfaction or waiver of the
conditions set forth in Article VIII hereof, the parties hereto shall cause the
Merger to be consummated by filing articles of merger, if applicable (the
"Articles of Merger"), with the Department of State of the Commonwealth of
Pennsylvania and by making all other filings or recordings required under the
PBCL in connection with the Merger, in such form as is required by,
104
and executed in accordance with the relevant provisions of, the PBCL. The Merger
shall become effective at such time as the Articles of Merger are duly filed
with the Department of State of the Commonwealth of Pennsylvania, or at such
other time as the parties hereto agree shall be specified in the Articles of
Merger (the date and time the Merger becomes effective, the "Effective Time").
On the date of such filing, a closing (the "Closing") shall be held at 10:00
a.m., Atlanta Time, at the offices of King & Spalding, 191 Peachtree Street,
Atlanta, Georgia 30303, or at such other time and location as the parties hereto
shall otherwise agree.
Section 1.3. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the PBCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of the
Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
Section 1.4. Conversion of Company Common Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder thereof:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares canceled
pursuant to Section 1.4(b), if any) shall be canceled and shall by virtue
of the Merger and without any action on the part of the holder thereof be
converted automatically into the right to receive 0.525 (five hundred
twenty-five thousandths) of a fully paid and nonassessable share (the
"Exchange Ratio") of Parent Common Stock upon surrender of the certificate
that formerly evidenced such share of Company Common Stock in the manner
provided in Section 2.2. The fraction of a share of Parent Common Stock
that each share of Company Common Stock will be converted into is referred
to herein as the "Merger Consideration". Certificates previously
representing shares of Company Common Stock shall be exchanged for
certificates representing whole shares of Parent Common Stock, and cash in
lieu of any fractional share, issued in consideration therefor upon the
surrender of such certificates in accordance with Section 2.2, without
interest. Each share of Parent Common Stock issued pursuant to this Section
1.4(a) will include any related rights issuable in accordance with the
terms of the Parent's Rights Agreement.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is owned by Parent or Merger
Sub and each share of Company Common Stock and Company Preferred Stock (as
hereinafter defined) (collectively, "Company Stock") that is owned by the
Company as treasury stock shall be canceled and retired and cease to exist,
and no payment or distribution shall be made with respect thereto.
(c) At the Effective Time, all shares of the Company Common Stock
converted pursuant to Section 1.4(a) shall no longer be outstanding and
shall automatically be canceled and retired and cease to exist, and each
holder of a certificate ("Certificate") representing any such shares of
Company Common Stock shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration in accordance with
Section 1.4(a).
(d) Each share of common stock, no par value per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable
share of common stock, par value $.10 per share, of the Surviving
Corporation and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation.
Section 1.5. Tax-Free Reorganization. The Merger is intended to be a
reorganization within the meaning of Section 368(a) of the Code, and this
Agreement is intended to be a "plan of reorganization" within the meaning of the
regulations promulgated under Section 368(a) of the Code and for the purpose of
qualifying as a tax-free transaction for federal income tax purposes. The
parties hereto will agree to report the Merger as a tax-free reorganization
under the provisions of Section 368(a). None of the parties hereto will take or
cause to be taken any action which would prevent the transactions contemplated
by this Agreement from qualifying as a reorganization under Section 368(a).
A-2
105
ARTICLE II
EXCHANGE OF CERTIFICATES
Section 2.1. Exchange Agent. Prior to the Effective Time, Parent shall
appoint a commercial bank or trust company reasonably satisfactory to the
Company to act as exchange agent hereunder for the purpose of exchanging
Certificates for the Merger Consideration (the "Exchange Agent"). At or prior to
the Effective Time, Parent shall deposit with the Exchange Agent, in trust for
the benefit of holders of shares of the Company Common Stock, certificates
representing the Parent Common Stock issuable pursuant to Section 1.4 in
exchange for outstanding shares of Company Common Stock in the Merger pursuant
to Section 1.4. Parent agrees to make available to the Exchange Agent from time
to time as needed, cash sufficient to pay cash in lieu of fractional shares
pursuant to Section 2.5 and any dividends and other distributions pursuant to
Section 2.3.
Section 2.2. Exchange Procedures. As soon as reasonably practicable after
the Effective Time, Parent and the Surviving Corporation shall cause the
Exchange Agent to mail to each holder of a Certificate (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent, and which letter shall be in such form and
have such other provisions as the Company may reasonably specify and (ii)
instructions for effecting the surrender of such Certificates in exchange for
the applicable Merger Consideration. Upon surrender of a Certificate to the
Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents
as may reasonably be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor (A) shares of
Parent Common Stock representing, in the aggregate, the whole number of shares
that such holder has the right to receive pursuant to Section 1.4 and (B) a
check in the amount equal to the cash that such holder has the right to receive
pursuant to the provisions of this Article II including cash in lieu of any
fractional shares of applicable Parent Common Stock pursuant to Section 2.5 and
any dividends or other distributions pursuant to Section 2.3 (after giving
effect to any required tax withholdings from cash payments), and in each case
the Certificate so surrendered shall forthwith be canceled. No interest will be
paid or will accrue on any cash payable pursuant to Section 2.3 or Section 2.5.
Section 2.3. Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made with respect to shares of
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock that such holder would be entitled to receive upon surrender of
such Certificate and no cash payment in lieu of fractional shares of Parent
Common Stock shall be paid to any such holder pursuant to Section 2.5 until such
holder shall surrender such Certificate in accordance with Section 2.2. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to such holder of shares of Parent Common Stock issuable in
exchange therefor, without interest, (a) promptly after the time of such
surrender, the amount of any cash payable in lieu of fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section 2.5 and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and (b) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
such surrender and a payment date subsequent to such surrender payable with
respect to such shares of Parent Common Stock.
Section 2.4. No Further Ownership Rights in the Company Common Stock. All
shares of Parent Common Stock issued and cash paid upon conversion of shares of
Company Common Stock in accordance with the terms of this Article II (including
any cash paid pursuant to Section 2.3 or 2.5) shall be deemed to have been
issued or paid in full satisfaction of all rights pertaining to the shares of
Company Common Stock, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by the
Company on such shares of Company Common Stock which remain unpaid at the
Effective Time, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If,
after
A-3
106
the Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article II.
Section 2.5. No Fractional Shares of Parent Common Stock.
(a) No certificates or scrip or shares of Parent Common Stock
representing fractional shares of Parent Common Stock shall be issued upon
the surrender for exchange of Certificates, and such fractional share
interests will not entitle the owner thereof to vote or to have any rights
of a shareholder of Parent or a holder of shares of Parent Common Stock.
(b) Notwithstanding any other provision of this Agreement, each holder
of shares of Company Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of
Parent Common Stock (after taking into account all Certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest) in
an amount equal to the product of (i) such fractional part of a share of
applicable Parent Common Stock multiplied by (ii) the per share closing
price of Parent Common Stock quoted on the New York Stock Exchange ("NYSE")
on the Closing Date. The fractional share interests of Parent Common Stock
will be aggregated, and no holder of record of Company Common Stock will
receive cash in an amount equal to or greater than the value of one full
share of Company Common Stock.
Section 2.6. No Liability. None of Parent, Merger Sub, the Company, the
Surviving Corporation or the Exchange Agent shall be liable to any Person (as
hereinafter defined) in respect of any Merger Consideration, any dividends or
distributions with respect thereto or any cash in lieu of fractional shares of
applicable Parent Common Stock, in each case delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificate shall not have been surrendered prior to three years after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration, any dividends or distributions payable to the holder of such
Certificate or any cash payable in lieu of fractional shares of Parent Common
Stock pursuant to this Article II, would otherwise escheat to or become the
property of any Governmental Entity (as hereinafter defined)), any such Merger
Consideration, dividends or distributions in respect thereof or such cash shall,
to the extent permitted by applicable law, be delivered to Parent, upon demand,
and any holders of Company Common Stock who have not theretofore complied with
the provisions of this Article II shall thereafter look only to Parent for
satisfaction of their claims for such Merger Consideration, dividends or
distributions in respect thereof or such cash.
Section 2.7. Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will deliver in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect to the shares of
Company Common Stock formerly represented thereby, any cash in lieu of
fractional shares of Parent Common Stock, and unpaid dividends and distributions
on shares of Parent Common Stock deliverable in respect thereof, pursuant to
this Agreement.
Section 2.8. Withholding Rights. The Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code and the rules and regulations promulgated
thereunder, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Surviving Corporation such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock in respect of which such deduction
and withholding was made by the Surviving Corporation.
Section 2.9. Stock Transfer Books. At the close of business, Atlanta time,
on the day the Effective Time occurs (the "Closing Date"), the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of shares of Company Common Stock thereafter on the records of the
Company. From and after the Effective Time, the holders of Certificates shall
cease to have any rights with
A-4
107
respect to such shares of Company Common Stock formerly represented thereby,
except as otherwise provided herein or by law. On or after the Effective Time,
any Certificates presented to the Exchange Agent or Parent for any reason shall
be converted into the Merger Consideration with respect to the shares of Company
Common Stock formerly represented thereby, any cash in lieu of fractional shares
of Parent Common Stock to which the holders thereof are entitled pursuant to
Section 2.5 and any dividends or other distributions to which the holders
thereof are entitled pursuant to Section 2.3.
Section 2.10. Shares held by the Company Affiliates. Anything to the
contrary in this Agreement notwithstanding, no shares of Parent Common Stock (or
certificates therefor) shall be issued in exchange for any certificate to any
Person who may be an "affiliate" of the Company (identified pursuant to Section
7.11) until the Person shall have delivered to Parent and the Company a duly
executed letter as contemplated by Section 7.11.
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1. Certificate of Incorporation. The Articles of Incorporation
of the Company as in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation, until the same shall
thereafter be altered, amended or repealed in accordance with applicable law or
such Articles of Incorporation.
Section 3.2. Bylaws. The Bylaws of the Company as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation,
until the same shall thereafter be altered, amended or repealed in accordance
with applicable law, the Certificate of Incorporation of the Surviving
Corporation or such Bylaws.
Section 3.3. Directors and Officers. From and after the Effective Time,
until the earlier of their resignation or removal or until their respective
successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Merger Sub at the Effective Time shall be
the directors of the Surviving Corporation, and (ii) the officers of Merger Sub
at the Effective Time shall be the officers of the Surviving Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the other parties hereto as
follows:
Section 4.1. Organization and Standing. Each of the Company and each
Subsidiary (as hereinafter defined) of the Company (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has full corporate power and authority
and all necessary government approvals to own, lease and operate its properties
and assets and to conduct its business as presently conducted and (iii) is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except where failure to be so qualified or licensed
would not, individually or in the aggregate, have a Company Material Adverse
Effect (as hereinafter defined). The Company has furnished or made available to
Parent correct and complete copies of its articles of incorporation (including
any certificates of designations attached thereto, the "Company Articles of
Incorporation") and bylaws (the "Company Bylaws") and the articles of
incorporation and bylaws (or equivalent organizational documents) of each of its
Subsidiaries, each as amended to date. Such articles of incorporation, bylaws or
equivalent organizational documents are in full force and effect, and neither
the Company nor any such Subsidiary is in violation of any provision of its
articles of incorporation, bylaws or equivalent organizational documents.
A-5
108
Section 4.2. Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, $.10 par value per share ("Company Preferred Stock"). As of the
date hereof, (i) 20,144,446 shares of Company Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable and
free of preemptive rights, (ii) no shares of Company Common Stock are held in
the treasury of the Company, (iii) 3,399,034 options are outstanding pursuant to
the Company Stock Option Plans (the "Company Options"), each such option
entitling the holder thereof to purchase one share of Company Common Stock, and
2,600,966 shares of Company Common Stock are authorized and reserved for future
issuance pursuant to the exercise of such Company Options, and (iv) no shares of
Company Preferred Stock are issued and outstanding. Section 4.2 of the Company
Disclosure Letter delivered by the Company to the other parties hereto
concurrently with the execution of this Agreement (the "Company Disclosure
Letter") sets forth a correct and complete list of the outstanding Company
Options with the exercise price. Except as set forth above or in Section 4.2 of
the Company Disclosure Letter, there are no options, warrants, convertible
securities, subscriptions, stock appreciation rights, phantom stock plans or
stock equivalents or other rights, agreements, arrangements or commitments
(contingent or otherwise) of any character issued or authorized by the Company
relating to the issued or unissued capital stock of the Company or any
Subsidiary of the Company or obligating the Company or any Subsidiary of the
Company to issue or sell any shares of capital stock of, or options, warrants,
convertible securities, subscriptions or other equity interests in, the Company
or any Subsidiary of the Company. All shares of Company Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of the Company or any Subsidiary of the Company to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
any capital stock of any Subsidiary of the Company or to pay any dividend or
make any other distribution in respect thereof or to provide funds to, or make
any investment (in the form of a loan, capital contribution or otherwise) in,
any Person. The Company owns beneficially and of record all of the issued and
outstanding capital stock of each Subsidiary of the Company and does not own an
equity interest in any other corporation, partnership or entity, other than in
such Subsidiaries. Each outstanding share of capital stock of each Subsidiary of
the Company is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by the Company or another Subsidiary of the Company is
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on the Company's or such other
Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever.
Section 4.3. Authority for Agreement.
(a) The Company has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and, subject
to obtaining necessary shareholder approval, to consummate the Merger and
the other transactions contemplated by this Agreement. The execution,
delivery and performance by the Company of this Agreement, and the
consummation by the Company of the Merger and the other transactions
contemplated by this Agreement, have been duly authorized by all necessary
corporate action (including, without limitation, the unanimous approval of
the Board of Directors of the Company) and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the Merger or the other transactions contemplated by this
Agreement (other than, with respect to the Merger, the approval and
adoption of this Agreement by the affirmative vote of a majority of the
then outstanding shares of Company Common Stock and the filing and
recordation of appropriate merger documents as required by the PBCL). This
Agreement has been duly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by Parent and Merger Sub,
constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. The
affirmative vote of holders of the outstanding shares of Company Common
Stock entitled to vote at a duly called and held meeting of shareholders is
the only vote of the holders of any capital stock of the Company necessary
to approve this Agreement, the Merger and the other transactions
contemplated by this Agreement.
A-6
109
(b) At a meeting duly called and held on February 14, 2000, the Board of
Directors of the Company unanimously (i) determined that this Agreement and
the other transactions contemplated hereby, including the Merger, are fair
to and in the best interests of the Company and the holders of the Company
Common Stock, (ii) approved, authorized and adopted this Agreement, the
Merger and the other transactions contemplated hereby, and (iii) resolved
to recommend approval and adoption of this Agreement and the Merger by the
holders of the Company Common Stock. The actions taken by the Board of
Directors of the Company constitute approval of the Merger, this Agreement
and transactions contemplated hereby by the Board of Directors of the
Company under the provisions of Sections 2541 et seq., 2551 et seq. and
2561 et seq. of the PBCL such that Sections 2541 et seq., 2551 et seq. and
2561 et seq. of the PBCL do not apply to this Agreement or the transactions
contemplated hereby. Other than Sections 2541 et seq., 2551 et seq. and
2561 et seq. of the PBCL, no state antitakeover or similar statute is
applicable to Parent or Merger Sub in connection with the Merger, this
Agreement or any of the transactions contemplated hereby.
(c) Credit Suisse First Boston Corporation, the independent financial
advisor to the Board of Directors of the Company (the "Company's
Independent Advisor"), has delivered to the Board of Directors of the
Company its written opinion, dated as of the date of this Agreement, that,
as of such date and based on the assumptions, qualifications and
limitations contained therein, the Exchange Ratio in the Merger was fair,
from a financial point of view, to such holders.
Section 4.4. No Conflict. The execution and delivery of this Agreement by
the Company do not, and the performance of this Agreement by the Company and the
consummation of the Merger and the other transactions contemplated by this
Agreement will not, (i) conflict with or violate the Company's Articles of
Incorporation or the Company's Bylaws or equivalent organizational documents of
any of its Subsidiaries, (ii) subject to Section 4.5, conflict with or violate
any United States federal, state or local or any foreign statute, law, rule,
regulation, ordinance, code, order, judgment, decree or any other requirement or
rule of law (a "Law") applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, or (iii) except as set forth in Section 4.4 of the Company
Disclosure Letter, result in a breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, give
to others any right of termination, amendment, acceleration or cancellation of,
result in triggering any payment or other obligations, or result in the creation
of a lien or other encumbrance on any property or asset of the Company or any of
its Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any property or asset of any of them is
bound or affected, except in the case of clauses (ii) and (iii) above for any
such conflicts, violations, breaches, defaults or other occurrences which could
not, individually or in the aggregate, have a Company Material Adverse Effect.
"Company Material Adverse Effect" shall mean, with respect to the Company, any
change, event or effect shall have occurred or been threatened that, when taken
together with all other adverse changes, events or effects that have occurred
or, to the Knowledge of the Company, been threatened (exclusive, however, of (1)
any such changes, events, or effects that occur as a result of conditions
affecting (A) the information services or public records database businesses as
a whole or (B) the stock markets and capital markets generally or the United
States economy as a whole and (2) any such changes, events, or effects which
have occurred prior to the date hereof and have been disclosed to Parent in
writing prior to the date hereof), is or is reasonably likely to (i) be
materially adverse to the business, results of operations, properties,
prospects, condition (financial or otherwise), assets, liabilities (including,
without limitation, contingent liabilities) of the Company and its Subsidiaries
taken as a whole or (ii) prevent or materially delay the performance by the
Company of any of its obligations under this Agreement or the consummation of
the Merger or the other transactions contemplated by this Agreement.
Section 4.5. Required Filings and Consents. The execution and delivery of
this Agreement by the Company does not, and the performance of this Agreement by
the Company will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any United States federal, state or local or
any foreign government or any court, administrative or regulatory agency or
commission or other governmen-
A-7
110
tal authority or agency, domestic or foreign (a "Governmental Entity"), except
(i) for applicable requirements, if any, of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "Securities
Act"), Securities and Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act"), state securities or
"blue sky" laws ("Blue Sky Laws") and filing and recordation of appropriate
merger documents as required by the PBCL, (ii) for those required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (iii) for filings contemplated by Section 4.14 hereof, and (iv) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, could not, individually or in the aggregate,
have a Company Material Adverse Effect.
Section 4.6. Compliance. Except as disclosed in Section 4.6 of the Company
Disclosure Letter, each of the Company and its Subsidiaries (i) has been
operated at all times in compliance with all laws applicable to the Company or
any of its Subsidiaries or by which any property, business or asset of the
Company or any of its Subsidiaries is bound or affected and (ii) is not in
default or violation of any notes, bonds, mortgages, indentures, contracts,
agreements, leases, licenses, permits, franchises, or other instruments or
obligations to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any property or asset of the
Company or any of its Subsidiaries is bound or affected, except in the case of
clauses (i) and (ii) which could not, individually or in the aggregate, have a
Company Material Adverse Effect.
Section 4.7. SEC Filings, Financial Statements.
