Rule 424(b)
File No. 333-11411
PROSPECTUS
INFODATA SYSTEMS INC.
COMMON STOCK
386,342 shares
The shares of Common Stock, $.03 par value per share (the "Common Stock")
of Infodata Systems Inc. ("Infodata" or the "Company") offered hereby are
being offered for sale by the shareholders of the Company named herein (the
"Selling Shareholders"). No shares of Common Stock are being offered by the
Company hereunder. See "Selling Shareholders."
The Company's Common Stock is traded in the NASDAQ SmallCap Market under
the symbol "INFD." On September 16, 1996, the closing sale price of the Common
Stock was $5.50 per share.
The Company has been advised by the Selling Shareholders that the shares
of Common Stock being offered hereunder may be sold by them from time to time
to or through registered broker-dealers or otherwise as discussed herein under
"Plan of Distribution." The net proceeds to the Selling Shareholders will be
the proceeds received by them upon such sales less any brokerage commissions
paid by them in connection therewith. The Company will not receive any of the
proceeds from the sale of the shares.
The shares being offered hereunder previously were acquired by the
Selling Shareholders directly from the Company in private transactions. Such
shares were issued to them without registration under the Securities Act of
1933 (the "Securities Act") pursuant to the private offering exemption
thereunder.
See "Risk Factors" for information that should be considered by
prospective investors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September 16, 1996.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports and proxy statements filed
by the Company with the Commission pursuant to the informational requirements
of the Exchange Act may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission: New York Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048; and
Chicago Regional Office, Citicorp Center, 500 West Madison Street (Suite
1400), Chicago, Illinois 60661. Copies of such material may be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Common Stock is quoted on the
NASDAQ SmallCap Market and reports, proxy statements and other information
concerning the Company can be inspected at the offices of NASDAQ Operations,
1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby
made to the Registration Statement.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission (File
No. 0-10416) pursuant to Section 13 of the Exchange Act are hereby
incorporated by reference in this Prospectus:
1. Annual Report on Form 10-KSB for the fiscal year ended December 31,
1995
2. Quarterly Reports on Form 10-QSB for the quarters ended March 31 and
June 30, 1996
3. Current Reports on Form 8-K filed on July 8 and August 1, 1996
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the Common Stock hereunder will be deemed
to be incorporated by reference in this Prospectus and to be a part hereof
from the date
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of filing of such documents. Any statement contained herein or in any document
incorporated or deemed to be incorporated by reference herein will be deemed
to be modified or superseded for purposes of this Prospectus to the extent any
statement contained in this Prospectus or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statements so modified or superseded will
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
the company will provide without charge to each person, to whom a copy of
this prospectus is delivered, upon the written or oral request of any such
person, a copy of the documents described above (other than exhibits).
requests for such copy should be directed to infodata systems inc., 12150
monument drive (suite 400), fairfax, va 22033, attention: ms. sandra riggs,
executive assistant, (703) 934-5205.
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING RISK FACTORS, IN
ADDITION TO OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN,
IN EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
NEW PRODUCT DEVELOPMENT
The Company has focused on modifying and enhancing the Company's core
technology to support a broader set of document management solutions for use
on desktop and enterprise-wide systems, and over on-line services and the
Internet. The Company's proposed new products are still being developed and
there is no assurance that such products will be successfully completed on a
timely basis, will achieve market acceptance or will generate significant
revenues.
UNPROVED ACCEPTANCE OF THE COMPANY'S PROPOSED NEW PRODUCTS
The Company intends to introduce or announce new products and services
addressing the information management requirements of networked systems,
on-line services and the Internet. The market for such products and services
has only recently begun to develop, is rapidly evolving and is characterized
by an increasing number of market entrants who have introduced or developed
products and services addressing document management and search and retrieval
requirements over private and public networks, on-line services and the
Internet. The demand and market acceptance for recently introduced products
and services are subject to a high level of uncertainty. Moreover, critical
issues concerning the commercial use of on-line services and the Internet
(including security, reliability, cost, ease of use and access, and quality of
service)
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remain unresolved and may impact the growth of the Internet and on-line
markets, together with the software standards and electronic media employed in
such markets. There can be no assurance that the market for the Company's new
or enhanced products will achieve market acceptance.
FLUCTUATIONS IN OPERATING RESULTS
The Company's quarterly operating results have varied and are expected to
vary significantly in the future. These fluctuations may be caused by many
factors, including among others: the size and timing of customer orders;
customer order deferrals or cancellations in anticipation of new products;
changes in the budgets or purchasing patterns of government agencies; timing
of introduction or enhancement of products by the Company or its competitors;
market acceptance of new products; technological changes in document
management, search and retrieval, database, networking, or communications
technology; competitive pricing pressures; changes in the Company's operating
expenses; personnel changes; mix of products sold; quality control of products
sold; and general economic conditions.
