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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE
ACT OF 1934)
DATAPOINT CORPORATION
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(Name of Issuer)
DATAPOINT CORPORATION
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(Name of Person(s) Filing Statement)
8 7/8% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2006
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(Title of Class of Securities)
238100-AB-7
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(CUSIP Number of Class of Securities)
GERALD N. AGRANOFF, DATAPOINT CORPORATION
8410 DATAPOINT DRIVE, SAN ANTONIO, TEXAS 78229-8500
(210) 593-7000
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
COPY TO:
SELIG D. SACKS, ESQ.
PRYOR CASHMAN SHERMAN & FLYNN LLP
410 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 421-4100
December 3, 1999
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(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
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Transaction
Valuation(1) Amount Of Filing Fee
$24,732,000 $4,946
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/ / Check box if any part of the fee is offset as provided by Rule 0-1l(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form or
schedule and the date of its filing.
Amount previously paid: _______________ Filing party:_______________
Form or registration no.:______________ Date filed:_________________
Instruction. Ten Copies of this statement, including all exhibits, shall be
filed with the Commission.
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(1) The filing fee is based on the total amount of consideration to be received
by debentureholders assuming all debentureholders tender.
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This Issuer Tender Offer Statement (the "Statement") relates to the tender
offer by Datapoint Corporation, a Delaware corporation (the "Company"), to
purchase any and all of the $54,960,000 of outstanding principal amount of its
8 7/8% Convertible Subordinated Debentures due June 1, 2006 (the "Debentures"),
at a price per $1,000 principal amount of Debenture, net to the seller in cash,
equal to $4,500, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated __________, 1999 (the "Offer to Purchase") and the
related letter of transmittal (the "Letter of Transmittal") (which are herein
collectively referred to as the "Offer"). The Offer is being made to all holders
of Debentures, including officers, directors and affiliates of the Company.
ITEM 1. SECURITY AND ISSUER.
(a) The name of the Issuer is Datapoint Corporation, a Delaware
corporation. Its principal executive offices are located at 7 rue d'Anjou 75008,
Paris, France and at 8410 Datapoint Drive, San Antonio, Texas 78229-8500.
(b) The class of securities to which this Statement relates is the
Debentures. The information set forth in "INTRODUCTION" and "Interests of
Directors and Officers" in the Offer to Purchase is incorporated herein by
reference.
(c) The Debentures are authorized for quotation on the Over-The-Counter
Bulletin Board. Because the Debentures are sporadically traded and no market
maker exists for the Debentures, accurate ranges of high and low bid quotations
for each of the calendar quarters during the past two years are unavailable to
the Company. To the knowledge of the Company, there has been no trading activity
for Debentures during the past several months.
(d) This statement is being filed by the Issuer.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in "Source and Amount of Funds" in the Offer
to Purchase is incorporated herein by reference.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER.
(a)-(j) The information set forth in "INTRODUCTION," "The Debentures,"
"Conditions to the Offer," "Acceptance for Payment and Payment for Debentures,"
"Purpose of the Offer and the Solicitation" and "Interests of Directors and
Officers" in the Offer to Purchase is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
2
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Not Applicable
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
Not Applicable.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "Dealer Manager" and "Depository and
Information Agent" in the Offer to Purchase is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in "Selected Financial information in
the Offer to Purchase is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) The information set forth in "Miscellaneous" in the Offer to Purchase
is incorporated herein by reference.
(c) Not applicable.
(d) Not applicable.
(e) The information set forth in the Offer to Purchase and the related
Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), and the Stock Purchase Agreement, a copy of which is attached hereto
as Exhibit (c)(1) respectively, is incorporated herein by reference in its
entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated __________, 1999.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Letter to Clients from Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees dated __________, 1999.
(a)(4) Form of Notice of Guaranteed Delivery.
(a)(5) Form of letter dated __________, 1999 to stockholders from the
Chairman the Board of the Company and the President of the
Company.
3
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(a)(6) Form of press release issued by the Company dated _________, 1999.
(a)(7) Form of summary advertisement dated __________, 1999.
(a)(8) Guidelines for Certification of Taxpayer Identification Number.
(b) Not applicable.
(c)(1) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
4
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: December 3, 1999
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DATAPOINT CORPORATION
By: /s/ Gerald N. Agranoff
-----------------------
Name: Gerald N. Agranoff
Title: Secretary
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OFFER TO PURCHASE AND CONSENT SOLICITATION STATEMENT
DATAPOINT CORPORATION
Offer to Purchase for Cash
Any and All of its Outstanding
8 7/8% Convertible Subordinated Debentures Due 2006
(CUSIP No. 238100 AB 7)
and Solicitation of Consents to Amendments of the Related Indenture
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Datapoint Corporation, a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this Offer to
Purchase and Consent Solicitation Statement (as it may be supplemented from time
to time, the "Statement") and in the accompanying Consent Letter of Transmittal
(the "Consent Letter of Transmittal" and, together with the Statement, the
"Offer"), to purchase for cash any and all of its 8 7/8% Convertible
Subordinated Debentures Due June 1, 2006 (the "Debentures").
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THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [_________], OR SUCH
LATER DATE TO WHICH THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). IN ORDER TO
RECEIVE THE CONSENT PAYMENT (AS DEFINED BELOW), HOLDERS OF DEBENTURES MUST
TENDER THEIR DEBENTURES AND/OR PROVIDE THEIR CONSENTS (AS DEFINED BELOW) TO THE
PROPOSED AMENDMENTS (AS DEFINED BELOW) AT OR PRIOR TO 5:00 P.M., NEW YORK CITY
TIME, ON THE DATE (THE "CONSENT DATE") WHICH IS THE LATER OF [_________], IF ON
SUCH DATE THE COMPANY HAS RECEIVED THE REQUISITE CONSENTS (AS DEFINED BELOW),
AND THE FIRST DATE THEREAFTER ON WHICH THE COMPANY RECEIVES THE REQUISITE
CONSENTS. THE COMPANY INTENDS TO EXECUTE A SUPPLEMENTAL INDENTURE CONTAINING THE
PROPOSED AMENDMENTS FOLLOWING THE SATISFACTION OF THE CONDITIONS (AS DEFINED
BELOW) IN ACCORDANCE WITH THE TERMS OF THE OFFER AND SOLICITATION. CONSENTS MAY
BE REVOKED AT ANY TIME AT OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
CONSENT DATE, BUT NOT THEREAFTER. IF A HOLDER REVOKES THEIR CONSENT, IT WILL BE
DEEMED AN AUTOMATIC WITHDRAWAL OF A TENDERED DEBENTURE. HOLDERS OF DEBENTURES DO
NOT HAVE TO TENDER THEIR DEBENTURES IN ORDER TO RECEIVE THE CONSENT PAYMENT. THE
TENDER OF DEBENTURES IS AN AUTOMATIC CONSENT. IF NECESSARY, THE COMPANY WILL
EXTEND THE OFFER SO THAT THE EXPIRATION DATE OCCURS NO EARLIER THAN FIVE
BUSINESS DAYS FOLLOWING THE CONSENT DATE.
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THIS OFFER IS SUBJECT TO THE SATISFACTION OF CERTAIN CONDITIONS, INCLUDING,
WITHOUT LIMITATION, THE SUPPLEMENTAL INDENTURE CONDITION, THE MINIMUM CONSENT
CONDITION, THE FUNDING CONDITION, THE STOCKHOLDER APPROVAL CONDITION AND THE
GENERAL CONDITIONS (EACH AS DEFINED HEREIN)
The consideration (the "Offer Price") for each $1,000 principal amount of
Debentures tendered pursuant to the Offer will be $450. Holders of Debentures
may be entitled to receive the Consent Payment (as defined below) in accordance
with the terms of the Offer. The "Payment Date" is the date one business day
following satisfaction of the Conditions (as defined below). Debentureholders
who tender their Debentures and Consents pursuant to this Tender Offer and
Solicitation will not be entitled to receive any portion of the Offer Price or
Consent Payment until satisfaction of the Conditions and the occurrence of the
Payment Date.
The Dealer Manager and Solicitation Agent for the Offer and the Solicitation is:
Georgeson Shareholder Securities Corporation
[Date]
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In conjunction with the Offer, the Company hereby solicits (the
"Solicitation") consents (the "Consents") from registered holders of Debentures
(each, a "Holder" and, collectively, the "Holders") of at least 66-2/3% of the
principal amount of outstanding Debentures (the "Requisite Consents") to the
adoption of certain Proposed Amendments (as defined below) to the Indenture,
dated as of June 1, 1981, between the Company and U.S. Bank Trust National
Association, as successor trustee (the "Trustee"), pursuant to which the
Debentures were issued (the "Indenture"). Holders who tender their Debentures in
the Offer must deliver corresponding Consents to the Proposed Amendments.
Subject to the terms and conditions set forth in this Statement and the Consent
and Letter of Transmittal, the Company hereby offers to pay to each Holder who
validly consents to the Proposed Amendments at or prior to 5:00 p.m., New York
City time, on the Consent Date, an amount in cash equal $450 per $1,000
principal amount of the Debentures for which Consents have been validly
delivered and not validly revoked at or prior to 5:00 p.m., New York City time,
on the Consent Date (the "Consent Payment"), with such payment to be made
promptly following the Payment Date if, but only if, the Conditions are
satisfied and the Debentures are accepted for payment pursuant to the terms of
the Offer. If a Holder's Consents either are not properly delivered, or are
revoked and not properly redelivered, at or prior to 5:00 p.m., New York City
time, on the Consent Date, such Holder will not receive the Consent Payment,
even though the Proposed Amendments will be effective as to all Debentures that
are not purchased in the Offer. Adoption of the Proposed Amendments will effect
significant changes to the Indenture, and may have adverse consequences for
Holders who elect not to tender Debentures in the Offer. See "The Proposed
Amendments."
Holders who tender Debentures in the Offer are obligated to consent to the
Proposed Amendments. Pursuant to the terms of the Consent and Letter of
Transmittal, the completion, execution and delivery thereof by a Holder in
connection with the tender of Debentures will be deemed to constitute the
Consent of such tendering Holder to the Proposed Amendments. Holders may deliver
Consents without tendering Debentures in the Offer, and may not revoke Consents
without withdrawing the previously tendered Debentures to which such Consents
relate. Holders who validly tender their Debentures and thereby deliver their
Consents subsequent to 5:00 p.m., New York City time, on the Consent Date will
receive the Offer Price but will not receive the Consent Payment.
Notwithstanding any other provision of the Offer or the Solicitation, the
Company's obligation to accept for purchase, and to pay for, Debentures validly
tendered pursuant to the Offer is conditioned upon (i) there being validly
tendered and not withdrawn not less than the Requisite Consents (the "Minimum
Consent Condition") (ii) the receipt of the Requisite Consents and the execution
of a supplemental indenture (the "Supplemental Indenture") providing for the
Proposed Amendments (the "Supplemental Indenture Condition"), (iii) the
consummation of the Asset Sale (as defined herein) and receiving proceeds from
the Asset Sale in an amount sufficient to pay the total consideration and
related costs and expenses of the Offer and the Solicitation (the "Funding
Condition"), (iv) the approval by the holders (the "Stockholders") of a majority
of outstanding shares of the Company's common stock, par value $.25 (the "Common
Stock") of the (a) Asset Sale (as defined below) and (b) amendment of the
Company's Certificate of Incorporation to change the name of the Company to
DYNACORE Corporation (the "Name Change," and together with the Asset Sale the
"Stockholder Approval Condition") and (v) satisfaction of the General Conditions
(as defined below). The Company reserves the right to waive any one or more of
the conditions to the Offer. The Minimum Consent Condition, the Supplemental
Indenture Condition, the Funding Condition, the Stockholder Approval Condition
and the General Conditions are referred to collectively as the "Conditions."
In the event that the Offer and the Solicitation are withdrawn or
otherwise not completed, the Offer Price and Consent Payment will not be paid or
become payable to Holders of Debentures who have validly tendered their
Debentures and delivered Consents in connection with the Offer and the
Solicitation.
Any questions and requests for assistance may be directed to the
Information Agent, the Dealer Manager and Solicitation Agent at their respective
addresses and telephone number set forth on the back cover page of this
Statement.
CERTAIN OFFER AND CONSENT SOLICITATION MATTERS
The Company's obligation to accept for purchase and to pay for Debentures
and the adoption of the Proposed Amendments, is conditioned on the satisfaction
of the Conditions. See "Conditions to the Offer."
The purpose of the Offer is to acquire any and all outstanding Debentures.
The purpose of the Solicitation and the Proposed Amendments is to amend the
Indenture to eliminate certain restrictive covenants contained therein and to
enable the Company to consummate the Asset Sale and to improve the operating and
financial flexibility of the Company.
The Company intends to execute a supplemental indenture containing the
Proposed Amendments (the "Supplemental Indenture") following the satisfaction of
the Conditions (excluding the Supplemental Indenture Condition). Although the
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Supplemental Indenture will become effective upon execution by the Company and
the Trustee, the Proposed Amendments will not become operative until the opening
of business on the Payment Date. The Indenture will remain in effect, without
giving effect to the Proposed Amendments, until the Proposed Amendments become
operative on the Payment Date.
The Company, in its sole discretion, may waive any of the conditions or
amend any of the terms of the Offer and the Solicitation, in whole or in part,
at any time and from time to time. See "Conditions to the Offer."
Tenders of Debentures may be validly withdrawn at any time at or prior to
5:00 p.m., New York City time, on the Expiration Date, but not thereafter. If,
after such time as withdrawal rights expire, the Company reduces either (A) the
principal amount of Debentures subject to the Offer or (B) the Offer Price, then
previously tendered Debentures may be validly withdrawn on or prior to the date
ten business days after the date that notice of any such reduction is first
published, given or sent to Holders by the Company. In addition, tenders of
Debentures may be validly withdrawn if the Offer is terminated without any
Debentures being purchased thereunder. In the event of a termination of the
Offer, the Debentures tendered pursuant to the Offer will be promptly returned
to tendering Holders.
A Holder may not validly revoke a Consent unless such Holder validly
withdraws such Holder's previously tendered Debentures. Thus the valid
revocation of a Holder's Consent will constitute the concurrent valid withdrawal
of such Holder's Debentures. As a result, a Holder who validly withdraws their
previously delivered Consent will not receive the Offer Price or the Consent
Payment. However, a withdrawal of a Holder's Debentures does not constitute the
revocation of a Holder's Consent.
Consent Payments and the Offer Price will be paid promptly after the date
that the Company accepts tendered Debentures for purchase and payment pursuant
to the Offer. If a Holder's Debentures are not accepted for purchase and payment
by the Company pursuant to the Offer or such Holder's Consent either is received
after, or revoked and not validly redelivered, at or prior to 5:00 p.m., New
York City time, on the Consent Date, such Holder will not receive the Consent
Payment. See "Withdrawal Rights."
The Company intends to extend the Offer, if necessary, so that the
Expiration Date occurs on or about the same date as the consummation of the
Asset Sale. The Company, however, intends to execute the Supplemental Indenture
at or promptly following 5:00 p.m., New York City time, on the Consent Date,
which is expected to be prior to the initially scheduled Expiration Date. If
necessary, the Company will extend the Offer so that the Expiration Date occurs
no earlier than five business days following the Consent Date.
See "Certain Considerations" and "Certain Federal Income Tax Consequences"
for discussions of certain factors that should be considered in evaluating the
Offer and the Solicitation, and also see "The Proposed Amendments" for a
description of the Proposed Amendments and the consequences thereof to Holders
of unpurchased Debentures.
Under no circumstances will any interest be payable because of any delay
by the Depository in the transmission of funds to Holder. Subject to applicable
securities laws and the terms set forth in this Offer, the Company reserve the
right (a) to waive any and all conditions to the Offer or the Solicitation, (b)
to extend or terminate the Offer or the Solicitation or (c) otherwise to amend
the Offer or the Solicitation in any respect.
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Statement and if
given or made, any such information or representation may not be relied upon as
having been authorized by the Company or the Dealer Manager. This Statement
constitutes neither an offer to purchase nor a solicitation of Consents in any
jurisdiction in which, or to or from any person to or from whom, it is unlawful
to make such offer or solicitation under applicable securities or blue sky laws
The delivery of this Statement shall not under any circumstances create any
implication that the information contained herein is correct as of any time
subsequent to the date hereof or that there has been no change in the
information set forth herein or in any attachments hereto or in the affairs of
the Company or any of its subsidiaries or affiliates since the date hereof.
The Company expressly reserves the absolute right, in its sole discretion,
from time to time, to purchase any Debentures after the Expiration Date, through
open market or privately negotiated transactions, one or more additional tender
or exchange offers or otherwise on terms that may or may not differ materially
from the terms of the Offer.
IMPORTANT INFORMATION
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Any Holder desiring to tender Debentures and/or deliver Consents should
either (i) complete and sign the Consent and Letter of Transmittal (or a
facsimile copy thereof) in accordance with the instructions thereon, have his or
her signature thereon guaranteed (if required by Instruction 1 of the Consent
and Letter of Transmittal) and send or deliver such manually signed Consent and
Letter of Transmittal (or a manually signed facsimile copy thereof) and any
other required documents, including, without limitation, certificates evidencing
such Debentures (or, in the case of Debentures delivered by book entry transfer,
confirmation of the transfer of such Debentures into the Depositary's account
with a Book Entry Transfer Facility (as defined below) pursuant to the
procedures set forth herein), to the Depositary or (ii) request such Holder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such Holder. A beneficial owner who has Debentures registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such broker, dealer, commercial bank, trust company or other
nominee if such beneficial owner desires to tender, and/or deliver Consents for,
such Debentures so registered. See "Procedures for Tendering Debentures and
Delivering Consents."
Any Holder desiring to tender Debentures but who cannot comply with the
procedures set forth herein for tender on a timely basis or whose certificates
for Debentures are not immediately available may tender the Debentures by
following the procedures for guaranteed delivery set forth under "Procedures for
Tendering Debentures and Delivering Consents -- Guaranteed Delivery."
The Depository Trust Company ("DTC") has authorized DTC participants that
hold Debentures on behalf of beneficial owners of Debentures through DTC to
tender their Debentures and consent to the Proposed Amendments as if they were
Holders. To effect a tender and consent, DTC participants may, in lieu of
physically completing and signing the Consent and Letter of Transmittal,
transmit their acceptance to DTC through the DTC Automated Tender Offer Program
("ATOP"), for which the transaction will be eligible, and follow the procedure
for book-entry transfer set forth in "Procedures for Tendering Debentures and
Delivering Consents." A beneficial owner of Debentures that are held of record
by a custodian bank, depositary, broker, trust company or other nominee must
instruct such Holder to tender the Debentures on the beneficial owner's behalf.
A Letter of Instructions, which may be used by a beneficial owner in this
process to effect the tender, is included in the solicitation materials provided
along with this Statement. See "Procedures for Tendering Debentures and
Delivering Consents."
Questions and requests for assistance or for additional copies of this
Statement, the Consent and Letter of Transmittal, the Notice of Guaranteed
Delivery or any other documents may be directed to the Information Agent or the
Dealer Manager and Solicitation Agent at their respective addresses and
telephone numbers set forth on the back cover of this Statement. Beneficial
owners may also contact their broker, dealer, commercial bank, trust company, or
other nominee through which they hold the Debentures with questions and requests
for assistance.
THIS STATEMENT AND THE CONSENT AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER AND THE SOLICITATION.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended July
31, 1999, which has been filed by the Company with the Securities and Exchange
Commission (the "Commission"), is incorporated herein by reference and shall be
deemed to be a part hereof.
The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 1998, which has been filed by the Company with the Commission, is
incorporated herein by reference and shall be deemed to be a part hereof.
The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
January 30, 1999, which has been filed by the Company with the Commission, is
incorporated herein by reference and shall be deemed to be a part hereof.
The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
May 1, 1999, which has been filed by the Company with the Commission, is
incorporated herein by reference and shall be deemed to be a part hereof.
The Company's Current Report on Form 8-K dated May 19, 1999.
The Company's Current Report on Form 8-K dated August 3, 1999.
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All documents and reports filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
after the date of this Offer to Purchase and prior to the termination of the
Offer made hereby shall be deemed incorporated herein by reference and shall be
deemed to be a part hereof from the date of filing of such documents and
reports. Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Offer to Purchase and Consent Solicitation Statement to the
extent that a statement contained herein or in any subsequently filed document
or report that also is or is deemed to be incorporated by reference herein
modifies or supersedes such Statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Offer to Purchase and Consent Solicitation Statement.
THIS STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS, EXCEPT THE EXHIBITS TO SUCH
DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN
SUCH DOCUMENTS), ARE AVAILABLE ON REQUEST. REQUESTS FOR SUCH COPIES SHOULD BE
DIRECTED TO GERALD N. AGRANOFF, SECRETARY, DATAPOINT CORPORATION, 8410 DATAPOINT
DRIVE, SAN ANTONIO, TEXAS 78229-8500.
AVAILABLE INFORMATION
The Company is subject to the information and reporting requirements of
the Exchange Act and is required to file reports, proxy statements and other
information with the U.S. Securities and Exchange Commission (the "SEC"). Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities of the SEC located in Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be
available for inspection and copying at prescribed rates at the following
regional offices of the Commission: Seven World Trade Center, New York, New
York, 13th Floor, 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of this material may also be obtained by mail, upon
payment of the SEC's customary fees, by writing to the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC maintains a
Web site at http://www.sec.gov containing reports, proxy statements and other
information regarding registrants that file electronically with the SEC,
including the Company.
THIS STATEMENT CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. ALL FORWARD-LOOKING STATEMENTS
INVOLVE RISK AND UNCERTAINTY AND THE RESULTS COULD DIFFER MATERIALLY FROM THOSE
SET FORTH IN THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN FOR A VARIETY OF
REASONS.
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TABLE OF CONTENTS
Page
Summary.................................................................... 1
Principal Terms of the Offer and Solicitation.............................. 3
Purpose of the Offer and Solicitation...................................... 4
Source and Amount of Funds................................................. 4
Conditions to the Offer.................................................... 4
The Debentures............................................................. 5
The Proposed Amendments.................................................... 6
The Company and the Asset Sale............................................. 7
The Stock Purchase Agreement............................................... 8
Preferred Stock............................................................12
Special Meeting............................................................12
Certain Considerations.....................................................17
Unaudited Pro Forma Financial Statements...................................19
Fairness Opinion...........................................................26
Voting Securities and Holders Thereof......................................31
Interests of Directors and Officers........................................32
Expiration, Extension, Amendment or Termination of the Offer...............32
Acceptance for Payment and Payment for Debentures and Consents.............34
Procedures for Tendering Debentures and Delivering Consents................35
Withdrawal Rights..........................................................40
Certain Federal Income Tax Consequences....................................41
Dealer Manager.............................................................41
Depositary and Information Agent...........................................42
Miscellaneous..............................................................43
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TO THE HOLDERS OF DEBENTURES:
This Statement and the related Consent and Letter of Transmittal contain
important information which should be read carefully before any decision is made
with respect to the Offer and the Solicitation.
1. Summary
The following summary is provided solely for the convenience of Holders of
the Debentures. This summary is not intended to be complete and is qualified in
its entirety by reference to the full text and more specified details contained
in this Statement and any amendments hereto. Holders of the Debentures are urged
to read this Statement in its entirety. Each of the capitalized terms used in
this Summary and not defined herein has the meaning set forth elsewhere in this
Statement.
The Company...................................Datapoint Corporation
The Debentures................................8 7/8% Convertible Subordinated
Debentures due 2006.
The Offer.....................................Offer to purchase any and all of
the outstanding Debentures.
Expiration Date...............................The Expiration Date of the Offer
shall be 5:00 p.m., New York City
time, on [______________], 2000,
unless extended. The Company
intends to extend the Offer, if
necessary, so that the Expiration
Date occurs no earlier than five
(5) business days following the
Consent Date.
Total Consideration for the Offer and the
Solicitation...............................The Offer Price for each $1,000
principal amount of Debentures
tendered pursuant to the Offer
will be $450 and each Holder who
validly consents to the Proposed
Amendments prior to the Consent
Date shall be entitled to a
Consent Payment equal to $[____]
per $1,000 principal amount of
Debentures.
Offer.........................................Price $450 for each $1,000
principal amount of Debentures.
The Solicitation..............................The Company is also soliciting
from Holders Consents to the
Proposed Amendments to the
Indenture, and the Company is
offering to pay to each Holder who
validly consents to the Proposed
Amendments on or prior to 5:00
p.m., New York City time, on the
applicable Consent Date, the
applicable Consent Payment of
$[_____] per $1,000 principal
amount of Debentures for which
Consents have been validly
delivered with such payment to be
made promptly on the Payment Date
if, but only if, the Conditions
are satisfied and the Debentures
are accepted for payment pursuant
to the terms of the Offer.
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Consent Date..................................The Consent Date shall be the
later of [________] and the date
on which the Company shall have
first received the Requisite
Consents. The Company will execute
the Supplemental Indenture on or
promptly after 5:00 p.m., New York
City time, on the Consent Date.
Requisite Consents............................Duly executed (and not revoked)
Consents to the applicable
Proposed Amendments from Holders
representing at least 66 2/3% in
aggregate principal amount of the
outstanding Debentures (excluding
for such purposes any Debentures
owned at such time by the Company
or any of its affiliates).
Acceptance....................................Date The date the Company accepts
Debentures for purchase pursuant
to the Offer.
Payment Date..................................The Payment Date shall be the
business day following the
satisfaction of the Conditions and
the acceptance of the Debentures
for payment by the Company
pursuant to the terms of the
Offer.
How to Tender Debentures or Deliver Consents..See "Procedures for Tendering
Debentures and Delivering
Consents." For further
information, call the Information
Agent or the Dealer Manager or
consult your broker, dealer,
commercial bank or trust company
for assistance.
Withdrawal Rights.............................Tenders of Debentures may be
withdrawn at any time on or prior
to 5:00 p.m., New York City time,
on the Expiration date, and
Consents may be revoked at any
time on or prior to 5:00 p.m., New
York City time, on the Consent
Date. In order for a Holder to
revoke a Consent, such Holder must
withdraw the related tendered
Debentures. See "Withdrawal
Rights."
Purpose of the Offer and Solicitation.........The purpose of the Offer is to
acquire any and all outstanding
Debentures. The purpose of the
Solicitation and the Proposed
Amendments is to waive certain
requirements contained in the
Indenture to, amend the Indenture
to eliminate certain restrictive
covenants contained therein and to
enable the Company to consummate
the Asset Sale and to improve the
operating and financial
flexibility of the Company.
Brokerage Commissions.........................No brokerage commissions are
payable by tendering Holders of
the Debentures to the Dealer
Manager, the Company, the
Information Agent or the
Depositary.
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Further Information...........................Additional copies of this
Statement and the Consent and
Letter of Transmittal may be
obtained by contacting Georgeson
Shareholder Communications Inc.,
17 State Street, New York, NY
10004, telephone (800) 223-2064
(toll free) and (212) 440-9800
(brokers and dealers). Questions
about the Offer should be directed
to the Dealer Manager: Georgeson
Shareholder Securities Corporation
(212) 440-9884 or toll free (800)
445-1790.
Principal Terms of the Offer and Solicitation
Upon the terms and subject to the conditions set forth in this Statement
and in the accompanying Consent and Letter of Transmittal, the Company hereby
offers to purchase for cash any and all of the outstanding Debentures at the
Offer Price. Upon the terms and subject to the conditions set forth in this
Statement and in the accompanying Consent and Letter of Transmittal, the Company
is also soliciting Consents to the Proposed Amendments from Holders of
Debentures.
Upon the terms and subject to the conditions set forth in this Statement
and in the accompanying Consent and Letter of Transmittal, the Company will
accept for payment, and thereby purchase, all Debentures validly tendered on or
prior to the Expiration Date and not properly withdrawn in the manner described
under "Withdrawal Rights." Neither the Offer Price nor the Consent Payment will
be payable until the occurrence of the Payment Date. The Payment Date will not
occur until the satisfaction of the Conditions.
In conjunction with the Offer, the Company is also hereby soliciting
Consents from registered Holders of at least the Requisite Consents to Proposed
Amendments to the Indenture. See "The Proposed Amendments." Holders who provide
their consents or who tender their Debentures and concurrently provide their
Consents (and have not validly withdrawn such Debentures and the related
Consents) at or prior to 5:00 p.m., New York City time, on the Consent Date,
will be entitled to the Consent Payment. The Consent Payment is payable to
Holders of Debentures for which Consents have been validly delivered and not
validly revoked at or prior to 5:00 p.m., New York City time, on the Consent
Date. If necessary, the Company will extend the Offer so that the Expiration
Date occurs no earlier than five business days following the Consent Date.
Holders who tender Debentures in the Offer prior to the Consent Date are
obligated to consent to the Proposed Amendments. Pursuant to the terms of the
Consent and Letter of Transmittal, the completion, execution and delivery
thereof by a Holder in connection with the tender of Debentures will be deemed
to constitute the Consent of such tendering Holder to the Proposed Amendments.
Holders may deliver Consents without tendering Debentures in the Offer, but may
not revoke Consents without withdrawing the previously tendered Debentures to
which such Consents relate.
If the Requisite Consents are received and the Proposed Amendments have
become effective, the Proposed Amendments will be binding on all non-tendering
Holders of Debentures. Therefore, consummation of the Offer and the adoption of
the Proposed Amendments may have adverse consequences for Holders who elect not
to tender Debentures in the Offer.
The Company intends to execute the Supplemental Indenture at or promptly
following 5:00 p.m., New York City time, on the Consent Date. Although the
Supplemental Indenture will become effective upon execution by the Company and
the Trustee, the Proposed Amendments will not become operative until the opening
of business on the Payment Date. The indenture will remain in effect, without
giving effect to the Proposed Amendments, until the Proposed Amendments become
operative on the Payment Date.
A Holder may not validly revoke a Consent unless such Holder also validly
withdraws such Holder's previously tendered Debentures. As a result, a Holder
who validly withdraws previously tendered Debentures and revokes the related
Consent will not receive the Offer Price or the Consent Payment unless such
Debentures are retendered and Consents are delivered at or prior to 5:00 p.m.,
New York City time, on the Consent Date (to receive the Offer Price and the
Consent Payment) or the Expiration Date (to receive the Offer Price). Holders
will have no right to revoke their Consents after
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5:00 p.m., New York City time, on the Consent Date, unless the principal amount
of Debentures subject to the Offer or the Offer Price is reduced after such
date, as described under "Withdrawal Rights."
Purpose of the Offer and Solicitation
The purpose of the Offer, Solicitation and Proposed Amendments, which are
conditioned upon satisfaction of Conditions, is to provide for, among other
things, the Asset Sale and the reduction in the Company's aggregate interest
expense and required sinking fund payment on the Debenture by purchasing such
Debentures in the Offer.
Source and Amount of Funds
The total amount of funds required by the Company to pay the Offer Price
and any related fees and expenses is estimated to be approximately $[____]
million (assuming that 100% of the outstanding Debentures are tendered at or
prior to 5:00 p.m., New York City time, on the Consent Date and accepted for
payment). The Company expects to obtain such funds, and thereby satisfy the
Funding Condition, by consummating the Asset Sale substantially concurrently
with the Expiration Date. The proceeds from the Asset Sale, less fees and
expenses, are estimated to be approximately $42,550,000. Consummation of the
Offer is subject to satisfaction of the Funding Condition and the other
Conditions. See "Conditions to the Offer." Funds received by the Company to pay
the Offer Price and any related fees and expenses will be deposited in escrow
until the occurrence of the Payment Date as more fully described in "The Stock
Purchase Agreement - Escrow" below.
Conditions to the Offer
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) the Company's rights to extend, amend or terminate the
Offer at any time in its sole discretion, the Company shall not be required to
accept for payment or pay for any Debentures tendered, and may delay the
acceptance for payment of, or payment for, any Debentures so tendered, in each
event subject to Rule 14e-1(c) under the Exchange Act, and/or may terminate the
Offer, if, on or prior to the Expiration Date, there has not been satisfaction
of any of the Conditions.
As previously indicated, the Company's obligation to accept for purchase,
and to pay for, Debentures validly tendered pursuant to the Offer is conditioned
upon (i) the Minimum Consent Condition, (ii) the Supplemental Indenture
Condition, (iii) the Funding Condition, (iv) the Stockholder Approval Condition
and (v) the General Conditions. The General Conditions shall be deemed to be
satisfied on the Expiration Date, unless any of the following conditions (the
"General Conditions") shall occur on or after the date of this Offer to Purchase
and prior to the Expiration Date:
(a) there shall have been instituted or threatened or be pending any
action or proceeding before or by any court, governmental regulatory or
administrative agency or authority or instrumentality, or by any other person,
in connection with the Offer, the Solicitation, the solicitation of Stockholder
approvals (the "Stockholder Proxy") or the Asset Sale, that (i) challenges the
making of the Offer, the Solicitation, the Stockholder Proxy or the consummation
of the Asset Sale, the acquisition of Debentures pursuant to the Offer or the
obtaining of Consents pursuant to the Solicitation or otherwise relates in any
manner to the Offer, the Stockholder Proxy or the Solicitation or (ii) has, or
is reasonably likely to have, in the sole judgment of the Company, a material
adverse effect on the business, operations, properties, condition (financial or
otherwise), assets, liabilities or prospects of the Company or any of its
affiliates, taken as a whole;
(b) a statute, rule, regulation, order, stay, decree, judgment or
injunction shall have been proposed, enacted, entered, issued, promulgated,
enforced or deemed applicable by any court, governmental regulatory or
administrative agency or authority or instrumentality that, in the sole judgment
of the Company, would or might directly or indirectly prohibit, prevent,
restrict or delay consummation of, or materially impair the contemplated
benefits to the Company, or any of its affiliates, of, the Offer, the
Solicitation, the Stockholder Proxy or the Asset Sale;
(c) there shall have occurred any development that would materially
adversely affect the business of the Company and its subsidiaries, taken as a
whole, in the sole judgment of the Company, with respect to any action or
proceeding concerning the Company;
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(d) there shall have occurred or be likely to occur any event affecting
the business or financial affairs of the Company that, in the Company's sole
judgment, would or might prohibit, prevent, restrict or delay consummation of
the Offer, the Solicitation, the Stockholder Proxy or the Asset Sale;
(e) there shall have occurred (i) any general suspension of, shortening of
hours for or limitation on prices for trading in securities in the United States
securities or financial markets (whether or not mandatory), (ii) any significant
adverse change in the price of the Debentures or in the United States securities
or financial markets, (iii) a significant impairment in the trading market for
debt securities, (iv) a declaration of a banking moratorium or any suspension of
payments in respect of banks by federal or state authorities in the United
States (whether or not mandatory), (v) a commencement of a war, armed
hostilities or other national or international calamity directly or indirectly
involving the United States, (vi) any limitation (whether or not mandatory) by
any governmental authority on, or other event having a reasonable likelihood of
affecting, the extension of credit by banks or other lending institutions in the
United States, (vii) any significant change in United States currency exchange
rates or a suspension of, or limitation on, the markets therefor (whether or not
mandatory), or (viii) in the case of any of the foregoing existing at the time
of the commencement of the Offer, a significant acceleration or worsening
thereof; or
(f) the Trustee under the Indenture shall have objected in any respect to,
or taken any action that could, in the sole judgment of the Company, adversely
affect the consummation of the Offer, the Solicitation, the Stockholder Proxy or
the Asset Sale or the Company's ability to effect any of the Proposed
Amendments, or shall have taken any action that challenges the validity or
effectiveness of the procedures used by the Company in soliciting the Consents
(including the form thereof) or in the making of the Offer, the Solicitation,
the Stockholder Proxy or the acceptance of or payment for any of the Debentures.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances giving rise to any
such condition (including any action or inaction by the Company) and may be
waived by the Company, in whole or in part, at any time and from time to time,
in the sole discretion of the Company. The Company does not intend to waive the
Minimum Consent Condition, Stockholder Approval Condition, Supplemental
Indenture Condition or the Funding Condition. The failure by the Company at any
time to exercise any of the foregoing rights will not be deemed a waiver of any
other right and each right will be deemed an ongoing right which may be asserted
at any time and from time to time. Any determination by the Company concerning
the events described above will be final and binding upon all parties.
The Debentures
The Debentures were issued pursuant to the Indenture. As of July 31, 1999,
approximately $54,960,000 in principal amount of Debentures were outstanding.
Certain executive officers and directors of the Company hold an aggregate of
approximately $188,000 in principal amount of the Debentures and have informed
the Company that they will tender their Debentures pursuant hereto and also
consent to the Proposed Amendments. The Debentures are unsecured subordinated
obligations of the Company and bear interest at the rate of 8 7/8% per annum.
Interest is paid semiannually on June 1 and December 1 of each year. The
Debentures mature on June 1, 2006. The Debentures are convertible into Common
Stock at any time prior to June 1, 2006 at the rate of 55.231 shares of Common
Stock per $1,000 principal amount of Debentures converted.
The Debentures are redeemable at the option of the Company in whole or
part, at any time and from time to time, in accordance with the terms of the
Debentures and the Indenture at a far greater price then is being paid pursuant
hereto. The Debentures are also redeemable through the operation of a sinking
fund, with payment to be made on June 1 of each year.
The Debentures are authorized for quotation on the Over-The-Counter
Bulletin Board. The Debentures trade at a significant discount to par and trade
infrequently. Because the Debentures are sporadically traded and no market maker
exists for the Debentures, accurate ranges of high and low bid quotations for
each of the calendar quarters during the past two years are unavailable to the
Company. To the knowledge of the Company, there has been no trading activity for
Debentures during the past several months. THE COMPANY URGES DEBENTUREHOLDERS TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE DEBENTURES.
There are no appraisal or other similar statutory rights available to the
Holders of Debentures in connection with the Offer or the Solicitation.
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The Proposed Amendments
The Proposed Amendments are set forth in the proposed Supplemental Indenture, a
copy of which is included herein as Appendix B. The Supplemental Indenture will
be executed by the Company and the Trustee promptly following the Consent Date.
Although the Supplemental Indenture will become effective upon execution by the
Company and the Trustee and will provide for the elimination and/or waiver of
certain sections of the Indenture, the Proposed Amendments will not become
operative until the opening of business on the Payment Date. The Indenture will
remain in effect, without giving effect to the Proposed Amendments, until the
Proposed Amendments become operative on the Payment Date. If the Consent Date is
not achieved, the Supplemental Indenture will not be executed and will not
become operative. The Proposed Amendments are conditioned on the Conditions.
The following is a summary of the Proposed Amendments. Capitalized terms
used but not defined in the following summary have the meanings assigned to them
in the Indenture. For more complete information regarding the effects of the
Proposed Amendments, reference is made to the Indenture, which is incorporated
herein by reference.
The Proposed Amendments would eliminate the following provisions of the
Indenture:
Section 801. Company May Consolidate, etc., Only on Certain Terms.
This provision currently restricts the ability of the Company consolidate,
merge or to convey, transfer or lease all or substantially all of its
assets to another person. It requires, among other things, that the other
person into which the Company is merged or which acquires the properties
and assets of the Company, substantially as an entirety, shall expressly
assume by way of supplemental indenture all covenants of the Company under
the Debentures and the Indenture, including the covenants of the Company
to pay principal and interest on the Debentures.
Section 802. Successor Corporation Substituted. This provision
currently states that, in the event of a consolidation or merger
transaction, or a conveyance, transfer or lease all or substantially all
of its assets of the Company, the successor corporation into which the
Company is merged or to which such conveyance, transfer or lease is made
shall succeed to the Company under the terms of the Indenture and
Debentures, and the Company shall be relieved of its obligations and
covenants under the Indenture and Debentures.
The Proposed Amendments would waive compliance with the following
provisions contained in the Indenture.
Section 1005. Properties. This provision imposes certain
requirements on the Company with respect to the maintenance, repair and
operation of all of the properties used in the conduct of its business.
Section 1203. Redemption of Debentures for Sinking Fund. This
provision requires the Company, on or before March 1 of each year, to
deliver to the Trustee a certificate specifying the amount of the next
ensuing sinking fund payment pursuant to Section 1201 and the portion
thereof, if any, which is to be satisfied by delivery and crediting of
repurchased Debentures by the Company. Further, the Company must deliver
such Debentures to the Trustee on March 1. The Company intends to make the
$5 million June 1, 2000 sinking fund payment by delivering Debentures
purchased pursuant to the Offer utilizing the proceeds of the Asset Sale.
However, the Company may not be able to consummate the Offer and the Asset
Sale on or before March 1, 2000. If the Asset Sale and Offer are not
consummated on or before March 1, 2000, the Company would be unable to
make the $5 million sinking fund payment by delivering Debentures to the
Trustee on March 1, 2000 and the Company would have to make such sinking
fund payment in cash. The proposed waiver would enable the Company to
delay the delivery of such certificate and Debentures until April 20,
2000. Delaying the date for delivery of the Debentures until April 20,
2000 would allow the Company to deliver Debentures repurchased in the
Offer to the Trustee and thus fulfill its obligations in a timely manner
under Section 1203.
Waiver of the covenants in Section 1005 and Section 1203 and elimination
of the covenants in Sections 801 and 802 of the Indenture are collectively
referred to herein as the "Proposed Amendments." If the Proposed Amendments
become operative, the restrictive covenants of the Indenture will be
substantially less restrictive, and will afford less protection to Holders than
those currently set forth in the Indenture. If Sections 801 and 802 are
eliminated, any person who acquires the Company, or to whom all or substantially
all of the Company's assets are transferred, will not be required to assume the
obligations of the Company under the Indenture and Debentures, and the consent
of Debentureholders to any such merger, consolidation or transfer of all or
substantially all of the assets of the Company will no longer be required.
Furthermore, such
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person will not be substituted for the Company under the Indenture and the
Debentures, and the Company will not be relieved of its obligations and
covenants under the Indenture and Debentures. If Section 1005 is waived, the
Company will no longer be required to conduct its business in the manner
originally set forth in such section, and may take certain actions with respect
to the properties used in the course of its business that it otherwise would not
be able to take absent the waiver of Section 1005. If Section 1203 is waived,
the Company, for the year 2000 only, would be able to satisfy the Debenture
sinking fund payment by delivering redeemed Debentures to the Trustee on April
20, 2000 rather than on March 1, 2000.
Pursuant to the terms of the Indenture, the Proposed Amendments require
written consent of the Holders equal to the Requisite Consent. The Proposed
Amendments with respect to the Indenture constitute a single proposal and a
consenting Holder must consent to the Proposed Amendments as an entirety and may
not consent selectively with respect to certain of such Proposed Amendments.
The completion, execution and delivery of a Consent and Letter of
Transmittal will constitute the Consent of such Holder to the Proposed
Amendments with respect to such Debentures.
The delivery of this Offer to Purchase by the Company to each of the
Holders shall constitute the requisite notice to Holders pursuant to Section
1307 of the Indenture.
The Company and the Asset Sale
On November 1, 1999 the Board of Directors (the "Board") approved
the Stock Purchase Agreement dated July 31, 1999 (as subsequently amended on
November 1, 1999) (collectively, the "Stock Purchase Agreement"), by and among
Reboot Systems, Inc. a Delaware corporation (together with an investor group
headed by Blake Thomas, the President of the Company and including key European
management employees, collectively, the "Buyer"), the companies listed on
Schedule A of the Stock Purchase Agreement (collectively, the "Sellers") and the
Company (the direct or indirect parent of each of the Sellers), which sets forth
the terms and conditions under which the Company would dispose of certain assets
(the "Asset Sale") of the Company, including, without limitation, its direct and
indirect operating subsidiaries in Europe (such assets and subsidiaries,
collectively, the "European Subsidiaries") together with certain other for $49.5
million subject to adjustments downward up to $1.7 million based on escrowed
funds (the "Purchase Price"). See "Description of the Transaction - Escrow."
The Board authorized the Company to enter into the Stock Purchase
Agreement and resolved to recommend that the Stockholders vote their shares of
Common Stock in favour of the Asset Sale. The Board believes that the proposed
transaction offers the best possible strategic opportunity for the Company
because the Asset Sale will result in the following advantages:
o The Company will receive an infusion of cash which will enable the
Company to reduce its outstanding corporate and trade indebtedness
and provide capital to further implement its strategic business
plan. The Company will be able to undertake additional acquisitions
and have the fiscal resources to adequately capitalize the Corebyte
subsidiary (as described below) in order to enable the Company to
reposition itself within the information technology and e-commerce
industry.
o Given the Company's limited resources and the declining
profitability of the Company over the past few years which is likely
to continue to decline without significant additional capital
investment in the European Subsidiaries (from which significantly
all of the Company's revenue for the last three years has been
derived), the proceeds from the Asset Sale will enable the Company
to shift its focus to developing internet and e-commerce
applications, which the Company has already begun with the
conditional acquisition of the Corebyte product line (as described
below).
o The Company will not be required to raise additional capital at this
time, thereby avoiding dilution to existing Stockholders.
In reaching its conclusion and the recommendation, the Board considered a
number of factors, including without limitation:
(i) The Board's familiarity with the financial condition, results of
operations, business, prospects and strategic objectives of the
European Subsidiaries, as well as its assessment of possible future
trends in the information technology industry;
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(ii) The absence of potential alternatives to the Asset Sale;
(iii) The terms and conditions of the Stock Purchase Agreement, including
the Purchase Price Deposit (as defined below);
(iv) The Company's belief that, based on current trends in its business
and financial forecasts, absent the Asset Sale, there is a
substantial likelihood that there will not be sufficient funding,
whether from cash flow from operations or other capital sources,
sufficient to make the scheduled $2,438,850 June 2000 Debenture
interest payment and the June 1, 2000 $5 million Debenture sinking
fund payment, and any interest and sinking fund payments which
become due thereafter, and certain accounts payable from U.S. trade
creditors totaling $1.160 million as of July 31, 1999 and $1.217
million as of October 30, 1999. The Company believes that these
creditors may assert certain rights against the Company that they
would otherwise not assert if the Asset Sale is approved.
Furthermore, absent the Asset Sale, all or a portion of such
creditors may commence involuntary bankruptcy proceedings against
the Company;
(v) The savings for interest and sinking fund payments that would not
have to be paid if the Company is able to redeem all or a portion of
the Company's Debentures that are currently outstanding at a
significant discount to the face amount thereof;
(vi) The terms of certain comparable transactions in the industry; and
(vii) The Fairness Opinion of BNY Capital Markets Inc.
The Board did not assign relative weights to any specific factor in
reaching its conclusion or recommendation.
THE STOCK PURCHASE AGREEMENT
The following summary of the material provisions of the Stock Purchase
Agreement, is qualified in its entirety by reference to the Stock Purchase
Agreement, a copy of which was filed as Exhibit (10)(jj) to the Company's Annual
Report on Form 10-K for the fiscal year ended July 31, 1999 which is
incorporated herein by reference.
On July 31, 1999, the Company and the Sellers entered into the Stock
Purchase Agreement with the Buyer for the sale of the European Subsidiaries. The
Stock Purchase Agreement was subsequently amended on November 1, 1999. In
connection therewith, the Stock Purchase Agreement provides that the Buyer will
purchase from the Company substantially all of the issued and outstanding
capital stock of the European Subsidiaries, the Datapoint name and certain
intellectual property (collectively, the "Transferred Assets").
The sale is scheduled to close (the "Closing") upon the satisfaction or
waiver of all conditions to Closing set forth in the Stock Purchase Agreement on
such date as mutually agreed between the parties (the "Closing Date") on or
prior to March 31, 2000
Purchase Price
The Purchase Price, payable by wire transfer of immediately available
funds at the Closing, is $49.5 million (subject to adjustment See "Description
of Transaction Escrow") plus $650,000 as reimbursement to the Company for the
fees paid to Dain Rauscher Wessels, a division of Dain Rauscher Incorporated
("Dain Rauscher"), the Company's investment banker.
Purchase Price Deposit and December 1 Funding
On November 8, 1999, the Buyer paid to the Company a deposit of $750,000
(the "Deposit"). The Deposit will be used primarily to fund transaction costs
associated with the sale of the European Subsidiaries, the costs associated with
the Solicitation and the proxy statement submitted the Stockholders, and the
engagement of BNY Capital Markets, Inc. ("BNY"), a subsidiary of Bank of New
York, to issue a fairness opinion in connection with the transaction. Pursuant
to the Stock Purchase Agreement on December 1, 1999 the Buyer is obligated to
loan to the Company approximately $2.5 million (the
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<PAGE>
"December 1 Funding") which represents the funds that the Company intends to use
to make its December 1999 interest payment on the Debentures. In connection with
such loan, the Company and Buyer are working to finalize the process to grant a
security interest to the Buyer in certain receivables of the European
Subsidiaries and expect that this process shall be completed shortly and upon
completion of such process such loan shall be funded.
If the Asset Sale is consummated, the Deposit and the December 1 Funding
shall be applied toward the purchase price. If the Asset Sale is not consummated
as a result of the inability of the Company to obtain the approval by the
Stockholders of the Asset Sale and Name Change and the approval of the
Debentureholders to the Proposed Amendments, the Company would be required to
immediately repay to the Buyer (i) the December 1 Funding, (ii) the Deposit,
(iii) fees of the Buyer in connection with obtaining funding commitments which
the Buyer may incur in connection with the Asset Sale (the "Commitment Fees")
and (iv) a fee of $375,000 (the "$375,000 Fee") as reimbursement for certain
expenses incurred by the Buyer in connection with the Asset Sale. All amounts
payable or repayable by the Company to the Buyer are to be secured by certain
accounts receivable of certain of the European Subsidiaries. In the event that
the Buyer does not obtain the financing commitment necessary to secure
acquisition financing for the Purchase Price by February 1, 2000, the Company is
required to immediately reimburse the Buyer for the December 1 Funding, however
the Company retains the Deposit. In the event that the Company is required to
immediately repay the December 1 Funding and any other amounts owed to Buyer it
may very likely be unable to since it lacks the capital to do so. Absent the
ability to negotiate with the Buyer a scheduled repayment of these amounts, if
the Buyer exercises its rights against the accounts receivables of certain of
the European Subsidiaries, such action would have a material adverse effect on
the ability of the Company to conduct its ongoing operations.
Escrow
At the Closing, a portion of the purchase price may be placed in escrow
with an escrow agent selected by the parties pursuant to an escrow agreement
(the "Indemnity Escrow Agreement") to satisfy certain specified contingent
obligations and any claims made against the Sellers or the Company by the Buyer
related to certain liabilities which are potential breaches of the
representations and warranties of the Company and the Sellers. The total amount
of these contingent claims equals $1.7 million which consists of $1,300,000 in
connection with the pending Swedish tax audit and $400,000 in connection with a
suit from a former employee in Belgium, unless such claims are resolved prior to
the Closing. The remainder of the Purchase Price up to the amount necessary to
pay the aggregate offer price and consent fees will be placed in escrow with The
Bank of New York, as escrow agent, pursuant to an escrow agreement (the "Tender
Offer Escrow Agreement") to the extent necessary to satisfy amounts due to
Debentureholders who consent and/or tender their Debentures to the Company
pursuant to the Offer. Funds remaining after payment of the aggregate Offer
Price to the Debentureholders will be distributed to the Company by such escrow
agent.