(a) The Company has filed all forms, reports, statements and documents
required to be filed with the Securities and Exchange Commission (the
"SEC") since January 1, 1997 (collectively, the "Company SEC Reports"),
each of which has complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, each as in effect
on the date so filed. None of the Company SEC Reports (including, but not
limited to, any financial statements or schedules included or incorporated
by reference therein) contained when filed any untrue statement of a
material fact or omitted or omits to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) All of the financial statements included in the Company SEC Reports,
in each case, including any related notes thereto, as filed with the SEC,
as well as the unaudited consolidated balance sheet of the Company as of
December 31, 1999, together with the unaudited statements of income and
cash flow of the Company for the fiscal year then ended, including any
notes thereto (as furnished to Parent by the Company (collectively, the
"Company Financial Statements"), have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved (except as may be indicated in the
notes thereto and subject, in the case of the unaudited statements, to
normal, recurring audit adjustments) and fairly present the consolidated
financial position of the Company and its Subsidiaries at the respective
date thereof and the consolidated results of its operations and changes in
cash flows for the periods indicated. The Company does not anticipate any
changes to the accounting policies historically applied by the Company as a
result of newly adopted SAB No. 101.
(c) Except as disclosed in Section 4.7 of the Company Disclosure Letter,
there are no liabilities of the Company or any of its Subsidiaries of any
kind whatsoever, whether or not accrued and whether or not contingent or
absolute, that are material to the Company and its Subsidiaries, taken as a
whole, other than (i) liabilities disclosed or provided for in the
consolidated balance sheet of the Company and its Subsidiaries at December
31, 1999, including the notes thereto, (ii) liabilities disclosed in the
Company SEC Reports, (iii) liabilities incurred on behalf of the Company in
connection with this Agreement and the contemplated Merger, and (iv)
liabilities incurred in the ordinary course of business consistent with
past practice since December 31, 1999, none of which are, individually or
in the aggregate, reasonably likely to have a Company Material Adverse
Effect.
A-8
111
(d) The Company has heretofore furnished or made available to Parent a
complete and correct copy of any amendments or modifications which have not
yet been filed with the SEC to agreements, documents or other instruments
which previously had been filed by the Company with the SEC as exhibits to
the Company SEC Reports pursuant to the Securities Act or the Exchange Act.
Section 4.8. Absence of Certain Changes or Events. Except as contemplated
by this Agreement or as disclosed in Section 4.8 of the Company Disclosure
Letter, since December 31, 1998, the Company and its Subsidiaries have conducted
their respective businesses only in the ordinary course and consistent with
prior practice and there has not been (i) any event or occurrence of any
condition that has had or would reasonably be expected to have a Company
Material Adverse Effect, (ii) any declaration, setting aside or payment of any
dividend or any other distribution with respect to any of the capital stock of
the Company or any Subsidiary of the Company, (iii) any material change in
accounting methods, principles or practices employed by the Company or any of
its Subsidiaries, or (iv) any action of the type described in Section 6.1 which,
had such action been taken after the date of this Agreement, would be in
violation of any such Section.
Section 4.9. Taxes. The Company and each of its Subsidiaries have timely
filed all material Tax Returns required to be filed by any of them. All such Tax
Returns (as hereinafter defined) are correct and complete in all material
respects. All Taxes (as hereinafter defined) of the Company and its Subsidiaries
which are (i) shown as due on such Tax Returns, (ii) otherwise due and payable
or (iii) claimed or asserted by any taxing authority to be due, have been paid,
except for those Taxes being contested in good faith and for which adequate
reserves have been established in the financial statements included in the SEC
Reports in accordance with GAAP. There are no liens for any Taxes upon the
assets of the Company or any of its Subsidiaries, other than statutory liens for
Taxes not yet due and payable and liens for real estate Taxes contested in good
faith. The Company does not know of any proposed or threatened Tax claims or
assessments, which, individually or in the aggregate, exceed $500,000. Neither
the Company nor any of its Subsidiaries has made an election under Section
341(f) of the Code. Except as set forth in Section 4.9 of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries has waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency. The Company and each Subsidiary has
withheld and paid over to the relevant taxing authority all Taxes required to
have been withheld and paid in connection with payments to employees,
independent contractors, creditors, shareholders or other third parties. The
unpaid Taxes of the Company and its Subsidiaries for the current taxable period
did not, as of the most recent Company Financial Statement, exceed the reserve
for Tax liability (disregarding any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the face of
the balance sheet in the most recent Company Financial Statement (disregarding
any notes thereto). For purposes of this Agreement, (a) "Tax" (and, with
correlative meaning, "Taxes") means any federal, state, local or foreign income,
gross receipts, property, sales, use, license, excise, franchise, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty or addition thereto, whether disputed or not, imposed by any
Governmental Entity, and (b) "Tax Return" means any return, report or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
Section 4.10. Title to Assets.
(a) Except as set forth in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (the "10-K"), the Company and each of its
Subsidiaries have good and marketable title to, or a valid leasehold interest
in, all of their real and personal properties and assets reflected in the 10-K
or acquired after December 31, 1998 (other than assets disposed of since
December 31, 1998 in the ordinary course of business consistent with past
practice), in each case free and clear of all title defects, liens, encumbrances
and restrictions, except for (i) liens, encumbrances or restrictions which
secure indebtedness which are properly reflected in the 10-K; (ii) liens for
Taxes accrued but not yet payable; (iii) liens arising as a matter of law in the
ordinary course of business with respect to obligations incurred after December
31, 1998, provided that the obligations secured by such liens are not
delinquent; and (iv) such title defects, liens,
A-9
112
encumbrances and restrictions, if any, as individually or in the aggregate are
not reasonably likely to have a Company Material Adverse Effect. The Company
Disclosure Letter sets forth a correct and complete list of all real property
(i) owned or leased by the Company or a Subsidiary, (ii) as to which the Company
or a Subsidiary of the Company has a license, easement or right of way to use,
(iii) as to which the Company or a Subsidiary of the Company has the option to
purchase, lease, license or acquire an easement or right of way or (iv) in which
the Company or a Subsidiary of the Company has any other interest. Except as set
forth in Section 4.10 of the Company Disclosure Letter, the Company and each of
its Subsidiaries either own, or have valid leasehold interests in, all
properties and assets used by them in the conduct of their business.
(b) Except as set forth in Section 4.10 of the Company Disclosure Letter,
neither the Company nor any of its Subsidiaries has any legal obligation,
absolute or contingent, to any other person to sell or otherwise dispose of any
of its assets with an individual value of $100,000 or an aggregate value in
excess of $500,000.
Section 4.11. Change of Control Agreements. Except as set forth in Section
4.11 of the Company Disclosure Letter, neither the execution and delivery of
this Agreement nor the consummation of the Merger or the other transactions
contemplated by this Agreement, will (either alone or in conjunction with any
other event) result in, cause the accelerated vesting or delivery of, or
increase the amount or value of, any payment or benefit to any former or current
director, officer, employee, consultant or advisor of the Company. Without
limiting the generality of the foregoing, no amount paid or payable by the
Company in connection with the Merger or the other transactions contemplated by
this Agreement, including accelerated vesting of options, (either solely as a
result thereof or as a result of such transactions in conjunction with any other
event) will be an "excess parachute payment" within the meaning of Section 280G
of the Code.
Section 4.12. Litigation. Except for such matters disclosed in Section
4.12 of the Company Disclosure Letter which, if adversely determined, have not
resulted in, and would not reasonably be expected to result in, a loss,
individually or in the aggregate, to the Company or any of its Subsidiaries in
excess of $500,000, there are no claims, suits, actions, investigations,
indictments or information, or administrative, arbitration or other proceedings
("Litigation") pending or, to the Knowledge of the Company, threatened against
the Company or any of its Subsidiaries. Except for such matters which have not
resulted in, and would not reasonably be expected to result in, a loss,
individually or in the aggregate, to the Company or any of its Subsidiaries in
excess of $500,000, there are no judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court, administrative agency, or
by arbitration, pursuant to a grievance or other procedure) against or relating
to the Company or any of its Subsidiaries.
Section 4.13. Contracts and Commitments. Section 4.13 of the Company
Disclosure Letter sets forth a correct and complete list of the following
contracts to which the Company or a Subsidiary of the Company is a party
(including every amendment, modification or supplement to the foregoing): (i)
any contracts of employment, consulting or noncompete, (ii) agreements or
arrangements for the purchase or sale of any assets (otherwise than in the
ordinary course of business), (iii) agreements, contracts or indentures relating
to the borrowing of money, (iv) agreements with unions, material independent
contractor agreements and material leased or temporary employee agreements, (v)
leases of any real property involving annual rent of $100,000 or more, and (vi)
other than contracts identified in the Company Disclosure Letter pursuant to
Section 4.6, all other contracts, agreements or commitments involving payments
made by or to the Company or a Subsidiary of $500,000 or more. Except for
agreements, arrangements or commitments disclosed in the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to any
agreement, arrangement or commitment which is material to the business of the
Company taken as a whole. The Company has delivered or made available correct
and complete copies of all such agreements, arrangements and commitments to
Parent. Neither the Company nor any of its Subsidiaries is in default under any
such agreement, arrangement or commitment which has had, or could reasonably be
expected to have, a Company Material Adverse Effect.
Section 4.14. Information Supplied.
(a) None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in (A) the Form S-4 (as
hereinafter defined) to be filed with the SEC by Parent in connection with
the issuance of the Parent Common Stock in the Merger will, at the time the
A-10
113
Form S-4 becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading and (B) the Joint Proxy Statement/Prospectus included in the
Form S-4 related to the Company Shareholders Meeting and the Parent
Shareholders Meeting (each as hereinafter defined) and the Parent Common
Stock to be issued in the Merger will, on the date it is first mailed to
the holders of Company Common Stock and Parent Common Stock or at the time
of the Company Shareholders Meeting or the Parent Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Joint Proxy Statement/ Prospectus will comply as
to form in all material respects with the requirements of the Exchange Act.
(b) Notwithstanding the foregoing provisions of this Section 4.14, no
representation or warranty is made by the Company with respect to
statements made or incorporated by reference in the Form S-4 or the Joint
Proxy Statement/Prospectus based on information supplied by Parent for
inclusion or incorporation by reference therein.
Section 4.15. ERISA and Related Matters.
(a) Section 4.15 of the Company Disclosure Letter lists all deferred
compensation, pension, profit-sharing and retirement plans, and all bonus,
welfare, severance pay and other "employee benefit plans" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), fringe benefit or stock option plans, including
individual contracts, employee agreements, programs or arrangements,
providing the same or similar benefits, whether or not written,
participated in or maintained by the Company or with respect to which
contributions are made or obligations assumed by the Company in respect of
the Company (including health, life insurance and other benefit plans
maintained for former employees or retirees), at any time between January
1, 1995 and the Closing Date. Said plans or other arrangements are
sometimes collectively referred to in this Section as "Benefit Plans."
Copies of all Benefit Plans and related documents, including those setting
out the Company's personnel policies and procedures, and including any
insurance contracts, trust agreements or other arrangements under which
benefits are provided, as currently in effect, and descriptions of any such
plan which are not written have been delivered to Parent. The Company has
also delivered to Parent a copy of the summary plan description, if any,
for each Benefit Plan, as well as copies of any other summaries or
descriptions of any such Benefit Plans which have been provided to
employees or other beneficiaries during the current and previous three (3)
calendar years.
(b) Except as set forth in Section 4.15 of the Company Disclosure
Letter, the Company has fulfilled its obligations, to the extent
applicable, under the minimum funding requirements of Section 302 of ERISA
and Section 412 of the Code, with respect to each "employee benefit plan"
(as defined in Section 3(3) of ERISA) appearing in Section 4.15 of the
Company Disclosure Letter. Each Benefit Plan is in compliance with, and has
been administered in all respects consistent with, the presently applicable
provisions of ERISA, the Code and state law, including but not limited to
the satisfaction of all applicable reporting and disclosure requirements
under the Code, ERISA and state law. The Company has made all payments to
all Benefit Plans as required by the terms of each such plan in accordance,
if applicable, with the actuarial and funding assumptions in effect as for
the most recent actuarial valuation of such plans. All required actuarial
valuations and reports relating to said plans have been prepared and a copy
of the most recent actuarial valuation and report for each pension plan, as
defined in Section 3(2) of ERISA, has been provided to Parent, if
applicable. The Company has filed or caused to be filed with the Internal
Revenue Service annual reports on Form 5500 for each Benefit Plan
attributable to them for all years and periods for which such reports were
required and within the time period required by ERISA and the Code, and
copies of such reports for the past five years have been provided to
Parent. Except as disclosed in Section 4.15 of the Company Disclosure
Letter, the Company has funded or will fund each Benefit Plan attributable
to it in accordance with its terms through Closing, including the payment
of applicable premiums on any insurance contract funding a Benefit Plan for
coverage provided through Closing. To the extent that any annual
contribution for the current year is not yet required for any Benefit Plan
as of the Effective Time, the Company has made a pro rata
A-11
114
contribution to said plan for the period ended at the Effective Time or
said contribution has been accrued on the books of the Company.
(c) Except as set forth in Section 4.15 of the Company Disclosure
Letter, no "prohibited transaction," as defined in Section 406 of ERISA and
Section 4975 of the Code, has occurred in respect of any such Benefit Plan,
and no civil or criminal action brought pursuant to Part 5 of Title I or
ERISA is pending or is threatened in writing or orally against any
fiduciary of any such plan.
(d) Except as set forth in Section 4.15 of the Company Disclosure
Letter, the Internal Revenue Service has issued a letter for each employee
pension benefit plan, as defined in Section 3(2) of ERISA, listed in
Section 4.15 of the Company Disclosure Letter, determining that such plan
is a qualified plan under Section 401(a) of the Code and is exempt from
United States Federal Income Tax under Section 501(a) of the Code, and
there has been no occurrence since the date of any such determination
letter which has adversely affected such qualification. The Company does
not maintain a plan or arrangement intended to qualify under Section
501(c)(9) of the Code.
(e) Except as set forth in Section 4.15 of the Company Disclosure
Letter, each Benefit Plan that provides medical benefits has been operated
in compliance with all requirements of Section 4980B(f) of the Code and
Sections 601 through 608 of ERISA relating to continuation of coverage
under certain circumstances in which coverage would otherwise cease. All
former employees of the Company or other persons entitled to such
continuation of coverage through relationship to said former employees are
listed in Section 4.15 of the Company Disclosure Letter.
(f) Neither the Company nor any entity that is treated as a single
employer with the Company pursuant to Section 414(b), (c), (m) or (o) of
the Code currently maintains or contributes to any Benefit Plan that is
subject to Title IV of ERISA, nor has previously maintained or contributed
to any such plan that has resulted in any liability or potential liability
for the Company under said Title IV. There shall not be as of Closing any
outstanding unpaid minimum funding waiver within the meaning of Code
Section 412(d).
(g) Attached as a part of Section 4.15 of the Company Disclosure Letter
is a 5-year contribution history indicating the dollar amount contributed
and the level of contribution as a percentage of compensation of covered
participants for each profit sharing plan, stock bonus plan or other
retirement plan to which the Company makes discretionary contributions.
(h) Except as disclosed on Section 4.15 of the Company Disclosure
Letter, the Company does not maintain any Benefit Plan, plans or programs
that provide post-retirement medical benefits (other than benefits
described in Section 4.15 and those which are required by law),
post-employment benefits, death benefits or other post-retirement welfare
benefits. A copy of any written description of post-retirement welfare
benefits that has been provided to employees is attached hereto as a part
of Section 4.15 of the Company Disclosure Letter. Copies of each plan
document, insurance contract or other written instrument providing for
post-retirement welfare benefits, together with a description of any
advance funding arrangement that has been established to fund
post-retirement welfare benefits, are attached hereto as a part of Section
4.15 of the Company Disclosure Letter. Section 4.15 of the Company
Disclosure Letter contains a list of those persons who are currently
retired with a right to future post-retirement welfare benefits and also
contains a list of employees who would be currently eligible for
post-retirement welfare benefits if they retired and satisfied any waiting
period provided for under the applicable plan. Except as otherwise
disclosed in Section 4.15 of the Company Disclosure Letter, all plans or
programs for providing post-retirement medical, death or other welfare
benefits could be terminated by the Company as of Closing without liability
for such benefits to any employee who has not retired on or before the
Effective Time.
(i) Neither the Company nor any employer referred to in Section 4.15(f)
above, maintains, nor has contributed within the past five years to, any
multiemployer plan within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA. No such employer currently has any liability to make withdrawal
liability
A-12
115
payments to any multiemployer plan. There is no pending dispute between any
such employer and any multiemployer plan concerning payment of
contributions or payment of withdrawal liability payments.
(j) All Benefit Plans have been operated and administered in accordance
with their respective terms and no inconsistent representation or
interpretation has been made to any plan participant. Except as set forth
in Section 4.15 of the Company Disclosure Letter, no lawsuit or complaint
(including any dispute that might result in a lawsuit or complaint against,
by, or relating to any Benefit Plan or any fiduciary, as defined in Section
3(21) of ERISA) of a Benefit Plan has been filed or is pending.
(k) Any reference to Company in this Section 4.15 shall be deemed to
refer to each Subsidiary of Company, where relevant.
Section 4.16. Labor and Employment Matters. Except as set forth in Section
4.16 of the Company Disclosure Letter:
(a) There are no agreements or arrangements on behalf of any officer,
director or employee providing for payment or other benefits to such person
contingent upon the execution of this Agreement, the Closing or a
transaction involving a change of control of the Company.
(b) Neither the Company nor any of its Subsidiaries is a party to, or
bound by, any collective bargaining agreement or other contracts,
arrangements, agreements or understandings with a labor union or labor
organization that was certified by the National Labor Relations Board
("NLRB"). There is no existing, pending or threatened (i) unfair labor
practice charge or complaint, labor dispute, labor arbitration proceeding
or any other matter before the NLRB or any other comparable state agency
against or involving the Company or any of its Subsidiaries, (ii) activity
or proceeding by a labor union or representative thereof to organize any
employees of the Company or any of its Subsidiaries, (iii) certification or
decertification question relating to collective bargaining units at the
premises of the Company or any of its Subsidiaries or (iv) lockout, strike,
organized slowdown, work stoppage or work interruption with respect to such
employees.
(c) Neither the Company nor any of its Subsidiaries has taken any action
that would constitute a "Mass Layoff" or "Plant Closing" within the meaning
of the Worker Adjustment and Retraining Notification ("WARN") Act or would
otherwise trigger notice requirements or liability under any state or local
plant closing notice law. No agreement, arbitration or court decision or
governmental order in any way limits or restricts any of the Company, any
of its Subsidiaries or Parent from relocating or closing any of the
operations of the Company or any of its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries has failed to pay
when due any wages, bonuses, commissions, benefits, taxes, penalties or
assessments or other monies, owed to, or arising out of the employment of
or any relationship or arrangement with, any officer, director, employee,
sales representative, contractor, consultant or other agent. There are no
citations, investigations, administrative proceedings or formal complaints
of violations of any federal or state wage and hour laws pending or
threatened before the Department of Labor or any federal, state or
administrative agency or court against or involving the Company or any of
its Subsidiaries.
