<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1997
REGISTRATION NO. 333-22929
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HBO & COMPANY
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7373 37-0986839
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
301 PERIMETER CENTER NORTH
ATLANTA, GEORGIA 30346
(770) 393-6000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------
CHARLES W. MCCALL
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
HBO & COMPANY
301 PERIMETER CENTER NORTH
ATLANTA, GEORGIA 30346
(770) 393-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
LISA A. STATER, ESQ. MICHAEL J. SILVER, ESQ.
Jones, Day, Reavis & Pogue Hogan & Hartson L.L.P.
3500 One Peachtree Center 111 South Calvert Street, Suite 1600
303 Peachtree Street, N.E. Baltimore, Maryland 21202
Atlanta, Georgia 30308-3242 (410) 659-2700
(404) 521-3939
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AMISYS MANAGED CARE SYSTEMS, INC.
30 WEST GUDE DRIVE, FIFTH FLOOR
ROCKVILLE, MD 20850
May 13, 1997
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders (the
"Meeting") of AMISYS Managed Care Systems, Inc. ("AMISYS") to be held at the
corporate offices of AMISYS in the Training Center, First Floor, 30 West Gude
Drive, Rockville, Maryland 20850 at 10:00 a.m., local time, on June 13, 1997.
At the Meeting, you will be asked to consider and take action upon a
proposal to approve an Agreement of Merger dated February 10, 1997 (the "Merger
Agreement"), among AMISYS, HBO & Company, a Delaware corporation ("HBOC"), and
HBO & Company of Georgia, a Delaware corporation, which is a wholly owned
subsidiary of HBOC ("HBOC-GA"), pursuant to which, among other things, (a)
AMISYS will merge with and into HBOC-GA (the "Merger") and (b) each outstanding
share of common stock, $.001 par value per share, of AMISYS ("AMISYS Common
Stock"), and each right to acquire a share of AMISYS Common Stock will be
converted into the right to receive .35 of a share of common stock, $.05 par
value per share, of HBOC (the "Exchange Ratio"), less the amount of any
fractional share, which will be paid in cash.
Details of the proposed Merger and the Merger Agreement are set forth in the
accompanying Proxy Statement/Prospectus which you are urged to review carefully.
A copy of the Merger Agreement is also attached to the Proxy
Statement/Prospectus as Appendix A.
Your Board of Directors has carefully considered and unanimously approved
the Merger proposal and has determined that the Merger is fair to, and in the
best interests of, AMISYS and its stockholders. Accordingly, the Board of
Directors unanimously recommends that stockholders vote FOR approval of the
Merger Agreement. The Board of Directors has been advised by Alex. Brown & Sons
Incorporated that, in its opinion, the Exchange Ratio is fair, from a financial
point of view, to the AMISYS stockholders as of the date of such opinion. A copy
of such opinion is attached to the Proxy Statement/Prospectus as Appendix B.
The Board of Directors appreciates and encourages stockholder participation.
However, whether or not you plan to be with us at the Meeting, it is important
that your shares be represented. Accordingly, we request that you sign, date and
mail the enclosed proxy in the envelope provided at your earliest convenience.
Thank you for your cooperation.
Very truly yours,
KEVIN R. BROWN
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
AMISYS MANAGED CARE SYSTEMS, INC.
30 WEST GUDE DRIVE, FIFTH FLOOR
ROCKVILLE, MD 20850
------------------------
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
------------------------
A Special Meeting of Stockholders (the "Meeting") of AMISYS Managed Care
Systems, Inc., a Delaware corporation ("AMISYS"), will be held at the corporate
offices of AMISYS in the Training Center, First Floor, 30 West Gude Drive,
Rockville, Maryland 20850, on Friday, June 13, 1997, at 10:00 a.m., local time,
for the following purpose:
To consider and vote upon a proposal to approve an Agreement of Merger
dated February 10, 1997 (the "Merger Agreement"), among AMISYS, HBO &
Company, a Delaware corporation ("HBOC"), and HBO & Company of Georgia,
a Delaware corporation, which is a wholly owned subsidiary of HBOC
("HBOC-GA"), pursuant to which, among other things (a) AMISYS will merge
with and into HBOC-GA (the "Merger") and (b) each outstanding share of
common stock, $.001 par value per share of AMISYS ("AMISYS Common
Stock"), and each right to acquire a share of AMISYS Common Stock will
be converted into the right to receive .35 of a share of common stock,
$.05 par value per share, of HBOC, less the amount of any fractional
share, which will be paid in cash.
The Board of Directors of AMISYS (the "AMISYS Board") has unanimously
approved the Merger proposal and has determined that the Merger is fair to, and
in the best interests of, AMISYS and its stockholders. Accordingly, the AMISYS
Board unanimously recommends that you vote FOR approval of the Merger Agreement.
The AMISYS Board has fixed the close of business on April 25, 1997 as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Meeting. Only holders of AMISYS Common Stock of record at the close
of business on that date will be entitled to notice of and to vote at the
Meeting or any adjournment or postponement thereof.
Details of the Merger and other important information concerning AMISYS and
HBOC are more fully described in the accompanying Proxy Statement/Prospectus.
Please give this information your careful consideration.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE.
EVEN IF YOU HAVE VOTED YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND
THE MEETING.
By Order of the Board of Directors,
ROBERT J. SULLIVAN
SECRETARY
Rockville, Maryland
May 13, 1997
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION DATED MAY 13, 1997
PROXY STATEMENT
OF
AMISYS MANAGED CARE SYSTEMS, INC.
FOR SPECIAL MEETING OF STOCKHOLDERS
------------------------
PROSPECTUS
OF
HBO & COMPANY
------------------
This Proxy Statement/Prospectus is being furnished to holders of common
stock, $.001 par value per share ("AMISYS Common Stock"), of AMISYS Managed Care
Systems, Inc., a Delaware corporation ("AMISYS"), as a proxy statement in
connection with the solicitation of proxies by the Board of Directors of AMISYS
(the "AMISYS Board") for use at the Special Meeting of Stockholders (the
"Meeting") of AMISYS to be held on June 13, 1997, at the corporate offices of
AMISYS in the Training Center, First Floor, 30 West Gude Drive, Rockville,
Maryland 20850 commencing at 10:00 a.m., local time, and at any adjournment or
postponement thereof, for the purpose set forth herein and in the accompanying
Notice of Special Meeting.
This Proxy Statement/Prospectus also constitutes the prospectus of HBO &
Company, a Delaware corporation ("HBOC"), with respect to up to 3,089,217 shares
(net of the aggregate amount of fractional shares, which will be paid in cash)
of common stock, $.05 par value per share, of HBOC (the "HBOC Common Stock") to
be issued in connection with the merger (the "Merger") of AMISYS with and into
HBO & Company of Georgia, a Delaware corporation, which is a wholly owned
subsidiary of HBOC ("HBOC-GA"), in exchange for all of the outstanding shares
and rights to acquire shares of AMISYS Common Stock. In the Merger, subject to
the terms of the Agreement of Merger dated February 10, 1997, among AMISYS, HBOC
and HBOC-GA (the "Merger Agreement"), each outstanding share of AMISYS Common
Stock will be converted into the right to receive .35 of a share of HBOC Common
Stock (the "Exchange Ratio"), less the amount of any fractional shares, which
will be paid in cash. The AMISYS Board may terminate the Merger Agreement if the
average closing market price per share (or if there is no sale on any such day,
then the average between the closing bid and ask prices on any such day) for
shares of HBOC Common Stock during the fifteen (15) consecutive trading days
ending on the third trading day prior to the date of the Meeting (the "Market
Value") is less than $53.33 per share.
Outstanding and unexercised options to purchase shares of AMISYS Common
Stock will be effectively assumed by HBOC upon consummation of the Merger such
that the holder will have the right to purchase the number of shares of HBOC
Common Stock into which the shares of AMISYS Common Stock subject to such
options would have been converted in the Merger.
As a result of the Merger, holders of shares of AMISYS Common Stock or
rights to acquire shares of AMISYS Common Stock will receive an aggregate of up
to 3,089,217 shares of HBOC Common Stock (less the aggregate amount of any
fractional shares, which will be paid in cash). Shares of HBOC Common Stock and
AMISYS Common Stock are currently approved for quotation on the Nasdaq Stock
Market National Market ("Nasdaq NM") under the symbols "HBOC" and "AMCS,"
respectively. On May 12, 1997, the reported closing sale prices of a share of
HBOC Common Stock and AMISYS Common Stock on the Nasdaq NM were $56.75 and
$20.00, respectively.
This Proxy Statement/Prospectus and the related Notice of Special Meeting
and proxy card are first being mailed on or about May 13, 1997, to stockholders
of record at the close of business on April 25, 1997 (the "Record Date"). There
were 7,787,100 shares of AMISYS Common Stock outstanding at the close of
business on the Record Date. Only holders of AMISYS Common Stock of record on
the Record Date will be entitled to notice of, and to vote at, the Meeting or
any adjournment or postponement thereof.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROXY
STATEMENT/PROSPECTUS. STOCKHOLDERS OF AMISYS ARE STRONGLY URGED TO READ AND
CONSIDER THIS PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY. SEE "RISK FACTORS," ON
PAGE 19 OF THIS PROXY STATEMENT/ PROSPECTUS, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY AMISYS STOCKHOLDERS IN DETERMINING HOW TO VOTE ON
THE MERGER AGREEMENT.