Use of Name
On the Closing Date, the Company and any continuing subsidiary of the
Company which has included in its name the name "Datapoint" or any derivative or
variation thereof, shall provide a Certificate of Amendment to its respective
Certificate of Incorporation (the "Name Change Certificates") in order to effect
a change of corporate name to a new name not including the name "Datapoint" or
any derivative or variation thereof and the Company shall transfer and assign
all of its respective right, title and interest in the name "Datapoint" to the
Buyer subject to a limited license granted by the Buyer to the Company and the
Sellers to utilize the name on existing stationery and brochures (the "Datapoint
License").
Intellectual Property
At the Closing the Company shall transfer to the Buyer ownership of the
source code for the Company's RMS Operating System. In addition, (i) all
intellectual property of the European Subsidiaries shall be purchased by the
Buyer by purchasing the shares of the European Subsidiaries in connection with
the Asset Sale, (ii) Buyer is acquiring on a non-exclusive basis rights to
non-patented Company product created prior to consummation of the Asset Sale and
(iii) the Company is granting a royalty free license (the "Company LP License")
to the Buyer for currently patented products of the Company, limited to current
customers of the European Subsidiaries. Existing U.S., Switzerland and Far East
end users will be designated as Company customers (the "Company Accounts"). The
Company will receive a royalty free license (the "Buyer LP License" and together
with the Company LP License, collectively, the "LP License Agreements"), in
perpetuity, from the Buyer to use RMS including any new releases for Company
Accounts on terms set by Company. The Buyer shall provide administrative and
telephone support services for the Company Accounts for a fee payable by the
Company.
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Representations and Warranties of the Buyer
In the Stock Purchase Agreement, the Buyer has represented and warranted
to the Company as of the date of the Stock Purchase Agreement and will represent
and warrant as of the Closing Date, among other matters, as to its corporate
status, its authority to enter into the Stock Purchase Agreement, the Indemnity
Escrow Agreement, the IP License Agreement and the Datapoint License (and,
together with the Name Change Certificates, the "Asset Sale Documents"); that it
has obtained all authorizations and approvals necessary from its Board of
Directors, and that each of the Asset Sale Documents to which the Buyer is a
party constitutes the legal, valid and binding obligation of the Buyer; that the
execution and delivery of the Asset Sale Documents to which the Buyer is a party
does not violate or conflict with any provisions of the Buyer's Certificate of
Incorporation or By-Laws, violate or create a default under any agreement or
instrument to which the Buyer is a party or any statute or decree or order or
authority to which the Buyer is subject; that no consent or governmental
authorizations are required for the execution or delivery by the Buyer of the
Asset Sale Documents; that no brokers have been retained by the Buyer in
connection with this transaction; that the Buyer has assets of $5,000,000 or
more, has the financial knowledge and experience to be able to evaluate the
merits and risks of the contemplated transactions, has had access to the
necessary corporate information relating to the European Subsidiaries.
Representations and Warranties of the Company
The Company and the Sellers have represented and warranted to the Buyer as
of the date of the Stock Purchase Agreement and will represent and warrant as of
the Closing Date, as to the corporate status of the Company, each of the Sellers
and the European Subsidiaries, and their good standing in the jurisdictions of
their incorporation, the authority of the Company and the Sellers to execute and
deliver the Asset Sale Documents, and subject to the approval by the
Stockholders of the Asset Sale and Name Change, and satisfaction of the
Supplemental Indenture Condition or any other necessary governmental or
third-party approvals, that each of the Asset Sale Documents to which the
Company or the Sellers is a party constitutes the legal, valid and binding
obligation of the Company and the Sellers; and that the transactions
contemplated by the Stock Purchase Agreement do not violate the Company's or
Sellers Certificates of Incorporation or By-Laws or any other statute, judgment,
order or regulation to which the Company or the Sellers may be subject.
The Company also represents and warrants, to the knowledge of certain
senior members of management of the Company as to certain operational matters
concerning the European Subsidiaries, among other matters, as to the fair
presentation of the financial condition of the European Subsidiaries by the
financial statements prepared in accordance with United States generally
accepted accounting principles provided to the Buyer; that the conduct of the
business since January 31, 1999 has not caused the European Subsidiaries to have
suffered any material adverse effect; that there exists no litigation which
challenges the validity of the transactions; that the European Subsidiaries are
in legal compliance; that they have good title to their properties and assets;
that none of the European Subsidiaries are in default on their real property
leases or, except as may have been set forth in the appropriate disclosure
schedule, are in violation of environmental laws or have received notices of any
noncompliance. The Company has also provided the Buyer with information relating
to as well as, wherever required, schedules of, the assets, insurance,
contracts, employee lists and compensation, including employee benefit plans,
labor relations, trademarks, patents, etc., suppliers and customers, accounts
receivable, the absence of undisclosed liabilities, tax compliance status of the
European Subsidiaries, the inventory and supplies of the European Subsidiaries,
the absence of brokers (except for Dain Rauscher, the Company's investment
banker), indebtedness, bank accounts, Year 2000 compliance and minute books. The
Company and the Sellers however, make no representations or warranties regarding
any projections, forecasts or business plans which may have been provided to the
Buyer in the course of its investigations of the European Subsidiaries.
Noncompetition
After the Closing Date, the Company has agreed not to compete with the
Buyer in Europe, North America and South America (the "Prohibited Area") for a
period of five years from the Closing Date in the business of selling or
providing telephony, call-center or data processing products or services,
including, without limitation, telephone switches and dialers, personal
computers, servers, printers and other peripheral hardware and software used in
connection therewith, or business consulting services with respect thereto (the
"Designated Industry"); except for the business of providing internet or
cybernet networking solutions (including, without limitation, external and
hybrid networking solutions, hardware, software and consulting services related
thereto), except that Mr. Asher Edelman and his affiliates are not restricted by
this provision as long as they are not directly or indirectly involved in any
operational capacity with any person in the Designated Industry or Prohibited
area. The Company has also agreed not to divert any customer of any of the
European Subsidiaries or engage in recruiting employees of the Buyer or of any
of the European Subsidiaries.
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Conditions Precedent to the Buyer's Obligations to Effect the Asset Sale
The Buyer's obligations to consummate the Closing is subject to the truth
and correctness of the Company's and the Sellers' representations and warranties
in all material respects at the Closing Date, compliance by the Company and the
Sellers with their obligations under the Stock Purchase Agreement, the absence
of any material adverse changes since January 31, 1999 with respect to the
business assets and properties of the acquired companies, receipt of a closing
certificate from the Company and the Sellers certifying as to compliance with
the aforementioned representations and warranties, receipt of the required
opinions from the Sellers' counsels, receipt of necessary corporate approvals,
the absence of any undisclosed litigation, securing of debt and/or equity
financing, the execution of the Indemnity Escrow Agreement, the execution and
delivery of the Name Change Certificates and Name Assignment, receipt of
necessary third party consents, including, without limitation, obtaining
consents from certain third parties and approval of the Debentureholders
pursuant to this Statement, termination of intercompany accounts, receipt of a
Support Agreement from each of Asher Edelman, Gerald Agranoff and Irving
Garfinkel (each, a "Support Agreement") with respect to the voting of the shares
beneficially owned by each of them at the Special Meeting and covenants with
respect to the confidentiality and non-compete provisions of the Stock Purchase
Agreement.
Conditions Precedent to the Company's Obligation to Effect the Asset Sale
The Company's obligation to consummate the Closing is subject to the truth
and correctness of the Buyer's representations and warranties in all material
respects at the Closing Date, compliance by the Buyer with all material
obligations under the Stock Purchase Agreement, the receipt of a certificate
from the Buyer certifying as to compliance with the aforementioned
representations, receipt of the executed Datapoint License from the Buyer,
receipt of an opinion of Buyer's counsel, the absence of any litigation, the
execution of the Indemnity Escrow Agreement, termination of inter company
accounts, receipt of satisfactory documentation from the Buyer, receipt of a
Representation Letter and a bring-down letter (on the Closing Date) from certain
members of senior management of the European Subsidiaries, including Blake
Thomas and the satisfaction of the Stockholder Approval condition and the
receipt of the Requisite Consent.
Indemnification by the Company
The Company and the Sellers have agreed to indemnify the Buyer and the
European Subsidiaries with respect to any breaches of representations and
warranties by the Company or the Sellers, acts, omissions or decisions of the
Company or the Sellers (or their officers, employees or agents) which may have
affected the business or financial condition of any of the European
Subsidiaries. The Company shall be liable in all cases, while each Seller is
jointly and severally liable with the Company in the event of a breach of
representations and warranties related to the European Subsidiary which it is
selling.
With respect to breaches of representations and warranties or covenants in
the Asset Sale Documents, only the excess over $500,000 in aggregate claims and
up to a maximum of $15,000,000 may be recovered, provided the aggregate loss
coverage with respect to all claims for indemnification by each party shall not
exceed the purchase price and provided, further, that claims are made within 18
months of the Closing Date, except for claims arising out of any inaccuracies in
the representations and warranties of the Company regarding the absence (except
as set forth in the appropriate disclosure schedule) of any litigation or basis
for any litigation, that would affect the Company's business or operations or
threaten the validity of the Asset Sale Documents or the transactions
contemplated therein.
Termination
The Stock Purchase Agreement shall terminate (i) upon the mutual agreement
of the Buyer and the Company, (ii) by either the Buyer or the Company if,
without fault of such party, the Closing doesn't occur prior to March 31, 2000
(the "Termination Date") or (iii) by either the Buyer or the Company if any of
the conditions precedent to such parties obligation to effect the Asset Sale are
not fulfilled or waived as of the Closing or become incapable of being
fulfilled.
Break-Up Fees and Other Payments
In the event that a Third Party Acquiror (as defined below) directly or
indirectly acquires the European Subsidiaries, during the period from the date
of the Stock Purchase Agreement and ending on the date which is six months after
the date on which the Stock Purchase Agreement is terminated, unless the Stock
Purchase Agreement has been terminated by the Company as a result of the Buyer's
failure to obtain financing commitments or has otherwise not satisfied its
conditions precedent to the Company's obligations to effect the Asset Sale, the
Company shall pay the Buyer a $5,000,000 break-up fee.
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For purposes of this section, "Third Party Acquiror" shall mean a party who has
indicated interest to, negotiated with, or requested information from, the
Company or Sellers relating to the European Subsidiaries during the period
beginning May 17, 1999 and ending on the date that the Stock Purchase Agreement
is terminated.
At the Closing, the Buyer shall pay the Company an amount not to exceed
$650,000 as reimbursement for the fees of Dain Rauscher as the Company's
investment banker for the Asset Sale.
Stockholder and Debentureholder Approval
The Company is required, under the terms of the Stock Purchase Agreement,
to seek Stockholder approval for the Asset Sale and the Name Change at the
Special Meeting, at which certain members of the senior management of the
Company have collectively agreed to vote and cause all their shares to be voted
in favor of the Asset Sale and Name Change pursuant to the Support Agreements
which in the aggregate account for approximately 20% of the outstanding Common
stock assuming all convertible securities are converted to Common stock. The
Company is also required under the terms of the Stock Purchase Agreement to seek
the Requisite Consents. In the event that the Stockholders do not approve the
Asset Sale or Name Change or the Company does not obtain the Requisite Consents
and the Buyer is otherwise ready, willing and able to close the Asset Sale, the
Company would be required to repay to the Buyer (i) the December 1 Funding, (ii)
the Deposit, (iii) the Commitment Fees and (iv) the $375,000 Fee, which
repayment is secured by accounts receivables of the European Subsidiaries.
Background to the Asset Sale
On November 13, 1998, the Company engaged Dain Rauscher as its investment
banker to assist the Company in marketing and negotiating the sale of the
European Subsidiaries. Dain Rauscher solicited indications of interest from a
broad array of strategic and financial prospective purchasers and contacted over
thirty potential buyers. In addition to the Buyer, the Company entered into
preliminary negotiations with two other groups. One such group made a
financially inferior offer to purchase the European Subsidiaries, which the
Board rejected in February 1999. The other such group initially indicated a
willingness to pay a higher purchase price than the Buyer and the Company
engaged in active negotiations with this group. However, when such group failed
to make an adequate offer, the Company then resumed negotiations with the Buyer.
Based upon the Buyer's proposed purchase price, the Company's familiarity with
certain of the entities and individuals comprising the Buyer, and the Buyer's
familiarity with the European Subsidiaries, among other factors, the Company
believed the transaction with the Buyer represented the most favorable available
opportunity to consummate the sale of the European Subsidiaries on the most
favorable terms, including price.
Tax Treatment of the Asset Sale to the Company
The Asset Sale will be a taxable transaction to the Company for United
States federal income tax purposes. Based on the allocation of the Purchase
Price among the Transferred Assets that will be used by the Company, the Company
believes that neither the Company nor any Seller will recognize any gain for
United States federal income tax purposes on the sale of the capital stock of
any of the European Subsidiaries. The Company further believes that any foreign
income or withholding tax to which the Company or any Seller may be subject as a
result of the Asset Sale and the other transactions to be undertaken by the
Company and any Seller in connection with the Asset Sale would be insignificant.
The Company also believes that, for United States federal income tax purposes,
it has sufficient net operating losses and other tax credit carryovers to absorb
any ordinary income that the Company may be required to recognize, and/or any
regular income tax to which the Company may be subject, as a result of the Asset
Sale, its extinguishment of Debentures pursuant to the Tender Offer and any
other transaction to be undertaken by the Company or any Seller in connection
with the Asset Sale; however, the Company may be liable for a 2 percent
alternative minimum tax (taking into account the Company's alternative tax net
operating losses to be carried over to the Company's taxable year beginning
August 1, 1999) on any such ordinary income that the Company may be required to
recognize and which cannot be offset by the ordinary deductions of the Company.
Business of the Company
General
Datapoint Corporation, including its subsidiaries, is principally engaged
in the development, acquisition, marketing, servicing, and system integration of
computer and communication products -- both hardware and software. These
products and services are for integrated computer and telecommunication network
systems. The Company through its 80% owned subsidiary Corebyte Inc., is also
actively engaged in the development and marketing of the Corebyte Networks(TM)
product line consisting of
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internet communication and networking software.
Datapoint was reincorporated in Delaware in 1976 as the successor
corporation to a Texas corporation. It was originally incorporated in 1968 as
Computer Terminal Corporation and changed its name to Datapoint Corporation in
1972. Its principal executive offices are located at 7 rue d'Anjou 75008, Paris,
France (telephone number - (33-1) 40 07 37 37) and at 8410 Datapoint Drive, San
Antonio, Texas 78229-8500 (telephone number - (210) 593-7000).
Throughout the 1980's and the early 1990's, the Company's business was
characterized by a significant decline in total revenue, recurring significant
losses, and a reduction of the domestic workforce. This was primarily due to (1)
a mass entry of competitors in the networking marketplace compounded by (2) a
marketplace demand for "Open Systems" products and standard interfaces, both of
which had a negative impact on the traditional networking and data processing
components of the Company's business. The marketplace was forced into a sameness
of design that lead to highly competitive pricing being the only significant
product differentiator. These adverse effects were, in turn, worsened by the
increasing availability of low-cost, off-the-shelf software applications
packages written in a number of industry-standard programming languages. Between
1994 and 1996, the Company was able to maintain a consistent and slightly
increasing revenue level while, at the same time, restructuring its operations
mostly through significant workforce reductions worldwide. The aim was to reduce
its cost base to support such revenue levels. Since fiscal year 1996, the
Company pursued, and is continuing to pursue, actions to provide cash infusions,
including the sale of selected assets of the Company in order to improve its
financial condition. At the end of 1996, the Company sold its European based
Automotive Dealer Management Systems business ("EADS") to Kalamazoo Computer
Group, plc, a public limited company organized under the laws of England
("Kalamazoo") for a purchase price of $33 million. The decline in revenue levels
in 1997 and subsequently, reflects the result of this sale.
In addition, on October 27, 1997, the Company sold the three buildings it
owned in San Antonio, Texas to a private unaffiliated group for approximately
$3.2 million (net of mortgage obligations and closing costs). The sales contract
provided for the leaseback by the Company of one of the buildings (approximately
38,000 square feet) for an initial lease term of five years. During the first
quarter of 1999, the Company sold the building it owned in Gouda, Netherlands to
a private unaffiliated group for approximately $2.1 million (net of mortgage
obligations and closing costs). The sales contract provided for the leaseback by
the Company of approximately 18,000 square feet for an initial lease term of
five years and approximately 12,000 square feet for an initial lease term of one
year. The Company recorded in non-operating income a gain of approximately $.3
million during the first quarter of fiscal year 1999. The remainder of the gain
($.9 million) was deferred and is being amortized over the lease terms.
During the second quarter of fiscal year 1997, the Company accepted
1,145,945 shares of its Preferred Stock which were tendered in its exchange
offer (the "Exchange Offer") described in the proxy statement/prospectus
delivered to the holders of the Common Stock of the Company and to the holders
of Preferred Stock. Under the terms of the exchange offer, each share of
Preferred Stock tendered was exchanged for 3.25 shares of Common Stock. The
exchange offer expired December 10, 1996. The tendered shares approximated
61.34% of the total outstanding shares of Preferred Stock immediately prior to
the expiration of the exchange offer. For purposes of calculating net income
applicable to holders of Common Stock in fiscal year 1997, and related per share
amounts, a gain of $3.8 million on exchange and retirement of Preferred Stock
was added to net income. This gain includes the excess of the carrying value of
Preferred Stock accepted in the exchange over the fair value of the Common Stock
issued. In addition, the gain includes accumulated dividends on the retired
Preferred Stock.
Currently, the Company, principally through its European Subsidiaries, has
been engaged in the development, acquisition, marketing, servicing and system
integration of computer and communications products. These products and services
are for integrated computer and telecommunication network systems. While
substantially all of the Company's revenue for the last three years has come
from the European Subsidiaries, the profitability of that business has
decreased. The Board has determined that such decline in profitability is likely
to continue into the foreseeable future unless the Company was to invest
significant capital in the European Subsidiaries.
The Board determined that the Company should shift its focus and channel
whatever resources it has into developing and/or marketing internet products and
e-commerce applications. In this regard, the Company recently took steps to
enter into the Stock Purchase Agreement to sell its European Subsidiaries and
conditionally acquired the Corebyte Networks(TM) product family ("Corebyte")
which consists of internet communication and networking software products
through a newly formed subsidiary named Corebyte Inc., of which the Company owns
an eighty-percent (80%) interest as more fully described below. The European
Subsidiaries represented 96% of the Company's total revenue during 1999. The
closing under the Stock Purchase Agreement requires majority Stockholder
approval and the Required Consents of Debentureholders hereunder. In connection
with obtaining the Required Consents being solicited hereunder the Company is
concurrently filing Stockholder
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Proxy documents with the SEC.
Based on current trends in its business and its financial forecasts, the
Company believes if the Asset Sale is not consummated, the Company will not be
able to make the scheduled $5.0 million sinking fund payment due in June 1,
2000. In the event the sinking fund payment is not made on June 1, 2000 the
resulting default would entitle 25% or more of the holders of the Debentures or
the Trustee to elect to declare the entire indebtedness of approximately $55.0
million as immediately due and payable. Upon consummation of the Tender Offer,
in the event that Debentureholders tender $5.0 million principal amount of
Debentures, the Company may deliver such Debentures to the Trustee to satisfy
the Company's $5.0 million June 1, 2000 Debenture sinking fund payment
obligation and to the extent that the principal amount of Debentures exceeds
$5.0 million, such excess up to $5.0 million may be applied against the
Company's $5.0 million June 1, 2001 Debenture sinking fund obligation.
On July 27, 1999, the Company, through its newly formed subsidiary,
Corebyte Inc., conditionally acquired (the "Corebytye Acquisition") the Corebyte
communication and networking software product family (the "Corebyte Products").
The acquisition was accomplished pursuant to an Asset Purchase Agreement, by and
among the Company, SF Digital, LLC and John Engstrom ("Engstrom"), dated July
27, 1999. Consideration provided for the Corebyte assets comprised the
following: (i) options to purchase up to one million shares of common stock of
the Company at an exercise price of $1.00 per share, (ii) options to purchase an
additional one million shares of common stock of the Company at an exercise
price equal to 80% of the closing price per share of common stock of the Company
on July 27, 2000, the first anniversary of the acquisition, provided that Mr.
Engstrom is still employed by the Company on such date; (iii) up to twenty-five
percent of the common stock in Corebyte, Inc.; and (iv) $75,000 in cash as
reimbursement for certain research and development expenses. All such
consideration is to be held in escrow pending final resolution of Engstrom v.
Futureshare.com, LLC, a litigation which is pending in the United States
District Court for the Southern District of New York, Civil Action No. 99 Civ.
3824 (WHP), concerning the ownership status of the software, technology, and
intellectual property which is the subject of the acquisition (the "Corebyte
Intellectual Property"). The discovery process, including the taking of
depositions, has begun in connection with such litigation. In the event that a
court makes a final determination in the Engstrom v. Futureshare.com, LLC
litigation that an entity or individual other than Engstrom or the Company owns
the Corebyte Intellectual Property, Engstrom shall not be entitled to the
escrowed consideration for the Corebyte Acquisition and the Company may be
required to negotiate with Futureshare.com LLC or may abandon its efforts to
market the Corebyte products. In such event, the Company may be subject to
liability, and may be forced to treat as a loss its investment and efforts
towards the development and marketing of the Corebyte Products and the Company
will seek to invest the funds that would otherwise have been used to purchase
Corebyte in other internet and e-commerce related businesses.
Corebyte Inc. is led by John Engstrom, a pioneer of online and
accomplished enterprise groupware and e-mail service provider. Corebyte is an
intelligent browser-based enterprise-to-enterprise networking system. With a
single interface, and based upon beta testing of the system performed to date,
the end-user directly accesses every application necessary to manage their
enterprise from basic e-mail to advanced e-commerce. Users of Corebyte
seamlessly share and exchange valuable information, selectively and securely,
within their network community and across enterprises.
Products
The Company provides communication solutions to the world through data and
voice integration. A complete line of products for data processing,
communications, and telecommunications is available.
In 1994, consistent with the Company's patent licensing business, the
Company began patent infringement suits against several defendants related to
the Company's video conferencing patents and dual protocol local area network
patents. The Company's patent enforcement policy included the identification of
video conferencing products and dual protocol local area network products and
applications which infringe the related patents and the execution of licensing
agreements through a) normal commercial negotiations or b) pursuant to
settlements of litigation brought against the patent infringers. The Company has
not been successful in asserting its U.S. video conferencing patents resulting
in payments for licenses. The Company is taking steps through an industry-wide
program to license and enforce its multi-speed networking patents through
negotiations and/or litigation. Currently, four patent infringement suits are
pending with respect to Datapoint's patents on its dual protocol local area
networking technology. These patents cover certain ARCNET and Fast Ethernet
products recently introduced by various suppliers to the local area network
industry and dominates certain types of dual-speed LAN Adaptor Products recently
introduced by various industry leaders. Such royalty bearing licenses and
enforcement of its patents may create long-term value for its shareholders,
pending resolution of the above-referenced litigations which so far have not had
favorable results to the Company.
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The Company's Networking products are industry-standard. The file servers
are based upon a scalable architecture using the Intel microprocessor. The
multi-processor functionality is provided for the Company's highly sophisticated
RMS network operating system. The same systems can be used for Windows NT, UNIX
and other operating systems. The Company offers high-performance, Pentium PRO
and Pentium III file servers. All systems support RAID disks and popular network
protocols such as TCP/IP and NetBios.
The Company's networking products focus on linking file servers,
workstations, terminals, printers, and other peripherals (such as modems) to the
network. High-performance networking software and hardware components comprise
the product offering and provide the ability to implement high-capacity, highly
efficient networks composed of client/server and data communications devices.
The networking solutions provide the capability of running MS-DOS, WINDOWS,
Windows NT, UNIX, and RMS simultaneously along with flexible choices of adapters
such as ARCNET, ARCNETPLUS, Ethernet and FastEthernet. These capabilities
provide customers the flexibility to design network architectures to meet their
specific requirements.
Realizing that personal computers are the desktop workstation of choice,
the Company offers PC-based hardware and software. A Microsoft Windows compliant
terminal emulation package for the RMS environment which can be run on existing
PCs is also provided.
Through various non-exclusive value added reseller agreements, the
Company, through its European Subsidiaries, sells a complete set of
telecommunications products and systems integration services to meet the
requirements of call centers, customer service centers, and telemarketing firms.
These products include automatic call distributor (ACD), power dialer,
interactive voice response (IVR), and software, which are used to handle high
volumes of inbound and outbound telephone calls, faxes, and e-mails. The
Company's services include, consulting, systems integration, application
development, and post sales support. The Company provides solutions with
expertise in networking, data processing, and voice technologies.
The supplier and value-added reseller relationships that the Company
continues to develop, allow its customers worldwide to enhance their
productivity with sensible, cost-effective computer-based networking and
telephony communication solutions.
Corebyte is an intelligent browser-based enterprise-to-enterprise
networking system. With a single interface, and based upon beta testing of the
system performed to date, the end-user directly accesses every application
necessary to manage their enterprise from basic e-mail to advanced e-commerce.
Users of Corebyte seamlessly share and exchange valuable information,
selectively and securely, within their network community and across enterprises.
Based on the above, the following features are currently available with
Corebyte:
o Instant Virtual Private Network with simple and remote
administration;
o E-mail;
o Calendar;
o Address book;
o Notepad;
o Enterprise-wide website editor;
o Slideshow;
o Intelligent instant messaging;
o Website bookmarks and links manager;
o Folder management and sharing;
o Unlimited color and style combinations (totally customizable);
o Advanced searching and sorting; and
o Automatic content update broadcast.
In October 1999 the Company discontinued its domestic video conferencing
(MINX) operations. As a result, severance pay of approximately $624 thousand
will be paid to 28 employees in regular bi-weekly installments. The severance
obligations have not been reflected in fiscal year 1999 results. In connection
with the discontinuance of this domestic operation, the Company recognized a
charge to cost of revenue during the fourth quarter of 1999 of $613 thousand to
reflect an adjustment to the net realizable value of inventories at July 31,
1999 relating to the domestic video conferencing (MINX) operation. Net revenues
from this domestic operation were approximately $2.1 million during 1999. Due to
the Company's limited financial resources, it was not able to continue making
the investment required, both in marketing and product development, to sustain
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consistent profitability for this portion of the business. The Company does
intend to honor its existing warranty obligations as well as its existing
maintenance support contracts and other contracts related to this business.
Patents and Trademarks
The Company owns certain patents, copyrights, trademarks and trade secrets
in network technologies, which it considers valuable proprietary assets.
Video Conferencing Patents
The Company, along with John Frassanito and David A. Monroe, owns United
States Patent Nos. 4,710,917 and 4,847,829 related to video teleconferencing
technology. The Company has filed infringement actions against several
companies.
The status of the patent infringement litigation is as follows:
(1) Datapoint Corporation v. PictureTel Corporation, No. 3:93-CV-2381-D
(N.D. Texas). This case was tried in March and April of 1998 with an adverse
result. Notice of Appeal had been filed and the case has since been dismissed.
(2) Datapoint Corporation v. Compression Labs, Inc. No. 3:93-CV-2522-D
(N.D. Texas); Datapoint Corporation v. Teleos Communications, Inc. No.
95-4455-AET (D.N.J.); Datapoint Corporation v. Videolan Technologies, Inc.;
Videolan Technologies, Inc. v. Datapoint Corporation, No. 96 CV-604-H (W.D.
Kentucky) et al; Datapoint Corporation v. Intel Corp. No. 97-CV-2581 (N.D.
Texas). These cases have been dismissed and were subject to being reopened if
the Company was successful in its appeal of certain of the issues adversely
determined in the PictureTel litigation described above. The Company's appeal
was unsuccessful.
Multi-speed Networking Patents
The Company is also the owner of United States Patent Nos. 5,008,879 and
5,077,732 related to network technology. The Company believes these patents
cover most products introduced by various suppliers to the networking industry
and dominates certain types of dual-speed technology on networking recently
introduced by various industry leaders. The Company has asserted one or both of
these patents in the United States District Court for the Eastern District of
New York against a number of parties:
(1) Datapoint Corporation v. Standard Micro-Systems, Inc. and Intel
Corporation, No. C.V.-96-1685;
(2) Datapoint Corporation v. Cisco Systems, Plaintree Systems Corp.,
Accton Technologies Corp., Cabletron Systems, Inc., Bay Networks, Inc., Crosscom
Corp. and Assante Technologies, Inc. No. CV 96 4534;
(3) Datapoint Corporation v. Dayna Communications, Inc., Sun Microsystems,
Inc., Adaptec, Inc. International Business Machines Corp., Lantronix, SVEC
America Computer Corporation, and Nbase Communications, No. CV 96 6334; and
(4) Datapoint Corporation v. Standard Microsystems Corp. and Intel Corp.,
individually, and as representatives of the class of all manufacturers, vendors
and users of Fast Ethernet-compliant, dual protocol local-area network products,
No. CV-96-03819.
These actions have been consolidated for discovery, and for purposes of
claim construction. On January 20, 1998, a hearing commenced in the United
States District Court that concluded on January 23, 1998 during which claim
construction was submitted to a Special Master. The Special Master's report was
issued April of 1998 adverse to the Company. The Company had filed two sets of
objections to certain portions of this report. The objections were overruled.
These objections will now have to be resolved at the Appellate Court level. The
briefing is completed. The Company is awaiting a date to be scheduled for oral
arguments.
The above actions represent the Company's continuing efforts to license
and enforce its multi-speed networking patents through negotiations and/or
litigation. The Company believes that these patents provide broad coverage in
multi-speed networking technology and present the opportunity for further
royalty bearing licenses. While such royalty bearing licenses
16
<PAGE>
and enforcement of its patents may create long-term value for its shareholders,
the ultimate outcome of the above litigation, appeals with respect to the
litigation, and /or negotiations cannot be determined at this time.
The Company utilizes a number of trademarks, most importantly "DATAPOINT",
"ARCNET" and "MINX". The Company registers or otherwise protects those
trademarks it deems valuable to its business and anticipates no significant
impairment of its ability to continue to use and protect its important
trademarks. Datapoint, the "D" logo, ARC, ARCNET, RMS, MINX, and Resource
Management System are trademarks of Datapoint Corporation registered in the U.S.
Patent and Trademark office. Attached Resource Computer, ARCNETPLUS, and DATALAN
are trademarks of the Company. (AT&T is a registered trademark of American
Telephone and Telegraph. Ethernet is a registered trademark of Xerox
Corporation. Intel is a registered trademark of Intel Corporation. Microsoft and
MS-DOS are registered trademarks of Microsoft Corporation. UNIX is a registered
trademark of UNIX System Laboratories, Inc.)
Employees
At July 31, 1999, the Company had 639 employees. The Company considers its
relations with its employees to be satisfactory. In the event the sale of the
European Subsidiaries is consummated, the Company will have approximately 10
Datapoint and 5 Corebyte Inc. employees.
Preferred Stock
As of July 31, 1999, there were 661,967 shares of the $1.00 Exchangeable
Preferred Stock, having a liquidation preference of $20 per share (the "$1.00
Preferred Stock"), with outstanding and an aggregate liquidation preference
including dividends in arrears of $16,549,000. The Board does not intend to
declare a dividend with respect to the Preferred Stock in the event the Asset
Sale is consummated. The holders of the Preferred Stock have the right to elect
two members to the Board at any time dividends on the Preferred Stock are in
arrears for more than 6 consecutive quarterly periods and accordingly have
elected Charles Robinson and Robert Summer to the Board.
Special Meeting
The Board intends to hold a special meeting of Stockholders on [________,
2000] (the "Special Meeting") to approve the Asset Sale and Name Change. The
Board may extend the date of the Special Meeting in its discretion. The
Stockholder Approval Condition cannot be satisfied until the Special Meeting is
held and the Stockholders approve the Asset Sale.
CERTAIN CONSIDERATIONS
All references in this section to "we", "us" or "our" refer to the
Company.
We have incurred and continue to incur operating losses and we may be
unable to operate as a going concern.
The Company incurred net losses in fiscal years 1998 and 1999. We believe
that our ability to become profitable will depend upon (1) consummation of the
Asset Sale, (2) the success of Corebyte and (3) success in repositioning the
Company in the information technology and e-commerce industry. The report of our
independent accountants on the 1999 financial statements of the Company included
an explanatory paragraph stating that our financial statements have been
prepared assuming that the Company will continue as a going concern. The Company
has incurred recurring net losses and has a working capital and net capital
deficiency at July 31, 1999 which raise substantial doubt as to our ability to
continue as a going concern. In addition, given the size and priority of the
claims of the Debentureholders, holders of the Preferred Stock and certain trade
creditors, we believe that it is possible that unless the Asset Sale is approved
that involuntary bankruptcy proceedings could be commenced against the Company
and the Stockholders would not receive any monetary payment if the Company were
liquidated.
Our current obligations are greater than our current assets.
The Company's current obligations on the Debentures include an interest
payment of $2.5 million payable due December 1, 1999 and a sinking fund payment
and interest payment totaling $7.5 million due June 1, 2000. The Company's
balance sheet as of July 31, 1999 showed net fixed assets of $5.9 million. The
Company does not believe it can meet its
17
<PAGE>
interest and sinking fund obligations from operating cash flows and over the
past few years has sold substantially all of its available fixed assets, other
than the assets of the European Subsidiaries, to raise the cash flows required
to fund our operations. The Company does not plan a liquidation. However, if the
Company is unable to meet its interest and sinking fund payments on the
Debentures, the holders of the Debentures can force the Company to liquidate its
assets to meet its obligations. In such a liquidation, the obligations to the
Debentures (approximately $55 million aggregate principal amount outstanding)
and the Preferred Stock (preference value of approximately $16.5 million,
including dividends in arrears) for an aggregate amount of approximately $71.5
million would participate in the assets of the Company upon a liquidation before
the Stockholders. Accordingly, we believe that the Asset Sale is much more
advantageous to the Stockholders than a liquidation of the Company.
Intense competition for Internet products and e-commerce applications and
continued entry by parties with greater resources could harm our financial
performance and industry position.
The market for Internet products and e-commerce applications is extremely
competitive. Many of the current competitors to Corebyte and potential
competitors in the Internet products and e-commerce applications businesses have
longer operating histories, greater managerial experience in these industries,
significantly greater financial, technical and marketing resources, greater name
recognition and larger existing customer bases than we have. As a result of
their advantages, our competitors may be able to limit or curtail our ability to
successfully compete. The competitive pressures that we encounter could
materially adversely affect our business, financial condition and operating
results.
We might not be successful in the development and introduction of new products
and services.
Our future success will depend on our ability to develop or acquire new
products and services in a timely manner and to provide new products and
services that achieve market acceptance. We may fail to identify new product and
service opportunities successfully and develop and bring to market new products
and services in a timely manner. In addition, product innovations may not
achieve the market penetration or price stability necessary for profitability.
We might not be successful in our attempts to keep up with rapid technological
change and evolving industry standards.
The markets for Internet products and e-commerce applications are
characterized by rapidly changing technology, evolving industry standards,
changes in customer needs, emerging competition, and frequent new product and
service introductions. The Company's future success will depend, in part, on its
ability to:
o use leading technologies effectively;
o continue to develop our strategic and technical expertise;
o enhance our current products and services;
o develop new products and services that meet changing customer
needs;
o advertise and market our products and services; and
o influence and respond to emerging industry standards and other
technological changes.
This must be accomplished in a timely and cost-effective manner. We may
not be successful in acquiring and effectively using new technologies,
developing new products or services or enhancing our existing products or
services on a timely basis. These new technologies or enhancements may not
achieve market acceptance. Our pursuit of necessary technological advances may
require substantial time and expense. In addition, as new technologies are
developed they could have a depressing effect on margins. Finally, we may not
succeed in adapting our services to new technologies as they emerge.
18
<PAGE>
Future growth of our operations may make additional capital or financing
necessary.
We anticipate that the proceeds of the Asset Sale will be adequate to meet
our working capital needs through 2001 (assuming an 80% tender of the
Debentures). Beyond that period, we may need to raise additional funds in order
to:
o finance working capital requirements and operating losses;
o develop or enhance existing services or products;
o fund costs associated with strategic marketing alliances;
o respond to competitive pressures; or
o acquire complementary businesses, technologies, content or
products.
We cannot be certain that we will be able to obtain funds on favorable
terms, or at all. If we decide to raise funds by issuing additional equity
securities, current shareholders may experience additional dilution. Issuance of
additional equity securities may also involve granting preferences or privileges
ranking senior to the purchasers in the offerings. If we cannot obtain
sufficient funds, we may not be able to grow our operations, take advantage of
future business opportunities or respond to technological developments or
competitive pressures.
Demand for our products and services might decrease if growth in the use of the
Internet declines.
Our future success substantially depends upon the continued growth in the
use of the Internet. The number of users on the Internet may not increase and
commerce over the Internet may not become more accepted and widespread for a
number of reasons, including the following, over which we have little or no
control:
o actual or perceived lack of security of information, such as
credit card numbers;
o lack of access and ease of use;
o inconsistent quality of service and lack of availability of
cost-effective, high speed service;
o damage to the Internet;
o excessive governmental regulation; and
o uncertainty regarding intellectual property rights.
In particular, if use of the Internet abroad does not grow and gain
acceptance, our business plan could be materially harmed. If the necessary
infrastructure, products, services or facilities are not developed, or if the
Internet does not become a viable commercial medium, our business would be
harmed.
Our operations will significantly depend upon maintenance and continued
improvement of the Internet's infrastructure.
The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and amount of traffic. Our success
will depend upon the development and maintenance of the Internet's
infrastructure to cope with this increased traffic. This will require a reliable
network backbone with the necessary speed, bandwidth, data capacity and
security. Improvement of the Internet's infrastructure will also require the
timely development of complementary products, such as high-speed modems, to
provide reliable Internet access and services. The Internet has experienced a
variety of outages and other delays as a result of damage to portions of its
infrastructure and could face similar outages and delays in the future. Outages
and delays are likely to affect the level of Internet usage, the level of
traffic on our website and the number of purchases on our website. In addition,
the Internet could lose its viability as a mode of commerce due to delays in the
development or adoption of new standards to handle increased levels of activity
or due to increased government regulation.
19
<PAGE>
Government regulation of the Internet might harm our business.
The applicability to the Internet of existing laws governing issues such
as property ownership, libel and personal privacy is uncertain. In addition,
governmental authorities may seek to further regulate the Internet with respect
to issues such as user privacy, pornography, acceptable content, e-commerce,
taxation, and the pricing, characteristics and quality of products and services.
Finally, the global nature of the Internet could subject us to the laws of a
foreign jurisdiction in an unpredictable manner. Any new legislation regulating
the Internet could inhibit the growth of the Internet and decrease the
acceptance of the Internet as a communications and commercial medium, which
might harm our business.
In addition, the growing use of the Internet has burdened the existing
telecommunications infrastructure and has caused interruptions in telephone
service. Telephone carriers have petitioned the government to regulate the
Internet and impose usage fees on Internet service providers. Any regulations of
this type could increase the costs of using the Internet and impede its growth,
which could in turn decrease the demand for our services or otherwise harm our
business.
Our acquisition of Corebyte is conditional upon the successful resolution of
litigation.
The acquisition by the Company of the Corebyte product line is dependent on the
final resolution of Engstrom v. Futureshare.com, LLC. This litigation involves
factual questions regarding the ownership of the source code and other
intellectual property comprising the Corebyte Products. The Company cannot
predict the resolution of such factual issues. In the event that a court makes a
final determination in the Engstrom v. Futureshare.com, LLC litigation that an
entity or individual other than Engstrom or the Company owns the Corebyte
Intellectual Property, the Company may be required to negotiate with
Futureshare.com LLC or may abandon its efforts to market the Corebyte Products.
In such event, the Company may be subject to liability, and may be forced to
treat as a loss its investment and efforts towards the development and marketing
of the Corebyte Products and the Company will seek to invest the funds that
would otherwise have been used to purchase Corebyte in other internet and
e-commerce related businesses. We are not currently involved in negotiations or
discussions relating to any such acquisitions.
20
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements have been prepared
to give effect to the following transactions, which are collectively referred to
as the "pro forma transactions,"
- - the Asset Sale, including related costs and expenses incurred in
consummating the Asset Sale.
- - the Tender Offer, assuming (i) 80% of the Debentures are purchased by
the Company and (ii) 100% of the Debentures are purchased by the
Company.
The unaudited pro forma financial statements of Datapoint give effect to the
consummation of the pro forma transactions, as if the pro forma transactions had
been consummated: (i) on July 31, 1999, in the case of the Unaudited Pro Forma
Balance Sheets and (ii) on August 2, 1998, in the case of the Unaudited Pro
Forma Statements of Operations for the fiscal year ended July 31, 1999.
The unaudited pro forma financial statements are presented for illustrative
purposes only and are not necessarily indicative of what Datapoint's actual
financial position or results of operations would have been had the pro forma
transactions been consummated on such dates, nor is it necessarily indicative of
future financial position or results of operations. Additionally, these
financial statements do not give effect to (i) any transactions other than the
pro forma transactions and those described in the accompanying notes to
unaudited pro forma financial statements of Datapoint, (ii) any one-time charges
that may result from the restructuring of Datapoint's existing business due to
the pro forma transactions, or (iii) any cost savings or other synergies
anticipated by Datapoint management as a result of the pro forma transactions.
The unaudited pro forma financial statements do not purport to be indicative of
Datapoint's financial position or results of operations as of the date hereof or
for any period ended on the date hereof, as of the closing date of the Asset
Sale, or for any period ending at the closing date, or as of or for any other
future date or period. Future results of the Company could differ materially
from the unaudited pro forma financial statements because of various risks and
uncertainties including without limitation changes in product demand, the
availability of products, changes in competition, economic conditions, new
product development, changes in market conditions, changes in tax and other
governmental rules, the outcome of the Engstrom v. Futureshare.com, LLC
litigation, and regulations applicable to the Company.
The following unaudited pro forma financial statements are based upon the
historical financial statements of Datapoint and should be read in conjunction
with such historical financial statements, the related notes, and the other
information included or incorporated by reference in this proxy statement.
Subsequent to year end, in October 1999 the Company discontinued its domestic
video conferencing (MINX) operations. Net revenues from this domestic operation
were approximately $2.1 million during 1999. The following unaudited pro forma
financial statements do not give effect to the discontinuance of this operation.
21
<PAGE>
DATAPOINT CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
Pro Forma Adjustments
------------------------
Historical Asset 100% Tender Pro
July 31, 1999 Sale(A) Offer(B) Forma
--------- ----------- -------
Revenue:
Sales $78,687 ($75,123) $3,564
Service and lease 59,598 (58,173) 1,425
-------- ---------- -------- -------
Total revenue 138,285 (133,296) - 4,989
Operating Cost and expenses
Sales 60,740 (59,016) 1,724
Service and lease 41,958 (41,113) 845
Research and development 1,965 (1,362) 603
Selling, general and
administrative 35,695 (28,483) 7,212
Restructuring costs 813 (163) 650
-------- ---------- -------- -------
Total operating expenses 141,171 (130,137) - 11,034
Operating income (loss) (2,886) (3,159) - (6,045)
Non-operating income (expense)
Interest expense (5,731) 817 4,916 2
Other, net 196 (220) - (24)
-------- ---------- -------- -------
Income (loss) before (8,421) (2,562) 4,916 (6,067)
income taxes and
extraordinary item
Income tax expense 835 (762) - 73
-------- ---------- -------- -------
Income (loss) before
extraordinary item (9,256) (1,800) 4,916 (6,140)
Debt extinguishment 1,707 - (1,707) -
-------- ---------- -------- -------
Net income (loss) ($7,549) ($1,800) $3,209 ($6,140)
======== ========== ======== =======
Net Loss Less Preferred
Stock Dividends Paid or
Accumulated plus the Gain
on Exchange & Retirement
of Preferred Stock ($7,927) ($6,518)
Net Loss Per Common Stock ($0.44) ($0.36)
Average Common Shares 18,225,790 18,225,790
22
<PAGE>
DATAPOINT CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------
Historical Asset 80% Tender Pro
July 31, 1999 Sale(A) Offer(C) Forma
------------- --------- ---------- --------
<S> <C> <C> <C> <C>
Revenue:
Sales $78,687 ($75,123) $3,564
Service and lease 59,598 (58,173) 1,425
------------- --------- ---------- --------
Total Revenue 138,285 (133,296) - 4,989
Operating Cost and expenses
Sales 60,740 (59,016) 1,724
Service and lease 41,958 (41,113) 845
Research and development 1,965 (1,362) 603
Selling, general and
administrative 35,695 (28,483) 7,212
Restructuring costs 813 (163) 650
------------- --------- ---------- --------
Total operating expenses 141,171 (130,137) - 11,034
Operating income (loss) (2,886) (3,159) - (6,045)
Non-operating income (expense)
Interest expense (5,731) 817 3,933 (981)
0
Other, net 196 (220) - (24)
------------- --------- ---------- --------
Income (loss) before
income taxes and
extraordinary item (8,421) (2,562) 3,933 (7,050)
Income tax expense 835 (762) - 73
------------- --------- ---------- --------
Income (loss before
extraordinary item (9,256) (1,800) 3,933 (7,123)
Debt extinguishment 1,707 - (1,707) -
------------- --------- ---------- --------
Net income (loss) ($7,549) ($1,800) $2,226 ($7,123)
------------- --------- ---------- --------
------------- --------- ---------- --------
Net Loss Less Preferred Stock Dividends
Paid or Accumulated plus the Gain on
Exchange & Retirement of Preferred Stock ($7,927) ($7,501)
Net Loss Per Common Share ($0.44) ($0.41)
Average Common Shares 18,225,790 18,225,790
</TABLE>
23
<PAGE>
DATAPOINT CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
JULY 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Historical --------------------------------
July 31, Asset 100% Tender Pro
1999 Sale Offer Forma
--------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 3,568 ($3,478)(A) ($24,732)(D) $17,908
49,500 (B)
(6,950)(B)
Restricted cash and cash equivalents 328 (317)(A) 11
Accounts receivable, net 32,130 (31,349)(A) 781
Inventories 2,632 (2,087)(A) 545
Prepaid expenses 2,272 (1,906)(A) 366
--------------- -------------- -------------- -----------
Total current assets 40,930 3,413 (24,732) 19,611
Fixed assets, net 5,928 (5,716)(A) 212
Other assets, net 2,475 (1,673)(A) (260)(D) 542
--------------- -------------- -------------- -----------
Total assets $49,333 ($3,976) ($24,992) $20,365
--------------- -------------- -------------- -----------
--------------- -------------- -------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Payable to banks $6,676 ($6,659)(A) $0 $17
Current maturities of long-term debt 4,960 - (4,960)(D) -
Accounts payable 14,451 (13,049)(A) 1,402
Accrued expenses 22,890 (19,782)(A) (813)(D) 2,295
Deferred revenue 9,311 (8,392)(A) 919
Income taxes payable 2,175 (2,147)(A) 616 (D) 644
--------------- -------------- -------------- -----------
Total current liabilities 60,463 (50,029) (5,157) 5,277
Long-term debt, exclusive of current
maturities 50,000 - (50,000)(D) -
Other liabilities 10,998 (5,547)(A) 5,451
Stockholders' equity (deficit) (72,128) 6,656 (C) 30,165 (D) 9,637
(6,302)(C)
51,246 (C)
--------------- -------------- -------------- -----------
Total liabilities &
stockholders' equity (deficit) $49,333 ($3,976) ($24,992) $20,365
--------------- -------------- -------------- -----------
--------------- -------------- -------------- -----------
</TABLE>
24
<PAGE>
DATAPOINT CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
JULY 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Historical -----------------------------
July 31, Asset 80% Tender Pro
ASSETS 1999 Sale Offer Forma
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $3,568 ($3,478)(A) ($19,786)(E) $22,854
49,500 (B)
(6,950)(B)
Restricted cash and cash equivalents 328 (317)(A) 11
Accounts receivable net 32,130 (31,349)(A) 781
Inventories 2,632 (2,087)(A) 545
Prepaid expenses 2,272 (1,906)(A) 366
----------- ---------- ------------ ----------
Total current assets 40,930 3,413 (19,786) 24,557
Fixed assets, net 5,928 (5,716)(A) 212
Other assets, net 2,475 (1,673)(A) (208)(E) 594
----------- ---------- ------------ ----------
Total assets $49,333 ($3,976) ($19,994) $25,363
----------- ---------- ------------ ----------
----------- ---------- ------------ ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Payable to banks $6,676 ($6,659)(A) $0 $17
Current maturities of long-term debt 4,960 - (4,960)(E) -
Accounts payable 14,451 (13,049)(A) 1,402
Accrued expenses 22,890 (19,782)(A) (650)(E) 2,458
Deferred revenue 9,311 (8,392)(A) 919
Income taxes payable 2,175 (2,147)(A) 492 (E) 520
----------- ---------- ------------ ----------
Total current liabilities 60,463 (50,029) (5,118) 5,316
Long-term debt, exclusive of current maturities 50,000 - (39,008)(E) 10,992
Other liabilities 10,998 (5,547)(A) 5,451
Stockholders' equity (deficit) (72,128) 6,656 (C) 24,132 (E) 3,604
(6,302)(C)
51,246 (C)
----------- ---------- ------------ ----------
Total liabilities &
stockholders' equity (deficit) $49,333 ($3,976) ($19,994) $25,363
----------- ---------- ------------ ----------
----------- ---------- ------------ ----------
</TABLE>
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
The accompanying unaudited pro forma statements of operations have been prepared
as if the Asset Sale and Tender Offer were consummated as of August 2, 1998, and
reflect the pro forma adjustments described below. The estimated non-recurring
gain on the Asset Sale and the estimated gain on early debt extinguishment as a
result of the Tender Offer are excluded from the pro forma results of
operations.
(A) to eliminate the historical results of operations associated with the
European Subsidiaries included in the Asset Sale, including costs
associated with certain corporate employees and other personnel who
will be transferred to the Buyer in connection with the Asset Sale.
(B) to record the elimination of interest expense and gains on early
debt extinguishment in connection with an assumed 100% tender of the
Debentures.
(C) to record the elimination of interest expense and gains on early
debt extinguishment in connection with an assumed 80% tender of the
Debentures.
2. UNAUDITED PRO FORMA BALANCE SHEETS
The accompanying unaudited pro forma balance sheets assumes the Asset Sale and
Tender Offer were consummated on July 31, 1999 and reflects the following pro
forma adjustments:
(A) to record the sale of the historical operating assets and liabilities
of the European Subsidiaries pursuant to the Asset Sale.