(e) The Company and each of its Subsidiaries are in compliance with all
immigration laws relating to employment and have properly completed and
maintained all applicable forms (including but not limited to I-9 forms)
and, to the Knowledge of the Company, there are no citations,
investigations, administrative proceedings or formal complaints of
violations of the immigration laws pending or threatened before the
Immigration and Naturalization Service or any federal, state or
administrative agency or court against or involving the Company or any of
its Subsidiaries.
(f) There are no investigations, administrative proceedings, charges or
formal complaints of discrimination (including discrimination based upon
sex, age, marital status, race, national origin, sexual preference,
disability, handicap or veteran status) pending or threatened before the
Equal Employment Opportunity Commission or any federal, state or local
agency or court against or involving the Company or any of its
Subsidiaries. No discrimination and/or retaliation claim is pending or, to
the Knowledge of
A-13
116
the Company, threatened against the Company or any of its Subsidiaries
under the 1866, 1877, 1964 or 1991 Civil Rights Acts, the Equal Pay Act,
the Age Discrimination in Employment Act, as amended, the Americans with
Disabilities Act, the Family and Medical Leave Act, the Fair Labor
Standards Act, ERISA, or any other federal law relating to employment or
any comparable state or local fair employment practices act regulating
discrimination in the workplace, and no wrongful discharge, libel, slander,
invasion of privacy or other claim (including but not limited to violations
of the Fair Credit Reporting Act, as amended, and any applicable
whistleblower statutes) under any state or federal law is pending or
threatened against the Company or any of its Subsidiaries.
(g) If the Company or any of its Subsidiaries is a Federal, State or
local contractor obligated to develop and maintain an affirmative action
plan, no discrimination claim, show-cause notice, conciliation proceeding,
sanctions or debarment proceedings is pending or has been threatened
against the Company or any of it Subsidiaries with the Office of Federal
Contract Compliance Programs or any other Federal agency or any comparable
state or local agency or court and no desk audit or on-site review is in
progress.
(h) There are no citations, investigations, administrative proceedings
or formal complaints of violations of local, state or federal occupational
safety and health laws pending or threatened before the Occupational Safety
and Health Review Commission or any federal, state or local agency or court
against or involving the Company or any of its Subsidiaries.
(i) No workers' compensation or retaliation claim is pending against the
Company or any of its Subsidiaries in excess of $250,000 in the aggregate,
and the Company maintains adequate insurance with respect to workers'
compensation claims pursuant to insurance policies that are currently in
force, or has accrued an adequate liability for such obligations,
including, without limitation, adequate accruals with respect to accrued
but unreported claims and retroactive insurance premiums.
Section 4.17. Environmental Compliance and Disclosure. Except as set forth
in Section 4.17 of the Company Disclosure Letter:
(a) The Company and each of its Subsidiaries possess, and are in
compliance with, all permits, licenses and government authorizations and
have filed all notices that are required under local, state and federal
Laws and regulations relating to protection of the environment, pollution
control, product registration and hazardous materials ("Environmental
Laws") applicable to the Company and each of its Subsidiaries, and the
Company and each of its Subsidiaries are in compliance with all applicable
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in those laws
or contained in any Law, regulation, code, plan, order, decree, judgment,
notice, permit or demand letter issued, entered, promulgated or approved
thereunder;
(b) Neither the Company nor any of its Subsidiaries has received notice
of actual or threatened liability under the Federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") or any
similar state or local statute or ordinance from any governmental agency or
any third party, and there are no facts or circumstances which could form
the basis for the assertion of any claim against the Company or any of its
Subsidiaries under any Environmental Laws including, without limitation,
CERCLA or any similar local, state or foreign Law with respect to any
on-site or off-site location;
(c) Neither the Company nor any of its Subsidiaries has entered into or
agreed to, nor does the Company or any of its Subsidiaries contemplate
entering into any consent decree or order, and are not subject to any
judgment, decree or judicial or administrative order relating to compliance
with, or the cleanup of hazardous materials under, any applicable
Environmental Laws;
(d) Neither the Company nor any of its Subsidiaries has been subject to
any administrative or judicial proceeding pursuant to and, to the Knowledge
of the Company, has not been alleged to be in violation of, applicable
Environmental Laws or regulations either now or any time during the past
five years;
A-14
117
(e) Neither the Company nor any of its Subsidiaries has received notice
that it is subject to any claim, obligation, liability, loss, damage or
expense of whatever kind or nature, contingent or otherwise, incurred or
imposed or based upon any provision of any Environmental Law and arising
out of any act or omission of the Company or any of its Subsidiaries, its
employees, agents or representatives or, to the Knowledge of the Company,
arising out of the ownership, use, control or operation by the Company or
any of its Subsidiaries of any plant, facility, site, area or property
(including, without limitation, any plant, facility, site, area or property
currently or previously owned or leased by the Company or any of its
Subsidiaries) from which any hazardous materials were released into the
environment (the term "release" meaning any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment, and the term "environment"
meaning any surface or ground water, drinking water supply, soil, surface
or subsurface strata or medium, or the ambient air);
(f) The Company has heretofore provided Parent with correct and complete
copies of all files of the Company and its Subsidiaries relating to
environmental matters (or an opportunity to review such files). Neither the
Company nor any of its Subsidiaries has paid any fines, penalties or
assessments within the last five years with respect to environmental
matters; and
(g) None of the assets owned by the Company or any of its Subsidiaries
or any real property leased by the Company or any of its Subsidiaries
contain any friable asbestos, regulated PCBs or underground storage tanks.
As used in this Agreement, the term "hazardous materials" means any waste,
pollutant, hazardous substance, toxic, ignitable, reactive or corrosive
substance, hazardous waste, special waste, industrial substance, by-product,
process intermediate product or waste, petroleum or petroleum-derived substance
or waste, chemical liquids or solids, liquid or gaseous products, or any
constituent of any such substance or waste, the use, handling or disposal of
which by the Company or any of its Subsidiaries (or, as used in Section 5.13,
Parent or any of its Subsidiaries) is in any way governed by or subject to any
applicable Law, rule or regulation of any Governmental Entity.
Section 4.18. Intellectual Property.
(a) Section 4.18(a) of the Company Disclosure Letter sets forth a true
and complete list of all Registered Intellectual Property (as hereinafter
described) owned by or licensed to the Company, with an indication as to
which of such items are owned by the Company (the "Owned Registered
Intellectual Property") and which are licensed to the Company (the
"Licensed Registered Intellectual Property").
For purposes of this Agreement, "Intellectual Property" means copyrights
(both registered and unregistered), mask works, trademarks (both registered
and unregistered), trade names, service marks, service names, patents,
patent applications, proprietary information, trade secrets, technical
information and data, computer programs and program rights and other
similar intangible property rights and interests (and any goodwill
associated with any of the foregoing) arising under the laws of any
applicable jurisdiction. "Registered Intellectual Property" means
Intellectual Property that is the subject of a patent registration,
copyright registration or trademark registration or an application for any
of the foregoing.
(b) All of the Owned Registered Intellectual Property has been duly
issued and not canceled, abandoned or otherwise terminated.
(c) The Company uses no Intellectual Property in its business except for
(i) the Registered Intellectual Property, (ii) those other items of
Intellectual Property disclosed in Section 4.18(c)(ii) of the Company
Disclosure Letter, (iii) those other items of Intellectual Property that,
if the Company were deprived of the use thereof, such deprivation would not
have a materially adverse impact on the business and operations of the
Company and (iv) COTS Software (as hereinafter defined). Section
4.18(c)(ii) of the Company Disclosure Letter indicates the nature of the
applicable Intellectual Property and whether such Intellectual Property is
owned by the Company or licensed to the Company (and, if licensed, the name
of the applicable licensor and a reference to the applicable license
agreement).
A-15
118
For purposes of this Agreement, "COTS Software" means software that is
licensed by third parties to willing licensees on an indiscriminate,
off-the-shelf basis, pursuant to license terms that are non-negotiable at a
price of not more than $2,000 per copy.
For purposes of this Agreement, "Owned Intellectual Property" means,
collectively, the Owned Registered Intellectual Property and the
Intellectual Property indicated in Section 4.18(c)(ii) of the Company
Disclosure Letter as being owned by the Company.
For purposes of this Agreement, "Licensed Intellectual Property" means,
collectively, the Licensed Registered Intellectual Property and the
Intellectual Property indicated in Section 4.18(c)(ii) of the Company
Disclosure Letter as being licensed to the Company, with respect to which
the Company or its Subsidiaries makes annual license payments in excess of
$100,000.
(d) The Company has taken reasonable measures to protect and maintain
the rights of the Company in the Owned Intellectual Property and the
Licensed Intellectual Property.
(e) Except as set forth in Section 4.18(e) of the Company Disclosure
Letter, the Company has not sent or otherwise communicated to any other
person any notice, charge, claim or assertion of, or has any Knowledge of,
any present, impending or threatened infringement by any other person of
any of the Owned Intellectual Property, and to the Knowledge of the
Company, no third party has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any of the Owned
Intellectual Property.
(f) The Company has not received notice alleging that (i) the Company
has violated or is violating any Intellectual Property of any other person,
or (ii) any other person or entity claims any interest in any Owned
Intellectual Property.
(g) The Company is not infringing upon or otherwise acting adversely to
any Intellectual Property owned by any other person, and there is no claim
or action pending or overtly threatened with respect thereto.
(h) Section 4.18(h)(i) of the Company Disclosure Letter sets forth a
true and complete list of all software, computer programs and databases
owned or licensed by the Company excluding any COTS Software (the
"Software"), making reference to the other Sections of the Company
Disclosure Letter to this Agreement where such Software may already be
listed, with an indication as to which items are owned by the Company (the
"Owned Software") and which are licensed to the Company (the "Licensed
Software"). Except for licenses of the Owned Software granted by the
Company to others in the ordinary course of business, the Company has not
licensed any of the Owned Intellectual Property to any other person, nor
does any other person have any option or other right to acquire any of the
Owned Intellectual Property except as otherwise set forth in Section
4.18(h)(ii) of the Company Disclosure Letter. The Company has not disclosed
or granted any right of access to the source code of any of the Owned
Software except to (i) employees of the Company and (ii) as set forth in
Section 4.18(h)(iii) of the Company Disclosure Letter.
(i) Except as disclosed in Section 4.18(i) of the Company Disclosure
Letter: (i) the Company will upon Closing deliver to Parent complete,
current copies of all user and technical documentation related to the
Software and access to all source code for the Software to which the
Company has the rights to such source code; (ii) the Software performs in
all material respects in accordance with the documentation and other
written material used in connection with the Software and is free from any
material defects in programming and operation, contains all current
revisions of such Software, and includes all computer programs, materials,
tapes, know-how, object and source codes related to the Software; (iii) no
employee, contractor or agent (directly or through employees or
subcontractors or sub-agents) of the Company has developed or assisted in
the enhancement of any of the Owned Software or the development of any
program or product based on any of the Owned Software or any part thereof
without assigning all of such person's rights and interest in the same to
the Company pursuant to an agreement included in the contracts set forth in
Section 4.13 of the Company Disclosure Letter; and (iv) except as provided
in such contracts, the Company has no obligation to compensate any person
for the
A-16
119
development, enhancement, creation of derivative works, use, license or
exploitation of any of the Software.
(j) Except as disclosed in Section 4.18(j) of the Company Disclosure
Letter, no shareholder or director, officer, employee (including both
current and former employees), consultant (including both current and
former consultants) or independent contractor (including both current and
former contractors) of the Company owns, directly or indirectly, in whole
or in part, any Owned Intellectual Property.
Section 4.19. Year 2000 Compliance.
(a) The Company has reviewed its operations and the operations of each
Subsidiary of the Company with a view to assessing whether its business was
adversely affected by not being Year 2000 Compliant (as hereinafter
defined) and has taken such actions as it deems necessary or advisable to
address Year 2000 Compliance. All of the product(s) and/or service(s)
offered and/or used by the Company or its Subsidiaries, including each item
of hardware, software, and firmware; any system, equipment, or products
consisting of or containing one or more thereof; and any and all
enhancements, upgrades, customizations, modifications, maintenance and the
like, currently and at any time in the past are, to the Company's
Knowledge, as of the date of this Agreement, Year 2000 Compliant. In those
instances where the Company or any of its Subsidiaries is under an
obligation to repair or replace product(s) or service(s) previously
provided by the Company or such Subsidiary to meet the Company's or such
Subsidiary's contractual obligations, to avoid personal injury, to avoid
misrepresentation claims, or due to other obligations, the Company or such
Subsidiary has repaired or replaced those product(s) and service(s).
(b) To the Company's Knowledge, neither the Company nor any of its
Subsidiaries is subject to any pending or threatened regulatory action,
proceeding or investigation concerning the Year 2000 Compliance of the
Company's or any of its Subsidiaries' products, services or operations, and
there is no basis for any such regulatory action, investigation or
proceeding. The Company and its Subsidiaries are in material compliance
with all applicable regulatory rules, regulations and requirements in
regards to the Year 2000 Compliance of their products, services and
operations. No claim that any of the Company's or any of its Subsidiaries'
products or services are not Year 2000 Compliant, including but not limited
to product liability claims, has been asserted or threatened, and there is
no basis for any such claim or action. The Company and its Subsidiaries
have furnished Parent with correct and complete copies of any customer
agreements or other materials in which the Company or any Subsidiary has
furnished (or could be deemed to have furnished) assurances as to the Year
2000 Compliance of the Company's or such Subsidiary's products or services,
including any responses to surveys or requests for certification of Year
2000 Compliance and letters of assurance to customers.
(c) All vendors of products or services material to the Company and its
Subsidiaries, and their respective products, services and operations, are,
to the Company's Knowledge, Year 2000 Compliant, and each such vendor has
continued to furnish its products or services to the Company and such
Subsidiary, without interruption or delay, on and after January 1, 2000.
(d) "Year 2000 Compliant" means that (a) the products, services, or
other item(s) at issue accurately process, provide and/or receive date/time
data (including but not limited to calculating, comparing, and sequencing),
within, from, into, and between centuries (including the twentieth and
twenty-first centuries and the years 1999 and 2000), including but not
limited to leap year calculations, and (b) neither the performance nor the
functionality nor the supply of the products, services, and other item(s)
at issue will be or has been affected by dates/times prior to, on, after,
or spanning January 1, 2000. The design of the products, services, and
other item(s) at issue to ensure compliance with the foregoing warranties
and representations includes proper date/time data century recognition and
recognition of 1999 and 2000, calculations that accommodate same century
and multi-century formulae and date/time values before, on, after, and
spanning January 1, 2000, and date/time data interface values that reflect
the century, 1999, and 2000. In particular, but without limitation, (i) no
value for current date/time will cause or has caused any error,
interruption, or decreased performance in or for such product(s),
service(s), and other item(s), (ii) all manipulations of date and time
related data
A-17
120
(including but not limited to calculating, comparing, sequencing,
processing, and outputting) produces correct results for all valid dates
and times, including when used in combination with Year 2000 Compliant
products, services, or items, (iii) all date/time elements in interfaces
and data storage specifies the century to eliminate date ambiguity without
human intervention, including leap year calculations, (iv) where any
date/time element is represented without a century, the correct century is
unambiguous for all manipulations involving that element, (v) authorization
codes, passwords, and zaps (purge functions) function normally and in the
same manner during prior to, on, and after January 1, 2000, including the
manner in which they function with respect to expiration dates and CPU
serial numbers, and (vi) the Company's and its Subsidiaries' (or, as used
in Section 5.14, Parent's and its Subsidiaries') supply of the product(s),
service(s), and other item(s) was not interrupted, delayed, decreased, or
otherwise affected by the advent of the year 2000.
Section 4.20. Brokers. Except for the Company's Independent Advisor, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with this Agreement, the Merger or the
other transactions contemplated by this Agreement based upon arrangements made
by or on behalf of the Company. Section 4.20 of the Company Disclosure Letter
includes a complete and correct copy of all agreements between the Company and
the Company's Independent Advisor pursuant to which such firm would be entitled
to any payment relating to this Agreement, the Merger or the other transactions
contemplated by this Agreement.
Section 4.21. Insurance Policies. The Company has delivered to Parent
prior to the date hereof a complete and accurate list of all insurance policies
in force naming the Company, any of its Subsidiaries or employees thereof as an
insured or beneficiary or as a loss payable payee or for which the Company or
any Subsidiary of the Company has paid or is obligated to pay all or part of the
premiums. Neither the Company nor any Subsidiary of the Company has received
notice of any pending or threatened cancellation or premium increase
(retroactive or otherwise) with respect thereto, and each of the Company and
such Subsidiaries is in compliance in all material respects with all conditions
contained therein. Except as set forth in Section 4.21 of the Company Disclosure
Letter, there are no material pending claims against such insurance policies by
the Company or any Subsidiary of the Company as to which insurers are defending
under reservation of rights or have denied liability, and there exists no
material claim under such insurance policies that has not been properly filed by
the Company or any Subsidiary.
Section 4.22. Notes and Accounts Receivable.
(a) Except as disclosed in Section 4.22 of the Company Disclosure
Letter, there are no notes receivable of the Company or any Subsidiary of
the Company owing by any director, officer, stockholder or employee of the
Company or any Subsidiary of the Company.
(b) Except as disclosed in Section 4.22 of the Company Disclosure
Letter, all accounts receivable of the Company and any Subsidiary of the
Company are current or covered by adequate reserves for uncollectability,
and there are no material disputes regarding the collectability of any such
accounts receivable that would reasonably be expected to have a Company
Material Adverse Effect.
Section 4.23. Transactions with Affiliates. Except as set forth in Section
4.23 of the Company Disclosure Letter or in the Company SEC Reports filed since
January 1, 1999 (other than compensation and benefits received in the ordinary
course of business as an employee or director of the Company or its
Subsidiaries), no director, officer or other "affiliate" or "associate" (as
hereinafter defined) of the Company or any Subsidiary of the Company or any
entity in which, to the Knowledge of the Company, any such director, officer or
other affiliate or associate, owns any beneficial interest (other than a
publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 1% of the stock of
which is beneficially owned by any such persons) has any interest in: (i) any
contract, arrangement or understanding with, or relating to the business or
operations of Company or any Subsidiary of the Company; (ii) any loan,
arrangement, understanding, agreement or contract for or relating to
indebtedness of the Company or any Subsidiary of the Company; or (iii) any
property (real, personal or mixed), tangible, or intangible, used or currently
intended to be used in, the business or operations of the Company or any
Subsidiary of the Company.
A-18
121
Section 4.24. No Existing Discussions. As of the date hereof, the Company
is not engaged, directly or indirectly, in any negotiations or discussions with
any other party with respect to an Company Competing Proposal (as hereinafter
defined).
Section 4.25. Pooling; Tax Matters.
