<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
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 Under Rule 14a-12
HEALTH SYSTEMS DESIGN CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/ / 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
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(2) Aggregate number of securities to which transaction
applies:
7,072,528
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
$2.00
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(4) Proposed maximum aggregate value of transaction:
$14,145,056
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(5) Total fee paid:
$2,829.01
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/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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HEALTH SYSTEMS DESIGN CORPORATION
1111 BROADWAY SUITE 1800
OAKLAND, CALIFORNIA 94607
------------------------
NOVEMBER , 2000
------------------------
To Our Stockholders:
We are pleased to enclose information about a special meeting of
Stockholders of Health Systems Design Corporation to be held at its corporate
offices, 1111 Broadway, Suite 1800, Oakland, California 94607 on November ,
2000 at 10:00 a.m., local time. At the meeting, you will be asked to consider
and vote upon the approval of an Agreement and Plan of Merger dated as of
October 18, 2000 by and between Health Systems Design Corporation, Perot Systems
Corporation and PSC Health Care, Inc., a wholly-owned subsidiary of Perot
Systems.
The merger agreement provides for the acquisition of Health Systems Design
by Perot Systems. As a result of the merger, Health Systems Design will become a
wholly-owned subsidiary of Perot Systems. The merger cannot be completed unless
the holders of a majority of the outstanding common stock of Health Systems
Design entitled to vote adopt the merger agreement. Only stockholders who hold
their shares of Health Systems Design common stock at the close of business on
November , 2000 will be entitled to vote at the special meeting. If the
proposed merger is completed, each issued and outstanding share of Health
Systems Design common stock (other than shares owned by Health Systems Design or
its wholly-owned subsidiaries, by Perot Systems or any of its subsidiaries, and
by stockholders who exercise their dissenters' rights) will be converted into
the right to receive $2.00 in cash. The tax consequences to you of this
transaction are described in the enclosed proxy statement. We urge you to read
the enclosed proxy statement carefully.
We believe the acquisition of Health Systems Design by Perot Systems
provides our stockholders with the best value reasonably available to them,
strategically benefits both Health Systems Design and Perot Systems, and results
in a stronger and more competitive combined company. A more detailed description
of the reasons why the Board of Directors of Health Systems Design believes the
proposed combination of Health Systems Design and Perot Systems is in the best
interests of our stockholders appears in the enclosed proxy statement in the
section entitled "Special Factors--Reasons for the Merger" on page 17.
Please use this opportunity to take part in the affairs of Health Systems
Design by voting on the adoption of the merger agreement. Details of the
proposed merger and related proposals are contained in the enclosed materials. I
urge you to review them carefully. PLEASE BE CERTAIN THAT YOUR SHARES ARE VOTED
AT THE SPECIAL MEETING. Whether or not you plan to attend the meeting, please
complete, sign, date and return the accompanying proxy in the enclosed
self-addressed stamped envelope. Returning the proxy does NOT deprive you of
your right to attend the meeting and vote your shares in person. YOUR VOTE IS
VERY IMPORTANT.
MY FELLOW DIRECTORS AND I HAVE UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMEND YOU VOTE FOR ITS APPROVAL.
Sincerely yours,
/s/ RICHARD C. AUGER
Richard C. Auger
CHAIRMAN OF THE BOARD OF DIRECTORS
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------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER , 2000
------------------------
To the stockholders of HEALTH SYSTEMS DESIGN CORPORATION:
NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of Health
Systems Design Corporation will be held at its corporate offices,
1111 Broadway, Suite 1800, Oakland, California on November , 2000 at
10:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Merger, dated as of October 18, 2000 (the "merger agreement"), by and
between Health Systems Design Corporation, a Delaware corporation,
("Health Systems Design"), Perot Systems Corporation, a Delaware
corporation ("Perot Systems"), and PSC Health Care, Inc., a Delaware
corporation and a wholly-owned subsidiary of Perot Systems ("Merger
Subsidiary").
2. To transact such other business as may properly come before the special
meeting or any adjournment or postponement of the meeting.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS IN THE
BEST INTERESTS OF HEALTH SYSTEMS DESIGN AND ITS STOCKHOLDERS AND RECOMMENDS THAT
YOU VOTE TO APPROVE THE MERGER AGREEMENT. Each of the items of business to be
submitted to a vote at the Health Systems Design meeting is more fully described
in this proxy statement, which we urge you to read carefully.
Stockholders of record on the close of business on November , 2000 are
entitled to notice of and to vote at the special meeting and any adjournment or
postponement of the meeting. Stockholders are cordially invited to attend the
special meeting in person. Approval of the merger agreement at the special
meeting requires the affirmative vote of the holders of a majority of the
outstanding shares of Health Systems Design common stock entitled to vote at the
special meeting.
Holders of Health Systems Design common stock who do not vote their shares
in favor of the merger agreement and who strictly comply with Section 262 of the
Delaware General Corporation Law have the right to dissent from the merger
agreement and make written demand for payment of the "fair value" of their
shares (the "Dissenting Shares"). For a description of the rights of holders of
Dissenting Shares, see Section 262 of the Delaware General Corporation Law, a
copy of which is attached as Appendix B to the accompanying proxy statement. In
addition, the description of the procedures to be followed in order to obtain
payment for Dissenting Shares is set forth in the accompanying proxy statement.
YOUR VOTE IS VERY IMPORTANT. TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT
THE SPECIAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND
MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN
TO ATTEND THE SPECIAL MEETING IN PERSON. ANY EXECUTED BUT UNMARKED PROXY CARDS
WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT. YOU MAY REVOKE YOUR PROXY IN
THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AT ANY TIME BEFORE IT
HAS BEEN VOTED AT THE SPECIAL MEETING. ANY STOCKHOLDER ATTENDING THE SPECIAL
MEETING MAY VOTE IN PERSON EVEN IF THE STOCKHOLDER HAS RETURNED A PROXY.
If the merger is approved by the stockholders, you will receive instructions
as soon as practicable after completion of the merger on how to receive payment
for your shares by surrendering the shares.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ RICHARD C. AUGER
Richard C. Auger
CHAIRMAN OF THE BOARD OF DIRECTORS
Oakland, California,
November , 2000
<PAGE>
HEALTH SYSTEMS DESIGN CORPORATION
1111 BROADWAY SUITE 1800
OAKLAND, CALIFORNIA 94607
------------------------
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER , 2000
------------------------
Health Systems Design and Perot Systems have entered into a merger agreement
that provides for the merger of Health Systems Design into a wholly-owned
subsidiary of Perot Systems in a transaction pursuant to which Health Systems
Design would become a wholly-owned subsidiary of Perot Systems. If the merger is
consummated, each share of Health Systems Design common stock will be converted
into the right to receive $2.00 in cash, with the exception of any shares in
respect of which the holders exercise dissenters' appraisal rights as more fully
described in this proxy statement. As a result of the merger, stockholders of
Health Systems Design will no longer hold an equity interest in the company.
The merger requires the approval of the stockholders of Health Systems
Design.
THE BOARDS OF DIRECTORS OF HEALTH SYSTEMS DESIGN UNANIMOUSLY RECOMMEND THAT
YOU VOTE IN FAVOR OF THE MERGER. YOUR VOTE IS VERY IMPORTANT. Whether or not you
plan to attend a meeting, please take the time to vote by completing and mailing
the enclosed proxy card to us.
This proxy statement provides you with detailed information about the
merger, a description of which begins on page 25.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED THIS PROXY STATEMENT OR DETERMINED IF THIS PROXY
STATEMENT IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This proxy statement is dated November , 2000 and is first being mailed to
stockholders of Health Systems Design and Health Systems Design on or about
November , 2000.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
THIS PROXY STATEMENT AND OTHER STATEMENTS MADE FROM TIME TO TIME BY HEALTH
SYSTEMS DESIGN, PEROT SYSTEMS, PSC HEALTH CARE, INC. OR THEIR REPRESENTATIVES
CONTAIN FORWARD-LOOKING STATEMENTS. THOSE STATEMENTS INCLUDE STATEMENTS
REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF HEALTH SYSTEMS DESIGN,
PEROT SYSTEMS AND PSC HEALTH CARE, INC. AND MEMBERS OF THEIR RESPECTIVE
MANAGEMENT TEAMS, AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED.
SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND
INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY
KNOWN TO MANAGEMENT OF HEALTH SYSTEMS DESIGN, PEROT SYSTEMS AND PSC HEALTH CARE,
INC. THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN
FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS DETAILED
IN THIS PROXY STATEMENT AND THOSE FACTORS SET FORTH FROM TIME TO TIME IN REPORTS
OF HEALTH SYSTEMS DESIGN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
PROTECTION FROM LIABILITY OF THE SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
CONTAINED IN THE PRIVATE SECURITIES REFORM ACT OF 1995 IS NOT APPLICABLE TO THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT OR IN STATEMENTS INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT.
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TABLE OF CONTENTS
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PAGE
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SUMMARY TERM SHEET.......................................... 1
The Companies............................................. 1
The Special Meeting....................................... 2
Record Date; Voting Power; Votes Required................. 2
Recommendation of the Board of Directors.................. 2
Opinion of Financial Advisor.............................. 3
Terms of the Merger Agreement............................. 3
Accounting Treatment...................................... 5
Interests of Certain Persons in Matters to be Acted
Upon.................................................... 6
Regulatory Approvals...................................... 6
Dissenters' Appraisal Rights.............................. 6
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 7
THE SPECIAL MEETING......................................... 9
General; Date, Time and Place of the Special Meeting...... 9
Proposal to Be Considered at the Special Meeting.......... 9
Record Date for Voting on Merger; Stockholders Entitled to
Vote.................................................... 9
Security Ownership of Certain Persons in the Matters to Be
Acted Upon.............................................. 9
Voting and Revocation of Proxies.......................... 10
Proxy Solicitation........................................ 10
Stockholder Vote Required to Approve the Merger
Agreement............................................... 10
Health Systems Design's Board Recommendation.............. 11
SPECIAL FACTORS............................................. 11
Background of the Merger.................................. 11
Reasons for the Merger.................................... 17
Recommendation of the Board of Directors.................. 18
Opinion of Financial Advisor.............................. 19
Certain Effects of the Merger............................. 23
Interests of Certain Persons in Matters to be Acted
Upon.................................................... 23
SUMMARY OF MATERIAL FEATURES OF THE MERGER.................. 25
The Merger................................................ 25
Effective Time............................................ 33
Conversion of Health Systems Design Common Stock.......... 33
Cancellation of Unexercised Stock Options................. 33
Conduct of Business Pending the Merger.................... 33
Regulatory Filings and Approvals.......................... 34
Income Tax Consequences of the Transaction................ 34
Financing of the Merger; Source of Funds.................. 34
Anticipated Accounting Treatment.......................... 34
Dissenters' Appraisal Rights.............................. 34
WHERE YOU CAN FIND MORE INFORMATION......................... 36
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 37
STOCKHOLDER PROPOSALS....................................... 37
OTHER MATTERS............................................... 38
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i
<PAGE>
SUMMARY TERM SHEET
This summary highlights selected information from this proxy statement and
may not contain all of the information that is important to you. For a more
complete understanding of the merger and for a more complete description of the
legal terms of the merger, you should read this proxy statement carefully, as
well as the appendices to this proxy statement, including the merger agreement.
For additional information on Health Systems Design, see "Where You Can Find
More Information" (page 36).
THE COMPANIES
Health Systems Design Corporation
1111 Broadway, Suite 1800
Oakland, California 94607
Telephone: (510) 251-1330.
- Health Systems Design Corporation provides health benefits information
systems software to a broad range of organizations that administer
health benefits. The company's principal product line, DIAMOND-TM-,
consists of DIAMOND-TM- 725, and DIAMOND-TM- 950C/S. The company's
principal software products enable organizations to manage information
about members, employer groups, providers, benefit plans, referrals,
authorizations and health care services. DIAMOND-TM- supports a wide
range of administrative and financial transactions related to provider
reimbursement, premium billing, customer service, patient care
management and a variety of other functions. DIAMOND-TM- products are
distinctive for their ability to administer a wide variety of complex
benefit and provider reimbursement arrangements for a wide range of
clients some of whom are the largest health insurers in the country.
Health Systems Design markets its products through its direct sales
force as well as through remarketing agreements.
Perot Systems Corporation
12404 Park Central Drive
Dallas, Texas 75251
Telephone: (972) 340-5000.
- Perot Systems is a worldwide provider of information technology
services and e-business solutions to a broad range of clients. Perot
Systems emphasizes developing and integrating information systems,
operating and improving technology and business processes, and helping
clients transform their businesses. Perot Systems helps companies take
full advantage of e-business by leveraging their traditional strengths
and technologies into digital marketplaces. Perot Systems focuses its
business integration, systems integration and applications development,
and infrastructure services to enable clients to accelerate growth,
streamline operations, and create new levels of customer value.
PSC Health Care, Inc.
12404 Park Central Drive
Dallas, Texas 75251
Telephone: (972) 340-5000.
- Merger Subsidiary is a wholly-owned subsidiary of Perot Systems. Perot
Systems formed Merger Subsidiary shortly before execution of the merger
agreement for the purpose of carrying out the merger.
1
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THE SPECIAL MEETING (PAGE 9)
- The special meeting will be at Health Systems Design's corporate
offices, 1111 Broadway, Suite 1800, Oakland, California on November ,
2000 at 10:00 a.m., local time. At the special meeting, Health Systems
Design stockholders will be asked to consider and vote upon a proposal
to approve the merger agreement and the transactions contemplated by
the merger agreement. The special meeting has been called by order of
the Board of Directors of Health Systems Design.
RECORD DATE; VOTING POWER; VOTES REQUIRED (PAGES 9-11)
- Holders of record of Health Systems Design common stock at the close of
business on November , 2000 (the "Record Date") are entitled to
notice of and to vote at the special meeting. As of the Record Date,
there were shares of Health Systems Design common stock issued
and outstanding held by approximately holders of record. Holders
of record of Health Systems Design common stock on the Record Date are
entitled to one vote per share on any matter that may properly come
before the special meeting. The quorum required to hold the special
meeting is a majority of the shares of Health Systems Design common
stock entitled to vote at the meeting, present in person or by proxy.
If a quorum is present, the affirmative vote of the holders of a
majority of the outstanding shares of Health Systems Design common
stock is required to approve the merger agreement.
- On the Record Date, Perot Systems owned no shares of Health Systems
Design common stock. On the Record Date, three of the directors of
Health Systems Design owned of record an aggregate of 3,884,834 shares
of Health Systems Design common stock or approximately 57% of the
outstanding shares of Health Systems Design common stock; these
directors have agreed to vote their shares of Health Systems Design
common stock for approval of the merger agreement.
- Approval by the Health Systems Design stockholders of the merger
agreement requires the affirmative vote of a majority of the shares of
Health Systems Design common stock outstanding on the Record Date. If a
majority of the shares of Health Systems Design common stock
outstanding on the Record Date vote against the merger, fail to vote or
abstain from voting, the merger agreement will not be approved, the
merger will not be completed, Health Systems Design will not become a
subsidiary of Perot Systems and the stockholders of Health Systems
Design will not have the right to receive the merger consideration. A
stockholder who wishes to exercise dissenters' appraisal rights under
the Delaware General Corporation Law must vote against or fail to vote
for approval of the merger agreement.
RECOMMENDATION OF THE BOARD OF DIRECTORS (PAGE 18)
- At a special meeting held on October 17, 2000, the Health Systems
Design Board of Directors determined that the merger is in the best
interests of Health Systems Design and the stockholders of Health
Systems Design, and that the merger consideration of $2.00 per share
represents the best value reasonably available to its stockholders. The
Board of Directors recommends that the Health Systems Design
stockholders approve the merger agreement. You should refer to the
matters considered by the Board of Directors in determining whether to
approve the merger agreement, which are set forth in the section
entitled "Special Factors--Background of the Merger" beginning at page
11.
2
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OPINION OF FINANCIAL ADVISOR (PAGE 19)
- Houlihan Lokey Howard & Zukin Financial Advisors, Inc. ("Houlihan
Lokey"), a nationally recognized investment banking firm, rendered an
opinion to the Board of Directors dated October 16, 2000, that, based
upon and subject to the assumptions, limitations and qualifications in
the opinion, the consideration to be received by the public
stockholders of Health Systems Design in the merger is fair to the
holders from a financial point of view. A copy of the fairness opinion,
setting forth the assumptions made, general procedures followed,
factors considered and limitations on the review undertaken by Houlihan
Lokey in rendering its fairness opinion, is attached to this proxy
statement as Appendix C. You should read the fairness opinion of
Houlihan Lokey in its entirety.
TERMS OF THE MERGER AGREEMENT (PAGE 25)
The merger agreement is attached to this proxy statement as Appendix A. You
should read the merger agreement in its entirety. It is the legal document that
governs the merger.
- GENERAL. The merger agreement provides that Merger Subsidiary will be
merged with and into Health Systems Design and Health Systems Design
will be the surviving corporation. As a result of the merger, the
stockholders of Health Systems Design will have the right to receive
$2.00 in cash, without interest, for each share of Health Systems
Design common stock that they own, other than shares owned by Health
Systems Design or its wholly-owned subsidiaries, by Perot Systems or
any of its subsidiaries, or by stockholders who exercise dissenters'
rights. After the completion of the merger, the stockholders of Health
Systems Design will no longer own an equity interest in the company.
- CONDITIONS TO THE MERGER. The completion of the merger depends upon the
satisfaction of a number of conditions, including those listed below.
Each party may waive the satisfaction of any condition to its
obligations under the merger agreement, other than approval of the
merger agreement by the Health Systems Design stockholders. EVEN IF THE
STOCKHOLDERS OF HEALTH SYSTEMS DESIGN APPROVE THE MERGER, THERE CAN BE
NO ASSURANCE THAT THE MERGER WILL BE COMPLETED.
- approval of the merger agreement by the holders of a majority of
the outstanding shares of Health Systems Design common stock;
- receipt of all necessary orders and consents of governmental
authorities and other persons, and the expiration of any regulatory
waiting periods;
- absence of a federal or state statute, rule, regulation,
injunction, decree, or order prohibiting consummation of the merger
or of the other transactions contemplated by the agreement;
provided that Health Systems Design and Perot Systems both use
commercially reasonable efforts to have any injunction, decree, or
order that may be imposed lifted;
- accuracy of the representations and warranties of the parties; and
- absence of a material adverse change in the business, operations or
financial condition of Health Systems Design.
- NO SOLICITATION. Until completion or abandonment of the merger, Health
Systems Design and its affiliates are not permitted to solicit any
acquisition proposals from any other party, except that Health Systems
Design may, subject to certain conditions, furnish information in
response to unsolicited requests and enter into discussions with a
third party that wants to make an acquisition proposal if the Board of
Directors determines the discussions are necessary to fulfill its
fiduciary obligations after receiving the advice of counsel.
3
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- TERMINATION. Perot Systems may terminate the merger agreement if the
Health Systems Design Board of Directors withdraws or modifies its
recommendation that Health Systems Design stockholders approve the
merger agreement or recommends an alternative acquisition proposal or
if Health Systems Design engages in negotiations with any person or
group other than Perot Systems which has proposed to acquire Health
Systems Design or enters into an agreement, letter of intent or
arrangement with respect to such an acquisition. Either Health Systems
Design or Perot Systems may terminate the merger agreement under
certain circumstances, including the following:
- Health Systems Design and Perot Systems mutually consent in
writing;
- the merger is not completed by the close of business on
February 15, 2001;
- legal constraints or prohibitions prevent the completion of the
merger;
- Health Systems Design stockholders do not approve the merger
agreement;
- the other party breaches in a material manner any of its
representations, warranties or covenants under the merger agreement
and the breach is not cured within 10 days after notice; or
- Health Systems Design enters into or its Board of Directors
approves an agreement for Health Systems Design to be acquired by
another party for consideration to Health Systems Design
stockholders that is superior to the consideration to Health
Systems Design stockholders under the merger agreement (a "Superior
Proposal") if (a) Health Systems Design notifies Perot Systems of
the Superior Proposal, (b) Perot Systems has an opportunity to
respond, and (c) Health Systems Design pays Perot Systems a
termination fee of $850,000.
- FEES AND EXPENSES. Whether or not the merger is consummated, each of
Health Systems Design, Perot Systems and Merger Subsidiary will pay its
own fees and expenses, except that:
(a) Health Systems Design will pay out-of-pocket fees of Perot
Systems and its affiliates if the merger agreement is terminated
by:
PEROT SYSTEMS DUE TO:
- a breach of any representation or warranty of Health Systems
Design (that is not cured or not capable of being cured by
Health Systems Design within 10 days following notice by Perot
Systems of the breach) having a material adverse effect on
Health Systems Design or materially and adversely affecting or
delaying the ability of Perot Systems or Merger Subsidiary to
consummate the merger;
- a breach of any covenant or agreement of Health Systems Design
(that is not cured or not capable of being cured by Health
Systems Design within 10 days following notice by Perot Systems
of the breach) having a material adverse effect on Health
Systems Design or materially and adversely affecting or
delaying the ability of Perot Systems or Merger Subsidiary to
consummate the merger;
- a breach of Health Systems Design's agreement not to solicit,
facilitate, or encourage, directly or indirectly, the
initiation of any inquiries or proposals regarding certain
third party acquisitions of Health Systems Design if Health
Systems Design's violation is not cured prior to 5 days
following notice to Health Systems Design by Perot Systems of
such violation;
4
<PAGE>
- a breach of Health Systems Design's agreement not to engage in
negotiations with any person or group other than Perot Systems
or Merger Subsidiary that has proposed certain third party
acquisitions of Health Systems Design;
- a breach of Health Systems Design's agreement not to enter into
any agreement, letter of intent or arrangement with respect to
certain third party acquisitions of Health Systems Design;
- the withdrawal or adverse modification, by the Board of
Directors of Health Systems Design, of its approval or
recommendation of the merger agreement or the merger, the
recommendation by the Board of Directors of Health Systems
Design of another transaction, or the adoption of a resolution
by the Board of Directors of Health Systems Design having the
effect of either of the foregoing; or
HEALTH SYSTEMS DESIGN DUE TO:
- the receipt by Health Systems Design of a bona fide proposal
concerning certain third party acquisitions of Health Systems
Design that the Board of Directors determines in its good faith
judgment and in the exercise of its fiduciary duties,
(i) after consultation with its financial advisors, is a
Superior Proposal, and (ii) after consultation with its legal
advisors, obligates the Board to terminate the merger
agreement, provided that (a) Health Systems Design notifies
Perot Systems of the Superior Proposal, (b) Perot Systems has
an opportunity to respond, and (c) Health Systems Design pays
Perot Systems a termination fee of $850,000 if Health Systems
Design concludes the other offer is still a Superior Proposal.
(b) Perot Systems will pay out-of-pocket fees of Health Systems
Design and its affiliates if the merger agreement is terminated
by Health Systems Design due to:
- a breach of any representation or warranty of Perot Systems
(that is not cured or not capable of being cured by Perot
Systems within 10 days following notice by Health Systems
Design of the breach) having a material adverse effect on Perot
Systems or materially and adversely affecting or delaying the
ability of Perot Systems or Merger Subsidiary to consummate the
merger; or
- a material breach of any covenant or agreement of Perot Systems
(that is not cured or not capable of being cured by Perot
Systems within 10 days following notice by Health Systems
Design of the breach) having a material adverse effect on Perot
Systems or materially and adversely affecting or delaying the
ability of Perot Systems or Merger Subsidiary to consummate the
merger;
Please see "Summary of Material Features of the Merger--the
Merger--Fees and Expenses" on page 31 of this proxy statement for
more information concerning the fees and expenses provided under the
merger agreement and for a description of the types of transactions
that may constitute a prohibited "Third Party Acquisition" under the
merger agreement.
ACCOUNTING TREATMENT (PAGE 34)
- Health Systems Design believes that the merger will be accounted for by
Perot Systems using the purchase method of accounting in accordance
with generally accepted accounting principles.
5
<PAGE>
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON (PAGE 23)
- BOARD OF DIRECTORS AND OFFICERS OF HEALTH SYSTEMS DESIGN. Three members
of the Board of Directors of Health Systems Design, Richard C. Auger,
Catherine C. Roth and J. Matthew Mackowski, beneficially own in the
aggregate 3,945,520 shares, or 58%, of the issued and outstanding
Health Systems Design common stock. In addition, the following officers
of Health Systems Design have the following interests in the proposed
transaction with Perot Systems:
-- Christopher C. Ohman, the Chief Financial Officer of the company,
and Suzanne Blumenthal-Smith, the company's Executive Vice
President of Sales and Marketing, are parties to employment
agreements which will continue in effect following the
consummation of the merger;
-- Mr. Ohman will be eligible to receive a "transaction bonus" of
$75,000 pursuant to a resolution of the Board of Directors of
Health Systems Design adopted on August 16, 2000;
-- Arthur M. Southam, M.D., the President and Chief Executive
Officer of the company, will continue to serve as a principal in
2C Solutions, LLC, a consultancy that currently provides services
to Health Systems Design and that may continue to provide
services to Health Systems Design after the consummation of the
merger; and
-- Dr. Southam will be paid a "transaction bonus" of $150,000
pursuant to a letter agreement with Health Systems Design dated
January 25, 2000, as amended September 25, 2000, upon the
consummation of the merger.
The remaining members of the Board of Directors and the executive
officers of Health Systems Design beneficially own in the aggregate
103,861 shares, or less than 2% of the issued and outstanding Health
Systems Design common stock. For more information concerning the
security ownership of the management of Health Systems Design, please
see "The Special Meeting--Security Ownership of Management and
Principal Stockholders" on page 9 of this proxy statement.
REGULATORY APPROVALS (PAGE 34)
- Health Systems Design is required to make filings with or obtain
approvals from regulatory authorities in connection with the merger. In
addition to this proxy statement, which has been filed with the SEC,
these filings and approvals include filings with the Federal Trade
Commission and the Department of Justice and the Secretary of State of
the State of Delaware. An application and notice was filed with the
Federal Trade Commission and the Department of Justice as required by
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act") on , 2000 and Health Systems Design received early
termination on , 2000.
DISSENTERS' APPRAISAL RIGHTS (PAGE 34)
- If the merger is completed, Health Design Systems stockholders who
file a written objection with Health Design Systems prior to the
special meeting and do not vote for the acquisition are entitled to
dissenters' appraisal rights under Delaware law.
6
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: You are being asked to approve the merger agreement, which provides for the
merger of Merger Subsidiary into Health Systems Design in a transaction
pursuant to which Health Systems Design will become a wholly-owned
subsidiary of Perot Systems. If the merger is approved and completed, you
will no longer own an equity interest in Health Systems Design. Following
completion of the merger, you will have a right to receive $2.00 in cash,
without interest (the "Merger Consideration"), for each share of Health
Systems Design common stock that you hold. The Board of Directors has
approved the merger agreement and recommended that the stockholders of
Health Systems Design vote to approve the merger agreement and the other
transactions contemplated by the merger agreement.
Q: WHAT WILL HAPPEN IN THE MERGER?
A: In the merger, Merger Subsidiary will be merged into Health Systems Design,
and Health Systems Design will be the surviving corporation. Each share of
Health Systems Design common stock at the time of the merger (other than
shares owned by Health Systems Design or its wholly-owned subsidiaries, by
Perot Systems or any of its subsidiaries, and by stockholders who exercise
their dissenters' rights) will be converted into the right to receive $2.00
in cash, without interest. After the merger, Health Systems Design will be a
wholly-owned subsidiary of Perot Systems. Please see "Summary of Material
Features of The Merger," beginning on page 25 of this proxy statement, for
more information.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: You will receive, for each share of Health Systems Design common stock you
hold prior to the closing of the merger, the right to receive $2.00 in cash,
without interest. This amount is called the "Per Share Amount," and the
aggregate amount you will receive for your shares of Health Systems Design
common stock is called the "Merger Consideration." For example: If you own
100 shares of Health Systems Design common stock, then the Merger
Consideration that you will be entitled to receive will be $200.00 in cash
upon completion of the merger and surrender of your stock certificates.
Q: WHAT RISKS ARE ASSOCIATED WITH THE MERGER FOR STOCKHOLDERS OF HEALTH SYSTEMS
DESIGN?
A. Upon completion of the merger, you will no longer have an equity interest in
Health Systems Design and will no longer participate in any future earnings
or growth of Health Systems Design. You might receive a greater return if
Health Systems Design were to remain public. Also, the "fair value" of any
dissenting shares has not been determined and may be greater than $2.00 per
share. To review special factors concerning the merger, including the
background of and reasons for the merger, please see "Special
Factors--Background of the Merger" on page 11 of this proxy statement. For
more information on the rights of dissenting stockholders, please see
"Summary of Material Features of the Merger--Dissenters' Appraisal Rights"
on page 34 of this proxy statement.
Q: WHY IS HEALTH SYSTEMS DESIGN BEING ACQUIRED?
A. The Board of Directors believes that, in light of a number of factors
considered by the Board, including the relative lack of liquidity for
current and potential stockholders due to the low trading volume of the
company's common stock, the company's limited public float, the limited
coverage of the company by market analysts, the company's lack of sustained
profitability and its need for additional capital if it is to remain an
independent company, the merger of Health Systems Design is in the best
interests of the stockholders of Health Systems Design by providing the
stockholders of Health Systems Design with the right to receive the Merger
Consideration. For more information on the background of and reasons for the
merger, including other important factors
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<PAGE>
considered by the Board of Directors of Health Systems Design, please see
"Special Factors--Background of the Merger" on page 11 of this proxy
statement.
Q: HOW SHOULD I SEND IN MY HEALTH SYSTEMS DESIGN STOCK CERTIFICATES?
A: You must send in your Health Systems Design stock certificates with your
completed letter of transmittal to the exchange agent. You must keep your
stock certificates until after the closing, when you will receive a letter
of transmittal describing how you may exchange your certificates for merger
consideration. DO NOT SEND YOUR STOCK CERTIFICATES WITH YOUR PROXY CARD.
Q: HOW DOES MY BOARD OF DIRECTORS RECOMMEND THAT I VOTE ON THE PROPOSALS?