---------------------
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS MAY 13, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
---------
<S> <C>
AVAILABLE INFORMATION AND SOURCES OF INFORMATION.......................................................... 4
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................................................... 5
SUMMARY................................................................................................... 6
The Parties............................................................................................. 6
The Meeting............................................................................................. 7
The Merger Proposal..................................................................................... 7
Other................................................................................................... 10
Summary Financial Data.................................................................................. 11
Pro Forma Financial Information......................................................................... 13
Comparative Per Share Data.............................................................................. 17
RISK FACTORS.............................................................................................. 19
Exchange Ratio.......................................................................................... 19
Interests of Certain AMISYS Executive Officers and Directors in the Merger.............................. 19
CERTAIN MARKET INFORMATION................................................................................ 19
HBOC.................................................................................................... 19
AMISYS.................................................................................................. 20
THE MEETING............................................................................................... 21
THE MERGER PROPOSAL....................................................................................... 21
Background of the Merger................................................................................ 21
Reasons of AMISYS for Engaging in the Merger; Recommendation of the AMISYS Board........................ 25
Opinion of Alex. Brown, Financial Advisor to AMISYS..................................................... 26
Reasons of HBOC for Engaging in the Merger.............................................................. 31
Terms of the Merger..................................................................................... 32
Effective Time........................................................................................ 32
General Effects of the Merger......................................................................... 32
Conversion of Shares.................................................................................. 32
Fractional Shares..................................................................................... 32
Stock Plans........................................................................................... 32
Exchange of Certificates.............................................................................. 32
Payment of Dividends.................................................................................. 33
Limitations on Transferability of HBOC Common Stock................................................... 33
Conditions; Waiver.................................................................................... 33
Hart-Scott-Rodino..................................................................................... 34
No Solicitation....................................................................................... 34
Termination........................................................................................... 35
Accounting Treatment.................................................................................... 35
Certain Federal Income Tax Consequences................................................................. 35
No Appraisal Rights..................................................................................... 37
INTERESTS OF CERTAIN PERSONS IN EACH OF HBOC AND AMISYS................................................... 37
Security Ownership of Certain Beneficial Owners and Management of HBOC.................................. 37
Security Ownership of Certain Beneficial Owners and Management of AMISYS................................ 39
Interests of Certain AMISYS Persons in Matters to be Acted Upon......................................... 40
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF HBOC
COMMON STOCK AND AMISYS COMMON STOCK...................................................................... 41
Introduction............................................................................................ 41
Authorized Capital Stock................................................................................ 41
Board or Stockholder Approved Preferred Stock........................................................... 41
Voting Rights........................................................................................... 41
Number of Directors..................................................................................... 42
Election of Board of Directors.......................................................................... 42
Vote on Merger, Consolidation or Sale of Substantially All Assets....................................... 42
Special Meetings of Stockholders........................................................................ 42
Stockholder Action by Written Consent................................................................... 43
Amendment of Certificate of Incorporation............................................................... 43
Amendment of Bylaws..................................................................................... 43
Liability and Indemnification of Officers and Directors................................................. 43
Payment of Dividends.................................................................................... 44
Anti-Takeover Protection................................................................................ 44
Appraisal Rights........................................................................................ 44
BUSINESS OF HBOC.......................................................................................... 46
General................................................................................................. 46
Recent Developments..................................................................................... 46
BUSINESS OF AMISYS........................................................................................ 46
General................................................................................................. 46
Recent Developments..................................................................................... 47
STOCKHOLDER PROPOSALS..................................................................................... 47
OTHER MATTERS............................................................................................. 47
CERTAIN LEGAL MATTERS..................................................................................... 47
EXPERTS................................................................................................... 47
APPENDIX A--Agreement of Merger dated February 10, 1997................................................. A-1
APPENDIX B--Opinion of Alex. Brown & Sons Incorporated.................................................. B-1
</TABLE>
3
<PAGE>
AVAILABLE INFORMATION AND SOURCES OF INFORMATION
Each of HBOC and AMISYS is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by each of HBOC and AMISYS with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at 7 World Trade Center,
13th Floor, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material also may be
obtained by mail from the Public Reference Section of the Commission, Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Additionally, the Commission maintains a Web site on the Internet that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission and that is located at
http://www.sec.gov.
HBOC has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), which includes the
proxy statement of AMISYS with respect to the Merger and the prospectus of HBOC
with respect to the shares of HBOC Common Stock issuable in the Merger. This
Proxy Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which are omitted in accordance with
the rules and regulations of the Commission. Statements contained in this Proxy
Statement/Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission, reference is made to the
exhibit or other filing for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference. Copies of the Registration Statement together with exhibits may be
inspected at the office of the Commission in Washington, D.C., as indicated
above, without charge and copies thereof may be obtained therefrom upon payment
of a prescribed fee.
All information contained in this Proxy Statement/Prospectus regarding
AMISYS has been supplied by AMISYS, information regarding the Merger proposal
has been supplied by AMISYS and/or HBOC and all other information has been
supplied by HBOC. References to AMISYS and HBOC in this Proxy
Statement/Prospectus mean the respective corporations and, in the case of HBOC,
its consolidated subsidiaries except as the context may otherwise indicate.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS,
IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SHARES OF HBOC
COMMON STOCK MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HBOC, AMISYS
OR ANY OTHER PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROXY STATEMENT/ PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HBOC OR AMISYS SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
4
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The information in the following documents filed by HBOC with the Commission
(File No. 0-9900) pursuant to the Exchange Act is incorporated by reference in
this Proxy Statement/Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1996
filed with the Commission on March 6, 1997;
2. Current Reports on Form 8-K: dated and filed with the Commission on
February 11, 1997, and dated and filed with the Commission on March 19, 1997;
3. Proxy Statement, dated as of April 4, 1997, filed in definitive form on
April 4, 1997 with the Commission with respect to the information required to be
included herein by Items 401 (management), 402 (executive compensation) and 404
(certain relationships and related transactions) of Regulation S-K promulgated
under the Securities Act and the Exchange Act; and
4. The description of Common Stock and Preferred Share Purchase Rights
contained in HBOC's Registration Statements on Form 8-A, filed with the
Commission on August 19, 1981, as amended, and February 19, 1991, as amended,
respectively.
The information in the following document filed by AMISYS with the
Commission (File No. 0-27364) pursuant to the Exchange Act is incorporated by
reference in this Proxy Statement/Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1996
filed with the Commission on March 6, 1997.
All documents filed by HBOC and AMISYS pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus
and prior to the date of the Meeting, shall be deemed to be incorporated by
reference in this Proxy Statement/Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
previously filed document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or was deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement/ Prospectus.
The information relating to HBOC and AMISYS contained in this Proxy
Statement/Prospectus should be read together with the information in the
documents incorporated by reference.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR
ORAL REQUEST. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED, IN THE CASE OF
HBOC DOCUMENTS, TO HBO & COMPANY, 301 PERIMETER CENTER NORTH, ATLANTA, GEORGIA
30346, ATTENTION: MONIKA BROWN, TELEPHONE: (800) 426-2411, AND, IN THE CASE OF
AMISYS DOCUMENTS, TO AMISYS MANAGED CARE SYSTEMS, INC., 30 WEST GUDE DRIVE,
FIFTH FLOOR, ROCKVILLE, MD 20850, ATTENTION: JULIE PULZONE, TELEPHONE: (301)
738-7319. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE
MEETING, ANY SUCH REQUESTS SHOULD BE MADE BY JUNE 6, 1997.
5
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED
IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING NOTES THERETO, INCLUDED OR INCORPORATED BY REFERENCE IN
THIS PROXY STATEMENT/PROSPECTUS.
THE PARTIES
HBO & COMPANY
GENERAL. HBOC develops integrated patient care, clinical, financial,
managed care and strategic management software solutions for the healthcare
industry. These open systems applications facilitate the integration of
clinical, financial and administrative data from a wide range of customer
systems and software. HBOC's broad product portfolio can be implemented in a
variety of combinations from stand-alone to enterprisewide, enabling customers
to add incremental capabilities to existing information systems without making
prior capital investments obsolete. HBOC also provides a full complement of
network communications technologies, including wireless capabilities, as well as
outsourcing services that are offered under contract management agreements
whereby its staff manages and operates data centers, information systems,
organizations and business offices of healthcare institutions of various sizes
and structures. In addition, HBOC offers a wide range of electronic commerce
services, including electronic medical claims and remittance advice services as
well as statement processing.
HBOC markets its products and services to integrated health delivery
networks, hospitals, physicians' offices, home health providers, pharmacies,
reference laboratories, managed care providers and payers. HBOC also sells its
products and services internationally through subsidiaries and/or distribution
agreements in the United Kingdom, Canada, Ireland, Saudi Arabia, Kuwait,
Australia, Puerto Rico and New Zealand.
The address and telephone number of the principal executive offices of HBOC
are 301 Perimeter Center North, Atlanta, Georgia 30346, (770) 393-6000.
RECENT DEVELOPMENTS. HBOC, HBOC-GA and Enterprise Systems, Inc.
("Enterprise") entered into an Agreement of Merger dated March 13, 1997. If such
agreement is approved by the stockholders of Enterprise and all other closing
conditions set forth under the terms of such agreement are satisfied, up to
4,675,886 shares of HBOC Common Stock will be issued to such stockholders in
connection with the merger of Enterprise with and into HBOC-GA. Enterprise is a
healthcare information services company that develops, implements and services
an integrated suite of resource management software to assist healthcare
providers in managing operations and reducing costs.
On April 9, 1997, HBOC announced that for the quarter ended March 31, 1997,
revenues were $219.9 million, net income was $35.7 million and earnings per
share were $0.38.
AMISYS MANAGED CARE SYSTEMS, INC.
GENERAL. AMISYS develops, markets and supports managed healthcare
information systems for payers and providers who offer managed care products and
services. AMISYS provides an integrated system solution, which includes AMISYS's
proprietary AMISYS software, third-party hardware and software and
implementation services (the "AMISYS System") that automate most of the
operational underpinnings of AMISYS's managed care clients. These products and
services are directed at supporting critical "risk-management" operational
functions that help ensure the proper balance of premium revenue against
healthcare utilization costs, availability and quality. The AMISYS software
contains a set of fully integrated applications designed to support the full
range of operations in managed care and risk-management administrative
functions, including premium billing and receivables, capitation, utilization
management and claims adjudication and payment.
6
<PAGE>
Historically, AMISYS's client base consisted primarily of health maintenance
organizations ("HMOs"). Since 1992, as managed care initiatives have spread
throughout the healthcare system, AMISYS has broadened its client base to
include many new entities that manage healthcare risk or administer managed
healthcare products. AMISYS's installed base now includes commercial and
Medicaid HMOs, indemnity insurers, integrated delivery systems,
physician-hospital organizations, third-party administrators and mental health
and other specialty managed care organizations. AMISYS currently has licenses
with 80 clients supporting 87 sites nationwide. AMISYS estimates that its
clients are utilizing or installing the AMISYS System to administer risk for
approximately 8.2 million covered lives.
The address and telephone number of the principal executive offices of
AMISYS are 30 West Gude Drive, Fifth Floor, Rockville, Maryland 20850, (301)
251-8600.
RECENT DEVELOPMENTS. On May 1, 1997, AMISYS announced that for the quarter
ended March 31, 1997, revenues were $12.3 million, net income was $1.0 million
and earnings per share were $0.12.
