<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1996
REGISTRATION NO. 333-11081
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
INTELIDATA TECHNOLOGIES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7373, 3661
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL 54-1820617
JURISDICTION CLASSIFICATION CODE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NUMBER)
ORGANIZATION)
13100 WORLDGATE DRIVE
SUITE 600
HERNDON, VIRGINIA 20170
(703) 834-8500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ALBERT N. WERGLEY, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
13100 WORLDGATE DRIVE
SUITE 600
HERNDON, VIRGINIA 20170
(703) 834-8500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
THE COMMISSION IS REQUESTED TO SEND COPIES OF
ALL COMMUNICATIONS TO:
DAVID M. CARTER THOMAS L. FAIRFIELD
HUNTON & WILLIAMS LEBOEUF, LAMB, GREENE & MACRAE,
RIVERFRONT PLAZA, EAST TOWER L.L.P.
951 EAST BYRD STREET GOODWIN SQUARE
RICHMOND, VIRGINIA 23219 225 ASYLUM STREET
HARTFORD, CONNECTICUT 06103
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
-----------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[LOGO OF US ORDER APPEARS HERE]
13100 WORLDGATE DRIVE
SUITE 600
HERNDON, VIRGINIA 20170
October 9, 1996
Dear US Order Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
US Order, Inc. ("US Order") to be held at 13100 Worldgate Drive, Suite 600,
Herndon, Virginia, on November 7, 1996, at 11:00 a.m., local time. At this
meeting, you will be asked to consider and vote on an Agreement and Plan of
Merger (the "Merger Agreement") between US Order and Colonial Data
Technologies Corp. ("Colonial Data"), pursuant to which US Order will merge
with and into InteliData Technologies Corporation, a Delaware corporation
("InteliData"). On the same day, stockholders of Colonial Data will consider
at a special meeting a proposal pursuant to which Colonial Data also will
merge with and into InteliData.
The Merger Agreement generally provides for a tax-free exchange in which US
Order common stockholders will receive one share of InteliData common stock
for each US Order share held, and Colonial Data common stockholders will
receive one share of InteliData common stock for each Colonial Data share
held. Immediately following the mergers, former holders of US Order common
stock collectively will hold approximately 52% of the outstanding common stock
of InteliData and former holders of Colonial Data common stock collectively
will hold approximately 48% of the outstanding common stock of InteliData,
assuming that existing warrants and options of US Order and Colonial Data are
not exercised before the mergers.
The Merger Agreement has been unanimously approved by the Board of Directors
of US Order and Colonial Data and recommended by each of their Boards to their
respective stockholders. US Order's Board of Directors and management believe
that the proposed mergers of US Order and Colonial Data with and into
InteliData will result in significant benefits to US Order and its
stockholders. WorldCorp, Inc. and certain directors and executive officers of
US Order, who collectively own approximately 56% of the outstanding shares of
common stock of US Order, have agreed to vote all of their shares of common
stock of US Order for approval of the Merger Agreement.
The InteliData Board of Directors will consist of nine persons, five of whom
have been designated by US Order and four of whom have been designated by
Colonial Data. The new Board of Directors will consist of members from the
existing Boards of US Order and Colonial Data. Robert J. Schock, Colonial
Data's Chairman of the Board, President and Chief Executive Officer will be
Chief Executive Officer and Vice Chairman of InteliData, which will be
headquartered in Herndon, Virginia. I will be Chairman of InteliData.
The enclosed Notice of Meeting and Joint Proxy Statement/Prospectus explain
the proposed mergers and provide specific information concerning the Special
Meeting. Please read these materials carefully and thoughtfully consider the
information contained in them.
Whether or not you plan to attend the Special Meeting, you are urged to
complete, sign and return promptly the enclosed proxy card to assure that your
shares will be voted at the meeting. The merger is an important and historic
step for US Order and its stockholders. On behalf of the Board of Directors, I
urge you to vote FOR approval of the merger.
Sincerely,
William F. Gorog
Chairman of the Board and Chief
Executive Officer
<PAGE>
COLONIAL DATA TECHNOLOGIES
80 PICKETT DISTRICT ROAD
NEW MILFORD, CT 06776
October 9, 1996
Dear Colonial Data Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
Colonial Data Technologies Corp. ("Colonial Data"), to be held at 13100
Worldgate Drive, Suite 600, Herndon, Virginia, on November 7, 1996, at 9:00
a.m., local time. At this meeting, you will be asked to consider and vote on
an Agreement and Plan of Merger (the "Merger Agreement"), between Colonial
Data and US Order, Inc. ("US Order"), pursuant to which Colonial Data will
merge with and into InteliData Technologies Corporation, a Delaware
corporation ("InteliData"). On the same day, stockholders of US Order will
consider at a special meeting a proposal pursuant to which US Order also will
merge with and into InteliData.
The Merger Agreement generally provides for a tax-free exchange in which
Colonial Data common stockholders will receive one share of InteliData common
stock for each Colonial Data share held, and US Order common stockholders will
receive one share of InteliData common stock for each US Order share held.
Immediately following the mergers, former holders of Colonial Data common
stock collectively will hold approximately 48% of the outstanding common stock
of InteliData and former holders of US Order common stock collectively will
hold approximately 52% of the outstanding common stock of InteliData, assuming
that existing warrants and options of US Order and Colonial Data are not
exercised before the mergers.
The Merger Agreement has been unanimously approved by the Board of Directors
of each of Colonial Data and US Order and recommended by each of their Boards
to their respective stockholders. Colonial Data's Board of Directors and
management believe that the proposed mergers of US Order and Colonial Data
with and into InteliData will result in significant benefits to Colonial Data
and its stockholders. Certain stockholders, directors and officers of Colonial
Data, who collectively own approximately 13% of the outstanding shares of
common stock of Colonial Data, have agreed to vote all of their shares of
common stock of Colonial Data for approval of the Merger Agreement.
The InteliData Board of Directors will consist of nine persons, four of whom
have been designated by Colonial Data and five of whom have been designated by
US Order. The new Board of Directors will consist of members from the existing
Boards of Colonial Data and US Order. William F. Gorog, US Order's Chairman
and Chief Executive Officer will be Chairman of InteliData, which will be
headquartered in Herndon, Virginia. I will be Chief Executive Officer and Vice
Chairman of InteliData.
The enclosed Notice of Meeting and Joint Proxy Statement/Prospectus explain
the proposed mergers and provide specific information concerning the Special
Meeting. Please read these materials carefully and thoughtfully consider the
information contained in them. Your vote on the Merger Agreement is of great
importance.
Whether or not you plan to attend the Special Meeting, you are urged to
complete, sign and return promptly the enclosed proxy card to assure that your
shares will be voted at the meeting. The merger is an important and historic
step for Colonial Data and its stockholders. On behalf of the Board of
Directors, I urge you to vote FOR approval of the merger.
Sincerely,
Robert J. Schock
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
US ORDER, INC.
13100 WORLDGATE DRIVE, SUITE 600
HERNDON, VIRGINIA 20170
----------------
NOTICE TO STOCKHOLDERS OF SPECIAL MEETING
TO BE HELD NOVEMBER 7, 1996
----------------
To the Stockholders of US Order, Inc.:
Notice is Hereby Given that a Special Meeting of Stockholders (the "US Order
Meeting") of US Order, Inc. ("US Order") will be held at 13100 Worldgate
Drive, Suite 600, Herndon, Virginia, on November 7, 1996, at 11:00 a.m., local
time for the following purposes:
1. To consider and vote upon an Agreement and Plan of Merger, dated as of
August 5, 1996 (the "Merger Agreement"), by and between Colonial Data
Technologies Corp., a Delaware corporation ("Colonial Data"), and US
Order pursuant to which US Order and Colonial Data will be merged with
and into InteliData Technologies Corporation, a Delaware corporation
("InteliData"). The Merger Agreement provides that each outstanding
share of common stock of US Order will be converted into the right to
receive one share of common stock of InteliData and each outstanding
share of common stock of Colonial Data will be converted into the right
to receive one share of common stock of InteliData. The respective
mergers of US Order and Colonial Data with and into InteliData will
become effective simultaneously with InteliData being the surviving
corporation. A copy of the Merger Agreement is attached to the
accompanying Joint Proxy Statement/Prospectus as Appendix I.
2. To transact such other business as may be properly brought before the US
Order Meeting or at any and all adjournments or postponements thereof.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE MERGER
AGREEMENT FOR THE REASONS SET FORTH IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS.
PLEASE READ THE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY.
Only stockholders of record at the close of business on October 4, 1996, are
entitled to notice of, and to vote at, the US Order Meeting. Whether or not
you plan to attend the US Order Meeting in person, you are requested to sign,
date and return the enclosed proxy card in the enclosed prepaid envelope as
soon as possible. PLEASE DO NOT SEND STOCK CERTIFICATES WITH THE ENCLOSED
PROXY CARD. Stockholders attending the US Order Meeting may vote in person
even if they have returned a proxy card.
By Order of the Board of Directors,
Albert N. Wergley
Secretary
Herndon, Virginia
October 9, 1996
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD IMMEDIATELY.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 8, 1996
JOINT PROXY STATEMENT
US ORDER, INC.
AND
COLONIAL DATA TECHNOLOGIES CORP.
----------
PROSPECTUS
INTELIDATA TECHNOLOGIES CORPORATION
COMMON STOCK
This Joint Proxy Statement/Prospectus is being furnished (a) to holders of
common stock of US Order, Inc., a Delaware corporation ("US Order"), in
connection with the solicitation of proxies by the Board of Directors of US
Order (the "US Order Board") for use at the Special Meeting of Stockholders of
US Order, or any adjournment or postponement thereof (the "US Order Meeting"),
which is to be held on November 7, 1996, at 11:00 a.m., local time, at 13100
Worldgate Drive, Suite 600, Herndon, Virginia and (b) to holders of common
stock of Colonial Data Technologies Corp., a Delaware corporation ("Colonial
Data"), in connection with the solicitation of proxies by the Board of
Directors of Colonial Data (the "Colonial Data Board" and together with the US
Order Board, the "Boards") for use at the Special Meeting of Stockholders of
Colonial Data or any adjournment or postponement thereof (the "Colonial Data
Meeting" and, together with the US Order Meeting, the "Meetings"), which is to
be held on November 7, 1996, at 9:00 a.m., local time, at 13100 Worldgate
Drive, Suite 600, Herndon, Virginia. At the Meetings, stockholders of US Order
and Colonial Data will be asked to consider and vote upon a proposal to approve
an Agreement and Plan of Merger, dated as of August 5, 1996 (the "Merger
Agreement," a copy of which is attached hereto as Appendix I), by and between
US Order and Colonial Data, and certain transactions contemplated thereby. The
transactions contemplated by the Merger Agreement are referred to herein
collectively as the "Mergers."
The Merger Agreement provides, among other things, for (a) the merger of US
Order with and into InteliData Technologies Corporation, a Delaware corporation
("InteliData"), and (b) the merger of Colonial Data with and into InteliData
each in accordance with the Merger Agreement. As a result of the Mergers, each
of US Order and Colonial Data will merge with and into InteliData, and
stockholders of US Order and Colonial Data will become stockholders of
InteliData, on the terms described in this Joint Proxy Statement/Prospectus.
The Mergers will become effective simultaneously at the date and time specified
in the certificates of merger to be filed with the Secretary of State of
Delaware (the "Effective Time"). See "The Mergers--The Merger Agreement."
InteliData has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-4 (together with all
amendments, exhibits and schedules thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), covering up to
32,536,857 shares of common stock of InteliData, $.001 par value per share (the
"InteliData Common Stock"), that may be issued in accordance with the Merger
Agreement to holders of outstanding shares of common stock of US Order, $.001
par value (the "US Order Common Stock") and to holders of outstanding shares of
common stock of Colonial Data, $.01 par value (the "Colonial Data Common
Stock"). The InteliData Common Stock will be included on The Nasdaq National
Market ("Nasdaq") under the symbol "INTD", subject to official notice of
issuance. This Joint Proxy Statement/Prospectus also constitutes the Prospectus
of InteliData filed as part of the Registration Statement.
If the Mergers are approved, immediately following the Effective Time, former
holders of US Order Common Stock will hold approximately 52% of the outstanding
shares of InteliData Common Stock and former holders of Colonial Data Common
Stock will hold approximately 48% of the outstanding shares of InteliData
Common Stock, assuming that existing warrants and options of US Order and
Colonial Data are not exercised before the Mergers.
This Joint Proxy Statement/Prospectus, the Notice of Special Meeting of
Stockholders of US Order, the Notice of Special Meeting of Stockholders of
Colonial Data and the accompanying proxy cards are first being mailed to the
respective stockholders of US Order and Colonial Data on or about October 9,
1996.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 OF THIS JOINT PROXY
STATEMENT/PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY THE STOCKHOLDERS OF US ORDER AND COLONIAL DATA.
NEITHER THE MERGERS NOR THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT
PROXY STATEMENT/PROSPECTUS HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HASTHE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACYOF THIS JOINT PROXY STATEMENT/ PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS OCTOBER 9, 1996.
<PAGE>
AVAILABLE INFORMATION
US Order and Colonial Data are each subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, file reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
following Regional Offices of the Commission: 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material can be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. The Commission maintains a Web Site
on the Internet that contains reports, proxy and information statements and
other information regarding US Order and Colonial Data. The Commission's Web
Site address is (http://www.sec.gov).
Shares of US Order Common Stock and Colonial Data Common Stock are included
on Nasdaq, and proxy statements, reports and other information concerning US
Order and Colonial Data can be inspected and copied at the offices of the
National Association of Securities Dealers, Inc. (the "NASD"), 1735 K Street,
N.W., Washington, D.C. 20006.
InteliData has filed the Registration Statement with the Commission with
respect to the InteliData Common Stock to be issued in the Mergers. This Joint
Proxy Statement/Prospectus does not include all of the information set forth
in the Registration Statement, as permitted by the rules and regulations of
the Commission. The Registration Statement, including any amendments,
schedules and exhibits filed or incorporated by reference as a part thereof,
is available for inspection and copying as set forth above. Statements
contained in this Joint Proxy Statement/Prospectus or in any document
incorporated herein by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document, and
each such statement shall be deemed qualified in its entirety by such
reference.
The information contained herein with respect to US Order before the Mergers
has been provided by US Order, and the information contained herein with
respect to Colonial Data before the Mergers has been provided by Colonial
Data.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
JOINT PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF
PROXIES OR THE OFFERING OF SECURITIES MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY US ORDER OR COLONIAL DATA. THIS JOINT PROXY STATEMENT/PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES COVERED BY THIS JOINT PROXY STATEMENT/PROSPECTUS OR A SOLICITATION
OF A PROXY IN ANY JURISDICTION WHERE, OR TO OR FROM ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF US ORDER OR COLONIAL DATA SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
i
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by US Order with the Commission
under the Exchange Act are incorporated herein by reference:
(a) US Order's Annual Report on Form 10-K for the year ended December 31,
1995;
(b) US Order's Quarterly Reports on Form 10-Q for the quarters ended June
30, 1996 and March 31, 1996; and
(c) US Order's Current Reports on Form 8-K filed with the Commission on
August 5, 1996 and October 8, 1996.
The following documents previously filed by Colonial Data with the
Commission under the Exchange Act are incorporated herein by reference:
(a) Colonial Data's Annual Report on Form 10-K for the year ended
December 31, 1995;
(b) Colonial Data's Quarterly Reports on Form 10-Q for the quarters ended
June 30, 1996 and March 31, 1996; and
(c) Colonial Data's Current Report on Form 8-K filed with the Commission
on August 5, 1996.
All documents filed by US Order and Colonial Data pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Joint
Proxy Statement/Prospectus and prior to the Meetings shall be deemed to be
incorporated by reference into this Joint Proxy Statement/Prospectus and to be
a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
subsequently filed document that is or is deemed to be incorporated by
reference herein) modifies or supersedes such previous statement. Any
statement so modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE HEREIN) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN
OR ORAL REQUEST BY ANY PERSON TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS
HAS BEEN DELIVERED, IN THE CASE OF DOCUMENTS RELATING TO US ORDER, FROM ALBERT
N. WERGLEY, VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY, 13100 WORLDGATE
DRIVE, SUITE 600, HERNDON, VIRGINIA 20170 (TELEPHONE NUMBER: (703) 834-8500)
AND, IN THE CASE OF DOCUMENTS RELATING TO COLONIAL DATA, FROM JOHN N.
GIAMALIS, VICE PRESIDENT--FINANCE, CHIEF FINANCIAL OFFICER, TREASURER AND
SECRETARY, 80 PICKETT DISTRICT ROAD, NEW MILFORD, CONNECTICUT 06776 (TELEPHONE
NUMBER: (860) 210-3000). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY SUCH REQUEST SHOULD BE MADE BY OCTOBER 31, 1996.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION..................................................... i
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... ii
SUMMARY................................................................... 1
The Companies........................................................... 1
The Meetings; Votes Required............................................ 2
The Mergers............................................................. 3
Comparison of Stockholders' Rights...................................... 6
Certain Federal Income Tax Consequences................................. 6
Stockholders' Rights of Dissent and Appraisal........................... 7
Exchange of Shares...................................................... 7
Comparative Market Price................................................ 8
Selected Historical and Pro Forma Financial Data........................ 8
RISK FACTORS.............................................................. 11
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995....................... 11
Risk Factors with Respect to InteliData................................. 11
Risk Factors with Respect to US Order................................... 14
Risk Factors with Respect to Colonial Data.............................. 16
THE MEETINGS.............................................................. 18
Times and Places; Purposes.............................................. 18
Voting Rights; Votes Required for Approval.............................. 19
Proxies................................................................. 20
THE MERGERS............................................................... 21
General; Effective Time................................................. 21
Exchange Ratios; Exchange of Shares..................................... 21
Background and Negotiation of the Mergers............................... 22
Negotiation of the Mergers.............................................. 22
Reasons for the Mergers................................................. 23
Recommendations of the Boards of Directors.............................. 25
Opinions of Financial Advisors.......................................... 25
The Merger Agreement.................................................... 32
Interests of Certain Persons in the Mergers............................. 38
Accounting Treatment.................................................... 40
Certain Consequences of the Mergers..................................... 40
Regulatory Matters...................................................... 40
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 42
MANAGEMENT AND OPERATION AFTER THE MERGERS................................ 43
INTELIDATA UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION............................................................... 47
BUSINESS OF INTELIDATA.................................................... 54
BUSINESS OF US ORDER...................................................... 54
General................................................................. 54
Products................................................................ 55
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Marketing and Sales..................................................... 57
Competition............................................................. 59
Product Development..................................................... 60
Manufacturing........................................................... 60
Government Regulation................................................... 61
Patents, Proprietary Rights and Licenses................................ 61
Employees............................................................... 61
Properties.............................................................. 61
Legal Proceedings....................................................... 61
BUSINESS OF COLONIAL DATA................................................. 62
General Overview........................................................ 62
Industry Background..................................................... 62
Emergence of ADSI-Based Network Services................................ 63
Products................................................................ 63
Services................................................................ 64
Marketing and Distribution.............................................. 64
Leasing Programs with RBOCs and other Telco Customers................... 65
Retail/Private Label Customer Sales..................................... 66
Product Development..................................................... 66
Manufacturing........................................................... 66
Competition............................................................. 67
Government Regulation................................................... 67
Patents, Proprietary Rights and Licenses................................ 68
Employees............................................................... 68
Properties.............................................................. 69
Seasonality............................................................. 69
Backlog................................................................. 69
CERTAIN TRANSACTIONS OF COLONIAL DATA SINCE DECEMBER 31, 1995............. 69
DESCRIPTION OF INTELIDATA CAPITAL STOCK................................... 70
General................................................................. 70
Common Stock............................................................ 70
Preferred Stock......................................................... 71
Certain Provisions of the DGCL, InteliData Certificate and InteliData
Bylaws................................................................. 71
COMPARISON OF STOCKHOLDERS' RIGHTS........................................ 73
Authorized Capital Stock................................................ 73
Directors............................................................... 73
Removal of Directors.................................................... 74
Vacancies on the Board of Directors..................................... 75
Notice of Stockholder Nominations of Directors and Stockholder Propos-
als.................................................................... 75
Director Standard of Conduct............................................ 76
Limitations on Director Liability....................................... 76
Indemnification......................................................... 76
Mergers, Share Exchanges and Sales of Assets............................ 76
Anti-takeover Statutes.................................................. 76
Amendments to Articles of Incorporation................................. 77
Amendments to Bylaws.................................................... 77
Dissenters' Rights...................................................... 78
Transfer Restrictions................................................... 78
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
OWNERSHIP OF US ORDER COMMON STOCK........................................ 79
OWNERSHIP OF COLONIAL DATA COMMON STOCK................................... 80
LEGAL MATTERS............................................................. 81
EXPERTS................................................................... 81
STOCKHOLDER PROPOSALS..................................................... 81
OTHER MATTERS............................................................. 81
APPENDICES:
Appendix IAgreement and Plan of Merger, dated August 5, 1996, by and
between US Order, Inc. and Colonial Data Technologies
Corp........................................................ A-1
Appendix IIOpinion of Salomon Brothers Inc................................ B-1
Appendix IIIOpinion of First Albany Corporation........................... C-1
Appendix IVCertificate of Incorporation of InteliData Technologies
Corporation................................................. D-1
Appendix VBylaws of InteliData Technologies Corporation................... E-1
</TABLE>
v
<PAGE>
SUMMARY
The following summary is intended only to highlight certain information
contained elsewhere in this Joint Proxy Statement/Prospectus. This summary is
not intended to be complete and is qualified in its entirety by the more
detailed information contained elsewhere in this Joint Proxy
Statement/Prospectus, the Appendices hereto and the documents incorporated by
reference or otherwise referred to herein. Stockholders are urged to review
this entire Joint Proxy Statement/Prospectus carefully, including the
Appendices hereto. Unless expressly stated herein, all statements assume that
existing stock options and warrants of US Order and Colonial Data,
respectively, are not exercised before the Effective Time.
THE COMPANIES
InteliData
InteliData Technologies Corporation, a newly-formed Delaware corporation
("InteliData"), has not, to date, conducted any significant activities other
than those incident to its formation, its execution of the Merger Agreement and
its participation in the preparation of this Joint Proxy Statement/Prospectus
and certain other matters contemplated by the Merger Agreement. As a result of
the Mergers, US Order and Colonial Data will merge with and into InteliData,
and InteliData will continue the businesses currently conducted by US Order and
Colonial Data. The mailing address and telephone number of InteliData's
principal executive offices are 13100 Worldgate Drive, Suite 600, Herndon,
Virginia 20170, (703) 834-8500. See "Business of InteliData."
US Order
US Order, Inc., a Delaware corporation ("US Order"), develops and markets
products and services for the financial services and telecommunications
industries in two target markets: home banking and intelligent
telecommunications network services. US Order's financial service products
allow consumers to pay bills, check account balances and receive other bank
information from their homes through bank-branded customer service, voice
response systems and data translation systems. US Order's telecommunications
products include the Telesmart 4000/Intelifone 2000 smart telephone, which has
been developed in conjunction with Colonial Data Technologies Corp., and a
complete package of interactive applications. Smart telephones are telephones
with a central processing unit, an integrated display screen and memory which
allow consumers to send and receive text information. Over 50 banks and
telephone companies currently use US Order's products and services. US Order
has a strategic alliance with Visa Interactive, Inc. ("Visa InterActive"), a
wholly-owned subsidiary of Visa International Service Association, Inc.
("Visa"), in the financial services market and with Colonial Data Technologies
Corp. in the intelligent network services market.
On October 4, 1996, US Order acquired Braun, Simmons & Co., an Ohio
corporation ("Braun Simmons"), for approximately $7 million consisting of cash
and US Order common stock and including US Order transaction costs pursuant to
a merger of Braun Simmons into US Order. Braun Simmons is an information
engineering firm specializing in the development of home banking and electronic
commerce solutions for financial institutions. The acquisition expands US
Order's product line for both large and small financial institutions. US Order
intends to offer Braun Simmons' bill payment products in tandem with US Order's
bill payment and biller solutions. In addition, Braun Simmons will enable US
Order to offer a variety of Internet access and financial products and
services.
The mailing address and telephone number of US Order's principal executive
offices are 13100 Worldgate Drive, Suite 600, Herndon, Virginia 20170,
(703) 834-8500. See "Business of US Order."
Colonial Data
Colonial Data Technologies Corp., a Delaware corporation ("Colonial Data"),
designs, develops and markets telecommunications products that support
intelligent network services being developed and implemented
1
<PAGE>
by the regional Bell operating companies and other telephone operating
companies ("telcos"). In recent years, Colonial Data has concentrated its
product development and marketing efforts on products that support Caller ID
and other emerging intelligent network services. Colonial Data and US Order
have developed a smart telephone, the Telesmart 4000/Intelifone 2000, which
provides consumers call management features and major new advances in
interactive applications via telephone. In addition, Colonial Data currently
offers a line of Caller ID adjunct units and telephones with integrated Caller
ID, small business telecommunications systems with the Landmark(R) trademark
and high-end consumer telecommunications equipment. Colonial Data also repairs
and refurbishes telecommunications products for commercial customers and
provides other services that support the development and implementation of
intelligent network services. The mailing address and telephone number of
Colonial Data's principal executive offices are 80 Pickett District Road, New
Milford, Connecticut 06776, (860) 210-3000. See "Business of Colonial Data."
THE MEETINGS; VOTES REQUIRED
US Order
The US Order Meeting will be held at 13100 Worldgate Drive, Suite 600,
Herndon, Virginia on November 7, 1996, at 11:00 a.m., local time. At the US
Order Meeting, holders of US Order Common Stock will be asked to consider and
vote upon a proposal to approve the Merger Agreement, which is summarized below
and described in more detail elsewhere in this Joint Proxy
Statement/Prospectus. See "The Mergers."
Holders of record of US Order Common Stock at the close of business on
October 4, 1996 (the "US Order Record Date"), have the right to receive notice
of, and vote at, the US Order Meeting. Each share of US Order Common Stock is
entitled to one vote on each matter that is properly presented to stockholders
for a vote at the US Order Meeting. Under US Order's Certificate of
Incorporation (the "US Order Certificate") and the Delaware General Corporation
Law, as amended (the "DGCL"), the affirmative vote of the holders of a majority
of the shares of US Order Common Stock issued and outstanding on the US Order
Record Date is required to approve and adopt the Merger Agreement. For
information with respect to the treatment of abstentions, shares held of record
by a broker, as nominee ("Broker Shares"), that are not voted and properly
executed but unmarked proxy cards, see "The Meetings--Voting Rights; Votes
Required for Approval" and "--Proxies."
As of the US Order Record Date, US Order's directors and executive officers
beneficially owned 112,712 shares of US Order Common Stock, representing less
than 1% of the shares of US Order Common Stock outstanding on such date.
WorldCorp Investments, Inc., the majority stockholder of US Order and a wholly-
owned subsidiary of WorldCorp, Inc. (together, "WorldCorp"), the Chairman and
Chief Executive Officer of US Order, and certain directors and executive
officers of US Order, who collectively owned approximately 56% of the
outstanding shares of US Order Common Stock as of the US Order Record Date,
have executed stockholder agreements with Colonial Data pursuant to which they
have agreed to vote all of their shares of US Order Common Stock for approval
of the Merger Agreement unless the Merger Agreement is terminated pursuant to
its terms, the US Order Board recommends to the US Order stockholders a
Superior Proposal (as defined below under "The Mergers--Termination; Amendment
and Waiver") or otherwise, in the exercise of its fiduciary duties upon the
advice of counsel, withdraws, amends or modifies in any manner adverse to
Colonial Data its favorable recommendation of the Merger Agreement. The vote of
such persons in accordance with the stockholder agreements would be sufficient
to approve the Merger Agreement on the part of US Order without any action on
the part of any other holder of US Order Common Stock.
Colonial Data
The Colonial Data Meeting will be held at 13100 Worldgate Drive, Suite 600,
Herndon, Virginia on November 7, 1996, at 9:00 a.m., local time. At the
Colonial Data Meeting, holders of Colonial Data Common Stock will be asked to
consider and vote upon a proposal to approve the Merger Agreement, which is
summarized below and described in more detail elsewhere in this Joint Proxy
Statement/Prospectus. See "The Mergers."
2
<PAGE>
Holders of record of Colonial Data Common Stock at the close of business on
October 4, 1996 (the "Colonial Data Record Date"), have the right to receive
notice of, and vote at, the Colonial Data Meeting. Each share of Colonial Data
Common Stock is entitled to one vote on each matter that is properly presented
to stockholders for a vote at the Colonial Data Meeting. Under Colonial Data's
Certificate of Incorporation (the "Colonial Data Certificate") and the DGCL,
the affirmative vote of the holders of a majority of the shares of Colonial
Data Common Stock issued and outstanding on the Colonial Data Record Date is
required to approve and adopt the Merger Agreement. For information with
respect to the treatment of abstentions, Broker Shares that are not voted and
properly executed but unmarked proxy cards, see "The Meetings--Voting Rights;
Votes Required for Approval" and "--Proxies."
As of the Colonial Data Record Date, Colonial Data's directors and executive
officers owned 1,818,745 shares of Colonial Data Common Stock, representing
approximately 12% of the shares of Colonial Data Common Stock outstanding on
such date. Certain stockholders of Colonial Data, including the Chairman and
Chief Executive Officer of Colonial Data, and certain directors and officers of
Colonial Data, who collectively owned approximately 13% of the outstanding
shares of Colonial Data Common Stock as of the Colonial Data Record Date, have
executed stockholder agreements with US Order pursuant to which they have
agreed to vote all of their shares of Colonial Data Common Stock for approval
of the Merger Agreement, unless the Merger Agreement is terminated pursuant to
its terms, the Colonial Data Board recommends to the Colonial Data stockholders
a Superior Proposal (as defined below under "The Mergers--Termination,
Amendment and Waiver") or otherwise, in the exercise of its fiduciary duties
upon the advice of counsel, withdraws, amends or modifies in any manner adverse
to US Order its favorable recommendation of the Merger Agreement.
THE MERGERS
Overview; Exchange Ratio
Pursuant to the Merger Agreement, US Order and Colonial Data will be merged
with and into InteliData. InteliData will be the surviving corporation of the
Mergers, and Colonial Data's subsidiaries will become direct and indirect
subsidiaries of InteliData. Upon consummation of the Mergers, each outstanding
share of US Order Common Stock will be converted into one share of InteliData
Common Stock and each outstanding share of Colonial Data Common Stock will be
converted into one share of InteliData Common Stock (individually, the
"Exchange Ratio" and collectively, the "Exchange Ratios"). See "The Mergers--
Exchange Ratios; Exchange of Shares." For a description of the InteliData
Common Stock, see "Description of InteliData Capital Stock--Common Stock."
Immediately following the Effective Time, (a) former holders of US Order
Common Stock collectively will hold approximately 52% of the outstanding shares
of InteliData Common Stock and (b) former holders of Colonial Data Common Stock
collectively will hold approximately 48% of the outstanding shares of
InteliData Common Stock, assuming that existing warrants and options of US
Order and Colonial Data, respectively, are not exercised before the Effective
Time. On a fully diluted basis, former US Order stockholders will hold
approximately 55% of the outstanding shares of InteliData Common Stock and
former Colonial Data stockholders will hold approximately 45% of the
outstanding shares of InteliData Common Stock immediately after the Effective
Time. Pursuant to the Merger Agreement, each outstanding option and warrant to
purchase shares of common stock of US Order or shares of common stock of
Colonial Data, respectively, will be assumed by InteliData. See "The Mergers--
The Merger Agreement--Stock Options and Warrants."
Effective Time
It is presently expected that the Effective Time will occur as soon as
practicable following approval of the Merger Agreement by the US Order
stockholders and by the Colonial Data stockholders and, in any event, no later
than February 28, 1997. See "The Mergers--General; Effective Time."
3
<PAGE>
Recommendations; Reasons for the Mergers
The US Order Board and the Colonial Data Board believe that the Merger
Agreement is fair to and in the best interests of the stockholders of their
respective companies. The Boards have unanimously approved the Merger Agreement
and the transactions contemplated thereby. The US Order Board recommends that
the stockholders of US Order vote for approval of the Merger Agreement. The
Colonial Data Board recommends that the stockholders of Colonial Data vote for
approval of the Merger Agreement.
The US Order Board and the Colonial Data Board each believe that the Mergers
will achieve full integration of the companies' activities and alignment of
interests to better respond to changes and provide customer solutions in the
emerging markets for intelligent network and interactive communication
services. The recommendations of the Boards are based on the ability of US
Order and Colonial Data to capture more fully the markets for home banking,
intelligent communications network products and interactive services; the
combination of technology, manufacturing, distribution and management
capabilities of US Order and Colonial Data into a single entity; and the
ability to distribute a full product and service line to telephone companies
and retailers through a combination of the companies, and, in part, the receipt
by the US Order Board of a fairness opinion from its financial advisor, Salomon
Brothers Inc ("Salomon"), and, in part, the receipt by the Colonial Data Board
of a fairness opinion from its financial advisor, First Albany Corporation
("First Albany"). See "The Mergers--Reasons for the Mergers" and "--Opinions of
Financial Advisors."
Opinions of Financial Advisors
On August 2, 1996, prior to the execution of the Merger Agreement, Salomon
rendered to the US Order Board its written opinion to the effect that, as of
such date, the Exchange Ratio was fair, from a financial point of view, to
holders of US Order Common Stock. One-half of the fees payable by US Order to
Salomon are conditioned upon consummation of the Mergers. See "The Mergers--
Opinions of Financial Advisors--Salomon."
On August 2, 1996, prior to the execution of the Merger Agreement, First
Albany rendered to the Colonial Data Board its written opinion to the effect
that, as of such date, the consideration to be received by the stockholders of
Colonial Data pursuant to the Merger Agreement was fair, from a financial point
of view, to holders of Colonial Data Common Stock. A portion of the fees
payable by Colonial Data to First Albany are conditioned upon consummation of
the Mergers. See "The Mergers--Opinions of Financial Advisors--First Albany."
US Order and Colonial Data stockholders are urged to read carefully the
opinion of Salomon, dated as of August 2, 1996, and the opinion of First
Albany, dated as of August 2, 1996, which are set forth in their entirety as
Appendices II and III, respectively, to this Joint Proxy Statement/Prospectus,
for a description of the factors considered and assumptions made by Salomon and
First Albany in rendering their respective opinions. See "The Mergers--Opinions
of Financial Advisors."
Interests of Certain Persons in the Mergers
Certain of the officers and directors of US Order and Colonial Data have
interests in the Mergers in addition to their interests as stockholders. Those
additional interests include, among other things, provisions in the Merger
Agreement relating to the management of InteliData following the Mergers,
indemnification of directors and officers, eligibility for certain InteliData
employee benefits and the assumption of outstanding employee stock options with
respect to InteliData Common Stock held by directors, officers and employees of
US Order and Colonial Data, respectively. InteliData will assume the employment
agreements between Robert J. Schock and Colonial Data and between John C.
Backus, Jr. and US Order. See "The Mergers--Interests of Certain Persons in the
Mergers." In connection with the formation of InteliData, InteliData has
adopted the following stock
4
<PAGE>
option plans in which directors, officers and employees of InteliData and its
affiliates who are eligible may participate in the future: (i) the InteliData
Incentive Plan, (ii) the InteliData Non-employee Directors' Stock Option Plan
and (iii) the InteliData Employee Stock Purchase Plan. See "Management and
Operation After the Mergers."
Board of Directors, Management and Headquarters of InteliData
It is expected that the InteliData Board, at the Effective Time, will consist
of nine persons: T. Coleman Andrews, III, William F. Gorog, John C. Backus,
Jr., Patrick F. Graham and Wesley C. Tallman (the "US Order Designees") and
Robert J. Schock, Walter M. Fiederowicz, Timothy R. Welles and Constantine S.
Macricostas (the "Colonial Data Designees"). The InteliData Board will be
divided into three classes, with the initial term of office of the first,
second and third classes expiring at the first, second and third annual
meetings of the stockholders of InteliData, respectively. InteliData will take
all action necessary to cause the US Order Designees and the Colonial Data
Designees to serve in nearly equal numbers in each of InteliData's three
classes of directors. If any of US Order's Designees or Colonial Data's
Designees, respectively, declines or is unable to serve as a director prior to
the Effective Time, US Order (if such person was a US Order Designee) or
Colonial Data (if such person was a Colonial Data Designee), as the case may
be, will nominate another person to serve in such person's stead, subject to
the other party's designees' approval. If any of the US Order Designees or
Colonial Data Designees declines or becomes unable to serve as a director
during his initial term following the Effective Time, the remaining US Order
Designees (if such person was a US Order Designee) or the remaining Colonial
Data Designees (if such person was a Colonial Data Designee), as the case may
be, will nominate another person to serve in such person's stead, which such
person will be subject to the other party's designees' approval. See
"Management and Operation After the Mergers."
At the Effective Time, the InteliData Board will have an Executive Committee,
a Compensation Committee, an Audit Committee and a Nominating Committee, on
each of which there will be an equal representation of US Order Designees and
Colonial Data Designees. The Executive Committee will initially consist of
William F. Gorog and John C. Backus, Jr., as the US Order Designees, and Robert
J. Schock and Timothy R. Welles, as the Colonial Data Designees, each to serve
until the next annual meeting of stockholders of InteliData at which such
Executive Committee member first stands for reelection to the InteliData Board.
The members of the other committees will be selected by the full InteliData
Board.
The principal officers of InteliData at the Effective Time will be: (i)
Robert J. Schock, Chief Executive Officer and Vice Chairman of the InteliData
Board; (ii) William F. Gorog, Chairman of the InteliData Board; (iii) John C.
Backus, Jr., President and Chief Operating Officer of InteliData; (iv) Timothy
R. Welles, Executive Vice President of InteliData; (v) Joseph E. Smith,
Executive Vice President of InteliData; (vi) Albert N. Wergley, Vice President,
General Counsel and Secretary of InteliData; and (vii) John N. Giamalis, Vice
President, Treasurer and Chief Financial Officer of InteliData. Between six and
nine months from the Effective Date, Mr. Schock will become Chairman of the
InteliData Board, Mr. Gorog will become Vice Chairman of the InteliData Board
and Mr. Backus will become President and Chief Executive Officer of InteliData.
The headquarters of InteliData will be located in Herndon, Virginia. See
"Management and Operation After the Mergers."
Indemnification
The Merger Agreement provides that InteliData shall indemnify the former
employees, agents, directors and officers of US Order and Colonial Data to the
fullest extent provided by law for a period of not less than six years after
the Effective Time with respect to matters occurring prior to the Effective
Time. See "The Mergers--The Merger Agreement--Indemnification; Insurance."
5
<PAGE>
Conditions to the Mergers
The consummation of the Mergers is subject to various conditions, including
approval of the Merger Agreement by a majority of the respective stockholders
of US Order and Colonial Data, the absence of any material adverse change in
the business operations of US Order or Colonial Data and the receipt by US
Order and Colonial Data of certain opinions regarding tax matters. See "The
Mergers--The Merger Agreement--Conditions to Consummation of the Mergers."
Termination of the Merger Agreement
The Merger Agreement is subject to termination at the option of either US
Order or Colonial Data if the Mergers are not consummated on or before February
28, 1997 (unless the failure to consummate is due to the failure of the party
seeking to terminate the Merger Agreement to fulfill any of its obligations
thereunder), and prior to such time upon the occurrence of certain events. If
the Merger Agreement is terminated in certain circumstances involving the
receipt by US Order or Colonial Data, as the case may be, of a proposal for a
transaction which the US Order Board or the Colonial Data Board, as the case
may be, believes is more favorable, to US Order's stockholders or Colonial
Data's stockholders, as the case may be, US Order will pay to Colonial Data or
Colonial Data will pay to US Order, as the case may be, a termination fee of
$3.0 million. In the event that within 12 months after the Merger Agreement is
terminated for any of the preceding reasons, the non-terminating party enters
into an agreement with respect to a Third Party Acquisition (as defined below
under "The Mergers--The Merger Agreement--No Solicitation of Transactions"),
and such Third Party Acquisition is consummated within 12 months thereafter,
then the non-terminating party will pay to the terminating party an amount
equal to $4.5 million. In the event that the Merger Agreement is terminated by
either US Order or Colonial Data because there is a willful breach of any
representation, warranty or certain covenants on the part of the other party
and such other party consummates a Third Party Acquisition within 12 months
after such termination of the Merger Agreement, then such other party shall pay
to the non-breaching party an amount equal to $7.0 million. See "The Mergers--
The Merger Agreement--Termination; Amendment and Waiver."
Accounting Treatment
The Mergers will be accounted for using the purchase method of accounting
with US Order being deemed to be the acquiror for financial reporting purposes.
See "The Mergers--Accounting Treatment."
Risk Factors
The consummation of the Mergers involves certain risks with respect to an
investment in shares of InteliData Common Stock. Before voting for the Merger
Agreement, stockholders should carefully consider the information set forth in
"Risk Factors."
COMPARISON OF STOCKHOLDERS' RIGHTS
InteliData, US Order and Colonial Data are each incorporated under the laws
of the State of Delaware. US Order stockholders, whose rights are currently
governed by the US Order Certificate and the US Order Bylaws, will, upon
consummation of the Mergers, become stockholders of InteliData, and their
rights as such will be governed by InteliData's Certificate of Incorporation
(the "InteliData Certificate") and the Bylaws of InteliData (the "InteliData
Bylaws"). Colonial Data stockholders, whose rights are currently governed by
the Colonial Data Certificate and the Colonial Data Bylaws, will, upon
consummation of the Mergers, become stockholders of InteliData, and their
rights as such will be governed by the InteliData Certificate and the
InteliData Bylaws. See "Comparison of Stockholders' Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Mergers have been structured to qualify as "reorganizations" as defined
in Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), with the result that US Order stockholders and
6
<PAGE>
Colonial Data stockholders will not recognize gain or loss on the exchange of
US Order Common Stock or Colonial Data Common Stock, as the case may be, for
InteliData Common Stock. A condition to consummation of the Mergers is the
receipt by each of InteliData and US Order of the opinion from Hunton &
Williams and the receipt by each of InteliData and Colonial Data of the opinion
from LeBoeuf, Lamb, Greene & MacRae, L.L.P., each as of the date of the
Effective Time, as to the qualification of the Mergers as tax-free
reorganizations and certain other federal income tax consequences of the
Mergers. See "The Mergers--The Merger Agreement--Conditions to Consummation of
the Mergers" and "Certain Federal Income Tax Consequences."
STOCKHOLDERS' RIGHTS OF DISSENT AND APPRAISAL
Pursuant to the DGCL, neither holders of US Order Common Stock nor holders of
Colonial Data Common Stock have dissenters' or appraisal rights in connection
with the Mergers.
EXCHANGE OF SHARES
Promptly after the Effective Time, American Stock Transfer & Trust Company,
or such other bank or trust company designated by InteliData (the "Exchange
Agent"), will mail written transmittal materials concerning exchange of stock
certificates to each record holder of outstanding shares of US Order Common
Stock and Colonial Data Common Stock. The transmittal materials will contain
instructions with respect to the proper method of surrender of certificates
formerly representing shares of US Order Common Stock or Colonial Data Common
Stock, respectively, in exchange for certificates representing shares of
InteliData Common Stock. Upon surrender to the Exchange Agent by a US Order or
Colonial Data stockholder of certificates formerly representing shares of US
Order Common Stock or Colonial Data Common Stock, as the case may be, for
cancellation, together with properly completed transmittal materials, such
stockholder will be entitled to receive a certificate representing the number
of whole shares of InteliData Common Stock into which the stockholder's shares
of US Order Common Stock, or Colonial Data Common Stock, as the case may be,
have been converted. Such transmittal forms will be accompanied by instructions
specifying other details of the exchange. See "The Mergers--Exchange Ratios;
Exchange of Shares."
7
<PAGE>
COMPARATIVE MARKET PRICE
Since June 2, 1995, US Order Common Stock has been included on Nasdaq under
the symbol "USOR." Since February 9, 1996, the Colonial Data Common Stock has
been included on Nasdaq under the symbol "CDTX." Prior to February 9, 1996, the
Colonial Data Common Stock was traded on the American Stock Exchange (the
"ASE"). The following table sets forth, for the periods indicated, the high and
low sales prices of US Order Common Stock on Nasdaq and Colonial Data Common
Stock on the ASE and on Nasdaq.
<TABLE>
<CAPTION>
US ORDER COLONIAL DATA
---------------- ---------------
HIGH LOW HIGH LOW
------- -------- ------- -------
<S> <C> <C> <C> <C>
1994
First Quarter........... $ * $ * $ 7 1/8 $ 3 7/8
Second Quarter.......... * * 6 5/8 4 1/8
Third Quarter........... * * 5 5/8 3 7/8
Fourth Quarter.......... * * 15 3/8 4 3/8
1995
First Quarter........... * * 19 1/8 12 1/4
Second Quarter (June 2-
June 30 for US Order).. 17 1/4 14 1/4 22 3/8 14 1/8
Third Quarter........... 26 1/2 14 1/4 27 1/4 16 3/4
Fourth Quarter.......... 23 1/4 13 1/4 23 13 1/2
1996
First Quarter........... 24 1/4 16 3/4 25 1/4 15 7/8
Second Quarter.......... 22 1/2 13 23 5/8 14 7/8
Third Quarter........... 15 1/4 8 15/16 15 1/4 8 1/2
Fourth Quarter (through
October 7, 1996)....... 11 7/8 10 11 5/8 9 3/4
</TABLE>
- --------
* No established public trading market for US Order Common Stock existed prior
to the completion of US Order's initial public offering on June 1, 1995.
On August 2, 1996, the last trading day before US Order and Colonial Data
announced that they had signed the Merger Agreement, the last reported sale
price for US Order Common Stock was $14.00 per share and the last reported sale
price for Colonial Data Common Stock was $10.25 per share. On October 7, 1996,
the last reported sale price for US Order Common Stock was $10.25 and the last
reported sale price for Colonial Data Common Stock was $9.75.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following is selected consolidated financial data for US Order and
Colonial Data for the six months ended June 30, 1996 and 1995 and for each of
the five years ended December 31, 1991 through 1995. In addition, pro forma
selected consolidated financial data is included for InteliData as of and for
the six months ended June 30, 1996 and for the year ended December 31, 1995.
The consolidated financial data as of and for each of the years in the five-
year period ended December 31, 1995 is derived from the audited consolidated
financial statements of US Order and Colonial Data. The consolidated financial
data for the six months ended June 30, 1996 and 1995 is derived from the
unaudited consolidated financial statements, which in the opinion of management
of US Order and Colonial Data, include all adjustments necessary for a fair
presentation. All such adjustments are of a normal and recurring nature. The
results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the results of operations that may be expected for
the entire year. For pro forma information regarding the Mergers, see
"InteliData Unaudited Pro Forma Condensed Consolidated Financial Information."
The information is qualified in its entirety by the detailed information and
financial statements of US Order, Braun Simmons and Colonial Data incorporated
by reference in this Prospectus.
8
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA -- US ORDER/INTELIDATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------------------- ------------------------------
PRO FORMA(1) PRO FORMA(1)
1991 1992 1993 1994 1995 1995 1995 1996 1996
------- ------- -------- -------- ------- ------------ ------- ------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................ $ 1 $ 63 $ 905 $ 1,432 $ 4,186 $80,221 $ 1,692 $ 1,874 $40,960
Cost of revenue........ 23 126 908 1,013 2,471 49,730 1,397 1,271 27,394
------- ------- -------- -------- ------- ------- ------- ------- -------
Gross profit (loss).... (22) (63) (3) 419 1,715 30,491 295 603 13,566
Operating expenses..... 1,844 6,492 (2) 10,540 (2) 10,584 (3) 6,877 23,110 2,746 5,781 14,197
------- ------- -------- -------- ------- ------- ------- ------- -------
Operating income
(loss)................ (1,866) (6,555) (10,543) (10,165) (5,162) 7,381 (2,451) (5,178) (631)
Gain on sale of bill
pay operations........ -- -- -- 14,523 (4) -- -- -- -- --
Other income
(expense)............. 13 (251) (682) (575) 444 1,751 (149) (16) 1,129
------- ------- -------- -------- ------- ------- ------- ------- -------
Income (loss) before
income taxes.......... (1,853) (6,806) (11,225) 3,783 (4,718) 9,132 (2,600) (5,194) 498
Income taxes........... -- -- -- (70) -- (5,063) -- -- (612)
------- ------- -------- -------- ------- ------- ------- ------- -------
Net income (loss)...... $(1,853) $(6,806) $(11,225) $ 3,713 $(4,718) $ 4,069 $(2,600) $(5,194) $ (114)
======= ======= ======== ======== ======= ======= ======= ======= =======
Weighted average common
stock and common
equivalent shares
outstanding........... 6,090 6,090 6,090 8,243 10,772 33,114 6,420 15,833 33,114
Net income (loss) per
common share.......... $ (0.30) $ (1.18) $ (2.01) $ 0.28 (5) $ (0.50) $ 0.12 $ (0.51) $ (0.33) $ 0.00
======= ======= ======== ======== ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------------------------- ----------------------
PRO FORMA(1)
1991 1992 1993 1994 1995 1996 1996
------- ------- -------- -------- -------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficit)............. $ (198) $(1,789) $ 1,799 $ 1,628 $ 24,568 $ 19,193 $ 88,396
Net property and
equipment............. 988 2,772 2,876 1,207 1,448 2,077 13,781
Total assets........... 1,342 4,681 7,694 4,637 40,252 34,289 154,460
Notes payable to
affiliates............ -- -- 3,500 4,633 -- -- --
Redeemable preferred
stock................. -- 4,570 7,567 4,783 -- -- --
Accumulated deficit.... (2,148) (8,954) (20,178) (16,465) (21,184) (26,377) (103,401)
Total stockholders'
equity (deficit)...... 393 (3,633) (5,849) (6,465) 37,733 32,440 144,897
</TABLE>
- -------
(1) The pro forma InteliData consolidated financial data gives effect to the
September 1996 merger of Braun Simmons into US Order and the proposed
Mergers of Colonial Data and US Order into InteliData. The merger of Braun
Simmons into US Order will be accounted for as a purchase of Braun Simmons
by US Order. The merger of Colonial Data into InteliData will be accounted
for as a purchase of Colonial Data by US Order. See "InteliData Unaudited
Pro Forma Condensed Consolidated Financial Information."
(2) Operating expenses in 1992 and 1993 include write-downs of terminals and
terminal components of approximately $430,000 and $1.5 million,
respectively.
(3) Operating expenses in 1994 include a $3.25 million payment to certain
employees to cancel certain outstanding vested options in connection with
the sale of the Visa Bill-Pay System to Visa. Visa required that all US
Order employees who became employees of Visa InterActive cancel their
outstanding vested options to eliminate any potential conflicts of
interest. As a result, US Order's stockholders and Board of Directors
agreed to pay all active and full-time US Order employees (excluding
William F. Gorog) an aggregate of $3.25 million for the cancellation of
675,334 of their outstanding and vested options with exercise prices
ranging between $0.98 and $4.00 per share. Of the $3.25 million,
approximately $2.1 million was paid to US Order employees who became Visa
InterActive employees as of August 1, 1994.
(4) US Order sold the Visa Bill-Pay System to Visa in connection with US
Order's entry into a strategic alliance with Visa. See "US Order Business--
General."
(5) Excluding the effect of the gain on the sale of the Visa Bill-Pay System to
Visa, net income (loss) per common share in 1994 would decrease by $2.37
per share.
9
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA -- COLONIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------ ----------------
1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................ $8,006 $ 9,722 $17,439 $36,829 $74,194 $33,514 $37,608
Cost of revenue........ 5,442 6,809 12,204 24,228 44,240 19,905 24,369
------ ------- ------- ------- ------- ------- -------
Gross profit........... 2,564 2,913 5,235 12,601 29,954 13,609 13,239
Operating expenses..... 2,312 2,362 3,182 6,301 11,056 5,251 6,726
------ ------- ------- ------- ------- ------- -------
Operating income....... 252 551 2,053 6,300 18,898 8,358 6,513
Other income
(expense)............. (170) (9) (101) (132) 1,312 375 1,150
------ ------- ------- ------- ------- ------- -------
Income before income
taxes................. 82 542 1,952 6,168 20,210 8,733 7,663
Income taxes........... (35) (231) (849) (2,590) (7,687) (3,494) (2,957)
------ ------- ------- ------- ------- ------- -------
Net income............. $ 47 $ 311 $ 1,103 $ 3,578 $12,523 $ 5,239 $ 4,706
====== ======= ======= ======= ======= ======= =======
Weighted average common
stock and common
equivalent shares
outstanding........... 9,623 10,849 10,910 11,806 14,722 13,719 15,606
Net income per common
share................. $ 0.00 $ 0.03 $ 0.10 $ 0.30 $ 0.85 $ 0.38 $ 0.30
====== ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------- JUNE 30,
1991 1992 1993 1994 1995 1996
------ ------ ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................. $3,902 $4,076 $ 2,326 $23,930 $68,915 $75,125
Net property and equipment...... 612 795 3,272 5,755 6,733 4,615
Total assets.................... 5,772 5,641 10,487 33,133 86,405 87,624
Total borrowings................ 646 183 2,130 2,000 1,000 --
Accumulated earnings............ 1,086 1,397 2,500 6,078 18,601 23,307
Total stockholders' equity...... 4,514 4,825 6,082 28,353 80,568 84,394
</TABLE>
10
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully in evaluating the
proposals to be considered and voted upon at each of the US Order Meeting and
the Colonial Data Meeting. Set forth below are certain risk factors, among
others, with respect to InteliData, US Order and Colonial Data. Following
consummation of the Mergers, the risk factors set forth below with respect to
US Order and Colonial Data will also be applicable to InteliData.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
InteliData, US Order and Colonial Data desire to take advantage of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
InteliData, US Order and Colonial Data wish to caution readers that the
following important factors, among others, in some cases have affected US
Order's and Colonial Data's actual results, and could affect US Order's and
Colonial Data's actual results prior to the Effective Time and InteliData's
actual results following the Effective Time and could cause InteliData's
actual results for 1996 and beyond, to differ materially from those expressed
in any forward-looking statements made by, or on behalf of, InteliData.
RISK FACTORS WITH RESPECT TO INTELIDATA
Uncertainty as to Future Financial Results
US Order and Colonial Data believe that the Mergers will offer opportunities
for long-term efficiencies in operations that should positively affect future
operating results of the combined companies. However, the combined companies
will be more complex and diverse than either US Order or Colonial Data
individually, and the combination and continued operation of their distinct
business operations will present difficult challenges for each company's
management due to the increased time and resources required in the management
effort. While the managements and the US Order and Colonial Data Boards
believe that the combination can be effected in a manner that will realize the
value of the two companies, neither management group has experience in
combinations of this size. Accordingly, there can be no assurance that the
process of effecting the business combination can be effectively managed to
realize the operational efficiencies anticipated to result from the Mergers.
Following the Mergers, in order to maintain and increase profitability, the
combined companies will need to successfully integrate and streamline
overlapping functions. US Order and Colonial Data have different systems and
procedures in many operational areas that must be rationalized and integrated.
There can be no assurances that integration will be accomplished smoothly or
successfully. The difficulties of such integration may be increased by the
necessity of coordinating geographically separated organizations. The
integration of certain operations following the Mergers will require the
dedication of management resources that may temporarily distract attention
from the day-to-day business of the combined companies. Failure to effectively
accomplish the integration of the two companies' operations could have an
adverse effect on InteliData's results of operation and financial condition.
History of Operating Losses
The Mergers will be accounted for using the purchase method of accounting
with US Order being deemed the acquiror for financial reporting purposes.
Because US Order as the acquiror has a financial history of operating losses,
InteliData will have a financial history of operating losses. For income tax
purposes, use of US Order's net operating loss carryforwards in future years
may be limited as a result of the change in control upon completion of the
Mergers. In the future, there can be no assurance that InteliData will be able
to achieve profitability and, if achieved, sustain such profitability.
11
<PAGE>
InteliData Common Stock Owned by WorldCorp
As of the Effective Time, WorldCorp will beneficially own approximately 29%
of the outstanding InteliData Common Stock. WorldCorp is highly leveraged, and
therefore requires substantial funds to meet debt service requirements each
year. As a result of WorldCorp's cash requirements, it may be required to sell
shares of InteliData Common Stock from time to time and such sales, or the
threat of such sales, could have a material adverse effect on the market price
for the InteliData Common Stock. In addition, the InteliData Board has nine
members, four of whom also serve on the Board of Directors of WorldCorp. As a
result of InteliData Board membership and stock ownership, WorldCorp may have
a significant influence on the decisions made by InteliData.
Market Acceptance of Smart Telephones
InteliData's future growth and profitability also will depend upon the
consumer's acceptance of smart telephone technologies and a significant
expansion in the consumer market for telephone-based interactive applications
technologies. Even if these markets experience substantial growth, there can
be no assurance that InteliData's products or services will be successful or
benefit from such growth. InteliData's smart telephone is designed to support
Analog Display Services Interface ("ADSI")-based intelligent network services
such as integrated Caller ID and Call Waiting with call disposition features,
as well as new applications such as home banking and national directory
assistance. After the Mergers, much of InteliData's success in the smart
telephone market depends on InteliData's ability to meet design specifications
and delivery requirements for its products and services. There can be no
assurance of the timing of introduction of, necessary regulatory approvals
for, or market acceptance of these services and applications. InteliData faces
competition in these markets from other emerging interactive applications
delivered through personal computers, cable television and Integrated Service
Digital Network ("ISDN"). See "Business of US Order--Products" and "Business
of Colonial Data--Products," and "--Services."
Fluctuations in Operating Results
Historically, US Order and Colonial Data have experienced fluctuations in
quarterly operating results, and after the Effective Time, InteliData may
experience fluctuations in quarterly operating results due to a variety of
factors, some of which are beyond InteliData's control. These include the size
and timing of customer orders or the royalty payments from Visa InterActive,
if any, changes in InteliData's pricing policies or those of its competitors,
new product introductions or enhancements by competitors, delays in the
introduction of new products or product enhancements by InteliData or by its
competitors, customer order deferrals in anticipation of upgrades and new
products, market acceptance of new products, the timing and nature of sales,
marketing, and research and development expenses by InteliData and its
competitors, the timing of programs offering Caller ID or other intelligent
network services by a telco, disruptions in sources of supply, the effects of
regulation on Caller ID and other intelligent network services, the timing and
extent of promotional activities by a telco, changes in service charges by a
telco, other changes in operating expenses, personnel changes and general
economic conditions. No assurance can be given that such quarterly variations
will not occur in the future and, accordingly, the results of any one quarter
may not be indicative of the operating results for future quarters.
Technological Considerations
US Order's and Colonial Data's business activities are concentrated in
fields characterized by rapid and significant technological advances. There
can be no assurance that after the Mergers, InteliData will remain competitive
technologically or that InteliData's products, processes or services will
continue to be reflective of such advances. Failure to introduce new products
or product enhancements that achieve market acceptance on a timely basis could
materially and adversely affect InteliData's business, operating results and
financial condition. There can be no assurance that after the Mergers,
InteliData will not encounter unanticipated technical, marketing or other
problems or delays relating to new products, features or services which US
Order and Colonial Data have recently introduced or which InteliData may
introduce in the future. Moreover, there can be no assurance that after the
Mergers, InteliData's new products, features or services will be successful,
that the introduction of
12
<PAGE>
new products, features or services by InteliData's competitors will not
materially and adversely affect the sales of InteliData's existing products or
that InteliData will be able to adapt to future changes in the
telecommunications industry. Most of US Order's and Colonial Data's
competitors and potential competitors have significantly greater financial,
technological and research and development resources than InteliData will
have. See "Business of US Order--Products," "--Product Development," "--
Competition" and "--Patents, Proprietary Rights and Licenses" and "Business of
Colonial Data--Products and Services," "--Product Development," "--
Competition" and "--Patents, Proprietary Rights and Licenses."
Dependence on Foreign Production
Colonial Data's Caller ID units and certain other products, including the
smart phone jointly developed by US Order and Colonial Data, the Telesmart
4000/Intelifone 2000, are manufactured by companies with facilities in Hong
Kong, Taiwan, and the People's Republic of China. These facilities are
supplemented, in part, by other manufacturers in Asia for certain integrated
telephone and small business system products and by limited manufacturing
facilities in Connecticut and Canada. The availability or cost of these Caller
ID units and smart telephones may be adversely affected by political, economic
or labor conditions in Hong Kong, Taiwan or the People's Republic of China,
including the 1997 return of Hong Kong to China, and by fluctuations in
currency exchange rates. In addition, a change in the tariff structure or
other trade policies of the United States or countries from which InteliData
will import products could adversely affect InteliData's foreign manufacturing
strategies. See "Business of US Order--Manufacturing" and "Business of
Colonial Data--Manufacturing."
Dependence on Key Employees
InteliData will be highly dependent on certain key executive officers and
technical employees to fully integrate the operations and business of US Order
and Colonial Data as well as to implement the business plans of InteliData on
an ongoing basis. The loss of any such key employees could have an adverse
impact on the future operations of InteliData. See "Management and Operation
After the Mergers."
Regulation
In the United States, Caller ID and other intelligent network services are
subject to federal and state regulation. Caller ID and other intelligent
network services may in the future be subject to further regulation by the
federal government, state public utility commissions and other regulatory
authorities, as well as court challenges, including possible challenges due to
protests from special interest groups that object to such services on the
basis of privacy concerns. An order issued by the Federal Communications
Commission ("FCC") effective December 1, 1995, requires all United States
telephone service providers with Signaling System 7 switching architecture to
transmit to each other without charge Caller ID number information on
interstate calls within the United States (except for public pay phones and
party lines). The FCC's order also requires that telcos that offer Caller ID
service must provide to their telephone subscribers without charge a per-call
blocking mechanism to block the transmission of their Caller ID information on
interstate calls and must inform subscribers that their telephone numbers may
be identified to a called party and how to use this blocking capability.