A: The Board of Directors of Health Systems Design unanimously recommends that
you vote FOR the merger and the transactions contemplated by the merger
agreement.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS?
A: Approval of the merger agreement and the transactions contemplated by the
merger agreement requires the affirmative vote of the holders of a majority
of the outstanding shares of Health Systems Design common stock. If you do
not vote, your non-votes will have the same effect as votes against approval
of the merger.
Q: WHAT DO I NEED TO DO NOW?
A: After you read and consider the information in this document, just mail your
signed proxy card in the enclosed return envelope as soon as possible, so
that your shares may be represented at the Health Systems Design
stockholders meeting. You should return your proxy card whether or not you
plan to attend the stockholders meeting. If you attend the stockholders
meeting, you may revoke your proxy at any time before it is voted and vote
in person if you wish.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE AFTER I HAVE SENT IN MY PROXY CARD?
A: You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you
can complete and submit a new proxy card at a later date. If you choose
either of these methods, you must submit your notice of revocation or your
new proxy card to Health Systems Design before the stockholders meeting.
Finally, you can attend the meeting and vote in person. Simply attending the
special meeting, however, will not revoke your proxy. If you have instructed
a broker to vote your shares, you must follow directions received from your
broker to change your vote.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares ONLY if you provide instructions on how to
vote. If you do not provide your broker with instructions on how to vote,
your broker's non-votes will have the same effect as votes against approval
of the merger. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares.
Q: WHAT CONSTITUTES A QUORUM AT THE STOCKHOLDERS' MEETING?
A: A quorum is a majority of the outstanding shares entitled to vote which are
present or represented by proxy at the special meeting. A quorum must exist
for the transaction of business at the special meeting. If you submit a
properly executed proxy card, even if you abstain from voting, your shares
will be considered part of the quorum. Broker non-votes, which are shares
held by a broker or nominee that are represented at the special meeting, but
with respect to which the broker or nominee is not empowered to vote on a
proposal, are included in determining the presence of a quorum.
Q: WHO CAN I CALL WITH QUESTIONS?
A: Christopher C. Ohman, the Chief Financial Officer of Health Systems Design,
at (510) 251-1330.
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THE SPECIAL MEETING
GENERAL; DATE, TIME AND PLACE OF THE SPECIAL MEETING
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Health Systems Design for a special meeting
of Stockholders of Health Systems Design to be held at its corporate offices,
1111 Broadway, Suite 1800, Oakland, California on November , 2000 at
10:00 a.m., local time, and at any adjournments thereof.
PROPOSAL TO BE CONSIDERED AT THE SPECIAL MEETING
At the special meeting, the stockholders of Health Systems Design will be
asked to consider and vote upon the approval of the merger agreement. Subject to
the receipt of regulatory approvals, approval by the stockholders of Health
Systems Design and satisfaction of other conditions, the merger agreement
provides for the merger of Merger Subsidiary with and into Health Systems
Design. If the proposed merger is completed, each issued and outstanding share
of Health Systems Design common stock at the effective time of the merger (other
than shares owned by Health Systems Design or its wholly-owned subsidiaries, by
Perot Systems or any of its subsidiaries, and by stockholders who exercise their
dissenters' rights) will be converted into the right to receive the Merger
Consideration.
RECORD DATE FOR VOTING ON MERGER; STOCKHOLDERS ENTITLED TO VOTE
Only Health Systems Design common stockholders of record at the close of
business on November , 2000 are entitled to notice of and to vote at the
special meeting. As of the close of business on that record date, there were
shares of Health Systems Design common stock issued and outstanding
held by approximately holders of record. Each Health Systems Design
stockholder is entitled to one vote for each share of Health Systems Design
common stock held as of the record date for each matter that may properly come
before the special meeting.
SECURITY OWNERSHIP OF CERTAIN PERSONS IN THE MATTERS TO BE ACTED UPON
The following table indicates, as to each person who has been a director or
executive officer of Health Systems Design at any time since the beginning of
the last fiscal year, the number of shares and percentage of the company's stock
beneficially owned as of September 30, 2000.
SHARES BENEFICIALLY OWNED AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP OF CLASS
---------------- ----------------------- --------
<S> <C> <C>
Richard C. Auger (1)........................................ 1,566,800 23%
Catherine C. Roth (1) (2)................................... 897,134 13%
J. Matthew Mackowski (1) (3)................................ 1,481,586 22%
Christopher J. Herron....................................... 15,000 --
Arthur M. Southam, M.D. (4)................................. 34,749 *
Gary L. Durbin.............................................. 4,000 *
Christopher C. Ohman........................................ 0 *
Steven L. Moore............................................. 3,376 *
Suzanne J. Blumenthal (5)................................... 24,999 *
Robert D. Archibald......................................... 21,737 *
Hamilton Chaffee............................................ 0 *
</TABLE>
------------------------
(*) Less than 1%.
9
<PAGE>
(1) The address of Mr. Auger, Ms. Roth and Mr. Mackowski is 1111 Broadway, Suite
1800, Oakland, California 94607. Each of these persons may be deemed to be a
"control person" of the company within the meaning of the rules and
regulations of the Securities and Exchange Commission by reason of his or
her stock ownership and position with the company.
(2) Does not include 289,966 shares of Common Stock held by Ms. Roth's children.
Ms. Roth disclaims beneficial ownership of these shares.
(3) Includes 686 shares held in the name of Mr. Mackowski's spouse, and 60,000
shares issuable under a stock option agreement with Mackowski & Shepler, a
company of which Mr. Mackowski is a principal.
(4) Includes 1,166 shares issuable upon exercise of outstanding stock options
exercisable within 60 days as of September 30, 2000, and 8,749 shares
issuable under a stock option agreement with 2CSolutions, LLC, a company of
which Dr. Southam is a principal.
(5) Includes 3,352 shares issuable upon exercise of outstanding stock options
exercisable within 60 days as of September 30, 2000.
VOTING AND REVOCATION OF PROXIES
The proxy for the Health Systems Design stockholders meeting is solicited on
behalf of Health Systems Design's board of directors. Health Systems Design
stockholders are requested to complete, date and sign the enclosed proxy and
promptly return it in the accompanying envelope or otherwise mail it to Health
Systems Design. All properly executed proxies received by Health Systems Design
before the special meeting that are not revoked will be voted at the special
meeting in accordance with the instructions indicated on the proxies or, if no
direction is indicated, to approve the merger agreement and the transactions
contemplated thereby.
A Health Systems Design stockholder that has given a proxy may revoke it at
any time before it is exercised at the special meeting by doing any of the
following:
- delivering to the Secretary of Health Systems Design a written notice,
bearing a date later than the date of the proxy, stating that the proxy
is revoked;
- signing and delivering a proxy relating to the same shares and bearing
a later date than the date of the previous proxy before the vote at the
special meeting; or
- attending the special meeting and voting in person.
PROXY SOLICITATION
The cost of preparing, assembling and mailing this proxy statement, the
notice, the form of proxy and other material which may be sent to the
stockholders will be borne by Health Systems Design. In addition, directors,
officers and regular employees of Health Systems Design and its subsidiaries, at
no additional compensation, may solicit proxies by telephone, telegram or in
person. Upon request, Health Systems Design will reimburse brokers and other
persons holding shares for the benefit of others for their expenses in
forwarding proxies and accompanying material and in obtaining authorization from
beneficial owners of Health Systems Design common stock to give proxies.
STOCKHOLDER VOTE REQUIRED TO APPROVE THE MERGER AGREEMENT
Health Systems Design's stockholders' approval of the merger agreement and
the transactions contemplated in the merger agreement requires the affirmative
vote of the holders of a majority of the shares of Health Systems Design common
stock represented at the special meeting. Abstentions and
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<PAGE>
broker non-votes are not counted as voting with respect to the approval of the
merger agreement and will have the same effect as a vote against approval of the
merger agreement.
HEALTH SYSTEMS DESIGN'S BOARD RECOMMENDATION
HEALTH SYSTEMS DESIGN'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
MERGER AND BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO, AND THAT
THE MERGER IS IN THE BEST INTERESTS OF, HEALTH SYSTEMS DESIGN AND ITS
STOCKHOLDERS.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE HEALTH SYSTEMS DESIGN STOCKHOLDERS. ACCORDINGLY, HEALTH SYSTEMS DESIGN'S
STOCKHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED
IN THIS PROXY STATEMENT AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THE SIGNING OF THE
PROXY WILL NOT PREVENT YOU FROM ATTENDING THE MEETING AND VOTING IN PERSON,
SHOULD YOU SO DESIRE.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
Both before and after its initial public offering of its common stock in
1996, Health Systems Design has from time to time explored strategic alliance
opportunities with various entities that might have yielded higher value for the
stockholders of the company. Health Systems Design has thus held discussions
with a number of potential partners, some of which have led to the execution of
non-disclosure agreements and detailed negotiations but others of which did not
progress beyond the early stages of expressions of interest.
During September 1999 the Board of Directors and senior management of the
company engaged in extensive discussions regarding the company's strategic plans
and the potential benefits of a strategic combination of the company with
another entity. These discussions focused on the following factors:
- The relatively low market price of Health Systems Design stock;
- The relative lack of liquidity for current and potential stockholders due
to the low trading volume of the stock, the limited public float and
limited coverage of the company by market analysts;
- The company's lack of sustained profitability;
- The historical dependence of the company on revenues derived from
licensing its software products to, and from installing and modifying its
software products for, a small number of large client organizations;
- The potential for declining revenues as a result of the decline in
information technology purchasing activity on the part of health care
payors, particularly with respect to the acquisition of core
administrative and financial information technology systems similar to
those offered by the company;
- The length of the company's sales and implementation cycles, which makes
it difficult to predict and which may delay the time at which the company
may recognize revenue from the sale of information technology or services
and which may cause revenue and operating results to vary significantly
from period to period;
- The relatively low volume and size of requests for proposals by health
care payors during calendar year 1999 which the Board of Directors and
senior management of the company believed was attributable in significant
part to: (i) the focus of information technology purchasers on planning
for and remediation of the so-called "Y2K" or "Year 2000" problem;
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<PAGE>
(ii) the limited number of health care payor companies; (iii) the poor
financial performance of many health care payors, and (iv) the poor
performance of the health care industry as a whole;
- The need to broaden the range of products and services offered by the
company to current and prospective clients, diversify its revenue base,
increase the amount of its recurring revenues, and reduce its dependence
on non-recurring revenues; and
- The need to strengthen the company's balance sheet to allow it to support
continued product development and to improve its competitive position when
pursuing large, long-term information systems implementation projects.
The Board of Directors thus concluded that the interests of the stockholders
of the company would best be served and the value of the company's assets could
best be realized through a strategic combination of the company with another
entity having some or all of the following characteristics:
- Experience in the development and/or implementation of payor information
technology solutions;
- Substantial service and consulting capability related to payor information
technology;
- Experience in outsourcing and application service provider activities;
- Products and services complementary to those of Health Systems Design;
- A larger and more diversified revenue base than that of the company;
- Capital resources sufficient to support development of products and
services and to address client concerns regarding the size and capital
resources of Health Systems Design;
- Software development capabilities which could be used to further develop
the company's products and/or internet-based software services; and
- The ability to offer the stockholders of Health Systems Design greater
liquidity, whether as a public company with a large shareholder base or
through becoming a private company offering cash or other liquid
consideration.
Based on these considerations and discussions with various parties regarding
potential strategic alliances, the Board of Directors determined that it would
be desirable and in the best interests of the stockholders of Health Systems
Design to retain a nationally recognized and experienced investment banking firm
to assist the company in the solicitation and evaluation of strategic alliance
opportunities. The company engaged the investment banking firm of BancBoston
Robertson Stephens for this purpose in November 1999. On November 22, 1999, the
company issued a press release announcing its engagement of BancBoston Robertson
Stephens to explore strategic alternatives in order to enhance stockholder
value. Given the relatively illiquid market for the company's stock and the
limited number of potential strategic partners, BancBoston Robertson Stephens
advised the Board of Directors that a competitive bid process could best
establish the market value of Health Systems Design as an acquisition target.
Soon after the company retained BancBoston Robertson Stephens, the parties
jointly developed descriptive materials about Health Systems Design to present
to potential merger partners and contacted several of such potential partners in
late 1999 and the first half of 2000. Some withdrew from discussions concerning
a potential acquisition of Health Systems Design due to their perceived lack of
synergy between their business and products and those of the company.
Between December 1999 and January 2000, the company had a number of meetings
and discussions regarding a potential merger with board and management
representatives of a private company providing management services to health
care providers and payors. The parties believed that a potential merger would
have created a larger, more diverse organization that would have addressed
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<PAGE>
evolving market interests in application service provider ("ASP") arrangements
and outsourcing. However, after these discussions and preliminary proposals
regarding valuation, the Board of Directors of the other company determined that
the proposals were inadequate and significantly undervalued the other company
and no further discussions were held.
During January and February 2000, the Board of Directors received written
indications of interest with preliminary pricing and transaction structures from
several potential acquirors. The Board, in consultation with BancBoston
Robertson Stephens, evaluated these potential acquirors and the proposed pricing
and transaction structure in connection with each. The Board ultimately narrowed
the field to three viable candidates, initiated discussions between the senior
management of each and that of the company, and allowed them to conduct detailed
due diligence on Health Systems Design during February 2000.
After meetings and discussions with senior management and the Board of
Directors of the company, one of these three potential acquirors withdrew from
further discussions after concluding that the company's products were not
aligned with that potential acquiror's market strategy and due to concerns that
the company's cash flow did not warrant a valuation that the Board of Directors
of Health Systems Design would accept as fair to the company's stockholders.
The second of the three potential acquirors identified in early 2000 by the
Board of Directors and BancBoston Robertson Stephens was a publicly-held foreign
software development company. Following extensive due diligence, in March 2000
this potential acquiror submitted a written proposal to the company which
proposed three potential transaction structures: (1) a tender offer for
thirty-four percent (34%) of the outstanding shares of Health Systems Design at
$4.50 per share; (2) a tender offer for fifty-one percent (51%) of the
outstanding shares of Health Systems Design at $4.00 per share; or (3) a merger
in which the stockholders of Health Systems Design would receive $1.50 per share
plus a payment contingent on license revenues for the subsequent year. These
three alternative proposals offered consideration which was less than the
then-current market price of the stock and the consideration indicated by other
potential acquirors. In addition, both the Board of Directors of the company and
its advisors were concerned that there could be barriers and delays in
consummating a transaction due to regulatory approvals required by the
government of the country under the laws of which the potential acquiror was
organized. Thus, the Board determined that it was in the best interests of the
company's stockholders to pursue other offers.
In late February 2000, BancBoston Robertson Stephens and senior management
of Health Systems Design were contacted by and began discussions with a company
which had recently completed its initial public offering and which had
experience in the payor software market and expertise in the development of
internet software based on XML, a contemporary software tool for internet
software application development. This potential acquiror submitted an offer,
dated March 9, 2000, to the Board of Directors of the company which consisted
primarily of the acquiror's stock but which was significantly higher than the
offer which had been submitted by the foreign software development company.
Based on this higher offer and on the advice from BancBoston Robertson Stephens,
the company elected to pursue merger discussions with this potential acquiror.
The potential acquiror conducted detailed due diligence on the company and the
parties agreed to proceed with negotiating and drafting definitive acquisition
documents.
However, while these negotiations were underway, the market prices of many
internet and health care information technology companies' stocks declined
precipitously. The market price of the potential acquiror's stock declined by
approximately seventy-four percent (74%) from March 14, 2000 to April 14, 2000.
Also while these discussions were underway, other firms in the health care
information technology sector which had announced merger transactions
experienced precipitous declines in the market prices of their stock. Because
the consideration to be paid to the stockholders of Health Systems Design
consisted primarily of the stock of the potential acquiror, the decline in the
acquiror's
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<PAGE>
stock price would have resulted in greater dilution for the acquiror's
stockholders than had been anticipated. In addition, the potential acquiror
indicated to the company and its advisors that investor and analytical sentiment
would not be supportive of the proposed acquisition. As a result, the acquiror
terminated further discussions.
The Board of Directors of the company then pursued detailed discussions and
negotiations with another public company which provides consulting, ASP and
other services to health care payors and providers. Senior management and the
Board of Directors conducted ongoing discussions with senior management of this
potential acquiror between January and May 2000, which led to several
alternative pricing proposals between January 2000 and April 2000, each
consisting primarily of the acquiror's stock. The first three of these pricing
proposals involved "stock-for-stock" exchanges in which the stockholders of
Health Systems Design would receive a number of shares of the acquiror's common
stock in exchange for their shares of Health Systems Design common stock based
on an exchange ratio that, although based on the market price of the acquiror's
stock at the time of closing, was subject to a "collar" which would place upper
and lower bounds on the exchange ratio. The fourth proposal involved structuring
the transaction as a stock-for-stock exchange in which the exchange ratio would
not be subject to a collar. Given the lack of profitability and the relatively
small revenues of the potential acquiror, the Board of Directors of the company
concluded that there was significant risk of a decrease in the price of the
acquiror's stock. Because of this risk, the Board had not initially pursued
these proposed transactions, the value of which would have been highly dependent
on the ability of the potential acquiror to maintain what appeared to be a high
value relative to financial performance.
However, after further discussions the parties tentatively agreed on pricing
terms which the Board of Directors of the company believed would adequately
compensate the company's stockholders for this risk. The parties continued
detailed due diligence and began negotiating and drafting definitive transaction
documents. The parties had reached agreement on all material terms and were in
the final stages of receiving board approval and finalizing definitive documents
when, approximately two weeks prior to the anticipated signing of a definitive
merger agreement, the potential acquiror announced that it had terminated its
agreement to merge with another entity but had entered into an agreement to
acquire a division of the other entity which developed software products similar
to those developed by Health Systems Design. Immediately following this
announcement, the market price of the potential acquiror's stock as well as
those of other health care information technology companies declined
precipitously. The price of the potential acquiror's stock dropped approximately
fifty-four percent (54%) at its lowest point during the two weeks following this
announcement. Within a few days of the anticipated signing of definitive
transaction documents with the company, the potential acquiror informed the
company that its board of directors had determined not to pursue a merger with
the company at that time due to the decline in its stock price, the resulting
exchange ratio in the absence of a "collar" and the negative market reaction to
the potential acquiror's announced agreement to acquire the division of the
entity which developed software products similar to those developed by the
company, as described above.
Following the termination of these discussions, BancBoston Robertson
Stephens was contacted by a different publicly traded health care information
technology company about a potential acquisition of the company. The boards of
directors, senior management and advisors of the company and the potential
acquiror met several times to discuss the terms of a potential transaction. The
potential acquiror delivered several unsigned pricing proposals to the company,
all of which lacked sufficient detail to allow for detailed consideration by the
Health Systems Design Board. After several unsuccessful attempts by the
company's management and advisors to define details of a proposed transaction,
the parties mutually determined not to move forward with further discussions.
Following the termination of these discussions, senior management of the
company discussed with BancBoston Robertson Stephens the status of the company's
search for a strategic partner. On
14
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August 30, 2000, the parties mutually agreed to terminate their letter of
agreement from November 1999.
In summary, the various acquisition proposals which had been submitted to
the Board of Directors of Health Systems Design during the course of the
preceding year had been rejected or the discussions were terminated because the
Board and its advisors did not believe that any of the proposals submitted
represented the best value reasonably available to the stockholders of the
company, in each case due to one or more of the following factors, among others:
- The proposals offered consideration valued at less than the then-current
trading price of the company's stock;
- The proposals offered consideration valued at less than the consideration
offered by other potential acquirors;
- In respect of potential foreign acquirors, concerns that required
regulatory approvals and the delays or barriers incident thereto added a
degree of risk which significantly reduced the value of such proposals to
the company's stockholders;
- Extreme volatility in the market price of the stock of certain potential
acquirors which were offering merger consideration consisting primarily of
the potential acquiror's stock;
- The lack of profitability and the relatively small revenues, which could
in turn lead to extreme stock price volatility, of certain potential
acquirors which were offering merger consideration consisting primarily of
the potential acquiror's equity; and
- In the case of one proposal whereby Health Systems Design would acquire
another company, the dilution which the stockholders of Health Systems
Design would suffer and which could not be justified by the value of the
company to be acquired.
Following the announcement of the termination of the company's relationship
with BancBoston Robertson Stephens and the company's lower than expected
revenues for the third quarter of 2000, senior management and representatives of
the Board of Directors contacted several potential strategic partners, and
certain others contacted the company. The company also began preparations for
discussions with potential sources of equity financing to prepare for the
possibility that the company might not identify and enter into a definitive
agreement with a strategic partner quickly enough to meet the company's working
capital needs.
In August 2000, senior management and the Board of Directors of Health
Systems Design entered into discussions with Perot Systems regarding the
potential acquisition of the company by Perot Systems. In a written expression
of interest dated August 25, 2000, Perot Systems proposed a tentative price
range of $1.50 - $3.00 per share for a merger in which the company's
stockholders would receive cash in exchange for their shares of Health Systems
Design stock. Based on these discussions and the tentative proposal, Perot
Systems conducted extensive due diligence on the company.
Also during this period, several other potential acquirors expressed
interest in Health Systems Design and representatives of each company held
discussions regarding a possible business combination. However, such discussions
did not result in a definitive offer for the Board of Directors of Health
Systems Design to consider.
On September 22, 2000, legal counsel to Perot Systems submitted a draft
merger agreement for consideration by the company and its counsel. This draft
was reviewed and discussed among the parties. The Board of Directors of the
company met on September 26, 2000 to consider the status of the negotiations
with Perot Systems and to review and discuss the draft merger agreement. The
Board of Directors then directed management to continue pursuing a potential
transaction. The Board also approved the engagement of the investment banking
firm of Houlihan Lokey Howard & Zukin to
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provide a fairness opinion to the Board in connection with the proposed
transaction with Perot Systems. On September 29, 2000, representatives of both
parties met in Dallas to discuss the principal issues which needed to be
resolved in order to move forward with definitive documentation, including
price, closing conditions and the consequences to the company and Perot Systems
of the transaction not closing.
On October 6, 2000, counsel to Perot Systems forwarded a revised draft
merger agreement, which incorporated certain revisions which had been discussed
during the parties' meetings in Dallas and highlighted certain other issues
related to the conditions to Perot Systems' obligation to close and the
consequences to the company of the transaction not closing, including the
circumstances under which the company would be obligated to pay Perot Systems a
termination fee. On October 10, 2000, management and legal counsel for both
Health Systems Design and Perot Systems held a conference call to discuss the
most recent draft of the merger agreement. The central issues continued to be
the circumstances under which Perot Systems could elect not to close and the
consequences to the company of the closing not occurring, with a particular
focus on the circumstances under which the company would be obligated to pay a
termination fee to Perot Systems. The parties agreed to continue discussions and
to consider possible alternatives in this regard.
On October 10, 2000, the board of directors of Perot Systems met to consider
the proposed acquisition of Health Systems Design and review drafts of the
definitive transaction documents, including the Merger Agreement. The Perot
Systems board unanimously approved the proposed transactions on the terms and
conditions set forth in the draft documents presented to it.
Between October 10, 2000 and October 16, 2000, management and counsel for
each of Perot Systems and Health Systems Design continued working toward
finalizing the draft merger agreement and resolving the remaining issues.
Agreement on substantially all terms and conditions of the merger agreement
was reached on October 16, 2000 and a near-final draft was presented to the
Health Systems Design Board of Directors during a board meeting the evening of
October 16, 2000. At the meeting, counsel reviewed the terms of the draft merger
agreement and the changes that had been made to the October 6, 2000 draft of the
agreement previously received by the directors. A representative from Houlihan
Lokey then provided a financial analysis of the proposed transaction with Perot
Systems in which Houlihan Lokey generally discussed the results of its analysis
of the comparison of the value of the consideration to be received by
stockholders of Health Systems Design under the proposed transaction with Perot
Systems to the value of the common equity of Health Systems Design under certain
widely accepted valuation methodologies, such as a comparable company analysis,
a discounted cash flow analysis, and a consideration of Health Systems Design's
publicly traded stock price. At a price of $2.00 per share, the total value of
Health Systems Design, including in-the-money stock options, implicit in the
transaction was approximately $13.5 million. Based on an implicit value of
$13.5 million, Houlihan Lokey indicated that the proposed transaction was
greater than the potential or concluded value of Health Systems Design of
between $2.6 million and $7.6 million that Houlihan Lokey calculated based upon
its discounted cash flow analysis and comparable company analysis of Health
Systems Design. In addition, Houlihan Lokey determined that Perot Systems' offer
of $2.00 per share represented a 52% premium to the closing price of $1.31 per
share for Health Systems Design common stock on October 12, 2000. Houlihan Lokey
then delivered its fairness opinion to the Board of Directors, a copy of which
is attached to this proxy statement as Appendix C. After considering the
presentation of Houlihan Lokey and the Board's discussion of the terms and
conditions of the merger agreement with company counsel, the Board concluded
that it was in the best interests of the company for the Board to give further
consideration to the transaction documents relating to the proposed transaction
with Perot Systems on the following day because certain aspects of the proposed
transaction were not yet final and because this would provide the Board with the
opportunity to once again discuss and consider the proposed merger with Perot
Systems.
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The Health Systems Design Board of Directors met again the following
evening, on October 17, 2000, to further consider the near final draft of the
merger agreement and to discuss and consider the proposed transaction with Perot
Systems. At the meeting, after the Board of Directors considered and discussed
the proposed transaction with Perot Systems, the merger agreement, the other
transaction documents relating to the merger agreement, and the presentation and
fairness opinion of Houlihan Lokey, the Board of Directors unanimously approved
the merger agreement in substantially the form presented to the Board and the
Board of Directors and recommended that the Health Systems Design stockholders
approve the merger agreement on the basis that the proposed transaction with
Perot Systems represented the highest value reasonably available to the
company's stockholders.
Between October 16, 2000 and October 18, 2000, management and counsel of
Perot Systems and Health Systems Design resolved the few remaining open issues
and finalized the merger agreement. The parties executed the merger agreement in
the form attached as Appendix A on October 18, 2000.
REASONS FOR THE MERGER
The Health Systems Design Board of Directors has determined that the merger
is in the best interests of the company and is fair to and in the best interests
of the stockholders of Health Systems Design, including the unaffiliated
stockholders of Health Systems Design. In approving the merger, the Board of
Directors considered and analyzed a number of factors; all of the material
factors considered by the Board of Directors are described below.
1. Information presented to the Board by Houlihan Lokey relating to the
rendering of the fairness opinion analyzing the financial aspects of the terms
of the merger indicated that the terms of the merger were favorable by
demonstrating that the value of the consideration to be provided to the
stockholders of Health Systems Design under the merger agreement was greater
than the results of certain widely accepted valuation methodologies applied to
Health Systems Design, including a comparable company analysis, a discounted
cash flow analysis and a consideration of Health Systems Design's publicly
traded stock price.
2. The Board of Directors received an opinion dated October 16, 2000 from
Houlihan Lokey, its financial advisor, to the effect that the consideration to
be received by the public stockholders of Health Systems Design in the merger is
fair to the holders from a financial point of view. The full text of the
opinion, setting forth the assumptions made, matters considered and limitations
on the review undertaken in connection with the opinion, is attached as
Appendix C. The stockholders of Health Systems Design are urged to read the
opinion in its entirety. A summary of the material financial analyses employed
by Houlihan Lokey is included in this proxy statement under the heading "Special
Factors--Opinion of the Financial Advisor" (page 19).
3. Although Health Systems Design stockholders would receive in cash a
substantial premium to market for the common stock upon completion of the
merger, the stockholders would not be entitled to participate in any future
earnings or growth of Health Systems Design. In addition, the stockholders of
Health Systems Design may be required to recognize a taxable gain as a result of
the merger.
4. The stockholders of Health Systems Design might receive a greater return
if Health Systems Design were to remain a public company.
5. Perot Systems is willing to pay an amount for each share of Health
Systems Design common stock that is reflective of the potential benefits of the
combination of the Health Systems Design and Perot Systems businesses and which
was not matched by another party.
6. Perot Systems has the financial ability to complete the merger so that
the merger is not conditioned on financing.
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7. The merger agreement permits the Health Systems Design Board of
Directors to provide responsive information for a takeover proposal from another
party that is superior to Perot System's proposal and allows the Health Systems
Design Board of Directors to terminate the merger agreement in the event it
determines to accept a superior proposal upon notice to Perot Systems and
payment to Perot Systems of a termination fee of $850,000.
8. The merger must be approved by a majority of the outstanding shares of
Health Systems Design common stock.
9. Stockholders of Health Systems Design who do not support the merger or
are dissatisfied with the consideration to be received by the holders of common
stock are able to obtain "fair value" for their shares if they properly exercise
their dissenters' rights under Delaware law.
10. Health Systems Design had, for an extended period, engaged in
discussions with multiple parties considering a merger or acquisition of the
company. Health Systems Design had not completed a transaction and had not
received a superior offer to the offer made by Perot Systems.
11. The operating losses and capital requirements of Health Systems Design
require additional capital if the company were to remain independent. This could
result in significant dilution and a reduction in the value of the holdings of
current stockholders.
12. Due to the declining market capitalization and share price of Health
Systems Design, the company expects that it would no longer be listed on the
Nasdaq National Market; this would further reduce investor interest in the
company, shareholder liquidity, and shareholder value.
13. Perot Systems possesses broad experience and knowledge in the
development and implementation of payor information technology solutions and at
the same time possesses significant capital resources that are important to
support further development of the company's products and services, to address
client concerns regarding the size and capital resources of Health Systems
Design and to allow Health Systems Design to more effectively and credibly sell
its licensing and installation services to large customers.
In view of the variety of factors considered in connection with its
evaluation of the merger, the Board of Directors found it impracticable to, and
did not, quantify, rank or otherwise assign relative weights to the reasons for
the merger described above or determine that any reason was of particular
importance in reaching its determination that the merger is in the best
interests of Health Systems Design and is fair to, represents the highest value
reasonably available to and in the best interests of the stockholders of Health
Systems Design, including the unaffiliated stockholders of Health Systems
Design. Rather, the Board of Directors viewed its recommendation as being based
upon its judgment, in light of the totality of the information presented and
considered, as summarized in the reasons for the merger described above, and the
overall effect of the merger on Health Systems Design's stockholders compared to
continuing the business of Health Systems Design in the ordinary course or
seeking other potential parties to effect a business combination.