DEPENDENCE ON UNITED STATES GOVERNMENT AND THE RISK OF CONTRACT
TERMINATION AND OTHER EVENTS
Agencies of the United States Government (the "Government") have
accounted for a significant portion of the Company's revenues. The Company
anticipates that it will continue to depend on sales to U.S. and state and
local government agencies for a significant percentage of the Company's
revenues for the foreseeable future. In recent years, budgets of many
government agencies have been reduced, causing certain customers and potential
customers of the Company's products to re-evaluate their needs. Such budget
reductions may continue. Future reductions in government spending on
information technologies and technology service firms could have a material
adverse effect on the Company's operating results.
The Company's Government contracts contain standard termination clauses
which permit the Government to terminate such contracts with or without cause,
for convenience of the Government. Further, all Government contracts require
compliance with various contract provisions and procurement regulations. The
adoption of new or modified procurement regulations could adversely affect the
Company or increase costs of competing for or performing such contracts. Any
violation of the procurement regulations could result in termination of
contracts, imposition of fines, and/or debarment from award of additional
Government contracts. Many Government contracts are also subject to
modification in the event of changes in funding. Moreover, the Company's
contractual costs, labor rates and revenue are subject to adjustment as a
result of audits by the Defense Contract Audit Agency ("DCAA") and other
Governmental auditors. There can be no assurance the Company's
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Government contracts will not be terminated in the future, that fines or
damages will not be imposed, or that the Company's ability to enter into
Government contracts will not be adversely affected as a result of an audit by
the DCAA or other Governmental authority. The termination of any of the
Company's significant Government contracts or the imposition of fines, damages
or the suspension from bidding on additional contracts could have a material
adverse effect on the financial condition and results of operations of the
Company.
COMPETITION
The markets for the Company's services and products are highly
competitive. The Company competes with many other companies engaged in the
same lines of business as the Company, many of which have substantially
greater financial and technical resources and geographic presence than the
Company. In addition, as a reseller of other manufacturers' products, the
Company must continue to obtain products from suppliers and developers at
competitive prices in a rapidly changing technology environment. The inability
to remain competitive and procure new contracts would have a substantial
material adverse effect on the Company's financial condition and results of
operations.
TECHNOLOGICAL CHANGE; MARKET ACCEPTANCE OF EVOLVING STANDARDS
The computer software industry is subject to rapid technological change,
changing customer requirements, frequent new product introductions and
evolving industry standards that may render existing products and services
obsolete. While these changes create service opportunities for the Company,
the Company's position with respect to its products in its existing markets or
other markets that it may enter could be eroded rapidly by product
advancements by competitors. The life cycles of the Company's products are
difficult to estimate. The Company's future success will depend, in part, upon
its ability to enhance existing products and to develop new products on a
timely basis. In addition, its products must keep pace with technological
developments, conform to evolving industry standards, particularly
client/server and Internet communication and security protocols, as well as
publishing formats and address increasingly sophisticated customer needs.
There can be no assurance that the Company will not experience difficulties
that could delay or prevent the successful development, introduction and
marketing of new products, or that new products and product enhancements will
meet the requirements of the marketplace and achieve market acceptance.
SIGNIFICANCE OF PROPRIETARY TECHNOLOGY
The Company's proprietary technology, technical and organizational
knowledge, and practices and procedures will have a significant effect on its
success and competitive position. The
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Company believes that its future success will depend on its ability to
continue to keep pace with technological developments and applications and
incorporate such changes in its products and services. The Company relies on
trademark, trade secret and copyright law and confidentiality agreements to
protect its technology, proprietary information and interests in work
products, software programs and practices and procedures. There can be no
assurance that competitors will not develop technologies, proprietary
information, software programs and practices and procedures that are similar
or superior to those of the Company. Despite the Company's efforts to protect
its proprietary rights and intellectual property, unauthorized parties may
attempt to copy aspects of the Company's products or property or to obtain and
use information that the Company regards as proprietary. Policing unauthorized
use of the Company's products or property is difficult. There can be no
assurance that the steps taken by the Company will prevent misappropriation of
its technology or intellectual property or that such agreements will be
enforceable.
