<PAGE>
SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
14(a) of the Securities Exchange
Act of 1934 (Amendment No __ )
Filed by the Registrant [ X ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
DATAPOINT CORPORATION
-----------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ X] Fee computed on table below per Exchange Act rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, $.25 par value
2) Aggregate number of securities to which transaction applies:
18,348,229 shares
3) Per unit price of other underlying value of transaction computer
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
Based on consideration to be received by registrant as a result of
the disposition of substantially all of its assets.
4) Proposed maximum aggregate value of transaction: $49.5 million
5) Total fee paid: $9,900
[ ] Fee paid previously with preliminary
materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of the filing.
1) Amount Previously Paid:
.......................................................................
2) Form, Schedule or Registration Statement No.:
.......................................................................
3) Filing Party:
.......................................................................
4) Date Filed:
December 3, 1999
.......................................................................
<PAGE>
DATAPOINT CORPORATION
8410 Datapoint Drive
San Antonio, Texas 78229-8500
-----------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
[ ]
-----------
To Our Stockholders:
Notice is hereby given that a special meeting (the "Special Meeting")
of the stockholders (the "Stockholders") of Datapoint Corporation (the
"Company") will be held at the University Club, 1 West 54th Street, New York, NY
10019 on February [__], 2000, at 10:00 a.m. local time for the following
purposes:
o To approve the sale of certain of the Company's direct and
indirect operating subsidiaries which operate in Europe
pursuant to the Stock Purchase Agreement, dated July 31,
1999 (as subsequently amended on November 1, 1999), 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 referred to as the Buyer, the
companies listed on Schedule A of the Stock Purchase
Agreement, collectively referred to as the Sellers, and the
Company.
o To approve an amendment to the Company's Certificate of
Incorporation to change the name of the Company to "DYNACORE
Corporation".
The enclosed Proxy Statement includes information relating to these
proposals. Additional purposes of the Special Meeting are to receive reports of
officers (without taking action thereon) and to transact such other business as
may properly come before the Special Meeting.
All Stockholders of record as of the close of business on [December
___, 1999] are entitled to notice of and to vote at the Special Meeting with
respect to the first two proposals listed above. At least a majority of the
outstanding shares of common stock of the Company present in person or by proxy
is required for a quorum.
By Order of the Board of Directors
/s/ Gerald N. Agranoff
----------------------
GERALD N. AGRANOFF
Secretary
December [___], 1999
San Antonio, Texas
THE BOARD OF DIRECTORS APPRECIATES AND ENCOURAGES YOUR PARTICIPATION IN
THE COMPANY'S SPECIAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED. ACCORDINGLY, PLEASE
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE
PROVIDED. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY WITHDRAW YOUR PROXY, IF YOU
WISH, AND VOTE IN PERSON. YOUR PROXY IS REVOCABLE IN ACCORDANCE WITH THE
PROCEDURES SET FORTH IN THE PROXY STATEMENT.
2
<PAGE>
Mailed to Stockholders
on or about [December , 1999]
DATAPOINT CORPORATION
8410 Datapoint Drive
San Antonio, Texas 78229-8500
PROXY STATEMENT
This proxy 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.
General Information
This Proxy Statement is furnished to stockholders (the "Stockholders")
of the common stock, par value $.25 per share (the "Common Stock") of Datapoint
Corporation, a Delaware corporation (the "Company"), in connection with the
solicitation (the "Proxy Solicitation") by the Board of Directors of the Company
(the "Board") of proxies in the accompanying form (the "Stockholder Proxies")
for use in voting at the special meeting of Stockholders of the Company (the
"Special Meeting") with respect to Proposals No. 1 and No. 2 (as set forth
below) to be brought before the Special Meeting (the "Stockholder Proposals") to
be held on [_________, 2000], at 10:00 a.m., local time, at The University Club,
1 West 54th Street, New York, NY 10019 and any adjournment or postponement
thereof.
Revocability of Proxies
Any Stockholder Proxy given pursuant to this solicitation may be
revoked by the person giving it at any time before it is exercised by delivering
to the Company (to the attention of Gerald N. Agranoff, the Company's Secretary)
a written notice of revocation or a properly executed Stockholder Proxy bearing
a later date, or by attending the Special Meeting and voting in person.
Solicitation and Voting Procedures
The solicitation of Stockholder Proxies will be conducted by mail and
the Company will bear all attendant costs. These costs will include the expense
of preparing and mailing proxy materials for the Special Meeting and
reimbursements paid to brokerage firms and others for their expenses incurred in
forwarding solicitation material regarding the Special Meeting to Stockholders.