THE MEETING
The Meeting will be held on June 13, 1997 at 10:00 a.m., local time, at the
corporate offices of AMISYS in the Training Center, First Floor, 30 West Gude
Drive, Rockville, Maryland 20850. The purpose of the Meeting is to consider and
take action upon a proposal to approve the Merger Agreement. The AMISYS Board
has fixed the close of business on April 25, 1997, as the Record Date for the
determination of stockholders entitled to vote at the Meeting. The presence at
the Meeting, in person or by proxy, of the holders of at least a majority of the
shares of AMISYS Common Stock issued and
outstanding and entitled to vote on such date is necessary to constitute a
quorum at the Meeting. The Merger Agreement must be approved by holders of a
majority of the issued and outstanding shares of AMISYS Common Stock. See "The
Meeting."
THE MERGER PROPOSAL
RECOMMENDATION OF THE AMISYS BOARD; OPINION OF FINANCIAL ADVISOR
The AMISYS Board has unanimously approved the Merger Agreement and has
determined that the Merger is fair to, and in the best interests of, AMISYS and
its stockholders. Accordingly, the AMISYS Board unanimously recommends that
AMISYS's stockholders vote FOR approval of the Merger Agreement. In approving
the Merger Agreement, the AMISYS Board considered, among other things, that (i)
the Merger offers AMISYS stockholders an opportunity to receive shares in a
significantly larger company in a tax-free transaction at a substantial premium
over historic market prices; (ii) the strategic fit of HBOC and AMISYS and
potential operating synergies and cost savings; (iii) the opinion of Alex. Brown
& Sons Incorporated ("Alex. Brown") that, as of February 10, 1997, the Exchange
Ratio was fair from a financial point of view, to the stockholders of AMISYS;
(iv) the expected accounting treatment for the Merger and (v) various additional
factors regarding the Merger and HBOC. The AMISYS Board also considered
potentially negative factors, including, among other things; (i) the possibility
that certain of the operating synergies and cost savings sought to be achieved
as a result of the Merger may not be achieved; (ii) potential conflicts that may
arise in integrating the product lines of the companies; (iii) the high price to
earnings ratio of HBOC Common Stock and the possibility that the price of HBOC
Common Stock may decrease after the Merger; and (iv) the lack of significant
operating history following recently completed HBOC acquisitions to demonstrate
the successful integration of those businesses into HBOC. See "The Merger
Proposal--Reasons of AMISYS for Engaging in the Merger; Recommendation of the
AMISYS Board." The full text of the opinion of Alex. Brown, which is dated the
date hereof and is substantially identical to the opinion dated February 10,
1997, and which sets forth, among other things, assumptions made, matters
considered and limitations on the review undertaken, is attached hereto as
Appendix B. Each AMISYS stockholder should read such opinion carefully in its
entirety. The opinion of Alex. Brown is directed only to the matters set forth
therein and does not constitute a recommendation to any AMISYS
7
<PAGE>
stockholder as to how such stockholder should vote at the Meeting. See "The
Merger Proposal--Opinion of Alex. Brown, Financial Advisor to AMISYS."
TERMS OF THE MERGER
The following is a summary of certain of the terms and conditions of the
Merger Agreement, a copy of which is attached hereto as Appendix A.
EFFECTIVE TIME. The Merger will become effective when both (i) the Merger
Agreement is adopted and approved by the stockholders of AMISYS in accordance
with the applicable provisions of the Delaware General Corporation Law (the
"DGCL") and (ii) a certificate of merger (the "Certificate of Merger") is filed
with the Secretary of State of Delaware (the time the Merger becomes effective
being referred to as the "Effective Time" and the date on which the Effective
Time occurs being referred to as the "Closing Date").
CONVERSION OF SHARES. Each share of AMISYS Common Stock issued and
outstanding immediately prior to the Effective Time, will, at the Effective
Time, be converted into the right to receive .35 of a share of HBOC Common
Stock, less the amount of any fractional shares paid in cash. (The shares of
HBOC Common Stock, and any cash in lieu of fractions thereof, receivable by
holders of AMISYS Common Stock are hereinafter referred to as the "Merger
Consideration"). See "The Merger Proposal--Terms of the Merger--Conversion of
Shares."
FRACTIONAL SHARES. No certificates or scrip representing fractional shares
of HBOC Common Stock shall be issued pursuant to the Merger, but in lieu
thereof, a cash payment will be made therefor without interest, at a pro rata
amount based on the Market Value. See "The Merger Proposal--Terms of the
Merger--Fractional Shares."
STOCK PLANS. Options to purchase shares of AMISYS Common Stock outstanding
at the Effective Time of the Merger will be effectively assumed by HBOC, by
which assumption the optionee will have the right to purchase the number of
shares (rounded down to the nearest whole share) of HBOC Common Stock into which
the number of shares of AMISYS Common Stock the optionee was entitled to
purchase under the existing option would have been converted pursuant to the
terms of the Merger. Additionally, each outstanding share of AMISYS Common Stock
subject to restriction or risk of forfeiture under the AMISYS 1994 Equity
Incentive Plan shall be converted into HBOC Common Stock in accordance with the
terms of the Merger Agreement and shall remain subject to such restriction or
risk of forfeiture to the extent provided in such plan or the related agreement.
Pursuant to the terms of the 1994 Equity Incentive Plan, at the Effective Time
of the Merger, 50% of all unvested and unexercisable restricted stock awards and
option grants will vest and become exercisable. The accelerated vesting will
result in a one-time charge to HBOC earnings related to the Merger of
approximately $65,000. See "The Merger Proposal--Terms of the Merger--Stock
Plans."
EXCHANGE OF CERTIFICATES. Promptly after the Effective Time, SunTrust Bank,
Atlanta (the "Exchange Agent") will mail to each record holder (as of the
Effective Time) of an outstanding certificate or certificates that immediately
prior to the Effective Time represented outstanding shares of AMISYS Common
Stock (the "Certificates"), a letter of transmittal and instructions for use in
effecting the surrender of the Certificates for exchange and/or payment
therefor. Until surrendered, each Certificate shall represent for all purposes
only the right to receive the Merger Consideration, without any interest on the
value thereof. See "The Merger Proposal--Terms of the Merger--Exchange of
Certificates."
LIMITATIONS ON TRANSFERABILITY OF HBOC COMMON STOCK. Shares of HBOC Common
Stock received by certain persons deemed to be "affiliates" of AMISYS for
purposes of Rule 145 under the Securities Act will be subject to the
restrictions imposed by such rule. In accordance with Rule 145, an affiliate of
AMISYS receiving HBOC Common Stock issued in the Merger may not sell such shares
except pursuant to the volume and manner of sale limitations and other
requirements specified therein or pursuant to an
8
<PAGE>
effective registration statement under the Securities Act. In addition, AMISYS
affiliates are subject to certain restrictions on transfer of both AMISYS Common
Stock and HBOC Common Stock prior to and following the Effective Time of the
Merger to support pooling of interests accounting treatment of the transaction.
See "The Merger Proposal--Terms of the Merger--Limitations on Transferability of
HBOC Common Stock."
CONDITIONS; WAIVER. The obligations of HBOC and HBOC-GA, on the one hand,
and of AMISYS, on the other hand, to consummate the Merger are contingent upon
and subject to the satisfaction or waiver of certain conditions, including the
approval of the Merger Agreement by holders of the requisite number of shares of
AMISYS Common Stock. See "The Merger Proposal--Terms of the Merger--Conditions;
Waiver."
HART-SCOTT-RODINO. The Merger is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), which provides that certain transactions (including the Merger) may not
be consummated until certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the Federal
Trade Commission (the "FTC") and certain waiting period requirements have been
satisfied. HBOC and AMISYS filed the required information with the Antitrust
Division and the FTC on February 20, 1997 and February 19, 1997, respectively,
and were notified that the waiting period was terminated March 6, 1997. See "The
Merger Proposal--Terms of the Merger--Hart-Scott-Rodino."
NO SOLICITATION. AMISYS has agreed, subject to certain exceptions, that
prior to the Effective Time of the Merger or earlier termination of the Merger
Agreement, AMISYS shall not, directly or indirectly, solicit, initiate,
encourage, endorse or enter into any agreement with respect to, or take any
other action to facilitate, any inquiries or the making of any proposal or offer
for any tender or exchange offer, proposal for a merger, share exchange or other
business combination or similar transactions involving AMISYS. See "The Merger
Proposal--Terms of the Merger--No Solicitation."
TERMINATION. The Merger may be terminated at any time prior to the
Effective Time of the Merger by: (i) mutual consent of the Board of Directors of
HBOC (the "HBOC Board") and the AMISYS Board, notwithstanding the prior approval
of the AMISYS stockholders; (ii) the HBOC Board, in the event of material
condemnation, destruction, loss or damage to the business or assets of AMISYS;
(iii) the Board of Directors of HBOC-GA (the "HBOC-GA Board") or the AMISYS
Board, after June 30, 1997, if the other party fails to fulfill any of its
conditions to the consummation of the Merger, unless fulfillment has been
frustrated or made impossible by the party seeking termination; (iv) the AMISYS
Board, if, in the good faith exercise of its fiduciary duties to the
stockholders of AMISYS in the context of a proposal to acquire AMISYS by another
party, the AMISYS Board decides that such termination is required; and (v) the
AMISYS Board, if the Market Value of HBOC Common Stock is less than $53.33 per
share.
If the Merger is terminated by AMISYS in accordance with (iv) above, or by
HBOC, HBOC-GA or AMISYS because the Merger Agreement was not approved by holders
of the requisite number of shares of AMISYS Common Stock, AMISYS will be
obligated to reimburse all reasonable costs and expenses of HBOC and HBOC-GA
incurred in connection with the negotiation and performance of the Merger
Agreement and to pay to HBOC-GA a fee in the amount of $5,825,000. See "The
Merger Proposal-- Terms of the Merger--Termination."
ACCOUNTING TREATMENT
It is a condition to the consummation of the Merger that each of the parties
to the Merger Agreement shall have received letters, dated as of the date hereof
and as of the Closing Date, from Coopers & Lybrand L.L.P. that no conditions
exist that would preclude accounting for the Merger as a pooling of interests
under Accounting Principles Board Opinion No. 16 and from Arthur Andersen LLP
regarding the appropriateness of accounting for the Merger as a pooling of
interests under Accounting Principles
9
<PAGE>
Board Opinion No. 16 if the transaction is closed and consummated in accordance
with the Merger Agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is a condition to the closing of the Merger that AMISYS shall have
received an opinion of its counsel, subject to the assumptions contained
therein, to the effect that the Merger will qualify as a reorganization pursuant
to Section 368(a) of the Internal Revenue Code (the "Code"). Accordingly, no
gain or loss will be recognized by an AMISYS stockholder upon the exchange of
the shares of AMISYS Common Stock for shares of HBOC Common Stock pursuant to
the Merger, except on the receipt of cash in lieu of fractional share interests
in HBOC Common Stock. See "The Merger Proposal--Certain Federal Income Tax
Consequences."