(a) The Company intends that the Merger be accounted for under the
"pooling-of-interests" method under the requirements of Opinion No. 16
(Business Combinations) of the Accounting Principles Board of the American
Institute of Certified Public Accountants, the Financial Accounting
Standards Board, and the Regulations of the SEC. To the Knowledge of the
Company, neither the Company nor any of its affiliates has taken or agreed
to take any action, failed to take any action or is aware of any fact or
circumstance that would prevent (i) the Merger from being treated for
financial accounting purposes as a "pooling-of-interests" in accordance
with GAAP and the rules and regulations of the SEC or (ii) the Merger from
constituting a reorganization within the meaning of Section 368(a) of the
Code.
(b) The Company has no Knowledge of any reason why it may not receive a
letter from Deloitte & Touche LLP (the "Company's Accountants") dated as of
the Closing Date and addressed to the Company in which the Company's
accountants will concur with the Company's management's conclusion that no
conditions exist related to the Company that would preclude Parent from
accounting for the Merger as a "pooling-of-interests."
Section 4.26. Disclosure. No representation, warranty or covenant made by
the Company in this Agreement or in the Company Disclosure Letter contains an
untrue statement of a material fact or omits to state a material fact required
to be stated herein or therein or necessary to make the statements contained
herein or therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Each of Parent and Merger Sub represents and warrants to the Company as
follows:
Section 5.1. Organization and Standing. Each of Parent and each Subsidiary
of Parent (a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, (b) has full
corporate power and authority to own, lease and operate it properties and assets
and to conduct its business as presently conducted and (c) is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed would not,
individually or in the aggregate, have a Parent Material Adverse Effect (as
hereinafter defined). Parent has furnished or made available to the Company
correct and complete copies of its articles of incorporation (including any
certificates of designations attached thereto, the "Parent Articles of
Incorporation") and bylaws (the "Parent Bylaws") and the articles of
incorporation and bylaws (or equivalent organizational documents) of each of its
Subsidiaries, each as amended to date. Such articles of incorporation, bylaws or
equivalent organizational documents are in full force and effect, and neither
Parent nor any such Subsidiary is in violation of any provision of its
certificate of incorporation, bylaws or equivalent organizational documents.
Section 5.2. Capitalization. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock and 10,000,000 shares of
preferred stock, $.10 par value per share ("Parent Preferred Stock"). As of the
date hereof, (i) 29,519,116 shares of Parent Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable and
free of preemptive rights, (ii) 467,600 (included in outstanding amount) shares
of Parent Common Stock are held in the treasury of Parent, (iii) 5,901,742
(restricted stock included herein are included in the outstanding stock number)
awards are outstanding pursuant to the ChoicePoint, Inc. 1997 Omnibus Stock
Incentive Plan ("Parent Awards"), each
A-19
122
such option entitling the holder thereof to purchase one share of Parent Common
Stock, and 1,662,484 shares of Parent Common Stock are authorized and reserved
for future issuance pursuant to the ChoicePoint, Inc. 1997 Omnibus Stock
Incentive Plan, and (iv) no shares of Parent Preferred Stock are issued and
outstanding. Section 5.2 of the Parent Disclosure Letter delivered by Parent to
the Company concurrently with the execution of this Agreement (the "Parent
Disclosure Letter") sets forth a correct and complete list of the outstanding
Parent Options with the exercise price. Except as set forth above or in Section
5.2 of the Parent Disclosure Letter, there are no options, warrants, convertible
securities, subscriptions, stock appreciation rights, phantom stock plans or
stock equivalents or other rights, agreements, arrangements or commitments
(contingent or otherwise) of any character issued or authorized by the Parent
relating to the issued or unissued capital stock of Parent or obligating Parent
to issue or sell any shares of capital stock of, or options, warrants,
convertible securities, subscriptions or other equity interests in, Parent. All
shares of Parent Common Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
There are no outstanding contractual obligations of Parent to repurchase, redeem
or otherwise acquire any shares of Parent Common Stock or to pay any dividend or
make any other distribution in respect thereof or to provide funds to, or make
any investment (in the form of a loan, capital contribution or otherwise) in,
any person. Parent owns beneficially and of record all of the issued and
outstanding capital stock of each Subsidiary of Parent and, except as otherwise
set forth in Section 5.2 of Parent Disclosure Letter, does not own an equity
interest in any other corporation, partnership or entity, other than in such
Subsidiaries. Each outstanding share of capital stock of each Subsidiary of
Parent is duly authorized, validly issued, fully paid and nonassessable and each
such share owned by Parent or another Subsidiary of Parent is free and clear of
all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on Parent's or such other Subsidiary's voting
rights, charges and other encumbrances of any nature whatsoever.
Section 5.3. Authority for Agreement.
(a) Each of Parent and Merger Sub has all necessary power and authority
to execute and deliver this Agreement, to perform its obligations hereunder
and, subject to obtaining necessary shareholder approval of Parent, to
consummate the Merger and the other transactions contemplated by this
Agreement. The execution, delivery and performance by each of Parent and
Merger Sub of this Agreement, and the consummation by each of Parent and
Merger Sub of the Merger and the other transactions contemplated by this
Agreement, have been duly authorized by all necessary corporate action
(including, without limitation, the unanimous approval of the Board of
Directors of each of Parent and Merger Sub and the sole shareholder of
Merger Sub), and no other corporate proceedings on the part of either
Parent or Merger Sub are necessary to authorize this Agreement or to
consummate the Merger or the other transactions contemplated by this
Agreement (other than, with respect to the Merger, the approval and
adoption of this Agreement by the affirmative vote of the then outstanding
shares of Parent Common Stock and the filing and recordation of appropriate
merger documents as required by the PBCL). This Agreement has been duly
executed and delivered by each of Parent and Merger Sub and, assuming the
due authorization, execution and delivery by the Company, constitutes a
legal, valid and binding obligation of each of Parent and Merger Sub
enforceable against each of Parent and Merger Sub in accordance with its
terms. The Board of Directors of Parent has taken all action to the extent
necessary (including, if required, amending the Parent Rights Agreement) in
order to render the Parent Rights inapplicable to the Merger and the other
transactions contemplated by this Agreement to the extent provided herein.
The affirmative vote of holders of the outstanding shares of Parent Common
Stock entitled to vote at a duly called and held meeting of shareholders is
the only vote of the holders of any capital stock of Parent necessary to
approve this Agreement, the Merger and the other transactions contemplated
by this Agreement.
(b) At a meeting duly called and held on February 14, 2000, the Board of
Directors of each of Parent and Merger Sub unanimously (i) determined that
this Agreement and the other transactions contemplated hereby, including
the Merger, are fair to and in the best interests of each of Parent and
Merger Sub and the holders of Parent Common Stock, (ii) approved,
authorized and adopted this
A-20
123
Agreement, the Merger and the other transactions contemplated hereby, and
(iii) resolved to recommend approval and adoption of this Agreement and the
Merger by the holders of Parent Common Stock. The actions taken by the
Board of Directors of Parent constitute approval of the Merger, this
Agreement and transactions contemplated hereby by the Board of Directors of
Parent under the provisions of Sections 14-2-1110 et seq. and 14-2-1131 of
the Georgia Business Corporate Code such that Sections 14-2-1110 et seq.
and 14-2-1131 of the Georgia Business Corporate Code do not apply to this
Agreement or the transactions contemplated hereby. Other than Sections
14-2-1110 et seq. and 14-2-1131 of the Georgia Business Corporate Code, no
state antitakeover or similar statute is applicable to the Company in
connection with the Merger, this Agreement or any of the transactions
contemplated hereby.
(c) The Robinson-Humphrey Company LLC, the independent financial advisor
to the Board of Directors of Parent ("Parent's Independent Advisor"), has
delivered to the Board of Directors of Parent its written opinion dated as
of the date of this Agreement, that, as of such date and based on the
assumptions, qualifications and limitations contained therein, the Exchange
Ratio in the Merger was fair, from a financial point of view, to the
shareholders of Parent.
Section 5.4. No Conflict. The execution and delivery of this Agreement by
each of Parent and Merger Sub do not, and the performance of this Agreement by
each of Parent and Merger Sub and the consummation of the Merger and the other
transactions contemplated by this Agreement will not, (i) conflict with or
violate Parent's or Merger Sub's Articles of Incorporation or Parent's or Merger
Sub's Bylaws or equivalent organizational documents of any of Parent's
Subsidiaries, (ii) subject to Section 5.5, conflict with or violate any law
applicable to each of Parent and Merger Sub or any of Parent's Subsidiaries or
by which any property or asset of Parent or its Subsidiaries is bound or
affected, or (iii) except as set forth in Section 5.4 of the Parent Disclosure
Letter, result in a breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, give to others
any right of termination, amendment, acceleration or cancellation of, result in
triggering any payment or other obligations, or result in the creation of a lien
or other encumbrance on any property or asset of Parent or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or any of its Subsidiaries is a party or by which Parent or any
of its Subsidiaries or any property or asset of any of them is bound or
affected, except in the case of clauses (ii) and (iii) above for any such
conflicts, violations, breaches, defaults or other occurrences which could not,
individually or in the aggregate, have a Parent Material Adverse Effect. "Parent
Material Adverse Effect" shall mean, with respect to Parent, any change, event
or effect shall have occurred or, to the Knowledge of Parent, been threatened
that, when taken together with all other adverse changes, events or effects that
have occurred or been threatened (exclusive, however, of (1) any such changes,
events, or effects that occur as a result of conditions affecting (A) the
information services or public records database businesses as a whole or (B) the
stock markets and capital markets generally or the United States economy as a
whole and (2) any such changes, events, or effects which have occurred prior to
the date hereof and have been disclosed to the Company in writing prior to the
date hereof), is or is reasonably likely to (i) be materially adverse to the
business, results of operations, properties, prospects, condition (financial or
otherwise), assets, liabilities (including, without limitation, contingent
liabilities) of Parent and its Subsidiaries taken as a whole or (ii) prevent or
materially delay the performance by either Parent or Merger Sub of any of its
obligations under this Agreement or the consummation of the Merger or the other
transactions contemplated by this Agreement.
Section 5.5. Required Filings and Consents. The execution and delivery of
this Agreement by such person do not, and the performance of this Agreement by
such person will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Entity, except (i) for
applicable requirements, if any, of the Securities Act, the Exchange Act, Blue
Sky Laws and filing and recordation of appropriate merger documents as required
by the PBCL, (ii) for those required by the HSR Act, (iii) for filings
contemplated by Section 5.12 and (iv) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
could not, individually or in the aggregate, have a Parent Material Adverse
Effect.
A-21
124
Section 5.6. Compliance Except as disclosed in Section 5.6 of the Parent
Disclosure Letter, each of Parent and its Subsidiaries (i) has been operated at
all times in compliance with all laws applicable to Parent or any of its
Subsidiaries or by which any property, business or asset of Parent or any of its
Subsidiaries is bound or affected and (ii) is not in default or violation of any
notes, bonds, mortgages, indentures, contracts, agreements, leases, licenses,
permits, franchises, or other instruments or obligations to which Parent or any
of its subsidiaries is a party or by which Parent or any of its Subsidiaries or
any property or asset of Parent or any of its Subsidiaries is bound or affected,
except in the case of clauses (i) and (ii) which could not, individually or in
the aggregate, have a Parent Material Adverse Effect.
Section 5.7. SEC Filings, Financial Statements.
(a) Parent has filed all forms, reports, statements and documents
required to be filed with the SEC since June 9, 1997 (collectively, the
"Parent SEC Reports"), each of which has complied in all material respects
with the applicable requirements of the Securities Act or the Exchange Act,
each as in effect on the date so filed. None of the Parent SEC Reports
(including, but not limited to, any financial statements or schedules
included or incorporated by reference therein) contained when filed any
untrue statement of a material fact or omitted or omits to state a material
fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) All of the financial statements included in the Parent SEC Reports,
in each case, including any related notes thereto, as filed with the SEC,
as well as the unaudited consolidated balance sheet of Parent as of
December 31, 1999, together with the unaudited statements of income and
cash flows of Parent for the fiscal year then ended, including any notes
thereto (as furnished to the Company by Parent) (collectively, the "Parent
Financial Statements"), have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto and subject, in the case of the unaudited
statements, to normal, recurring audit adjustments) and fairly present the
consolidated financial position of Parent and its subsidiaries at the
respective date thereof and the consolidated results of its operations and
changes in cash flows for the periods indicated. Parent does not anticipate
any changes to the accounting policies historically applied by Parent as a
result of newly adopted SAB No. 101.
(c) Except as disclosed in Section 5.7 of the Parent Disclosure Letter,
there are no liabilities of Parent or any of its subsidiaries of any kind
whatsoever, whether or not accrued and whether or not contingent or
absolute, that are material to Parent and its subsidiaries, taken as a
whole, other than (i) liabilities disclosed or provided for in the
consolidated balance sheet of Parent and its Subsidiaries at December 31,
1999, including the notes thereto, (ii) liabilities disclosed in the Parent
SEC Reports, (iii) liabilities incurred on behalf of the Company in
connection with this Agreement and the contemplated Merger, and (iv)
liabilities incurred in the ordinary course of business consistent with
past practice since December 31, 1999, none of which are, individually or
in the aggregate, reasonably likely to have a Parent Material Adverse
Effect.
(d) Parent has heretofore furnished or made available to the Company a
complete and correct copy of any amendments or modifications which have not
yet been filed with the SEC to agreements, documents or other instruments
which previously had been filed by Parent with the SEC as exhibits to the
Parent SEC Reports pursuant to the Securities Act or the Exchange Act.
Section 5.8. Absence of Certain Changes or Events. Except as contemplated
by this Agreement or as disclosed in Section 5.8 of the Parent Disclosure
Letter, since December 31, 1998, Parent and its Subsidiaries have conducted
their respective businesses only in the ordinary course and consistent with
prior practice and there has not been (i) any event or occurrence of any
condition that has had or would reasonably be expected to have a Parent Material
Adverse Effect, (ii) any declaration, setting aside or payment of any dividend
or any other distribution with respect to any of the capital stock of Parent or
any Subsidiary, (iii) any material change in accounting methods, principles or
practices employed by Parent, or (iv) any action of the type described in
Section 6.2 which had such action been taken after the date of this Agreement
would be in violation of any such Section.
A-22
125
Section 5.9. Taxes. Parent and each of its Subsidiaries have timely filed
all material Tax Returns required to be filed by any of them. All such Tax
Returns are correct and complete in all material respects. All Taxes of Parent
and its Subsidiaries which are (i) shown as due on such Tax Returns, (ii)
otherwise due and payable or (iii) claimed or asserted by any taxing authority
to be due, have been paid, except for those Taxes being contested in good faith
and for which adequate reserves have been established in the financial
statements included in the Parent SEC Reports in accordance with GAAP. There are
no liens for any Taxes upon the assets of Parent or any of its Subsidiaries,
other than statutory liens for Taxes not yet due and payable and liens for real
estate Taxes contested in good faith. Parent does not know of any proposed or
threatened Tax claims or assessments which, individually or in the aggregate,
exceed $500,000. Except as set forth in Section 5.9 of the Parent Disclosure
Letter, neither the Parent nor any of its Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency. Neither Parent nor any of its Subsidiaries
has made an election under Section 341(f) of the Code. Parent and each
Subsidiary has withheld and paid over to the relevant taxing authority all Taxes
required to have been withheld and paid in connection with payments to
employees, independent contractors, creditors, shareholders or other third
parties, except for such Taxes which individually or in the aggregate could not
have a Parent Material Adverse Effect. The unpaid Taxes of Parent and its
Subsidiaries for the current taxable period did not, as of the most recent
Parent Financial Statement, exceed the reserve for Tax liability (disregarding
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the balance sheet in the most
recent Parent Financial Statement (disregarding any notes thereto).
Section 5.10. Title to Assets.
(a) Except as set forth in the Parent's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 (the "Parent 10-K") or except as
set forth in Section 5.10 of Parent Disclosure Letter, Parent and each of
its Subsidiaries have good and marketable title to, or a valid leasehold
interest in, all of their real and personal properties and assets reflected
in the Parent 10-K or acquired after December 31, 1998 (other than assets
disposed of since December 31, 1998 in the ordinary course of business
consistent with past practice), in each case free and clear of all title
defects, liens, encumbrances and restrictions, except for (i) liens,
encumbrances or restrictions which secure indebtedness which are properly
reflected in the Parent 10-K; (ii) liens for Taxes accrued but not yet
payable; (iii) liens arising as a matter of law in the ordinary course of
business with respect to obligations incurred after December 31, 1998,
provided that the obligations secured by such liens are not delinquent; and
(iv) such title defects, liens, encumbrances and restrictions, if any, as,
individually or in the aggregate, are not reasonably likely to have a
Parent Material Adverse Effect. Except as set forth in Section 5.10 of the
Parent Disclosure Letter, Parent and each of its Subsidiaries either own,
or have valid leasehold interests in, all properties and assets used by
them in the conduct of their business.
(b) Except as set forth in Section 5.10 of Parent Disclosure Letter,
neither Parent nor any of its Subsidiaries has any legal obligation,
absolute or contingent, to any other person to sell or otherwise dispose of
any of its assets with an individual value of $100,000 or an aggregate
value in excess of $500,000.
Section 5.11. Litigation. Except for such matters disclosed in Section
5.11 of the Parent Disclosure Letter which, if adversely determined, have not
resulted in, and would not reasonably be expected to result in, a loss,
individually or in the aggregate, to Parent or any of its Subsidiaries in excess
of $500,000, there is no Litigation pending or, to the Knowledge of Parent,
threatened against Parent or any of its Subsidiaries. Except for such matters
which have not resulted in, and would not reasonably be expected to result in, a
loss, individually or in the aggregate, to Parent or any of its Subsidiaries in
excess of $500,000, there are no judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court, administrative agency, or
by arbitration, pursuant to a grievance or other procedure) against or relating
to Parent or any of its Subsidiaries.
A-23
126
Section 5.12. Information Supplied.
(a) None of the information supplied or to be supplied by Parent for
inclusion or incorporation by reference in (A) the Form S-4 will, at the
time the Form S-4 becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and (B) the Joint Proxy Statement/Prospectus will, on the
date it is first mailed to the Company's shareholders or Parent's
shareholders or at the time of the Company Shareholders Meeting or the
Parent Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Form S-4 and
the Joint Proxy Statement/Prospectus will comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act.
(b) Notwithstanding the foregoing provisions of this Section 5.12, no
representation or warranty is made by Parent or Merger Sub with respect to
statements made or incorporated by reference in the Form S-4 or the Joint
Proxy Statement/Prospectus based on information supplied by the Company for
inclusion or incorporation by reference therein.