Certain technology incorporated into the Company's products and services
is provided by third parties, generally on a nonexclusive basis. The failure
of the third party providers to adequately maintain or update their products,
could result in delay in the Company's ability to ship certain of its products
or render services while it seeks to implement technology offered by
alternative sources. Any required replacement could prove costly. Also, any
such delay, to the extent it becomes extended or occurs at or near the end of
a fiscal quarter, could have a material adverse effect on the Company's
quarterly results of operations. There can be no assurance that the Company
will be able to obtain replacement technology relating to one or more of the
Company's products or services or relating to current or future technologies
on commercially reasonable terms or at all.
REQUIREMENT TO MAINTAIN SECURITY CLEARANCES
Certain Government contracts of the Company require the Company to
maintain security clearances complying with U.S. Department of Defense and
other requirements. If these clearances were lost, the Company might not be
able to retain such contracts, and, if present clearances were invalidated, it
might not be able to obtain new contracts requiring security clearances.
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the performance
of its executive officers and key employees. Competition for employees with
superior technical, management and other skills is intense in the information
technology services industry, and the Company frequently must comply with the
terms and provisions of its Government contracts that require it to employ
persons for particular projects with specified levels of education,
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work experience and security clearance. The loss of the services of any of its
executive officers or other key employees could have a material adverse effect
on the business, operating results or financial condition of the Company.
The Company's future success also depends on its continuing ability to
identify, hire, train and retain other highly qualified technical and
managerial personnel. Competition for such personnel is intense, and there can
be no assurance that the Company will be able to attract, assimilate or retain
other highly qualified technical and managerial personnel in the future. The
inability to attract, hire or retain the necessary technical and managerial
personnel could have a material adverse effect upon the Company's business,
operating results or financial condition.
POSSIBLE VOLATILITY OF STOCK PRICE; DILUTION
The Company's Common Stock is quoted for trading on the NASDAQ SmallCap
Market. The market price for the Common Stock may be highly volatile for a
number of reasons, including future announcements concerning the Company or
its competitors, quarterly variations in operating results, announcements of
technological innovations, the introduction of new products or changes in
product pricing policies by the Company or its competitors, proprietary rights
or other litigation, changes in earnings estimates by analysts or other
factors. There can be no assurance that the market price of the Common Stock
will not decline in the future. In addition, stock prices for many technology
companies fluctuate widely for reasons which may be unrelated to operating
results. The fluctuations, as well as general economic, market and political
conditions such as recessions or military conflicts, may materially and
adversely affect the market price of the Company's Common Stock. The interests
of shareholders in the Company will be diluted to the extent outstanding
options to purchase the Company's Common Stock are exercised.
ANTI-TAKEOVER PROVISIONS
Virginia law has two separate anti-takeover statutory provisions, either
of which may deter or delay unsolicited changes in control of the Company. See
"Description of Capital Stock -- Virginia Anti-Takeover Provisions."
THE COMPANY
Infodata Systems Inc. (the "Company" or "Infodata") is a software product
and services firm that specializes in providing complex information solutions
to large commercial organizations and Federal, state and local governmental
agencies. "Complex information solutions" include software integration
services and software products, with special emphasis on the design,
development and implementation of electronic document systems and solutions.
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By weaving together combinations of technologies provided by its strategic
partners, Infodata's services enable the storage, retrieval, control and
dissemination of documents, images, multimedia and other unstructured
information across departments, enterprises and the global Internet.
Infodata's existing commercial customer base and target market includes the
Fortune 1000, banks and financial services firms, utilities and hospitals. The
Company also derives significant revenues from various agencies of the United
States government (the "Government"). All of these organizations share a
common problem - managing complex, unstructured information across the
enterprise.
The Company has been a pioneer in providing document solutions. Prior to
1994, substantially all of the Company's business was derived from the sale,
support and maintenance of its INQUIRE/Text full-text database management
system - a leading product in the IBM and IBM-compatible mainframe text
retrieval marketplace. The Company now focuses on the design, development and
implementation of document systems and solutions, which blend technologies
that capture and leverage business-critical documents across an enterprise and
the Internet.
During 1994, Infodata shifted its focus to providing a broader range of
information solutions deliverable through open systems based upon
client/server architecture. The Company's shift into the client/server arena
accelerated with the acquisition of the business and certain assets of Merex,
Inc. ("Merex") in October, 1995. Merex, a document systems solutions and
integration firm, brought experienced management and staff, a diverse client
base, and an established market reputation to Infodata.
Infodata's experience and successes in both the mainframe and
client/server arenas, and Merex's project experience in client/server document
management technology, combine to produce an organization uniquely focused on
solving complex information/document management problems. Management believes
that Infodata's desktop-to-mainframe know-how also positions the Company to
exploit the mainframe's resurgence as a server in the client/server
environment, including Intranets and the Internet.