NO APPRAISAL RIGHTS
Because AMISYS Common Stock is a Nasdaq NM security, the holders of shares
of AMISYS Common Stock will not be entitled to appraisal rights pursuant to
Section 262 of the DGCL in connection with the Merger. See "The Merger
Proposal--No Appraisal Rights."
OTHER
INTERESTS OF CERTAIN PERSONS
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS. As of the Record
Date, directors and executive officers of AMISYS and their affiliates were
beneficial owners of 3,644,920 outstanding shares (giving effect to the exercise
of their presently exercisable stock options) of AMISYS Common Stock
representing approximately 46.4% of the total issued and outstanding AMISYS
Common Stock. At April 30, 1997, directors and executive officers of HBOC and
their affiliates were beneficial owners of approximately 2,755,521 outstanding
shares (giving effect to the exercise of their presently exercisable stock
options) of HBOC Common Stock representing approximately 3.0% of the total
issued and outstanding HBOC Common Stock. See "Interests of Certain Persons in
Each of HBOC and AMISYS."
INTERESTS OF CERTAIN AMISYS PERSONS IN MATTERS TO BE ACTED UPON. Certain
executive officers and the directors of AMISYS have interests in the Merger that
differ from those of AMISYS stockholders generally. Such interests include
severance payments, vesting of 50% of all unvested and unexercisable restricted
stock awards and stock options held by certain of such persons and continuing
indemnification against certain liabilities. As a result, such executive
officers and directors could be more likely to favor consummation of the Merger
than stockholders generally. See "Interests of Certain Persons in Each of HBOC
and AMISYS--Interests of Certain AMISYS Persons in Matters to be Acted Upon."
COMPARISON OF STOCKHOLDER RIGHTS
HBOC and AMISYS are each incorporated under Delaware law. For a summary of
material differences between the rights of holders of shares of each of AMISYS
Common Stock and HBOC Common Stock, see "Comparison of Rights of Holders of
Shares of Each of HBOC Common Stock and AMISYS Common Stock."
CERTAIN MARKET INFORMATION
HBOC Common Stock and AMISYS Common Stock are traded on the Nasdaq NM under
the symbols "HBOC" and "AMCS," respectively. The closing sale prices per share
of HBOC Common Stock and AMISYS Common Stock on February 10, 1997, the last
trading day preceding the announcement of the proposed Merger, were $62.88 and
$15.88, respectively. See "Certain Market Information."
10
<PAGE>
RISK FACTORS
The stockholders of AMISYS should carefully review the matters set forth
under "Risk Factors."
SUMMARY FINANCIAL DATA
The following summary historical financial data for each of HBOC and AMISYS
should be read in conjunction with the financial statements and notes thereto of
HBOC and AMISYS, incorporated by reference in this Proxy Statement/Prospectus.
HBO & COMPANY (1)
(FROM CONTINUING OPERATIONS)
(000 OMITTED EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995(2) 1996(3)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................................. $ 324,349 $ 364,697 $ 453,979 $ 607,242 $ 796,578
Operating Income (Loss)................. $ 29,858 $ 29,995 $ 57,103 $ (32,457) $ 118,250
Income (Loss) Before Income Taxes....... $ 30,098 $ 34,298 $ 58,257 $ (31,917) $ 122,352
Net Income (Loss)....................... $ 20,232 $ 17,682 $ 36,469 $ (17,569) $ 73,954
Primary Earnings (Loss) Per Share....... $ .26 $ .22 $ .45 $ (.21) $ .79
Fully Diluted Earnings (Loss) Per
Share................................. $ .26 $ .22 $ .44 $ (.21) $ .79
Weighted Average Shares Outstanding
(Fully Diluted)....................... 78,477 80,940 82,064 84,224 93,162
Cash Dividends Per Share................ $ .075 $ .075 $ .08 $ .08 $ .08
BALANCE SHEET DATA:
Working Capital......................... $ 43,842 $ 83,193 $ 39,905 $ 83,626 $ 203,405
Total Assets............................ $ 218,869 $ 266,394 $ 380,410 $ 649,417 $ 848,947
Long-Term Debt.......................... $ 7,200 $ 6,133 $ 4,715 $ 3,642 $ 192
Stockholders' Equity.................... $ 125,882 $ 164,836 $ 203,515 $ 408,190 $ 525,343
</TABLE>
- ------------------------
(1) All prior period amounts have been restated to reflect the 1996 acquisitions
of CyCare Systems, Inc., Management Software, Inc., and GMIS Inc. in pooling
transactions. All share and per share amounts have been restated to reflect
the 1996 two-for-one stock split effected in the form of a stock dividend.
(2) 1995 Income Statement related items include nonrecurring charges of $136,481
and exclude the dilutive effect of stock options. Net income was $64,320 and
fully diluted earnings per share was $.73 excluding the nonrecurring charges
and including the dilutive effect of stock options.
(3) 1996 Income Statement related items include nonrecurring charges of $61,414.
Net income was $110,805 and fully diluted earnings per share was $1.19
excluding the nonrecurring charges.
11
<PAGE>
AMISYS MANAGED CARE SYSTEMS, INC.
(000 OMITTED EXCEPT FOR PER SHARE DATA)
The following table presents summary historical financial data for AMISYS,
the surviving corporation of a merger between American International Healthcare,
Inc. ("AIHI") and AIH Systems, Inc., which subsequent to such merger, changed
its name to AMISYS. This data reflects the segregation of the operating
activities for the periods of different ownership.
<TABLE>
<CAPTION>
AIHI
---------------------------------------
YEARS ENDED DECEMBER 31, JAN. 1,
1994 TO
------------------------- MAY 26,
1992(1) 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue......................................... $ 18,082 $ 15,654 $ 8,048
Operating Income (Loss)......................... $ (9,408) $ 846 $ 546
Income (Loss) Before Income Taxes............... $ (9,424) $ 819 $ 552
Net Income (Loss)............................... $ (6,565) $ 498 $ 333
Net Income (Loss) Per Share.....................
Weighted Average Common and Common Equivalent
Shares........................................
Cash Dividends Per Share........................
<CAPTION>
AMISYS
---------------------------------------
MAY 27, YEAR YEAR
1994 TO ENDED ENDED
DEC. 31, DEC. 31, DEC. 31,
1994(2) 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue......................................... $ 14,387 $ 31,787 $ 46,438
Operating Income (Loss)......................... $ (5,589) $ 2,175 $ 5,485
Income (Loss) Before Income Taxes............... $ (5,952) $ 1,675 $ 6,803
Net Income (Loss)............................... $ (6,428) $ 1,675 $ 4,697
Net Income (Loss) Per Share..................... $ (1.09) $ .28 $ .57
Weighted Average Common and Common Equivalent
Shares........................................ 5,900 5,949 8,275
Cash Dividends Per Share........................ $ -- $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
AIHI AMISYS
-------------------- -------------------------------
DECEMBER 31, DECEMBER 31,
-------------------- -------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital................................. $ 2,400 $ 2,315 $ 5,110 $ 26,092 $ 31,349
Total Assets.................................... $ 10,358 $ 9,833 $ 10,167 $ 34,045 $ 44,402
Long-Term Debt.................................. $ 2,158 $ 1,509 $ 10,100 $ -- $ --
Stockholders' Equity (Deficit).................. $ 2,378 $ 2,875 $ (6,395) $ 27,317 $ 33,784
</TABLE>
- ------------------------
(1) 1992 Income Statement items include nonrecurring charges of $8,380 for the
write-down of assets, primarily capitalized software costs related to an
obsolete software product previously sold to a third party.
(2) 1994 Income Statement items include nonrecurring charges of $6,516 for the
write-off of purchased research and development.
12
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following pro forma combined condensed financial statements give effect
to the acquisition of AMISYS by HBOC in the Merger accounted for as a pooling of
interests. The pro forma combined income statement for the year ended December
31, 1994, includes AMISYS for the period May 27, 1994 (date of inception) to
December 31, 1994, only.
The pro forma combined condensed financial statements are presented for
information purposes only and are not necessarily indicative of the financial
position or results of operations which would have occurred had the transaction
been consummated on the dates indicated, nor are they necessarily indicative of
the future results or the financial position of HBOC in the future. The pro
forma combined condensed financial statements should be read in conjunction with
the historical consolidated financial statements of HBOC and AMISYS incorporated
elsewhere herein.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(1) AMISYS shares were converted using the Exchange Ratio of .35.