Section 5.13. Environmental Compliance and Disclosure. Except as set forth
in Section 5.13 of the Parent Disclosure Letter:
(a) Parent and each of its Subsidiaries possess, and are in compliance
with, all permits, licenses and government authorizations and has filed all
notices that are required under Environmental Laws applicable to Parent and
each of its Subsidiaries, and Parent and each of its Subsidiaries are in
compliance with all applicable limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in those laws or contained in any Law, regulation,
code, plan, order, decree, judgment, notice, permit or demand letter
issued, entered, promulgated or approved thereunder;
(b) Neither Parent nor any of its Subsidiaries has received notice of
actual or threatened liability under CERCLA or any similar state or local
statute or ordinance from any governmental agency or any third party, and
there are no facts or circumstances which could form the basis for the
assertion of any claim against Parent or any of its Subsidiaries under any
Environmental Laws including, without limitation, CERCLA or any similar
local, state or foreign Law with respect to any on-site or off-site
location;
(c) Neither Parent nor any of its Subsidiaries has entered into or
agreed to, nor does Parent or any of its Subsidiaries contemplate entering
into any consent decree or order, and are not subject to any judgment,
decree or judicial or administrative order relating to compliance with, or
the cleanup of hazardous materials under, any applicable Environmental
Laws;
(d) Neither Parent nor any of its Subsidiaries has been subject to any
administrative or judicial proceeding pursuant to and, to the Knowledge of
Parent, has not been alleged to be in violation of, applicable
Environmental Laws or regulations either now or any time during the past
five years;
(e) Neither Parent nor any of its Subsidiaries has received notice that
it is subject to any claim, obligation, liability, loss, damage or expense
of whatever kind or nature, contingent or otherwise, incurred or imposed or
based upon any provision of any Environmental Law and arising out of any
act or omission of Parent or any of its Subsidiaries, its employees, agents
or representatives or, to the Knowledge of Parent, arising out of the
ownership, use, control or operation by Parent or any of its Subsidiaries
of any plant, facility, site, area or property (including, without
limitation, any plant, facility, site, area or property currently or
previously owned or leased by Parent or any of its Subsidiaries) from which
any hazardous materials were released into the environment (the term
"release" meaning any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing
into the environment, and the term "environment" meaning any surface or
ground water, drinking water supply, soil, surface or subsurface strata or
medium, or the ambient air);
A-24
127
(f) Parent has heretofore provided the Company with correct and complete
copies of all files of Parent and its Subsidiaries relating to
environmental matters (or an opportunity to review such files). Neither
Parent nor any of its Subsidiaries has paid any fines, penalties or
assessments within the last five years with respect to environmental
matters; and
(g) None of the assets owned by Parent or any of its Subsidiaries or any
real property leased by Parent or any of its Subsidiaries contain any
friable asbestos, regulated PCBs or underground storage tanks.
Section 5.14. Year 2000 Compliance.
(a) Parent has reviewed its operations and the operations of each
Subsidiary of Parent with a view to assessing whether its business was
adversely affected by not being Year 2000 Compliant and has taken such
actions as it deems necessary or advisable to address Year 2000 Compliance.
All of the product(s) and/or service(s) offered and/or used by Parent or
its Subsidiaries, including each item of hardware, software, and firmware;
any system, equipment, or products consisting of or containing one or more
thereof; and any and all enhancements, upgrades, customizations,
modifications, maintenance and the like, currently and at any time in the
past are, to the Knowledge of Parent, as of the date of this Agreement,
Year 2000 Compliant. In those instances where Parent or any of its
Subsidiaries is under an obligation to repair or replace product(s) or
service(s) previously provided by Parent or such Subsidiary to meet
Parent's or such Subsidiary's contractual obligations, to avoid personal
injury, to avoid misrepresentation claims, or due to other obligations,
Parent or such Subsidiary has repaired or replaced those product(s) and
service(s).
(b) To the Knowledge of Parent, neither Parent nor any of its
Subsidiaries is subject to any pending or threatened regulatory action,
proceeding or investigation concerning the Year 2000 Compliance of the
Parent's or any of its Subsidiaries' products, services or operations, and
there is no basis for any such regulatory action, investigation or
proceeding. Parent and its Subsidiaries are in material compliance with all
applicable regulatory rules, regulations and requirements in regards to the
Year 2000 Compliance of their products, services and operations. No claim
that any of Parent's or any of its Subsidiaries' products or services are
not Year 2000 Compliant, including but not limited to product liability
claims, has been asserted or threatened, and there is no basis for any such
claim or action.
(c) All vendors of products or services material to Parent and its
Subsidiaries, and their respective products, services and operations, are,
to the Knowledge of Parent, Year 2000 Compliant, and each such vendor has
continued to furnish its products or services to the Parent and such
Subsidiary, without interruption or delay, on and after January 1, 2000.
Section 5.15. Insurance Policies. Neither Parent nor any Subsidiary of
Parent has received notice of any pending or threatened cancellation or premium
increase (retroactive or otherwise) with respect to any of the insurance
policies in force naming Parent, any of its Subsidiaries or employees thereof as
an insured or beneficiary or as a loss payable payee or for which Parent or any
Subsidiary of Parent has paid or is obligated to pay all or part of the
premiums, and each of Parent and such Subsidiaries is in compliance in all
material respects with all conditions contained therein. There are no material
pending claims against such insurance policies by Parent or any Subsidiary of
Parent as to which insurers are defending under reservation of rights or have
denied liability, and there exists no material claim under such insurance
policies that has not been properly filed by Parent or any Subsidiary.
Section 5.16. ERISA and Related Matters.
(a) As used in this Section 5.16, the term "Parent Benefit Plans" shall
mean all deferred compensation, pension, profit-sharing and retirement
plans, and all bonus, welfare, severance pay and other "employee benefit
plans" (as defined in Section 3(3) of ERISA), fringe benefit or stock
option plans, including individual contracts, employee agreements, programs
or arrangements, providing the same or similar benefits, whether or not
written, participated in or maintained by Parent or with respect to which
contributions are made or obligations assumed by Parent in respect of
Parent (including health, life insurance and other benefit plans maintained
for former employees or retirees), at any time between
A-25
128
September 1, 1997 and the Closing Date. Copies of all Parent Benefit Plans
and related documents, including those setting out Parent's personnel
policies and procedures, and including any insurance contracts, trust
agreements or other arrangements under which benefits are provided, as
currently in effect, and descriptions of any such plan which are not
written have been made available for inspection by the Company. Parent has
also made available for inspection by the Company a copy of the summary
plan description, if any, for each Parent Benefit Plan, as well as copies
of any other summaries or descriptions of any such Parent Benefit Plans
which have been provided to employees or other beneficiaries during the
current and previous three (3) calendar years.
(b) Except as set forth in Section 5.16 of the Parent Disclosure Letter,
Parent has fulfilled its obligations, to the extent applicable, under the
minimum funding requirements of Section 302 of ERISA and Section 412 of the
Code, with respect to each "employee benefit plan" (as defined in Section
3(3) of ERISA) appearing in Section 5.16 of the Parent Disclosure Letter.
Each Parent Benefit Plan is in compliance with, and has been administered
in all respects consistent with, the presently applicable provisions of
ERISA, the Code and state law, including but not limited to the
satisfaction of all applicable reporting and disclosure requirements under
the Code, ERISA and state law. Parent has made all payments to all Parent
Benefit Plans as required by the terms of each such plan in accordance, if
applicable, with the actuarial and funding assumptions in effect as for the
most recent actuarial valuation of such plans. All required actuarial
valuations and reports relating to said plans have been prepared and a copy
of the most recent actuarial valuation and report for each pension plan, as
defined in Section 3(2) of ERISA, has been made available for inspection by
the Company, if applicable. Parent has filed or caused to be filed with the
Internal Revenue Service annual reports on Form 5500 for each Parent
Benefit Plan attributable to them for all years and periods for which such
reports were required and within the time period required by ERISA and the
Code, and copies of such reports for the past three years have been made
available for inspection by the Company. Except as disclosed in Section
5.16 of the Parent Disclosure Letter, Parent has funded or will fund each
Parent Benefit Plan attributable to it in accordance with its terms through
Closing, including the payment of applicable premiums on any insurance
contract funding a Parent Benefit Plan for coverage provided through
Closing. To the extent that any annual contribution for the current year is
not yet required for any Parent Benefit Plan as of the Effective Time,
Parent has made a pro rata contribution to said plan for the period ended
at the Effective Time or said contribution has been accrued on the books of
Parent.
(c) Except as set forth in Section 5.16 of the Parent Disclosure Letter,
no "prohibited transaction," as defined in Section 406 of ERISA and Section
4975 of the Code, has occurred in respect of any such Parent Benefit Plan,
and no civil or criminal action brought pursuant to Part 5 of Title I or
ERISA is pending or is threatened in writing or orally against any
fiduciary of any such plan.
(d) Except as set forth in Section 5.16 of the Parent Disclosure Letter,
the Internal Revenue Service has issued a letter for each employee pension
benefit plan, as defined in Section 3(2) of ERISA, listed in Section 5.16
of the Parent Disclosure Letter, determining that such plan is a qualified
plan under Section 401(a) of the Code and is exempt from United States
Federal Income Tax under Section 501(a) of the Code, and there has been no
occurrence since the date of any such determination letter which has
adversely affected such qualification. Parent does not maintain a plan or
arrangement intended to qualify under Section 501(c)(9) of the Code.
(e) Except as set forth in Section 5.16 of the Parent Disclosure Letter,
each Parent Benefit Plan that provides medical benefits has been operated
in compliance with all requirements of Section 4980B(f) of the Code and
Sections 601 through 608 of ERISA relating to continuation of coverage
under certain circumstances in which coverage would otherwise cease.
(f) Neither Parent nor any entity that is treated as a single employer
with Parent pursuant to Section 414(b), (c), (m) or (o) of the Code
currently maintains or contributes to any Parent Benefit Plan that is
subject to Title IV of ERISA, nor has previously maintained or contributed
to any such plan that has resulted in any liability or potential liability
for Parent under said Title IV. There shall not be
A-26
129
as of Closing any outstanding unpaid minimum funding waiver within the
meaning of Code Section 412(d).
(g) Except as disclosed in Section 5.16 of the Parent Disclosure Letter,
Parent does not maintain any Parent Benefit Plan, plans or programs that
provide post-retirement medical benefits (other than benefits described in
Section 5.16 and those which are required by law), post-employment
benefits, death benefits or other post-retirement welfare benefits. A copy
of any written description of post-retirement welfare benefits that has
been provided to employees has been made available for inspection by the
Company. Copies of each plan document, insurance contract or other written
instrument providing for post-retirement welfare benefits, together with a
description of any advance funding arrangement that has been established to
fund post-retirement welfare benefits, have been made available for
inspection by the Company. Except as otherwise disclosed in Section 5.16 of
the Parent Disclosure Letter, all plans or programs for providing
post-retirement medical, death or other welfare benefits could be
terminated by Parent as of Closing without liability for such benefits to
any employee who has not retired on or before the Effective Time.
(h) Neither Parent nor any employer referred to in Section 5.16(f)
above, maintains, nor has contributed within the past five years to, any
multiemployer plan within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA. No such employer currently has any liability to make withdrawal
liability payments to any multiemployer plan. There is no pending dispute
between any such employer and any multiemployer plan concerning payment of
contributions or payment of withdrawal liability payments.
(i) All Parent Benefit Plans have been operated and administered in
accordance with their respective terms and no inconsistent representation
or interpretation has been made to any plan participant. Except as set
forth in Section 5.16 of the Parent Disclosure Letter, no lawsuit or
complaint (including any dispute that might result in a lawsuit or
complaint against, by, or relating to any Parent Benefit Plan or any
fiduciary, as defined in Section 3(21) of ERISA) of a Parent Benefit Plan
has been filed or is pending.
(j) Any reference to Parent in this Section 5.16 shall be deemed to
refer to each Subsidiary of Parent, where relevant.
Section 5.17. Transactions with Affiliates. Except as set forth in Section
5.17 of the Parent Disclosure Letter or in the Parent SEC Reports filed since
January 1, 1999 (other than compensation and benefits received in the ordinary
course of business as an employee or director of Parent or its Subsidiaries), no
director, officer or other "affiliate" or "associate" (as hereinafter defined)
of Parent or any Subsidiary of Parent or any entity in which, to the Knowledge
of Parent, any such director, officer or other affiliate or associate, owns any
beneficial interest (other than a publicly held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market and
less than 1% of the stock of which is beneficially owned by any such persons)
has any interest in: (i) any contract, arrangement or understanding with, or
relating to the business or operations of Parent or any Subsidiary of Parent;
(ii) any loan, arrangement, understanding, agreement or contract for or relating
to indebtedness of Parent or any Subsidiary of Parent; or (iii) any property
(real, personal or mixed), tangible, or intangible, used or currently intended
to be used in, the business or operations of Parent or any Subsidiary of Parent.
Section 5.18. No Existing Discussions. As of the date hereof, Parent is
not engaged, directly or indirectly, in any negotiations or discussions with any
other party with respect to a Parent Competing Proposal (as hereinafter
defined).
Section 5.19. Brokers. No broker, finder or investment banker (other than
Parent's Independent Advisor) is entitled to any brokerage, finder's or other
fee or commission payable by such person in connection with this Agreement, the
Merger or the other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of such person.
A-27
130
Section 5.20. Pooling; Tax Matters.
(a) Parent intends that the Merger be accounted for under the
"pooling-of-interests" method under the requirements of Opinion No. 16
(Business Combinations) of the Accounting Principles Board of the American
Institute of Certified Public Accountants, the Financial Accounting
Standards Board, and the Regulations of the SEC. To the Knowledge of
Parent, neither Parent nor any of its affiliates has taken or agreed to
take any action, failed to take any action or is aware of any fact or
circumstance that would prevent (i) the Merger from being treated for
financial accounting purposes as a "pooling-of-interests" in accordance
with GAAP and the rules and regulations of the SEC or (ii) the Merger from
constituting a reorganization within the meaning of Section 368(a) of the
Code.
(b) To the Knowledge of Parent, there is no reason why it may not
receive a letter from Arthur Andersen LLP (the "Parent's Accountants")
dated as of the Closing Date and addressed to Parent in which Parent's
Accountants will concur with Parent's management's conclusion that no
conditions exist related to Parent that would preclude Parent from
accounting for the Merger as a "pooling-of-interests."
Section 5.21. Disclosure. No representation, warranty or covenant made by
Parent in this Agreement or in the Parent Disclosure Letter contains an untrue
statement of a material fact or omits to state a material fact required to be
stated herein or therein or necessary to make the statements contained herein or
therein not misleading.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1. Covenants of the Company. During the period from the date of
this Agreement and continuing until the Effective Time, the Company agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement or as otherwise indicated on the Company Disclosure Letter or
to the extent that Parent shall otherwise consent in writing, which consent
shall not be unreasonably withheld or delayed):
(a) Ordinary Course. The Company shall, and shall cause its
Subsidiaries to, carry on its business in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted, and shall
use all reasonable efforts to maintain its rights and franchises and
preserve its relationships with customers, suppliers and others having
business dealings with it; provided, however, that no action by the Company
or its Subsidiaries with respect to matters specifically addressed by any
other provisions of this Section 6.1 or the Company Disclosure Letter shall
be deemed a breach of this Section 6.1(a) unless such action would
constitute a breach of one or more of such other provisions.
(b) Dividends; Changes in Share Capital. The Company shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of
any of its capital stock, (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock, except for any such transaction by a wholly owned Subsidiary
of the Company which remains a wholly owned Subsidiary after consummation
of such transaction, or (iii) repurchase, redeem or otherwise acquire any
shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock.
(c) Issuance of Securities. The Company shall not, and shall not permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares of its capital stock of any
class or any securities convertible into or exercisable for, or any rights,
warrants or options to acquire, any such shares, or enter into any
agreement with respect to any of the foregoing, other than (i) the issuance
of Company Common Stock upon the exercise of stock options or warrants or
in connection with rights under other stock-based benefits plans, to the
extent such options or rights are outstanding on the date hereof in
accordance with their present terms or (ii) issuances by a wholly owned
Subsidiary of the Company of capital stock to such Subsidiary's parent.
A-28
131
(d) Governing Documents. Except to the extent required to comply with
their respective obligations hereunder, required by law or required by the
rules and regulations of the NYSE, the Company shall not, and shall cause
its Subsidiaries not to, amend the Company Articles of Incorporation or the
Company Bylaws or other governing documents.
(e) No Acquisitions. The Company shall not, and shall not permit any of
its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of a material amount of assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets, other than in the ordinary course of business
consistent with past practice.
(f) No Dispositions. The Company shall not, and shall not permit any of
its Subsidiaries to, sell, lease, encumber or otherwise dispose of, or
agree to sell, lease, encumber or otherwise dispose of (including by way of
a spin-off or similar transaction), any material amount of assets.
(g) Capital Expenditures. The Company shall not, and shall not permit
any of its Subsidiaries to, incur or commit to any capital expenditures
other than capital expenditures incurred or committed to in the ordinary
course of business consistent with past practice and which, in the
aggregate, are not in excess of $1,000,000.
(h) Tax-Free Qualification; Pooling. The Company shall not, and shall
not permit any of its Subsidiaries to, take any action that would prevent
or impede the Merger from qualifying as a reorganization under Section 368
of the Code or which would disqualify the Merger as a "pooling-of-
interests" for accounting purposes.
(i) Other Actions. The Company shall not, and shall not permit any of
its Subsidiaries to, take any action that would, or that could reasonably
be expected to, result in (i) any of the conditions to the Merger set forth
in Article VIII not being satisfied or (ii) a material delay in the
satisfaction of such conditions.
(j) Accounting Methods. Except as required by a Governmental Entity,
the Company shall not make any material change to its methods of accounting
in effect at December 31, 1998, except as required by changes in GAAP as
concurred with by the Company's Accountants. The Company shall not change
its fiscal year.
(k) Representations and Warranties. The Company shall not take any
action that would cause any of its representations and warranties set forth
in this Agreement to no longer be true and correct.
(l) Authorization of the Foregoing. The Company shall not, and shall
not permit any of its Subsidiaries to, authorize, commit or agree to take
any of the foregoing actions.
Section 6.2. Covenants of Parent. During the period from the date of this
Agreement and continuing until the Effective Time, Parent agrees as to itself
and its Subsidiaries that (except as expressly contemplated or permitted or
required by this Agreement or as otherwise indicated on the Parent Disclosure
Letter or to the extent that the Company shall otherwise consent in writing,
which consent shall not be unreasonably withheld or delayed):
(a) Ordinary Course. Parent shall, and shall cause its Subsidiaries to,
carry on its business in the usual, regular and ordinary course in all
material respects, in substantially the same manner as heretofore
conducted, and shall use all reasonable efforts to maintain its material
rights and material franchises and preserve its material relationships with
customers, suppliers and others having business dealings with it; provided,
however, that no action by Parent or its Subsidiaries with respect to
matters specifically addressed by any other provisions of this Section 6.2
shall be deemed a breach of this Section 6.2(a) unless such action would
constitute a breach of one or more of such other provisions.