RECOMMENDATION OF THE BOARD OF DIRECTORS
On October 17, 2000, the day following a presentation by and receipt of a
fairness opinion from Houlihan Lokey, the Board of Directors approved the merger
agreement and recommended that Health Systems Design stockholders approve the
merger agreement. The approval of the Board of Directors of the merger agreement
and recommendation of approval by the stockholders is based on the conclusion of
the Board of Directors that the proposed merger is fair to the stockholders of
Health Systems Design. In reaching that conclusion, the Board of Directors
relied on consideration of the material factors presented in this proxy
statement in "Special Factors--Reasons for the Merger"
(page 17) and on the opinion of Houlihan Lokey that the consideration to be
received by the public stockholders of Health Systems Design pursuant to the
merger agreement is fair to the stockholders
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from a financial point of view. The conclusion of the Board of Directors as to
the fairness of the proposed merger encompasses the interests of all
stockholders, including unaffiliated stockholders of Health Systems Design. The
merger and the merger agreement were negotiated on an arm's-length basis by the
parties. At completion of the merger, each share of Health Systems Design common
stock (other than shares owned by Health Systems Design or its wholly-owned
subsidiaries, by Perot Systems or any of its subsidiaries, and by stockholders
who exercise their dissenters' rights) will be converted into the right to
receive $2.00, a price per share which represents a 52% premium to the closing
price of $1.31 per share for Health Systems Design common stock on October 12,
2000 and which the Board of Directors believed could not be obtained from any
source other than Perot Systems for the reasons described in "Special
Factors--Background of the Merger" and "Special Factors--Reasons for the
Merger." Upon completion of the merger, all unaffiliated stockholders of Health
Systems Design will have the opportunity for immediate liquidity for their
shares of Health Systems Design common stock.
The Board of Directors of Health Systems Design concluded that the
consideration of $2.00 per share of the company's common stock is fair to the
unaffiliated stockholders of Health Systems Design.
All directors of Health Systems Design, including all non-employee
directors, unanimously approved the merger agreement and recommended approval by
the stockholders.
THE BOARD OF DIRECTORS OF HEALTH SYSTEMS DESIGN HAS APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF
THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR
Health Systems Design engaged Houlihan Lokey to act as its financial advisor
in connection with the merger. Houlihan Lokey is a nationally recognized
investment banking firm that provides financial advisory services in connection
with mergers and acquisitions, leveraged buyouts, business valuations for a
variety of regulatory and planning purposes, recapitalizations, financial
restructurings, and private placements of debt and equity securities. Health
Systems Design selected Houlihan Lokey based on its reputation as an investment
banking firm with experience in providing fairness opinions for transactions of
a similar nature to that of the proposed transaction with Perot Systems.
The company instructed Houlihan Lokey, in its role as a financial advisor,
to evaluate the fairness from a financial point of view, of the consideration to
be received in the merger by the public stockholders of Health Systems Design.
On October 16, 2000, Houlihan Lokey delivered its oral and written opinion to
the Board of Directors of Health Systems Design to the effect that as of such
date and based upon and subject to certain matters stated therein, from a
financial point of view, the consideration to be received in the merger is fair
to the public stockholders of Health Systems Design. Houlihan Lokey's fairness
opinion is for the use and benefit of the Board and was rendered to the Board in
connection with the merger.
Health Systems Design imposed no limitations on the scope of Houlihan
Lokey's investigation or the procedures to be followed by Houlihan Lokey in
rendering its fairness opinion. However, Houlihan Lokey was not engaged to
solicit other offers or to provide any investment banking services to Health
Systems Design in connection with this matter other than to evaluate the
fairness of the consideration offered in the merger.
Houlihan Lokey's fairness opinion addresses only fairness from a financial
point of view of the merger to the public stockholders of Health Systems Design,
and does not constitute a recommendation as to how such holders or any other
person should vote with respect to the merger. Houlihan Lokey has not been
requested and does not intend to further update, revise or reaffirm its fairness
opinion in connection with the merger, unless requested to do so by the Board.
Events that could affect the fairness of the merger, from a financial point of
view, include adverse changes in
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industry performance or market conditions and changes to the business, financial
condition and results of operations of Health Systems Design.
Houlihan Lokey did not, and was not requested by Health Systems Design to,
make any recommendations as to the form or terms of the merger, and does not
express any opinion as to the fairness of any aspect of the merger not expressly
addressed in the fairness opinion. Houlihan Lokey was not asked to opine on and
does not express any opinion as to the tax consequences of the merger, or the
public market value or realizable value of Health Systems Design's common stock.
Health Systems Design agreed to pay Houlihan Lokey a fee of $250,000 for the
preparation and delivery of its fairness opinion. No portion of Houlihan Lokey's
fee is contingent upon the successful completion of the merger. In addition,
Health Systems Design agreed to indemnify Houlihan Lokey and its affiliates
against certain liabilities, including liabilities under federal securities laws
that arise out of the engagement of Houlihan Lokey.
THE FULL TEXT OF HOULIHAN LOKEY'S WRITTEN FAIRNESS OPINION, WHICH SETS FORTH
THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, FACTORS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN BY HOULIHAN LOKEY IN RENDERING ITS FAIRNESS
OPINION IS ATTACHED AS APPENDIX C AND IS INCORPORATED HEREIN BY REFERENCE. THE
DISCUSSION OF THE FAIRNESS OPINION BELOW IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH OPINION. PLEASE READ THE FAIRNESS OPINION IN ITS ENTIRETY.
In arriving at its opinion, among other things, Houlihan Lokey:
- reviewed the company's annual reports to stockholders and on Form 10-K for
the fiscal year ended September 30, 1999, quarterly reports on Form 10-Q
for each of the three quarters ended December 31, 1999, March 31, 2000 and
June 30, 2000, and company-prepared financial statements for the 10 month
period ended July 31, 2000, which the company's management has identified
as being the most current financial statements available;
- reviewed the draft Agreement and Plan of Merger dated September 27, 2000
provided to it by the company's legal counsel;
- met with certain members of the senior management of the company to
discuss the operations, financial condition, future prospects and
projected operations and performance of the company;
- visited the headquarters of the company;
- reviewed forecasts and projections prepared by the company's management
with respect to the company for the fiscal year ending September 30, 2001;
- reviewed the Offering Memorandum prepared by BancBoston Robertson Stephens
as of December 1999;
- reviewed the historical market prices and trading volume for the company's
publicly traded securities;
- reviewed certain other publicly available financial data for certain
companies that Houlihan Lokey deemed comparable to the company, and
publicly available prices and premiums paid in other transactions that
Houlihan Lokey considered similar to the merger; and
- conducted such other studies, analyses and inquiries as Houlihan Lokey
deemed appropriate.
In preparing its opinion, Houlihan Lokey performed a variety of financial
and comparative analyses. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analysis or summary
description. Houlihan Lokey believes that its analyses must be considered as a
whole and that selected portions of its analyses and portions of the factors
considered by it, without considering all analyses and factors, could create a
misleading view of the processes underlying its opinion. In performing its
analyses, Houlihan Lokey made numerous assumptions with
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respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Health Systems Design.
The analyses performed by Houlihan Lokey are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by these analyses. In addition, analyses relating to
the value of the businesses or assets do not purport to be appraisals or to
necessarily reflect the prices at which businesses or assets may be actually
sold. The analyses performed were prepared solely as part of Houlihan Lokey's
analysis of the consideration to be received by stockholders of Health Systems
Design from a financial point of view, and were provided to the Health Systems
Design directors in connection with the delivery of its opinion.
In assessing the financial fairness of the consideration to be received by
stockholders of Health Systems Design, Houlihan Lokey valued the common equity
of Health Systems Design using widely accepted valuation methodologies and
compared the results of such analyses with the value of the consideration to be
received by the stockholders of Health Systems Design. The following is a
summary of the material financial analyses performed by Houlihan Lokey in
connection with rendering its fairness opinion to the Health Systems Design
board of directors. The summary of the financial analyses is not a complete
description of all of the analyses performed by Houlihan Lokey. The Houlihan
Lokey opinion is based upon the totality of the various analyses performed by
Houlihan Lokey and no particular portion of the analyses has any merit standing
alone.
In order to determine the fairness, from a financial point of view, of the
consideration to be received by the public stockholders of Health Systems Design
in the merger, Houlihan Lokey conducted several analyses, including the
following:
- a comparable company analysis whereby Health Systems Design's projected
fiscal 2001 revenue and earnings before income taxes, depreciation and
amortization ("EBITDA") were multiplied by risk adjusted multiples based
upon a comparison of Health Systems Design and comparable companies;
- a discounted cash flow analysis whereby projected cash flows of Health
Systems Design were discounted to determine Health Systems Design's
present enterprise value; and
- consideration of Health Systems Design's publicly traded stock price.
COMPARABLE COMPANY ANALYSIS: Using publicly available information, Houlihan
Lokey compared selected financial data of Health Systems Design with similar
data of various companies engaged in businesses considered by Houlihan Lokey to
be comparable to Health Systems Design, including Cerner Corp., Dynamic
Healthcare Technologies, Inc., Eclipsys Corp., Health Management Systems Inc.,
IDX Systems Corp., InfoCure Corp., Landacorp, Inc., OAO Technology
Solutions, Inc., QuadraMed Corp., Quality Systems, Inc., Simione Central
Holdings, Inc., and Transcend Services, Inc.. For each of the comparable
companies, Houlihan Lokey calculated, reviewed and analyzed numerous financial
and operating performance ratios, as well as numerous market capitalization
ratios, such as enterprise value (aggregate equity plus total interest-bearing
debt) to next twelve months revenue and next twelve months EBITDA. The multiple
of enterprise value to next twelve months revenue for the comparable companies
ranged from 1.0 to 3.4 with 1.6 as the median of the multiple of enterprise
value to next twelve months revenue for Health Systems Design's comparable
companies. The multiple of enterprise value to next twelve months EBITDA for the
comparable companies ranged from 1.0 to 19.4 with 4.2 as the median of the
multiple of enterprise value to next twelve months EBITDA for Health Systems
Design's comparable companies.
There are significant inherent differences between Health Systems Design's
business, operations, and prospects and those of the comparable companies,
including Health Systems Design's mix of business compared with the comparable
companies. Accordingly, Houlihan Lokey believed that it was inappropriate to,
and therefore did not, rely solely on the above-described quantitative results
of the
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comparable company analysis. It also made qualitative judgments concerning
differences between Health Systems Design's financial and operating
characteristics and prospects and those of the comparable companies that would,
in Houlihan Lokey's opinion, affect the valuation of Health Systems Design
relative to such public companies.
Based upon the aforementioned analyses, Health Systems Design's indicated
enterprise equity value was approximately $6.1 million to $7.6 million.
DISCOUNTED CASH FLOW APPROACH: Houlihan Lokey utilized cash flow
projections for Health Systems Design made by its management for the fiscal year
ending September 30, 2001. The net present value of the after-tax cash flows for
Health Systems Design was based upon managements' projections for fiscal 2001
and a perpetuity growth model for cash flows beyond that period. This method
involved application of a 17 percent to 18 percent discount rate range, and a
perpetuity growth rate range of 7.0 percent to 8.0 percent. Based on Health
Systems Design's management's projections and this analysis, Houlihan Lokey
calculated Health Systems Design's enterprise equity value from this approach as
approximately $2.6 million to $3.1 million.
CONSIDERATION OF PUBLICLY TRADED PRICE: Houlihan Lokey reviewed the
historical market prices and trading volumes for Health Systems Design's
publicly traded security. As of October 12, 2000, Health Systems Design's stock
price was $1.31, which implied a minority equity value of approximately
$8.9 million before consideration of an appropriate control premium. The
company's stock is not followed by any Wall Street analysts, and institutions
only own approximately 10% of its shares. Furthermore, only approximately 0.3%
of its outstanding shares trade on an average daily basis. Therefore, Houlihan
Lokey did not give significant weight to the company's stock price since it may
not be reflective of the company's value.
RESULTING EQUITY VALUE: Using the comparable company approach and
discounted cash flow approach, Houlihan Lokey concluded that Health Systems
Design's enterprise equity value is in the range of $2.6 million to
$7.6 million.
FAIRNESS ANALYSIS: To determine the fairness of the consideration to be
received by Health Systems Design stockholders in the merger to Health Systems
Design from a financial point of view, Houlihan Lokey compared the value of the
consideration to be received for the company to its estimated value.
Houlihan Lokey concluded that the value of the consideration to be received
by Health Systems Design was approximately $13.5 million ($2 per share), which
Houlihan Lokey noted was greater than the concluded value of Health Systems
Design of between $2.6 million and $7.6 million. Accordingly, Houlihan Lokey's
analyses indicated that the consideration to be received by Health Systems
Design stockholders in the merger is fair, from a financial point of view, to
the public stockholders of the company.
In arriving at its fairness opinion, Houlihan Lokey reviewed key economic
and market indicators, including growth in gross domestic product, inflation
rates, interest rates, consumer spending levels, manufacturing productivity
levels, unemployment rates and general stock market performance. Houlihan
Lokey's opinion is based on the business, economic, market and other conditions
as they existed as of October 16, 2000, as well as on the projected financial
information provided to Houlihan Lokey as of such date. In rendering its
opinion, Houlihan Lokey has relied upon and assumed, without independent
verification, that the historical and projected financial information provided
to Houlihan Lokey by us was reasonably and accurately prepared based upon the
best current available estimates of the financial results and condition of
Health Systems Design taken as a whole. Houlihan Lokey did not independently
verify the accuracy or completeness of the information supplied to it with
respect to Health Systems Design and does not assume responsibility for it.
Houlihan Lokey did not make any independent appraisal of Health Systems Design's
properties or assets.
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The summary set forth above describes the material points of more detailed
analyses performed by Houlihan Lokey in arriving at its fairness opinion. The
preparation of a fairness opinion is a complex analytical process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and application of those methods to the particular
circumstances and is therefore not readily susceptible to summary description.
In arriving at its opinion, Houlihan Lokey made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly,
Houlihan Lokey believes that its analyses and summary set forth herein must be
considered as a whole. In its analysis, Houlihan Lokey made numerous assumptions
with respect to Health Systems Design, industry performance, general business,
economic, political, market and financial conditions and other matters, many of
which are beyond the control of Health Systems Design. The estimates contained
in such analyses are not necessarily indicative of actual values or predictive
of future results or values, which may be more or less favorable than suggested
by such analyses. However, there were no specific factors reviewed by Houlihan
Lokey that did not support its opinion. Additionally, analyses relating to the
value of businesses or securities are not appraisals. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty.
CERTAIN EFFECTS OF THE MERGER
As a result of the merger, the entire equity interest of Health Systems
Design will be owned by Perot Systems, and the current stockholders will have no
continuing interest in Health Systems Design. Therefore, following the merger,
the stockholders of Health Systems Design will no longer benefit from any
increases in the value of Health Systems Design and will no longer bear the risk
of any decreases in the value of Health Systems Design. Following the merger,
Perot Systems will own 100% of Health Systems Design and will have complete
control over the management and conduct of Health Systems Design's business, all
income generated by Health Systems Design and any future increase in Health
Systems Design's value. Similarly, Perot Systems will also bear the risk of any
losses incurred in the operation of Health Systems Design and any decrease in
the value of Health Systems Design.
Following the merger, the Health Systems Design common stock will no longer
meet the requirements of The Nasdaq National Market for continued listing and
will, therefore, be delisted from The Nasdaq National Market.
The Health Systems Design common stock is currently registered as a class of
securities under the Securities Exchange Act of 1934 (the "Exchange Act").
Registration of the Health Systems Design common stock under the Exchange Act
may be terminated upon application of Health Systems Design to the Commission if
the Health Systems Design common stock is not listed on a national securities
exchange or quoted on The Nasdaq National Market and there are fewer than 300
record holders of the Health Systems Design common stock. It is the present
intention of Perot Systems to cause Health Systems Design to make an application
for the termination of the registration of the Health Systems Design common
stock under the Exchange Act.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
In considering the recommendations of the Board of Directors of Health
Systems Design with respect to the merger, stockholders should be aware that
three of the directors and certain of the officers of Health Systems Design have
interests in connection with the merger which may present them with actual or
potential conflicts of interest as summarized below. The Board of Directors was
aware of these interests and considered them among the other matters described,
but such conflicts, individually or in the aggregate, did not have a negative
impact on the determination of the Board of Directors of Health Systems Design
that the merger is fair to and in the best interests of the stockholders.
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BOARD OF DIRECTORS AND OFFICERS OF HEALTH SYSTEMS DESIGN. Three members of
the Board of Directors of Health Systems Design, Richard C. Auger, Catherine C.
Roth and J. Matthew Mackowski, beneficially own in the aggregate 3,945,520
shares, or 58%, of the issued and outstanding Health Systems Design common
stock. In addition, the following officers of Health Systems Design have the
following interests in the proposed transaction with Perot Systems:
- Christopher C. Ohman, the Chief Financial Officer of the company, and
Suzanne Blumenthal-Smith, the company's Executive Vice President of Sales
and Marketing, are parties to employment agreements which will continue in
effect following the consummation of the merger;
- Mr. Ohman will be eligible to receive a "transaction bonus" of $75,000
pursuant to a resolution of the Board of Directors of Health Systems
Design adopted on August 16, 2000;
- Arthur M. Southam, M.D., the President and Chief Executive Officer of the
company, will continue to serve as a principal in 2C Solutions, LLC, a
consultancy that currently provides services to Health Systems Design and
that may continue to provide services to Health Systems Design after the
consummation of the merger; and
- Dr. Southam will be paid a "transaction bonus" of $150,000 pursuant to a
letter agreement dated January 25, 2000, as amended September 25, 2000,
upon the consummation of the merger.
The remaining members of the Board of Directors and the executive officers
of Health Systems Design beneficially own in the aggregate 103,861 shares,
or less than 2% of the issued and outstanding Health Systems Design common
stock. For more information concerning the security ownership of the
management of Health Systems Design, please see "The Special Meeting--
Security Ownership of Management and Principal Stockholders" on page 9 of
this proxy statement.
INDEMNIFICATION. The Delaware General Corporation Law permits a corporation
to indemnify officers and directors for actions taken in good faith and in a
manner they reasonably believed to be in, or not opposed to, the best interests
of the corporation, and with respect to any criminal action, which they had no
reasonable cause to believe was unlawful.
Health Systems Design's certificate of incorporation and/or by-laws provide
that any person made or threatened to be made a party to an action or
proceeding, whether civil, criminal, administrative or investigative, because
that person is or was a director, officer, or employee of either of our
corporations, or is or was serving at the request of either of us as a director
or officer of another corporation or of a partnership, joint venture, trust or
other enterprise, will be indemnified against expenses, including attorney's
fees, judgments, fines and amounts paid in a settlement, and held harmless by
Health Systems Design to the fullest extent permitted by the Delaware General
Corporation Law.
The indemnification rights conferred by Health Systems Design are not
exclusive of any other right to which persons seeking indemnification may be
entitled under any statute, Health Systems Design's certificate of incorporation
or by-laws, any agreement, vote of stockholders or disinterested directors or
otherwise. In addition, Health Systems Design is authorized to, and does,
purchase and maintain insurance on behalf of our directors and officers.
The merger agreement provides that all rights to indemnification now
existing in favor of the directors or officers of Health Systems Design and its
subsidiaries under its certificate of incorporation or bylaws and under certain
contracts will, to the extent such rights are in accordance with applicable law,
survive the merger and stay in effect in accordance with their respective terms.
In addition, Health Systems Design and Perot Systems agreed, that so long as the
directors of Health Systems Design and Perot Systems first satisfy their
fiduciary duties, that the companies will cooperate and use all commercially
reasonable efforts to defend against and respond to any action, suit, proceeding
or investigation relating to the merger agreement or to the transactions
contemplated by the merger
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agreement. Perot Systems also agrees to extend the term of Health Systems
Design's existing directors' and officers' liability insurance policies for
three years and to purchase a six-year tail to be effective for the six-year
period commencing on March 4, 2001 for the company's director's and officer's
liability insurance policies in effect as of October 18, 2000, the date of the
merger agreement.
SUMMARY OF MATERIAL FEATURES OF THE MERGER
THE MERGER
GENERAL. The merger agreement provides that, subject to its conditions and
in accordance with the Delaware General Corporation Law, Merger Subsidiary will
be merged into Health Systems Design when the Certificate of Merger is filed
with the Delaware Secretary of State or such other date or time as is stated in
the Certificate of Merger (the "Effective Time"). Following the merger, the
separate existence of Merger Subsidiary will cease, and Health Systems Design
will continue as the surviving corporation and will be a wholly-owned subsidiary
of Perot Systems. At the Effective Time, each issued and outstanding share of
common stock of Health Systems Design, other than shares owned by Health Systems
Design or its wholly-owned subsidiaries, by Perot Systems or its subsidiaries or
by stockholders who exercise their dissenters' rights, will be converted into
the right to receive, upon surrender of the certificate formerly representing
the shares of common stock of Health Systems Design (the "Certificate"), $2.00
in cash. As a result of the Merger, the common stock of Health Systems Design
will no longer be publicly traded and the equity of the surviving corporation
will be 100% owned by Perot Systems.
MERGER CONSIDERATION. When the merger is completed, each share of common
stock of Health Systems Design issued and outstanding immediately prior to the
Effective Time will no longer be outstanding and will automatically be canceled
and retired. Each holder of a Certificate will have only the right to receive an
amount in cash equal to the number of such shares multiplied by $2.00 per share
(the "Merger Consideration") at the time the Certificate is surrendered.
PAYMENT FOR SHARES. Promptly after the Effective Time, a bank or trust
company reasonably acceptable to Health Systems Design (the "Paying Agent") will
mail to each holder of record of a Certificate a form of letter of transmittal
which instructs Health Systems Design stockholders how to surrender their shares
of common stock of Health Systems Design and receive the Merger Consideration.
Risk of loss and title to the Certificate will pass from the holder only when
the Paying Agent receives delivery. When a record holder has delivered to the
Paying Agent all Certificates for its shares of common stock of Health Systems
Design together with the duly executed letter of transmittal, the Paying Agent
will issue a check for the Merger Consideration and mail the check to the record
holder or to such other person designated by the record holder if the record
holder follows the instructions in the letter of transmittal.
STOCK OPTIONS. The merger agreement provides that, as soon as practicable
following the date of the agreement, the company will take such actions as are
required to provide that stock options outstanding immediately prior to the
consummation of the merger, whether or not then exercisable, will be canceled,
if not exercised by the holder thereof immediately prior to the consummation of
the merger without the incurrence of any liability or obligation on the part of
the company.
CLOSING OF TRANSFER BOOKS. At the Effective Time, the stock transfer books
of Health Systems Design will be closed and no further transfer of shares of
common stock of Health Systems Design will be made on the records of Health
Systems Design. On or after the Effective Time, any Certificates presented to
the Surviving Corporation or the Paying Agent will be canceled and exchanged for
the Merger Consideration.
CONDITIONS TO THE MERGER. The respective obligations of each party to
effect the merger are subject to the satisfaction prior to the Effective Time of
the following conditions:
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- The merger agreement will have been adopted and approved by the
affirmative vote of the stockholders of Health Systems Design in
accordance with the certificate of incorporation and bylaws of the
company, and with applicable law;
- No federal or state statute, rule, regulation, injunction, decree, or
order will be enacted, promulgated, entered, or enforced that would
prohibit consummation of the merger or of the other transactions
contemplated by the agreement; provided that the parties to the agreement
agree to use their respective commercially reasonable efforts to have any
such injunction, decree, or order lifted;
- The waiting period applicable to the consummation of the merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 will have expired or
been terminated.
In addition, the obligations of Perot Systems and Merger Subsidiary to
consummate the merger are also subject to the following conditions:
- Each of the representations and warranties of the company contained in the
agreement will be true and correct in all material respects;
- The company will have performed or complied in all material respects with
all agreements and covenants required by the agreement to be performed or
complied with by it on or prior to the closing date;
- The company will have delivered, or caused to be delivered, to Perot
Systems certain certificates as to the company's good standing and the due
authorization of the merger by the company's board of directors and
stockholders;
- Perot Systems will have received "comfort letters" from Arthur Anderson
LLP, the company's independent auditors, on the date this proxy statement
is first mailed to the company's stockholders and on the closing date.
- From and including the date of the agreement, there will not have occurred
a material adverse change in the business, operations or financial
condition of Health Systems Design;
- Perot Systems will have received evidence, in form and substance
reasonably satisfactory to it, that all necessary consents and filings
required by the merger agreement have been obtained or made, as
applicable, by the company, Merger Subsidiary or Perot Systems, as the
case may be, without the imposition of any limitations, prohibitions or
requirements, and are in full force and effect;
- Perot Systems shall have received an opinion of counsel to the company,
Gibson, Dunn & Crutcher LLP, in the form attached as an exhibit to the
merger agreement;
- Perot Systems shall have received evidence, in form and substance
reasonably satisfactory to it, that all options to purchase shares of
Health Systems Design common stock have been canceled or exercised;
- On the closing date, stockholders of the company shall have exercised
dissenters' appraisal rights in respect of no more than 5% of the then
outstanding shares of the company's common stock;
- The company shall have used commercially reasonable efforts to cause at
least 90% of the employees of the company as of the date of the agreement,
other than certain designated employees, to have executed and delivered to
Perot Systems an Associate's Agreement in the form attached as an exhibit
to the merger agreement;
- The company shall have used commercially reasonable efforts to cause all
of the employees of the company specifically designated by Perot Systems
to have agreed to remain employed by the
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surviving corporation after the closing, including by having executed an
Associate's Agreement, in the capacities designated by Perot Systems;
- Perot Systems shall have received an executed Non-Competition Agreement
from Richard C. Auger in the form attached as an exhibit to the merger
agreement.
In addition, the obligations of Health Systems Design to consummate the
merger are also subject to the following conditions:
- Each of the representations and warranties of Perot Systems and Merger
Subsidiary contained in the agreement will be true and correct in all
material respects;
- Perot Systems and Merger Subsidiary will have performed or complied in all
material respects with all agreements and covenants required by the
agreement to be performed or complied with by them on or prior to the
closing date;
- Perot Systems and Merger Subsidiary will have delivered, or caused to be
delivered, to Health Systems Design certain certificates as to their good
standing and the due authorization of the merger by their boards of
directors;
- The company shall have received an opinion of counsel to Perot Systems and
Merger Subsidiary, Hughes & Luce, L.L.P., in the form attached as an
exhibit to the merger agreement;
EVEN IF THE STOCKHOLDERS OF HEALTH SYSTEMS DESIGN APPROVE THE MERGER AS
PROVIDED IN THE MERGER AGREEMENT, THERE CAN BE NO ASSURANCE THAT THE MERGER WILL
BE COMPLETED.
REPRESENTATIONS AND WARRANTIES. Health Systems Design made representations
and warranties in the merger agreement, qualified in certain instances by
materiality or as disclosed in a disclosure letter regarding the following:
- its organization and good standing;
- its subsidiaries;
- its authorized capital stock and number of shares of capital stock and
options to acquire shares of capital stock issued and outstanding;
- authority to enter into the merger agreement and complete the transactions
contemplated by the merger agreement;
- requisite governmental and other consents and approvals;
- absence of conflicts with the charter documents of the company or material
contracts of the company or orders applicable to the company;
- compliance with the Securities and Exchange Commission filing
requirements;
- its financial statements;
- the absence of certain material liabilities and changes since
September 30, 1999;
- possession of permits and compliance with governing documents and laws;
- termination, severance and employment agreements to which the company is a
party or by which it is bound;
- agreements relating to certain employment, consulting and benefit matters
of Health Systems Design;
- requisite tax filings and examinations;
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- absence of litigation pending or threatened against the company or any of
its subsidiaries;
- compliance with environmental laws;
- the approval of the merger agreement and the merger by the company's board
of directors and the required vote of stockholders of Health Systems
Design necessary to approve the merger agreement;
- absence of brokers or similar fees other than to Houlihan Lokey;
- insurance coverage;
- ownership of all material assets in the conduct of the company's business;
- ownership of intellectual property rights;
- information regarding and status of the company's relationships with its
major customers;
- absence of undisclosed material contracts;
- absence of conflicts of interest with insiders;
- absence of restrictions on the ability of the company to provide services
or products to any customer or potential customer; and
- the accuracy of the information to be supplied by it for inclusion in this
proxy statement.
Perot Systems and Merger Subsidiary made representations and warranties in
the merger agreement, qualified in certain instances by materiality regarding
the following:
- its organization and good standing;
- authority to enter into the merger agreement and complete the transactions
contemplated by the merger agreement;
- requisite governmental and other consents and approvals;
- absence of conflicts with the charter documents of Perot Systems and
Merger Subsidiary or material contracts of Perot Systems and Merger
Subsidiary or orders applicable to Perot Systems and Merger Subsidiary;
and
- the accuracy of the information to be supplied by it for inclusion in this
proxy statement.