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AT DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HBOC/AMISYS
PRO FORMA PRO FORMA
HBOC AMISYS ADJUSTMENTS COMBINED
---------- --------- ----------- --------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents............................. $ 160,363 $ 24,087 $ 184,450
Short-Term Investments................................ 23,250 2,389 25,639
Receivables, Net...................................... 291,351 14,781 306,132
Current Deferred Income Taxes......................... 25,020 501 25,521
Inventories........................................... 6,993 -- 6,993
Prepaids and Other Current Assets..................... 12,786 209 12,995
---------- --------- ----------- --------------
Total Current Assets................................ 519,763 41,967 -- 561,730
---------- --------- ----------- --------------
Capitalized Software, Net............................... 58,338 122 58,460
Property and Equipment, Net............................. 49,419 2,313 51,732
Intangibles, Net........................................ 177,911 -- 177,911
Deferred Income Taxes................................... 34,998 -- 34,998
Other Noncurrent Assets, Net............................ 8,518 -- 8,518
---------- --------- ----------- --------------
TOTAL ASSETS................................................ $ 848,947 $ 44,402 $ -- $ 893,349
---------- --------- ----------- --------------
---------- --------- ----------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities..................................... $ 316,358 $ 10,618 $ 326,976
Long-Term Debt.......................................... 192 -- 192
Other Long-Term Liablilities............................ 7,054 -- 7,054
Stockholders' Equity.................................... 525,343 33,784 559,127
---------- --------- ----------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $ 848,947 $ 44,402 $ -- $ 893,349
---------- --------- ----------- --------------
---------- --------- ----------- --------------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
13
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/AMISYS
PRO FORMA PRO FORMA
HBOC AMISYS ADJUSTMENTS COMBINED
---------- --------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue.................................................. $ 796,578 $ 46,438 $ 843,016
Operating Expense:
Cost of Operations..................................... 351,139 24,264 375,403
Marketing.............................................. 115,660 3,935 119,595
Research and Development............................... 64,096 7,715 71,811
General and Administrative............................. 86,019 5,039 91,058
Nonrecurring Charge.................................... 61,414 -- 61,414
---------- --------- ------ --------------
Total Operating Expense............................ 678,328 40,953 -- 719,281
---------- --------- ------ --------------
Operating Income......................................... 118,250 5,485 -- 123,735
Other Income, Net........................................ 4,102 1,318 5,420
---------- --------- ------ --------------
Income Before Income Taxes............................... 122,352 6,803 -- 129,155
Income Taxes............................................. 48,398 2,106 50,504
---------- --------- ------ --------------
Net Income............................................... $ 73,954 $ 4,697 $ -- $ 78,651
---------- --------- ------ --------------
---------- --------- ------ --------------
Earnings Per Share....................................... $ .79 $ .57 $ .82
---------- --------- --------------
---------- --------- --------------
Weighted Average Shares Outstanding...................... 93,162 8,275 (5,379)(1) 96,058
---------- --------- ------ --------------
---------- --------- ------ --------------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
14
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/AMISYS
PRO FORMA PRO FORMA
HBOC AMISYS ADJUSTMENTS COMBINED
---------- --------- ----------- --------------
<S> <C> <C> <C> <C>
Revenue..................................................... $ 607,242 $ 31,787 $ 639,029
Operating Expense:
Cost of Operations........................................ 285,756 17,278 303,034
Marketing................................................. 90,852 2,961 93,813
Research and Development.................................. 53,847 5,502 59,349
General and Administrative................................ 72,763 3,871 76,634
Nonrecurring Charge....................................... 136,481 -- 136,481
---------- --------- ----------- --------------
Total Operating Expense............................... 639,699 29,612 -- 669,311
---------- --------- ----------- --------------
Operating Income (Loss)..................................... (32,457) 2,175 -- (30,282)
Other Income (Expense), Net................................. 540 (500) 40
---------- --------- ----------- --------------
Income (Loss) Before Income Taxes........................... (31,917) 1,675 -- (30,242)
Income Taxes................................................ (14,348) -- (14,348)
---------- --------- ----------- --------------
Net Income (Loss)........................................... $ (17,569) $ 1,675 $ -- $ (15,894)
---------- --------- ----------- --------------
---------- --------- ----------- --------------
Earnings (Loss) Per Share................................... $ (.21) $ .28 $ (.18)
---------- --------- --------------
---------- --------- --------------
Weighted Average Shares Outstanding......................... 84,224 5,949 (3,867)(1) 86,306
---------- --------- ----------- --------------
---------- --------- ----------- --------------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
15
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/AMISYS
PRO FORMA PRO FORMA
HBOC AMISYS ADJUSTMENTS COMBINED
---------- --------- ----------- --------------
<S> <C> <C> <C> <C>
Revenue..................................................... $ 453,979 $ 14,387 $ 468,366
Operating Expense:
Cost of Operations...................................... 225,546 7,714 233,260
Marketing............................................... 64,127 738 64,865
Research and Development................................ 42,919 3,270 46,189
General and Administrative.............................. 64,284 1,738 66,022
Nonrecurring Charge..................................... -- 6,516 6,516
---------- --------- ----------- --------------
Total Operating Expense............................. 396,876 19,976 -- 416,852
---------- --------- ----------- --------------
Operating Income (Loss)..................................... 57,103 (5,589) -- 51,514
Other Income (Expense), Net................................. 1,154 (363) 791
---------- --------- ----------- --------------
Income (Loss) Before Income Taxes........................... 58,257 (5,952) -- 52,305
Provision for Income Taxes.................................. 21,788 476 22,264
---------- --------- ----------- --------------
Net Income (Loss)........................................... $ 36,469 $ (6,428) $ -- $ 30,041
---------- --------- ----------- --------------
---------- --------- ----------- --------------
Earnings (Loss) Per Share................................... $ .44 $ (1.09) $ .36
---------- --------- --------------
---------- --------- --------------
Weighted Average Shares Outstanding......................... 82,064 5,900 (3,835)(1) 84,129
---------- --------- ----------- --------------
---------- --------- ----------- --------------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
16
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables set forth certain per share data for HBOC and AMISYS on
both a historical and pro forma combined basis, giving effect to the Merger
using the pooling of interests method of accounting, as well as historical
equivalent per share data for AMISYS. The unaudited pro forma combined per share
data provided below is not necessarily indicative of the results of operations
or the financial position which would have occurred had the Merger been
consummated on the indicated dates or which may be attained in the future. The
pro forma combined per share data should be read in conjunction with the
historical consolidated financial statements of HBOC and AMISYS, which are
incorporated by reference in this Proxy Statement/Prospectus.
HBO & COMPANY--HISTORICAL(1)
<TABLE>
<CAPTION>
AT AND FOR THE YEAR
ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
PER SHARE DATA:
Book Value.......................................................... $ 2.58 $ 4.59 $ 5.80
Cash Dividends Declared............................................. $ .08 $ .08 $ .08
Fully Diluted Earnings (Loss)....................................... $ .44 $ (.21)(2) $ .79(3)
</TABLE>
- ------------------------
(1) Gives effect to the 1996 acquisitions of CyCare Systems, Inc., Management
Software, Inc. and GMIS Inc. in pooling transactions. All amounts have been
restated to reflect the HBOC 1996 two-for-one stock split effected in the
form of a stock dividend.
(2) Including the effect of the $136 million nonrecurring charges related to
1995 acquisitions and excluding the dilutive effect of stock options.
(3) Including the effect of the $61 million nonrecurring charges related to 1996
acquisitions.
AMISYS MANAGED CARE SYSTEMS, INC.--HISTORICAL
<TABLE>
<CAPTION>
AT AND FOR THE YEAR
ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
PER SHARE DATA:
Book Value.......................................................... $ (.75) $ 3.61 $ 4.36
Cash Dividends Declared............................................. $ -- $ -- $ --
Net Income (Loss)................................................... $ (1.09)(1) $ .28 $ .57
</TABLE>
AMISYS MANAGED CARE SYSTEMS, INC.--HISTORICAL EQUIVALENT
(USING THE EXCHANGE RATIO OF .35)
<TABLE>
<CAPTION>
AT AND FOR THE YEAR
ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
PER SHARE DATA:
Book Value.......................................................... $ (2.14) $ 10.32 $ 12.45
Cash Dividends Declared............................................. $ -- $ -- $ --
Net Income (Loss)................................................... $ (3.11)(1) $ .80 $ 1.62
</TABLE>
- ------------------------
(1) For the period May 27, 1994 through December 31, 1994.
17
<PAGE>
PRO FORMA COMBINED HBO & COMPANY AND AMISYS MANAGED CARE SYSTEMS, INC.
(USING THE EXCHANGE RATIO OF .35)
<TABLE>
<CAPTION>
AT AND FOR THE YEAR
ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
PER SHARE DATA:
Book Value.......................................................... $ 2.47 $ 4.76 $ 5.99
Cash Dividends Declared............................................. $ .08 $ .08 $ .08
Fully Diluted Earnings (Loss)....................................... $ .36(1)(2) $ (.18)(3) $ .82(4)
</TABLE>
- ------------------------
(1) Includes AMISYS only for the period May 27, 1994 through December 31, 1994.
(2) Including the effect of the AMISYS $6.5 million nonrecurring charge related
to the 1994 write-off of purchased research and development.
(3) Including the effect of the HBOC $136 million nonrecurring charges related
to 1995 acquisitions and excluding the dilutive effect of stock options.
(4) Including the effect of the HBOC $61 million nonrecurring charges related to
1996 acquisitions.
18
<PAGE>
RISK FACTORS
EXCHANGE RATIO
AMISYS stockholders should consider that the fractional share of HBOC Common
Stock to be issued in respect of each share of AMISYS Common Stock is .35 and
will not be adjusted in the event the price of the HBOC Common Stock declines.
Although the AMISYS Board has the right to terminate the Merger Agreement if the
Market Value of HBOC Common Stock is less than $53.33 per share, it is not
obligated to do so. See "The Merger Proposal--Terms of the Merger."
INTERESTS OF CERTAIN AMISYS EXECUTIVE OFFICERS AND DIRECTORS IN THE MERGER
Certain executive officers and the directors of AMISYS have interests in the
Merger that differ from those of AMISYS stockholders generally. Such interests
include severance payments, vesting of 50% of all unvested and unexercisable
stock awards and stock options held by certain of such persons and continuing
indemnification against certain liabilities. As a result, such executive
officers and directors could be more likely to favor consummation of the Merger
than stockholders generally. See "Interests of Certain Persons in Each of HBOC
and AMISYS--Interests of Certain AMISYS Persons in Matters to be Acted Upon."
CERTAIN MARKET INFORMATION
HBOC
HBOC Common Stock is traded on the Nasdaq NM under the symbol "HBOC." The
table below presents the quarterly high and low closing sales prices and
dividend information for HBOC Common Stock as furnished by the Nasdaq NM for the
periods indicated, after restating for the 1996 two-for-one stock split effected
in the form of a stock dividend.
<TABLE>
<CAPTION>
DIVIDENDS
DECLARED
YEAR ENDED DECEMBER 31: HIGH LOW PER SHARE
- ----------------------------------------------------------------------------------- --------- --------- -------------
<S> <C> <C> <C>
1995
First Quarter.................................................................... $ 21.88 $ 16.75 $ .02
Second Quarter................................................................... $ 27.25 $ 20.25 $ .02
Third Quarter.................................................................... $ 32.00 $ 26.41 $ .02
Fourth Quarter................................................................... $ 42.88 $ 31.13 $ .02
1996
First Quarter.................................................................... $ 50.97 $ 32.75 $ .02
Second Quarter................................................................... $ 68.75 $ 49.38 $ .02
Third Quarter.................................................................... $ 68.63 $ 50.50 $ .02
Fourth Quarter................................................................... $ 71.88 $ 52.25 $ .02
1997
First Quarter.................................................................... $ 70.13 $ 47.50 $ .02
Second Quarter (through May 12, 1997)............................................ $ 58.75 $ 43.63 $ .02
</TABLE>
As of April 30, 1997, there were approximately 3,286 holders of record of
shares of HBOC Common Stock.
19
<PAGE>
AMISYS
AMISYS Common Stock has traded on the Nasdaq NM under the symbol "AMCS"
since its initial public offering on December 20, 1995. The following table sets
forth the quarterly high and low sales prices for AMISYS Common Stock as
furnished by the Nasdaq NM for the periods indicated. AMISYS has never declared
a dividend on AMISYS Common Stock.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31: HIGH LOW
- --------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
1995
Fourth Quarter (from December 20, 1995
through December 31, 1995)............................................. $ 20.00 $ 15.00
1996
First Quarter............................................................ $ 23.25 $ 16.00
Second Quarter........................................................... $ 27.88 $ 17.75
Third Quarter............................................................ $ 28.25 $ 19.00
Fourth Quarter........................................................... $ 27.50 $ 12.25
1997
First Quarter............................................................ $ 23.63 $ 14.00
Second Quarter (through May 12, 1997).................................... $ 20.50 $ 14.88
</TABLE>
As of April 25, 1997, there were approximately 33 holders of record of
shares of AMISYS Common Stock.