Infodata provides solutions that cover a broad range of services,
including strategic planning, consulting, workflow and document analysis,
Internet/Intranet solutions, integration, data migration, and training and
support.
o Strategic planning involves rendering assistance in developing document
management strategies including the strategic functional specification of
document management technologies.
o Infodata's consulting services include needs assessment, requirements
definition, vendor selection, process and cost-benefit analyses and the
development of technical
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specifications and bidder lists to support the procurement of document
systems solutions.
o Infodata provides workflow and document analysis, including tracing
source documents, creating retention schedules and developing procedures
to collect and store information.
o The Company also provides customized solutions leveraging existing
software investment across the Internet and Intranets.
o Integration services include application software design and development,
project management, communication network design, system integration,
acceptance testing, and training services to support the installation and
deployment of systems.
o Data migration entails migration planning, project management, facilities
management, and staff training and procedures development for the
migration and indexing of documents into a system.
Infodata also provides product specific and customized training courses.
Infodata training staff are skilled in developing custom courseware
specifically designed to meet user needs. The Company has recently signed an
agreement with Verity Inc., a major provider of full-text retrieval software
and one of the Company's strategic partners, whereby the Company will act as
Verity's East Coast Training Center. The Company operates a state-of-the-art
training facility near its headquarters in Fairfax, Virginia. In addition to
providing training on the full line of Verity products, the curriculum
includes instruction in Adobe's Acrobat and Frame products, and will include
other partner products in the future.
Project services are delivered using a well-defined project management
methodology. Most projects involve the integration of multiple commercial
off-the-shelf software products such as full-text retrieval engines, document
management systems, and Web browsers. Services are provided by highly skilled
software engineers and project managers who are adept at dealing with the
rapidly changing technologies necessary to construct the best possible
solutions for customers. The Company develops customized software solutions as
stand-alone products or intuitive user interfaces to existing or
Infodata-installed systems.
Infodata sells its own software products and those of third-party
developers with which it maintains close strategic relationships. Infodata
sells products and services through its own direct sales force to leads
generated from its partners and its own marketing efforts. Marketing
activities include selected trade shows, seminars, and direct mail. The
Company quickly identifies potential customers and then salespersons and
senior technical
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managers team to present the Company's qualifications and approach to solving
the customer's complex information problem.
Frequently, projects start as prototypes or pilots where concepts are
proven to the customer's satisfaction. These initial projects are then
followed by more substantial implementations. The Company performs under time
and materials, fixed price, and cost-based contracts. Infodata has a high rate
of repeat business which management believes is a result of the high degree of
customer satisfaction with its services and solutions.
There are four components to the Company's business, all of which
interact to provide differentiation from its competitors. They are products,
and three markets for consulting services commercial customers, the United
States intelligence community, and other Federal, state and local government
agencies.
The market sectors are distinct but related through a common objective of
achieving solutions to complex information problems. For example, the
intelligence community is frequently ahead of commercial organizations and
other government agencies in adopting new technologies. Therefore, the Company
benefits from technology transfer from the intelligence community to other
customers. On the other hand, certain commercial concepts may not have taken
root in the intelligence community despite similar needs. The Company focuses
on exploiting these similarities of interests to leverage projects from one
sector to another.
The three consulting sectors - commercial, intelligence, and other
government - provide real-world experience from which product concepts are
generated. Management believes Infodata will derive increased revenue from its
product-based business as existing solutions are cross-marketed among the
sectors.
The Company competes with larger service firms, such as the consulting
divisions of the major accounting firms, prime contractors, and systems
integrators, many of which have substantially greater financial resources than
the Company. A primary competitive advantage for Infodata is its total
business focus on document/complex information systems as compared to the more
diffuse approach of most of its competitors. The Company has chosen to deliver
high quality results in a specialized, but rapidly growing, niche which cuts
across all industries and segments of the economy as the need to manage and
find complex information in the form of images, documents, and other objects
is a universal one.
The Company is focusing attention on Internet-based solutions,
particularly those internal to organizations, known as Intranets. Infodata has
completed several projects incorporating a variety of state-of-the-art
technologies which are presented to the users through the customer's Intranet.
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The Company continues to invest in software development involving
INQUIRE/Text in order to respond to its customers which provide a base of
maintenance revenues. The Company during the first half of 1996 has devoted
substantial resources to developing new software products, designed to allow
users to search for, retrieve, share and manage information, data and
documents over the Internet and Intranets, and also to provide Web access to
large text-based repositories.