(B) to record net cash proceeds to be received by the Company upon
consummation of the Asset Sale. Net proceeds include the purchase
price of $49,500 less anticipated transaction costs of $5,250 and an
escrow deposit of $1,700. Transaction costs include legal,
accounting, and other professional fees of $1,250 and estimated
management bonuses of approximately $4,000 to be paid in connection
with the consummation of the Asset Sale.
(C) to record the estimated net gain on the sale of the European
Subsidiaries as follows:
Net cash proceeds $42,550
Net liabilities of European Subsidiaries 9,050
Accumulated other comprehensive income (354)
-------
Net gain from Asset Sale $51,246
Accumulated other comprehensive income includes $6,656 for minimum
pension liability adjustments recorded by the Company in connection
with its United Kingdom subsidiary's defined benefit pension plan,
offset by $(6,302) for foreign currency translation adjustments
recorded by the Company relating to its European Subsidiaries.
Based upon the allocation of the purchase price among the assets to
be transferred in the Asset Sale, the Company believes that it has
sufficient tax basis in excess of book basis of assets sold and net
operating loss carryovers to avoid income taxes on the Asset Sale.
26
<PAGE>
(D) to record a cash payment of $24,732 and an estimated extraordinary
gain on the early debt extinguishment of $30,165 in connection with
an assumed 100% tender of the Debentures at an estimated Tender Offer
price of $450 per $1,000 Debenture, including consent fees, as
follows:
Cash payment ($24,732)
--------
Less:
Balance of Debentures 54,960
Accrued interest 813
Debt issuance costs (260)
--------
Estimated pre-tax gain - debt extinguishment $ 30,781
Tax effect 616
--------
Estimated gain, net of tax $ 30,165
========
Tax consequences of the recognition of a gain of $30,781 would be
limited by available net operating loss carryovers. However, the
Alternative Minimum Tax with an effective rate of 2% (taking into
account the Company's alternative minimum tax net operating loss
carryovers) would approximate $616.
(E) to record a cash payment of $19,786 and an estimated extraordinary
gain on early debt extinguishment of $24,132 in connection with an
assumed 80% tender of the Debentures at an estimated Tender Offer
price of $450 per $1,000 Debenture, including consent fees, as
follows:
Cash payment ($19,786)
Less:
Balance of Debentures 43,968
Accrued interest 650
Debt issuance costs (208)
--------
Estimated pre-tax gain - debt extinguishment $24,624
Tax effect 492
--------
Estimated gain, net of tax $24,132
=======
Tax consequences of the recognition of a gain of $24,624 would be
limited by available net operating loss carryovers. However, the
Alternative Minimum Tax with an effective rate of 2% (taking into
account the Company's alternative minimum tax net operating loss
carryovers) would approximate $492.
27
<PAGE>
FAIRNESS OPINION
The Board retained BNY to act as its financial advisor in connection with
the Asset Sale. BNY has delivered a written opinion to the Board, dated November
29, 1999, to the effect that, subject to the various assumptions and limitations
set forth therein, as of the date thereof, the $49.5 million consideration to be
received by the Company pursuant to the Stock Purchase Agreement, is fair to the
Stockholders, other than the Buyer its affiliates and the officers and directors
of the Company or its affiliates, collectively referred to in the fairness
opinion as the Minority Shareholders, from a financial point of view. BNY was
engaged and acted solely as an advisor to the Board and not as an advisor to or
agent of any other person, including the Company. BNY's opinion is for the
benefit and use of the Board in its consideration of the Asset Sale and may not
be used for any other purpose. Although BNY's opinion is not addressed to the
Debentureholders and BNY did not focus on the fairness of the Asset Sale to
Debentureholders the Company believes that the underlying analysis is relevant
to and may be useful to the analysis of the Debentureholders.
THE FULL TEXT OF THE WRITTEN OPINION OF BNY, DATED NOVEMBER 29, 1999,
WHICH SETS FORTH AMONG OTHER THINGS THE OPINIONS EXPRESSED, THE ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS OF THE REVIEW
UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS APPENDIX A HERETO AND
IT MAY BE USEFUL TO DEBENTUREHOLDERS TO READ IT IN ITS ENTIRETY. BNY'S OPINION
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY DEBENTUREHOLDER AS TO WHETHER OR NOT
SUCH DEBENTUREHOLDER SHOULD CONSENT TO THE PROPOSED AMENDMENTS AND SHOULD NOT BE
RELIED UPON BY ANY DEBENTUREHOLDER IN RESPECT OF SUCH MATTERS. THE SUMMARY OF
THE OPINION OF BNY SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF THE OPINION ATTACHED AS APPENDIX A.
28
<PAGE>
In connection with rendering its opinion, BNY, among other things, (i)
reviewed the financial terms and provisions of the Stock Purchase Agreement
dated as of July 31, 1999 and the Amendment No. 1 thereto dated November 1, 1999
by and among the Company and the Buyer; (ii) reviewed and analyzed certain
publicly available business and financial information relating to the European
Subsidiaries for recent years as well as certain internal financial and
operating information, financial forecasts, projections and analyses prepared by
or on behalf of the Company and provided to BNY for purposes of its analyses;
(iii) interviewed certain representatives of the Company to review and discuss
such information and, among other matters, the Company's and the European
Subsidiaries' business, financial condition, results of operations and
prospects; (iv) reviewed and considered certain financial and stock market data
relating to the Company and compared that data with similar data for certain
other companies, the securities of which are publicly traded and that BNY
believed might be relevant or comparative in certain respects to the European
Subsidiaries or one or more of its businesses or assets; (v) reviewed and
considered the financial terms of certain recent acquisitions and business
combination transactions in the systems integration industry specifically, and
in other industries generally, which BNY believed to be reasonably comparative
to the Asset Sale or otherwise relevant to its analysis; and (vi) received and
considered the process pursued by Dain Rauscher as well as information produced
and the result thereof; and (vii) performed such other studies, analyses and
investigations and reviewed such other information as BNY considered
appropriate.
In its review and analysis and in formulating its opinion, BNY assumed and
relied on the accuracy and completeness of all the financial and other
information provided to or discussed with it or publicly available, including
the financial projections, forecasts, analyses and other information provided to
BNY, without assuming any responsibility for independent verification of, or
expressing an opinion as to, any of such information. BNY also relied upon the
reasonableness and accuracy of the projections, forecasts, analyses and other
information furnished to BNY and assumed, with the Board's consent, that such
projections, forecasts, analyses and other information were reasonably prepared
in good faith and on bases reflecting the best currently available judgments and
estimates of the Company's management as of November 29, 1999 and that
management of the Company is unaware of any facts that would make the
projections, forecasts and other information provided to BNY incomplete or
misleading. BNY expressed no opinion with respect to such projections, forecasts
and analyses or the assumptions on which they are based. BNY also did not review
any of the books and records of the Company or the European Subsidiaries, and
although BNY visited certain facilities of the Company, BNY was not retained to
conduct, and did not assume any responsibility for conducting, a physical
inspection of the properties or facilities of the Company or the European
Subsidiaries, or for making or obtaining an independent valuation or appraisal
of the assets or liabilities of the Company or European Subsidiaries, and no
such independent valuation or appraisal was provided to it. BNY's opinion was
based on economic and market conditions and other circumstances as they existed
and could be evaluated by it as of November 29, 1999. BNY's analysis assumes
that the Asset Sale as described in the Stock Purchase Agreement will be
consummated on the terms set forth therein, without material waiver or
modification.
In the context of its engagement, BNY was not authorized to solicit and
did not solicit alternative offers for the Company or its assets, or investigate
any other alternative transactions which may be available to the Company.
The following is a summary of the report presented by BNY to the Board in
connection with the delivery of its opinion on November 29, 1999.
COMPARATIVE COMPANY ANALYSIS. BNY reviewed and compared certain financial
information of the Company to corresponding financial information for twelve
publicly traded companies: Alphanet Solutions, Inc.; Brooktrout, Inc.;
Cotelligent, Inc.; Data Systems Network Corporation; IAT Multimedia; Inter-tel,
Incorporated; Inter Voice-Brite, Inc.; MAI Systems Corporation; Network Six,
Inc.; Norstan, Inc.; Pomeroy Computer Resources, Inc.; and Vitech America, Inc.
(collectively, the "Comparative Companies"). Such financial information was used
to calculate for each Comparative Company the multiple of market value to LTM
(as defined below) financial results, including sales and EBITDA (as defined
below).
Such analysis, excluding certain multiples which BNY determined were not
meaningful, indicated that, with respect to market value, the Comparative
Companies (i) had a range of 0.27x to 1.67x, with a mean of a median of 0.44x,
to the LTM sales; and (ii) had a range of 2.81x to 10.49x with a median of
6.13x, to the LTM EBITDA. The value for the European Subsidiaries implied by
these analyses ranged from $54.0 million to $58.3 million on a stand-alone
basis.
COMPARATIVE TRANSACTION ANALYSIS. BNY reviewed recent acquisitions of companies
with SIC codes and business descriptions that encompassed the business of the
European Subsidiaries where the acquisition occurred between November 1, 1998
and November 8, 1999. The target's revenues were defined as $50 million to $250
million and the acquisition was for more than 50% of the outstanding equity. For
each transaction, BNY calculated the multiple of
29
<PAGE>
announced purchase price to the seller's (i) last twelve months ("LTM") sales
and (ii) LTM earnings before interest, taxes, depreciation and amortization
("EBITDA").
Such analysis, excluding certain multiples that BNY determined were not
meaningful, yielded a range of multiples of LTM EBITDA of 2.5x to 14.6x. BNY
used these comparative transaction multiples to calculate implied values for the
European Subsidiaries on a stand-alone basis. The value implied by this analysis
was $61.4 million.
DISCOUNTED CASH FLOW ANALYSES. BNY performed a discounted cash flow ("DCF")
analysis of the Company based on the Company's financial projections for the
2000-2004 period by business segment.
In conducting the DCF analysis, BNY used a range of discount rates and a range
of terminal multiples of EBITDA. This analysis yielded ranges of value of $43.1
million to $64.6 million.
CAPITAL STRUCTURE DISCOUNT. BNY discounted the ranges of value calculated in the
Comparative Company, Comparative Transactions and DCF valuations by 20% to
account for the extra risk associated with acquiring the European Subsidiaries
because of the capital structure of the Company.
COMPOSITE RANGE. Based on the above analyses, BNY derived a composite range of
value for the European Subsidiaries of $34.5 million to $51.7 million. In
deriving this composite range, BNY took into account, among other things, that
(i) the European Subsidiaries historically has failed to achieve its operating
projections, (ii) the 2000 projections provided to BNY by management of the
Company were significantly higher than those achieved by the European
Subsidiaries in 1999, (iii) the selection of an appropriate capital structure
discount set forth above involved a greater than usual degree of subjective
judgement, and (iv) the Company's competitors generally are significantly
larger, better established companies with much greater resources, larger market
capitalization, and greater market share.
DAIN RAUSCHER. BNY relied on the work done by Dain Rauscher in connection with
its engagement to advise the Board and sell the European Subsidiaries. The
process Dain Rauscher used and the results of the process were taken into
account in arriving at our opinion. The fact that the European Subsidiaries were
for sale, and known by the investment community to be for sale, for
approximately one year, and the fact that the Buyer's bid was the highest
remaining bid was a factor in our opinion.
LIQUIDATION VALUE. In coming to its opinion BNY was mindful of the current
financial condition of the Company and its announced inability to meet its
interest and sinking fund payments on the Debentures from operating income. In
liquidation the claims of the Debentureholders and the holders of Preferred
Stock come before those of the Stockholders. Since the claims of the
Debentureholders and the holders of the Preferred Stock are greater than the
fair value for the European Subsidiaries, as a going concern, BNY believes the
Stockholders would not receive any monetary payment if the Company were
liquidated.
CERTAIN GENERAL MATTERS. No company or transaction used in the foregoing
analyses is identical to the European Subsidiaries or the Asset Sale. In
addition, those analyses and the discounted cash flow analyses are based and
heavily dependent upon, among other factors, assumptions as to future
performance and other factors, and are therefore subject to the limitations
described in BNY's opinion. Accordingly, an analysis of the results of the
foregoing is not entirely 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
acquisition value or the public trading value of the companies to which they are
being compared and the Company.
A fairness analysis is a complex process and is not necessarily susceptible to a
partial analysis or summary description. BNY believes that its analyses must be
considered as a whole and that selecting portions of its analyses, without
considering the analyses taken as a whole, would create an incomplete view of
the process underlying the analyses performed in reaching its opinion. In
addition, BNY considered the results of all such analyses and did not assign
relative weights to any of the analyses, so that the ranges of valuations
resulting from any particular analysis described above should not be taken to be
BNY's view of the actual value of the Company.
In performing its analyses, BNY made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of the Company. The analyses
performed by BNY are not necessarily indicative of actual values, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of BNY's opinion. The analyses do not
purport to be appraisals or to
30
<PAGE>
reflect the prices at which a company might actually be sold.
The Board retained BNY based upon its experience and expertise. BNY is an
internationally recognized investment banking and advisory firm. BNY, as part of
its investment banking business, is continuously engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
Pursuant to the terms of a letter agreement, dated November 8, 1999 between BNY
and the Company (the "BNY Letter Agreement"), the Board retained BNY to serve as
financial advisor to the Board with respect a proposal received by the Company
from the Buyer to acquire the European Subsidiaries.
The Company agreed in the BNY Letter Agreement to pay BNY $100,000 upon the
execution of the BNY Letter Agreement and an additional fee of $100,000 at such
time as BNY advises the Board that it is prepared to render an opinion to the
Board with respect to the fairness from a financial point of view of the
consideration to be received by the Company pursuant to the Stock Purchase
Agreement or that, having completed its review of the proposed Asset Sale, it is
unable to render such an opinion.
VOTING SECURITIES AND PRINCIPAL HOLDERS
(a) Security Ownership of Certain Beneficial Owners. The following persons are
known to the Company to be beneficial owners of more than five percent (5%) of
the Company's securities as defined under Exchange Act Rule 13(d)(3).
<TABLE>
<CAPTION>
Common Stock Preferred Stock Percent
Name and Address Beneficially Owned Beneficially Owned of Class
- ------------------------- --------------------------- ------------------ --------
<S> <C> <C> <C>
Asher B. Edelman (1) (See Table under Security
c/o Datapoint Corporation Ownership of Management)(1)
717 Fifth Avenue
New York, NY 10222
Lloyd I. Miller (2) 69,900 (2) 10.6% (2)
</TABLE>
(1) Mr. Edelman is part of a "group" as that term is used in Exchange Act
Section 13(d)(3). See subsection (b) below for detailed description as to the
amount and nature of beneficial ownership by the members of the group.
(2) Mr. Miller filed an amended Schedule 13D/A on August 4, 1997,
reporting 69,900 Preferred shares, 37,500 of which are owned by LIM, Inc., a
Florida corporation of which he is sole shareholder, and 32,400 of which are
owned by Trust C under a September 20, 1983 Amended and Restated Trust Agreement
for which Trust Mr. Miller serves as Investment Advisor. Mr. Miller reported a
percentage ownership of 9.7%, but that percentage, based upon currently
outstanding Preferred shares of 661,967 as of November 1, 1999 is now 10.6%.
(b) Security Ownership of Management
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, Preferred Stock and Debentures by each director,
by each of the executive officers named in the table, and by the directors and
executive officers as a group as of November 1, 1999.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Convertible
Common Stock Preferred Stock Debentures
Beneficially Percent Beneficially Beneficially
Name of Officer/Director Owned (1) of Class(13) Owned(2) Owned(3)
------------------------ --------------------------- ------------ --------------- ------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gerald N. Agranoff (O&D) 225,000(4)(5)(7)(14) * - 0 - - 0 -
Asher B. Edelman (O&D) 3,836,238(4)(5)(6)(13)(14) 20.9% 14,200** $141,000*
Roger Edmonds (O) 60,834(4) * - 0 - - 0 -
Irving J. Garfinkel (D) 25,000(4)(5)(7)(14) * - 0 - - 0 -
Walter Gevers (O) 98,334(4) * - 0 - - 0 -
</TABLE>
31
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Daniel R. Kail (D) 25,000(4) * - 0 - - 0 -
Phillip P. Krumb (O&D) 138,000(4)(8) * - 0 - - 0 -
John Perkins (O) 51,128(4)(9) * - 0 - - 0 -
Charles F. Robinson (D) 25,000(4)(10)(13) * 3,000*(10) $47,000*(10)
Didier Ruffat (D) 50,000(4) * - 0 - - 0 -
Robert D. Summer (D) 32,300(4)(11) * - 0 - - 0 -
Blake D. Thomas (O&D) 428,847(4)(12)(13) 2.3% - 0 - - 0 -
Executive Officers and
Directors of Datapoint as
a group (13 persons) 4,995,681 27.2%
</TABLE>
* Indicates less than 1% ownership as a percent of the outstanding class(13)
** The percent of the outstanding class is 2.2% (13)
(1) Information relating to beneficial ownership is based upon ownership
information furnished by each person using "beneficial ownership"
definitions set forth in Section 13 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Under those rules, a person is
deemed to be a "beneficial owner" of a security if that person has or
shares "voting power", which includes the power to vote or to direct the
voting of such security, or "investment power", which includes the power
to dispose or to direct the disposition of such security. The person is
also deemed to be a beneficial owner of any security of which that person
has a right to acquire beneficial ownership (such as by exercise of
options) within 60 days. Under such rules, more than one person may be
deemed to be a beneficial owner of the same securities, and a person may
be deemed to be a beneficial owner of securities as to which he or she may
disclaim any beneficial interest. Except as otherwise indicated in other
table footnotes, the indicated directors and executive officers possessed
sole voting and investment power with respect to all shares of Common
Stock and Preferred Stock attributed.
(2) The Company's Preferred Stock is a non-voting class of security. Each
share may be exchanged, at the option of the holder, for two (2) shares of
Common Stock so long as six (6) quarters of accrued dividends remain
outstanding and unpaid.
(3) The Company's Debentures is a non-voting class of security. Each one
thousand dollar ($1,000.00) principal amount may be exchanged, at the
option of the holder, into 55.231 shares of Common Stock.
(4) The tabulation includes shares of Common Stock which may be deemed to be
beneficially owned by such persons by reason of stock options currently
exercisable or which may become exercisable within sixty (60) days after
that date. The number of shares deemed to be beneficially owned by reason
of such options is: Mr. Edelman, 400,000; Mr. Agranoff, 225,000; Mr.
Thomas, 275,000; Mr. Krumb, 125,000; Mr. Ruffat, 50,000; Mr. Summer,
25,000; Mr. Garfinkel, 25,000; Mr. Kail, 25,000; Mr. Robinson, 25,000; Mr.
Edmonds, 60,834; Mr. Gevers, 98,334; Mr. Perkins 50,834; and all officers
and directors as a group, 1,385,002.
(5) Gerald N. Agranoff, Asher B. Edelman and Irving Garfinkel are Trustees of
the Datapoint Corporation Supplemental Executive Retirement Plan (the
"Datapoint Plan") which owns 316,435 Common shares. In the above
tabulation, such shares have been excluded within each party's Common
shares listing and the listing for the directors and executive officers as
a group. Messrs. Agranoff, Edelman and Garfinkel each disclaim beneficial
ownership of these shares except to the extent of pecuniary interests in
such shares with which each party may currently be vested under the Plan.
Mr. Edelman has a current vested interest in 145,288 shares under the
Datapoint Plan which have been excluded. Mr. Agranoff is currently vested
with 21,402 Common shares under the Datapoint Plan. Mr. Garfinkel has no
current vested interest under the Datapoint Plan. Mr. Thomas is vested
with 13,376 Common shares, Mr. Krumb is vested with 18,567 Common shares
and Mr. Perkins with 4,344 Common shares under the Datapoint Plan which
have not been included in their listed beneficial ownership.
(6) Mr. Edelman's listed beneficial ownership of 3,836,238 shares of Common
Stock is explained in detail in this paragraph, and is based upon his
beneficial ownership reported on Schedule 13D. Mr. Edelman reports
beneficial ownership jointly, as a group, with the following named persons
or entities. Those whose shares have been included within Mr. Edelman's
listed total are reported as beneficially owned pursuant to Rule 13d-3 by
Mr. Edelman. As the controlling general partner of each of Plaza
Securities Company, A.B. Edelman Limited Partnership and Citas
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<PAGE>
Partners (which is the sole general partner of Felicitas Partners, L.P.),
Mr. Edelman may be deemed to own beneficially the 441,348, 994,383 and
6,290 shares held, respectively, by each of such entities for purposes of
Rule 13d-3 under the Exchange Act, and these shares are included in the
listed ownership. Also included are the 361,267 shares owned by Canal
Capital Corporation ("Canal"), in which company Mr. Edelman and various
persons and entities with which he is affiliated own interests. By virtue
of investment management agreements between A. B. Edelman Management
Company Inc. and Canal, A. B. Edelman Management Company Inc. has the
authority to purchase, sell and trade in securities on behalf of Canal. A.
B. Edelman Management Company Inc. therefore may be deemed to be the
beneficial owner of the 361,267 shares owned by Canal. Mr. Edelman is the
sole stockholder of A. B. Edelman Management Company Inc. and these shares
are included. A. B. Edelman Management Company Inc. is also the sole
general partner of Edelman Value Partners, L.P. which currently owns
494,175 shares of Common Stock which are included. Also included are the
201,460 shares owned by Mr. Edelman's spouse Maria Regina M. Edelman,
5,000 shares held by Mr. Edelman in a Keough account, 31,000 shares
beneficially owned by Mr. Edelman's children in accounts for which he is
the custodian, and 859,900 shares owned by Edelman Value Fund, Ltd., for
which Mr. Edelman serves as the sole investment manager. Also included are
Mr. Edelman's presently exercisable options to purchase 400,000 shares.
Also included are the 41,415 shares owned by Edelman Family Partners, L.P.
for which Mr. Edelman serves as a general partner. As a Trustee of the
Canal Capital Corporation Retirement Plan ("Canal Plan") which owns
121,181 shares and the Datapoint Plan described above which owns 316,435
shares, Mr. Edelman may be deemed to own beneficially, and share voting
and investment power over the shares owned by each such Plan, which are
excluded. Also excluded from the listed ownership are 57,507 shares
beneficially owned by Mr. Edelman's daughters in accounts for which their
mother, Penelope C. Edelman, is the custodian and the 17,204 shares owned
directly by Penelope C. Edelman. Mr. Edelman disclaims beneficial
ownership of these excluded shares. Although disclaimed and excluded for
purposes of Rule 13d-3, certain of the disclaimed and excluded shares are
nevertheless reported by Mr. Edelman as beneficially owned on his Form 4's
pursuant to the rules promulgated under Section 16 of the Exchange Act.
Mr. Edelman's beneficial ownership total does not include the additional
Common Stock which would be acquired upon the conversion of the Preferred
Stock and the Debentures as described below. Upon such exchange, Mr.
Edelman's listed beneficial ownership would increase to 3,872,426 and his
percentage of the outstanding class would be 21.1%. This percentage upon
exchange is the listed percentage above pursuant to Rule 13d-3(d)(1).
Mr. Edelman's listed beneficial ownership of 14,200 shares of Preferred
Stock is based upon the 5,100 Preferred shares owned by Edelman Value
Partners, L.P., and the 9,100 Preferred shares owned by Edelman Value
Fund, Ltd. If exchanged for Common Stock, Mr. Edelman's Common Stock
beneficial ownership total listed above would increase by 28,400 shares.
Mr. Edelman's listed beneficial ownership of $141,000.00 of Debentures is
based upon the $44,000.00 of Debentures owned by Edelman Value Partners,
L.P. and the $97,000.00 of Debentures owned by Edelman Value Fund, Ltd. If
exchanged for Common Stock, Mr. Edelman's Common Stock beneficial
ownership total listed above would increase by 7,788 shares.
(7) Messrs. Agranoff and Garfinkel are general partners of Plaza Securities
Company, which owns 441,348 shares of Common Stock. Each disclaims
beneficial ownership of these shares which are excluded in each party's
listing in the beneficial ownership table above due to the sole voting and
dispositive powers attributed to Mr. Edelman in his Schedule 13D. Mr.
Agranoff is also a director of Canal which owns 361,267 shares. Mr.
Agranoff disclaims beneficial ownership of these shares and they are
excluded from his beneficial ownership listing due to the sole voting and
dispositive powers attributed to Mr. Edelman.
(8) Mr. Krumb owns 13,000 Common shares directly in addition to the 125,000
shares represented by exercisable options.
(9) Mr. Perkins owns 294 Common shares directly in addition to the 50,834
shares represented by exercisable options.
(10) Mr. Robinson owns 3,000 Preferred shares and $47,000.00 in Debentures
directly in addition to the 25,000 shares represented by exercisable
options. These Preferred shares and Debentures, if converted to Common
Stock, represent 8,596 Common shares and would increase Mr. Robinson's
total listed above to 33,596 shares.
(11) Mr. Summer owns 7,300 Common shares directly in addition to the 25,000
shares represented by exercisable options.
33
<PAGE>
(12) Mr. Thomas owns 135,447 Common shares directly in addition to the 275,000
shares represented by exercisable options. Mr. Thomas is also attributed
beneficial ownership of 16,500 Common shares owned by Foresail Limited
Partnership as its sole general partner and 1,900 Common shares held in
Mr. Thomas' self-employed pension plan.
(13) The percentage of the outstanding class calculations are based upon
18,348,229 Common shares, 661,967 Preferred shares and $54,960,000
Debentures outstanding as of November 1, 1999. For purposes of calculating
Mr. Edelman's, Mr. Thomas', and Mr. Robinson's percentages of Common
shares under Rule 13d-3(d)(1), as well as the percentage of officers and
directors as a group, the common shares underlying their respective
Preferred Stock and their respective Debentures upon exchange are added to
the outstanding share total as if the exchange has occurred.
(14) In accordance with the terms of each Support Agreement, Edelman, Agranoff
and Garfinkel have agreed to vote all each individual's beneficially owned
shares in favor of the Asset Sale and Name Change. See Conditions
Precedent to The Buyer's Obligations to Effect the Asset Sale.
Interests of Directors and Officers
Blake Thomas, President of the Company, and Reboot Systems, Inc. are
leading an investor group which includes other key management personnel of the
European Subsidiaries which comprise the Buyer that is seeking to purchase
certain of the Company's European Subsidiaries. To the knowledge of the Company
certain members of such investor group are the beneficial owners in the
aggregate of 540,809 shares of Common Stock and $0 principal amount of
Debentures.
To the knowledge of the Company, Asher Edelman, Chairman of the Board and
CEO of the Company, Gerald Agranoff, Vice President, General Counsel, Secretary
and Director of the Company, and Irving Garfinkel, a Director of the Company,
are the beneficial owners in the aggregate of 4,086,238 shares of Common Stock
and pursuant to Support Agreements have committed to vote such shares in favor
of both Proposals No. 1 and No. 2 and $141,000 of principal amount of Debentures
and have committed to vote such Debentures in favor of the Debentureholder
Consent Solicitation which in the aggregate account for approximately 20% of the
outstanding Common Stock, assuming all convertible securities are converted to
Common stock. In addition, to the knowledge of the Company Phillip Krumb, acting
Chief Financial Officer and a Director of the Company is the beneficial owner of
238,000 shares of Common Stock. In the event that the Asset Sale is approved by
the Stockholders and the requisite consent is obtained pursuant to the
Debentureholder Consent Solicitation the members of senior management of the
Company indicated below will receive bonuses in accordance with the respective
terms of each such individual's employment agreement with the Company. The
respective employment agreements between each of Asher Edelman and Gerald
Agranoff provide that such individuals are entitled to receive a performance
bonus in the aggregate payable at the close of each of Datapoint's fiscal years
in an amount equal to Datapoint's net pre-tax earnings, excluding the excess
over $10,000,000 of the net of any extraordinary gains due to debt repurchase
(e.g. via the Tender Offer) or exchange against all extraordinary losses, times
the requisite "Bonus Percentage." The Bonus Percentage for each senior executive
is set forth in such executive's employment agreement. The Bonus Percentage for
Asher Edelman is 5%, for Gerald Agranoff is 2% and for Phillip Krumb is .25%. In
addition, Phillip Krumb shall be entitled to a $200,000 bonus upon completion of
the Asset Sale, provided, that Krumb remains with the Company through
consummation of the Asset Sale. Unlike the percentage based bonuses, Krumb's
$200,000 bonus is payable upon consummation of the Asset Sale. As a result of
the Asset Sale, and due to the fact that the book value of the European
Subsidiaries is significantly less than the proposed Purchase Price, which is
estimated to result in a large gain on the Asset Sale, these bonuses are
expected to total approximately $4,000,000. A committee of the Board comprised
of the independent members of the Board has been established to negotiate with
senior management to amend these employment agreements due to the change in the
nature of the business to adjust the compensation package for such members of
management after consummation of the Asset Sale both with respect to the bonuses
payable as a result of the Asset Sale and with respect to the ongoing executive
compensation of such management.
Market for the Company's Securities
Until August 21, 1998, the Company's Common Stock and Debentures were
quoted on the New York Stock Exchange under the symbol "DPT". As of August 24,
1998, the Common Stock and Debentures have been quoted on the National
Association of Securities Dealers' Over-the-Counter Bulletin Board ("OTCBB")
under the symbol "DTPT" and "DTPT 8-7/8", respectively. As of December [__],
1999, there were approximately ____ holders of record and approximately
_________ outstanding shares of Common Stock. The prices below represent the
high and low prices for composite transactions for stock traded during the
applicable period.
34
<PAGE>
Fiscal Year Quarter High Low
----------- ------- ---- ----
1999 Q4 1.69 .59
Q3 2.06 .56
Q2 .84 .50
Q1 1.25 .50
1998 Q4 2.25 1.13
Q3 3.13 1.50
Q2 3.44 2.50
Q1 4.13 2.06
1997 Q4 3.13 0.94
Q3 1.13 0.88
Q2 1.50 1.00
Q1 1.63 0.94
The Debentures are authorized for quotation on the Over-The-Counter
Bulletin Board. Because the Debentures are sporadically traded and no market
maker exists for the Debentures, accurate ranges of high and low bid quotations
for each of the calendar quarters during the past two years are unavailable to
the Company. To the knowledge of the Company, there has been no trading activity
for Debentures during the past several months.
Capital Consumption
The Company believes that if the Asset Sale is consummated it will have
sufficient cash to purchase all or a portion of the Debentures and to meet its
obligations over the next several years. For illustrative purposes only, if the
Company makes a Tender Offer for the Debentures for a price of at least $0.45
per each dollar of principal amount of Debentures outstanding (including the
consent fee to be paid by the Company), the Company believes that after payment
of all transaction costs associated with the Asset Sale, this Proxy Statement
and the Tender Offer, it will have approximately $22.854 million if eighty
percent (80%) of the Debentures are tendered and approximately $17.908 million
if one hundred percent (100%) of the Debentures are tendered. Without its
European Subsidiaries, the Company expects to utilize approximately $2 million
of cash per year (the "Burn Rate"). Such Burn Rate includes costs associated
with the operation of Corebyte but does not include the cost of debt service on
Debentures which are not tendered pursuant to the Tender Offer and interest
income earned on the Company's cash reserves, which the Company believes will
offset each other. The Burn Rate also assumes aggregate bonuses paid to
management under employment agreements with senior management of the Company
totaling approximately $4 million. A committee of the Board comprised of
independent members of the Board has been established to negotiate with senior
management to amend these employment agreements to adjust the compensation
package for such members of management after consummation of the Asset Sale. See
"Interest of Directors and Officers", with respect to these bonuses.
Certain Considerations Relating to the Proposed Amendments
In deciding whether to participate in the Offer and the Solicitation, each
Holder should consider carefully, in addition to the other information contained
in this Statement, the following:
Effects of the Proposed Amendments. Debentures not purchased
pursuant to the Offer will remain outstanding. If the Proposed Amendments
become operative, the restrictive covenants of the Indenture will be
substantially less restrictive, and will afford less protection to Holders
than those currently set forth in the Indenture. If Sections 801 and 802
are eliminated, any person who acquires the Company, or to whom all or
substantially all of the Company's assets are transferred, will not be
required to assume the obligations of the Company under the Indenture and
Debentures, and the consent of Debentureholders to any such merger,
consolidation or transfer of all or substantially all of the assets of the
Company will no longer be required. Furthermore, such person will not be
substituted for the Company under the Indenture and the Debentures, and
the Company will not be relieved of its obligations and covenants under
the Indenture and Debentures. If Section 1005 is waived, the Company will
no longer be required to conduct its business in the manner originally set
forth in such section. If Section 1203 is waived, the Company, for the
year 2000 only, would be able to satisfy the sinking fund payment by
delivering redeemed Debentures to the Trustee on April 20, 2000, rather
than on March 1, 2000. The Indenture, as so amended, will continue to
govern the terms of any Debentures that remain outstanding after the
consummation of the Offer. It is possible that any such actions that the
Company would be permitted to take as a result of the Proposed Amendments
could increase the credit risks with respect to the Company faced by
Holders, adversely affect the market price of the remaining Debentures or
otherwise be adverse to the interests of Holders. See "The Proposed
Amendments."
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Limited Trading Market. Depending on, among other things, the amount
of Debentures outstanding after the Offer, the liquidity, market value and
price volatility of Debentures may be adversely affected by the
consummation of the Offer. To the extent a market continues to exist for
the Debentures after the Offer, the Debentures may trade at a greater
discount compared to present trading prices depending on prevailing
interest rates, the market for securities with similar credit features,
the performance of the Company and other factors. There can be no
assurance that any trading market in the Debentures will exist and no
assurance as to the prices at which the Debentures may trade following
consummation of the Offer.
Subsequent Repurchases. The Company expressly reserves the absolute
right, in its sole discretion, from time to time after the Expiration Date
to purchase any Debentures that may remain outstanding, through open
market or privately negotiated transactions, one or more additional tender
or exchange offers, or otherwise, upon such terms and at such prices as it
may determine.
Expiration, Extension, Amendment or Termination of the Offer
The Offer will expire at 5:00 p.m., New York City time, on [_______],
unless extended by the Company. The Company expressly reserves the right, at any
time or from time to time, and regardless of whether or not any of the events
set forth under "Conditions to the Offer" shall have occurred or shall have been
determined by the Company to have occurred, subject to applicable law, (i) to
extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Debentures, by giving oral
or written notice of such extension to the Depositary and (ii) to amend the
Offer in any respect by giving oral or written notice of such amendment to the
Depositary. The rights reserved by the Company in this paragraph are in addition
to the Company's rights to extend, amend or terminate the Offer as described
under "Conditions to the Offer." Any extension, amendment or termination will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which the Company may choose to
make any public announcement, the Company shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to the Dow Jones News Service.
If the Company extends the Offer, or if, for any reason, the acceptance
for payment of, or the payment for, Debentures is delayed or if the Company is
unable to accept for payment or pay for Debentures pursuant to the Offer, then,
without prejudice to the Company's rights under the Offer, the Depositary may
retain tendered Debentures on behalf of the Company, and such Debentures may not
be withdrawn except to the extent tendering Holders are entitled to withdrawal
rights as described under "Withdrawal Rights." However, the ability of the
Company to delay the payment for Debentures which the Company has accepted for
payment is limited by Rule 14e-1 (c) under the Exchange Act, which requires that
a bidder pay the consideration offered or return the securities deposited by or
on behalf of holders of securities promptly after the termination or withdrawal
of a tender offer.
If the Company makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Company will disseminate additional tender offer materials and extend the
Offer to the extent required by law. If the Solicitation is amended prior to the
Consent Date in a manner determined by the Company to constitute a material
adverse change to the Holders, the Company promptly will disclose such amendment
and, if necessary, extend the Solicitation for a period deemed by the Company to
be adequate to permit Holders to withdraw their Debentures and revoke their
Consents.
The Company expressly reserves the right, in its sole discretion, to
terminate the Offer and the Solicitation if any of the conditions set forth
above under "Conditions to the Offer" shall exist and shall not have been waived
by the Company. Any such termination will be followed promptly by public
announcement thereof. In the event that the Company shall terminate the Offer,
it shall give immediate notice thereof to the Depositary, and all Debentures
theretofore tendered and not accepted for payment shall be returned promptly to
the tendering Holders thereof. In the event that the Offer and the Solicitation
are withdrawn or otherwise not completed, the Offer Price and Consent Payment
will not be paid or become payable to Holders of the Debentures who have validly
tendered their Debentures and delivered Consents in connection with the Offer
and the Solicitation. See "Withdrawal Rights" and "Conditions to the Offer."
Acceptance for Payment and Payment for Debentures and Consents
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment) and applicable law, including the prior execution of the
Supplemental
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Indenture, the Company will accept for payment, and thereby purchase, and will
(i) pay the Offer Price for all Debentures validly tendered prior to the
Expiration Date (and not properly withdrawn in the manner described in
"Withdrawal Rights") as soon as practicable after the later of (a) the
Expiration Date and (b) the satisfaction or waiver of the conditions described
in "Conditions to the Offer" and (ii) pay the Consent Payment to all Holders
that have validly provided their Consent to the Proposed Amendments at or prior
to 5:00 p.m., New York City time, on the Consent Date (and have not properly
withdrawn such Debentures or revoked such Consent in the manner described in
"Withdrawal Rights") as soon as practicable after the later of (a) the
Expiration Date and (b) the satisfaction or waiver of the conditions described
in "Conditions to the Offer."
The Company expressly reserves the right, in the Company's sole
discretion, to delay acceptance for payment of, or payment for, the Debentures,
subject to the requirements of Rule 14e-1 (c) under the Exchange Act, if any of
the conditions to the Offer shall not have been satisfied or validly waived or
in order to comply, in whole or in part, with any applicable law.
In all cases, payment for Debentures purchased pursuant to the Offer and
payment of Consent Payments will be made only after timely receipt by the
Depositary of (i) certificates representing such Debentures or confirmation of a
book-entry transfer of such Debentures into the Depositary's account at a
Book-Entry Transfer Facility, as defined in and pursuant to the procedures set
forth under "Procedures for Tendering Debentures and Delivering Consents," (ii)
a properly completed and duly executed Consent and Letter of Transmittal (or a
manually signed facsimile copy thereof), with any required signature guarantees
and (iii) any other documents required by the Consent and Letter of Transmittal.
For purposes of the Offer, validly tendered Debentures (or defectively
tendered Debentures with respect to which the Company has waived, or has caused
to be waived, such defect) will be deemed to have been accepted for payment, if,
as and when the Company gives oral (confirmed in writing) or written notice
thereof to the Depositary. The Company will pay for Debentures so accepted on
the Payment Date by depositing the aggregate Offer Price in immediately
available funds with the Depositary, which will act as agent for tendering
Holders for the purpose of receiving payments from the Company and transmitting
such payments to the tendering Holders. Tenders of Debentures will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof.
Payments for the Debentures will not include accrued interest. Under no
circumstances will any additional interest be payable because of any delay in
the transmission of funds to the Holders of purchased Debentures or otherwise.
For purposes of the Solicitation, Consents received by the Depositary will
be deemed to have been accepted, if, as and when (a) the Company and the Trustee
execute the Supplemental Indenture at or promptly following 5:00 p.m., New York
City time, on the Consent Date, and (b) the Company has accepted the Debentures
for purchase and payment pursuant to the Offer.
It is a condition precedent to the Company's obligation to purchase
Debentures pursuant to the Offer that the Supplemental Indenture be executed. It
is a condition subsequent to the effectiveness of the Proposed Amendments
contained in the Supplemental Indenture that the Company accept for payment all
Debentures validly tendered (and not withdrawn) pursuant to the Offer (in which
event the Company will be obligated to pay the Offer Price for the Debentures so
accepted).
If any tendered Debentures are not purchased pursuant to the Offer for any
reason, such Debentures not purchased will be returned, without expense, to the
tendering Holder (or, in the case of Debentures tendered by book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility, such Debentures
will be credited to the account maintained at such Book-Entry Transfer Facility
from which such Debentures were delivered) as promptly as practicable following
the expiration, termination or withdrawal of the Offer.
The Company reserves the right, in its sole discretion, to transfer or
assign, in whole at any time or in part from time to time, to any person, the
right to purchase Debentures tendered pursuant to the Offer, but any such
transfer or assignment will neither relieve the Company of its obligations under
the Offer nor prejudice the rights of tendering Holders to receive payments for
Debentures validly tendered and accepted for payment pursuant to the Offer.
Procedures for Tendering Debentures and Delivering Consents
Holders will not be entitled to receive both the Offer Price and the
Consent Payment unless they BOTH tender their Debentures pursuant to the Offer
AND deliver Consents to the Proposed Amendments prior to the Consent Date with
respect to such Debentures. Holders who validly deliver Consents prior to the
Consent Date without tendering their Debentures are entitled to receive the
Consent Payment. The proper tender by a Holder of Debentures pursuant to the
Offer in accordance with the procedures described below will be deemed to
constitute (i) a tender of the Debentures and (ii) the giving of a Consent by
such Holder with respect to the full principal amount of the Debentures
tendered. Payment of the Offer Price and
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the Consent Payment, if applicable, for Debentures validly tendered and accepted
for payment shall be made on the Payment Date.
The method of delivery of Debentures and the Consent and Letter of
Transmittal, any required signature guarantees and all other required documents,
including delivery through a Book-Entry Transfer Facility and any acceptance or
Agent's Message (as defined below) transmitted through ATOP, is at the election
and risk of the Holder tendering Debentures and delivering the Consent and
Letter of Transmittal and, except as otherwise provided in the Consent and
Letter of Transmittal, delivery will be deemed made only when actually received
by the Depositary. if such delivery is by mail, it is suggested that the Holder
use properly insured, registered mail with return receipt requested, and that
the mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Depositary on or prior to such date.
Tender of Debentures and Delivery of Consents. The tender by a Holder of
Debentures (and subsequent acceptance of such tender by the Company) pursuant to
one of the procedures set forth below will constitute a binding agreement
between such Holder and the Company in accordance with the terms and subject to
the conditions set forth in this Statement, the Consent and Letter of
Transmittal and, if applicable, the Notice of Guaranteed Delivery.
Only Holders are authorized to tender their Debentures and Consent to the
Proposed Amendments. The procedures by which Debentures may be tendered and
Consents may be given by beneficial owners that are not Holders will depend upon
the manner in which the Debentures are held. Holders who wish to transfer
Debentures without tendering prior to the Consent Date and who wish to retain
the benefits of the applicable Consent Payment or wish to provide such benefit
to a transferee should validly tender the Debentures and deliver the related
Consents, designating the transferee as payee in the boxes entitled "Special
issuance Instructions" or "Special Delivery Instructions," as applicable,
contained in the Consent and Letter of Transmittal.
Tender of Debentures Held in Physical Form. To validly tender Debentures
held in physical form pursuant to the Offer, a registered Holder should complete
and sign the Consent and Letter of Transmittal (or a facsimile copy thereof) in
accordance with the Instructions to the Consent and Letter of Transmittal, have
the signature thereon guaranteed if required by Instruction 1 of the Consent and
Letter of Transmittal and deliver it, together with any other documents required
by the Instructions to the Consent and Letter of Transmittal, to the Depositary
at its address set forth on the back cover page of this Statement and deliver
certificates representing such Debentures to the Depositary at such address. A
Holder who desires to tender Debentures and who cannot comply with the
procedures set forth herein for tender on a timely basis or whose Debentures are
not immediately available must comply with the procedures for guaranteed
delivery set forth below. The Consent and Letter of Transmittal and any
certificates evidencing Debentures tendered pursuant to the Offer should be sent
only to the Depositary, and NOT to the Company, the Information Agent, the
Dealer Manager and Solicitation Agent or the Trustee.
The proper completion, execution and delivery of the Consent and Letter of
Transmittal by a registered Holder with respect to Debentures will constitute
the giving of a Consent by such Holder to the Proposed Amendments with respect
to such Debentures, and no separate Consent will be required.
If Debentures are registered in the name of a person other than the person
executing the Consent and Letter of Transmittal with respect to such Debentures,
then, in order to validly tender such Debentures pursuant to the Offer, the
Debentures must be endorsed or accompanied by an appropriate written instrument
or instruments of transfer executed exactly as the name or names of such
registered Holder or Holders appear on the Debentures, with the signature(s) on
the Debentures or instruments of transfer guaranteed as provided below. In
addition, such tender of Debentures must be accompanied by a valid Consent of
such registered Holder or Holders, since Debentures may not be tendered without
also delivering a Consent to the Proposed Amendments with respect to such
Debentures, and only Holders are entitled to deliver Consents to the Proposed
Amendments.
Tender of Debentures Held Through a Custodian. Any beneficial owner whose
Debentures are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to tender Debentures and deliver a
Consent and Letter of Transmittal should contact such registered Holder promptly
and instruct such Holder to tender Debentures and deliver a Consent and Letter
of Transmittal on such beneficial owner's behalf.
Tender of Debentures Held Through DTC. To effectively tender Debentures
that are held through DTC, DTC participants may, in lieu of physically
completing and signing the Consent and Letter of Transmittal and delivering it
to the Depositary, electronically transmit their acceptance through ATOP (and
thereby provide their Consents to the Proposed
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Amendments), for which the transaction will be eligible, and DTC will then
verify the acceptance and send an Agent's Message to the Depositary for its
acceptance. Delivery of tendered Debentures must be made to the Depositary
pursuant to the book-entry delivery procedures set forth below or the tendering
DTC participant must comply with the guaranteed delivery procedures set forth
below.
Except as provided below, unless the Debentures being tendered are
deposited with the Depositary at or prior to 5:00 p.m., New York City time, on
the Consent Date or the Expiration Date, as applicable (accompanied by a
properly completed and duly executed Consent and Letter of Transmittal or a
properly transmitted Agent's Message), the Company may, at its option,, treat
such tender as defective for purposes of the right to receive the applicable
Consent Payment or Offer Price, respectively. Payment for the Debentures will be
made only against deposit of the tendered Debentures and delivery of all other
required documents.
Book-Entry Delivery Procedures. Within two business days after the date
hereof, the Depositary will establish accounts with respect to the Debentures at
DTC (the "Book-Entry Transfer Facility") for purposes of the Offer. Any
financial institution that is a participant in the Book-Entry Transfer Facility
systems may make book-entry delivery of the Debentures by causing DTC to
transfer such Debentures into the Depositary's account at the Book-Entry
Transfer Facility in accordance with such Book-Entry Transfer Facility's
procedures for such transfer. Timely book-entry delivery of Debentures pursuant
to the Offer, however, requires receipt of a confirmation (a "Book-Entry
Confirmation") at or prior to 5:00 p.m., New York City time, on the Expiration
Date. In addition, although delivery of Debentures may be effected through
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility, a properly completed and duly executed Consent and Letter of
Transmittal (or a manually signed facsimile copy thereof), together with any
required signature guarantees and any other required documents, or an Agent's
Message in the case of a book-entry transfer, and all other documents required
by the Consent and Letter of Transmittal, must, in any case, be delivered or
transmitted to and received by the Depositary at its address set forth on the
back cover page of this Statement at or prior to 5:00 p.m., New York City time,
on the Consent Date to receive payment for Consents, and on the Expiration Date
to receive payment for tendered Debentures, or the guaranteed delivery
procedures described below must be complied with. Tenders of Debentures will not
be deemed validly made until such documents are received by the Depositary.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Depositary.
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Depositary and forming a part of the Book-Entry Confirmation,
which states that DTC has received an express acknowledgement from each
participant in DTC tendering Debentures and that such participants have received
and agree to be bound by the terms of the Consent and Letter of Transmittal and
that the Company may enforce such agreement against such participants.
Signature Guarantees. Signatures on all Consents and Letters of
Transmittal must be guaranteed by a financial institution that is a member of
the Securities Transfer Agents' Medallion Program, the Stock Exchange Medallion
Program or the New York Stock Exchange Medallion Signature Program (each of the
foregoing being referred to as an "Eligible Institution"), unless the Debentures
tendered thereby are tendered (i) by a registered Holder of Debentures (or by a
participant in the Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of such Debentures) who has not completed either
the box entitled "Special Delivery Instructions" or the box entitled "Special
Issuance instructions" contained in the Consent and Letter of Transmittal, or
(ii) for the account of an Eligible Institution. See Instruction 1 of the
Consent and Letter of Transmittal. If Debentures are registered in the name of a
person other than the person executing the Consent and Letter of Transmittal or
if Debentures not accepted for payment or not tendered are to be returned to a
person other than the registered Holder, then the signatures on the Consent and
Letter of Transmittal accompanying the tendered Debentures must be guaranteed by
an Eligible Institution as described above. See Instructions 1 and 5 of the
Consent and Letter of Transmittal.
Guaranteed Delivery. If a Holder desires to tender Debentures pursuant to
the Offer and deliver a Consent pursuant to the Solicitation, and time will not
permit the Consent and Letter of Transmittal, certificates representing such
Debentures and all other required documents to reach the Depositary, or the
procedures for book-entry transfer cannot be completed, in each case, at or
prior to 5:00 p.m., New York City time, on the Consent Date or the Expiration
Date, as the case may be, such Holder may nevertheless tender Debentures and
deliver Consents if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Company herewith, or
an Agent's Message with respect to guaranteed delivery, is received by the
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Depositary at or prior to 5:00 p.m., New York City time, on the Consent
Date or the Expiration Date, as provided below; and
(iii) the certificates for the tendered Debentures, in proper form
for transfer (or a Book-Entry Confirmation, including by means of an
Agent's Message, of the transfer of such Debentures into the Depositary's
account at the Book-Entry Transfer Facility as described above), together
with a Consent and Letter of Transmittal (or a manually signed facsimile
copy thereof), properly completed and duly executed, with any required
signature guarantees and any other documents required by the instructions
to the Consent and Letter of Transmittal, are received by the Depositary
within three New York Stock Exchange trading days after the date of
execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be sent by hand delivery, telegram,
facsimile transmission or mail to the Depositary and must include a guarantee by
an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
Under no circumstances will interest be paid by the Company by reason of
any delay in making payment to any person using the guaranteed delivery
procedures, and the Offer Price for Debentures tendered pursuant to the
guaranteed delivery procedures will be the same as that for Debentures delivered
to the Depositary on or prior to the Expiration Date, even If the Debentures to
be delivered pursuant to the guaranteed delivery procedures are not so delivered
to the Depositary, and therefore payment by the Depositary on account of such
Debentures is not made, until after the Payment Date.
Notwithstanding any other provision hereof, payments for Debentures
tendered and accepted for payment pursuant to the Offer will, in all cases, be
made only after timely receipt by the Depositary of (i) such Debentures (or a
Book-Entry Confirmation, including by means of an Agent's Message, of the
transfer of such Debentures into the Depositary's account at a Book-Entry
Transfer Facility as described above), and (ii) a Consent and Letter of
Transmittal (or a manually signed facsimile copy thereof) with respect to such
Debentures, properly completed and duly executed, with any required signature
guarantees and any other documents required by the Consent and Letter of
Transmittal.