In addition, the Telecommunications Act of 1996 and regulations or orders
promulgated thereunder may result in or accelerate changes in various aspects
of the telecommunications industry, including the competitive environment, the
delivery and pricing of various telecommunications services and possible
consolidation. Although InteliData is unable to predict what effect, if any,
the Telecommunications Act of 1996 or other regulatory developments may have
upon the telecommunications industry or InteliData's business, any such
effects could have a material adverse impact on the future operations of
InteliData.
In Canada, the Canadian Radio-television and Telecommunications Commission
regulates Caller ID and intelligent network services. InteliData believes that
Canadian regulation of telecommunications devices for intelligent network
services is not more burdensome than regulation in the United States. See
"Business of Colonial Data--Government Regulation."
13
<PAGE>
Volatility of Stock Price
The market price of both the US Order Common Stock and the Colonial Data
Common Stock experiences significant volatility. There can be no assurance
that the InteliData Common Stock will not also experience significant
volatility. The stock market has experienced volatility that has particularly
affected the market prices of equity securities of many high technology and
developmental stage companies and that has often been unrelated to the
operating performance of such companies. Factors such as announcements of the
introduction of new products or services by InteliData or its competitors,
announcements of joint development efforts or corporate partnerships in the
interactive applications industry, market conditions in the banking,
telecommunications and other emerging growth company sectors and rumors
relating to InteliData or its competitors may have a significant impact on the
market price of InteliData Common Stock.
Anti-takeover Provisions; Certain Provisions of Delaware Law and InteliData's
Certificate of Incorporation and Bylaws
Certain provisions of Delaware law and InteliData's Certificate of
Incorporation and Bylaws and certain other contractual provisions could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of InteliData.
Under US Order's agreement with Visa, which InteliData will assume at the
Effective Time, InteliData may not sell equity interests in InteliData or a
portion of its assets to major competitors of Visa, currently including
MasterCard, Discover Card, American Express, Japan Credit Bureau and EuroPay
Card, until at least December 31, 2000. Such provisions and control
considerations could limit the price that certain investors might be willing
to pay in the future for shares of InteliData Common Stock. InteliData's
Certificate of Incorporation allows InteliData to issue shares of preferred
stock of InteliData with rights senior to those of InteliData Common Stock
without any further vote or action by the stockholders. The issuance of shares
of preferred stock of InteliData could decrease the amount of earnings and
assets available for distribution to the holders of InteliData Common Stock or
could adversely affect the rights and powers, including voting rights, of the
holders of InteliData Common Stock. In certain circumstances, such issuance
could have the effect of decreasing the market price of InteliData Common
Stock. See "Description of InteliData Capital Stock--Preferred Stock; --
Certain Provisions of DGCL, InteliData Certificate and InteliData Bylaws."
Dividends
Each of US Order and Colonial Data historically has not paid cash dividends
on US Order Common Stock or Colonial Data Common Stock, as the case may be.
InteliData currently intends to retain its future earnings, if any, to fund
the development and growth of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future.
RISK FACTORS WITH RESPECT TO US ORDER
Minimal Revenue; History of Losses
US Order did not introduce its first commercial product until 1991 and
accordingly has a limited operating history. To date, US Order has generated
limited revenue from the sale of its products and services, has incurred
significant losses and has experienced a substantial negative cash flow. US
Order expects to incur operating losses during 1996. There can be no assurance
that US Order will be able to achieve profitability and, if achieved, sustain
such profitability, nor can there be any assurance as to when such
profitability might be achieved. US Order is subject to all of the risks
inherent in the establishment of a new business enterprise.
Developing Marketplace
Home banking and smart telephones are developing markets. Consumer
preferences in interactive technologies are difficult to predict. US Order's
future growth and profitability will depend, in part, upon consumer acceptance
of electronic home banking and smart telephone technologies and a significant
expansion in the consumer market for telephone-based interactive applications
technologies. Even if these markets
14
<PAGE>
experience substantial growth, there can be no assurance that US Order's
products and services will be commercially successful or benefit from such
growth.
Early Stage Products and Services
The continued development of the marketplace for US Order's products and
services will depend in part upon US Order's ability to create and develop
additional applications for US Order's technologies. Many of US Order's
products and services, including its smart telephones, are in the early stages
of development or marketing, and are subject to the risks inherent in the
development and marketing of new products and services. See "Business of US
Order."
Restrictions from the Visa Agreement
As a condition of Visa's acquisition of US Order's bill payment operations
and technology (the "Visa Bill-Pay System"), US Order has agreed to work
exclusively with Visa in certain areas and to refrain from certain activities
that are in competition with Visa and its affiliates. These covenants may
increase US Order's reliance upon Visa. US Order's dependence on Visa, and the
terms of the agreement between the parties, may have a material adverse effect
on US Order. See "Business of US Order."
Dependence on Strategic Alliances
US Order's business strategy has been to sell its products and services
through strategic alliances, primarily through a strategic alliance with Visa
InterActive in addition to the alliance with Colonial Data. US Order's primary
success will depend both on the ultimate success of its strategic partners as
well as on the ability of its partners to successfully market US Order's
products, services and interactive applications. There can be no assurance
that these alliance partners will view their alliance with US Order as
significant for their own businesses or that they will not reassess their
commitment to US Order at any time in the future. See "Business of US Order--
Products."
Competition
The market for interactive products and services is highly competitive and
subject to rapid innovation and technological change, shifting consumer
preferences and frequent new product introductions. US Order's home banking
products and services compete with services offered by a number of competitors
and competition may intensify as a result of new market entrants. Banks have
developed home banking products for their own customers and, in the future,
may offer these services to other banks. Non-banks also may develop home
banking products to offer to banks. Computer software and data processing
companies also offer home banking services. Visa competes with other
organizations, including MasterCard International, Inc. ("MasterCard"), which
offers its Masterbanking home banking service through CheckFree Corporation.
Many competitors exist for US Order's various banking products including other
manufacturers of touch-tone response systems, other financial software
companies and financial services software and service companies. US Order
believes that its primary competition for its customer support services will
come from financial institutions and third parties that choose to offer
customer support services either directly through Visa's customer support
messaging standard ("CSMS") product or on their own. US Order expects that
competition in all of these areas will increase in the near future. See
"Business of US Order--Competition--Home Banking."
The market for US Order's smart telephone products and services is highly
competitive and subject to rapid technological change. At present, US Order's
principal competitors in the market for smart telephones are or will be
Philips Home Services, Inc. ("Philips"), Northern Telecom Ltd. ("Northern
Telecom"), Lucent Technologies, Inc., formerly part of AT&T Corp. ("Lucent")
and CIDCO Incorporated ("CIDCO"). US Order expects competition to increase in
the future from existing and new competitors and expects new competitors to
include electronics manufacturers. US Order's competitors, including Philips
and Northern Telecom, have already introduced smart telephones that include
technological features incorporated in US Order's Telesmart
15
<PAGE>
4000/Intelifone 2000 smart phone product. US Order expects that as the market
for smart telephones grows, it will face competition from traditional personal
computer on-line service providers, as well as from personal computer software
companies. See "Business--Competition--Smart Telephones."
Reliance on Visa Royalty Payments
US Order sold the Visa Bill-Pay System to Visa on August 1, 1994, for
approximately $15 million in cash, the assumption of certain liabilities and
rights to a 72-month royalty period commencing January 1, 1995 and ending
December 31, 2000 (the "Royalty Period"). Visa subsequently transferred these
assets to Visa InterActive, its wholly owned subsidiary. The royalty
obligation is based on the number of customers who use the Visa Bill-Pay
System during the Royalty Period. The agreement with Visa expressly provides
that the royalty will apply only if the means by which a customer makes an
electronic bill payment involves the use of a "significant portion" of the
Visa Bill-Pay System. See "Business of US Order."
Royalties to US Order are calculated and paid by Visa InterActive quarterly
during the Royalty Period. Because the amount of the royalties to US Order is
dependent upon the number of customers that use the Visa Bill-Pay System on a
monthly basis during the Royalty Period, US Order cannot provide any
assurances of the amount of royalties, if any, that will be payable by Visa
InterActive to US Order. The royalty payment will be reduced for each quarter
through December 31, 1997, by an offset amount (the "Visa Offset") which is
initially set at $73,315. If the royalty payment that would otherwise be due
in respect of a quarter is smaller than the offset amount for that quarter, no
royalty payment will be made to US Order, and the difference between $73,315
and the royalty otherwise due will increase the size of the Visa Offset for
the next quarter. The aggregate amount of the Visa Offset for the Royalty
Period is $879,780. US Order did not receive any royalty revenue from Visa in
1995 due to the Visa Offset and does not expect to receive any royalty revenue
after application of the Visa Offset through at least the end of 1996.
In addition, under the terms of its agreement with Visa, Visa InterActive is
not obligated to pay royalties to US Order for active bank customers who
utilize home banking and bill payment technology independently developed by
Visa InterActive. If Visa InterActive independently develops or acquires its
own home banking and bill payment technology which does not use or build upon
US Order's technology, this could have a material adverse effect on the amount
of royalties payable by Visa InterActive to US Order. As a condition of Visa's
acquisition of the Visa Bill-Pay System, US Order has agreed to work
exclusively with Visa in certain areas and to refrain from certain activities
that are in competition with Visa and its affiliates. These covenants may
increase US Order's reliance upon Visa. See "Business of US Order--Marketing
and Sales--Home Banking--Bill Payment Channel."
RISK FACTORS WITH RESPECT TO COLONIAL DATA
Reliance on Caller ID Revenues
During the year ended December 31, 1995 and the six months ended June 30,
1996, 96% and 91%, respectively, of Colonial Data's revenues were derived from
sales and leases of its Caller ID products. The sale or lease of these
products is directly linked to the implementation and promotion of Caller ID
service by telcos. The timing of such implementation may be affected by
government regulation, by changes in the telecommunications industry resulting
from changes in the regulatory and competitive environment, by switch and
software upgrades and by other factors. There can be no assurance that telcos
will continue to introduce and promote this service successfully or that it
will gain widespread market acceptance. Delays in the introduction of Caller
ID service in local markets or failure of this service to gain widespread
market acceptance would materially and adversely affect Colonial Data's
business, operating results and financial condition. See "Business of Colonial
Data--Industry Background," "--Products and Services" and "--Government
Regulation."
16
<PAGE>
Competition
The market for Colonial Data's products is highly competitive and subject to
rapid technological change. At present, Colonial Data's principal competitors
are CIDCO, Lucent and Northern Telecom. Colonial Data's Caller ID products
also compete with Caller ID telephones offered by Panasonic Co. ("Panasonic"),
Sony Corp. ("Sony"), Thomson Consumer Electronics, Inc. ("Thomson") and US
Electronics, Inc. ("US Electronics").
The smart telephone marketed by Colonial Data through its alliance with US
Order is subject to competition from smart telephones marketed or developed by
Philips, Northern Telecom and CIDCO as well as other emerging platforms for
interactive applications delivered through personal computers and cable
television. Colonial Data expects competition to increase in the future from
existing and new competitors, possibly including telcos or other current
customers, from network switch-based services and from the increased
application of cellular technology. Colonial Data's primary current and
potential competitors in the market for products that support intelligent
network services have substantially greater financial, marketing and technical
resources than Colonial Data. Competition could materially and adversely
affect Colonial Data's results of operations through price reductions and loss
of market share.
Colonial Data competes with a large number of competitors for its repair
services and other services supporting the development and implementation of
intelligent network services. Several of Colonial Data's competitors in the
market for such services have substantially greater financial, marketing and
technological resources than Colonial Data. There can be no assurance that
Colonial Data will be able to continue to compete successfully against its
existing competitors or that it will be able to compete successfully against
new competitors. See "Business of Colonial Data--Competition."
Concentration of Distribution of Products and Services
Colonial Data sells its products and services to telcos, individual
telephone subscribers, other equipment manufacturers on a private label basis
("private label customers") and retail chains. In addition, Colonial Data
leases its products to individual telco subscribers. Sales and leases to
individual telco subscribers are largely dependent on direct fulfillment
distribution arrangements with certain Regional Bell Operating Companies
("RBOCs") and other telcos. Since Colonial Data views the telcos with which it
maintains direct fulfillment relationships as its customers, it considers its
customer base to be highly concentrated. In 1995, Colonial Data's three
largest customers (including telcos with which Colonial Data maintains direct
fulfillment relationships) accounted for 59%, of which the top two accounted
for 48%, of its revenues. In the six months ended June 30, 1996, the three
largest customers accounted for 51%, of which the top two accounted for 38%,
of Colonial Data's revenues. Colonial Data's current telco fulfillment
arrangements are not exclusive and may be terminated by either party. The loss
of any one or more of Colonial Data's major customers or the termination of
its distribution arrangements with any telco or the failure to be selected for
significant orders or programs by a telco could materially and adversely
affect Colonial Data's business, operating results, and financial condition.
In addition, consolidation in the telecommunications industry could result in
the loss of such customers or business. See "Business of Colonial Data--
Marketing and Distribution."
Management of Growth
During recent periods, Colonial Data has experienced a rapid rate of growth.
Colonial Data has responded to the growth in its business by significantly
increasing its service, support and administrative facilities and staff.
However, there can be no assurance that Colonial Data will be able on a timely
basis to anticipate its future requirements for personnel, facilities or
systems or to maintain the levels of customer service that it has provided in
the past. The inability of Colonial Data to anticipate and meet these
requirements, or a decline in the quality of Colonial Data's customer service
or delays in the delivery of Colonial Data's products could materially and
adversely affect Colonial Data's business. See "Business of Colonial Data--
Manufacturing."
17
<PAGE>
Limited Proprietary Protection
Colonial Data possesses limited patent or registered intellectual property
rights with respect to its technology. Colonial Data depends in part upon its
proprietary technology and know-how to differentiate its products from those
of its competitors. Colonial Data has relied on US Order for the design of a
new smart telephone. Colonial Data also works independently and from time to
time with third parties with respect to the design and engineering of its own
products. Colonial Data also relies on a combination of contractual rights and
trade secret laws to protect its proprietary technology. There can be no
assurance, however, that Colonial Data will be able to protect its technology
or successfully develop new technology or gain access to such technology or
that third parties will not be able to develop similar technology
independently or that competitors will not obtain unauthorized access to
Colonial Data's proprietary technology, that third parties will not misuse the
technology to which Colonial Data has granted access, or that Colonial Data's
contractual or legal remedies will be sufficient to protect Colonial Data's
interests in its proprietary technology. See "Business of Colonial Data--
Patents, Proprietary Rights and Licenses."
A portion of the messaging technology used in Colonial Data's Caller ID
products is licensed on an exclusive basis from Lucent. However, Lucent has
reserved for itself and its subsidiaries the right to use that technology for
all purposes relating to its and its subsidiaries' businesses. Certain of
Lucent's Caller ID patents are licensed by Lucent to Colonial Data and others,
including Colonial Data's competitors. If the Lucent license were terminated
and Colonial Data were unable to negotiate a new patent license agreement with
Lucent, Colonial Data would no longer be authorized to manufacture or sell
Caller ID products in the United States other than to the RBOCs and to Lucent,
and Colonial Data's business would be materially and adversely affected. See
"Business of Colonial Data--Patents, Proprietary Rights and Licenses."
Limited Sources of Supply
The key components used in Colonial Data's products are currently being
purchased from multiple sources, except for its application specific
integrated circuit ("ASIC") chips, which are purchased from a single source.
The only supply contract to which Colonial Data is a party is with the maker
of its ASIC chips. Colonial Data has no other supply contracts for its
components. Although Colonial Data believes it could develop other sources for
each of the components for its products, the process could take several
months, and the inability or refusal of any such source to continue to supply
components could have a material adverse effect on Colonial Data pending the
development of an alternative source.
THE MEETINGS
This Joint Proxy Statement/Prospectus is furnished for use in connection
with the solicitation of proxies from the holders of US Order Common Stock by
the US Order Board for use at the US Order Meeting and from the holders of
Colonial Data Common Stock by the Colonial Data Board for use at the Colonial
Data Meeting.
TIMES AND PLACES; PURPOSES
The US Order Meeting will be held at 13100 Worldgate Drive, Suite 600,
Herndon, Virginia on November 7, 1996, at 11:00 a.m., local time.
The Colonial Data Meeting will be held at 13100 Worldgate Drive, Suite 600,
Herndon, Virginia on November 7, 1996, at 9:00 a.m., local time.
At the US Order Meeting, the stockholders of US Order will be asked to
consider and vote upon a proposal to approve and adopt the Merger Agreement
and to transact such other matters as may properly come before the US Order
Meeting. At the Colonial Data Meeting, the stockholders of Colonial Data will
be asked to consider and vote upon a proposal to approve and adopt the Merger
Agreement and to transact such other matters as may properly come before the
Colonial Data Meeting. A copy of the Merger Agreement is included as Appendix
I to this Joint Proxy Statement/Prospectus.
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VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
US Order
The US Order Board has fixed the close of business on October 4, 1996, as
the US Order Record Date for determination of holders of US Order Common Stock
entitled to notice of, and to vote at, the US Order Meeting. Only holders of
record of shares of US Order Common Stock at the close of business on the US
Order Record Date are entitled to notice of, and to vote at, the US Order
Meeting. At the close of business on the US Order Record Date, there were
16,633,956 shares of US Order Common Stock outstanding and entitled to vote at
the US Order Meeting. Each holder of record of US Order Common Stock as of the
US Order Record Date is entitled to cast one vote per share, in person or by
proxy, on each proposal properly presented at the US Order Meeting. A majority
of the votes entitled to be cast on each matter to be considered at the US
Order Meeting will constitute a quorum as to that matter. In accordance with
the DGCL, the affirmative vote of a majority of the votes entitled to be cast
by holders of US Order Common Stock is required to approve and adopt the
Merger Agreement. Abstentions and Broker Shares that are not voted will have
the same effect as negative votes with respect to the proposal to approve and
adopt the Merger Agreement.
As of the US Order Record Date, US Order's directors and executive officers
beneficially owned 112,712 shares of US Order Common Stock, representing less
than 1% of the shares of US Order Common Stock outstanding on such date.
WorldCorp, the majority stockholder of US Order, the current Chairman of the
Board and Chief Executive Officer of US Order, and certain directors and
officers of US Order, who as of the US Order Record Date collectively owned
approximately 56% of the outstanding shares of US Order Common Stock
outstanding on such date, have executed stockholder agreements with Colonial
Data in which they have agreed to vote all of their shares of US Order Common
Stock for approval of the Merger Agreement, unless the US Order Board
recommends to the US Order stockholders a Superior Proposal (as defined below
under "The Mergers--Termination; Amendment and Waiver") or otherwise, in the
exercise of its fiduciary duties upon the advice of counsel, withdraws, amends
or modifies in any manner adverse to Colonial Data its favorable
recommendation of the Merger Agreement. The vote of such persons in accordance
with such stockholder agreements would be sufficient to approve the Merger
Agreement without any action on the part of any other holder of US Order
Common Stock.
Colonial Data
The Colonial Data Board has fixed the close of business on October 4, 1996,
as the Colonial Data Record Date for determination of holders of Colonial Data
Common Stock entitled to notice of, and to vote at, the Colonial Data Meeting.
Only holders of record of shares of Colonial Data Common Stock at the close of
business on the Colonial Data Record Date are entitled to notice of, and to
vote at, the Colonial Data Meeting. At the close of business on the Colonial
Data Record Date, there were 15,522,055 shares of Colonial Data Common Stock
outstanding and entitled to vote at the Colonial Data Meeting. Each holder of
record of Colonial Data Common Stock as of the Colonial Data Record Date is
entitled to cast one vote per share, in person or by proxy, on each proposal
properly presented at the Colonial Data Meeting. A majority of the votes
entitled to be cast on each matter to be considered at the Colonial Data
Meeting will constitute a quorum as to that matter. In accordance with the
DGCL, the affirmative vote of a majority of the votes entitled to be cast by
holders of Colonial Data Common Stock is required to approve and adopt the
Merger Agreement. Abstentions and Broker Shares that are not voted will have
the same effect as negative votes with respect to the proposal to approve and
adopt the Merger Agreement.
As of the Colonial Data Record Date, Colonial Data's directors and executive
officers owned 1,818,745 shares of Colonial Data Common Stock, representing
approximately 12% of the shares of Colonial Data Common Stock outstanding on
such date. Certain stockholders of Colonial Data, including the current
Chairman of the Board and Chief Executive Officer of Colonial Data, and
certain directors and officers of Colonial Data, who as of the Colonial Data
Record Date collectively owned approximately 13% of the outstanding shares of
Colonial Data Common Stock outstanding on such date, have executed stockholder
agreements with US Order
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in which they have agreed to vote all of their shares of Colonial Data Common
Stock for approval of the Merger Agreement, unless the Colonial Data Board
recommends to the Colonial Data stockholders a Superior Proposal (as defined
below under "The Mergers--Termination; Amendment and Waiver") or otherwise, in
the exercise of its fiduciary duties upon the advice of counsel, withdraws,
amends or modifies in any manner adverse to US Order its favorable
recommendation of the Merger Agreement.
PROXIES
All shares of US Order Common Stock and Colonial Data Common Stock
represented by properly executed proxy cards received prior to or at the US
Order Meeting or Colonial Data Meeting, respectively, and not revoked, will be
voted in accordance with the instructions indicated in such proxy cards. If no
instructions are indicated on properly executed proxies representing shares of
US Order Common Stock, such proxies will be voted FOR approval and adoption of
the Merger Agreement. If no instructions are indicated on properly executed
proxies representing shares of Colonial Data Common Stock, such proxies will
be voted FOR approval of the Merger Agreement. A properly executed proxy card
representing shares of US Order Common Stock marked "ABSTAIN" with respect to
any proposal, although counted for purposes of determining whether there is a
quorum present and for purposes of determining the aggregate number of Shares
represented and entitled to vote at the US Order Meeting, will not be voted on
that matter. A properly executed proxy card representing shares of Colonial
Data Common Stock marked "ABSTAIN" with respect to any proposal, although
counted for purposes of determining whether there is a quorum present and for
purposes of determining the aggregate number of shares represented and
entitled to vote at the Colonial Data Meeting, will not be voted on that
matter.
If any other matters are properly presented for consideration at the US
Order Meeting or Colonial Data Meeting, the persons named in the US Order
proxy card and Colonial Data proxy card, respectively, will have discretionary
authority to vote on such matters. If necessary, and unless the shares
represented by the proxy were voted against the applicable proposals therein,
the holders of the proxies granted by US Order stockholders and Colonial Data
stockholders also may vote in favor of a proposal to adjourn the US Order
Meeting or Colonial Data Meeting, respectively, to permit further solicitation
of proxies in order to obtain sufficient votes to approve any of the matters
being considered at the Meetings. US Order and Colonial Data are not aware of
any matters to be presented at the US Order Meeting or Colonial Data Meeting,
respectively, other than the proposals described in this Joint Proxy
Statement/Prospectus. If any matters come before the US Order Meeting or
Colonial Data Meeting that are not directly referred to in this Joint Proxy
Statement/Prospectus or the enclosed Proxy, including matters incident to such
meetings, the proxy holders will vote the shares represented by such proxies
in accordance with the recommendations of the US Order Board or the Colonial
Data Board, respectively.
A stockholder may revoke his or her proxy at any time prior to its use by
delivering to the Secretary of US Order or Colonial Data, as the case may be,
a signed notice of revocation or a later dated signed proxy or by attending
the applicable Meeting and voting in person. Attendance at the US Order
Meeting or the Colonial Data Meeting will not in itself constitute the
revocation of a proxy.
All expenses of the solicitation of proxies from US Order stockholders will
be borne by US Order, and all expenses of the solicitation of proxies from
Colonial Data stockholders will be borne by Colonial Data, except that US
Order and Colonial Data have agreed that the expenses incurred in connection
with printing and mailing this Joint Proxy Statement/Prospectus will be shared
equally by US Order and Colonial Data. In addition to solicitation by mail,
officers and employees of US Order and Colonial Data may solicit proxies by
telephone, telegram or personal interviews. Such persons will receive no
additional compensation for such services. Colonial Data has retained the firm
of D.F. King & Co., Inc. to assist in the solicitation of proxies at a fee
estimated not to exceed $9,000, plus direct out-of-pocket expenses. Brokerage
houses, nominees, fiduciaries and other custodians will be requested to
forward proxy soliciting material to the beneficial owners of shares held of
record by them and will be reimbursed for their reasonable expenses.
STOCKHOLDERS SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS
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THE MERGERS
GENERAL; EFFECTIVE TIME
In the Mergers, US Order and Colonial Data will merge with and into
InteliData, and stockholders of US Order and Colonial Data will receive the
consideration described below. The Mergers will become effective at the date
and time specified in the certificates of merger to be filed with the
Secretary of State of Delaware. The filing of the certificates of merger is
anticipated to take place as soon as practicable after the last of the
conditions precedent to the Mergers set forth in the Merger Agreement have
been satisfied or, where permissible, waived, which is expected to occur
shortly after the Meetings. THE FOLLOWING DESCRIPTION OF THE MERGERS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE TEXT OF THE MERGER
AGREEMENT, WHICH IS INCORPORATED BY REFERENCE HEREIN AND A COPY OF WHICH
(EXCLUSIVE OF EXHIBITS AND SCHEDULES) IS ATTACHED TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AS APPENDIX I.
EXCHANGE RATIOS; EXCHANGE OF SHARES
Upon consummation of the Mergers, each outstanding share of US Order Common
Stock will be converted into one share of InteliData Common Stock and each
outstanding share of Colonial Data Common Stock will be converted into one
share of InteliData Common Stock. The Exchange Ratios were determined through
arm's length negotiations between US Order and Colonial Data after
consideration of all relevant factors, and will result in former US Order
stockholders holding approximately 52% of the outstanding shares of InteliData
Common Stock immediately after the Effective Time and former Colonial Data
stockholders holding approximately 48% of the outstanding shares of InteliData
Common Stock immediately after the Effective Time, assuming that existing
warrants and options of US Order and Colonial Data, respectively, are not
exercised before the Effective Time. On a fully diluted basis, former US Order
stockholders will hold approximately 55% of the outstanding shares of
InteliData Common Stock and former Colonial Data stockholders will hold
approximately 45% of the outstanding shares of InteliData Common Stock
immediately after the Effective Time. Each share of US Order Common Stock held
by Colonial Data and each share of Colonial Data Common Stock held by US Order
prior to the Effective Time shall by virtue of the Merger be canceled and
retired and shall cease to exist and no payment shall be made with respect
thereto. See "--Background and Negotiation of the Mergers."
Promptly after the Effective Time, the Exchange Agent will mail written
transmittal materials concerning exchange of stock certificates to each record
holder of outstanding shares of US Order Common Stock and Colonial Data Common
Stock. The transmittal materials will contain instructions with respect to the
proper method of surrender of certificates formerly representing shares of US
Order Common Stock or Colonial Data Common Stock, respectively, in exchange
for certificates representing shares of InteliData Common Stock. Upon
surrender to the Exchange Agent by a US Order or Colonial Data stockholder of
certificates formerly representing shares of US Order Common Stock or Colonial
Data Common Stock, as the case may be, for cancellation, together with
properly completed transmittal materials, such stockholder will be entitled to
receive a certificate representing the number of whole shares of InteliData
Common Stock into which the stockholder's shares of US Order Common Stock or
Colonial Data Common Stock, as the case may be, have been converted. Such
transmittal forms will be accompanied by instructions specifying other details
of the exchange.
STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A
TRANSMITTAL FORM.
After the Effective Time, each certificate that evidenced US Order Common
Stock or Colonial Data Common Stock immediately prior to the Effective Time,
until so surrendered and exchanged, will be deemed, for all purposes, to
evidence only the right to receive a certificate representing the number of
shares of InteliData Common Stock into which such holder's shares were
converted in the Mergers. The holder of such unexchanged certificate will not
be entitled to receive any dividends or other distributions payable by
InteliData until the certificate is surrendered. Subject to applicable laws,
such dividends and distributions, if any, will be accumulated and, at the time
of such surrender, all such unpaid dividends and distributions will be paid
without interest.
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BACKGROUND AND NEGOTIATION OF THE MERGERS
In January 1995, US Order and Colonial Data formed a strategic alliance to
jointly design, develop, manufacture and market a smart telephone product to
the public. In June 1995, Colonial Data and US Order consummated an agreement
whereby US Order exchanged 230,000 shares of US Order Common Stock for 170,743
shares of Colonial Data Common Stock. Such stock exchange agreement also
provides for the exchange of additional shares with a market value of $3.0
million, which exchange has been postponed pending consummation of the
Mergers. Beginning in 1996, senior management of US Order and Colonial Data
began periodically and informally to reassess the long-term strategy and
alternatives for the business and operations of US Order and Colonial Data,
respectively. As management of US Order and Colonial Data assessed these
alternatives and reviewed the history of the strategic relationship between US
Order and Colonial Data, they began to assess whether a merger of equals
between US Order and Colonial Data would enhance stockholder value through the
potential enhancement of each company's competitive position.
NEGOTIATION OF THE MERGERS
From time to time beginning in the fall of 1995, management of US Order and
Colonial Data discussed ways to expand the strategic relationship between the
two companies. In May 1996, senior management of both companies participated
in discussions concerning the idea of a combination of the companies and the
financial implications of such a possible combination. During May and early
June 1996, senior management of both companies had several discussions
regarding the strategic, technological and competitive advantages of a
combination of US Order and Colonial Data. On June 17 and 18, 1996, John C.
Backus, Jr. and Mark S. Lynch of US Order and Robert J. Schock, Timothy R.
Welles, Walter M. Fiederowicz and John N. Giamalis of Colonial Data met in
Danbury, Connecticut to discuss the overall transaction. On June 24, 1996,
Messrs. Backus, Albert N. Wergley, Lynch, Schock, Welles, Fiederowicz and
Giamalis, together with their respective accountants and legal counsel, met in
Hartford, Connecticut to discuss potential terms and conditions of a
transaction. The parties determined to continue to discuss and consider a
transaction that would merge the companies as equals and tentatively agreed to
continue such discussions with respect to the strategic relationship between
the companies and to work towards negotiating a definitive agreement based on
their preliminary meetings. At such time, the proposal being considered by
each of US Order and Colonial Data included the initial designation by each of
US Order and Colonial Data of an equal number of members to the board of
directors of the resulting corporation and exchange ratios that provided no
significant premium to the stockholders of either company. US Order and
Colonial Data then executed a confidentiality agreement pursuant to which each
agreed to keep the merger negotiations and all information received in
connection therewith confidential. On July 1 and 2, 1996, while the parties
continued to negotiate aspects of the proposed transaction, the parties and
their advisors conducted due diligence meetings at each of the respective
headquarters. On July 16, 1996, the senior management of US Order and Colonial
Data, Salomon and First Albany met in Virginia to continue to negotiate the
terms of the Merger Agreement and to conduct further due diligence. On July
18, 1996, Salomon and First Albany met with Mr. Backus of US Order and Mr.
Giamalis of Colonial Data in New York City to review financial information of
Colonial Data. Salomon, First Albany and Colonial Data thereafter conducted a
conference call with Mr. Lynch to review financial information of US Order. In
addition, First Albany subsequently interviewed the management of both
companies with respect to financial data for both companies.
On August 1, 1996, the Colonial Data Board met with management, First
Albany, legal counsel and accountants to discuss the terms of the draft Merger
Agreement and other outstanding issues. At this meeting, representatives of
First Albany presented to the Colonial Data Board an analysis of the proposed
transaction with US Order. A detailed discussion of First Albany's analysis
appears below under "--Opinions of Financial Advisors--First Albany." Counsel
to Colonial Data then presented to the Colonial Data Board an analysis of
Delaware law as it relates to the proposed transaction, discussed certain
results of their due diligence review and reviewed the terms of the draft
Merger Agreement. At the conclusion of the presentations, First Albany
indicated that, under the terms then proposed, it was prepared to deliver its
opinion that the number of shares of InteliData Common Stock proposed to be
offered in exchange for each share of Colonial Data Common Stock in the
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Mergers was fair, from a financial point of view, to Colonial Data
stockholders. During the course of First Albany's presentation and afterwards,
representatives of First Albany and Colonial Data management responded to
questions from the Colonial Data Board on several topics, including the
financial conditions of Colonial Data and US Order and the impact of the
proposed transaction on Colonial Data stockholders. After further discussion,
the meeting was adjourned to the next day to allow the Colonial Data Board
members additional time to consider the materials and information presented at
the meeting.
At 5:00 p.m. on August 2, 1996, the Colonial Data Board reconvened to
reconsider the Merger Agreement. First Albany then delivered its written
fairness opinion to the Colonial Data Board. The text of First Albany's
fairness opinion is attached as Appendix III. After further discussion, the
Colonial Data Board unanimously approved the draft Merger Agreement and
authorized senior management to execute the Merger Agreement and recommended
that the stockholders of Colonial Data approve the Merger Agreement and the
merger of Colonial Data into InteliData as contemplated therein.
On August 2, 1996, after the close of business, the US Order Board met with
management, Salomon, legal counsel and accountants to discuss the terms of the
draft Merger Agreement and other outstanding issues. At this meeting,
representatives of Salomon presented to the US Order Board an analysis of the
proposed transaction with Colonial Data. A detailed discussion of Salomon's
analysis appears below under "--Opinions of Financial Advisors--Salomon."
Counsel to US Order then presented to the US Order Board an analysis of
Delaware law as it relates to the proposed transaction and reviewed the terms
of the draft Merger Agreement. At the conclusion of the presentations, Salomon
orally indicated that, under the terms then proposed, it was prepared to
deliver its opinion that the Exchange Ratio was fair, from a financial point
of view, to the holders of US Order Common Stock (other than Colonial Data and
its affiliates). During the course of Salomon's presentation and afterwards,
representatives of Salomon and US Order management responded to questions from
the US Order Board on several topics, including the financial conditions of
Colonial Data and US Order and the impact of the proposed transaction on US
Order stockholders. Salomon subsequently delivered its written opinion to the
US Order Board, a copy of which is attached hereto as Appendix II, that as of
August 2, 1996, the Exchange Ratio is fair, from a financial point of view, to
the holders of US Order Common Stock (other than Colonial Data and its
affiliates). After further discussion, the US Order Board unanimously approved
the draft Merger Agreement and authorized senior management to execute the
Merger Agreement and recommended that the stockholders of US Order approve the
Merger Agreement and the merger of US Order into InteliData as contemplated
therein.
On August 5, 1996, the definitive Merger Agreement was executed by US Order
and Colonial Data.
REASONS FOR THE MERGERS
US Order
The US Order Board unanimously believes that the Mergers are fair to and in
the best interests of US Order and its stockholders. Accordingly, the US Order
Board has approved the Merger Agreement and the transactions contemplated
thereby and recommends that the stockholders of US Order vote FOR approval and
adoption of the Merger Agreement. In reaching this conclusion, the US Order
Board considered the following material factors:
(a) to achieve full integration of the companies' activities and
alignment of interests to better respond to changes and provide customer
solutions in the emerging markets for intelligent network and interactive
communication services;
(b) the ability to capture in particular the markets for intelligent
communications network products and interactive services;
(c) the combination of technology, manufacturing and distribution
capabilities into a single entity;
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(d) the ability to distribute a full product and service line through
telephone companies and retailers through a combination of the companies;
(e) the enhancement of the strategic and market position of the combined
companies beyond that achievable by US Order or Colonial Data alone through
a combination of financial, operational, management, customer base and
other resources;
(f) the strategic relationship shared between US Order and Colonial Data
indicated the enhanced value of a combined entity;
(g) to diversify the future revenue bases of the companies and to provide
an existing profitable business from which cash may be supplied to fund the
development of US Order's products and services;
(h) to strengthen the company's capitalization, resulting in an improved
ability to make strategic investments in marketing, product development,
leasing programs, complementary acquisitions and other initiatives;
(i) to strengthen the management team with individuals having extensive
experience in the areas of strategic and financial planning, marketing,
research and development and other operational activities;
(j) the elimination of duplicative product development, sales and
marketing, general and administrative efforts and the reduction in
overlapping personnel and related expenses;
(k) the potential economies of scale and other synergies resulting from a
combination of US Order's and Colonial Data's operations and InteliData's
resulting competitive position;
(l) historical market prices of US Order Common Stock and Colonial Data
Common Stock and their relationship on average historical base price, to
the Exchange Ratios; and
(m) the opinion of Salomon that, as of August 2, 1996, the Exchange Ratio
was fair, from a financial point of view, to the holders of US Order Common
Stock (other than Colonial Data and its affiliates), and the analysis of
Salomon presented to the US Order Board on August 2, 1996, each as
described under "--Opinion of Financial Advisors--Salomon."
The foregoing is a summary of the material factors considered by the US
Order Board and does not purport to be a complete description of every matter
considered. In view of the wide variety of factors considered, the US Order
Board did not find it practicable to, and did not, quantify or assign relative
weights to any of these factors.
Colonial Data
The Colonial Data Board unanimously believes that the Mergers are in the
best interests of Colonial Data and its stockholders. Accordingly, the
Colonial Data Board has approved the Merger Agreement and the transactions
contemplated thereby and recommends that the stockholders of Colonial Data
vote FOR the approval and adoption of the Merger Agreement. In reaching this
conclusion, the Colonial Data Board considered the following material factors:
(a) to achieve full alignment of interests and thereby facilitate
marketing, pricing, product development and strategic planning while
eliminating possible conflicts of interest and other inefficiencies;
(b) to diversify the future product offerings and revenue bases of the
companies and facilitate the offering of higher margin products;
(c) the ability to distribute a broader product and service line
incorporating products supporting intelligent network technologies and
related interactive services through telephone operating companies and
retailers by combining US Order's technology, products and services with
Colonial Data's technology, products and services;
(d) the enhancement of the strategic and market position of the combined
companies beyond that achievable by US Order or Colonial Data alone through
a combination of financial, operational, customer base and other resources;
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(e) the strategic relationship shared between US Order and Colonial Data
indicated the enhanced value of a combined entity;
(f) to strengthen the company's capitalization, resulting in an improved
ability to make strategic investments in marketing, product development,
leasing programs, complementary acquisitions and other initiatives;
(g) to strengthen the management team and the overall employee base with
individuals having complementary skills, including extensive experience in
the areas of strategic and financial planning, marketing, research and
development and other operational activities;
(h) the elimination of duplicative product development, sales and
marketing, general and administrative efforts and the reduction in
overlapping personnel and related expenses;
(i) the enhancement of Colonial Data's competitive position through the
addition of technological resources and the ability to offer more complete
customer solutions for telco customers;
(j) historical market prices of US Order Common Stock and Colonial Data
Common Stock and their relationship on average historical base price, to
the Exchange Ratios; and
(k) the opinion and analysis of First Albany that, as of August 2, 1996,
the consideration to be received by stockholders of Colonial Data pursuant
to the Merger Agreement was fair from a financial point of view to the
holders of Colonial Data Common Stock, as described under "--Opinion of
Financial Advisors--First Albany."
The foregoing is a summary of the material factors considered by the
Colonial Data Board and does not purport to be a complete description of every
matter considered. In view of the wide variety of factors considered, the
Colonial Data Board did not find it practicable to, and did not, quantify or
assign relative weights to any of these factors.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
THE US ORDER BOARD AND COLONIAL DATA BOARD HAVE UNANIMOUSLY APPROVED, AND
RECOMMEND THAT THE STOCKHOLDERS OF THEIR RESPECTIVE COMPANIES VOTE FOR
APPROVAL OF, THE MERGER AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
Salomon
At the meeting of the US Order Board on August 2, 1996, at which meeting the
US Order Board approved the Merger Agreement, Salomon delivered its oral
opinion, subsequently confirmed in writing, to the effect that, as of such
date, the Exchange Ratio is fair, from a financial point of view, to the
holders of US Order Common Stock (other than Colonial Data and any of its
affiliates). No limitations were imposed by the US Order Board upon Salomon
with respect to the investigations made or the procedures followed by Salomon
in rendering its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SALOMON, DATED AS OF AUGUST 2, 1996,
IS SET FORTH AS APPENDIX II TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND SETS
FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND
LIMITATIONS ON THE SCOPE OF THE REVIEW UNDERTAKEN. HOLDERS OF US ORDER COMMON
STOCK ARE URGED TO READ THE OPINION IN ITS ENTIRETY. SALOMON'S OPINION IS
DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE EXCHANGE
RATIO AND DOES NOT CONSTITUTE A RECOMMENDATION CONCERNING HOW SUCH HOLDERS
SHOULD VOTE WITH RESPECT TO THE MERGER AGREEMENT OR THE MERGERS. THE SUMMARY
OF THE OPINION OF SALOMON SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Salomon reviewed the Merger Agreement and its
related exhibits. Salomon also reviewed certain publicly available business
and financial information relating to US Order and Colonial Data,
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as well as certain other information, including financial projections,
provided to Salomon by US Order and Colonial Data. Salomon discussed the past
and current operations and financial condition and prospects of US Order and
Colonial Data with the senior management of US Order and Colonial Data,
respectively. Salomon also considered such other information, financial
studies, analyses, investigations and financial, economic, market and trading
criteria that Salomon deemed relevant.
In arriving at its opinion, Salomon assumed and relied upon the accuracy and
completeness of the information reviewed by Salomon and Salomon did not assume
any responsibility for verifying any of such information or for independent
evaluation or appraisal of the assets of US Order or Colonial Data. With
respect to the financial projections of US Order and Colonial Data, Salomon
assumed that they had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the respective managements of
US Order or Colonial Data as to the future financial performance of US Order
or Colonial Data, respectively, and Salomon expressed no opinion with respect
to such forecasts or the assumptions on which they are based.
The following is a summary of the analyses and valuation methodologies
contained in the report (the "Salomon Report") presented by Salomon to the US
Order Board on August 2, 1996, in connection with the rendering of Salomon's
opinion:
(i) Discounted Cash Flow Valuation. Using a discounted cash flow ("DCF")
methodology, Salomon valued each of US Order and Colonial Data estimating
the present value of unlevered future free cash flows available to their
respective debt and equity holders if each of US Order and Colonial Data
were to perform on a stand-alone basis (without giving effect to the
Mergers) in accordance with the management forecasts. Free cash flow
represents the amount of cash generated and available for principal,
interest and dividend payments after providing for ongoing business
operations. For each entity, Salomon aggregated (x) the present value of
the free cash flows over the five-year forecast period with (y) the present
value of the range of terminal values described below. The range of
terminal values was generally calculated by applying a range of implied
multiples to each entity's earnings before interest, taxes, depreciation
and amortization ("EBITDA") in the final year of the forecast period. This
range of terminal values represented, for each of US Order and Colonial
Data, their respective value beyond the applicable forecast period. As part
of the DCF analysis, Salomon used discount rates reflecting each entity's
specific financial characteristics. This DCF analysis resulted in equity
value reference ranges of $11.70 to $13.00 for each share of US Order
Common Stock and $11.80 to $14.60 for each share of Colonial Data Common
Stock. Salomon also used a DCF methodology to value InteliData on a pro
forma basis (after giving effect to the Mergers) in accordance with the
management forecasts. This DCF analysis utilized the method of calculating
free cash flow and terminal value described above (using discount rates
reflecting InteliData's projected financial characteristics) and resulted
in an equity value reference range of $16.11 to $18.20 for each share of
InteliData Common Stock.
(ii) Transaction Multiples Valuation. Salomon reviewed and analyzed
selected merger or acquisition transactions involving other companies in
the telecommunications products, network services and homebanking
industries that it deemed relevant. These transactions were: Antec
Corporation/Keptel, Inc.; Octel Communications Corporation/VMX, Inc.; ECI
Telecom Ltd./Telematics International; and Checkfree Corporation/Servantis
Systems, Inc. Among other matters, Salomon indicated that the merger and
acquisition transaction environment varies over time because of
macroeconomic factors such as interest rate and equity market fluctuations
and microeconomic factors such as industry results and growth expectations.
Salomon noted that no transaction reviewed was identical to the Mergers and
that, accordingly, an assessment of the results of the following analysis
necessarily involves complex considerations and judgments concerning
differences in financial and operating characteristics of Colonial Data and
other factors that would affect the acquisition value of the companies to
which it is being compared. Salomon reviewed, for each acquired company,
the ratio of firm value to latest 12 months ("LTM") revenues, to LTM EBITDA
and to LTM earnings before interest and taxes ("EBIT"). Based on these
ratios, the prices paid in these transactions and corresponding data for
Colonial Data, Salomon calculated an implied equity value reference range
of $14.01 to $17.03 for each share of Colonial Data Common Stock.
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(iii) Comparable Company Valuation. Salomon also performed a comparable
company analysis in which it compared certain publicly available historical
financial and operating data, projections of future financial performance
(reflecting a composite of equity research analysts' estimates) and market
statistics (calculated based upon closing stock prices as of July 31, 1996)
of selected publicly traded companies in the telecommunications products,
network services and homebanking industries considered by Salomon to be
reasonably comparable to US Order or Colonial Data with similar historical
financial and operating data, projections of future financial performance
(also reflecting a composite of equity research analysts' estimates) and
market statistics (also calculated based upon closing stock prices as of
July 31, 1996) of US Order or Colonial Data, respectively. For US Order,
these companies were Intuit Inc.; Cybercash, Inc.; Checkfree Corporation;
and Affinity Technology Group, Inc. (the "US Order Selected Companies") and
for Colonial Data, these companies were Cellstar Corporation; CIDCO;
Cincinnati Microwave, Inc.; and Tessco Technologies Incorporated (the
"Colonial Data Selected Companies"). Salomon compared the common stock
prices per share of each of the US Order Selected Companies and the
Colonial Data Selected Companies, respectively, as of July 31, 1996 ("Per
Share Price"), as a multiple of LTM earnings per share ("EPS") and
estimated calendarized 1996 and 1997 EPS of each of the US Order Selected
Companies and the Colonial Data Selected Companies, respectively. Salomon
also compared the firm value (equal to the sum of equity market value (the
Per Share Price multiplied by fully diluted shares outstanding less
exercisable option proceeds), straight debt, minority interest, straight
preferred stock, and all out-of-the-money convertibles less investments in
unconsolidated affiliates and cash) as a multiple of LTM revenues, LTM
EBITDA and LTM EBIT for each of the US Order Selected Companies and the
Colonial Data Selected Companies, respectively. Based on its analysis,
Salomon calculated equity value reference ranges of $9.50 to $11.50 for
each share of Colonial Data Common Stock and $9.75 to $12.75 for each share
of US Order Common Stock. No company used in the public market valuation
analysis summarized above is identical to US Order or Colonial Data.
Accordingly, any analysis of the value of the Mergers based upon the US
Order Selected Companies and the Colonial Data Selected Companies involves
complex considerations and judgments concerning differences in the
potential financial and operating characteristics of such companies and
other factors in relation to the trading and acquisition values of such
companies.
In addition, as part of its evaluation of the Mergers, Salomon also
performed the following analyses:
(i) Pro Forma Consolidation Analysis. Salomon reviewed certain pro forma
financial effects resulting from the Mergers for each of the 12-month
periods ending December 31 in the five-year period ending December 31,
2000. Salomon estimated that, on a pro forma basis, the Mergers would be
accretive to the EPS of US Order in each of such periods.
(ii) Contribution Analysis. Salomon reviewed and analyzed the pro forma
contribution to the combined entity of each of US Order and Colonial Data
as of and for the 12-month periods ending December 31, 1996 and 1997,
respectively. Salomon reviewed, among other things, the pro forma
contribution to sales, gross profit, EBITDA, EBIT, net income, total assets
and stockholders' equity. Based on this analysis, in 1996, US Order
contributed 12.8% to pro forma combined sales, 17.2% to pro forma combined
gross profit, 28.7% to pro forma combined total assets and 26.8% to pro
forma combined stockholders' equity. Based on the Exchange Ratio, US
Order's stockholders will own approximately 54.4% of InteliData Common
Stock after the Mergers, on a fully diluted basis. The results of the
contribution analysis are not necessarily indicative of the contributions
that the respective businesses may have in the future.
(iii) Historical Trading Analysis. Salomon examined the history of
trading prices for US Order Common Stock and Colonial Data Common Stock in
relation to each other and the relationship of price movements thereof as
of July 31, 1996, and over the three, six and 12 month periods ending July
31, 1996. Salomon noted that on July 31, 1996, the exchange ratio was 0.76
shares of US Order Common Stock per share of Colonial Data Common Stock.
The Salomon Report indicated average, high and low exchange ratios over the
period from three, six and 12 month periods ending July 31, 1996, to be
1.08, 1.30 and 0.76, respectively, 1.05, 1.30 and 0.76, respectively, and
0.99, 1.30 and 0.73, respectively, shares of US Order Common Stock per
share of Colonial Data Common Stock.
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The preparation of a fairness opinion is not susceptible to partial analysis
or summary descriptions. Salomon believes that its analysis and the summary
set forth above must be considered as a whole and that selecting portions of
its analyses and the factors considered by it, without considering all such
analyses and factors, could create an incomplete view of the processes
underlying the analysis set forth in its opinion and the Salomon Report.
Salomon has not indicated that any of the analyses which it performed had a
greater significance than any other. The ranges of valuations resulting from
any particular analysis described above should not be taken to be the view of
Salomon of the actual value of US Order and Colonial Data.
In performing its analyses, Salomon made numerous assumptions with respect
to industry performance, general business, financial, market and economic
conditions and other matters, many of which are beyond the control of US Order
or Colonial Data. The analyses which Salomon performed are not necessarily
indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as a part of Salomon's analysis of the fairness,
from a financial point of view, of the consideration which the holders of US
Order Common Stock would receive in the Mergers. The analyses do not purport
to be appraisals or to reflect the prices at which a company might actually be
sold or the prices at which any securities may trade at the present time or at
any time in the future.
Salomon is not affiliated with US Order or Colonial Data. Salomon has
previously rendered certain financial advisory and investment banking services
to US Order, for which Salomon received customary compensation. In the
ordinary course of its business, Salomon actively trades the equity securities
of US Order and Colonial Data for its own account and the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. Pursuant to an engagement letter dated July 1, 1996, US Order
agreed to pay Salomon for its services in connection with the Mergers a cash
fee of $750,000, of which $375,000 has been paid to Salomon and the balance of
which will be payable upon consummation of the Mergers. US Order also agreed
to reimburse Salomon for reasonable travel and out-of-pocket expenses incurred
by Salomon in connection with its engagement (including reasonable fees and
expenses of Salomon's counsel). US Order also agreed to indemnify Salomon and
certain related persons against certain liabilities, including liabilities
under the federal securities laws, relating to or arising out of its
engagement.
Salomon is an internationally recognized investment banking firm that
provides financial services in connection with a wide range of business
transactions. As part of its business, Salomon regularly engages in the
valuation of companies and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and for
other purposes. The US Order Board retained Salomon based on Salomon's
expertise in the valuation of companies as well as its familiarity with US
Order and other telecommunications products, network services and home banking
companies.
First Albany
In connection with the Merger, Colonial Data retained First Albany to render
an opinion as to the fairness to Colonial Data's stockholders, from a
financial point of view, of the consideration to be received by the holders of
Colonial Data Common Stock pursuant to the Merger Agreement. On August 1,
1996, First Albany reviewed its analysis with and indicated to the Colonial
Data Board that it was prepared to deliver an opinion that the consideration
to be received is fair to Colonial Data's stockholders from a financial point
of view, and on August 2, 1996, First Albany delivered its written opinion
(the "First Albany Opinion") to such effect. First Albany did not recommend to
the Colonial Data Board that any specific amount of consideration constituted
the appropriate consideration for the Mergers. The amount of consideration set
forth in the Merger Agreement was determined through negotiations between
Colonial Data and US Order.
A COPY OF THE FIRST ALBANY OPINION IS ATTACHED HERETO AS APPENDIX III.
STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR A SUMMARY OF
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER MATTERS CONSIDERED, AND LIMITS OF
THE REVIEW BY FIRST ALBANY. THE SUMMARY OF THE FIRST ALBANY OPINION SET FORTH
IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH
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OPINION. THE FIRST ALBANY OPINION WAS PREPARED FOR COLONIAL DATA'S BOARD, IS
DIRECTED ONLY TO THE FAIRNESS TO COLONIAL DATA'S STOCKHOLDERS AS OF AUGUST 2,
1996, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY
THE HOLDERS OF COLONIAL DATA COMMON STOCK PURSUANT TO THE MERGER AGREEMENT,
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW TO VOTE
AT THE COLONIAL DATA MEETING.
In rendering its opinion, in connection with its analyses of the valuation
of Colonial Data or US Order or the Colonial Data Common Stock or the US Order
Common Stock, First Albany did not make or seek to obtain appraisals of
Colonial Data's or US Order's assets. First Albany relied, without independent
verification, upon the accuracy and completeness in all material respects of
all of the financial information reviewed by it. With respect to the financial
and operating forecasts (and the assumptions and bases therefor), estimates
and analyses provided to First Albany by Colonial Data and US Order, First
Albany assumed that such forecasts, estimates and analyses were reasonably
prepared in good faith and represent the best currently available estimates
and judgments of Colonial Data and US Order managements as to the future
financial performance of Colonial Data and US Order. First Albany noted, among
other things, that its opinion is necessarily based upon financial, economic
and market criteria existing as of the date of the opinion, and information
available to First Albany as of the date thereof. No limitations were imposed
by the Colonial Data Board upon First Albany with respect to the investigation
made or the procedures followed by First Albany in rendering its opinion.
In connection with and in preparation for rendering its opinion, First
Albany reviewed, analyzed and relied upon certain information bearing upon the
financial and operating condition of Colonial Data and US Order, including:
the Merger Agreement; financial statements and related information of Colonial
Data and US Order for the year ended December 31, 1995, and for the interim
periods ending June 30, 1996; publicly available information concerning the
historical prices at which the Colonial Data Common Stock has been
transferred; research reports published by equity analysts; and other
financial information concerning the business and operations of Colonial Data
and US Order, including certain internal financial and operating budgets,
analyses and forecasts of Colonial Data and US Order prepared by their
respective managements. First Albany also met with members of the senior
management of each of Colonial Data and US Order to discuss past and current
business operations, financial condition and future prospects of Colonial Data
and US Order, as well as other matters believed to be relevant to First
Albany's analysis, including, but not limited to, the following strategic
implications: (i) access to new technology, including the smart phone
platform; (ii) increased access to telco distribution channels; (iii) entry to
retail distribution channels; and (iv) the bringing together of management
teams and companies with complementary skill sets and assets. Further, First
Albany considered such other information, financial studies, analyses and
investigations, and financial, economic and market criteria which First Albany
deemed relevant to its analysis including, to the extent publicly available,
the financial terms of comparable transactions.
In rendering its opinion to the Colonial Data Board, First Albany performed
and presented certain financial information and comparative analyses, with
such other factors as it deemed relevant. The preparation of a fairness
opinion involves various determinations as to the most appropriate and
relevant methods of financial analyses and the application of those methods to
particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Furthermore, in arriving at its opinion,
First Albany did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. First Albany used information on
the financial condition of Colonial Data and US Order as of a date or dates
shortly before the Merger Agreement was executed on August 5, 1996, and stock
price information through the close of the market on August 1, 1996. Included
in the quantitative and qualitative analyses, among other things, are the
following:
Historical Financial Statement Analysis: First Albany reviewed and analyzed
selected annual and quarterly income statements and selected annual balance
sheets for both Colonial Data and US Order.
Liquidation Values: First Albany calculated the orderly liquidation value of
Colonial Data by starting with the June 30, 1996 unaudited balance sheet and
making adjustments totaling $6.1 million to total assets of $86.8
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million. The net result of these adjustments indicates a liquidation value of
$92.9 million, resulting in proceeds to its stockholders of $5.84 per share.
First Albany calculated the liquidation value of US Order by starting with
the June 30, 1996 unaudited balance sheet and making adjustments totaling $4.7
million to total assets of $35.1 million. The net result of these adjustments
indicates a liquidation value of $39.8 million, resulting in proceeds to its
stockholders of $2.50 per share.
Peer Group Comparison Analysis: First Albany analyzed certain financial
information of a group of several publicly traded companies comparable to
Colonial Data which manufacture and distribute communications components and
equipment; these companies included: CIDCO, Comdial, Inter-Tel Incorporated,
Microdyne Corporation, and Zoom Telephonics, Inc. In addition Avid
Technologies, Inc., a developer and manufacturer of computer-based video
editing systems, was included based on product/technology transition
characteristics. Such financial information included market valuation, market
value as a multiple of earnings, and market value as a multiple of revenues.
In particular, such analysis showed that, on average, as of August 1, 1996,
based on the closing prices for the respective common stocks, this group of
common stocks traded at 23.24 times the most recently reported four quarters
earnings per share, 14.17 times 1996 forecasted and 9.18 times 1997 forecasted
earnings per share (based on research analysts' estimates as reported by
Zacks, Nelsons and I/B/E/S). The price to earnings per share multiples for
Colonial Data for the comparable periods are 12.7, 11.8 and 6.9 times,
respectively (based on earnings estimates in First Albany's research analysis
published in a report dated July 3, 1996). The group, on average, traded at
0.82 times the most recently reported four quarters revenues, 0.73 times 1996
forecasted and 0.58 times 1997 forecasted revenues (based on published
research analysts' estimates). The price to revenue multiples for Colonial
Data for the comparable periods are 1.99, 1.67 and 1.04 times, respectively
(based on revenue estimates in First Albany's research analysis published in a
report dated July 3, 1996).
First Albany analyzed certain financial information of a group of several
publicly traded companies comparable to US Order, consisting of selected
companies in the home banking, electronic commerce software and related
application software industries. These companies included: Checkfree
Corporation, Cybercash, Inc. and Intuit, Inc. (home banking); Harbinger
Corporation, HNC Software, Inc., Premenos Technology Corp., Quick Response
Services, Inc., Sterling Commerce, Inc., and Verifone, Inc. (electronic
commerce software); and Transaction System Architects, Inc. (related
application software). Such financial information included market valuation,
market value as a multiple of earnings, and market value as a multiple of
revenues. In particular, such analysis showed that, on average, as of August
1, 1996, based on the closing prices for the respective common stocks, this
group of common stocks traded at 55.9 times the most recently reported four
quarters earnings per share, 47.4 times 1996 forecasted and 31.3 times 1997
forecasted earnings per share (based on research analysts' estimates as
reported by Zacks, Nelsons and I/B/E/S). The price to earnings per share
multiples for US Order for the comparable periods are negative, negative, and
75.7 times, respectively (based on earnings estimates in First Albany's
research analysis published in a report dated July 31, 1996). The group traded
at 7.01 times the most recently reported four quarters revenues, 4.99 times
1996 forecasted and 3.92 times 1997 forecasted revenues (based on published
research analysts' estimates). The price to revenue multiples for US Order for
the comparable periods are 46.1, 14.0, and 3.2 times, respectively (based on
revenue estimates in First Albany's research analysis published in a report
dated July 31, 1996).
Analysis of Selected Precedent Transactions: First Albany analyzed publicly
available information for selected and recent precedent pending or completed
acquisitions and mergers. In examining these transactions, First Albany
analyzed certain financial parameters of the acquired company relative to the
consideration offered. Financial indicators compared included the aggregate
consideration to latest 12 months revenue. For Colonial Data, First Albany
examined transactions in which the acquirors were faced with the loss of a
significant customer base. Specifically, First Albany examined Interpublic
Group's acquisition of Campbell Mithun Esty and Radius Inc.'s acquisition of
SuperMac Technologies, Inc. Such analysis resulted in a transaction valuation
of 0.8 times the most recently reported four quarters revenues.
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For US Order, First Albany examined transactions involving technology
companies that were entering emerging industries or industry segments by
either acquiring products which incorporated new technologies or combining the
technology of a new product with an existing product to deliver a better
solution. Specifically, First Albany examined Bay Networks, Inc.'s acquisition
of Xylogics, Inc., Ascend Communications, Inc.'s acquisition of NetStar, Inc.,
Cabletron Systems, Inc.'s acquisition of Network Express, Inc., CheckFree
Corporation's acquisitions of Security APL, Inc., and Servantis Systems
Holdings, Inc., Medaphis Corporation's acquisition of Health Data Sciences
Corporation, Security Dynamics Technologies, Inc.'s acquisition of RSA Data
Security, Inc., Comdial Corporation's acquisitions of Key Voice Technologies,
Inc. and Aurora Systems, Inc., CUC International Inc.'s acquisition of Sierra
On-Line, Inc., ADC Telecommunications Inc.'s acquisition of Information
Transmission Systems Corp., Sungard Data Systems, Inc.'s acquisition of NCS
Financial Systems, Inc. and MFS Communications Co.'s acquisition of UUNet
Technologies, Inc. Such analysis resulted in an average transaction valuation
of 5.1 times the most recently reported four quarters revenues.
Because WorldCorp, an existing stockholder of US Order, will own
approximately 29% of the combined company, First Albany reviewed transactions
during the period January 1, 1993 to the present in which the purchaser
acquired 20 to 30% of the outstanding capital stock of a corporation. In such
transactions, the average premium of the purchase price to the price at which
the shares were trading one week prior to the announcement of the transaction
was approximately 20%. On August 1, 1996, one share of US Order Common Stock
was trading at a premium of 26% to one share of Colonial Data Common Stock.
No company or transaction used in the above analyses is identical to
Colonial Data, US Order or the proposed transaction. Accordingly, an analysis
of the results of the foregoing is not mathematical; rather it involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading values of the companies or company to which they are
compared, including in particular the market environment in which such company
or companies operate.
Pro Forma Contribution Analysis: First Albany analyzed the pro forma
contribution of each of US Order and Colonial Data, if the Merger were to be
consummated, to historical and projected pro forma combined revenue, gross
profit, operating income, pre-tax income, net income, and earnings per share.
This analysis was based on actual results for the year ended December 31,
1995, and Colonial Data's and US Order's managements' forecasts of their
respective financial performance, based on their historical performance and
following discussions with Colonial Data and US Order. For the fiscal years
1996 and 1997 First Albany noted that Colonial Data would contribute 86.2% and
73.3% of pro forma combined revenue, respectively, 83.2% and 65.4% of pro
forma combined gross profit, respectively, 158.1% and 73.8% of pro forma
combined operating income, respectively, 152.8% and 75.9% of pro forma
combined pre-tax income, respectively, and 192.3% and 62.5% of pro forma
combined net income, respectively. For such periods, First Albany noted that
US Order would contribute 13.8% and 26.7% of pro forma combined revenue,
respectively, 16.8% and 34.6% of pro forma combined gross profit,
respectively, (58.1)% and 26.2% of pro forma combined operating income,
respectively, (52.8)% and 24.1% of pro forma combined pre-tax income,
respectively, and (92.3)% and 37.5% of pro forma combined net income,
respectively. First Albany compared these historical and projected
contribution percentages to 49.2%, the approximate pro forma ownership
(implied by the comparative shares outstanding) of the combined company by
Colonial Data stockholders. The analysis further showed that pro forma
earnings per share of the combined company, compared to Colonial Data as a
stand-alone entity, would be decreased by 69.6% for calendar year 1996 and
would be increased by 38.3% for calendar year 1997.