Infodata's principal offices are located at 12150 Monument Drive (Suite
400), Fairfax, VA 22033. Its telephone number is 703-934-5205 and fax number
is 703-934-7154. Infodata's Internet e-mail address is [email protected] and
the Company maintains a World Wide Web home page at http://www.infodata.com .
SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of the date of this Prospectus, and as
adjusted to reflect the assumed sale of the shares offered hereby, by each of
the Selling Shareholders. The reported amounts give effect to the two-for-one
stock split in the form of a 100% share distribution on the Common Stock
declared on July 30, 1996 and distributed on August 26, 1996 to shareholders
of record on August 12, 1996.
<TABLE>
<CAPTION>
Shares
Beneficially
Owned Before Owned After
This Offering(1) This Offering(6)
-------------------- --------------------
Shares
Percent of Offered Percent of
Name Number Outstanding Hereunder Number Outstanding
---- ------ ----------- --------- ------ -----------
<S> <C> <C> <C> <C> <C>
The University of
Rochester (1) . . 300,092 13.80% 300,092 --- ---
Richard M.
Tworek (2)(3) . . 190,420 8.76% 25,000 165,420 7.61%
Mary M. Styer
(2)(4). . . . . . 37,150 1.71% 36,750 400 .02
Andrew M. Fregly
(2)(5). . . . . . 24,500 1.13% 24,500 --- ---
------- ------ ------- ------- -----
552,162 25.39% 386,342 165,820 7.62%
======= ====== ======= ======= =====
</TABLE>
(1) The University of Rochester acquired its shares of Common Stock from the
Company in July 1996 upon the conversion of 100,000 shares of Preferred
Stock, $1.00 par value per share, of the Company (the "Preferred Stock")
which were originally acquired by the University of Rochester from the
Company in 1985 in a private transaction. Pursuant to an agreement, dated
June 24, 1996, between the Company and the University of
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Rochester, the Company agreed to file this Registration Statement and the
University of Rochester agreed to pay up to $75,000 of expenses incurred
by the Company in connection therewith; provided, however, that the
University of Rochester's obligation will be limited to its pro-rata
portion of such offering expenses based upon the amount of its shares
included in the offering covered by this Prospectus.
(2) Richard M. Tworek, Mary M. Styer and Andrew M. Fregley acquired the
shares of Common Stock being offered by them hereunder from the Company
on October 11, 1995, in connection with the Company's acquisition of
Merex, of which corporation such Selling Shareholders were the
shareholders, pursuant to the terms of an Asset and Purchase Agreement
and Plan of Reorganization, dated as of October 6, 1995, among the
Company, Merex and such Selling Shareholders. Pursuant to that agreement,
sales of such shares of Common Stock by such Selling Shareholders prior
to October 11, 1997 may not be made if and to the extent that such sales
would reduce the fair market value of the shares retained by them to an
amount less than 50% of the fair value of the shares when received by
them on October 11, 1995.
(3) Richard M. Tworek is a director and an Executive Vice President of the
Company. Of the shares reported above as beneficially owned by Mr.
Tworek, 6,666 shares may be acquired by him upon the exercise of
presently exercisable stock options. Mr. Tworek is employed by the
Company pursuant to an Employment and Non-Competition Agreement, dated
October 11, 1995, with the Company pursuant to which he receives an
annual base salary of $125,000 during the term ending October 11, 1997.
On August 29, 1996, the Company's Board of Directors approved the
extension by the Company of a loan for $60,000 to Mr. Tworek, which loan
will bear annual interest at a rate of prime plus 1%, call for the
payment of interest only until maturity three years from issuance and be
prepayable without penalty. Mr. Tworek has the right to request the
Company to register under the Securities Act the 158,754 shares acquired
by him in connection with the Merex transaction that are not included in
the offering covered by this Prospectus.
(4) Ms. Styer served as a consultant to the Company pursuant to the terms of
a Consulting and Non-Competition Agreement, dated October 11, 1995, with
the Company that provided for payment of $5,333.33 per month during the
six months ended April 11, 1996.
(5) Mr. Fregley was employed by the Company pursuant to an Employment and
Non-Competition Agreement, dated October 11, 1995, with the Company that
provided for a base salary of $90,000 per year through the term ending
October 11, 1997. However, on March 20, 1996, Mr. Fregley resigned as an
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employee of the Company and serves as a consultant to the Company at a
rate of $85.00 per hour.
(6) The amounts of shares beneficially owned after this offering set forth in
the above table assume that the Selling Shareholders sell all of the
shares of Common Stock proposed to be sold by them under this Prospectus.