Determination of Validity. In order for any tender of Debentures to be
valid, it must be in proper form. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Debentures or delivered Consents pursuant to any of the procedures
described above will be determined by the Company, in the Company's sole
discretion (which determination will be final and binding). The Company reserves
the absolute right to reject any or all tenders of any Debentures or deliveries
of any Consents determined by it not to be in proper form or if the acceptance
for payment of or payment for such Debentures and Consents may, in the opinion
of the Company's counsel, be unlawful. The Company also reserves the absolute
right, in its sole discretion, to waive any of the conditions of the Offer or
any defect or irregularity in any tender with respect to Debentures or delivery
with respect to a Consent of any particular Holder, whether or not similar
defects or irregularities are waived in the case of other Holders. The Company's
interpretation of the terms and conditions of the Offer (including the Consent
and Letter of Transmittal and the Instructions thereto) will be final and
binding. None of the Company, the Depositary, the Dealer Manager and
Solicitation Agent, the Information Agent, the Trustee or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or will incur any liability for failure to give any such notification.
If the Company waives its right to reject a defective tender of Debentures, the
tendering Holder will be entitled to the applicable payments.
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Certain Federal Income Tax Consequences
General. The following discussion sets forth the principal United States
federal income tax consequences to a Holder of (i) the sale of Debentures to the
Company pursuant to the Offer and (ii) the retention of Debentures after the
adoption of the Proposed Amendments and is included herein for general
information only. The following discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), existing and proposed Treasury
Regulations, administrative pronouncements of the Internal Revenue Service
("IRS") and judicial decisions, changes to any of which subsequent to the date
of this Statement may affect the tax consequences described herein (including,
possibly, on a retroactive basis). This summary does not purport to discuss all
aspects of the United States federal income taxation that may be relevant to
particular Holders in light of their individual investment circumstances or to
certain types of Holders subject to special tax rules (e.g., insurance
companies, traders in securities, tax-exempt organizations, financial
institutions, brokers, dealers, Holders who hold the Debentures as part of a
straddle, hedging or conversion transaction, foreign entities and nonresident
aliens) nor does it consider the effect of any applicable foreign, state, local
or other tax laws. The following discussion assumes that Holders held their
Debentures as "capital assets" (generally, property held for investment) within
the meaning of Section 1221 of the Code and that Holders are U.S. persons. For
these purposes, a "U.S. person" means a beneficial owner of a Debenture that or
who, for United States federal income tax purposes, is (i) an individual who is
a citizen or resident of the United States, (ii) a corporation or other taxable
entity created or organized in or under the laws of the United States or any
political subdivision thereof (including any State or the District of Columbia),
(iii) a trust or estate described in Section 7701(a)(30) of the Code or (iv)
otherwise subject to United States federal income tax on a net income basis in
respect of such owner's worldwide taxable income or such owner's ownership of
Debentures.
Consequences to Holders Tendering Debentures Pursuant to the Offer. The
receipt of the Offer Price by a Holder pursuant to the Offer (each such Holder,
a "Tendering Holder," and all such Holders, collectively, the "Tendering
Holders") in exchange for such Holder's Debenture will be a taxable transaction
for United States federal income tax purposes. Accordingly, a Tendering Holder
will recognize gain or loss for United States federal income tax purposes equal
to the difference between (i) the amount of the Offer Price received by the
Tendering Holder for a Debenture and, as discussed below, that the Tendering
Holder is not required to treat as accrued but unpaid interest received in
respect of such Debenture, and (ii) such Tendering Holder's adjusted tax basis
in such Debenture. A Tendering Holder's adjusted tax basis in a Debenture will
generally equal the price such Tendering Holder paid for such Debenture, (a)
increased by the amount of any market discount previously included in income by
the Tendering Holder with respect to such Debenture pursuant to an election to
include market discount in gross income currently as it accrues, and (b) reduced
(but not below zero) by any bond premium allowed as an offset against interest
income with respect to such Debenture pursuant to an election to amortize bond
premium on an annual basis. Subject to the market discount rules discussed
below, a Tendering Holder's gain or loss should generally constitute capital
gain or loss, which will be long-term capital gain or loss if such Holder's
holding period for a Debenture is more than one year on the date of the sale.
The Company intends to treat no portion of the Offer Price that it will
pay to a Tendering Holder as a payment of accrued but unpaid interest on the
Debenture being tendered by such Tendering Holder, and the Company believes that
such treatment should be respected for United States federal income tax
purposes. If, however, the IRS were to attempt to treat some amount of the Offer
Price as a payment of accrued but unpaid interest on the tendered Debenture, and
the IRS were to ultimately succeed in such attempt, then the Tendering Holder
would be required to recognize such amount as ordinary interest income for
United States federal income tax purposes (which would have the effect of
reducing the Tendering Holder's gain, or increasing the Tendering Holder's loss,
that the Tendering Holder would be required to recognize as a result of his, her
or its tendering of the Debenture to the Company pursuant to the Offer).
In the case of a Tendering Holder who or that acquired a Debenture at a
market discount, any gain recognized upon the taxable disposition of such
Debenture will represent ordinary income to the extent of the market discount
that accrued during the period such Tendering Holder held such Debenture, unless
the Tendering Holder previously had elected to include such accrued market
discount in the Tendering Holder's income on a current basis. In general, market
discount with respect to a Debenture means the excess (if any) of the stated
redemption price at maturity of such Debenture (i.e., its stated principal
amount) over the Holder's tax basis therein at the time of its acquisition by
the Holder (unless the amount of such excess is less than 1/4 of 1% of the
Debenture's stated principal amount multiplied by the number of complete years
to maturity, after the Holder acquired the Debenture, in which case the market
discount with respect to such Debenture is considered to be zero). In the case
of a Tendering Holder who or that had acquired a Debenture at a bond premium and
who or that had elected to deduct bond premium may be permitted to deduct any
remaining unamortized bond premium as an ordinary loss in the taxable year of
disposition of the Debenture. In general, "bond premium" on a Debenture equals
the excess (if any) of the
41
<PAGE>
purchase price of such Debenture over the amount payable at maturity of such
Debenture (other than stated interest thereon), subject to special provision for
debt instruments with early call dates at a premium.
The tax treatment of a Consent Payment received by a Holder is not
entirely certain. Since it is possible for a Holder to receive a Consent Payment
without receiving the Offer Price for the tendering of a Debenture, the Company
intends to treat the Consent Payments as a separate fee for consenting to the
Proposed Amendments. Accordingly, under this treatment, the Consent Payments
made to Holders would be taxable as ordinary income to such Holders for United
States federal income tax purposes. Holders should consult their tax advisors
regarding the tax treatment of the Consent Payment.
Consequences to Holders not tendering Debentures pursuant to the Offer.
Holders who or that do not tender their Debentures pursuant to the Offer (such
Holder, individually, a "Non-Tendering Holder", and all such Holders,
collectively, the "Non-Tendering Holders") should not recognize any gain or loss
due to the adoption of the Proposed Amendments and the resulting modification to
the Indenture (the "Modification") because the Modification would not appear to
be a significant modification of the Debentures resulting in a deemed taxable
exchange ("Deemed Exchange") of the Debentures for new Debentures ("New
Debentures") under Section 1001 of the Code and the applicable Treasury
Regulations thereunder. As such, a Non-Tendering Holder should have the same
adjusted tax basis and holding period in his, her or its Debentures following
the Modification as the Non-Tendering Holder had with respect to his, her or its
Debentures immediately prior to the Modification.
Moreover, even if the Modification were to result in a Deemed Exchange,
the Deemed Exchange may qualify as a tax-free recapitalization under the
reorganization provisions of the Code (although, in such case, the IRS may
attempt to allocate a portion of the New Debentures of a Non-Tendering Holder to
the accrued but unpaid interest on the Debentures, in which case, if such
attempt were successful, the Non-Tendering Holder would be required to recognize
the portion so allocated as ordinary income for United States federal income tax
purposes). If the Modification were to result in a Deemed Exchange and such
Deemed Exchange were to constitute a tax-free recapitalization under the
reorganization provisions of the Code, then, except for any portion of the New
Debentures which may be allocated to the accrued but unpaid interest on the
Debentures, a Non-Tendering Holder should have the same adjusted tax basis and
holding period in his, her or its Debentures following the Modification as the
Non-Tendering Holder had with respect to his, her or its Debentures immediately
prior to the Modification.
However, in the unlikely event that the Modification would result in a
Deemed Exchange, and, furthermore, that such Deemed Exchange would not otherwise
qualify as a tax-free recapitalization under the reorganization provisions of
the Code, then a Non-Tendering Holder would be required to recognize taxable
gain or loss as a result of such Deemed Exchange. In such event, the amount of
gain or loss that a Non-Tendering Shareholder would be required to recognize
would equal the difference between the issue price of the New Debentures (i.e.,
which, because the Debentures are "publicly-traded" within the meaning of the
applicable Treasury Regulations, would equal the fair market value of the
Debentures immediately after the Modification), and such Non-Tendering Holder's
adjusted tax basis in its, his or her Debentures at the time of the Deemed
Exchange, except that the IRS may attempt to allocate a portion of the New
Debentures to the accrued but unpaid interest on the Debentures of the
Non-Tendering Holder. If the IRS were to be successful in such attempt, then
such Non-Tendering Holder would be required to recognize the portion so
allocated as ordinary income for United States federal income tax purposes
(which would have the effect of reducing the Non-Tendering Holder's gain, or
increasing the Non-Tendering Holder's loss, on the Deemed Exchange by the amount
so recognized as ordinary income).
Any gain recognized as a result of the Deemed Exchange would be treated as
ordinary income to the extent of any accrued but unrecognized market discount in
respect of the Debentures deemed to have been exchanged. If, in a Deemed
Exchange, the New Debenture's stated principal amount exceeds its issue price,
then such New Debenture would have original issue discount ("OID") equal to such
excess for United States federal income tax purposes (unless the amount of such
excess is, in general, less than 1/4 of 1% of the New Debenture's stated
principal amount, multiplied by the number of complete years to
42
<PAGE>
maturity of the New Debenture, in which case the OID with respect to such New
Debenture would be considered to be zero). If a New Debenture were to have OID,
then the Non-Tendering Holder of such New Debenture would, in general, be
required to include such OID in income as it accrues under a constant yield
method in advance of receipt of cash attributable to such OID (regardless of
whether such Non-Tendering Holder is a cash or accrual basis taxpayer).
Non-Tendering Holders should consult their tax advisors as to the tax
consequences to them of the adoption of the Proposed Amendments and the
resulting modification to the Indenture.
Backup Withholding. A Holder may be subject to backup withholding at the
rate of 31% with respect to the Offer Price and/or Consent Payment that such
Holder is to receive, unless such Holder (i) is a corporation or other exempt
recipient and, when required, establishes its exemption from backup withholding,
or (ii) provides his, her or its correct taxpayer identification number,
certifies that he, she or it is not currently subject to backup withholding and
otherwise complies with applicable requirements of the backup withholding rules.
Completion of the Substitute Form W-9 provided in the Letter of Transmittal
should be used for this purpose. A Holder of Debentures who or that fails to
provide the Company with such Holder's correct taxpayer identification number
may be subject to penalties imposed by the IRS. The amount of any backup
withholding from a payment to a Holder will be allowed as a credit against such
Holder's United States federal income tax liability and may entitle such Holder
to a refund provided that the required information is furnished to the IRS.
The Company will provide information in connection with the Offer and
Solicitation to Holders and to the IRS reporting the payment of the Offer Price
and Consent Payment as required by law.
The foregoing discussion of certain United States federal income tax
consequences is for general information only and is not tax advice. Accordingly,
each Holder of Debentures should consult such Holder's own tax advisor to
determine the particular tax consequences to such Holder either of tendering the
Debentures or of retaining the Debentures, including the applicability and
effect of state, local and foreign tax laws.
Withdrawal Rights
A Holder may not validly revoke a Consent unless such Holder validly
withdraws such Holder's previously tendered Debentures, and the valid withdrawal
of a Holder's Debentures will constitute the concurrent valid revocation of such
Holder's Consent As a result, a Holder who validly withdraws previously tendered
Debentures at or prior to 5:00 p.m., New York City time, on the Consent Date
will not receive the Offer Price or a Consent Payment Any withdrawal of
previously tendered Debentures otherwise than in accordance with the provisions
described herein will not constitute a valid revocation of such Holder's
Consent.
Except as otherwise stated below, tenders of Debentures and the concurrent
delivery of Consents made pursuant to the Offer and the Solicitation are
irrevocable. Debentures tendered pursuant to the Offer may be withdrawn and the
related Consents revoked at any time at or prior to 5:00 p.m., New York City
time, on the Consent Date, but not thereafter. If, after such time as withdrawal
rights expire, the Company reduces either (A) the principal amount of Debentures
subject to the Offer or (B) the Offer Price, then previously tendered Debentures
may be validly withdrawn on or prior to the date ten business days after the
date that notice of any such reduction is first published, given or sent to
Holders by the Company. In addition, tenders of Debentures may be validly
withdrawn if the Offer is terminated without any such Debentures being purchased
thereunder. In the event of a termination of the Offer, the Debentures tendered
pursuant to the Offer will be promptly returned to the tendering Holders, and
the Supplemental Indenture will not become operative.
For a withdrawal of a tender of Debentures and the concurrent revocation
of Consents to be effective, a written, telegraphic or facsimile transmission
notice of withdrawal or a "Request Message" (as defined below) must be timely
received by the Depositary at its address set forth on the back cover page of
this Statement at or prior to 5:00 p.m., New York City time, on the Consent
Date. Any such notice of withdrawal must (i) specify the name of the person who
tendered the Debentures to be withdrawn, (ii) contain the description of the
Debentures to be withdrawn and identify the certificate number or numbers shown
on the particular certificates evidencing such Debentures (unless such
Debentures were tendered by book-entry transfer) and the aggregate principal
amount represented by such Debentures and (iii) be signed by the Holder of such
Debentures in the same manner as the original signature on the Consent and
Letter of Transmittal by which such Debentures were tendered (including any
required signature guarantees) or be accompanied by (x) documents of transfer
sufficient to have the Trustee register the transfer of the Debentures into the
name of the person withdrawing such Debentures and (y) a
43
<PAGE>
properly completed irrevocable proxy that authorized such person to effect such
revocation on behalf of such Holder. In lieu of submitting a written,
telegraphic or facsimile transmission notice of withdrawal or revocation, DTC
participants may electronically transmit a request for withdrawal or revocation
to DTC. DTC will then edit the request and send a Request Message to the
Depositary. If the Debentures to be withdrawn have been delivered or otherwise
identified to the Depositary, a properly completed and presented written or
facsimile notice of withdrawal or a Request Message is effective immediately
upon receipt thereof even if physical release is not yet effected. The term
"Request Message" means a message transmitted by DTC and received by the
Depositary, which states that DTC has received a request for withdrawal from a
DTC participant and identifies the Debentures to which such request relates. A
withdrawal of Debentures (and the concurrent revocation of Consents) can only be
accomplished in accordance with the foregoing procedures.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal and revocation of Consents, including a Request Message,
will be determined by the Company, in the Company's sole discretion (which
determination will be final and binding). None of the Company, the Depositary,
the Dealer Manager and Solicitation Agent, the Information Agent, the Trustee or
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or revocation of Consents, including
a Request Message, or incur any liability for failure to give any such
notification.
Any Debentures properly withdrawn, and with respect to which a Consent has
been properly revoked, will be deemed to be not validly tendered for purposes of
the Offer. Withdrawn Debentures may be retendered by following one of the
procedures described under "Procedures for Tendering Debentures and Delivering
Consents" at any time at or prior to 5:00 p.m., New York City time, on the
Expiration Date.
There are no appraisal or other similar statutory rights available to the
Holders of Debentures in connection with the Offer or the Solicitation.
Dealer Manager and Solicitation Agent
The Company has engaged Georgeson Shareholder Securities Corporation to
act as the Dealer Manager and Solicitation Agent (the "Dealer Manager and
Solicitation Agent") in connection with the Offer and the Solicitation and to
provide certain financial advisory services to the Company in connection
therewith. The Company will pay reasonable and customary compensation to for
such services, plus reimbursement for reasonable out-of-pocket expenses. The
Company has agreed to indemnify the Dealer Manager and Solicitation Agent
against certain liabilities in connection with its services as Dealer Manager,
Solicitation Agent and financial advisor, including liabilities under the
Federal securities laws. At any given time, the Dealer Manager and Solicitation
Agent may trade the Debentures or other debt or equity securities of the Company
for its own accounts or for the accounts of customers, and, accordingly, may
hold a long or short position in the Debentures or such other securities. All
inquiries and correspondence addressed to the Dealer Manager and Solicitation
Agent relating to the Offer or the Solicitation should be directed to the
address or telephone number set forth on the back cover page of this Statement.
Depositary and Information Agent
The Bank of New York has been appointed as Depositary for the Offer and
the Solicitation. The Consent and Letter of Transmittal and all correspondence
in connection with the Offer or the Solicitation should be sent or delivered by
each Holder or a beneficial owner's broker, dealer, commercial bank, trust
company or other nominee to the Depositary at the appropriate address or
telecopier number set forth on the back cover page of this Statement. Any Holder
or beneficial owner that has questions concerning tender or consent procedures
or whose Debentures have been mutilated, lost, stolen or destroyed should
contact the Depositary at the address or telecopier number set forth on the back
cover page of this Statement.
Georgeson Shareholder Communications Inc. has been appointed as
Information Agent for the Offer and the Solicitation. Requests for assistance or
additional copies of this Statement, the Consent and Letter of Transmittal or
the Notice of Guaranteed Delivery may be directed to the information Agent at
the address or telephone numbers set forth on the back cover page of this
Statement. Holders of Debentures may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Offer or the Solicitation.
The Company will pay the Information Agent and the Depositary reasonable
and customary fees for their services and will reimburse them for their
reasonable out-of-pocket expenses in connection therewith. The Company will also
reimburse brokers and dealers for customary mailing and handling expenses
incurred by them in forwarding copies of this
44
<PAGE>
Statement and related documents to the beneficial owners of Debentures. The
Company will not pay any fees or commissions to any broker, dealer or other
person (other than the Dealer Manager) in connection with the Offer and the
Solicitation.
Miscellaneous
The Company is not aware of any jurisdiction in which the making of the
Offer and the Solicitation is not permitted by applicable law. If the Company
becomes aware of any jurisdiction in which the making of the Offer and the
Solicitation would not be in compliance with applicable law, the Company will
make a good faith effort to comply with any such law. If, after such good faith
effort, the Company cannot comply with any such law, the Offer and the
Solicitation will not be made to (nor will tender of Debentures and deliveries
of Consents be accepted from or on behalf of) the Holders residing in such
jurisdiction.
DATAPOINT CORPORATION
December [__], 1999
45
<PAGE>
APPENDIX A
November 29, 1999
Board of Directors
Datapoint Corporation
8410 Datapoint Drive
San Antonio, TX 78229-8500
Gentlemen:
You have asked us to advise you with respect to the fairness, from a financial
point of view, to the Minority Shareholders (holders other than Reboot Systems,
Inc. and its affiliates (collectively "Reboot" or the "Buyer"), officers and
employees of Datapoint corporation ("Datapoint," the "Company" or the "Seller")
or its affiliates of the shares of Datapoint common stock, par value $1.00 per
share (the "Shares")) of the consideration to be received by the Minority
Shareholders in the Transaction (as defined below) pursuant to the Stock
Purchase Agreement, dated as of July 31, 1999 as amended by Amendment No. 1
thereto dated as of November 1, 1999 (collectively the "Agreement") by and
between the Company and Reboot.
The Agreement states that Datapoint will sell its European Operations to Reboot
for $49.5 million, subject to certain adjustments for which money shall be
escrowed. Additionally, as of the closing date the Buyer will acquire and the
Seller will cease to use the "Datapoint" name, except under a limited license
granted to allow the seller to deplete stationery and marketing materials.
Reboot has advanced the Company $750,000. If Reboot is unable to complete the
Transaction due to an inability to obtain financing, the Company will keep
$750,000.
Additionally, Reboot will advance the Company $2.5 million by December 1, 1999
to be used for the sole purpose of funding the Company's obligation to pay the
interest payment due December 1, 1999 on the company's 8 7/8% Convertible
Subordinated Debentures. If the Company is unable to secure the required
approvals of the debenture holders and shareholders, and Reboot is able to
secure financing, the Company will repay to Reboot the $750,000 advance and the
$2.5 million advance and will owe Reboot an additional $375,000 in expenses plus
any financing fees incurred by Reboot.
<PAGE>
November 29, 1999
Board of Directors
Datapoint Corporation
Page 2
In connection with rendering our opinion, we have reviewed the financial terms
and provisions of the Agreement. We further reviewed and analyzed certain
publicly available business and financial information relating to the Company
for recent years and interim periods to date, as well as certain internal
financial and operating information, financial forecasts, projections and
analyses prepared by or on behalf of the Company and provided to us for the
purpose of our analysis. We have met with representatives of the Company to
review and discuss such information and, among other matters, the Company's and
the European Operations' (as defined in the Agreement) businesses, financial
condition, results of operations and prospects.
We reviewed and considered certain financial and stock market data relating to
the company and its European Operations, and we compared that data with similar
data for certain other companies, the securities of which are publicly traded,
that we believe may be relevant or comparable in certain respects to the
European Operations or one or more of its businesses or assets, and we reviewed
and considered the financial terms of certain recent acquisitions and business
combinations transactions in the systems integration industry specifically, and
in other industries generally, which we believe to be reasonable comparable to
the Transaction or otherwise relevant to our inquiry. We also performed such
other studies, analyses and investigations and reviewed such other analyses and
investigations and reviewed such information, as we considered appropriate for
purposes of this opinion.
In our review and analysis and in formulating our opinion, we assumed and relied
upon the accuracy and completeness of all the financial and other information
provided to or discussed with us or publicly available, including the financial
projections, forecasts, analyses and other information provided to us, and we
have not assumed any responsibility for independent verification of, and express
no opinion as to, any such information. We also relied upon the reasonableness
and accuracy of the projections, forecasts, analyses and other information
furnished to us, and have assumed, with consent of the Board of Directors of the
Company, that such projections, forecasts, analyses, and other information are
reasonable, prepared in good faith and on bases reflecting the best currently
available judgments and estimates of the company's management as of the date
hereof and that management of the Company is unaware of any facts that would
make the projections, forecasts and other information provided to us incomplete
or misleading. We express no opinion with respect to such projections, forecasts
and analyses or the assumptions on which they are based. We were not retained to
conduct, nor have we assumed any responsibility for conducting, a physical
inspection of the properties or facilities of the Company or the European
Operations, or for making or obtaining an independent valuation or appraisal of
the assets or liabilities of the Company or the European Operations, and no such
independent valuation or appraisal was provided to us. Our opinion is
necessarily based on economic and market conditions and other circumstances as
they exist and can be evaluated by us as of the date hereof. It should be
understood that prior to the closing of the Transaction, we will update, revise
or reaffirm this opinion to reflect subsequent developments. Finally, we have
assumed that the Transaction described in the Agreement will be consummated on
the terms set forth therein, without material waiver or modification.
<PAGE>
November 29, 1999
Board of Directors
Datapoint Corporation
Page 3
In the context of our engagement, we have not been authorized to and have not
solicited alternative offers for the Company or its assets. We have relied upon
the work done by Dain Raucher Wessels in connection with its engagement to
advise the Company and sell the European Operations.
We are acting as financial advisor to the Board in connection with the proposed
Transaction and will receive a fee for our services, including this opinion,
none of which is contingent upon the completion of the proposed Transaction.
Our opinion addresses only the fairness, from a financial point of view, to the
Minority Shareholders of the consideration to be paid for the European
Operations pursuant to the Agreement and does not address the underlying
business decision by the Board to recommend the Transaction.
This letter is for the benefit and use of the Board in its consideration of the
Transaction, and may not be used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose without our prior written consent (except as otherwise provided in the
engagement letter, dated November 8, 1999 between the Company and us). We have
been engaged and are acting solely as an advisor to the Board and not as an
advisor to or agent of any other person. This opinion does not constitute a
recommendation to any stockholder with respect to how such stockholder should
vote or otherwise act with respect to the Transaction, and should not be relied
upon by any stockholder as to any such matter.
Based upon and subject to the foregoing, including the various assumptions and
limitations set forth herein, it is our opinion that, as of the date hereof, the
consideration to be received by the Company in the Transaction pursuant to the
Agreement is fair to the Minority Shareholders from a financial point of view.
Very truly yours,
/s/ BNY CAPITAL MARKETS, INC.
BNY CAPITAL MARKETS, INC.
<PAGE>
Confidential Presentation
to
Board of Directors
of
DATAPOINT CORPORATION
BNY Capital Markets, Inc.
November 29, 1999
Datapoint Corporation Confidential
<PAGE>
BNY Capital Markets, Inc.
Table of Contents
Page
- --------------------------------------------------------------------------------
Transaction Overview.......................................................1
BNY Due Diligence..........................................................2
General Observations Concerning Datapoint..................................4
General Observations Concerning the European Operations....................6
Summary Financial Information Observations................................14
Summary of Issues Respecting Fairness.....................................16
Stand-Alone Valuation of European Operations..............................17
Comparative Company Approach..............................................18
Comparative Transaction Approach..........................................29
Discounted Cash Flow Valuation............................................33
The Composite Range for a Stand-alone Entity..............................38
The Capital Structure.....................................................39
The Capital Structure Discount............................................41
Liquidation Value.........................................................42
Conclusion................................................................43
Appendix
A. Comparative Company & Comparative Transaction Financial Data
B. Financial Model & Discounted Cash Flow
Datapoint Corporation i Confidential
<PAGE>
BNY Capital Markets, Inc.
Preface
This report has been prepared by BNY Capital Markets, Inc. ("BNY") in connection
with BNY's opinion to be rendered to the Board of Directors of Datapoint
Corporation ("Datapoint" or the "Company") as to the fairness from a financial
point of view of the Transaction, described herein, to the Company's Minority
Shareholders. The material in this report and all analyses contained herein are
confidential and are solely for the use of the Board of Directors in its
consideration of the Transaction and may not be used for any other purpose.
In the course of our activities as financial advisor, BNY received and reviewed
business and financial information on the Company developed by Datapoint and
held discussions with the management of Datapoint and with others regarding this
information. In connection with the analyses contained herein, we have not
independently verified the accuracy of any such information and have relied on
all such information as being complete and accurate in all material respects. In
addition, we have not obtained any independent appraisal of Datapoint's
properties or assets.
BNY has employed several analytical methodologies herein and no one method of
analysis should be regarded as critical to the overall conclusion we have
reached. Each analytical technique has inherent strengths and limitations, and
the nature of the available information may further affect the value of
particular techniques. Our conclusion is based on all the analyses and factors
presented herein taken as a whole and also on application of our experience.
Such conclusion often involves significant elements of judgment and qualitative
as well as quantitative analysis. Hence, we express no opinion as to the
probative force standing alone, of any one or more parts of the material that
follows. Our only opinion is the formal written opinion that we have expressed
or will express as to the fairness from a financial point of view of the
consideration being paid in the transaction. The opinion, the analyses contained
herein and all conclusions drawn from such analyses are necessarily based upon
market, economic and other conditions that exist and can be evaluated as of the
date of this presentation, and on information available to us as of the date
hereof.
Datapoint Corporation ii Confidential
<PAGE>
Transaction Overview
o The Company has signed the Stock Purchase Agreement dated July 31, 1999
and Amendment No. 1 thereto dated November 1, 1999, to sell its European
Operations to Reboot Systems, Inc. ("Reboot" or The "Buyer") for $49.5
million (The "Transaction"). Additionally, as of the Closing Date of the
Transaction, the Buyer will assume and the seller will cease to use the
"Datapoint" name, except under a limited license granted to allow the
seller to deplete stationery and marketing materials.
o The Buyer has advanced the Company $750,000. If the Buyer is unable to
complete the Transaction due to an inability to obtain financing, seller
will keep $750,000.
o The Buyer will further advance the Company $2.5 million by December 1,
1999 to be used for the sole purpose of funding the Company's obligation
to pay the interest payment due December 1, 1999 on the Company's 8 7/8%
Convertible Subordinated Debentures (The "Debentures"). If the Company is
unable to secure the required approvals of the debentureholders and
shareholders, and the Buyer has secured financing, the Seller will repay
the $750,000 advance and the $2.5 million advance, and will owe to the
Buyer $375,000 for reimbursement of certain expenses plus the fees
associated with securing the Buyer's financing.
o The votes of at least two-thirds of the outstanding principal of the
Debentures and a majority of the outstanding shares of the Common Stock is
required to approve the Transaction.
Datapoint Corporation Confidential
<PAGE>
BNY Capital Markets, Inc.
BNY Due Diligence
Persons Interviewed
Datapoint Corporation
Asher Edelman Chairman
Blake Thomas Chief Operating Officer
Gerald Agranoff, Esq. Chief Counsel
Philip Krumb Chief Financial Officer
William Richardson Controller
Ken Witt Finance Department
Pryor Cashman Sherman & Flynn, LLP
Selig Sacks Partner
Mark Saks Associate
Adam Rosenberg Associate
Dain Rauscher & Wessels
Travis Winkey Managing Director
Michael Townley Associate
Datapoint Corporation 2 Confidential
<PAGE>
BNY Capital Markets, Inc.
BNY Due Diligence (continued)
Documents Reviewed
o Relevant Agreements and Contracts of the Company, including:
- Stock Purchase Agreement dated 7/31/99
- Amendment No. 1 to the Stock Purchase Agreement dated 11/1/99
- 8 7/8% Convertible Subordinated Debenture Prospectus and Indenture
- Certificate of Designation, Preferences, Rights and Limitations of
the $1.00 Exchangeable Preferred Stock
o Public Filings of Datapoint Corporation
- 10-Ks for the years ended 8/2/97, 7/31/98, 7/31/99
- Draft Proxy Statement dated 11/12/99
o Company Data
- Annual Operating Plan for fiscal year 1998, 1999 and 2000
- Other internal company financial statements (historic, current, and
prospective)
- Company product descriptions
- By laws, articles of incorporation and other corporate items
- Minutes of meetings of the Board of Directors
o Trading history of Datapoint Common Stock, Preferred Stock and Convertible
Debentures
o Documents prepared by Dain Rauscher Wessels in connection with its
engagement as an advisor to the Company
o Letters of intent of the Buyer and proposals of others
o Public filings of companies used for comparative purposes
Datapoint Corporation 3 Confidential
<PAGE>
BNY Capital Markets, Inc.
General Observations Concerning Datapoint
o As of November 1999, the Company consisted of three divisions: the
computer telephony integration systems integration division
("Telebusiness"), the systems integration and proprietary hardware and
software business (Open Systems Networking division, or "OSN") and
Corebyte.
o Because of the negative cash flow of the Company, caused in large part by
the interest and sinking fund payments associated with the Debentures,
Datapoint has been forced to sell virtually all of its fixed assets. Since
1996 the Company has monetized many of its assets. In an effort to reduce
the number of outstanding Debentures, Datapoint has sold its EADS
division, the San Antonio buildings and the building in Gouda,
Netherlands. The proceeds from these sales were not sufficient to reduce
the number of outstanding Debentures to a level where the interest and
sinking fund obligations could be met by the Company's operating income.
As a result, in 1998 the Company hired Dain Rauscher Wessels ("Dain") to
help it explore strategic alternatives.
o Dain recommended three possibilities: remain independent; take the Company
private; or sell the Company, or the European Operations, to a strategic
buyer.
o After considering the alternatives, the Company decided that neither
remaining independent nor taking the Company private in its current form
was viable.
o Dain managed a process to sell the Company or its European Operations.
o In the opinion of Dain and of Company management, two factors strongly
affected the sale process:
- the Company's capital structure, and
- the necessity of obtaining the bondholder and shareholder approvals
for the sale of the European Operations.
o There were no bids for the entire Company.
Datapoint Corporation 4 Confidential
<PAGE>
BNY Capital Markets, Inc.
o Initially, there were only two bids for the European Operations.
o Reboot Systems, Inc.'s (a company formed by the current European
Operations management) bid was the highest.
o A third bid was received at the very end of the sale process. The third
bid was higher than that of Reboot.
o The Company approached Reboot and asked them if they would meet the new
bid. Reboot declined and the Company proceeded with the third bidder.
o The third bidder then dropped out after having done due diligence.
o The Company then proceeded with Reboot, at the price Reboot had originally
bid, even though the Company's financial results had deteriorated since
the original bid.
Datapoint Corporation 5 Confidential
<PAGE>
BNY Capital Markets, Inc.
General Observations Concerning the European Operations
o Over 95% of Datapoint's revenue, and all of its operating income is
generated in Europe.
Note: Figures in thousands
[BAR CHART APPEARS HERE]
1997 1998 1999
European Operations Revenues $ 125,783 $ 142,417 $ 133,437
Non-European Operations Revenues $ 16,338 $ 9,028 $ 4,848
Total Company Revenues $ 142,121 $ 151,445 $ 138,285
Datapoint Corporation 6 Confidential
<PAGE>
BNY Capital Markets, Inc.
General Observations Concerning the European Operations
o European Operations have consistently failed to meet AOP goals. The 1998
AOP for European Operations for revenue and operating income were $151.1
million and $15.3 million respectively vs. $142.4 million and $14.6
million of actual results. The shortfall for revenues and operating income
was 5.8% and 4.6%, respectively.
o European Operations failed to meet the AOP goals established for it for
FY1999. The 1999 AOP for European Operations revenues and operating income
were $142.1 million and $10.9 million respectively. The FY1999 result of
European Operations was revenues of $133.4 million and operating income of
$10.2 million. The shortfalls for revenues and operating income were 6.1%
and 6.4%, respectively.
o The Company projects total revenue for European Operations of $149.4
million, operating income of $12.7 million and profit before tax of $8.6
for the fiscal year ended July 31, 2000. These projected results are an
increase of 12%, 25% and 41%, respectively.
Consolidated European Operations Historical 1997, 1998 & 1999 and
Projected 2000 Income Statements
- --------------------------------------------------------------------------------
(Figures in thousands) Historical July 31, Projected
------------------------------ --------
1997 1998 1999 2000(1)
-------- -------- -------- --------
Telebusiness Revenues $ 41,187 $ 52,367 $ 46,742 $ 66,685
OSN Revenues 84,596 90,050 86,695 82,719
-------- -------- -------- --------
Total Revenues 125,783 142,417 133,437 149,404
Telebusiness Gross Profit 13,532 16,203 12,769 19,425
OSN Gross Profit 22,653 21,115 20,097 19,010
-------- -------- -------- --------
Total Gross Profit 36,185 37,318 32,866 38,435
Telebusiness Operating Expenses 9,726 9,970 9,928 13,014
OSN Operating Expenses 13,974 12,731 12,780 12,750
-------- -------- -------- --------
Total Operating Expenses 23,700 22,701 22,708 25,764
Telebusiness Operating Income 3,806 6,233 2,841 6,411
OSN Operating Income 8,679 8,384 7,317 6,260
-------- -------- -------- --------
Total Operating Income $ 12,485 $ 14,617 $ 10,158 $ 12,671
-------- -------- -------- --------
- --------------------------------------------------------------------------------
(1) Projections taken from Management's Year 2000 Annual Operating Plan.
Datapoint Corporation 7 Confidential
<PAGE>
BNY Capital Markets, Inc.
General Observations Concerning the European Operations
Sales by Country
o The following is a breakdown of the European Operations estimated sales
for fiscal year 1999.
FYE July 31, 1999 Revenue
- --------------------------------------------------------------------------------
(Figures in thousands)
Telebusiness OSN Total
------------ -------- --------
Belguim $ 5,296 $ 10,739 $ 16,035
France 7,451 10,144 17,595
Germany -- 3,553 3,553
Holland 16 4,276 4,292
Italy 8,383 152 8,535
Norway 86 1,583 1,669
Spain 2,480 1,357 3,837
Sweden 495 42,138 42,633
Switzerland 14 331 345
United Kingdom 22,521 12,422 34,943
------------ -------- --------
Total Europan Revenues $ 46,742 $ 86,695 $133,437
============ ======== ========
- --------------------------------------------------------------------------------
Datapoint Corporation 8 Confidential
<PAGE>
BNY Capital Markets, Inc.
General Observations Concerning the European Operations
Sales by Business
European Operations Revenues
Note: Figures in thousands
[BAR CHART APPEARS HERE]
1997 1998 1999
---- ---- ----
Telebusiness Revenues $ 41,187 $ 52,367 $46,742
OSN Revenues $ 84,596 $ 90,050 $86,695
Datapoint Corporation 9 Confidential
<PAGE>
BNY Capital Markets, Inc.
General Observations Concerning the European Operations
Telebusiness
o Telebusiness is principally engaged in the development, marketing,
distribution and servicing of computer and communications products, both
hardware and software, in the field of computer telephony integration
("CTI"). Telebusiness acts primarily as a systems integrator, providing
corporations with integrated solutions for CTI applications using hardware
and software supplied by third parties. Telebusiness typically services
these CTI systems after installation, providing it with a profitable
ongoing stream of revenue.
o Telebusiness competes with hardware suppliers such as IBM and personal
computer manufacturers as well as with consultancies and value added
resellers ("VAR's"). Telebusiness has been poised for growth for a number
of years, but has not realized the potential that management has expected.
o Telebusiness revenue was concentrated in the U.K. (approximately 48.2% of
$46.7 million 1999 revenue) but the Company has invested considerable
resources in developing the market for CTI on the European continent.
Italy has had substantial CTI adoption, while the rest of this market has
lagged the U.S. and U.K. market in adoption of CTI technology. The Company
expects significant growth in the other countries in which it operates in
the future.
1999 Telebusiness Revenues
[PIE CHART APPEARS HERE]
Belgium 5,296
France 7,451
Germany -
Holland 16
Italy 8,383
Norway 86
Spain 2,480
Sweden 495
Switzerland 14
United Kingdom 22,521
Datapoint Corporation 10 Confidential
<PAGE>
BNY Capital Markets, Inc.
General Observations Concerning the European Operations
Telebusiness
o Telebusiness is projected to generate revenue of $66.7 million in fiscal
year 2000, up from $46.7 million for fiscal year 1999. Operating Income is
projected to increase to 128%, from $2.8 million to $6.4 million estimated
for 2000 (on a stand-alone basis, excluding certain corporate overhead
allocations).
Note: Figures in thousands
[BAR CHART APPEARS HERE]
1997 1998 1999 2000
Telebusiness Revenues $ 41,187 $ 52,367 $ 46,742 $ 66,685
o Telebusiness operating income margins, which were greater than OSN's in
1998, declined below those of OSN in 1999. In 2000 they are projected to
be greater than OSN operating income margins, but not as large as they
were in 1998.
o Datapoint tried to sell Telebusiness in 1996. Although over 80 potential
buyers were contracted, only two proceeded through the due diligence
process. In the end, there were no bidders for the business.
Datapoint Corporation 11 Confidential
<PAGE>
BNY Capital Markets, Inc.
General Observations Concerning the European Operations
OSN
o OSN is engaged in the development, marketing, distribution and servicing
of hardware and software computer products. OSN markets a variety of
hardware and software, usually as a VAR.
o A steadily declining installed base of Datapoint proprietary hardware and
software exists. Each year a portion of this installed base switches to
non-proprietary systems. It is hoped that the Company will be chosen by
many of these customers to assist in the switch and continue to service
the system. This process has taken place slowly and is expected to
accelerate over the next several years. However, revenue generated through
the sale of proprietary hardware and software is substantially more
profitable than those from sale of third party hardware and software.
o In 1999, OSN revenue was concentrated in Belgium and France, Sweden and
the U.K.
1999 OSN Revenues
[PIE CHART APPEARS HERE]
1999 OSN Revenues
Belgium 10,739
France 10,144
Germany 3,553
Holland 4,276
Italy 152
Norway 1,583
Spain 1,357
Sweden 42,138
Switzerland 331
United Kingdom 12,422
Datapoint Corporation 12 Confidential
<PAGE>
BNY Capital Markets, Inc.
General Observations Concerning the European Operations
OSN
o A significant portion of OSN's $42 million in Swedish revenue was
generated through the sale of third-party personal computers to the
Swedish government at low gross margins. Datapoint management is confident
that its Swedish subsidiary will find additional sales opportunities,
either with the Swedish government or other customers, sufficient to
replace any non-recurring personal computer sales revenue.
o The $10.7 million of revenue in Belgium was largely generated through
sales to a single customer. This customer has been slow to switch from
Datapoint's proprietary system. However, the Company expects this change
to come in the very near future.
o OSN competes with hardware manufacturers, and with VARs and systems
integration consultancies. Management no longer believes OSN has a
competitive advantage due to the installed base of Datapoint proprietary
hardware and software.
o OSN revenues and operating income are projected to decrease in 2000 from
already depressed 1999 levels.
Note: Figures in thousands
[BAR CHART APPEARS HERE]
1997 1998 1999 2000
---- ---- ---- ----
OSN Revenues $ 84,596 $ 90,050 $ 86,695 $ 82,719
Datapoint Corporation 13 Confidential
<PAGE>
BNY Capital Markets, Inc.
Summary Financial Information Observations
o Performance has suffered in recent years due to increasing competition and
the impact of an industry shift away from proprietary systems to open
standards.
European Operations
Note: Figures in thousands
[BAR CHART APPEARS HERE]
1997 1998 1999
Telebusiness Operating Income $3,806 $6,233 $2,841
OSN Operating Income $8,679 $8,383 $7,317
o This led to a relatively high debt level and a negative net worth, as
illustrated by a net debt of $58.4 million with an EBITDA of ($2.9)
million and net shareholder deficit of $72.1 million as of July 31, 1999.
To improve the financial condition of the Company management sold its EADS
division in the fourth quarter of 1996 and tried unsuccessfully to sell
Telebusiness in 1997.
o Since FY 1996 Datapoint has pursued actions to provide cash infusions in
order to improve its financial condition. In 1996 the Company sold its
EADS division. In 1997 Datapoint's San Antonio campus was sold and in 1999
the building in Gouda, Netherlands was sold.
Datapoint Corporation 14 Confidential
<PAGE>
BNY Capital Markets, Inc.
Summary Financial Information Observations
o Over the past several years, the Company has not devoted significant
resources to the development of new customers and revenue sources, due to
liquidity and leverage concerns.
o Revenue from the Swedish subsidiary totaled $42 million. The Swedish tax
authority has questioned the technical support/headquarters charges that
have reduced the taxable income at the local level for 1997. A decision
against Datapoint in this matter would also result in a liability for
1996, 1997, 1998 and 1999. An adverse decision would cause Datapoint to
have approximately $1.2 million in exposure. A decision is expected by the
end of 1999.
o New rules affecting the recognition and funding of pension fund
obligations in the UK were recently enacted. As a result, the Company
changed its accounting for its pension liability. If the Company is not
able to get an exemption from the new pension fund obligations, it will
owe $3.3 million.
Datapoint Corporation 15 Confidential
<PAGE>
BNY Capital Markets, Inc.
Summary of Issues Respecting Fairness
To assess the fairness from a financial point of view, BNY considered, among
other things:
o The fact that Dain had conducted a thorough auction process and its
results;
o The rights of the holders of the 8 7/8% Convertible Subordinated
Debentures including:
- payment of interest,
- sinking fund obligations,
- consent requirement for the sale of the European Operations, and
- liquidation preference;
o The rights of holders of Preferred Stock with respect to:
- dividends,
- liquidation preference, and
- the ability to influence corporate actions;
o The right of the Common Shareholders to approve the sale of the European
Operations;
o Several valuation approaches:
- Comparative company analysis
- Comparative transaction analysis
- Discounted cash flow analysis;
o The public market for the Common Stock, the Preferred Stock and the
Subordinated Debentures. The recent trading history of these securities
has been impacted by the Company's announced inability to meet its
interest and sinking fund obligations for the Subordinated Debentures from
cash flow from operations and
o The value of the Company in liquidation to the Common Shareholder.
Datapoint Corporation 16 Confidential
<PAGE>
BNY Capital Markets, Inc.
Stand-Alone Valuation of European Operations
o In valuing the European Operations on a stand-alone basis, BNY considered
three valuation approaches: the comparative company approach, the
comparative transaction, and the discounted cash flow approach.
Results of Valuation of the European Operations on a Stand-Alone Basis
- --------------------------------------------------------------------------------
(Figures in thousands)
Comparative Company Analysis
Revenues Basis EBITDA Basis
-------------- --------------
- --------------------------------------------------------------------------------
Implied Enterprise Value $ 58,340 $ 53,998
- --------------------------------------------------------------------------------
Comparative Transactions Analysis
EBITDA Basis
--------------
- --------------------------------------------------------------------------------
Implied Enterprise Value $ 61,434
- --------------------------------------------------------------------------------
Discounted Cash Flow Analysis
- --------------------------------------------------------------------------------
Implied Enterprise Value Range Low: $ 43,073 High: $ 64,601
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Datapoint Corporation 17 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Company Approach
Comparative Company Selection Criteria
o Listed in OneSource database with a primary SIC code of 7385, 7373, 7372,
5045, 3679, 3669, 3661, 3577, 3571 and companies whose business is related
to computer and communication products.
o Revenues between $25 million and $750 million.
o Company not the subject of an ancillary transaction such as a takeover or
going private deal.
o U.S. domiciled company.
Datapoint Corporation 18 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Company Approach
Comparative Company Descriptions
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LTM
----------------------- --------- --------------------------------------------------
COMPANY NAME Ticker Revenue EBITDA Mkt Value Company Description
- -------------------------------------------------------------------- --------- --------------------------------------------------
<S> <C> <C> <C> <C> <C>
AlphaNet Solutions, Inc. ALPH $ 140,022 $ 1,444 $ 33,289 AlphaNet Solutions, Inc. is a single-source
provider of information technology products,
services and support to Fortune 1000 and other
large and mid-sized companies located primarily in
the New York to Philadelphia corridor. The Company
is authorized by many industry-leading
manufacturers of IT products to resell their
products and provide related services. Such
products include workstations, servers, networking
and communications equipment, enterprise computing
products and application software. Through its
established vendor alliances, the Company provides
its customers with competitive pricing and
value-added services such as electronic product
ordering, product configuration, testing,
warehousing and delivery.
Brooktrout, Inc. BRKT $ 125,740 $ 13,077 $ 183,983 Brooktrout Technology, Inc. is a Massachusetts
corporation founded in 1984 to design, manufacture
and market computer hardware and software for use
in electronic communications applications in
telecommunications and networking environments.
Brooktrout is a supplier of advanced software and
hardware products for system vendors and service
providers in the electronic communications market.
The Company's products enable its customers to
deliver a wide range of solutions for the
integration and management of image (fax), voice
and data communications in telecommunications and
networking environments. The Company sells its
products primarily to service providers, original
equipment manufacturers ("OEMs") and value added
resellers ("VARs") both domestically and
internationally through a direct sales force and a
two-tier distribution system.
Cotelligent, Inc. CGZ $ 348,645 $ 20,332 $ 71,849 Cotelligent, Inc. is a software professional
services firm providing information technology
("IT") consulting and outsourcing services through
its five consulting practices which include
Professional Services, Technology Solutions,
Alliance Services, Network Services and IT
Education. The Company conducts operations from
offices in 27 metropolitan areas across the United
States. The Company also has two international
consultant recruiting offices, one in Brazil and
one in the Philippines. Cotelligent provides its
clients with IT solutions for complex business
issues. The Company also provides IT professionals
with a broad base of skills to its clients who
have short-term staffing support requirements.
Data Systems Network Corporation DSYS $ 55,362 $ 225 $ 4,648 Data Systems Network Corporation provides computer
network integration and data management services
in the distributed computing marketplace. Data
Systems Network's broad array of services includes
designing, installing, and managing networks of
personal computers, workstations and mainframes
linked with communications hardware and software
and peripheral equipment, selling network
components, training users and administrators of
networks and providing technical, expansion and
maintenance services. Marketing efforts are
directed at state and local governments, Fortune
1000 and middle market corporations, and
institutional users such as hospitals and
universities.
</TABLE>
- --------------------------------------------------------------------------------
Source: Business description from the 10-K of the comparable companies.
Datapoint Corporation 19 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Company Approach
Comparative Company Descriptions
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LTM
----------------------- --------- --------------------------------------------------
COMPANY NAME Ticker Revenue EBITDA Mkt Value Company Description
- -------------------------------------------------------------------- --------- --------------------------------------------------
<S> <C> <C> <C> <C> <C>
IAT Multimedia, Inc. IATA $ 45,960 $ (1,893) $ 23,454 IAT Multimedia, Inc. develops, manufacturers, and
markets high-performance personal computers, as
well as components and peripherals. The Company's
computers are assembled according to customer
specifications and sold under the trade name
"Trinology." IAT offers visual communications
products designed to enable users to participate
in video conferencing. All of IAT's revenues are
generated in Europe.
Inter-Tel, Incorporated INTL $ 297,382 $ 48,739 $ 560,258 Inter-Tel, incorporated in Arizona in 1969, is a
single point of contact, full service provider of
digital business telephone systems, call
processing software, voice processing software,
call accounting software, Internet Protocol (IP)
telephony software, computer telephone integration
("CTI") applications and long distance calling
services. Inter-Tel's products and services
include the AXXESS and Inter-Tel Axxent digital
business communication software platforms, the
AXXESSORY TALK voice processing platform, the
Inter-Tel Axxent digital business communication
software platforms, the Vocal'Net Service Provider
Software and Centralized Accounting Software and
Inter-Tel.net, an IP telephony packed switched
long distance service. The Company also provides
maintenance, leasing and support services for its
products.
InterVoice-Brite, Inc. INTV $ 329,485 $ (797) $ 510,610 InterVoice, Inc. develops, sells and services call
automation systems. The Company's historical
emphasis has been on interactive voice response
("IVR") systems, which allow individuals a self
help facility using their telephones, personal
computers, credit card terminals or voices to
access and/or provide information to computer data
bases utilized by businesses. More recently, the
Company has focused on systems for
telecommunications network operators which provide
a variety of automated services such as processing
collect and credit card calls, and advanced
calling features such as prepaid calling cards,
voice and text messaging, one number personal
numbering plans and voice dialing. In the last
year, InterVoice has increased its emphasis on
customer relationship management systems which
provide companies automated customer service,
telemarketing capability and the ability to
general sales without human interaction.
MAI Systems Corporation NOW $ 61,972 $ 1,788 $ 8,809 MAI Systems Corporation provides total information
technology solutions primarily to the hospitality,
resort and destination industry and to mid-sized
process manufacturers. The solutions provided by
the Company typically include applications
software, computer hardware, peripherals and wide
and local area network design, implementation,
installation and support. The software
applications are generally the Company's
proprietary software, or software which is
licensed to the Company on an exclusive or
non-exclusive basis. The hardware, peripherals and
networking systems are generally third-party
products which the Company distributes. Directly
and through its arrangement with third parties,
the Company provides on-site and off-site service
and support to users of its network and systems
hardware.
</TABLE>
- --------------------------------------------------------------------------------
Source: Business description from the 10-K of the comparable companies.