COVENANTS. Until the Merger is completed, Health Systems Design has agreed
that Health Systems Design and its subsidiaries will conduct their business in
the ordinary course and use commercially reasonable efforts to preserve their
current business organizations, keep available the services of its current
officers and employees and preserve their third party relationships. Health
Systems Design has also agreed that, without the consent of Perot Systems,
neither Health Systems Design nor its subsidiaries will:
- issue, sell, or dispose of additional shares of capital stock of any class
of the company or any of its subsidiaries, or securities convertible into
or exchangeable for any such shares or securities, or any rights,
warrants, or options to acquire any such shares or securities, other than
shares of common stock issued upon exercise of the options disclosed to
Perot Systems;
- redeem, purchase, or otherwise acquire, or propose to redeem, purchase, or
otherwise acquire, any of its outstanding capital stock, or other
securities of the company or any of its subsidiaries;
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- split, combine, subdivide, or reclassify any of its capital stock or
declare, set aside, make, or pay any dividend or distribution on any
shares of its capital stock except for dividends or distributions to the
company and its subsidiaries from their respective subsidiaries;
- sell, pledge, dispose of, or encumber any of its assets, except for sales,
pledges, dispositions, or encumbrances in the ordinary course of business
consistent with past practices or between the company and its
subsidiaries;
- incur or modify any indebtedness or issue or sell any debt securities, or
assume, guarantee, endorse, or otherwise as an accommodation become
absolutely or contingently responsible for obligations of any other
person, or make any loans or advances;
- adopt or amend any bonus or other employee benefit agreements or other
similar arrangements for the benefit of any director, officer, or employee
or take any action or grant any benefit not expressly required under the
terms of any existing agreements, or other similar arrangements or enter
into any arrangement to do any of the foregoing; or make or agree to make
any payments to any directors, officers, agents, contractors, or employees
relating to a change or potential change in control of the company;
- acquire by merger, consolidation, or acquisition of stock or assets any
corporation, partnership, or other business organization or division or
make any investment either by purchase of stock or securities,
contributions to capital (other than to wholly-owned subsidiaries),
property transfer, or purchase of any material amount of property or
assets, in any other person;
- amend its certificate of incorporation, bylaws or other comparable charter
or organizational documents, or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of any material subsidiary of the company;
- take any action other than in the ordinary course of business and
consistent with past practices, to pay, discharge, settle, or satisfy any
claim, liability, or obligation (absolute or contingent, accrued or
unaccrued, asserted or unasserted, or otherwise);
- change any method of accounting or accounting practice used by the company
or any of its subsidiaries, except for any change required by reason of a
concurrent change in generally accepted accounting principles;
- revalue in any respect any of its assets, including, without limitation,
writing off notes or accounts receivable other than in the ordinary course
of business consistent with past practices;
- authorize any new capital expenditure or expenditures that, individually,
is in excess of $50,000 or, in the aggregate, are in excess of $100,000;
- make any tax election, settle or compromise any federal, state, or local
tax liability or consent to the extension of time for the assessment or
collection of any federal, state, or local tax;
- settle or compromise any pending or threatened suit, action, or claim
material to the company and its subsidiaries taken as a whole or relevant
to the transactions contemplated by the merger agreement;
- authorize, recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation or dissolution of the company;
- enter into any collective bargaining agreement;
- engage in any transaction with, or enter into any agreement, arrangement
or understanding with, directly or indirectly, any of the company's
affiliates (or any member of their respective families), subject to
certain exceptions; or
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- voluntarily take any action or willfully omit to take any action that
could make any representation or warranty of the company untrue or
incorrect in any material respect at any time.
In addition, the following additional covenants were made:
- Health Systems Design and Perot Systems would cooperate with each other
and use all commercially reasonable efforts to prepare and file this proxy
statement with the SEC and mail it to the company's stockholders;
- Health Systems Design would take such action as is necessary to call the
special meeting of stockholders to approve the merger agreement;
- each of the parties would take such action as is necessary, advisable or
proper to consummate the merger;
- each of the parties would notify the other upon the occurrence of certain
events;
- each of the parties would grant to the other access to certain information
but would hold such information confidential;
- each of the parties would consult with the other prior to making any
public announcement concerning the merger;
- Perot Systems and Merger Subsidiary agreed to keep in place the company's
existing director and officer indemnification rights and to provide
related insurance for a specified period of time;
- Health Systems Design will take such action as is necessary to cancel all
unexercised stock options immediately prior to the merger;
- Health Systems Design will use commercially reasonable efforts to render
inapplicable any antitakeover statute which may become applicable to the
merger; and
- Health Systems Design will use commercially reasonable efforts to procure
"comfort" letters from its independent accountants.
TERMINATION. Perot Systems may terminate the merger agreement if the Health
Systems Design Board of Directors withdraws or modifies its recommendation that
Health Systems Design stockholders approve the merger agreement or recommends an
alternative acquisition proposal or if Health Systems Design breaches its
agreement not to solicit, facilitate, or encourage, directly or indirectly, the
initiation of any inquiries or proposals regarding a "Third Party Acquisition"
(as defined below) (if Health Systems Design's violation is not cured prior to
5 days following notice to Health Systems Design by Perot Systems of such
violation) or engages in negotiations with any person or group other than Perot
Systems which has proposed to acquire Health Systems Design or enters into an
agreement, letter of intent or arrangement with respect to such an acquisition.
Either Health Systems Design or Perot Systems may terminate the merger agreement
under certain circumstances, including the following:
- Health Systems Design and Perot Systems mutually consent in writing;
- the merger is not completed by the close of business on February 15, 2001;
- legal constraints or prohibitions prevent the completion of the merger;
- Health Systems Design stockholders do not approve the merger agreement;
- the other party breaches in a material manner any of its representations,
warranties or covenants under the merger agreement and the breach is not
cured within 10 days after notice; or
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- Health Systems Design enters into or its Board of Directors approves an
agreement for Health Systems Design to be acquired by another party for
consideration to Health Systems Design stockholders that is superior to
the consideration to Health Systems Design stockholders under the merger
agreement (a "Superior Proposal") if (a) Health Systems Design notifies
Perot Systems of the Superior Proposal, (b) Perot Systems has an
opportunity to respond, and (c) Health Systems Design pays Perot Systems a
termination fee of $850,000.
FEES AND EXPENSES. Whether or not the merger is consummated, each of Health
Systems Design, Perot Systems and Merger Subsidiary will pay its own fees and
expenses, except that:
(a) Health Systems Design will pay out-of-pocket fees of Perot Systems and
its affiliates if the merger agreement is terminated by:
PEROT SYSTEMS DUE TO:
- a breach of any representation or warranty of Health Systems Design
(that is not cured or not capable of being cured by Health Systems
Design within 10 days following notice by Perot Systems of the breach)
having a material adverse effect on Health Systems Design or materially
and adversely affecting or delaying the ability of Perot Systems or
Merger Subsidiary to consummate the merger;
- a breach of any covenant or agreement of Health Systems Design (that is
not cured or not capable of being cured by Health Systems Design within
10 days following notice by Perot Systems of the breach) having a
material adverse effect on Health Systems Design or materially and
adversely affecting or delaying the ability of Perot Systems or Merger
Subsidiary to consummate the merger;
- a breach of Health Systems Design's agreement not to solicit,
facilitate, or encourage, directly or indirectly, the initiation of any
inquiries or proposals regarding a "Third Party Acquisition" if Health
Systems Design's violation is not cured prior to 5 days following
notice to Health Systems Design by Perot Systems of such violation;
- Under the terms of the Merger Agreement, a "Third Party
Acquisition" is defined to include any of the following:
- the acquisition of Health Systems Design by merger or otherwise
by a third party, which is any person or group other than Perot
Systems, Merger Subsidiary or their affiliates.
- the acquisition by a third party of more than 19.9% of the
total assets of the Health Systems Design and its subsidiaries,
taken as a whole;
- the acquisition by a third party of 19.9% or more of the
outstanding shares of Health Systems Design common stock from
Health Systems Design or any of its affiliates or in a
transaction or series of related transactions that results in a
change of control of Health Systems Design;
- the adoption by Health Systems Design of a plan of liquidation
or the declaration or payment of an extraordinary dividend;
- the acquisition by Health Systems Design or any of its
subsidiaries of more than 19.9% of the outstanding shares of
Health Systems Design common stock; or
- any agreement or understanding to do or that would result in
any of the foregoing.
- a breach of Health Systems Design's agreement not to engage in
negotiation with any person or group other than Perot Systems or Merger
Subsidiary that has proposed a Third Party Acquisition;
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- a breach of Health Systems Design's agreement not to enter into any
agreement, letter of intent or arrangement with respect to a Third
Party Acquisition;
- the withdrawal or adverse modification, by the Board of Directors of
Health Systems Design, of its approval or recommendation of the merger
agreement or the merger, the recommendation by the Board of Directors
of Health Systems Design of another transaction, or the adoption of a
resolution by the Board of Directors of Health Systems Design having
the effect of either of the foregoing; or
HEALTH SYSTEMS DESIGN DUE TO:
- the receipt by Health Systems Design of a bona fide proposal concerning
a Third Party Acquisition of Health Systems Design that the Board of
Directors determines in its good faith judgment and in the exercise of
its fiduciary duties, (i) after consultation with its financial
advisors, is a Superior Proposal, and (ii) after consultation with its
legal advisors, obligates the Board to terminate the merger agreement,
provided that (a) Health Systems Design notifies Perot Systems of the
Superior Proposal, (b) Perot Systems has an opportunity to respond, and
(c) Health Systems Design pays Perot Systems a termination fee of
$850,000 if Health Systems Design concludes the other offer is still a
Superior Proposal.
(b) Perot Systems will pay out-of-pocket fees of Health Systems Design and
its affiliates if the merger agreement is terminated by Health Systems
Design due to:
- a breach of any representation or warranty of Perot Systems (that is
not cured or not capable of being cured by Perot Systems within
10 days following notice by Health Systems Design of the breach) having
a material adverse effect on Perot Systems or materially and adversely
affecting or delaying the ability of Perot Systems or Merger Subsidiary
to consummate the merger; or
- a material breach of any covenant or agreement of Perot Systems (that
is not cured or not capable of being cured by Perot Systems within
10 days following notice by Health Systems Design of the breach) having
a material adverse effect on Perot Systems or materially and adversely
affecting or delaying the ability of Perot Systems or Merger Subsidiary
to consummate the merger;
NO SOLICITATION. Until completion or abandonment of the merger, Health
Systems Design and its affiliates are not permitted to solicit any acquisition
proposals from any other party, except that Health Systems Design may, subject
to certain conditions, furnish information in response to unsolicited requests
and enter into discussions with a third party that wants to make an acquisition
proposal if the Board of Directors determines the discussions are necessary to
fulfill its fiduciary obligations after receiving the advice of counsel.
AMENDMENT AND WAIVER. The merger agreement may be amended in writing by the
parties at any time prior to approval of the merger agreement by the
stockholders of Health Systems Design but, after such approval, no amendment
will be made without the further approval of the stockholders if further
approval is required by law. At any time prior to the Effective Time, either of
the parties to the merger agreement may extend, in writing, the time for
performance of any obligations or other acts of the other party, waive any
inaccuracies in the representations and warranties contained in the merger
agreement or any document delivered pursuant to the merger agreement or waive
compliance with any of the agreements or conditions contained in the merger
agreement, provided that any such extension or waiver must be set forth in
writing by the party granting such extension or waiver.
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EFFECTIVE TIME
The merger will become effective at the Effective Time. It is expected that
the Effective Time will be the date of closing of the merger, which is expected
to occur on , 2000, or as soon thereafter as is practicable subject
to satisfaction or waiver of the conditions to closing. Subject to certain
limitations, the merger agreement may be terminated by either party if, among
other reasons, the merger has not been completed by February 15, 2001.
CONVERSION OF HEALTH SYSTEMS DESIGN COMMON STOCK
As of the Effective Time, each share of Health Systems Design common stock
issued and outstanding immediately prior to the Effective Time will be cancelled
and extinguished and converted into the right to receive the Merger
Consideration when the stock certificate formerly representing such share of
Health Systems Design common stock is surrendered and a duly executed letter of
transmittal is delivered to the Paying Agent. The Paying Agent will mail to each
record holder of Health Systems Design common stock, as soon as practicable
after the Effective Time, a certificate or certificates that immediately prior
to the Effective Time represented shares of common stock of Health Systems
design held of record by that stockholder and a form of letter of transmittal
which will contain instructions for surrendering the stock certificates for
Health Systems Design common stock in exchange for the Merger Consideration.
When a record holder has delivered to the Paying Agent all certificates for its
shares of common stock of Health Systems Design together with the duly executed
letter of transmittal, the Paying Agent will issue a check for the Merger
Consideration and mail the check to the record holder or to such other person
designated by the record holder if the record holder follows the instructions in
the letter of transmittal. Risk of loss and title to the Certificate will pass
from a holder only when the Paying Agent receives delivery.
HEALTH SYSTEMS DESIGN'S STOCKHOLDERS SHOULD NOT FORWARD THEIR STOCK
CERTIFICATES TO THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL. STOCK
CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY CARD.
The payment of the Merger Consideration upon surrender of any Certificate
will be deemed to constitute full satisfaction of all rights pertaining to the
shares of Health Systems Design common stock represented by the Certificate.
Until surrendered as contemplated by the merger agreement, each Certificate for
Health Systems Design common stock will be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration
upon surrender. No interest will be paid or will accrue on any Merger
Consideration payable to stockholders. At the Effective Time, the stock transfer
books of Health Systems Design will be closed. Neither Perot Systems nor the
Surviving Corporation will be liable to any former stockholder or holder of a
Health Systems Design stock option for any cash held in the payment fund which
is delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
CANCELLATION OF UNEXERCISED STOCK OPTIONS
The merger agreement provides that, as soon as practicable following the
date of the agreement, the company will take such actions as are required to
provide that stock options outstanding immediately prior to the consummation of
the merger, whether or not then exercisable, will be canceled, if not exercised
by the holder thereof immediately prior to the consummation of the merger
without the incurrence of any liability or obligation on the part of the
company.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the merger agreement, Health Systems Design has agreed to carry
on its business prior to the Effective Time in the ordinary course of its
business as conducted on the date of the
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merger agreement, and consistent with past practices, subject to certain
covenants by Health Systems Design in the merger agreement.
REGULATORY FILINGS AND APPROVALS
Health Systems Design believes that the following filings and approvals are
required with respect to the merger: (a) filings by Health Systems Design and
Perot Systems with the Federal Trade Commission and the Department of Justice
pursuant to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as to which Health Systems Design received early termination on
, 2000, (b) filings by Health Systems Design and Perot Systems with
the Securities and Exchange Commission pursuant to the Exchange Act, and
(c) filing of a certificate of merger with the Secretary of State of the State
of Delaware and appropriate documents with the relevant authorities of other
states in which Health Systems Design is qualified to do business.
INCOME TAX CONSEQUENCES OF THE TRANSACTION
The following discussion summarizes the material income tax considerations
relevant to the merger that are generally applicable to holders of Health
Systems Design common stock and stock options. This discussion is based on
currently existing provisions of the Internal Revenue Code, existing and
proposed Treasury Regulations and current administrative rulings and court
decisions, all of which are subject to change. Any change, which may or may not
be retroactive, could alter the tax consequences to the holders of the Health
Systems Design common stock or stock options as described here. Special tax
consequences not described below may be applicable to particular classes of
taxpayers, including financial institutions, broker-dealers, persons who are not
citizens or residents of the United States or who are foreign corporations,
foreign partnerships or foreign estates or trusts and stockholders who acquired
Health Systems Design common stock through the exercise of stock options or
otherwise as compensation prior to the Effective Time of the merger.
The conversion of the Health Systems Design common stock at the Effective
Time of the merger into the right to receive the Merger Consideration will be a
taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state and other tax laws. In general, a stockholder
will recognize gain or loss equal to the difference between the tax basis of the
Health Systems Design common stock and the amount of Merger Consideration
received in exchange for the Health Systems Design common stock. The gain or
loss will be treated as capital gain or loss if the Health Systems Design common
stock is a capital asset in the hands of the stockholder.
The income tax consequences set forth above are for general information
only. Each stockholder and each holder of stock options is urged to consult his
or her own tax advisor to determine the particular tax consequences to him or
her of the merger, including the applicability and effect of state and other tax
laws.
FINANCING OF THE MERGER; SOURCE OF FUNDS
Perot Systems intends to finance the transaction with working capital funds.
ANTICIPATED ACCOUNTING TREATMENT
Health Systems Design believes that the merger will be accounted for by
Perot Systems using the purchase method of accounting in accordance with
generally accepted accounting principles.
DISSENTERS' APPRAISAL RIGHTS
Health Systems Design's stockholders have the right to dissent from the
merger and to receive payment for their shares in accordance with the terms of
Section 262 of the Delaware General
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Corporation Law. The following discussion is a summary of the dissenters' rights
law under the Delaware law. The entire statute is reprinted in Appendix B. ANY
STOCKHOLDER THAT WISHES TO EXERCISE DISSENTERS' RIGHTS OR PRESERVE THE RIGHT TO
DO SO SHOULD REVIEW THE STATUTE CAREFULLY. HEALTH SYSTEMS DESIGN STOCKHOLDERS
THAT DO NOT COMPLY WITH THE PROCEDURES OF THE STATUTE WILL LOSE THEIR
DISSENTERS' RIGHTS.
A stockholder that wishes to dissent from the merger must satisfy both of
the following conditions, among others:
- WRITTEN OBJECTION. The stockholder must file a written objection to the
merger with Health Systems Design at its offices at 1111 Broadway, Suite
1800, Oakland, California 94607, Attention: Christopher C. Ohman, Chief
Financial Officer, before the vote is taken at the Health Systems Design
stockholders meeting.
- NO VOTE IN FAVOR. The stockholder must not vote in favor of the merger.
A negative vote alone will not constitute the written objection required
before the meeting. The written objection should specify the stockholder's name
and mailing address, the number of shares of Health Systems Design common stock
owned by the stockholder and that the stockholder is demanding appraisal of his
or her shares.
If the Health Systems Design stockholders approve the merger, Health Systems
Design will send written notice to each dissenting stockholder that has filed an
objection and not voted in favor of the merger no later than 10 days after
consummation of the merger. The notice will state the date that the merger has
become effective.
Within 120 days after the effective time of the merger, any dissenting
stockholder that desires to have his or her shares appraised should file a
petition with the Delaware Court of Chancery demanding a determination of the
fair value of the shares of all the dissenting stockholders. Within the same
period, a dissenting stockholder may also make a written request to Health
Systems Design demanding a statement by Health Systems Design of the number of
dissenting Health Systems Design stockholders and the aggregate number of
dissenting shares of Health Systems Design common stock. Health Systems Design
must mail the statement within 10 days after it receives the request.
If a proper petition for appraisal is timely filed, the Chancery Court will
determine which Health Systems Design stockholders, if any, are entitled to
appraisal rights. The Chancery Court may require any stockholders demanding
appraisal rights to submit their certificates of Health Systems Design common
stock to the Register in Chancery for notation on these certificates of the
pendency of the appraisal proceedings. Where the proceedings are not dismissed,
the Chancery Court will appraise the shares of Health Systems Design common
stock owned by the dissenting stockholders by determining the fair value of the
shares exclusive of any element of value arising out of the accomplishment or
expectation of the merger and the fair rate of interest, if any, on the amount
determined to be the fair value. In making this determination of fair value, the
Chancery Court must consider the following factors:
- market value;
- asset value;
- dividends;
- earnings prospects;
- the nature of the enterprise; and
- any other facts which could be ascertained as of the date of the merger
which would be relevant in evaluating the future prospects of the combined
corporation.
35
<PAGE>
Health Systems Design stockholders considering seeking appraisal should
recognize that the fair value of their shares determined under Section 262 could
be more than, the same as or less than the consideration they are entitled to
receive pursuant to the merger agreement if they do not seek appraisal of their
shares. The Chancery Court may determine the cost of the appraisal proceedings
and allocate the cost against the dissenting stockholders and Health Systems
Design as it deems equitable under the circumstances.
After the merger is complete, any Health Systems Design stockholder who has
demanded appraisal in compliance with Section 262 will not be entitled to vote
for any purpose any shares subject to the demand or to receive payment of
dividends or other distributions on the shares, except for dividends or
distributions payable to stockholders of record on a date prior to the effective
time of the merger.
At any time within 60 days after the consummation of the merger, any
dissenting stockholder will have the right to withdraw his or her demand for
appraisal and to accept the terms offered in the merger. After this period, the
stockholder may withdraw the demand only with the written consent of Health
Systems Design. If no petition is filed by any dissenting stockholder within
120 days after the effective time of the merger, Health Systems Design
stockholders' rights as to appraisal will cease and dissenting stockholders will
be entitled only to receive the consideration offered pursuant to the merger
agreement.
ANY HOLDER WHO FAILS TO COMPLY FULLY WITH THE STATUTORY PROCEDURE SUMMARIZED
ABOVE WILL FORFEIT HIS OR HER RIGHTS OF DISSENT AND WILL RECEIVE THE MERGER
CONSIDERATION FOR HIS OR HER SHARES. SEE APPENDIX B.
WHERE YOU CAN FIND MORE INFORMATION
Health Systems Design files annual, quarterly and special reports, proxy
statements and other information with the Commission. You may read and copy any
such reports, statements or other information at the Commission's public
reference rooms in Washington, DC, New York, New York and Chicago, Illinois.
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference rooms. Health Systems Design's Commission filings are also
available to the public from commercial document retrieval services and at the
world wide web site maintained by the Commission at HTTP://WWW.SEC.GOV. Reports,
proxy statements and other information concerning Health Systems Design also may
be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, DC 2006.
The Commission allows Health Systems Design to incorporate by reference
information into this document, which means that Health Systems Design can
disclose important information to you by referring you to another document filed
separately with the Commission. The information incorporated by reference is
deemed to be a part of this document, except for any information superseded by
information contained directly in this document. This document incorporates by
reference certain documents that Health Systems Design has previously filed with
the Commission. These documents contain important business information about
Health Systems Design and its financial condition.
Health Systems Design may have sent to you some of the documents
incorporated by reference, but you can obtain any of them through Health Systems
Design or the Commission or the Commission's World Wide Web site described
above. Documents incorporated by reference are available from Health Systems
Design without charge, excluding all exhibits, unless specifically incorporated
by reference as an exhibit to this document.
36
<PAGE>
Stockholders may obtain documents incorporated by reference in this document
by requesting them in writing or by telephone at the following address:
<TABLE>
<S> <C>
Health Systems Design Corporation
1111 Broadway, Suite 1800,
Oakland, California 94607
Attention: Chief Financial Officer
Telephone: (800) 995-6285
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM HEALTH SYSTEMS DESIGN, PLEASE DO
SO AT LEAST FIVE BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL MEETING IN ORDER
TO RECEIVE TIMELY DELIVERY OF SUCH DOCUMENTS PRIOR TO THE SPECIAL MEETING.
You should rely only on the information contained or incorporated by
reference in this document to vote your shares at the special meeting. Health
Systems Design has not authorized anyone to provide you with information that is
different from what is contained in this document. This document is dated
November , 2000. You should not assume that the information contained in this
document is accurate as of any date other than that date, and the mailing of
this document to stockholders does not create any implication to the contrary.
This proxy statement does not constitute a solicitation of a proxy in any
jurisdiction where, or to or from any person to whom, it is unlawful to make
such proxy solicitation in such jurisdiction.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the SEC by Health Systems
Design (Commission File No. 000-27502) are incorporated by reference in this
proxy statement:
(i) Health Systems Design's Annual Report on Form 10-K for the fiscal year
ended September 30, 1999;
(ii) Health Systems Design's Quarterly Report on Form 10-Q for quarter ended
December 31, 1999;
(iii) Health Systems Design's Quarterly Report on Form 10-Q for quarter ended
March 31, 2000;
(iv) Health Systems Design's Quarterly Report on Form 10-Q for quarter ended
June 30, 2000;
(v) Health Systems Design's Current Report on Form 8-K filed on August 31,
2000; and
(vi) Health Systems Design's Current Report on Form 8-K filed on
October 20, 2000.
All documents filed by Health Systems Design with the SEC pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
document and prior to the date of the special meeting will be deemed to be
incorporated by reference in this document. Information filed with the SEC in
future documents will automatically update and supersede the information in this
document.
STOCKHOLDER PROPOSALS
If the merger is not completed for any reason, proposals of stockholders
intended to be presented at the 2001 Annual Meeting of Stockholders must be
received by the Corporate Secretary of Health Systems Design Corporation, 1111
Broadway, Suite 1800, Oakland, California 94607 on or prior to November 13, 2000
to be eligible for inclusion in Health Systems Design's proxy statement and
Proxy Card relating to that meeting. Health Systems Design is not required to
include in its proxy statement and Proxy Card for the 2001 Annual Meeting any
stockholder proposals which do not meet all of the requirements then in effect
for inclusion.
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<PAGE>
OTHER MATTERS
Management knows of no other business to be presented at the special
meeting. If other matters do properly come before the meeting, or any
adjournment or adjournments thereof, it is the intention of the persons named in
the proxy to vote on such matters according to their best judgment unless the
authority to do so is withheld in such proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ RICHARD C. AUGER
Richard C. Auger
CHAIRMAN OF THE BOARD OF DIRECTORS
38
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AMONG
PEROT SYSTEMS CORPORATION
PSC HEALTH CARE, INC.
AND
HEALTH SYSTEMS DESIGN CORPORATION
DATED AS OF OCTOBER 18, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
ARTICLE I THE MERGER
SECTION 1.1 The Merger.................................................. 1
SECTION 1.2 Closing..................................................... 1
SECTION 1.3 Effective Time.............................................. 2
SECTION 1.4 Effects of the Merger....................................... 2
SECTION 1.5 Certificate of Incorporation and Bylaws..................... 2
SECTION 1.6 Directors................................................... 2
SECTION 1.7 Officers.................................................... 2
SECTION 1.8 Additional Actions.......................................... 2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; MERGER CONSIDERATION
SECTION 2.1 Effect on Capital Stock..................................... 2
SECTION 2.2 Appraisal Rights............................................ 3
SECTION 2.3 Payment for Shares.......................................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Organization and Qualification.............................. 5
SECTION 3.2 Subsidiaries................................................ 5
SECTION 3.3 Authorized Capital.......................................... 6
SECTION 3.4 Corporate Authorization..................................... 6
SECTION 3.5 Approvals; No Violations.................................... 7
SECTION 3.6 SEC Filings; Financial Statements........................... 7
SECTION 3.7 Absence of Certain Liabilities and Changes.................. 8
SECTION 3.8 Compliance with Applicable Law.............................. 9
SECTION 3.9 Termination, Severance, and Employment Agreements........... 9
SECTION 3.10 Employee Benefits; Labor Matters............................ 10
SECTION 3.11 Taxes....................................................... 12
SECTION 3.12 Litigation.................................................. 13
SECTION 3.13 Environmental Matters....................................... 13
SECTION 3.14 Voting Requirements......................................... 15
SECTION 3.15 Finders and Investment Bankers; Transaction Expenses........ 15
SECTION 3.16 Insurance................................................... 16
SECTION 3.17 Title to Properties; Entire Business........................ 16
SECTION 3.18 Intellectual Property Rights................................ 16
SECTION 3.19 Major Customers............................................. 17
SECTION 3.20 Contracts................................................... 18
SECTION 3.21 Insider Interests........................................... 18
SECTION 3.22 Noncompetition.............................................. 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 4.1 Organization and Qualification.............................. 19
SECTION 4.2 Corporate Authorization..................................... 19
SECTION 4.3 Approvals; No Violations.................................... 20
ARTICLE V COVENANTS
SECTION 5.1 Conduct of Business of the Company.......................... 20
SECTION 5.2 Proxy Statement............................................. 22
SECTION 5.3 Action of Stockholders of the Company; Voting............... 23
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
SECTION 5.4 Additional Agreements....................................... 23
SECTION 5.5 Notification of Certain Matters............................. 24
SECTION 5.6 Access to Information....................................... 24
SECTION 5.7 Public Announcements........................................ 25
SECTION 5.8 Officers' and Directors' Indemnification.................... 25
SECTION 5.9 Employee Options............................................ 25
SECTION 5.10 Other Actions by the Company................................ 26
SECTION 5.11 Letters of Accountants...................................... 26
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.1 Mutual Conditions........................................... 26
SECTION 6.2 Additional Conditions to Obligations of Parent and Merger 26
Sub.........................................................
SECTION 6.3 Additional Conditions to Obligations of the Company......... 28
ARTICLE VII TERMINATION; AMENDMENT; WAIVER
SECTION 7.1 Termination................................................. 29
SECTION 7.2 Effect of Termination....................................... 31
SECTION 7.3 Fees and Expenses........................................... 31
SECTION 7.4 Amendment................................................... 32
SECTION 7.5 Waiver...................................................... 32
ARTICLE VIII MISCELLANEOUS
SECTION 8.1 Survival of Representations, Warranties, and Agreements..... 33
SECTION 8.2 Entire Agreement; Assignment................................ 33
SECTION 8.3 Severability................................................ 33
SECTION 8.4 Notices..................................................... 33
SECTION 8.5 Governing Law............................................... 34
SECTION 8.6 Specific Performance........................................ 34
SECTION 8.7 Other Potential Bidders..................................... 34
SECTION 8.8 Descriptive Headings; References............................ 35
SECTION 8.9 Parties in Interest......................................... 35
SECTION 8.10 Beneficiaries............................................... 35
SECTION 8.11 Counterparts................................................ 35
SECTION 8.12 Obligations................................................. 35
SECTION 8.13 Certain Definitions......................................... 36
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 18, 2000, among Perot
Systems Corporation, a Delaware corporation ("Parent"), PSC Health Care, Inc., a
Delaware corporation and a direct wholly-owned subsidiary of Parent ("Merger
Sub"), and Health Systems Design Corporation, a Delaware corporation (the
"Company").
PRELIMINARY STATEMENTS
A. The respective Boards of Directors of Parent, Merger Sub and the Company
have approved the merger of Merger Sub with and into the Company (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"), whereby the
issued and outstanding shares of common stock of the Company, $.001 par value
per share (the "Company Common Stock"), will be converted into the right to
receive cash consideration of $2.00 per share (the "Per Share Amount").
B. The Merger requires the approval of the holders of a majority of the
outstanding shares of the Company Common Stock (the "Stockholder Approval").
C. Concurrently with the execution and delivery of this Agreement and as a
condition and inducement to each of Parent's and Merger Sub's willingness to
enter into this Agreement, certain stockholders of the Company named on
EXHIBIT A-1 have entered into Voting Agreements (the "Voting Agreements") with
Parent, substantially in the form of EXHIBIT A-2, pursuant to which such
stockholders have agreed, among other things, to vote all shares of Company
Common Stock beneficially owned by such stockholders, or for which such
stockholders exercise voting power pursuant to an irrevocable proxy, in favor of
approval and adoption of this Agreement and the Merger.
D. Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
In consideration of the foregoing and the representations, warranties,
covenants and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which all parties hereby
acknowledge, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, Merger Sub will be
merged with and into the Company at the Effective Time (as defined in
SECTION 1.3). Following the Merger, the separate corporate existence of Merger
Sub will cease and the Company will continue as the surviving corporation (the
"Surviving Corporation") and will succeed to and assume all rights and
obligations of the Company and of Merger Sub in accordance with the DGCL. At the
election of Parent or Merger Sub, any one or more direct or indirect
wholly-owned subsidiaries of Parent organized under the laws of the State of
Delaware may be substituted for Merger Sub as a constituent entity in the
Merger. As used in this Agreement, the term "Merger Sub" refers to any such
substituted entity.
SECTION 1.2 CLOSING. The closing of the Merger will take place at
10:00 a.m. on a date to be specified by the parties, which will be no later than
the second business day after satisfaction or waiver of the conditions set forth
in ARTICLE VI (the "Closing Date"), at the offices of Hughes & Luce, L.L.P.,
1717 Main Street, Suite 2800, Dallas, Texas 75201, unless another time, date or
place is agreed to in writing by the parties to this Agreement.
A-1
<PAGE>
SECTION 1.3 EFFECTIVE TIME. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties will prepare,
execute and acknowledge and thereafter file a certificate of merger in such form
as is required by the DGCL and will make all other filings or recordings
required under the DGCL. The Merger will become effective at such time as such
filings are made with the Delaware Secretary of State, or at such later time as
Merger Sub and the Company agree and is specified in such filings (the date and
time of such filing, or such later date or time as may be set forth therein,
being the "Effective Time").
SECTION 1.4 EFFECTS OF THE MERGER. The Merger will have the effects set
forth in Section259 of the DGCL and all other effects specified in the
applicable provisions of the DGCL. Without limiting the foregoing, at the
Effective Time, all properties, rights, privileges, powers, and franchises of
the Company and Merger Sub will vest in the Surviving Corporation and all debts,
liabilities, obligations, and duties of the Company and Merger Sub will become
the debts, liabilities, obligations, and duties of the Surviving Corporation.
SECTION 1.5 CERTIFICATE OF INCORPORATION AND BYLAWS. At the Effective
Time, the certificate of incorporation and bylaws of the Surviving Corporation
will be amended to be identical to the certificate of incorporation and bylaws,
respectively, of Merger Sub as in effect immediately prior to the Effective Time
(except that the name of the Surviving Corporation will be changed to
).
SECTION 1.6 DIRECTORS. The directors of Merger Sub at the Effective Time
will continue as the directors of the Surviving Corporation, until the earlier
of their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 1.7 OFFICERS. The officers of the Company immediately after the
Effective Time will be as set forth on Section 1.7 of the Disclosure Letter and
will hold office until the earlier of their death, resignation or removal.
SECTION 1.8 ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation considers or is advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Merger Sub or the Company or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation will be
authorized to execute and deliver, in the name and on behalf of Merger Sub or
the Company, all such deeds, bills of sale, assignments and assurances and to
take and do, in the name and on behalf of Merger Sub or the Company, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; MERGER CONSIDERATION
SECTION 2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, subject to
SECTION 2.2, by virtue of the Merger and without any action on the part of
Parent, Merger Sub, the Company or the holders of any shares of capital stock of
the Company or any shares of capital stock of Merger Sub:
(a) Each share of the capital stock of Merger Sub issued and outstanding
immediately prior to the Effective Time will be converted into and become
one fully paid and nonassessable share of common stock of the Surviving
Corporation.
(b) Each share of Company Common Stock that is owned by the Company or
by any wholly-owned subsidiary of the Company and each share of Company
Common Stock that is owned by Parent, Merger Sub or any other subsidiary of
Parent immediately prior to the Effective Time will
A-2
<PAGE>
automatically be canceled and retired without any conversion thereof and no
consideration will be delivered with respect thereto.
(c) (i) Except for shares to be canceled in accordance with
SECTION 2.1(b), each share of the Company Common Stock issued and
outstanding as of the Effective Time (the "Common Shares") will be
automatically canceled and extinguished and converted into the right to
receive in cash the Per Share Amount (the "Merger Consideration") without
interest, less any required withholding taxes, upon surrender of the
certificate formerly representing such Common Shares in accordance with
SECTION 2.3.
(ii) As of the Effective Time, all Common Shares will no longer be
outstanding and will automatically be canceled and retired and will cease
to exist, and each certificate previously representing any such Common
Shares will thereafter represent the right to receive the Merger
Consideration. The holders of such certificates previously evidencing the
Common Shares outstanding immediately prior to the Effective Time will
cease to have any rights with respect to such Common Shares as of the
Effective Time, except as otherwise provided in this Agreement or by law.
Such certificates previously representing Common Shares will be exchanged
for the Merger Consideration upon the surrender of such certificates in
accordance with the provisions of SECTION 2.3, without interest.
SECTION 2.2 APPRAISAL RIGHTS.
(a) Notwithstanding anything in this Agreement to the contrary, Common
Shares that are issued and outstanding immediately prior to the Effective
Time and that are held by stockholders that are entitled to demand and have
properly demanded appraisal of their Common Shares under the DGCL and have
complied in all respects with the requirements of the DGCL concerning the
right of a stockholder of the Company to demand appraisal of such Common
Shares and that, as of the Effective Time, have not effectively withdrawn or
lost such right to appraisal (the "Dissenting Shares") will not be converted
into or represent a right to receive the Merger Consideration, but the
holders of such Dissenting Shares will be entitled only to such rights as
are granted under Section262 of the DGCL. Each holder of Dissenting Shares
that becomes entitled to payment for such Dissenting Shares pursuant to
Section262 of the DGCL will receive payment for such Dissenting Shares from
the Surviving Corporation in accordance with the DGCL; PROVIDED, HOWEVER,
that to the extent that any holder or holders of Common Shares have failed
to establish the entitlement to appraisal rights as provided in Section262
of the DGCL, such holder or holders (as the case may be) will forfeit the
right to appraisal of such Common Shares and each such Common Share will
thereupon be deemed to have been converted, as of the Effective Time, into
and represent the right to receive payment from the Surviving Corporation of
the Merger Consideration, without interest.
(b) The Company will give the Parent and Merger Sub (i) prompt notice of
any written demands for appraisal, withdrawals of demands for appraisal, and
any other instrument served pursuant to Section262 of the DGCL received by
the Company, and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under Section262 of the
DGCL. The Company will not, except with the express written consent of the
Parent, voluntarily make any payment with respect to any demands for
appraisal or settle or offer to settle any such demands.
SECTION 2.3 PAYMENT FOR COMMON SHARES.
(a) Prior to the Effective Time, Merger Sub will appoint a bank or trust
company reasonably acceptable to the Company as agent for the holders of
Common Shares (the "Paying Agent") to receive and disburse the Merger
Consideration to which holders of Common Shares become entitled pursuant to
SECTION 2.1(c). At the Effective Time, Merger Sub or Parent will provide the
Paying Agent with sufficient cash to allow the Merger Consideration to be
paid by the Paying
A-3
<PAGE>
Agent for each Common Share then entitled to receive the Merger
Consideration (the "Payment Fund").
(b) Promptly after the Effective Time, Merger Sub or Parent will cause
the Paying Agent to mail to each record holder of a certificate or
certificates that immediately prior to the Effective Time represented Common
Shares (the "Certificates"), a form of letter of transmittal (which will
specify that delivery will be effected, and risk of loss and title to the
Certificates will pass, only upon proper delivery of the Certificates to the
Paying Agent) and instructions for use in effecting the surrender of the
Certificates for payment.
(i) Upon surrender to the Paying Agent of a Certificate, together
with such letter of transmittal duly executed and completed in accordance
with its instructions and such other documents as may be reasonably
requested, the holder of such Certificate will be entitled to receive in
exchange for such Certificate, less any required withholding of taxes,
the Merger Consideration and such Certificate will forthwith be canceled.
No interest will be paid or accrued on the Merger Consideration upon the
surrender of the Certificates.
(ii) If payment or delivery is to be made to a person other than the
person in whose name the Certificate surrendered is registered, it will
be a condition of payment or delivery that the Certificate so surrendered
be properly endorsed, with signature properly guaranteed, or otherwise be
in proper form for transfer and that the person requesting such payment
or delivery pay any transfer or other taxes required by reason of the
payment or delivery to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable.
(iii) Subject to SECTION 2.2, until surrendered in accordance with the
provisions of this SECTION 2.3(b), each Certificate (other than
Certificates held by persons referred to in SECTION 2.1(b)) will
represent for all purposes only the right to receive the Merger
Consideration, without interest and less any required withholding of
taxes.
(c) Promptly following the date that is six months after the Effective
Time, the Paying Agent will return to the Surviving Corporation all cash,
certificates, and other property in its possession that constitute any
portion of the Payment Fund (including any interest received with respect
thereto), and the duties of the Paying Agent will terminate. Thereafter,
each holder of a Certificate formerly representing a Common Share or Common
Shares shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender
of their Certificates without any interest thereon. Notwithstanding the
foregoing, neither the Parent, Merger Sub, the Surviving Corporation nor the
Paying Agent shall be liable to any holder of a Certificate for Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. Notwithstanding the foregoing,
the Surviving Corporation will be entitled to receive from time to time all
interest or other amounts earned with respect to the Payment Fund as such
amounts accrue or become available.
(d) After the Effective Time there will be no registration of transfers
on the stock transfer books of the Surviving Corporation of the Common
Shares that were outstanding immediately prior to the Effective Time. If
after the Effective Time, any Certificate is presented to the Surviving
Corporation, it shall be canceled and exchanged for the Merger
Consideration, without interest and less any required withholding taxes, as
provided for, and in accordance with the procedures set forth in, this
ARTICLE II.
A-4
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
SECTION 3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority and any
necessary governmental authority to own, operate, and lease its properties and
assets and to carry on its business as it is now being conducted, except for
failures to have such power and authority as could not reasonably be expected to
result in a Company Material Adverse Effect (as defined below in this
SECTION 3.1). The Company is duly qualified or licensed to do business and is in
good standing in each jurisdiction where the character of its properties owned
or leased or the nature of its activities makes such qualification or licensing
necessary, except for failures to be so qualified or licensed and in good
standing as could not reasonably be expected to result in a Company Material
Adverse Effect. The certificate of incorporation and bylaws of the Company,
including all amendments, filed with the SEC as part of the Company Reports (as
defined below in SECTION 3.6) are accurate and complete. The certificate of
incorporation and bylaws of the Company are in full force and effect and the
Company is not in default of the performance, observation, or fulfillment of any
provision of its certificate of incorporation or bylaws. For purposes of this
Agreement, "Company Material Adverse Effect" or "Company Material Adverse
Change" means in each case any change or effect that, individually or when taken
together with all such other changes or effects, could reasonably be expected to
be materially adverse to the condition (financial or other), business,
operations, properties, assets, liabilities, prospects, results of operations of
the Company and its subsidiaries, taken as a whole or to adversely affect the
ability of the Company to perform its obligations under this Agreement and
consummate the Merger, provided that none of the following shall be deemed,
either alone or in combination, to constitute a Company Material Adverse Effect
or Company Material Adverse Change: (i) general industry or economic conditions
affecting the U.S. or world economy as a whole, (ii) conditions affecting the
health care or health care software industry, so long as such conditions do not
affect the Company and the Company's subsidiaries taken as a whole in a
disproportionate manner as compared to companies of a similar size, or
(iii) any disruption of customer, supplier or employee relationships that the
Company can establish results primarily from the announcement of this Agreement
or the consummation of the transactions contemplated hereby.
SECTION 3.2 SUBSIDIARIES. Section 3.2 of the Disclosure Letter is a list
of each subsidiary of the Company and its jurisdiction of incorporation or
organization.
(a) The Company is, directly or indirectly, the record and beneficial
owner of all outstanding shares of capital stock or other equity interests
of each of its subsidiaries, there are no proxies or voting agreements with
respect to any such shares, and no equity security of any of its
subsidiaries is or may become required to be issued by reason of any
options, warrants, scrip, rights to subscribe to, calls, or commitments of
any character whatsoever relating to, or securities or rights convertible
into or exchangeable for, shares of any capital stock or other equity
interests of any such subsidiary, and there are no contracts, commitments,
understandings, or arrangements by which any subsidiary is bound to issue
additional shares of its capital stock or other equity interests or
securities convertible into or exchangeable for such shares or other equity
interests. All such shares or other equity interests directly or indirectly
owned by the Company are owned by the Company or a wholly-owned subsidiary
of the Company, free and clear of any claim, lien, encumbrance, or
agreement.
(b) Each subsidiary of the Company is duly organized, validly existing,
and in good standing under the laws of its jurisdiction of incorporation or
organization and has the requisite corporate or entity power and authority
and any necessary governmental authority to own, operate, or lease its
properties and assets and to carry on its business as it is now being
conducted, except for failures as could not reasonably be expected to result
in a Company Material Adverse Effect.
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(c) Each subsidiary of the Company is duly qualified or licensed to do
business and is in good standing in each jurisdiction where the character of
its properties owned or leased or the nature of its activities makes such
qualification or licensing necessary, except for failures to be so qualified
or licensed and in good standing as could not reasonably be expected to
result in a Company Material Adverse Effect. Copies of the charter
documents, bylaws, or equivalent organizational documents of each subsidiary
of the Company have been delivered to Parent and are accurate and complete.
(d) Neither the Company nor any subsidiary of the Company:
(i) beneficially owns any equity interests in any entities that are
not subsidiaries of the Company; or
(ii) is party to any joint venture, partnership, or similar
arrangement.
SECTION 3.3 AUTHORIZED CAPITAL.
(a) The authorized capital stock of the Company consists solely of
(i) 20,000,000 shares of common stock, $.001 par value per share, of which
6,772,528 shares are outstanding as of the date hereof, and (ii) 1,000,000
shares of preferred stock, $.001 par value per share, of which there are no
shares outstanding as of the date hereof.
(b) All of the outstanding shares of capital stock of the Company have
been duly authorized and are validly issued, fully paid, nonassessable, and
free of preemptive or similar rights.
(c) Section 3.3 of the Disclosure Letter lists each stock option of the
Company outstanding on the date hereof (the "Employee Options"), the number
of shares covered by such Employee Options, the exercise prices, the
exercise dates, and the plan or agreement pursuant to which such Employee
Options were issued. Except as set forth above or on Section 3.3 of the
Disclosure Letter, there are no preemptive or similar rights nor any
outstanding subscriptions, options, warrants, rights, convertible
securities, or other agreements or commitments of any character relating to
the issued or unissued capital stock or other securities of the Company or
any of its subsidiaries to which the Company or any of its subsidiaries is a
party. There are no voting trusts or other understandings to which the
Company or any of its subsidiaries is a party with respect to the voting
capital stock or other interests of the Company or any of its subsidiaries.
SECTION 3.4 CORPORATE AUTHORIZATION.
(a) The Company has the full corporate power and authority to execute
and deliver this Agreement, and, subject to any necessary stockholder
approval of the Merger, to consummate the transactions contemplated by this
Agreement.
(b) The execution, delivery, and performance by the Company of this
Agreement, and the consummation by the Company of the Merger and of the
other transactions contemplated by this Agreement, have been duly and
validly authorized by all necessary corporate action and, except for any
required approval of the Merger and any adoption of this Agreement by the
stockholders of the Company in connection with the consummation of the
Merger, no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated by this Agreement.
(c) This Agreement has been duly and validly executed and delivered by
the Company and constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditor's
rights and to general equity principles.
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SECTION 3.5 APPROVALS; NO VIOLATIONS.
(a) No filing with, and no permit, authorization, consent, or approval
of, any foreign or domestic public body or authority is necessary for the
consummation by the Company of the transactions contemplated by this
Agreement, except:
(i) the filing of a premerger notification and report form under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act");
(ii) the filing with the Securities and Exchange Commission (the
"SEC") of:
(A) the Proxy Statement (as defined in SECTION 5.2); and
(B) such reports under the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), as may be required in connection with this Agreement
and the transactions contemplated by this Agreement; and
(iii) the filing of the certificate of merger with the Delaware
Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do
business.
(b) Except as set forth on Section 3.5(b) of the Disclosure Letter, the
execution and delivery of this Agreement by the Company, the consummation by
the Company of the transactions contemplated by this Agreement and the
compliance by the Company with any of the provisions of this Agreement do
not and will not:
(i) conflict with or result in any breach of any provision of the
charters or bylaws or equivalent organizational documents of the Company
or any of its subsidiaries;
(ii) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) or require any
authorization, consent or approval under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, lease,
contract, agreement or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which any of them or
any of their properties or assets may be bound; or
(iii) provided all filings, permits, authorizations, consents, and
approvals as described in SECTION 3.5(A) are made or obtained, violate or
require any authorization, consent or approval under any order, writ,
injunction, decree, statute, rule or regulation applicable to the
Company, any of its subsidiaries or any of their properties or assets;
except, with respect to the foregoing SECTIONS 3.5(a) and (b), such violations,
conflicts, breaches, defaults, terminations, cancellations, accelerations,
authorizations, consents or approvals referred to in this SECTION 3.5 as could
not reasonably be expected to result in a Company Material Adverse Effect or to
otherwise materially adversely affect the Company's ability to timely (in
accordance with this Agreement) perform its obligations under this Agreement and
consummate the Merger.
SECTION 3.6 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has timely filed with the SEC all forms, reports,
statements, and documents required to be filed by it pursuant to the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), and the Exchange Act, and the
rules and regulations promulgated thereunder, together with all amendments
thereto and will file all such forms, reports, statements and documents
required to be filed by it prior to the Effective Time (collectively, the
"Company Reports"), and has otherwise complied in all material respects with
the requirements of the Securities Act and the Exchange Act.
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(b) The Company has made available to Merger Sub accurate and complete
copies of all Company Reports and will promptly deliver to Merger Sub any
Company Reports filed by the Company after the date of this Agreement.
(c) As of their respective dates, the Company Reports did not and (in
the case of Company Reports filed after the date of this Agreement) will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were or (in the case
of Company Reports filed after the date of this Agreement) will be made, not
misleading.
(d) Each of the historical consolidated balance sheets and each of the
historical consolidated statements of income and earnings, stockholders'
equity, and cash flows included in or incorporated by reference into the
Company Reports (including any related notes and schedules) fairly presents
or will (in the case of Company Reports filed after the date of this
Agreement) fairly present the consolidated financial condition, results of
operations, stockholders' equity, and cash flows, as the case may be, of the
Company and its subsidiaries for the periods set forth (subject, in the case
of unaudited statements, to normal year-end audit adjustments of a character
and amount consistent with those of previous periods), in each case, in
accordance with generally accepted accounting principles consistently
applied during the periods involved.
(e) The Company maintains a system of internal accounting controls
sufficient to provide that transactions are executed in accordance with
management's general or specific authorization, transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets, access to assets is permitted only in accordance with management's
general or specific authorization, and the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
SECTION 3.7 ABSENCE OF CERTAIN LIABILITIES AND CHANGES.
(a) Except as set forth on Section 3.7(a) of the Disclosure Letter, in
the audited financial statements of the Company for the period ended as of
September 30, 1999 (a copy of which has been delivered to Parent), in the
condensed consolidated balance sheets of the Company as of December, 31,
1999, March 31, 2000, and June 30, 2000 or in the Company Reports, neither
the Company nor any of its subsidiaries has any liabilities or obligations
of any nature, whether or not accrued, contingent, or otherwise that could
reasonably be expected to result in a Company Material Adverse Effect.
(b) Since September 30, 1999, the Company and its subsidiaries have
conducted their respective businesses in a manner consistent with past
practices, and neither the Company nor any of its subsidiaries has become
subject to any material liabilities or obligations other than liabilities or
obligations (i) incurred in the ordinary course of business consistent with
past practices, or (ii) incurred in connection with this Agreement or the
Merger and set forth on Section 3.7(b) of the Disclosure Letter.
(c) Except as disclosed in the Company Reports filed prior to the date
of this Agreement, since September 30, 1999, the Company has conducted its
business only in the ordinary course consistent with prior practice, and
there has not been:
(i) any Company Material Adverse Change;
(ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to
any of the Company's capital stock;
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(iii) any split, combination or reclassification of any of its capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock;
(iv) except as set forth on Section 3.7 of the Disclosure Letter, any
granting by the Company or any of its subsidiaries to any director,
officer, employee, agent or contractor of the Company or any of its
subsidiaries of:
(A) any increase in compensation, except in the ordinary course
of business consistent with prior practice or as was required under
employment agreements in effect as of the date of the most recent
audited financial statements included in the Company Reports filed
prior to the date hereof and set forth on Section 3.9 of the
Disclosure Letter; or
(B) any right to participate in (by way of bonus or otherwise)
the profits of the Company or any of its subsidiaries;
(v) except as set forth on Section 3.7 of the Disclosure Letter, any
granting by the Company or any of its subsidiaries to any such director,
officer, employee, agent or contractor of any increase in severance or
termination pay, except as was required under employment, severance or
termination agreements in effect as of the date of the most recent
audited financial statements included in the Company Reports filed prior
to the date hereof and set forth on Section 3.9 of the Disclosure Letter,
(vi) except as set forth on Section 3.7 of the Disclosure Letter, any
entry into, or renewal or modification, by the Company or any of its
subsidiaries, of any employment, consulting, severance or termination
agreement with any director, officer, employee, agent or contractor of
the Company or any of its subsidiaries;
(vii) any damage, destruction or loss, whether or not covered by
insurance, that has or could reasonably be expected to have a Company
Material Adverse Effect; or
(viii) any change in accounting methods, principles or practices by the
Company materially affecting its assets, liabilities or business.
SECTION 3.8 COMPLIANCE WITH APPLICABLE LAW.
(a) The Company and each of its subsidiaries currently holds and is in
compliance with the terms of all licenses, permits, and authorizations
necessary for the lawful conduct of its business, and has complied with, and
neither the Company nor any of its subsidiaries is in violation of, or in
default under, the applicable statutes, laws, ordinances, rules,
regulations, orders, or decrees of any federal, state, local or foreign
governmental bodies, agencies, or authorities having, asserting or claiming
jurisdiction over it or over any part of its operations or assets, except
for violations or defaults that could not reasonably be expected to result
in a Company Material Adverse Effect.
(b) No investigation or review by any governmental or regulatory bodies,
agencies, or authorities with respect to the Company or any of its
subsidiaries is pending or, to the knowledge of the Company, threatened,
nor, to the knowledge of the Company, have any governmental bodies or
authorities or regulatory agencies indicated any intention to conduct such
an investigation or review, and no fine has been levied against, or order
entered with respect to, the Company or any subsidiary by any governmental
body or authority or regulatory agency.
SECTION 3.9 TERMINATION, SEVERANCE, AND EMPLOYMENT AGREEMENTS. Set forth
on Section 3.9 of the Disclosure Letter is a complete and accurate list of each:
(a) employment, severance, or collective bargaining agreement not
terminable without liability or obligation to the Company or any of its
subsidiaries on 60 days' or less notice;
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(b) agreement with any director, affiliate, executive officer, or other
key employee (or any member of the immediate family of any of the
foregoing), agent, or contractor of the Company or any subsidiary of the
Company:
(i) the benefits of which are contingent, or the terms of which are
materially altered, on the occurrence of a transaction involving the
Company or any subsidiary of the Company of the nature of any of the
transactions contemplated by this Agreement or relating to an actual or
potential change in control of the Company or any of its subsidiaries; or
(ii) providing any term of employment or other compensation guarantee
or extending severance benefits or other benefits after termination not
comparable to benefits available to employees, agents, or contractors
generally;
(c) agreement, plan, or arrangement under which any person may receive
payments that may be subject to the tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") or included in the
determination of such person's "parachute payment" under Section 280G of the
Code; and
(d) agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan, or stock purchase plan, any
of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement.
SECTION 3.10 EMPLOYEE BENEFITS; LABOR MATTERS.
(a) Set forth in Section 3.10 of the Disclosure Letter is a complete and
correct list of all "Employee Benefit Plans" (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
all plans or policies providing for "fringe benefits" (including but not
limited to vacation, paid holidays, personal leave, employee discounts,
educational benefits or similar programs), and each other bonus, incentive
compensation, deferred compensation, profit sharing, stock, severance,
retirement, health, life, disability, group insurance, employment, stock
option, stock purchase, stock appreciation right, supplemental unemployment,
layoff, consulting, or any other similar plan, agreement, policy or
understanding (whether written or oral, qualified or nonqualified), and any
trust, escrow or other agreement related thereto, which (i) is maintained or
contributed to by the Company or any ERISA Affiliate or with respect to
which the Company or any ERISA Affiliate has any liability, or
(ii) provides benefits, or describes policies or procedures applicable, to
any officer, employee, director, former officer, former employee or former
director of the Company or any ERISA Affiliate, or any dependent thereof,
regardless of whether funded (each, an "Employee Plan," and collectively,
the "Employee Plans"). The term "ERISA Affiliate" shall mean any
corporation, trade or business the employees of which, together with the
employees of the Company, are required to be treated as employed by a single
employer under the provisions of ERISA or Code Section 414.
(b) Neither the Company nor any ERISA Affiliate has at any time
maintained any plan subject to the provisions of Title IV of ERISA or
Section 412 of the Code or contributed, or been obligated to contribute, to
any "multiemployer plan" within the meaning of ERISA Section 4001(a)(3).
(c) With respect to each Employee Plan intended to constitute a
qualified plan under Code Section 401(a):
(i) such plan has satisfied in form the requirements of such
qualification except to the extent amendments are not required by law to
be made until after the Closing Date;
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(ii) the Internal Revenue Service has issued a favorable
determination letter as to the qualified status of the plan;
(iii) there has been no termination or partial termination of the
plan; and
(iv) the plan has been operated and administered in material
compliance with its terms and applicable laws.
(d) Each Employee Benefit Plan has been operated in material compliance
with ERISA, the Code, and other applicable law.
(e) With respect to each Employee Benefit Plan, the Company has
furnished to Merger Sub true, correct and complete copies of:
(i) the plan documents (including amendments and summary plan
descriptions);
(ii) the most recent determination letter received from the Internal
Revenue Service;
(iii) the annual reports (Form 5500) required to be filed for the
three most recent plan years of each such Employee Benefit Plan; and
(iv) all related trust agreements, insurance contracts or other
funding agreements that implement such Employee Benefit Plan.
(f) Except as set forth on Section 3.10 of the Disclosure Letter and to
the extent of coverage required under Code Section 4980B, no written or oral
representations have been made by, or on behalf of, the Company or any of
its subsidiaries to any employee or officer or former employee or officer of
the Company promising or guaranteeing any coverage under any employee
welfare benefit plan (as defined in ERISA Section 3(1)) for any period of
time beyond the end of the current plan year.
(g) Except as set forth on Section 3.10 of the Disclosure Letter, the
consummation of the transactions contemplated by this Agreement will not:
(i) accelerate the time of payment or vesting, or increase the amount
of compensation (including amounts due under an Employee Benefit Plan)
due to any employee, officer, former employee or former officer of Merger
Sub; or
(ii) require the Company to make a larger contribution to, or pay
greater benefits or provide owner rights under, any Employee Benefit Plan
than it otherwise would.
(h) No condition exists that would subject Merger Sub, any ERISA
Affiliate or the Company to any excise tax, penalty tax or fine related to
any Employee Benefit Plan, including, but not limited to a violation of
Section 406(a) or (b) of ERISA or any "prohibited transaction" (as defined
in Code Section 4975(c)(1)).
(i) Other than routine claims for benefits, there are no actions, suits,
claims, audits or investigations pending or, to the knowledge of the
Company, threatened against, or with respect to, any of the Employee Benefit
Plans or their assets; and all contributions required to be made to the
Employee Benefit Plans have been made timely.
(j) Except as set forth in Section 3.9 of the Disclosure Letter, all
employees of the Company and its subsidiaries are terminable at the will of
the Company, and neither the Company, nor any present or former director,
officer, employee or agent of the Company has made any binding commitments
of the Company or any of its subsidiaries, written or verbal, to any present
or former, director, officer, employee or agent concerning his term,
condition, benefits or employment (other than as expressly required by law
or stated in an applicable Employee Benefit Plan).
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(k) All reports, returns or filings required by any government agency
have been timely filed in accordance in all material respects with all
applicable requirements, except as could not reasonably be expected to have
a Company Material Adverse Effect.
(l) None of the Company or any of its subsidiaries is a party to any
collective bargaining or other labor union contract. No collective
bargaining agreement is being negotiated by the Company or any of its
subsidiaries. The Company and its subsidiaries are in compliance in all
material respects with all applicable laws respecting employment, employment
practices and wages and hours. There is no pending or, to the knowledge of
the Company, threatened labor dispute, strike or work stoppage against the
Company or any of its subsidiaries that may materially interfere with
respective business activities of the Company or any of its subsidiaries.
None of the Company, its subsidiaries or any of their respective
representatives or employees has committed any material unfair labor
practices in connection with the operation of the respective businesses of
the Company and its subsidiaries, and there is no pending or, to the
knowledge of the Company, threatened charge or complaint against the Company
or any of its subsidiaries by the National Labor of Relations Board or any
comparable state agency.
(m) Set forth on Section 3.10(m) of the Disclosure Letter is a complete
list of all current employees, temporary employees, contractors and
consultants of the Company and its subsidiaries including date of hiring,
current title and compensation, and date and amount of last increase in
compensation.
SECTION 3.11 TAXES.
(a) The Company and its subsidiaries have timely filed all federal
income tax returns and reports and other material returns and reports
relating to federal, state, local, and foreign taxes required to be filed.
Such reports and returns are true, correct and complete, except for such
failures to be true, correct and complete as could not reasonably be
expected to result in a Company Material Adverse Effect.
(b) The Company and its subsidiaries have paid or made adequate
provision for all taxes owed except taxes that if not so paid or provided
for could not reasonably be expected to result in a Company Material Adverse
Effect, and, except as disclosed in Section 3.11 of the Disclosure Letter,
no unpaid deficiencies in taxes or other governmental charges for any period
have been proposed or assessed by any government taxing authority and, to
the knowledge of the Company, no government tax authority is threatening to
propose or assess against the Company or any of its subsidiaries any such
deficiency or charge that could reasonably be expected to result in a
Company Material Adverse Effect.