The following table sets forth the closing sales price for a share of each
of the listed stocks, on February 10, 1997, the last trading day preceding the
announcement of the proposed Merger, and the AMISYS equivalent share value.
<TABLE>
<CAPTION>
CLOSING SALES
PRICE AS OF
FEBRUARY 10, 1997
-----------------
<S> <C>
HBOC........................................................................ $ 62.88
AMISYS--Historical.......................................................... $ 15.88
AMISYS--Equivalent.......................................................... $ 22.01
</TABLE>
20
<PAGE>
THE MEETING
This Proxy Statement/Prospectus and the accompanying Notice of Special
Meeting and proxy card are being furnished to the stockholders of AMISYS in
connection with the solicitation of proxies by the AMISYS Board for the Meeting
to be held on June 13, 1997 at the time and place and for the purpose set forth
in the accompanying Notice of Special Meeting.
Any AMISYS stockholder who has previously delivered a properly executed
proxy may revoke such proxy at any time before its exercise. A proxy may be
revoked either by (i) delivering to the Secretary of AMISYS prior to the Meeting
either a written revocation of such proxy or a duly executed proxy bearing a
later date or (ii) attending the Meeting and voting in person. All valid,
unrevoked proxies will be voted as directed. In the absence of any contrary
directions, proxies will be voted in favor of the proposal set forth in the
Notice of Special Meeting and, with respect to such other matters as may
properly come before the Meeting, in the discretion of the appointed proxies.
Only holders of record of AMISYS Common Stock as of the close of business on
April 25, 1997, the Record Date, will be entitled to vote at the Meeting. At
that date, there were 7,787,100 shares of AMISYS Common Stock outstanding and
entitled to vote, 3,644,920 of which, or 46.4%, were beneficially owned by
directors and executive officers of AMISYS and their affiliates. Stockholders of
record on the Record Date are entitled to one vote for each share of AMISYS
Common Stock held on all matters to be voted upon at the Meeting. The presence
at the Meeting, in person or by proxy, of the holders of at least a majority of
the shares of AMISYS Common Stock issued and outstanding and entitled to vote on
the Record Date is necessary to constitute a quorum at the Meeting. The Merger
Agreement must be approved by holders of a majority of the issued and
outstanding shares of AMISYS Common Stock. Abstentions will be counted in
determining whether a quorum is present, will be considered present and entitled
to vote and will thus have the effect of a negative vote. If a proxy is returned
by a broker or other stockholder who does not have authority to vote, does not
give authority to a proxy to vote, or withholds authority to vote as to any
shares, such shares will be considered present at the Meeting for purposes of
determining a quorum, but will not be considered for purposes of calculating the
vote with respect to such matters.
The cost of soliciting proxies will be borne entirely by AMISYS. In addition
to the solicitation of proxies by mail, proxies may be solicited by directors,
officers and employees of AMISYS, without extra remuneration, by personal
interviews, telephone, telegraph or otherwise. AMISYS will request persons,
firms and corporations holding shares in their name or in the names of their
nominees, which are beneficially owned by others, to send proxy materials to and
obtain proxies from the beneficial owners and will reimburse the holders for
their reasonable expenses in doing so.
THE MERGER PROPOSAL
BACKGROUND OF THE MERGER
In the late summer and fall of 1995, the AMISYS Board considered two
principal options to increase stockholder value and enhance the liquidity of the
AMISYS Common Stock--conducting an initial public offering of the AMISYS Common
Stock and engaging in a strategic merger. The AMISYS Board determined to explore
both options on parallel paths. On November 8, 1995, while still a private
company, AMISYS retained Alex. Brown to provide certain investment banking
advice and services to AMISYS, including assisting AMISYS in evaluating such
options. At AMISYS's direction, Alex. Brown contacted a number of prospective
partners for AMISYS, including HBOC. HBOC executed a confidentiality agreement
and received certain information regarding AMISYS in November 1995. No
discussions between HBOC and AMISYS regarding a potential business combination,
however, took place until December 1996.
In late November 1995, AMISYS determined to pursue a strategy of remaining
independent and completed an initial public offering in December 1995 and
another public offering, principally on behalf of certain selling stockholders,
in May 1996.
21
<PAGE>
Following the completion of the May 1996 offering, AMISYS began exploring
strategic acquisitions of related businesses. During the summer and fall of
1996, AMISYS engaged in discussions with certain prospective acquisition
targets. In late October, as a result of a decrease in the price of AMISYS
Common Stock by approximately 50%, those discussions were interrupted. In early
December 1996, AMISYS received an unsolicited inquiry from a public company that
provides healthcare information technology services ("Company No. 1").
Prior to December 18, 1996, HBOC inquired concerning a possible strategic
relationship with AMISYS.
On December 18, 1996, the AMISYS Board formed a committee (the "Committee")
to consider strategic alternatives, including exploring the possibility of a
strategic business combination. This action was prompted by concern about
AMISYS's long-term position in the healthcare information technology market, a
desire to enhance the value and liquidity of AMISYS's stockholders' investment
and receipt of inquiries from HBOC and Company No. 1 about exploring possible
business combinations. The Committee consisted of Messrs. Peter J. Barris,
Howard E. Cox, Jr., Donald B. Hebb, Jr. and Arthur S. Marks, directors of
AMISYS, and Mr. Kevin R. Brown, President, Chief Executive Officer and a
director of AMISYS.
On December 19, 1996, AMISYS and Alex. Brown met with senior executives of
HBOC to discuss the possibility of a strategic relationship between AMISYS and
HBOC. On January 2, 1997, AMISYS was contacted by Company No. 1 to initiate
discussions concerning a possible strategic relationship. On January 3, 1997,
AMISYS executed an amendment to its November 1995 engagement letter with Alex.
Brown to renew the terms of the engagement on a month-to-month basis. AMISYS
then instructed Alex. Brown to pursue further discussions with HBOC and Company
No. 1 regarding possible strategic combinations, but instructed Alex. Brown not
to solicit further indications of interest from third parties.
On January 7, 1997, a member of the Committee, Mr. Cox, met with Charles W.
McCall, President, Chief Executive Officer and a director of HBOC, to explore
further the possibility of a strategic business combination. On January 13,
1997, AMISYS and Alex. Brown met with HBOC to further discuss such possibility
and agreed to continue their discussions.
On January 17, 1997, Alex. Brown and AMISYS met with Company No. 1 to
discuss the interest of Company No. 1 in a potential business combination and to
consider sharing confidential information.
On January 21, 1997, a meeting of the Committee was held, which was attended
by Alex. Brown and Hogan & Hartson L.L.P. ("Hogan & Hartson"), counsel to
AMISYS. At the meeting, Mr. Brown described recent contacts with HBOC and
Company No. 1 and the possible strategic advantages that each potential partner
could offer. Hogan & Hartson described to the Committee the fiduciary duties
applicable to directors in considering a strategic business combination and
alternative proposals. Alex. Brown presented publicly available information
concerning both HBOC and Company No. 1, including financial information and
information on the healthcare information technology market and a preliminary
analysis of the strategic position of AMISYS, HBOC and Company No. 1 in such
market. The Committee authorized discussions to continue with each potential
partner and directed Alex. Brown to contact each of them to solicit indications
of possible combination structures and terms. On January 22, 1997, AMISYS
management attempted to contact both HBOC and Company No. 1 to convey AMISYS's
interest in pursuing discussions as outlined above. HBOC was reached that day
and messages were left for Company No. 1 on January 22 and 27, 1997.
On January 23 and 24, 1997, pursuant to AMISYS's instructions, Alex. Brown
held discussions with HBOC concerning a possible strategic combination. They
discussed a structure involving a stock-for-stock merger and had preliminary
discussions concerning an exchange ratio and termination provisions. Discussions
also occurred between Alex. Brown and Company No. 1 concerning similar matters.
22
<PAGE>
On January 27, 1997, HBOC met with AMISYS and Alex. Brown to review due
diligence materials assembled at HBOC's request and on January 28, 1997, HBOC
continued to conduct due diligence. A first draft of a proposed merger agreement
was forwarded to Hogan & Hartson by Jones, Day, Reavis & Pogue ("Jones Day"),
counsel for HBOC, on January 28.
Also on January 28, 1997, Company No. 1 responded to the two messages left
by AMISYS and indicated that Company No. 1 wished to proceed with discussions
regarding a possible structure and a due diligence schedule.
On January 29, 1997, AMISYS and Alex. Brown traveled to the principal
offices of HBOC and reviewed information relating to HBOC's financial position
and prospects and the advantages of a strategic combination. At the same time,
further discussions were held by AMISYS with Company No. 1 concerning a due
diligence schedule and Company No. 1's interest in pursuing further discussions.
On January 30 and 31, 1997, discussions took place between Company No. 1 and
each of AMISYS and Alex. Brown concerning the structure of a proposed
transaction and the terms of a confidentiality agreement.
On January 30, 1997, Jones Day met with Hogan & Hartson to conduct a legal
due diligence review of certain contracts and other documentation.
On January 31, 1997, discussions with Company No. 1 continued concerning the
schedule for sharing of confidential information and the terms of a proposed
mutual confidentiality agreement.
On February 1, 1997, the AMISYS Board met by telephone conference, and Alex.
Brown and Hogan & Hartson also participated in the meeting. At the meeting, Mr.
Brown briefed the AMISYS Board on activities since the last meeting of the
AMISYS Board and reviewed the status of discussions with both HBOC and Company
No. 1 and reviewed the respective business opportunities presented in a
combination with HBOC or Company No. 1. Hogan & Hartson described to the AMISYS
Board its fiduciary duties associated with entering into a transaction involving
a strategic merger not involving a sale of control and any relevant obligations
to consider competing offers. The AMISYS Board unanimously expressed the view
that it had not determined whether to sell the company, but that continued
consideration of strategic alternatives, including any offers presented by HBOC
and Company No. 1 was appropriate. The AMISYS Board expressed a strong
preference towards HBOC as a potential strategic partner and in particular noted
the prospect that a strategic business combination with HBOC would enable AMISYS
stockholders to continue as investors in a combined company that would have
financial resources, diversification and liquidity for sustained growth and
noted the strategic fit of the AMISYS System with the HBOC product line. The
potential importance of the AMISYS System in the hierarchy of HBOC products
compared to its position in the product line of Company No. 1 also led the
AMISYS Board to favor continued discussions with HBOC. The AMISYS Board directed
management to continue discussions with HBOC and Company No. 1.