Datapoint Corporation 20 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Company Approach
Comparative Company Descriptions
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LTM
----------------------- --------- --------------------------------------------------
COMPANY NAME Ticker Revenue EBITDA Mkt Value Company Description
- -------------------------------------------------------------------- --------- --------------------------------------------------
<S> <C> <C> <C> <C> <C>
Network Six, Inc. NWSS $ 10,076 $ 1,569 $ 2,478 Network Six, Inc. is a systems integrator and
provider of software, information technology
consulting and network services to government and
industry. The Company has historically focused on
providing its services to state government human
services agencies. In 1998, substantial portions
of its revenues were derived from contracts with
such agencies. The Company today also targets its
marketing activities to many government agencies
other than human service agencies, as well as
higher education and network services.
Norstan, Inc. NRRD $ 483,063 $ 36,583 $ 104,441 Norstan is a leading provider of communication and
information technology ("IT") solutions for over
18,000 customers in the United States, Canada and
England. To address the complex communication
requirements of its customers, Norstan provides a
broad range of products and services, including
telephone systems, call center systems, voice
processing, network integration, voice and video
conferencing, and facilities management services.
Norstan's network of approximately 700 field
technicians and service consultants delivers
communication services to its customers. In
addition, Norstan provides a wide array of IT
solutions through IT Consulting Services. These
solutions include the design, implementation,
maintenance and modification of IT applications
and systems. IT Consulting Services currently
employs over 800 consultants and generated a 49%
increase in revenues during fiscal year 1999.
Pomeroy Computer Resources, Inc. PMRY $ 717,959 $ 46,289 $ 153,487 Pomeroy Computer Resources, Inc. is comprised of
(1) the sale and leasing of a broad range of
desktop computer equipment including hardware,
software, and related products, and (2) the
provision of information technology (IT) services
which support such computer products. Prior to
January 6, 1999, the Company (including its
wholly-owned subsidiary Global Combined
Technologies, Inc., Pomeroy Computer Resources of
South Carolina, Inc. and Technology Integration
Financial Services, Inc.) operated the IT products
and services business as a single integrated
business. In December, 1998, the Company formed a
new subsidiary, Pomeroy Select Integration
Solutions, Inc. for the purpose of operating
independently the IT services business previously
operated by the Company other than procurement and
configuration services which are directly related
to the sale of products.
Vitech America, Inc. VTCH $ 144,649 $ 28,728 $ 115,869 Vitech America, Inc. and subsidiaries are engaged
in the manufacture and direct marketing of PCs and
related products, business systems integration
products and turn-key business solutions, as well
as the financing of the purchase thereof, in the
Federal Republic of Brazil. The Company's
principal operations are conducted in Brazil by
its Brazilian subsidiaries. The parent company,
Vitech America, Inc., is based in Miami, Florida
and sources components in the United States and
throughout the world and engages in the
distribution of those components to its
subsidiaries' manufacturing operations in Brazil.
Substantially all of the Company's revenues have
been recognized in Brazil by the Company's
subsidiaries.
</TABLE>
- --------------------------------------------------------------------------------
Source: Business description from the 10-K of the comparable companies.
Datapoint Corporation 21 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Company Approach
European Operations Performance Relative to the Comparative Group
o Relative Performance of Datapoint's European Operations to the universe of
Comparatives:
Size: Slightly smaller than the median of the group based on revenues;
Growth: Significantly lower than the median of the group based on revenue
growth;
Margins: Lower gross margins than the median of the Comparatives for 1997-1999.
1999 EBITDA margins were lower than the previous year and are slightly
lower than the median for the Comparatives. A number of the
Comparatives are systems integrators and value added resellers
("VARs"), and have gross margins of 30% or more and EBITDA margins of
10% to 20%.
o Of the Comparatives, Norstan, Inc. ("Norstan") has businesses that most
closely overlap those provided by the European Operations. It offers a
similar product mix and sells directly to the end user. Its 1999 financial
performance was very similar to that of the European Operations.
o Among the Comparatives, IAT Multimedia, Inc. ("IAT") is the most similar
to the European Operations in geographic source of revenue.
Datapoint Corporation 22 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Company Approach
Comparative Company Valuation
Note: Figures in thousands
[BAR CHART APPEARS HERE]
AlphaNet Solutions, Inc. $140.0
Brooktrout, Inc. $125.7
Cotelligent, Inc. $348.6
DataSystems Network Corporation $ 55.4
IAT Multmedia, Inc. $ 46.0
Inter-Tel, Incorporation $297.4
InterVoice-Brite, Inc. $329.5
MAI Systems Corporation $ 62.0
Network Six, Inc. $ 10.1
Norstan, Inc. $483.1
Pomeroy Computer Resources, Inc. $718.0
Vitech America, Inc. $144.6
Datapoint's European Operations $133.4
Datapoint Corporation 23 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Company Approach
Comparative Company Valuation
[BAR CHART APPEARS HERE]
Gross Margin
------------
AlphaNet Solutions, Inc. 17.8%
Brooktrout, Inc. 61.4%
Cotelligent, Inc. 28.8%
DataSystems Network Corporation 18.5%
IAT Multimedia, Inc. 5.8%
Inter-Tel, Incorporated 49.1%
InterVoice-Brite, Inc. 50.1%
MAI Systems Corporation 50.0%
Network Six, Inc. 40.0%
Norstan, Inc. 30.0%
Pomeroy Computer Resources, Inc. 17.2%
Vitech America, Inc. 40.8%
Datapoint's European Operations 24.6%
Datapoint Corporation 24 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Company Approach
Comparative Company Valuation
[BAR CHART APPEARS HERE]
EBITDA Margins
AlphaNet Solutions, Inc. 1.0%
Brooktrout, Inc. 10.4%
Cotelligent, Inc. 5.8%
DataSystems Network Corporation 0.4%
IAT Multimedia, Inc. NM
Inter-Tel, Incorporated 16.4%
InterVoice-Brite, Inc. NM
MAI Systems Corporation 2.9%
Network Six, Inc. 15.6%
Norstan, Inc. 7.6%
Pomeroy Computer Resources, Inc. 6.4%
Vitech America, Inc. 19.9%
Datapoint's European Operations 6.6%
Note: InterVoice-Brite, Inc. and IAT Multimedia, Inc. have negative EBITDA
values.
Datapoint Corporation 25 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Company Approach
Comparative Company Valuation
[BAR CHART APPEARS HERE]
Revenue Growth
AlphaNet Solutions, Inc. 32.0%
Brooktrout, Inc. 37.2%
Cotelligent, Inc. 69.2%
Data Systems Network Corporation 40.4%
IAT Multimedia, Inc. 190.8%
Inter-Tel, Incorporated 21.9%
InterVoice-Brite, Inc NM
MAI Systems Corporation -1.0%
Network Six, Inc. -20.7%
Norstan, Inc. 14.4%
Pomeroy Computer Resources, Inc. 39.2%
Vitech America, Inc. 58.4%
Datapoint's European Operations 3.0%
Note: Datapoint's information represents a 2 year CAGR.
Datapoint Corporation 26 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Company Approach
Comparative Company Valuation
While all of the comparative companies have business lines that resemble
Datapoint, only IAT Multimedia is a U.S. domiciled company with substantially
all of its operations in Europe. IAT Multimedia's revenue multiple is 0.45x
while its EBITDA multiple is not meaningful as its EBITDA was negative and it
was therefore removed from the universe of comparative companies.
We then looked at the other companies. Alphanet, Data Systems Network
Corporation and InterVoice-Brite had negative earnings. As a result, their
multiples are skewed or not meaningful. We therefore removed them from the
universe of comparative companies and looked at those that remained. For the
remaining companies, the median revenue multiple is 0.44x and the median EBITDA
multiple is 6.13x.
- --------------------------------------------------------------------------------
ENTERPRISE MULTIPLES(1)
---------------------------------
COMPANY NAME Ticker Revenue EBITDA
- --------------------------------------------------------------------------------
AlphaNet Solutions, Inc. ALPH 0.18 x 17.33 x
Brooktrout, Inc. BRKT 1.09 x 10.49 x
Cotelligent, Inc. CGZ 0.34 x 5.90 x
Data Systems Network Corporation DSYS 0.16 x 38.91 x
IAT Multimedia, Inc. IATA 0.45 x NM
Inter-Tel, Incorporated INTL 1.67 x 10.19 x
InterVoice-Brite, Inc. INTV 1.87 x NM
MAI Systems Corporation NOW 0.27 x 9.28 x
Network Six, Inc. NWSS 0.44 x 2.81 x
Norstan, Inc. NRRD 0.47 x 6.24 x
Pomeroy Computer Resources, Inc. PMRY 0.28 x 4.37 x
Vitech America, Inc. VTCH 1.22 x 6.13 x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
High: 1.87 x 38.91 x
Mean: 0.70 x 11.16 x
Median: 0.45 x 7.76 x
Low: 0.16 x 2.81 x
- --------------------------------------------------------------------------------
Adjusted Summary Statistics(2)
- --------------------------------------------------------------------------------
High: 1.67 x 10.49 x
Mean: 0.72 x 6.93 x
Median: 0.44 x 6.13 x
Low: 0.27 x 2.81 x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Enterprise Multiples based on LTM Revenue and EBITDA.
(2) Adjusted Summary Statistics exclude ALPH, DSYS, IATA and INTV.
Datapoint Corporation 27 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Company Approach
Comparative Company Valuation
o The following table presents the values obtained by applying the resulting
multiples to the FY 1999 results:
Calculation of European Operations Value
- --------------------------------------------------------------------------------
($ Figures in thousands)
Adjusted Summary Statistics(1)
- --------------------------------------------------------------------------------
High: 1.67 x 10.49 x
Mean: 0.72 x 6.93 x
Median: 0.44 x 6.13 x
Low: 0.27 x 2.81 x
- --------------------------------------------------------------------------------
Datapoint's European Operation Results
Revenues EBITDA
-------- ------
1999 Actual Results $ 133,437 $ 8,810
Comparative Company Median Multiples 0.44 x 6.13 x
- --------------------------------------------------------------------------------
Implied Enterprise Value $ 58,340 $ 53,998
- --------------------------------------------------------------------------------
(1) Adjusted Summary Statistics exclude ALPH, DSYS, IATA and INTV.
Note: Using the revenue multiple of IATA and NRRD and the EBITDA multiple of
NRRD produces similar results to the Implied Enterprise Value.
Datapoint Corporation 28 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Transaction Approach
Comparative Transaction Selection Criteria
o Transactions listed in Securities Data Corporation ("SDC") database with a
primary SIC code of 7385, 7373, 7372, 5045, 3679, 3669, 3661, 3577, 3571 and
transactions where the Target's business is related to that of the European
Operations.
o Target company's revenues between $50 and $250 million.
o Completed Transactions from 11/1/98 - 11/1/99.
Datapoint Corporation 29 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Transaction Approach
Comparative Transaction Selection Criteria
o We identified 19 companies that fit the above selection criteria. None of
them were truly comparable to the European Operations, in that substantially
all of their business was generated in the United States and many of their
products and services did not overlap with those provided by the European
Operations.
o We narrowed the list to include those transactions where more than 50% of the
target was acquired and where the targets business most closely resembled
that of the European Operations. Five transactions remained. The targets in
those five transactions were: Equitrac Corporation; Brite Voice Systems,
Inc.; Vanstar Corporation; Peerless Group, Inc.; and Carnegie Group, Inc.
o Because the products among the selected companies and the realizable margins
on those products, differed greatly, the revenue multiples were not
meaningful for our analysis. We therefore use the EBITDA multiples for the
remaining five companies.
Datapoint Corporation 30 Confidential
<PAGE>
BNY Capital Markets, Inc.
<TABLE>
<CAPTION>
Comparative Transactions Approach
Comparative Transactions Valuation
- --------------------------------------------------------------------------------
($ Figures in thousands) TRANSACTION VALUE
-------------------- -------------------------------------------- ---------------------------- -------------------------
No. Announc. Effective TARGET COMPANY Acquisition ACQUIROR COMPANY Equity TEV
-------------------- -------------------------------- ----------- ---------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 02/17/99 08/06/99 Equitrac Corporation $ 77,140 Chargeback Acquisition Corp. $ 77,140 $ 68,421
Equitrac is a leading provider 100.0% ("Merger Sub") for
of computer system solutions to Cornerstone Equity
manage office equipment Investors IV, L.P.
resources
--------------------------------------------------------------------------------------------------------------------------
2 04/27/99 08/13/99 Brite Voice Systems, Inc. $ 122,719 InterVoice, Inc. $ 163,626 $ 151,194
Brite Voice Systems, Inc. 75.0%
designs, integrates, assembles,
markets, and support voice
processing and call processing
systems and services.
--------------------------------------------------------------------------------------------------------------------------
3 10/09/98 02/17/99 Vanstar Corporation $ 680,800 Inacom Corp. $ 680,800 $1,189,690
Vanstar Corporation provides 100.0%
services and products designed
to build, manage, and enhance
personal computer network
infrastructures of Fortune 1000
companies and other larger
enterprises.
--------------------------------------------------------------------------------------------------------------------------
4 08/19/98 12/16/98 Peerless Group, Inc. $ 33,000 Jack Henry & Associates $ 33,000 $ 31,623
Peerless Group designs, 100.0%
develops, installs and supports
integrated information systems
and check and statement
processing solutions.
--------------------------------------------------------------------------------------------------------------------------
5 10/01/98 11/06/98 Carnegie Group, Inc. $ 32,800 Logica PLC $ 32,800 $ 27,233
Provides business and technical 100.0%
consulting, client/server and
internet-based custom software
development, third-party
package implementation and
systems integrations services.
--------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------
High: $680,800 $1,189,690
Mean: $197,473 $293,632
Median: $77,140 $68,421
Low: $32,800 $27,233
-------------------------------------------------------
<CAPTION>
ACQUISITION MULTIPLES
---------- -------------------------------------------
Contributed Book
No. Announc. Revenue EBITDA Equity Value
--------- -------------------- ----------------------
<S> <C> <C> <C> <C> <C>
1 02/17/99 1.23 x 6.97 x 6.03 x 2.29 x
------------------------------------------------------
2 04/27/99 1.03 x 14.59 x 3.61 x 1.92 x
------------------------------------------------------
3 10/09/98 0.20 x 5.30 x NA NA
------------------------------------------------------
4 08/19/98 0.50 x 7.60 x 4.11 x 3.47 x
------------------------------------------------------
5 10/01/98 1.00 x 2.50 x 0.85 x 1.24 x
------------------------------------------------------
---------------------------------------------
High: 14.59 x
Mean: 7.39 x
Median: 6.97 x
Low: 2.50 x
---------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Datapoint Corporation 31 Confidential
<PAGE>
BNY Capital Markets, Inc.
Comparative Transactions Approach
Comparative Transactions Valuation
o The following table presents the values obtained by applying the resulting
multiples to the FY 1999 results:
Calculation of European Operations Value
- --------------------------------------------------------------------------------
($ Figures in thousands)
Summary Statistics
- --------------------------------------------------------------------------------
High: 14.59 x
Mean: 7.39 x
Median: 6.97 x
Low: 2.50 x
- --------------------------------------------------------------------------------
Datapoint's European Operation Results
EBITDA
------
1999 Actual Results $ 8,810
Comparative Transactions Median Multiples 6.97 x
- --------------------------------------------------------------------------------
Implied Enterprise Value $ 61,434
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Datapoint Corporation 32 Confidential
<PAGE>
BNY Capital Markets, Inc.
Discounted Cash Flow Valuation
o We performed a discounted cash flow valuation of Datapoint based on a
discounted cash flow analysis that:
- Discounts cumulative stream of free cash flow to the present
(November 1, 1999);
- Assumes a terminal value based on a multiple of 2004 EBITDA.
o Management's projections formed the basis of the analysis:
(i) Revenues:
- Telebusiness annual sales growth of 15% and OSN annual sales decline
of 5%;
- Telebusiness gross margins of 29% (equal to 1999) and OSN gross
margins of 20% remain constant throughout the projected years;
- Telebusiness operating margins of 10% remain constant throughout the
projected years while OSN operating margins decline annually by 0.5%
from the 2000 rate;
(ii) Technical Service/HQ charges were assumed to remain flat at year 2000
pro forma estimated levels;
(iii) Capital Expenditures remain flat at year 2000 projected levels;
o Key assumptions:
(i) Terminal year 2004;
(ii) Datapoint's calculated cost of unlevered equity is 15.08%;
(iii) A range of unlevered cost of equity of 14%, 16%, 18% and 20% is used to
discount Datapoint's free cash flow and terminal value;
(iv) Terminal multiple of 2004 EBITDA in a range of 5.0x to 6.5x.
Datapoint Corporation 33 Confidential
<PAGE>
BNY Capital Markets, Inc.
Discounted Cash Flow Valuation
Potential Areas for Concern
o Datapoint may be unable to maintain pro forma profitability and/or meet the
projections utilized in the discounted cash flow analysis due to a
combination of:
(i) competition from larger, better capitalized companies;
(ii) inability to effectively generate new customers and revenues to replace
customers expected to switch from Datapoint proprietary products to
third-party products;
(iii) faster than expected switching of OSN's customers from Datapoint
proprietary products to third-party products;
o Operating results may be impacted by issues beyond the Company's control such
as:
(i) a general recession;
(ii) unfavorable foreign exchange rates;
(iii) technological change.
Datapoint Corporation 34 Confidential
<PAGE>
BNY Capital Markets, Inc.
<TABLE>
<CAPTION>
Discounted Cash Flow Valuation
Datapoint Projections for European Operations
- --------------------------------------------------------------------------------
(Figures in thousands) Projected July 31,
-------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Telebusiness Revenues $ 66,685 $ 76,688 $ 88,191 $ 101,420 $ 116,632
OSN Revenues 82,719 78,583 74,654 70,921 67,375
-------------- -------------- -------------- -------------- --------------
Total Revenues 149,404 155,271 162,845 172,341 184,008
Telebusiness Gross Profit 19,425 22,339 25,690 29,543 33,974
OSN Gross Profit 19,010 15,717 14,931 14,184 13,475
-------------- -------------- -------------- -------------- --------------
Total Gross Profit 38,435 38,055 40,620 43,727 47,449
Telebusiness Operating Expenses 13,014 14,670 16,870 19,401 22,311
OSN Operating Expenses 12,750 10,163 10,028 9,881 9,724
-------------- -------------- -------------- -------------- --------------
Total Operating Expenses 25,764 24,833 26,898 29,282 32,035
Telebusiness Operating Income 6,411 7,669 8,819 10,142 11,663
OSN Operating Income 6,260 5,554 4,903 4,303 3,751
Less: Increased Depreciation - 500 1,000 1,500 1,500
-------------- -------------- -------------- -------------- --------------
Total Operating Income(1) $ 12,671 $ 12,723 $ 12,722 $ 12,945 $ 13,915
============== ============== ============== ============== ==============
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes the increased depreciation costs which are not directly allocable
to Telebusaness and 05N operations.
Datapoint Corporation 35 Confidential
<PAGE>
BNY Capital Markets, Inc.
Discounted Cash Flow Valuation
Cost of Equity
- --------------------------------------------------------------------------------
Rate
----
Unlevered Cost of Equity
Risk Free Rate (1) 6.48%
------
Risk Premium for Equities (2) 8.00
Unlevered Specific Industry Risk Factor (3) 0.75
------
Industry Specific Risk Premium for Equities (4) 6.00
Small Size Company Premium (2) 2.60
------
Total Premium for Equities (5) 8.60
------
Unlevered Cost of Equity (6) 15.08%
======
Footnotes:
- ----------
(1) Yield on the 20-year U.S. Government Bond.
(2) Based on Ibbotson & Associates 1999 Yearbook.
(3) A forward looking levered beta for the systems integration industry is 1.
An unlevered forward looking beta, assuming an average debt/equity ratio is .75.
(4) Risk Premium for Equities x Specific Industry Risk Factor.
(5) Industry Specific Risk Premium for Equities + Small Size Company Premium.
(6) Risk Free Rate + Total Premium for Equities.
- --------------------------------------------------------------------------------
Datapoint Corporation 36 Confidential
<PAGE>
BNY Capital Markets, Inc.
<TABLE>
<CAPTION>
Discounted Cash Flow Valuation
Equity Valuation Matrices
- --------------------------------------------------------------------------------
Valuation Summary
($ in thousands)
Discount -----------------------------------------------------------------------
Rate 5.0 x 5.5 x 6.0 x 6.5 x
- ----------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
14.00% $15,532 $15,532 $15,532 $15,532 Present Value of Cash Flows
37,745 41,520 45,294 49,069 Present Value of Terminal Value
- ----------- -------------- ------------- ------------- --------------
$53,277 $57,052 $60,826 $64,601 Total Enterprise Value
============== ============= ============= ==============
0.4 x 0.4 x 0.5 x 0.5 x As a Multiple of 1999 Sales
6.0 6.5 6.9 7.3 As a Multiple of 1999 EBITDA
16.00% $14,799 $14,799 $14,799 $14,799 Present Value of Cash Flows
34,752 38,227 41,703 45,178 Present Value of Terminal Value
- ----------- -------------- ------------- ------------- --------------
$49,551 $53,026 $56,502 $59,977 Total Enterprise Value
============== ============= ============= ==============
0.4 x 0.4 x 0.4 x 0.4 x As a Multiple of 1999 Sales
5.6 6.0 6.4 6.8 As a Multiple of 1999 EBITDA
18.00% $14,120 $14,120 $14,120 $14,120 Present Value of Cash Flows
32,042 35,246 38,450 41,654 Present Value of Terminal Value
- ----------- -------------- ------------- ------------- --------------
$46,162 $49,366 $52,570 $55,774 Total Enterprise Value
============== ============= ============= ==============
0.3 x 0.4 x 0.4 x 0.4 x As a Multiple of 1999 Sales
5.2 5.6 6.0 6.3 As a Multiple of 1999 EBITDA
20.00% $13,490 $13,490 $13,490 $13,490 Present Value of Cash Flows
29,583 32,542 35,500 38,458 Present Value of Terminal Value
- ----------- -------------- ------------- ------------- --------------
$43,073 $46,032 $48,990 $51,948 Total Enterprise Value
============== ============= ============= ==============
0.3 x 0.3 x 0.4 x 0.4 x As a Multiple of 1999 Sales
4.9 5.2 5.6 5.9 As a Multiple of 1999 EBITDA
- --------------------------------------------------------------------------------
</TABLE>
Datapoint Corporation 37 Confidential
<PAGE>
BNY Capital Markets, Inc.
The Composite Range for a Stand-alone Entity
Based on the above analysis, BNY derived a composite range of values for the
European Operations as a stand-alone entity of $43.1 million to $64.6 million.
In deriving this composite range, BNY took into account, among other things:
o There are no truly comparable publicly traded companies to the European
Operations.
o There were no truly comparable acquisitions from November 1998 through
November 1999.
o The DCF is based on optimistic financial results for 2000. Despite the fact
that the European Operations have historically failed to meet their more
modest growth projections, the AOP for 2000 projects revenue growth for
Telebusiness of 42.7% and overall revenue growth of 12%. In addition, the AOP
for 2000 projects operating income growth of 125.6% for Telebusiness and
overall operating income growth of 24.7% over 1999.
(Figures in thousands)
BNY Composite Range - Stand-Alone
- --------------------------------------------------------------------------------
Low High
------- -------
Comparative Companies Range: $53,998 $58,340
Comparative Transactions: $61,434
Discounted Cash Flow Range: $43,073 $64,601
- --------------------------------------------------------------------------------
Datapoint Corporation 38 Confidential
<PAGE>
BNY Capital Markets, Inc.
The Capital Structure
The above analyses establish a range of values for the European Operations as a
stand-alone entity. However, they do not address the issues associated with
Datapoint's capital structure that affect the price a willing buyer will pay.
Datapoint is capitalized with Debentures with $55 million in face value,
Preferred Stock with a liquidation preference of $16.5 million, and 18.3 million
shares of Common Stock. A fair value for the European Operations, which
represent all of the current operating income of the Company, is below the face
value of the Debentures and the liquidation preference of the Preferred Stock.
Both the Debentures and the Preferred Stock have senior positions to the Common
Shares. However, in addition to the two-thirds of the Debenture Holders that
must give their consent to the sale of the European Operations, one-half of the
Common Shareholders must also vote to allow the sale of the European Operations.
While this process takes place, the buyer does not know whether or not the deal
will be consummated.
The requirement of approvals from both the Debenture Holders and the Common
Shareholders, each of which is competing for the same proceeds, greatly reduces
the probability of reaching a favorable outcome when compared to only having to
receive approval from one group.
This increase in uncertainty is a risk for which buyers must be compensated. All
other things being equal, the buyer has more control and lower transaction risks
when buying a stand-alone business with the same characteristics than when
buying the European Operations with the attendant competing approval
requirements.
The discount given to this capital structure and the uncertainties associated
with it are similar to those for lack of liquidity or marketability. The
marketability discount is a succinct way of saying that investors expect higher
rates of return, and hence lower prices, when they cannot control the outcome of
the buy/sell process.
Datapoint Corporation 39 Confidential
<PAGE>
BNY Capital Markets, Inc.
The Capital Structure
Depending on the circumstances, marketability discounts range from 20-60% or
greater. BNY believes that a corresponding capital structure discount that takes
into account the risks of a buyer consummating a deal for the European
Operations based on the competing interests of the different security holders is
at least 20%.
Datapoint Corporation 40 Confidential
<PAGE>
BNY Capital Markets, Inc.
The Capital Structure Discount
The analysis below establishes a range of values for the European Operations
starting with the stand-alone entity and then applying a 20% discount as
described above.
(Figures in thousands)
BNY Composite Range - Stand-Alone
- --------------------------------------------------------------------------------
Low High
------- -------
Comparative Companies Range: $53,998 $58,340
Comparative Transactions: $61,434
Discounted Cash Flow Range: $43,073 $64,601
- --------------------------------------------------------------------------------
Capital Structure Discount 20.0%
Capital Structure Discount Range
- --------------------------------------------------------------------------------
Low High
------- -------
Comparative Companies Range: $43,198 $46,672
Comparative Transactions: $49,147
Discounted Cash Flow Range: $34,459 $51,680
- --------------------------------------------------------------------------------
Datapoint Corporation 41 Confidential
<PAGE>
BNY Capital Markets, Inc.
Liquidation Value
o The Company does not plan a liquidation. However, if the Company is unable to
meet its interest and sinking fund payments on the 8 7/8% Subordinated
Debentures, the holders of those debentures can force the Company to
liquidate its assets to meet its obligations. The Company does not believe it
can meet its interest and sinking fund obligations from operating income. The
Company's balance sheet as of July 31, 1999 showed net fixed assets of $6
million. Current obligations include an interest payment of $2.5 million on
December 1, 1999 and a sinking fund payment and interest payment of $7.5
million on June 1, 2000.
o In a liquidation, the obligations to the 8 7/8% Subordinated Debentures and
the Preferred Stock preference value of $20 per share, would come before the
interests of the Common Shareholders.
o The face value of the outstanding 8 7/8% Subordinated Debentures is $55
million.
o As of July 31, 1999 there were 661,967 shares of Preferred Stock outstanding
with an aggregate liquidation preference, including dividends in arrears, of
$16.5 million.
o The total outstanding face value of the securities whose claims come ahead of
the Common Shareholders in liquidation is $71.5 million.
o Given the current bid for the European Operations (which make up
substantially all of the Company's revenues and operating income), the value
of the assets is not sufficient to satisfy the liabilities and Preferred
Stock preference in liquidation.
o A sale of the Company in liquidation is likely to bring much less than the
current bid as a result of the process involved. Current academic literature
points to receipts of less than 50% of the "fair-market value" in distressed
sales situations.
Datapoint Corporation 42 Confidential
<PAGE>
BNY Capital Markets, Inc.
Conclusion
Based upon and subject to the foregoing, including the various assumptions and
limitations set forth herein it is our opinion that, as of the date hereof, the
consideration to be received by the Company in the Transaction pursuant to the
Agreement, is fair to the Minority Shareholders from a financial point of view.
Datapoint Corporation 43 Confidential
<PAGE>
- --------------------------------------------------------------------------------
Datapoint Corporation TRADING MULTIPLES
- --------------------------------------------------------------------------------
(Figures in US$ Millions, except per share data)
Date: 12/01/99
<TABLE>
<CAPTION>
SHARE PRICE (1) MARKET VALUES
---------------------------- -------------------------
COMPANY NAME Ticker FYE LTM Current High Low Equity Enterprise
- ------------------------------------------------------------------- ---------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AlphaNet Solutions, Inc. ALPH 12/31/98 09/30/99 $5.31 $6.75 $2.88 $33,289 $25,022
Brooktrout, Inc. BRKT 12/31/98 09/30/99 $17.00 $20.81 $9.88 $183,983 $137,156
Cotelligent, Inc. CGZ 03/31/99 09/30/99 $4.75 $5.63 $2.75 $71,849 $120,008
Data Systems Network Corporation DSYS 12/31/98 09/30/99 $0.84 $3.13 $0.38 $4,648 $8,771
IAT Multimedia, Inc. IATA 12/31/98 09/30/99 $2.38 $9.69 $1.56 $23,454 $20,837
Inter-Tel, Incorporated INTL 12/31/98 09/30/99 $21.63 $28.13 $11.50 $560,258 $496,694
InterVoice-Brite, Inc. INTV 02/28/99 08/31/99 $15.94 $18.13 $8.94 $510,610 $615,618
MAI Systems Corporation NOW 12/31/98 09/30/99 $0.81 $4.00 $0.44 $8,809 $16,597
Network Six, Inc. NWSS 12/31/98 09/30/99 $3.13 $6.75 $3.13 $2,478 $4,405
Norstan, Inc. NRRD 04/30/99 07/31/99 $9.63 $18.63 $7.00 $104,441 $228,118
Pomeroy Computer Resources, Inc. PMRY 01/05/99 10/05/99 $13.00 $23.13 $10.13 $153,487 $202,413
Vitech America, Inc. VTCH 12/31/98 09/30/99 $7.63 $18.00 $6.88 $115,869 $176,081
- ------------------------------------------------------------------- ---------------------------- -------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Datapoint Corporation DTPT 07/31/99 07/31/99 $0.56 $2.06 $0.50 $10,275 $68,677
- ---------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------
High: $560,258 $615,618
Mean: $147,765 $170,977
Median: $88,145 $128,582
Low: $2,478 $4,405
-----------------------------------------------------------
Adjusted Summary Statistics(4)
-----------------------------------------------------------
High: $560,258 $496,694
Mean: $150,147 $172,684
Median: $104,441 $137,156
Low: $2,478 $4,405
-----------------------------------------------------------
<CAPTION>
ENTERPRISE MULTIPLES(2) EQUITY MULTIPLES
----------------------------------------------------------- ---------------
COMPANY NAME Ticker Revenue EBITDA Contr. Cap (3) Book Value Beta
- --------------------------------------------- ----------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
AlphaNet Solutions, Inc. ALPH 0.18 x 17.33 x 0.97 x 0.78 x 0.73
Brooktrout, Inc. BRKT 1.09 x 10.49 x 3.90 x 2.35 x 1.24
Cotelligent, Inc. CGZ 0.34 x 5.90 x 0.88 x 0.79 x 1.21
Data Systems Network Corporation DSYS 0.16 x 38.91 x 0.22 x 1.55 x NA
IAT Multimedia, Inc. IATA 0.45 x NM 0.72 x 2.04 x 0.19
Inter-Tel, Incorporated INTL 1.67 x 10.19 x 5.36 x 3.58 x 1.27
InterVoice-Brite, Inc. INTV 1.87 x NM 11.60 x 5.36 x 0.76
MAI Systems Corporation NOW 0.27 x 9.28 x 0.04 x NM 0.53
Network Six, Inc. NWSS 0.44 x 2.81 x 0.59 x 1.05 x 0.90
Norstan, Inc. NRRD 0.47 x 6.24 x 1.96 x 0.95 x 0.33
Pomeroy Computer Resources, Inc. PMRY 0.28 x 4.37 x 2.34 x 1.36 x 0.87
Vitech America, Inc. VTCH 1.22 x 6.13 x 1.77 x 2.81 x 0.98
- --------------------------------------------- ----------------------------------------------------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------
Datapoint Corporation DTPT 0.50 x 234.39 x 0.05 x NM 0.19
- ---------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
High: 1.87 x 38.91 x 11.60 x 5.36 x 1.27
Mean: 0.70 x 11.16 x 2.53 x 2.06 x 0.82
Median: 0.45 x 7.76 x 1.37 x 1.55 x 0.87
Low: 0.16 x 2.81 x 0.04 x 0.78 x 0.19
-------------------------------------------------------------------------------------------------------------
Adjusted Summary Statistics(4)
-------------------------------------------------------------------------------------------------------------
High: 1.67 x 10.49 x 5.36 x 3.58 x 1.27 x
Mean: 0.72 x 6.93 x 2.11 x 1.84 x 0.92 x
Median: 0.44 x 6.13 x 1.77 x 1.21 x 0.90 x
Low: 0.27 x 2.81 x 0.04 x 0.79 x 0.33 x
-------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES
- -----
(1) Current Share Price and 52-Week High/Low.
(2) Enterprise Multiples based on LTM Revenue and EBITDA
(3) Contributed Capital = Common plus Preferred Shares.
(4) Adjusted Summary Statistics exclude ALPH, DSYS, IATA and INTV.
BNY Capital Markets, Inc. Page 1 of 10
<PAGE>
- --------------------------------------------------------------------------------
Datapoint Corporation Operating Statistics
- --------------------------------------------------------------------------------
(Figures in US$ thousands, except per share data)
Date: 12/02/99
<TABLE>
<CAPTION>
LTM FINANCIAL RESULTS
------------------------------------------------------------
COMPANY NAME Ticker FYE LTM Revenue Gross Profit EBITDA EBIT Net Income
- -------------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AlphaNet Solutions, Inc. ALPH 12/31/98 09/30/99 $140,022 $24,904 $1,444 ($1,227) ($392)
Brooktrout, Inc. BRKT 12/31/98 09/30/99 $125,740 $77,244 $13,077 $8,232 $14,266
Cotelligent, Inc. CGZ 03/31/99 09/30/99 $348,645 $100,276 $20,332 $14,507 $6,653
Data Systems Network Corporation DSYS 12/31/98 09/30/99 $55,362 $10,240 $225 ($865) ($1,357)
IAT Multimedia, Inc. IATA 12/31/98 09/30/99 $45,960 $2,644 ($1,893) ($2,564) ($803)
Inter-Tel, Incorporated INTL 12/31/98 09/30/99 $297,382 $146,116 $48,739 $40,062 $25,916
InterVoice-Brite, Inc. INTV 02/28/99 08/31/99 $329,485 $164,937 ($797) ($19,466) ($30,950)
MAI Systems Corporation NOW 12/31/98 09/30/99 $61,972 $30,983 $1,788 ($2,085) ($4,232)
Network Six, Inc. NWSS 12/31/98 09/30/99 $10,076 $4,026 $1,569 $1,491 $913
Norstan, Inc. NRRD 04/30/99 07/31/99 $483,063 $144,930 $36,583 $14,269 $5,019
Pomeroy Computer Resources, Inc. PMRY 01/05/99 10/05/99 $717,959 $123,206 $46,289 $41,571 $22,761
Vitech America, Inc. VTCH 12/31/98 09/30/99 $144,649 $59,045 $28,728 $24,394 ($15,514)
- -----------------------------------------------------------------------------------------------------------------------------------
Datapoint Corporation DTPT 07/31/99 07/31/99 $138,285 $35,587 $293 ($2,886) ($7,549)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
European Operations 07/31/99 07/31/99 $133,437 $32,866 $8,810 $10,158 $3,648
- -----------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------
High: $717,959 $164,937 $48,739 $41,571
Mean: $230,026 $74,046 $16,340 $9,860
Median: $142,336 $68,144 $7,433 $4,862
Low: $10,076 $2,644 ($1,893) ($19,466)
---------------------------------------------------------------------------
Adjusted Summary Statistics(1)
---------------------------------------------------------------------------
High: $717,959 $146,116 $48,739 $41,571
Mean: $278,171 $85,555 $24,205 $17,298
Median: $221,016 $88,760 $24,530 $14,388
Low: $45,960 $2,644 ($1,893) ($2,564)
---------------------------------------------------------------------------
<CAPTION>
LTM LEVERAGE
MARGINS STATISTICS 3 Year CAGR
------------- --------------- ------------ ---------- -----------
COMPANY NAME Ticker EBITDA Gross Profit Debt/MC Revenue EBIT
- -------------------------------------------- ------------- --------------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
AlphaNet Solutions, Inc. ALPH 1.0% 17.8% 2.15% 31.97% -6.1%
Brooktrout, Inc. BRKT 10.4% 61.4% 4.49% 37.20% 4.6%
Cotelligent, Inc. CGZ 5.8% 28.8% 40.24% 69.25% 106%
Data Systems Network Corporation DSYS 0.4% 18.5% 55.39% 40.41% NM
IAT Multimedia, Inc. IATA NM 5.8% 12.11% 190.77% NM
Inter-Tel, Incorporated INTL 16.4% 49.1% NA 21.93% 37.78%
InterVoice-Brite, Inc. INTV NM 50.1% 20.91% NM NM
MAI Systems Corporation NOW 2.9% 50.0% 55.60% -1.00% NM
Network Six, Inc. NWSS 15.6% 40.0% 62.69% -20.68% NM
Norstan, Inc. NRRD 7.6% 30.0% 54.44% 14.37% 2.02%
Pomeroy Computer Resources, Inc. PMRY 6.4% 17.2% 25.63% 39.15% 55.09%
Vitech America, Inc. VTCH 19.9% 40.8% 37.60% 58.38% 66.72%
- --------------------------------------------------------------------------------------------------------------------
Datapoint Corporation DTPT 0.2% 25.7% 85.84% -8.26% NM
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
European Operations 6.6% 24.6% #REF! -9.80%
- --------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
High: 19.9% 61.4% 62.7% 190.8% 105.7%
Mean: 8.6% 34.1% 33.7% 43.8% 38.0%
Median: 7.0% 35.0% 37.6% 37.2% 37.8%
Low: 0.4% 5.8% 2.1% -20.7% -6.1%
----------------------------------------------------------------------------------------
Adjusted Summary Statistics(1)
----------------------------------------------------------------------------------------
High: 19.9% 61.4% 55.6% 190.8% 105.7%
Mean: 9.9% 35.4% 32.9% 53.8% 45.3%
Median: 7.6% 35.4% 37.6% 38.2% 46.4%
Low: 2.9% 5.8% 4.5% -1.0% 2.0%
----------------------------------------------------------------------------------------
</TABLE>
NOTES
- -----
(1) Adjusted Summary Statistics exclude ALPH, DSYS, IATA and INTV.
BNY Capital Markets, Inc. Page 2 of 10
<PAGE>
- --------------------------------------------------------------------------------
Datapoint Corporation Company Financial Data
- --------------------------------------------------------------------------------
Date: 12/01/99
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Data
AlphaNet Systems IAT
Solutions, Brooktrout, Cotelligent, Network Multimedia, Inter-Tel
Inc.(A) Inc.(B) Inc. Corporation(C) Inc.(D) Incorporated(E)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Market: NASDAQ NASDAQ NYSE NASDAQ NASDAQ NASDAQ
Ticker: ALPH BRKT CGZ DSYS IATA INTL
FYE: 12/31/98 12/31/98 03/31/99 12/31/98 12/31/98 12/31/98
LTM: 09/30/99 09/30/99 09/30/99 09/30/99 09/30/99 09/30/99
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MARKET STATISTICS
Closing Share Price $ 5.31 $ 17.00 $ 4.75 $ 0.84 $ 2.38 $ 21.63
Common Shares (MM) 6,266 10,823 15,126 5,509 9,876 25,908
Market Value of Equity (1) 33,289 183,983 71,849 4,648 23,454 560,258
Cash & Equivalents 8,997 55,480 217 1,648 5,848 63,564
Off Balance Sheet Assets 0 0 0 0 0 0
Total Debt (2) 730 8,653 48,375 5,771 3,230 0
Net Debt (8,267) (46,827) 48,158 4,123 (2,618) (63,564)
Enterprise Value (3) 25,022 137,156 120,008 8,771 20,837 496,694
Technology Value (4) 24,292 128,503 71,632 3,000 17,607 496,694
52-Week High Share Price $ 6.75 $ 20.81 $ 5.63 $ 3.13 $ 9.69 $ 28.13
52-Week Low Share Price $ 2.88 $ 9.88 $ 2.75 $ 0.38 $ 1.56 $ 11.50
EARNINGS & BETA
LTM Primary EPS ($0.06) $1.32 $0.44 ($0.25) ($0.08) $1.00
Nelson's FY 1999 E.P.S. Est. (5) $0.15 $0.65 $0.08 NA NA $1.01
Nelson's FY 2000 E.P.S. Est. $0.49 $0.88 $0.37 NA NA $1.35
LTM Beta Estimate 0.73 1.24 1.21 NA 0.19 1.27
MARKET MULTIPLES
Revenue (6) 0.2 x 1.1 x 0.3 x 0.2 x 0.5 x 1.7 x
EBITDA (7) 17.3 x 10.5 x 5.9 x 38.9 x NM 10.2 x
EBIT (8) NM 16.7 x 8.3 x NM NM 12.4 x
Net Income (9) NM 12.9 x 10.8 x NM NM 21.6 x
Nelson's FY 1998 E.P.S. Est. (5) 35.4 x 26.2 x 59.4 x NA NA 21.4 x
Nelson's FY 1999 E.P.S. Est. 10.8 x 19.3 x 12.8 x NA NA 16.0 x
Tangible Book Value 0.8 x 2.3 x 0.8 x 1.6 x 2.0 x 3.6 x
Contributed Equity Capital 1.0 x 3.9 x 0.9 x 0.2 x 0.7 x 5.4 x
LTM FINANCIAL RESULTS
Revenues 140,022 125,740 348,645 55,362 45,960 297,382
S,G&A 26,131 41,829 78,944 11,105 4,965 92,292
Gross Profit 24,904 77,244 100,276 10,240 2,644 146,116
EBITDA 1,444 13,077 20,332 225 (1,893) 48,739
EBIT (1,227) 8,232 14,507 (865) (2,564) 40,062
Net Income (10) (392) 14,266 6,653 (1,357) (803) 25,916
Book Value 42,928 78,345 90,568 2,996 11,505 156,457
Tangible Book Value 42,928 64,935 15,225 121 11,505 156,457
Contributed Equity Capital 34,173 47,208 81,644 21,571 32,697 104,432
CAPITAL & RETURN
Total Debt/(TD + Bk. Equity) 1.7% 9.9% 34.8% 65.8% 21.9% 0.0%
Total Debt/(TD + Mkt. Equity) 2.1% 4.5% 40.2% 55.4% 12.1% NA
MARGINS
Gross Margin 17.8% 61.4% 28.8% 18.5% 5.8% 49.1%
LTM EBITDA Margin 1.0% 10.4% 5.8% 0.4% NM 16.4%
LTM EBIT Margin NM 6.5% 4.2% NM NM 13.5%
LTM Net Income Margin NM 11.3% 1.9% NM NM 8.7%
LEVERAGE
LTM Sen Debt / EBITDA 0.5 x NM 2.4 x 25.4 x NM NM
LTM Total Debt / EBITDA 0.5 x 0.7 x 2.4 x 25.6 x NM NM
THREE-YEAR CAGRs
3 Year CAGR Revenues 32.0% 37.2% 69.2% 40.4% 190.8% 21.9%
3 Year CAGR EBIT (6.1%) 4.6% 105.7% NM NM 37.8%
<CAPTION>
-----------------------------------------------------------------------------------------
Pomeroy
Intervoice- MAI Computer Vitech
Brite Systems Network Six, Norstan, Resources, America,
Inc.(F) Corporation Inc.(G) Inc.(H) Inc. Inc.
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Market: NASDAQ AMERICAN NASDAQ NASDAQ NASDAQ NASDAQ
Ticker: INTV NOW NWSS NRRD PMRY VTCH
FYE: 02/28/99 12/31/98 12/31/98 04/30/99 01/05/99 12/31/98
LTM: 08/31/99 09/30/99 09/30/99 07/31/99 10/05/99 09/30/99
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MARKET STATISTICS
Closing Share Price $ 15.94 $ 0.81 $ 3.13 $ 9.63 $ 13.00 $ 7.63
Common Shares (MM) 32,038 10,842 793 10,851 11,807 15,196
Market Value of Equity (1) 510,610 8,809 2,478 104,441 153,487 115,869
Cash & Equivalents 29,992 3,242 2,236 1,122 3,962 9,594
Off Balance Sheet Assets 0 0 0 0 0 0
Total Debt (2) 135,000 11,030 4,163 124,799 52,888 69,806
Net Debt 105,008 7,788 1,928 123,677 48,926 60,212
Enterprise Value (3) 615,618 16,597 4,405 228,118 202,413 176,081
Technology Value (4) 480,618 5,567 242 103,319 149,525 106,275
52-Week High Share Price $ 18.13 $ 4.00 $ 6.75 $ 18.63 $ 23.13 $ 18.00
52-Week Low Share Price $ 8.94 $ 0.44 $ 3.13 $ 7.00 $ 10.13 $ 6.88
EARNINGS & BETA
LTM Primary EPS ($0.97) ($0.39) $1.15 $0.46 $1.93 ($1.02)
Nelson's FY 1999 E.P.S. Est. (5) $0.67 NA NA $0.60 $2.06 $1.45
Nelson's FY 2000 E.P.S. Est. $1.06 NA NA $0.90 $2.42 NA
LTM Beta Estimate 0.76 0.53 0.90 0.33 0.87 0.98
MARKET MULTIPLES
Revenue (6) 1.9 x 0.3 x 0.4 x 0.5 x 0.3 x 1.2 x
EBITDA (7) NM 9.3 x 2.8 x 6.2 x 4.4 x 6.1 x
EBIT (8) NM NM 3.0 x 16.0 x 4.9 x 7.2 x
Net Income (9) NM NM 2.7 x 20.8 x 6.7 x NM
Nelson's FY 1998 E.P.S. Est. (5) 23.8 x NA NA 16.0 x 6.3 x 5.3 x
Nelson's FY 1999 E.P.S. Est. 15.0 x NA NA 10.7 x 5.4 x NA
Tangible Book Value 5.4 x NM 1.1 x 0.9 x 1.4 x 2.8 x
Contributed Equity Capital 11.6 x 0.0 x 0.6 x 2.0 x 2.3 x 1.8 x
LTM FINANCIAL RESULTS
Revenues 329,485 61,972 10,076 483,063 717,959 144,649
S,G&A 120,209 25,628 2,534 130,661 75,075 34,651
Gross Profit 164,937 30,983 4,026 144,930 123,206 59,045
EBITDA (797) 1,788 1,569 36,583 46,289 28,728
EBIT (19,466) (2,085) 1,491 14,269 41,571 24,394
Net Income (10) (30,950) (4,232) 913 5,019 22,761 (15,514)
Book Value 95,196 (7,585) 2,353 110,471 112,989 41,190
Tangible Book Value (13,441) (15,796) 2,353 71,307 112,989 21,819
Contributed Equity Capital 44,035 220,399 4,201 53,334 65,572 65,346
CAPITAL & RETURN
Total Debt/(TD + Bk. Equity) 58.6% 100.0% 63.9% 53.0% 31.9% 62.9%
Total Debt/(TD + Mkt. Equity) 20.9% 55.6% 62.7% 54.4% 25.6% 37.6%
MARGINS
Gross Margin 50.1% 50.0% 40.0% 30.0% 17.2% 40.8%
LTM EBITDA Margin NM 2.9% 15.6% 7.6% 6.4% 19.9%
LTM EBIT Margin NM NM 14.8% 3.0% 5.8% 16.9%
LTM Net Income Margin NM NM 9.1% 1.0% 3.2% NM
LEVERAGE
LTM Sen Debt / EBITDA NM 6.2 x 1.2 x 2.1 x 1.1 x 2.4 x
LTM Total Debt / EBITDA NM 6.2 x 2.7 x 3.4 x 1.1 x 2.4 x
THREE-YEAR CAGRs
3 Year CAGR Revenues NM (1.0%) (20.7%) 14.4% 39.2% 58.4%
3 Year CAGR EBIT NM NM NM 2.0% 55.1% 66.7%
<CAPTION>
---------------
Datapoint
Corporation
---------------
---------------
Market: NASDAQ
Ticker: DTPT
FYE: 07/31/99
LTM: 07/31/99
---------------
<S> <C>
MARKET STATISTICS
Closing Share Price $ 0.56
Common Shares (MM) 18,348
Market Value of Equity (1) 10,275
Cash & Equivalents 3,896
Off Balance Sheet Assets 0
Total Debt (2) 62,298
Net Debt 58,402
Enterprise Value (3) 68,677
Technology Value (4) 6,379
52-Week High Share Price $ 2.06
52-Week Low Share Price $ 0.50
EARNINGS & BETA
LTM Primary EPS ($0.41)
Nelson's FY 1999 E.P.S. Est. (5) NA
Nelson's FY 2000 E.P.S. Est. NA
LTM Beta Estimate 0.19
MARKET MULTIPLES
Revenue (6) 0.5 x
EBITDA (7) 234.4 x
EBIT (8) NM
Net Income (9) NM
Nelson's FY 1998 E.P.S. Est. (5) NA
Nelson's FY 1999 E.P.S. Est. NA
Tangible Book Value NM
Contributed Equity Capital 0.0 x
LTM FINANCIAL RESULTS
Revenues 138,285
S,G&A 35,695
Gross Profit 35,587
EBITDA 293
EBIT (2,886)
Net Income (10) (7,549)
Book Value (72,128)
Tangible Book Value (72,128)
Contributed Equity Capital 218,643
CAPITAL & RETURN
Total Debt/(TD + Bk. Equity) 100.0%
Total Debt/(TD + Mkt. Equity) 85.8%
MARGINS
Gross Margin 25.7%
LTM EBITDA Margin 0.2%
LTM EBIT Margin NM
LTM Net Income Margin NM
LEVERAGE
LTM Sen Debt / EBITDA 210.4 x
LTM Total Debt / EBITDA 212.6 x
THREE-YEAR CAGRs
3 Year CAGR Revenues (8.3%)
3 Year CAGR EBIT NM
</TABLE>
BNY Capital Markets, Inc. Page 3 of 10
<PAGE>
- --------------------------------------------------------------------------------
Datapoint Corporation Company Financial Data
- --------------------------------------------------------------------------------
Date: 12/01/99
<TABLE>
<CAPTION>
- --------------------- -------------------------------------------------------------------------------------------------------
LTM SUMMARY
- --------------------- Data
AlphaNet Systems IAT Intervoice-
Solutions, Brooktrout, Cotelligent, Network Multimedia, Inter-Tel Brite
Inc.(A) Inc.(B) Inc. Corporation(C) Inc.(D) Incorporated(E) Inc.(F)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Latest Fiscal Year 171,536 100,851 327,234 85,324 38,340 274,504 272,619
Latest Interim Period 102,498 100,415 174,189 39,566 31,165 225,113 119,937
Year Earlier Interim Period 134,012 75,526 152,778 69,527 23,545 202,235 63,071
-------------------------------------------------------------------------------------------------------
140,022 125,740 348,645 55,362 45,960 297,382 329,485
GROSS PROFIT
Latest Fiscal Year 30,956 59,967 95,977 14,085 2,875 133,558 145,323
Latest Interim Period 19,135 61,399 48,977 8,047 1,789 111,180 56,711
Year Earlier Interim Period 25,187 44,122 44,678 11,892 2,020 98,622 37,097
-------------------------------------------------------------------------------------------------------
24,904 77,244 100,276 10,240 2,644 146,116 164,937
SG&A
Latest Fiscal Year 27,505 29,902 66,328 15,673 4,933 86,554 100,534
Latest Interim Period 19,423 33,128 44,228 7,920 2,278 70,715 38,688
Year Earlier Interim Period 20,797 21,201 31,612 12,487 2,246 64,977 19,013
-------------------------------------------------------------------------------------------------------
26,131 41,829 78,944 11,105 4,965 92,292 120,209
R&D
Latest Fiscal Year 0 22,106 0 0 0 11,373 29,080
Latest Interim Period 0 20,821 0 0 0 10,928 41,637
Year Earlier Interim Period 0 15,744 0 0 0 8,539 6,523
-------------------------------------------------------------------------------------------------------
0 27,183 0 0 0 13,762 64,194
EBIT
Latest Fiscal Year 3,451 7,959 24,492 (1,587) (2,058) 35,631 15,709
Latest Interim Period (288) 7,450 1,631 127 (2,003) 29,537 (23,614)
Year Earlier Interim Period 4,390 7,177 11,616 (595) (1,497) 25,106 11,560
-------------------------------------------------------------------------------------------------------
(1,227) 8,232 14,507 (865) (2,564) 40,062 (19,466)
INTEREST EXPENSE
Latest Fiscal Year 0 3 542 802 585 60 0
Latest Interim Period 17 0 1,407 312 158 54 0
Year Earlier Interim Period 61 0 26 515 107 58 0
-------------------------------------------------------------------------------------------------------
(44) 3 1,923 599 635 56 0
NET INCOME
Latest Fiscal Year 2,197 6,205 15,316 (2,638) (1,743) 22,697 4,205
Latest Interim Period 194 13,527 (1,303) 343 (481) 19,382 (27,723)
Year Earlier Interim Period 2,783 5,465 7,360 (937) (1,421) 16,163 7,432
-------------------------------------------------------------------------------------------------------
(392) 14,266 6,653 (1,357) (803) 25,916 (30,950)
<CAPTION>
- --------------------- -------------------------------------------------------------------------------------------
LTM SUMMARY
- --------------------- Pomeroy
MAI Computer Vitech
Systems Network Six, Norstan, Resources, America, Datapoint
Corporation Inc.(G) Inc.(H) Inc. Inc. Corporation
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Latest Fiscal Year 62,238 10,400 482,709 627,928 195,335 138,285
Latest Interim Period 43,784 7,814 116,204 547,862 69,136 0
Year Earlier Interim Period 44,050 8,138 115,850 457,831 119,821 0
------------------------------------------------------------------------------------------
61,972 10,076 483,063 717,959 144,649 138,285
GROSS PROFIT
Latest Fiscal Year 29,690 3,981 145,039 110,422 79,704 35,587
Latest Interim Period 20,681 3,042 36,354 73,622 28,478 0
Year Earlier Interim Period 19,388 2,997 36,463 60,838 49,137 0
------------------------------------------------------------------------------------------
30,983 4,026 144,930 123,206 59,045 35,587
SG&A
Latest Fiscal Year 23,798 2,260 128,665 69,947 41,587 35,695
Latest Interim Period 18,826 2,011 32,833 35,006 18,009 0
Year Earlier Interim Period 16,996 1,738 30,837 29,878 24,945 0
------------------------------------------------------------------------------------------
25,628 2,534 130,661 75,075 34,651 35,695
R&D
Latest Fiscal Year 4,058 0 0 0 0 1,965
Latest Interim Period 4,119 0 0 0 0 0
Year Earlier Interim Period 3,228 0 0 0 0 0
------------------------------------------------------------------------------------------
4,949 0 0 0 0 1,965
EBIT
Latest Fiscal Year (1,066) 1,721 16,374 35,098 38,117 (2,886)
Latest Interim Period (3,905) 1,030 3,521 31,649 10,469 0
Year Earlier Interim Period (2,886) 1,260 5,626 25,176 24,192 0
------------------------------------------------------------------------------------------
(2,085) 1,491 14,269 41,571 24,394 (2,886)
INTEREST EXPENSE
Latest Fiscal Year 1,098 0 4,886 2,670 17,022 5,731
Latest Interim Period 1,084 0 1,426 2,832 9,976 0
Year Earlier Interim Period 767 0 1,089 2,011 5,873 0
------------------------------------------------------------------------------------------
1,415 0 5,223 3,491 21,124 5,731
NET INCOME
Latest Fiscal Year (2,316) 1,061 6,803 20,159 17,862 (7,549)
Latest Interim Period (5,441) 601 882 17,280 (21,706) 0
Year Earlier Interim Period (3,525) 748 2,666 14,678 11,669 0
------------------------------------------------------------------------------------------
(4,232) 913 5,019 22,761 (15,514) (7,549)
</TABLE>
BNY Capital Markets, Inc. Page 4 of 10
<PAGE>
- --------------------------------------------------------------------------------
Datapoint Corporation Company Financial Data
- --------------------------------------------------------------------------------
Date: 12/01/99
<TABLE>
<CAPTION>
- ---------------------- -------------------------------------------------------------------------------------------
LTM SUMMARY
- ---------------------- Data
AlphaNet Systems IAT
Solutions, Brooktrout, Cotelligent, Network Multimedia, Inter-Tel
Inc.(A) Inc.(B) Inc. Corporation(C) Inc.(D) Incorporated(E)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
Shareholders Equity 42,928 78,345 90,568 2,996 11,505 156,457
Preferred Stock 0 0 0 55 0 0
Common Stock (Includes PIC) 34,173 47,208 81,644 18,575 32,697 104,432
Contributed Equity Capital 34,173 47,208 81,644 21,571 32,697 104,432
Cash & Equivalents 8,997 55,480 217 1,648 5,848 63,564
Intangible Assets 0 13,410 75,343 2,874 0 0
Senior Term Debt 675 0 48,375 5,716 3,204 0
Subordinated Debt 0 0 0 0 0 0
Capitalized Leases (Off-Balance Sheet) 55 0 0 0 0 0
Minority Interest 0 8,653 0 0 27 0
Total Debt (2) 730 8,653 48,375 5,771 3,230 0
Off Balance Sheet Assets 0 0 0 0 0 0
DEPR. & AMORT.