The Selling Shareholders may offer all or some of their shares of Common
Stock pursuant to the offering; provided, however, that Messrs. Tworek,
Fregley and Ms. Styer are subject to the restriction on the number of
shares that may be sold by them as described in footnote (2) above.
Because there are no agreements, arrangements or understandings with
respect to the amount and timing of their offers and sales, the Company
cannot estimate the number of shares that will be beneficially owned by
them after this offer. See "Plan of Distribution."
The Company and the Selling Shareholders have agreed to indemnify each
other against certain liabilities arising under the Securities Act. The
Company has agreed to pay all expenses relating to this offering, except for
brokerage commissions incurred by the Selling Shareholders in connection with
their sales, in excess of the amount of expenses referred to above that will
be born by the University of Rochester.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company has a total of 6,666,666 authorized shares of Common Stock,
$.03 par value per share, of which 2,174,735 shares were outstanding as of the
date of this Prospectus. Such amount gives effect to the two-for-one stock
split in the form of a 100% share distribution declared by the Board of
Directors on July 30, 1996 and distributed on August 26, 1996 to shareholders
of record as of August 12, 1996. Holders of the Common Stock are entitled to
one vote per share on all matters to be voted upon by the shareholders. There
is no cumulative voting for directors. In the event of the liquidation,
dissolution, or winding up of the Company, the holders of Common Stock are
entitled to share ratably in any assets remaining after payment of the
Company's liabilities and satisfaction of the applicable rights of any series
of Preferred Stock of the Company that may then be outstanding. The Common
Stock has no preemptive or conversion rights. The shares of Common Stock being
offered by this Prospectus are validly issued, fully paid and nonassessable.
The Company has paid no cash dividends on its Common Stock in the past
and has no intention to do so in the foreseeable future. Holders of Common
Stock will be entitled to receive such dividends as may be declared by the
Board of Directors out of any sums legally available therefor. If the Company
were to issue any of
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its authorized Preferred Stock, no dividends could be declared, paid, or set
apart for payment on shares of Common Stock until dividends on all of the
issued and outstanding shares of Preferred Stock had been paid.
The transfer agent and registrar for the Common Stock is Chase Mellon
Shareholder Services of New York City, New York.
PREFERRED STOCK
Of the Company's originally authorized 500,000 shares of Preferred Stock,
$1.00 par value per share (the "Preferred Stock"), 340,000 authorized shares
remain available for possible issuance in the future. No shares of Preferred
Stock currently are outstanding. The Preferred Stock may be issued in one or
more series providing for such dividend rates, voting, liquidation,
redemption, and conversion rights, and such other terms and conditions as the
Board of Directors may determine.
ANTI-TAKEOVER PROVISIONS
The Virginia Stock Corporation Act (the "Virginia Act") has two separate
anti-takeover statutory provisions - one regulating "affiliated transactions"
and the other regulating "control share acquisitions". The Virginia Act
"affiliated transactions" provisions prohibit a corporation from engaging in
certain transactions (including a merger, share exchange or sale of more than
5% of the corporation's assets) with an "interested shareholder" (which is
defined to include the holder of more than 10% of the corporation's
outstanding voting shares) during the three-year period following the date
that the interested shareholder became an interested shareholder, unless the
proposed transaction is approved by a majority of the disinterested directors
and by the affirmative vote of the holders of more than two-thirds of the
outstanding shares (not including shares owned by the interested shareholder).
Excluded from those voting requirements are transactions that are either (i)
approved by a majority of the disinterested directors, or (ii) provide that
the holders of shares held by other than the interested shareholder will
receive consideration in the proposed transaction at least equal in amount to
the higher of the fair market value of the shares (which is the highest
closing sale price of a share during the 30 days immediately preceding the
announcement date) plus interest, or the highest price previously paid by the
interested shareholder for the shares owned by it during the two years
immediately preceding the announcement date or in the transaction in which it
became an interested shareholder, plus interest.
In the event of a "control share acquisition" of a Virginia public
corporation, shares acquired in such "control share acquisition" will have no
voting rights unless voting rights are granted by resolution adopted by the
holders of a majority of the
14
<PAGE>
outstanding shares (other than shares owned by the acquiror). A "control share
acquisition" is defined to include the acquisition of 20% or more of the
corporation's outstanding shares unless the acquisition is directly from the
issuing corporation or is effected pursuant to a merger approved by
shareholders in accordance with the Virginia Act, a tender or exchange offer
made pursuant to an agreement to which the issuing corporation is a party, the
satisfaction of a pledge or other security interest created in good faith, or
in certain other acquisition transactions. If a resolution is passed giving
the acquiror voting rights in the majority of the voting stock, dissenting
shareholders are entitled to appraisal rights. See "Risk
Factors--Anti-Takeover Provisions."