The summary of the First Albany analyses set forth above does not purport to
be a complete description of the presentation by First Albany to the Colonial
Board. In performing its analyses, First Albany made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Colonial Data or US
Order. The analyses performed by First Albany are not necessarily indicative
of actual values or actual future results, which may be significantly more or
less favorable than suggested by such analyses. In addition, analyses relating
to value of businesses do not purport to
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be appraisals or to reflect the prices at which businesses actually may be
sold or the prices at which the securities of the companies may be traded. The
analyses and the summary set forth above should be considered as a whole as
any consideration of only selected portions of the First Albany analyses, or
of the above summary, could create an incomplete view of the process
underlying the analyses performed by First Albany in connection with the
preparation of its opinion letter.
The Colonial Data Board selected First Albany as its financial advisor due
to its experience in acting as a financial advisor in connection with mergers
and acquisitions and its familiarity with Colonial Data and its business.
Pursuant to the letter agreement dated as of July 16, 1996, between Colonial
Data and First Albany, Colonial Data has agreed to pay First Albany: (1) a
retainer fee of $50,000 and (2) an opinion fee of $150,000 to render its
opinion as to the fairness, from a financial point of view, of the
consideration to be paid by Colonial Data pursuant to the Merger Agreement.
The retainer fee and the first half of the opinion fee have been paid to First
Albany. The second half of the opinion fee is payable upon the completion of
the Mergers and was not contingent on the favorable or unfavorable nature of
the opinion. In addition, Colonial Data has agreed to reimburse First Albany
for all of its reasonable out-of-pockets expenses, including but not limited
to legal fees and travel expenses, up to an aggregate amount of $12,000.
Colonial Data has also agreed to indemnify and hold First Albany harmless
against certain liabilities under federal securities laws arising out of, or
in connection with, its rendering of services under the engagement letter.
First Albany provides research coverage on, and makes a market in, both the
Colonial Data Common Stock and the US Order Common Stock and may continue to
provide investment banking services to the combined company in the future. In
the course of its market-making activities, First Albany may from time to
time, have a long or short position in or buy and sell securities of Colonial
Data. Walter M. Fiederowicz, a director of Colonial Data, serves on the board
of directors of First Albany. First Albany, as part of its investment banking
activities, is engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. First Albany served as
the lead underwriter on Colonial Data's public offerings in October of 1994
and in July of 1995, and served as a managing underwriter on US Order's
initial public offering in June of 1995. With respect to all transactions,
First Albany has been compensated for such services in the form of customary
underwriting discounts and commissions. First Albany has served as financial
advisor to US Order in connection with US Order's acquisition of Braun
Simmons. In connection with the Braun Simmons acquisition, US Order paid First
Albany a retainer of $35,000 and, upon closing of the transaction, has become
obligated to pay First Albany approximately an additional $130,000 and to
reimburse First Albany for its out-of-pocket expenses.
THE MERGER AGREEMENT
Conditions to Consummation of the Mergers
The respective obligations of US Order and Colonial Data to consummate the
transactions contemplated by the Merger Agreement are subject to the
satisfaction or, where permissible, waiver at or prior to the Effective Time
of the following conditions: (a) approval and adoption of the Merger Agreement
and the transactions contemplated thereby by the requisite vote of the
stockholders of US Order and Colonial Data, respectively; (b) the absence of
any statute, rule, regulation, ruling, order, decree, or injunction issued by
any United States court or United States governmental authority prohibiting,
restraining, enjoining or restricting consummation of the Mergers; (c)
expiration or early termination of all applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR
Act"), and filing or receipt of any other governmental or regulatory notices
or approvals required with respect to the transactions contemplated thereby;
and (d) effectiveness of the Form S-4 under the Securities Act, which shall
not be the subject of any stop order, or proceeding seeking a stop order and
obtaining all state securities laws or "blue sky" permits and authorizations
necessary to issue shares of InteliData Common Stock in exchange for US Order
Common Stock and Colonial Data Common Stock in the Mergers.
The obligation of US Order to consummate the transactions contemplated by
the Merger Agreement is subject to the satisfaction or waiver at or prior to
the Effective Time of the following conditions: (a) the representations of
Colonial Data and InteliData contained in the Merger Agreement or in any other
document delivered pursuant thereto shall be true and correct (except to the
extent that the breach thereof would not have a
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material adverse effect on Colonial Data or InteliData), and at the closing,
each of Colonial Data and InteliData shall have delivered to US Order a
certificate to that effect; (b) each of the covenants and obligations of
Colonial Data and InteliData to be performed at or before the Effective Time
pursuant to the terms of the Merger Agreement shall have been duly performed
in all material respects at or before the Effective Time and at the closing
each of Colonial Data and InteliData shall have delivered to US Order a
certificate to that effect; (c) the InteliData Common Stock issuable to the US
Order stockholders pursuant to the Merger Agreement and such other shares
required to be reserved for issuance in connection with the Mergers shall have
been authorized for listing on Nasdaq upon official notice of issuance; (d)
the opinion of Hunton & Williams, counsel to US Order, dated the closing date
and addressed to US Order and InteliData to the effect that (i) the merger of
US Order with and into InteliData will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code;
(ii) each of InteliData and US Order will be a party to the reorganization
within the meaning of Section 368(b) of the Code; and (iii) no gain or loss
for Federal income tax purposes will be recognized by InteliData, US Order or
a stockholder of US Order as a result of the Mergers; (e) Colonial Data shall
have obtained the consent or approval of each person whose consent or approval
shall be required to consummate the transactions contemplated under the Merger
Agreement, under any loan or credit agreement, note, mortgage, indenture,
lease or other agreement or instrument, except those for which failure to
obtain such consents and approvals would not, in the reasonable opinion of US
Order, individually or in the aggregate, have a material adverse effect on
Colonial Data; and (f) there shall have been no events, changes or effects
with respect to Colonial Data or its subsidiaries having or which could
reasonably be expected to have a material adverse effect on Colonial Data.
The obligation of Colonial Data to consummate the transactions contemplated
by the Merger Agreement is subject to the satisfaction or waiver at or prior
to the Effective Time of the following conditions: (a) the representations of
US Order and InteliData contained in the Merger Agreement or in any other
document delivered pursuant thereto shall be true and correct (except to the
extent that the breach thereof would not have a material adverse effect on US
Order or InteliData), and at the closing, each of US Order and InteliData
shall have delivered to Colonial Data a certificate to that effect; (b) each
of the covenants and obligations of US Order and InteliData to be performed at
or before the Effective Time pursuant to the terms of the Merger Agreement
shall have been duly performed in all material respects at or before the
Effective Time and at the Closing, each of US Order and InteliData shall have
delivered to Colonial Data a certificate to that effect; (c) the InteliData
Common Stock issuable to the Colonial Data stockholders pursuant to the Merger
Agreement and such other shares to be reserved for issuance in connection with
the Mergers shall have been authorized for listing on Nasdaq upon official
notice of issuance; (d) the opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.,
counsel to Colonial Data, dated the closing date and addressed to Colonial
Data and InteliData, to the effect that (i) the merger of Colonial Data with
and into InteliData will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code; (ii) each of
InteliData and Colonial Data will be a party to the reorganization within the
meaning of Section 368(b) of the Code; and (iii) no gain or loss for Federal
income tax purposes will be recognized by InteliData, Colonial Data or a
stockholder of Colonial Data as a result of the Mergers; (e) US Order shall
have obtained the consent or approval of each person whose consent or approval
shall be required in order to permit the succession by InteliData pursuant to
the Mergers to any obligation, right or interest of US Order under any loan or
credit agreement, note, mortgage, indenture, lease or other agreement or
instrument, except for those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of Colonial Data, individually
or in the aggregate, have a material adverse effect on US Order; and (f) there
shall have been no events, changes, or effects with respect to US Order having
or which could reasonably be expected to have a material adverse effect on US
Order.
Conduct of Business Pending the Mergers
US Order has agreed, pending the Effective Time, to conduct its business in
the ordinary and usual course of business and consistent with past practice,
and to use its reasonable best efforts to preserve intact its business
organization, to keep available the services of its current officers and
employees and to preserve its relationships with customers, suppliers and
others having business dealings with it to the end that goodwill and ongoing
businesses will be unimpaired at the Effective Time. US Order has agreed that,
except as expressly provided in
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the Merger Agreement or consented to in writing by Colonial Data, it will not,
prior to the Effective Time: (a) amend its Certificate of Incorporation or
Bylaws (or other similar governing instrument); (b) amend the terms of the
warrants issued pursuant to the warrant agreement between US Order and
WorldCorp, dated as of May 1, 1993, authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver any stock of any class or
any other securities (except bank loans) or equity equivalents, except for (i)
the issuance and sale of US Order Common Stock pursuant to options previously
granted under the US Order Plans, or (ii) the issuance and sale of US Order
Common Stock pursuant to US Order warrants outstanding on the date of the
Merger Agreement, and (iii) the granting of stock options to employees in the
ordinary course of business and consistent with past practices of US Order,
provided that the aggregate number of shares of US Order Common Stock issuable
pursuant to such options shall not exceed 200,000; (c) split, combine or
reclassify any shares of its capital stock, declare, set aside or pay any
dividend or other distribution in respect of its capital stock, make any other
actual, constructive or deemed distribution in respect of its capital stock or
otherwise make any payments to stockholders in their capacity as such, or
redeem or otherwise acquire any of its securities; (d) adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of US Order (other
than the Mergers); (e) incur or assume any long-term or short-term debt, or
issue any debt securities except for borrowings or issuances of letters of
credit under existing lines of credit in the ordinary course of business; (f)
except as may be required by law, take certain actions regarding employee
compensation; (g) acquire, sell, lease or dispose of any assets in any single
transaction or series of related transactions outside of the ordinary course
of business; (h) except as may be required as a result of a change in law or
in generally accepted accounting principles, change any of the accounting
principles or practices used by it; (i) revalue in any material respect any of
its assets, including without limitation, writing down the value of inventory
or writing-off notes or accounts receivable other than in the ordinary course
of business; (j) (i) acquire, in any manner, any corporation, partnership or
other business organization or division thereof or any equity interest therein
(other than in connection with outsourcing agreements entered into with
customers of US Order), (ii) enter into any contract or agreement other than
in the ordinary course of business consistent with past practice which would
be material to US Order, or (iii) authorize any new capital expenditure or
expenditures which, individually, is in excess of $500,000 or, in the
aggregate, are in excess of $1,000,000, provided, however, that none of the
foregoing shall limit any capital expenditure required pursuant to existing
contracts; (k) make any tax election or settle or compromise any income tax
liability material to US Order; (l) settle or compromise any pending or
threatened suit, action, or claim which either relates to the Merger Agreement
or the settlement or compromise of which could have a material adverse effect
on US Order; (m) commence any material research and development project or
terminate any material research and development project that is currently
ongoing, in either case, except pursuant to the terms of existing contracts or
in the ordinary course of business; or (n) take or agree to take any of the
actions described above which would make any of the representations or
warranties of US Order contained in the Merger Agreement untrue or incorrect.
Colonial Data has agreed, pending the Effective Time, to conduct its
business in the ordinary and usual course of business and consistent with past
practice, and to use its reasonable best efforts to preserve intact its
business organization, to keep available the services of its current officers
and employees and to preserve its relationships with customers, suppliers and
others having business dealings with it to the end that goodwill and ongoing
businesses shall be unimpaired at the Effective Time. Colonial Data has agreed
that, except as expressly provided in the Merger Agreement or consented to in
writing by US Order, it and any of its subsidiaries will not, prior to the
Effective Time: (a) amend its Certificate of Incorporation or Bylaws (or other
similar governing instrument); (b) amend the term of the warrants issued to
purchase Colonial Data Common Stock, authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver any stock of any class or
any other securities (except bank loans) or equity equivalents, except for (i)
the issuance and sale of Colonial Data Common Stock pursuant to options
previously granted under the Colonial Data Plans, or (ii) the issuance and
sale of Colonial Data Common Stock pursuant to Colonial Data warrants
outstanding on the date of the Merger Agreement, and (iii) the granting of
stock options to employees in the ordinary course of business and consistent
with past practices of Colonial Data, provided that the aggregate number of
shares of Colonial Data Common Stock issuable pursuant to such options shall
not exceed
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200,000; (c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution in respect of its
capital stock, make any other actual, constructive or deemed distribution in
respect of its capital stock or otherwise make any payments to stockholders in
their capacity as such, or redeem or otherwise acquire any of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
Colonial Data (other than the Mergers); (e) incur or assume any long-term or
short-term debt, or issue any debt securities except for borrowings or
issuances of letters of credit under existing lines of credit in the ordinary
course of business; (f) except as may be required by law, take certain actions
regarding employee compensation; (g) acquire, sell, lease or dispose of any
assets in any single transaction or series of related transactions outside of
the ordinary course of business; (h) except as may be required as a result of
a change in law or in generally accepted accounting principles, change any of
the accounting principles or practices used by it; (i) revalue in any material
respect any of its assets, including without limitation, writing down the
value of inventory or writing-off notes or accounts receivable other than in
the ordinary course of business; (j) (i) acquire, in any manner, any
corporation, partnership or other business organization or division thereof or
any equity interest therein (other than in connection with outsourcing
agreements entered into with customers of Colonial Data), (ii) enter into any
contract or agreement other than in the ordinary course of business consistent
with past practice which would be material to Colonial Data, or (iii)
authorize any new capital expenditure or expenditures which, individually, is
in excess of $500,000 or, in the aggregate, are in excess of $1,000,000,
provided, however, that none of the foregoing shall limit any capital
expenditure required pursuant to existing contracts; (k) make any tax election
or settle or compromise any income tax liability material to Colonial Data and
its subsidiaries taken as a whole; (l) settle or compromise any pending or
threatened suit, action, or claim which either relates to the Merger Agreement
or the settlement or compromise of which could have a material adverse effect
on Colonial Data; (m) commence any material research and development project
or terminate any material research and development project that is currently
ongoing, in either case, except pursuant to the terms of existing contracts or
in the ordinary course of business; or (n) take or agree to take any of the
actions described above which would make any of the representations or
warranties of Colonial Data contained in the Merger Agreement untrue or
incorrect.
No Solicitation of Transactions
The Merger Agreement provides that each of US Order and Colonial Data will
immediately cease any existing discussions or negotiations, if any, with any
parties with respect to the following: (i) the acquisition of US Order or
Colonial Data by merger or otherwise by any person other than US Order,
Colonial Data or InteliData; (ii) the acquisition by a third party of more
than 30% of the total assets of US Order or Colonial Data; (iii) the
acquisition by a third party of 30% or more of US Order Common Stock or
Colonial Data Common Stock; (iv) the adoption by US Order or Colonial Data of
a plan of liquidation or the declaration or payment of an extraordinary
dividend; (v) the repurchase by US Order or Colonial Data of more than 20% of
its outstanding shares; or (vi) the acquisition by US Order or Colonial Data,
by merger, purchase of stock or assets, joint venture or otherwise, of a
direct or indirect ownership interest or investment in any business whose
annual revenues, net income or assets is equal or greater than 40% of its
annual revenues, net income or assets together with its subsidiaries taken as
a whole (each a "Third Party Acquisition"). The Merger Agreement does not
prohibit US Order or the US Order Board or Colonial Data or the Colonial Data
Board, to the extent there is a bona fide proposal to acquire, directly or
indirectly, for consideration consisting of cash and/or securities, more than
50% of the shares then outstanding or all or substantially all of the assets
of US Order or Colonial Data, as the case may be, and otherwise on terms which
the US Order Board or the Colonial Data Board, as the case may be, by a
majority vote determines in its good faith (based on written advice of Salomon
or other nationally recognized investment bank in the case of US Order or
First Albany or other nationally recognized investment bank in the case of
Colonial Data) to be more favorable to such party's stockholders than the
Mergers (a "Superior Proposal"), from providing information to, or
participating in negotiations or otherwise cooperating with, any party with
respect to the foregoing. US Order or Colonial Data, as the case may be, will
promptly advise the other party of any such proposal or offer and will inform
that party of all the terms and conditions thereof and the contents of any
response thereto.
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Stock Options and Warrants
At the Effective Time, each outstanding option to purchase shares of US
Order Common Stock and shares of Colonial Data Common Stock shall be assumed
by InteliData. Thus, at the Effective Time, each outstanding option to
purchase US Order Common Stock (a "US Order Stock Option" or collectively, "US
Order Stock Options"), whether vested or unvested, shall be assumed by
InteliData (all of such plans or agreements pursuant to which any US Order
Stock Option has been issued or may be issued are referred to collectively as
the "US Order Plans"). Each US Order Stock Option shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such US Order Stock Option, the same number of shares of
InteliData Common Stock as the holder of such US Order Stock Option would have
been entitled to receive pursuant to the Mergers had such holder exercised
such option in full immediately prior to the Effective Time, at a price per
share equal to (y) the aggregate exercise price for the US Order Common Stock
otherwise purchasable pursuant to such US Order Stock Option divided by (z)
the number of shares of InteliData Common Stock deemed purchasable pursuant to
such US Order Stock Option; provided, however, that in the case of any option
to which section 421 of the Code applies by reason of its qualification under
section 422 of the Code ("incentive stock options" or "ISOs"), the option
price, the number of shares purchasable pursuant to such option and the terms
and conditions of exercise of such option shall be determined in compliance
with the requirements of section 424(a) of the Code.
At the Effective Time, each outstanding option to purchase Colonial Data
Common Stock (a "Colonial Data Stock Option" or collectively, "Colonial Data
Stock Options"), whether vested or unvested, shall be assumed by InteliData
(all of such plans or agreements pursuant to which any Colonial Data Stock
Option has been issued or may be issued are referred to collectively as the
"Colonial Data Plans"). Each Colonial Data Stock Option shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Colonial Data Stock Option, the same number of shares of
InteliData Common Stock as the holder of such Colonial Data Stock Option would
have been entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time, at a price per
share equal to (y) the aggregate exercise price for the Colonial Data Common
Stock otherwise purchasable pursuant to such Colonial Data Stock Option
divided by (z) the number of shares of InteliData Common Stock deemed
purchasable pursuant to such Colonial Data Stock Option; provided, however,
that in the case of any ISOs, the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise
of such option shall be determined in compliance with the requirements of
section 424(a) of the Code.
Stockholder approval of the Merger Agreement will constitute authorization
of InteliData to assume the existing US Order and Colonial Data stock option
plans and the options and awards outstanding thereunder.
At the Effective Time, each warrant to purchase US Order Common Stock and
each warrant to purchase Colonial Data Common Stock, which then remains
outstanding shall be deemed to constitute a warrant to purchase, on the same
terms and conditions as were applicable under such warrant, the same number of
shares of InteliData Common Stock as the holder of such warrant would have
been entitled to receive pursuant to the Mergers had such holder exercised
such warrant in full immediately prior to the Effective Time, at a price per
share equal to (y) the aggregate exercise price for the US Order Common Stock
or Colonial Data Common Stock otherwise purchasable pursuant to such warrant,
as the case may be, divided by (z) the number of shares of InteliData Common
Stock deemed purchasable pursuant to such warrant, as the case may be.
Indemnification; Insurance
InteliData will to the fullest extent permitted by applicable law, from and
after the Effective Time, indemnify each person who is or has been or becomes
prior to the Effective Time, a director, officer or employee of US Order,
Colonial Data or InteliData or any subsidiary thereof, against all losses,
expenses (including reasonable attorney fees and expenses), claims, damages or
liabilities and amounts paid in settlement arising out of certain matters and
shall provide certain other indemnifications no less favorable then those
indemnifications provided for in the US Order Certificate, the Colonial Data
Certificate, the US Order Bylaws and the Colonial
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Data Bylaws as in effect on the date of the Merger Agreement for a period of
not less than six years. For a period of three years from the Effective Time,
InteliData will maintain in effect the policies of directors' and officers'
liability insurance maintained by US Order and Colonial Data for the benefit
of those persons who are covered by such policies at the Effective Time (or
InteliData may substitute therefor policies of at least the same coverage with
respect to matters occurring prior to the Effective Time).
Termination; Amendment and Waiver
The Merger Agreement may be terminated and the Mergers abandoned at any time
before the Effective Time, whether before or after approval by the Colonial
Data stockholders or the US Order stockholders: (a) by mutual written consent
of Colonial Data and US Order; (b) by either Colonial Data or US Order if (i)
the Mergers have not been consummated on or before February 28, 1997, unless
the failure to consummate the Mergers is due to the failure of the party
seeking to terminate the Merger Agreement to fulfill any of its obligations
thereunder, (ii) there has been a material breach by the other party of any of
its representations, warranties, covenants or agreements materially adversely
affecting the consummation of the Mergers or materially adversely affecting
one of the other parties that is not cured within 20 business days after
receipt by the party alleged to be in breach of written notice thereof, (iii)
any court of competent jurisdiction or other competent governmental authority
has issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Mergers and such action has become
final and nonappealable, (iv) the US Order Board or the Colonial Data Board
has recommended to its stockholders a Superior Proposal or (v) the other
party's stockholders have voted on the Merger Agreement and the transactions
contemplated thereby and the requisite vote in favor is not obtained; (c) by
Colonial Data if the US Order Board fails to recommend to the US Order
stockholders approval of the Merger Agreement or withdraws such
recommendation; (d) by US Order if the Colonial Data Board fails to recommend
to the Colonial Data stockholders approval of the Merger Agreement or
withdraws such recommendation; (e) by Colonial Data if, before the Effective
Time, Colonial Data receives a Superior Proposal (as hereinafter defined),
provided, that Colonial Data does not receive, within five business days of
receiving notice of such Superior Proposal, an offer from US Order that the
Colonial Data Board believes, in good faith after consulting with its
financial advisors, is at least as favorable, from a financial point of view,
to its stockholders as such Superior Proposal; (f) by US Order if, before the
Effective Time, US Order receives a Superior Proposal (as hereinafter
defined), provided, that US Order does not receive, within five business days
of receiving notice of such Superior Proposal, an offer from Colonial Data
that the US Order Board believes, in good faith after consulting with its
financial advisors, is at least as favorable, from a financial point of view,
to its stockholders as such Superior Proposal.
In the event that the Merger Agreement is terminated by US Order because:
(i) the Colonial Data Board recommended to its stockholders a Superior
Proposal, or (ii) the Colonial Data Board withdrew, modified or changed its
approval or recommendation of the Mergers, then Colonial Data shall pay to US
Order the amount of $3.0 million within five business days after such
termination. In the event that, within 12 months after such termination of the
Merger Agreement, Colonial Data enters into and consummates a Third Party
Acquisition, then Colonial Data shall pay to US Order an additional $4.5
million. In the event that the Merger Agreement is terminated by US Order
because there is a willful breach of any material representation, warranty or
certain covenants on the part of Colonial Data and Colonial Data consummates a
Third Party Acquisition within 12 months after such termination of the Merger
Agreement, then Colonial Data shall pay to US Order $7.0 million.
In the event that the Merger Agreement is terminated by Colonial Data
because: (i) the US Order Board recommended to its stockholders a Superior
Proposal, or (ii) the US Order Board withdrew, modified or changed its
approval or recommendation of the Mergers, then US Order shall pay to Colonial
Data the amount of $3.0 million within five business days after such
termination. In the event that, within 12 months after such termination of the
Merger Agreement, US Order enters into and consummates a Third Party
Acquisition, then US Order shall pay to Colonial Data an additional $4.5
million. In the event that the Merger Agreement is terminated by Colonial Data
because there is a willful breach of any material representation, warranty or
certain covenants on the part of US Order and US Order consummates a Third
Party Acquisition within 12 months after such termination of the Merger
Agreement, then US Order shall pay to Colonial Data $7.0 million.
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InteliData, US Order and Colonial Data may amend the Merger Agreement, by
action taken or authorized by their respective Boards of Directors, either
before or after approval by the US Order stockholders of the Merger Agreement
and approval by the Colonial Data stockholders of the Merger Agreement, except
that after such approval, no amendment may be made that, under Delaware law,
requires further approval by the US Order or Colonial Data stockholders, as
the case may be, without such further approval. At any time prior to the
Effective Time, either Colonial Data or US Order may extend the time specified
in the Merger Agreement for the performance of any of the obligations of the
other party, waive any inaccuracies in the representations and warranties of
the other party contained in the Merger Agreement or in any document delivered
pursuant thereto or waive compliance by the other party with any of the
agreements or conditions of such other party contained in the Merger
Agreement.
Certain Restrictions on Resale of InteliData Common Stock
All shares of InteliData Common Stock issuable in the Mergers will be
registered under the Securities Act and will be freely transferable, except
that any such shares received by persons who are deemed "affiliates" (as such
term is defined under the Securities Act) of US Order or Colonial Data prior
to the Mergers or of InteliData upon consummation of the Mergers may be resold
by them only in transactions registered under the Securities Act or permitted
by the resale provisions of Rule 145 under the Securities Act (or Rule 144 in
the case of such persons who become affiliates of InteliData) or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
of US Order or Colonial Data generally include individuals or entities that
control, are controlled by, or are under common control with US Order or
Colonial Data and may include certain officers and directors of US Order or
Colonial Data as well as principal stockholders of such party. The Merger
Agreement requires each of the parties thereto to use its best efforts to
cause each of its affiliates to execute a written agreement to the effect that
such person will not offer or sell or otherwise dispose of any of the shares
of InteliData Common Stock issued to such person in or pursuant to the Mergers
in violation of the Securities Act or the rules and regulations promulgated by
the Commission thereunder. See "Comparison of Stockholders' Rights--Transfer
Restrictions--InteliData."
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
Certain of the officers and directors of US Order and Colonial Data have
interests in the Mergers in addition to their interests as stockholders. These
include, among other things, provisions in the Merger Agreement relating to
the management of InteliData following the Mergers, indemnification,
eligibility for certain InteliData employee benefits and the assumption of
outstanding employee stock options with respect to InteliData Common Stock
held by directors, officers and employees of US Order and Colonial Data,
respectively. InteliData will assume the employment agreements between Robert
J. Schock and Colonial Data and between John C. Backus, Jr. and US Order. In
connection with the formation of InteliData, InteliData has adopted the
following stock option plans in which directors, officers and employees who
are eligible may participate in the future: (i) InteliData Incentive Plan,
(ii) InteliData Non-employee Directors' Stock Option Plan, and (iii)
InteliData Employee Stock Purchase Plan. See "Management and Operation After
the Mergers."
The Colonial Data Board has authorized the payment of a stock bonus in the
amount of 50,000 shares of Colonial Data Common Stock to Timothy R. Welles
conditioned upon consummation of the Mergers. Of these shares, 40,000 shares
will vest immediately, 5,000 shares will vest on December 31, 1997, and 5,000
shares will vest on December 31, 1998. Mr. Welles has agreed not to sell or
otherwise transfer any of the 40,000 vested shares prior to December 31, 1997.
The bonus was authorized by the Colonial Data Board in recognition of Mr.
Welles' valuable service to Colonial Data, including his efforts in connection
with the structuring and negotiation of the Mergers.
Employment Agreements
Robert J. Schock. Pursuant to the Merger Agreement, at the Effective Time,
InteliData will assume Mr. Schock's employment agreement (the "Schock
Employment Agreement") with Colonial Data. Colonial Data entered into an
employment agreement with Robert J. Schock as of July 1, 1996, providing that
Mr. Schock will serve as President and Chief Executive Officer of Colonial
Data until June 30, 1997, a term which
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automatically extends in one-year increments thereafter, unless terminated
earlier. Mr. Schock is entitled to a base salary of $250,000 per year for the
first year (subject to increase by the Colonial Data Board), a bonus of up to
50% of his base salary, the right to participate in all of the other benefit
plans that Colonial Data provides to its executives and key management
employees, disability and health insurance benefits, and certain other
benefits, including a company car. Colonial Data may terminate the Schock
Employment Agreement upon Mr. Schock's death, disability or "for cause" (as
defined) upon the affirmative vote of the majority of the Colonial Data Board.
If, within two years after a "Change of Control" (as defined in the Schock
Employment Agreement) occurs, the Schock Employment Agreement is terminated by
Colonial Data, or by Mr. Schock for "Good Reason" (as defined in the Schock
Employment Agreement), Colonial Data will pay the remainder of Mr. Schock's
compensation already accrued, a lump sum equal to three times his annual base
salary, and the amount needed by Mr. Schock to purchase benefits equivalent to
those previously provided by Colonial Data for the three year period
commencing as of his termination date. The Mergers do not constitute a "Change
of Control" for purposes of the Schock Employment Agreement. Mr. Schock may
terminate the Schock Employment Agreement upon 30 days notice. In addition, if
Mr. Schock should terminate the Schock Employment Agreement for "Good Reason,"
including a diminution of responsibilities, a reduction in base salary or a
relocation of Colonial Data's offices to a location more than 30 miles from
New Milford, Connecticut, Colonial Data will pay Mr. Schock the amount of his
base salary and other compensation already accrued, pay his base salary until
the earlier of three years or through June 30, 2000, permit continued use of
his company vehicle for such period and continue to provide Mr. Schock with
the option to participate in Colonial Data's employee benefit plans.
As part of the Schock Employment Agreement, should the Schock Employment
Agreement be terminated under certain circumstances, such as termination by
either Colonial Data or Mr. Schock upon proper notice, Mr. Schock will have
the option of entering into a consulting agreement with Colonial Data. The
consulting agreement would commence simultaneously with the termination of the
Schock Employment Agreement and the election by Mr. Schock to enter into the
consulting agreement and would remain in effect for three years or until June
30, 2000, whichever comes first, unless the consulting agreement is terminated
earlier. During the time the consulting agreement is in effect, Mr. Schock
would receive an annual consulting fee equal to the base salary he was
receiving at the time the Schock Employment Agreement was terminated, and
Colonial Data would continue to provide certain benefits, such as disability
and health insurance benefits.
John C. Backus, Jr. Pursuant to the Merger Agreement, at the Effective Time,
InteliData will assume Mr. Backus' employment agreement with US Order. US
Order entered into an employment agreement with John C. Backus, Jr. on August
1, 1994 (the "Backus Employment Agreement"), providing that Mr. Backus will
serve as President and Chief Operating Officer of US Order until July 31,
1997, a term which automatically extends until December 31, 1997, unless
terminated earlier. Mr. Backus is entitled to a base salary of $250,000 per
year, a bonus of up to 75% of his base salary based on his individual
performance as well as that of US Order as determined by the US Order Board,
the right to participate in all bonus and incentive compensation plans or
arrangements made available to other US Order officers and directors and
certain other benefits, including a $5.0 million life insurance policy. Mr.
Backus is entitled to receive performance stock options in accordance with
US Order's 1991 Stock Option Agreement (the "1991 Plan"). US Order may
terminate the Backus Employment Agreement upon Mr. Backus' death, disability
or for cause (as defined) upon the affirmative vote of the majority of the US
Order Board. If the US Order Board terminates Mr. Backus without cause, Mr.
Backus is entitled to receive the remainder of the base salary and certain
other compensation due under the Backus Employment Agreement and all options
granted to Mr. Backus but unexercisable under the 1991 Plan shall become
immediately exercisable for a period of one year. Mr. Backus may terminate the
Backus Employment Agreement upon 30 days notice under certain circumstances,
including a diminution of responsibilities, a change in control (as defined)
of US Order or a relocation of its executive offices outside of the
Washington, D.C. area. Upon such termination by Mr. Backus, he is entitled to
receive the remainder of his base salary and certain other compensation due
under the Backus Employment Agreement and all options granted but
unexercisable shall become immediately exercisable for a period of one year.
As part of the Backus Employment Agreement, Mr. Backus has agreed to hold
shares of US Order Common Stock during the term of the Backus Employment
Agreement. Mr. Backus has agreed to hold 10,000, 15,000 or 20,000 shares of US
Order Common Stock upon
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the earlier of April 1, 1996, April 1, 1997 and April 1, 1998 or the exercise
of 100,000, 200,000 or 300,000 options, respectively. During 1995, Mr. Backus
acquired 25,000 shares of US Order Common Stock through the exercise of stock
options and currently satisfies all of the holding requirements set forth in
the Backus Employment Agreement.
Pursuant to a stock option agreement between US Order and Mr. Backus, Mr.
Backus has been awarded options to purchase 600,000 shares of US Order Common
Stock at an exercise price of $7.13 per share. The options for 600,000 shares
of US Order Common Stock will become exercisable on May 1, 2004; however, the
exercise date will be accelerated with respect to increments of 100,000 shares
of US Order Common Stock if certain targets are achieved regarding the Common
Stock price. Pursuant to this provision, Mr. Backus will be entitled to
exercise options to purchase 100,000 shares of US Order Common Stock, at the
$7.13 exercise price, each time that the US Order Common Stock trades at a
price that is an increase of 25% over the preceding eligibility level for 20
trading days. Thus, Mr. Backus will first be entitled to exercise options for
100,000 shares of US Order Common Stock if the US Order Common Stock trades at
or above $8.91 for 20 consecutive trading days. The same entitlement would
arise for five additional blocks of 100,000 options, at the exercise price of
$7.13 per share, if the Common Stock trades at or above $11.14, $13.93,
$17.41, $21.76, and $27.20, for 20 trading days each (each of these trading
prices is 25% above the price of the US Order Common Stock at the earlier
tier). In the event that Mr. Backus is no longer employed in certain
capacities by US Order or its affiliates, options that have not become
exercisable by such time will not thereafter become exercisable, except that
upon a termination without Cause or for Good Reason (as defined therein) the
exercisability of the options shall accelerate.
Indemnification; Insurance
For a period of up to six years after the Effective Time, InteliData has
agreed to maintain certain indemnities and to maintain for up to three years,
policies of insurance in favor of US Order's and Colonial Data's directors and
officers prior to the Effective Time. See "The Mergers--The Merger Agreement--
Indemnification; Insurance" above.
ACCOUNTING TREATMENT
The Mergers will be accounted for using the purchase method of accounting
with US Order being deemed to be the acquiror for financial reporting
purposes. See "InteliData Unaudited Pro Forma Condensed Consolidated Financial
Information."
CERTAIN CONSEQUENCES OF THE MERGERS
After the Mergers, the holders of US Order Common Stock and Colonial Data
Common Stock will cease to have any direct interest in US Order or its future
earnings or growth or Colonial Data or its future earnings or growth, as the
case may be, but, by virtue of their receipt of shares of InteliData Common
Stock in the Mergers, they will share in the future earnings and growth of the
consolidated entity resulting from the merger of US Order and Colonial Data
with and into InteliData.
The US Order Common Stock and Colonial Data Common Stock will be removed
from inclusion on Nasdaq, and the registration of US Order Common Stock and
Colonial Data Common Stock under the Exchange Act will be terminated.
REGULATORY MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules promulgated thereunder by the United States
Federal Trade Commission (the "FTC"), the Mergers may
40
<PAGE>
not be consummated until notifications have been given and certain information
has been furnished to the FTC and the Antitrust Division of the United States
Justice Department (the "Antitrust Division") and specified waiting period
requirements have been satisfied. The applicable waiting period under the HSR
Act with respect to the Mergers expires on October 30, 1996. Based on
information available to them, US Order and Colonial Data believe that the
Mergers will not violate federal or state antitrust laws.
41
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
US Order has received the opinion of Hunton & Williams, counsel to US Order,
to the effect that for federal income tax purposes: (i) the merger of US Order
into InteliData will constitute a reorganization within the meaning of Section
368(a) of the Code; (ii) neither US Order nor InteliData will recognize any
taxable gain or loss upon consummation of the merger of US Order into
InteliData; and (iii) the merger of US Order into InteliData will result in
the tax consequences summarized below for US Order stockholders who receive
InteliData Common Stock in exchange for US Order Common Stock pursuant to the
merger. Such opinion has been filed as an exhibit to the Registration
Statement. Receipt of substantially the same opinion as of the date of the
Effective Time of the Mergers is a condition to consummation of the Mergers.
Colonial Data has received the opinion of LeBoeuf, Lamb, Greene & MacRae,
L.L.P., counsel to Colonial Data, to the effect that for federal income tax
purposes: (i) the merger of Colonial Data into InteliData will constitute a
reorganization within the meaning of Section 368(a) of the Code; (ii) neither
Colonial Data nor InteliData will recognize any taxable gain or loss upon
consummation of the merger of Colonial Data into InteliData; and (iii) the
merger of Colonial Data into InteliData will result in the tax consequences
summarized below for Colonial Data stockholders who receive InteliData Common
Stock in exchange for Colonial Data Common Stock pursuant to the merger. Such
opinion has been filed as an exhibit to the Registration Statement. Receipt of
substantially the same opinion as of the date of the Effective Time of the
Mergers is a condition to consummation of the Mergers.
The opinions of Hunton & Williams and LeBoeuf, Lamb, Greene & MacRae, L.L.P.
are based on, and the opinions to be given as of the date of the Effective
Time of the Mergers will be based on, certain customary assumptions and
representations regarding, among other things, the existing and future
ownership of US Order capital stock and Colonial Data capital stock and the
future business plans for InteliData. In addition, the opinions are based on
current law and certain other information, data, documents and materials as
such counsel deem necessary. No ruling will be sought from the Internal
Revenue Service, and an opinion of counsel is not binding on the Internal
Revenue Service.
A US Order stockholder or a Colonial Data stockholder who receives solely
InteliData Common Stock in exchange for his shares of US Order Common Stock or
Colonial Data Common Stock, as the case may be, will not recognize any gain or
loss on the exchange. A stockholder will have an aggregate tax basis in his
shares of InteliData Common Stock received in the Mergers equal to his
aggregate tax basis in the shares of US Order Common Stock or Colonial Data
Common Stock, as the case may be, exchanged therefor. A stockholder's holding
period for shares of InteliData Common Stock received in the Mergers will
include his holding period for the shares of US Order Common Stock or Colonial
Data Common Stock, as the case may be, exchanged therefor if they are held as
a capital asset, within the meaning of Section 1221 of the Code, at the
Effective Time of the Mergers.
THE PRECEDING DISCUSSION SUMMARIZES FOR GENERAL INFORMATION THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS TO US ORDER STOCKHOLDERS AND
COLONIAL DATA STOCKHOLDERS. IT DOES NOT DISCUSS ALL POTENTIALLY RELEVANT
FEDERAL INCOME TAX MATTERS OR CONSEQUENCES TO ANY FOREIGN OR OTHER
STOCKHOLDERS SUBJECT TO SPECIAL TAX TREATMENT, NOR DOES IT DISCUSS, AND NO
OPINION HAS BEEN REQUESTED REGARDING, ANY STATE OR LOCAL TAX CONSEQUENCES OF
THE MERGERS. THE TAX CONSEQUENCES TO ANY PARTICULAR US ORDER STOCKHOLDER OR A
COLONIAL DATA STOCKHOLDER MAY DEPEND ON THE STOCKHOLDER'S CIRCUMSTANCES. US
ORDER AND COLONIAL DATA STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH REGARD TO FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES.
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<PAGE>
MANAGEMENT AND OPERATION AFTER THE MERGERS
InteliData Board
It is expected that the InteliData Board, at the Effective Time, will
consist of nine persons: T. Coleman Andrews, III, William F. Gorog, John C.
Backus, Jr., Patrick F. Graham and Wesley C. Tallman (the "US Order
Designees") and Robert J. Schock, Walter M. Fiederowicz, Timothy R. Welles and
Constantine S. Macricostas (the "Colonial Data Designees"). The InteliData
Board will be divided into three classes, with the initial term of office of
the first, second and third classes expiring at the first, second and third
annual meetings of the stockholders of InteliData, respectively. InteliData
will take all action necessary to cause the US Order Designees and the
Colonial Data Designees to serve in nearly equal numbers in each of
InteliData's three classes of directors. If any of US Order's Designees or
Colonial Data's Designees, respectively, declines or is unable to serve as a
director prior to the Effective Time, US Order (if such person was a US Order
Designee) or Colonial Data (if such person was a Colonial Data Designee), as
the case may be, will nominate another person to serve in such person's stead,
subject to the other party's designees' approval. If any of the US Order
Designees or Colonial Data Designees declines or becomes unable to serve as a
director during his initial term following the Effective Time, the remaining
US Order Designees (if such person was a US Order Designee) or Colonial Data
Designees (if such person was a Colonial Data Designee), as the case may be,
will nominate another person to serve in such person's stead, which such
person will be subject to the other party's designees' approval.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William F. Gorog.................... 71 Chairman of the Board
Robert J. Schock.................... 54 Chief Executive Officer, Vice-Chairman
of the Board and Director
John C. Backus, Jr.................. 37 President, Chief Operating Officer and
Director
Timothy R. Welles................... 37 Executive Vice President and Director
T. Coleman Andrews, III............. 42 Director
Walter M. Fiederowicz............... 50 Director
Patrick F. Graham................... 56 Director
Constantine S. Macricostas.......... 59 Director
Wesley C. Tallman................... 53 Director
</TABLE>
WILLIAM F. GOROG will be Chairman of the InteliData Board. Mr. Gorog is the
founder of US Order and had served as its Chairman and Chief Executive Officer
since May 1, 1990. From October, 1987 until founding US Order, he served as
chairman of the board of Arbor International, an investment management firm.
From 1982 to 1987, he served as president and chief executive officer of the
Magazine Publishers of America, an association representing the principal
consumer publications in the United States. During the Ford Administration,
Mr. Gorog served as deputy assistant to the President for Economic Affairs and
Executive Director of the Council on International Economic Policy. Prior to
that time, he founded and served as chief executive officer of DataCorp.,
which developed the Lexis and Nexis information systems for legal and media
research and which was subsequently sold to the Mead Corporation. He currently
serves as chairman of the board of WorldCorp, the majority owner of World
Airways and US Order, and as a director of Home Financial Network, Inc.
("HomeNet").
ROBERT J. SCHOCK will be Vice-Chairman of the InteliData Board and Chief
Executive Officer of InteliData. Mr. Schock had served as President and Chief
Executive Officer of Colonial Data since September 1989 and as President of
Colonial Technologies Corp., a wholly-owned subsidiary of Colonial Data, since
1981. From 1977 to 1980, Mr. Schock was director of national operations for
ICOT Corporation, a telecommunications equipment manufacturer. From 1966 to
1977, Mr. Schock held a variety of positions with Xerox Corporation, including
product manager, regional sales operations manager and regional manager for
microsystems.
JOHN C. BACKUS, JR. will be President and Chief Operating Officer of
InteliData and a director on the InteliData Board. Mr. Backus had worked with
US Order since its inception in 1990 and had served as President,
43
<PAGE>
Chief Operating Officer and a director of US Order since 1994. Prior to
working with US Order, Mr. Backus worked for six years at WorldCorp and its
subsidiaries holding a variety of executive positions including vice president
of corporate development, vice president of finance, and vice president of
sales and marketing at a WorldCorp subsidiary. Prior to joining WorldCorp, Mr.
Backus worked for Bain & Company, Inc., a worldwide strategy consulting firm
with approximately 1,200 employees, in its consulting and venture capital
groups where he focused on consumer products and services. Mr. Backus serves
on the board of directors of WorldCorp and HomeNet.
TIMOTHY R. WELLES will be Executive Vice President of InteliData and a
director on the InteliData Board. Mr. Welles had served as Executive Vice
President and Chief Operating Officer of Colonial Data since March 7, 1996.
Prior to joining Colonial Data, Mr. Welles was Senior Vice President of First
Albany Corporation, an investment banking firm, from January 1994 to March
1996, with responsibilities related primarily to corporate finance activities.
Prior to joining First Albany, Mr. Welles held various positions, most
recently as Managing Director, at Advest, Inc., an investment banking firm,
from August 1989 to January 1994. Prior to joining Advest, Inc., Mr. Welles
practiced securities and corporate law at Cahill Gordon & Reindel in its New
York office.
T. COLEMAN ANDREWS, III will be a director on the InteliData Board. Mr.
Andrews had served as a director of US Order since 1990. He is the chief
executive officer, president and a director of WorldCorp, and chairman of the
board of World Airways, a position he has held since 1986. Prior to February
1996, Mr. Andrews also served as chief executive officer of World Airways.
From 1978 through 1986, he was affiliated with Bain & Company, Inc., an
international strategy consulting firm. At Bain, he was elected partner in
1982 and was a founding general partner in 1984 of The Bain Capital Fund, a
private venture capital partnership. Prior to his experience with Bain, Mr.
Andrews served in several appointed positions in the Ford Administration,
including serving with Mr. Gorog in the White House.
WALTER M. FIEDEROWICZ will be a director on the InteliData Board. Mr.
Fiederowicz had been Chairman of the Board of Directors of Colonial Data from
August 1994 until March 1996, a director of Colonial Data since September 1989
and a director of Colonial Technologies Corp. since 1985. From 1979 to
December 1988, Mr. Fiederowicz was a partner of the law firm of Cummings &
Lockwood and served as counsel to that firm from December 1988 until September
1990. From January 1991 until July 1994, he held various positions, including
chairman, and served as a director of Conning Corporation, the parent company
of an investment firm. He is also a director of Photronics, Inc., a photomask
manufacturer. Mr. Fiederowicz was chairman and director of Covenant Mutual
Insurance Company, a property and casualty insurance company ("Covenant") from
1989 until March 1993, and was president and chief executive officer of
Covenant from 1989 until December 1992. Covenant was placed in rehabilitation
by the Insurance Commissioner of the State of Connecticut in 1993 and
subsequently liquidated as a result of losses in connection with insurance
claims relating to Hurricane Andrew. Mr. Fiederowicz is a director of Blau
Marketing Technologies, Inc., a direct marketing firm, and First Albany.
PATRICK F. GRAHAM will be a director on the InteliData Board. Mr. Graham had
served as a director of US Order since 1993. He is a director of Bain &
Company, Inc., a management consulting firm co-founded by Mr. Graham in 1973.
In addition to his primary responsibilities with Bain clients, he has served
as Bain's vice chairman and chief financial officer. Prior to founding Bain,
Mr. Graham was a group vice president with the Boston Consulting Group. Mr.
Graham currently serves as a director of WorldCorp.
CONSTANTINE S. MACRICOSTAS will be a director on the InteliData Board. Mr.
Macricostas had been a director of Colonial Data since September 1989 and a
director of Colonial Technologies Corp. since 1987. Since 1974, Mr.
Macricostas has served in several positions including as chairman and chief
executive officer of Photronics, Inc., a photomask manufacturer. He also
serves as a director of Nutmeg Federal Savings and Loan Association.
WESLEY C. TALLMAN will be a director on the InteliData Board. Mr. Tallman
had served as a director of US Order since June, 1995. He is the president for
products and information services of Visa, a post to which he was named in
March 1994. Previously, he held the title of executive vice president for
product and market
44
<PAGE>
development for Visa's full range of credit and deposit access products. Mr.
Tallman joined Visa in April 1989 as executive vice president for debit
products. Prior to joining Visa, Mr. Tallman spent three years as president
and chief operating officer of PayChex, Inc., a national payroll processing
company in Rochester, New York. Earlier, he was a senior executive vice
president of banking of Chase Lincoln First Bank, Rochester.
At the Effective Time, the InteliData Board will have an Executive
Committee, a Compensation Committee, an Audit Committee and a Nominating
Committee, on each of which there will be an equal representation of US Order
Designees and Colonial Data Designees. The Executive Committee will initially
consist of William F. Gorog and John C. Backus, Jr., as the US Order
Designees, and Robert J. Schock and Timothy R. Welles, as the Colonial Data
Designees, each to serve until the next annual meeting of stockholders of
InteliData at which such Executive Committee member first stands for
reelection to the InteliData Board. The members of the other committees will
be selected by the full InteliData Board.
Management
The principal officers of InteliData at the Effective Time will be as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William F. Gorog.................... 71 Chairman of the Board
Robert J. Schock.................... 54 Chief Executive Officer, Vice-Chairman
of the Board and Director
John C. Backus, Jr.................. 37 President, Chief Operating Officer and
Director
Timothy R. Welles................... 37 Executive Vice President and Director
Joseph E. Smith..................... 46 Executive Vice President
Albert N. Wergley................... 49 Vice President, General Counsel and
Secretary
John N. Giamalis.................... 38 Vice President, Treasurer and Chief
Financial Officer
</TABLE>
Between six and nine months from the Effective Date, Mr. Schock will become
Chairman of the InteliData Board, Mr. Gorog will become Vice Chairman of the
InteliData Board and Mr. Backus will become President and Chief Executive
Officer of InteliData. Additional officers will be elected by the InteliData
Board after the Merger.
Headquarters
The headquarters of InteliData will be located in Herndon, Virginia.
InteliData Non-Employee Directors' Stock Option Plan
InteliData has adopted the InteliData Corporation Non-Employee Directors'
Stock Option Plan (the "Directors' Plan"), pursuant to which each Eligible
Director will be offered options to purchase shares of InteliData Common
Stock. "Eligible Directors" are those directors of InteliData who are not
employees of InteliData or an affiliate, and who have not received
compensation from consulting services to InteliData in excess of $100,000
during the 12 months preceding the date of grant (the "Grant Date"). The Grant
Date will be the Annual Meeting Date of InteliData each year, and the exercise
price for any option granted under the Directors' Plan will be the average
closing price of the InteliData Common Stock during the 30 trading days
immediately preceding the date of grant. Each Eligible Director will receive a
grant of 6,000 options annually. Options granted under the Directors' Plan
vest in 12 equal monthly installments of 500 shares of InteliData Common Stock
per month during the Eligible Director's continued service on the Board. The
option price may be paid in cash, by surrendering shares of InteliData Common
Stock or by a combination of cash and InteliData Common Stock. All options
expire 10 years after their grant. Up to 200,000 shares of InteliData Common
Stock may be issued under the Directors' Plan, subject to certain adjustments.
No options have been granted under the Directors' Plan.
45
<PAGE>
InteliData Incentive Plan
InteliData has adopted the InteliData Corporation Incentive Plan (the
"Incentive Plan"). Members of the InteliData Board, employees of InteliData
and its affiliates and consultants to InteliData or its affiliates are
eligible to participate in the Incentive Plan. The Incentive Plan permits the
grant of options to purchase shares of InteliData Common Stock from
InteliData, stock appreciation rights ("SARs"), stock awards and incentive
awards. InteliData has reserved 1,500,000 shares of InteliData Common Stock
for issuance upon the exercise of options granted to participants under the
Incentive Plan. InteliData has not awarded any options under the Incentive
Plan.
The Incentive Plan is designed to help InteliData attract and retain key
management level employees, and to reward InteliData's employees for results
that contribute to strong earnings performance and improved share values. The
number of options granted under the Incentive Plan in the case of InteliData
executives will be set by the InteliData Board based upon a range of factors,
including scope of responsibilities, internal equity and external
competitiveness.
The Incentive Plan permits the grant of both incentive stock options and
nonqualified stock options. The Incentive Plan is administered by the
Compensation Committee, which has the authority to select individuals to
participate in the Incentive Plan and to determine the terms of all options
awards made under the Incentive Plan.
The exercise price for options granted under the Incentive Plan may not be
less than 85% of the fair market value (as defined) of the InteliData Common
Stock at the time of grant, except that the exercise price for incentive stock
options may not be less than the fair market value of the InteliData Common
Stock at the time of grant. Participants may pay the exercise price in cash or
shares of InteliData Common Stock already held by the participant.
SARs generally entitle a participant to receive the excess of the fair
market value of a share of InteliData Common Stock on the data of exercise
over the initial value of the SAR. Stock awards are grants of shares of
InteliData Common Stock, which may be subject to forfeiture or nontransferable
or both unless and until certain conditions are satisfied. An incentive award
is an opportunity to earn a bonus, payable in cash, upon the attainment of
stated performance objectives.
InteliData Employee Stock Purchase Plan
InteliData has adopted the InteliData Corporation Employee Stock Purchase
Plan (the "Purchase Plan") which is intended to qualify under Section 423 of
the Code. The Purchase Plan permits eligible employees to purchase InteliData
Common Stock through payroll deductions at a price equal to 85% of the fair
market value of the InteliData Common Stock at the beginning or at the end of
each offering period, whichever is lower. The purpose of the Purchase Plan is
to provide employees of InteliData and certain subsidiaries with an
opportunity to purchase InteliData Common Stock through accumulated payroll
deductions. The Purchase Plan is administered by the Compensation Committee of
the InteliData Board or its delegate. Employees are eligible to participate if
they have been employed by InteliData (or US Order or Colonial Data) for at
least three months as of an offering date and are regularly employed by
InteliData for at least 20 hours per week. Employees who own or who are deemed
to own more than five percent of the combined voting power or value of
InteliData are not eligible to participate in the Purchase Plan. The Purchase
Plan is implemented by consecutive offering periods of approximately six
months, with a new offering period commencing no later than July 1 and January
2 of each year. Shares of InteliData Common Stock purchased pursuant to the
Purchase Plan shall be transferable one year following the date of such
purchase. Up to 500,000 shares of InteliData Common Stock may be issued under
the Purchase Plan, subject to certain adjustments. InteliData has reserved
500,000 shares of InteliData Common Stock for purchase under the Purchase
Plan.
46
<PAGE>
INTELIDATA
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed financial information gives
effect to the September 1996 merger of Braun Simmons into US Order and the
subsequent proposed mergers of US Order and Colonial Data into InteliData. The
Braun Simmons and US Order merger was consummated on September 30, 1996 and
was accounted for as a purchase of Braun Simmons by US Order. US Order
acquired all of the outstanding stock of Braun Simmons for $2 million and
375,000 shares of US Order common stock.
The allocation of the purchase price of Braun Simmons of approximately $7
million is based upon a preliminary independent appraisal of the fair value of
the assets acquired and liabilities assumed. The appraisal preliminarily
allocated $0.3 million to the tangible and identifiable intangible assets net
of liabilities assumed, $2 million to the cost in excess of net assets
acquired ("goodwill") and $5 million to in-process research and development.
Such in-process research and development was expensed by US Order on September
30, 1996. The final appraisals of assets and liabilities acquired, and other
factors related to the integration of these companies, may result in
differences in the final allocation of the purchase price.
The proposed merger of US Order, after considering the effects of the Braun
Simmons acquisition, and Colonial Data into InteliData will be accounted for
as a purchase of Colonial Data by US Order. The share exchange reflects the
exchange ratio approved by the respective boards of directors of Colonial Data
and US Order whereby at the effective time, one share of InteliData will be
issued for each outstanding share of Colonial Data and US Order.
The allocation of the purchase price of Colonial Data of approximately $189
million is based upon a preliminary independent appraisal of the fair market
value of certain of the assets acquired and liabilities assumed. The appraisal
preliminarily allocated $87 million to the tangible and identifiable
intangible assets net of liabilities assumed, $30 million to the cost in
excess of net assets acquired ("goodwill") and $72 million to in-process
research and development. Such in-process research and development will be
expensed by InteliData upon consummation of the mergers. The final appraisals
of assets and liabilities acquired, and other factors related to the
integration of these companies, may result in differences in the final
allocation of the purchase price.
The unaudited pro forma condensed consolidated balance sheet has been
prepared as if the acquisitions were consummated as of June 30, 1996. The
unaudited pro forma condensed consolidated statements of operations for the
year ended December 31, 1995 and for the six months ended June 30, 1996, give
effect to the mergers as if each was completed as of January 1, 1995 and
combines US Order's, Braun Simmons' and Colonial Data's statements of
operations for each of those periods. Such statements of operations do not
include the combined effect of the $77 million nonrecurring charges for in-
process research and development. However, such statements do reflect
adjustments for the elimination of historical transactions between US Order,
Braun Simmons and Colonial Data, amortization of goodwill and related income
tax effects.
This method of combining historical financial statements for the preparation
of the pro forma condensed consolidated financial information is for
presentation only. Actual statements of operations of InteliData will reflect
the operating results of both of the companies from the closing date of the
mergers with no retroactive restatements. The unaudited pro forma condensed
consolidated financial information is provided for illustrative purposes only
and is not necessarily indicative of the consolidated financial position or
consolidated results of operations that would have been reported had the
mergers occurred on the dates indicated, nor do they represent a forecast of
the consolidated financial position or results of operations for any future
period. The unaudited pro forma condensed consolidated financial information
should be read in conjunction with the historical financial statements and
accompanying notes of US Order, Braun Simmons and Colonial Data, incorporated
by reference herein.
47
<PAGE>
INTELIDATA
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
----------------- ----------
PRO
BRAUN FORMA COLONIAL PRO FORMA
US ORDER SIMMONS ADJUSTMENTS US ORDER DATA ADJUSTMENTS INTELIDATA
-------- ------- ----------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Product sales.......... $ 1,817 $ 220 $ -- $ 2,037 $51,733 $ -- $53,770
Leases................. -- -- -- -- 20,325 -- 20,325
Services............... 2,369 1,621 -- 3,990 2,136 -- 6,126
------- ------ ----- ------- ------- ------- -------
Total revenue......... 4,186 1,841 -- 6,027 74,194 -- 80,221
------- ------ ----- ------- ------- ------- -------
Cost of revenue:
Product sales.......... 1,748 65 -- 1,813 34,520 629 (4)(d) 36,962
Leases................. -- -- -- -- 8,424 1,366 (4)(f) 9,790
Services............... 723 959 -- 1,682 1,296 -- 2,978
------- ------ ----- ------- ------- ------- -------
Total cost of
revenue.............. 2,471 1,024 -- 3,495 44,240 1,995 49,730
------- ------ ----- ------- ------- ------- -------
Gross profit............ 1,715 817 -- 2,532 29,954 (1,995) 30,491
Operating expenses:
Selling, general and
administrative........ 5,810 699 287 (2)(d) 6,846 9,580 2,014 (4)(d) 20,440
50 (2)(e) 2,000 (4)(e)
Research and
development........... 1,067 127 -- 1,194 1,476 -- 2,670
------- ------ ----- ------- ------- ------- -------
Total operating
expenses............. 6,877 826 337 8,040 11,056 4,014 23,110
------- ------ ----- ------- ------- ------- -------
Operating income
(loss)................. (5,162) (9) (337) (5,508) 18,898 (6,009) 7,381
Other income, net....... 444 (5) -- 439 1,312 -- 1,751
------- ------ ----- ------- ------- ------- -------
Income (loss) before
income taxes........... (4,718) (14) (337) (5,069) 20,210 (6,009) 9,132
Income taxes............ -- (15) 15 (2)(f) -- (7,687) 2,624 (4)(h) (5,063)
------- ------ ----- ------- ------- ------- -------
Net income (loss)....... $(4,718) $ (29) $(322) $(5,069) $12,523 $(3,385) $ 4,069
======= ====== ===== ======= ======= ======= =======
Weighted average
shares................. 10,772 11,147 14,722 33,114
Net income (loss) per
share
(Note 5)............... $ (0.50) $ (0.68) $ 0.85 $ 0.12
======= ======= ======= =======
</TABLE>
48
<PAGE>
INTELIDATA
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
----------------- ----------
PRO
BRAUN FORMA COLONIAL PRO FORMA
US ORDER SIMMONS ADJUSTMENTS US ORDER DATA ADJUSTMENTS INTELIDATA
-------- ------- ----------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Product sales.......... $ 837 $ 74 $-- $ 911 $29,241 $ (240)(4)(g) $29,912
Leases................. -- -- -- -- 7,417 -- 7,417
Services............... 1,037 1,644 -- 2,681 950 -- 3,631
------- ------ ---- ------- ------- ------- -------
Total revenue......... 1,874 1,718 -- 3,592 37,608 (240) 40,960
------- ------ ---- ------- ------- ------- -------
Cost of revenue:
Product sales.......... 692 -- -- 692 20,612 315 (4)(d) 21,379
(240)(4)(g)
Leases................. -- -- -- -- 3,190 683 (4)(f) 3,873
Services............... 579 996 -- 1,575 567 -- 2,142
------- ------ ---- ------- ------- ------- -------
Total cost of
revenue.............. 1,271 996 -- 2,267 24,369 758 27,394
------- ------ ---- ------- ------- ------- -------
Gross profit............ 603 722 -- 1,325 13,239 (998) 13,566
------- ------ ---- ------- ------- ------- -------
Operating expenses:
Selling, general and
administrative........ 4,605 467 144 (2)(d) 5,216 5,970 1,007 (4)(d) 12,193
Research and
development........... 1,176 72 -- 1,248 756 -- 2,004
------- ------ ---- ------- ------- ------- -------
Total operating
expenses............. 5,781 539 144 6,464 6,726 1,007 14,197
------- ------ ---- ------- ------- ------- -------
Operating income
(loss)................. (5,178) 183 (144) (5,139) 6,513 (2,005) (631)
Other income (loss),
net.................... (16) (5) -- (21) 1,150 -- 1,129
------- ------ ---- ------- ------- ------- -------
Income (loss) before
income taxes........... (5,194) 178 (144) (5,160) 7,663 (2,005) 498
Income taxes............ -- (45) 45 (2)(f) -- (2,957) 2,345 (4)(h) (612)
------- ------ ---- ------- ------- ------- -------
Net income (loss)....... $(5,194) $ 133 $(99) $(5,160) $ 4,706 $ 340 $ (114)
======= ====== ==== ======= ======= ======= =======
Weighted average
shares................. 15,833 16,208 15,606 33,114
Net income (loss) per
share
(Note 5)............... $ (0.33) $ (0.32) $ 0.30 $ 0.00
======= ======= ======= =======
</TABLE>
49
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INTELIDATA
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
----------------- ----------
PRO
BRAUN FORMA COLONIAL PRO FORMA
US ORDER SIMMONS ADJUSTMENTS US ORDER DATA ADJUSTMENTS INTELIDATA
-------- ------- ----------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 17,120 $ 1 $(2,000)(2)(a) $15,121 $10,996 $ -- $ 26,117
Short-term
investments........... 2,500 -- -- 2,500 19,100 -- 21,600
Accounts receivable.... 328 559 -- 887 14,956 -- 15,843
Inventory.............. 714 -- -- 714 31,908 -- 32,622
Prepaid and other...... 366 16 -- 382 1,395 -- 1,777
-------- ---- ------- ------- ------- -------- --------
Total current assets.. 21,028 576 (2,000) 19,604 78,355 -- 97,959
Property and equipment,
net.................... 2,077 257 -- 2,334 4,615 6,832 (4)(f) 13,781
Restricted cash......... 4,309 -- -- 4,309 -- -- 4,309
Investments, net........ 6,481 -- -- 6,481 3,761 (6,048)(4)(g) 4,194
Other noncurrent assets,
net.................... 394 5 2,012(2)(d) 2,411 893 30,913 (4)(d) 34,217
-------- ---- ------- ------- ------- -------- --------
Total assets.......... $ 34,289 $838 $ 12 $35,139 $87,624 $ 31,697 $154,460
======== ==== ======= ======= ======= ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities:
Maturities of long-term
debt.................. $ 26 $152 $ -- $ 178 $ -- $ -- $ 178
Accounts payable....... 1,197 87 950(2)(e) 2,234 1,762 3,000 (4)(e) 6,996
Accrued expenses....... 626 295 -- 921 1,468 -- 2,389
-------- ---- ------- ------- ------- -------- --------
Total liabilities..... 1,849 534 950 3,333 3,230 3,000 9,563
-------- ---- ------- ------- ------- -------- --------
Stockholders' equity:
Common stock........... 16 -- -- 16 155 16 (4)(a) 31
(155)(4)(b)
(1)(4)(g)
Additional paid-in
capital............... 62,333 -- 4,430(2)(a) 66,763 62,106 184,182 (4)(a) 250,946
(62,106)(4)(b)
1 (4)(g)
Receivable from sale of
stock................. (2,488) -- -- (2,488) -- -- (2,488)
Other.................. (1,044) -- -- (1,044) 36 (36)(4)(b) (191)
853 (4)(g) --
Accumulated earnings
(deficit)............. (26,377) 304 (304)(2)(b) (31,441) 23,307 (23,307)(4)(b) (103,401)
(5,064)(2)(c) (71,960)(4)(c)
Treasury stock, at
cost.................. -- -- -- -- (1,210) 1,210 (4)(b) --
-------- ---- ------- ------- ------- -------- --------
Total stockholders'
equity............... 32,440 304 (938) 31,806 84,394 28,697 144,897
-------- ---- ------- ------- ------- -------- --------
Total liabilities and
stockholders'
equity............... $ 34,289 $838 $ 12 $35,139 $87,624 $ 31,697 $154,460
======== ==== ======= ======= ======= ======== ========
</TABLE>
50
<PAGE>
INTELIDATA
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
NOTE 1--PURCHASE PRICE OF BRAUN SIMMONS
The purchase price of the acquisition of Braun Simmons is computed as
follows:
<TABLE>
<S> <C>
Estimated fair value of common stock to be issued.................. $4,430
Cash consideration................................................. 2,000
Estimated US Order transaction costs............................... 900
------
Total............................................................ $7,330
======
The purchase price is expected to be allocated as follows:
Current assets..................................................... $ 526
Equipment and other................................................ 262
In-process research and development................................ 5,064
Goodwill........................................................... 2,012
Liabilities assumed................................................ (534)
------
Total............................................................ $7,330
======
</TABLE>
The allocation of the purchase price among Braun Simmons' identifiable
intangible assets was based on a preliminary independent appraisal of the
estimated fair value of those assets. Such preliminary appraisal indicated
approximately $5 million for purchased in-process research and development,
which was expensed by US Order on September 30, 1996, as the technology had
not reached technological feasibility and does not have alternative future
uses. The unaudited pro forma condensed consolidated statements of operations
do not include this one-time charge for purchased in-process technology as it
represents a material nonrecurring charge. The final appraisals of assets and
liabilities acquired, and other factors related to the integration of the
companies, may result in differences in the final allocation of the purchase
price.