Latest Fiscal Year 2,662 2,852 4,157 1,145 575 6,718
Latest Interim Period 2,005 4,194 3,118 807 559 6,574
Year Earlier Interim Period 1,996 2,201 1,450 862 464 4,615
-------------------------------------------------------------------------------------------
2,671 4,845 5,825 1,090 670 8,677
THREE-YEAR CAGR
Revenue Latest Fiscal 171,536 100,851 327,234 85,324 38,340 274,504
Revenue 3 Years Ago 74,016 38,673 66,433 30,506 1,510 150,530
- ----------------------------------------------------------------------------------------------------------------------------
EBIT Latest Fiscal 3,451 7,959 24,492 (1,587) (2,058) 35,631
EBIT 3 Years Ago 4,175 6,948 2,752 (935) (3,761) 13,490
- ----------------------------------------------------------------------------------------------------------------------------
Net Income Latest Fiscal 2,197 6,205 15,316 (2,638) (1,743) 22,697
Net Income 3 Years Ago 3,965 5,204 2,612 (613) (3,730) NA
<CAPTION>
- ---------------------- ------------------------------------------------------------------------------------------
LTM SUMMARY
- ---------------------- Pomeroy
Intervoice- MAI Computer Vitech
Brite Systems Network Six, Norstan, Resources, America,
Inc.(F) Corporation Inc.(G) Inc.(H) Inc. Inc.
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
Shareholders Equity 95,196 (7,585) 2,353 110,471 112,989 41,190
Preferred Stock 0 0 2,236 0 0 0
Common Stock (Includes PIC) 44,035 220,399 1,966 53,334 65,572 65,346
Contributed Equity Capital 44,035 220,399 4,201 53,334 65,572 65,346
Cash & Equivalents 29,992 3,242 2,236 1,122 3,962 9,594
Intangible Assets 108,637 8,211 0 39,164 0 19,371
Senior Term Debt 135,000 11,030 1,920 75,336 52,888 69,806
Subordinated Debt 0 0 0 0 0 0
Capitalized Leases (Off-Balance Sheet) 0 0 7 49,463 0 0
Minority Interest 0 0 0 0 0 0
Total Debt (2) 135,000 11,030 4,163 124,799 52,888 69,806
Off Balance Sheet Assets 0 0 0 0 0 0
DEPR. & AMORT.
Latest Fiscal Year 11,013 4,060 47 20,514 3,940 3,587
Latest Interim Period 12,818 1,738 62 5,854 4,752 3,185
Year Earlier Interim Period 5,162 1,925 32 4,054 3,974 2,438
------------------------------------------------------------------------------------------
18,669 3,873 78 22,314 4,718 4,334
THREE-YEAR CAGR
Revenue Latest Fiscal 272,619 62,238 10,400 482,709 627,928 195,335
Revenue 3 Years Ago NA 64,164 20,985 321,364 230,710 48,489
- ---------------------------------------------------------------------------------------------------------------------------
EBIT Latest Fiscal 15,709 (1,066) 1,721 16,374 35,098 38,117
EBIT 3 Years Ago NA (12,744) (3,407) 15,411 9,285 8,099
- ---------------------------------------------------------------------------------------------------------------------------
Net Income Latest Fiscal 4,205 (2,316) 1,061 6,803 20,159 17,862
Net Income 3 Years Ago NA 13,487 (2,427) 8,489 4,367 6,905
<CAPTION>
- ---------------------- ---------------
LTM SUMMARY
- ----------------------
Datapoint
Corporation
---------------
<S> <C>
BALANCE SHEET
Shareholders Equity (72,128)
Preferred Stock 662
Common Stock (Includes PIC) 217,981
Contributed Equity Capital 218,643
Cash & Equivalents 3,896
Intangible Assets 0
Senior Term Debt 61,636
Subordinated Debt 0
Capitalized Leases (Off-Balance Sheet) 0
Minority Interest 0
Total Debt (2) 62,298
Off Balance Sheet Assets 0
DEPR. & AMORT.
Latest Fiscal Year 3,179
Latest Interim Period 0
Year Earlier Interim Period 0
---------------
3,179
THREE-YEAR CAGR
Revenue Latest Fiscal 138,285
Revenue 3 Years Ago 179,541
- ------------------------------------------------
EBIT Latest Fiscal (2,886)
EBIT 3 Years Ago 1,017
- ------------------------------------------------
Net Income Latest Fiscal (7,549)
Net Income 3 Years Ago 19,342
</TABLE>
BNY Capital Markets, Inc. Page 5 of 10
<PAGE>
- --------------------------------------------------------------------------------
Datapoint Corporation Company Financial Data
- --------------------------------------------------------------------------------
Date: 12/01/99
- ------------------------------------------------
NOTES TO FINANCIAL DATA
- ------------------------------------------------
Definitions of Terms:
- --------------------------------------------------------------------------------
(1) Market Value of Equity = Closing common stock price per share times
the number of common shares outstanding.
(2) Total Debt = All indebtedness for borrowed money including long-term
debt, capitalized leases, current maturities of long-term debt,
minority interest, miscellaneous short-term borrowings plus book
value of Preferred Stock.
(3) Enterprise Value = Market Value of Equity plus book value of Total
Debt and Preferred Stock less Cash and Equivalents less Off Balance
Sheet Assets.
(4) Technology Value = Market Value of Equity - Cash and Cash
Equivalents.
(5) Nelson's: Figures are median Wall Street estimates (Source:
Bloomberg).
(6) Revenue, EBITDA, and EBIT are multiples of Enterprise Value.
(7) EBITDA is Earnings Before Interest, Taxes, Depreciation,
Amortization, and non-recurring items.
(8) EBIT is Earnings Before Interest, Taxes, and non-recurring items.
(9) Net Income as a multiple of Market Value of Equity.
(10) Net Income, applicable to common equity, from continuing operations
before extraordinary items and changes in accounting principles.
NM: Not Meaningful.
NA: Not Available
Companies mentioned in this report:
- --------------------------------------------------------------------------------
ALPH Alphanet Solutions, Inc.
BRKT Brooktrout, Inc.
CGZ Cotelligent, Inc.
DSYS Data Systems Network Corporation
IATA IAT Multimedia, Inc.
INTL Inter - Tel Incorporated
INTV InterVoice-Brite, Inc.
NOW MAI Systems Corporation
NWSS Network Six, Inc.
NRRD Norstan, Inc.
PMRY Pomeroy Computer Resources, Inc.
VTCH Vitech America, Inc.
DTPT Datapoint Corporation
Additional notes:
- --------------------------------------------------------------------------------
(A) ALPH's financials exclude the write-off of capitalized assets in the
amount of $2,476, ($139) and $2,476 for the year ended 12/31/98, and
the nine months ended 9/30/99 - 98.
(B) BRKT excludes a non-cash compensation charge of $2,313 for the nine
months ended 9/30/99 and in-process research and development in the
amount of $9,786 for the year ended 12/31/98.
(C) DSYS financials exclude a shareholder settlement in the amount of
$1,768 for the year ended 12/31/98 and $1,138 for the nine months
ended 9/30/99. A loss on the sale of equipment is excluded in the
amount of $385 for the nine months ended 9/30/99.
(D) IATA's financials exlcude extraordinary other income in the amount
of $3,453 for the nine months ended 9/30/99.
(E) INTL's financials exclude an in-process research and develoment and
acquisition related expense in the amount of $22,755 for the year
ended 12/31/98 and nine months ended 9/30/99.
(F) INTV's financials include the acquisition of Brite Voice Systems,
Inc. on June 9, 1999 and exclude related charges to the acquisition.
(G) NWSS's financials exclude a litigation settlement in the amount of
$3,177 for the nine months ended 9/30/99. to the acquisition.
(H) NRRD excludes a restructuring charge in the amount of $1,500 for the
fiscal year ended 4/30/99.
BNY Capital Markets, Inc. Page 6 of 10
<PAGE>
- --------------------------------------------------------------------------------
Datapoint Corporation Company Descriptions
- --------------------------------------------------------------------------------
(Figures in US$ Millions, except per share data)
<TABLE>
<CAPTION>
LTM
----------------------- --------------------------------------------------------------
COMPANY NAME Ticker Revenue EBITDA Mkt Value Company Description
- -------------------------------------------------------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AlphaNet Solutions, Inc. ALPH $ 140,022 $ 1,444 $ 33,289 AlphaNet Solutions, Inc. is a single-source
provider of information technology products,
services and support to Fortune 1000 and other
large and mid-sized companies located primarily in
the New York to Philadelphia corridor. The Company
is authorized by many industry-leading
manufacturers of IT products to resell their
products and provide related services. Such
products include workstations, servers, networking
and communications equipment, enterprise computing
products and application software. Through its
established vendor alliances, the Company provides
its customers with competitive pricing and
value-added services such as electronic product
ordering, product configuration, testing,
warehousing and delivery.
Brooktrout, Inc. BRKT $ 125,740 $ 13,077 $ 183,983 Brooktrout Technology, Inc. is a Massachusetts
corporation founded in 1984 to design, manufacture
and market computer hardware and software for use
in electronic communications applications in
telecommunications and networking environments.
Brooktrout is a supplier of advanced software and
hardware products for system vendors and service
providers in the electronic communications market.
The Company's products enable its customers to
deliver a wide range of solutions for the
integration and management of image (fax), voice
and data communications in telecommunications and
networking environments. The Company sells its
products primarily to service providers, original
equipment manufacturers ("OEMs") and value added
resellers ("VARs") both domestically and
internationally through a direct sales force and a
two-tier distribution system.
Cotelligent, Inc. CGZ $ 348,645 $ 20,332 $ 71,849 Cotelligent, Inc. is a software professional
services firm providing information technology
("IT") consulting and outsourcing services through
its five consulting practices which include
Professional Services, Technology Solutions,
Alliance Services, Network Services and IT
Education. The Company conducts operations from
offices in 27 metropolitan areas across the United
States. The Company also has two international
consultant recruiting offices, one in Brazil and
one in the Philippines. Cotelligent provides its
clients with IT solutions for complex business
issues. The Company also provides IT professionals
with a broad base of skills to its clients who
have short-term staffing support requirements.
Data Systems Network Corporation DSYS $ 55,362 $ 225 $ 4,648 Data Systems Network Corporation provides computer
network integration and data management services
in the distributed computing marketplace. Data
Systems Network's broad array of services includes
designing, installing, and managing networks of
personal computers, workstations and mainframes
linked with communications hardware and software
and peripheral equipment, selling network
components, training users and administrators of
networks and providing technical, expansion and
maintenance services. Marketing efforts are
directed at state and local governments, Fortune
1000 and middle market corporations, and
institutional users such as hospitals and
universities.
IAT Multimedia, Inc. IATA $ 45,960 $ (1,893) $ 23,454 IAT Multimedia, Inc. develops, manufacturers, and
markets high-performance personal computers, as
well as components and peripherals. The Company's
computers are assembled according to customer
specifications and sold under the trade name
"Trinology." IAT offers visual communications
products designed to enable users to participate
in video conferencing. All of IAT's revenues are
generated in Europe.
</TABLE>
BNY Capital Markets, Inc. Page 7 of 10
<PAGE>
- --------------------------------------------------------------------------------
Datapoint Corporation Company Descriptions
- --------------------------------------------------------------------------------
(Figures in US$ Millions, except per share data)
<TABLE>
<CAPTION>
LTM
----------------------- --------------------------------------------------------------
COMPANY NAME Ticker Revenue EBITDA Mkt Value Company Description
- -------------------------------------------------------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Inter-Tel, Incorporated INTL $ 297,382 $ 48,739 $ 560,258 Inter-Tel, incorporated in Arizona in 1969, is a
single point of contact, full service provider of
digital business telephone systems, call
processing software, voice processing software,
call accounting software, Internet Protocol (IP)
telephony software, computer telephone integration
("CTI") applications and long distance calling
services. Inter-Tel's products and services
include the AXXESS and Inter-Tel Axxent digital
business communication software platforms, the
AXXESSORY TALK voice processing platform, the
Inter-Tel Axxent digital business communication
software platforms, the Vocal'Net Service Provider
Software and Centralized Accounting Software and
Inter-Tel.net, an IP telephony packed switched
long distance service. The Company also provides
maintenance, leasing and support services for its
products.
InterVoice-Brite, Inc. INTV $ 329,485 $ (797) $ 510,610 InterVoice, Inc. develops, sells and services call
automation systems. The Company's historical
emphasis has been on interactive voice response
("IVR") systems, which allow individuals a self
help facility using their telephones, personal
computers, credit card terminals or voices to
access and/or provide information to computer data
bases utilized by businesses. More recently, the
Company has focused on systems for
telecommunications network operators which provide
a variety of automated services such as processing
collect and credit card calls, and advanced
calling features such as prepaid calling cards,
voice and text messaging, one number personal
numbering plans and voice dialing. In the last
year, InterVoice has increased its emphasis on
customer relationship management systems which
provide companies automated customer service,
telemarketing capability and the ability to
general sales without human interaction.
MAI Systems Corporation NOW $ 61,972 $ 1,788 $ 8,809 MAI Systems Corporation provides total information
technology solutions primarily to the hospitality,
resort and destination industry and to mid-sized
process manufacturers. The solutions provided by
the Company typically include applications
software, computer hardware, peripherals and wide
and local area network design, implementation,
installation and support. The software
applications are generally the Company's
proprietary software, or software which is
licensed to the Company on an exclusive or
non-exclusive basis. The hardware, peripherals and
networking systems are generally third-party
products which the Company distributes. Directly
and through its arrangement with third parties,
the Company provides on-site and off-site service
and support to users of its network and systems
hardware.
Network Six, Inc. NWSS $ 10,076 $ 1,569 $ 2,478 Network Six, Inc. is a systems integrator and
provider of software, information technology
consulting and network services to government and
industry. The Company has historically focused on
providing its services to state government human
services agencies. In 1998, substantial portions
of its revenues were derived from contracts with
such agencies. The Company today also targets its
marketing activities to many government agencies
other than human service agencies, as well as
higher education and network services.
Norstan, Inc. NRRD $ 483,063 $ 36,583 $ 104,441 Norstan is a leading provider of communication and
information technology ("IT") solutions for over
18,000 customers in the United States, Canada and
England. To address the complex communication
requirements of its customers, Norstan provides a
broad range of products and services, including
telephone systems, call center systems, voice
processing, network integration, voice and video
conferencing, and facilities management services.
Norstan's network of approximately 700 field
technicians and service consultants delivers
communication services to its customers. In
addition, Norstan provides a wide array of IT
solutions through IT Consulting Services. These
solutions include the design, implementation,
maintenance and modification of IT applications
and systems. IT Consulting Services currently
employs over 800 consultants and generated a 49%
increase in revenues during fiscal year 1999.
</TABLE>
BNY Capital Markets, Inc. Page 8 of 10
<PAGE>
- --------------------------------------------------------------------------------
Datapoint Corporation Company Descriptions
- --------------------------------------------------------------------------------
(Figures in US$ Millions, except per share data)
<TABLE>
<CAPTION>
LTM
----------------------- --------------------------------------------------------------
COMPANY NAME Ticker Revenue EBITDA Mkt Value Company Description
- -------------------------------------------------------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pomeroy Computer Resources, Inc. PMRY $ 717,959 $ 46,289 $ 153,487 Pomeroy Computer Resources, Inc. is comprised of
(1) the sale and leasing of a broad range of
desktop computer equipment including hardware,
software, and related products, and (2) the
provision of information technology (IT) services
which support such computer products. Prior to
January 6, 1999, the Company (including its
wholly-owned subsidiary Global Combined
Technologies, Inc., Pomeroy Computer Resources of
South Carolina, Inc. and Technology Integration
Financial Services, Inc.) operated the IT products
and services business as a single integrated
business. In December, 1998, the Company formed a
new subsidiary, Pomeroy Select Integration
Solutions, Inc. for the purpose of operating
independently the IT services business previously
operated by the Company other than procurement and
configuration services which are directly related
to the sale of products.
Vitech America, Inc. VTCH $ 144,649 $ 28,728 $ 115,869 Vitech America, Inc. and subsidiaries are engaged
in the manufacture and direct marketing of PCs and
related products, business systems integration
products and turn-key business solutions, as well
as the financing of the purchase thereof, in the
Federal Republic of Brazil. The Company's
principal operations are conducted in Brazil by
its Brazilian subsidiaries. The parent company,
Vitech America, Inc., is based in Miami, Florida
and sources components in the United States and
throughout the world and engages in the
distribution of those components to its
subsidiaries' manufacturing operations in Brazil.
Substantially all of the Company's revenues have
been recognized in Brazil by the Company's
subsidiaries.
Datapoint Corporation DTPT $ 138,285 $ 293 $ 10,275 Datapoint Corporation, including its subsidiaries,
is principally engaged in the development,
acquisition, marketing, servicing, and system
integration of computer and communication products
- both hardware and software. These products and
services are for integrated computer,
telecommunication and video conferencing network
systems. The Company through its 80% owned
subsidiary Corebyte Inc., is also engaged in the
development and marketing of the Corebyte
Networks(TM) product line consisting of internet
communication and networking software.
</TABLE>
BNY Capital Markets, Inc. Page 9 of 10
<PAGE>
- --------------------------------------------------------------------------------
Datapoint Corporation
- --------------------------------------------------------------------------------
Date: 12/01/99
COMPLETED DEALS
($ Figures in thousands)
<TABLE>
<CAPTION>
TRANSACTION VALUE
-------------------- -------------------------------------------- ---------------------------- -------------------------
No. Announc. Effective TARGET COMPANY Acquisition ACQUIROR COMPANY Equity TEV
-------------------- -------------------------------- ----------- ---------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 02/17/99 08/06/99 Equitrac Corporation $ 77,140 Chargeback Acquisition Corp. $ 77,140 $ 68,421
Equitrac is a leading provider 100.0% ("Merger Sub") for
of computer system solutions to Cornerstone Equity
manage office equipment Investors IV, L.P.
resources
--------------------------------------------------------------------------------------------------------------------------
2 04/27/99 08/13/99 Brite Voice Systems, Inc. $ 122,719 InterVoice, Inc. $ 163,626 $ 151,194
Brite Voice Systems, Inc. 75.0%
designs, integrates, assembles,
markets, and support voice
processing and call processing
systems and services.
--------------------------------------------------------------------------------------------------------------------------
3 10/09/98 02/17/99 Vanstar Corporation $ 680,800 Inacom Corp. $ 680,800 $1,189,690
Vanstar Corporation provides 100.0%
services and products designed
to build, manage, and enhance
personal computer network
infrastructures of Fortune 1000
companies and other larger
enterprises.
--------------------------------------------------------------------------------------------------------------------------
4 08/19/98 12/16/98 Peerless Group, Inc. $ 33,000 Jack Henry & Associates $ 33,000 $ 31,623
Peerless Group designs, 100.0%
develops, installs and supports
integrated information systems
and check and statement
processing solutions.
--------------------------------------------------------------------------------------------------------------------------
5 10/01/98 11/06/98 Carnegie Group, Inc. $ 32,800 Logica PLC $ 32,800 $ 27,233
Provides business and technical 100.0%
consulting, client/server and
internet-based custom software
development, third-party
package implementation and
systems integrations services.
--------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------
High: $680,800 $1,189,690
Mean: $197,473 $293,632
Median: $77,140 $68,421
Low: $32,800 $27,233
-------------------------------------------------------
<CAPTION>
ACQUISITION MULTIPLES
---------- -------------------------------------------
Contributed Book
No. Announc. Revenue EBITDA Equity Value
--------- -------------------- ----------------------
<S> <C> <C> <C> <C> <C>
1 02/17/99 1.23 x 6.97 x 6.03 x 2.29 x
------------------------------------------------------
2 04/27/99 1.03 x 14.59 x 3.61 x 1.92 x
------------------------------------------------------
3 10/09/98 0.20 x 5.30 x NA NA
------------------------------------------------------
4 08/19/98 0.50 x 7.60 x 4.11 x 3.47 x
------------------------------------------------------
5 10/01/98 1.00 x 2.50 x 0.85 x 1.24 x
------------------------------------------------------
---------------------------------------------
High: 14.59 x
Mean: 7.39 x
Median: 6.97 x
Low: 2.50 x
---------------------------------------------
</TABLE>
BNY Capital Markets, Inc. Page 10 of 10
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
================================================================================
ASSUMPTIONS
================================================================================
1) Historical and Year 2000 budgeted financials provided by Management. 1997,
1998, 1999 and projected year 2000 financials are at the 1999 AOP (Annual
Operating Plan) foreign exchange rate.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
2) BNY projection assumptions for 2001-2004: 2001 2002 2003 2004
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Telebusiness revenue growth: 15.0% 15.0% 15.0% 15.0%
OSN revenue growth: -5.0% -5.0% -5.0% -5.0%
Telebusiness gross profit margin: 29.13% 29.13% 29.13% 29.13%
OSN gross profit margin: 20.00% 20.00% 20.00% 20.00%
Telebusiness operating margin: 10.00% 10.00% 10.00% 10.00%
OSN operating margin: 7.07% 6.57% 6.07% 5.57%
3) Technical Service/HQ Charges growth assumption: 0.0% 0.0% 0.0% 0.0%
4) European Depreciation increase assumptions: 500 500 500 --
5) Capital Expenditure increase assumptions: -- -- -- --
6) Assumed corporate tax rate: 40.0%
</TABLE>
BNY Capital Markets, Inc. Page 1
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
Datapoint Projected July 31,
----------------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
REVENUES
Telebusiness $ 41,187 $ 52,367 $ 46,742
OSN 84,596 90,050 86,695
--------- --------- ---------
- --------------------------------------------------------------------------------
TOTAL REVENUES 125,783 142,417 133,437
- --------------------------------------------------------------------------------
13.2% -6.3%
GROSS PROFIT
Telebusiness 13,532 16,203 12,769
OSN 22,653 21,115 20,097
Less: Increased Depreciation -- -- --
--------- --------- ---------
- --------------------------------------------------------------------------------
TOTAL GROSS PROFIT 36,185 37,318 32,866
- --------------------------------------------------------------------------------
OPERATING EXPENSES
Telebusiness
Marketing 785 983 1,031
Selling 5,603 4,865 4,995
G&A 3,338 4,122 3,902
Opex ICP & Adjustments -- -- --
--------- --------- ---------
Total Telebusiness Expenses 9,726 9,970 9,928
OSN
Marketing 362 50 46
Selling 5,648 5,997 5,861
G&A 8,125 6,690 6,943
Opex ICP & Adjustments (161) (6) (70)
--------- --------- ---------
Total OSN Expenses 13,974 12,731 12,780
--------- --------- ---------
Total Operating Expenses 23,700 22,701 22,708
OPERATING INCOME
Telebusiness 3,806 6,233 2,841
OSN 8,679 8,384 7,317
--------- --------- ---------
- --------------------------------------------------------------------------------
OPERATING INCOME 12,485 14,617 10,158
- --------------------------------------------------------------------------------
Total Technical Service/HQ Charges 4,078 4,078 4,078
--------- --------- ---------
- --------------------------------------------------------------------------------
PROFIT BEFORE TAX 8,407 10,539 6,080
- --------------------------------------------------------------------------------
Tax Provision 3,363 4,216 2,432
--------- --------- ---------
- --------------------------------------------------------------------------------
NET INCOME $ 5,044 $ 6,323 $ 3,648
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR CASH FLOW PURPOSES
Profit Before Tax $ 8,407 $ 10,539 $ 6,080
European Depreciation(1) 5,186 3,019 2,730
--------- --------- ---------
- --------------------------------------------------------------------------------
EBITDA 13,593 13,558 8,810
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net Income 5,044 6,323 3,648
- --------------------------------------------------------------------------------
Plus: European Depreciation 5,186 3,019 2,730
Less: Capital Expenditures(2) 3,159 1,999 2,547
Less: Incremental Changes in Working
Capital(3) -- -- --
--------- --------- ---------
- --------------------------------------------------------------------------------
Unlevered Free Cash Flow $ 7,071 $ 7,343 $ 3,831
- --------------------------------------------------------------------------------
Growth
<CAPTION>
Datapoint Projected July 31,
-------------------------------------------------------------
2000 2001 2002 2003 2004
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
REVENUES
Telebusiness $ 66,685 $ 76,688 $ 88,191 $101,420 $116,632
OSN 82,719 78,583 74,654 70,921 67,375
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------
TOTAL REVENUES 149,404 155,271 162,845 172,341 184,008
- -----------------------------------------------------------------------------------------------------
GROSS PROFIT
Telebusiness 19,425 22,339 25,690 29,543 33,974
OSN 19,010 15,717 14,931 14,184 13,475
Less: Increased Depreciation -- 500 1,000 1,500 1,500
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------
TOTAL GROSS PROFIT 38,435 37,555 39,620 42,227 45,949
- -----------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Telebusiness
Marketing 1,303 NA NA NA NA
Selling 6,804 NA NA NA NA
G&A 4,907 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
-------- -------- -------- -------- --------
Total Telebusiness Expenses 13,014 14,670 16,870 19,401 22,311
OSN
Marketing 279 NA NA NA NA
Selling 6,189 NA NA NA NA
G&A 6,282 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
-------- -------- -------- -------- --------
Total OSN Expenses 12,750 10,163 10,028 9,881 9,724
-------- -------- -------- -------- --------
Total Operating Expenses 25,764 24,833 26,898 29,282 32,035
OPERATING INCOME
Telebusiness 6,411 7,669 8,819 10,142 11,663
OSN 6,260 5,554 4,903 4,303 3,751
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------
OPERATING INCOME 12,671 12,723 12,722 12,945 13,915
- -----------------------------------------------------------------------------------------------------
Total Technical Service/HQ Charges 4,078 4,078 4,078 4,078 4,078
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------
PROFIT BEFORE TAX 8,593 8,645 8,644 8,867 9,837
- -----------------------------------------------------------------------------------------------------
Tax Provision 3,437 3,458 3,458 3,547 3,935
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------
NET INCOME $ 5,156 $ 5,187 $ 5,187 $ 5,320 $ 5,902
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
FOR CASH FLOW PURPOSES
Profit Before Tax $ 8,593 $ 8,645 $ 8,644 $ 8,867 $ 9,837
European Depreciation(1) 2,730 3,230 3,730 4,230 4,230
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------
EBITDA 11,323 11,875 12,374 13,097 14,067
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Net Income 5,156 5,187 5,187 5,320 5,902
- -----------------------------------------------------------------------------------------------------
Plus: European Depreciation 2,730 3,230 3,730 4,230 4,230
Less: Capital Expenditures(2) 4,000 4,000 4,000 4,000 4,000
Less: Incremental Changes in Working
Capital(3) -- 196 253 318 390
-------- -------- -------- -------- --------
- -----------------------------------------------------------------------------------------------------
Unlevered Free Cash Flow $ 3,886 $ 4,221 $ 4,663 $ 5,233 $ 5,741
- -----------------------------------------------------------------------------------------------------
Growth 1.4% 8.6% 10.5% 12.2% 9.7%
</TABLE>
- ----------
BNY Capital Markets, Inc. Page 2
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
(1) European Depreciation figures are taken from the 10K adjusted for domestic
(Corporate and Other) depreciation.
(2) Capital Expenditures are taken from the 10K adjusted for domestic
(Corporate and Other) expenditures. Capital Expenditures in the projected
years are per discussions with Blake Thomas on 11/15/99. Capital
Expenditures are depreciated over three years.
(3) Working Capital for 2000 is assumed at $5,000. Working capital is assumed
to change at the annual revenue growth rate.
BNY Capital Markets, Inc. Page 3
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
REVENUE & GROSS PROFIT
<TABLE>
<CAPTION>
Datapoint Historical July 31,
-----------------------------------------
REVENUE 1997 1998 1999
-----------------------------------------
<S> <C> <C> <C>
Telebusiness
Belgium $ 5,206 $ 5,855 $ 5,296
France 4,180 7,429 7,451
Germany 222 99 --
Holland 357 217 16
Italy 8,452 10,920 8,383
Norway -- -- 86
Spain 3,053 5,013 2,480
Sweden 429 820 495
Switzerland 486 39 14
United Kingdom 18,802 21,975 22,521
--------- --------- ---------
Total Telebusiness 41,187 52,367 46,742
Growth 27.1% -10.7%
OSN
Belgium 5,016 5,784 10,739
France 9,843 8,694 10,144
Germany 7,826 4,732 3,553
Holland 4,857 4,360 4,276
Italy 499 382 152
Norway 1,365 1,698 1,583
Spain 2,204 1,537 1,357
Sweden 38,687 47,856 42,138
Switzerland 855 545 331
United Kingdom 13,444 14,462 12,422
--------- --------- ---------
Total OSN 84,596 90,050 86,695
Growth 6.4% -3.7%
- --------------------------------------------------------------------------------
TOTAL REVENUES 125,783 142,417 133,437
- --------------------------------------------------------------------------------
Growth 13.2% -6.3%
GROSS PROFIT
Telebusiness
Belgium 1,606 2,181 951
France 1,095 2,253 2,197
Germany (7) 65 (40)
Holland -- (18) 12
Italy 3,082 3,349 2,337
Norway -- -- 55
Spain 821 1,558 510
Sweden 136 154 210
Switzerland 216 39 14
United Kingdom 6,583 6,622 6,523
--------- --------- ---------
Total Telebusiness 13,532 16,203 12,769
Telebusiness Gross Profit Margin 32.86% 30.94% 27.32%
OSN
Belgium 2,306 1,359 2,194
France 2,941 2,472 2,487
Germany 2,163 475 725
Holland 1,364 1,259 1,192
Italy 212 294 76
Norway 906 1,008 923
Spain 612 330 227
Sweden 8,210 9,892 8,605
Switzerland 50 (14) 76
United Kingdom 3,889 4,040 3,592
--------- --------- ---------
Total OSN 22,653 21,115 20,097
OSN Gross Profit Margin 26.78% 23.45% 23.18%
Less: Increased Depreciation -- -- --
<CAPTION>
Datapoint Projected July 31,
--------------------------------------------------------
REVENUE 2000 2001 2002 2003 2004
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Telebusiness
Belgium $ 6,539 NA NA NA NA
France 10,648 NA NA NA NA
Germany -- NA NA NA NA
Holland 824 NA NA NA NA
Italy 15,095 NA NA NA NA
Norway 56 NA NA NA NA
Spain 6,097 NA NA NA NA
Sweden 3,200 NA NA NA NA
Switzerland -- NA NA NA NA
United Kingdom 24,226 NA NA NA NA
-------- ------- ------- ------- -------
Total Telebusiness 66,685 76,688 88,191 101,420 116,632
Growth 42.7% 15.0% 15.0% 15.0% 15.0%
OSN
Belgium 6,204 NA NA NA NA
France 11,534 NA NA NA NA
Germany 3,203 NA NA NA NA
Holland 3,737 NA NA NA NA
Italy 68 NA NA NA NA
Norway 1,591 NA NA NA NA
Spain 1,302 NA NA NA NA
Sweden 42,833 NA NA NA NA
Switzerland 344 NA NA NA NA
United Kingdom 11,903 NA NA NA NA
-------- ------- ------- ------- -------
Total OSN 82,719 78,583 74,654 70,921 67,375
Growth -4.6% -5.0% -5.0% -5.0% -5.0%
- ---------------------------------------------------------------------------------------------------
TOTAL REVENUES 149,404 155,271 162,845 172,341 184,008
- ---------------------------------------------------------------------------------------------------
Growth 12.0% 3.9% 4.9% 5.8% 6.8%
GROSS PROFIT
Telebusiness
Belgium 1,724 NA NA NA NA
France 3,209 NA NA NA NA
Germany -- NA NA NA NA
Holland 254 NA NA NA NA
Italy 4,242 NA NA NA NA
Norway 56 NA NA NA NA
Spain 1,558 NA NA NA NA
Sweden 921 NA NA NA NA
Switzerland -- NA NA NA NA
United Kingdom 7,461 NA NA NA NA
-------- ------- ------- ------- -------
Total Telebusiness 19,425 22,339 25,690 29,543 33,974
Telebusiness Gross Profit Margin 29.13% 29.13% 29.13% 29.13% 29.13%
OSN
Belgium 1,799 NA NA NA NA
France 2,957 NA NA NA NA
Germany 867 NA NA NA NA
Holland 715 NA NA NA NA
Italy 20 NA NA NA NA
Norway 678 NA NA NA NA
Spain 250 NA NA NA NA
Sweden 8,725 NA NA NA NA
Switzerland 107 NA NA NA NA
United Kingdom 2,892 NA NA NA NA
-------- ------- ------- ------- -------
Total OSN 19,010 15,717 14,931 14,184 13,475
OSN Gross Profit Margin 22.98% 20.00% 20.00% 20.00% 20.00%
Less: Increased Depreciation -- 500 1,000 1,500 1,500
</TABLE>
BNY Capital Markets, Inc. Page 4
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL GROSS PROFIT $ 36,185 $ 37,318 $ 32,866
- --------------------------------------------------------------------------------
Gross Profit Margin 28.77% 26.20% 24.63%
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TOTAL GROSS PROFIT $ 38,435 $ 37,555 $ 39,620 $ 42,227 $ 45,949
- ---------------------------------------------------------------------------------------------------
Gross Profit Margin 25.73% 24.19% 24.33% 24.50% 24.97%
</TABLE>
BNY Capital Markets, Inc. Page 5
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
OPERATING EXPENSES - TELEBUSINESS
<TABLE>
<CAPTION>
Datapoint Historical July 31,
---------------------------------
OPERATING EXPENSES 1997 1998 1999
---------------------------------
<S> <C> <C> <C>
Belgium
Marketing $ 37 $ 16 $ 28
Selling 701 516 598
G&A 520 683 550
Opex ICP & Adjustments -- -- --
------- ------- -------
---------------------------------------------------------------------------
Total Operating Expenses 1,258 1,215 1,176
---------------------------------------------------------------------------
France
Marketing -- -- --
Selling 629 813 1,154
G&A 182 450 539
Opex ICP & Adjustments -- -- --
------- ------- -------
---------------------------------------------------------------------------
Total Operating Expenses 811 1,263 1,693
---------------------------------------------------------------------------
Germany
Marketing -- -- --
Selling 204 -- --
G&A 28 -- --
Opex ICP & Adjustments -- -- --
------- ------- -------
---------------------------------------------------------------------------
Total Operating Expenses 232 -- --
---------------------------------------------------------------------------
Holland
Marketing 2 (18) 6
Selling 33 25 5
G&A 30 71 10
Opex ICP & Adjustments -- -- --
------- ------- -------
---------------------------------------------------------------------------
Total Operating Expenses 65 78 21
---------------------------------------------------------------------------
Italy
Marketing 407 623 531
Selling 988 1,094 1,124
G&A 790 874 851
Opex ICP & Adjustments -- -- --
------- ------- -------
---------------------------------------------------------------------------
Total Operating Expenses 2,185 2,591 2,506
---------------------------------------------------------------------------
Norway
Marketing -- -- --
Selling -- -- --
G&A -- -- --
Opex ICP & Adjustments -- -- --
------- ------- -------
---------------------------------------------------------------------------
Total Operating Expenses -- -- --
---------------------------------------------------------------------------
Spain
Marketing -- -- --
Selling 353 399 204
G&A 189 260 333
Opex ICP & Adjustments -- -- --
------- ------- -------
---------------------------------------------------------------------------
Total Operating Expenses 542 659 537
---------------------------------------------------------------------------
Sweden
Marketing -- -- --
Selling 524 421 249
G&A 36 -- 69
Opex ICP & Adjustments -- -- --
------- ------- -------
---------------------------------------------------------------------------
Total Operating Expenses 560 421 318
---------------------------------------------------------------------------
Switzerland
Marketing -- -- --
Selling -- -- --
G&A 141 -- --
Opex ICP & Adjustments -- -- --
------- ------- -------
---------------------------------------------------------------------------
Total Operating Expenses 141 -- --
---------------------------------------------------------------------------
United Kingdom
Marketing 339 362 466
Selling 2,171 1,597 1,661
G&A 1,422 1,784 1,550
Opex ICP & Adjustments -- -- --
------- ------- -------
---------------------------------------------------------------------------
Total Operating Expenses 3,932 3,743 3,677
---------------------------------------------------------------------------
<CAPTION>
Datapoint Projected July 31,
-----------------------------------------------------------
OPERATING EXPENSES 2000 2001 2002 2003 2004
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Belgium
Marketing $ 202 NA NA NA NA
Selling 685 NA NA NA NA
G&A 591 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------
Total Operating Expenses 1,478 NA NA NA NA
- ----------------------------------------------------------------------------------------------------
France
Marketing -- NA NA NA NA
Selling 1,610 NA NA NA NA
G&A 595 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------
Total Operating Expenses 2,205 NA NA NA NA
- ----------------------------------------------------------------------------------------------------
Germany
Marketing -- NA NA NA NA
Selling -- NA NA NA NA
G&A -- NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------
Total Operating Expenses -- NA NA NA NA
- ----------------------------------------------------------------------------------------------------
Holland
Marketing 14 NA NA NA NA
Selling 134 NA NA NA NA
G&A 36 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------
Total Operating Expenses 184 NA NA NA NA
- ----------------------------------------------------------------------------------------------------
Italy
Marketing 799 NA NA NA NA
Selling 1,404 NA NA NA NA
G&A 1,059 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------
Total Operating Expenses 3,262 NA NA NA NA
- ----------------------------------------------------------------------------------------------------
Norway
Marketing -- NA NA NA NA
Selling -- NA NA NA NA
G&A -- NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------
Total Operating Expenses -- NA NA NA NA
- ----------------------------------------------------------------------------------------------------
Spain
Marketing -- NA NA NA NA
Selling 331 NA NA NA NA
G&A 482 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------
Total Operating Expenses 813 NA NA NA NA
- ----------------------------------------------------------------------------------------------------
Sweden
Marketing -- NA NA NA NA
Selling 496 NA NA NA NA
G&A -- NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------
Total Operating Expenses 496 NA NA NA NA
- ----------------------------------------------------------------------------------------------------
Switzerland
Marketing -- NA NA NA NA
Selling -- NA NA NA NA
G&A -- NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------
Total Operating Expenses -- NA NA NA NA
- ----------------------------------------------------------------------------------------------------
United Kingdom
Marketing 288 NA NA NA NA
Selling 2,144 NA NA NA NA
G&A 2,144 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------
Total Operating Expenses 4,576 NA NA NA NA
- ----------------------------------------------------------------------------------------------------
</TABLE>
BNY Capital Markets, Inc. Page 6
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
<TABLE>
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL TELEBUSINESS OPERATING EXPENSES $ 9,726 $ 9,970 $ 9,928
- -------------------------------------------------------------------------------
As a % of Telebusiness Revenues 23.61% 19.04% 21.24%
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TOTAL TELEBUSINESS OPERATING EXPENSES $13,014 $ 14,670 $ 16,870 $ 19,401 $ 22,311
- ----------------------------------------------------------------------------------------------------
As a % of Telebusiness Revenues 19.52% 19.13% 19.13% 19.13% 19.13%
</TABLE>
BNY Capital Markets, Inc. Page 7
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
OPERATING EXPENSES - OSN
<TABLE>
<CAPTION>
Datapoint Historical July 31,
--------------------------------------
OPERATING EXPENSES 1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Belgium
Marketing $ 12 $ 10 $ 2
Selling 420 399 276
G&A 483 361 555
Opex ICP & Adjustments (70) -- (48)
-------- -------- --------
--------------------------------------------------------------------------
Total Operating Expenses 845 770 785
--------------------------------------------------------------------------
France
Marketing -- -- --
Selling 398 606 898
G&A 673 861 952
Opex ICP & Adjustments -- -- --
-------- -------- --------
--------------------------------------------------------------------------
Total Operating Expenses 1,071 1,467 1,850
--------------------------------------------------------------------------
Germany
Marketing -- -- --
Selling 661 197 160
G&A 2,255 845 226
Opex ICP & Adjustments (87) (6) 82
-------- -------- --------
--------------------------------------------------------------------------
Total Operating Expenses 2,829 1,036 468
--------------------------------------------------------------------------
Holland
Marketing 336 27 4
Selling 352 322 320
G&A 393 522 785
Opex ICP & Adjustments (16) -- (53)
-------- -------- --------
--------------------------------------------------------------------------
Total Operating Expenses 1,065 871 1,056
--------------------------------------------------------------------------
Italy
Marketing 14 13 --
Selling 31 (35) 2
G&A 66 (28) 22
Opex ICP & Adjustments -- -- --
-------- -------- --------
--------------------------------------------------------------------------
Total Operating Expenses 111 (50) 24
--------------------------------------------------------------------------
Norway
Marketing -- -- --
Selling 196 199 219
G&A 183 301 355
Opex ICP & Adjustments -- -- --
-------- -------- --------
--------------------------------------------------------------------------
Total Operating Expenses 379 500 574
--------------------------------------------------------------------------
Spain
Marketing -- -- --
Selling 136 100 70
G&A 167 105 192
Opex ICP & Adjustments 15 -- --
-------- -------- --------
--------------------------------------------------------------------------
Total Operating Expenses 318 205 262
--------------------------------------------------------------------------
Sweden
Marketing -- -- --
Selling 2,458 2,919 2,779
G&A 2,664 2,740 2,824
Opex ICP & Adjustments (3) -- --
-------- -------- --------
--------------------------------------------------------------------------
Total Operating Expenses 5,119 5,659 5,603
--------------------------------------------------------------------------
Switzerland
Marketing -- -- --
Selling 10 -- --
G&A 141 76 78
Opex ICP & Adjustments -- -- 172
-------- -------- --------
--------------------------------------------------------------------------
Total Operating Expenses 151 76 250
--------------------------------------------------------------------------
United Kingdom
Marketing -- -- 40
Selling 986 1,290 1,137
G&A 1,100 907 954
Opex ICP & Adjustments(1) -- -- (223)
-------- -------- --------
--------------------------------------------------------------------------
Total Operating Expenses 2,086 2,197 1,908
--------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL OSN OPERATING EXPENSES $ 13,974 $ 12,731 $ 12,780
- ------------------------------------------------------------------------------
<CAPTION>
Datapoint Projected July 31,
-----------------------------------------------------------
OPERATING EXPENSES 2000 2001 2002 2003 2004
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Belgium
Marketing $ -- NA NA NA NA
Selling 386 NA NA NA NA
G&A 503 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
-----------------------------------------------------------------------------------------
Total Operating Expenses 889 NA NA NA NA
-----------------------------------------------------------------------------------------
France
Marketing -- NA NA NA NA
Selling 1,000 NA NA NA NA
G&A 738 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
-----------------------------------------------------------------------------------------
Total Operating Expenses 1,738 NA NA NA NA
-----------------------------------------------------------------------------------------
Germany
Marketing -- NA NA NA NA
Selling 176 NA NA NA NA
G&A 540 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
-----------------------------------------------------------------------------------------
Total Operating Expenses 716 NA NA NA NA
-----------------------------------------------------------------------------------------
Holland
Marketing 8 NA NA NA NA
Selling 327 NA NA NA NA
G&A 406 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
-----------------------------------------------------------------------------------------
Total Operating Expenses 741 NA NA NA NA
-----------------------------------------------------------------------------------------
Italy
Marketing -- NA NA NA NA
Selling -- NA NA NA NA
G&A -- NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
-----------------------------------------------------------------------------------------
Total Operating Expenses -- NA NA NA NA
-----------------------------------------------------------------------------------------
Norway
Marketing -- NA NA NA NA
Selling 93 NA NA NA NA
G&A 367 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
-----------------------------------------------------------------------------------------
Total Operating Expenses 460 NA NA NA NA
-----------------------------------------------------------------------------------------
Spain
Marketing -- NA NA NA NA
Selling 76 NA NA NA NA
G&A 147 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
-----------------------------------------------------------------------------------------
Total Operating Expenses 223 NA NA NA NA
-----------------------------------------------------------------------------------------
Sweden
Marketing -- NA NA NA NA
Selling 2,950 NA NA NA NA
G&A 2,764 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
-----------------------------------------------------------------------------------------
Total Operating Expenses 5,714 NA NA NA NA
-----------------------------------------------------------------------------------------
Switzerland
Marketing -- NA NA NA NA
Selling -- NA NA NA NA
G&A 92 NA NA NA NA
Opex ICP & Adjustments -- NA NA NA NA
------- -------- -------- -------- --------
-----------------------------------------------------------------------------------------
Total Operating Expenses 92 NA NA NA NA
-----------------------------------------------------------------------------------------
United Kingdom
Marketing 271 NA NA NA NA
Selling 1,181 NA NA NA NA
G&A 725 NA NA NA NA
Opex ICP & Adjustments(1) -- NA NA NA NA
------- -------- -------- -------- --------
-----------------------------------------------------------------------------------------
Total Operating Expenses 2,177 NA NA NA NA
-----------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
TOTAL OSN OPERATING EXPENSES $12,750 $ 10,163 $ 10,028 $ 9,881 $ 9,724
- ---------------------------------------------------------------------------------------------
</TABLE>
BNY Capital Markets, Inc. Page 8
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
<TABLE>
<S> <C> <C> <C>
As a % of OSN Revenues 16.52% 14.14% 14.74%
- ------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $ 23,700 $ 22,701 $ 22,708
- ------------------------------------------------------------------------------
As a % of Total Revenues 18.84% 15.94% 17.02%
<CAPTION>
<S> <C> <C> <C> <C> <C>
As a % of OSN Revenues 15.41% 12.93% 13.43% 13.93% 14.43%
- ---------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $25,764 $ 24,833 $ 26,898 $ 29,282 $ 32,035
- ---------------------------------------------------------------------------------------------
As a % of Total Revenues 17.24% 15.99% 16.52% 16.99% 17.41%
</TABLE>
- ----------
(1) Opex ICP & Adjustments are adjusted for the $3,300 charge for a UK pension
liability in 1999.