PLAN OF DISTRIBUTION
The shares offered hereby may be offered and sold from time to time as
market conditions permit in the NASDAS SmallCap Market, or otherwise, at
prices and terms then prevailing, at prices related to the then-current market
price, or in negotiated transactions. The shares may be sold by one or more of
the following methods, without limitation: (a) a block trade in which a broker
or dealer so engaged will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate a transaction;
(b) purchases by a broker or a dealer as principal and resale by such broker
or dealer for its account pursuant to this Prospectus; (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (d)
face-to-face transactions between sellers and purchasers without a broker or
dealer.
In effecting sales transactions as described above, brokers or dealers
engaged by the Selling Shareholders may arrange for other brokers or dealers
to participate and may receive commissions or discounts from the Selling
Shareholders in amounts negotiated in connection with such sales. The Selling
Shareholders and any broker, dealer or other agent executing sell orders on
behalf of the Selling Shareholders may be deemed to be "underwriters" within
the meaning of the Securities Act, in which event commissions received by any
such broker, dealer or agent may be deemed to be underwriting commissions
under the Securities Act. The Selling Shareholders have agreed to indemnify
the Company against liabilities arising from material misstatements or
omissions in statements provided by them to the Company for use in this
Prospectus.
Neither the Company nor any Selling Shareholder has entered into any
agreement, arrangement or understanding with any underwriter, broker or dealer
or any other person relating to the sale of the shares by any such Selling
Shareholder.
There can be no assurance that any of the Selling Shareholders
15
<PAGE>
will sell any or all of the shares of Common Stock offered by them hereunder.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby is being passed
upon for the Company by Freedman, Levy, Kroll & Simonds, Washington, D.C.
EXPERTS
The audited consolidated financial statements of Infodata Systems Inc.
and subsidiaries incorporated by reference in this prospectus and elsewhere in
the Registration Statement relating to each of the years in the two-year
period ended December 31, 1995, to the extent and for the periods indicated in
their reports have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said report.
16
<PAGE>
No person has been authorized to |
give any information or to make |
any representations in connection |
with this offering other than |
those contained in this |
Prospectus and, if given or made, |
such other information and |
representations must not be |
relied upon as having been |
authorized by the Company or by |
any person who may be deemed to |
be an underwriter with respect to |
any sales hereunder. Neither the |
delivery of this Prospectus nor |
any sale made hereunder shall, |
under any circumstances, create |
any implication that there has |
been no change in the affairs of | INFODATA SYSTEMS INC.
the Company since the date hereof |
or that the information contained | Common Stock
herein is correct as of any time |
subsequent to its date. This | 386,342 shares
Prospectus does not constitute an |
offer to sell or a solicitation | ---------------------
of an offer to buy any securities |
other than the registered | P R O S P E C T U S
securities to which it relates. |
This Prospectus does not | ---------------------
constitute an offer to sell or a |
solicitation of an offer to buy |
such securities in any |
circumstances in which such offer |
or solicitation is unlawful. |
|
| September 16, 1996
|
TABLE OF CONTENTS |
|
|
Available Information ....... 2 |
Documents Incorporated |
by Reference............... 2 |
Risk Factors................. 3 |
The Company ................. 7 |
Selling Shareholders......... 11 |
Description of Capital Stock. 13 |
Plan of Distribution......... 15 |
Legal Matters ............... 15 |
Experts ..................... 16 |
17
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
The following table sets forth the estimated fees and expenses, other
than brokerage commissions, to be incurred in connection with the offering of
securities covered by this Registration Statement:
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . $ 733
Legal fees and expenses. . . . . . . . . . . . . . 50,000
Accounting fees and expenses . . . . . . . . . . . 9,000
Miscellaneous. . . . . . . . . . . . . . . . . . . 5,267
------
Total. . . . . . . . . . . . . . . . . . . . . . . $ 65,000
======
- -----------------
<FN>
*All expenses are estimated except the SEC registration fee. One of the
Selling Shareholders will be responsible for 77.6% of the expenses incurred in
connection with the preparation of the Registration Statement and the
Registrant will be responsible for the balance of such expenses.