(c) The Company and its subsidiaries have withheld or collected and paid
over to the appropriate governmental authorities or are properly holding for
such payment all taxes required by law to be withheld or collected, except
for such failures to have so withheld or collected and paid over, or to be
so holding for payment as could not reasonably be expected to result in a
Company Material Adverse Effect.
(d) There are no material liens for taxes upon the assets of the Company
or its subsidiaries, other than liens for current taxes not yet due and
payable and liens for taxes that are being contested in good faith by
appropriate proceedings diligently prosecuted and listed on Section 3.11 of
the Disclosure Letter.
(e) Neither the Company nor any of its subsidiaries has agreed to or is
required to make any adjustment under Section 481(a) of the Code.
(f) Neither the Company nor any of its subsidiaries has made any
election under Section 341(f) of the Code.
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(g) There are no outstanding agreements, waivers or arrangements
extending the statutory period of limitation applicable to any claim for, or
the period for the collection or assessment of, taxes due from or with
respect to the Company or any of its subsidiaries for any taxable period.
(h) No claim has been made by a taxing authority in a jurisdiction in
which the Company does not file tax returns that the Company is required to
file tax returns in such jurisdiction, and, to the Company's knowledge, no
taxing authority could reasonably make such a claim.
(i) The Company has not been a member of an affiliated group as defined
in Section 1504 of the Code (or any analogous combined, consolidated or
unitary group as defined under state, local or foreign income tax law) other
than one of which the Company was the common parent.
(j) The Company has no obligation or liability for the payment of taxes
of any other person arising as a result of any obligation to indemnify
another person or as a result of the Company assuming or succeeding to the
tax liability of any other person as a successor, transferee or otherwise.
(k) The Company will not be required to include any amount in taxable
income for any taxable period (or portion thereof) ending after the
Effective Time as a result of:
(i) a change in method of accounting for a taxable period ending
prior to the Effective Time;
(ii) any "closing agreement" as described in Section 7121 of the Code
(or corresponding provision of state, local or foreign income tax laws)
entered into prior to the Effective Time;
(iii) any sale reported on the installment method that occurred prior
to the Effective Time; or
(iv) any prepaid amount received prior to the Effective Time.
(l) All taxes accrued but not yet due and all contingent liabilities for
taxes are adequately reflected in the reserves for taxes in the financial
statements contained in the Company Reports.
(m) Except as set forth on Section 3.11 of the Disclosure Letter, there
has been no "ownership change" as described in Section 382 of the Code that
has resulted in any limitation on the Company's ability to offset pre-change
losses against its taxable income.
(n) The amounts of the Company's net operating loss carryforwards, and
the years in which such carryforwards will expire if not used, are as set
forth in the financial statements filed with the Company Reports.
SECTION 3.12 LITIGATION. Except as set forth on Section 3.12 of the
Disclosure Letter, there is no suit, claim, action, proceeding, or investigation
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries or any of their respective properties or assets before
any court, regulatory agency, or tribunal. Neither the Company nor any of its
subsidiaries is subject to any outstanding order, writ, injunction, or decree.
SECTION 3.13 ENVIRONMENTAL MATTERS.
(a) Except for matters disclosed in Section 3.13 of the Disclosure
Letter and except for matters that could not reasonably be expected to
result in a Company Material Adverse Effect:
(i) the properties, operations and activities of the Company and its
subsidiaries are and have at all times been in compliance with all
applicable Environmental Laws (as defined below);
(ii) the Company and its subsidiaries and the properties and
operations of the Company and its subsidiaries are not subject to any
existing, pending or, to the knowledge of the
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Company, threatened action, suit, claim, investigation, inquiry or
proceeding by or before any governmental authority under any
Environmental Laws;
(iii) all notices, permits, licenses, consents, authorizations,
approvals, certificates variances, filings or similar authorizations
("Environmental Permits"), if any, required to be obtained or filed by
the Company or any of its subsidiaries under any Environmental Laws in
connection with any aspect of the business of the Company or its
subsidiaries, including without limitation those relating to the
generation, management, treatment, storage, transportation, Disposal (as
defined below) or Release (as defined below) of a hazardous or otherwise
regulated substance, have been duly obtained or filed and will remain
valid and in effect after the Merger, and the Company and its
subsidiaries are in compliance with the terms and conditions of all such
Environmental Permits;
(iv) the Company and its subsidiaries have satisfied and are
currently in compliance with all financial responsibility requirements
applicable to their operations and imposed by any governmental authority
under any Environmental Laws;
(v) to the Company's knowledge, there are no environmental conditions
existing on any property of the Company or its subsidiaries or resulting
from the Company's or such subsidiaries' operations or activities, past
or present, at any location, that would give rise to any on-site or
off-site Remediation (as defined below) obligations imposed on the
Company or any of its subsidiaries under any Environmental Laws or that
would negatively affect the soil, groundwater or surface water or human
health;
(vi) to the Company's knowledge, since the effective date of the
relevant requirements of applicable Environmental Laws and the extent
required by such applicable Environmental Laws, all Hazardous Substances
(as defined below) generated by the Company and its subsidiaries have
been transported only by carriers authorized under Environmental Laws to
transport such substances and wastes, and disposed of only to treatment,
storage, and disposal facilities authorized under Environmental Laws to
treat, store or dispose of such substances and wastes;
(vii) there has been no exposure of any person or property to
Hazardous Substances, nor has there been any Release of Hazardous
Substances into the environment by the Company or its subsidiaries or in
connection with their properties or operations that could reasonably be
expected to give rise to any claim against the Company or any of its
subsidiaries for damages or compensation; and
(viii) the Company and its subsidiaries have made available to Parent
all internal and external environmental audits and studies, consent
decrees, injunctions, orders and all correspondence on substantial
environmental matters (including any Remediation) in the possession of
the Company or its subsidiaries relating to any of the current or former
properties or operations of the Company and its subsidiaries.
(b) For purposes of this Agreement, the term:
(i) "Disposal" shall mean discharging, depositing, injecting,
dumping, spilling, leaking, or placing any Hazardous Material into, on or
under any land or water so that such Hazardous Material or any
constituent thereof may enter the environment or be emitted into the air
or discharged into any waters, including groundwater;
(ii) "Environmental Laws" shall mean any and all federal, state and
local laws, statutes, ordinances, codes, rules, regulations, licenses,
permits, authorizations, decisions, orders, injunctions, or decrees of
any governmental body, authority or regulatory agency pertaining to
health, safety, or the environment in effect in any and all jurisdictions
in which the Company and its subsidiaries own property or conduct
business;
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(iii) "Hazardous Material" shall mean any substance whether solid,
liquid or gaseous that: (x) is listed, defined or regulated as a
"hazardous substance," "hazardous material," "hazardous waste,"
"extremely hazardous waste," "toxic substance," "sludge," "solid waste,"
"pollutant," "contaminant," or otherwise classified as a hazardous, or
toxic, in or pursuant to any Environmental Law; (y) is or contains
asbestos, radon, any polychlorinated biphenyl, urea formaldehyde foam
insulation, explosive or radioactive material, crude oil or any fraction
thereof, or motor fuel or other refined or process petroleum
hydrocarbons; or (z) causes or poses a threat to cause a contamination or
nuisance to the property or any adjacent property or a hazard to the
environment or the health or safety of persons on or about the property
or any adjacent property;
(iv) "Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
or disposing into the environment that is not authorized by Permit
required by or from any federal, state, or local governmental body
pursuant to any Environmental Law;
(v) "Remediation" shall mean those actions taken in the event of a
Release or threatened Release of a Hazardous Material into the
environment, to prevent or minimize the Release of a Hazardous Material
so that it does not migrate to cause substantial danger to present or
future public health or welfare of the environment and includes, but is
not limited to storage, confinement, dikes, trenches, ditches, clay
cover, neutralization, cleanup, recycling, reuse, diversion, destruction,
segregation dredging, excavation, repair, replacement, collection,
treatment, incineration, monitoring, storage, transportation, and
destruction.
SECTION 3.14 VOTING REQUIREMENTS.
(a) The Board of Directors of the Company at a meeting duly called and
held:
(i) determined that the Merger is advisable and fair and in the best
interests of the Company and its stockholders;
(ii) approved the Merger and this Agreement and the transactions
contemplated by this Agreement;
(iii) recommended approval of this Agreement and the Merger by the
Company's stockholders and directed that the Merger and this Agreement be
submitted for consideration by the Company's stockholders; and
(iv) taken all necessary action to assure that this Agreement, the
Merger and all other transactions contemplated by this Agreement are not
to be subject to Section203 of the DGCL.
(b) The affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock entitled to vote is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve the Merger, this Agreement and the transactions contemplated by this
Agreement.
SECTION 3.15 FINDERS AND INVESTMENT BANKERS; TRANSACTION EXPENSES. Neither
the Company nor any of its officers or directors has employed any investment
banker, business consultant, financial advisor, broker or finder in connection
with the transactions contemplated by this Agreement, except for Houlihan Lokey
Howard & Zukin (the "Advisor"), or incurred any liability for any investment
banking, business consultancy, financial advisory, brokerage or finders' fees or
commissions in connection with the transactions contemplated hereby, except for
fees payable to the Advisor (as reflected in the letter agreement dated
September 22, 2000 between Advisor and the Company, copies of which the Company
has delivered to Parent). The fee payable under such letter agreement upon the
consummation of the transactions contemplated by this Agreement, including fees
for Advisor's fairness opinion is set forth on Section 3.15 of the Disclosure
Letter.
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SECTION 3.16 INSURANCE. The Company and each of its subsidiaries is
currently insured, and during each of the past five calendar years has been
insured, for reasonable amounts against such risks as companies engaged in a
similar business and similarly situated would, in accordance with good business
practice, customarily be insured. Section 3.16 of the Disclosure Letter contains
a complete listing of all insurance (and all self-insurance arrangements)
maintained by the Company as of the date hereof that provides coverage for any
current or contingent claim, indicating the form of coverage, name of carrier
and broker, coverage limits and premium, expiration dates, deductibles, and all
endorsements.
SECTION 3.17 TITLE TO PROPERTIES; ENTIRE BUSINESS.
(a) The Company and its subsidiaries have good title or a valid and
subsisting leasehold interest in and to or a valid and enforceable license
to use all material assets, properties and rights owned, used or held for
use by them in the conduct of their respective businesses, in each case,
free and clear of any liens, claims or encumbrances other than Permitted
Liens (as defined below). The Company and its subsidiaries own or have
sufficient right to use all assets and properties necessary to conduct their
businesses in the manner in which they are currently conducted.
(b) As used in this Agreement, a "Permitted Lien" means:
(i) a lien of a landlord, carrier, warehouseman, mechanic,
materialman, or any other statutory lien arising in the ordinary course
of business that does not materially detract from the value of the
encumbered property or assets or does not materially detract from or
interfere with the use of the encumbered property or assets in the
ordinary course of business;
(ii) a lien for taxes not yet due or being diligently contested in
good faith in appropriate proceedings and that will not result in a
Company Material Adverse Effect;
(iii) with respect to the right of the Company or its subsidiaries to
use any property leased to the Company or its subsidiaries, a lien that
arises by the terms of the applicable lease;
(iv) a purchase money security interest arising in the ordinary
course of business that does not materially detract from the value of the
encumbered property or assets or does not materially detract from or
interfere with the use of the encumbered property or assets in the
ordinary course of business; or
(v) any other lien that does not materially detract from the value of
the encumbered property or assets or does not materially detract from or
interfere with the use of the encumbered property or assets in the
ordinary course of business.
SECTION 3.18 INTELLECTUAL PROPERTY RIGHTS.
(a) Except as set forth on Section 3.18 of the Disclosure Letter, there
are no registered patents, trademarks, service marks, trade names or
copyrights (the "Registered Intellectual Property"), or applications for or
licenses (to or from the Company or any of its subsidiaries) with respect to
any Registered Intellectual Property that are material to the Company and
its subsidiaries taken as a whole, that:
(i) are owned by the Company or any of its subsidiaries, or with
respect to which the Company or any of its subsidiaries has any rights;
or
(ii) are used, whether directly or indirectly, by the Company or any
of its subsidiaries.
(b) The Company has good title to its DIAMOND-Registered Trademark- 725
and DIAMOND-Registered Trademark- products, including, without limitation,
DIAMOND-Registered Trademark- 725 and DIAMOND-Registered Trademark- C/S
products, and all source code, algorithms, specifications, documentation and
user and training materials relating to the same (collectively, the "DIAMOND
Products"), free and clear of any liens, claims or
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encumbrances other than Permitted Liens. The DIAMOND Products are listed on
Section 3.18(b) of the Disclosure Letter. The Company owns no other software
products, and has no software products in development. The Company and its
subsidiaries own all rights to market, sell, license, install, maintain and
otherwise use the DIAMOND Products without infringing on or otherwise acting
adversely to the rights or claimed rights of any person. To the knowledge of
the Company, none of the Company's existing or contemplated development
efforts with respect to the DIAMOND Products or future products of the
Company infringe on or will infringe on or otherwise adversely affect the
rights or claimed rights of any person.
(c) Except as set forth on Section 3.18 of the Disclosure Letter (and
excluding the DIAMOND Products), the Company and its subsidiaries have the
right to use the Registered Intellectual Property set forth on Section 3.18
of the Disclosure Letter, and any other computer software and software
licenses, intellectual property, proprietary information, trade secrets,
trademarks, trade names, copyrights, material and manufacturing
specifications, drawings and designs used by the Company or any of its
subsidiaries (collectively, "Intellectual Property"), without infringing on
or otherwise acting adversely to the rights or claimed rights of any person,
except to the extent such infringement or actions adverse to another's
rights or claimed rights could not reasonably be expected to have a Company
Material Adverse Effect.
(d) The Company and its subsidiaries have taken all commercially
reasonable actions to protect, and to prevent the unauthorized disclosure
of, each item of Intellectual Property (including, without limitation, the
DIAMOND Products), owned by them, including, without limitation, through the
use of written nondisclosure agreements. Except as disclosed in
Section 3.20(a) of the Disclosure Letter, the Company has not disclosed the
source code for any of the DIAMOND Products.
(e) Except as set forth on such Section 3.18 of the Disclosure Letter,
neither the Company nor any of its subsidiaries is obligated to pay any
royalty or other consideration material to the Company and its subsidiaries
taken as a whole to any person in connection with the Company's use or
ownership of any Intellectual Property (including the DIAMOND Products).
(f) Except as set forth on such Section 3.18 of the Disclosure Letter
and as could not reasonably be expected to have a Company Material Adverse
Effect, to the Company's knowledge, no other person is infringing on the
rights of the Company and its subsidiaries in any of their Intellectual
Property (including the DIAMOND Products).
SECTION 3.19 MAJOR CUSTOMERS.
(a) Section 3.19 of the Disclosure Letter contains a list of: (i) all
customers for which the Company provides maintenance services with respect
to its DIAMOND Products; (ii) the Company's ten largest
DIAMOND-Registered Trademark- 725 C/S active customers (in terms of revenues
for the nine-month period ended June 30, 2000); (iii) the Company's ten
largest DIAMOND-Registered Trademark- 950 C/S active customers (in terms of
revenues for the nine-month period ended June 30, 2000); (iv) all customers
that generated in excess of $25,000 in revenue for the Company and its
subsidiaries during the nine-month period ended June 30, 2000 (all of such
customers described in the preceding clauses (i) through (iv) collectively,
the "Major Customers"); (v) the amount of revenues attributable to each
Major Customer in the fiscal year ended September 30, 1999; (vi) the amount
of revenues attributable to each Major Customer during the nine-month period
ended June 30, 2000; (vii) the scheduled expiration date of the respective
contracts between the Company and its subsidiaries and the Major Customers
(the "Customer Contracts"), as applicable; and (viii) the provisions of each
Customer Contract relating to a change of control of the Company or its
subsidiaries, as applicable.
(b) Except as set forth in Section 3.19(b) of the Disclosure Letter or
except as could not reasonably be expected to have a Company Material
Adverse Effect, since September 30, 1999:
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(i) none of the Major Customers has terminated or altered its relationship
with the Company other than in the ordinary course of business, or, to the
Company's knowledge, threatened to do so or otherwise notified the Company
of its intention to do so; and (ii) there has been no dispute with any of
the Major Customers.
(c) Without limiting the foregoing SECTION 3.19(b), it is acknowledged
and agreed that (i) any termination or material alteration (other than in
the ordinary course of business) of the Company's relationship with,
(ii) any notification of any material threat or intention to so terminate or
materially alter the Company's relationship with, and (iii) any notification
of any material dispute with, any of the customers designated by the Parent
and listed on Section 3.19(c) of the Disclosure Letter since September 30,
1999 will constitute a "Company Material Adverse Effect" for purposes of
this Agreement.
SECTION 3.20 CONTRACTS.
(a) Set forth on Section 3.20(a) of the Disclosure Letter is a list of
all contracts or agreements (i) granting any party any access or rights,
contingent or otherwise, to the DIAMOND Products; (ii) granting any party
the right, contingent or otherwise, (A) to sublicense the DIAMOND Products
to any other party or (B) to provide third parties any services using, or
access to, the DIAMOND Products, including, without limitation, the right to
act as a service bureau or provide the software on a time share basis;
(iii) granting any license to the source code for the DIAMOND Products; and
(iv) obligating the Company to provide, or pursuant to which the Company
provides, products or services without compensation or below the cost to the
Company to provide such products or services.
(b) Set forth on Section 3.20(b) of the Disclosure Letter is a list of
each contract or agreement to which the Company or any of its subsidiaries
is a party or to which the Company, any of its subsidiaries or any of their
respective assets is in any way bound or obligated, pursuant to which the
Company or any of its subsidiaries could be required to make or entitled to
receive aggregate payments or other value in excess of $25,000 or that is
otherwise material to the Company and its subsidiaries. Each contract
disclosed on Section 3.20(a) of the Disclosure Letter or Section 3.20(b) of
the Disclosure Letter is, to the extent it purports to be, a valid and
legally binding obligation of the Company or of its subsidiaries and, to the
knowledge of the Company, the other parties thereto, as applicable, and is
in full force and effect. Neither the Company, any of its subsidiaries nor,
to the knowledge of the Company, any other party thereto is in violation of
or in default under (nor does there exist any condition which upon the
passage of time or the giving of notice, or both, would cause such a
violation or default under) any loan or credit agreement, note, bond,
mortgage, indenture, lease or any other contract, agreement, arrangement or
understanding to which it is a party or by which it or any of its properties
or assets is bound, except for violations or defaults that could not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.21 INSIDER INTERESTS.
(a) Except as set forth on Section 3.21 of the Disclosure Letter, no
stockholder beneficially owning in excess of 5% of the Company Common Stock,
officer, director, employee (or any member of the immediate family of any of
the foregoing) or agent of the Company or any of its subsidiaries or any
affiliate of any officer or director of the Company or any of its
subsidiaries (as the term "affiliate" is defined in Rule 12b-2 under the
Exchange Act):
(i) has any interest in any assets or property (whether real or
personal, tangible or intangible) of or used in the business of the
Company or any subsidiary of the Company (other than as an owner of
outstanding securities of the Company);
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(ii) has any direct or indirect interest of any nature whatsoever in
any person or business which competes with, conducts any business similar
to, has any arrangement or agreement (including arrangements regarding
the shared use of personnel or facilities) with (whether as a customer or
supplier or otherwise), or is involved in any way with, the Company or
any subsidiary of the Company; or
(iii) is indebted or otherwise obligated to the Company (other than
expense advances in the ordinary course of business).
(b) The Company is not indebted or otherwise obligated to any such
person described in SECTION 3.21(A), except for amounts due under normal
arrangements applicable to all employees generally as to salary or
reimbursement of ordinary business expenses not unusual in amount or
significance.
(c) As of the date of this Agreement, except for claims and proceedings
listed on Section 3.21 of the Disclosure Letter, to the knowledge of the
Company, there are no losses, claims, damages, costs, expenses, liabilities
or judgments which would entitle any director, officer or employee (or any
member of the immediate family of any of the foregoing) of the Company or
any of its subsidiaries to indemnification by the Company or its
subsidiaries under applicable law, the certificate of incorporation or
bylaws of the Company or any of its subsidiaries or any insurance policy
maintained by the Company or any of its subsidiaries.
SECTION 3.22 NONCOMPETITION; RESTRICTIONS ON BUSINESS. Except as described
in Section 3.22 of the Disclosure Letter, the Company and its subsidiaries are
not, and after the Effective Time neither the Surviving Corporation nor Parent
will be (by reason of any agreement to which the Company is a party), subject to
any noncompetition, limitation on its ability to provide services or products to
any customer or potential customer, or similar restriction on their respective
businesses.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Merger Sub
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware and has all requisite corporate power and
authority and any necessary governmental authority to carry on its business as
now conducted. Each of Parent and Merger Sub is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or leased or the nature of its activities makes such
qualification or licensing necessary, except for failures to be so duly
qualified or licensed and in good standing as could not reasonably be expected
to result in a Parent Material Adverse Effect. For purposes of this Agreement,
"Parent Material Adverse Effect" or "Parent Material Adverse Change" means in
each case any change or effect that, individually or when taken together with
all such other changes or effects, could reasonably be expected to be materially
adverse to the condition (financial or other), business, operations, properties,
assets, liabilities, prospects, results of operations, or legal or regulatory
environment of Parent and its subsidiaries, taken as a whole, or to adversely
affect the ability of Parent and Merger Sub to perform their respective
obligations under this Agreement.
SECTION 4.2 CORPORATE AUTHORIZATION.
(a) Each of Parent and Merger Sub has the full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement.
(b) The execution, delivery, and performance by each of Parent and
Merger Sub of this Agreement and the consummation by Parent and Merger Sub
of the Merger and of the other transactions contemplated by this Agreement
have been duly and validly authorized by Parent as
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sole stockholder of Merger Sub and by the Board of Directors of each of
Parent and Merger Sub and no other corporate proceedings on the part of
Parent or Merger Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement.
(c) This Agreement has been duly and validly executed and delivered by
each of Parent and Merger Sub and constitutes a valid and binding obligation
of each of Parent and Merger Sub, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditor's rights and to general equity principles.
SECTION 4.3 APPROVALS; NO VIOLATIONS.
(a) No filing with, and no permit, authorization, consent, or approval
of, any foreign or domestic public body or authority is necessary for the
consummation by Parent and Merger Sub of the transactions contemplated by
this Agreement, except:
(i) the filing of a premerger notification and report form under the
HSR Act;
(ii) the filing with the SEC of such reports under the Exchange Act
as may be required in connection with this Agreement and the transactions
contemplated by this Agreement; and
(iii) the filing of the certificate of merger with the Delaware
Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do
business.
(b) Except as set forth on Section 4.3(b) of the Disclosure Letter, the
execution and delivery of this Agreement by Parent and Merger Sub, the
consummation by Parent and Merger Sub of the transactions contemplated by
this Agreement and the compliance by them with any of the provisions of this
Agreement will not:
(i) conflict with or result in any breach of any provision of the
organizational documents or bylaws of Parent or Merger Sub;
(ii) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, or acceleration) or require any
authorization, consent or approval under, any of the terms, conditions,
or provisions of any note, bond, mortgage, indenture, license, lease,
contract, agreement, or other instrument or obligation to which Parent or
Merger Sub is a party or by which either of them or any of their
respective properties or assets may be bound; or
(iii) violate or require any authorization, consent or approval under
any order, writ, injunction, decree, statute, rule, or regulation
applicable to Parent or Merger Sub or any of their respective properties
or assets, except such violations, conflicts, breaches, defaults,
terminations, or accelerations referred to in this SECTION 4.3 as could
not, individually or in the aggregate, reasonably be expected to result
in a Parent Material Adverse Effect.
ARTICLE V
COVENANTS
SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY.
(a) Except as expressly contemplated by this Agreement during the period
from the date of this Agreement to the Effective Time:
(i) the Company and each of its subsidiaries will conduct its
business solely in the ordinary course consistent with past practices;
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(ii) neither the Company nor any of its subsidiaries will
intentionally take or willfully omit to take any action that results in
or could reasonably be expected to result in, a Company Material Adverse
Effect; and
(iii) the Company will use its commercially reasonable efforts to
preserve intact the business organization of the Company and each of its
subsidiaries, to keep available the services of its and their present
officers and key employees and consultants, and to maintain satisfactory
relationships with customers, agents, reinsurers, suppliers, and other
persons having business relationships with the Company or its
subsidiaries.
(b) Without limiting the provisions of SECTION 5.1(a), except as
otherwise expressly provided in this Agreement, neither the Company nor any
of its subsidiaries will:
(i) issue, sell, or dispose of additional shares of capital stock of
any class (including shares of Company Common Stock) of the Company or
any of its subsidiaries, or securities convertible into or exchangeable
for any such shares or securities, or any rights, warrants, or options to
acquire any such shares or securities, other than shares of Company
Common Stock issued upon exercise of the options disclosed in
Section 3.3 of the Disclosure Letter, in each case in accordance with the
terms of such options or as disclosed on Section 3.3 of the Disclosure
Letter;
(ii) redeem, purchase, or otherwise acquire, or propose to redeem,
purchase, or otherwise acquire, any of its outstanding capital stock, or
other securities of the Company or any of its subsidiaries;
(iii) split, combine, subdivide, or reclassify any of its capital
stock or declare, set aside, make, or pay any dividend or distribution on
any shares of its capital stock except for dividends or distributions to
the Company and its subsidiaries from their respective subsidiaries;
(iv) sell, pledge, dispose of, or encumber any of its assets, except
for sales, pledges, dispositions, or encumbrances in the ordinary course
of business consistent with past practices or between the Company and its
subsidiaries;
(v) incur or modify any indebtedness or issue or sell any debt
securities, or assume, guarantee, endorse, or otherwise as an
accommodation become absolutely or contingently responsible for
obligations of any other person, or make any loans or advances;
(vi) adopt or amend any bonus, profit sharing, compensation,
severance, termination, stock option, pension, retirement, deferred
compensation, employment or other employee benefit agreements, trusts,
plans, funds, or other arrangements for the benefit or welfare of any
director, officer, or employee, or (except for normal increases in the
ordinary course of business that are consistent with past practices and
that, in the aggregate, do not result in a material increase in
benefits); increase in any manner the compensation or fringe benefits of
any director, officer, or employee or pay any benefit not required by any
existing plan or arrangement (including, without limitation, the granting
or vesting of stock options or stock appreciation rights) or take any
action or grant any benefit not expressly required under the terms of any
existing agreements, trusts, plans, funds, or other such arrangements or
enter into any contract, agreement, commitment, or arrangement to do any
of the foregoing; or make or agree to make any payments to any directors,
officers, agents, contractors, or employees relating to a change or
potential change in control of the Company; notwithstanding the
foregoing, the Company may, upon, reasonable prior notice to Parent, make
amendments to Company Benefit Plans that are required by applicable law;
(vii) acquire by merger, consolidation, or acquisition of stock or
assets any corporation, partnership, or other business organization or
division or make any investment either by
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purchase of stock or securities, contributions to capital (other than to
wholly-owned subsidiaries), property transfer, or purchase of any
material amount of property or assets, in any other person;
(viii) amend its certificate of incorporation, bylaws or other
comparable charter or organizational documents, or alter through merger,
liquidation, reorganization, restructuring or in any other fashion the
corporate structure or ownership of any material subsidiary of the
Company;
(ix) take any action other than in the ordinary course of business
and consistent with past practices, to pay, discharge, settle, or satisfy
any claim, liability, or obligation (absolute or contingent, accrued or
unaccrued, asserted or unasserted, or otherwise);
(x) change any method of accounting or accounting practice used by
the Company or any of its subsidiaries, except for any change required by
reason of a concurrent change in generally accepted accounting
principles;
(xi) revalue in any respect any of its assets, including, without
limitation, writing off notes or accounts receivable other than in the
ordinary course of business consistent with past practices;
(xii) authorize any new capital expenditure or expenditures that,
individually, is in excess of $50,000 or, in the aggregate, are in excess
of $100,000;
(xiii) make any tax election, settle or compromise any federal, state,
or local tax liability or consent to the extension of time for the
assessment or collection of any federal, state, or local tax;
(xiv) settle or compromise any pending or threatened suit, action, or
claim material to the Company and its subsidiaries taken as a whole or
relevant to the transactions contemplated by this Agreement;
(xv) authorize, recommend, propose or announce an intention to adopt a
plan of complete or partial liquidation or dissolution of the Company;
(xvi) enter into any collective bargaining agreement;
(xvii) engage in any transaction with, or enter into any agreement,
arrangement or understanding with, directly or indirectly, any of the
Company's affiliates (or any member of their respective families) other
than pursuant to such agreements existing on the date of this Agreement
and disclosed on the Disclosure Letter or, between the Company and any of
its wholly-owned subsidiaries; or
(xviii) voluntarily take any action or willfully omit to take any
action that could make any representation or warranty in ARTICLE III
untrue or incorrect in any material respect at any time, including as of
the date of this Agreement and as of the Effective Time, as if made as of
such time.
SECTION 5.2 PROXY STATEMENT.
(a) Promptly after the execution of this Agreement, the Company and
Parent will cooperate with each other and use all commercially reasonable
efforts to prepare, and the Company will file with the SEC, as soon as is
reasonably practicable, a proxy statement, together with a form of proxy,
with respect to the Special Meeting (as defined in SECTION 5.3). For the
purposes of this Agreement, the term "Proxy Statement" means such proxy or
information statement filed in final form with the SEC at the time it
initially is mailed to the stockholders of the Company and all amendments or
supplements thereto, if any, similarly filed and mailed.
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(b) The parties will use all commercially reasonable efforts to have the
Proxy Statement cleared by the SEC as promptly as practicable after filing
and, as promptly as practicable after the Proxy Statement has been so
cleared, the Company will mail the Proxy Statement to the Company's
stockholders as of the record date for the Special Meeting.