NOTE 2--PRO FORMA ADJUSTMENTS--BRAUN SIMMONS MERGER
The following pro forma adjustments have been made to the unaudited pro
forma condensed consolidated financial information:
(a) Reflects cash paid and the fair value of US Order common stock issued
to effect the acquisition of Braun Simmons. In determining the value of the
common shares issued to Braun Simmons' stockholders, the average market
price of shares of US Order Common Stock for a period of five trading days
prior to and after the public announcement of the merger has been utilized.
(b) Reflects elimination of Braun Simmons' historical stockholders'
equity.
(c) Reflects one-time charge for purchased in-process research and
development.
(d) Reflects the preliminary allocation of purchase price to goodwill
which is amortized on a straight-line basis over 7 years.
(e) Reflects accrual of estimated transaction and other related costs.
Estimated costs incurred by Braun Simmons relating to the merger of $50,000
have been reflected as expenses in the pro forma statement of operations
for the year ended December 31, 1995. Estimated costs incurred by US Order
relating to the merger of approximately $900,000 were accrued as additional
purchase consideration on September 30, 1996. The accrual is comprised of
the following: $650,000 in estimated expenses related to severance of
certain of Braun Simmons' employees and the relocation of certain other key
Braun Simmons' employees, $175,000 in estimated costs to terminate a five
year Braun Simmons' office facility lease which expires in the year 2000,
and $75,000 in miscellaneous transaction related expenses.
(f) Reflects the effect of the combination of Braun Simmons' and US
Orders' operations and the above adjustments on income taxes.
51
<PAGE>
NOTE 3--PURCHASE PRICE OF COLONIAL DATA
The purchase price of the acquisition of Colonial Data is computed as
follows:
<TABLE>
<S> <C>
Estimated fair value of common stock to be issued................ $181,752
Estimated fair value of employee stock options and warrants...... 2,446
Cost of previous investment in Colonial Data..................... 3,393
Estimated US Order transaction costs............................. 1,000
--------
Total............................................................ $188,591
========
The purchase price is expected to be allocated as follows:
Current assets................................................... $ 76,355
Lease base....................................................... 8,887
Equipment and other.............................................. 3,157
In-process research and development.............................. 71,960
Developed technology............................................. 1,258
Goodwill......................................................... 30,204
Liabilities assumed.............................................. (3,230)
--------
Total............................................................ $188,591
========
</TABLE>
The allocation of the purchase price to Colonial Data tangible and
identifiable intangible assets was based on a preliminary independent
appraisal of the estimated fair value of certain of those assets. Such
preliminary appraisal indicated approximately $72 million for purchased in-
process research and development, which will be expensed by InteliData upon
closing, as the technology has not reached technological feasibility and does
not have alternative future uses. The unaudited pro forma condensed
consolidated statements of operations do not include this one-time charge for
purchased in-process technology as it represents a material nonrecurring
charge. The final appraisals of assets and liabilities acquired, and other
factors related to the integration of the companies, may result in differences
in the final allocation of the purchase price.
NOTE 4--PRO FORMA ADJUSTMENTS--COLONIAL DATA MERGER
The following pro forma adjustments have been made to the unaudited pro
forma condensed consolidated financial information:
(a) Reflects the estimated fair value of InteliData Common Stock issued
to effect the transaction and the estimated fair value of Colonial Data
stock options and warrants assumed by InteliData. As noted above, US Order
has been deemed the acquiring company for the purpose of the purchase
method of accounting. As a result, the average market price of shares of US
Order Common Stock for a period of five trading days prior to and after the
public announcement of the Mergers has been utilized in the determination
of purchase consideration related to shares of InteliData Common Stock
issued to Colonial Data's stockholders.
(b) Reflects elimination of Colonial Data's historical stockholders'
equity.
(c) Reflects one-time charge for purchased in-process research and
development.
(d) Reflects the preliminary allocation of purchase price to developed
technology and goodwill. Such developed technology is amortized on a
straight-line basis over two years; goodwill is amortized on a straight-
line basis over 15 years.
(e) Reflects accrual of estimated transaction and other related costs.
Estimated costs incurred by Colonial Data relating to the Mergers of $2
million have been reflected as expenses in the pro forma statement of
operations for the year ended December 31, 1995.
(f) Reflects the preliminary allocation of purchase price of $6.8 million
to recognize the excess of the estimated fair market value over the
carrying amount of Colonial Data's lease base related to its leased Caller
ID units with the customers of a major telco and its amortization on a
straight-line basis over five years.
52
<PAGE>
(g) Reflects the elimination of intercorporate transactions and the
elimination of intercorporate investments and cancellation of such shares.
(h) Reflects the effect of the combination of Braun Simmons', US Order's
and Colonial Data's operations and the above adjustments on income taxes. A
valuation allowance has been recognized for the pro forma net deferred tax
assets of InteliData, relating primarily to operating loss carryforwards
generated by US Order prior to the Mergers, based on a preliminary
assessment of the likelihood of recoverability of such amounts. As a result
of the Mergers, the use of US Order's operating loss carryforwards may be
limited in future years.
NOTE 5--NET INCOME (LOSS) PER SHARE
US Order's historical loss per share for the year ended December 31, 1995
includes $681,000 of preferred dividend requirement which has been deducted
from historical net loss in determining net loss attributable to common
stockholders. All of US Order's series of preferred stock, including
accumulated dividends, were redeemed or converted to common stock in June
1995. The historical preferred dividend requirement has been excluded from the
computations of pro forma income per share.
The weighted average shares used in the computations of pro forma income per
share assumes that the shares issued in the acquisition of Braun Simmons and
the total number of shares to be exchanged in the Mergers, net of canceled
intercorporate investment shares, were outstanding for all periods presented.
The impact of outstanding stock options and warrants of InteliData has been
considered using the treasury stock method.
53
<PAGE>
BUSINESS OF INTELIDATA
InteliData is a newly-formed Delaware corporation that has not, to date,
conducted any significant activities other than those incident to its
formation, its execution of the Merger Agreement and its participation in the
preparation of this Joint Proxy Statement/Prospectus. As a result of the
Mergers, US Order and Colonial Data will merge with and into InteliData, and
InteliData will continue the business and operations currently conducted by US
Order and Colonial Data.
Following the Mergers, Colonial Data and US Order intend to integrate
certain operations of the two companies, which is expected to create more
efficient operations. The combined company expects to continue offering the
full product lines of both Colonial Data and US Order subsequent to the
Mergers. Research and development, engineering and support operations will be
co-located. In the near term, however, certain research and development
activities focused on future products or new technologies may operate
independently. The companies expect that the distribution channels for the
products of the two companies will remain unchanged subsequent to the Mergers.
Certain direct sales activities will be combined and some management
consolidation will occur subsequent to the Mergers.
BUSINESS OF US ORDER
GENERAL
US Order provides products and services for two markets: home banking and
smart telephones. Home banking allows consumers to pay bills, check account
balances and receive other bank information from their homes. US Order
currently receives its home banking revenue largely from the sale of products
and services to Visa member banks. Smart telephones are telephones with a
central processing unit, an integrated display screen and memory which allow
consumers to send and receive text information. US Order currently receives
its smart telephone revenue from the sale of its products and bundled
interactive applications to companies in the home banking and
telecommunications industries. To date, US Order has generated limited revenue
from the sale of its products and services. US Order has entered into
agreements with Visa InterActive, a wholly owned subsidiary of Visa, in the
home banking market and Colonial Data in the smart telephone market.
On August 1, 1994, US Order sold the Visa Bill-Pay System to Visa for cash
and the right to future royalty payments which are based on the number of
customers utilizing the Visa Bill-Pay System. US Order's right to future
royalty payments from Visa is subject to a cumulative offset amount
aggregating $879,780 and, accordingly, US Order does not expect to begin
receiving royalty payments through at least 1996. Visa formed Visa InterActive
around the technology and personnel acquired from US Order, including 54
former US Order employees. Visa InterActive also has agreed through 2000 to
inform Visa member banks that US Order is a preferred provider of certain home
banking products and services.
In January 1995, US Order entered into an agreement with Colonial Data to
jointly develop and distribute US Order's ADSI smart telephones (telephones
which incorporate the ADSI Bellcore protocol for the simultaneous transmission
of data and voice information between an information system and a subscriber's
telephone or other communications device such as a smart telephone) and
interactive applications to Colonial Data's telephone company customers
through 1999. US Order also sells its smart telephones and interactive
applications to consumers in other markets, including the home banking market.
In October 1995, US Order completed a transaction to acquire a 40% equity
interest in HomeNet, a newly formed, development stage personal computer
company that plans to develop and deliver electronic financial products and
services to consumers via the personal computer. US Order believes that its
investment in HomeNet will complement its home banking strategy by adding a
PC-based application to the current smart telephone and touch-tone
applications that US Order offers.
54
<PAGE>
On October 4, 1996, US Order acquired Braun Simmons for approximately $7
million consisting of cash and US Order Common Stock and including US Order
transaction costs pursuant to a merger of Braun Simmons into US Order. Braun
Simmons is an information engineering firm specializing in the development of
home banking and electronic commerce solutions for financial institutions.
Douglas E. Braun, the president of Braun Simmons, has been hired by US Order
to serve as chief technology officer of US Order's new electronic commerce
division, which includes Braun Simmons. The acquisition expands US Order's
product line for both large and small financial institutions. US Order intends
to offer Braun Simmons' bill payment products in tandem with US Order's bill
payment and biller solutions. In addition, Braun Simmons will enable US Order
to offer a variety of Internet access and financial products and services.
PRODUCTS
US Order's product strategy is to develop products and services for its
strategic partners and their customers. US Order strives to develop products
with broad appeal that are easy-to-use, practical, inexpensive and built
around common industry standards. US Order's products position US Order to
offer support services and interactive applications which are expected to
generate recurring monthly fee revenue. US Order's product development and
strategic marketing are organized within two markets: home banking and smart
telephones.
Home Banking
US Order's strategy in the home banking market is to support banks by
providing products and services that help them deploy home banking to their
customers. In addition, US Order supports Visa InterActive with products and
services which facilitate bill payment. US Order believes its home banking
products and services will provide it with an important source of recurring
monthly fee revenue both from ongoing customer support services for banks as
well as a royalty from Visa InterActive (based on the number of customers
using the Visa Bill-Pay System). US Order's products and services are designed
to provide consumers the ability to access and utilize their bank account
information. They are also designed to provide financial institutions with
connectivity to the Visa InterActive host computer system. The following
represent US Order's home banking products and services:
Consumer Access Products
Remote Banking Systems. The remote banking system product line, which runs
on an InterVoice platform, was developed by US Order for sale to Visa
InterActive financial institutions. US Order is an authorized value-added
reseller of InterVoice's hardware products. The remote banking system product
line is an advanced touch-tone telephone-based bill payment system with built-
in connectivity to the Visa Bill-Pay System. The products are custom-branded
for each individual bank or credit union customer. The products offer three
levels of touch-tone interaction. The first application allows a customer to
establish a list of payees identified by numerical codes. The customer then
uses the remote banking system to pay bills using the telephone by pressing
the appropriate payee code and desired payment amount. The second application
allows a customer to establish a list of payees identified by numerical codes
and record the customer's own voice identifying the payee by name. The
customer then uses the remote banking system to pay bills using the telephone
by pressing the appropriate payee code. After the customer's voice recording
confirms that the proper payee has been selected, the customer keys in the
desired amount of payment. The third application allows a customer, after
establishing a list of payees identified by numerical codes and recording the
customer's own voice identifying the payee by name, to pay bills by telephone
by speaking the name of the payee and then touching in the desired amount of
the payment.
HomeNet PC Products. HomeNet is developing, and plans to publish, simple to
use PC software designed to provide financial institutions with the ability to
deliver a wide range of electronic financial services directly to consumers at
home. The software imitates the look and feel of the familiar ATM machine and
is designed to ship without a user manual. HomeNet expects to introduce its
first products in the second half of 1996.
55
<PAGE>
Support Services
Home Banking Support Services. US Order offers bank-branded, turnkey
customer service to financial institutions in support of personal computers,
smart telephones and touch-tone telephone platforms. US Order's customer
service operation is open seven days a week, 24 hours a day. If a bank chooses
US Order to provide customer service, US Order receives a start-up fee from
that bank and a monthly fee per customer. In addition, US Order offers
secondary customer service technical support as well as customer service
training. US Order also offers outbound and inbound telemarketing, data entry
and other related support services to financial institutions.
Connectivity Products
The US Order gateway connectivity product currently being developed by US
Order supports the Visa Bill-Pay System and provides a real time connection
between banks and their customers. It is a data translator which enables a
real time connection between a customer's access device and a bank's host data
processor, allowing the customer to access all of his or her account activity
from the bank's mainframe CICS or IMS system. The product runs on a Sun SPARC
5 platform (or larger) and can communicate with almost any mainframe host.
US Order is currently developing automated payment systems, including a
biller workstation. The biller workstation will allow merchants to design bill
templates, transmit customized marketing information, and give customers
direct access to statement information in partnership with their financial
institutions. The product family incorporates the Visa InterActive and E-Pay
standards for electronic exchange of bill payment information with Visa banks
and supports formatting and delivery of bill information to consumers. Billers
will also be able to send and receive payment and invoice information
electronically to and from their commercial banks through the Visa Bill-Pay
System.
Smart Telephones
US Order's strategy in the smart telephone market is to build a subscriber
base for its bundle of interactive applications. US Order strives to
accomplish this strategy by designing cost-effective smart telephones, such as
its Telesmart 4000/Intelifone 2000 smart phone, that it licenses for
manufacture and sale, incorporating the BellCore ADSI protocol and US Order's
own proprietary digital signal processing ("DSP") technology. The following
represent US Order's smart telephone products and services:
ScanFone(R)
In 1992, US Order introduced the first commercially available smart
telephone, the ScanFone, with integrated Caller ID and DES encryption
capability. US Order deployed more than 20,000 ScanFones between 1992 and
1994. US Order currently has approximately 5,800 ScanFones in the field
generating service revenue for home banking services, and expects to formally
discontinue this product during 1996.
PhonePlus(R)
US Order began field-testing the PhonePlus smart phone in September 1994 and
commercially introduced the product in May 1995. New features of the PhonePlus
smart phone include 4 line by 20 character display screen, 32-bit central
processing unit ("CPU") and 48 key QWERTY keyboard. US Order has sold the
PhonePlus smart phone to GTE Communications Systems Corp., Sprint/United
Management Company ("Sprint") and several banks throughout the United States.
Telesmart 4000(TM)/Intelifone 2000
The Telesmart 4000/Intelifone 2000 smart phone (formerly referred to as the
"Falcon") was designed and developed by US Order with Colonial Data and will
be marketed under the Telesmart brand name in the telco channel and under the
Intelifone brand in the retail channel. Its design is based on a DSP
architecture. The smart phone is an ADSI telephone device that incorporates a
graphics display screen, magnetic card reader, alpha-
56
<PAGE>
numeric keypad, V.22 modem and a processor. The smart phone supports Caller ID
(both "number only" and "name and number"), the integration of Caller ID with
call waiting ("SCWID") and visual message waiting indicator. The Telesmart
4000/Intelifone 2000 smart phone will also support the US Order protocol for
information, transaction and communication services. In May 1995, US Order
executed a contract with Sprint for the initial sale of smart phone units and,
in December 1995, NYNEX Corp. selected the smart phone to be its primary
source for ADSI phone shipments for the 1996 fiscal year. US Order expects
that the smart phone will be available for sale during the second half of
1996.
Interactive Applications
US Order's strategy is first to deploy its interactive applications on its
smart telephones and later to deploy its interactive applications on other
smart telephones and small screen devices, such as alpha-numeric pagers and
personal digital assistants ("PDAs"), manufactured by other companies. US
Order believes that it must deliver a limited number of interactive
applications that exploit the unique capabilities of these devices. US Order
intends to sell interactive applications to local telephone companies through
Colonial Data. US Order's current interactive applications include electronic
National Directory Assistance lookup, one-way alpha-numeric paging, one-way
Internet E-Mail and a personal directory data save and restore function. The
National Directory Assistance lookup permits users to search a national
database provided by Metromail Corporation, a subsidiary of R.R. Donnelley and
Sons Company, for residential and business information. Alpha-numeric paging
and Internet E-Mail allow the users to send notes and messages to individuals
carrying a paging device and to individuals with an internet e-mail address,
respectively. The data save and restore service is an application that
provides remote backup capability and data retrieval for information that is
stored in the smart phone memory.
In the future, US Order expects to expand its interactive services by
offering stock quotes, horoscopes, weather, sports scores, two-way Internet E-
Mail, two-way paging and prepaid long distance. Stock quotes, horoscopes,
weather and sports scores are applications that will allow the smart phone
user to receive periodically updated application-specific information in an
on-line format. Two-way Internet E-Mail is an application which will enable
the user to not only send an e-mail message to an internet address, but also
to receive an e-mail message from an internet address. Two-way paging will
enable the user to send and receive pages. Prepaid long distance is an
application that will enable users to buy long distance service in advance at
a discounted rate from a third party long distance service provider.
MARKETING AND SALES
US Order's marketing strategy is to identify strategic partners with
established distribution channels in each of its target markets: home banking
and smart telephones.
Home Banking
There are three distinct market channels within the home banking market:
bill payment, bill presentment and account access.
Bill Payment Channel
Visa InterActive selected US Order as a preferred provider of certain of US
Order's bill pay and bill presentment products and services. One of US Order's
strategies with Visa is to increase the number of subscribers for US Order's
bill pay products and services with the goal of growing monthly fee revenue.
Visa is the largest consumer payment system in the world with more than 12
million acceptance locations. As of July 31, 1996, Visa has stated that it has
more than 20,000 member financial institutions worldwide that have issued more
than 387 million credit cards, including 13,000 members that have issued 205
million credit cards in the United States.
Visa markets its bill payment and bill presentment services directly to its
member banks. Once a Visa member bank signs a commitment to deploy home
banking services through the Visa Bill-Pay System (the "Commitment Date"), an
extended roll-out period of the bank's home banking services begins.
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<PAGE>
During the first 90 days following the Commitment Date, Visa InterActive
begins technical and operational implementation of the home banking service
for the Visa member bank and the member bank determines which consumer access
devices it will offer to its customers and how it will provide customer
support services. During this period, US Order has opportunities to market its
products and services directly to the member bank. The bank may choose US
Order to provide customer support services or the bank may choose any number
of other suppliers. Typically, during the second 90 days following the
Commitment Date, the Visa member bank completes the technical trial phase and
begins a market trial of its home banking system, including any selected US
Order-provided products and services. Approximately six to 12 months following
the Commitment Date, the member bank completes its market trial and can begin
a market roll-out of its home banking services.
In March 1996, Microsoft, Inc. ("Microsoft") entered into an agreement with
Visa InterActive to include an interface that will allow users of Microsoft's
Money personal finance software package to access Visa InterActive's
electronic bill payment system. Previously, banks working with the Money
software were only able to process bill payments through Intuit Service
Corporation ("ISC"), which is a subsidiary of Intuit Corporation. With the
signing of this agreement and the release of the next Money software upgrade,
which is expected in late 1996, banks working with the Money software will be
able to choose any back-end bill pay processor, including Visa InterActive, as
their electronic bill pay processor. Royalties due US Order from Visa will be
equal to $.666 per month per bill pay customer whose transactions are
processed by Visa InterActive's bill pay system. US Order's right to receive
these quarterly royalty payments is subject to a cumulative offset of $73,315
per quarter beginning January 1, 1995, through December 31, 1997.
As of July 31, 1996, Visa InterActive had announced commitments from more
than 90 financial institutions for the Visa Bill-Pay System. Although more
than 90 banks have committed to participate in the Visa Bill-Pay System, due
to the time necessary to install and implement the system for each bank, only
21 banks have rolled out in small, limited markets and have enrolled a
relatively small number of customers. There can be no assurances as to the
banks' ultimate success with this program or the number of customers that
ultimately will use the program. Announced customers of Visa InterActive
include First Union, Fidelity Investments, First Tennessee Bank National
Association, Bank One, Star Bank, Zions Bank and Deposit Guarantee. US Order
believes its relationship with Visa InterActive keeps US Order in close
contact with Visa, its banks and the end users of home banking services. US
Order believes that this relationship will enable US Order to continue to
develop complementary products and services, such as applications software for
Visa member banks, and potentially enable US Order to have access to Visa's
world wide member banks. There can be no assurance, however, that US Order's
marketing efforts will be successful or that Visa will not reassess its
commitment to US Order at any time in the future.
Bill Presentment Channel
US Order's marketing strategy in the bill presentment channel is to offer
its bill presentment products and services directly to financial institutions
as well as to billers. In December 1995, Visa commenced its E-PAY electronic
bill-payment programs with major U.S. financial institutions, including Banc
One Corp., Barnett Banks, The Chase Manhattan Bank, Crestar Bank, First Bank
System, First Interstate Bank, First Chicago, First Tennessee Bank, First
Union National Bank, Mellon Bank, Norwest Banks, Star Bank and U.S. Bancorp.
Visa's two-way E-PAY standard allows financial institutions to implement a
fully electronic, seamless, back-end bill payment system. The E-PAY system is
patented in the United States and is expected to significantly reduce
remittance-processing inefficiencies for participating financial institutions
and organizations that bill for goods and services. In addition, the system
will enable billers to electronically send invoices to their customers who pay
bills on-line. The system currently offers summary-invoice presentment
capability. It is expected that during 1997, the system will be able to
facilitate fully detailed, image-based, invoice-presentment services.
Account Access Channel
US Order also is developing products and services for financial institutions
who want to provide their customers with products and services that allow
customers the ability to access certain information from their
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banking accounts, much as they do with touch tone telephones today, but over
personal computers and screen based telephones as well.
Smart Telephones
US Order is committed to marketing its smart telephone products and
interactive applications in the following distribution channels:
Telecommunications Channel
US Order has formed a strategic alliance with Colonial Data. US Order's
strategy with Colonial Data is to gain access to telephone company customers
through Colonial Data's existing relationships with the RBOCs and other
telcos. Colonial Data manufactures and sells to or on behalf of its local
telephone company customers the Telesmart 4000/Intelifone 2000. Pursuant to a
strategic alliance agreement between US Order and Colonial Data dated January
1995, Colonial Data has agreed that, after introduction of US Order's
Telesmart 4000/Intelifone 2000 smart phone product and through January 17,
2000, all ADSI smart telephones that it produces and sells to local telephone
companies will be based on US Order's designs. For each such smart telephone
produced and sold by Colonial Data through December 31, 1997, Colonial Data
will pay US Order a royalty of 10% of the sale price, with the royalty
thereafter subject to annual good faith renegotiation. Under the agreement
with Colonial Data, US Order can manufacture and market ADSI-based smart
telephones outside of the telephone company market but must pay Colonial Data
a 10% royalty for each sale. In connection with this arrangement, US Order
also has authorized Colonial Data to manufacture its Telesmart 4000/Intelifone
2000 smart phone using Colonial Data's manufacturers in Hong Kong and the
People's Republic of China.
Retail Channel
US Order expects to begin selling its smart telephones and interactive
content on a wholesale basis through retail stores and related outlets. US
Order expects to begin to develop this channel towards the end of 1996.
COMPETITION
Home Banking
US Order's home banking products and services compete with services offered
by a number of competitors and competition may intensify as a result of new
market entrants. Banks such as Citibank, N.A., NationsBank, N.A. and Bank of
America, N.A. have developed home banking products for their own customers
and, in the future, may offer these services to other banks. Non-banks, such
as International Business Machines Corporation ("IBM"), Electronic Data
Systems, Inc. and First Data Corporation, also may develop home banking
products to offer to banks. Computer software and data processing companies,
such as Intuit, Inc., also offer home banking services. Visa competes with
other organizations, including MasterCard, which offers its Masterbanking home
banking service through CheckFree. US Order's success in home banking depends
in large part on the ultimate success of Visa and on the ability of Visa
InterActive and Visa member banks to successfully market home banking to their
customers. In addition, the success of US Order's home banking strategy
depends on the ability of Visa member banks to maintain market share in an
environment of disintermediation.
Many competitors exist for US Order's various banking products, including
other manufacturers of touch-tone response systems, such as Periphonics
Corporation and Syntellect Inc., other financial software companies, such as
ACI, and financial services software and service companies, such as Hogan
Systems, Inc. and M&I Data Services, Inc. US Order believes that its primary
competition for its customer support services to the customer will come from
financial institutions and third parties that choose to offer customer support
services either directly through Visa's customer support messaging standard
product or on their own.
US Order expects that competition in all of these areas will increase in the
near future. US Order believes that a principal competitive factor in its
markets is the ability to offer an integrated system, in conjunction with
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Visa, of various home banking products and services. Competition will be based
upon price, performance, customer service and the effectiveness of marketing
and sales efforts. US Order competes in its various markets on the basis of
its relationships with strategic partners, by developing many of the products
required for complete solutions, and by building reliable products and
offering those products at reasonable prices.
Smart Telephones
The market for US Order's smart telephone products and services is highly
competitive and subject to rapid technological change. At present, US Order's
principal competitors in the market for smart telephones are, or will be,
Philips, Northern Telecom, Lucent and CIDCO. US Order expects competition to
increase in the future from existing and new competitors and expects new
competitors to include electronics manufacturers, such as Sony Corp. and
Panasonic Company. US Order's competitors, including Philips and Northern
Telecom, have already introduced smart telephones that include technological
features incorporated in US Order's Telesmart 4000/Intelifone 2000 smart phone
product. Visa InterActive and Philips have announced that they have entered
into a letter of intent to collaborate on a series of projects, including the
development of a Visa InterActive banking application on a Philips smart
telephone. Any bill pay transaction generated by a Philips smart telephone
that is processed by Visa InterActive will potentially generate a royalty
payment due to US Order from Visa.
US Order's Telesmart 4000/Intelifone 2000 smart phone product incorporates
newer DSP technology. Although US Order is currently unaware of any efforts by
its competitors to deploy DSP technology in their smart telephones, US Order
expects that its competitors will attempt to replicate the Telesmart
4000/Intelifone 2000 smart phone DSP design if it is commercially successful.
US Order expects that as the market for smart telephones grows, it will face
competition from traditional personal computer on-line service providers, such
as America Online, Prodigy, and Compuserve, Inc., as well as from personal
computer software companies such as Intuit and Novell, Inc.
PRODUCT DEVELOPMENT
US Order's product development efforts are focused on software and systems
for the banking and smart telephone markets. In particular, US Order applies
its research and development expenditures to audio and data transaction
processing and messaging software, customer support services and smart
telephone designs. The home banking and smart telephone industries are
characterized by rapid change. To keep pace with this change, US Order
maintains an aggressive program of new product development. US Order dedicates
considerable resources to research and development to further enhance its
existing products and to create new products and technologies. During the
fiscal years 1993, 1994 and 1995 and during the first six months of 1996, US
Order expended $963,694, $1,769,029, $1,066,582 and $1,175,876, respectively,
for software and hardware design, development and project management
activities.
US Order's ability to attract and retain highly skilled research and
development personnel is important to US Order's continued success. At July
31, 1996, 36 of US Order's 120 full-time employees were engaged in product and
service development. US Order expects to increase the number of personnel
devoted to product development throughout 1996 and possibly beyond.
MANUFACTURING
US Order's manufacturing operations are limited to the sourcing, testing,
quality control, software downloading and shipping of finished products. US
Order's PhonePlus product is manufactured by VeriFone's Taiwan facility, which
is certified under the International Standards Organization 9000 series (the
"ISO 9000 series"). In addition, US Order has authorized Colonial Data to
manufacture the Telesmart 4000/Intelifone 2000 smart phone product using
Colonial Data's manufacturer located in Hong Kong and the People's Republic of
China, which are also certified under the ISO 9000 series.
US Order generally provides a one-year warranty and offers, for an
additional cost to the customer, an extended warranty against defects for its
products.
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GOVERNMENT REGULATION
US Order's smart telephone products are subject to regulation by the FCC.
Among other requirements, US Order's smart telephones must comply with Parts
15 and 68 of the FCC's regulations.
The two markets which US Order has targeted are highly regulated. The
banking industry, although it has recently undergone significant deregulation,
remains quite regulated at both the federal and state levels. Similarly, the
telecommunications industry has undergone rapid change in the past decade.
Federal and state regulations are currently undergoing constant review and
revision as evidenced by the recent passing of the Telecommunications Act of
1996. Interpretation, implementation or revision of banking and
telecommunications regulations can accelerate or hinder the ultimate success
of US Order and its products.
PATENTS, PROPRIETARY RIGHTS AND LICENSES
As of July 31, 1996, US Order holds no patents or other restricted
intellectual property rights with respect to its products. US Order's original
patent for an automated order and payment system was sold to Visa in August
1994.
US Order has filed for patents on certain new features developed by US Order
for use in its smart telephone and certain of its bill payment and transaction
processing technology, but there can be no assurances that such patents will
be granted, or if granted, will have any commercial value.
Although US Order does not believe that its products and services infringe
on the rights of third parties, there can be no assurance that third parties
will not assert infringement claims against US Order in the future or that any
such assertion will not result in costly litigation or require US Order to
cease using, or obtain a license to use, intellectual property rights of such
parties.
EMPLOYEES
At July 31, 1996, US Order had approximately 135 employees, of whom 120 were
full-time. Of the full-time employees, 36 were engaged in research and
development, 39 were engaged in customer service and fulfillment, 16 were
engaged in sales and marketing and 29 were engaged in administration and
finance. US Order has no collective bargaining agreements with its employees
and believes that its relationship with its employees is good.
PROPERTIES
US Order is headquartered in Herndon, Virginia, where it leases 17,000
square feet of office space from unaffiliated parties under two leases
expiring in 1999. In October 1995, US Order entered into a facilities
operating lease for 30,000 additional square feet of office space in Herndon,
Virginia. The lease covers a 53-month period commencing July 1, 1996. In May
1996, US Order entered into a lease for 10,478 square feet of office space in
Herndon, Virginia, to be used for US Order's customer service organization.
This lease commenced on July 6, 1996 and expires in 2001. Additionally, US
Order leases a 9,000 square foot facility in Salt Lake City, Utah for
sourcing, testing, software downloading, inventory storage and distribution.
LEGAL PROCEEDINGS
US Order is not currently a party to any litigation. From time to time, US
Order may be a party to routine litigation incidental to its business.
Management does not believe that the resolution of any or all of such routine
litigation will be likely to have a material adverse effect on US Order's
financial condition or results of operations.
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BUSINESS OF COLONIAL DATA
GENERAL OVERVIEW
Colonial Data designs, develops and markets telecommunications products that
support intelligent network services being developed and implemented by the
RBOCs and telcos. In recent years, Colonial Data has concentrated its product
development and marketing efforts on products that support Caller ID and other
emerging intelligent network services. In addition, Colonial Data and US Order
have developed a smart telephone, the Telesmart 4000/Intelifone 2000, which
provides consumers call management features and major new advances in
interactive applications via telephone. Colonial Data currently offers a line
of Caller ID adjunct units and telephones with integrated Caller ID, small
business telecommunications systems with the Landmark(R) trademark and high-
end consumer telecommunications equipment. Colonial Data also repairs and
refurbishes telecommunications products for commercial customers and provides
other services that support the development and implementation of intelligent
network services.
INDUSTRY BACKGROUND
Deregulation and technological advances have intensified competition among
existing operators of telecommunication networks and encouraged the entrance
of new service providers. In the United States, competition among RBOCs, other
telcos and long distance carriers and new service providers that have entered
the local and long distance markets, has increased and may increase further as
a result of the Telecommunications Act of 1996. RBOCs and other telcos are
responding to increasing competition by introducing value-added, intelligent
network services.
The regulatory environment relating to the telecommunications industry is
undergoing rapid and significant changes. The Telecommunications Act of 1996
(the "Telecommunications Act") has effected basic changes in the
telecommunications regulatory scheme. The intention of the Telecommunications
Act is to enhance competition in all telecommunications markets and bring new
packages, lower prices and increased innovation to U.S. telephone customers.
The FCC issued its first major order under the Telecommunications Act in
August, 1996 which constitutes the initial measures to begin implementation of
sections of the Telecommunications Act relating to interconnection among
carriers and providing access to unbundled services. This order has been
challenged and, as of September 30, 1996, its effectiveness has been stayed in
the U.S. Court of Appeals for the Eighth Circuit. Colonial Data is unable to
predict what effect, if any, the Telecommunications Act and the emerging
regulatory scheme under the Telecommunications Act will have on Caller ID
service or the Company's business generally.
In order to deploy intelligent network services, the telcos have been
upgrading their telecommunications networks to support a set of standards,
known as the Intelligent Networks ("IN"). IN supports open, distributed
switching and processing capabilities and allows the telcos to create, modify
and deploy new services quickly and economically. An important aspect of IN is
a signaling protocol called Signaling System No. 7 ("SS7").
Caller ID is a service that displays information about the incoming call
(including the number and name of the caller and the time and date of the
call) on a device located near the telephone (in the case of an adjunct unit)
or on a display screen located on the telephone (in the case of an integrated
Caller ID telephone). The actual information displayed depends on the Caller
ID equipment and whether the caller has elected to block the passage of
information. Colonial Data estimates that the current penetration rate of
Caller ID service is approximately 15% of the total subscribers in those areas
in the United States that have Caller ID capabilities.
Until December 1, 1995, the deployment of Caller ID services was limited to
transferring the calling party information between callers within the same
local calling area. Effective December 1, 1995, the FCC issued an order that
requires all telephone service providers with SS7 switching capability to
transmit calling party number information to each other on interstate calls
within the United States (except for public pay phones and party lines).
Colonial Data believes that certain aspects of Caller ID may become subject to
certain court challenges and other objections. See "--Government Regulation".
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Caller ID has been successful in Canada, where it has achieved a penetration
rate of over 30% of available lines according to certain industry estimates,
and the service is also offered in certain markets outside of the United
States and Canada. Colonial Data believes that further opportunities for
Caller ID may emerge over the long term in international markets.
EMERGENCE OF ADSI-BASED NETWORK SERVICES
In addition to services such as Caller ID, Bell Communications Research,
Inc. has developed ADSI, a standard protocol for the simultaneous transmission
of data and voice information between an information system and a subscriber's
telephone or other communications device such as a smart telephone. By
deploying the ADSI protocol in the telecommunications network, RBOCs and other
telcos will be able to offer additional intelligent network services and
third-party interactive applications.
ADSI-based services will include Caller ID with Call Waiting together with
call disposition. By subscribing to Caller ID with Call Waiting, a subscriber
who receives a call waiting signal could look at the display screen on the
smart telephone and see the name and number of the calling party before
deciding whether to answer the call, send a prerecorded message telling the
calling party to wait, forward the call to voice mail or drop the line.
Additional services are expected to include home banking, on-line directory
assistance, e-mail, paging, electronic yellow pages, stock quotations, news
and weather.
PRODUCTS
Since introducing the first commercially available Caller ID unit in 1987,
Colonial Data has developed and marketed Caller ID products with increased
functionality to meet the needs of its RBOC and other telco customers. During
the years ended December 31, 1993, 1994 and 1995 and the six months ended June
30, 1996, 84%, 90%, 96% and 91%, respectively, of Colonial Data's revenues
were derived from the sale and leasing of its Caller ID products.
Entry Level Caller ID Adjunct Devices
Colonial Data provides low-priced, entry level Caller ID devices primarily
to support RBOC marketing and promotional campaigns in which a telco may give
away or subsidize the purchase of a Caller ID adjunct device when a consumer
subscribes for the service. The units display only the number of an incoming
call and are capable of storing calling information for up to 50 calls.
Colonial Data believes that RBOCs utilize lower-priced products to reduce the
initial consumer expenditure required to obtain the service and, as a result,
may subsequently achieve higher penetration rates for Caller ID in selected
markets.
Full-Featured Caller ID Adjunct Devices
Colonial Data's full-featured products display all transmitted information
before the incoming phone call is answered and store this information in
memory. Among the features available on Colonial Data's full-featured products
are memory capacity for up to 99 calls, a "blocked call"/"new call" light, a
patented "Block the Blocker" feature, a bilingual display and a "message
waiting alert" light that indicates to a network voice mail subscriber that a
new voice mail message has been received. "Block the Blocker" is a feature
that detects when call block is used by a caller, delivers a message to that
caller that the Caller ID subscriber does not accept blocked calls and
disconnects the call. Colonial Data's full-featured Caller ID adjunct devices
have suggested retail prices of $39.99 to $79.99.
Integrated Telephones
Colonial Data offers a line of corded and cordless telephones with
integrated Caller ID functionality which have suggested retail prices of
$59.99 to $229.99.
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SCWID (Integrated Caller ID and Call Waiting)
SCWID allows a subscriber to both services, to view the directory name and
telephone number of an incoming call as the Call Waiting signal is delivered.
Colonial Data's SCWID adjunct device also allows a consumer to store
approximately 85 names and numbers in memory. Colonial Data has applied for a
patent on certain aspects of SCWID technology. The SCWID adjunct device has a
suggested retail price of $79.99.
ADSI-Compatible Smart Telephones
Colonial Data has developed an ADSI-compatible smart telephone in
conjunction with US Order. See "Business of US Order--Products".
Colonial Data believes that the marketing of smart telephones will be
actively supported by RBOCs and other telcos which are seeking to offer
intelligent network services to their customers, and by banks which are
seeking to reduce costs through the adoption by consumers of home banking
services.
Under Colonial Data's strategic alliance with US Order, Colonial Data has
agreed that, until January 17, 2000, all ADSI compatible smart telephones that
it produces and sells to telcos will be pursuant to the US Order agreement.
During the term of the agreement, Colonial Data will manufacture and
exclusively market the smart telephone to telco customers. For each such smart
telephone that Colonial Data sells or leases through December 31, 1997,
Colonial Data pays US Order a royalty of 10% of the sale or lease price, with
the royalty thereafter subject to annual good faith renegotiations. The
agreement grants US Order the right to manufacture and exclusively market
ADSI-compatible smart telephones outside of the telco market, and provides
that US Order pays Colonial Data a royalty of 10% of the sale or lease price
for each such sale or lease. Colonial Data will exclusively purchase from US
Order and resell interactive applications made available by US Order, such as
national directory assistance.
SERVICES
Colonial Data has provided telephone repair and refurbishment services to
RBOCs, other telcos and certain telephone equipment manufacturers for a wide
variety of telecommunications products, including corded and cordless
telephones, key telephone business systems, coin telephones and leased
telephone products. Colonial Data believes that its capabilities in this area
have strengthened its relationship with the RBOCs and other telcos. During the
six months ended June 30, 1996, Colonial Data's service customer base included
Southern New England Telecommunications Corp. ("SNET"), TIE/communications,
Inc. ("TIE"), Nitsuko America Corp., Conair Corp., and Motorola, Inc.
Additionally, through its joint venture with Blau Marketing Technologies,
Inc. and Worldwide Telecom Partners, Inc. ("Worldwide Telecom"), Colonial Data
markets intelligent network services to end users on behalf of RBOCs. This
joint venture has completed programs that marketed Caller ID and other
intelligent network services to subscribers of Bell Atlantic Corp. ("Bell
Atlantic") and NYNEX.
In addition to repair and refurbishment services, Colonial Data offers
fulfillment services whereby Colonial Data utilizes its systems and facilities
to provide customer service, inventory handling and management, and billing
services in connection with the distribution of telecommunications equipment.
MARKETING AND DISTRIBUTION
Colonial Data markets its products and services through 16 employees in its
direct sales force and marketing department, and currently uses 28 independent
sales representative firms. Colonial Data's distribution strategy is to make
its products available to potential end users through multiple distribution
channels described below. Bell Atlantic, BellSouth and US West Communications,
Inc. ("US West") each accounted for more than 10% of Colonial Data's total
revenues for 1995. US West, Pacific Bell ("PacBell") and Ameritech Corp.
("Ameritech") each accounted for more than 10% of Colonial Data's total
revenues for the six months ended June 30, 1996.
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Direct Fulfillment Arrangements
Colonial Data sells telecommunications products to RBOC subscribers and
other telco subscribers through direct fulfillment arrangements with
Ameritech, Bell Atlantic, BellSouth, Frontier Corp., US West and NYNEX. In
most instances, the telco representatives market both Caller ID service and
Colonial Data equipment to subscribers and transmit equipment orders to
Colonial Data electronically on a daily basis. Colonial Data then ships its
equipment directly to the subscribers and bills the telco, which, in turn,
bills its subscribers directly or through a third party. As part of
promotional campaigns, some RBOCs may elect to purchase Caller ID units from
Colonial Data and distribute them to their subscribers free of charge.
Colonial Data provides an 800 number service and support to help the
subscriber understand how to utilize the Caller ID service and equipment. In
addition, Colonial Data entered into a three-year arrangement with PacBell
whereby Colonial Data supplies Caller ID units and cordless Caller ID
telephones to PacBell's direct fulfillment vendor.
Colonial Data continually seeks to strengthen its current telco marketing
alliances and to develop new alliances. Colonial Data believes that marketing
of Caller ID service and equipment is more successful when the subscriber can
subscribe to Caller ID service and purchase or lease Caller ID equipment from
a single source, especially when payment for equipment can be made either on
an installment basis or by monthly lease payments through the subscriber's
telephone bill. Colonial Data believes that subscriber satisfaction with
Caller ID service is enhanced when the subscriber receives Caller ID equipment
promptly after ordering the service and is provided an 800 number for service
and support.
Direct Marketing on Behalf of Telcos
In May 1995, Colonial Data entered into a joint venture agreement with the
direct marketing firm of Blau Marketing Technologies, Inc. The joint venture
operates through a jointly owned corporation, Worldwide Telecom, which is 50%
owned by each of the joint venturers. The joint venture agreement is
terminable by either party upon sufficient advance notice to the other to
enable Worldwide Telecom to complete performance of any outstanding contracts
with telcos.
Worldwide Telecom has provided direct marketing services to Bell Atlantic
and NYNEX under several separate programs. The first such program with Bell
Atlantic customers in New Jersey included direct mail advertising with follow-
up outbound telemarketing to potential Caller ID customers. Following the
successful completion of this first program, Worldwide Telecom has completed
additional programs for Caller ID, Call Answering and Call Waiting services.
Colonial Data supplies all Caller ID units and product management services for
Worldwide Telecom.
Direct Sales to Telcos
Through its direct sales force and sales representatives, Colonial Data
sells Caller ID units in quantity to a number of telcos, including Bell
Atlantic, BellSouth, NYNEX, and others, which units may be redistributed
either under the Colonial Data name or the respective telco's trade name.
Colonial Data, through its Canadian subsidiary, sells its products or services
directly to Bell Canada Inc. and to other telcos in Canada.
LEASING PROGRAMS WITH RBOCS AND OTHER TELCO CUSTOMERS
In 1992, Colonial Data entered into a leasing agreement with US West,
whereby Colonial Data leases Caller ID units directly to US West customers.
The leasing program enables subscribers to pay a monthly fee for the service
and the equipment and provides Colonial Data with a stream of recurring
revenues. During the fourth quarter of 1995, Colonial Data was notified by US
West that it would discontinue leasing new units under the leasing program.
Notwithstanding the discontinuation of this program, previously existing
leases remain in effect. The Company is not able to estimate the effect on
future operations of the discontinuation of this leasing program. Colonial
Data believes that leasing will be an attractive option for telcos and telco
customers for higher priced equipment, such as ADSI-compatible smart
telephones and intends to continue offering leasing programs to telcos.
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RETAIL/PRIVATE LABEL CUSTOMER SALES
Colonial Data sells Caller ID units to national, regional and local
retailers and private label customers. A substantial portion of Colonial
Data's retail sales are made through manufacturers' representatives or
distributors with the support of Colonial Data's sales personnel. Colonial
Data's retail customers include Sears and Home Depot Inc. in the United States
and Price/Costco Inc. in Canada. Colonial Data's private label customers
include Gemini Industries, Inc. and Hello Direct, Inc.
PRODUCT DEVELOPMENT
Colonial Data's product development efforts are focused on new products that
support intelligent network services, product enhancements, international
standards compliance and the continued improvement of hardware components to
reduce manufacturing costs. Colonial Data's product development group is
experienced in engineering products for high-volume assembly, stressing low-
cost manufacturing design while maintaining quality, consistency and
reliability. Colonial Data's products utilize proprietary electrical,
mechanical and software design.
At June 30, 1996, 12 employees were engaged in product development including
nine in Colonial Data's New Milford, Connecticut facility and three in
Colonial Data's Brampton, Ontario, Canada facility. Standard
Telecommunications Ltd. ("STL") of Hong Kong, an affiliate of Colonial Data's
principal manufacturer, provides additional design, engineering and product
development support services to Colonial Data from time to time on a
subcontract basis. Colonial Data also utilizes the engineering resources of
some of its other manufacturers.
In 1993, 1994 and 1995 and for the six months ended June 30, 1996, Colonial
Data's research and development expenditures were $327,000, $782,000,
$1,476,000 and $756,000, respectively.
MANUFACTURING
Colonial Data's primary equipment manufacturer is STL and certain of its
affiliates, which have ISO 9000 series certified facilities located in Hong
Kong and the People's Republic of China, for the manufacture of its Caller ID
units, smart phones and other products. In addition, Colonial Data has
established relationships with other ISO 9000 series certified Asian
manufacturers for its integrated cordless telephones and small business
telecommunications products. The facilities of Colonial Data's suppliers are
supplemented, in part, by Colonial Data's own limited manufacturing facilities
in Connecticut and Canada. The availability or cost of Colonial Data's
products may be affected by political, economic or labor conditions in the
countries where those products are manufactured, including the 1997 return of
Hong Kong to China, by fluctuations in currency exchange rates and by other
factors. In addition, a change in the tariff structure or other trade policies
of the United States could adversely affect Colonial Data's foreign
manufacturing strategies.
Colonial Data does not have any production contracts with its assembly
contractors. Colonial Data's principal manufacturer performs comprehensive
inspection and statistical process control testing, utilizing Colonial Data's
internally designed automated testing equipment. To date, Colonial Data has
not experienced significant returns of defective products.
In the United States, Colonial Data's manufacturing operations are limited
to the testing, quality control and shipping of finished products and the
purchase and inventory management of two key components of Colonial Data's
products.
The key components used in Colonial Data's products are currently being
purchased from two sources, except for its ASIC chips, which are purchased
from a single source. The only supply contract to which Colonial Data is a
party is with the maker of its ASIC chips. Colonial Data has no other supply
contracts for its components. Although Colonial Data believes it could develop
other sources for each of the components for its products, the process could
take several months, and the inability or refusal of any such source to
continue to
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supply components could have a material adverse effect on Colonial Data
pending the development of an alternative source.
COMPETITION
The market for Colonial Data's products and services is highly competitive
and subject to rapid technological change. At present, Colonial Data's
principal competitors are CIDCO, Lucent and Northern Telecom. Colonial Data's
Caller ID products also compete with Caller ID telephones offered by
Panasonic, Sony Corp., Thomson and US Electronics. The smart telephone
marketed by Colonial Data through an alliance with US Order is subject to
competition from smart telephones marketed by Philips, Northern Telecom and
CIDCO as well as other emerging platforms for interactive applications
delivered through personal computers and cable television. Colonial Data
expects competition to increase in the future from existing and new
competitors, possibly including telcos or other current customers, from
network switch-based services and from the increased application of cellular
technology. Colonial Data's primary current and potential competitors in the
market for products that support intelligent network services have
substantially greater financial, marketing and technical resources than
Colonial Data. Increased competition could materially and adversely affect
Colonial Data's results of operations through price reductions and loss of
market share.
Colonial Data competes with a large number of competitors for its repair
services and other services supporting the development and implementation of
intelligent network services. Several of Colonial Data's competitors in the
market for such services have substantially greater financial, marketing and
technological resources than Colonial Data. There can be no assurance that
Colonial Data will be able to continue to compete successfully against its
existing competitors or that it will be able to compete successfully against
new competitors.
Colonial Data believes that the principal competitive factors in its markets
are knowledge of the requirements of the various RBOCs and other telcos,
product reliability, product design, the quality of its repair and support
services, customer service and support, and price relative to performance.
Colonial Data competes in the market for products that support intelligent
network services principally on the basis of its relationships with telcos,
product design and reliability, low product pricing and flexibility of
marketing alternatives, including leasing.
GOVERNMENT REGULATION
In the United States, Caller ID and other intelligent network services
offered by telcos are subject to federal and state regulation. Although Caller
ID is currently available in all 50 states and the District of Columbia,
during the past several years, protests by special interest groups and
regulatory concerns regarding the privacy aspects of the service have been
effective in both slowing down the regulatory approval process and, in most
states, requiring free per-call or per-line call blocking to be offered by the
telcos, thereby allowing a caller to prevent the display of his or her name
and number.
An FCC order, which rules promulgated thereunder became effective December
1, 1995 (the "FCC Order"), requires all U.S. telephone service providers with
SS7 switching architecture to transmit to each other without charge Caller ID
number information on interstate calls within the United States (except for
public pay phones and party lines). The FCC's order also requires that telcos
that offer Caller ID service must provide to their telephone subscribers
without charge a per-call blocking mechanism to block the transmission of
their Caller ID information on interstate calls and must inform subscribers
that their telephone numbers may be identified to a called party and how to
use this blocking capability.
Although the FCC Order was implemented December 1, 1995, several factors may
delay, prevent or substantially limit the implementation or market acceptance
of Caller ID. The availability of Caller ID service in a particular area
requires end-to-end interconnection of SS7 networks between telcos and other
carriers. Further, the FCC Order requires telcos to offer free per-call
blocking for interstate calls to all customers to protect privacy
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interests and permits state public utility commissions to authorize per-line
blocking for interstate calls. Such blocking, if widely adopted, could limit
the usefulness and marketability of the Caller ID service.
The California Public Utilities Commission and AT&T Corp. ("AT&T") filed
petitions for review of the FCC Order in federal court challenging portions of
the FCC Order. Although the FCC Order withstood that particular challenge,
other parties have also objected to, sought delays in the implementation of or
sought clarification of the FCC Order. In addition, in the future, Caller ID
service may be subject to additional state and federal legislation, regulation
and court challenges. Colonial Data is unable to predict what effect, if any,
further legislation, regulation, court challenges or other objections may have
on the FCC Order or Caller ID service.
In Canada, the Canadian Radio-television and Telecommunications Commission
regulates Caller ID and intelligent network services. Colonial Data believes
that Canadian regulation of telecommunications devices for intelligent network
services is not more burdensome than regulation in the United States. In
Canada, Caller ID service is available on a national and local basis on
networks with SS7 architecture.
PATENTS, PROPRIETARY RIGHTS AND LICENSES
Colonial Data holds limited patent or registered intellectual property
rights with respect to its products. Colonial Data has been issued a patent
for its "Block the Blocker" feature. Colonial Data has also applied for a
patent on certain aspects of its SCWID product. However, there can be no
assurance that a patent will be issued to Colonial Data for its SCWID product
or that such patent, if issued, will afford effective protection of Colonial
Data's technology. Colonial Data also believes that, because of the rapid pace
of technological change in the voice and data communications market, the
knowledge, ability and experience of Colonial Data's employees, the frequency
of product enhancements and the quality of support services provided by
Colonial Data will all contribute to Colonial Data's success.
Colonial Data additionally relies on trade secret laws to establish and
maintain its proprietary rights to its products. Although Colonial Data has
obtained confidentiality agreements from its key executives and engineers in
its product development group, there can be no assurance that third parties
will not independently develop the same or similar alternative technology,
obtain unauthorized access to Colonial Data's proprietary technology or misuse
the technology to which Colonial Data has granted access.
A portion of the messaging technology used in Colonial Data's Caller ID
products is licensed from Lucent on an exclusive basis. However, Lucent
reserved to itself and its subsidiaries the right to use the technology for
all purposes relating to its and its subsidiaries' businesses. Colonial Data
has rights to practice the inventions under certain of Lucent's Caller ID
patents. These patents are also licensed to others, including Colonial Data's
competitors. Lucent receives royalties from sales and leases of Colonial
Data's Caller ID products other than to Lucent. Colonial Data incurred royalty
expense of $277,000, $684,000, $1,129,000 and $496,000 in 1993, 1994, 1995 and
the six months ended June 30, 1996, respectively. The Lucent license agreement
has no expiration date but is terminable by Lucent for breach on two months'
written notice unless within such time all specified breaches have been
remedied. If the Lucent license were terminated and Colonial Data were unable
to negotiate a new patent license agreement with Lucent, Colonial Data would
no longer be authorized to manufacture or sell Caller ID products in the
United States other than to the RBOCs and to Lucent . Additionally, under the
agreement, Colonial Data granted Lucent a non-exclusive, royalty-free license
to all patents on inventions which are improvements or modifications based
upon the technology licensed from Lucent.
EMPLOYEES
At June 30, 1996, Colonial Data employed 185 full-time persons, of whom 74
were engaged in repair and manufacturing, 12 in product development, 16 in
sales and marketing, 44 in customer service, 22 in operations, and 17 in
management, finance and administration. Colonial Data has no collective
bargaining agreement with its employees and believes that its relationship
with its employees is good.
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PROPERTIES
Colonial Data maintains its principal administrative, development and
support facility at a building located in New Milford, Connecticut which
consists of approximately 63,000 square feet. Until September 13, 1996,
Colonial Data leased this facility from a partnership of which a subsidiary of
Colonial Data was general partner. On September 13, 1996, Colonial Data
acquired all of the equity interests in the partnership which owns this
facility. See "Certain Transactions of Colonial Data since December 31, 1995."
Certain environmental contamination occurred in the part of the facility
formerly occupied by another tenant and the Connecticut Department of
Environmental Protection ("DEP") performed a clean-up and removed such
contamination. The DEP notified Cee Associates Limited Partnership, in which
Colonial Data is a general partner, in the first quarter of 1994 that it is a
responsible party for the costs of the environmental clean-up performed at the
facility and demanded payment by the partnership of $125,000. Colonial Data
has not received any notice of any violation of environmental laws by Colonial
Data or any notice of any direct claim against Colonial Data associated with
the contamination or clean-up at the facility. Colonial Data does not believe
that the foregoing will have a materially adverse effect on Colonial Data.
Colonial Data also maintains a research, sales and manufacturing facility in
Brampton, Ontario, Canada which consists of 15,750 square feet. Colonial Data
leases this facility under a sublease that expires October 31, 1996. The rent
is $5.75 (Canadian) per square foot per year plus taxes, operating expenses
and insurance.
Colonial Data believes that its facilities are suitable and adequate for the
current and foreseeable future business of Colonial Data. However, Colonial
Data will continue to assess its warehousing needs as Colonial Data expands
its business.
SEASONALITY
Colonial Data's product lines are not subject to sales seasonality to a
material extent.
BACKLOG
At June 30, 1996, Colonial Data did not have a significant backlog.
CERTAIN TRANSACTIONS OF COLONIAL DATA SINCE DECEMBER 31, 1995
Pursuant to an Agreement dated as of March 1, 1996, Colonial Data sold to
Robert J. Schock, director, Chairman, President and Chief Executive Officer,
all of the stock of a subsidiary which owned as its sole asset an airplane.
The price paid by Mr. Schock for the shares of the subsidiary was $1,250,000,
comprised of 48,780 shares of Colonial Data Common Stock valued at $20.50 per
share, and $250,000 in cash. Colonial Data determined the value of the stock
of the subsidiary based on an independent appraisal of the airplane prepared
by Bell Aviation, Inc. Colonial Data acquired the airplane on January 12, 1995
for a purchase price of $960,000 and trade aircraft priced at $70,000. Since
the sale of the subsidiary to Mr. Schock, Colonial Data has continued to
utilize the airplane for business purposes and has paid $58,000 in expenses
relating to the airplane through July 31, 1996. Colonial Data has entered into
an agreement with the corporation owned by Mr. Schock ending September 30,
1998 which provides for the use of the airplane by Colonial Data and provides
that Colonial Data will pay certain related operating and maintenance costs
related to the airplane.
During 1996, pursuant to arm's-length negotiations, Colonial Data purchased
from Craftsmen Management Services Inc. ("Craftsmen") certain office furniture
and leasehold improvements totalling an aggregate of approximately $138,000.
The president and principal owner of Craftsmen is the son of Frederick P.
Masotta, Jr., a director of Colonial Data.
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Until September 13, 1996, Colonial Data leased its headquarters facility
from Cee Associates Limited Partnership, a limited partnership in which Robert
J. Schock, Constantine S. Macricostas and Frederick P. Masotta, Jr., each of
whom are directors of Colonial Data, were limited partners and a subsidiary of
Colonial Data was the general partner. The limited partners owned a 99%
interest in the partnership. Colonial Data paid aggregate rent to the
partnership from January 1, 1996 to September 13, 1996 in the amount of
$98,000.
In September 1996, Colonial Data purchased the industrial development bonds
(the "Bonds") in the outstanding principal amount of approximately $1,400,000
which were issued in connection with the financing of its headquarters
facility, and acquired all of the limited partnership interests in the limited
partnership whose sole asset is the headquarters facility for an aggregate
consideration of $1,350,000. The Bonds were acquired from a company owned by
Robert J. Schock, Constantine S. Macricostas, Frederick P. Masotta, Jr., and
Walter M. Fiederowicz, each of whom is a director of Colonial Data. In
connection with the transaction, the Bonds were canceled and Colonial Data and
its subsidiaries acquired ownership of all outstanding interests in the
partnership. In connection with such transaction, before expenses, Robert J.
Schock received $405,000, Constantine S. Macricostas received $470,000,
Frederick P. Masotta, Jr. received $340,000 and Walter M. Fiederowicz received
$135,000. Colonial Data determined the value of the Bonds and the partnership
interests based on an independent appraisal of the headquarters facility
prepared by Lexington Hunter Associates, LLC.
DESCRIPTION OF INTELIDATA CAPITAL STOCK
GENERAL
Immediately prior to the Effective Time, the authorized capital stock of
InteliData will consist of 60,000,000 shares of InteliData Common Stock and
5,000,000 shares of InteliData Preferred Stock. There are presently 1,000
shares of InteliData Common Stock issued and outstanding, of which 500 shares
are owned by US Order and 500 shares are owned by Colonial Data. Pursuant to
the Merger Agreement, all of such shares will be canceled at the Effective
Time. No shares of InteliData Preferred Stock are presently issued and
outstanding.