The Company may use the services of Georgeson Shareholder Communications, Inc.,
in soliciting Stockholder Proxies, in such event, the Company expects to pay an
amount not to exceed $7,500, plus out-of-pocket expenses, for such services. The
Company may conduct further solicitation personally, telephonically or by
facsimile through its officers, directors and regular employees, none of whom
would receive additional compensation for assisting with the solicitation.
With respect to the Stockholder Proposals, the presence at the Special
Meeting of the holders of a majority of the outstanding shares of Common Stock
of the Company, represented either in person or by proxy, will constitute a
quorum for the transaction of business at the Special Meeting. The close of
business at [December ___, 1999] has been fixed as the record date (the "Record
Date") for determining the Stockholders entitled to notice of and to vote at the
Special Meeting. Each share of Common Stock outstanding on the Record Date is
entitled to one vote on all matters that the Stockholders are entitled to vote
on. As of the Record Date, there were ___ shares of Common Stock outstanding.
Shares of Common Stock represented by a properly executed and delivered
Stockholder Proxy will be voted at the Special Meeting and, when instructions
have been given by the Stockholder, will be voted in accordance with those
instructions. If no instructions are given, the Stockholder Proxies will be
voted FOR Proposals No. 1 and No. 2. Abstentions and broker non-votes will each
be counted as present for purposes of determining the presence of a quorum.
Abstentions and broker non-votes will have no effect on the outcome of Proposals
No. 1 and No. 2.
The affirmative vote of a majority of the outstanding shares entitled
to vote is required to approve Proposal No. 1 and Proposal No. 2.
No persons have been authorized to give any information or to make any
representation other than those contained in this Proxy Statement in connection
with the solicitation of proxies hereby and, if given or made, such information
or representation must not be relied on as having been authorized by the Company
or any other person.
3
<PAGE>
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 (as defined below) and Debentures
(as defined below) 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 -
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").
4
<PAGE>
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 (as defined below) 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 (as defined below) are 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 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
5
<PAGE>
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.
(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 (as defined below),
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.
6
<PAGE>
PROPOSAL NO. 1
APPROVAL OF THE SALE OF THE COMPANY'S EUROPEAN OPERATIONS
BY THE STOCKHOLDERS
On November 1, 1999 the Board of Directors 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 and Sellers 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 assets for $49.5 million (the "Purchase Price") subject to adjustments
downward up to $1.7 million based on escrowed fund's. See "Description of the
Transaction Escrow." The Asset Sale is contingent upon certain conditions,
including, without limitation, the ability of the Buyer to secure acquisition
financing to finance the purchase price, majority approval of the Stockholders
with respect to the Asset Sale (this Proposal No. 1) and the amendment of the
Company's Certificate of Incorporation to change the Company's corporate name
(See Proposal No. 2), and the consent of 66-2/3% (by principal amount) of the
holders of the Company's 8-7/8% Convertible Subordinated Debentures due 2006
(the "Debentures" and the holders thereof, the "Debentureholders") of certain
actions (collectively, the "Debentureholder Consent Solicitation") to amend and
waive several provisions set forth in the Company's Indenture dated June 1, 1981
(the "Indenture"), pursuant to which such Debentures were issued. See
"Description of Transaction - Conditions Precedent to the Buyers Obligations to
Effect the Asset Sale, Conditions Precedent to the Company's Obligation to
Effect the Asset Sale, and Stockholder and Debentureholder Approval".
The Board of Directors authorized the Company to enter into the Stock
Purchase Agreement and resolved to recommend that the Stockholders vote their
shares of Common Stock in favor of the Asset Sale. The Board of Directors
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. To that end, the Company will be able to
reduce its liabilities by repurchasing by Tender Offer (as
defined below), See "The Company's Proposed Tender Offer", up to
all of the Company's outstanding Debentures while continuing to
meets its obligations to pay interest and principal on the
Debentures not tendered in accordance with the terms and
conditions under which such Debentures were issued as the same
may be amended by the Debentureholder Proposals. Following the
completion of the Tender Offer, the Company may also make
open-market purchases of its Debentures.
o 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.
The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote is required to approve Proposal No. 1. The Board of
Directors unanimously recommends that Stockholders vote FOR Proposal No. 1.