(c) The Company represents that none of the information contained in the
Proxy Statement, and Parent and Merger Sub represent that none of the
written information provided or to be provided by them expressly for use in
the Proxy Statement, will, on the date the Proxy Statement is first mailed
to the stockholders of the Company and on the date of the Special Meeting,
be false or misleading with respect to any material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading, and Parent, the Company, and Merger Sub each
agrees to correct any information provided by it for use in the Proxy
Statement that has become false or misleading in any material respect and
the Company will file such amendments and supplements as are necessary.
(d) Provided that Parent and Merger Sub provide all necessary
information they are required to provide for inclusion therein, and provided
further that Parent and Merger Sub have complied with their obligations
under Section 5.2(c), the Company agrees that the Proxy Statement will
comply as to form in all material respects with all applicable requirements
of federal securities laws and applicable state laws.
SECTION 5.3 ACTION OF STOCKHOLDERS OF THE COMPANY; VOTING.
(a) The Company will take all action necessary in accordance with the
DGCL and the certificate of incorporation and bylaws of the Company, to
call, as soon as is practicable, a meeting of its stockholders (the "Special
Meeting") at which the stockholders of the Company will consider and vote
upon the Merger and this Agreement. Unless the Board of Directors determines
in its good faith judgment, after consultation with outside legal counsel,
that its fiduciary duties require otherwise, the Proxy Statement will
contain the recommendation of the Board of Directors of the Company that the
stockholders of the Company vote to adopt and approve the Merger and this
Agreement. The Company will, at the request of Parent, use all commercially
reasonable efforts to obtain from its stockholders proxies in favor of such
adoption and approval and to take all other action necessary or helpful to
secure the vote or consent of stockholders required by the DGCL to effect
the Merger.
(b) At the Special Meeting, Parent, Merger Sub, and their subsidiaries
will vote, or cause to be voted, all of the shares of Company Common Stock
then owned by any of them in favor of the Merger and the Agreement.
SECTION 5.4 ADDITIONAL AGREEMENTS.
(a) Subject to the terms and conditions of this Agreement and to the
fiduciary obligations of the Board of Directors of the Company under
applicable law, each of the parties agrees to use their respective
commercially reasonable efforts to take, or cause to be taken, all actions
to do, or cause to be done, all things necessary, proper, or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement (including consummation of the Merger) and to
cooperate with each other in connection with the foregoing, including,
without limitation, using their respective commercially reasonable efforts:
(i) to obtain all necessary waivers, consents, and approvals from
other parties to loan agreements, leases, and other contracts;
(ii) to obtain all necessary consents, approvals, and authorizations
as are required to be obtained under any federal, state, or foreign law
or regulations;
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(iii) to lift or rescind any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
transactions contemplated by this Agreement;
(iv) to prepare and effect all necessary registrations and filings;
and
(v) to fulfill all conditions to and covenants contained in this
Agreement.
(b) If, after the Effective Time, any action is necessary to effect the
purposes of this Agreement, the proper officers and directors of each party
will take all such necessary action.
SECTION 5.5 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company will give prompt notice to Parent and Merger Sub, and
Parent and Merger Sub will give prompt notice to the Company, of:
(i) the occurrence, or failure to occur, of any event, which
occurrence or failure could cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material
respect at any time;
(ii) any material failure of the Company, Parent, or Merger Sub, as
the case may be, or of any officer, director, employee, or agent of the
Company, Parent, or Merger Sub, as the case may be, to comply with or
satisfy any covenant, condition, or agreement to be complied with or
satisfied by it under this Agreement;
(iii) any act, omission to act, event, or occurrence that, with
notice, the passage of time, or otherwise, could result in a Company
Material Adverse Effect or a Parent Material Adverse Effect, as the case
may be; and
(iv) any contingent liability of the Company for which it reasonably
believes it will, with the passage of time or otherwise, become liable.
(b) The notification described in SECTION 5.5(a) will not affect the
representations or warranties of the parties or the conditions to the
obligations of the parties under this Agreement.
SECTION 5.6 ACCESS TO INFORMATION.
(a) From the date of this Agreement to the Effective Time, the Company
will, and will cause its subsidiaries, officers, directors, employees, and
agents upon reasonable notice to, afford to officers, employees, and agents
of Parent, Merger Sub and their affiliates and the banks, other financial
institutions, and investment bankers working with Parent or Merger Sub, and
their respective officers, employees, and agents, complete access at all
reasonable times to its officers, employees, agents, properties, books,
records, and contracts, and will furnish Parent, Merger Sub and their
affiliates and the banks, other financial institutions, and investment
bankers working with Parent or Merger Sub, all financial, operating, and
other data and information as they reasonably request. Without limiting the
foregoing, the Company has delivered to Parent the financial statements and
operating results of the Company and its subsidiaries for the months ended
July 31 and August 31, 2000 and the Company will promptly deliver to Parent
the financial statements and operating results of the Company and its
subsidiaries for each month prior to the Closing Date, as they come
available.
(b) Each of Parent and Merger Sub will hold and will cause its
directors, officers, agents, employees, consultants, and advisors to hold in
confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all documents and information
concerning the Company and its subsidiaries furnished to such persons in
connection with the transactions contemplated by this Agreement (except to
the extent that such information can be shown to have been (i) previously
known by such persons from sources other than the Company, or its directors,
officers, representatives, or affiliates, (ii) in the public domain through
no fault of
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such persons, or (iii) later lawfully acquired by such persons on a
non-confidential basis from other sources who are not known by Parent or
Merger Sub to be bound by a confidentiality agreement or otherwise
prohibited from transmitting the information to Parent or Merger Sub by a
contractual, legal, or fiduciary obligation) and will not release or
disclose such information to any other person, except its directors,
officers, agents, employees, consultants, and advisors, in connection with
this Agreement who need to know such information. If the transactions
contemplated by this Agreement are not consummated, such confidence shall be
maintained and, if requested by or on behalf of the Company, Parent and
Merger Sub will, and will use all commercially reasonable efforts to cause
their auditors, attorneys, advisors, and other consultants, agents, and
representatives to, return to the Company or destroy all copies of written
information furnished by the Company to Parent and Merger Sub or their
agents, representatives, or advisors. It is understood that Parent and
Merger Sub will be deemed to have satisfied their obligation to hold such
information confidential if they exercise the same care as they take to
preserve confidentiality for their own similar information.
(c) No investigation pursuant to this SECTION 5.6 will affect any
representations or warranties of the parties in this Agreement or the
conditions to the obligations of the parties to this Agreement.
SECTION 5.7 PUBLIC ANNOUNCEMENTS. Parent and Merger Sub, on the one hand,
and the Company, on the other hand, will consult with each other before issuing
any press release or otherwise making any public statements with respect to this
Agreement, or the other transactions contemplated by this Agreement, and will
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or the listing requirements of
any securities exchange.
SECTION 5.8 OFFICERS' AND DIRECTORS' INDEMNIFICATION.
(a) Parent and Merger Sub agree that all rights to indemnification now
existing in favor of the directors or officers of the Company and its
subsidiaries as provided in their respective certificates of incorporation
or bylaws and pursuant to the contracts listed on SCHEDULE 5.8 will, to the
extent such rights are in accordance with applicable law, survive the Merger
and stay in effect in accordance with their respective terms.
(b) In the event any action, suit, proceeding, or investigation relating
to this Agreement or to the transactions contemplated by this Agreement is
commenced by a third party, whether before or after the Effective Time, the
parties to this Agreement agree, subject to the fiduciary duties of the
respective directors of the Company and Parent, to cooperate and use all
commercially reasonable efforts to defend against and respond to such
action, suit, proceeding, or investigation.
(c) Parent will extend the term of the Company's existing directors and
officers liability insurance policies for three years and will purchase a
six-year tail to be effective for the six-year period commencing on
March 4, 2001 for the Company's director's and officer's liability insurance
policies in effect as of the date hereof.
(d) The covenants contained in this SECTION 5.8 will survive the Merger
and will continue without time limit.
SECTION 5.9 EMPLOYEE OPTIONS. As soon as practicable following the date of
this Agreement, the Company will take such actions as are required to provide
that each of the Employee Options outstanding immediately prior to the
consummation of the Merger, whether or not then exercisable, will be canceled,
if not exercised by the holder thereof immediately prior to the consummation of
the Merger without the incurrence of any liability or obligation on the part of
the Company.
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SECTION 5.10 OTHER ACTIONS BY THE COMPANY. If any "fair price,"
"moratorium," "control share acquisition," or other form of antitakeover
statute, regulation, charter provision, or contract is or becomes applicable to
the transactions contemplated by this Agreement, the Company and the members of
the Board of Directors of the Company will use their commercially reasonable
efforts to grant such approvals and take such actions as are necessary under
such laws, provisions, or contracts so that the transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise act to eliminate or minimize the
effects of such statute, regulation, provision or contract on the transactions
contemplated by this Agreement.
SECTION 5.11 LETTERS OF ACCOUNTANTS. The Company shall use its
commercially reasonable efforts to cause to be delivered to Parent "comfort"
letters of Arthur Anderson LLP, the Company's independent public accountants,
dated and delivered on the date on which the Proxy Statement is mailed to the
Company's stockholders and on the Closing Date, each addressed to Parent, in
form and substance reasonably satisfactory to Parent and reasonably customary in
scope and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.1 MUTUAL CONDITIONS. The respective obligations of each party to
effect the Merger are subject to the satisfaction prior to the Effective Time of
the following conditions:
(a) This Agreement will have been adopted and approved by the
affirmative vote of the stockholders of the Company in accordance with the
certificate of incorporation and bylaws of the Company, and with applicable
law.
(b) No federal or state statute, rule, regulation, injunction, decree,
or order will be enacted, promulgated, entered, or enforced that would
prohibit consummation of the Merger or of the other transactions
contemplated by this Agreement; provided that the parties to this Agreement
agree to use their respective commercially reasonable efforts to have any
such injunction, decree, or order lifted.
(c) The waiting period applicable to the consummation of the Merger
under the HSR Act will have expired or been terminated.
SECTION 6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER
SUB. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Each of the representations and warranties of the Company contained
in this Agreement will be true and correct in all material respects (except
that where any statement in a representation or warranty expressly includes
a standard of materiality, such statement will be true and correct in all
respects giving effect to such standard) as of the Closing Date as though
made on and as of the Closing Date, provided that those representations and
warranties that address matters only as of a particular date will remain
true and correct in all material respects (except that where any statement
in a representation or warranty expressly includes a standard of
materiality, such statement will be true and correct in all respects giving
effect to such standard) as of such date. Parent will have received a
certificate of the Chief Executive Officer and Chief Financial Officer of
the Company to such effect.
(b) The Company will have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed
or complied with by it on or prior to the Closing Date. Parent will have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of the Company to that effect.
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(c) The Company will have delivered, or caused to be delivered, to
Parent:
(i) a certificate of good standing from the Delaware Secretary of
State and of comparable authority in other jurisdictions in which the
Company and its subsidiaries are incorporated or qualified to do business
stating that each is a validly existing corporation in good standing;
(ii) duly adopted resolutions of the Board of Directors and
stockholders of the Company approving the execution, delivery and
performance of this Agreement and the instruments contemplated hereby,
certified by the Secretary of the Company; and
(iii) a true and complete copy of the certificate of incorporation or
comparable governing instruments, as amended, of the Company and its
subsidiaries certified by the Secretary of State of the state of
incorporation or comparable authority in other jurisdictions, and a true
and complete copy of the bylaws or comparable governing instruments, as
amended, of the Company and its subsidiaries certified by the Secretary
of the Company and its subsidiaries, as applicable.
(d) Parent will have received "comfort letters" from Arthur Anderson LLP
on the date the Proxy Statement is mailed to the Company's stockholders and
on the Closing Date.
(e) From and including the date of this Agreement, there will not have
occurred a Company Material Adverse Change.
(f) Parent will have received evidence, in form and substance reasonably
satisfactory to it, that all licenses, permits, consents, approvals,
waivers, findings of suitability, authorizations, qualifications and orders
of, and declarations, registrations and filings required under the terms,
conditions or provisions of any item or matter referenced in SECTION 3.5(b)
and SECTION 4.3(b) and required to be listed on Section 3.5(b) and
Section 4.3(b) of the Disclosure Letter (collectively, "Consents and
Filings") have been obtained or made, as applicable, by the Company, Merger
Sub or Parent, as the case may be, without the imposition of any
limitations, prohibitions or requirements, and are in full force and effect.
(g) Parent shall have received an opinion of counsel to the Company,
Gibson, Dunn & Crutcher LLP, in the form of EXHIBIT B. In rendering such
opinion, such counsel may rely on opinions of local counsel to the extent
such counsel deems it reasonable to do so. Such counsel will also state that
the Proxy Statement complied as to form in all material respects with the
requirements of the Exchange Act and the rules thereunder. In addition, such
counsel will state that it has participated in the preparation of the Proxy
Statement and has read the documents incorporated by reference therein, and
that, although such counsel is not assuming responsibility for the matters
stated in the Proxy Statement, such counsel has no reason to believe that
the Proxy Statement on the date the Proxy Statement was first mailed to the
stockholders of the Company and on the date of the Special Meeting or the
Closing Date, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order
to make the statements made, in light of the circumstances under which they
were made, not misleading.
(h) Parent shall have received evidence, in form and substance
reasonably satisfactory to it, that all options to purchase shares of
Company Common Stock have been canceled or exercised.
(i) On the Closing Date, Dissenting Shares shall aggregate no more than
5% of the then outstanding shares of Company Common Stock.
(j) The Company shall have used commercially reasonable efforts to cause
at least 90% of the employees of the Company as of the date hereof (other
than the Designated Employees) to
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have executed and delivered to Parent an Associate's Agreement in the form
attached hereto as EXHIBIT C.
(k) Without limiting the provisions of SECTION 6.2(j), the Company shall
have used commercially reasonable efforts to cause all of the employees of
the Company specifically designated by Parent to have agreed to remain
employed by the Surviving Corporation after the Closing, including by having
executed an Associate's Agreement, in the capacities designated by Parent.
(l) Parent shall have received an executed Non-Competition Agreement
from Richard C. Auger in the form attached hereto as EXHIBIT D.
SECTION 6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger are also subject to the
following conditions:
(a) Each of the representations of Parent and Merger Sub contained in
this Agreement will be true and correct in all material respects (except
that where any statement in a representation or warranty expressly includes
a standard of materiality, such statement will be true and correct in all
respects giving effect to such standard) as of the Closing Date as though
made on and as of the Closing Date, provided that those representations and
warranties which address matters only as of a particular date will remain
true and correct in all material respects (except that where any statement
in a representation or warranty expressly includes a standard of
materiality, such statement will be true and correct in all respects giving
effect to such standard) as of such date. The Company will have received a
certificate of a Vice President and the Chief Financial Officer of Parent to
such effect.
(b) Parent will have, and will cause Merger Sub to have, performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them on or prior to
the Closing Date. The Company will have received a certificate of a Vice
President and the Chief Financial Officer of Parent to such effect.
(c) Parent will have delivered to the Company:
(i) certificates of good standing from the Delaware Secretary of
State stating that each of Parent and Merger Sub is a validly existing
corporation in good standing;
(ii) duly adopted resolutions of the Board of Directors of each of
Parent and Merger Sub approving the execution, delivery and performance
of this Agreement and the instruments contemplated hereby, each certified
by the Secretary or the Assistant Secretary of the Company; and
(iii) a true and complete copy of the certificates of incorporation,
as amended, of Parent and Merger Sub certified by the Secretary of State
of the state of each of their incorporation, and a true and complete copy
of the bylaws, as amended, of Parent and Merger Sub certified by the
Secretary or Assistant Secretary of Parent and Merger Sub, as applicable.
(d) The Company shall have received an opinion of counsel to Parent and
Merger Sub, Hughes & Luce, L.L.P., in the form of EXHIBIT E. In rendering
such opinion, such counsel may rely on opinions of local counsel to the
extent such counsel deems it reasonable to do so.
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ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1 TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding
approval of this Agreement and the Merger by the Company's stockholders):
(a) by mutual written consent of Parent, Merger Sub, and the Company;
(b) by Parent and Merger Sub, on the one hand, or the Company, on the
other hand, if any court of competent jurisdiction or other governmental
body has issued a final order, decree, or ruling or taken any other final
action restraining, enjoining, or otherwise prohibiting the Merger and such
order, decree, ruling, or other action is or has become nonappealable;
(c) by the Company if a person or group has made a bona fide proposal
concerning a Third Party Acquisition (as defined in SECTION 7.3(c)):
(i) that the Board of Directors of the Company determines in its good
faith judgment and in the exercise of its fiduciary duties, after
consultation with its financial advisors, is a Superior Proposal; and
(ii) as a result of which the Board of Directors of the Company
determines in its good faith judgment, after consultation with outside
legal counsel, that it is obligated by its fiduciary duties to terminate
this Agreement, provided:
(A) that the Company may not terminate this Agreement pursuant to
this SECTION 7.1(c) unless and until:
(1) three business days have elapsed following delivery to
Parent of a written notice of such determination by the Board of
Directors of the Company:
(I) which notice informs Parent of the terms and
conditions of the proposed Third Party Acquisition; and
(II) during such three business day period the Company
otherwise reasonably cooperates with Parent with respect
thereto (subject, in the case of this
SECTION 7.1(c)(ii)(A)(1)(II), to the condition that the Board
of Directors of the Company shall not be required to take any
action that it determines in its good faith judgment, after
consultation with outside legal counsel, would result in a
violation of its fiduciary duties to the stockholders under
applicable law) with the intent of providing Parent with the
opportunity to offer to modify the terms and conditions of
this Agreement so that the transactions contemplated hereby
may be effected; and
(2) at the end of such three business day period the
determination of the Board of Directors of the Company described
in SECTION 7.1(c)(i) continues (after consultation with its
financial advisors) to be the good faith judgment of the Board of
Directors of the Company, and the provisions of
SECTION 7.1(c)(ii) continue to be true; and
(B) that such termination under this SECTION 7.1(c) will not be
effective until payment of the fee required by SECTION 7.3(b);
(d) by Parent and Merger Sub, if:
(i) there has been a breach (which breach is not cured or not capable
of being cured prior to 10 days following notice to the Company by Parent
of such breach) of any representation or warranty on the part of the
Company having a Company Material Adverse
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Effect or materially adversely affecting or delaying the ability of
Parent or Merger Sub to consummate the Merger;
(ii) there has been a breach (which breach is not cured or not
capable of being cured prior to 10 days following notice to the Company
by Parent of such breach) of any covenant or agreement on the part of the
Company having a Company Material Adverse Effect or materially adversely
affecting or delaying the ability of Parent or Merger Sub to consummate
the Merger;
(iii) the Company, directly or indirectly, solicits, facilitates, or
encourages the initiation of any inquiries or proposals regarding a Third
Party Acquisition in violation of the first sentence of SECTION 8.7(a),
which violation is not cured prior to 5 days following notice to the
Company by Parent of such violation. The parties hereto understood and
agree that any such violation that results in or leads to, at any time
(before or after such five-day period), a Superior Proposal or that
otherwise materially adversely affects the ability of the Company to
perform its obligations under this Agreement and consummate the Merger
without significant delay (it being understood and agreed that any delay
beyond February 15, 2001 will be deemed a significant delay)
(collectively, an "Adverse Result"), will constitute a violation that was
not cured within such 5 day period; provided however, that the parties
hereto further understand and agree that if the Company communicates to
the party acting as a result of such violation that the Company is bound
by the provisions of SECTION 8.7(a), and such violation does not result
in an Adverse Result, such violation will be deemed to have been cured by
the Company; provided further, however, that the opportunity of the
Company to so cure any such violation is expressly conditioned on the
Company having diligently taken, at all times during the term of this
Agreement, all reasonable measures to prevent such violation, including,
without limitation, informing its officers, directors and representatives
of the prohibition contained in the first sentence of SECTION 8.7(a);
(iv) the Company engages in negotiations with any person or group
(other than Parent or Merger Sub) that has proposed a Third Party
Acquisition except to the extent permitted by SECTION 8.7;
(v) the Company enters into an agreement, letter of intent, or
arrangement with respect to a Third Party Acquisition; or
(vi) the Board of Directors of the Company has withdrawn or modified
in a manner adverse to Parent or Merger Sub its approval or
recommendation of this Agreement, or the Merger or has recommended
another transaction, or has adopted any resolution to effect any of the
foregoing;
(e) by the Company if:
(i) there has been a breach (which breach is not cured or not capable
of being cured prior to 10 days following notice to Parent of such
breach) of any representation or warranty on the part of Parent or Merger
Sub having a Parent Material Adverse Effect or materially adversely
affecting or delaying the ability of Parent or Merger Sub to consummate
the Merger; or
(ii) there has been a material breach (which breach is not cured or
not capable of being cured prior to 10 days following notice to Parent of
such breach) of any covenant or agreement on the part of Parent or Merger
Sub having a Parent Material Adverse Effect or materially adversely
affecting or delaying the ability of the Company to consummate the
Merger;
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(f) by either Parent or the Company, if the Merger has not occurred by
February 15, 2001, unless the failure to consummate the Merger is the result
of a breach of any covenant set forth in this Agreement or a material breach
of any representation or warranty set forth in this Agreement by the party
seeking to terminate this Agreement pursuant to this provision; or
(g) by either Parent or the Company (provided that the terminating party
is not in material breach of any of its representations, warranties, or
obligations under this Agreement), if the approval of the stockholders of
the Company required for the consummation of the Merger shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of the Company's stockholders or at any adjournment or postponement
thereof.
SECTION 7.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to SECTION 7.1, this Agreement will
become void and have no effect, without any liability on the part of any party
to this Agreement or its affiliates, directors, officers, or stockholders, other
than as provided by this SECTION 7.2 and SECTIONS 5.6(b), 5.7, and 7.3. Nothing
contained in this SECTION 7.2 will relieve any party from liability for any
willful breach of this Agreement.
SECTION 7.3 FEES AND EXPENSES.
(a) In the event Parent and Merger Sub terminate this Agreement pursuant
to SECTION 7.1(d) or the Company terminates this Agreement pursuant to
SECTION 7.1(c), the Company will reimburse Parent, Merger Sub, and their
affiliates and in the event the Company terminates this Agreement pursuant
to Section 7.1(e) Parent will reimburse the Company and its affiliates (not
later than one business day after submission of statements together with
reasonable documentation therefor) for all out-of-pocket fees and expenses
actually incurred by any of them or on their behalf in connection with the
Merger, and the proposed consummation of all transactions contemplated by
this Agreement (including, without limitation, filing fees and fees payable
to legal counsel, financing sources, investment bankers, counsel to any of
the foregoing, and accountants).
(b) If:
(i) (A) Parent and Merger Sub terminate this Agreement pursuant to
SECTIONS 7.1(d)(iv), (v) OR (vi) or in circumstances that would permit
Parent and Merger Sub to terminate this Agreement pursuant to
SECTIONS 7.1(d) (iv), (v) OR (vi) had a notice of termination specified
such SECTION 7.1(d) (iv), (iv) OR (iv) or (B) if the Company terminates
this Agreement pursuant to SECTION 7.1(c) or the Parent or the Company
terminate this Agreement pursuant to SECTION 7.1(g), and in the case of
either clause (i)(A) or (i)(B), the Company has, or within 365 days after
a termination pursuant to clause (i)(A) or (i)(B), the Company enters
into, an agreement, letter of intent, or arrangement with respect to a
Third Party Acquisition, or a Third Party Acquisition occurs, then in
either case the Company will pay to Parent, within one business day
following the execution and delivery of such agreement or letter of
intent or the entering into of such an arrangement or the occurrence of
such Third Party Acquisition, as the case may be, or simultaneously with
such termination, a fee, in cash, of $850,000 and reimburse Parent for
all out-of-pocket fees and expenses actually incurred by or on behalf of
Parent or Merger Sub in connection with the Merger and the proposed
consummation of all transactions contemplated by this Agreement
(including, without limitation, filing fees and fees payable to legal
counsel, investment bankers, counsel to any of the foregoing, and
accountants); or
(ii) Parent and Merger Sub terminate this Agreement pursuant to
SECTION 7.1(d)(iii), or in circumstances that would permit Parent and
Merger Sub to terminate this Agreement pursuant to SECTION 7.1(d)(iii)
had a notice of termination specified such SECTION 7.1(d)(iii), then the
Company will pay to Parent, within one business day following the
occurrence of any event specified in SECTION 7.1(d)(iii) or
simultaneously with such termination, a fee, in cash, of
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$850,000 and reimburse Parent for all out-of-pocket fees and expenses
actually incurred by or on behalf of Parent or Merger Sub in connection
with the Merger and the proposed consummation of all transactions
contemplated by this Agreement (including, without limitation, filing
fees and fees payable to legal counsel, investment bankers, counsel to
any of the foregoing, and accountants).
(c) For the purposes of this Agreement, "Third Party Acquisition" means
the occurrence of any of the following events:
(i) the acquisition of the Company by merger or otherwise by any
person or group other than Parent, Merger Sub, or any affiliate of Parent
or Merger Sub (a "Third Party");
(ii) the acquisition by a Third Party of more than 19.9% of the total
assets of the Company and its subsidiaries, taken as a whole;
(iii) the acquisition by a Third Party of 19.9% or more of the
outstanding shares of Company Common Stock from the Company or any of its
affiliates or in a transaction or series of related transactions that
results in a change of control of the Company;
(iv) the adoption by the Company of a plan of liquidation of the
Company or the declaration or payment of an extraordinary dividend;
(v) the acquisition by the Company or any of its subsidiaries of more
than 19.9% of the outstanding shares of Company Common Stock; or
(vi) or any agreement or understanding to do or that would result in
any of the foregoing.
(d) Except as specifically provided in this SECTION 7.3 each party will
bear its own expenses in connection with this Agreement and the transactions
contemplated by this Agreement.
SECTION 7.4 AMENDMENT. This Agreement may not be amended except in an
instrument in writing signed on behalf of all of the parties to this Agreement;
PROVIDED, HOWEVER, that after approval of the Merger and this Agreement by the
stockholders of the Company, no amendment that under applicable law requires
further approval of such stockholders may be made without the further approval
of such stockholders of the Company.
SECTION 7.5 WAIVER.
(a) At any time prior to the Effective Time, whether before or after the
Special Meeting, any party to this Agreement may:
(i) extend the time for the performance of any of the obligations or
other acts of any other party or parties to this Agreement;
(ii) waive any inaccuracies in the representations and warranties
contained in this Agreement by any other applicable party or in any
documents, certificate, or writing delivered pursuant to this Agreement
by any other applicable party; or
(iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations.
(b) Any agreement on the part of a party to this Agreement to any such
extension or waiver will be valid only if set forth in an instrument in
writing signed on behalf of such party by a duly authorized officer.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. The
representations and warranties made in this Agreement will not survive beyond
the Effective Time or the termination of this Agreement, as the case may be. No
investigation made, or information received by, any party to this Agreement will
affect any representation or warranty made by any other party to this Agreement.
The covenants and agreements of the parties to this Agreement will survive in
accordance with their terms.
SECTION 8.2 ENTIRE AGREEMENT; ASSIGNMENT.
(a) This Agreement, together with the Disclosure Letter, Exhibits and
Annexes:
(i) constitutes the entire agreement between the parties with respect
to the subject matter of this Agreement and supersedes all other prior
written agreements and understandings and all prior and contemporaneous
oral agreements and understandings between the parties to this Agreement
or any of them with respect to the subject matter of this Agreement; and
(ii) will not be assigned by operation of law or otherwise, provided
that Parent may assign its rights and obligations under this Agreement,
or those of Merger Sub, including, without limitation, the right to
substitute in place of Merger Sub a subsidiary as one of the constituent
entities to the Merger as provided in SECTION 1.1 to any direct or
indirect subsidiary of Parent, but no such assignment will relieve the
assigning party of its obligations under this Agreement.
(b) Any purported assignment of this Agreement not made in accordance
with this Section 8.2 will be null, void, and of no effect.
SECTION 8.3 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal, or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect. Upon any final judicial determination that any
term or other provision is invalid, illegal, or incapable of being enforced, the
parties to this Agreement will negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement be consummated to the extent possible.
SECTION 8.4 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed to
have been duly given when delivered in person, by cable, telegram or telex,
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
(a) if to Parent or Merger Sub, to:
Perot Systems Corporation
12404 Park Central Drive
Dallas, Texas 75251
Attention: Peter A. Altabef
Fax: (972) 340-6085
and
PSC Health Care, Inc.
12404 Park Central Drive
Dallas, Texas 75251
Attention: Peter A. Altabef
Fax: (972) 340-6085
A-33
<PAGE>
with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attention: Glen J. Hettinger
Fax: (214) 939-5849
(b) if to the Company, to:
Health Systems Design Corporation
1111 Broadway Suite 1800
Oakland, California 94607
Attention: Christopher Ohman
Fax: (510) 251-1326
with a copy to:
Gibson, Dunn & Crutcher, LLP
One Montgomery Street
San Francisco, California 94104
Attention: Douglas D. Smith
Fax: (415) 374-8411
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address will be effective only upon
receipt).
SECTION 8.5 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS
THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS.
SECTION 8.6 SPECIFIC PERFORMANCE. Each of the parties to this Agreement
acknowledges and agrees that the other parties to this Agreement would be
irreparably damaged in the event any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. Accordingly, each of the parties to this Agreement agrees that each of
them will be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions of this Agreement in any action instituted in any court of
the United States or any state having subject matter jurisdiction, in addition
to any other remedy to which such party may be entitled, at law or in equity.
SECTION 8.7 OTHER POTENTIAL BIDDERS.