</FN>
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 10 of the Company's Articles of Incorporation, as amended,
provides that the Company will indemnify its directors to the fullest extent
authorized and in the manner provided by Article 10 of Chapter 9 of the
Virginia Stock Company Act, as amended (the "Virginia Act"). Article VI of the
Company's By-Laws further provides that the Company will indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative (collectively, a "proceeding") other than an
action by or in the right of the Company, by reason of the fact that he is or
was a director or officer of the Company, or is or was serving at the request
of the Company as a director or officer of another Company, partnership, joint
venture, trust, or other enterprise (collectively, "entity"), against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such proceeding if
he acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Company, and with respect to any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, will not, of
itself, create a presumption that the person did not act in good faith and in
a manner which he reasonably believed to be in, or not opposed to, the best
interests
II-1
<PAGE>
of the Company, and with respect to any criminal proceeding, the person had
reasonable cause to believe that his conduct was unlawful.
The By-Laws further provide that the Company will indemnify any person
who was or is a party or is threatened to be made a party to any proceeding by
or in the right of the Company to procure a judgment in its favor by reason of
the fact that he is or was a director or officer of the Company, or is or was
serving at the request of the Company as a director or officer of another
entity, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such
proceeding if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Company, except
indemnification is not available in respect of any claim, issue, or matter as
to which such person shall have been adjudged to be liable to the Company
unless and only to the extent that the court in which such proceeding was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
To the extent that a director or officer of the Company has been
successful on the merits or otherwise in defense of any proceeding referred to
above, or in defense of any claim, issue or matter therein, the Company will
indemnify him against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Any indemnification described in the preceding paragraphs (unless ordered
by a court) shall be made by the Company only as authorized in the specific
case upon a determination that indemnification of the director or officer is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the By-Laws. This determination is to be made (1) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to a proceeding, or, (2) if such a quorum is not obtainable,
or, even if obtainable, if a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders in
accordance with Virginia law.
The By-Laws also state that the Company will pay expenses incurred by an
officer or director in defending such a proceeding in advance of the final
disposition of a proceeding upon (i) the receipt of an undertaking by or on
behalf of such director or officer that (a) such director or officer believes
in good faith that he has met the applicable standards of conduct described
above and (b) he shall repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Company as authorized in the
By-Laws; and (ii) a determination is made in
II-2
<PAGE>
accordance with the By-Laws that the facts then known to those persons making
the determination would not preclude indemnification.
The indemnification and advancement of expenses provisions of the By-Laws
are not exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any statute, By-Laws,
agreements, vote of stockholders or disinterested directors, or otherwise,
both as to action in his official capacity and as to action in another
capacity while holding such office. Such provisions also will, unless
otherwise provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person. The
Company maintains an officer's and director's liability insurance policy
pursuant to which such persons generally are insured against liabilities
incurred by them in such capacities.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number The following exhibits are filed herewith:
------
Document
--------
<S> <C>
5 Legal opinion, dated September 5, 1996 of Freedman, Levy,
Kroll & Simonds. (Filed herewith.)
24(a) Consent of Freedman, Levy, Kroll, & Simonds. (Included in
Exhibit No. 5 hereto.)
24(b) Consent of Arthur Andersen LLP. (See page II-7.)
25 Power of Attorney. (Included on page II-5.)
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement. To include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective
II-3
<PAGE>
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering;
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered therein and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement or amendment thereto to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fairfax, State of
Virginia, on this 29th day of August, 1996.
INFODATA SYSTEMS INC.
(Registrant)
By:/s/HARRY KAPLOWITZ
---------------------
Harry Kaplowitz
President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints HARRY KAPLOWITZ and ROBERT M. LEOPOLD his true
and lawful attorneys-in-fact and agents, each acting alone, with full powers
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or
his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment thereto has been signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/HARRY KAPLOWITZ President & Director August 29, 1996
--------------------- (Principal Executive
Harry Kaplowitz and Financial Officer)
/s/RICHARD T. BUESCHEL Chairman of the Board August 23, 1996
--------------------- of Directors
Richard T. Bueschel
/s/RICHARD M. TWOREK Director and Executive August 29, 1996
--------------------- Vice President
Richard M. Tworek
/s/PAUL T. HARLEY Controller August 30, 1996
---------------------
Paul T. Harley
/s/LAURENCE C. GLAZER Director August 20, 1996
---------------------
Laurence C. Glazer
/s/ROBERT M. LEOPOLD Director August 29, 1996
---------------------
Robert M. Leopold
/s/ISAAC M. POLLAK Director August 21, 1996
---------------------
Isaac M. Pollak
/s/MILLARD H. PRYOR, JR. Director August 30, 1996
---------------------
Millard H. Pryor, Jr.
</TABLE>
II-6