Immediately following the Effective Time, (a) former holders of US Order
Common Stock collectively will hold approximately 52% of the outstanding
shares of InteliData Common Stock and (b) former holders of Colonial Data
Common Stock collectively will hold approximately 48% of the outstanding
shares of InteliData Common Stock, assuming that existing warrants and options
of US Order and Colonial Data, respectively, are not exercised before the
Effective Time. No shares of InteliData Preferred Stock will be outstanding
immediately following the Effective Time.
COMMON STOCK
Each share of InteliData Common Stock will be entitled to one vote on all
matters properly submitted to a vote at any valid meeting of stockholders.
Holders of InteliData Common Stock will be entitled to receive dividends when,
as and if declared by the InteliData Board out of funds legally available
therefor, and, upon liquidation, to receive pro rata all assets, if any, of
InteliData available for distribution after payment of necessary expenses and
all prior claims. Holders of InteliData Common Stock have no preemptive rights
to subscribe for any additional securities of any class that InteliData may
issue, nor any conversion, redemption or sinking fund rights. Holders of
InteliData Common Stock have no right to cumulate votes in the election of
directors. The rights and privileges of holders of InteliData Common Stock are
subject to any preferences provided for by resolution of the InteliData Board
for any series of InteliData Preferred Stock that InteliData may issue in the
future.
The transfer agent and registrar for InteliData Common Stock will be
American Stock Transfer & Trust Company. InteliData Common Stock has been
approved for listing, subject to official notice of issuance, on Nasdaq under
the trading symbol "INTD".
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PREFERRED STOCK
Under the InteliData Certificate, InteliData may issue shares of InteliData
Preferred Stock in one or more series as may be determined by the InteliData
Board, which may establish, from time to time, the number of shares to be
included in each series, may fix the designation, powers, preferences and
rights of the shares of each such series and any qualifications, limitations
or restrictions thereof, and may increase or decrease the number of shares of
any series without any further vote or action by the stockholders. Any
InteliData Preferred Stock so issued by the InteliData Board may rank senior
to the InteliData Common Stock with respect to the payment of dividends or
amounts upon liquidation, dissolution or winding up of InteliData, or both. In
addition, any such shares of InteliData Preferred Stock may have class or
series voting rights. Under certain circumstances, the issuance of InteliData
Preferred Stock or the existence of the unissued InteliData Preferred Stock
may tend to discourage or render more difficult a merger or other change in
control of InteliData.
CERTAIN PROVISIONS OF THE DGCL, INTELIDATA CERTIFICATE AND INTELIDATA BYLAWS
General
A number of provisions of the DGCL, the InteliData Certificate and the
InteliData Bylaws deal with matters of corporate governance and the rights of
stockholders. Certain of these provisions, as well as the ability of the
InteliData Board to issue shares of InteliData Preferred Stock and to set the
voting rights, preferences and other terms thereof, may be deemed to have an
anti-takeover effect and may delay or prevent takeover attempts not first
approved by the InteliData Board (including takeovers which certain
stockholders may deem to be in their best interests). These provisions also
could delay or frustrate the removal of incumbent directors or the assumption
of control by stockholders. InteliData believes that these provisions are
appropriate to protect the interests of InteliData and all of its
stockholders. The following describes the principal provisions of the DGCL,
the InteliData Certificate and InteliData Bylaws that may be deemed to have
anti-takeover effects.
Certain Business Combinations
Certain provisions of the DGCL will make a takeover of InteliData more
difficult and may have the effect of diminishing the possibility of certain
"front-end loaded" acquisitions or other unsolicited attempts to acquire
InteliData. For a description of these provisions, see "Comparison of
Stockholders' Rights--Anti-takeover Statutes."
Provisions Regarding InteliData Board
Certain provisions of the InteliData Certificate with respect to the
classification of the InteliData Board and the removal of directors could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, control of InteliData. For a
description of such provisions, see "The Mergers--Management and Operations
After the Mergers--InteliData Board."
Advance Notice Requirements for Stockholder Proposals and Director
Nominations
The InteliData Bylaws establish advance notice procedures for stockholder
proposals and the nomination, other than by or at the direction of the
InteliData Board or a committee thereof, of candidates for election as
directors. With respect to stockholder nominations for the election of
directors, the InteliData Bylaws provide that commencing with the 1997 annual
stockholders' meeting, any stockholder entitled to vote in the election of
directors generally may nominate at a meeting one or more persons for election
as a director only if written notice of such nomination or nominations is
delivered or mailed to the secretary of InteliData (a) in the case of an
annual meeting of stockholders that is called for a date that is within 30
days before or after the anniversary date of the immediately preceding annual
meeting of stockholders, not less than 50 days prior to such anniversary date
and (b) in the case of an annual meeting of stockholders that is called for a
date that is not within 30 days before or after the anniversary date of the
immediately preceding annual meeting of stockholders, or in the case
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of a special meeting of stockholders, not later than the close of business on
the tenth day following the day on which the notice of meeting was mailed or
public disclosure of the date of the meeting was made, whichever occurs first.
The secretary of InteliData will deliver all such notices to the Nominating
Committee of the InteliData Board, to such other committee as may be appointed
from time to time by the InteliData Board for the purpose of recommending to
the InteliData Board candidates to serve as directors or, in the absence of
any such committee, to the InteliData Board, for review. The Nominating
Committee or such other committee will thereafter make its recommendation to
the InteliData Board, and the InteliData Board will thereafter make its
determination, with respect to whether such candidate should be nominated for
election as a director. Nominations not made in accordance with the foregoing
provisions will be disregarded by the chairman of the meeting and all votes
cast for each such nominee may be disregarded.
With respect to other stockholder proposals, the InteliData Bylaws provide
that a stockholder desiring to make such a proposal must give notice thereof
to the secretary of InteliData (a) in the case of the 1997 annual
stockholders' meeting, not later than February 1, 1997 and (b) in the case of
all subsequent annual meetings of stockholders, not less than 60 days before
the first anniversary of the date of InteliData's proxy statement in
connection with the last annual meeting. Such notice must set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting
and the reason for conducting such business at the annual meeting, (b) the
name and record address of the stockholder proposing such business, (c) the
class, series and number of InteliData's shares that are beneficially owned by
the stockholder, and (d) any material interest of the stockholder in such
business. In the event that a stockholder attempts to bring business before an
annual meeting without complying with the foregoing provisions, the chairman
of the meeting may, if the facts warrant, determine that the business was not
properly brought before the meeting in accordance with the foregoing
procedures, and, if he so determines, he will declare to the meeting that such
business will not be transacted.
The foregoing provisions may preclude stockholders from bringing matters
before other stockholders at an annual or special meeting, including making
nominations for directors.
Meeting of Stockholders
Under the InteliData Bylaws, meetings of the stockholders may be called by
the Chairman of the Board or a majority of the InteliData Board. This
provision could have the effect of delaying until the next annual
stockholders' meeting stockholder actions that are favored by the holders of a
majority of the outstanding voting securities of InteliData, because such
person or entity, even if it acquired a majority of the outstanding voting
securities of InteliData, would be able to take action as a stockholder (such
as electing new directors or approving a merger) only at a duly called
stockholders' meeting.
Amendment of Certificate and Bylaws
Subject to the DGCL, the InteliData Certificate may be amended by the
affirmative vote of the holders of a majority of the outstanding votes
entitled to be cast by each voting group entitled to vote thereon.
Notwithstanding the foregoing, the amendment or repeal of certain provisions
of the InteliData Certificate relating to certain matters require the
affirmative vote of the holders of two-thirds of the votes entitled to be cast
by each voting group that is entitled to vote on such amendment or repeal. See
"Comparison of Stockholders' Rights--Amendments to Articles of Incorporation"
and "--Amendments to Bylaws."
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COMPARISON OF STOCKHOLDERS' RIGHTS
The following is a comparison of certain of the rights of holders of US
Order Common Stock and those of holders of Colonial Data Common Stock,
respectively, and those of holders of InteliData Common Stock. Because each of
InteliData, US Order and Colonial Data is organized under the laws of the
State of Delaware, the rights of holders of InteliData Common Stock and that
of holders of US Order Common Stock and holders of Colonial Data Common Stock
arising from the DGCL are the same. There are, however, differing provisions
of InteliData's organizational documents from that of US Order's and Colonial
Data's respective organizational documents which may affect the rights of
holders of US Order Common Stock and Colonial Data Common Stock, respectively.
The following summary does not purport to be a complete statement of the
provisions affecting, and differences between, the rights of holders of US
Order Common Stock and Colonial Data Common Stock, respectively, and those of
holders of InteliData Common Stock. The identification of specific provisions
or differences is not meant to indicate that other equally or more significant
differences do not exist. This summary is qualified in its entirety by
reference to the DGCL and by the governing corporate instruments of
InteliData, US Order and Colonial Data, to which stockholders are referred.
AUTHORIZED CAPITAL STOCK
InteliData
InteliData's authorized capital stock consists of 60,000,000 shares of
InteliData Common Stock and 5,000,000 shares of InteliData Preferred Stock. It
is anticipated that up to 31,805,268 shares of InteliData Common Stock and no
shares of InteliData Preferred Stock will be issued and outstanding
immediately following the consummation of the Mergers.
US Order
US Order's authorized capital stock consists of 30,000,000 shares of US
Order Common Stock and 5,000,000 shares of preferred stock, $.001 par value
per share ("US Order Preferred Stock"). As of the US Order Record Date,
16,633,956 shares of US Order Common Stock and no shares of US Order Preferred
Stock were issued and outstanding and no shares of US Order Common Stock were
held in treasury. US Order may issue shares of US Order Preferred Stock from
time to time in one or more classes or series with such voting powers,
preferences, rights and such qualifications, limitations or restrictions as
shall be stated in a resolution or resolutions adopted by the US Order Board
before issuance of such shares. The issuance of such shares does not require
the approval of the holders of US Order Common Stock.
Colonial Data
Colonial Data's authorized capital stock consists of 20,000,000 shares of
Colonial Data Common Stock. As of the Colonial Data Record Date, 15,585,835
shares of Colonial Data Common Stock were issued, 15,522,055 shares of
Colonial Data Common Stock were outstanding and 63,780 shares of Colonial Data
Common Stock were held in treasury.
DIRECTORS
InteliData
For a description of the size and structure of the InteliData Board, see
"Management and Operations After the Mergers--InteliData Board." Holders of
InteliData Common Stock will not have cumulative voting rights in the election
of directors.
The InteliData Certificate provides that the number of directors shall be
fixed by, or in the manner provided by, the InteliData Bylaws. The InteliData
Bylaws provide that the number of directors of InteliData shall consist
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of not less than five nor more than 15 individuals, as may be fixed or changed
from time to time, within the minimum and maximum, by the InteliData Board.
The InteliData Board presently consists of nine members. Members of the
InteliData Board shall be elected by a plurality of the votes cast at an
annual meeting of stockholders at which a quorum is present.
The InteliData Certificate and Bylaws provide that the directors are divided
into three classes, designated Class I, Class II and Class III, to serve
staggered three-year terms on the InteliData Board. Each class consists, as
nearly as may be possible, of one-third of the total number of directors
constituting the entire InteliData Board.
US Order
The US Order Certificate provides that the number of directors shall consist
of five to 15 members as shall be fixed by, or in the manner provided by, the
US Order Bylaws. The US Order Bylaws provide that the number of directors of
US Order shall consist of not less than six nor more than 13 individuals, as
may be fixed or changed from time to time, within the minimum and maximum, by
the US Order Board. The US Order Board presently consists of eight members.
Members of the US Order Board shall be elected by a plurality of the votes
cast at an annual meeting of stockholders at which a quorum is present.
The US Order Certificate and Bylaws provide that the directors are divided
into three classes, designated Class I, Class II and Class III, to serve
staggered three-year terms on the US Order Board. Each class consists, as
nearly as may be possible, of one-third of the total number of directors
constituting the entire US Order Board.
Colonial Data
The Colonial Data Certificate provides that the number of directors shall be
fixed by, or in the manner provided by, the Colonial Data Bylaws. The Colonial
Data Bylaws provide that the number of directors of Colonial Data shall
consist of not less than three nor more than nine individuals, as may be fixed
or changed from time to time, within the minimum and maximum, by the Colonial
Data Board. The Colonial Data Board presently consists of five members.
Members of the Colonial Data Board shall be elected by a plurality of the
votes cast at an annual meeting of stockholders at which a quorum is present.
REMOVAL OF DIRECTORS
InteliData
The InteliData Certificate provides that, subject to the rights of the
holders of any class or series of InteliData Preferred Stock then outstanding,
a director may be removed with cause at a meeting of stockholders called
expressly for that purpose at which a quorum is present by the vote of at
least two-thirds of the votes entitled to be cast by each voting group
entitled to vote in the election of directors generally.
US Order
The US Order Bylaws provide that, subject to the rights, if any, of the
holders of shares of US Order preferred stock then outstanding, members of the
US Order Board may be removed from office at any time, with or without cause,
by the affirmative vote of the holders of a majority of the outstanding shares
of US Order then entitled to vote generally in the election of directors.
Colonial Data
The Colonial Data Bylaws provide that unless otherwise provided in any
contract with the corporation, a member of the Colonial Data Board may be
removed at any time, with or without cause, by the affirmative vote of the
holders of a majority of the outstanding shares of Colonial Data then entitled
to vote generally in the election of directors.
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VACANCIES ON THE BOARD OF DIRECTORS
InteliData
For a description of certain agreements with respect to vacancies on the
InteliData Board and certain committees thereof, see "Management and
Operations After the Mergers--InteliData Board." In general, the InteliData
Bylaws provide that the InteliData Board may fill any vacancy on the
InteliData Board through a majority vote of the directors then in office, even
if less than a quorum. Any director elected to fill a vacancy holds office for
a term that coincides with the term of the class to which such director was
elected.
US Order
The US Order Bylaws provide that the US Order Board may fill any vacancy on
the US Order Board through a majority vote of the directors then in office,
even if less than a quorum. Any director elected to fill a vacancy holds
office for a term that coincides with the term of the class to which such
director was elected.
Colonial Data
The Colonial Data Bylaws provide that the Colonial Data Board may fill any
vacancy on the Colonial Data Board through a majority vote of the directors
then in office, though less than a quorum, or by the stockholders. A director
elected to fill a vacancy is elected for the unexpired term of his predecessor
and until his successor is duly chosen.
NOTICE OF STOCKHOLDER NOMINATIONS OF DIRECTORS AND STOCKHOLDER PROPOSALS
InteliData
See "Description of InteliData Capital Stock--Certain Provisions of the
DGCL, InteliData Certificate and InteliData Bylaws--Advance Notice
Requirements for Stockholder Proposals and Director Nominations" for a summary
of provisions of the InteliData Bylaws with respect to requirements for
advance notice by stockholders who desire to nominate a candidate for election
to the InteliData Board or to submit a stockholder proposal.
US Order
The US Order Bylaws provide that nominations for election as a director at
an annual meeting of stockholders or at a general meeting called for that
purpose, must be made in writing and be received by the Secretary of US Order
and (a) must be made by a holder of any outstanding class of shares of US
Order entitled to vote in the election of directors at least 90 days prior to
such meeting or (b) must be made by or at the direction of the Board of
Directors.
The US Order Bylaws provide that proposals for stockholder action by a
holder of any outstanding class of shares of US Order entitled to vote for the
election of directors shall be made in writing and be delivered or mailed to
the Secretary of US Order at the principal executive offices of US Order not
less than 60 days prior to the scheduled annual meeting, regardless of any
postponements, deferrals or adjournments of that meeting to a later date. The
US Order Bylaws further provide that to be in proper written form, a
stockholder's notice to the Secretary must set forth as to each matter that
such stockholder proposes to bring before the meeting: (a) a brief description
of the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting; (b) the name and record address of
such stockholder; (c) the class and number of shares of capital stock of the
corporation which are owned beneficially or of record by such stockholder on
the date of such notice; and (d) any material interest of such stockholder in
such business. If business is brought before a meeting without complying with
these provisions, the chairman of the meeting shall declare that the business
has not been brought properly before the meeting and such business shall not
be transacted.
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Colonial Data
The Colonial Data Certificate and the Colonial Data Bylaws contain no
provisions with respect to notice of stockholder nomination of directors and
stockholder proposals.
DIRECTOR STANDARD OF CONDUCT
InteliData, US Order and Colonial Data
Delaware common law requires that a director of a Delaware corporation
discharge his duties as a director in accordance with the fiduciary duties of
care and loyalty. The duty of care requires that directors, in performing
their corporate duties, exercise the care that an ordinarily prudent person
would exercise under similar circumstances. The duty of loyalty prohibits
self-dealing by directors.
LIMITATIONS ON DIRECTOR LIABILITY
The InteliData Certificate, the US Order Certificate and the Colonial Data
Certificate each eliminates the personal liability of the company's respective
directors to such company or its stockholders arising out of any action for
monetary damages for any breach of fiduciary duty, except with respect to (a)
any breach of the director's duty of loyalty to the company or its
stockholders, (b) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (c) any liability for
unlawful distributions or (d) any transaction from which the director derived
an improper personal benefit.
INDEMNIFICATION
InteliData, US Order and Colonial Data
The InteliData Bylaws, the US Order Bylaws and the Colonial Data Bylaws
require indemnification to the fullest extent permitted by the DGCL of any
person made, or threatened to be made, a defendant or witness to any action,
suit or proceeding because he is or was a director or officer of InteliData,
US Order or Colonial Data, as the case may be, or by reason of the fact that
such director or officer, at the request of InteliData, US Order or Colonial
Data, is or was serving another entity. Delaware law permits indemnification
in connection with liability arising out of any action where the indemnified
party acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation or, in the case of a
criminal action, he had no reasonable cause to believe his conduct was
unlawful. In an action by or in the right of the corporation in which a person
has been adjudged to be liable to the corporation, indemnification is not
permitted unless and to the extent the relevant court determines that, despite
such adjudication, such person is fairly and reasonably entitled to indemnity
for such expenses as the court deems proper. Prior to the Effective Time,
InteliData intends to enter into agreements with certain of its directors and
officers whereby InteliData will agree to indemnify such persons to the
fullest extent permitted by the DGCL.
MERGERS, SHARE EXCHANGES AND SALES OF ASSETS
InteliData, US Order and Colonial Data
The DGCL generally requires that any merger, share exchange or sale of all
or substantially all the assets of a corporation not in the ordinary course of
business be approved by the affirmative vote of the majority of the issued and
outstanding shares of each voting group entitled to vote. Neither the
InteliData Certificate, the US Order Certificate nor the Colonial Data
Certificate specifically address mergers, share exchanges or sales of assets.
ANTI-TAKEOVER STATUTES
InteliData and US Order
Section 203 of the DGCL regulates business combinations with interested
stockholders. Under Section 203 of the DGCL, a Delaware corporation is
prohibited from entering into a business combination with the beneficial
76
<PAGE>
owner of 15% or more of the corporation's outstanding voting stock (an
"interested stockholder"), or its affiliates, for three years from the date
such stockholder became an interested stockholder unless (i) prior to the date
the stockholder became an interested stockholder, the board of directors of
the corporation approved either the business combination or the transaction
that resulted in such person or entity becoming an interested stockholder,
(ii) the interested stockholder acquired at least 85% of such corporation's
outstanding voting stock (excluding shares owned by persons who are directors,
officers and by certain employee stock plans) in the same transaction in which
such stockholder became an interested stockholder or (iii) on or subsequent to
the date of the transaction by which the stockholder became an interested
stockholder, the business combination is approved by the board of directors
and the holders of two-thirds of the corporation's outstanding voting stock
(not including shares owned by the interested stockholder). In general, a
Delaware corporation must specifically elect, through an amendment to its
bylaws or certificate of incorporation, not to be governed by these
provisions. Each of InteliData and US Order has not made such an election and,
therefore, is currently subject to these provisions of the DGCL.
Colonial Data
The Colonial Data Certificate expressly elects not to be governed by Section
203 of the DGCL which regulates business combinations with interested
stockholders.
AMENDMENTS TO ARTICLES OF INCORPORATION
InteliData
The DGCL provides generally that a Delaware corporation's certificate of
incorporation may be amended by the board of directors and by the affirmative
vote of the holders of a majority of the outstanding shares entitled to vote
on the matter. The InteliData Certificate provides that any amendment to the
InteliData Certificate shall be approved by a majority of the votes entitled
to be cast by each voting group that is entitled to vote on the matter, except
that an amendment that affects the provisions relating to the classification
and size of the InteliData Board must be approved by two-thirds of the votes
entitled to be cast by each voting group that is entitled to vote on the
matter.
US Order and Colonial Data
The DGCL provides generally that a Delaware corporation's certificate of
incorporation may be amended by the board of directors and by the affirmative
vote of the holders of a majority of the outstanding shares entitled to vote
on the matter.
AMENDMENTS TO BYLAWS
InteliData
The InteliData Certificate and Bylaws provide generally that the InteliData
Bylaws may be amended by the InteliData Board, provided, however, that any
provision of the InteliData Bylaws adopted or required to be adopted pursuant
to the DGCL, by the stockholders of InteliData, may only be amended by the
affirmative vote of the majority of the holders of the outstanding capital
stock of InteliData entitled to vote thereon.
US Order
The US Order Certificate and Bylaws provide generally that the US Order
Bylaws may be amended by the US Order Board, provided, however, that any
provision of the US Order Bylaws adopted or required to be adopted pursuant to
the DGCL, by the stockholders of US Order, may only be amended by the
affirmative vote of the majority of the holders of the outstanding capital
stock of US Order entitled to vote thereon.
77
<PAGE>
Colonial Data
The Colonial Data Bylaws provide generally that the Colonial Data Bylaws may
be amended by the Colonial Data Board or the stockholders of Colonial Data,
provided, however, that any proposed provision amending the Colonial Data
Bylaws by the stockholders of Colonial Data may only be amended by the
affirmative vote of the majority of the stockholders entitled to vote thereon
if notice of the proposed action was included in the notice of the meeting or
is waived in writing by a majority of the stockholders entitled to vote
thereon.
DISSENTERS' RIGHTS
InteliData, US Order and Colonial Data
Under the DGCL, a stockholder of a Delaware corporation is entitled to an
appraisal by the Court of Chancery of the "fair value" of his shares in the
event of the consummation of a merger or consolidation to which the
corporation is a party, provided that either (i) approval by the stockholders
of the corporation is required for the merger pursuant to the DGCL or the
corporation's certificate of incorporation and the stockholder is entitled to
vote, or (ii) the corporation is a subsidiary being merged with its parent or
another subsidiary of the parent pursuant to a particular DGCL provision for
such transactions and all of the stock of the corporation is not owned by the
parent corporation.
With respect to shares of any class or series that are either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the NASD or held by at least
2,000 record stockholders, appraisal rights are not available to the holders
of such shares by reason of a merger or consolidation unless the holders
thereof are required by the terms of an agreement of merger or consolidation
to accept for such stock anything except (i) cash in lieu of fractional
shares, (ii) shares of the surviving corporation or shares of any other
corporation that are either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the NASD or held by more than 2,000 record stockholders or (iii) a
combination of cash in lieu of fractional shares and such shares.
A Delaware corporation may provide in its certificate of incorporation that
appraisal rights shall be available for the shares of any class or series of
its stock as a result of an amendment to its certificate of incorporation, any
merger or consolidation to which the corporation is a party or the sale of all
or substantially all of the assets of the corporation. Neither InteliData, US
Order nor Colonial Data has provided for such rights in the InteliData
Certificate, the US Order Certificate or the Colonial Data Certificate.
A stockholder who has the right to appraisal in connection with a
transaction and to receive payment of the "fair value" of his shares must
follow specific procedural requirements as set forth in the DGCL in order to
maintain such right and obtain such payment.
TRANSFER RESTRICTIONS
InteliData, US Order and Colonial Data
Neither the InteliData Certificate, the US Order Certificate nor the
Colonial Data Certificate establishes transfer restrictions on the original
issuance or transfer of shares of InteliData Common Stock, US Order Common
Stock or Colonial Data Common Stock, as the case may be.
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<PAGE>
OWNERSHIP OF US ORDER COMMON STOCK
The following table sets forth certain information with respect to
beneficial ownership of US Order Common Stock as of August 30, 1996, by (i)
each person who is known by US Order to beneficially own more than 5% of the
outstanding shares of US Order Common Stock, (ii) each of US Order's
directors, (iii) each executive officer of US Order, and (iv) all directors
and executive officers of US Order as a group. Unless otherwise indicated in
the footnotes to the table, each person or entity has sole voting and
investment power with respect to all shares of US Order Common Stock shown as
beneficially owned by such person or entity.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
--------------------------
NUMBER OF
NAME OF STOCKHOLDER SHARES PERCENT
------------------- ------------ ---------
<S> <C> <C>
WorldCorp, Inc. .................................... 9,179,273(1) 56.5%
13878 Park Center Road
Suite 490
Herndon, Virginia 22071
John Hancock Advisers, Inc. ........................ 980,328(2) 6.0%
101 Huntington Avenue
Boston, Massachusetts 02199
John C. Backus, Jr.................................. 705,550(3) 4.2%
William F. Gorog.................................... 481,212(4) 2.9%
Peter W. Costello................................... 84,330(5) *
Scott A. Corzine.................................... 61,712(6) *
Mark S. Lynch....................................... 26,944(7) *
Joseph E. Smith..................................... -- *
Albert N. Wergley................................... 14,965(8) *
T. Coleman Andrews, III............................. 11,500(9) *
Patrick F. Graham................................... 9,875(10) *
L. William Seidman.................................. 8,500(11) *
Geoffrey S. Rehnert................................. 8,333(12) *
Ross Jones.......................................... 1,000 *
Wesley C. Tallman................................... -- *
Directors and executive officers as a Group (13 per-
sons).............................................. 1,413,921(13) 8.1%
</TABLE>
- --------
* Less than 1%.
(1) Includes 9,179,273 shares owned by WorldCorp Investments, Inc., a wholly
owned subsidiary of WorldCorp.
(2) As reported in the Schedule 13G filed with the Commission, includes
973,500 shares owned by John Hancock Advisers, Inc. and 6,828 shares held
in customer accounts with Tucker Anthony Incorporated, which are both
indirect wholly owned subsidiaries of John Hancock Mutual Life Insurance
Company.
(3) Includes 662,495 shares of US Order Common Stock issuable upon the
exercise of options and options to purchase 18,055 shares transferred by
Mr. Backus to his son, John C. Backus, III.
(4) Includes 400,000 shares of US Order Common Stock issuable upon the
exercise of options and 10,000 shares held by Mr. Gorog's wife. Does not
include 9,179,273 shares of US Order Common Stock held by WorldCorp, of
which Mr. Gorog serves as chairman of the board. Mr. Gorog disclaims
beneficial ownership of such shares.
(5) Includes 84,330 shares of US Order Common Stock issuable upon the
exercise of options.
(6) Includes 61,712 shares of US Order Common Stock issuable upon the
exercise of options.
(7) Includes 24,444 shares of US Order Common Stock issuable upon the
exercise of options.
(8) Includes 14,965 shares of US Order Common Stock issuable upon the
exercise of options.
(9) Does not include 9,179,273 shares of US Order Common Stock beneficially
held by WorldCorp, of which Mr. Andrews serves as chief executive
officer, president and director. Mr. Andrews disclaims beneficial
ownership of such shares.
(10) Includes 9,375 shares of US Order Common Stock issuable upon the exercise
of options.
(11) Includes 7,500 shares of US Order Common Stock issuable upon the exercise
of options.
(12) Includes 8,333 shares of US Order Common Stock issuable upon the exercise
of options.
(13) Includes 1,291,209 shares of US Order Common Stock issuable upon the
exercise of options.
79
<PAGE>
OWNERSHIP OF COLONIAL DATA COMMON STOCK
The following table shows, as of August 30, 1996 (except as provided below),
the direct and indirect beneficial ownership of shares of Colonial Data Common
Stock by (i) each person who is known by Colonial Data to beneficially own
more than 5% of the outstanding shares of Colonial Data Common Stock, (ii)
each of Colonial Data's directors of Colonial Data, (iii) each executive
officer of Colonial Data, (iv) all directors and executive officers of
Colonial Data as a group. Unless otherwise indicated in the footnotes to the
table, each person or entity has sole voting and investment power with respect
to all shares of Colonial Data Common Stock shown as beneficially owned by
such person or entity.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-------------------------
NUMBER OF
NAME OF STOCKHOLDER SHARES PERCENT
------------------- ------------ ---------
<S> <C> <C>
Robert J. Schock..................................... 710,515(1) 4.6%
Constantine S. Macricostas........................... 65,590(2) *
Frederick P. Masotta, Jr............................. 648,284 4.2%
Walter M. Fiederowicz................................ 50,916(3) *
Timothy R. Welles.................................... 0 *
William L. Nutter.................................... 133,100(4) *
Daniel V. Cusack..................................... 235,340(5) 1.5%
Joseph W. Cline...................................... 8,333(6) *
John N. Giamalis..................................... 6,000(7) *
Directors and executive officers as a group (9
persons)............................................ 1,858,078(8) 12.0%
</TABLE>
- --------
* Less than 1%.
(1) Includes 185,295 shares held by his wife as to which Mr. Schock may be
deemed to share voting and investment power. Mr. Schock disclaims
beneficial ownership of such shares held by his wife.
(2) Does not include 604,755 shares held by Photronics, Inc., of which Mr.
Macricostas is chairman of the board of directors, chief executive officer
and a stockholder. Mr. Macricostas disclaims beneficial ownership of such
shares.
(3) Includes 50,916 shares held by his wife as to which Mr. Fiederowicz may be
deemed to share voting and investment power. Mr. Fiederowicz disclaims
beneficial ownership of such shares held by his wife.
(4) Includes 25,000 shares for which Mr. Nutter holds options exercisable
within 60 days and 1,500 shares held by his children as to which he may be
deemed to share voting and investment power. Mr. Nutter disclaims
beneficial ownership of shares held by his children.
(5) Includes 31,500 shares held by his wife as to which Mr. Cusack may be
deemed to share voting and investment power. Mr. Cusack disclaims
beneficial ownership over such shares held by his wife.
(6) Includes 8,333 shares for which Mr. Cline holds options exercisable within
60 days.
(7) Includes 6,000 shares for which Mr. Giamalis holds options exercisable
within 60 days.
(8) Includes 39,333 shares for which executive officers hold options
exercisable within 60 days.
80
<PAGE>
LEGAL MATTERS
The validity of the InteliData Common Stock to be issued in connection with
the Mergers is being passed upon by Hunton & Williams, Richmond, Virginia.
Certain of the tax consequences of the Mergers will be passed upon as of the
Effective Time, as a condition to the Mergers, by Hunton & Williams, Richmond,
Virginia, as counsel to US Order and InteliData and LeBoeuf, Lamb, Greene &
MacRae, L.L.P., Hartford, Connecticut, as counsel to Colonial Data and
InteliData.
EXPERTS
The financial statements and schedule of US Order as of December 31, 1995
and 1994, and for each of the years in the three-year period ended December
31, 1995, incorporated by reference herein and in the Registration Statement,
have been incorporated by reference herein and in the Registration Statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
The financial statements of Braun Simmons as of December 31, 1995, and for
the year then ended, incorporated by reference herein and in the Registration
Statement, have been incorporated by reference herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Colonial Data as of December 31,
1995 and 1994, and for each of the fiscal years in the three-year period ended
December 31, 1995, incorporated by reference herein and in the Registration
Statement, have been audited by Deloitte & Touche LLP, independent auditors,
as stated in their report incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the proxy statement and form of
proxy to be used in connection with US Order's 1997 Annual Meeting of
Stockholders, if such meeting is held, stockholder proposals must be received
by the Secretary of US Order no later than December 17, 1996. See "Comparison
of Stockholders' Rights--Notice of Stockholder Nominations of Directors and
Stockholder Proposals."
In order to be considered for inclusion in the proxy statement and form of
proxy to be used in connection with Colonial Data's 1997 Annual Meeting of
Stockholders, if such meeting is held, stockholder proposals must be received
by the Secretary of Colonial Data no later than November 8, 1996. See
"Comparison of Stockholders' Rights--Notice of Stockholder Nominations of
Directors and Stockholder Proposals."
OTHER MATTERS
As of the date of this Joint Proxy Statement/Prospectus (i) US Order
management knows of no business that will be presented for consideration at
the US Order Meeting other than as specified in the US Order notice, and (ii)
Colonial Data management knows of no business that will be presented for
consideration at the Colonial Data Meeting other than that stated in the
Colonial Data notice. As to other business, if any, and matters incident to
the conduct of the US Order Meeting or the Colonial Data Meeting, as the case
may be, that may properly come before such meeting, it is intended that
proxies in the accompanying forms will be voted in respect thereof in
accordance with the recommendations of the US Order Board and the Colonial
Data Board, respectively.
81
<PAGE>
APPENDIX I
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 5, 1996
BETWEEN
US ORDER, INC.
AND
COLONIAL DATA TECHNOLOGIES CORP.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 1. The Merger................................................. A-1
Section 1.1. The Merger........................................... A-1
Section 1.2. Effective Time....................................... A-1
Section 1.3. Closing of the Merger................................ A-1
Section 1.4. Effects of the Merger................................ A-1
Formation of Newco; Certificate of Incorporation and
Section 1.5. Bylaws............................................... A-1
Section 1.6. Board of Directors and Officers of Newco............. A-2
Section 1.7. Conversion of Shares................................. A-3
Section 1.8. Exchange of Certificates............................. A-3
Section 1.9. Stock Options........................................ A-5
Section 1.10. Taking of Necessary Action; Further Action........... A-6
ARTICLE 2. Representations and Warranties of USO...................... A-6
Section 2.1. Organization and Qualification....................... A-7
Section 2.2. Capitalization of USO................................ A-7
Authority Relative to this Agreement; Recommenda-
Section 2.3. tion................................................. A-8
Section 2.4. SEC Reports; Financial Statements.................... A-8
Section 2.5. Information Supplied................................. A-8
Section 2.6. Consents and Approvals; No Violations................ A-9
Section 2.7. No Default........................................... A-9
Section 2.8. No Undisclosed Liabilities; Absence of Changes....... A-9
Section 2.9. Litigation........................................... A-10
Section 2.10. Compliance with Applicable Law....................... A-10
Section 2.11. Employee Benefit Plans; Labor Matters................ A-10
Section 2.12. Environmental Laws and Regulations................... A-11
Section 2.13. Tax Matters.......................................... A-11
Section 2.14. Title to Property.................................... A-12
Section 2.15. Intellectual Property................................ A-12
Section 2.16. Insurance............................................ A-12
Section 2.17. Vote Required........................................ A-12
Section 2.18. Tax Treatment........................................ A-12
Section 2.19. Affiliates........................................... A-12
Section 2.20. Certain Business Practices........................... A-13
Section 2.21. Insider Interests.................................... A-13
Section 2.22. Opinion of Financial Adviser......................... A-13
Section 2.23. Brokers.............................................. A-13
Section 2.24. Disclosure........................................... A-13
Section 2.25. No Existing Discussions.............................. A-13
Section 2.26. Material Contracts................................... A-13
ARTICLE 3. Representations and Warranties of CDT...................... A-14
Section 3.1. Organization and Qualification....................... A-14
Section 3.2. Capitalization of CDT................................ A-14
Authority Relative to this Agreement; Recommenda-
Section 3.3. tion................................................. A-15
Section 3.4. SEC Reports; Financial Statements.................... A-15
Section 3.5. Information Supplied................................. A-16
Section 3.6. Consents and Approvals; No Violations................ A-16
Section 3.7. No Default........................................... A-16
Section 3.8. No Undisclosed Liabilities; Absence of Changes....... A-17
Section 3.9. Litigation........................................... A-17
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Section 3.10. Compliance with Applicable Law....................... A-17
Section 3.11. Employee Benefit Plans; Labor Matters................ A-17
Section 3.12. Environmental Laws and Regulations................... A-18
Section 3.13. Tax Matters.......................................... A-19
Section 3.14. Title to Property.................................... A-19
Section 3.15. Intellectual Property................................ A-19
Section 3.16. Insurance............................................ A-20
Section 3.17. Vote Required........................................ A-20
Section 3.18. Tax Treatment........................................ A-20
Section 3.19. Affiliates........................................... A-20
Section 3.20. Certain Business Practices........................... A-20
Section 3.21. Insider Interests.................................... A-20
Section 3.22. Opinion of Financial Adviser......................... A-20
Section 3.23. Brokers.............................................. A-20
Section 3.24. Disclosure........................................... A-20
Section 3.25. No Existing Discussions.............................. A-20
Section 3.26. Material Contracts................................... A-20
ARTICLE 4. Covenants.................................................. A-21
Section 4.1. Conduct of Business of USO........................... A-21
Section 4.2. Conduct of Business of CDT........................... A-23
Section 4.3. Preparation of S-4 and the Proxy Statement........... A-24
Section 4.4. Other Potential Acquirers............................ A-24
Section 4.5. Meetings of Stockholders............................. A-25
Section 4.6. Nasdaq Listing....................................... A-26
Section 4.7. Access to Information................................ A-26
Section 4.8. Additional Agreements; Reasonable Efforts............ A-26
Employee Benefits; Stock Option and Employee Purchase
Section 4.9. Plans................................................ A-27
Section 4.10. Public Announcements................................. A-27
Section 4.11. Indemnification...................................... A-27
Section 4.12. Notification of Certain Matters...................... A-28
Section 4.13. Affiliates........................................... A-28
ARTICLE 5. Conditions to Consummation of the Merger................... A-29
Conditions to Each Party's Obligations to Effect the
Section 5.1. Merger............................................... A-29
Section 5.2. Conditions to the Obligations of USO................. A-29
Section 5.3. Conditions to the Obligations of CDT................. A-30
ARTICLE 6. Termination; Amendment; Waiver............................. A-30
Section 6.1. Termination.......................................... A-30
Section 6.2. Effect of Termination................................ A-31
Section 6.3. Fees and Expenses.................................... A-31
Section 6.4. Amendment............................................ A-33
Section 6.5. Extension; Waiver.................................... A-33
ARTICLE 7. Miscellaneous.............................................. A-33
Section 7.1. Nonsurvival of Representations and Warranties........ A-33
Section 7.2. Entire Agreement; Assignment......................... A-33
Section 7.3. Validity............................................. A-33
Section 7.4. Notices.............................................. A-33
Section 7.5. Governing Law........................................ A-34
Section 7.6. Descriptive Headings................................. A-34
Section 7.7. Parties in Interest.................................. A-34
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Section 7.8. Certain Definitions.................................... A-34
Section 7.9. Personal Liability..................................... A-34
Section 7.10. Specific Performance................................... A-35
Section 7.11. Counterparts........................................... A-35
</TABLE>
A-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of August 5,
1996, is between US Order, Inc., a Delaware corporation ("USO"), and Colonial
Data Technologies Corp., a Delaware corporation ("CDT").
Whereas, the Boards of Directors of USO and CDT each have, in light of and
subject to the terms and conditions set forth herein, (i) determined that the
Merger (as defined below) is fair to their respective stockholders and in the
best interests of such stockholders and (ii) approved the Merger in accordance
with this Agreement;
Whereas, for Federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
Whereas, USO and CDT desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
Now, therefore, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, USO and CDT hereby agree as follows:
ARTICLE 1
The Merger
Section 1.1. The Merger. At the Effective Time (as defined below) and upon
the terms and subject to the conditions of this Agreement and in accordance
with the General Corporation Law of the state of Delaware (the "DGCL"), USO
and CDT shall each be merged with and into Newco (as defined below) (the
"Merger"). Following the Merger, Newco shall continue as the surviving
corporation (the "Surviving Corporation"), shall continue to be governed by
the laws of the jurisdiction of its incorporation or organization and the
separate corporate existence of each of USO and CDT shall cease. Prior to the
Effective Time, the parties hereto shall mutually agree as to the name of the
Surviving Corporation. The Merger is intended to qualify as a tax-free
reorganization under Section 368 of the Code.
Section 1.2. Effective Time. Subject to the terms and conditions set forth
in this Agreement, a Certificate of Merger (the "Merger Certificate") shall be
duly executed and acknowledged by each of CDT, USO and Newco and thereafter
the Merger Certificate reflecting the Merger shall be delivered to the
Secretary of State of the State of Delaware for filing pursuant to the DGCL on
the Closing Date (as defined in Section 1.3). The Merger shall become
effective at such time as a properly executed and certified copy of the Merger
Certificate is duly filed by the Secretary of State of the State of Delaware
in accordance with the DGCL or such later time as the parties may agree upon
and set forth in the Merger Certificate (the time at which the Merger becomes
effective shall be referred to herein as the "Effective Time").
Section 1.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date to be specified by the
parties, which shall be no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Article 5
(the "Closing Date"), at the offices of LeBoeuf, Lamb, Greene & MacRae,
L.L.P., 1875 Connecticut Avenue, N.W., Suite 1200, Washington, D.C., unless
another time, date or place is agreed to in writing by the parties hereto.
Section 1.4. Effects of the Merger. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights,
privileges, powers and franchises of USO and CDT shall vest in the Surviving
Corporation, and all debts, liabilities and duties of USO and CDT shall become
the debts, liabilities and duties of the Surviving Corporation.
Section 1.5. Formation of Newco; Certificate of Incorporation and Bylaws.
(a) Prior to the Effective Time, USO and CDT agree to take such action as is
necessary to form a new corporation under the laws of a jurisdiction to be
mutually agreed upon by USO and CDT ("Newco") and shall
A-1
<PAGE>
amend this Agreement to add Newco as a party. USO and CDT agree to take such
action as is necessary to cause Newco to perform the various covenants and
agreements contained herein which are contemplated herein to be performed by
Newco. Any covenants or agreements of Newco contained herein shall be binding
on Newco as of the time Newco becomes a party to this Agreement.
(b) The Certificate of Incorporation of Newco shall, as of the Effective
Time, be the Certificate of Incorporation of the Surviving Corporation after
the Effective Time. Such Certificate of Incorporation shall be amended and
restated at or prior to the Effective Time to include, among other things: (i)
a change in the name of the Surviving Corporation to such name as may be
mutually agreed by CDT and USO; (ii) an increase in the authorized common
stock to 60,000,000 shares, par value $.001 per share; (iii) authorization of
a class of 5,000,000 shares of Preferred Stock, par value $.001 per share, to
be issued, if at all, in such series and having such rights, limitations and
preferences as may be authorized by Surviving Corporation's Board of
Directors; and (iv) a classified Board consisting of three (3) classes of
directors, which amended and restated Certificate of Incorporation shall be in
form and substance subject to the reasonable approval of CDT and USO.
(c) The Bylaws of Newco shall, as of the Effective Time, be the Bylaws of
the Surviving Corporation after the Effective Time.
Section 1.6. Board of Directors and Officers of Newco. (a) At or prior to
the Effective Time, each of CDT and USO agrees to take such action as is
necessary (i) to cause the number of directors comprising the full Board of
Directors of Newco to be nine (9) persons and (ii) to cause T. Coleman Andrews
III, William F. Gorog, John C. Backus, Jr., Patrick F. Graham and Wesley C.
Tallman (the "USO Designees") and Robert J. Schock, Walter M. Fiederowicz,
Timothy R. Welles and Constantine S. Macricostas (the "CDT Designees") to be
elected as directors of Newco. In addition, CDT and USO, as the stockholders
of Newco prior to the Effective Time shall take all action necessary to cause,
to the greatest extent practicable, the USO Designees and the CDT Designees to
serve in equal numbers in each of Newco's three classes of directors until the
1997 Annual Meeting, 1998 Annual Meeting and 1999 Annual Meeting. If any of
the USO Designees or the CDT Designees, respectively, shall decline or be
unable to serve as a director prior to the Effective Time, USO (if such person
was a USO Designee) or CDT (if such person was a CDT Designee), as the case
may be, shall nominate another person to serve in such person's stead which
such person shall be subject to approval of the other party. If any of the USO
Designees or the CDT Designees, respectively, shall decline or be unable to
serve as a director during his initial term following the Effective Time, the
remaining USO Designees (if such person was a USO Designee) or the CDT
Designees (if such person was a CDT Designee), as the case may be, shall
nominate another person to serve in such person's stead, which such person
shall be subject to the approval of the other party's designees.
(b) Prior to or at the Effective Time, the Newco Board shall take action to
establish an Executive Committee, a Compensation Committee, an Audit Committee
and a Nominating Committee on which as of the Effective Time there shall be
equal representation of the USO Designees and the CDT Designees, and initially
William F. Gorog and John C. Backus, Jr. shall be the USO Designees, and
Robert J. Schock and Timothy R. Welles shall be the CDT Designees to serve on
the Executive Committee, each such Executive Committee member to serve until
the next annual meeting of stockholders of Newco at which such Executive
Committee member first stands for reelection to the Board. The members of the
other committees shall be selected by the full Board. If a vacancy occurs on
any committee prior to the 1997 Annual Meeting of Stockholders, the Newco
Board shall use its best efforts to seek nominations to such committee to
accomplish an equal representation of USO Designees and CDT Designees.
(c) From and after the Effective Time, until successors are duly elected or
appointed and qualified in accordance with applicable law, the directors of
all of the subsidiaries of Newco shall be Robert J. Schock, John C. Backus,
Jr. and Timothy R. Welles.
(d) From and after the Effective Time, and until successors are duly elected
or appointed and qualified in accordance with applicable law, Robert J. Schock
shall be Chief Executive Officer and Vice Chairman of Newco, William F. Gorog
shall be Chairman of Newco, John C. Backus, Jr. shall be President and Chief
Operating
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Officer of Newco, Timothy R. Welles shall be Executive Vice President of
Newco, Joseph Smith shall be Executive Vice President of Newco, Albert N.
Wergley shall be Vice President, General Counsel and Secretary of Newco, Mark
S. Lynch shall be Vice President-Finance of Newco, and John N. Giamalis shall
be Vice President, Treasurer and Chief Financial Officer of Newco. It is the
current intention of the parties that between six months and nine months from
the Effective Date, Mr. Schock shall become Chairman, Mr. Gorog shall become
Vice Chairman and Mr. Backus shall become President and Chief Executive
Officer of Newco.
(e) From and after the Effective Time, Newco shall take such action as is
necessary to appoint and cause to be elected in accordance with applicable
law, until their successors are duly elected, John C. Backus, Jr. as
President, Albert N. Wergley as Secretary and John N. Giamalis as Treasurer of
each of the subsidiaries of Newco.
Section 1.7. Conversion of Shares.
(a) At the Effective Time, each share of common stock, par value $.001 per
share, of USO (individually a "USO Share" and collectively, the "USO Shares")
issued and outstanding immediately prior to the Effective Time (other than (i)
USO Shares held in the USO's treasury and (ii) USO Shares held by CDT) shall,
by virtue of the Merger and without any action on the part of CDT, Newco, USO
or the holder thereof, be converted into and shall become one (1.0) fully paid
and nonassessable share of common stock, par value $.001 per share, of Newco
(individually a "Newco Share" and collectively, the "Newco Shares").
(b) At the Effective Time, each share of common stock, par value $.01 per
share of CDT (individually a "CDT Share" and collectively, the "CDT Shares")
issued and outstanding immediately prior to the Effective Time (other than (i)
CDT Shares held in CDT's Treasury and (ii) CDT Shares held by USO) shall, by
virtue of the Merger and without any action on the part of CDT, USO, Newco or
the holder thereof, be converted into and shall become one (1.0) fully paid
and nonassessable Newco Share. USO Shares and CDT Shares are sometimes
referred to collectively herein as "Shares."
(c) At the Effective Time, each outstanding share of the common stock of any
subsidiaries of CDT shall remain outstanding.
(d) At the Effective Time, each USO Share or CDT Share held in the treasury
of either of USO or CDT, respectively, and each Newco Share held by CDT or USO
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of Newco, CDT or USO be canceled, retired and
cease to exist and no payment shall be made with respect thereto. At the
Effective Time, each USO Share held by CDT and each CDT Share held by USO
shall, by virtue of the Merger and without any action on the part of CDT or
USO, be cancelled, retired and cease to exist and no payment shall be made
with respect thereto.
Section 1.8. Exchange of Certificates.
(a) Prior to the Effective Time, Newco shall enter into an agreement with,
and shall deposit with, American Stock Transfer & Trust Company, or such other
agent or agents as may be satisfactory to USO and CDT (the "Exchange Agent"),
for the benefit of the holders of CDT Shares and USO Shares, for exchange
through the Exchange Agent in accordance with this Article I: (i) certificates
representing the appropriate number of Newco Shares to be issued to holders of
USO Shares and to holders of CDT Shares and (ii) cash to be paid in lieu of
fractional Newco Shares (such Newco Shares and such cash are hereinafter
referred to as the "Exchange Fund") issuable pursuant to Section 1.7 in
exchange for outstanding CDT Shares and USO Shares.
(b) As soon as reasonably practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented outstanding USO
Shares or CDT Shares (the "Certificates") whose shares were converted into the
right to receive Newco Shares pursuant to Section 1.7: (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
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Exchange Agent and shall be in such form and have such other provisions as CDT
and USO may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing Newco
Shares. Upon surrender of a Certificate to the Exchange Agent, together with
such letter of transmittal, duly executed, and any other required documents,
the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole Newco Shares and, if
applicable, a check representing the cash consideration to which such holder
may be entitled on account of a fractional Newco Share, which such holder has
the right to receive pursuant to the provisions of this Article I, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of USO Shares or CDT Shares which is not registered in
the transfer records of either USO or CDT, a certificate representing the
proper number of Newco Shares may be issued to a transferee if the Certificate
representing such CDT Shares or USO Shares is presented to the Exchange Agent,
accompanied by all documents required by the Exchange Agent or Newco to
evidence and effect such transfer and by evidence that any applicable stock
transfer or other taxes have been paid. Until surrendered as contemplated by
this Section 1.8, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
certificate representing Newco Shares and cash in lieu of any fractional Newco
Shares as contemplated by this Section 1.8.
(c) No dividends or other distributions declared or made after the Effective
Time with respect to Newco Shares with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the Newco Shares represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 1.8(f) until the
holder of record of such Certificate shall surrender such Certificate. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the record holder of the certificates representing
whole Newco Shares issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a fractional
Newco Share to which such holder is entitled pursuant to Section 1.8(f) and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole Newco Shares, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole Newco Shares.
(d) In the event that any Certificate for CDT Shares or USO Shares shall
have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange therefor, upon the making of an affidavit of that fact by the holder
thereof such Newco Shares and cash in lieu of fractional Newco Shares, if any,
as may be required pursuant to this Agreement; provided, however, that Newco
or the Exchange Agent, may, in its respective discretion, require the delivery
of a suitable bond, opinion or indemnity.
(e) All Newco Shares issued upon the surrender for exchange of CDT Shares or
USO Shares in accordance with the terms hereof (including any cash paid
pursuant to Section 1.8(c) or 1.8(f)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such CDT Shares or USO Shares.
There shall be no further registration of transfers on the stock transfer
books of either of CDT or USO of the CDT Shares or USO Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to Newco for any reason, they shall be
canceled and exchanged as provided in this Article I.
(f) No fractional Newco Shares shall be issued in the Merger, but in lieu
thereof each holder of USO Shares or CDT Shares otherwise entitled to a
fractional Newco Share shall, upon surrender of its, his or her Certificate or
Certificates, be entitled to receive an amount of cash rounded to the nearest
cent (without interest) determined by multiplying the fair market value of a
Newco Share as determined by the Newco Board of Directors by the fractional
share interest to which such holder would otherwise be entitled. The parties
acknowledge that payment of the cash consideration in lieu of issuing
fractional shares was not separately bargained for consideration but merely
represents a mechanical rounding off for purposes of simplifying the corporate
and accounting complexities which would otherwise be caused by the issuance of
fractional shares.
(g) Any portion of the Exchange Fund which remains undistributed to the
stockholders of either USO or CDT for six months after the Effective Time
shall be delivered to Newco, upon demand, and any stockholders
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of either USO or CDT who have not theretofore complied with this Article I
shall thereafter look only to Newco for payment of their claim for Newco
Shares, any cash in lieu of fractional Newco Shares and any applicable
dividends or distributions with respect to Newco Shares, as the case may be.
(h) Neither Newco, CDT nor USO shall be liable to any holder of CDT Shares,
USO Shares or Newco Shares, as the case may be, for such shares (or dividends
or distributions with respect thereto) or cash from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
Section 1.9. Stock Options.
(a) At the Effective Time, each outstanding option to purchase USO Shares (a
"USO Stock Option" or collectively, "USO Stock Options") issued pursuant to
the USO 1991 Stock Option Plan, the USO 1995 Incentive Plan, the USO Non-
Employee Directors' Stock Option Plan and the USO Outside Directors Stock
Option Plan, and a one-time grant of 25,000 options to an individual which is
described in Section 1.9 of the USO Disclosure Schedule, whether vested or
unvested, shall be assumed by Newco (all of such plans or agreements pursuant
to which any USO Stock Option has been issued or may be issued are referred to
collectively as the "USO Plans"). Each USO Stock Option shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such USO Stock Option, the same number of Newco Shares as the
holder of such USO Stock Option would have been entitled to receive pursuant
to the Merger had such holder exercised such option in full immediately prior
to the Effective Time, at a price per share equal to (y) the aggregate
exercise price for the USO Shares otherwise purchasable pursuant to such USO
Stock Option divided by (z) the number of full Newco Shares deemed purchasable
pursuant to such USO Stock Option; provided, however, that in the case of any
option to which section 421 of the Code applies by reason of its qualification
under section 422 of the Code ("incentive stock options" or "ISOs"), the
option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order
to comply with section 424(a) of the Code.
(b) At the Effective Time, each outstanding option to purchase CDT Shares (a
"CDT Stock Option" or collectively, "CDT Stock Options") issued pursuant to
the CDT 1983 Stock Option Plan or the CDT 1994 Long Term Incentive Plan,
whether vested or unvested, shall be assumed by Newco (all of such plans or
agreements pursuant to which any CDT Stock Option has been issued or may be
issued are referred to collectively as the "CDT Plans"). Each CDT Stock Option
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such CDT Stock Option, the same number of
Newco Shares as the holder of such CDT Stock Option would have been entitled
to receive pursuant to the Merger had such holder exercised such option in
full immediately prior to the Effective Time, at a price per share equal to
(y) the aggregate exercise price for the CDT Shares otherwise purchasable
pursuant to such CDT Stock Option divided by (z) the number of Newco Shares
deemed purchasable pursuant to such CDT Stock Option; provided, however, that
in the case of any ISOs, the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such
option shall be determined in order to comply with section 424(a) of the Code.
(c) As soon as practicable after the Effective Time, Newco shall deliver to
the holders of USO Stock Options and CDT Stock Options appropriate notices
setting forth such holders' rights pursuant to the respective USO Plans and
CDT Plans and the agreements evidencing the grants of such CDT Options and USO
Options shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 1.9 after giving effect to the
Merger). Newco shall comply with the terms of the USO Plans and CDT Plans and
ensure, to the extent required by, and subject to the provisions of, such
Plans, that USO Stock Options and CDT Stock Options which qualified as
incentive stock options immediately prior to the Effective Time continue to
qualify as incentive stock options of Newco after the Effective Time.
(d) Newco shall take all corporate action necessary to reserve for issuance
a sufficient number of Newco Shares for delivery upon exercise of USO Stock
Options and CDT Stock Options assumed in accordance with
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this Section 1.9. As soon as practicable after the Effective Time, Newco shall
file a registration statement on Form S-8 (or any successor or other
appropriate forms) with respect to the Newco Shares subject to any USO Stock
Options and CDT Stock Options held by persons who are or were directors,
officers or employees of USO or CDT or their subsidiaries and shall use its
best efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain
outstanding. With respect to those individuals who subsequent to the Merger
will be subject to the reporting requirements under Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), where
applicable, Newco shall administer USO Plans and CDT Plans assumed pursuant to
this Section 1.9 in a manner that complies with Rule 16b-3 promulgated under
the Exchange Act, as it may be amended from time to time, to the extent the
applicable USO Plan and CDT Plan complied with such rule immediately prior to
the Merger.
(e) At the Effective Time, each of the (i) 371,429 warrants to purchase USO
Shares (each a "USO Warrant") issued pursuant to the Warrant Agreement between
US Order, Inc. and WorldCorp, Inc. dated as of May 1, 1993, and (ii) 14,802
warrants to purchase CDT Shares (each a "CDT Warrant") which then remains
outstanding shall be deemed to constitute a warrant to purchase, on the same
terms and conditions as were applicable under such USO Warrant or CDT Warrant,
as the case may be, the same number of Newco Shares as the holder of such USO
Warrant or CDT Warrant would have been entitled to receive pursuant to the
Merger had such holder exercised such warrant in full immediately prior to the
Effective Time, at a price per share equal to (y) the aggregate exercise price
for the USO Shares or CDT Shares otherwise purchasable pursuant to such USO
Warrant or CDT Warrant, as the case may be, divided by (z) the number of full
Newco Shares deemed purchasable pursuant to such USO Warrant or CDT Warrant,
as the case may be.
As soon as practicable after the Effective Time, Newco shall deliver to each
holder of a USO Warrant or CDT Warrant appropriate notices setting forth such
holder's rights pursuant to the warrants to purchase Newco Shares and the
agreements evidencing such USO Warrants or CDT Warrants shall continue in
effect on the same terms and conditions (subject to the adjustments required
by this Section 1.9(d) after giving effect to the Merger).
Newco shall take all corporate action necessary to reserve for issuance a
sufficient number of Newco Shares for delivery upon exercise of USO Warrants
or CDT Warrants assumed in accordance with this Section 1.9(d).
(f) The parties will take such action as may be necessary to cause Newco to
assume USO's rights and obligations with respect to the shares of Home
Financial Network, Inc. ("HFN") pursuant to a certain shareholders agreement
between USO, HFN, Daniel M. Schley and Eric T. Jacobsen (the "Founders"),
dated October 18, 1995, as amended (the "HFN Shareholders Agreement"), and a
certain shareholders agreement among USO, HFN, the Founders and Fleet Venture
Resources, Inc., dated April 19, 1996 (the "Fleet Agreement"), and to reserve
out of the authorized Newco Shares a sufficient number of Newco Shares for
delivery pursuant to the HFN Shareholders Agreement and the Fleet Agreement.
Section 1.10. Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, Newco, CDT or USO reasonably determines that any
deeds, assignments, or instruments or confirmations of transfer are necessary
or desirable to carry out the purposes of this Agreement and to vest Newco
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of USO or CDT, the officers and directors of
Newco, USO and CDT are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and
necessary or desirable action.
ARTICLE 2
Representations and Warranties of USO
Except as set forth on the Disclosure Schedule delivered by USO to CDT (the
"USO Disclosure Schedule"), USO hereby represents and warrants to CDT as
follows:
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Section 2.1. Organization and Qualification.
(a) USO is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has all
requisite power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted, except where the failure to be
so organized, existing and in good standing or to have such power and
authority would not have a Material Adverse Effect (as defined below) on USO.
When used in connection with USO, the term "Material Adverse Effect" means any
change or effect (i) that is or is reasonably likely to be materially adverse
to the business, results of operations, condition (financial or otherwise) or
prospects of USO, other than any change or effect arising out of general
economic conditions unrelated to any business in which USO is engaged, or (ii)
that may impair the ability of USO to perform its obligations hereunder or to
consummate the transactions contemplated hereby.
(b) USO has heretofore delivered to CDT accurate and complete copies of the
Certificate of Incorporation and Bylaws (or similar governing documents), as
currently in effect, of USO. Except as set forth on Schedule 2.1 of the USO
Disclosure Schedule, USO is duly qualified or licensed and in good standing to
do business in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not
have a Material Adverse Effect on USO.
Section 2.2. Capitalization of USO.
(a) The authorized capital stock of USO consists of: (i) Thirty-Five Million
(35,000,000) USO Shares, of which, as of July 31, 1996, 15,887,407 USO Shares
were issued and outstanding, and no USO Shares were held in treasury, and (ii)
Five Million (5,000,000) shares of Preferred Stock, par value $.001 per share,
no shares of which are outstanding. All of the outstanding USO Shares have
been duly authorized and validly issued, and are fully paid, nonassessable and
free of preemptive rights. As of July 31, 1996, approximately 2,519,923 USO
Shares were reserved for issuance and issuable upon or otherwise deliverable
in connection with the exercise of outstanding USO Stock Options issued
pursuant to the USO Plans, 1,000,000 USO Shares were reserved for issuance
pursuant to the USO Employee Stock Purchase Plan (the "ESPP"), and 371,429 USO
Shares were reserved for issuance with respect to USO Warrants. All of the USO
Warrants expire on September 4, 1996. In addition, pursuant to an agreement
dated September 14, 1995, certain parties have the right to require USO to
acquire their shares in Home Financial Network, Inc. in exchange for USO
Shares pursuant to a formula contained in such agreement. Between July 31,
1996 and the date hereof, no shares of USO's capital stock have been issued
other than pursuant to USO Stock Options already in existence on such date,
and, between July 31, 1996 and the date hereof, no stock options have been
granted. Except as set forth above, as of the date hereof, there are no
outstanding (i) shares of capital stock or other voting securities of USO,
(ii) securities of USO convertible into or exchangeable for shares of capital
stock or voting securities of USO, (iii) options or other rights to acquire
from USO and, except as described in the USO SEC Reports (as defined below),
no obligations of USO to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of USO, and (iv) equity equivalents, interests in the ownership or
earnings of USO or other similar rights (collectively, "USO Securities"). As
of the date hereof, except as set forth on Schedule 2.2(a) of the USO
Disclosure Schedule there are no outstanding obligations of USO or its
subsidiaries to repurchase, redeem or otherwise acquire any USO Securities or
stockholder agreements, voting trusts or other agreements or understandings to
which USO is a party or by which it is bound relating to the voting or
registration of any shares of capital stock of USO. For purposes of this
Agreement, "Lien" means, with respect to any asset (including, without
limitation, any security) any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset.
(b) The USO Shares constitute the only class of equity securities of USO
registered or required to be registered under the Exchange Act.
(c) USO does not own directly or indirectly more than fifty percent (50%) of
the outstanding voting securities or interests (including membership
interests) of any entity.