(a) The Company shall not, directly or indirectly, through any
officer, director, employee, representative or agent of the Company or
any of its subsidiaries, solicit, facilitate, or encourage (including by
way of furnishing information) the initiation of any inquires or
proposals regarding a Third Party Acquisition (any of the foregoing
inquiries or proposals being referred to in this Agreement as an
"Acquisition Proposal"). Nothing contained in this SECTION 8.7(a) or any
other provision of this Agreement shall prevent the Board if it
determines in its good faith judgment, after consultation with outside
legal counsel, that it is required to do so in order to discharge
properly its fiduciary duties, from considering, negotiating, approving
and recommending to the stockholders of the Company an unsolicited bona
fide written Acquisition Proposal which the Board of Directors of the
Company determines in its good faith judgment (after consultation with
its financial advisors) would result in a transaction more favorable to
the Company's stockholders from a financial point of view than the
transaction contemplated by this Agreement (any Acquisition Proposal
meeting
A-34
<PAGE>
such criterion being referred to in this Agreement as a "Superior
Proposal"). Nothing in this Agreement shall prohibit the Company from
complying with Item 1012 of Regulation M-A under the Exchange Act with
respect to any tender offer.
(b) The Company shall promptly, but in no event later than 24 hours,
notify Parent after receipt of any Acquisition Proposal or any request
for nonpublic information relating to the Company or any of its
subsidiaries in connection with an Acquisition Proposal or for access to
the properties, books or records of the Company or any subsidiary by any
person that informs the Board that it is considering making, or has made,
an Acquisition Proposal. Such notice to Parent shall be made orally and
in writing and shall indicate in reasonable detail the identity of the
offeror and the terms and conditions of such proposal, inquiry or
contact.
(c) If the Board receives a request for nonpublic information by a
person that makes an unsolicited bona fide Acquisition Proposal and the
Board determines that such Acquisition Proposal is a Superior Proposal,
then, and only in such case, the Company may, subject to the execution of
a confidentiality agreement substantially the same as that then in effect
between the Company and Parent, provide such party with access to
information regarding the Company.
(d) The Company shall immediately cease and cause to be terminated
any existing discussions or negotiations with any parties (other than
Parent and Merger Sub) conducted heretofore with respect to any of the
foregoing. The Company agrees not to release any third party from any
confidentiality or standstill agreement to which the Company is a party.
(e) The Company shall ensure that the officers and directors and each
employee that is aware of this Agreement of the Company and its
subsidiaries and any investment banker or other advisor or representative
retained by the Company are aware of the restrictions described in this
SECTION 8.7; and shall be responsible for any breach of this SECTION 8.7
by such bankers, advisors and representatives.
SECTION 8.8 DESCRIPTIVE HEADINGS; REFERENCES. The descriptive headings in
this Agreement are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement. References in this Agreement to Sections, Annexes, and the Disclosure
Letter are references to the Sections, Annexes, and the Disclosure Letter of
this Agreement unless the context indicates otherwise.
SECTION 8.9 PARTIES IN INTEREST. This Agreement will be binding upon and
inure solely to the benefit of each party to this Agreement, and, except as
provided in SECTIONS 5.8 and 8.10, nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
SECTION 8.10 BENEFICIARIES. Parent hereby acknowledges that SECTION 5.8 is
intended to benefit the indemnified parties referred to in SECTION 5.8, any of
whom will be entitled to enforce SECTION 5.8 against the Surviving Corporation
or the Company, as the case may be.
SECTION 8.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original, but all of which
will constitute one and the same agreement.
SECTION 8.12 OBLIGATIONS. Parent will perform or cause Merger Sub to
perform all of the obligations of Merger Sub under this Agreement, including
consummation of the Merger, in accordance with the terms of this Agreement.
A-35
<PAGE>
SECTION 8.13 CERTAIN DEFINITIONS. For the purposes of this Agreement:
(a) the term "subsidiary" means each person in which a person owns or
controls, directly or through one or more subsidiaries, 50 percent or
more of the stock or other interests having general voting power in the
election of directors or persons performing similar functions or
50 percent or more of the equity interests;
(b) the term "person" will be broadly construed to include any
individual, corporation, company, partnership, trust, joint stock
company, association, or other private or governmental entity;
(c) the term "group" has the meaning given in Section 13(d)(3) of the
Exchange Act;
(d) the term "affiliate" has the meaning given in Rule 144(a)(1)
under the Securities Act;
(e) the term "business day" has the meaning given in
Rule 14d-1(c)(6) under the Exchange Act; and
(f) the term "Disclosure Letter" means the disclosure letter executed
by the Company and Parent, as applicable, concurrently with the execution
and delivery of this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
A-36
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PARENT:
PEROT SYSTEMS CORPORATION, a Delaware
corporation
By: /s/ RANDALL BOOTH
-----------------------------------------------------------------------------
Name: Randall Booth
--------------------------------------------------------------------------
Title: Vice President
---------------------------------------------------------------------------
MERGER SUB:
PSC HEALTH CARE, INC., a Delaware
corporation
By: /s/ JOHN HARPER
-----------------------------------------------------------------------------
Name: John Harper
--------------------------------------------------------------------------
Title: Treasurer
---------------------------------------------------------------------------
COMPANY:
HEALTH SYSTEMS DESIGN CORPORATION, a
Delaware corporation
By: /s/ ARTHUR M. SOUTHAM, M.D.
-----------------------------------------------------------------------------
Name: Arthur M. Southam, M.D.
--------------------------------------------------------------------------
Title: President & Chief Executive
Officer
---------------------------------------------------------------------------
A-37
<PAGE>
EXHIBIT A-1
PARTIES TO VOTING AGREEMENT
Richard C. Auger
J. Matthew Mackowski
Catherine C. Roth
A-1-1
<PAGE>
EXHIBIT A-2
FORM OF VOTING AGREEMENT
VOTING AGREEMENT
, 2000
[PARENT]
____________________________
____________________________
____________________________
Re: Agreement of Stockholders Concerning Transfer and Voting of Shares of
Health Systems Design Corporation
I understand that you and Health Systems Design Corporation (the "Company"),
of which the undersigned is a stockholder, are prepared to enter into an
agreement for the merger of a wholly-owned subsidiary of Parent ("Merger Sub")
into the Company (the "Merger"), but that you have conditioned your willingness
to proceed with such agreement (the "Agreement") upon your receipt from me of
assurances satisfactory to you of my support of and commitment to the Merger. I
am familiar with the Agreement and the terms and conditions of the Merger. Terms
used but not otherwise defined in this letter will have the same meanings as are
given them in the Agreement. In order to evidence such commitment and to induce
you to enter into the Agreement, I hereby represent and warrant to you and agree
with you as follows:
1. VOTING. I will vote or cause to be voted all shares of capital stock of
the Company owned of record or beneficially owned or held in any capacity by me
or under my control, by proxy or otherwise, in favor of the Merger and other
transactions provided for in or contemplated by the Agreement and against any
inconsistent proposals or transactions. I hereby revoke any other proxy granted
by me and irrevocably appoint you, during the term of this letter agreement, as
proxy for and on behalf of me to vote (including, without limitation, the taking
of action by written consent) such shares, for me and in my name, place and
stead for the matters and in the manner contemplated by this SECTION 1.
2. OWNERSHIP. As of the date of this letter, my only ownership of, or
interest in, equity securities of the Company, including proxies granted to me,
consists solely of the interests described in SCHEDULE 1 (collectively, the
"Shares").
3. RESTRICTION ON TRANSFER. I will not sell, transfer, pledge or otherwise
dispose of any of the Shares or any interest therein (including the granting of
a proxy to any person) or agree to sell, transfer, pledge or otherwise dispose
of any of the Shares or any interest therein, unless, as a condition to receipt
of such Shares, the transferee agrees to bound by the terms of this letter.
4. NO SOLICITATION. From the date of this letter until the termination of
this letter, I will not, directly or indirectly, (a) take any action to solicit,
initiate or encourage any Acquisition Proposal or (b) engage in negotiations or
discussions with, or disclose any nonpublic information relating to the Company
or any subsidiary of the Company to, or otherwise assist, facilitate or
encourage, any person (other than Parent and Merger Sub) that may be considering
making, or has made, an Acquisition Proposal. I will promptly notify Merger Sub
after receipt of any Acquisition Proposal or any indication that any such third
party is considering making an Acquisition Proposal or any request for nonpublic
information relating to the Company or any subsidiary of the Company or for
access to the properties, books or records of the Company or any such subsidiary
by any such third party that may be
A-2-1
<PAGE>
considering making, or has made, an Acquisition Proposal and will keep Parent
fully informed of the status and details of any such Acquisition Proposal,
indication or request. The foregoing provisions of this SECTION 4 will not be
construed to limit actions taken, or to require actions to be taken, by me that
are required or restricted by my fiduciary duties or my employment duties, or
permitted by the Agreement, and that, in each case, are undertaken in my
capacity as a director or officer of the Company.
5. EFFECTIVE DATE; SUCCESSION; REMEDIES; TERMINATION. Upon your acceptance
and execution of the Agreement, this letter agreement will mutually bind and
benefit you and me, any of our heirs, successors and assigns and any of your
successors. You will not assign the benefit of this letter agreement other than
to a wholly owned subsidiary. We agree that in light of the inadequacy of
damages as a remedy, specific performance will be available to you, in addition
to any other remedies you may have for the violation of this letter agreement.
This letter agreement will terminate on the earlier of (i) the termination of
the Agreement and (ii) February 15, 2001.
6. NATURE OF HOLDINGS; SHARES. All references in this letter to our
holdings of the Shares will be deemed to include Shares held or controlled by
the undersigned, individually, jointly, or in any other capacity, and will
extend to any securities issued to the undersigned in respect of the Shares.
[STOCKHOLDER]:
___________________________________________
Name: ____________________________________
A-2-2
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES RECORD OWNER BENEFICIAL OWNER PROXY HOLDER
----- ---------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
</TABLE>
A-2-3
<PAGE>
EXHIBIT C
[PEROT SYSTEMS LOGO]
ASSOCIATE EMPLOYMENT AGREEMENT
Perot Systems Corporation or one of its affiliates ("Company") and
_________________________ agree to enter into an employment relationship with a
start date of ____________________, 20______, in accordance with the terms of my
written offer of employment and this Agreement.
1. SALARY. My initial salary will be $_____________ per month/hour (circle
one). I may, subject to my satisfaction of the applicable eligibility
requirements, participate in the Company's benefit programs.
2. CONFIDENTIAL INFORMATION. I acknowledge that I will receive confidential
information and training from Company, its customers and suppliers because of
our relationship of mutual confidence and trust. This confidential information
will include all business, financial and technical information, including
information I develop, relating to the business activities, products or services
of Company, its customers or suppliers, whether or not such information is
identified as confidential. Confidential information does not include any
information that Company approves for unrestricted public disclosure.
I will not disclose or use, and will take reasonable precautions to prevent
the disclosure or use of, any of this confidential information, except in the
good faith performance of my duties, and I will return all confidential
information to Company at its request. At Company's request, I will execute and
comply with a third party's agreement not to disclose or use its confidential
information. In addition, I will not solicit or induce the unauthorized
disclosure or use of any third party's confidential information.
3. PROPRIETARY RIGHTS. All copyrights, patent rights and other intellectual
property rights in and to all works of authorship, including software programs,
and inventions that I produce, working alone or jointly with others, while
employed by Company, together with all related ideas, know-how and techniques
will be owned solely by Company, except for works of authorship or inventions
that both (i) I develop on my own time without using Company's resources or
confidential information, and (ii) do not relate to Company's business or actual
or demonstrably anticipated research or development, or my work for Company. I
will disclose and assign to Company, and waive (to the maximum extent permitted
by law) all moral or similar rights in, all such works of authorship and
inventions, and will sign, without additional compensation, all necessary
documents and otherwise assist Company, at its expense, to register and enforce
all copyrights, patents and other intellectual property rights. I appoint
Company as my attorney-in-fact for the sole purpose of executing all necessary
documents relating to the registration or enforcement of Company's copyrights,
patents and other intellectual property rights. Company can waive its rights in
any work of authorship or invention only through a written instrument signed by
an officer of Company after I have fully and completely disclosed in writing the
existence and nature of that work of authorship or invention.
4. NO COMPETITION. Because of my access to Confidential Information, for
one year after my employment by Company ends, for any reason, I will not solicit
or perform services, as an employee, independent contractor or otherwise, for
any person (including any affiliates or subsidiaries of that person) that is or
was a customer or prospect of Company during the two years prior to that date if
I solicited business from or performed services for that customer or prospect
while employed by Company. If a court finds this paragraph to be unreasonable,
then this paragraph will be amended to provide the broadest scope of protection
to Company that such court will allow.
5. NO SOLICITATION. For one year after my employment with Company ends, for
any reason, I will not recruit, hire or help anyone to recruit or hire anyone
who was an employee of Company or any of its customers within the six months
before my employment by Company ended. If a court finds this
C-1
<PAGE>
paragraph to be unreasonable, then this paragraph will be amended to provide the
broadest scope of protection to Company that such court will allow.
6. OUTSIDE ACTIVITIES. While employed by Company, I will not engage or have
any financial interest (excluding investments in less than 5% of the securities
of a publicly-traded company) in any other business activity, without notifying
the Company and obtaining its approval. I represent that the performance of my
duties as an Associate will not conflict with any obligations that I have to any
former employer or other person.
7. POLICIES. I have read and reviewed, and I agree to comply with, all
policies of Company, including its Standards and Ethical Principles and all
other policies published on The Real Time Associate Network (TRAIN), and
acknowledge that Company may revise these policies from time to time without my
consent. Upon request, I will provide Company with blood or urine samples to be
tested for alcohol, controlled substances or other materials that could
interfere with my work performance.
8. EMPLOYMENT. I UNDERSTAND THAT MY EMPLOYMENT IS "AT WILL" AND THAT I CAN
TERMINATE MY EMPLOYMENT, WITH OR WITHOUT CAUSE, WITHOUT NOTICE AT ANY TIME, AND
THAT COMPANY HAS THE SAME RIGHT UNLESS OTHERWISE PROHIBITED BY LAW. I ALSO
UNDERSTAND AND AGREE THAT THIS AGREEMENT WILL CONTINUE TO APPLY TO ME IF I AM
TRANSFERRED TO AN AFFILIATE OF COMPANY.
9. OFFSETS. I AUTHORIZE COMPANY TO OFFSET, TO THE MAXIMUM EXTENT PERMITTED
BY LAW, ANY AMOUNTS THAT I OWE COMPANY AGAINST, AND TO WITHHOLD SUCH AMOUNTS
FROM, ANY AMOUNTS, INCLUDING SALARY, BONUSES, COMMISSIONS AND EXPENSE
REIMBURSEMENTS, COMPANY OWES ME.
10. GOVERNING LAW AND VENUE. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF TEXAS WITHOUT GIVING EFFECT TO ANY RULES OF CONFLICTS OF LAW. I
AGREE THAT ANY LEGAL ACTION RELATING TO CLAIMS, INCLUDING ANY STATUTORY CLAIMS,
ARISING OUT OF OR RELATING TO MY EMPLOYMENT SHALL BE BROUGHT ONLY IN A COURT OF
COMPETENT JURISDICTION IN DALLAS, TEXAS, OR IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE PARTIES HERETO SUBMIT TO THE PERSONAL JURISDICTION OF SUCH
COURTS AND WAIVE ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE IN SUCH COURTS. NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR
PUNITIVE DAMAGES FOR ANY SUCH CLAIMS AND I HEREBY WAIVE ANY CLAIMS AGAINST
COMPANY FOR SUCH DAMAGES.
11. CONTINUING OBLIGATIONS. I agree that my obligations with respect to
confidential information, proprietary rights, non-competition and
non-solicitation will continue after my employment with Company ends. I also
agree that my breach of any of these obligations will cause irreparable injury
for which there are no adequate remedies at law and that Company will be
entitled to equitable relief in addition to all other remedies that may be
available.
12. ENTIRE AGREEMENT. This is our entire agreement with respect to its
subject matter. It supersedes any prior discussions, promises, or agreements on
these subjects. It cannot be changed except in writing signed by an officer of
Company and me.
<TABLE>
<CAPTION>
<S> <C>
ASSOCIATE COMPANY
Hiring Manager
Signed: Signed:
Name: Name:
Date: Date:
</TABLE>
C-2
<PAGE>
EXHIBIT D
NON-COMPETITION AGREEMENT
This Non-competition Agreement (this "AGREEMENT") is dated and made
effective as of October 18, 2000, by and between Richard C. Auger ("RECIPIENT"),
and PSC Health Care, Inc., a Delaware corporation (the "COMPANY"). Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
such terms in the Merger Agreement (as defined below).
WHEREAS, Merger Sub, the predecessor to the Company, Perot Systems
Corporation, a Delaware corporation and parent of the Company ("PSC"), and
Health Systems Design Corporation, a Delaware corporation ("HSDC"), entered into
that certain Agreement and Plan of Merger dated as of October 18, 2000 (the
"MERGER AGREEMENT") pursuant to which Merger Sub merged with and into HSDC, with
the Company continuing as the surviving corporation;
WHEREAS, Recipient held shares of capital stock of the Company, or options
to acquire shares of capital stock of the Company, or some combination of each
(collectively, "HOLDINGS");
WHEREAS, upon the closing of the transactions contemplated by the Merger
Agreement, Recipient received a substantial portion of the Merger Consideration
in respect of his Holdings;
WHEREAS, Merger Sub and PSC require that Recipient enter into this Agreement
as part of the transactions contemplated by the Merger Agreement;
WHEREAS, Recipient received substantial direct and indirect benefits from
the transactions contemplated by the Merger Agreement;
NOW, THEREFORE, the parties agree as follows:
1. CONSIDERATION. In consideration of the substantial direct and indirect
benefits received by Recipient pursuant to and as a result of the transactions
contemplated by the Merger Agreement, Recipient hereby agrees to the provisions
set forth in this Agreement.
2. NON-COMPETITION.
(a) For the period beginning on the date hereof and ending on the date
two years after the date hereof (the "NON-COMPETE PERIOD"), Recipient
will not, directly or indirectly, without the express written consent
of an authorized officer of PSC, which may be withheld in the sole
and absolute discretion of PSC:
(i) solicit or perform consulting or other services (including,
without limitation, marketing or sales services) for, or provide
information to, any client of the Company or PSC (including any
affiliates or subsidiaries of such client) concerning or
relating to the Company's DIAMOND-Registered Trademark- 725 and
DIAMOND-Registered Trademark- 950 products or any competing
software product that processes health care provider claims,
capitation, premium billing and related transactions for health
insurers or health plans that could be a replacement or
substitute for the Company's DIAMOND-Registered Trademark- 725
and DIAMOND-Registered Trademark- 950 products, as such
DIAMOND-Registered Trademark- 725 and
DIAMOND-Registered Trademark- 950 products exist on the date of
this Agreement;
(ii) engineer, design, develop, build, program, market, sell or
license, or assist in any manner with the engineering,
designing, development, building, programming, marketing,
selling or licensing of, any software product that processes
health care provider claims, capitation, premium billing and
related transactions for health insurers or health plans that
could be a replacement or substitute for the Company's
DIAMOND-Registered Trademark- 725 and
DIAMOND-Registered Trademark- 950 products, as such
DIAMOND-Registered Trademark- 725 and
DIAMOND-Registered Trademark- 950 products exist on the date of
this Agreement; or
D-1
<PAGE>
(iii) solicit or perform consulting or other services (including,
without limitation, marketing or sales services) for any Named
Competitor. For purposes of this Agreement, Named Competitors
shall include: EDS, CSC, TriZetto, Erisco, QCSI, McKesson,
AMISYS, Siemans Medical Systems, First Consulting Group,
Superior Consulting, Daou Systems or any successor to the
competing business or the competing products of any Named
Competitor, whether by means of a merger, acquisition, or other
transaction;
anywhere in the United States or Canada (the "COVERED AREA"). For purposes of
this Agreement, the phrase "directly or indirectly" shall mean to engage
directly or to have an interest, directly or indirectly, as owner, partner,
shareholder, director, officer, employee, independent contractor, capital
investor, lender, renderer of consultation services or advice or otherwise
(other than as the holder of less than 5% of the outstanding stock of a
publicly-traded corporation), either alone or in association with others. If
Recipient desires to engage in any of the activities described in Sections
2(a)(i)-(iii), Recipient will deliver advance written notice to PSC, which
notice will specify in reasonable detail the activity in which Recipient desires
to engage and the parties involved (the "ACTIVITY"). PSC will have a period of
10 days from its receipt of such notice (the "REPLY PERIOD") to inform
Recipient, in writing, whether PSC will grant or withhold its consent. If PSC
informs Recipient, in writing within the Reply Period, that it does not consent
to the Activity, Recipient will be prohibited from engaging in such Activity in
accordance with this Agreement. If PSC informs Recipient, in writing within the
Reply Period, that it consents to the Activity, or fails to notify the
Recipient, in writing within the Reply Period, of its decision concerning the
Activity, Recipient will be allowed to engage in the Activity, as and to the
extent (and only with respect to the parties), described in Recipient's notice,
notwithstanding the terms of this Agreement.
(b) Notwithstanding SECTION 2(A)(I), Recipient may provide services of
the type described in SECTION 2(A)(I), with systems that merely
interface, without more, with the Company's
DIAMOND-Registered Trademark- 725 and DIAMOND-Registered Trademark-
950 product line or with any product that is competitive with the
Company's DIAMOND-Registered Trademark- 725 and
DIAMOND-Registered Trademark- 950 product line.
(c) Recipient understands that the provisions of this SECTION 2 may limit
his or her ability to earn a livelihood in a business similar to the
Company's business, but nevertheless agrees and hereby acknowledges
that the consideration referenced in this Agreement is sufficient to
justify the restrictions contained in such provisions. In
consideration thereof and in light of Recipient's education, skills
and abilities, Recipient agrees that he will not assert in any forum
of any nature or description that, and it should not be considered
that, such provisions prevent him or her from earning a living or
otherwise are void or unenforceable or should be voided or held
unenforceable.
3. ENFORCEMENT.
(a) Recipient acknowledges and agrees that his obligations under this
Agreement were a material inducement and condition to PSC and Merger
Sub entering into the Merger Agreement and the performance of their
respective obligations thereunder and that the restrictions and
remedies contained in this Agreement are reasonable as to time,
geographic area and scope of activity and do not impose a greater
restraint than is necessary to protect the goodwill and other
legitimate business interests of the Company and PSC.
(b) If the provisions of this Agreement are found by a court of competent
jurisdiction to contain unreasonable or unnecessary limitations as to
time, geographic area or scope of activity, then such court is hereby
directed to reform such provisions to the minimum extent necessary to
cause the limitations contained therein as to time, geographical area
and scope of activity to be reasonable and enforceable.
D-2
<PAGE>
(c) Recipient acknowledges and agrees that the Company and PSC would be
irreparably harmed by any violation of their obligations under this
Agreement and that, in addition to all other rights or remedies
available at law or in equity, the Company and PSC will be entitled
to injunctive and other equitable relief to prevent or enjoin any
such violation.
4. MISCELLANEOUS.
(a) If attorneys' fees or other costs are incurred to secure performance
of any obligations hereunder, or to establish damages for the breach
hereof or to obtain any other appropriate relief, whether by way of
prosecution or defense, the prevailing party will be entitled to
recover reasonable attorneys' fees and costs incurred in connection
herewith.
(b) This Agreement may be executed in one or more counterparts for the
convenience of the parties hereto, all of which together will
constitute one and the same instrument.
(c) This Agreement, the Merger Agreement and the other documents and
agreements to be entered into in connection with the Merger Agreement
contain the entire understanding of the parties relating to the
subject matter thereof and supersede all prior written or oral and
all contemporaneous oral agreements and understandings relating to
the subject matter thereof. This Agreement may not be modified or
amended except in writing signed by the party against whom
enforcement is sought.
(d) This Agreement will be governed by and construed and interpreted in
accordance with the substantive laws of the State of Delaware,
without giving effect to any conflicts of law rule or principle that
might require the application of the laws of another jurisdiction.
(e) PSC is intended to be, and is, a third party beneficiary of this
Agreement.
5. ARBITRATION. Any controversy, dispute, or claim arising under this
Agreement will be finally settled by arbitration conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association in
effect on the date of this Agreement. Notwithstanding any provision of the
American Arbitration Association Commercial Arbitration Rules, any such
arbitration will be conducted before and decided by three arbitrators. The
parties to the arbitration will request that the American Arbitration
Association provide the parties with a list of seven potential arbitrators that
are former judges of the Chancery Court for the State of Delaware or the federal
courts of such state. Each party will then strike from the list (taking turns,
beginning with PSC) two names. After the rights to strike are exercised, the
last three individuals remaining on the list will be the arbitrators. Any such
arbitration will take place in the City of Wilmington, Delaware. The arbitrators
in any such arbitration will apply the laws of the State of Delaware and the
United States of America. In any arbitration under this Agreement, this
Agreement will be deemed to have been made in, and will be governed by and
construed under the laws of, the State of Delaware and the United States of
America. Any decision rendered by the arbitrators will be final and binding and
judgment thereon may be entered in any court having jurisdiction or application
may be made to such court for an order of enforcement as the case may require.
The parties intend that this agreement to arbitrate be irrevocable and the
exclusive means of settling all disputes under this Agreement, whether for money
damages or equitable relief. If arbitration is invoked in accordance with the
provisions of this Agreement, the prevailing party in the arbitration will be
entitled to recover from the other all costs, fees, and expenses pertaining or
attributable to such arbitration, including reasonable attorneys' fees.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
D-3
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
PSC HEALTH CARE, INC.
By: /s/_JOHN E. HARPER________________
Name: _John E. Harper_________________
Title: Treasurer______________________
RECIPIENT:
/S/_RICHARD C. AUGER__________________
Richard C. Auger
D-4
<PAGE>
APPENDIX B
DELAWARE GENERAL CORPORATION LAW
SECTION 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(G) of this title), Section 252 Section 254 Section 257 Section 258
Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
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d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the merger
or consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or series
of stock of such constituent
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corporation that are entitled to appraisal rights of the effective date of
the merger or consolidation or (ii) the surviving or resulting corporation
shall send such a second notice to all such holders on or within 10 days
after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such
second notice need only be sent to each stockholder who is entitled to
appraisal rights and who has demanded appraisal of such holder's shares in
accordance with this subsection. An affidavit of the secretary or assistant
secretary or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be not
more than 10 days prior to the date the notice is given, provided, that if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day
on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
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<PAGE>
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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<PAGE>
APPENDIX C
[HOULIHAN LOKEY HOWARD & ZUKIN LETTERHEAD]
October 16, 2000
To the Board of Directors
Health Systems Design Corporation
We understand that Health Systems Design Corporation ("Company" or "HSDC"
hereinafter) is entering into a merger agreement pursuant to which 100% of the
outstanding shares of HSDC will be sold for $2 per share to Perot Systems in an
all cash transaction. Such transaction, as disclosed to Houlihan Lokey, is
referred to herein as the "Transaction."
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
Further, at your request, we have not negotiated the Transaction or advised you
with respect to alternatives to it.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed the Company's annual reports to shareholders and on Form 10-K
for the fiscal years ended September 30, 1999, quarterly reports on
Form 10-Q for the three quarters ended June 30, 2000, and Company
prepared financial statements for the 10 month period ended July 31,
2000, which the Company's management has identified as being the most
current financial statements available;
2. reviewed copies of the following agreements: draft Agreement and Plan of
Merger dated September 27, 2000;
3. met with certain members of the senior management of the Company to
discuss the operations, financial condition, future prospects and
projected operations and performance of the Company;
4. visited certain facilities and business offices of the Company;
5. reviewed forecasts and projections prepared by the Company's management
with respect to the Company for the fiscal year ending September 30,
2001;
6. reviewed the Offering Memorandum prepared by Robertson Stephens as of
December 1999;
7. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;
8. reviewed certain other publicly available financial data for certain
companies that we deem comparable to the Company, and publicly available
prices and premiums paid in other transactions that we considered similar
to the Transaction; and
9. conducted such other studies, analyses and inquiries as we have deemed
appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company, and that there has been no material change
in the assets, financial condition, business or prospects of the Company since
the date of the most recent financial statements made available to us.
<PAGE>
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
Based on the foregoing, and in reliance thereon, it is our opinion that the
consideration to be received by the public stockholders of the Company in
connection with the Transaction is fair to them from a financial point of view.
/s/ HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
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<PAGE>
HEALTH SYSTEMS DESIGN CORPORATION
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
, 2000
The undersigned hereby constitutes and appoints Richard C. Auger and
Christopher C. Ohman, or either of them, and each of them, the attorneys and
proxies of the undersigned with full power of substitution to appear and to
vote all of the shares of common stock of Health Systems Design Corporation.
held of record by the undersigned on , 2000 at the Special Meeting
of Stockholders to be held on , 2000, or any adjournment or
postponement thereof, as designated below:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HEALTH
SYSTEMS DESIGN CORPORATION. IF NO VOTE IS INDICATED, THIS PROXY WILL BE VOTED
FOR EACH OF THE PROPOSALS.
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PLEASE DO NOT SEND YOUR STOCK CERTIFICATE(S) IN WITH YOUR PROXY CARD.
--------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
------------------------------------- --------------------------------------
------------------------------------- --------------------------------------
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(CONTINUED ON REVERSE SIDE)
<PAGE>
/X/ PLEASE MARK YOUR VOTES
AS IN THIS EXAMPLE.
FOR AGAINST ABSTAIN
1) To approve the terms of that certain Agreement / / / / / /
and Plan of Merger, dated as of October 18, 2000,
among Perot Systems Corporation, PSC Health
Care, Inc., a wholly-owned subsidiary of Perot
Systems Corporation, and Health Systems Design
Corporation.
You are urged to date, sign and return
promptly this proxy in the envelope
provided. It is important for you to be
represented at the meeting. The execution of
your proxy will not affect your right to vote
in person if you are present at the meeting.
---------------------------------
Dated: , 2000 IMPORTANT: please sign exactly as your name or
--------------------------------- names appear on this proxy, and when signing
as an attorney, executor, administrator,
trustee or guardian, give your full title as
such. If the signatory is a corporation, sign
the full corporate name by duly authorized
officer, or if a partnership, sign in
--------------------------------- partnership name by authorized person.
Signature(s)
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DETACH CARD DETACH CARD
YOU CAN VOTE BY SIMPLY MARKING, SIGNING AND DATING YOUR PROXY CARD AND RETURNING
IT PROMPTLY IN THE ENCLOSED ENVELOPE.