BNY Capital Markets, Inc. Page 9
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
OPERATING INCOME
<TABLE>
<CAPTION>
Datapoint Historical July 31,
------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
OPERATING INCOME
Telebusiness
Belgium $ 348 $ 966 $ (225)
France 284 990 504
Germany (239) 65 (40)
Holland (65) (96) (9)
Italy 897 758 (169)
Norway -- -- 55
Spain 279 899 (27)
Sweden (424) (267) (108)
Switzerland 75 39 14
United Kingdom 2,651 2,879 2,846
-------- -------- --------
Total Telebusiness 3,806 6,233 2,841
OSN
Belgium 1,461 589 1,409
France 1,870 1,005 637
Germany (666) (561) 257
Holland 299 388 136
Italy 101 344 52
Norway 527 508 349
Spain 294 125 (35)
Sweden 3,091 4,233 3,002
Switzerland (101) (90) (174)
United Kingdom 1,803 1,843 1,684
-------- -------- --------
Total OSN 8,679 8,384 7,317
- --------------------------------------------------------------------------------
OPERATING INCOME 12,485 14,617 10,158
- --------------------------------------------------------------------------------
Paris HQ 1,346 1,346 1,346
Finance 1,332 1,332 1,332
SAT Executive 300 300 300
SAT Administration 100 100 100
International Other(1) 1,000 1,000 1,000
-------- -------- --------
Total Technical Service/HQ Charges(2) 4,078 4,078 4,078
- --------------------------------------------------------------------------------
PROFIT BEFORE TAX 8,407 10,539 6,080
- --------------------------------------------------------------------------------
Tax Rate 40.0% 40.0% 40.0%
Tax Provision 3,363 4,216 2,432
-------- -------- --------
- --------------------------------------------------------------------------------
NET INCOME $ 5,044 $ 6,323 $ 3,648
- --------------------------------------------------------------------------------
<CAPTION>
Datapoint Projected July 31,
----------------------------------------------------
2000 2001 2002 2003 2004
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
OPERATING INCOME
Telebusiness
Belgium $ 246 NA NA NA NA
France 1,004 NA NA NA NA
Germany -- NA NA NA NA
Holland 70 NA NA NA NA
Italy 980 NA NA NA NA
Norway 56 NA NA NA NA
Spain 745 NA NA NA NA
Sweden 425 NA NA NA NA
Switzerland -- NA NA NA NA
United Kingdom 2,885 NA NA NA NA
-------- ------- ------- ------- -------
Total Telebusiness 6,411 7,669 8,819 10,142 11,663
OSN
Belgium 910 NA NA NA NA
France 1,219 NA NA NA NA
Germany 151 NA NA NA NA
Holland (26) NA NA NA NA
Italy 20 NA NA NA NA
Norway 218 NA NA NA NA
Spain 27 NA NA NA NA
Sweden 3,011 NA NA NA NA
Switzerland 15 NA NA NA NA
United Kingdom 715 NA NA NA NA
-------- ------- ------- ------- -------
Total OSN 6,260 5,554 4,903 4,303 3,751
- --------------------------------------------------------------------------------------------------
OPERATING INCOME 12,671 12,723 12,722 12,945 13,915
- --------------------------------------------------------------------------------------------------
Paris HQ 1,346 1,346 1,346 1,346 1,346
Finance 1,332 1,332 1,332 1,332 1,332
SAT Executive 300 300 300 300 300
SAT Administration 100 100 100 100 100
International Other(1) 1,000 1,000 1,000 1,000 1,000
-------- ------- ------- ------- -------
Total Technical Service/HQ Charges(2) 4,078 4,078 4,078 4,078 4,078
- --------------------------------------------------------------------------------------------------
PROFIT BEFORE TAX 8,593 8,645 8,644 8,867 9,837
- --------------------------------------------------------------------------------------------------
Tax Rate 40.0% 40.0% 40.0% 40.0% 40.0%
Tax Provision 3,437 3,458 3,458 3,547 3,935
-------- ------- ------- ------- -------
- --------------------------------------------------------------------------------------------------
NET INCOME $ 5,156 $ 5,187 $ 5,187 $ 5,320 $ 5,902
- --------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) International Other figure is cost of maintaining international
installations.
(2) Total Technical Service/HQ Charges for all years are based on 2000 pro
forma estimates assuming stand-alone European Operations as per
discussions with Phil Krumb on 11/16/99.
BNY Capital Markets, Inc. Page 10
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
REVENUE & GROSS MARGIN ANALYSIS
<TABLE>
<CAPTION>
Datapoint Historical July 31,
--------------------------------------
1997 1998 1999
--------------------------------------
<S> <C> <C> <C>
REVENUE
Telebusiness
Belgium 4.14% 4.11% 3.97%
France 3.32% 5.22% 5.58%
Germany 0.18% 0.07% 0.00%
Holland 0.28% 0.15% 0.01%
Italy 6.72% 7.67% 6.28%
Norway 0.00% 0.00% 0.06%
Spain 2.43% 3.52% 1.86%
Sweden 0.34% 0.58% 0.37%
Switzerland 0.39% 0.03% 0.01%
United Kingdom 14.95% 15.43% 16.88%
------ ------ ------
Total Telebusiness 32.74% 36.77% 35.03%
OSN
Belgium 3.99% 4.06% 8.05%
France 7.83% 6.10% 7.60%
Germany 6.22% 3.32% 2.66%
Holland 3.86% 3.06% 3.20%
Italy 0.40% 0.27% 0.11%
Norway 1.09% 1.19% 1.19%
Spain 1.75% 1.08% 1.02%
Sweden 30.76% 33.60% 31.58%
Switzerland 0.68% 0.38% 0.25%
United Kingdom 10.69% 10.15% 9.31%
------ ------ ------
Total OSN 67.26% 63.23% 64.97%
- --------------------------------------------------------------------------------
TOTAL REVENUES 100.00% 100.00% 100.00%
- --------------------------------------------------------------------------------
GROSS PROFIT
Telebusiness
Belgium 30.85% 37.25% 17.96%
France 26.20% 30.33% 29.49%
Germany -3.15% 65.66% NM
Holland 0.00% -8.29% 75.00%
Italy 36.46% 30.67% 27.88%
Norway NM NM 63.95%
Spain 26.89% 31.08% 20.56%
Sweden 31.70% 18.78% 42.42%
Switzerland 44.44% 100.00% 100.00%
United Kingdom 35.01% 30.13% 28.96%
------ ------ ------
Total Telebusiness 32.86% 30.94% 27.32%
OSN
Belgium 45.97% 23.50% 20.43%
France 29.88% 28.43% 24.52%
Germany 27.64% 10.04% 20.41%
Holland 28.08% 28.88% 27.88%
Italy 42.48% 76.96% 50.00%
Norway 66.37% 59.36% 58.31%
Spain 27.77% 21.47% 16.73%
Sweden 21.22% 20.67% 20.42%
Switzerland 5.85% -2.57% 22.96%
United Kingdom 28.93% 27.94% 28.92%
------ ------ ------
Total OSN 26.78% 23.45% 23.18%
- --------------------------------------------------------------------------------
TOTAL GROSS PROFIT 28.77% 26.20% 24.63%
- --------------------------------------------------------------------------------
<CAPTION>
Datapoint Projected July 31,
--------------------------------------------------
2000 2001 2002 2003 2004
--------------------------------------------------
REVENUE
Telebusiness
Belgium 4.38% NA NA NA NA
France 7.13% NA NA NA NA
Germany 0.00% NA NA NA NA
Holland 0.55% NA NA NA NA
Italy 10.10% NA NA NA NA
Norway 0.04% NA NA NA NA
Spain 4.08% NA NA NA NA
Sweden 2.14% NA NA NA NA
Switzerland 0.00% NA NA NA NA
United Kingdom 16.22% NA NA NA NA
------ ------ ------ ------ ------
Total Telebusiness 44.63% 49.39% 54.16% 58.85% 63.38%
OSN
Belgium 4.15% NA NA NA NA
France 7.72% NA NA NA NA
Germany 2.14% NA NA NA NA
Holland 2.50% NA NA NA NA
Italy 0.05% NA NA NA NA
Norway 1.06% NA NA NA NA
Spain 0.87% NA NA NA NA
Sweden 28.67% NA NA NA NA
Switzerland 0.23% NA NA NA NA
United Kingdom 7.97% NA NA NA NA
------ ------ ------ ------ ------
Total OSN 55.37% 50.61% 45.84% 41.15% 36.62%
- --------------------------------------------------------------------------------
TOTAL REVENUES 100.00% 100.00% 100.00% 100.00% 100.00%
- --------------------------------------------------------------------------------
GROSS PROFIT
Telebusiness
Belgium 26.36% NA NA NA NA
France 30.14% NA NA NA NA
Germany NM NA NA NA NA
Holland 30.83% NA NA NA NA
Italy 28.10% NA NA NA NA
Norway 100.00% NA NA NA NA
Spain 25.55% NA NA NA NA
Sweden 28.78% NA NA NA NA
Switzerland NM NA NA NA NA
United Kingdom 30.80% NA NA NA NA
------ ------ ------ ------ ------
Total Telebusiness 29.13% 29.13% 29.13% 29.13% 29.13%
OSN
Belgium 29.00% NA NA NA NA
France 25.64% NA NA NA NA
Germany 27.07% NA NA NA NA
Holland 19.13% NA NA NA NA
Italy 29.41% NA NA NA NA
Norway 42.61% NA NA NA NA
Spain 19.20% NA NA NA NA
Sweden 20.37% NA NA NA NA
Switzerland 31.10% NA NA NA NA
United Kingdom 24.30% NA NA NA NA
------ ------ ------ ------ ------
Total OSN 22.98% 20.00% 20.00% 20.00% 20.00%
- --------------------------------------------------------------------------------
TOTAL GROSS PROFIT 25.73% 24.19% 24.33% 24.50% 24.97%
- --------------------------------------------------------------------------------
</TABLE>
BNY Capital Markets, Inc. Page 11
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
TELEBUSINESS OPERATING EXPENSES MARGIN ANALYSIS
<TABLE>
<CAPTION>
Datapoint Historical July 31,
--------------------------------
1997 1998 1999
--------------------------------
<S> <C> <C> <C>
OPERATING EXPENSES
Belgium
Marketing 0.71% 0.27% 0.53%
Selling 13.47% 8.81% 11.29%
G&A 9.99% 11.67% 10.39%
Opex ICP & Adjustments 0.00% 0.00% 0.00%
------ ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 24.16% 20.75% 22.21%
---------------------------------------------------------------------------
France
Marketing 0.00% 0.00% 0.00%
Selling 15.05% 10.94% 15.49%
G&A 4.35% 6.06% 7.23%
Opex ICP & Adjustments 0.00% 0.00% 0.00%
------ ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 19.40% 17.00% 22.72%
---------------------------------------------------------------------------
Germany
Marketing 0.00% 0.00% NM
Selling 91.89% 0.00% NM
G&A 12.61% 0.00% NM
Opex ICP & Adjustments 0.00% 0.00% NM
------ ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 104.50% 0.00% NM
---------------------------------------------------------------------------
Holland
Marketing 0.56% -8.29% 37.50%
Selling 9.24% 11.52% 31.25%
G&A 8.40% 32.72% 62.50%
Opex ICP & Adjustments 0.00% 0.00% 0.00%
------ ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 18.21% 35.94% 131.25%
---------------------------------------------------------------------------
Italy
Marketing 4.82% 5.71% 6.33%
Selling 11.69% 10.02% 13.41%
G&A 9.35% 8.00% 10.15%
Opex ICP & Adjustments 0.00% 0.00% 0.00%
------ ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 25.85% 23.73% 29.89%
---------------------------------------------------------------------------
Norway
Marketing NM NM 0.00%
Selling NM NM 0.00%
G&A NM NM 0.00%
Opex ICP & Adjustments NM NM 0.00%
------ ----- -----
---------------------------------------------------------------------------
Total Operating Expenses NM NM 0.00%
---------------------------------------------------------------------------
Spain
Marketing 0.00% 0.00% 0.00%
Selling 11.56% 7.96% 8.23%
G&A 6.19% 5.19% 13.43%
Opex ICP & Adjustments 0.00% 0.00% 0.00%
------ ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 17.75% 13.15% 21.65%
---------------------------------------------------------------------------
Sweden
Marketing 0.00% 0.00% 0.00%
Selling 122.14% 51.34% 50.30%
G&A 8.39% 0.00% 13.94%
Opex ICP & Adjustments 0.00% 0.00% 0.00%
------ ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 130.54% 51.34% 64.24%
---------------------------------------------------------------------------
Switzerland
Marketing 0.00% 0.00% 0.00%
Selling 0.00% 0.00% 0.00%
G&A 29.01% 0.00% 0.00%
Opex ICP & Adjustments 0.00% 0.00% 0.00%
------ ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 29.01% 0.00% 0.00%
---------------------------------------------------------------------------
United Kingdom
Marketing 1.80% 1.65% 2.07%
Selling 11.55% 7.27% 7.38%
G&A 7.56% 8.12% 6.88%
Opex ICP & Adjustments 0.00% 0.00% 0.00%
------ ----- -----
<CAPTION>
Datapoint Projected July 31,
-------------------------------------------
2000 2001 2002 2003 2004
-------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES
Belgium
Marketing 3.09% NA NA NA NA
Selling 10.48% NA NA NA NA
G&A 9.04% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-------------------------------------------------------------------------------
Total Operating Expenses 22.60% NA NA NA NA
-------------------------------------------------------------------------------
France
Marketing 0.00% NA NA NA NA
Selling 15.12% NA NA NA NA
G&A 5.59% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-------------------------------------------------------------------------------
Total Operating Expenses 20.71% NA NA NA NA
-------------------------------------------------------------------------------
Germany
Marketing NM NA NA NA NA
Selling NM NA NA NA NA
G&A NM NA NA NA NA
Opex ICP & Adjustments NM NA NA NA NA
----- ----- ----- ----- -----
-------------------------------------------------------------------------------
Total Operating Expenses NM NA NA NA NA
-------------------------------------------------------------------------------
Holland
Marketing 1.70% NA NA NA NA
Selling 16.26% NA NA NA NA
G&A 4.37% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-------------------------------------------------------------------------------
Total Operating Expenses 22.33% NA NA NA NA
-------------------------------------------------------------------------------
Italy
Marketing 5.29% NA NA NA NA
Selling 9.30% NA NA NA NA
G&A 7.02% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-------------------------------------------------------------------------------
Total Operating Expenses 21.61% NA NA NA NA
-------------------------------------------------------------------------------
Norway
Marketing 0.00% NA NA NA NA
Selling 0.00% NA NA NA NA
G&A 0.00% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-------------------------------------------------------------------------------
Total Operating Expenses 0.00% NA NA NA NA
-------------------------------------------------------------------------------
Spain
Marketing 0.00% NA NA NA NA
Selling 5.43% NA NA NA NA
G&A 7.91% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-------------------------------------------------------------------------------
Total Operating Expenses 13.33% NA NA NA NA
-------------------------------------------------------------------------------
Sweden
Marketing 0.00% NA NA NA NA
Selling 15.50% NA NA NA NA
G&A 0.00% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-------------------------------------------------------------------------------
Total Operating Expenses 15.50% NA NA NA NA
-------------------------------------------------------------------------------
Switzerland
Marketing NM NA NA NA NA
Selling NM NA NA NA NA
G&A NM NA NA NA NA
Opex ICP & Adjustments NM NA NA NA NA
----- ----- ----- ----- -----
-------------------------------------------------------------------------------
Total Operating Expenses NM NA NA NA NA
-------------------------------------------------------------------------------
United Kingdom
Marketing 1.19% NA NA NA NA
Selling 8.85% NA NA NA NA
G&A 8.85% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
</TABLE>
BNY Capital Markets, Inc. Page 12
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
<TABLE>
---------------------------------------------------------------------------
<S> <C> <C> <C>
Total Operating Expenses 20.91% 17.03% 16.33%
---------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL TELEBUSINESS OPERATING EXPENSES 23.61% 19.04% 21.24%
- -------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Operating Expenses 18.89% NA NA NA NA
-------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
TOTAL TELEBUSINESS OPERATING EXPENSES 19.52% 19.13% 19.13% 19.13% 19.13%
- -----------------------------------------------------------------------------------
</TABLE>
BNY Capital Markets, Inc. Page 13
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
OSN OPERATING EXPENSES MARGIN ANALYSIS
<TABLE>
<CAPTION>
Datapoint Historical July 31,
-------------------------------------
OPERATING EXPENSES 1997 1998 1999
-------------------------------------
<S> <C> <C> <C>
Belgium
Marketing 0.24% 0.17% 0.02%
Selling 8.37% 6.90% 2.57%
G&A 9.63% 6.24% 5.17%
Opex ICP & Adjustments -1.40% 0.00% -0.45%
----- ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 16.85% 13.31% 7.31%
---------------------------------------------------------------------------
France
Marketing 0.00% 0.00% 0.00%
Selling 4.04% 6.97% 8.85%
G&A 6.84% 9.90% 9.38%
Opex ICP & Adjustments 0.00% 0.00% 0.00%
----- ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 10.88% 16.87% 18.24%
---------------------------------------------------------------------------
Germany
Marketing 0.00% 0.00% 0.00%
Selling 8.45% 4.16% 4.50%
G&A 28.81% 17.86% 6.36%
Opex ICP & Adjustments -1.11% -0.13% 2.31%
----- ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 36.15% 21.89% 13.17%
---------------------------------------------------------------------------
Holland
Marketing 6.92% 0.62% 0.09%
Selling 7.25% 7.39% 7.48%
G&A 8.09% 11.97% 18.36%
Opex ICP & Adjustments -0.33% 0.00% -1.24%
----- ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 21.93% 19.98% 24.70%
---------------------------------------------------------------------------
Italy
Marketing 2.81% 3.40% 0.00%
Selling 6.21% -9.16% 1.32%
G&A 13.23% -7.33% 14.47%
Opex ICP & Adjustments 0.00% 0.00% 0.00%
----- ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 22.24% -13.09% 15.79%
---------------------------------------------------------------------------
Norway
Marketing 0.00% 0.00% 0.00%
Selling 14.36% 11.72% 13.83%
G&A 13.41% 17.73% 22.43%
Opex ICP & Adjustments 0.00% 0.00% 0.00%
----- ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 27.77% 29.45% 36.26%
---------------------------------------------------------------------------
Spain
Marketing 0.00% 0.00% 0.00%
Selling 6.17% 6.51% 5.16%
G&A 7.58% 6.83% 14.15%
Opex ICP & Adjustments 0.68% 0.00% 0.00%
----- ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 14.43% 13.34% 19.31%
---------------------------------------------------------------------------
Sweden
Marketing 0.00% 0.00% 0.00%
Selling 6.35% 6.10% 6.59%
G&A 6.89% 5.73% 6.70%
Opex ICP & Adjustments -0.01% 0.00% 0.00%
----- ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 13.23% 11.83% 13.30%
---------------------------------------------------------------------------
Switzerland
Marketing 0.00% 0.00% 0.00%
Selling 1.17% 0.00% 0.00%
G&A 16.49% 13.94% 23.56%
Opex ICP & Adjustments 0.00% 0.00% 51.96%
----- ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 17.66% 13.94% 75.53%
---------------------------------------------------------------------------
United Kingdom
Marketing 0.00% 0.00% 0.32%
Selling 7.33% 8.92% 9.15%
G&A 8.18% 6.27% 7.68%
Opex ICP & Adjustments 0.00% 0.00% -1.80%
----- ----- -----
---------------------------------------------------------------------------
Total Operating Expenses 15.52% 15.19% 15.36%
---------------------------------------------------------------------------
<CAPTION>
Datapoint Projected July 31,
-----------------------------------------------
OPERATING EXPENSES 2000 2001 2002 2003 2004
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Belgium
Marketing 0.00% NA NA NA NA
Selling 6.22% NA NA NA NA
G&A 8.11% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-----------------------------------------------------------------------------
Total Operating Expenses 14.33% NA NA NA NA
-----------------------------------------------------------------------------
France
Marketing 0.00% NA NA NA NA
Selling 8.67% NA NA NA NA
G&A 6.40% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-----------------------------------------------------------------------------
Total Operating Expenses 15.07% NA NA NA NA
-----------------------------------------------------------------------------
Germany
Marketing 0.00% NA NA NA NA
Selling 5.49% NA NA NA NA
G&A 16.86% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-----------------------------------------------------------------------------
Total Operating Expenses 22.35% NA NA NA NA
-----------------------------------------------------------------------------
Holland
Marketing 0.21% NA NA NA NA
Selling 8.75% NA NA NA NA
G&A 10.86% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-----------------------------------------------------------------------------
Total Operating Expenses 19.83% NA NA NA NA
-----------------------------------------------------------------------------
Italy
Marketing 0.00% NA NA NA NA
Selling 0.00% NA NA NA NA
G&A 0.00% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-----------------------------------------------------------------------------
Total Operating Expenses 0.00% NA NA NA NA
-----------------------------------------------------------------------------
Norway
Marketing 0.00% NA NA NA NA
Selling 5.85% NA NA NA NA
G&A 23.07% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-----------------------------------------------------------------------------
Total Operating Expenses 28.91% NA NA NA NA
-----------------------------------------------------------------------------
Spain
Marketing 0.00% NA NA NA NA
Selling 5.84% NA NA NA NA
G&A 11.29% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-----------------------------------------------------------------------------
Total Operating Expenses 17.13% NA NA NA NA
-----------------------------------------------------------------------------
Sweden
Marketing 0.00% NA NA NA NA
Selling 6.89% NA NA NA NA
G&A 6.45% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-----------------------------------------------------------------------------
Total Operating Expenses 13.34% NA NA NA NA
-----------------------------------------------------------------------------
Switzerland
Marketing 0.00% NA NA NA NA
Selling 0.00% NA NA NA NA
G&A 26.74% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-----------------------------------------------------------------------------
Total Operating Expenses 26.74% NA NA NA NA
-----------------------------------------------------------------------------
United Kingdom
Marketing 2.28% NA NA NA NA
Selling 9.92% NA NA NA NA
G&A 6.09% NA NA NA NA
Opex ICP & Adjustments 0.00% NA NA NA NA
----- ----- ----- ----- -----
-----------------------------------------------------------------------------
Total Operating Expenses 18.29% NA NA NA NA
-----------------------------------------------------------------------------
</TABLE>
BNY Capital Markets, Inc. Page 14
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
<TABLE>
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL OSN OPERATING EXPENSES 16.52% 14.14% 14.74%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 18.84% 15.94% 17.02%
- -------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
TOTAL OSN OPERATING EXPENSES 15.41% 12.93% 13.43% 13.93% 14.43%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 17.24% 15.99% 16.52% 16.99% 17.41%
- ---------------------------------------------------------------------------------
</TABLE>
BNY Capital Markets, Inc. Page 15
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
OPERATING INCOME MARGIN ANALYSIS
<TABLE>
<CAPTION>
Datapoint Historical July 31,
--------------------------------
1997 1998 1999
--------------------------------
<S> <C> <C> <C>
OPERATING INCOME
Telebusiness
Belgium 6.68% 16.50% -4.25%
France 6.79% 13.33% 6.76%
Germany -107.66% 65.66% NM
Holland -18.21% -44.24% -56.25%
Italy 10.61% 6.94% -2.02%
Norway NM NM 63.95%
Spain 9.14% 17.93% -1.09%
Sweden -98.83% -32.56% -21.82%
Switzerland 15.43% 100.00% 100.00%
United Kingdom 14.10% 13.10% 12.64%
------ ------ ------
Total Telebusiness 9.24% 11.90% 6.08%
OSN
Belgium 29.13% 10.18% 13.12%
France 19.00% 11.56% 6.28%
Germany -8.51% -11.86% 7.23%
Holland 6.16% 8.90% 3.18%
Italy 20.24% 90.05% 34.21%
Norway 38.61% 29.92% 22.05%
Spain 13.34% 8.13% -2.58%
Sweden 7.99% 8.85% 7.12%
Switzerland -11.81% -16.51% -52.57%
United Kingdom 13.41% 12.74% 13.56%
------ ------ ------
Total OSN 10.26% 9.31% 8.44%
- -------------------------------------------------------------------------------
OPERATING INCOME 9.93% 10.26% 7.61%
- -------------------------------------------------------------------------------
Paris HQ 1.1% 0.9% 1.0%
Finance 1.1% 0.9% 1.0%
SAT Executive 0.2% 0.2% 0.2%
SAT Administration 0.1% 0.1% 0.1%
International Other 0.8% 0.7% 0.7%
------ ------ ------
Total Technical Service/HQ Charges 3.2% 2.9% 3.1%
- -------------------------------------------------------------------------------
PROFIT BEFORE TAX 6.7% 7.4% 4.6%
- -------------------------------------------------------------------------------
Tax Provision 2.7% 3.0% 1.8%
- -------------------------------------------------------------------------------
NET INCOME 4.0% 4.4% 2.7%
- -------------------------------------------------------------------------------
FOR CASH FLOW PURPOSES
- -------------------------------------------------------------------------------
EBITDA 10.8% 9.5% 6.6%
- -------------------------------------------------------------------------------
European Depreciation 4.1% 2.1% 2.0%
Capital Expenditures 2.5% 1.4% 1.9%
Incremental Changes in Working Capital 0.0% 0.0% 0.0%
------ ------ ------
- -------------------------------------------------------------------------------
Unlevered Free Cash Flow 5.6% 5.2% 2.9%
- -------------------------------------------------------------------------------
<CAPTION>
Datapoint Projected July 31,
-------------------------------------------------
2000 2001 2002 2003 2004
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING INCOME
Telebusiness
Belgium 3.76% NA NA NA NA
France 9.43% NA NA NA NA
Germany NM NA NA NA NA
Holland 8.50% NA NA NA NA
Italy 6.49% NA NA NA NA
Norway 100.00% NA NA NA NA
Spain 12.22% NA NA NA NA
Sweden 13.28% NA NA NA NA
Switzerland NM NA NA NA NA
United Kingdom 11.91% NA NA NA NA
------ ----- ----- ----- -----
Total Telebusiness 9.61% 10.00% 10.00% 10.00% 10.00%
OSN
Belgium 14.67% NA NA NA NA
France 10.57% NA NA NA NA
Germany 4.71% NA NA NA NA
Holland -0.70% NA NA NA NA
Italy 29.41% NA NA NA NA
Norway 13.70% NA NA NA NA
Spain 2.07% NA NA NA NA
Sweden 7.03% NA NA NA NA
Switzerland 4.36% NA NA NA NA
United Kingdom 6.01% NA NA NA NA
------ ----- ----- ----- -----
Total OSN 7.57% 7.07% 6.57% 6.07% 5.57%
- -------------------------------------------------------------------------------------------
OPERATING INCOME 8.48% 8.19% 7.81% 7.51% 7.56%
- -------------------------------------------------------------------------------------------
Paris HQ 0.90% 0.87% 0.83% 0.78% 0.73%
Finance 0.89% 0.86% 0.82% 0.77% 0.72%
SAT Executive 0.20% 0.19% 0.18% 0.17% 0.16%
SAT Administration 0.07% 0.06% 0.06% 0.06% 0.05%
International Other 0.67% 0.64% 0.61% 0.58% 0.54%
------ ----- ----- ----- -----
Total Technical Service/HQ Charges 2.73% 2.63% 2.50% 2.37% 2.22%
- -------------------------------------------------------------------------------------------
PROFIT BEFORE TAX 5.75% 5.57% 5.31% 5.15% 5.35%
- -------------------------------------------------------------------------------------------
Tax Provision 2.30% 2.23% 2.12% 2.06% 2.14%
- -------------------------------------------------------------------------------------------
NET INCOME 3.45% 3.34% 3.18% 3.09% 3.21%
- -------------------------------------------------------------------------------------------
FOR CASH FLOW PURPOSES
- -------------------------------------------------------------------------------------------
EBITDA 7.58% 7.65% 7.60% 7.60% 7.64%
- -------------------------------------------------------------------------------------------
European Depreciation 1.83% 2.08% 2.29% 2.45% 2.30%
Capital Expenditures 2.68% 2.58% 2.46% 2.32% 2.17%
Incremental Changes in Working Capital 0.00% 0.13% 0.16% 0.18% 0.21%
------ ----- ----- ----- -----
- -------------------------------------------------------------------------------------------
Unlevered Free Cash Flow 2.60% 2.72% 2.86% 3.04% 3.12%
- -------------------------------------------------------------------------------------------
</TABLE>
BNY Capital Markets, Inc. Page 16
<PAGE>
- --------------------------------------------------------------------------------
DATAPOINT CORPORATION - EUROPEAN COUNTRIES CONFIDENTIAL
- --------------------------------------------------------------------------------
(Figures in thousands) 12/01/99
BNY Capital Markets, Inc. Page 17
<PAGE>
DATAPOINT CORPORATION - EUROPEAN COUNTRIES
DISCOUNTED CASH FLOW ANALYSIS
Unlevered Cost of Equity
- --------------------------------------------------------------------------------
Rate
----
Unlevered Cost of Equity
Risk Free Rate (1) 6.48%
----
Risk Premium for Equities (2) 8.00
Unlevered Specific Industry Risk Factor (3) 0.75
----
Industry Specific Risk Premium for Equities (4) 6.00
Small Size Company Premium (2) 2.60
----
Total Premium for Equities (5) 8.60
----
====
Unlevered Cost of Equity (6) 15.08%
====
Footnotes:
(1) Yield on the 20-year U.S. Government Bond.
(2) Based on Ibbotson & Associates 1999 Yearbook.
(3) A forward looking levered beta for the systems integration industry is 1.
An unlevered forward looking beta, assuming an average debt/equity ratio is .75.
(4) Risk Premium for Equities x Specific Industry Risk Factor.
(5) Industry Specific Risk Premium for Equities + Small Size Company Premium.
(6) Risk Free Rate + Total Premium for Equities.
BNY Capital Markets, Inc. Page 18
<PAGE>
DATAPOINT CORPORATION - EUROPEAN COUNTRIES
DISCOUNTED CASH FLOW ANALYSIS
MANAGEMENT PROJECTIONS
($ in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Valuation Summary
($ in thousands)
Discount -----------------------------------------------------------------------
Rate 5.0 x 5.5 x 6.0 x 6.5 x
- ----------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
14.00% $15,532 $15,532 $15,532 $15,532 Present Value of Cash Flows
37,745 41,520 45,294 49,069 Present Value of Terminal Value
- ----------- -------------- ------------- ------------- --------------
$53,277 $57,052 $60,826 $64,601 Total Enterprise Value
============== ============= ============= ==============
0.4 x 0.4 x 0.5 x 0.5 x As a Multiple of 1999 Sales
6.0 6.5 6.9 7.3 As a Multiple of 1999 EBITDA
16.00% $14,799 $14,799 $14,799 $14,799 Present Value of Cash Flows
34,752 38,227 41,703 45,178 Present Value of Terminal Value
- ----------- -------------- ------------- ------------- --------------
$49,551 $53,026 $56,502 $59,977 Total Enterprise Value
============== ============= ============= ==============
0.4 x 0.4 x 0.4 x 0.4 x As a Multiple of 1999 Sales
5.6 6.0 6.4 6.8 As a Multiple of 1999 EBITDA
18.00% $14,120 $14,120 $14,120 $14,120 Present Value of Cash Flows
32,042 35,246 38,450 41,654 Present Value of Terminal Value
- ----------- -------------- ------------- ------------- --------------
$46,162 $49,366 $52,570 $55,774 Total Enterprise Value
============== ============= ============= ==============
0.3 x 0.4 x 0.4 x 0.4 x As a Multiple of 1999 Sales
5.2 5.6 6.0 6.3 As a Multiple of 1999 EBITDA
20.00% $13,490 $13,490 $13,490 $13,490 Present Value of Cash Flows
29,583 32,542 35,500 38,458 Present Value of Terminal Value
- ----------- -------------- ------------- ------------- --------------
$43,073 $46,032 $48,990 $51,948 Total Enterprise Value
============== ============= ============= ==============
0.3 x 0.3 x 0.4 x 0.4 x As a Multiple of 1999 Sales
4.9 5.2 5.6 5.9 As a Multiple of 1999 EBITDA
</TABLE>
BNY Capital Markets, Inc. Page 19
<PAGE>
Appendix B
FORM OF SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE (the "Supplemental Indenture"), dated as
of ___________________, by and among Datapoint Corporation, a Delaware
corporation ("Datapoint"), and U.S. Bank Trust National Association, as Trustee
(the "Trustee").
WHEREAS, the Company and a predecessor of the Trustee executed an
indenture, dated as of June 1, 1981 (the "Indenture"), relating to the Company's
8 7/8% Convertible Subordinated Debentures due 2006 (the "Debentures"); and
WHEREAS, Section 902 of the Indenture provides that the Company and the
Trustee may execute and deliver one or more supplemental indentures, with the
consent of the Holders (as defined in the Indenture) of at least 66 2/3% in
principal amount of the outstanding Debentures to, among other things, amend or
supplement certain provisions of the Indenture; and
WHEREAS, the Company and the Trustee desire to amend the Indenture for the
purpose of changing and eliminating certain of such provisions; and
WHEREAS, the Company has received consents to such modifications from the
Holders of at least 66 2/3% in principal amount of the outstanding Debentures;
and
WHEREAS, all conditions precedent provided for in the Indenture relating
to this Supplemental Indenture have been complied with;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the Company and the Trustee for the benefit of each other and for
the equal and ratable benefit of the Holders of the Debentures agree as follows:
ARTICLE I
EFFECTIVENESS AND EFFECT
Section 1.1 Effectiveness and Effect.
This Supplemental Indenture shall take effect on the date hereof,
provided, however, that the amendments provided for in Article Two hereof shall
become operative only upon, and simultaneously with, the date on which the
Debentures (as such term is defined in the Offer as defined below), validly
tendered pursuant to the Company's Offer to Purchase and Consent Solicitation,
dated December ____, 1999 (as the same may have been amended, extended or
otherwise modified) (the "Offer"), are accepted for purchase and such amendments
provided for in Article Two hereof shall have no force or effect prior to the
operative time specified in this Section. Subject to the foregoing, the
provisions set forth in this Supplemental Indenture shall be deemed to be, and
shall be construed as part of, the Indenture. All references to the Indenture in
the Indenture or in any other agreement, document or instrument delivered in
connection therewith or pursuant thereto shall be deemed to refer to the
Indenture as amended by this
1
<PAGE>
Supplemental Indenture. Except as amended hereby, the Indenture shall remain in
full force and effect.
ARTICLE II.
AMENDMENT AND WAIVER OF THE INDENTURE
Section 2.1 Deletion of Certain Provisions.
Each of the following provisions of the Indenture is hereby deleted and
eliminated in its entirety, without any redesignation of any other provision of
the Indenture:
Section 801 Company May Consolidate, etc., Only on Certain Terms.
Section 802 Successor Corporation Substituted.
All references in the Indenture, as amended by this Section 2.1, to any of
the provisions deleted and eliminated as provided above, or to the terms defined
in such provisions, shall also be deemed deleted and eliminated.
Section 2.2 Waiver of Certain Provision
Trustee does hereby waive the covenant contained in Section 1005 of the
Indenture in connection with the Asset Sale (as defined in Offer to Purchase and
Consent Solicitation Statement as filed with the U.S. Securities and Exchange
Commission on ____________________) and furthermore does hereby waive the
Company's obligation to deliver Outstanding Debentures on March 1, 2000
contained in Section 1203 of the Indenture until April 20, 2000.
ARTICLE III.
MISCELLANEOUS
Section 3.1 Counterparts.
This Supplemental Indenture may be executed in counterparts, each of which
when so executed shall be deemed to be an original, but all such counterparts
shall together constitute one and the same instrument.
Section 3.2 Severability.
In the event that any provision in this Supplemental Indenture shall be
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provision shall not in any way be affected or
impaired thereby.
Section 3.3 Heading.
The article and section headings herein are for convenience only and shall
not affect the construction hereof.
2
<PAGE>
Section 3.4 Successors and Assigns.
Any covenants and agreements in this Supplemental Indenture by the Company
and the Trustee shall bind their successors and assigns, whether so expressed or
not.
Section 3.5 GOVERNING LAW.
THIS SUPPLEMENTAL INDENTURE, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 3.6 Effect of Supplemental Indenture.
Except as amended by this Supplemental Indenture, the terms and provisions
of the Indenture shall remain in full force and effect.
Section 3.7 Trustee.
The Trustee accepts the modifications of the Trust effected by this
Supplemental Indenture, but only upon the terms and conditions set forth in the
Indenture. Without limiting the generality of the foregoing, the Trustee assumes
no responsibility for the correctness of the recitals herein contained, which
shall be taken as the statements of the Company, and the Trustee shall not be
responsible or accountable in any way whatsoever for or with respect to the
validity or execution or sufficiency of this Supplemental Indenture, and the
Trustee makes no representation with respect thereto.
Section 3.8 Definitions.
Capitalized terms used but not defined herein shall have the respective
meanings ascribed to them in the Indenture.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be executed by their duly authorized representative as of the date
hereof.
DATAPOINT CORPORATION
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Trustee
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
4
<PAGE>
The Depositary for the Offer is:
THE BANK OF NEW YORK
By Mail: By Hand:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
Reorganization Department, 7E Corporate Trust Services Window
Attention: Santino Ground Floor
Ginocchietti, Attention: Santino
New York, New York 10286 Ginocchietti,
Reorganization Department
New York, New York 10286
By Overnight Courier: By Facsimile Transmission:
(212) 815-4699
The Bank of New York Attention: Santino Ginocchietti
101 Barclay Street
Corporate Trust Services
Window For Information or
Ground Floor Confirmation by Telephone:
Attention: Santino Santino Ginocchietti
Ginocchietti, (212) 815-2963
Reorganization Department
New York, New York 10286
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Consent and Letter of Transmittal or the Notice of
Guaranteed Delivery may be directed to the Information Agent or Dealer Manager
at the telephone numbers or address set forth below. A Holder may also contact
such Holder's broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer and the Solicitation.
<TABLE>
<CAPTION>
The Information Agent: The Dealer Manager and Solicitation Agent:
<S> <C>
Georgeson Shareholder Communications Inc. Georgeson Shareholder Securities Corporation
17 State Street 17 State Street
New York, New York 10004 New York, New York 10004
Bankers and Brokers Call Collect: Bankers and Brokers Call Collect:
(212) 440-9800 (212) 440-9884
All Others Call Toll-Free: All Others Call Toll-Free:
(800) 223-2064 (800) 445-1790
</TABLE>
<PAGE>
Exhibit (a)(2)
CONSENT AND LETTER OF TRANSMITTAL
to Tender and Consent
with respect to
8 7/8% Convertible Subordinated Debentures Due June 1, 2006
(CUSIP No. 238100 AB 7)
of
Datapoint Corporation
Pursuant to the Offer to Purchase and Consent Solicitation Statement
Dated _________ ___, 1999
- --------------------------------------------------------------------------------
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [_________], OR SUCH
LATER DATE TO WHICH THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). IN ORDER TO
RECEIVE THE CONSENT PAYMENT, HOLDERS OF DEBENTURES MUST TENDER THEIR DEBENTURES
AND/OR PROVIDE THEIR CONSENTS TO THE PROPOSED AMENDMENTS AT OR PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE DATE (THE "CONSENT DATE") WHICH IS THE LATER OF
[_________], IF ON SUCH DATE THE COMPANY HAS RECEIVED THE REQUISITE CONSENTS,
AND THE FIRST DATE THEREAFTER ON WHICH THE COMPANY RECEIVES THE REQUISITE
CONSENTS. THE COMPANY INTENDS TO EXECUTE A SUPPLEMENTAL INDENTURE CONTAINING THE
PROPOSED AMENDMENTS FOLLOWING THE SATISFACTION OF THE CONDITIONS IN ACCORDANCE
WITH THE TERMS OF THE OFFER AND SOLICITATION. CONSENTS MAY BE REVOKED AT ANY
TIME AT OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE CONSENT DATE, BUT NOT
THEREAFTER. IF A HOLDER REVOKES THEIR CONSENT, IT WILL BE DEEMED AN AUTOMATIC
WITHDRAWAL OF A TENDERED DEBENTURE. HOLDERS OF DEBENTURES DO NOT HAVE TO TENDER
THEIR DEBENTURES IN ORDER TO RECEIVE THE CONSENT PAYMENT. THE TENDER OF
DEBENTURES IS AN AUTOMATIC CONSENT. IF NECESSARY, THE COMPANY WILL EXTEND THE
OFFER SO THAT THE EXPIRATION DATE OCCURS NO EARLIER THAN FIVE BUSINESS DAYS
FOLLOWING THE CONSENT DATE.
- --------------------------------------------------------------------------------
The Depositary for the Offer is:
THE BANK OF NEW YORK
By Mail: By Hand:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
Reorganization Department, 7E Corporate Trust Services Window
Attention: Santino Ground Floor
Ginocchietti, Attention: Santino
New York, New York 10286 Ginocchietti,
Reorganization Department
New York, New York 10286
By Overnight Courier: By Facsimile Transmission:
(212) 815-4699
The Bank of New York Attention: Santino Ginocchietti
101 Barclay Street
Corporate Trust Services
Window For Information or
Ground Floor
Attention: Santino
Ginocchietti,
Reorganization Department
New York, New York 10286
<PAGE>
Confirmation by Telephone:
Santino Ginocchietti
(212) 815-2963
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE OF THOSE
LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
In order to properly complete this Consent and Letter of Transmittal, a
registered holder of Debentures (each, a "Holder" and, collectively, "Holders")
must (i) complete the box entitled "Description of Debentures Tendered;" (ii)
check the appropriate box under the heading "Consents;" (iii) if appropriate,
check and complete the boxes relating to guaranteed delivery, Special Issuance
or Payment Instructions and Special Delivery Instructions; (iv) sign the Consent
and Letter of Transmittal; and (v) complete Substitute Form W-9 (a foreign
Holder should obtain Form W-8 from the Depositary and complete such form). Each
Holder should carefully read the detailed instructions contained herein before
completing this Consent and Letter of Transmittal.
The undersigned has completed, executed and delivered this Consent and
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Offer.
Holders who desire to tender their Debentures pursuant to the Offer are
required to consent to the Proposed Amendments. Holders can consent to the
Proposed Amendments without tendering any of their Debentures.
This Consent and Letter of Transmittal is to be used only (a) if
certificates for Debentures are to be forwarded with it or (b) if a tender of
Debentures is to be made by book-entry transfer to the account maintained by the
Depositary at The Depository Trust Company ("DTC" or the "Book-Entry Transfer
Facility") pursuant to the "Procedures for Tendering Debentures" set forth in
the Offer to Purchase and Consent Solicitation Statement dated December __, 1999
(the "Offer to Purchase"). Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Depositary.
Holders whose certificates are not immediately available or who cannot
deliver their certificates for Debentures and all other required documents to
the Depositary before the Expiration Date (as defined in the Offer to Purchase)
or whose Debentures cannot be delivered on a timely basis pursuant to the
procedure for book-entry transfer must tender their Debentures according to the
guaranteed delivery procedure set forth in "Procedures for Tendering Debentures"
in the Offer to Purchase. See Instruction 2.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Offer to Purchase.
Any questions or requests for assistance may be directed to Georgeson
Shareholder Communications Inc., the information agent for the Offer (the
"Information Agent"), whose address and telephone number are set forth on the
last page of this Consent and Letter of Transmittal. See Instruction 9.
<PAGE>
The Company is not aware of any jurisdiction where making of the Offer is
not in compliance with the laws of such jurisdiction. If the Company becomes
aware of any jurisdiction where the making of the Offer would not be in
compliance with such laws, the Company will make a good faith effort to comply
with any such laws or seek to have such laws declared inapplicable to the Offer.
If, after such good faith effort, the Company cannot comply with any such
applicable laws, the Offer will not be made to (nor will tenders be accepted
from or on behalf of) the Holders residing in such jurisdiction.
CHECK HERE IF TENDERED DEBENTURES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY, AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:__________________________________________________
DTC Account Number:_____________________________________________________________
Transaction Code Number:________________________________________________________
CHECK HERE IF CERTIFICATES FOR TENDERED DEBENTURES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY,
AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):________________________________________________
Date of Execution of Notice of Guaranteed Delivery:_____________________________
Name of Institution Which Guaranteed Delivery:__________________________________
DTC Account Number:_____________________________________________________________
Transaction Code Number:________________________________________________________
<PAGE>
List below the Debentures to which this Consent and Letter of Transmittal
relates. If the space provided below is inadequate, list the certificate numbers
and principal amounts on a separately executed schedule and affix the schedule
to this Consent and Letter of Transmittal. Tenders of Debentures will be
accepted only in principal amounts equal to $1,000 or integral multiples
thereof.
DESCRIPTION OF DEBENTURES TENDERED
(See Instructions 3 and 4)
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN EXACTLY AS
NAME(S) APPEAR(S) ON CERTIFICATE(S))
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CERTIFICATE(S) TENDERED (ATTACH SIGNED LIST IF NECESSARY)
AGGREGATE
PRINCIPAL AMOUNT AGGREGATE
OF DEBENTURES PRINCIPAL AMOUNT
CERTIFICATE REPRESENTED BY OF DEBENTURES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL PRINCIPAL AMOUNT OF DEBENTURES TENDERED $
- --------------------------------------------------------------------------------
* Need not be completed by Holders delivering Debentures by book-entry
transfer.
** If you desire to tender less than the entire principal amount of
Debentures evidenced by any certificates listed above, please indicate in this
column the principal amount of Debentures you wish to tender. Otherwise, the
entire principal amount of Debentures evidenced by such certificates will be
deemed to have been tendered. See Instruction 4.
The names and addresses of the registered holders should be printed, if
they are not already printed above, exactly as they appear on the certificates
representing Debentures tendered
<PAGE>
hereby. The certificate numbers, the principal amount of Debentures represented
by such certificates and the principal amount of Debentures that the undersigned
wishes to tender should be indicated in the appropriate boxes on this Consent
and Letter of Transmittal.
SPECIAL ISSUANCE OR PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 7)
To be completed ONLY if certificates for Debentures not tendered or not
purchased and/or any check for the Consent Payment and/or Offer Price of
Debentures purchased are to be issued in the name of and sent to someone other
than the undersigned.
Issue / / Check / / Certificates to:
Name:
................................................................................
Please Print
Address:
................................................................................
................................................................................
................................................................................
................................................................................
(Include Zip Code)
................................................................................
(Tax Identification or Social Security Number)
/ / Credit Debentures tendered by book-entry transfer and not purchased to the
account set forth below:
Name of account party:
................................................................................
DTC Account number:
................................................................................
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, AND 7)
To be completed ONLY if certificates for Debentures not tendered or not
purchased issued in the name of the undersigned and/or any check for the Offer
Price of Debentures purchased issued in the name of undersigned are to be sent
to someone other than the undersigned or to the undersigned at an address other
than that shown above.
Deliver / / Check / / Certificates to:
Name:
................................................................................
Please Print
Address:
................................................................................
................................................................................
................................................................................
................................................................................
(Include Zip Code)
................................................................................
(Tax Identification or Social Security Number)
<PAGE>
HOLDERS WHO WISH TO ACCEPT THE OFFER AND TENDER THEIR DEBENTURES AND
DELIVER THEIR CONSENT MUST COMPLETE THIS CONSENT AND LETTER OF TRANSMITTAL IN
ITS ENTIRETY.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Datapoint Corporation, a Delaware
corporation (the "Company"), the above-described 8 7/8% Convertible Subordinated
Debentures Due June 1, 2006 (the "Debentures"), at the price of $450 per $1,000
principal amount of Debentures (the "Offer Price"), and consents to the Proposed
Amendments (the "Consent") upon the terms and subject to the conditions set
forth in the Company's Offer to Purchase and Consent Solicitation Statement
dated December __, 1999 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Consent and Letter of Transmittal (which together
constitute the "Offer").
Subject to, and effective on acceptance for payment of the Debentures
tendered hereby in accordance with, the terms of the Offer (including, if the
Offer is extended or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Company all right, title and interest in and to all Debentures
tendered hereby or orders the registration of such Debentures tendered by
book-entry transfer that are purchased pursuant to the Offer to or upon the
order of the Company and hereby irrevocably constitutes and appoints the
Depositary as attorney-in-fact of the undersigned with respect to such
Debentures, with full power of substitution (such power of attorney being an
irrevocable power coupled with interest), to:
(a) deliver certificates for such Debentures, or transfer ownership of
such Debentures on the account books maintained by a Book-Entry
Transfer Facility, together in either such case with all
accompanying evidences of transfer and authenticity, to or upon the
order of the Company, upon receipt by the Depositary, as the
undersigned's agent, of the Offer Price with respect to such
Debentures;
(b) present certificates for such Debentures for cancellation and
transfer on the Company's books; and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Debentures, subject to the next paragraph, all in
accordance with the terms of the Offer.