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Section 2.3. Authority Relative to this Agreement; Recommendation.
(a) USO has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of USO (the "USO Board") and no other corporate proceedings
on the part of USO are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby, except, as referred to in Section 2.17,
the approval and adoption of this Agreement by the holders of at least a
majority of the then outstanding USO Shares. This Agreement has been duly and
validly executed and delivered by USO and constitutes a valid, legal and
binding agreement of USO, enforceable against USO in accordance with its
terms.
(b) The USO Board has resolved to recommend that the stockholders of USO
approve and adopt this Agreement.
Section 2.4. SEC Reports; Financial Statements.
(a) USO has filed all required forms, reports and documents with the
Securities and Exchange Commission (the "SEC") since June 1, 1995, each of
which has complied in all material respects with all applicable requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act (and the rules and regulations promulgated thereunder,
respectively), each as in effect on the dates such forms, reports and
documents were filed. USO has heretofore delivered or promptly will deliver
prior to the Effective Date to Newco and CDT, in the form filed with the SEC
(including any amendments thereto but excluding any exhibits), (i) its Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, (ii) all
definitive proxy statements relating to USO's meetings of stockholders
(whether annual or special) held since June 1, 1995 and (iii) all other
reports or registration statements filed by USO with the SEC since June 1,
1995 (all of the foregoing, collectively, the "USO SEC Reports"). None of such
USO SEC Reports, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, contained, when
filed, any untrue statement of a material fact or omitted to state a material
fact required to be stated or incorporated by reference therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial statements of USO
included in the USO SEC Reports fairly present, in conformity with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto), the financial position of USO as of the dates
thereof and its results of operations and changes in financial position for
the periods then ended. All material agreements, contracts and other documents
required to be filed as exhibits to any of the USO SEC Reports have been so
filed.
(b) USO has heretofore made available or promptly will make available to
Newco and CDT a complete and correct copy of any amendments or modifications,
which are required to be filed with the SEC but have not yet been filed with
the SEC, to agreements, documents or other instruments which previously had
been filed by USO with the SEC pursuant to the Exchange Act.
Section 2.5. Information Supplied. None of the information supplied or to be
supplied by USO for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Newco in
connection with the issuance of Newco Shares in the Merger (the "S-4") will,
at the time the S-4 is filed with the SEC and at the time it 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 (ii) the proxy statement
relating to the meeting of USO's stockholders and the meeting of CDT's
stockholders to be held in connection with the Merger (the "Proxy Statement")
will, at the date mailed to stockholders of USO and at the times of the
meeting or meetings of stockholders of USO to be held in connection with the
Merger, 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 are made,
not misleading. The Proxy Statement, insofar as it relates to the meeting of
USO's stockholders to vote on the Merger, will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
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Section 2.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), the rules of the National Association of
Securities Dealers, Inc. ("NASD"), the filing and recordation of the Merger
Certificate as required by the DGCL, and as set forth on Schedule 2.6 of the
USO Disclosure Schedule no filing with or notice to, and no permit,
authorization, consent or approval of, any court or tribunal or
administrative, governmental or regulatory body, agency or authority (a
"Governmental Entity") is necessary for the execution and delivery by USO of
this Agreement or the consummation by USO of the transactions contemplated
hereby, except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings or give such notice would not
have a Material Adverse Effect on USO.
Except as set forth in Section 2.6 of the USO Disclosure Schedule, neither
the execution, delivery and performance of this Agreement by USO nor the
consummation by USO of the transactions contemplated hereby will (i) conflict
with or result in any breach of any provision of the respective Certificate of
Incorporation or Bylaws (or similar governing documents) of USO, (ii) result
in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration or Lien) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which USO is
a party or by which any of its properties or assets may be bound, or (iii)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to USO or any of its properties or assets, except in the case of
(ii) or (iii) for violations, breaches or defaults which would not have a
Material Adverse Effect on USO.
Section 2.7. No Default. Except as set forth in Section 2.7 of the USO
Disclosure Schedule, USO is not in breach, default or violation (and no event
has occurred which with notice or the lapse of time or both would constitute a
breach, default or violation) of any term, condition or provision of (i) its
Certificate of Incorporation or Bylaws (or similar governing documents), (ii)
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which USO is now a party or by which any of
its respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to USO or any
of its respective properties or assets, except in the case of (ii) or (iii)
for violations, breaches or defaults that would not have a Material Adverse
Effect on USO. Except as set forth in Section 2.7 of the USO Disclosure
Schedule, each note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which USO is now a party or by
which its respective properties or assets may be bound that is material to USO
and that has not expired is in full force and effect and is not subject to any
material default thereunder of which USO is aware by any party obligated to
USO thereunder.
Section 2.8. No Undisclosed Liabilities; Absence of Changes. Except as set
forth in Section 2.8 of the USO Disclosure Schedule and except as and to the
extent publicly disclosed by USO in the USO SEC Reports, as of December 31,
1995, USO does not have any liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, that would be required by generally
accepted accounting principles to be reflected on a balance sheet of USO
(including the notes thereto) or which would have a Material Adverse Effect on
USO. Except as publicly disclosed by USO, since December 31, 1995, USO has not
incurred any liabilities of any nature, whether or not accrued, contingent or
otherwise, which could reasonably be expected to have, and there have been no
events, changes or effects with respect to USO having or which reasonably
could be expected to have, a Material Adverse Effect on USO. Except as and to
the extent publicly disclosed by USO in the USO SEC Reports and except as set
forth in Section 2.8 of the USO Disclosure Schedule, since December 31, 1995,
there has not been (i) any material change by USO in its accounting methods,
principles or practices (other than as required after the date hereof by
concurrent changes in generally accepted accounting principles), (ii) any
revaluation by USO of any of its assets having a Material Adverse Effect on
USO, including, without limitation, any write-down of the value of any assets
other than in the ordinary course of business or (iii) any other action or
event that would have required the consent of any other party hereto pursuant
to Section 4.1 of this Agreement had such action or event occurred after the
date of this Agreement.
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Section 2.9. Litigation. Except as publicly disclosed by USO in the USO SEC
Reports, there is no suit, claim, action, proceeding or investigation pending
or, to the knowledge of USO, threatened against USO or any of its subsidiaries
or any of their respective properties or assets before any Governmental Entity
which, individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect on USO or could reasonably be expected to prevent or
delay the consummation of the transactions contemplated by this Agreement.
Except as publicly disclosed by USO in the USO SEC Reports, USO is not subject
to any outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen in the future, could reasonably be expected to have a
Material Adverse Effect on USO or could reasonably be expected to prevent or
delay the consummation of the transactions contemplated hereby.
Section 2.10. Compliance with Applicable Law. Except as publicly disclosed
by USO in the USO SEC Reports, USO holds all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities necessary for
the lawful conduct of their respective businesses (the "USO Permits"), except
for failures to hold such permits, licenses, variances, exemptions, orders and
approvals which would not have a Material Adverse Effect on USO. Except as
publicly disclosed by USO in the USO SEC Reports, USO is in compliance with
the terms of the USO Permits, except where the failure so to comply would not
have a Material Adverse Effect on USO. Except as publicly disclosed by USO in
the USO SEC Reports, the business of USO is not being conducted in violation
of any law, ordinance or regulation of any Governmental Entity except that no
representation or warranty is made in this Section 2.10 with respect to
Environmental Laws (as defined in Section 2.12 below) and except for
violations or possible violations which do not, and, insofar as reasonably can
be foreseen, in the future will not, have a Material Adverse Effect on USO.
Except as publicly disclosed by USO in the USO SEC Reports, no investigation
or review by any Governmental Entity with respect to USO is pending or, to the
knowledge of USO, threatened, nor, to the knowledge of USO, has any
Governmental Entity indicated an intention to conduct the same, other than, in
each case, those which USO reasonably believes will not have a Material
Adverse Effect on USO.
Section 2.11. Employee Benefit Plans; Labor Matters.
(a) Except as set forth in Section 2.11(a) of the USO Disclosure Schedule,
with respect to each employee benefit plan, program, policy, arrangement and
contract (including, without limitation, any "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), maintained or contributed to at any time by USO
or any entity required to be aggregated with USO pursuant to Section 414 of
the Code (each, a "USO Employee Plan"), no event has occurred and to the
knowledge of USO, no condition or set of circumstances exists in connection
with which USO could reasonably be expected to be subject to any liability
which would have a Material Adverse Effect on USO.
(b) (i) No USO Employee Plan is or has been subject to Title IV of ERISA or
Section 412 of the Code; and (ii) each USO Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code is the subject of a favorable Internal Revenue
Service determination letter, and nothing has occurred which could reasonably
be expected to adversely affect such determination.
(c) Section 2.11(c) of the USO Disclosure Schedule sets forth a true and
complete list, as of the date of this Agreement, of each person who holds any
USO Stock Options, together with the number of USO Shares which are subject to
such option, the date of grant of such option, the extent to which such option
is vested (or will become vested as a result of the Merger), the option price
of such option (to the extent determined as of the date hereof), whether such
option is a nonqualified stock option or is intended to qualify as an
incentive stock option within the meaning of Section 422(b) of the Code, and
the expiration date of such option. Section 2.11(c) of the USO Disclosure
Schedule also sets forth the total number of such incentive stock options and
such nonqualified options. USO has furnished CDT with complete copies of the
plans pursuant to which the USO Stock Options were issued. Other than the
automatic vesting of USO Stock Options that may occur without any action on
the part of USO or its officers or directors, USO has not taken any action
that would result in any USO Stock Options that are unvested becoming vested
in connection with or as a result of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
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(d) USO has made available to CDT (i) a description of the terms of
employment and compensation arrangements of all officers of USO and a copy of
each such agreement currently in effect; (ii) copies of all agreements with
consultants who are individuals obligating USO to make annual cash payments in
an amount exceeding $60,000; (iii) a schedule listing all officers of USO who
have executed a non-competition agreement with USO and a copy of each such
agreement currently in effect; (iv) copies (or descriptions) of all severance
agreements, programs and policies of USO with or relating to its employees,
except programs and policies required to be maintained by law; and (v) copies
of all plans, programs, agreements and other arrangements of USO with or
relating to its employees which contain change in control provisions all of
which are set forth in Section 2.11(d) of the USO Disclosure Schedule.
(e) There shall be no payment, accrual of additional benefits, acceleration
of payments, or vesting in any benefit under any USO Employee Plan or any
agreement or arrangement disclosed under this Section 2.11 solely by reason of
entering into or in connection with the transactions contemplated by this
Agreement.
(f) There are no controversies pending or, to the knowledge of USO,
threatened, between USO and any of their employees, which controversies have
or could reasonably be expected to have a Material Adverse Effect on USO.
Neither USO nor any of its subsidiaries is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by USO or any of its subsidiaries (and neither USO nor any of its
subsidiaries has any outstanding material liability with respect to any
terminated collective bargaining agreement or labor union contract), nor does
USO know of any activities or proceedings of any labor union to organize any
of its or employees. USO has no knowledge of any strike, slowdown, work
stoppage, lockout or threat thereof, by or with respect to any of its
employees.
Section 2.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by USO in the USO SEC Reports, (i) USO is
in material compliance with all applicable federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) (collectively, "Environmental
Laws"), except for non-compliance that would not have a Material Adverse
Effect on USO, which compliance includes, but is not limited to, the
possession by USO of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance
with the terms and conditions thereof; (ii) USO has not received written
notice of, or, to the knowledge of USO, is the subject of, any action, cause
of action, claim, investigation, demand or notice by any person or entity
alleging liability under or non-compliance with any Environmental Law (an
"Environmental Claim") that could reasonably be expected to have a Material
Adverse Effect on USO; and (iii) to the knowledge of USO, there are no
circumstances that are reasonably likely to prevent or interfere with such
material compliance in the future.
(b) Except as publicly disclosed by USO, there are no Environmental Claims
which could reasonably be expected to have a Material Adverse Effect on USO
that are pending or, to the knowledge of USO, threatened against USO or, to
the knowledge of USO, against any person or entity whose liability for any
Environmental Claim USO has or may have retained or assumed either
contractually or by operation of law.
Section 2.13. Tax Matters.
(a) Except as set forth in Section 2.13 of the USO Disclosure Schedule: (i)
USO has filed or has had filed on its behalf in a timely manner (within any
applicable extension periods) with the appropriate Governmental Entity all
income and other material Tax Returns (as defined herein) with respect to
Taxes (as defined herein) of USO and all Tax Returns were in all material
respects true, complete and correct; (ii) all material Taxes with respect to
USO have been paid in full or have been provided for in accordance with GAAP
on USO's most recent balance sheet which is part of the USO SEC Documents;
(iii) there are no outstanding agreements or waivers extending the statutory
period of limitations applicable to any federal, state, local or foreign
income or other material Tax Returns required to be filed by or with respect
to USO; (iv) to the knowledge of USO none of
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the Tax Returns of or with respect to USO is currently being audited or
examined by any Governmental Entity; and (v) no deficiency for any income or
other material Taxes has been assessed with respect to USO which has not been
abated or paid in full.
(b) For purposes of this Agreement, (i) "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, sales, use, ad valorem, goods and services, capital,
transfer, franchise, profits, license, withholding, payroll, employment,
employer health, excise, estimated, severance, stamp, occupation, property or
other taxes, customs duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority and (ii) "Tax Return" shall
mean any report, return, documents, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction with respect
to Taxes.
Section 2.14. Title to Property. USO has good and defensible title to all of
its properties and assets, free and clear of all liens, charges and
encumbrances except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which, individually or in the aggregate, would not have a Material Adverse
Effect on USO; and, to USO's knowledge, all leases pursuant to which USO
leases from others real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not, to the
knowledge of USO, under any of such leases, any existing material default or
event of default (or event which with notice of lapse of time, or both, would
constitute a default and in respect of which USO has not taken adequate steps
to prevent such a default from occurring) except where the lack of such good
standing, validity and effectiveness, or the existence of such default or
event, would not have a Material Adverse Effect on USO.
Section 2.15. Intellectual Property.
(a) USO owns, or possesses adequate licenses or other valid rights to use,
all existing United States and foreign patents, trademarks, trade names,
service marks, copyrights, trade secrets and applications therefor that are
material to its business as currently conducted (the "USO Intellectual
Property Rights").
(b) The validity of the USO Intellectual Property Rights and the title
thereto of USO is not being questioned in any litigation to which USO is a
party.
(c) Except as set forth in Section 2.15(c) of the USO Disclosure Schedule,
the conduct of the business of USO as now conducted does not, to USO's
knowledge, infringe any valid patents, trademarks, trade names, service marks
or copyrights of others. The consummation of the transactions completed hereby
will not result in the loss or impairment of any USO Intellectual Property
Rights.
(d) USO has taken steps it believes appropriate to protect and maintain its
trade secrets as such, except in cases where USO has elected to rely on patent
or copyright protection in lieu of trade secret protection.
Section 2.16. Insurance. USO maintains general liability and other business
insurance that USO believes to be reasonably prudent for its business.
Section 2.17. Vote Required. The affirmative vote of the holders of at least
a majority of the outstanding USO Shares is the only vote of the holders of
any class or series of USO's capital stock necessary to approve and adopt this
Agreement and the Merger.
Section 2.18. Tax Treatment. Neither USO nor, to the knowledge of USO, any
of its affiliates has taken or agreed to take action that would prevent the
Merger from constituting a reorganization qualifying under the provisions of
Section 368(a) of the Code.
Section 2.19. Affiliates. Except for Principal USO Stockholder ("PCS") and
the directors and executive officers of USO, each of whom is listed in Section
2.19 of the USO Disclosure Schedule, there are no
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persons who, to the knowledge of USO, may be deemed to be affiliates of USO
under Rule 1-02(b) of Regulation S-X of the SEC (the "USO Affiliates").
Section 2.20. Certain Business Practices. None of USO or any directors,
officers, agents or employees of USO has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties
or campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended (the "FCPA"), or (iii) made any other unlawful payment.
Section 2.21. Insider Interests. Except as set forth in Section 2.21 of the
USO Disclosure Schedule, neither PCS nor any officer or director of USO has
any interest in any material property, real or personal, tangible or
intangible, including without limitation, any computer software or USO
Intellectual Property Rights, used in or pertaining to the business of USO,
expect for the ordinary rights of a stockholder or employee stock
optionholder.
Section 2.22. Opinion of Financial Adviser. Salomon Brothers Inc (the "USO
Financial Adviser") has delivered to the USO Board its written opinion, dated
the date of this Agreement, to the effect that, as of such date, the exchange
ratio contemplated by the Merger is fair to the holders of USO Shares.
Section 2.23. Brokers. No broker, finder or investment banker (other than
the USO Financial Adviser, a true and correct copy of whose engagement
agreement has been provided to CDT) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of USO.
Section 2.24. Disclosure. No representation or warranty of USO in this
Agreement or any certificate, schedule, document or other instrument furnished
or to be furnished to CDT pursuant hereto or in connection herewith contains,
as of the date of such representation, warranty or instrument, or will contain
any untrue statement of a material fact or, at the date thereof, omits or will
omit to state a material fact necessary to make any statement herein or
therein, in light of the circumstances under which such statement is or will
be made, not misleading.
Section 2.25. No Existing Discussions. As of the date hereof, USO is not
engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to any Third Party Acquisition (as defined in Section
4.4).
Section 2.26. Material Contracts.
(a) USO has delivered or otherwise made available to CDT true, correct and
complete copies of all contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which USO is a
party affecting the obligations of any party thereunder) to which USO is a
party or by which any of its properties or assets are bound that are, material
to the business, properties or assets of USO taken as a whole, including,
without limitation, to the extent any of the following are, individually or in
the aggregate, material to the business, properties or assets of USO taken as
a whole, all: (i) employment, product design or development, personal
services, consulting, non-competition, severance, golden parachute or
indemnification contracts (including, without limitation, any contract to
which USO is a party involving employees of USO); (ii) licensing, publishing,
merchandising or distribution agreements; (iii) contracts granting rights of
first refusal or first negotiation; (iv) partnership or joint venture
agreements; (v) agreements for the acquisition, sale or lease of material
properties or assets or stock or otherwise entered into since June 1, 1995;
(vi) contracts or agreements with any Governmental Entity; and (vii) all
commitments and agreements to enter into any of the foregoing (collectively,
together with any such contracts entered into in accordance with Section 4.1
hereof, the "USO Contracts"). USO is not a party to or bound by any severance,
golden parachute or other agreement with any employee or consultant pursuant
to which such person would be entitled to receive any additional compensation
or an accelerated payment of compensation as a result of the consummation of
the transactions contemplated hereby.
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(b) Each of the USO Contracts is valid and enforceable in accordance with
its terms, and there is no default under any USO Contract so listed either by
USO or, to the knowledge of USO, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by USO or, to the knowledge of USO, any other
party, in any such case in which such default or event could reasonably be
expected to have a Material Adverse Effect on USO.
(c) No party to any such USO Contract has given notice to USO of or made a
claim against USO with respect to any breach or default thereunder, in any
such case in which such breach or default could reasonably be expected to have
a Material Adverse Effect on USO.
ARTICLE 3
Representations and Warranties of CDT
Except as set forth on the Disclosure Schedule delivered by CDT to USO (the
"CDT Disclosure Schedule"), CDT hereby represents and warrants to USO as
follows:
Section 3.1. Organization and Qualification.
(a) Each of CDT and its subsidiaries is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite power and authority to own, lease and
operate its properties and to carry on its businesses as now being conducted,
except where the failure to be so organized, existing and in good standing or
to have such power and authority would not have a Material Adverse Effect (as
defined below) on CDT. When used in connection with CDT, the term "Material
Adverse Effect" means any change or effect (i) that is or is reasonably likely
to be materially adverse to the business, results of operations, condition
(financial or otherwise) or prospects of CDT and its subsidiaries, taken as a
whole, other than any change or effect arising out of general economic
conditions unrelated to any businesses in which CDT and its subsidiaries are
engaged, or (ii) that may impair the ability of CDT to consummate the
transactions contemplated hereby.
(b) CDT has heretofore delivered to USO accurate and complete copies of the
Certificate of Incorporation and Bylaws (or similar governing documents), as
currently in effect, of CDT. Each of CDT and its subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary,
except in such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not have a Material Adverse Effect on CDT.
Section 3.2. Capitalization of CDT.
(a) As of July 31, 1996, the authorized capital stock of CDT consists of
Twenty Million (20,000,000) CDT Shares, 15,525,035 CDT Shares (including
63,780 CDT Shares held in CDT's treasury) were issued and 15,461,225 shares
were outstanding. All of the outstanding CDT Shares have been duly authorized
and validly issued, and are fully paid, nonassessable and free of preemptive
rights. As of July 31, 1996, approximately 329,500 CDT Shares were reserved
for issuance and issuable upon or otherwise deliverable in connection with the
exercise of outstanding CDT Stock Options issued pursuant to the CDT Plans. As
of July 31, 1996, 14,802 CDT Shares were reserved for issuance and issuable
upon or otherwise deliverable in connection with the exercise of outstanding
warrants (collectively, the "CDT Warrants").
(b) Except as set forth in Section 3.2(b) of the CDT Disclosure Schedule,
CDT is the record and beneficial owner of all of the issued and outstanding
shares of capital stock of its subsidiaries.
(c) Except as set forth in Section 3.2(c) of the CDT Disclosure Schedule,
between July 31, 1996 and the date hereof, no shares of CDT's capital stock
have been issued other than pursuant to CDT Stock Options already in existence
on such date, and, between July 31, 1996 and the date hereof, no CDT Stock
Options have been granted. Except as set forth in Section 3.2(a) above, as of
the date hereof, there are no outstanding (i) shares of capital stock or other
voting securities of CDT, (ii) securities of CDT or its subsidiaries
convertible into or
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exchangeable for shares of capital stock or voting securities of CDT, (iii)
options or other rights to acquire from CDT or its subsidiaries, or
obligations of CDT or its subsidiaries to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of CDT, or (iv) equity equivalents, interests in the
ownership or earnings of CDT or its subsidiaries or other similar rights
(collectively, "CDT Securities"). As of the date hereof, there are no
outstanding obligations of CDT or any of its subsidiaries to repurchase,
redeem or otherwise acquire any CDT Securities. There are no stockholder
agreements, voting trusts or other agreements or understandings to which CDT
is a party or by which it is bound relating to the voting or registration of
any shares of capital stock of CDT.
(d) Except as set forth in Section 3.2(d) of the CDT Disclosure Schedule,
there are no securities of CDT convertible into or exchangeable for, no
options or other rights to acquire from CDT, and no other contract,
understanding, arrangement or obligation (whether or not contingent) providing
for the issuance or sale, directly or indirectly, of any capital stock or
other ownership interests in, or any other securities of, any subsidiary of
CDT.
(e) The CDT Shares constitute the only class of equity securities of CDT or
its subsidiaries registered or required to be registered under the Exchange
Act.
(f) Except as set forth in Section 3.2(f) of the CDT Disclosure Schedule,
CDT does not own directly or indirectly more than fifty percent (50%) of the
outstanding voting securities or interests (including membership interests) of
any entity.
Section 3.3. Authority Relative to this Agreement; Recommendation.
(a) CDT has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of CDT (the "CDT Board"), and no other corporate
proceedings on the part of CDT are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby, except, as referred to in
Section 3.17, the approval and adoption of this Agreement by the holders of at
least a majority of the then outstanding CDT Shares. This Agreement has been
duly and validly executed and delivered by CDT and constitutes a valid, legal
and binding agreement of CDT, enforceable against CDT in accordance with its
terms.
(b) The CDT Board has resolved to recommend that the stockholders of CDT
approve and adopt this Agreement.
Section 3.4. SEC Reports; Financial Statements.
(a) CDT has filed all required forms, reports and documents with the SEC
since January 1, 1993, each of which has complied in all material respects
with all applicable requirements of the Securities Act and the Exchange Act
(and the rules and regulations promulgated thereunder, respectively), each as
in effect on the dates such forms, reports and documents were filed. CDT has
heretofore delivered or promptly will deliver prior to the Effective Date to
Newco and USO, in the form filed with the SEC (including any amendments
thereto but excluding any exhibits), (i) its Annual Reports on Form 10-K for
the fiscal years ended December 31, 1993, December 31, 1994 and December 31,
1995, (ii) all definitive proxy statements relating to CDT's meetings of
stockholders (whether annual or special) held since January 1, 1993 and (iii)
all other reports or registration statements filed by CDT with the SEC since
January 1, 1993 (all of the foregoing, collectively, the "CDT SEC Reports").
None of such CDT SEC Reports, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements of CDT included in the CDT SEC Reports
fairly present, in conformity with generally accepted accounting principles
applied on a consistent basis (except as may be indicated in the
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notes thereto), the consolidated financial position of CDT and its
consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods then
ended. All material agreements, contracts and other documents required to be
filed as exhibits to any of the CDT SEC Reports have been so filed.
(b) CDT has heretofore made available or promptly will make available to
Newco and USO a complete and correct copy of any amendments or modifications,
which are required to be filed with the SEC but have not yet been filed with
the SEC, to agreements, documents or other instruments which previously had
been filed by CDT with the SEC pursuant to the Exchange Act.
Section 3.5. Information Supplied. None of the information supplied or to be
supplied by CDT for inclusion or incorporation by reference to (i) the S-4
will, at the time the S-4 is filed with the SEC and at the time it 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 (ii) the Proxy
Statement will, at the date mailed to stockholders of CDT and at the times of
the meeting or meetings of stockholders of CDT to be held in connection with
the Merger, 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 are
made, not misleading. The Proxy Statement, insofar as it relates to the
meeting of CDT's stockholders to vote on the Merger, will comply as to form in
all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder, and the S-4 will comply as to form in all material
respects with the provisions of the Securities Act and the rules and
regulations thereunder.
Section 3.6. Consents and Approvals; No Violations. Except as set forth in
Section 3.6 of the CDT Disclosure Schedule, and for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act, the rules of the NASD, and the
filing and recordation of the Merger Certificate as required by the DGCL, no
filing with or notice to, and no permit, authorization, consent or approval
of, any Governmental Entity is necessary for the execution and delivery by CDT
of this Agreement or the consummation by CDT of the transactions contemplated
hereby, except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings or give such notice would not
have a Material Adverse Effect on CDT.
Neither the execution, delivery and performance of this Agreement by CDT nor
the consummation by CDT of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
Certificate of Incorporation or Bylaws (or similar governing documents) of CDT
or any of CDT's subsidiaries, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or Lien) under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument
or obligation to which CDT or any of CDT's subsidiaries is a party or by which
any of them or any of their respective properties or assets may be bound or
(iii) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to CDT or any of CDT's subsidiaries or any of their
respective properties or assets, except in the case of (ii) or (iii) for
violations, breaches or defaults which would not have a Material Adverse
Effect on CDT.
Section 3.7. No Default. None of CDT or any of its subsidiaries is in
breach, default or violation (and no event has occurred which with notice or
the lapse of time or both would constitute a breach, default or violation) of
any term, condition or provision of (i) its Certificate of Incorporation or
Bylaws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which CDT or any of its subsidiaries is now a party or by which
any of them or any of their respective properties or assets may be bound or
(iii) any order, writ, injunction, decree, law, statute, rule or regulation
applicable to CDT, its subsidiaries or any of their respective properties or
assets, except in the case of (ii) or (iii) for violations, breaches or
defaults that would not have a Material Adverse Effect on CDT. Each note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which
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CDT or any of its subsidiaries is now a party or by which any of them or any
of their respective properties or assets may be bound that is material to CDT
and its subsidiaries taken as a whole and that has not expired is in full
force and effect and is not subject to any material default thereunder of
which CDT is aware by any party obligated to CDT or any subsidiary thereunder.
Section 3.8. No Undisclosed Liabilities; Absence of Changes. Except as and
to the extent publicly disclosed by CDT in the CDT SEC Reports, as of December
31, 1995, none of CDT or its subsidiaries had any liabilities or obligations
of any nature, whether or not accrued, contingent or otherwise, that would be
required by generally accepted accounting principles to be reflected on a
consolidated balance sheet of CDT and its consolidated subsidiaries (including
the notes thereto) or which would have a Material Adverse Effect on CDT.
Except as publicly disclosed by CDT, since December 31, 1995, none of CDT or
its subsidiaries has incurred any liabilities of any nature, whether or not
accrued, contingent or otherwise, which could reasonably be expected to have,
and there have been no events, changes or effects with respect to CDT or its
subsidiaries having or which could reasonably be expected to have, a Material
Adverse Effect on CDT. Except as and to the extent publicly disclosed by CDT
in the CDT SEC Reports or except as set forth in Section 3.8 of the CDT
Disclosure Schedule, since December 31, 1995, there has not been (i) any
material change by CDT in its accounting methods, principles or practices
(other than as required after the date hereof by concurrent changes in
generally accepted accounting principles), (ii) any revaluation by CDT of any
of its assets having a Material Adverse Effect on CDT, including, without
limitation, any write-down of the value of any assets other than in the
ordinary course of business or (iii) any other action or event that would have
required the consent of any other party hereto pursuant to Section 4.2 of this
Agreement had such action or event occurred after the date of this Agreement.
Section 3.9. Litigation. Except as set forth in Schedule 3.9 of the CDT
Disclosure Schedule or as publicly disclosed by CDT in the CDT SEC Reports,
there is no suit, claim, action, proceeding or investigation pending or, to
the knowledge of CDT, threatened against CDT or any of its subsidiaries or any
of their respective properties or assets before any Governmental Entity which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on CDT or could reasonably be expected to prevent or
delay the consummation of the transactions contemplated by this Agreement.
Except as publicly disclosed by CDT in the CDT SEC Reports, none of CDT or its
subsidiaries is subject to any outstanding order, writ, injunction or decree
which, insofar as can be reasonably foreseen in the future, could reasonably
be expected to have a Material Adverse Effect on CDT or could reasonably be
expected to prevent or delay the consummation of the transactions contemplated
hereby.
Section 3.10. Compliance with Applicable Law. Except as publicly disclosed
by CDT in the CDT SEC Reports, CDT and its subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary for the lawful conduct of their respective businesses (the
"CDT Permits"), except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals which would not have a Material Adverse
Effect on CDT. Except as publicly disclosed by CDT in the CDT SEC Reports, CDT
and its subsidiaries are in compliance with the terms of the CDT Permits,
except where the failure so to comply would not have a Material Adverse Effect
on CDT. Except as publicly disclosed by CDT in the CDT SEC Reports, the
businesses of CDT and its subsidiaries are not being conducted in violation of
any law, ordinance or regulation of any Governmental Entity except that no
representation or warranty is made in this Section 3.10 with respect to
Environmental Laws and except for violations or possible violations which do
not, and, insofar as reasonably can be foreseen, in the future will not, have
a Material Adverse Effect on CDT. Except as publicly disclosed by CDT in the
CDT SEC Reports, no investigation or review by any Governmental Entity with
respect to CDT or its subsidiaries is pending or, to the knowledge of CDT,
threatened, nor, to the knowledge of CDT, has any Governmental Entity
indicated an intention to conduct the same, other than, in each case, those
which CDT reasonably believes will not have a Material Adverse Effect on CDT.
Section 3.11. Employee Benefit Plans; Labor Matters.
(a) With respect to each employee benefit plan, program, policy, arrangement
and contract (including, without limitation, any "employee benefit plan," as
defined in Section 3(3) of ERISA), maintained or
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contributed to at any time by CDT, any of its subsidiaries or any entity
required to be aggregated with CDT or any of its subsidiaries pursuant to
Section 414 of the Code (each, a "CDT Employee Plan"), no event has occurred
and, to the knowledge of CDT, no condition or set of circumstances exists in
connection with which CDT or any of its subsidiaries could reasonably be
expected to be subject to any liability which would have a Material Adverse
Effect on CDT.
(b) (i) No CDT Employee Plan is or has been subject to Title IV of ERISA or
Section 412 of the Code; and (ii) each CDT Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code is the subject of a favorable Internal Revenue
Service determination letter, and nothing has occurred which could reasonably
be expected to adversely affect such determination.
(c) Section 3.11(c) of the CDT Disclosure Schedule sets forth a true and
complete list, as of the date of this Agreement, of each person who holds any
CDT Stock Options, together with the number of CDT Shares which are subject to
such option, the date of grant of such option, the extent to which such option
is vested (or will become vested as a result of the Merger), the option price
of such option (to the extent determined as of the date hereof), whether such
option is a nonqualified stock option or is intended to qualify as an
incentive stock option within the meaning of Section 422(b) of the Code, and
the expiration date of such option. Section 3.11(c) of the CDT Disclosure
Schedule also sets forth the total number of such incentive stock options and
such nonqualified options. CDT has furnished USO with complete copies of the
plans pursuant to which the CDT Stock Options were issued. Other than the
automatic vesting of CDT Stock Options that may occur without any action on
the part of CDT or its officers or directors, CDT has not taken any action
that would result in any CDT Stock Options that are unvested becoming vested
in connection with or as a result of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(d) CDT has made available to USO (i) a description of the terms of
employment and compensation arrangements of all officers of CDT and a copy of
each such agreement currently in effect; (ii) copies of all agreements with
consultants who are individuals obligating CDT to make annual cash payments in
an amount exceeding $60,000; (iii) a schedule listing all officers of CDT who
have executed a non-competition agreement with CDT and a copy of each such
agreement currently in effect; (iv) copies (or descriptions) of all severance
agreements, programs and policies of CDT with or relating to its employees,
except programs and policies required to be maintained by law; and (v) copies
of all plans, programs, agreements and other arrangements of the CDT with or
relating to its employees which contain change in control provisions.
(e) Except as disclosed in Section 3.11(e) of the CDT Disclosure Schedule,
there shall be no payment, accrual of additional benefits, acceleration of
payments, or vesting in any benefit under any CDT Employee Plan or any
agreement or arrangement disclosed under this Section 3.11 solely by reason of
entering into or in connection with the transactions contemplated by this
Agreement.
(f) There are no controversies pending or, to the knowledge of CDT,
threatened, between CDT or any of its subsidiaries and any of their respective
employees, which controversies have or could reasonably be expected to have a
Material Adverse Effect on CDT. Neither CDT nor any of its subsidiaries is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by CDT or any of its subsidiaries (and neither
CDT nor any of its subsidiaries has any outstanding material liability with
respect to any terminated collective bargaining agreement or labor union
contract), nor does CDT know of any activities or proceedings of any labor
union to organize any of its or any of its subsidiaries' employees. CDT has no
knowledge of any strike, slowdown, work stoppage, lockout or threat thereof,
by or with respect to any of its or any of its subsidiaries' employees.
Section 3.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by CDT in the CDT SEC Reports, (i) each of
CDT and its subsidiaries is in material compliance with all Environmental
Laws, except for non-compliance that would not have a Material Adverse Effect
on CDT, which compliance includes, but is not limited to, the possession by
CDT and its
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subsidiaries of all material permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms
and conditions thereof; (ii) none of CDT or its subsidiaries has received
written notice of, or, to the knowledge of CDT, is the subject of, any
Environmental Claim that could reasonably be expected to have a Material
Adverse Effect on CDT; and (iii) to the knowledge of CDT, there are no
circumstances that are reasonably likely to prevent or interfere with such
material compliance in the future.
(b) Except as publicly disclosed by CDT, there are no Environmental Claims
which could reasonably be expected to have a Material Adverse Effect on CDT
that are pending or, to the knowledge of CDT, threatened against CDT or any of
its subsidiaries or, to the knowledge of CDT, against any person or entity
whose liability for any Environmental Claim CDT or its subsidiaries has or may
have retained or assumed either contractually or by operation of law.
Section 3.13. Tax Matters. Except as set forth in Section 3.13 of the CDT
Disclosure Schedule: (i) CDT and each of its subsidiaries has filed or has had
filed on its behalf in a timely manner (within any applicable extension
periods) with the appropriate Governmental Entity all income and other
material Tax Returns with respect to Taxes of CDT and each of its subsidiaries
and all Tax Returns were in all material respects true, complete and correct;
(ii) all material Taxes with respect to CDT and each of its subsidiaries have
been paid in full or have been provided for in accordance with GAAP on CDT's
most recent balance sheet which is part of the CDT SEC Documents; (iii) there
are no outstanding agreements or waivers extending the statutory period of
limitations applicable to any federal, state, local or foreign income or other
material Tax Returns required to be filed by or with respect to CDT or its
subsidiaries; (iv) to the knowledge of CDT none of the Tax Returns of or with
respect to CDT or any of its subsidiaries is currently being audited or
examined by any Governmental Entity; and (v) no deficiency for any income or
other material Taxes has been assessed with respect to CDT or any of its
subsidiaries which has not been abated or paid in full.
Section 3.14. Title to Property. CDT and each of its subsidiaries have good
and defensible title to all of their properties and assets, free and clear of
all liens, charges and encumbrances except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which, individually or in the aggregate, would
not have a Material Adverse Effect on CDT; and, to CDT's knowledge, all leases
pursuant to which CDT or any of its subsidiaries lease from others real or
personal property are in good standing, valid and effective in accordance with
their respective terms, and there is not, to the knowledge of CDT, under any
of such leases, any existing material default or event of default (or event
which with notice or lapse of time, or both, would constitute a material
default and in respect of which CDT or such subsidiary has not taken adequate
steps to prevent such a default from occurring) except where the lack of such
good standing, validity and effectiveness, or the existence of such default or
event of default would not have a Material Adverse Effect on CDT.
Section 3.15. Intellectual Property.
(a) Each of CDT and its subsidiaries owns, or possesses adequate licenses or
other valid rights to use, all existing United States and foreign patents,
trademarks, trade names, services marks, copyrights, trade secrets, and
applications therefor that are material to its business as currently conducted
(the "CDT Intellectual Property Rights").
(b) Except as set forth in Section 3.15(b) of the CDT Disclosure Schedule,
the validity of the CDT Intellectual Property Rights and the title thereto of
CDT or any subsidiary, as the case may be, is not being questioned in any
litigation to which CDT or any subsidiary is a party.
(c) The conduct of the business of CDT and its subsidiaries as now conducted
does not, to CDT's knowledge, infringe any valid patents, trademarks,
tradenames, service marks or copyrights of others. The consummation of the
transactions contemplated hereby will not result in the loss or impairment of
any CDT Intellectual Property Rights.
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(d) Each of CDT and its subsidiaries has taken steps it believes appropriate
to protect and maintain its trade secrets as such, except in cases where CDT
has elected to rely on patent or copyright protection in lieu of trade secret
protection.
Section 3.16. Insurance. CDT and its subsidiaries maintain general liability
and other business insurance that CDT believes to be reasonably prudent for
its business.
Section 3.17. Vote Required. The affirmative vote of the holders of at least
a majority of the outstanding CDT Shares is the only vote of the holders of
any class or series of CDT's capital stock necessary to approve and adopt this
Agreement and the Merger.
Section 3.18. Tax Treatment. Neither CDT nor, to the knowledge of CDT, any
of its affiliates has taken or agreed to take any action that would prevent
the Merger from constituting a reorganization qualifying under the provisions
of Section 368(a) of the Code.
Section 3.19. Affiliates. Except for the directors and executive officers of
CDT, each of whom is listed in Section 3.19 of the CDT Disclosure Schedule,
there are no persons who, to the knowledge of CDT, may be deemed to be
affiliates of CDT under Rule 1-02(b) of Regulation S-X of the SEC (the "CDT
Affiliates").
Section 3.20. Certain Business Practices. None of CDT, any of its
subsidiaries or any directors, officers, agents or employees of CDT or any of
its subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the FCPA, or (iii) made any other unlawful payment.
Section 3.21. Insider Interests. Except as set forth in Section 3.21 of the
CDT Disclosure Schedule, no officer or director of CDT has any interest in any
material property, real or personal, tangible or intangible, including without
limitation, any computer software or CDT Intellectual Property Rights, used in
or pertaining to the business of CDT or any subsidiary, except for the
ordinary rights of a stockholder or employee stock optionholder.
Section 3.22. Opinion of Financial Adviser. First Albany Corporation (the
"CDT Financial Adviser") has delivered to the CDT Board its written opinion,
dated as of the date of this Agreement, to the effect that, as of such date,
the exchange ratio contemplated by the Merger is fair to the holders of CDT
Shares.
Section 3.23. Brokers. No broker, finder or investment banker (other than
the CDT Financial Adviser, a true and correct copy of whose engagement
agreement has been provided to USO) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of CDT.
Section 3.24. Disclosure. No representation or warranty of CDT in this
Agreement or any certificate, schedule, document or other instrument furnished
or to be furnished to USO pursuant hereto or in connection herewith contains,
as of the date of such representation, warranty or instrument, or will contain
any untrue statement of a material fact or, at the date thereof, omits or will
omit to state a material fact necessary to make any statement herein or
therein, in light of the circumstances under which such statement is or will
be made, not misleading.
Section 3.25. No Existing Discussions. As of the date hereof, CDT is not
engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to any Third Party Acquisition (as defined in Section
5.4).
Section 3.26. Material Contracts.
(a) CDT has delivered or otherwise made available to USO true, correct and
complete copies of all contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to
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which CDT is a party affecting the obligations of any party thereunder) to
which CDT or any of its subsidiaries is a party or by which any of their
properties or assets are bound that are, material to the business, properties
or assets of CDT and its subsidiaries taken as a whole, including, without
limitation, to the extent any of the following are, individually or in the
aggregate, material to the business, properties or assets of CDT and its
subsidiaries taken as a whole, all: (i) employment, product design or
development, personal services, consulting, non-competition, severance, golden
parachute or indemnification contracts (including, without limitation, any
contract to which CDT is a party involving employees of CDT); (ii) licensing,
publishing, merchandising or distribution agreements; (iii) contracts granting
rights of first refusal or first negotiation; (iv) partnership or joint
venture agreements; (v) agreements for the acquisition, sale or lease of
material properties or assets or stock or otherwise entered into since January
1, 1993, (vi) contracts or agreements with any Governmental Entity; and (vii)
all commitments and agreements to enter into any of the foregoing
(collectively, together with any such contracts entered into in accordance
with Section 5.2 hereof, the "CDT Contracts"). Neither CDT nor any of its
subsidiaries is a party to or bound by any severance, golden parachute or
other agreement with any employee or consultant pursuant to which such person
would be entitled to receive any additional compensation or an accelerated
payment of compensation as a result of the consummation of the transactions
contemplated hereby.
(b) Each of the CDT Contracts is valid and enforceable in accordance with
its terms, and there is no default under any CDT Contract so listed either by
CDT or, to the knowledge of CDT, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by CDT or, to the knowledge of CDT, any other
party, in any such case in which such default or event could reasonably be
expected to have a Material Adverse Effect on CDT.
(c) No party to any such CDT Contract has given notice to CDT of or made a
claim against CDT with respect to any breach or default thereunder, in any
such case in which such breach or default could reasonably be expected to have
a Material Adverse Effect on CDT.
ARTICLE 4
Covenants
Section 4.1. Conduct of Business of USO. Except as contemplated by this
Agreement or as described in Section 4.1 of the USO Disclosure Schedule,
during the period from the date hereof to the Effective Time, USO will conduct
its operations in the ordinary course of business consistent with past
practice and, to the extent consistent therewith, with no less diligence and
effort than would be applied in the absence of this Agreement, seek to
preserve intact its current business organization, keep available the service
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end
that goodwill and ongoing businesses shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing, except as otherwise
expressly provided in this Agreement or as described in Section 4.1 of the USO
Disclosure Schedule, prior to the Effective Time, USO will not, without the
prior written consent of CDT:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) amend the terms of the USO Warrants, authorize for issuance, issue,
sell, deliver or agree or commit to issue, sell or deliver (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any other
securities (except bank loans) or equity equivalents (including, without
limitation, any stock options or stock appreciation rights), except for (i)
the issuance and sale of USO Shares pursuant to options previously granted
under the USO Plans; (ii) the issuance and sale of USO Shares pursuant to
USO Warrants outstanding on the date hereof; and (iii) the granting of
stock options to employees in the ordinary course of business and
consistent with past practices of USO, provided that the aggregate number
of USO Shares issuable pursuant to such options shall not exceed 200,000;
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(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, make any other actual, constructive or deemed distribution
in respect of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or redeem or otherwise acquire any
of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
USO (other than the Merger);
(e) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings or issuances of letters of credit
under existing lines of credit in the ordinary course of business; (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person; (iii) make any loans, advances or capital contributions to,
or investments in, any other person; (iv) pledge or otherwise encumber
shares of capital stock of USO; or (v) mortgage or pledge any of its
material assets, tangible or intangible, or create or suffer to exist any
material Lien thereupon (other than tax Liens for taxes not yet due);
(f) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock
appreciation rights or performance units); provided, however, that this
paragraph (f) shall not prevent USO from (i) entering into employment
agreements or severance agreements with employees in the ordinary course of
business and consistent with past practice or (ii) increasing annual
compensation and/or providing for or amending bonus arrangements for
employees for fiscal 1997 in the ordinary course of year-end compensation
reviews consistent with past practice and paying bonuses to employees for
fiscal 1996 in amounts previously disclosed to CDT (to the extent that such
compensation increases and new or amended bonus arrangements do not result
in a material increase in benefits or compensation expense to USO);
(g) acquire, sell, lease or dispose of any assets in any single
transaction or series of related transactions (other than in the ordinary
course of business);
(h) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(i) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or writing-off notes or
accounts receivable other than in the ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any
contract or agreement other than in the ordinary course of business
consistent with past practice which would be material to USO; (iii)
authorize any new capital expenditure or expenditures which, individually,
is in excess of $500,000 or, in the aggregate, are in excess of $1,000,000;
provided, however that none of the foregoing shall limit any capital
expenditure required pursuant to existing contracts;
(k) make any tax election or settle or compromise any income tax
liability material to USO;
(l) settle or compromise any pending or threatened suit, action or claim
which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which could have a Material Adverse Effect on
USO;
(m) commence any material research and development project or terminate
any material research and development project that is currently ongoing, in
either case, except pursuant to the terms of existing contracts or in the
ordinary course of business; or
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(n) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through 4.1(m) or any action which would make
any of the representations or warranties of USO contained in this Agreement
untrue or incorrect.
Section 4.2. Conduct of Business of CDT. Except as contemplated by this
Agreement or as described in Section 4.2 of the CDT Disclosure Schedule,
during the period from the date hereof to the Effective Time, CDT will conduct
its operations in the ordinary course of business consistent with past
practice and, to the extent consistent therewith, with no less diligence and
effort than would be applied in the absence of this Agreement, seek to
preserve intact its current business organization, keep available the service
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end
that goodwill and ongoing businesses shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing, except as otherwise
expressly provided in this Agreement or as described in Section 4.2 of the CDT
Disclosure Schedule, prior to the Effective Time, CDT will not, without the
prior written consent of USO:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) amend the terms of the CDT Warrants, authorize for issuance, issue,
sell, deliver or agree or commit to issue, sell or deliver (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any other
securities (except bank loans) or equity equivalents (including, without
limitation, any stock options or stock appreciation rights), except for (i)
the issuance and sale of CDT Shares pursuant to options previously granted
under the CDT Plans (ii) the issuance and sale of CDT Shares pursuant to
CDT Warrants outstanding on the date hereof; and (iii) the granting of
stock options to employees in the ordinary course of business and
consistent with past practices of CDT, provided that the aggregate number
of CDT Shares issuable pursuant to such options shall not exceed 200,000;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, make any other actual, constructive or deemed distribution
in respect of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or redeem or otherwise acquire any
of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
CDT (other than the Merger);
(e) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings or issuances of letters of credit
under existing lines of credit in the ordinary course of business; (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person; (iii) make any loans, advances or capital contributions to,
or investments in, any other person; (iv) pledge or otherwise encumber
shares of capital stock of CDT or its subsidiaries; or (v) mortgage or
pledge any of its material assets, tangible or intangible, or create or
suffer to exist any material Lien thereupon (other than tax Liens for taxes
not yet due);
(f) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock
appreciation rights or performance units); provided, however, that this
paragraph (f) shall not prevent CDT or its subsidiaries from (i) entering
into employment agreements or severance agreements with employees in the
ordinary course of business and consistent with past practice or (ii)
increasing annual compensation and/or providing for or amending bonus
arrangements for employees for fiscal 1997 in the ordinary course of year-
end compensation reviews consistent with past practice and paying bonuses
to employees for fiscal
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1996 in amounts previously disclosed to USO (to the extent that such
compensation increases and new or amended bonus arrangements do not result
in a material increase in benefits or compensation expense to CDT);
(g) acquire, sell, lease or dispose of any assets in any single
transaction or series of related transactions other than in the ordinary
course of business;
(h) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(i) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory of writing-off notes or
accounts receivable other than in the ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership, or other business organization or
division thereof or any equity interest therein; (ii) enter into any
contract or agreement other than in the ordinary course of business
consistent with past practice which would be material to CDT; (iii)
authorize any new capital expenditure or expenditures which, individually,
is in excess of $500,000 or, in the aggregate, are in excess of $1,000,000:
provided, however that none of the foregoing shall limit any capital
expenditure required pursuant to existing contracts;
(k) make any tax election or settle or compromise any income tax
liability material to CDT and its subsidiaries taken as a whole;
(l) settle or compromise any pending or threatened suit, action or claim
which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which could have a Material Adverse Effect on
CDT;
(m) commence any material research and development project or terminate
any material research and development project that is currently ongoing, in
either case, except pursuant to the terms of existing contracts or except
in the ordinary course of business; or
(n) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.2(a) through 4.2(m) or any action which would make
any of the representations or warranties of the CDT contained in this
Agreement untrue or incorrect.
Section 4.3. Preparation of S-4 and the Proxy Statement. CDT and USO shall
promptly prepare and file with the SEC the Proxy Statement, and the parties
shall prepare and file with the SEC the S-4, in which the Proxy Statement will
be included as a prospectus. Each of the parties shall use its best efforts to
have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing. The parties shall also take any action (other
than qualifying to do business in any jurisdiction in which it is now not so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Newco Shares in the Merger and upon the
exercise of USO Stock Options and CDT Stock Options. Each party shall furnish
all information concerning such party and the stockholders and holders of
stock options of such party as may be reasonably requested in connection with
any such action.
Section 4.4. Other Potential Acquirers.
(a) Each of CDT and USO, its affiliates and their respective officers,
directors, employees, representatives and agents shall immediately cease any
existing discussions or negotiations, if any, with any parties conducted
heretofore with respect to any Third Party Acquisition (as defined below). CDT
or USO may, directly or indirectly, furnish information and access, in each
case only in response to unsolicited requests therefor, to any person or group
pursuant to confidentiality agreements with terms no less favorable to CDT or
USO than the Confidentiality Agreement dated June 24, 1996 between USO and CDT
is with respect to CDT, or USO, as the case may be, and may participate in
discussions and negotiate with such entity or group concerning any Third Party
Acquisition, if (i) such entity or group has submitted a Superior Proposal (as
defined in paragraph (b) below) to the CDT Board or the USO Board, as the case
may be, relating to any such Third Party Acquisition and (ii) such Board by a
majority vote determines in its good faith judgment, after consultation with
and based upon the advice of independent legal counsel, that it is required to
do so in order to comply with its fiduciary
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duties; provided, and subject to Section 6.1 below, if CDT shall have received
a Superior Proposal it shall not, in any event, be entitled to terminate this
Agreement as a result of the occurrence of the events described in clauses (i)
and (ii) of this sentence; provided further, if USO shall have received a
Superior Proposal it shall not, in any event, be entitled to terminate this
Agreement as a result of the occurrence of the events described in clauses (i)
and (ii) of this sentence. The CDT Board or the USO Board, as the case may be,
shall provide a copy of any such written Superior Proposal and a summary of
any such oral Superior Proposal to the other party to this Agreement
immediately after receipt thereof and thereafter keep such other party
promptly advised of any development with respect thereto. Except as set forth
above, neither CDT nor USO nor any of their respective affiliates shall, nor
shall CDT or USO authorize or permit any of its or their respective officers,
directors, employees, representatives or agents to, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations
with, or provide any information to, any person or group (other than to the
other party to this Agreement, any affiliate or associate of or any designees
of the other party to this Agreement) concerning any Third Party Acquisition;
provided, however, that nothing herein shall prevent the CDT Board or the USO
Board from taking, and disclosing to the CDT's or USO's stockholders, as the
case may be, a position contemplated by Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to any tender offer.
(b) Except as set forth in this Section 4.4(b), neither the CDT Board nor
the USO Board shall withdraw its recommendation of the transactions
contemplated hereby or approve or recommend, or cause CDT or USO, as the case
may be, to enter into any agreement with respect to, any Third Party
Acquisition. Notwithstanding the foregoing, if the CDT Board or the USO Board,
respectively, by a majority vote determines in its good faith judgment, after
consultation with and based upon the advice of independent legal counsel, that
it is required to do so in order to comply with its fiduciary duties, the CDT
Board or the USO Board, as the case may be, may withdraw its recommendation of
the transactions contemplated hereby and may approve or recommend a Superior
Proposal, but in each case only (i) after providing reasonable written notice
to USO or CDT, as the case may be, (a "Notice of Superior Proposal") advising
USO or CDT that the CDT Board or the USO Board has received a Superior
Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal, and (ii) if
USO or CDT does not, within seven business days after such party's receipt of
the Notice of Superior Proposal, make a counter offer which such party's Board
by a majority vote determines in its good faith judgment (based on the written
advice of the USO Financial Advisor or the CDT Financial Advisor or another
financial adviser of nationally recognized reputation) to be as favorable to
the stockholders of the party who has received the original Superior Proposal;
provided, however, no party hereto shall be entitled to enter into any
agreement with respect to a Superior Proposal unless and until this Agreement
is terminated by its terms pursuant to Section 6.1. For the purposes of this
Agreement, "Third Party Acquisition" means the occurrence of any of the
following events: (i) the acquisition of CDT or USO by merger or otherwise by
any person (which includes a "person" as such term is defined in Section
13(d)(3) of the Exchange Act) other than by USO, CDT, or Newco or any
affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of
more than 30% of the total assets of USO or CDT; (iii) the acquisition by a
Third Party of 30% or more of the outstanding USO Shares or CDT Shares; (iv)
the adoption by CDT or USO of a plan of liquidation or the declaration or
payment of an extraordinary dividend; (v) the repurchase by CDT or USO of more
than 20% of its outstanding shares; or (vi) the acquisition by CDT or USO, by
merger, purchase of stock or assets, joint venture or otherwise, of a direct
or indirect ownership interest or investment in any business whose annual
revenues, net income or assets is equal or greater than 40% of its annual
revenues, net income or assets together with its subsidiaries taken as whole.
For purposes of this Agreement, a "Superior Proposal" means any bona fide
proposal to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 50% of the shares then outstanding or all or
substantially all of the assets of CDT or USO, as the case may be, and
otherwise on terms which the CDT Board or the USO Board, as the case may be,
by a majority vote determines in its good faith judgment (based on the written
advice of the USO Financial Advisor or the CDT Financial Advisor or another
financial adviser of nationally recognized reputation) to be more favorable to
such party's stockholders than the Merger.
Section 4.5. Meetings of Stockholders. Each of CDT and USO shall take all
action necessary, in accordance with the DGCL, and its respective certificate
of incorporation and bylaws, to duly call, give notice
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of, convene and hold a meeting of its stockholders as promptly as practicable,
to consider and vote upon the adoption and approval of this Agreement and the
transactions contemplated hereby. The stockholder votes required for the
adoption and approval of the transactions contemplated by this Agreement shall
be the vote required by the DGCL and its charter and bylaws, in the case of
USO, and the DGCL and its charter and bylaws, in the case of CDT. USO and CDT
will, through their respective Boards of Directors, recommend to their
respective stockholders approval of such matters; provided, however, that,
subject to the provisions of Section 6.3, the USO Board or the CDT Board may
withdraw its recommendation if (i) USO or CDT, as the case may be, receives a
Superior Proposal, and (ii) after complying with the provisions of Section
4.4(b), the USO Board or the CDT Board by a majority vote determines in its
good faith judgment, after consultation with and based upon the advice of
independent legal counsel, that it is required, in order to comply with its
fiduciary duties, to recommend the Superior Proposal; provided further,
however, that neither USO nor CDT, respectively, if such party shall have
received a Superior Proposal, shall, in any event, be permitted to terminate
this Agreement as a result of the occurrence of the events described in
clauses (i) and (ii) of this sentence. USO and CDT shall coordinate and
cooperate with respect to the timing of such meetings and shall use their best
efforts to hold such meetings on the same day and as soon as practicable after
the date hereof.
Section 4.6. Nasdaq Listing. The parties shall use all reasonable efforts to
cause the Newco Shares to be issued in the Merger and the Newco Shares to be
reserved for issuance upon exercise of USO Stock Options or CDT Stock Options
to be approved for listing on the Nasdaq National Market ("Nasdaq"), subject
to official notice of issuance, prior to the Effective Time.
Section 4.7. Access to Information.
(a) Between the date hereof and the Effective Time, USO will give CDT and
its authorized representatives, and CDT will give USO and its authorized
representatives, reasonable access to all employees, plants, offices,
warehouses and other facilities and to all books and records of itself and its
subsidiaries, will permit the other party to make such inspections as such
party may reasonably require and will cause its officers and those of its
subsidiaries to furnish the other party with such financial and operating data
and other information with respect to the business and properties of itself
and its subsidiaries as the other party may from time to time reasonably
request.
(b) Between the date hereof and the Effective Time, USO shall furnish to
CDT, and CDT will furnish to USO, within 25 business days after the end of
each calendar month (commencing with June 1996, and, in the case of June 1996,
within 90 days), an unaudited balance sheet of the party furnishing such
information as of the end of the such month and the related statements of
earnings, stockholders' equity (deficit) and, within 25 business days after
the end of each calendar quarter (or, in the case of the quarter ended June
30, within 90 days), cash flows for the quarter then ended, each prepared in
accordance with generally accepted accounting principles in conformity with
the practices consistently applied by such party with respect to its monthly
or quarterly financial statements. All the foregoing shall be in accordance
with the books and records of the party furnishing such information and shall
fairly present its financial position (taking into account the differences
between the monthly and quarterly statements prepared by such party in
conformity with its past practices) as of the last day of the period then
ended.
(c) Each of the parties hereto will hold and will cause its consultants and
advisers to hold in confidence all documents and information furnished to it
in connection with the transactions contemplated by this Agreement pursuant to
the terms of that certain Confidentiality Agreement entered into between USO
and CDT dated June 24, 1996.
Section 4.8. Additional Agreements; Reasonable Efforts. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
(i) cooperating in the preparation and filing of the Proxy Statement and the
S-4, any filings
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that may be required under the HSR Act, and any amendments to any thereof;
(ii) obtaining consents of all third parties and Governmental Entities
necessary, proper or advisable for the consummation of the transactions
contemplated by this Agreement; (iii) contesting any legal proceeding relating
to the Merger and (iv) the execution of any additional instruments necessary
to consummate the transactions contemplated hereby. Subject to the terms and
conditions of this Agreement, CDT, Newco and USO agree to use all reasonable
efforts to cause the Effective Time to occur as soon as practicable after the
stockholder votes with respect to the Merger. In case at any time after the
Effective Time any further action is necessary to carry out the purposes of
this Agreement, the proper officers and directors of each party hereto shall
take all such necessary action.
Section 4.9. Employee Benefits; Stock Option and Employee Purchase Plans.
(a) Subject to the provisions of Section 1.6(d) hereof, prior to the
Effective Time, Newco will take or cause to be taken all action necessary to
adopt the employment agreements of Robert J. Schock and John C. Backus, Jr.
with CDT and USO, respectively, and to enter into employment agreements with
Timothy R. Welles and Joseph Smith. It is the parties' present intent to
provide after the Effective Time to employees of CDT and USO and their
subsidiaries employee benefit plans (other than stock option or other plans
involving the potential issuance of securities of Newco) which, in the
aggregate, are not less favorable than those currently provided by CDT and
USO, respectively. Notwithstanding the foregoing, nothing contained herein
shall be construed as requiring the parties to continue any specific employee
benefit plans.
(b) The parties agree to work together prior to the Effective Time to cause
Newco to develop and adopt (i) an incentive plan authorizing the issuance of
up to 1,500,000 Newco Shares pursuant to stock options or other incentive
awards to employees of Newco and its subsidiaries; (ii) a stock option plan
authorizing the issuance of up to 200,000 Newco Shares to nonemployee
directors of Newco; and (iii) an employee stock purchase plan authorizing the
issuance of up to 500,000 Newco Shares to employees of Newco and its
subsidiaries and providing for a vesting period of not less than one year.
(c) The parties agree to work together prior to the Effective Time to
develop and design such plans, programs and arrangements and to prepare for
the implementation of such plans, programs and arrangements described in this
Section 4.9 following the Effective Time.
Section 4.10. Public Announcements. CDT, and USO will consult with one
another before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement,
including, without limitation, the Merger, and shall not issue any such press
release or make any such public statement prior to such consultation, except
as may be required by applicable law or by obligations pursuant to any listing
agreement with the Nasdaq as determined by CDT or USO.
Section 4.11. Indemnification.
(a) To the extent, if any, not provided by an existing right under one of
the parties' directors and officers liability insurance policies, from and
after the Effective Time, Newco shall, to the fullest extent permitted by
applicable law, indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, a director, officer or employee of the parties hereto or any
subsidiary thereof (each an "Indemnified Party" and, collectively, the
"Indemnified Parties") against all losses, expenses (including reasonable
attorneys' fees and expenses), claims, damages or liabilities or, subject to
the proviso of the next succeeding sentence, amounts paid in settlement,
arising out of actions or omissions occurring at or prior to the Effective
Time and whether asserted or claimed prior to, at or after the Effective Time)
that are in whole or in part (i) based on, or arising out of the fact that
such person is or was a director, officer or employee of such party or a
subsidiary of such party or (ii) based on, arising out of or pertaining to the
transactions contemplated by this Agreement. In the event of any such loss,
expense, claim, damage or liability (whether or not arising before the
Effective Time), (i) Newco shall pay the reasonable fees and expenses of
counsel selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to Newco, promptly after statements therefor are received and
otherwise advance to such Indemnified Party upon request
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reimbursement of documented expenses reasonably incurred, in either case to
the extent not prohibited by the DGCL or its certificate of incorporation or
bylaws, (ii) Newco will cooperate in the defense of any such matter and (iii)
any determination required to be made with respect to whether an Indemnified
Party's conduct complies with the standards set forth under the DGCL and
Newco's certificate of incorporation or bylaws shall be made by independent
counsel mutually acceptable to Newco and the Indemnified Party; provided,
however, that Newco shall not be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld). The
Indemnified Parties as a group may retain only one law firm with respect to
each related matter except to the extent there is, in the opinion of counsel
to an Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between positions of any two or more
Indemnified Parties.