On February 3, 1997, AMISYS received a signed confidentiality agreement from
Company No. 1 and initial due diligence materials were provided on a
confidential basis to Company No. 1. On February 5, 1997, Company No. 1 met with
AMISYS in Rockville, Maryland to conduct initial financial due diligence. Due
diligence activities by Company No. 1 continued through February 6, 1997.
Company No. 1, however, did not make a proposal or offer to AMISYS of the terms
or conditions of any transaction.
On February 7, 1997, HBOC met with certain members of the AMISYS Board and
Alex. Brown in Rockville, Maryland to present information regarding the
financial performance and prospects of HBOC and the strategic factors viewed by
HBOC as favorable to a possible combination.
On February 8, 1997, HBOC continued to hold meetings with Mr. Brown in
Rockville regarding the possible future relationship between the two companies.
At the end of the day on February 8, 1997, HBOC proposed an exchange ratio based
upon the completion of their review of the financial information of AMISYS.
23
<PAGE>
On February 9, 1997, a meeting of the AMISYS Board was held at the offices
of Hogan & Hartson in Washington, D.C. to discuss the status of negotiations and
the proposal presented to AMISYS by HBOC. At that meeting, which was also
attended by Hogan & Hartson and Alex. Brown, Hogan & Hartson reviewed the
current status of negotiations and the significant terms of the transaction as
proposed. Alex. Brown described its preliminary analysis of the possible
combination with HBOC and reviewed various matters relating to a potential
fairness opinion, specifically including valuation considerations and
explanations of valuation methodology. The AMISYS Board noted that discussions
with Company No. 1 were still at a preliminary stage and that no proposal or
offer had been received from Company No. 1 nor was a proposal or offer expected
shortly. The AMISYS Board noted that HBOC had already proposed a strategic
combination and, in view of the AMISYS Board's prior discussions of the
strategic advantage of a combination with HBOC, reviewed the proposed merger
agreement. The AMISYS Board then instructed Hogan & Hartson to seek to resolve
the remaining issues with HBOC and to attempt to complete a definitive
agreement, subject to the AMISYS Board's approval, by the close of business the
next day.
The AMISYS Board met again on the afternoon of February 10, 1997. At that
meeting, Hogan & Hartson reported on the substantive completion of the merger
agreement and resolution of the remaining issues, including the Exchange Ratio.
After a detailed discussion of the Exchange Ratio and other legal, accounting
and financial issues, the AMISYS Board received an oral opinion of Alex. Brown,
subsequently confirmed in writing, that as of February 10, 1997 the Exchange
Ratio was fair, from a financial point of view, to AMISYS's stockholders. The
AMISYS Board then unanimously approved the merger and the merger agreement with
HBOC, authorized management to execute the merger agreement and recommended its
adoption by the holders of AMISYS Common Stock. Immediately following such
meeting, each of AMISYS, HBOC and HBOC-GA executed and delivered the Merger
Agreement. The execution of the Merger Agreement was announced on the morning of
February 11, 1997 by issuance of a press release by each of HBOC and AMISYS, and
AMISYS telephoned Company No. 1 to advise them of the execution of the Merger
Agreement and the termination of discussions between AMISYS and Company No. 1.
In early March 1997, AMISYS was approached by another public company
("Company No. 2") to discuss the possibility of an alternative transaction
involving a business combination with that company. AMISYS and Company No. 2
entered into a mutual confidentiality agreement and initial due diligence
materials were exchanged. On April 17, 1997, Company No. 2 submitted a proposal
to effect a stock for stock merger with AMISYS to be accounted for as a pooling
of interests. The proposal provided for each stockholder of AMISYS to receive
shares of Company No. 2 valued at $21.00 per share if Company No. 2's stock
price for the fifteen trading days ending three calendar days prior to the
effective date of the proposed merger averaged between $21.00 and $27.375 per
share. If Company No. 2's stock price averaged below that range, AMISYS
stockholders would receive Company No. 2 shares at a fixed exchange ratio of one
for one, and if the stock price averaged above that range, the exchange ratio
would be .7671 of a Company No. 2 share for each AMISYS share.
The AMISYS Board met with representatives of Company No. 2 on April 24, 1997
and discussed the proposal at AMISYS Board meetings held on Friday April 24 and
Monday April 28, 1997. On April 25, 1997, the business day prior to the AMISYS
Board meeting held April 28, 1997, Company No. 2's stock closed at $18.875 per
share. The AMISYS Board determined to proceed with the strategic Merger with
HBOC and so informed Company No. 2 on April 29, 1997.
The AMISYS Board determined that, while taking into account the similarity
in the effective prices of the proposals, the factors identified in "Reasons of
AMISYS for Engaging in the Merger; Recommendation of the AMISYS Board,"
especially those factors identified in paragraphs (i), (iii), (iv), (vii),
(viii), (ix) and (x), weighed in favor of proceeding with the Merger. With
respect to factor (xi), the AMISYS Board noted that substantial progress had
been made toward the completion of the transaction. With respect to factor (ii),
the AMISYS Board noted that HBOC Common Stock had been recently trading at a
level below $53.33, and that while the AMISYS Board retained the right to
terminate the Merger in the event
24
<PAGE>
the Market Value of the HBOC Common Stock does not reach $53.33, the AMISYS
Board continued to have a favorable view of the long-term prospects of HBOC
Common Stock.
REASONS OF AMISYS FOR ENGAGING IN THE MERGER; RECOMMENDATION OF THE AMISYS BOARD
The AMISYS Board has unanimously approved the proposed Merger and the Merger
Agreement and recommends approval of the Merger Agreement by the stockholders of
AMISYS based on its belief that the Merger is in the best interest of AMISYS and
its stockholders. In reaching its decision, the AMISYS Board considered the
following factors:
(i) The Merger offers AMISYS stockholders an opportunity to receive shares
in a significantly larger company with strong historical performance, capital
resources significantly greater than AMISYS's and demonstrated ability to
successfully implement a growth strategy that has resulted in historical
profitability and growth while affording them the opportunity to continue to
participate in the long-term growth and appreciation of AMISYS's business
through an ownership interest in HBOC;
(ii) The Merger provides AMISYS stockholders with HBOC Common Stock in a
tax-free exchange at a substantial premium over the market price of their shares
of AMISYS Common Stock prior to the announcement of the Merger Agreement. In
addition, the Merger Agreement provides potential protection to the AMISYS
stockholders by providing the AMISYS Board the right to terminate the
transaction if the Market Value of HBOC Common Stock falls below $53.33 per
share. The Merger Agreement also permits the AMISYS Board to terminate the
Merger Agreement (subject to the payment of a termination fee of $5,825,000 plus
expenses to HBOC-GA) if the AMISYS Board determines that termination of the
Merger Agreement would be in the best interest of stockholders and is required
in the exercise of its fiduciary duties, based upon the advice of outside
counsel;
(iii) The strategic fit between AMISYS and HBOC and the complementary nature
of their respective businesses, particularly the fact that AMISYS's managed care
system will provide a significant enhancement to the overall product line of
HBOC, which has historically been primarily devoted to the hospital segment of
the healthcare information systems industry and, to a lesser extent, other
provider segments;
(iv) Potential operating synergies and cost savings of the combined
enterprises, including possible synergies and cost savings with respect to (a)
the consolidation of administrative and support functions, (b) the combination
of sales forces and research and development capabilities and (c) the
elimination of public reporting obligations and attendant costs of AMISYS;
(v) The presentations, financial analyses and advice of its financial
advisor, Alex. Brown, and the opinion of Alex. Brown that, as of February 10,
1997, the Exchange Ratio was fair, from a financial point of view, to the AMISYS
stockholders;
(vi) The fact that the Merger is expected to be accounted for as a "pooling
of interests" and the fact that the Merger will not be subject to approval by
HBOC stockholders;
(vii) The capital structure, customer profile, product portfolio and
integration strategy of HBOC, as well as other information on the management,
business operations and prospects of HBOC and AMISYS and the likelihood of
achieving those prospects on both a combined and separate basis;
(viii) The outlook for continued financial stability and growth in stockholder
value by HBOC, including an analysis of HBOC's future sales potential;
(ix) The likelihood that the Merger would be consummated, including the
experience, reputation and financial capability of HBOC;
(x) Publicly available information concerning the financial performance,
condition, prospects and operations of each of AMISYS and HBOC; and
(xi) The proposed terms, timing and structure of the Merger and the Merger
Agreement.
25
<PAGE>
The AMISYS Board also considered the following potentially negative factors
in its deliberations concerning the Merger:
(i) The possibility that certain of the operating synergies and cost savings
sought to be achieved as a result of the Merger might not be achieved;
(ii) The potential conflicts that may arise from integrating AMISYS's
managed care oriented product with a product line emphasizing the provider side
of the healthcare information technology spectrum;
(iii) The high price to earnings ratio of HBOC Common Stock and the
possibility of a decrease in the price of the HBOC Common Stock after the
Merger; and
(iv) The lack of significant operating history following recently completed
acquisitions, including CyCare Systems, Inc. and GMIS Inc., by HBOC that would
demonstrate the successful integration of those businesses into HBOC.
The foregoing discussion of information and factors considered by the AMISYS
Board is not intended to be exhaustive but is intended to include the material
factors considered. In light of the wide variety of factors considered, the
AMISYS Board did not find it practical to, and did not, quantify or otherwise
assign relative weight to the specific factors considered, and individual
directors may have given differing weights to different factors.
After taking into consideration all of the factors set forth above, together
with an analysis of the presentations of management, Alex. Brown and legal
counsel, the AMISYS Board unanimously approved the Merger and determined that
the Merger is fair to, and in the best interest of, AMISYS and its stockholders
and that AMISYS should proceed with the Merger at this time. ACCORDINGLY, THE
AMISYS BOARD UNANIMOUSLY RECOMMENDS THAT AMISYS STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE MERGER AGREEMENT.
OPINION OF ALEX. BROWN, FINANCIAL ADVISOR TO AMISYS
On November 8, 1995, AMISYS retained Alex. Brown to provide investment
banking advice and services to AMISYS, including assisting AMISYS in developing
a plan to carry out its strategic objectives and evaluating candidates for
potential business combinations. In 1995, AMISYS decided to pursue a strategy of
remaining independent and completed an initial public offering in December 1995.