The undersigned hereby represents and warrants that:
(a) the undersigned understands that tenders of Debentures pursuant to
any one of the procedures described in "Procedures for Tendering
Debentures" set forth in the
<PAGE>
Offer to Purchase and in the Instructions hereto will constitute the
undersigned's acceptance of the terms and conditions of the Offer;
(b) the undersigned owns the Debentures tendered hereby and is entitled
to tender such Debentures;
(c) the undersigned has full power and authority to tender, sell, assign
and transfer the Debentures tendered hereby and deliver the Consent
contained herein;
(d) when and to the extent the Company accepts the Debentures for
purchase, the Company will acquire good, marketable and unencumbered
title to them, free and clear of all security interests, liens,
charges, encumbrances, conditional sales agreements or other
obligations relating to their sale or transfer, and not subject to
any adverse claim;
(e) on request, the undersigned will execute and deliver any additional
documents the Depositary or the Company deems necessary or desirable
to complete the assignment, transfer and purchase of the Debentures
tendered hereby; and
(f) the undersigned has read and agrees to all of the terms of the
Offer.
The undersigned agrees and acknowledges that, by the execution and
delivery hereof, the undersigned makes and provides written Consent to the
Proposed Amendments (with respect to the principal amount of Debentures tendered
hereby) as permitted by the Indenture relating to the Debentures and hereby also
Consents to the execution of the Supplemental Indenture described in the Offer
to Purchase to effect the Proposed Amendments. The undersigned understands that
the Consent provided hereby shall remain in full force and effect unless and
until such Consent is revoked in accordance with the procedures set forth in the
Offer to Purchase and this Consent and Letter of Transmittal. The undersigned
understands that after the Consent Date, no Consents may be revoked (and agrees
that it will not attempt to do so) except in the limited circumstances described
in the Offer to Purchase under the caption "Withdrawal Rights." The undersigned
understands that although the Supplemental Indenture with respect to the
Debentures providing for the Proposed Amendments will have been executed by the
parties thereto, the Proposed Amendments will not become operative until the
validly tendered Debentures are accepted for payment by the Company on the
Payment Date. If the Offer is terminated or withdrawn, or the Debentures are not
accepted for payment, the Supplemental Indenture will not become operative.
The undersigned recognizes that under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may
postpone the acceptance for payment of, or the payment for, Debentures tendered
or may not be required to purchase any of the Debentures tendered hereby. In
either event, the undersigned understands that certificate(s) for any Debentures
not tendered or not purchased will be returned to the undersigned at the address
indicated above, unless otherwise indicated under the "Special Issuance or
Payment Instructions" or "Special Delivery Instructions" below. The undersigned
recognizes that the Company has no obligation, pursuant to the Special Issuance
or Payment Instructions, to transfer
<PAGE>
any certificate for Debentures from the name of their registered holder, or to
order the registration or transfer of such Debentures tendered by book-entry
transfer, if the Company purchases none of the Debentures represented by such
certificate or tendered by such book-entry transfer.
The undersigned understands that acceptance of Debentures by the Company
for payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
The check for the Offer Price for such of the tendered Debentures as are
purchased will be issued to the order of the undersigned and mailed to the
address indicated above unless otherwise indicated under the Special Issuance or
Payment Instructions or the Special Delivery Instructions below.
All authority conferred or agreed to be conferred in this Consent and
Letter of Transmittal shall survive the death or incapacity of the undersigned,
and any obligations of the undersigned under this Consent and Letter of
Transmittal shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer to
Purchase, this tender is irrevocable.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Offer to Purchase.
<PAGE>
HOLDER(S) DELIVERING CONSENTS AND TENDERING DEBENTURES SIGN HERE
(SEE INSTRUCTIONS 1 AND 5)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN)
................................................................................
................................................................................
(Signature(s))
Dated:
.........................................................................., 1999
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificate(s) and documents transmitted with
this Consent and Letter of Transmittal. If signature is by attorney-in-fact,
executor, administrator, trustee, guardian, officer of a corporation or another
acting in a fiduciary or representative capacity, please set forth the full
title. See Instruction 5.)
Name(s):
................................................................................
................................................................................
(Please Print)
Capacity (full title):
................................................................................
Address:
................................................................................
................................................................................
Area Code and Telephone Number:
................................................................................
Tax Identification or
Social Security
Number(s):......................................................................
<PAGE>
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
................................................................................
Name:
................................................................................
(Please Print)
Title:
................................................................................
Name of Eligible
Institution:....................................................................
Address:
................................................................................
................................................................................
................................................................................
Area Code and Telephone Number:
................................................................................
Dated:
......................................................................... , 1999
<PAGE>
HOLDER(S) DELIVERING CONSENTS AND NOT TENDERING DEBENTURES
SIGN HERE
(SEE INSTRUCTIONS 1 AND 5)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN)
CONSENT
Check one of the following boxes*:
I hereby give my Consent to the Proposed Amendments and tender all of the
Debentures listed herein.
I hereby give my Consent to the Proposed Amendments but do not tender any
of my Debentures.
* If neither box is checked, a Holder will be deemed to have delivered their
Consent to the Proposed Amendments for the full principal amount of their
Debentures but will not be deemed to have tendered such Holder's Debentures.
................................................................................
................................................................................
(Signature(s))
Dated:
......................................................................... , 1999
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificate(s) and documents transmitted with
this Consent and Letter of Transmittal. If signature is by attorney-in-fact,
executor, administrator, trustee, guardian, officer of a corporation or another
acting in a fiduciary or representative capacity, please set forth the full
title. See Instruction 5.)
Name(s):
................................................................................
<PAGE>
................................................................................
(Please Print)
Capacity (full title):
................................................................................
Address:
................................................................................
................................................................................
Area Code and Telephone Number:
................................................................................
Tax Identification or
Social Security
Number(s):......................................................................
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
................................................................................
Name:
................................................................................
(Please Print)
Title:
................................................................................
Name of Eligible
Institution:....................................................................
Address:
................................................................................
................................................................................
<PAGE>
................................................................................
Area Code and Telephone Number:
................................................................................
Dated:
.........................................................................
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. GUARANTEE OF SIGNATURES. No signature guarantee is required if either:
(a) this Consent and Letter of Transmittal is signed by a registered
holder of the Debentures exactly as the name of the registered holder appears on
the certificate tendered with this Consent and Letter of Transmittal unless such
holder has completed either the box entitled "Special Issuance or Payment
Instructions" or the box entitled "Special Delivery Instructions"; or
(b) such Debentures are tendered for the account of a member in good
standing of the Securities Transfer Agents' Medallion Program, the Stock
Exchange Medallion Program or the New York Stock Exchange Medallion Signature
Program, or any other bank, broker, dealer, credit union, savings association or
other entity which is an "eligible guarantor institution," as such term is
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended
(each of the foregoing being referred to as an "Eligible Institution" and
collectively, as "Eligible Institutions"). See Instruction 5.
In all other cases, an Eligible Institution must guarantee all signatures
on this Consent and Letter of Transmittal. See Instruction 5.
2. DELIVERY OF CONSENT AND LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Consent and Letter of Transmittal is to be used only
if certificates are delivered with it to the Depositary (or such certificates
will be delivered pursuant to a Notice of Guaranteed Delivery previously sent to
the Depositary) or if tenders are to be made pursuant to the procedure for
tender by book-entry transfer set forth in "Procedures for Tendering Debentures"
in the Offer to Purchase. Certificates for all physically tendered Debentures,
or confirmation of a book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility of Debentures tendered electronically, together in
each case with a properly completed and duly executed Consent and Letter of
Transmittal or duly executed facsimile of it, and any other documents required
by this Consent and Letter of Transmittal, should be mailed or delivered to the
Depositary at the appropriate address set forth herein and must be delivered to
the Depositary on or before the Expiration Date (as defined in the Offer to
Purchase). Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Depositary.
Holders whose certificates are not immediately available or who cannot
deliver Debentures and all other required documents to the Depositary before the
Expiration Date, or whose Debentures cannot be delivered on a timely basis
pursuant to the procedure for book-entry transfer, may tender their Debentures
by or through any Eligible Institution by properly completing and duly executing
and delivering a Notice of Guaranteed Delivery (or a facsimile of it) and by
otherwise complying with the guaranteed delivery procedure set forth in
"Procedures for Tendering Debentures" in the Offer to Purchase. Pursuant to such
procedure, the certificates for all physically tendered Debentures or book-entry
confirmation, as the case may be, as well as a properly completed Consent and
Letter of Transmittal and all other documents required by this
<PAGE>
Consent and Letter of Transmittal, must be received by the Depositary within
three New York Stock Exchange trading days after the date of receipt by the
Depositary of the Notice of Guaranteed Delivery, all as provided in "Procedures
for Tendering Debentures" set forth in the Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice. For
Debentures to be properly tendered pursuant to the guaranteed delivery
procedure, the Depositary must receive the Notice of Guaranteed Delivery before
the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR
DEBENTURES, IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders. All tendering Holders, by execution of this Consent and Letter of
Transmittal (or a facsimile of it), waive any right to receive any notice of the
acceptance of their tender.
3. INADEQUATE SPACE. If the space provided in the box captioned "Description of
Debentures Tendered" is inadequate, the certificate numbers and/or the principal
amount of Debentures should be listed on a separate signed schedule and attached
to this Consent and Letter of Transmittal.
4. PARTIAL TENDERS AND UNPURCHASED DEBENTURES. (Not applicable to Holders who
tender by book-entry transfer.) Tenders of Debentures pursuant to the Offer will
be accepted only in principal amounts equal to $1,000 or integral multiples
thereof. If fewer than all of the Debentures evidenced by any certificate are to
be tendered, Holder must fill in the principal amount of Debentures which are to
be tendered in the column entitled "Principal Amount of Debentures Tendered." In
such case, if any tendered Debentures are purchased, a new certificate for the
remainder of the Debentures evidenced by the old certificate(s) will be issued
and sent to the registered holder(s), unless otherwise specified in the "Special
Issuance or Payment Instructions" or "Special Delivery Instructions" box on this
Consent and Letter of Transmittal, as soon as practicable after the Expiration
Date. All Debentures represented by the certificate(s) listed and delivered to
the Depositary are deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON CONSENT AND LETTER OF TRANSMITTAL, BOND POWERS, AND
ENDORSEMENTS.
(a) If this Consent and Letter of Transmittal is signed by the
registered holder(s) of the Debentures tendered hereby, the
signature(s) must correspond exactly with the name(s) as written on
the face of the certificate without any change whatsoever.
<PAGE>
(b) If the Debentures are registered in the names of two or more joint
holders, each such holder must sign this Consent and Letter of
Transmittal.
(c) If any tendered Debentures are registered in different names on
several certificates, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal (or facsimiles of it)
as there are different registrations of certificates.
(d) When this Consent and Letter of Transmittal is signed by the
registered holder(s) of the Debentures listed and transmitted
hereby, no endorsements of certificate(s) representing such
Debentures or separate bond powers are required unless payment is to
be made, or the certificate(s) for Debentures not tendered or not
purchased are to be issued, to a person other than the registered
holder(s). If this Consent and Letter of Transmittal is signed by a
person other than the registered holder(s) of the certificate(s)
listed, or if payment is to be made or certificate(s) for Debentures
not tendered or not purchased are to be issued to a person other
than the registered holder(s), the certificate(s) must be endorsed
or accompanied by appropriate bond powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s), and any signature(s) on such certificate(s) or bond
power(s) must be guaranteed by an Eligible Institution. See
Instruction 1.
(e) If this Consent and Letter of Transmittal or any certificates or
bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity for the registered
holder(s) of the certificates listed, such persons should so
indicate when signing and must submit proper evidence satisfactory
to the Company of their authority so to act.
6. TRANSFER TAXES. Except as provided in this Instruction, no transfer tax
stamps or funds to cover such stamps need accompany this Consent and Letter of
Transmittal. The Company will pay or cause to be paid any transfer taxes payable
on the transfer to it of Debentures purchased pursuant to the Offer. If,
however:
(a) payment of the Offer Price and/or Consent Payment is to be made to
any person other than the registered holder(s);
(b) Debentures not tendered or not accepted for purchase are to be
registered in the name of any person other than the registered
holder(s); or
(c) tendered certificates are registered in the name of any person other
than the person(s) signing this Consent and Letter of Transmittal;
then the Depositary will deduct from the Offer Price the amount of any transfer
taxes (whether imposed on the registered holder, such other person or otherwise)
payable on account of the transfer to such person
<PAGE>
unless satisfactory evidence of the payment of such taxes, or an exemption from
them, is submitted.
7. SPECIAL ISSUANCE OR PAYMENT INSTRUCTIONS AND SPECIAL DELIVERY INSTRUCTIONS.
If certificate(s) for Debentures not tendered or not purchased and/or check(s)
are to be issued in the name of a person other than the signer of the Consent
and Letter of Transmittal or if such certificate(s) and/or check(s) are to be
sent to someone other than the signer of the Consent and Letter of Transmittal
or to the signer at a different address, the boxes captioned "Special Issuance
or Payment Instructions" and/or "Special Delivery Instructions" on this Consent
and Letter of Transmittal should be completed and signatures must be guaranteed
as described in Instructions 1 and 5. If no instructions are given, Debentures
not tendered or not accepted for purchase will be returned to the Holder.
8. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the validity, form, eligibility (including time of receipt) and
acceptance for payment of any tender of Debentures, and its determination shall
be final and binding on all parties. The Company reserves the absolute right to
reject any or all tenders determined by it not to be in proper form or the
acceptance of which or payment for which may, in the opinion of the Company's
counsel, be unlawful. The Company also reserves the absolute right to waive any
of the conditions of the Offer or any defects or irregularities in the tender of
any particular Debentures, and the Company's interpretation of the terms of the
Offer (including these instructions) will be final and binding on all parties.
No tender of Debentures will be deemed to be properly made until all defects and
irregularities have been cured or waived. Unless waived, any defects or
irregularities in connection with tenders must be cured within such time as the
Company shall determine. None of the Company, the Depositary nor any other
person is or will be obligated to give notice of any defects or irregularities
in tenders, nor shall any of them incur any liability for failure to give any
such notice.
9. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Any questions or
requests for assistance and requests for additional copies of the Offer to
Purchase, the Consent and Letter of Transmittal and other tender offer materials
should be directed to Information Agent, whose address and telephone number are
set forth below. A Holder may also contact such Holder's broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Offer and the Solicitation.
10. SUBSTITUTE FORM W-9 AND FORM W-8. Holders other than corporations and
certain foreign individuals may be subject to backup federal income tax
withholding. Each such tendering Holder or other payee who does not otherwise
establish to the satisfaction of the Depositary an exemption from backup federal
income tax withholding is required to provide the Depositary with a correct
taxpayer identification number ("TIN") on Substitute Form W-9 which is provided
as a part of this Consent and Letter of Transmittal, and to indicate that the
Holder or other payee is not subject to backup withholding by checking the box
in Part 2 of the form. For an individual, his TIN will generally be his social
security number. Failure to provide the information on the form or to check the
box in Part 2 of the form may subject the tendering Holder or other payee to 31%
backup federal income tax withholding on the payments made to the Holder or
other payee with respect to Debentures purchased pursuant to the Offer and to a
<PAGE>
$50 penalty imposed by the Internal Revenue Service. Backup withholding is not
an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained. The box in Part 3
of the form may be checked if the tendering Holder or other payee has not been
issued a TIN and has applied for a TIN or intends to apply for a TIN in the near
future. If the box in Part 3 is checked and the Depositary is not provided with
a TIN within sixty (60) days, the Depositary will withhold 31% on all such
payments thereafter until a TIN is provided to the Depositary. Holders who are
foreign individuals should submit Form W-8 to certify that they are exempt from
backup withholding, unless Instruction 11 applies. Form W-8 may be obtained from
the Depositary. For additional information concerning Substitute Form W-9, see
the enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9."
11. WITHHOLDING ON FOREIGN HOLDERS. The Depositary will withhold federal income
taxes equal to 30% of the gross payments payable to a foreign Holder or his
agent unless the Depositary determines that a reduced rate of withholding or an
exemption from withholding is applicable. (Exemption from backup withholding
does not exempt a foreign Holder from the 30% withholding.) For this purpose, a
foreign Holder is any Holder that is not (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof or
(iii) an estate or trust the income of which is subject to United States federal
income taxation regardless of the source of such income. The Depositary will
determine a Holder's status as a foreign Holder and eligibility for a reduced
rate of, or an exemption from, withholding by reference to the Holder's address
and to any outstanding certificates or statements concerning eligibility for a
reduced rate of, or exemption from, withholding unless facts and circumstances
indicate that reliance is not warranted. In order to obtain an exemption from
withholding on the grounds that the gross proceeds paid pursuant to the Offer
are effectively connected with the conduct of a trade or business within the
United States, a foreign Holder must deliver to the Depositary a properly
executed Form 4224. Such form can be obtained from the Depositary. A foreign
Holder who has not previously submitted the appropriate certificates or
statements with respect to a reduced rate of, or exemption from, withholding for
which such Holder may be eligible should consider doing so in order to avoid
overwithholding. A foreign Holder may be eligible to obtain a refund of tax
withheld if such Holder meets one of the three tests for capital gain or loss
treatment described in "Certain Federal Income Tax Consequences" of the Offer to
Purchase or is otherwise able to establish that no tax or reduced amount of tax
was due. Foreign Holders are urged to consult their tax advisors regarding the
application of federal income tax withholding, including eligibility for a
withholding tax reduction or exemption and the refund procedures.
IMPORTANT: THIS CONSENT AND LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE
OF IT (TOGETHER WITH CERTIFICATE(S) FOR DEBENTURES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR, IF APPLICABLE, THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY BEFORE THE EXPIRATION
DATE.
<PAGE>
IMPORTANT TAX INFORMATION
Under United States federal income tax law, a Holder whose tendered
Debentures are accepted for payment generally is required by law to provide the
Depositary with such Holder's correct TIN on Substitute Form W-9 below or
otherwise establish a basis for exemption from backup withholding. If such
Holder is an individual, his TIN is his social security number. If the
Depositary is not provided with the correct TIN, the Internal Revenue Service
may subject the Holder or other payee to a $50 penalty. Failure to comply
truthfully with the backup withholding requirements also may result in the
imposition of severe criminal and/or civil fines and penalties. In addition,
payments that are made to such Holder or other payee with respect to Debentures
purchased pursuant to the Offer may be subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. Exempt Holders should furnish their TIN, write "Exempt" on the
face to the Substitute Form W-9, and sign, date and return the Substitute Form
W-9 to the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions. In
order for a foreign individual to qualify as an exempt recipient, the Holder
must submit a Form W-8, signed under penalties of perjury, attesting to the
individual's exempt status. A Form W-8 can be obtained from the Depositary.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the Holder or other payee. Backup withholding is
not an additional federal income tax. Rather, the federal income tax liability
of persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payment made to a Holder or other payee
with respect to Debentures purchased pursuant to the Offer, the Holder is
required to notify the Depositary of the Holder's correct TIN by completing the
form below, certifying that the TIN provided on Substitute Form W-9 is correct
(or that such Holder is awaiting a TIN) and that:
(a) the Holder is exempt from backup withholding;
(b) the Holder has not been notified by the Internal Revenue Service
that the Holder is subject to backup withholding as a result of
failure to report all interest or dividends; or
(c) the Internal Revenue Service has notified the Holder that the Holder
is no longer subject to backup withholding.
<PAGE>
WHAT NUMBER TO GIVE THE DEPOSITARY
The Holder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the registered holder of
the Debentures. If the Debentures are held in more than one name or are not held
in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
<PAGE>
PAYER'S NAME:THE BANK OF NEW YORK
- --------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TIN Social Security number or
IN THE BOX AT RIGHT AND CERTIFY Employer identification
BY SIGNING AND DATING BELOW. number
__________________________
------------------------------------------------------------
SUBSTITUTE Part 2--Certification--Under penalties of perjury, I certify
Form W-9 that:
------------------------------------------------------------
Department of the (1) The number shown on this form is my correct Taxpayer
Treasury Identification Number (or I am waiting for a number to
Internal Revenue be issued to me), and
(2) I am not subject to backup withholding because: (a) I am
exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (IRS) that I am
subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
Certification Instructions--You must cross out item (2)
the above if you have been notified by the IRS that you
are currently subject to backup withholding because of
Internal Revenue Service underreporting interest or
dividends on your tax return.
Payer's Request for However, if after being notified by the IRS that you
Taxpayer Identification were subject to backup withholding you received another
Number ("TIN") notification from the IRS that you are no longer subject
to backup, do not cross out item (2).
--------------------------------------------------------
Part 3--
SIGNATURE _________________ DATE _____ Awaiting TIN //
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number, 31% of all reportable
payments made to me will be withheld, but that such amounts will be refunded to
me if I then provide a taxpayer identification number within 60 days.
Signature _____________________________ Date ____________________
- --------------------------------------------------------------------------------
<PAGE>
Manually signed facsimile copies of the Consent and Letter of Transmittal
will be accepted from Eligible Institutions. The Consent and Letter of
Transmittal, certificates for Debentures and any other required documents should
be sent or delivered by each Holder or their broker, dealer, commercial bank,
trust company or other nominee to the Depositary at the address set forth below:
The Depositary for the Offer and the Solicitation is:
THE BANK OF NEW YORK
By Mail: By Hand:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
Reorganization Department, 7E Corporate Trust Services Window
Attention: Santino Ground Floor
Ginocchietti, Attention: Santino
New York, New York 10286 Ginocchietti,
Reorganization Department
New York, New York 10286
By Overnight Courier: By Facsimile Transmission:
(212) 815-4699
The Bank of New York Attention: Santino Ginocchietti
101 Barclay Street
Corporate Trust Services
Window For Information or
Ground Floor Confirmation by Telephone:
Attention: Santino Santino Ginocchietti
Ginocchietti, (212) 815-2963
Reorganization Department
New York, New York 10286
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Consent and Letter of Transmittal or the Notice of
Guaranteed Delivery may be directed to the Information Agent or Dealer Manager
at the telephone numbers or address set forth below. A Holder may also contact
such Holder's broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer and the Solicitation.
The Information Agent:
Georgeson Shareholder Communications Inc.
17 State Street
New York, New York 10004
Bankers and Brokers Call Collect:
(212) 440-9800
All Others Call Toll-Free:
(800) 223-2064
The Dealer Manager and Solicitation Agent:
Georgeson Shareholder Securities Corporation
17 State Street
New York, New York 10004
Bankers and Brokers Call Collect:
(212) 440-9884
All Others Call Toll-Free:
(800) 445-1790
<PAGE>
December ___, 1999
<PAGE>
Exhibit (a)(4)
DATAPOINT CORPORATION
Offer to Purchase for Cash
Any and All of its $54,960,000 Principal Amount of Outstanding
8 7/8% Convertible Subordinated Debentures Due June 1, 2006
(CUSIP No. 238100 AB 7)
at a Purchase Price of $450 Per $1,000 Principal Amount of Debentures
and
Solicitation of Consents in Respect Thereof
- --------------------------------------------------------------------------------
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [_________], OR SUCH
LATER DATE TO WHICH THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). IN ORDER TO
RECEIVE THE CONSENT PAYMENT (AS DEFINED BELOW), HOLDERS OF DEBENTURES MUST
TENDER THEIR DEBENTURES AND/OR PROVIDE THEIR CONSENTS (AS DEFINED IN THE OFFER
TO PURCHASE) TO THE PROPOSED AMENDMENTS AT OR PRIOR TO 5:00 P.M., NEW YORK CITY
TIME, ON THE DATE (THE "CONSENT DATE") WHICH IS THE LATER OF [_________], IF ON
SUCH DATE THE COMPANY HAS RECEIVED THE REQUISITE CONSENTS (AS DEFINED IN THE
OFFER TO PURCHASE), AND THE FIRST DATE THEREAFTER ON WHICH THE COMPANY RECEIVES
THE REQUISITE CONSENTS. THE COMPANY INTENDS TO EXECUTE A SUPPLEMENTAL INDENTURE
CONTAINING THE PROPOSED AMENDMENTS FOLLOWING THE SATISFACTION OF THE CONDITIONS
IN ACCORDANCE WITH THE TERMS OF THE OFFER AND SOLICITATION. CONSENTS MAY BE
REVOKED AT ANY TIME AT OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE CONSENT
DATE, BUT NOT THEREAFTER. IF A HOLDER REVOKES THEIR CONSENT, IT WILL BE DEEMED
AN AUTOMATIC WITHDRAWAL OF A TENDERED DEBENTURE. HOLDERS OF DEBENTURES DO NOT
HAVE TO TENDER THEIR DEBENTURES IN ORDER TO RECEIVE THE CONSENT PAYMENT. THE
TENDER OF DEBENTURES IS AN AUTOMATIC CONSENT. IF NECESSARY, THE COMPANY WILL
EXTEND THE OFFER SO THAT THE EXPIRATION DATE OCCURS NO EARLIER THAN FIVE
BUSINESS DAYS FOLLOWING THE CONSENT DATE.
- --------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration is an Offer to Purchase and Consent
Solicitation Statement, dated December ___, 1999 (the "Offer to Purchase") and
the related Consent and Letter of Transmittal (which together constitute the
"Offer") in connection with the Offer by Datapoint Corporation, a Delaware
corporation (the "Company"), to purchase for cash any and all of its $54,960,000
principal amount of outstanding 8 7/8% Convertible Subordinated Debentures Due
June 1, 2006 (the "Debentures"), at a price of $450 per $1,000 principal amount
of Debentures (the "Offer Price"), on the terms and subject to the conditions of
the Offer. In conjunction with the Offer, the Company is soliciting Consents to
the adoption of amendments to the Indenture eliminating and waiving certain
covenants and other provisions contained therein (the "Proposed Amendments"). A
Consent Payment equal to [$________] per $1,000 principal amount of Debentures
will be paid only for Consents delivered on or before the Consent Date.
WE ARE THE HOLDER OF RECORD OF DEBENTURES HELD BY US FOR YOUR
<PAGE>
ACCOUNT. AS SUCH, WE ARE THE ONLY ONES WHO CAN DELIVER YOUR CONSENT TO THE
PROPOSED AMENDMENTS AND/OR TENDER YOUR DEBENTURES, AND THEN ONLY PURSUANT TO
YOUR INSTRUCTIONS. WE ARE SENDING YOU THE CONSENT AND LETTER OF TRANSMITTAL FOR
YOUR INFORMATION ONLY; YOU CANNOT USE IT TO TENDER DEBENTURES WE HOLD FOR YOUR
ACCOUNT.
Please instruct us as to whether you wish us to consent to the Proposed
Amendments and/or tender any or all of the Debentures we hold for your account
on the terms and subject to the conditions of the Offer.
We call your attention to the following:
1. You may tender Debentures at a price of $450 per $1,000 principal
amount of Debentures, as indicated in the attached instruction form.
2. You may deliver your Consent prior to the Consent Date and receive
the Consent Payment. You may deliver your Consent without tendering
your Debentures.
3. The Offer is not conditioned upon a minimum principal amount of
Debentures being tendered. The Offer is conditioned upon, among
other things, the Company receiving the Requisite Consents.
4. The Offer and withdrawal rights will expire at 5:00pm, New York City
time, on January __, 2000, unless the Company extends the Offer.
5. The Offer is for any and all of the outstanding Debentures.
6. Tendering holders of Debentures will not be obligated to pay any
brokerage commissions, solicitation fees or, subject to Instruction
6 of the Consent and Letter of Transmittal, transfer taxes on the
Company's purchase of Debentures pursuant to the Offer. However,
federal income tax backup withholding at a rate of 31% may be
required, unless an exemption is provided or unless the required
taxpayer identification information is provided. See Instruction 10
to the Consent and Letter of Transmittal).
7. The Company's obligation to pay the Offer Price or Consent Payment,
as applicable, for tendered Debentures or delivered Consents is
subject to certain conditions set forth in the Offer to Purchase,
including, among other things, (i) the receipt of the Requisite
Consents, (ii) the consummation of the Asset Sale, (iii) the
approval by the holders of a majority of the outstanding shares of
common stock of the Company of the Asset Sale and the change of the
Company's name and (iv) the satisfaction or waiver of certain other
conditions, as more fully discussed in the Offer to Purchase.
<PAGE>
If you wish to have us deliver your Consent or tender any or all of your
Debentures, please so instruct us by completing, executing and returning to us
the attached instruction form. An envelope to return your instructions to us is
enclosed. If you authorize us to deliver your Consent or tender your Debentures,
we will deliver such Consent and/or tender all such Debentures unless you
specify otherwise on the attached instruction form. The Consent and Letter of
Transmittal is furnished to you for informational purposes only and may not be
used by you to tender Debentures held by us and registered in our name for your
account or benefit or deliver the related Consent.
YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US
TO DELIVER YOUR CONSENT ON OR BEFORE THE CONSENT DATE OR SUBMIT A TENDER ON YOUR
BEHALF ON OR BEFORE THE EXPIRATION OF THE OFFER. THE OFFER AND WITHDRAWAL RIGHTS
EXPIRE AT 5:00PM, NEW YORK CITY TIME, ON JANUARY ___, 2000, UNLESS THE COMPANY
EXTENDS THE OFFER.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Offer to Purchase.
The Offer is made solely by the Offer to Purchase and the related Consent
and Letter of Transmittal and is being made to all Holders. The Company is not
aware of any jurisdiction in which the making of the Offer or the tender of
Debentures in connection therewith would not be in compliance with applicable
law. If the Company becomes aware of any jurisdiction in which the making of the
Offer or the tender of Debentures in connection therewith would not be in
compliance with applicable law, the Company will make a good faith effort to
comply with any such law. If, after such good faith effort, the Company cannot
comply with any such law, the Offer will not be made to (nor will tenders be
accepted from or on behalf of ) Holders residing in any such jurisdiction. In
any jurisdiction where the securities, blue sky or other laws require the Offer
to be made by licensed brokers or dealers, the Offer shall be deemed to be made
on behalf of the Company by the Dealer Manager or one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
<PAGE>
Instruction Form With Respect to the Offer to Purchase for Cash
Any and All Outstanding 8 7/8% Convertible Subordinated Debentures Due 2006
(CUSIP No. 238100 AB 7)
of
DATAPOINT CORPORATION
and
Solicitation of Consents in Respect Thereof
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase and Consent Solicitation Statement, dated December ___, 1999
(the "Offer to Purchase") and the related Consent and Letter of Transmittal
(which together constitute the "Offer"), in connection with the Offer by
Datapoint Corporation, a Delaware corporation (the "Company"), to purchase any
and all of its $54,960,000 principal amount of outstanding 8 7/8% Convertible
Subordinated Debentures Due June 1, 2006 (the "Debentures"), at a price of $450
per $1,000 principal amount of Debentures (the "Offer Price"), upon the terms
and subject to the conditions of the Offer. "). In conjunction with the Offer,
the Company is soliciting Consents to the adoption of amendments to the
Indenture eliminating and waiving certain covenants and other provisions
contained therein (the "Proposed Amendments"). A Consent Payment equal to
[$________] per $1,000 principal amount of Debentures will be paid only for
Consents delivered on or before the Consent Date.
The undersigned hereby instruct(s) you to (check whichever applies):
tender to the Company the principal amount of Debentures indicated below
or, if no principal amount is indicated, all Debentures you hold for the account
of the undersigned, pursuant to the terms and subject to the conditions of the
Offer and deliver a Consent for all such Debentures.
deliver a Consent for the principal amount of Debentures indicated below
or, if no principal amount is indicated, all Debentures you hold for the account
of the undersigned, pursuant to the terms and subject to the conditions of the
Offer but do not tender such Debentures.
AGGREGATE PRINCIPAL AMOUNT OF DEBENTURES TO BE TENDERED BY YOU FOR
ACCOUNT OF THE UNDERSIGNED:*
_________________ DEBENTURES
* Unless otherwise indicated, all of the Debentures held for the account of the
undersigned will be tendered.
SIGNATURE BOX
Signature(s)
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated
- --------------------------------------------------------------------------------
Name(s) and Address(es)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Area Code and Telephone Number
- --------------------------------------------------------------------------------
Taxpayer Identification or
Social Security Number
- --------------------------------------------------------------------------------
<PAGE>
Exhibit (a)(5)
NOTICE OF GUARANTEED DELIVERY
for
Tender of Certificates for Any and All Outstanding 8 7/8% Convertible
Subordinated Debentures Due 2006
(CUSIP No. 238100 AB 7)
of
Datapoint Corporation
- --------------------------------------------------------------------------------
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [_________], OR SUCH
LATER DATE TO WHICH THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). IN ORDER TO
RECEIVE THE CONSENT PAYMENT, HOLDERS OF DEBENTURES MUST TENDER THEIR DEBENTURES
AND/OR PROVIDE THEIR CONSENTS TO THE PROPOSED AMENDMENTS AT OR PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE DATE (THE "CONSENT DATE") WHICH IS THE LATER OF
[_________], IF ON SUCH DATE THE COMPANY HAS RECEIVED THE REQUISITE CONSENTS,
AND THE FIRST DATE THEREAFTER ON WHICH THE COMPANY RECEIVES THE REQUISITE
CONSENTS. THE COMPANY INTENDS TO EXECUTE A SUPPLEMENTAL INDENTURE CONTAINING THE
PROPOSED AMENDMENTS FOLLOWING THE SATISFACTION OF THE CONDITIONS IN ACCORDANCE
WITH THE TERMS OF THE OFFER AND SOLICITATION. CONSENTS MAY BE REVOKED AT ANY
TIME AT OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE CONSENT DATE, BUT NOT
THEREAFTER. IF A HOLDER REVOKES THEIR CONSENT, IT WILL BE DEEMED AN AUTOMATIC
WITHDRAWAL OF A TENDERED DEBENTURE. HOLDERS OF DEBENTURES DO NOT HAVE TO TENDER
THEIR DEBENTURES IN ORDER TO RECEIVE THE CONSENT PAYMENT. THE TENDER OF
DEBENTURES IS AN AUTOMATIC CONSENT. IF NECESSARY, THE COMPANY WILL EXTEND THE
OFFER SO THAT THE EXPIRATION DATE OCCURS NO EARLIER THAN FIVE BUSINESS DAYS
FOLLOWING THE CONSENT DATE.
- --------------------------------------------------------------------------------
Capitalized terms used but not defined herein have the meanings given them
in the Offer to Purchase and Consent Solicitation Statement dated December __,
1999 (the "Offer to Purchase").
This Notice of Guaranteed Delivery or a facsimile of it must be used to
accept the Offer, as defined below, if:
(a) certificates for 8 7/8% Convertible Subordinated Debentures Due June
1, 2006 (the "Debentures"), of Datapoint Corporation, a Delaware
corporation, are not immediately available or certificates for
Debentures and all other required documents cannot be delivered to
the Depositary before the Expiration Date; or
(b) Debentures cannot be delivered on a timely basis pursuant to the
procedure for book-entry transfer.
This form or a facsimile of it, signed and properly completed, may be
delivered by hand, mail, telegram or facsimile transmission to the Depositary.
See "Procedures for Tendering Debentures" in the Offer to Purchase.
<PAGE>
The Depositary for the Offer and the Solicitation is:
THE BANK OF NEW YORK
By Mail: By Hand:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
Reorganization Department, 7E Corporate Trust Services Window
Attention: Santino Ground Floor
Ginocchietti, Attention: Santino
New York, New York 10286 Ginocchietti,
Reorganization Department
New York, New York 10286
By Overnight Courier: By Facsimile Transmission:
(212) 815-4699
The Bank of New York Attention: Santino Ginocchietti
101 Barclay Street
Corporate Trust Services
Window For Information or
Ground Floor Confirmation by Telephone:
Attention: Santino Santino Ginocchietti
Ginocchietti, (212) 815-2963
Reorganization Department
New York, New York 10286
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THAT SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THAT LISTED ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature in a
Consent and Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box of the Consent and
Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby represents that it is the holder of the Debentures
being tendered (or caused to be tendered) hereby and is entitled to tender (or
cause to be tendered) such Debentures as contemplated by the Offer to Purchase.
The undersigned hereby delivers its Consent to the Proposed Amendments and
tenders (or causes a tender) to Datapoint Corporation, at the price of $450 per
$1,000 principal amount of Debentures (the "Offer Price"), upon the terms and
conditions set forth in the Offer to Purchase and the related Consent and Letter
of Transmittal (which together constitute the "Offer"), receipt of which is
hereby acknowledged, Debentures, pursuant to the guaranteed delivery procedure
set forth in "Procedures for Tendering Debentures" in the Offer to Purchase.
Except as stated in the Offer to Purchase, all authority herein conferred
or agreed to be conferred shall survive the death or incapacity of the
undersigned, and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.
A record holder must execute this Notice of Guaranteed Delivery exactly as
its name appears on its Debentures, and a DTC Participant must execute this
Notice of Guaranteed Delivery exactly as its name is registered with the
Depository Trust Company respectively. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person must
set forth his or her name, address and capacity as indicated below and submit
evidence to the Company of such person's authority to act.
Aggregate Principal Amount of Debentures Tendered: $____________________________
Certificate Nos. (if available):
- --------------------------------------------------------------------------------
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE TYPE OR PRINT
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ZIP CODE
<PAGE>
Area Code and
Telephone Number:
- --------------------------------------------------------------------------------
SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:
If Debentures will be tendered by book-entry transfer, provide the account
number below:
The Depository Trust Company Account Number: ___________________________________
<PAGE>
GUARANTEE
The undersigned is a member in good standing of the Securities Transfer
Agents' Medallion Program, the Stock Exchange Medallion Program or the New York
Stock Exchange Medallion Signature Program, or a bank, broker, dealer, credit
union, savings association or other entity which is an "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (each of the foregoing being referred to as an
"Eligible Institution" and collectively, as "Eligible Institutions"), and
guarantees that the Depositary will receive certificates for the Debentures
tendered hereby in proper form for transfer, or Debentures will be tendered
pursuant to the procedure for book-entry transfer at The Depository Trust
Company or The Bank of New York, in any case, together with a properly completed
and duly executed Consent and Letter of Transmittal and any other documents
required by the Consent and Letter of Transmittal (or a manually signed
facsimile of them), all within three New York Stock Exchange trading days from
the date of receipt by the Depositary of this Notice of Guaranteed Delivery.
Name of Firm: _____________________________Address:____________________________
Zip Code:________
Authorized Signature___________________________________________________________
Area Code and
Name: __________________________________ Telephone Number: ______________
Please Print
Title: __________________________________ Dated: ____________________
- --------------------------------------------------------------------------------
The institution which completes this form must deliver to the Depositary
the guarantee, the Consent and Letter of Transmittal (or facsimile thereof) and
certificates for Debentures within the time periods specified herein. Failure to
do so could result in a financial loss to such institution.
DO NOT SEND DEBENTURE CERTIFICATES WITH THIS NOTICE. DEBENTURE CERTIFICATES
SHOULD BE SENT WITH THE CONSENT AND LETTER OF TRANSMITTAL.
<PAGE>
Exhibit (a)(6)
December __, 1999
To Our Debentureholders:
Datapoint Corporation is offering to purchase any and all of its
$54,960,000 principal amount of outstanding 8 7/8% Convertible Subordinated
Debentures due June 1, 2006 (the "Debentures") from its Debentureholders at a
cash price of $450 per $1,000 principal amount of Debentures. In conjunction
with the Offer, the Company is soliciting Consents to the adoption of amendments
to the Indenture eliminating and waiving certain covenants and other provisions
contained therein (the "Proposed Amendments"). A Consent Payment equal to
[$________] per $1,000 principal amount of Debentures will be paid only for
Consents delivered on or before the Consent Date.
This offer will expire at 5:00 p.m., New York City time, on [_________],
or such later date to which the offer is extended (the "Expiration Date"). In
order to receive the Consent Payment , holders of Debentures must tender their
Debentures and/or provide their consents to the Proposed Amendments at or prior
to 5:00 p.m., New York City time, on the date (the "Consent Date") which is the
later of [_________], if on such date the Company has received the Requisite
Consents, and the first date thereafter on which the company receives the
Requisite Consents. The Company intends to execute a Supplemental Indenture
containing the Proposed Amendments following the satisfaction of the conditions
in accordance with the terms of the Offer and Consent Solicitation Statement.
Consents may be revoked at any time at or prior to 5:00 p.m., New York City
time, on the Consent Date, but not thereafter. If a Holder revokes their
consent, it will be deemed an automatic withdrawal of a tendered Debenture.
Holders of Debentures do not have to tender their Debentures in order to receive
the Consent Payment. The tender of Debentures is an automatic consent. If
necessary, the company will extend the offer so that the Expiration Date occurs
no earlier than five business days following the Consent Date.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Offer to Purchase and Consent Solicitation
Statement dated December __, 1999.
Neither the Company nor its Board of Directors makes any recommendation to
any Debentureholder as to whether to tender or refrain from tendering
debentures. You must make your own decision whether to tender debentures and, if
so, what principal amount of debentures to tender.
This Offer is explained in detail in the enclosed Offer to Purchase and
Consent and Letter of Transmittal. If you want to deliver your Consent and/or
tender your Debentures, the instructions on how to do so are explained in detail
in the enclosed materials. We encourage you to read these materials carefully
before making any decision with respect to the Offer.
Very truly yours,
<PAGE>
Asher B. Edelman
Chairman of the Board
<PAGE>
Exhibit (a)(7)
DATAPOINT CORPORATION
ANNOUNCES TENDER OFFER FOR ANY AND ALL OF
ITS $54,960,000 PRINCIPAL AMOUNT OF OUTSTANDING
8 7/8% CONVERTIBLE SUBORDINATED DEBENTURES DUE JUNE 1, 2006
(CUSIP No. 238100 AB 7)
San Antonio, Texas, December __, 1999 -- _____________________
(OTCBB:___).
The Board of Directors of Datapoint Corporation (DTCBB) today authorized a
tender offer for any and all of the company's $54,960,000 principal amount of
outstanding 8 7/8% Convertible Subordinated Debentures Due June 1, 2006 (the
"Debentures"). The offer will commence within a week, and will be subject to the
terms and conditions that will be more fully described in the offering
materials.
Under the terms of the offer, the company will invite holders of
Debentures to tender their Debentures at a price of $450 per $1,000 principal
amount of debentures (the "Offer Price"). In conjunction with the Offer, the
Company is soliciting Consents to the adoption of amendments to the Indenture
eliminating and waiving certain covenants and other provisions contained therein
(the "Proposed Amendments"). A Consent Payment equal to [$________] per $1,000
principal amount of Debentures will be paid only for Consents delivered on or
before the Consent Date.
The Company has $54,960,000 principal amount of outstanding 8 7/8%
Convertible Subordinated Debentures. The offer will not be conditioned on a
minimum principal amount of Debentures being tendered.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Offer to Purchase.
The Depositary for the offer will be The Bank of New York.
Datapoint Corporation --
o The Company is principally engaged in the development, acquisition,
marketing, servicing, and system integration of computer and
communications products. These products and services are for
integrated computer, telecommunication and video conferencing
network systems.
o Recently, the Company conditionally acquired the Corebyte product
family
<PAGE>
("Corebyte") which consists of internet communication and networking
software products. With the acquisition of Corebyte, the Company
intends to focus its energies and resources on information
technology and e-commerce applications which it had not previously
been engaged in.
<PAGE>
Exhibit (a)(9)
Guidelines for Certification of Taxpayer Identification Number
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
Purpose of Form. -- A person who is required to file an information return
with the IRS must obtain your correct TIN to report income paid to you, real
estate transactions, mortgage interest you paid, the acquisition or abandonment
of secured property, or contributions you made to an IRA. Use Form W-9 to
furnish your correct TIN to the requester (the person asking you to furnish your
TIN) and, when applicable, (1) to certify that the TIN you are furnishing is
correct (or that you are waiting for a number to be issued), (2) to certify that
you are not subject to backup withholding, and (3) to claim exemption from
backup withholding if you are an exempt payee. Furnishing your correct TIN and
making the appropriate certifications will prevent certain payments from being
subject to backup withholding.
Note: If a requester gives you a form other than a W-9 to request your
TIN, you must use the requester's form.
How To Obtain a TIN. -- If you do not have a TIN, apply for one
immediately. To apply, get Form SS-5, Application for a Social Security Card
(for individuals), from your local office of the Social Security Administration,
or Form SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in the
space for the TIN in Part I (or check box 2 of Substitute Form W-9), sign and
date the form, and give it to the requester. Generally, you must obtain a TIN
and furnish it to the requester by the time of payment. If the requester does
not receive your TIN by the time of payment, backup withholding, if applicable,
will begin and continue until you furnish your TIN to the requester.
Note: Writing "Applied for" (or checking box 2 of the Substitute Form W-9)
on the form means that you have already applied for a TIN OR that you intend to
apply for one in the near future.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
What Is Backup Withholding? -- Persons making certain payments to you
after 1992 are required to withhold and pay to the IRS 31% of such payments
under certain conditions. This is called "backup withholding." Payments that
could be subject to backup withholding include interest, dividends, broker and
barter exchange transactions, rents, royalties, nonemployee compensation, and
certain payments from fishing boat operators, but do not include real estate
transactions.
<PAGE>
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS notifies the requester that you furnished an incorrect TIN,
or
3. You are notified by the IRS that you are subject to backup
withholding because you failed to report all your interest and
dividends on your tax return (for reportable interest and dividends
only), or
4. You do not certify to the requester that you are not subject to
backup withholding under 3 above (for reportable interest and
dividend accounts opened after 1983 only), or
5. You do not certify your TIN. This applies only to reportable
interest, dividend, broker, or barter exchange accounts opened after
1983, or broker accounts considered inactive in 1983.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments are
exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Example Payees and Payments
under Specific Instructions, below, if you are an exempt payee.
Payees and Payments Exempt From Backup Withholding. -- The following is a
list of payees exempt from backup withholding and for which no information
reporting is required. For interest and dividends, all listed payees are exempt
except item (9). For broker transactions, payees listed in (1) through (13) and
a person registered under the Investment Advisers Act of 1940 who regularly acts
as a broker are exempt. Payments subject to reporting under sections 6041 and
6041A are generally exempt from backup withholding only if made to payees
described in items (1) through (7), except a corporation that provides medical
and health care services or bills and collects payments for such services is not
exempt from backup withholding or information reporting. Only payees described
in items (2) through (6) are exempt from backup withholding for barter exchange
transactions, patronage dividends, and payments by certain fishing boat
operators.
(1) A corporation. (2) An organization exempt from tax under section
501(a), or an IRA, or a custodial account under section 403(b)(7). (3) The
United States or any of its agencies or instrumentalities. (4) A state, the
District of Columbia, a possession of the United States, or any of their
political subdivisions or instrumentalities. (5) A foreign government or any of
its political subdivisions, agencies, or instrumentalities. (6) An international
organization or any of its agencies or instrumentalities. (7) A foreign central
bank of issue. (8) A dealer in securities or
<PAGE>
commodities required to register in the United States or a possession of the
United States. (9) A futures commission merchant registered with the Commodity
Futures Trading Commission. (10) A real estate investment trust. (11) An entity
registered at all times during the tax year under the Investment Company Act of
1940. (12) A common trust fund operated by a bank under section 584(a). (13) A
financial institution. (14) A middleman known in the investment community as a
nominee or listed in the most recent publication of the American Society of
Corporate Secretaries, Inc., Nominee List. (15) A trust exempt from tax under
section 664 or described in section 4947.
Payments of dividend and patronage dividends generally not subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section
1441.
- Payments to partnerships not engaged in a trade or business in the
United States and that have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Payments of interest generally not subject to backup withholding include
the following:
- Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have not
provided your correct TIN to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid by you.
Payments that are not subject to information reporting are also not
subject to backup withholding. For details, see sections 6041, 6041A(a), 6042,
6044, 6045, 6049, 6050A, and 6050N, and their regulations.
PENALTIES
<PAGE>
Failure To Furnish TIN. -- If you fail to furnish your correct TIN to a
requester, you will be subject to a penalty of $50 for each such failure unless
your failure is due to reasonable cause and not to willful neglect.
Civil Penalty for False Information With Respect to Withholding. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
Criminal Penalty for Falsifying Information. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
Misuse of TINS. -- If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
Name. -- If you are an individual, you must generally provide the name
shown on your Social Security card. However, if you have changed your last name,
for instance, due to marriage, without informing the Social Security
Administration of the name change, please enter your first name, the last name
shown on your Social Security card, and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either your SSN or EIN. You may also enter your business name or "doing business
as" name on the business name line. Enter your name(s) as shown on your Social
Security card and/or as it was used to apply for your EIN on Form SS-4.
SIGNING THE CERTIFICATION
1. Interest, Dividend, Broker and Barter Exchange Accounts Opened Before
1984 and Broker Accounts Considered Active During 1983. You are required to
furnish your correct TIN, but you are not required to sign the certification.
2. Interest, Dividend, Broker, and Barter Exchange Accounts Opened After
1983 and Broker Accounts Considered Inactive During 1983. You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
3. Real Estate Transactions. You must sign the certification. You may
cross out item 2 of the certification.
4. Other Payments. You are required to furnish your correct TIN, but you
are not required to sign the certification unless you have been notified of an
incorrect TIN. Other payments include payments made in the course of the
requester's trade or business for rents,
<PAGE>
royalties, goods (other than bills for merchandise), medical and health care
services, payments to a nonemployee for services (including attorney and
accounting fees), and payments to certain fishing boat crew members.
5. Mortgage Interest Paid by You, Acquisition or Abandonment of Secured
Property, IRA Contributions. You are required to furnish your correct TIN, but
you are not required to sign the certification.
6. Exempt Payees and Payments. If you are exempt from backup withholding,
you should complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and
sign and date the form. If you are a nonresident alien or foreign entity not
subject to backup withholding, give the requester a complete Form W-8,
Certificate of Foreign Status.
7. TIN "Applied for." Follow the instructions under How To Obtain a TIN on
page 1, and sign and date this form.
Signature. -- For a joint account, only the person whose TIN is shown in
Part I should sign.
Privacy Act Notice. -- Section 6109 requires you to furnish your correct
TIN to persons who must file information returns with the IRS to report
interest, dividends, and certain other income paid to you, mortgage interest you
paid, the acquisition or abandonment of secured property, or contributions you
made to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. You must provide your TIN whether or not
you are required to file a tax return. Payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does not
furnish a TIN to a payer. Certain penalties may also apply.
<PAGE>
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
For this type of account: Give name and SSN of:
1. Individual.................................. The individual
2. Two or more individuals (joint account)..... The actual owner of the
account or, if combined
funds, the first
individual on the
account(1)
3. Custodian account of a minor (Uniform Gift
to Minors Act).............................. The minor(2)
4. a. The usual revocable savings trust (grantor is
also trustee)............................... The grantor-trustee(1)
b. So-called trust account that is not a legal or
valid trust under state law................. The actual owner(1)
5. Sole proprietorship......................... The owner(3)
For this type of account: Give name and EIN of:
6. Sole proprietorship......................... The owner(3)
7. A valid trust, estate, or pension trust..... Legal entity(4)
8. Corporate................................... The corporation
9. Association, club, religious, charitable,
educational, or other tax-exempt
organization................................ The organization
10. Partnership................................. The partnership
11. A broker or registered nominee.............. The broker or nominee
12. Account with the Department of Agriculture in the
name of a public entity (such as a state or local
government, school district or prison) that
receives agriculture program payments....... The public entity
- ----------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) Show your individual name. You may also enter your business name. You may
use your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title.)
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