(b) For a period of three years after the Effective Time, Newco shall cause
to be maintained in effect the policies of directors' and officers' liability
insurance maintained by USO and CDT for the benefit of those persons who are
covered by such policies at the Effective Time (or Newco may substitute
therefor policies of at least the same coverage with respect to matters
occurring prior to the Effective Time).
(c) In the event Newco or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity or such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then and in either such case, proper provision shall be made so that
the successors and assigns of Newco shall assume the obligations set forth in
this Section 4.11.
(d) To the fullest extent permitted by law, from and after the Effective
Time, all rights to indemnification now existing in favor of the employees,
agents, directors or officers of USO and CDT and their subsidiaries with
respect to their activities as such prior to the Effective Time, as provided
in USO's and CDT's certificate of incorporation or bylaws, in effect on the
date thereof or otherwise in effect on the date hereof, shall survive the
Merger and shall continue in full force and effect for a period of not less
than six years from the Effective Time.
(e) The provisions of this Section 4.11 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her representatives.
Section 4.12. Notification of Certain Matters. The parties hereto shall give
prompt notice to the other parties, of (i) the occurrence or nonoccurrence of
any event the occurrence or nonoccurrence of which would be likely to cause
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time, (ii) any
material failure of such party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder, (iii)
any notice of, or other communication relating to, a default or event which,
with notice or lapse of time or both, would become a default, received by such
party or any of its subsidiaries subsequent to the date of this Agreement and
prior to the Effective Time, under any contract or agreement material to the
financial condition, properties, businesses or results of operations of such
party and its subsidiaries taken as a whole to which such party or any of its
subsidiaries is a party or is subject, (iv) any notice or other communication
from any third party alleging that the consent of such third party is or may
be required in connection with the transactions contemplated by this
Agreement, or (v) any material adverse change in their respective financial
condition, properties, businesses, results of operations or prospects, taken
as a whole, other than changes resulting from general economic conditions;
provided, however, that the delivery of any notice pursuant to this Section
4.12 shall not cure such breach or non-compliance or limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
Section 4.13. Affiliates.
(a) CDT and USO shall use all reasonable efforts to obtain from any CDT
Affiliate or USO Affiliate who has not previously executed such letter
agreement and from any person who may be deemed to have become a CDT Affiliate
or USO Affiliate after the date of this Agreement and on or prior to the
Effective Time, a letter agreement substantially in the form of Exhibit A
hereto as soon as practicable.
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(b) Newco shall not be required to maintain the effectiveness of the S-4 for
the purpose of resale of Newco Shares by stockholders of CDT or USO who may be
affiliates of CDT or USO or Newco pursuant to Rule 145 under the Securities
Act.
ARTICLE 5
Conditions to Consummation of the Merger
Section 5.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the Merger
are subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) this Agreement shall have been approved and adopted by the requisite
vote of the stockholders of USO and CDT;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which
prohibits, restrains, enjoins or restricts the consummation of the Merger;
(c) any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired, and any other governmental or regulatory
notices or approvals required with respect to the transactions contemplated
hereby shall have been either filed or received; and
(d) the S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop
order, and all state securities laws or "blue sky" permits and
authorizations necessary to issue Newco Shares in exchange for USO Shares
and CDT Shares in the Merger shall have been obtained.
Section 5.2. Conditions to the Obligations of USO. The obligation of USO to
effect the Merger is subject to the satisfaction at or prior to the Effective
Time of the following conditions:
(a) the representations of CDT and Newco contained in this Agreement or
in any other document delivered pursuant hereto shall be true and correct
(except to the extent that the breach thereof would not have a Material
Adverse Effect on CDT or Newco) at and as of the Effective Time with the
same effect as if made at and as of the Effective Time (except to the
extent such representations specifically related to an earlier date, in
which case such representations shall be true and correct as of such
earlier date), and at the Closing CDT and Newco shall have delivered to USO
a certificate to that effect;
(b) each of the covenants and obligations of CDT and Newco to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or
before the Effective Time and at the Closing CDT and Newco shall have
delivered to USO a certificate to that effect;
(c) the Newco Shares issuable to the USO stockholders pursuant to this
Agreement and such other shares required to be reserved for issuance in
connection with the Merger shall have been authorized for listing on the
Nasdaq upon official notice of issuance;
(d) the opinion of Hunton & Williams, counsel to USO, dated the Closing
Date and addressed to USO to the effect that (i) the merger of USO into
Newco will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code; (ii) each of Newco and
USO will be a party to the reorganization within the meaning of Section
368(b) of the Code; and (iii) no gain or loss for Federal income tax
purposes will be recognized by Newco, USO or a stockholder of USO as a
result of the Merger (other than with respect to cash received by a
stockholder in lieu of a fractional Newco Share), and such opinion shall
not have been withdrawn or modified in any material respect. Such opinion
may be conditioned upon the receipt of representations of USO, CDT and
Newco, all in form and substance reasonably satisfactory to such counsel
and other reasonable assumptions set forth therein;
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(e) CDT shall have obtained the consent or approval of each person whose
consent or approval shall be required in order to permit the succession by
Newco pursuant to the Merger to any obligation, right or interest of CDT
under any loan or credit agreement, note, mortgage, indenture, lease or
other agreement or instrument, except those for which failure to obtain
such consents and approvals would not, in the reasonable opinion of USO,
individually or in the aggregate, have a Material Adverse Effect on CDT;
and
(f) there shall have been no events, changes or effects with respect to
CDT or its subsidiaries having or which could reasonably be expected to
have a Material Adverse Effect on CDT.
Section 5.3. Conditions to the Obligations of CDT. The respective
obligations of CDT to effect the Merger are subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) the representations of USO and Newco contained in this Agreement or
in any other document delivered pursuant hereto shall be true and correct
(except to the extent that the breach thereof would not have a Material
Adverse Effect on USO or Newco) at and as of the Effective Time with the
same effect as if made at and as of the Effective Time (except to the
extent such representations specifically related to an earlier date, in
which case such representations shall be true and correct as of such
earlier date), and at the Closing USO and Newco shall have delivered to CDT
a certificate to that effect;
(b) each of the covenants and obligations of USO and Newco to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or
before the Effective Time and at the Closing USO and Newco shall have
delivered to CDT a certificate to that effect;
(c) the Newco Shares issuable to the CDT stockholders pursuant to this
Agreement and such other shares to be reserved for issuance in connection
with the Merger shall have been authorized for listing on Nasdaq upon
official notice of issuance;
(d) the opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel to
CDT, dated the Closing Date and addressed to CDT, to the effect that (i)
the merger of CDT into Newco will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code; (ii) each of CDT and Newco will be a party to the reorganization
within the meaning of Section 368(b) of the Code; and (iii) no gain or loss
for Federal income tax purposes will be recognized by CDT or Newco or a
stockholder of CDT as a result of the Merger (other than with respect to
cash received by a stockholder of CDT in lieu of a fractional Newco Share),
and such opinion shall not have been withdrawn or modified in any material
respect. Such opinion may be conditioned upon the receipt of
representations of USO, CDT and Newco, all in form and substance reasonably
satisfactory to such counsel and other reasonable assumptions set forth
therein.
(e) USO shall have obtained the consent or approval of each person whose
consent or approval shall be required in order to permit the succession by
Newco pursuant to the Merger to any obligation, right or interest of USO
under any loan or credit agreement, note, mortgage, indenture, lease or
other agreement or instrument, except for those for which failure to obtain
such consents and approvals would not, in the reasonable opinion of CDT,
individually or in the aggregate, have a Material Adverse Effect on USO;
and
(f) there shall have been no events, changes or effects with respect to
USO having or which could reasonably be expected to have a Material Adverse
Effect on USO.
ARTICLE 6
Termination; Amendment; Waiver
Section 6.1. 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 and adoption of this Agreement by USO's or CDT's stockholders:
(a) by mutual written consent of USO and CDT;
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(b) by CDT or USO if (i) any court of competent jurisdiction in the
United States or other United States Governmental Entity shall have issued
a final order, decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action is or shall have become nonappealable or
(ii) the Merger has not been consummated by February 28, 1997; provided,
however, that no party may terminate this Agreement pursuant to this clause
(ii) if such party's failure to fulfill any of its obligations under this
Agreement shall have been the reason that the Effective Time shall not have
occurred on or before said date;
(c) by USO if (i) there shall have been a breach of any representation or
warranty on the part of CDT or Newco set forth in this Agreement, or if any
representation or warranty of CDT or Newco shall have become untrue, in
either case such that the conditions set forth in Section 5.2(a) would be
incapable of being satisfied by February 28, 1997 (or as otherwise
extended), (ii) there shall have been a breach by CDT or Newco of any of
their respective covenants or agreements hereunder having a Material
Adverse Effect on CDT or Newco or materially adversely affecting (or
materially delaying) the consummation of the Merger, and CDT or Newco, as
the case may be, has not cured such breach within 20 business days after
notice by USO thereof, provided that USO has not breached any of its
obligations hereunder, (iii) the CDT Board shall have recommended to CDT's
stockholders a Superior Proposal, (iv) the CDT Board shall have withdrawn,
modified or changed its approval or recommendation of this Agreement or the
Merger or shall have failed to call, give notice of, convene or hold a
stockholders' meeting to vote upon the Merger, or shall have adopted any
resolution to effect any of the foregoing, (v) CDT shall have convened a
meeting of its stockholders to vote upon the Merger and shall have failed
to obtain the requisite vote of its stockholders or (vi) USO shall have
convened a meeting of its stockholders to vote upon the Merger and shall
have failed to obtain the requisite vote of its stockholders; or
(d) by CDT if (i) there shall have been a breach of any representation or
warranty on the part of USO or Newco set forth in this Agreement, or if any
representation or warranty of USO or Newco shall have become untrue, in
either case such that the conditions set forth in Section 5.3(a) would be
incapable of being satisfied by February 28, 1997 (or as otherwise
extended), (ii) there shall have been a breach by USO or Newco of its
covenants or agreements hereunder having a Material Adverse Effect on USO
or Newco or materially adversely affecting (or materially delaying) the
consummation of the Merger, and USO or Newco, as the case may be, has not
cured such breach within twenty business days after notice by CDT thereof,
provided that CDT has not breached any of its obligations hereunder, (iii)
the USO Board shall have recommended to USO's stockholders a Superior
Proposal, (iv) the USO Board shall have withdrawn, modified or changed its
approval or recommendation of this Agreement or the Merger or shall have
failed to call, give notice of, convene or hold a stockholders' meeting to
vote upon the Merger, or shall have adopted any resolution to effect any of
the foregoing, (v) CDT shall have convened a meeting of its stockholders to
vote upon the Merger and shall have failed to obtain the requisite vote of
its stockholders or (vi) USO shall have convened a meeting of its
stockholders to vote upon the Merger and shall have failed to obtain the
requisite vote of its stockholders.
Section 6.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders, other
than the provisions of this Section 6.2 and Sections 4.7(c) and 6.3 hereof.
Nothing contained in this Section 6.2 shall relieve any party from liability
for any breach of this Agreement.
Section 6.3. Fees and Expenses.
(a) In the event that this Agreement shall be terminated by USO pursuant to
Section 6.1(c)(iii) or 6.1 (c)(iv), then CDT shall pay to USO the amount of
Three Million Dollars ($3,000,000) within five business days after such
termination. In the event that this Agreement shall be terminated by CDT
pursuant to Section 6.1(d)(iii) or 6.1(d)(iv) then USO shall pay to CDT the
amount of Three Million Dollars ($3,000,000) within five (5) business days
after such termination. In the event that, within twelve months after the
termination of this Agreement as
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described in the first sentence of this Section 6.3(a), CDT enters into an
agreement with respect to a Third Party Acquisition, involving any party (or
any affiliate thereof) (x) with whom CDT (or its agents) had negotiations with
a view to a Third Party Acquisition, (y) to whom CDT (or its agents) furnished
information with a view to a Third Party Acquisition or (z) who had submitted
a proposal or expressed an interest in a Third Party Acquisition, in the case
of each of clauses (x), (y) and (z) after the date hereof and prior to such
termination, and such Third Party Acquisition is consummated within twelve
(12) months thereafter, then CDT shall pay to USO an additional amount equal
to Four Million Five Hundred Thousand Dollars ($4,500,000) on the next
business day following the consummation of such Third Party Acquisition. In
the event that, within twelve months after the termination of this Agreement
as described in the second sentence of this Section 6.3(a), USO enters into an
agreement with respect to a Third Party Acquisition, involving any party (or
any affiliate thereof) (x) with whom USO (or its agents) had negotiations with
a view to a Third Party Acquisition, (y) to whom USO (or its agents) furnished
information with a view to a Third Party Acquisition or (z) who had submitted
a proposal or expressed an interest in a Third Party Acquisition, in the case
of each of clauses (x), (y) and (z) after the date hereof and prior to such
termination, and such Third Party Acquisition is consummated within twelve
(12) months thereafter, then USO shall pay to CDT an additional amount equal
to Four Million Five Hundred Thousand Dollars ($4,500,000) on the next
business day following the consummation of such Third Party Acquisition. Each
party acknowledges that upon the occurrence of any of the events described
above in this Section 6.3(a), the party terminating this Agreement would
suffer direct and substantial damages, which damages cannot be determined with
reasonable certainty. To compensate the terminating party for such damages,
the party causing such damages shall pay to the other party hereto the amounts
described in this Section 6.3(a) as liquidated damages and not as a penalty.
(b) In the event that this Agreement shall be terminated by USO pursuant to
a willful breach of any material representation or warranty made by CDT
hereunder or any material covenant contained in Sections 4.2 (excluding the
first sentence contained therein), 4.3, 4.4, 4.5 and 4.8 of this Agreement on
the part of CDT, and within twelve months after the termination of this
Agreement as described in the preceding sentence of this Section 6.3(b), CDT
enters into an agreement with respect to a Third Party Acquisition, involving
any party (or any affiliate thereof) (x) with whom CDT (or its agents) had
negotiations with a view to a Third Party Acquisition, (y) to whom CDT (or its
agents) furnished information with a view to a Third Party Acquisition or (z)
who had submitted a proposal or expressed an interest in a Third Party
Acquisition, in the case of each of clauses (x), (y) and (z) after the date
hereof and prior to such termination, and such Third Party Acquisition is
consummated within 12 months thereafter, then CDT shall pay to USO an amount
equal to Seven Million Dollars ($7,000,000) in immediately available funds on
the next business day following the consummation of the Third Party
Acquisition.
(c) In the event that this Agreement shall be terminated by CDT pursuant to
a willful breach of any material representation or warranty made by USO
hereunder or any material covenant contained in Sections 4.1 (excluding the
first sentence contained therein), 4.3, 4.4, 4.5 and 4.8 of this Agreement on
the part of USO, and within twelve months after the termination of this
Agreement as described in the preceding sentence of this Section 6.3(c), USO
enters into an agreement with respect to a Third Party Acquisition, involving
any party (or any affiliate thereof) (x) with whom USO (or its agents) had
negotiations with a view to a Third Party Acquisition, (y) to whom USO (or its
agents) furnished information with a view to a Third Party Acquisition or (z)
who had submitted a proposal or expressed an interest in a Third Party
Acquisition, in the case of each of clauses (x), (y) and (z) after the date
hereof and prior to such termination, and such Third Party Acquisition is
consummated within 12 months thereafter, then USO shall pay to CDT an amount
equal to Seven Million Dollars ($7,000,000) in immediately available funds on
the next business day following the consummation of the Third Party
Acquisition.
(d) Except as specifically provided in this Section 6.3, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
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Section 6.4. Amendment. This Agreement may be amended by action taken by USO
and CDT at any time before or after approval of the Merger by the stockholders
of USO and CDT (if required by applicable law) but, after any such approval,
no amendment shall be made which requires the approval of such stockholders
under applicable law without such approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of the parties hereto.
Section 6.5. Extension; Waiver. At any time prior to the Effective Time,
each party hereto may (i) extend the time for the performance of any of the
obligations or other acts of any other party, (ii) waive any inaccuracies in
the representations and warranties of any other party contained herein or in
any document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by any other party with any of the agreements or conditions
contained herein. Any agreement on the part of any 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. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such
rights.
ARTICLE 7
Miscellaneous
Section 7.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall not
limit any covenant or agreement of the parties hereto which by its terms
requires performance after the Effective Time.
Section 7.2. Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof and (b) shall not be assigned by operation of law or otherwise.
Section 7.3. Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby,
and to such end, the provisions of this Agreement are agreed to be severable.
Section 7.4. 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
facsimile or by registered or certified mail (postage prepaid, return receipt
requested), to each other party as follows:
If to CDT:
Colonial Data Technologies Corp.
80 Pickett District Road
New Milford, CT 06776
Attention: Timothy R. Welles
Telecopy: (860) 355-3186
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
225 Asylum Street
Hartford, Connecticut 06103
Attention: Thomas L. Fairfield, Esq.
Telecopy: (860) 293-3555
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if to USO:
US Order, Inc.
13873 Park Center Road
Suite 353
Herndon, VA 22071
Attention: John C. Backus, Jr.
Telecopy: (703) 904-8809
with a copy to:
Hunton & Williams
River Front Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23212
Telecopy: (804) 788-8218
Attention: David M. Carter, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 7.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof.
Section 7.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
Section 7.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Sections 4.9 and 4.11, nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under
or by reason of this Agreement.
Section 7.8. Certain Definitions. For the purposes of this Agreement, the
term:
(a) "affiliate" means (except as otherwise provided in Sections 2.19,
3.19 and 4.13) a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person;
(b) "business day" means any day other than a day on which Nasdaq is
closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "knowledge" or "known" means, with respect to any matter in question,
if an executive officer of USO or CDT or its subsidiaries, as the case may
be, has actual knowledge of such matter;
(e) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
(f) "subsidiary" or "subsidiaries" of Newco, USO, CDT or any other
person, means any corporation, partnership, limited liability company,
association, trust, unincorporated association or other legal entity of
which Newco, USO, CDT or any such other person, as the case may be (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the capital stock, the holders of which are
generally entitled to vote for the election of the board of directors or
other governing body of such corporation or other legal entity.
Section 7.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of USO, CDT or Newco or any officer,
director, employee, agent, representative or investor of any party hereto.
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Section 7.10. Specific Performance. The parties hereby acknowledge and agree
that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder; provided, however, that, if a party
hereto is entitled to receive any payment or reimbursement of expenses
pursuant to Sections 6.3(a), (b) or (c), it shall not be entitled to specific
performance to compel the consummation of the Merger.
Section 7.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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In Witness Whereof, each of the parties has caused this Agreement to be duly
executed on its behalf as of the day and year first above written.
US Order, Inc.
/s/ John C. Backus, Jr.
By: _________________________________
Name: John C. Backus, Jr.
Title: President and Chief
Operating Officer
Colonial Data Technologies Corp.
/s/ Robert J. Schock
By: _________________________________
Name: Robert J. Schock
Title: President and Chief
Executive Officer
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APPENDIX II
SALOMON BROTHERS INC
SEVEN WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
August 2, 1996
Members of the Board of Directors
US Order, Inc.
13873 Park Center Road
Suite 353
Herndon, VA 22071
Dear Sirs:
You have requested our opinion, as investment bankers, as to the fairness,
from a financial point of view, to the holders of common stock, par value
$.001 per share ("Company Common Stock"), of US Order, Inc. (the "Company"),
other than Colonial Data Technologies Corp. ("CDT") and any of its affiliates,
of the consideration to be received by such holders in connection with the
proposed combination (the "Combination") of the Company, CDT and Newco
("Newco") pursuant to the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of August 5, 1996, between the Company and CDT. In the
Combination, the Company and CDT will each be merged with and into Newco,
which will be the surviving corporation in the Combination. Each issued and
outstanding share of the Company Common Stock (other than (a) Company Common
Stock held in the Company's treasury and (b) Company Common Stock held by CDT)
will be converted into and become one fully paid and nonassessable share (the
"Exchange Ratio") of common stock, par value $.001 per share, of Newco ("Newco
Common Stock") and each issued and outstanding share of common stock, par
value $.01 per share, of CDT ("CDT Common Stock") (other than (a) CDT Common
Stock held in CDT's treasury and (b) CDT Common Stock held by the Company)
will be converted into and become one fully paid and nonassessable share of
Newco Common Stock.
In arriving at our opinion, we have reviewed the Merger Agreement and its
related exhibits. We also have reviewed certain publicly available business
and financial information relating to the Company and CDT, as well as certain
other information, including financial projections, provided to us by the
Company and CDT. We have discussed the past and current operations and
financial condition and prospects of the Company and CDT with the respective
senior management of such entities. We have also considered such other
information, financial studies, analyses, investigations and financial,
economic, market and trading criteria which we deemed relevant.
We have assumed and relied on the accuracy and completeness of the
information reviewed by us for the purpose of this opinion and we have not
assumed any responsibility for independent verification of such information or
for independent evaluation or appraisal of the assets of the Company or CDT.
With respect to the Company's and CDT's financial projections, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the Company's and CDT's management, as
the case may be, as to the future financial performance of such entity, and we
express no opinion with respect to such forecasts or the assumptions on which
they are based.
Our opinion is necessarily based upon business, market, economic and other
conditions as they exist on, and can be evaluated as of, the date of this
letter and does not address the Company's underlying business decision to
enter into the Combination or constitute a recommendation to any holder of
Company Common Stock as to how such holder should vote with respect to the
Combination. Our opinion as expressed below does not imply any conclusion as
to the likely trading range for Newco Common Stock following the consummation
of the Combination, which may vary depending on, among other factors, changes
in interest rates, dividend rates, market conditions, general economic
conditions and other factors that generally influence the price of securities.
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We have acted as financial advisor to the Board of Directors of the Company
in connection with the Combination and will receive a fee for our services,
part of which is payable upon the initial submission of this opinion. In the
ordinary course of our business, we actively trade the securities of the
Company and CDT for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to the holders of Company Common Stock (other than
CDT and any of its affiliates).
Very truly yours,
Salomon Brothers Inc
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APPENDIX III
August 2, 1996
Board of Directors
Colonial Data Technologies Corp.
80 Pickett District Road
New Milford, CT 06776
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders of Colonial Data Technologies Corp. (the "Company")
of the merger of the Company (the "Merger") and US Order, Inc. ("USOR"), a
publicly held company pursuant to an Agreement and Plan of Merger (the
"Agreement"). Pursuant to the Agreement, holders of USOR common stock and
Company common stock will receive one share of the common stock of a newly
formed corporation, into which each of USOR and the Company will be merged, in
exchange for each share of USOR common stock or Company common stock,
respectively.
First Albany Corporation ("First Albany"), as a customary part of its
investment banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, private placements and valuations for corporate,
estate and other purposes. We regularly publish research reports regarding
various industry sectors, including telephony, and companies in those sectors.
In connection with and in preparation for rendering this opinion, we have
reviewed, analyzed and relied upon certain information bearing upon the
financial and operating condition of the Company and USOR, including: the
Agreement; financial statements and related information of the Company and
USOR for the year ended December 31, 1995, and for the interim periods ending
June 30, 1996; publicly available information concerning the historical prices
at which the common stock of the Company has been transferred; research
reports published by equity analysts; and other financial information
concerning the business and operations of the Company and USOR, including
certain internal financial and operating budgets, analyses and forecasts of
the Company and USOR prepared by their respective managements. We have also
met with members of the senior management of each of the Company and USOR to
discuss past and current business operations, financial condition and future
prospects of the Company and USOR, as well as other matters believed to be
relevant to our analysis. Further, we considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant to our analysis including, to the
extent publicly available, the financial terms of comparable transactions.
In conducting our review and arriving at our opinion, we have relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to us by the Company or USOR, or otherwise publicly
available. We have not independently verified this information, nor have we
had such information verified. For the purposes of rendering this opinion, we
have not conducted a physical inspection of any of the assets, properties or
facilities of the Company or USOR, nor have we made or obtained any
independent evaluation or appraisals of any such assets, properties or
facilities. Further, we have assumed that the Merger will be accounted for on
a purchase basis under generally accepted accounting principles.
First Albany will receive a fee for rendering this opinion, and such fee is
in part contingent upon the consummation of the Merger. First Albany served as
the lead underwriter on the Company's public offerings of 3,200,000 shares of
common stock in October of 1994 and 2,300,000 shares of common stock in July
of 1995, and served as a managing underwriter on USOR's initial public
offering of 3,850,000 shares of common stock in June of 1995. First Albany
provides research coverage on both the Company and USOR. Walter Fiederowicz, a
Director of the Company, is also a director of First Albany.
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We may, from time to time, have a long or short position in, and buy or
sell, the Company's common stock for our own account and for the accounts of
our customers. As of the date of this opinion, we have a nominal short
position in the common stock of both the Company and USOR.
Based upon and subject to the foregoing, it is our opinion that the
consideration to be received by the stockholders of the Company pursuant to
the Agreement is fair, from a financial point of view, to the stockholders of
the Company as of the above date.
Very truly yours,
FIRST ALBANY CORPORATION
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AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF INTELIDATA TECHNOLOGIES CORPORATION,
A DELAWARE CORPORATION
ARTICLE I
The name of the Corporation is InteliData Technologies Corporation.
ARTICLE II
The registered office of the Corporation in the State of Delaware is located
at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at that
address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage, directly or indirectly, in any
lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law.
ARTICLE IV
The aggregate number of shares of capital stock which the Corporation shall
have authority to issue is sixty-five million (65,000,000) shares of which
sixty million (60,000,000) shall be Common Stock, par value ($.001) per share,
and five million (5,000,000) shall be shares of Preferred Stock, par value
($.001) per share.
A. COMMON STOCK.
1. Voting Rights. The holders of each share of Common Stock shall have the
right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of this Corporation, and shall be
entitled to vote upon such matters and in such manner as may be provided by
law on all matters submitted to a vote at any meeting of shareholders.
2. Dividend Rights. Subject to the rights of holders of all classes of stock
at the time outstanding having prior rights as to dividends, the holders of
the Common Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of any funds of the Corporation legally available
therefor, such dividends as may be declared from time to time by the Board of
Directors.
B. PREFERRED STOCK.
1. General. The Preferred Stock may be issued from time to time in one or
more classes or series, as may be determined by the Board of Directors, with
such distinctive designations, rights and preferences as shall be stated and
expressed herein or in the resolution or resolutions providing for the issue
of shares of a particular series, and in such resolution or resolutions
providing for the issue of shares of such series the Board of Directors is
expressly authorized to fix:
a. The annual or other period dividend rate for such series, the dividend
payment dates, the date from which dividends on all shares of such series
issued shall be cumulative, and the extent of participation rights, if any;
b. The redemption price or prices, if any, for such series and other
terms and conditions on which such series may be retired and redeemed;
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c. The obligation, if any, of the Corporation to purchase and retire or
redeem shares as a sinking fund or otherwise, and the terms and conditions
of any such redemption;
d. The designation and maximum number of shares of such series issuable;
e. The right to vote, if any, with holders of shares of any other class
or series and any right to vote as a separate voting group, either
generally or as a condition to specified corporate action;
f. The amount payable upon shares in event of involuntary liquidation;
g. The amount payable upon shares in event of voluntary liquidation;
h. The rights, if any, of the holders of shares of such series to convert
such shares into other classes of stock of the Corporation and the terms
and conditions of any such conversion; and
i. Such other rights as may be specified by the Board of Directors and
not prohibited by law.
All shares of Preferred Stock of any one series shall be identical with each
other in all respects except, if so determined by the Board of Directors, as
to the dates from which dividends thereon shall be cumulative; and all shares
of Preferred Stock shall be of equal rank with each other, regardless of
series, and shall be identical with each other in all respects except as
provided herein or in the resolution or resolutions providing for the issue of
a particular series. In case dividends on all shares of Preferred Stock for
any quarterly dividend period are not paid in full, all such shares shall
participate ratably in any partial payment of dividends for such period in
proportion to the full amounts of dividends for such period to which they are
respectively entitled.
ARTICLE V
The business of the Corporation shall be managed under the direction of the
Board of Directors except as otherwise provided by law. Upon the effective
date of the Amended and Restated Certificate of Incorporation, the number of
directors shall be divided into three (3) classes, as nearly equal in number
as may be possible. Directors designated Class I shall serve in the first
instance until the annual meeting of the stockholders immediately following
the effective date of this Amended and Restated Certificate of Incorporation
(the "First Annual Meeting"), and until their successors shall have been
properly elected and shall qualify; and thereafter for a three-year term.
Directors designated Class II and Class III shall serve in the first instance
until the second and third meetings of the stockholders to be held after the
First Annual Meeting, respectively, and until their successors shall have been
properly elected and shall qualify; and thereafter for three-year terms. The
Board of Directors of the Corporation shall consist of five (5) to fifteen
(15) members as shall be fixed from time to time by, or in the manner provided
in, the Bylaws. Subject to the rights of the holders of any class or series of
Preferred Stock then outstanding, a Director may be removed with cause at a
meeting of stockholders called expressly for that purpose at which a quorum is
present by the vote of at least two-thirds ( 2/3) of the votes entitled to be
cast by each voting group entitled to vote in the election of Directors
generally.
ARTICLE VI
The Board of Directors may make, alter or repeal the Bylaws of the
Corporation, provided, however, that any provisions of the Bylaws adopted or
required to be adopted pursuant to the Delaware General Corporation Law by the
stockholders of the Corporation may only be made, altered or repealed by the
stockholders of the Corporation.
ARTICLE VII
No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
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ARTICLE VIII
The Directors of the Corporation shall be protected from personal liability,
through indemnification or otherwise, to the fullest extent permitted under
the Delaware General Corporation Law as from time to time in effect. A
Director of this Corporation shall under no circumstances have any personal
liability to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director except for those specific breaches and
acts or omissions with respect to which the Delaware General Corporation Law
expressly provides that this provision shall not eliminate or limit such
personal liability of Directors. The modification or repeal of this Article
VIII shall not affect the restriction hereunder of a Director's personal
liability for any act or omission occurring prior to such modification or
repeal.
ARTICLE IX
The Corporation shall, to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under said
section from and against any and all of the expenses, liabilities or other
matters referred to in or covered by said section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any Bylaw, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity while holding such office and to action while serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
and shall continue as to a person who has ceased to be a Director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person; provided, however, that the Corporation shall
indemnify any such indemnitee in connection with a proceeding initiated by
such indemnitee only if such proceeding was authorized by the Board of
Directors of the Corporation. In connection with the indemnification provided
by Section 145 of the Delaware General Corporation Law and under any Bylaw,
agreement, vote of stockholders or disinterested Directors or otherwise,
expenses incurred by a Director or officer in defending or investigating a
threatened or pending action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation in accordance with
Section 145 of the Delaware General Corporation Law or as authorized in the
Bylaws of the Corporation.
ARTICLE X
The Corporation reserves the right to amend, alter, change or repeal any
provisions contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation. This Certificate of
Incorporation may be amended by a resolution adopted by the Board of Directors
and, if required by the Delaware General Corporation Law, the approval at a
meeting of the stockholders of the Corporation by the affirmative vote of a
majority of the votes entitled to be cast by each voting group entitled to
vote on the matter; provided, however, that any amendment or repeal of Article
V of this Certificate of Incorporation shall be approved at such meeting by
the affirmative vote of at least two-thirds ( 2/3) of the votes entitled to be
cast by each voting group entitled to vote on the matter.
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BYLAWS
OF
INTELIDATA TECHNOLOGIES CORPORATION
(AS AMENDED THROUGH, AND EFFECTIVE ON, OCTOBER 7, 1996)
1. OFFICES.
1.01 Offices. The Corporation shall maintain its registered office in the
State of Delaware, and such other offices, either within or without the State
of Delaware, at such locations as the Board of Directors may from time to time
determine or the business of the Corporation may require.
2. SEAL.
2.01 Seal.
(a) The Corporation shall have a seal, which shall have inscribed thereon
its name and year of incorporation and the words, "Corporate Seal Delaware."
(b) The seal shall be kept in safe custody by the Secretary of the
Corporation. It shall be affixed by the Chairman of the Board, the President
or any Vice President, the Secretary or any Assistant Secretary, or the
Treasurer to any corporate instrument or document requiring it, by practice or
by law, and when so affixed, it may be attested by the signature of the
officer so affixing it.
3. MEETINGS OF STOCKHOLDERS.
3.01 Annual Meetings.
(a) Annual meetings of stockholders shall be held at such place, either
within or without the State of Delaware, and at such time and date as the
Board of Directors shall determine by resolution and set forth in the notice
of the meeting. In the event that the Board of Directors fails to so determine
the time, date and place for the annual meeting, it shall be held at the
principal office of the Corporation at 10:00 a.m. on the first Tuesday of May
of each year. In the event such day shall fall upon a legal holiday, then the
annual meeting shall be on the next succeeding business day at the
aforementioned time and place.
(b) At each annual meeting the stockholders shall, by plurality of the votes
cast, elect Directors and transact such other business as may properly be
brought before them.
(c) The Board of Directors may, in advance of any annual or special meeting
of the stockholders, adopt an agenda for such meeting, adherence to which the
Chairman of the Board may enforce.
3.02 Special Meetings. Special meetings of the stockholders of the
Corporation, for any purpose or purposes, unless otherwise prescribed herein
or by statute, (i) may be called by the Chairman of the Board and (ii) shall
be called by the Secretary at the written request, or by resolution adopted by
the affirmative vote, of a majority of the Board of Directors. Such request
shall state the purpose or purposes of the proposed meeting. Stockholders of
the Corporation shall not be entitled to request a special meeting of the
stockholders.
3.03 Notice of Meetings.
(a) Notice of meetings of stockholders shall be in writing and shall state
the place (which may be within or without the State of Delaware), date and
hour of the meeting and in the case of a special meeting, the purpose or
purposes for which a meeting is called. No business other than that specified
in the notice thereof shall be transacted at any special meeting.
(b) Such notice shall either be delivered personally or mailed, postage
prepaid, to each stockholder entitled to vote at such meeting not less than
ten (10) nor more than sixty (60) days before the date of the meeting. If
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mailed, the notice shall be directed to the stockholder at his or her address
as it appears on the records of the Corporation. Personal delivery of any such
notice to any officer of a corporation or association or to any member of a
partnership shall constitute delivery of such notice to such corporation,
association or partnership.
(c) Notice of any meeting of stockholders need not be given to any
stockholder if waived by such stockholder in writing, whether before or after
such meeting is held, or if such stockholder shall sign the minutes or attend
the meeting.
3.04 Stockholder Notices. At any meeting of the stockholders, only such
business shall be conducted, and only such proposals shall be acted upon as
shall have been brought before the meeting (i) by, or at the direction of the
Board of Directors or (ii) by any stockholder who complies with the notice
procedures set forth in this Section 3.04 (or for election of Directors, with
the notice provisions set forth in Section 4.03).
(a) For a proposal to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the Secretary. To be timely, a stockholder's notice must be delivered to,
or mailed and received at, the principal executive offices of the corporation
(i) in the case of the 1997 annual stockholders' meeting, not later than
February 1, 1997, and (ii) in the case of all subsequent annual stockholders'
meetings, not less than sixty (60) days before the first anniversary of the
date of the Corporation's proxy statement in connection with the last annual
stockholders' meeting.
(b) A stockholder's notice to the Secretary shall in addition set forth as
to each matter the stockholder proposes to bring before the meeting (i) a
brief description of the business desired to be brought before the annual
stockholders' meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address, as they appear on the
Corporation's books, of the stockholder proposing such business, (iii) the
class, series and number of shares of the Corporation that are beneficially
owned by the stockholder on the date of such stockholder notice and (iv) any
material interest of the stockholder in such business.
3.05 Adjourned Meetings. When a meeting is adjourned to another time or
place, unless otherwise provided by these Bylaws, notice need not be given of
the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting the
stockholders may transact any business that might have been transacted at the
original meeting. If an adjournment is for more than thirty (30) days or if
after an adjournment a new record date is fixed for the adjourned meeting a
notice of the adjourned meeting shall be given to each stockholder entitled to
vote at the meeting.
3.06 Quorum and Adjournment. Except as otherwise provided by law, by the
Certificate of Incorporation of the Corporation or by these Bylaws, the
presence, in person or by proxy, of the holders of a majority of the aggregate
voting power of the stock issued and outstanding, entitled to vote thereat,
and the voting rights of which are not suspended, shall be requisite and shall
constitute a quorum for the transaction of business at all meetings of
stockholders. If, however, such majority shall not be present or represented
at any meeting of stockholders, the stockholders present, although less than a
quorum, shall have the power to adjourn the meeting.
3.07 Majority Vote Required. When a quorum is present at any meeting of
stockholders, the affirmative vote of the majority of the aggregate voting
power of the shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall constitute the act of the
stockholders, unless by express provision of law, the Certificate of
Incorporation or these Bylaws a different vote is required, in which case such
express provision shall govern and control.
3.08 Manner of Voting. At each meeting of stockholders, each stockholder
having the right to vote, and whose voting rights have not been suspended
shall be entitled to vote in person or by proxy. Proxies need not be filed
with the Secretary of the Corporation until the meeting is called to order,
but shall be filed before being voted. Each stockholder shall be entitled to
vote each share of stock having voting power registered in his name on the
books of the Corporation on the record date fixed, as provided in Section 6.04
of these Bylaws, for the
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determination of stockholders entitled to vote at such meeting. All elections
of Directors shall be by written ballot.
3.09 Proxies.
(a) At any meeting of stockholders, any stockholder may be represented and
vote by proxy or proxies appointed by a written form of proxy. In the event
that any form of proxy shall designate two or more persons to act as proxies,
a majority of such persons present at the meeting or, if only one shall be
present, then that one shall have and may exercise all of the powers conferred
by the form of proxy upon all of the persons so designated unless the form of
proxy shall otherwise provide.
(b) The Board of Directors may, in advance of any annual or special meeting
of the stockholders, prescribe additional regulations concerning the manner of
execution and filing of proxies and the validation of the same, which are
intended to be voted at any such meeting.
3.10 Presiding Officer and Secretary. At each meeting of stockholders, the
Chairman of the Board shall preside and the Secretary shall act as Secretary
of the meeting.
3.11 Disregard of Nomination or Proposal. Except as otherwise provided by
law, the Certificate of Incorporation or these Bylaws, the person presiding
over any meeting of the stockholders shall have the power and duty to
determine whether a nomination or any other business proposed to be brought
before the meeting was made in accordance with the procedures set forth in
this Article 3 or Section 4.03 and, if any proposed nomination or business is
not in compliance with such provisions, to declare that such defective
proposal or nomination shall be disregarded.
3.12 Inspections of Elections. The Board of Directors by resolution shall
appoint one or more inspectors of election (which may include individuals who
serve the Corporation in other capacities including, without limitation, as
officers, employees, agents or representatives of the Corporation) to act at
any meeting of the stockholders and make a written report thereof. Such
appointments shall be made in accordance with, and each inspector shall have
the duties prescribed by, Section 231 of the Delaware General Corporation Law
(the "DGCL").
4. DIRECTORS.
4.01 Powers. The Board of Directors shall exercise all of the powers of the
Corporation except such as are by law, or by the Certificate of Incorporation
of this Corporation or by these Bylaws conferred upon or reserved to the
stockholders of any class or classes.
4.02 Number and Classification.
(a) The Board of Directors of the Corporation shall consist of five (5) to
fifteen (15) members, as determined by resolution duly adopted by such Board.
(b) Subject to and as provided in the Certificate of Incorporation, the
number of Directors shall be divided into three (3) classes, as nearly equal
in number as may be, to serve staggered three-year terms on the Board of
Directors. In the case of any increase in the number of Directors of the
Corporation, the additional Directors shall be so classified that all classes
of Directors shall be increased equally as nearly as may be, and the
additional Directors shall be elected as provided herein by the Directors or
by the stockholders at an annual meeting. In case of any decrease in the
number of Directors of the Corporation, all classes of Directors shall be
decreased equally, as nearly as may be. Election of Directors shall be
conducted as provided in the Certificate of Incorporation, in these Bylaws, or
by applicable law.
4.03 Nominations. No person shall be elected to the Board of Directors of
this Corporation at an annual meeting of the stockholders, or at a special
meeting called for that purpose, unless a written nomination of such
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person to the Board of Directors: (i) by a stockholder of the Corporation who
is entitled to vote at such meeting shall be received by the Secretary of the
Corporation (A) in the case of an annual meeting of stockholders that is
called for a date that is within thirty (30) days before or after the
anniversary date of the immediately preceding annual meeting of stockholders,
not less than fifty (50) days prior to such anniversary date and (B) in the
case of an annual meeting of stockholders that is called for a date that is
not within thirty (30) days before or after the anniversary date of the
immediately preceding annual meeting of stockholders, or in the case of a
special meeting of stockholders, not later than the close of business on the
tenth day following the day on which the notice of meeting was mailed or
public disclosure of the date of the meeting was made, whichever occurs first;
or (ii) is made by or at the direction of the Board of Directors.
4.04 Resignations. Any Director may resign at any time by giving written
notice to the Board of Directors or the Secretary. Such resignation shall take
effect at the date of receipt of such notice or at any later time specified
therein. Acceptance of such resignation shall not be necessary to make it
effective.
4.05 Removal. At any special meeting of the stockholders duly called as
provided herein, any Director may be removed from office in accordance with
the Certificate of Incorporation and the successor of the Director so removed
may be elected at such meeting. Any vacancy may be filled as provided in
Section 4.06.
4.06 Vacancies.
(a) In case any vacancy shall occur on the Board of Directors because of
death, resignation, retirement, disqualification, removal, an increase in the
authorized number of Directors or any other cause, the Board of Directors may,
at any meeting, by resolution adopted by the affirmative vote of a majority of
the Directors then in office, though less than a quorum, elect a Director to
fill such vacancy.
(b) If, as a result of a disaster or emergency (as determined in good faith
by the then remaining Directors), it becomes impossible to ascertain whether
or not vacancies exist on the Board of Directors, and a person is or persons
are elected by Directors, who in good faith believe themselves to be a
majority of the remaining Directors, to fill a vacancy or vacancies that said
remaining Directors in good faith believe exists, then the acts of such person
or persons who are so elected as Directors shall be valid and binding upon the
Corporation even though (i) there was in fact no vacancy or vacancies existing
on the Board of Directors, or (ii) the Directors who so elected such person or
persons did not in fact constitute a majority of the remaining Directors.
4.07 Presiding Officer and Secretary. At each meeting of the Board of
Directors, the Chairman of the Board shall preside, and the Secretary shall
act as secretary of the meeting.
4.08 Annual Meetings. The Board of Directors shall meet each year
immediately following the annual meeting of stockholders, at the place where
such meeting of stockholders has been held, or at such other place as shall be
fixed by the person presiding over the meeting of the stockholders at which
such Directors are elected, for the purpose of organization, election of
officers, and consideration of such other business as the Board considers
relevant to the management of the Corporation.
4.09 Regular Meetings. Regular meetings of the Board of Directors shall be
held on such dates and at such times and places, within or without the state
of Delaware, as shall from time to time be determined by the Board of
Directors. In the absence of any such determination, such meetings shall be
held at such times and places, within or without the State of Delaware, as
shall be designated by the Chairman of the Board on not less than three (3)
calendar days' notice (specifying the time and place of the meeting and the
agenda therefor) to each Director, given verbally or in writing either
personally, by telephone, by facsimile transmission, by mail, by courier
service, by telegram or by telex.
4.10 Special Meetings. Special meetings of the Board of Directors shall be
held at the call of the Chairman of the Board at such times and places, within
or without the State of Delaware, as he or she shall designate, on not less
than two (2) calendar days' notice (specifying the time and place of the
meeting and the
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agenda therefor) to each Director, given verbally or in writing either
personally, by telephone, by facsimile transmission, by mail, by courier
service, by telegram or by telex. Special meetings shall be called by the
Secretary on like notice at the written request of a majority of the
Directors.
4.11 Quorum and Powers of a Majority. At all meetings of the Board of
Directors and of each committee thereof, a majority of the members shall be
necessary and sufficient to constitute a quorum for the transaction of
business, and the act of a majority of the members present at any meeting at
which a quorum is present shall be the act of the Board of Directors or such
committee, unless by express provision of law, of the Certificate of
Incorporation or these Bylaws, a different vote is required, in which case
such express provision shall govern and control. In the absence of a quorum, a
majority of the members present at any meeting may, without notice other than
announcement at the meeting, adjourn such meeting from time to time until a
quorum is present.
4.12 Waiver of Notice. Notice of any meeting of the Board of Directors, or
any committee thereof, need not be given to any member if waived by him or her
in writing, whether before or after such meeting is held, or if he or she
shall sign the minutes or attend the meeting.
4.13 Manner of Acting.
(a) Members of the Board of Directors, or any committee thereof, may
participate in any meeting of the Board of Directors or such committee by
means of conference telephone or similar communications equipment by means of
which all persons participating therein can hear each other, and participation
in a meeting by such means shall constitute presence in person at such
meeting.
(b) Any action required or permitted to be taken at any meeting of the Board
of Directors or any committee thereof may be taken without a meeting if all
members of the Board of Directors or such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or such committee.
4.14 Compensation.
(a) The Board of Directors, by a resolution or resolutions, may fix, and
from time to time, change the compensation of Directors.
(b) Each Director who is not also an employee of the Corporation shall be
entitled to reimbursement from the Corporation for his or her reasonable
expenses incurred in attending meetings of the Board of Directors or any
committee thereof.
(c) Nothing contained in these Bylaws shall be construed to preclude any
Director from serving the Corporation in any other capacity and from receiving
compensation from the Corporation for services rendered to it in such other
capacity.
4.15 Committees. The Board of Directors may, by resolution or resolutions
adopted by the affirmative vote of a majority of the Board of Directors,
designate one or more committees, each committee to consist of two or more
Directors, which to the extent provided in said resolution or resolutions
shall have and may exercise the powers and authority of the Board of Directors
in the management of the business and affairs of the Corporation; provided
that no such committee shall have the power to (i) elect Directors, (ii)
alter, amend, or repeal these Bylaws or any resolution of the Board relating
to such committee, (iii) appoint any member of such committee, (iv) declare
any dividend or make any other distribution to the stockholders of the
Corporation or (v) take any other actions which may lawfully be taken only by
the full Board of Directors. Such committee or committees shall have such name
or names as may be determined from time to time by resolutions adopted by the
Board of Directors.
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4.16 Committee Procedure.
(a) Except as otherwise provided by these Bylaws, each committee shall adopt
its own rules governing the time, place and method of holding its meetings and
the conduct of its proceedings and shall meet as provided by such rules or by
resolution of the Board of Directors. Unless otherwise provided by these
Bylaws or any such rules or resolutions, notice of the time and place of each
meeting of a committee shall be given to each member of such committee as
provided in Section 4.10 of these Bylaws with respect to notices of special
meetings of the Board of Directors.
(b) Each committee shall keep regular minutes of its proceedings and report
the same to the Board of Directors when required.
(c) Any member of any committee, other than a member thereof serving ex-
officio, may be removed from such committee either with or without cause, at
any time, by resolution adopted by the affirmative vote of a majority of the
Board of Directors at any meeting thereof. Any vacancy in any committee shall
be filled by the Board of Directors in the manner prescribed by these Bylaws
for the original appointment of the members of such committee.
4.17 Executive Committee. There shall be established an Executive Committee
consisting of four (4) members. The Chairman of the Board shall be a member
and shall act as Chairman of the Executive Committee. In addition, the Board
of Directors shall elect from its members the remaining members of the
Executive Committee.
The Executive Committee shall, to the full extent of the DGCL, have and may
exercise in the intervals between meetings of the Board of Directors, all the
powers of the whole Board of Directors in its management of the affairs and
business of the Corporation, except the power or authority to:
(a) amend the Certificate of Incorporation;
(b) adopt any agreement of merger or consolidation;
(c) recommend to stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets;
(d) recommend to stockholders a dissolution of the Corporation or a
revocation of a dissolution;
(e) amend these Bylaws;
(f) appoint or remove a member of any committee established by the Board
of Directors, fill vacancies on the Board of Directors, remove an officer
elected by the Board of Directors, or raise or lower any officer's salary;
or
(g) declare dividends or authorize the issuance of stock.
Meetings of the Executive Committee may be called at any time by the
Chairman of the Board and shall be held at the general office of the
Corporation or at such other place, within or without the State of Delaware,
as the Chairman of the Board may designate, on not less than one (1) day's
notice to each member of the Executive Committee, given verbally or in writing
either personally, by telephone, by facsimile transmission, by mail, by
telegram or telex.
5. OFFICERS.
5.01 Number.
(a) The officers of the Corporation shall include a Chief Executive Officer,
a President, one or more Vice Presidents (including one or more Executive Vice
Presidents and one or more Senior Vice Presidents if deemed appropriate by the
Board of Directors), a Secretary and a Treasurer. The Board of Directors shall
also elect a Chairman of the Board pursuant to Section 5.02. The Board of
Directors may also elect such other officers as the
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Board of Directors may from time to time deem appropriate or necessary. Except
for the Chairman of the Board, none of the officers of the Corporation need be
a Director of the Corporation. Any two or more offices may be held by the same
person, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity.
(b) The Chairman of the Board shall be the Chief Executive Officer unless
the Board of Directors, by resolution adopted by the affirmative vote of not
less than a majority of the Directors then in office, designates the President
or some other person as Chief Executive Officer. If at any time the offices of
the Chairman of the Board and Chief Executive Officer shall not be filled, the
President shall also be the Chief Executive Officer.
(c) The Board of Directors may delegate to the Chief Executive Officer the
power to appoint one or more employees of the Corporation as divisional or
departmental Vice Presidents and fix the duties of such appointees. However,
no such divisional or departmental Vice President shall be considered as an
officer of the Corporation, the officers of the Corporation being limited to
those officers elected by the Board of Directors.
5.02 Election of Officers. The officers of the corporation to be elected by
the Board of Directors shall be elected annually at the first meeting of the
Board of Directors held after each annual meeting of the stockholders. Each
such officer shall hold office for one (1) year and until a successor shall
have been duly elected and shall qualify in his or her stead unless the Board
of Directors shall have provided by contract or otherwise in any particular
case, or until such officer shall have resigned and his or her resignation
shall have become effective, or until such officer shall have been removed in
the manner hereinafter provided. Notwithstanding anything in this Section 5.02
to the contrary, the Chairman of the Board may be elected only by the vote of
a majority of the Directors then in office (who may include the Director who
is or is to be the Chairman of the Board).
5.03 Removal. Except as otherwise expressly provided in a contract duly
authorized by the Board of Directors, any officer elected by the Board of
Directors may be removed, either with or without cause, at any time by
resolution adopted by the affirmative vote of a majority of the Board of
Directors at any meeting thereof; provided that the Chairman of the Board may
be removed by the vote of a majority of the Directors then in office
(excluding the Director who is the Chairman of the Board).
5.04 Resignations. Any officer of the Corporation may resign at any time by
giving written notice to the Board of Directors or the Chairman of the Board.
Such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein and, unless otherwise specified herein,
the acceptance of such resignation shall not be necessary to make it
effective.
5.05 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause may be filled for the unexpired
portion of the term by election by the Board of Directors at any meeting
thereof.
5.06 Salaries. The salaries of all officers of the Corporation shall be
fixed by the Board of Directors from time to time, and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
Director of the Corporation.
5.07 The Chairman of the Board.
(a) The Chairman of the Board shall have the powers and duties customarily
and usually associated with the office of the Chairman of the Board. The
Chairman of the Board shall preside at meetings of the stockholders and of the
Board of Directors. In the event of the Chairman of the Board's temporary
absence or disability and the absence or disability of the Chief Executive
Officer and the President, the Chairman of the Board shall have the power to
designate any Director to preside at any or all meetings of the stockholders
and of the Board of Directors.
(b) If at any time the office of President or Chief Executive Officer shall
not be filled, or in the event of the disability of the President or the Chief
Executive Officer, the Chairman of the Board (if one shall be elected)
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shall have the duties and powers of the President or the Chief Executive
Officer, as the case may be. The Chairman of the Board shall have such other
powers and perform such greater or lesser duties as may be delegated to him or
her from time to time by the Board of Directors.
5.08 The President. Unless the Board of Directors, by resolution adopted by
the affirmative vote of not less than a majority of the Directors then in
office, designates some other person to serve as the Chief Operating Officer,
the President shall serve as Chief Operating Officer and shall have such other
powers and perform such other duties as may be delegated to him or her from
time to time by the Board of Directors or the Chairman of the Board.
5.09 The Vice Presidents. Each Vice President shall have such powers and
perform such duties as may from time to time be assigned to him or her by the
Board of Directors, the Chairman of the Board or the President.
5.10 The Secretary and the Assistant Secretary.
(a) The Secretary shall attend meetings of the Board of Directors and
meetings of the stockholders and record all votes and minutes of all such
proceedings in a book or equivalent electronic database kept for such purpose
and shall perform like duties for the committees of Directors as provided for
in these Bylaws when required. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and of the Board of Directors (except
in case of meetings called by the Chairman of the Board in accordance with
Sections 4.09 or 4.10). He or she shall have charge of the stock ledger
(unless responsibility for maintaining the stock ledger is delegated to a
transfer agent by the Board of Directors pursuant to Section 6.06) and such
other books and papers as the Board of Directors may direct. He or she shall
have all such further powers and duties as generally are incident to the
position of Secretary or as may from time to time be assigned to him or her by
the Board of Directors or the Chairman of the Board.
(b) Each Assistant Secretary shall have such powers and perform such duties
as may from time to time be assigned to him or her by the Board of Directors,
the Chairman of the Board or the Secretary. In case of the absence or
disability of the Secretary, the Assistant Secretary designated by the
Secretary (or, in the absence of such designation, the senior Assistant
Secretary) shall perform the duties and exercise the powers of the Secretary.
5.11 The Treasurer and the Assistant Treasurer.
(a) The Treasurer shall have custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation and shall deposit moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories
as may be designated by the Board of Directors. He or she may endorse all
commercial documents requiring endorsements for or on behalf of the
Corporation and may sign all receipts and vouchers for payments made to the
Corporation.
(b) The Treasurer shall disburse funds of the Corporation as may from time
to time be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and render to the Board of Directors, the Chairman of the Board
and President, whenever they may require it, an account of all transactions
undertaken by him or her as Treasurer and of the financial condition of the
Corporation.
(c) Each Assistant Treasurer shall have such powers and perform such duties
as may from time to time be assigned to him or her by the Board of Directors,
the Chairman of the Board, the President or the Treasurer. In case of the
absence or disability of the Treasurer, the Assistant Treasurer designated by
the Treasurer (or, in the absence of such designation, the senior Assistant
Treasurer) shall perform the duties and exercise the powers of the Treasurer.
5.12 Treasurer's Bond. If required by the Board of Directors, the Treasurer
or any Assistant Treasurer shall give the Corporation a bond in such form and
with such surety or sureties as are satisfactory to the Board
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of Directors for the faithful performance of the duties of office and for the
restoration to the Corporation, in case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the Corporation.
5.13 Chief Executive Officer. The Chief Executive Officer shall have,
subject to the supervision, direction and control of the Board of Directors,
the general powers and duties of supervision, direction and management of the
affairs and business of the Corporation usually vested in the chief executive
officer of a Corporation, including, without limitation, all powers necessary
to direct and control the organizational and reporting relationships within
the Corporation.
5.14 Chief Operating Officer. The Chief Operating Officer shall, subject to
the supervision, direction and control of the Chief Executive Officer and the
Board of Directors, manage the day-to-day operations of the Corporation and,
in general, shall assist the Chief Executive Officer.
6. STOCK.
6.01 Certificates. Certificates or shares of the stock of the Corporation
shall be issued under the seal of the Corporation, or facsimile thereof, and
shall be numbered and shall be entered in the books of the Corporation as they
are issued. Each certificate shall bear a serial number, shall exhibit the
holder's name and the number of shares evidenced thereby and shall be signed
by the Chairman of the Board or a Vice Chairman, if any, or the Chief
Executive Officer or the President or any Vice President and the Secretary or
an Assistant Secretary or the Treasurer or an Assistant Treasurer. Any or all
of the signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person or entity were such
officer, transfer agent or registrar at the date of issue.
6.02 Transfers. Transfers of stock of the Corporation shall be made on the
books of the Corporation only upon surrender to the Corporation of a
certificate for the shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, provided such succession,
assignment, or transfer is not prohibited by the Certificate of Incorporation,
the Bylaws, applicable law or contract. Thereupon, the Corporation shall issue
a new certificate to the person entitled thereto, cancel the old certificate
and record the transaction upon its books.
6.03 Lost, Stolen or Destroyed Certificates. Any person claiming a
certificate of stock to be lost, stolen or destroyed shall make an affidavit
or an affirmation of that fact, and may be required to give the Corporation a
bond of indemnity in satisfactory form and with one or more satisfactory
sureties, whereupon a new certificate may be issued of the same tenor and for
the same number of shares as the one alleged to be lost or destroyed.
6.04 Record Date.
(a) In order that the Corporation may determine the stockholders entitled to
notice of or to vote at a meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors shall fix, in advance, a record date, which shall not
be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
(b) If no record date is fixed by the Board of Directors, (i) the record
date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the date on which notice is given, or, if the notice is waived by
all stockholders entitled to vote at the meeting, at the close of business on
the day next preceding the day on which the meeting was held and (ii) the
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record date for determining stockholders for any other purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
(c) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided that the Board of Directors may fix a new record date for
the adjourned meeting.
6.05 Registered Stockholders. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
as the person entitled to exercise the rights referred to in Section 6.04 and
shall not be bound to recognize any equitable or other claim to or interest in
any such shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise expressly provided by the
laws of the State of Delaware.
6.06 Additional Powers of the Board.
(a) In addition to those powers set forth in Section 4.01, the Board of
Directors shall have power and authority to make all such rules and
regulations as it shall deem expedient concerning the issue, transfer and
registration of certificates for shares of stock of the Corporation.
(b) The Board of Directors may appoint and remove transfer agents and
registrars of transfers, and may require all stock certificates to bear the
signature of any such transfer agent and/or any such registrar of transfers.
(c) The Board of Directors shall have power and authority to create and
issue (whether or not in connection with the issue and sale of any stock or
other securities of the Corporation) warrants, rights or options entitling the
holders thereof to purchase from the Corporation any shares of any class or
classes or any other securities of the Corporation for such consideration and
to such persons, firms or corporations as the Board of Directors, in its sole
discretion, may determine, setting aside from the authorized but unissued
stock of the Corporation the requisite number of shares for issuance upon the
exercise of such warrants, rights or options. Such warrants, rights or options
shall be evidenced by such instrument or instruments as shall be approved by
the Board of Directors. The terms upon which, the time or times (which may be
limited or unlimited in duration) at or within which, and the price or prices
at which any such shares or other securities may be purchased from the
Corporation upon the exercise of any such warrant, right or option shall be
such as shall be fixed and stated in a resolution or resolutions of the Board
of Directors providing for the creation and issue of such warrants, rights or
options.
7. MISCELLANEOUS.
7.01 Place and Inspection of Books.
(a) The books of the Corporation other than such books as are required by
law to be kept within the State of Delaware shall be kept in the Commonwealth
of Virginia or at such other place or places within or without the State of
Delaware as the Board of Directors may from time to time determine.
(b) At least ten (10) days before each meeting of stockholders, the officer
in charge of the stock ledger of the Corporation shall prepare a complete list
of the stockholders entitled to vote at the meeting, arranged in alphabetical
order and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
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(c) The Board of Directors shall determine from time to time whether, when
and under what conditions and regulations the accounts and books of the
Corporation (except such as may be by law specifically open to inspection or
as otherwise provided by these Bylaws) or any of them shall be open to the
inspection of the stockholders and the stockholders' rights in respect
thereof.
7.02 Indemnification of Directors, Officers, Employees and Agents.
(a) The Corporation shall indemnify any person who was or is a party to or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that such person is or was a Director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
or owed in settlement actually and reasonably paid or incurred by him or her
or rendered or levied against him or her in connection with such action, suit
or proceeding, if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent shall not, in itself,
create a presumption that the person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that such person is or was a Director or officer
of the Corporation, or is or was serving at the request of the Corporation as
a director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses, including attorneys' fees, actually and reasonably paid or
incurred by him or her in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation; provided however, that no indemnification shall be made in
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
(c) The Corporation may, at the discretion of the Board of Directors,
indemnify all employees and agents of the Corporation (other than Directors
and officers) to the extent that Directors and officers shall be indemnified
pursuant to subsections (a) and (b).
(d) To the extent that a person who may be entitled to indemnification by
the Corporation under this section is or has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b), or in defense of any claim, issue or matter therein,
he or she shall be indemnified against expenses, including attorney's fees,
actually and reasonably paid or incurred by him or her in connection
therewith.
(e) Any indemnification under subsections (a), (b) or (c) shall be made by
the Corporation only as authorized in the specific case upon a determination
that indemnification of the Director, officer, employee or agent is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in subsection (a) or (b). Such determination shall be made (i) by
the Board of Directors by a majority vote of a quorum consisting of Directors
who were not parties to such action, suit or proceeding, (ii) if such a quorum
is not obtainable or, even if obtainable, a quorum of disinterested Directors
so directs, by independent legal counsel
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in a written opinion, (iii) by the stockholders or (iv) in any case in which
applicable law makes court approval a prerequisite to indemnification, by the
court in which such action, suit or proceeding was brought or another court of
competent jurisdiction.
(f) Expenses, including attorneys' fees, incurred by an officer or Director
in defending a civil, criminal, administrative, or investigative action, suit
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the Director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
the Corporation as authorized in this section. Such expenses, including
attorneys' fees, incurred by other employees and agents shall be so paid upon
terms and conditions, if and as the Board of Directors deems appropriate.