(b) Dividends; Changes in Share Capital. Parent shall not, and shall
not permit any of its subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in
A-29
132
respect of any of its capital stock, (ii) split, combine or reclassify any
of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for, shares
of its capital stock, except for any such transaction by a wholly owned
subsidiary of Parent which remains a wholly owned subsidiary after
consummation of such transaction, or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into
or exercisable for any shares of its capital stock except for the purchase
from time to time by Parent of Parent Common Stock in the ordinary course
of business consistent with past practice.
(c) Issuance of Securities. Parent shall not, and shall not permit any
of its subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class
or any securities convertible into or exercisable for, or any rights,
warrants or options to acquire, any such shares or enter into any agreement
with respect to any of the foregoing, other than (i) the issuance of Parent
Common Stock upon the exercise of stock options or in connection with
rights under other stock-based benefits plans, to the extent such options
or rights are outstanding on the date hereof in accordance with their
present terms or upon the exercise of the stock options issued pursuant to
clause (iv) below, (ii) issuances by a wholly owned subsidiary of Parent of
capital stock to such Subsidiary's parent, (iii) issuances in accordance
with the Parent Rights Agreement, (iv) issuances of stock options in
connection with annual option grants by Parent or for new hires in the
ordinary course of business and consistent with past practice pursuant to
Parent's benefit plans not to exceed the aggregate amounts set forth on
Section 6.2(c)(iv) of the Parent Disclosure Schedule, or (v) the issuance
of Parent Common Stock pursuant to acquisitions.
(d) Governing Documents. Except to the extent required to comply with
their respective obligations hereunder, required by law or required by the
rules and regulations of the NYSE, Parent shall not, and shall cause its
Subsidiaries not to, amend the Parent Articles of Incorporation or the
Parent Bylaws, or other governing documents.
(e) Tax-Free Qualification; Pooling. Parent shall not, and shall not
permit any of its subsidiaries to, take any action that would prevent or
impede the Merger from qualifying as a reorganization under Section 368 of
the Code or which would disqualify the Merger as a "pooling-of-interests"
for accounting purposes.
(f) Other Actions. Parent shall not, and shall not permit any of its
subsidiaries to, take any action that would, or that could reasonably be
expected to, result in (i) any of the conditions to the Merger set forth in
Article VIII not being satisfied or (ii) a material delay in the
satisfaction of such conditions.
(g) Accounting Methods. Except as required by a Governmental Entity,
Parent shall not make any material change to its methods of accounting in
effect at December 31, 1999, except as required by changes in GAAP as
concurred with by Parent's independent auditors. Parent shall not change
its fiscal year.
(h) Representations and Warranties. Parent shall not take any action
that would cause any of its representations and warranties set forth in
this Agreement to no longer be true and correct.
(i) Authorization of the Foregoing. Parent shall not, and shall not
permit any of its subsidiaries to, authorize, commit or agree to take any
of the foregoing actions.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1. Preparation of the Form S-4 and the Joint Proxy
Statement/Prospectus; Stockholders Meetings.
(a) As promptly as practicable following the date hereof, Parent and the
Company shall jointly prepare and file with the SEC preliminary proxy
materials and any amendments or supplements thereof which shall constitute
the joint proxy statement/prospectus (such proxy statement/prospectus, and
any
A-30
133
amendments or supplements thereto, the "Joint Proxy Statement/Prospectus")
and Parent shall prepare and file with the SEC the Registration Statement
on Form S-4 with respect to the issuance of Parent Common Stock in the
Merger (the "Form S-4") in which the Joint Proxy Statement/Prospectus will
be included as a prospectus. The Form S-4 and the Joint Proxy
Statement/Prospectus shall comply as to form in all material respects with
the applicable provisions of the Securities Act and the Exchange Act. Each
of Parent and the Company shall use all reasonable efforts to have the Form
S-4 declared effective under the Securities Act as promptly as practicable
after filing it with the SEC and to keep the Form S-4 effective as long as
is necessary to consummate the Merger. The parties shall promptly provide
copies, consult with each other and prepare written responses with respect
to any written comments received from the SEC with respect to the Form S-4
and the Joint Proxy Statement/Prospectus and promptly advise the other
party of any oral comments received from the SEC. Parent agrees that none
of the information supplied or to be supplied by Parent for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing thereof and at the
time of the Company Shareholders Meeting or the Parent Shareholders
Meeting, will contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees that none of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in the Joint Proxy Statement/Prospectus and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
Company Shareholders Meeting or the Parent Shareholders Meeting, will
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. For purposes of the foregoing, it is understood and agreed that
information concerning or related to Parent and the Parent Shareholders
Meeting will be deemed to have been supplied by Parent and information
concerning or related to the Company and the Company Shareholders Meeting
shall be deemed to have been supplied by the Company.
(b) As of the date of this Agreement, the Board of Directors of Parent
is composed of three classes with a total of nine directors. The Joint
Proxy Statement/Prospectus shall nominate for election to the Board of
Directors of Parent, as of the date of the Parent Shareholders Meeting (as
hereinafter defined), the two persons listed in Exhibit A hereto. Promptly
following the Effective Time, the three directors listed in Exhibit B shall
resign from the Board of Directors of Parent, and the Board of Directors of
Parent shall take action to fill the vacancies created by such resignations
by appointing the four individuals listed in Part I of Exhibit C ("Company
Nominees"). In addition, promptly following the Effective Time, the Board
of Directors of Parent will take action to increase their size to ten and
shall appoint the individual listed in Part II of Exhibit C to fill the
seat created by such expansion.
(c) The Company shall, as promptly as practicable following the
execution of this Agreement, duly call, give notice of, convene and hold a
meeting of its shareholders (the "Company Shareholders Meeting") for the
purpose of obtaining the required Company shareholder vote with respect to
the transactions contemplated by this Agreement, and, subject to Section
7.4, shall use its reasonable efforts to solicit the adoption of this
Agreement by the required Company shareholder vote.
(d) Parent shall, as promptly as practicable following the execution of
this Agreement, duly call, give notice of, convene and hold a meeting of
its shareholders (the "Parent Shareholders Meeting") for the purpose of
obtaining the required Parent shareholder vote with respect to the
transactions contemplated by this Agreement and, subject to Section 7.5,
shall use its reasonable efforts to solicit the approval of this Agreement
by the required Parent shareholder vote.
(e) The Company Shareholders Meeting and the Parent Shareholders Meeting
shall take place on the same date to the extent practicable.
Section 7.2. Access to Information. Upon reasonable notice, each of Parent
and the Company shall, and shall cause its Subsidiaries to, afford to the other
party and to the officers, employees, accountants, counsel, financial advisors
and other representatives of such other party reasonable access during normal
A-31
134
business hours, during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
each of Parent and the Company shall, and shall cause its Subsidiaries to,
furnish promptly to the other party consistent with its legal obligations all
other information concerning its business, properties and personnel as such
other party may reasonably request; provided, however, that each of Parent and
the Company may restrict the foregoing access to the extent that (i) a
Governmental Entity requires either party or any of its Subsidiaries to restrict
access to any properties or information reasonably related to any such contract
on the basis of applicable laws and regulations with respect to national
security matters or (ii) in the reasonable judgment of such party any law,
treaty, rule or regulation of any Governmental Entity applicable to such party
requires it or its Subsidiaries to restrict access to any properties or
information. The parties will hold any such information in confidence to the
extent required by, and in accordance with, the provisions of the letter dated
January 17, 2000, between Parent and the Company (the "Confidentiality
Agreement"). Any investigation by Parent or the Company shall not affect the
representations and warranties of Parent or the Company, as the case may be.
Section 7.3. Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each party
hereto will use its best efforts to (i) take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the Merger
and the other transactions contemplated by this Agreement as soon as
practicable after the date hereof and (ii) obtain and maintain all
approvals, consents, waivers, registrations, permits, authorizations,
clearances and other confirmations required to be obtained from any third
party and/or any Governmental Entity that are necessary, proper or
advisable to consummate the Merger and the transactions contemplated hereby
(each a "Required Approval"). In furtherance and not in limitation of the
foregoing, each party hereto agrees to make as promptly as practicable, to
the extent it has not already done so, (i) an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby (which filing shall be made in any event
within five business days of the date hereof), (ii) all necessary filings
with other Governmental Entities relating to the Merger, and, in each case,
to supply as promptly as practicable any additional information and
documentary material that may be requested pursuant to the such laws and to
use its best efforts to cause the expiration or termination of the
applicable waiting periods under the HSR Act and the receipt of Required
Approvals under such other laws as soon as practicable.
(b) Each of Parent and the Company shall, in connection with the efforts
referenced in Section 7.3(a) to obtain all Required Approvals, use its best
efforts to (i) cooperate in all respects with each other in connection with
any filing or submission and in connection with any investigation or other
inquiry, including any proceeding initiated by a private party, (ii)
promptly inform the other party of any communication received by such party
from, or given by such party to, the Antitrust Division of the Department
of Justice (the "DOJ") or any other Governmental Entity and of any material
communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby, and (iii) promptly inform the other party of the timing and content
of any communications with the DOJ or any such other Governmental Entity
or, in connection with any proceeding by a private party, with any other
Person, and to the extent permitted by the DOJ or such other applicable
Governmental Entity or other Person, give the other party the opportunity
to attend and participate in such meetings and conferences.
(c) In furtherance and not in limitation of the covenants of the parties
contained in Sections 7.3(a) and 7.3(b), if any administrative or judicial
action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law (as
hereinafter defined), or if any statute, rule, regulation, executive order,
decree, injunction or administrative order is enacted, entered, promulgated
or enforced by a Governmental Entity which would make the Merger or the
transactions contemplated hereby illegal or would otherwise prohibit or
materially impair or delay the consummation of the Merger or the
transactions contemplated hereby, each of Parent and the Company shall
cooperate in all respects with each other and use its respective
commercially reasonable efforts to contest and resist any such action or
A-32
135
proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other action or order, whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents or
restricts consummation of the Merger or the transactions contemplated by
this Agreement and to have such statute, rule, regulation, executive order,
decree, injunction or administrative order repealed, rescinded or made
inapplicable. Notwithstanding any provision of this Agreement to the
contrary, Parent and Merger Sub shall not be required under the terms of
this Agreement to dispose of or hold separate all or any portion of the
businesses or assets of Parent or any of its Subsidiaries or of the Company
or any of its Subsidiaries in order to remedy or otherwise address the
concerns (whether or not formally expressed) of any Governmental Entity
under the HSR Act or any other antitrust statute or regulation. For
purposes of this Agreement, "Regulatory Law" means the Sherman Act, as
amended, the Clayton Act, as amended, the HSR Act, the Federal Trade
Commission Act, as amended, and all other Federal, state and foreign, if
any, statutes, rules, regulations, orders, decrees, administrative and
judicial doctrines and other laws that are designed or intended to regulate
mergers, acquisitions or other business combinations.
(d) The Company and its Board of Directors shall, if any state takeover
statute or similar statute becomes applicable to this Agreement, the Merger
or any other transactions contemplated hereby, to the extent legally
permissible take all action reasonably necessary to ensure that the Merger
and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise to minimize the effect of such statute or regulation on this
Agreement, the Merger and the other transactions contemplated hereby.
(e) Parent and its Board of Directors shall, if any state takeover
statute or similar statute becomes applicable to this Agreement, the Merger
or any other transactions contemplated hereby, to the extent legally
permissible take all action reasonably necessary to ensure that the Merger
and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise to minimize the effect of such statute or regulation on this
Agreement, the Merger and the other transactions contemplated hereby.
Section 7.4. No Solicitation by the Company.
(a) The Company shall not, nor shall it permit any of its Subsidiaries
to, nor shall it authorize or permit any of its directors, officers or
employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its Subsidiaries to,
directly or indirectly through another Person, (i) solicit, initiate or
knowingly encourage (including by way of furnishing information) the making
of any proposal that constitutes a Company Competing Proposal (as
hereinafter defined) or (ii) participate in any discussions or negotiations
regarding any Company Competing Proposal; provided, however, that if, at
any time prior to the date of the Company Shareholders Meeting (the
"Company Applicable Period"), the Board of Directors of Company determines
in good faith, after consultation with outside counsel, that to do
otherwise would not be in the best interests of the Company's shareholders,
the Company and its representatives may, in response to a Company Competing
Proposal which did not result from a breach of this Section 7.4(a) and
which could reasonably be expected to constitute, if consummated, a Company
Superior Proposal (as hereinafter defined), (x) furnish information with
respect to the Company and its Subsidiaries to any Person making such
Company Competing Proposal pursuant to a customary confidentiality
agreement (as determined by the Company after consultation with its outside
counsel) and (y) participate in discussions or negotiations regarding such
Company Competing Proposal. For purposes of this Agreement, "Company
Competing Proposal" means any bona fide inquiry, proposal or offer from any
Person relating to any direct or indirect acquisition or purchase of 30% or
more of the assets of the Company and its Subsidiaries, taken as a whole,
or 30% or more of the combined voting power of the shares of Company Common
Stock, any tender offer or exchange offer that if consummated would result
in any Person beneficially owning 30% or more of the combined voting power
of the shares of Company Common Stock or any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its Subsidiaries in which the
other party thereto or its stockholders will own 30% or more of the
combined voting power of the parent entity resulting from any such
transaction,
A-33
136
other than the transactions contemplated by this Agreement. For purposes of
this Agreement, a "Company Superior Proposal" means any proposal made by a
third party relating to any direct or indirect acquisition or purchase of
50% or more of the assets of the Company and its Subsidiaries, taken as a
whole, or 50% or more of the combined voting power of the shares of Company
Common Stock, any tender offer or exchange offer that if consummated would
result in any Person beneficially owning 50% or more of the combined voting
power of the shares of Company Common Stock or any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its Subsidiaries in which the
other party thereto or its stockholders will own 40% or more of the
combined voting power of the parent entity resulting from any such
transaction, and otherwise on terms which 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), taking into account
legal, financial, regulatory and other aspects of the proposal deemed
appropriate by the Board of Directors of the Company, (i) to be more
favorable from a financial point of view than the Merger to the Company's
shareholders taken as a whole, (ii) is reasonably capable of being
completed and (iii) for which financing, to the extent required, is then
committed or is reasonably capable of being obtained by such third party.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to Parent, the approval or recommendation by
such Board of Directors or such committee of the Merger or this Agreement,
(ii) approve or recommend, or propose publicly to approve or recommend, any
Company Competing Proposal or (iii) approve or recommend, or propose to
approve or recommend, or execute or enter into, any letter of intent,
agreement in principle, merger agreement, acquisition agreement, option
agreement or other similar agreement or propose publicly or agree to do any
of the foregoing (each, a "Company Acquisition Agreement") related to any
Company Competing Proposal, other than pursuant to the next sentence in
order to facilitate such action. Notwithstanding the foregoing, during the
Company Applicable Period, in response to a Company Superior Proposal which
did not result from a breach of Section 7.4(a), if the Board of Directors
of the Company determines in good faith, after consultation with outside
counsel, that to do otherwise would not be in the best interests of the
Company's shareholders, the Board of Directors of the Company may take any
action specified in clauses (i), (ii) or (iii) of the preceding sentence,
but only at a time that is during the Company Applicable Period and is
after the fifth Business Day following Parent's receipt of notice advising
Parent that the Board of Directors of the Company is prepared to accept a
Company Superior Proposal (or any material amendment thereto), specifying
the material terms and conditions of such the Company Superior Proposal (or
any material amendment thereto).
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 7.4, the Company shall promptly
advise Parent of any request for information or of any Company Competing
Proposal and the material terms and conditions of such request or Company
Competing Proposal, and will keep Parent reasonably informed of the status
of any such request or proposal. The Company will promptly inform Parent of
amendments to any such request or Company Competing Proposal.
(d) Nothing contained in this Section 7.4 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by
Rule 14d-9 or 14e-2 promulgated under the Exchange Act or from making any
disclosure to the Company's shareholders if, in the good faith judgment of
the Company, after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under applicable law;
provided, however, that, subject to Section 7.4(b), neither the Company nor
its Board of Directors nor any committee thereof shall approve or
recommend, or propose publicly to approve or recommend, a Company Competing
Proposal.
Section 7.5. No Solicitation by Parent.
(a) Parent shall not, nor shall it permit any of its Subsidiaries to,
nor shall it authorize or permit any of its directors, officers or
employees or any investment banker, financial advisor, attorney, accountant
or
A-34
137
other representative retained by it or any of its Subsidiaries to, directly
or indirectly through another Person, (i) solicit, initiate or knowingly
encourage (including by way of furnishing information), the making of any
proposal that constitutes, a Parent Competing Proposal (as hereinafter
defined) or (ii) participate in any discussions or negotiations regarding
any Parent Competing Proposal; provided, however, that if, at any time
prior to the Parent Shareholders Meeting (the "Parent Applicable Period"),
the Board of Directors of Parent determines in good faith, after
consultation with outside counsel, that to do otherwise would not be in the
best interests of Parent's shareholders, Parent and its representatives
may, in response to a Parent Competing Proposal which did not result from a
breach of this Section 7.5(a) and which could reasonably be expected to
constitute, if consummated, a Parent Superior Proposal (as hereinafter
defined), (x) furnish information with respect to Parent and its
Subsidiaries to any Person making such Parent Competing Proposal pursuant
to a customary confidentiality agreement (as determined by Parent after
consultation with its outside counsel) and (y) participate in discussions
or negotiations regarding such Parent Competing Proposal. For purposes of
this Agreement, "Parent Competing Proposal" means any bona fide inquiry,
proposal or offer from any Person relating to any direct or indirect
acquisition or purchase of 30% or more of the assets of Parent and its
Subsidiaries, taken as a whole, or 30% or more of any class or series of
equity securities of Parent or any of its Subsidiaries, any tender offer or
exchange offer that if consummated would result in any Person beneficially
owning 30% or more of any class or series of equity securities of Parent or
any of its Subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving Parent or any of its Subsidiaries in which the other
party thereto or its shareholders will own 30% or more of any class or
series of equity securities of the entity resulting from any such
transaction, other than the transactions contemplated by this Agreement.
For purposes of this Agreement, a "Parent Superior Proposal" means any
proposal made by a third party to any direct or indirect acquisition or
purchase of 50% or more of the assets of Parent and its Subsidiaries, taken
as a whole, or 50% or more of any class or series of equity securities of
Parent or any of its Subsidiaries, any tender offer or exchange offer that
if consummated would result in any Person beneficially owning 50% or more
of any class or series of equity securities of Parent or any of its
Subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Parent or any of its Subsidiaries in which the other party thereto or its
shareholders will own 40% or more of any class or series of equity
securities of the parent entity resulting from any such transaction, and
otherwise on terms which the Board of Directors of Parent determines in its
good faith judgment (based on the advice of a financial advisor of
nationally recognized reputation), taking into account legal, financial,
regulatory and other aspects of the proposal deemed appropriate by the
Board of Directors of Parent, (i) to be more favorable from a financial
point of view than the Merger to Parent 's shareholders taken as a whole,
(ii) is reasonably capable of being completed and (iii) for which
financing, to the extent required, is then committed or is reasonably
capable of being obtained by such third party.