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;
(ii) The absence of potential alternatives to the Asset Sale;
7
<PAGE>
(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 doubt that there will be sufficient funding, from
either cash flow from operations or other capital sources, to pay
obligations relating to the scheduled $2,438,850 June 2000
Debenture interest payment and the $5 million June 1, 2000
Debenture sinking fund payment, any interest and sinking fund
payments on the Debentures which become due thereafter, and
certain accounts payable from US trade creditors totalling $1.217
million as of July 31, 1999 and $1.160 million as of October 30,
1999. The Company believes that such U.S. trade 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 (as defined below).
The Board did not assign relative weights to any specific factor in
reaching its conclusion or recommendation.
DESCRIPTION OF THE TRANSACTION
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, 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, this proxy
statement, the Debentureholder Solicitation and Consent, 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 "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 Proposal No. 1 and Proposal No. 2 and the approval by the
Debentureholders to the Debentureholder Consent Solicitation, 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
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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 of the Asset Sale (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 Tender 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 IP License")
to the Buyer for currently patented products of the Company, limited to current
Customers of the European Subsidiaries. Existing US, 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 IP License" and together
with the Company IP License, collectively, the "IP 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.
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 Agreements 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
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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, of 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 Proposal No. 1 and Proposal No. 2 and the
Debentureholders of the Consent Solicitation or any other necessary governmental
or that 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, who acted as the investment
banker for the Company), 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.
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 Shareholders pursuant to
this Proxy 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
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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 Obligations 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 intercompany
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 receipt of the consent of Debentureholders to the Debentureholder
Consent Solicitation and the approvals of the Shareholders to Proposal Nos. 1
and 2 pursuant to this Proxy Statement.
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 Company if,
without fault of such party, the Closing does not 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 obligations are not fulfilled 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. 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 change to the
Company's corporate name (See Proposal No. 2) at a Stockholders Meeting, at
which certain members of the,
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senior management of the Company have collectively agreed to vote and cause all
their shares to be voted in favor of the Asset Sale 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 Stocks. The Company is also required under the terms of the Stock
Purchase Agreement to seek approval of the Debentureholders for the
Debentureholder Consent Solicitation. In the event that the Stockholders do not
approve Proposals Nos. 1 and 2 or the Company does not obtain the requisite
consents in the Debentureholder Consent Solicitation 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.
Tax Treatment of the Asset Sale
The Asset Sale will be a taxable transaction to the Company for United
States federal income tax purposes. As the Asset Sale does not involve any
distribution to Stockholders, the Company expects that there will be no federal
income tax consequences to the Stockholders from the Asset Sale.
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.
REASONS FOR THE TRANSACTION
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
Company rejected. 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.
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(Trademark) product line consisting of 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).
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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
principal 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 $33.0 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 $.3
million during the first quarter of fiscal 1999. The remainder of the gain ($.9
million) was deferred and is being amortized over the lease terms.
During the second quarter of fiscal 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 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 of Directors of the Company 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 consent of at least 66-2/3% (by principal amount)
of the Debentureholders to the Debentureholder Consent Solicitation. In
connection with obtaining the approvals to Proposals Nos. 1 and 2 being
solicited hereunder, the Company concurrently filed with the U.S. Securities and
Exchange Commission (the "SEC") the Debentureholder Consent Solicitation and
Tender Offer documents to repurchase up to all portion of the Debentures.
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 Debenture sinking fund payment due on
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 US Bank Trust National Association, the trustee under the Indenture (the
"Trustee") to elect to declare the entire Debenture indebtedness of
approximately $55.0 million as immediately due and payable. Upon consummation In
the event that Debentureholders tender more than $5.0 million principal amount
of Debentures in the Tender Offer by March 1, 2000, the Company's $5.0 million
June 1, 2000 Debenture sinking fund payment obligation will be satisfied and to
the extent that the principal amount of
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tendered 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 "Corebyte 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 Adapter 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.
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.
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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 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.
15
<PAGE>
(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 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
16
<PAGE>
Preferred Stock are in arrears for more than 6 consecutive quarterly periods and
accordingly have elected Charles Robinson and Robert Summer to the Board.
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 on 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 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 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 holders of the
Debentures (approximately $55 million aggregate principal amount outstanding)
and to the holders of the Preferred Stock (preference value of approximately
$16.5 million, including dividends in arrears) with 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 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;
17
<PAGE>
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.
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.
18
<PAGE>
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.
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.
19
<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.
20
<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
21
<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>
22
<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>
23
<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>
24
<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.
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<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.
26
<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 then the Buyer, its affiliates and
the officers and directors of the Company or its affiliates 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.