(g) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
the stockholders or disinterested Directors or otherwise, both as to action in
an official capacity and as to action in another capacity while holding such
office.
(h) The provisions of this section shall continue as to a person who has
ceased to be a Director, officer, employee or agent and shall inure to the
benefit of the estate, executors, administrators, spouse, heirs, legatees or
devisees of a person entitled to indemnification hereunder and the term
"person," as used in this section, shall include the estate, executors,
administrators, spouse, heirs, legatees or devisees of such person.
(i) For the purposes of this section 7.02, (i) "employee benefit plan" and
"fiduciary" shall be deemed to include, but not be limited to, the meanings
set forth, respectively, in Sections 3(3) and 21(A) of the Employee Retirement
Income Security Act of 1974, as amended, and references to the judgments,
fines and amounts paid or owed in settlement or rendered or levied shall be
deemed to encompass and include excise taxes required to be paid pursuant to
an applicable law in respect of any transaction involving an employee benefit
plan, (ii) references to the Corporation shall be deemed to include any
predecessor corporation and any constituent corporation absorbed in a merger,
consolidation or other reorganization of or by the Corporation which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees, agents or fiduciaries so that
any person who was a director, officer, employee, agent or fiduciary of such
predecessor or constituent corporation, or served at the request of such
predecessor or constituent corporation as a director, officer, employee agent
or fiduciary of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, shall stand in the same position
under the provisions of this Section 7.02 with respect to the Corporation as
such person would have with respect to such predecessor or constituent
corporation if its separate existence had continued, and (iii) all other terms
shall be deemed to have the meanings for such terms as set forth in Section
145 of the DGCL.
7.03 Dividends.
(a) Dividends may be declared at the discretion of the Board of Directors at
any meeting thereof.
(b) Dividends may be paid to stockholders in cash or, when the Directors
shall so determine, in stock. A Director shall be fully protected in relying
in good faith upon the books of account of the Corporation or statements
prepared by any of its officers as to the value and amount of the assets,
liabilities or net profits of the Corporation, or any other facts pertinent to
the existence and amount of surplus or other funds from which dividends might
properly be declared.
(c) Before payment of any dividend or any distribution of profits, there may
be set aside out of the said surplus of the Corporation such sum or sums as
the Board of Directors from time to time, in its discretion thinks proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for such
other purpose as the
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Board of Directors shall think conducive to the interests of the Corporation
and the Board of Directors may abolish any such reserve in the manner in which
it was created.
7.04 Execution of Deeds, Contracts and Other Agreements and
Instruments. Subject to the specific directions of the Board of Directors, all
deeds, mortgages and bonds entered into by the Corporation and all other
written contracts and agreements to which the Corporation shall be a party
shall be executed in its name by the Chairman of the Board, the President or a
Vice President, or such other person or persons as may be authorized by any
such officer.
7.05 Checks. All checks, drafts, acceptances, notes and other orders,
demands or instruments with respect to the payment of money may be signed or
endorsed on behalf of the Corporation by such officer or officers or by such
agent or agents as the Board of Directors may from time to time designate.
7.06 Voting of Shares Held. Unless otherwise provided by resolution of the
Board of Directors or of the Executive Committee, if any, each of the Chief
Executive Officer and President may from time to time appoint an attorney or
attorneys or agent or agents of the Corporation, in the name and on behalf of
the Corporation, to cast the vote which the Corporation may be entitled to
cast as a shareholder or otherwise in any other corporation, partnership,
limited liability company or joint venture, any of whose securities may be
held by the Corporation, at meetings of the holders of the shares or other
securities of such other corporation, partnership, limited liability company
or joint venture or to consent in writing to any action by any such other
corporation, partnership, limited liability company or joint venture; and the
Chief Executive Officer or President shall instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent and
may execute or cause to be executed on behalf of the Corporation, and under
its corporate seal or otherwise, such written proxies, consents, waivers or
other instruments as may be necessary or proper in the premises. In lieu of
such appointment the Chief Executive Officer or President may themselves
attend any meetings of the holders of shares or other securities of any such
other corporation, partnership, limited liability company or joint venture and
there vote or exercise any or all power of the Corporation as the holder of
such shares or other securities of such other corporation, partnership,
limited liability company or joint venture.
7.07 Fiscal Year. The fiscal year of the Corporation shall correspond with
the calendar year.
7.08 Gender/Number. As used in these Bylaws, the masculine, feminine or
neuter gender, and the singular or plural number, shall each include the
others whenever the context so indicates.
7.09 Paragraph Titles. The titles of the paragraphs have been inserted as a
matter of reference only and shall not control or affect the meaning or
construction of any of the terms and provisions hereof.
7.10 Amendment. These Bylaws may be altered, amended or repealed by the
affirmative vote of the holders of a majority of the voting power of the stock
issued and outstanding and entitled to vote at any meeting of stockholders or
by resolution adopted by the affirmative vote of not less than a majority of
the Directors in office at any annual or regular meeting of the Board of
Directors or at any special meeting of the Board of Directors if notice of the
proposed alteration, amendment or repeal be contained in the notice of such
special meeting; provided, however, that any provision of these Bylaws adopted
or required to be adopted pursuant to the DGCL by the stockholders of the
Corporation shall only be amended by the affirmative vote of a majority of the
votes entitled to be cast on such matter.
7.11 Certificate of Incorporation. Notwithstanding anything to the contrary
contained herein, if any provision contained in these Bylaws is inconsistent
with or conflicts with a provision of the Certificate of Incorporation of the
Corporation, such provision of these Bylaws shall be superseded by the
inconsistent provision in the Certificate of Incorporation to the extent
necessary to give effect to such provision in the Certificate of
Incorporation.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") authorizes,
inter alia, a corporation generally to indemnify any person ("indemnitee") who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than an action by or in
the right of the corporation) by reason of the fact that such person is or was
a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation, in a similar position with another
corporation or entity, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. With respect to actions or suits by or in the right of the
corporation; however, an indemnitee who acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation is generally limited to attorney's fees and other expenses, and no
indemnification shall be made if such person is adjudged liable to the
corporation unless and only to the extent that a court of competent
jurisdiction determines that indemnification is appropriate. Section 145
further provides that any indemnification shall be made by the corporation
only as authorized in each specific case upon a determination by the (i)
stockholders, (ii) board of directors by a majority voted of a quorum
consisting of directors who were not parties to such action, suit or
proceeding or (iii) independent counsel if a quorum of disinterested directors
so directs, that indemnification of the indemnitee is proper because he has
met the applicable standard of conduct. Section 145 provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise.
Article IX of the InteliData Technologies Corporation ("InteliData")
Certificate of Incorporation provides that InteliData shall indemnify any and
all persons permitted to be indemnified by Section 145 of DGCL to the fullest
extent permitted by the DGCL.
Section 7.02 of the InteliData ByLaws provides, in substance, that
directors, officers, employees and agents shall be indemnified to the fullest
extent permitted by Section 145 of the DGCL.
InteliData intends to enter into indemnification agreements with certain of
its directors providing for indemnification to the fullest extent permitted by
the laws of the State of Delaware. These agreements provide for specific
procedures to better assure the directors' rights to indemnification,
including procedures for directors to submit claims, for determination of
directors' entitlement to indemnification (including the allocation of the
burden of proof and selection of a reviewing party) and for enforcement of
directors' indemnification rights.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) The following are filed as exhibits to this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
2.1 Agreement and Plan of Merger, dated August 5, 1996, between US
Order, Inc. and Colonial Data Technologies Corp. (included as
Appendix I to the Joint Proxy Statement/Prospectus).
3.1 Certificate of Incorporation of InteliData Technologies
Corporation (included as Appendix IV to the Joint Proxy
Statement/Prospectus).
3.2 Bylaws of InteliData Technologies Corporation (included as
Appendix V to the Joint Proxy Statement/Prospectus).
4.1 Article IX of the Certificate of Incorporation of InteliData,
incorporated by reference to Exhibit 3.1 filed herewith, and
Section 7.02 of the Bylaws of InteliData, incorporated by
reference to Exhibit 3.2 filed herewith.
5.1 Opinion of Hunton & Williams.
8.1 Tax Opinion of Hunton & Williams.
8.2 Tax Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<C> <S>
10.1 Employment Agreement, dated August 1, 1994, between US Order, Inc.
and John C. Backus, Jr. (incorporated herein by reference to US
Order's Registration Statement on Form S-1, dated June 1, 1995
(as filed with the Commission, File number 33-90978)).
10.2 Employment Agreement, dated as of July 1, 1996, between Colonial
Data Technologies Corp. and Robert J. Schock.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Hunton & Williams (included as part of Exhibits 5 and
8.1).
23.4 Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included as
part of Exhibit 8.2).
23.5 Consent of Salomon Brothers Inc.+
23.6 Consent of First Albany Corporation.+
23.7 Consents of Director Designees of InteliData Technologies
Corporation.
99.1 Form of US Order, Inc. proxy card.
99.2 Form of Colonial Data Technologies Corp. proxy card.
</TABLE>
- --------
+Previously filed.
ITEM 22. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual
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report pursuant to section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
D. The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (C) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
E. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
F. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
G. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HERNDON, COMMONWEALTH OF
VIRGINIA, ON THE 8TH DAY OF OCTOBER, 1996.
InteliData Technologies Corporation
(Registrant)
/s/ Albert N. Wergley
By: _________________________________
Albert N. Wergley
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSON IN THE CAPACITIES INDICATED
ON OCTOBER 8, 1996.
SIGNATURE TITLE
/s/ Albert N. Wergley President, Treasurer and Sole Director
- ------------------------------------- (Principal Executive Officer and
ALBERT N. WERGLEY Principal Financial and Accounting
Officer)
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
5.1 Opinion of Hunton & Williams.
8.1 Tax Opinion of Hunton & Williams.
8.2 Tax Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.
10.2 Employment Agreement, dated as of July 1, 1996, between Colonial
Data Technologies Corp. and Robert J. Schock.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Deloitte & Touche LLP.
23.7 Consents of Director Designees of InteliData Technologies
Corporation.
99.1 Form of US Order, Inc. proxy card.
99.2 Form of Colonial Data Technologies Corp. proxy card.
</TABLE>
<PAGE>
Exhibit 5.1
[LETTERHEAD OF HUNTON & WILLIAM APPEARS HERE]
File No.: 49709.000016
October 8, 1996
Board of Directors
InteliData Technologies Corporation
13100 Worldgate Drive
Suite 600
Herndon, Virginia 20170
InteliData Technologies Corporation
Registration Statement on Form S-4
----------------------------------
Ladies & Gentlemen:
We have acted as counsel for InteliData Technologies Corporation, a
Delaware corporation (the "Company"), in connection with the Company's
Registration Statement on Form S-4, and any amendments thereto (the
"Registration Statement"), as filed with the Securities and Exchange Commission,
relating to the proposed mergers (the "Mergers") of US Order, Inc. ("US Order")
and Colonial Data Technologies Corp. ("Colonial Data") with and into the
Company, as provided for in the Agreement and Plan of Merger, dated as of August
5, 1996 (the "Merger Agreement"), which contemplates the issuance of up to
32,536,857 shares of the Company's common stock, $.001 par value per share (the
"Common Stock"), to holders as of the effective time of the Mergers of
outstanding shares of US Order common stock, $.001 par value per share, and
Colonial Data common stock, $.01 par value per share. In connection with the
filing of the Registration Statement, you have requested our opinion concerning
certain corporate matters.
In rendering this opinion, we have relied upon, among other things, our
examination of such records of the Company and certificates of its officers and
of public officials as we have deemed necessary.
Based upon the foregoing and the further qualifications stated below, we
are of the opinion that:
1. The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware.
<PAGE>
Board of Directors
October 8, 1996
Page 2
2. The 32,536,857 shares of Common Stock covered by the Registration
Statement have been duly authorized and, when issued in the Mergers pursuant to
the Merger Agreement, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the statements made in reference to our firm under
the heading "LEGAL MATTERS" in the joint proxy statement/prospectus that is
included in the Registration Statement. In giving this consent, we do not admit
that we are within the category of persons whose consent is required by Section
7 of the Securities Act of 1933 or the rules and regulations promulgated
thereunder by the Securities and Exchange Commission.
Very truly yours,
Hunton & Williams
<PAGE>
EXHIBIT 8.1
October __, 1996
US Order, Inc.
USOCDT Merger Corporation
13873 Park Center Road
Suite 353
Herndon, Virginia 22071
Merger of US Order, Inc.
Into USOCDT Merger Corporation
Certain Federal Income Tax Consequences
---------------------------------------
Ladies and Gentlemen:
We have acted as counsel to US Order, Inc., a Delaware corporation
("US Order"), in connection with a proposed transaction (the "Reorganization")
in which (a) US Order and Colonial Data Technologies, Corp., a Delaware
corporation ("Colonial Data"), each will merge into USOCDT Merger Corporation
("Newco"), a recently-formed Delaware corporation owned equally by US Order and
Colonial Data, and (b) the shareholders of US Order and the shareholders of
Colonial Data will become the shareholders of Newco.
In the merger of US Order into Newco (the "US Order Merger"), each
outstanding share of US Order common stock is to be converted into one share of
Newco common stock. US Order common stock is the only class of US Order stock
outstanding. Simultaneously with the US Order Merger, Colonial Data will be
merged into Newco (the "Colonial Data Merger"). In the Colonial Data Merger,
shareholders of Colonial Data will receive one share of Newco common stock in
exchange for each share of Colonial Data common stock. Neither US Order
shareholders nor Colonial Data shareholders are entitled to dissenter's rights
with respect to either the US Order Merger or the Colonial Data Merger.
In both the US Order Merger and the Colonial Data Merger, each
outstanding warrant or option, whether vested or unvested, to purchase US Order
common stock or Colonial Data common stock, as applicable, shall become an
option to acquire, on the same terms and conditions as were applicable under
such warrant or option, the same number of shares of Newco common stock as the
holder would have been entitled to receive had he exercised
<PAGE>
US Order, Inc.
Newco Corporation
October __, 1996
Page 2
such warrant or option prior to the US Order Merger or Colonial Data Merger.
You have requested our opinion concerning certain federal income tax
consequences relating to the US Order Merger. In giving this opinion, we have
reviewed the Agreement and Plan of Reorganization dated as of August 5, 1996,
the Form S-4 Registration Statement under the Securities Act of 1933 relating to
the Reorganization (the "S-4"), and such other documents as we have considered
necessary. In addition, we have assumed the following:
1. The fair market value of the Newco common stock received by a US
Order shareholder in exchange for US Order common stock will be approximately
equal to the fair market value of the US Order common stock surrendered in the
exchange.
2. None of the compensation received by any shareholder-employee of
US Order will be separate consideration for, or allocable to, any shares of US
Order common stock; none of the shares of Newco common stock received by any
shareholder-employee in the US Order Merger will be separate consideration for,
or allocable to, any employment agreement; and the compensation paid to any
shareholder-employee will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
3. No share of US Order common stock has been or will be redeemed in
anticipation of the US Order Merger, and US Order has not made and will not make
any extraordinary distribution with respect to its stock in anticipation of the
US Order Merger.
4. Newco has no plan or intention to reacquire any of its stock
issued in the US Order Merger or to make any extraordinary distribution with
respect to such stock.
5. There is no plan or intention by US Order shareholders to sell,
exchange, or otherwise dispose of a number of shares of Newco common stock
received in the US Order Merger that would reduce the US Order shareholders'
ownership of Newco common stock to a number of shares having a fair market
value, as of the effective date of the US Order Merger, of less than 50 percent
of the fair market value of all the formerly outstanding US Order common stock
(excluding any shares of US Order common stock issued in anticipation of the US
Order Merger) as of the same date. Moreover, shares of US Order common stock
sold, redeemed, or otherwise disposed of before the US Order Merger are
considered in making the above determination.
<PAGE>
US Order, Inc.
Newco Corporation
October __, 1996
Page 3
6. The liabilities of US Order that will be assumed by Newco and the
liabilities, if any, to which assets of US Order are subject were incurred by US
Order in the ordinary course of business.
7. On the effective date of the US Order Merger, each of the total
adjusted federal income tax basis and the fair market value of US Order's assets
will exceed the sum of its liabilities plus the amount of liabilities, if any,
to which its assets are subject.
8. There is no intercorporate indebtedness existing between
(a) Colonial Data or any subsidiary of Colonial Data and (b) US Order or any
subsidiary of US Order.
9. Following the US Order Merger, Newco will continue the historic
business of US Order or use a significant portion of US Order's historic
business assets in a business.
10. Newco has no plan or intention to sell or otherwise dispose of
any of the assets of US Order acquired in the US Order Merger, except for
dispositions made in the ordinary course of business.
11. Neither Newco, Colonial Data, nor any subsidiary of Colonial Data
(a) has transferred or will transfer cash or other property to US Order or any
subsidiary of US Order for less than fair market value consideration in
anticipation of the US Order Merger or (b) has made or will make any loan to US
Order or any subsidiary of US Order in anticipation of the US Order Merger.
12. Newco, US Order, and the shareholders of US Order will pay their
respective expenses, if any, incurred in connection with the US Order Merger.
13. For each of Newco and US Order, less than 50 percent of the fair
market value of its total assets consists of stock and securities, or less than
80 percent of the fair market value of its total assets consists of assets held
for investment. For purposes of the preceding sentence, (a) total assets
exclude cash, cash items (including accounts receivable and cash equivalents),
and United States government securities; (b) a corporation's total assets
exclude stock and securities issued by any subsidiary at least 50 percent of the
voting power or 50 percent of the total fair market value of the stock of which
is owned by the corporation, but the corporation is treated as owning directly a
ratable share (based on the percentage of the fair market of the subsidiary's
stock owned by the corporation) of the assets owned by any such subsidiary;
(c) the term "securities" includes among
<PAGE>
US Order, Inc.
Newco Corporation
October __, 1996
Page 4
other things (A) partnership interests other than interests held as a managing
general partner and (B) fractional undivided interests in mineral rights; and
(d) an asset is held for investment if it is held primarily for gain from
appreciation in value and/or for the production of passive income (including
royalties, rents, dividends, and interest).
14. At all times during the five-year period ending on the effective
date of the US Order Merger, the fair market value of all of US Order's United
States real property interests was and will have been less than 50 percent of
the total fair market value of (a) its United States real property interests,
(b) its interests in real property located outside the United States, and
(c) its other assets used or held for use in a trade or business. For purposes
of the preceding sentence, (x) United States real property interests include all
interests (other than an interest solely as a creditor) in real property and
associated personal property (such as movable walls and furnishings) located in
the United States or the Virgin Islands and interests in any corporation (other
than a controlled corporation) owning any United States real property interest,
(y) US Order is treated as owning its proportionate share (based on the relative
fair market value of its ownership interest to all ownership interests) of the
assets owned by any controlled corporation or any partnership, trust, or estate
in which US Order is a partner or beneficiary, and (z) any such entity in turn
is treated as owning its proportionate share of the assets owned by any
controlled corporation or any partnership, trust, or estate in which the entity
is a partner or beneficiary. As used in this paragraph, "controlled corporation"
means any corporation at least 50 percent of the fair market value of the stock
of which is owned by US Order, in the case of a first-tier subsidiary of US
Order, or by a controlled corporation, in the case of a lower-tier subsidiary.
15. Any shares of Newco common stock received in exchange for shares
of US Order common stock that (a) were acquired in connection with the
performance of services, including stock acquired through the exercise of an
option or warrant acquired in connection with the performance of services, and
(b) are subject to a substantial risk of forfeiture within the meaning of
section 83(c) of the Internal Revenue Code (the "Code") will be subject to
substantially the same risk of forfeiture.
16. No outstanding US Order common stock, if any, acquired in
connection with the performance of services was or will have been acquired
within six months before the effective date of the US Order Merger by any person
subject to section 16(b) of the Securities Exchange Act of 1934 other than
pursuant to an
<PAGE>
US Order, Inc.
Newco Corporation
October __, 1996
Page 5
option granted more than six months before the effective date of the US Order
Merger.
17. Newco has not acquired, nor will it acquire, any shares of US
Order common stock in anticipation of the US Order Merger.
18. US Order has not filed, nor does it hold any asset subject to, a
consent pursuant to section 341(f) of the Code and regulations thereunder.
19. US Order is not a party to, nor does it hold any asset subject
to, a "safe harbor lease" under former section 168(f)(8) of the Code and
regulations thereunder.
On the basis of the foregoing, and assuming that (a) with respect to
any nonresident alien or foreign entity that is or within the last five years
has been a more-than-five-percent shareholder of US Order, US Order (or Newco as
successor to US Order) will comply with all applicable statement and
notification requirements of Treasury Regulation (S) 1.897-2(g) & (h), and (b)
the US Order Merger will be consummated in accordance with the Plan of Merger
(as defined in the Agreement and Plan of Reorganization), we are of the opinion
that (under existing law) for federal income tax purposes:
1. The US Order Merger will be a "reorganization" within the meaning
of section 368(a)(1)(A) of the Code, and Newco and US Order each will be a
"party to a reorganization" within the meaning of section 368(b) of the Code.
2. Newco will not recognize gain or loss on the acquisition of US
Order's assets in the US Order Merger in exchange for Newco common stock and the
assumption of US Order's liabilities.
3. US Order will not recognize gain or loss (a) on the transfer of
its assets to Newco in the US Order Merger in exchange for Newco common stock
and the assumption of US Order's liabilities or (b) on the constructive
distribution of Newco common stock to US Order shareholders.
4. A US Order shareholder will not recognize gain or loss on the
exchange of shares of US Order common stock for shares of Newco common stock in
the US Order Merger.
5. The aggregate basis of shares of Newco common stock received by a
US Order shareholder in the US Order Merger will be
<PAGE>
US Order, Inc.
Newco Corporation
October __, 1996
Page 6
the same as the aggregate basis of the shares of US Order common stock exchanged
therefor.
6. The holding period for the shares of Newco common stock received
by a US Order shareholder in the US Order Merger will include the holding period
for the shares of US Order common stock exchanged therefor, if such shares of US
Order common stock are held as a capital asset on the effective date of the US
Order Merger.
We are also of the opinion that the federal income tax consequences of
the US Order Merger are fairly summarized in the S-4 under the headings
"Summary -- Certain Federal Income Tax Consequences" and "Certain Federal Income
Tax Consequences." We consent to the use of this opinion as an exhibit to the
S-4 and to the reference to this firm under such headings. In giving this
consent, we do not admit that we are within the category of persons whose
consent is required under section 7 of the Securities Act of 1933 or the rules
and regulations promulgated thereunder by the Securities and Exchange
Commission.
Very truly yours,
HUNTON & WILLIAMS
<PAGE>
Exhibit 8.2
[LETTERHEAD OF LEBOEUF, LAMB, GREENE & MACRAE, L.L.P. APPEARS HERE]
October 8, 1996
Colonial Data Technologies Corp.
80 Pickett District Road
New Milford, CT 06776
Re: Certain Federal Income Tax Consequences of the Agreement and Plan of Merger
dated as of August 5, 1996 between Colonial Data Technologies Corp., a
Delaware corporation ("CDT"), and U.S. Order, Inc., a Delaware corporation
("USO") (the "Agreement")
---------------------------------------------------------------------------
Gentlemen:
You have requested our opinion as to certain of the Federal income tax
consequences of the merger of CDT with InteliData Technologies Corporation, a
Delaware corporation ("InteliData"), pursuant to the Agreement (the "CDT
Merger"). All capitalized terms not otherwise defined in this opinion have the
meanings set forth in the Agreement. InteliData has filed a Registration
Statement with the Securities and Exchange Commission on Form S-4 (Registration
No. 333-11081) in connection with the transactions contemplated by the Agreement
(the "Registration Statement") which contains a joint proxy statement/
prospectus (the "Joint Proxy Statement/Prospectus").
In rendering this opinion, we have reviewed and relied on: (1) the
Agreement and all schedules and exhibits thereto; (2) a letter dated of even
date herewith containing certain representations by CDT and its management;
(3) a letter dated of even date herewith containing certain representations by
InteliData and its management; and (4) certain other matters of fact and law as
we have deemed necessary to enable us to render this opinion.
<PAGE>
Colonial Data Technologies Corp.
October 8, 1996
Page 2
ASSUMPTIONS
In addition, for purposes of issuing this opinion, we have assumed:
(1) the CDT Merger will qualify as a merger under applicable state law; (2) the
truth and accuracy of all information, statements, covenants and representations
relevant to this opinion and contained in the documents referred to above; and
(3) the transactions contemplated by the Agreement and all schedules and
exhibits thereto and related documents will be carried out in accordance with
their terms. If any of these stated assumptions is not correct, please advise
us at once, as our advice may be affected by any change to the assumptions.
OPINION
Based upon the assumptions set forth above and our examination of the
Agreement, the Joint Proxy Statement/ Prospectus, and the relevant legal
authorities, it is our opinion that:
(1) The CDT Merger will be treated for Federal income tax purposes as
a reorganization within the meaning of section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
(2) With respect to the CDT Merger, each of CDT and InteliData will be
a party to the reorganization within the meaning of section 368(b) of the Code.
(3) As a result of the CDT Merger, no gain or loss for Federal income
tax purposes will be recognized by CDT, InteliData (other than with respect to
any excess loss accounts, intercompany items or deferred intercompany gains) or
a stockholder of CDT (other than with respect to cash received by a stockholder
of CDT in lieu of a fractional InteliData Share) as a result of the CDT Merger.
This opinion is based upon the Federal income tax law as of the date
hereof, and no assurance can be given that changes in the law or the
administrative or judicial interpretation thereof will not occur so as to
adversely affect the conclusions expressed herein. This opinion is limited
solely to the Federal income tax consequences of the CDT Merger specifically set
forth herein and does not address the Federal income tax consequences of the
merger of USO with InteliData.
<PAGE>
Colonial Data Technologies Corp.
October 8, 1996
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and the reference to our
opinion under the headings "SUMMARY - CERTAIN FEDERAL INCOME TAX CONSEQUENCES",
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES" and "LEGAL MATTERS." In providing
such consent, we do not hereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ LeBoeuf, Lamb, Greene & MacRae, L.L.P.
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
by and between
COLONIAL DATA TECHNOLOGIES CORP.
and
ROBERT J. SCHOCK
Effective as of July 1, 1996
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
W I T N E S S E T H :
AGREEMENT effective as of July 1, 1996 (the "Commencement Date") by and
between Colonial Data Technologies Corp., a Delaware corporation (the
"Company"), and Robert J. Schock (the "Executive") (this "Agreement").
The Company desires to employ the Executive and the Executive is willing to
be employed by the Company, on the terms and conditions herein provided.
In order to effect the foregoing, the parties hereto wish to enter into an
employment agreement on the terms and conditions set forth below. Accordingly,
in consideration of the premises and the respective covenants and agreements of
the parties herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and the
----------
Executive hereby agrees to be employed by the Company, on the terms and
conditions set forth herein.
2. Term. The employment of the Executive under this Agreement shall
----
commence on the Commencement Date and shall end on June 30, 1997 (the "Term");
provided, however, that the Term shall thereafter be automatically extended for
- -------- -------
each succeeding one (1) year period unless either party hereto shall provide the
other party with a written notice at least ninety (90) days prior to the end of
the then current Term, advising that the party providing the notice shall not
agree to so extend the Term.
3. Position and Duties. The Executive shall serve as President and Chief
-------------------
Executive Officer of the Company and shall have such responsibilities and duties
(consistent with his position as President and Chief Executive Officer as may
from time to time be assigned to the Executive by the Board of Directors of the
Company (the "Board"), and shall have all of the powers and duties usually
incident to the office of President and Chief Executive Officer. In addition,
the Executive shall serve as Chairman and as a member of the Board of Directors
without additional compensation therefor. The Executive shall devote
substantially all of his working time and efforts to the business and affairs of
the Company, except for vacations, illness or incapacity; provided, however,
-------- -------
that the Executive may devote reasonable time to (a) industry associations and
charitable and civic organizations, (b) managing personal investments and (c)
service as a director or member of an advisory committee of any corporation not
in competition with the Company or its subsidiaries; provided further, however,
-------- ------- -------
that the performance of his duties and responsibilities in such service does not
interfere substantially with the performance of his duties and responsibilities
under this Agreement.
4. Place of Performance. The Executive shall be based at the offices of
--------------------
the Company, to be located during the Term within
<PAGE>
thirty (30) miles of New Milford, Connecticut, except for required travel on the
business of the Company.
5. Compensation and Benefits.
-------------------------
(a) Base Salary. During the Term, the Company shall pay the Executive
-----------
a base salary ("Base Salary") at the rate of Two Hundred Fifty Thousand Dollars
($250,000) per annum, or at such higher rate as the Board may determine from
time to time, payable in substantially equal installments in accordance with the
Company's normal practice for paying base salaries to its executive employees.
(b) Bonus Compensation. The Company shall pay the Executive as soon as
------------------
practicable following the end of each calendar year during the Term, at the sole
discretion of the Compensation Committee of the Board, a cash bonus in an amount
up to fifty percent (50%) of his then Base Salary. If Executive shall be a
member of the Compensation Committee of the Board at the time of any decision as
to Executive's bonus, Executive shall abstain from voting with respect to such
matter.
(c) Insurance Benefits. During the Term, the Company shall provide the
------------------
Executive with disability and health insurance benefits (including dependent
coverage) pursuant to the terms of the Company's health and disability plans and
shall continue the life insurance provided to Executive as of the date hereof.
(d) Automobile. During the Term, the Company shall provide the
----------
Executive with an automobile appropriate to his status as President and Chief
Executive Officer of the Company and shall reimburse the Executive for the cost
of reasonable and proper maintenance, insurance and parking expenses for such
automobile.
(e) Other Benefits. In addition to the benefits described in paragraphs
--------------
(c) and (d) above, during the Term, the Executive shall be entitled to
participate in all of the Company's other employee benefit plans made available
during the Term to its executives and key management employees as may be in
effect from time to time.
6. Termination. The Executive's employment hereunder may be terminated
-----------
under the following circumstances:
(a) Death. The Executive's employment hereunder shall terminate upon
-----
his death.
(b) Disability. If, as a result of the Executive's incapacity due to
----------
physical or mental illness, the Executive shall have been absent from his duties
hereunder on a full-time basis for the entire period of six (6) consecutive
months, and within thirty (30) days after written Notice of Termination (as
defined in Section 7(a)) is given (which may occur before or after the end of
such six (6) month period) shall not have returned to the performance of his
duties hereunder on a full-time basis, the
2
<PAGE>
Company may terminate the Executive's employment hereunder for "Disability."
(c) Cause. The Company may terminate the Executive's employment
-----
hereunder for Cause. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon:
(i) the willful and continued failure by the Executive to
substantially perform his duties hereunder (other than any such failure
resulting from the Executive's incapacity due to physical or mental
illness) after demand for substantial performance is delivered to the
Executive by the Company that specifically identifies the manner in which
the Company believes that the Executive has not substantially performed his
duties; or
(ii) the willful engaging by the Executive in misconduct which is
materially injurious to the business or reputation of the Company or any of
its subsidiaries (including, but not limited to, conduct described in
Section 9).
For purposes of this Section 6(c), no act or failure to act on the Executive's
part shall be considered "willful" unless done or omitted to be done by him not
in good faith and without reasonable belief that his action or omission was in
the best interests of the Company.
Notwithstanding the foregoing, the Executive shall not be terminated
for Cause without:
(A) reasonable notice to the Executive setting forth the reasons
for the Company's intention to terminate his employment hereunder for
Cause;
(B) an opportunity for the Executive, together with his counsel,
to be heard before the Board; and
(C) delivery to the Executive of a Notice of Termination (as
defined in Section 7(a)) from the Board finding that in the good faith
opinion of a majority of the Board the Executive was guilty of conduct set
forth above in clause (i) or (ii) of this Section 6(c), and specifying the
particulars thereof in detail.
(d) Good Reason. The Executive may terminate his employment hereunder
-----------
for "Good Reason" by providing a Notice of Termination (as defined in Section
7(a)) within thirty (30) days after the occurrence, without the Executive's
consent, of one of the following events that has not been cured within ten (10)
days after written notice thereof has been given to the Board by the Executive:
(i) a material and adverse change in the Executive's title,
status, authority, duties, function or benefits;
3
<PAGE>
(ii) any reduction in the Executive's Base Salary or the failure to pay
the Executive's Base Salary or earned bonus when due;
(iii) removal from any of his positions as Chairman and a member of the
Board, President and Chief Executive Officer (provided that a Notice of
Termination has not been provided under this Agreement at such time);
(iv) the relocation of the Executive's place of employment to a location
more than thirty (30) miles from New Milford, Connecticut;
(v) the willful and continued failure by the Company to comply with any
material provision of this Agreement after demand for substantial
performance is delivered to the Company by the Executive that specifically
identifies the manner in which the Executive believes that the Company has
failed to comply with one or more material provisions of this Agreement; or
(vi) the failure of the Company to obtain from a successor the
assumption and agreement by such successor to perform this Agreement (as
described in Section 11) prior to the effectiveness of any such succession.
(e) Without Good Reason. The Executive may terminate his employment
-------------------
hereunder without Good Reason by providing the Company with a Notice of
Termination (as defined in Section 7(a)).
7. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company or by the Executive (other than termination on account
of the Executive's death pursuant to Section 6(a)) shall be communicated by
written Notice of Termination to the other party hereto in accordance with
Section 10. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment hereunder pursuant to the provision so indicated.
(b) Date of Termination. "Date of Termination" shall mean:
-------------------
(i) if the Executive's employment is terminated on account of his death
pursuant to Section 6(a), the date of his death;
(ii) if the Executive's employment is terminated on account of his
Disability pursuant to Section 6(b), thirty (30) days after a Notice of
Termination has been provided thereto (provided that the Executive shall
not have returned
4
<PAGE>
to the performance of his duties on a full-time basis during such thirty
(30) day period);
(iii) if the Executive's employment is terminated for Cause
pursuant to Section 6(c), the date specified in the Notice of Termination
provided thereto; and
(iv) if the Executive's employment is terminated for any other reason,
the date on which a Notice of Termination is provided or any later date
(within thirty (30) days) set forth in such Notice of Termination;
provided, however that, if within thirty (30) days after any Notice of
- -------- -------
Termination is provided (other than with respect to a termination on account of
the Executive's Disability pursuant to Section 6(b)) the party receiving such
Notice of Termination notifies the other party that a dispute exists concerning
the termination, the Date of Termination shall be the date on which the dispute
is finally determined, either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
8. Compensation Upon Termination.
-----------------------------
(a) Death. If the Executive's employment with the Company hereunder is
-----
terminated on account of his death pursuant to Section 6(a), the Company shall
as soon as practicable pay to the Executive's estate or as may be directed by
the legal representatives of his estate any amounts accrued and due to the
Executive under Sections 5(a) and 5(b) through the date of his death, and the
Company shall have no further obligations hereunder.
(b) Disability. During any period that the Executive fails to perform
----------
his duties hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), the Executive shall continue to receive his full Base
Salary at the rate then in effect for such period until his employment is
terminated pursuant to Section 6(b), provided that payments so made to the
Executive during the first one hundred eighty (180) days of the Disability
Period shall be reduced by the sum of the amounts, if any, payable to the
Executive at or prior to the time of any such payment under disability benefit
plans of the Company or under the Social Security disability insurance program,
and which amounts were not previously applied to reduce any such payment. Upon
the Executive's termination of employment for Disability pursuant to Section
6(b), the Company shall as soon as practicable pay the Executive any amounts
accrued and due to the Executive under Sections 5(a) and 5(b) through his Date
of Termination, and the Company shall have no further obligations hereunder.
(c) By the Company for Cause. If the Executive's employment with the
------------------------
Company hereunder is terminated by the Company for Cause pursuant to Section
6(c), the Company shall as soon as practicable pay the Executive all amounts
accrued and due to the
5
<PAGE>
Executive under Sections 5(a) and 5(b) through his Date of Termination and the
Company shall have no further obligations hereunder.
(d) By the Executive Without Good Reason. If the Executive terminates
------------------------------------
his employment with the Company hereunder without Good Reason pursuant to
Section 6(e), the Company shall as soon as practicable pay the Executive all
amounts accrued and due to the Executive under Sections 5(a) and 5(b) through
his Date of Termination and the Company shall have no further obligations
hereunder except that the Executive shall have the option to enter into a
Consulting Agreement with the Company as provided in Section 8(h) hereof.
(e) By the Executive for Good Reason. If the Executive terminates his
--------------------------------
employment with the Company hereunder for Good Reason pursuant to Section 6(d),
then the Company shall:
(i) as soon as practicable pay the Executive all amounts accrued and
due to the Executive under Sections 5(a) and 5(b) through his Date of
Termination;
(ii) continue to pay the Executive his Base Salary (at the rate in
effect on the Date of Termination) until the earlier to occur of (A) the
third anniversary of the Date of Termination; or (B) June 30, 2000; at the
times such payments would otherwise have been made under Section 5(a); and
(iii) provide the Executive with continued participation (or equivalent
benefits if such participation is not permitted) in the employee benefit
plans provided to the Executive pursuant to Section 5(c) as of the Date of
Termination until the earlier to occur of (A) the third anniversary of the
Date of Termination; or (B) June 30, 2000; and permit the Executive to
retain any Company-provided automobile being used as of the Date of
Termination for such period.
(f) Change of Control. Notwithstanding any other provisions in this
-----------------
Agreement, if during the two (2) year period following a "Change of Control" (as
defined in the next succeeding paragraph) of the Company, the Executive's
employment with the Company hereunder shall terminate as a result of:
(i) the termination of the Executive's employment by the Company
(including a failure by the Company to extend the Term) other than for
Disability or Cause; or
(ii) the termination by the Executive for Good Reason;
the Company shall pay to the Executive, within five (5) days following the Date
of Termination, the aggregate of the compensation set forth in Section 8(e)(i)
and (in lieu of the compensation set forth in Sections 8(e)(ii) and (iii)) a
lump sum payment equal to the sum of (A) the product of three (3) multiplied by
the Executive's Base Salary (at the greater of the rate in effect as of the
Change of Control or the Date of Termination) and
6
<PAGE>
(B) the amount needed by the Executive to purchase benefits equivalent to those
provided to the Executive pursuant to Section 5(c) as of the Date of Termination
for a period of three (3) years from the Date of Termination.
For purposes of this Agreement, a "Change of Control" of the Company means
the first to occur of one of the following events:
(i) any "Person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and as such term is
modified in Sections 13(d) and 14(d) of the Exchange Act), excluding the
Company or any of its subsidiaries, a trustee or any fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, an underwriter temporarily holding securities pursuant to an
offering of such securities or a corporation owned, directly or indirectly,
by stockholders of the Company in substantially the same proportions as
their ownership of the Company, is or becomes the "Beneficial Owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (not including in the securities beneficially
owned by such Person any securities acquired directly from the Company or
its affiliates) representing fifty percent (50%) or more of the combined
voting power of the Company's then outstanding securities; or
(ii) during any period of not more than two (2) consecutive years (not
including any period prior to the execution of this Agreement), individuals
who at the beginning of such period constitute the Board and any new
director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in clause
(i), (iii) or (iv) of this paragraph) whose election by the Board or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; or
(iii) the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (A) a merger or
consolidation which (x) would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of
any trustee or other fiduciary holding securities under an employee benefit
plan of the Company, at least fifty percent (50%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (y) provides
for the assumption of this Agreement by the surviving entity and that
Executive will be chief executive officer of the Company or such surviving
entity or (B) a
7
<PAGE>
merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person acquires more than
fifty percent (50%) of the combined voting power of the Company's then
outstanding securities; or
(iv) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all the Company's assets.
Notwithstanding the foregoing, the merger of the Company with US Order,
Inc. (including a transaction involving the merger of the Company and US Order,
Inc. into a newly formed corporation) shall not constitute a "Change of Control"
for purposes of this Agreement.
(g) Excise Tax Gross-Up Payment. If any payments to the Executive by
---------------------------
the Company under this Agreement ("Payments") are subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Payments and all income
taxes and Excise Tax upon such Company payment shall be equal to the Payments.
The determination whether any Payments are subject to the Excise Tax shall be
based on the opinion of tax counsel selected by the Company and reasonably
acceptable to the Executive, whose fees and expenses shall be paid by the
Company. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal, state and local income taxes at the
highest marginal rate of income taxation applicable to any individual residing
in the jurisdiction in which the Executive resides in the calendar year in which
the Gross-Up Payment is to be made. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time of termination of the Executive's employment, the Executive shall
repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to
such reduction (plus that portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by the Executive to the extent that
such repayment results in a reduction in Excise Tax and/or a federal, state or
local income tax deduction) plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at the time
of the termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions payable by the
Executive with respect to such excess) at the time that the amount of such
excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any
8
<PAGE>
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Payments.
(h) Consulting Agreement. If the Executive's employment with the
--------------------
Company hereunder shall be terminated:
(i) by the Executive pursuant to Section 6(e);
(ii) by the Company notifying the Executive that it will not extend
the Term pursuant to Section 2; or
(iii) by the Executive notifying the Company that he will not
extend the Term pursuant to Section 2;
the Executive shall have the option to enter into a Consulting Agreement with
the Company, in the form attached hereto as Exhibit A.
9. Restrictions.
------------
(a) Reasonable Covenants. It is expressly understood by and between the
--------------------
Company and the Executive that the covenants contained in this Section 9 are an
essential element of this Agreement and that but for the agreement by the
Executive to comply with these covenants and thereby not to diminish the value
of the organization and goodwill of the Company or any subsidiary of the
Company, including relations with their employees, clients, customers and
accounts, the Company would not enter into this Agreement.
(b) Noncompetition. During the Term and for two (2) years after the
--------------
Executive's Date of Termination, the Executive shall not: (i) actively engage,
anywhere within the geographical areas in which the Company, and/or any of its
subsidiaries have conducted their business operations or provided services as of
the date hereof or at any time prior to the Date of Termination, directly or
indirectly, in any business conducted by the Company or any of its subsidiaries;
(ii) divert to any competitor of the Company or any of its subsidiaries, any
customer of the Company or any of its subsidiaries; or (iii) solicit or
encourage any officer, employee or consultant of the Company or any of its
subsidiaries to leave the employ of or the engagement by the Company or any of
its subsidiaries for employment or engagement by or with any competitor of the
Company or any of its subsidiaries.
If, at any time, the provisions of this Section 9(b) shall be determined to
be invalid or unenforceable by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 9(b) shall be considered severable
and shall become and shall be immediately amended solely with respect to such
area, duration and scope of activity as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter and
the Executive agrees that this Section 9(b) as so amended shall be valid and
binding as though any invalid or unenforceable provision had not been included
herein. Except as provided in this Section 9 and in Section 3, nothing in
9
<PAGE>
this Agreement shall prevent or restrict the Executive from engaging in any
business or industry in any capacity.
(c) Nondisclosure of Confidential Information. The Executive shall keep
-----------------------------------------
confidential any information regarding this Agreement, or any other information
regarding the Company or its subsidiaries which is not available to the general
public, and/or not generally known outside the Company, to which he has or shall
have had access at any time during the course of his employment with the
Company. Notwithstanding the foregoing provisions of this Section 9, the
Executive may discuss this Agreement with the members of his immediate family
and with his personal legal and tax advisors.
(d) Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Executive agrees that damages at law would be an
insufficient remedy to the Company in the event that the Executive violates any
of the provisions of this Section 9, and that the Company may apply for and,
upon the requisite showing, have injunctive relief in any court of competent
jurisdiction to restrain the breach or threatened breach of or otherwise to
specifically enforce any of the covenants contained in this Section 9.
10. Notice. For the purposes of this Agreement, notices, demands and all
------
other communications provided for herein shall be in writing and shall be deemed
to have been duly given when delivered or (unless otherwise specified) mailed by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
14 Poggy Bay Lane
Mystic, Connecticut 06355
If to the Company:
80 Pickett District Road
New Milford, Connecticut 06776
Attention: President
or to such other address as either party hereto may have furnished to the other
in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
11. Successors. Without the prior written consent of the Executive, this
----------
Agreement cannot be assigned by the Company except that it shall be binding
automatically on any successors and assigns of all or substantially all of the
business and/or assets of the Company (whether direct or indirect, by purchase,
merger, consolidation or otherwise). In addition, without the prior written
consent of the Company, it cannot be assigned by the Executive, except that the
right to receive payments or benefits hereunder may be transferred by will or
the laws of descent and
10
<PAGE>
distribution. This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives.
12. Arbitration. All controversies, claims or disputes arising out of or
-----------
relating to this Agreement, shall be settled by arbitration under the rules of
the American Arbitration Association then in effect in the State of Connecticut,
as the sole and exclusive remedy of either party, and judgment upon such award
rendered by the arbitrator(s) may be entered in any court of competent
jurisdiction.
13. Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of Connecticut
without regard to conflicts of law principles.
14. Amendments. No provisions of this Agreement may be modified, waived
----------
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and such officer of the Company as may be
specifically designated for such purpose by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
15. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
16. Non-Assignability. Neither the Executive nor the Company shall have
-----------------
any right to anticipate, alienate, sell, assign, transfer, pledge, encumber or
otherwise dispose of any right, interest, benefit or payment under this
Agreement and any attempted anticipation, alienation, sale, assignment,
transfer, pledge, encumbrance or other disposition of any of such rights,
interest, benefits or payments contrary to the provisions hereof shall be null
and void and without effect. All rights, interests, benefits and payments under
this Agreement shall, to the maximum extent permitted by law, be exempt from the
claims of any creditor or other person prior to the actual receipt thereof by
the person entitled to receive the same hereunder.
17. Severability. If any provision of this Agreement (or part thereof)
------------
shall be held to be invalid or unenforceable under applicable law, the
invalidity or unenforceability thereof shall not affect the validity or
enforceability of the remaining provisions hereof and each such other provision
(or the remainder of such provision) shall, to the full extent consistent with
applicable law, continue in full force and effect.
11
<PAGE>
18. Entire Agreement. This Agreement (including the Exhibits attached
----------------
hereto) sets forth the entire agreement of the parties hereto in respect of the
subject matter contained herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
ATTEST: COLONIAL DATA TECHNOLOGIES CORP.
- --------------------- By:
----------------------------
Name:
Title:
ATTEST: EXECUTIVE
- --------------------- -------------------------------
Robert J. Schock
13
<PAGE>
EXHIBIT A
---------
CONSULTING AGREEMENT
by and between
COLONIAL DATA TECHNOLOGIES CORP.
and
Robert J. Schock
Effective as of __________, 19____
<PAGE>
CONSULTING AGREEMENT
--------------------
CONSULTING AGREEMENT (this "Agreement"), by and between Colonial Data
Technologies Corp., a Delaware corporation (the "Company"), and Robert J. Schock
(the "Consultant").
W I T N E S S E T H:
The Company desires to engage the Consultant to render consulting services
to it and the Consultant is willing to provide such consulting services to the
Company, on the terms and conditions herein provided.
In order to effect the foregoing, the parties hereto wish to enter into a
consulting agreement on the terms and conditions set forth below. Accordingly,
in consideration of the premises and the respective covenants and agreements of
the parties herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Engagement. The Company hereby agrees to engage the Consultant to
----------
provide consulting services to the Company pursuant to the terms and conditions
of this Agreement and the Consultant hereby agrees to provide such services to
the Company.
2. Term.
----
(a) The term of this Agreement shall commence simultaneously with the
termination of the Employment Agreement (the "Employment Agreement") dated as of
July 1, 1996 between the Company and the Consultant (the "Effective Date"), and
the election by Consultant pursuant to Section 8(h) thereof to enter into this
Agreement. Unless sooner terminated pursuant to paragraph (b) or (c) of this
Section 2, this Agreement shall remain in full force and effect for the period
commencing on the Effective Date and ending on the earlier to occur of (i) the
third anniversary of the Effective Date or (ii) June 30, 2000.
(b) The Consultant may terminate this Agreement at any time upon sixty
(60) days written notice to the Company. The Company may not terminate this
Agreement without the prior written consent of the Consultant. The sixty (60)
days' prior written notice requirement contained in the immediately preceding
sentence may be reduced or waived by written agreement between the Company and
the Consultant.
(c) Upon the termination of this Agreement pursuant to this Section 2,
neither the Company nor the Consultant shall have any liability or obligation to
the other, except for (i) the obligation of the Company to pay the Consultant
any due and payable consulting fee pursuant to Section 6 for his consulting
services
1
<PAGE>
rendered to the Company prior to the termination of this Agreement, (ii) the
obligation of the Company to reimburse expenses incurred by the Consultant
pursuant to Section 7 and (iii) the restrictive covenant obligations of the
Consultant pursuant to Section 8, all of which shall survive such termination.
3. Consulting Services.
-------------------
(a) The Consultant shall provide such consulting services to the Company
as may be reasonably requested by it.
(b) The Consultant shall provide the Company with quarterly statements
setting forth in reasonable detail the consulting services that the Consultant
provided to the Company hereunder during the prior quarter.
(c) During the term of this Agreement, the Company shall furnish the
Consultant with office space, stenographic and secretarial assistance and such
other facilities and services as shall be suitable to, and necessary and
adequate for, Consultant, in his discretion, for the performance of the
consulting services to be rendered hereunder.
4. Nature of Relationship. The Consultant shall perform his consulting
----------------------
services hereunder in the capacity of an independent contractor and not as an
employee or agent of the Company. Any provision to the contrary in this
Agreement notwithstanding, the Consultant shall have no power or authority to
execute or otherwise enter into any agreement on behalf of, or in any way to
bind, the Company. The Company shall pay no amounts on account of the
Consultant for purposes of Social Security, unemployment insurance or federal or
state withholding taxes.
5. Benefits. During the term of this Agreement, the Company shall provide
--------
Consultant with continued participation (or equivalent benefits if such
participation is not permitted) in the employee benefit plans described in
Section 5(c) of the Employment Agreement. The Company shall not provide any
other contributions or benefits for the Consultant which might be expected in
the context of an employer-employee relationship.
6. Compensation. The Company shall pay the Consultant an annual
------------
consulting fee equal to the amount of the Consultant's base salary in effect
under the Employment Agreement on the date of the termination of the Employment
Agreement, which fee shall be payable in equal monthly installments on the first
business day of each month during the term of this Agreement.
7. Expenses; Automobile. During the term of this Agreement, the Company
-------- ----------
shall reimburse Consultant for all expenses incurred in performing the
consulting services to be provided hereunder including expenses relating to or
for travel, telephone, mail and similar items. The Company shall reimburse the
Consultant for expenses within thirty (30) days following the Company's
2
<PAGE>
receipt from the Consultant of reasonable supporting documentation of such
expenses. Without limiting the foregoing, the Company shall provide Consultant
with an automobile of the same or similar kind previously provided to Consultant
under the Employment Agreement and shall reimburse Consultant for expenses
related thereto (including lease payments, reasonable and proper maintenance,
insurance and parking expenses for such automobile).
8. Restrictive Covenants.
---------------------
(a) It is expressly understood by and between the Company and the
Consultant that the covenants contained in Sections 9(a), (b) and (c) of the
Employment Agreement shall be considered a part hereof and are incorporated by
reference herein as if stated in their entirety herein, and that such provisions
are an essential element of this Agreement and that but for the agreement by the
Consultant to comply with these covenants and thereby not to diminish the value
of the organization and goodwill of the Company or any subsidiary of the
Company, including relations with their employees, clients, customers and
accounts, the Company would not enter into this Agreement. The Consultant has
independently consulted with his legal counsel and after such consultation
agrees that such covenants are reasonable and proper.
(b) Public Support and Assistance. The Consultant agrees that following
-----------------------------
any termination of his consulting engagement with the Company hereunder, he
shall endorse strategies of the Company and/or its subsidiaries, and shall not
disclose or cause to be disclosed any negative, adverse or derogatory comments
or information of a substantial nature about the Company or its management, or
about any product or service provided by the Company, or about the Company's
prospects for the future (including any such comments or information with
respect to subsidiaries of the Company). The Company and/or any of its
subsidiaries may seek the assistance, cooperation or testimony of the Consultant
following any such termination in connection with any investigation, litigation
or proceeding arising out of matters within the knowledge of the Consultant and
related to his position as a consultant to the Company, and in any such
instance, the Consultant shall provide such assistance, cooperation or testimony
and the Company shall pay the Consultant's reasonable costs and expenses in
connection therewith; in addition, if such assistance, cooperation or testimony
requires more than a nominal commitment of the Consultant's time, the Company
shall compensate him for such time at a per diem rate derived from his annual
consulting fee hereunder at the time of the termination of his consulting
engagement hereunder.
(c) Specific Performance. Without intending to limit the remedies
--------------------
available to the Company, the Consultant agrees that damages at law would be an
insufficient remedy to the Company in the event that the Consultant violates any
of the provisions of this Section 8, and that the Company may apply for and,
upon the requisite showing, have injunctive relief in any court of competent
3
<PAGE>
jurisdiction to restrain the breach or threatened breach of or otherwise to
specifically enforce any of the covenants contained in this Section 8.
9. Non-Assignability. Neither the Consultant nor the Company shall have
-----------------
any right to anticipate, alienate, sell, assign, transfer, pledge, encumber or
otherwise dispose of any right, interest, benefit or payment under this
Agreement and any attempted anticipation, alienation, sale, assignment,
transfer, pledge, encumbrance or other disposition of any of such rights,
interest, benefits or payments contrary to the provisions hereof shall be null
and void and without effect. All rights, interests, benefits and payments under
this Agreement shall, to the maximum extent permitted by law, be exempt from the
claims of any creditor or other person prior to the actual receipt thereof by
the person entitled to receive the same hereunder.
10. Notice. For the purposes of this Agreement, notices, demands and all
------
other communications provided for herein shall be in writing and shall be deemed
to have been duly given when delivered or (unless otherwise specified) mailed by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
14 Poggy Bay Lane
Mystic, Connecticut 06355
If to the Company:
80 Pickett District Road
New Milford, Connecticut 06776
Attention: President
or to such other address as any party may have furnished to the other in writing
in accordance herewith except that notices of change of address shall be
effective only upon receipt.
11. Severability. If any provision of this Agreement (or part thereof)
------------
shall be held to be invalid or unenforceable under applicable law, the
invalidity or unenforceability thereof shall not affect the validity or
enforceability of the remaining provisions hereof and each such other provision
(or the remainder of such provision) shall, to the full extent consistent with
applicable law, continue in full force and effect.
12. Books and Records. The Consultant hereby agrees that all books and
-----------------
records relating in any manner to the business of the Company, and all other
files, books and records and other materials owned by the Company or used by it
in connection with the conduct of its business, whether prepared by the
Consultant or otherwise coming into the Consultant's possession, shall be the
4
<PAGE>
exclusive property of the Company regardless of which party prepared the
original material, books or records. All such books, records and other
materials shall be returned immediately to the Company upon the termination of
the Consultant's services hereunder.
13. Successors. Without the prior written consent of the Consultant, this
----------
Agreement cannot be assigned by the Company except that it shall inure to the
benefit of and be binding automatically on any successors and assigns of all or
substantially all of the business and/or assets of the Company (whether direct
or indirect, by purchase, merger, consolidation or otherwise). In addition,
without the prior written consent of the Company, this Agreement cannot be
assigned by the Consultant, except that the right to receive payments or
benefits hereunder may be transferred by will or the laws of descent and
distribution. This Agreement and all rights of the Consultant hereunder shall
inure to the benefit of and be enforceable by the Consultant's personal or legal
representatives.
14. Arbitration. All controversies, claims or disputes arising out of or
-----------
relating to this Agreement, shall be settled by arbitration under the rules of
the American Arbitration Association then in effect in the State of Connecticut,
as the sole and exclusive remedy of either party, and judgment upon such award
rendered by the arbitrator(s) may be entered in any court of competent
jurisdiction.
15. Governing Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of Connecticut
without regard to its conflicts of law principles.
16. Amendments. No provisions of this Agreement may be modified, waived
----------
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and such officer of the Company as may be
specifically designated for such purpose by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
17. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
----------------
the parties hereto in respect of the subject
5
<PAGE>
matter contained herein and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the Effective Date set forth in Section 2(a) hereof.
ATTEST: COLONIAL DATA TECHNOLOGIES CORP.
By
- -------------------- ------------------------------
Name:
Title:
ATTEST: CONSULTANT
- -------------------- -------------------------
Robert J. Schock
6
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
US Order, Inc.:
We consent to the use of our report dated February 5, 1996 with respect to
the balance sheets of US Order, Inc. as of December 31, 1995 and 1994, and the
related statements of operations, stockholders' equity (deficit), and cash
flows and the related schedule for each of the years in the three-year period
ended December 31, 1995, and to the use of our report dated September 13,
1996, except as to note 9, which is of September 30, 1996, with respect to the
balance sheet of Braun, Simmons & Co. as of December 31, 1995, and the related
statements of operations, shareholders' equity and cash flows for the year
then ended, which reports are incorporated by reference herein, and to the
references to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Washington, D.C.
October 8, 1996
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Colonial Data Technologies Corp. on Form S-4 of our report dated January 26,
1996, appearing in the Annual Report on Form 10-K of Colonial Data Technologies
Corp. for the year ended December 31, 1995 and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
Deloitte & Touche LLP
Hartford, Connecticut
October 7, 1996
<PAGE>
EXHIBIT 23.7
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management"
in the Prospectus, which is part of this Registration Statement on Form S-4 of
InteliData Technologies Corporation
/s/ William F. Gorog
_____________________________________
WILLIAM F. GOROG
October 7, 1996
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management"
in the Prospectus, which is part of this Registration Statement on Form S-4 of
InteliData Technologies Corporation
/s/ Robert J. Schock
_____________________________________
ROBERT J. SCHOCK
October 7, 1996
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management"
in the Prospectus, which is part of this Registration Statement on Form S-4 of
InteliData Technologies Corporation
/s/ John C. Backus, Jr.
_____________________________________
JOHN C. BACKUS, JR.
October 7, 1996
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management"
in the Prospectus, which is part of this Registration Statement on Form S-4 of
InteliData Technologies Corporation
/s/ Timothy R. Welles
_____________________________________
TIMOTHY R. WELLES
October 7, 1996
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management"
in the Prospectus, which is part of this Registration Statement on Form S-4 of
InteliData Technologies Corporation
/s/ T. Coleman Andrews, III
_____________________________________
T. COLEMAN ANDREWS, III
October 7, 1996
<PAGE>
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management"
in the Prospectus, which is part of this Registration Statement on Form S-4 of
InteliData Technologies Corporation
/s/ Walter M. Fiederowicz
_____________________________________
WALTER M. FIEDEROWICZ
October 7, 1996
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management"
in the Prospectus, which is part of this Registration Statement on Form S-4 of
InteliData Technologies Corporation
/s/ Patrick F. Graham
_____________________________________
PATRICK F. GRAHAM
October 7, 1996
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management"
in the Prospectus, which is part of this Registration Statement on Form S-4 of
InteliData Technologies Corporation
/s/ Constantine S. Macricostas
_____________________________________
CONSTANTINE S. MACRICOSTAS
October 7, 1996
CONSENT OF DIRECTOR DESIGNEE
The undersigned hereby consents, pursuant to Rule 438 under the Securities
Act of 1933, as amended, to the reference to him under the caption "Management"
in the Prospectus, which is part of this Registration Statement on Form S-4 of
InteliData Technologies Corporation
/s/ Wesley C. Tallman
_____________________________________
WESLEY C. TALLMAN
October 7, 1996
<PAGE>
US ORDER, INC. This Proxy is Solicited on Behalf
13100 Worldgate Drive, Suite 600 of the Board of Directors The
Herndon, Virginia 20170 undersigned hereby appoints William
F. Gerog, John C. Backus and
Albert N. Werglty as Proxies, each
such person acting individually
with the power to appoint his or
her substitute, and hereby
authorizes them to represent and
to VOTE, as designated below, all
PROXY shares of Common Stock of US Order,
Inc., held of record by the under-
signed on October 4, 1996 at the
Special Meeting of Stockholders to
be held on November 7, 1996 or any
adjournment thereof.
1. APPROVAL AND ADOPTION OF AGREEMENT AND PLAN OF MERGER
[_]FOR [_]AGAINST [_]ABSTAIN
2. IN THEIR DISCRETION, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy is solicited on behalf of the Board of Directors and unless a
contrary direction is indicated will be voted at the meeting FOR approval and
adoption of the Agreement and Plan of Merger.
- --------------------------------------------------------------------------------
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
-----------------------------------
MANAGEMENT URGES YOU TO SIGN AND RETURN Signature
THIS PROXY IMMEDIATELY TO INSURE ITS
VOTE AT THE SPECIAL MEETING TO BE HELD -----------------------------------
NOVEMBER 7, 1996 Signature if held jointly
Dated__________________________1996
No postage is required if
returned in enclosed the
envelope and mailed in the
United States.
<PAGE>
COLONIAL DATA TECHNOLOGIES CORP. This Proxy is Solicited on Behalf of the
80 Pickett District Road Board of Directors. The undersigned
New Milford, Connecticut 06776 hereby appoints Walter M. Fiederowicz,
Timothy R. Welles and John N. Giamolis
as Proxies, each such person acting
individually with the power to appoint
his or her substitute, and hereby
authorizes them to represent and to VOTE
as designated below, all shares of
Common Stock of Colonial Data
Technologies Corp., held of record by
the undersigned on October 4, 1996 at
PROXY the Special Meeting of Stockholders to
be held on November 7, 1996 or any
adjournment thereof.
1. APPROVAL AND ADOPTION OF AGREEMENT AND PLAN OF MERGER
[_] FOR [_] AGAINST [_] ABSTAIN
2. IN THEIR DISCRETION, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy is solicited on behalf of the Board of Directors and unless a
contrary direction is indicated will be voted at the meeting FOR approval and
adoption of the Agreement and Plan of Merger.
- --------------------------------------------------------------------------------
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
MANAGEMENT URGES YOU TO SIGN AND RETURN --------------------------------
THIS PROXY IMMEDIATELY TO INSURE ITS VOTE AT Signature
THE SPECIAL MEETING TO BE HELD NOVEMBER 7,
1996
--------------------------------
Signature if held jointly
Dated 1996
-----------------------
No postage is required
if returned in the enclosed
envelope and mailed in
the United States.