(b) Neither the Board of Directors of Parent nor any committee thereof
shall (i) withdraw or modify, or propose publicly to withdraw or modify, in
a manner adverse to the Company, the approval or recommendation by such
Board of Directors or such committee of the Merger or this Agreement, (ii)
approve or recommend, or propose publicly to approve or recommend, any
Parent Competing Proposal or (iii) approve or recommend, or propose to
approve or recommend, or execute or enter into, any letter of intent,
agreement in principle, merger agreement, acquisition agreement, option
agreement or other similar agreement or propose publicly or agree to do any
of the foregoing (each, a "Parent Acquisition Agreement") related to any
Parent Competing Proposal, other than pursuant to the next sentence in
order to facilitate such action. Notwithstanding the foregoing, during the
Parent Applicable Period, in response to a Parent Superior Proposal which
did not result from a breach of Section 7.5(a), if the Board of Directors
of Parent determines in good faith, after consultation with outside
counsel, that to do otherwise would not be in the best interests of Parent
shareholders, the Board of Directors of Parent may take any action
specified in clauses (i), (ii) or (iii) of the preceding sentence, but only
at a time that is during the Parent Applicable Period and is after the
fifth Business Day following the Company's receipt of notice advising the
Company that the Board of Directors of Parent is prepared to accept a
A-35
138
Parent Superior Proposal (or any material amendment thereto), specifying
the material terms and conditions of such Parent Superior Proposal (or any
material amendment thereto).
(c) In addition to the obligations of Parent set forth in paragraphs (a)
and (b) of this Section 7.5, Parent shall promptly advise the Company of
any request for information or of any Parent Competing Proposal and the
material terms and conditions of such request or Parent Competing Proposal.
Parent will promptly inform the Company of amendments to any such request
or Parent Competing Proposal, and will keep the Company reasonably informed
of the status of any such request or proposal.
(d) Nothing contained in this Section 7.5 shall prohibit Parent from
taking and disclosing to its shareholders a position contemplated by Rule
14d-9 or 14e-2 promulgated under the Exchange Act or from making any
disclosure to Parent's shareholders if, in the good faith judgment of
Parent, after consultation with outside counsel, failure so to disclose
would be inconsistent with its obligations under applicable law; provided,
however, that subject to Section 5.5(b), neither Parent nor its Board of
Directors nor any committee thereof shall withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to this Agreement
or the Merger or approve or recommend, or propose publicly to approve or
recommend, a Parent Competing Proposal.
Section 7.6. Company Options.
(a) As soon as practicable following the date of this Agreement, the
Board of Directors of the Company (or, if appropriate, any committee
administering the Company Stock Option Plans) shall adopt such resolutions
or take such other actions as may be required to adjust the terms of all
outstanding Company Stock Options (each, as so adjusted, an "Adjusted
Option"), whether vested or unvested, as necessary to provide that, at the
Effective Time, each Company Stock Option outstanding immediately prior to
the Effective Time shall be amended and converted, on the same terms and
conditions as were applicable under such Company Stock Option as such that
each Company Stock Option to acquire shares of any class of the Company
Common Stock will be converted into an option to acquire the number of
shares of Parent Common Stock determined by multiplying the number of
shares of Company Common Stock subject to such Company Stock Option by the
Exchange Ratio (rounded down to the nearest whole share), at an exercise
price determined by dividing the exercise price set forth in the Company
Stock Option by the Exchange Ratio (rounded up to the nearest whole cent).
(b) The adjustments provided in this Section 7.6 with respect to any
Company Stock Options to which Section 421(a) of the Code applies shall be
and are intended to be effected in a manner which is consistent with
Section 424(a) of the Code.
(c) Prior to the Effective Time, Parent shall take all necessary actions
(including, if required to comply with Section 162(m) of the Code (and the
regulations thereunder) or applicable law or rule of the NYSE, obtaining
the approval of its shareholders at the Parent Shareholders Meeting) to
assume at the Effective Time all obligations undertaken by, or on behalf
of, the Company under Section 7.6(a) and to adopt at the Effective Time the
Company Stock Option Plans and each Adjusted Option and to take all other
action called for in this Section 7.6, including the reservation, issuance
and listing of Parent Common Stock in a number at least equal to the number
of shares of Parent Common Stock that will be subject to the Adjusted
Options.
(d) As soon as practicable following the Effective Time, Parent shall
prepare and file with the SEC a registration statement on Form S-8 (or
another appropriate form) registering a number of shares of Parent Common
Stock equal to the number of shares subject to the Adjusted Options. Such
registration statement shall be kept effective (and the current status of
the prospectus or prospectuses required thereby shall be maintained) at
least for so long as any Adjusted Options or any unsettled awards granted
under the Company Stock Option Plans after the Effective Time may remain
outstanding.
(e) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of the Company Stock Options appropriate notices
setting forth such holders' rights pursuant to the respective Company Stock
Option Plans and the agreements evidencing the grants of such Company Stock
Options
A-36
139
and that such the Company Stock Options and agreements shall be assumed by
Parent and shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 7.6 after giving
effect to the Merger).
(f) Except as otherwise expressly provided in this Section 7.6 and
except to the extent required under the respective terms of the Company
Stock Options, all restrictions or limitations on transfer and vesting with
respect to the Company Stock Options awarded under the Company Stock Option
Plans or any other plan, program or arrangement of the Company or any
Subsidiary of the Company to the extent that such restrictions or
limitations shall not have already lapsed, and all other terms thereof,
shall remain in full force and effect with respect to such options after
giving effect to the Merger and the assumption by Parent as set forth in
the Section 7.6.
Section 7.7. Fees and Expenses.
(a) Whether or not the Merger is consummated, all Expenses (as
hereinafter defined) incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except Expenses incurred in connection with the filing, printing
and mailing of the Form S-4 and the Joint Proxy Statement/Prospectus
(including SEC filing fees) and the filing fees for the premerger
notification and report forms under the HSR Act, which shall be shared
equally by Parent and the Company. As used in this Agreement, "Expenses"
includes all out-of-pocket expenses (including all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a
party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and the transactions
contemplated hereby, including the preparation, printing, filing and
mailing of the Form S-4 and the Joint Proxy Statement/Prospectus and the
solicitation of shareholder approvals and all other matters related to the
transactions contemplated hereby.
(b)(1) If a Company Competing Proposal shall have been made to the
Company or any of its Subsidiaries or shall have been made directly to the
shareholders of the Company generally or any Person shall have publicly
announced an intention (whether or not conditional) to make a Company
Competing Proposal and thereafter this Agreement is terminated by either
Parent or the Company pursuant to Section 9.1(d)(i) and within 12 months of
such termination the Company or any of its Subsidiaries enters into any
Company Acquisition Agreement with respect to, or approves or consummates,
any Company Competing Proposal, then the Company shall promptly, but in no
event later than the date of the earliest of such entry, approval or
consummation, pay Parent a fee equal to Twelve Million Dollars
($12,000,000) (the "Company Termination Fee"), payable by wire transfer of
same day funds. For the purposes of this Section 7.7(b) the term "Company
Competing Proposal" shall have the meaning assigned to such term in Section
7.4 except that references to "30%" in the definition of "Company Competing
Proposal" in Section 7.4 shall be deemed to be references to "50%."
(2) If this Agreement is terminated by the Company or Parent pursuant
to Section 9.1(e)(i) and within 12 months of such termination the
Company or any of its Subsidiaries enters into any Company Acquisition
Agreement with respect to, or approves or consummates, any Company
Competing Proposal, then the Company shall promptly, but in no event
later than the date of the earliest of such entry, approval or
consummation, pay Parent the Company Termination Fee, payable by wire
transfer of same day funds.
(3) If this Agreement is terminated by the Company or Parent pursuant
to Section 9.1(e)(ii) or Section 9.1(e)(iii), then the Company shall
promptly, but in no event later than the date of such termination, pay
Parent the Company Termination Fee, payable by wire transfer of same day
funds.
(4) If the Company becomes obligated to pay the Company Termination
Fee to Parent pursuant to this Section 7.7(b), then, in addition to the
Company Termination Fee, the Company shall reimburse Parent (not later
than five Business Days after submission of a statement therefore) for
all out-of-pocket fees and expenses actually incurred by or own behalf
of Parent in connection
A-37
140
with this Agreement and the transactions contemplated herein (including
fees and disbursements payable to investment bankers, legal counsel and
accountants for Parent) up to a maximum amount of Two Million Dollars
($2,000,000).
(5) The Company acknowledges that the agreements contained in this
Section 7.7(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not
enter into this Agreement; accordingly, if the Company fails promptly to
pay any amount due pursuant to this Section 7.7(b), and, in order to
obtain such payment, Parent commences a suit which results in a judgment
against the Company for any amount set forth in this Section 7.7(b), the
Company shall pay to Parent its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest
on such amount at the prime rate of Citibank, N.A. in effect on the date
such payment was required to be made.
(c)(1) If a Parent Competing Proposal shall have been made to Parent or
any of its Subsidiaries or shall have been made directly to the
shareholders of Parent generally or any person shall have publicly
announced an intention (whether or not conditional) to make a Parent
Competing Proposal and thereafter this Agreement is terminated by either
Parent or the Company pursuant to Section 9.1(d)(ii) and within 12 months
of such termination Parent or any of its Subsidiaries enters into any
Parent Acquisition Agreement with respect to, or approves or consummates,
any Parent Competing Proposal then Parent shall promptly, but in no event
later than the date of such termination, pay the Company a fee equal to
Eighteen Million Dollars ($18,000,000) (the "Parent Termination Fee"),
payable by wire transfer of same day funds. For the purposes of this
Section 7.7(c) the term "Parent Competing Proposal" shall have the meaning
assigned to such term in Section 7.5, except those references to "30%" in
the definition of "Parent Competing Proposal" in Section 7.5 shall be
deemed to be references to "50%."
(2) If this Agreement is terminated by Parent or the Company pursuant
to Section 9.1(f)(i), and within 12 months of such termination Parent
enters into any Parent Acquisition Agreement with respect to, or
approves or consummates, any Parent Competing Proposal, then Parent
shall promptly, but in no event later than the date of the earliest of
such entry, approval or consummation, pay the Company the Parent
Termination Fee, payable by wire transfer of same day funds.
(3) If this Agreement is terminated by the Company or Parent pursuant
to Section 9.1(f)(ii) or Section 9.1(f)(iii), then Parent shall
promptly, but in no event later than the date of such termination, pay
the Company the Parent Termination Fee, payable by wire transfer of same
day funds.
(4) If Parent becomes obligated to pay the Parent Termination Fee to
the Company pursuant to this Section 7.7(c), then, in addition to the
Parent Termination Fee, Parent shall reimburse the Company (not later
than five Business Days after submission of a statement therefor) for
all out-of-pocket fees and expenses actually incurred by or own behalf
of the Company in connection with this Agreement and the transactions
contemplated herein (including fees and disbursements payable to
investment bankers, legal counsel and accountants for the Company) up to
a maximum amount of Two Million Dollars ($2,000,000).
(5) Parent acknowledges that the agreements contained in this Section
7.7(c) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the Company would not
enter into this Agreement; accordingly, if Parent fails promptly to pay
any amount due pursuant to this Section 7.7(c), and, in order to obtain
such payment, the Company commences a suit which results in a judgment
against Parent for any amount set forth in this Section 7.7(c), Parent
shall pay to the Company its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest
on such amount at the prime rate of Citibank, N.A. in effect on the date
such payment was required to be made.
A-38
141
Section 7.8. Indemnification, Exculpation and Insurance.
(a) Parent agrees that all rights to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to the
Effective Time now existing in favor of the current or former directors or
officers of the Company and its Subsidiaries as provided in their
respective articles of incorporation or bylaws (or comparable
organizational documents) and any indemnification agreements of the
Company, the existence of which does not constitute a breach of this
Agreement, shall be assumed by Parent, without further action, as of the
Effective Time and shall survive the Merger and shall continue in full
force and effect in accordance with their terms.
(b) In the event that Parent or any of its successors or assigns (i)
consolidates with or merges into any other Person and is not the continuing
or surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and assets
to any Person, then, and in each such case, proper provision will be made
so that the successors and assigns of Parent assume the obligations set
forth in this Section 7.8.
(c) For five years after the Effective Time, Parent shall maintain in
effect the Company's current directors' and officers' liability insurance
covering acts or omissions occurring prior to the Effective Time with
respect to those Persons who are currently covered by the Company's
directors' and officers' liability insurance policy on terms with respect
to such coverage and amounts no less favorable than those of such policy in
effect on the date hereof; provided, however, in no event shall Parent be
required to expend in any one year an amount in excess of 150% of the
annual premiums currently paid by the Company for such insurance; and
provided, further, that if the annual premiums of such insurance coverage
exceed such amount, Parent shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
Section 7.9. Public Announcements. The Company and Parent shall develop a
joint communications plan and each party shall use all reasonable efforts (i) to
ensure that all press releases and other public statements with respect to the
transactions contemplated hereby shall be consistent with such joint
communications plan, and (ii) unless otherwise required by applicable law or by
obligations pursuant to any listing agreement with or rules of any securities
exchange, the Company and Parent shall not issue any press release or otherwise
make any public statement with respect to this Agreement or the transactions
contemplated hereby that is inconsistent with such joint communications plan.
Section 7.10. Listing. Parent shall cause the shares of Parent Common
Stock to be issued in connection with the Merger to be listed on the NYSE,
subject to official notice of issuance.
Section 7.11. Affiliate Letter.
(a) Prior to the Effective Time, each of Parent and the Company shall
identify to the other all persons who were, at the time of the Parent
Shareholders Meeting and the Company Shareholders Meeting, as the case may
be, "affiliates" of such party as that term is used in paragraphs (c) and
(d) of Rule 145 under the Securities Act (including at a minimum, all those
persons subject to the reporting requirements of Rule 16(a) under the
Exchange Act) and for purposes of qualifying for "pooling-of-interests"
accounting treatment (for purposes of this Section 7.11, "Affiliates").
(b) Each of Parent and the Company shall obtain a written agreement in
the form of Exhibit D and Exhibit E, respectively, from each person who is
identified as an Affiliate of such party pursuant to clause (a) above. Each
of Parent and the Company shall deliver such written agreements to the
other party on or prior to the date of the Parent Shareholders Meeting and
the Company Shareholders Meeting, respectively.
Section 7.12. Tax Treatment. Each of Parent and the Company and their
respective Subsidiaries shall cause the Merger to qualify as a "reorganization"
under the provisions of Section 368(a) of the Code and to obtain the opinion of
counsel referred to in Section 8.1(g), including the execution of the letters of
representation referred to therein updated as necessary. The Company and Parent
(and their Subsidiaries) shall treat the Parent Common Stock received in the
Merger by holders of Company Common Stock as
A-39
142
property permitted to be received by Section 354 of the Code without the
recognition of gain. Each of the Company and Parent covenants and agrees to, and
agrees to cause its affiliates to, vigorously and in good faith defend all
challenges to the treatment of the reorganization as described in this Section
7.12. Each of the Company and Parent agree that if it becomes aware of any such
fact or circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization described in Section 368(a) of the Code, it will
promptly notify the other party in writing.
Section 7.13. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company, any deeds, bills
of sale, assignments or assurances and to take any other actions and do any
other things, in the name and on behalf of the Company, reasonably necessary to
vest, perfect or confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the rights, properties
or assets of the Company acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger.
Section 7.14. Notices of Certain Events. Each of the Company and Parent
shall promptly notify the other party of:
(a) the occurrence of any event whose occurrence would be likely to
cause either (i) any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect at any time from the
date hereof to the Effective Time, (ii) any condition set forth in Article
VIII to not be satisfied, or (iii) any Material Adverse Effect on such
party.
(b) any material failure of such party, to comply with in any material
respect any covenant or agreement to be complied with by it hereunder;
(c) any facts relating to such party which would make it necessary or
advisable to amend the Joint Proxy Statement/Prospectus or the Form S-4 in
order to make the statements therein not misleading or to comply with
applicable law; provided, however, that the delivery of any notice pursuant
to this Section 7.14 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice; and
(d) any notice or other communication from any Person alleging that a
material consent of such Person is or may be required in connection with
the transactions contemplated by this Agreement.
Section 7.15. Shareholder Litigation. Each of Parent and the Company shall
give the other the reasonable opportunity to consult in the defense of any
shareholder litigation against Parent or the Company, as applicable, and its
directors relating to the transactions contemplated by this Agreement.
ARTICLE VIII
CONDITIONS
Section 8.1. Conditions to the Obligation of Each Party. The respective
obligations of Parent, Merger Sub and the Company to effect the Merger are
subject to the satisfaction of the following conditions, unless waived in
writing by all parties:
(a) This Agreement and the Merger shall have been approved and adopted
by the requisite vote of the holders of the Parent Common Stock and Company
Common Stock;
(b) No temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition (including, any statute, rule, regulation,
injunction, order or decree proposed, enacted, enforced, promulgated,
issued or deemed applicable to, or any consent or approval withheld with
respect to, the Merger, by any Governmental Entity) preventing the
consummation of the Merger shall be in effect; provided, however, that the
parties invoking this condition shall use all commercially reasonable
efforts to have any such order or injunction vacated;
A-40
143
(c) All actions by or in respect of or filings with any Governmental
Entity required to permit the consummation of the Merger shall have been
obtained or made (including the expiration or termination of any applicable
waiting period under the HSR Act).
(d) The shares of Parent Common Stock to be issued in the Merger shall
have been approved for listing on the NYSE, subject to official notice of
issuance;
(e) The Form S-4 shall have been declared effective by the SEC under the
Securities Act and no stop order suspending the effectiveness of the Form
S-4 shall have been issued by the SEC and no proceedings for that purpose
shall have been initiated or threatened by the SEC;
(f) Parent and the Company shall have received a letter, as of the
Effective Time, by Arthur Andersen LLP that, in accordance with GAAP, the
Merger qualifies to be treated as a "pooling of interests" for accounting
purposes, and shall have been advised in writing, as of the Effective Time,
by Deloitte & Touche LLP that based upon inquiries and their examination of
the financial statements of the Company they are not aware of any
conditions relating to the Company that would preclude the use of "pooling
of interests" accounting in connection with the Merger; and
(g) Parent and the Company shall have each received from King &
Spalding, counsel to Parent, on the date on which the Form S-4 is declared
effective by the SEC and on the Closing Date, a written opinion dated as of
such date substantially in the form attached hereto as Exhibit F. In
rendering such opinion, counsel to Parent shall be entitled to rely upon
representations of officers of Parent and the Company and others reasonably
satisfactory in form and substance to such counsel.