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
STOCKHOLDERS ARE URGED TO READ IT IN ITS
27
<PAGE>
ENTIRETY. BNY'S OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
AS TO WHETHER OR NOT SUCH STOCKHOLDER SHOULD VOTE TO APPROVE THE ASSET SALE AND
SHOULD NOT BE RELIED UPON BY ANY STOCKHOLDER 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.
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%
28
<PAGE>
of the outstanding equity. For each transaction, BNY calculated the multiple of
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 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 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.
29
<PAGE>
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.
THE BOARD RECOMMENDS THAT STOCKHOLDERS APPROVE THE ASSET SALE
Dissenters Rights or Appraisal Rights with Respect to Stockholders' Votes
In connection with the Stock Purchase Agreement and the Asset Sale,
under the General Corporation Law of Delaware, dissenters or appraisal rights
are not available to Stockholders.
Interests of Certain Persons in Matters to be Acted On
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 as of November 1, 1999, 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 as of November 1, 1999 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, Gerald Agranoff and Phillip Krumb
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 consummation 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.
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 8-7/8", respectively. As of the Record Date, 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.
<TABLE>
<CAPTION>
Fiscal Year Quarter High Low
----------- ------- ---- ---
<S> <C> <C> <C>
1999 Q4 1.69 .59
Q3 2.06 .56
Q2 .84 .50
</TABLE>
30
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
</TABLE>
The Company's Debentures are authorized for quotation and principally
traded on the OTCBB. The closing sale prices for the Debentures as reported by
[____] on the Record Date, was [____].
The Company's Proposed Tender Offer
Upon the Closing of the Asset Sale, the Company intends to repurchase,
by way of a tender offer (the "Tender Offer"), up to all of the outstanding
Debentures of the Company and thereby reduce the Company's aggregate interest
expense and sinking fund payments. 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 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. See "Interest of Certain
Persons in Matters to be Acted on."
The Company believes that the price to be offered for the Debentures
tendered will be at a premium to the current market price for the Debentures.
The Company concurrently filed the Debentureholder Consent Solicitation and
Tender Offer documentation with the SEC which offers, subject to adjustment, to
repurchase up to all of the outstanding Debentures at a premium to the market
price. Since the current market price is at a discount to the principal amount
of the Debentures this will result in a significant savings to the Company in
principal, interest and sinking payments. Once the requisite approval is
obtained for Proposals 1, 2 and the Debentureholders consents are obtained for
the Debentureholder Consent Solicitation, the Tender Offer price shall no longer
be subject to adjustment. The Tender Offer is subject to certain conditions,
including without limitation:
o The approval by the Stockholders of the sale of the European
Subsidiaries (Proposal No. 1).
o The approval by the Stockholders of the change of the Company's
name (Proposal No. 2).
o Obtaining 66 2/3% (by principal amount) consent by the
Debentureholders to the Debentureholder Consent Solicitation.
o Consummation of the Asset Sale.
o The satisfaction of the general conditions to the Tender Offer
which shall be deemed to have been satisfied on the date of the
expiration of the Tender Offer unless certain conditions should
exist at that time such as:
o legal challenges that would delay or block this Proxy
Solicitation, the sale of the European Subsidiaries or the
Tender Offer or have a material adverse effect on the
Company's business;
o legal restrictions on this Proxy Solicitation, the
Debentureholder Consent Solicitation, the sale of the
European Subsidiaries or the Tender Offer;
o a development having a material adverse effect on the
Company;
31
<PAGE>
o any event that would tend to delay this Proxy Solicitation,
the Debentureholder Consent Solicitation, the sale of the
European Subsidiaries or the Tender Offer;
o general economic, political or commercial conditions
(including force majeure events) restricting the Company's
ability to operate or conduct business;
o any actions by the Trustee that would restrict the Company's
ability to proceed with the Debentureholder Consent
Solicitation or the Tender Offer.
The Debentureholder Consent Solicitation
Concurrent with mailing this Proxy Solicitation, the Company is
also mailing a Consent Solicitation Statement to all
Debentureholders. The Debentureholder Consent Solicitation, if
approved by 66-2/3% (by principal amount) of the Company's
Debentureholders, will:
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 of the Indentures:
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 of 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 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, deliver of any outstanding Debenture used to satisfy the company's $5
million sinking fund obligation will not occur until April 20, 2000 as opposed
to March 1, 2000.
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<PAGE>
The Debentureholder approval of the Debentureholder Consent
Solicitation is a condition precedent to the Asset Sale. Debentureholder
approval of the Debentureholder Consent Solicitation will also facilitate any
future sales of the assets and business of the Company that the Board may
determine to be in the best interests of the Company and the Stockholders.