Section 8.2. Conditions to Obligations of Parent and Merger Sub to Effect
the Merger. The obligations of Parent and Merger Sub to effect the Merger are
further subject to satisfaction or waiver at or prior to the Effective Time of
the following conditions:
(a) (i) the representations and warranties of the Company in this
Agreement that are qualified by materiality shall be true and correct in
all respects as of the date of the Agreement and as of the Effective Time;
(ii) the representations and warranties of the Company in the Agreement
that are not qualified by materiality shall be true and correct in all
material respects as of the date of this Agreement and as of the Effective
Time; (iii) the Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement; and (v) an
officer of the Company shall have delivered to Parent and Merger Sub a
certificate to the effect that each of the foregoing conditions is
satisfied in all respects;
(b) There shall not have occurred any change, condition, event or
development that has resulted in, or would reasonably be expected to result
in, a Company Material Adverse Effect; and
(c) The Company shall not have entered into or amended any employment,
consulting or severance agreement or arrangement with any present, former
or new director, officer or other employee (whose annual compensation is in
excess of $75,000) of the Company or any of its Subsidiaries, without the
prior written consent of Parent, and Ron Fournet shall have continued to
serve, on a full-business time basis, as the Chief Executive Officer of the
Company throughout the period commencing as of the date hereof and
continuing until the Effective Time.
Section 8.3. Conditions to Obligations of the Company to Effect the
Merger. The obligations of the Company to effect the Merger are further subject
to satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) (i) The representations and warranties of Parent and Merger Sub in
this Agreement that are qualified by materiality shall be true and correct
in all respects as of the date of the Agreement and as of the Effective
Time; (ii) the representations and warranties of Parent and Merger Sub in
the Agreement that are not qualified by materiality shall be true and
correct in all material respects as of the date of this Agreement and as of
the Effective Time; (iii) each of Parent and Merger Sub shall have
performed in all material respects all obligations required to be performed
by it under this Agreement; and (v) an officer
A-41
144
of each of Parent and Merger Sub shall have delivered to Parent and Merger
Sub a certificate to the effect that each of the foregoing conditions is
satisfied in all respects.
(b) There shall not have occurred any change, condition, event or
development that has resulted in, or would reasonably be expected to result
in, a Parent Material Adverse Effect.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval of matters presented in connection with the Merger by the Company
Shareholders:
(a) By mutual written consent of Parent and the Company, by action of
their respective Boards of Directors;
(b) By either the Company or Parent if the Effective Time shall not have
occurred on or before September 1, 2000 (the "Termination Date");
(c) By either the Company or Parent if any Governmental Entity (i) shall
have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and nonappealable or (ii) shall
have failed to issue an order, decree or ruling or to take any other
action, in each case (i) and (ii) which is necessary to fulfill the
conditions set forth in Section 8.1(c) and such denial of a request to
issue such order, decree, ruling or take such other action shall have
become final and nonappealable; provided, however, that the right to
terminate this Agreement under this Section 9.1(c) shall not be available
to any party whose failure to comply with Section 7.3 has caused or
resulted in such action or inaction;
(d) By either the Company or Parent if (i) the approval by the
shareholders of the Company required for the consummation of the Merger
shall not have been obtained by reason of the failure to obtain the
required vote of the holders of the Company Common Stock at the Company
Shareholders Meeting or at any adjournment or postponement thereof or (ii)
the approval by the shareholders of Parent required for the consummation of
the Merger shall not have been obtained by reason of the failure to obtain
the required vote of the holders of Parent Common Stock at the Parent
Shareholders Meeting or at any adjournment or postponement thereof;
(e) By the Company or Parent, if pursuant to Section 7.4 the Company (i)
withdraws or modifies, or proposes publicly to withdraw or modify, in a
manner adverse to Parent, the approval or recommendation by the Company's
Board of Directors of the Merger or this Agreement, (ii) approves or
recommends, or proposes publicly to approve or recommend, any Company
Competing Proposal or (iii) approves or recommends, or proposes to approve
or recommend, or execute or enter into, any Company Acquisition Agreement;
(f) By the Company or Parent, if pursuant to Section 7.5 Parent (i)
withdraws or modifies, or proposes publicly to withdraw or modify, in a
manner adverse to the Company, the approval or recommendation by Parent's
Board of Directors of the Merger or this Agreement, (ii) approves or
recommends, or proposes publicly to approve or recommend, any Parent
Competing Proposal or (iii) approves or recommends, or proposes to approve
or recommend, or execute or enter into, any Parent Acquisition Agreement;
(g) By the Company, if Parent shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (A) would
give rise to the failure of a condition set forth in Section 8.3(a) or (b)
and (B) has not been or is incapable of being cured by Parent within 30
calendar days after its receipt of written notice thereof from the Company;
or
A-42
145
(h) By Parent, if the Company shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (A) would
give rise to the failure of a condition set forth in Section 8.2(a), (b),
or (c) and (B) has not been or is incapable of being cured by the Company
within 30 calendar days after its receipt of written notice thereof from
Parent.
Notwithstanding anything else contained in this Agreement, the right to
terminate this Agreement under this Section 9.1 shall not be available to any
party (a) that is in material breach of its obligations hereunder or (b) whose
failure to fulfill its obligations or to comply with its covenants under this
Agreement has been the cause of, or resulted in, the failure to satisfy any
condition to the obligations of either party hereunder.
Section 9.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 9.1 hereof, this Agreement shall forthwith be
terminated and have no further effect except as specifically provided herein
and, except as provided in this Section 9.2 and in Sections 7.7 and 10.10, there
shall be no liability on the part of any party hereto, provided that nothing
herein shall relieve any party from liability for any willful breach hereof.
Section 9.3. Amendments. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective boards of directors,
at any time before or after approval of the matters presented in connection with
the Merger by the shareholders of the Company and Parent, but, after any such
approval, no amendment shall be made which by law or in accordance with the
rules of any relevant stock exchange requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 9.4. Waiver. At any time prior to the Effective Time, whether
before or after the Company Shareholders Meeting or the Parent Shareholders
Meeting, any party hereto, by action taken by its board of directors, may (i)
extend the time for the performance of any of the covenants, obligations or
other acts of any other party hereto or (ii) waive any inaccuracy of any
representations or warranties or compliance with any of the agreements,
covenants or conditions of any other party or with any conditions to its own
obligations. Any agreement on the part of a party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party by its duly authorized officer. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights. The waiver of any such right with
respect to particular facts and other circumstances shall not be deemed a waiver
with respect to any other facts and circumstances and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
ARTICLE X
GENERAL PROVISIONS
Section 10.1. No Third Party Beneficiaries. Other than as specifically
provided herein, nothing in this Agreement shall confer any rights or remedies
upon any person other than the parties hereto.
Section 10.2. Entire Agreement. This Agreement constitutes the entire
Agreement among the parties with respect to the subject matter hereof and
supersedes any prior understandings, agreements, or representations by or among
the parties, written or oral, with respect to the subject matter hereof.
Section 10.3. Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors. No party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of the
other parties; provided, however, that Merger Sub may freely assign its rights
to another wholly owned subsidiary of Parent without such prior written approval
but no such assignment shall relieve Merger Sub of any of its obligations
hereunder.
Section 10.4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
A-43
146
Section 10.5. Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia, without regard to
principles of conflicts of law thereof.
Section 10.7. Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
Section 10.8. Specific Performance. Each of the parties acknowledges and
agrees that the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other party shall be entitled to seek an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
Section 10.9. Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 10.10. Non-Survival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive the
Effective Time, except for those covenants and agreements contained herein that
by their terms apply or are to be performed in whole or in part after the
Effective Time and this Article X.
Section 10.11. Certain Definitions. For purposes of this Agreement, the
terms:
(a) "associate" and "affiliate" shall have the same meaning as set forth
in Rule l2b-2 promulgated under the Exchange Act, and the term "person"
shall mean any individual, corporation, partnership (general or limited),
limited liability company, limited liability partnership, trust, joint
venture, joint-stock company, syndicate, association, entity,
unincorporated organization or government or any political subdivision,
agency or instrumentality thereof.
(b) "Business Day" means any day on which banks are not required or
authorized to close in the City of New York.
(c) "Knowledge" of any Person that is not an individual means, with
respect to any specific matter, the actual knowledge of such Person's
executive officers and other officers having primary responsibility for
such matter.
(d) "Person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in the Exchange Act).
(e) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated,
(i) of which such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which
held by such party
A-44
147
or any Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (ii) at least a majority of the
securities or other interests of which having by their terms ordinary
voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or
by any one or more of its Subsidiaries, or by such party and one or more of
its Subsidiaries.
Section 10.12. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by overnight courier service to the respective parties at the following
addresses, or at such other address for a party as shall be specified in a
notice given in accordance with this Section 10.12:
If to Parent or Merger Sub:
ChoicePoint Inc.
1000 Alderman Drive
Alpharetta, Georgia 30005
Attention: J. Michael de Janes
Telecopy: (770) 752-5939
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Russell B. Richards
Telecopy: (404) 572-5135
If to the Company:
DBT Online, Inc.
4530 Blue Lake Drive
Boca Raton, Florida 33431
Attention: Ron Fournet
Telecopy: (561) 982-5805
with a copy to:
DBT Online, Inc.
4530 Blue Lake Drive
Boca Raton, Florida 33431
Attention: J. Henry Muetterties
Telecopy: (561) 982-5805
and a copy to:
Morgan, Lewis & Bockius
5300 First Union Financial Ctr.
200 South Biscayne Blvd.
Miami, Florida 33131-2339
Attention: John S. Fletcher
Telecopy: (305) 579-0321
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
A-45
148
IN WITNESS WHEREOF, the Company, Parent and Merger Sub and have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
DBT ONLINE, INC.
By: /s/ RONALD A. FOURNET
------------------------------------
Name: Ronald A. Fournet
Title: President & CEO
CHOICEPOINT INC.
By: /s/ DEREK V. SMITH
------------------------------------
Name: Derek V. Smith
Title: Chairman & CEO
CHOICEPOINT ACQUISITION CORPORATION
By: /s/ DEREK V. SMITH
------------------------------------
Name: Derek V. Smith
Title: Chairman & CEO
A-46
149
ANNEX B
THE ROBINSON-HUMPHREY COMPANY, LLC
February 14, 2000
Board of Directors
ChoicePoint Inc.
1000 Alderman Drive
Alpharetta, Georgia 30005
Gentlemen:
We understand that ChoicePoint Inc. (the "Company") is considering a
proposed merger of the Company with DBT Online, Inc. ("DBT Online"). We
understand that under this merger (the "Proposed Transaction"), the Company will
issue 0.525 shares (the "Exchange Ratio") of the Company's common stock in
exchange for each share of DBT Online common stock. We further understand that
the merger will be accounted for as a pooling of interests. The terms and
conditions of the Proposed Transaction are set forth in more detail in the
Agreement and Plan of Merger dated February 14, 2000 (the "Agreement").
We have been requested by the Company to render our opinion with respect to
the fairness, from a financial point of view, to the Company's common
stockholders of the Exchange Ratio pursuant to the Proposed Transaction.
In arriving at our opinion, we have, among other things:
1. Reviewed the Agreement.
2. Reviewed certain publicly available information concerning the
Company and DBT Online which we believe to be relevant to our analysis;
3. Reviewed certain financial and operating data concerning the Company
and DBT Online furnished to us by the Company and DBT Online, respectively;
4. Conducted discussions with members of the Company's and DBT Online's
management concerning their respective business, operations, assets,
present condition and prospects;
5. Reviewed the trading history of the common stock of the Company and
of DBT Online from February 7, 1997 to the date of this letter;
6. Reviewed the historical market prices and trading activity for the
common stock of the Company and DBT Online and compared them with those of
certain publicly traded companies which we deemed relevant;
7. Compared the historical financial results and present financial
condition of the Company and DBT Online with those of certain publicly
traded companies which we deemed relevant;
8. Reviewed the financial terms of the Proposed Transaction with the
terms of certain other recent merger and acquisition transactions which we
deemed relevant;
9. Performed certain financial analyses with respect to the Company's
and DBT Online's pro forma financial condition and projected future
operating performance; and
10. Reviewed such other financial statistics and undertook such other
analyses and investigations as we deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. With respect to the financial forecasts
B-1
150
of the Company and DBT Online, we have assumed that such forecasts have been
reasonably prepared and reflect the best currently available estimates and
judgments of the Company's and DBT Online's respective management as to future
financial performance. In arriving at our opinion, we conducted only a limited
physical inspection of the properties and facilities of the Company and DBT
Online. We have not made or obtained any evaluations or appraisals of the assets
or liabilities of the Company or DBT Online. Our opinion is necessarily based
upon market, economic and other conditions as they exist on, and can be
evaluated as of, the date of this letter.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is in part
contingent upon the consummation of the Proposed Transaction. In addition, the
Company has agreed to indemnify us for certain liabilities arising out of the
rendering of this opinion. We have also performed various investment banking
services for the Company in the past, and have received customary fees for such
services. In the ordinary course of our business, we may actively trade in the
common stock of the Company or DBT Online for our own account and for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that the Exchange Ratio in the Proposed Transaction is fair from a
financial point of view to the common stockholders of the Company.
Very truly yours,
/s/ The Robinson-Humphrey Company, LLC
THE ROBINSON-HUMPHREY COMPANY, LLC
B-2
151
ANNEX C
(CREDIT SUISSE FIRST BOSTON LOGO)
February 14, 2000
Board of Directors
DBT Online, Inc.
4530 Blue Lake Drive
Boca Raton, Florida 33431
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders
of the common stock of DBT Online, Inc. ("DBT") from a financial point of view
of the Exchange Ratio (as defined below) set forth in the Agreement and Plan of
Merger, dated as of February 14, 2000 (the "Merger Agreement"), by and among
DBT, ChoicePoint Inc. ("ChoicePoint") and ChoicePoint Acquisition Corporation, a
wholly owned subsidiary of ChoicePoint ("Merger Sub"). The Merger Agreement
provides for, among other things, the merger of Merger Sub with and into DBT
(the "Merger") pursuant to which each outstanding share of the common stock, par
value $.10 per share, of DBT (the "DBT Common Stock") will be converted into the
right to receive 0.525 (the "Exchange Ratio") of a share of the common stock,
par value $.10 per share, of ChoicePoint (the "ChoicePoint Common Stock").
In arriving at our opinion, we have reviewed the Merger Agreement and
certain publicly available business and financial information relating to DBT
and ChoicePoint. We have also reviewed certain other information relating to DBT
and ChoicePoint, including financial forecasts, provided to or discussed with us
by DBT and ChoicePoint, and have met with the managements of DBT and ChoicePoint
to discuss the businesses and prospects of DBT and ChoicePoint. We have also
considered certain financial and stock market data of DBT and ChoicePoint, and
we have compared those data with similar data for other publicly held companies
in businesses similar to DBT and ChoicePoint, and we have considered, to the
extent publicly available, the financial terms of certain other business
combinations and other transactions which have recently been effected. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the financial forecasts, we have been advised, and have assumed, that
such forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of DBT and
ChoicePoint as to the future financial performance of DBT and ChoicePoint and
the potential synergies and strategic benefits (including the amount, timing and
achievability thereof) anticipated to result from the Merger. We also have
assumed, with your consent, that the Merger will be treated as a pooling of
interests in accordance with generally accepted accounting principles and as a
tax-free reorganization for federal income tax purposes. In addition, we have
not been requested to make, and have not made, an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of DBT or
ChoicePoint, nor have we been furnished with any such evaluations or appraisals.
Our opinion is necessarily based upon information available to us, and
financial, economic, market and other conditions as they exist and can be
evaluated, on the date hereof. We are not expressing any opinion as to the
actual value of the ChoicePoint Common Stock when issued pursuant to the Merger
or the prices at which the ChoicePoint Common Stock will trade subsequent to the
Merger. In connection with our engagement, we were not requested to, and did
not, solicit third party indications of interest in the possible acquisition of
all or a part of DBT.
C-1
152
We have acted as financial advisor to DBT in connection with the Merger and
will receive a fee for such services, a significant portion of which is
contingent upon the consummation of the Merger. Credit Suisse First Boston and
its affiliates have in the past provided financial services to DBT and certain
of its affiliates and to ChoicePoint and certain of its affiliates unrelated to
the proposed Merger, for which services we have received compensation. In the
ordinary course of business, Credit Suisse First Boston, its affiliates and its
employees may actively trade the debt and equity securities of both DBT and
ChoicePoint for their own accounts and for the accounts of customers and,
accordingly, may at any time hold long or short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of DBT in connection with its evaluation of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to any matter relating to the Merger, and is not to be quoted
or referred to, in whole or in part, in any registration statement, prospectus
or proxy statement, or in any other document used in connection with the
offering or sale of securities, nor shall this letter be used for any other
purposes, without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of DBT Common Stock from
a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
C-2
153
CHOICEPOINT INC.
The undersigned hereby appoints Douglas C. Curling, J. Michael de Janes,
and Derek V. Smith, and each of them, to act, with or without the other and with
full power of substitution and revocation, as proxies to appear and vote on
behalf of the undersigned at the Annual Meeting of Shareholders of ChoicePoint
Inc. to be held on May 16, 2000 at 11:00 a.m. local time, and at any adjournment
or postponement thereof, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger (the "Merger Agreement"), dated as of February 14, 2000, by
and among ChoicePoint Inc., a Georgia corporation ("ChoicePoint"), DBT Online,
Inc., a Pennsylvania corporation ("DBT"), and ChoicePoint Acquisition
Corporation, a Pennsylvania corporation and a wholly owned subsidiary of
ChoicePoint ("ChoicePoint-Sub"), and the issuance of shares of ChoicePoint
common stock pursuant to the Merger Agreement. If the Merger Agreement is
approved, ChoicePoint-Sub would be merged with and into DBT, and DBT would
become a wholly owned subsidiary of ChoicePoint (the "Merger"). The terms of the
Merger are described in the accompanying Joint Proxy Statement/Prospectus.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Election of Directors
[ ] FOR ALL NOMINEES LISTED BELOW (except as marked [ ] WITHHOLD AUTHORITY to vote for all nominees
to the contrary below). listed below.
James M. Denny; Charles I. Story
(INSTRUCTION: To withhold authority to vote for any individual nominee(s), write
the name(s) of such nominee(s) immediately below.)
- --------------------------------------------------------------------------------
3. Proposal to ratify the appointment of Arthur Andersen LLP as independent
public accountants for ChoicePoint for the year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued on reverse -- please complete other side)
(continued from other side)
4. In their discretion, upon such other matters in connection with the
foregoing or otherwise as may properly come before the meeting and any
adjournment or postponement thereof; all as set forth in the Notice of Annual
Meeting of Shareholders and the Joint Proxy Statement/Prospectus, receipt of
which is hereby acknowledged.
THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED,
WILL BE VOTED "FOR" THE ABOVE MATTERS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Dated: , 2000
-------------------
------------------------------
Signature
------------------------------
Signature if held jointly
IMPORTANT: Please date
this proxy and sign exactly as
your name or names appear
above. If stock is held
jointly, signature should
include both names. Executors,
administrators, trustees,
guardians and others signing
in a representative capacity,
please give your full
title(s).
Do you plan to attend the Annual Meeting of Shareholders? [ ] Yes [ ] No
IMPORTANT: PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME OR NAMES APPEAR ABOVE.