Consent Solicitation Fee
In the event that 66-2/3% of Debentureholders consent to the Debentureholder
Consent Solicitation, the Company will pay each such Debentureholder who
consents a consent solicitation fee (the "Consent Solicitation Fee") to be
determined by the Executive Committee of the Board for each $1000 of principal
amount of Debentures owned by such Debentureholder. The Consent Solicitation Fee
is only payable by the Company in the event that the required percentage of
Debentureholders consent to the Debentureholder Proposals prior to the date that
such consents are due and all other conditions of the Tender Offer are
satisfied.
PROPOSAL NO. 2
APPROVAL BY THE STOCKHOLDERS OF AN
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CHANGE THE COMPANY'S CORPORATE NAME
Under the terms of the Stock Purchase Agreement, the Buyer shall
acquire the use of the name "Datapoint." The Company has agreed to change its
name. The Board has selected the name DYNACORE Corporation as the new name for
the Corporation.
The Board has unanimously approved and recommends the adoption by the
Stockholders of an amendment to the Company's Certificate of Incorporation (the
"Certificate on Incorporation Amendment") which will, on the Closing Date of the
sale of the European Subsidiaries, change the Company's name to "DYNACORE
Corporation". It is anticipated that DYNACORE Corporation will continue to trade
under the symbol DTPT on the OTCBB.
Upon approval of Stockholders and filing with the Secretary of State of
the State of Delaware of the Certificate of Incorporation Amendment, Article 1
of the Company's Certificate of Incorporation, as amended, shall read as
follows:
"The name of the corporation is DYNACORE Corporation."
Vote Required
The affirmative vote of a majority of the outstanding shares of Common
Stock of the Company, either in person or by proxy is required for approval of
this proposal. Abstentions, broker non-votes and a failure to vote will have the
same effect as a negative vote on this proposal.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS
APPROVE THE COMPANY'S CHANGE OF NAME
OTHER MATTERS
The Board of Directors knows of no other business which will be
presented at the Special Meeting. If any other business is properly brought
before the Special Meeting, it is intended that proxies in the enclosed form
will be voted in respect thereof and accordance with the judgements of the
persons voting the proxies.
It is important that the Stockholder Proxies be returned promptly and
that your shares be represented. Stockholders are urged to mark, date, execute
and promptly return the accompanying Stockholder Proxy card in the enclosed
envelope.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the 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.
33
<PAGE>
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.
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 Proxy Statement and prior to the date of the
Special Meeting 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 statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy 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 Proxy
Statement.
THIS PROXY STATEMENT INCORPORATE 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 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 SEC: 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 Commission,
including the Company.
BY THIS PROXY 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.
By Order of the Board of Directors,
/s/ Gerald N. Agranoff
----------------------
GERALD N. AGRANOFF
Secretary
Date: December 3, 1999
San Antonio, Texas
<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 Martin
------------
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>
Please mark your votes
as indicated in this
example [ X ]
The Board of Directors recommends a vote "FOR" proposals number 1 and 2 by the
Stockholders of Datapoint Corporation
PROPOSAL 1: The Approval of the Sale of the Company's European Operations.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PROPOSAL 2: Approval of an Amendment to the Company's Certificate
of Incorporation to change the Company's Name to "DYNACORE Corporation."
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE. IF NO CHOICES
ARE INDICATED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
Please sign exactly as your name appears at the left. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or corporation, please sign in full corporate name by
president or other authorized person. If a partnership, please sign in
partnership name by authorized person.
Dated: , 2000
-------------------------------------
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
(Signature if held jointly)
PLEASE MARK, SIGN, DATE AND RETURN THIS STOCKHOLDER PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE, THANK YOU.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
STOCKHOLDER PROXY DATAPOINT CORPORATION STOCKHOLDER PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned Stockholder(s) hereby appoint(s)
__________________________, or any of them, lawful attorneys and proxies of the
undersigned, with full power of substitution, for and in the name, place and
stead of the undersigned to attend the Special Meeting of Stockholders of
Datapoint Corporation to be held at ______________________on ________, ____,
2000, at _____, local time, and any adjournment(s) or postponement(s) thereof,
with all powers the undersigned would possess if personally present, and to vote
the number of shares of Common Stock the undersigned would be entitled to vote
if personally present.
This proxy when properly executed will be voted in the manner described
herein by the undersigned Stockholder. If no direction is made, this Proxy will
be voted FOR Proposals 1 and 2. Any prior proxy is hereby revoked.
(to be signed on the other side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