On January 3, 1997, AMISYS and Alex. Brown amended the November 1995 engagement
letter to re-engage Alex. Brown as AMISYS's financial advisor in connection with
the Merger, including rendering its opinion to the AMISYS Board as to the
fairness, from a financial point of view, of the Exchange Ratio to AMISYS's
stockholders.
On February 10, 1997, Alex. Brown made a presentation to the AMISYS Board
with respect to the Merger and rendered its oral opinion, subsequently confirmed
in writing as of the same date, that, as of such date, and subject to the
assumptions made, matters considered and limitations set forth in such opinion
and summarized below, the Exchange Ratio was fair, from a financial point of
view, to AMISYS's stockholders. The opinion was updated by delivery of a written
opinion dated as of the date of this Proxy Statement/Prospectus. No limitations
were imposed by the AMISYS Board upon Alex. Brown with respect to the
investigations made or procedures followed by it in rendering its opinions.
THE FULL TEXT OF ALEX. BROWN'S WRITTEN OPINION DATED AS OF THE DATE HEREOF
(THE "ALEX. BROWN OPINION"), WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED
HERETO AS APPENDIX B AND IS INCORPORATED HEREIN BY REFERENCE. AMISYS
STOCKHOLDERS ARE URGED TO READ THE ALEX. BROWN OPINION IN ITS ENTIRETY. THE
ALEX. BROWN OPINION IS DIRECTED TO THE AMISYS BOARD, ADDRESSES ONLY THE FAIRNESS
OF THE EXCHANGE RATIO TO AMISYS'S STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY AMISYS STOCKHOLDER AS TO HOW
SUCH STOCKHOLDER SHOULD VOTE AT THE MEETING. THE ALEX. BROWN OPINION WAS
RENDERED TO THE AMISYS BOARD FOR ITS CONSIDERATION IN DETERMINING WHETHER TO
APPROVE THE
26
<PAGE>
MERGER AGREEMENT. THE DISCUSSION OF THE ALEX. BROWN OPINION IN THIS PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE ALEX. BROWN OPINION.
In connection with the Alex. Brown Opinion, Alex. Brown reviewed certain
publicly available financial information and other information concerning AMISYS
and HBOC and certain internal analyses and other information furnished to it by
AMISYS and HBOC. Alex. Brown also held discussions with members of the senior
managements of AMISYS and HBOC regarding the businesses and prospects of their
respective companies and the joint prospects of a combined company. In addition,
Alex. Brown (i) reviewed the reported prices and trading activity for the common
stock of both AMISYS and HBOC, (ii) compared certain financial and stock market
information for AMISYS and HBOC with similar information for certain other
companies whose securities are publicly traded, (iii) reviewed the financial
terms of certain recent business combinations which it deemed comparable in
whole or in part, (iv) reviewed the terms of the Merger Agreement, and (v)
performed such other studies and analyses and considered such other factors as
it deemed appropriate.
In conducting its review and arriving at its opinion, Alex. Brown assumed
and relied upon, without independent verification, the accuracy, completeness
and fairness of the information furnished to or otherwise reviewed by or
discussed with it for purposes of rendering its opinion. With respect to the
information relating to the prospects of AMISYS and HBOC, Alex. Brown assumed
that such information relating thereto reflected the best currently available
judgments and estimates of the respective managements of AMISYS and HBOC as to
the likely future financial performances of their respective companies and of
the combined entity. Alex. Brown assumed, with the consent of AMISYS, that the
Merger will qualify for pooling of interests accounting treatment and as a
tax-free transaction for the stockholders of AMISYS. Alex. Brown did not make,
and it was not provided with, an independent evaluation or appraisal of the
assets of AMISYS and HBOC. The Alex. Brown Opinion is based on market, economic
and other conditions as they existed and could be evaluated as of the date of
the opinion letter.
In arriving at its opinion, Alex. Brown was not authorized to initiate and
did not initiate or generally solicit discussions with any party with respect to
AMISYS or any of its assets. Pursuant to the instructions of the AMISYS Board,
Alex. Brown engaged in discussions with HBOC and Company No. 1. See "The Merger
Proposal--Background of the Merger."
The following is a summary of the analyses performed and factors considered
by Alex. Brown in connection with rendering the Alex. Brown Opinion to the
AMISYS Board.
HISTORICAL FINANCIAL INFORMATION. In rendering its opinion, Alex. Brown
reviewed and analyzed historical financial information regarding AMISYS and
HBOC, which included (i) an assessment of AMISYS's and HBOC's income statements
and balance sheets; (ii) an analysis of AMISYS's and HBOC's quarterly and annual
operating results; and (iii) an assessment of AMISYS's and HBOC's margins and
growth rates. This information was presented to give the AMISYS Board background
information regarding the respective financial performances of AMISYS and HBOC.
HISTORICAL STOCK PRICE PERFORMANCE. Alex. Brown reviewed and analyzed the
daily closing per share market prices and trading volume for AMISYS Common Stock
from December 20, 1995, the date of AMISYS's initial public offering, to
February 7, 1997. In addition, Alex. Brown reviewed and analyzed the daily
closing per share market prices and trading volume for HBOC Common Stock from
January 1, 1996 to February 7, 1997. Alex. Brown also compared indices of the
daily closing per share market prices of AMISYS Common Stock and HBOC Common
Stock with the movement of the S&P 500 stock index over the periods from
December 20, 1995 and January 1, 1996 through February 7, 1997. Alex. Brown
noted that, on a relative basis, HBOC outperformed the S&P 500 stock index, and
AMISYS underperformed the S&P 500 stock index over each of the periods stated
above. Alex. Brown further noted that over such periods, on a relative stock
performance basis, HBOC's Common Stock price outperformed AMISYS's Common Stock
price. Alex. Brown also compared indices of the daily closing per share market
prices of AMISYS Common Stock and HBOC Common Stock with a healthcare
information technology composite
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index (consisting of: Enterprise Systems, Inc., HCIA, Inc., Health Management
Systems, Inc., Health Systems Design Corporation, IDX Systems Corporation, Medic
Computer Systems, Inc., PHAMIS, Inc., Shared Medical Systems Corporation, and
Transition Systems, Inc., collectively, the "Selected Companies") over such
periods. On a relative basis over both periods, both AMISYS Common Stock and
HBOC Common Stock outperformed the Selected Companies composite index. Alex.
Brown also compared an index of the daily closing prices of HBOC Common Stock
with the Selected Companies index and the S&P 500 stock index for the period
January 1, 1994 through February 7, 1996. Alex. Brown noted that the HBOC Common
Stock index significantly outperformed each of the Selected Companies index and
the S&P 500 stock index over such period. This information was presented to give
the AMISYS Board background information regarding the respective stock prices of
AMISYS and HBOC over the periods indicated.
ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES. Alex. Brown compared
certain financial information (based on commonly used valuation measurements
described below) relating to AMISYS and HBOC to certain corresponding
information for the Selected Companies. Such financial information included,
among other things, (i) common equity market valuation; (ii) operating
performance; (iii) ratios of common equity market value as adjusted for debt and
cash ("Adjusted Value") to revenues, earnings before interest expense and income
taxes ("EBIT"), and earnings before interest expense, income taxes, depreciation
and amortization ("EBITDA"), each for the latest reported twelve month period as
derived from publicly available information; and (iv) ratios of common equity
market prices per share ("Equity Value") to earnings per share ("EPS") and
projected EPS.
The financial information used in connection with the multiples provided
below with respect to AMISYS, HBOC and the Selected Companies was based on the
latest reported twelve month period as derived from publicly available
information and on estimated EPS for calendar years 1997 and 1998. AMISYS's
estimated EPS for calendar year 1997 is based on the reported estimate by the
Institutional Brokers Estimating System ("IBES"), as confirmed by AMISYS's
management, and its calendar year 1998 estimate is based on an estimate provided
by AMISYS's management. EPS estimates for calendar years 1997 and 1998 for HBOC
and the Selected Companies were based on the reported estimates by IBES as of
February 7, 1997, and with respect to EPS estimates for HBOC, as confirmed by
HBOC's management. Alex. Brown noted that, on a trailing twelve month basis, the
multiple of Adjusted Value to revenues was 2.1x for AMISYS and 7.2x for HBOC,
compared to a range of 1.7x to 6.4x, with a mean of 3.7x, for the Selected
Companies; and the multiple of Adjusted Value to EBITDA was 15.6x for AMISYS and
25.0x for HBOC, compared to a range of 9.9x to 25.1x, with a mean of 17.9x, for
the Selected Companies. Alex. Brown further noted that the multiple of Adjusted
Value to EBIT was 18.1x for AMISYS and 31.9x for HBOC, compared to a range of
12.1x to 41.2x, with a mean of 26.6x, for the Selected Companies; and the
multiple of Equity Value to trailing twelve month EPS was 28.5x for AMISYS and
53.4x for HBOC, compared to a range of 22.2x to 67.0x, with a mean of 43.8x, for
the Selected Companies; on a projected basis, the multiple of Equity Value to
calendar year 1997 EPS was 23.3x based on IBES estimates for AMISYS and 22.2x
based on AMISYS's 1997 budgeted net income and 39.8x for HBOC, compared to a
range of 14.7x to 36.2x, with a mean of 26.1x, for the Selected Companies; and
the multiple of Equity Value to calendar year 1998 EPS was 17.5x for AMISYS and
29.5x for HBOC, compared to a range of 12.2x to 27.9x, with a mean of 19.9x, for
the Selected Companies. As a result of the foregoing procedures, Alex. Brown
noted that the multiples for AMISYS were generally within the range of the
multiples for the Selected Companies and the multiples for HBOC were generally
at the high end or outside the high end of the range of the multiples for the
Selected Companies. The IBES EPS estimates, as of February 7, 1997, for calendar
year 1997 were $0.66 for AMISYS and $1.58 for HBOC. The calendar year 1998 EPS
estimate for AMISYS, as provided by AMISYS management, was $0.86 and HBOC's 1998
IBES estimate was $2.13.
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ANALYSIS OF SELECTED MERGERS AND ACQUISITIONS. Alex. Brown reviewed the
financial terms, to the extent publicly available, of 19 completed mergers and
acquisitions since November 1991 (the "Selected Transactions") in the healthcare
information technology industry. Alex. Brown calculated various financial
multiples and the premiums over market value based on certain publicly available
information for each of the Selected Transactions and compared them to
corresponding financial multiples and the premiums over market for the Merger,
based on the Exchange Ratio. Alex. Brown noted that the multiple of adjusted
purchase price (the value of consideration paid for common equity adjusted for
debt, preferred stock and cash) to trailing twelve month revenues was 3.4x for
the Merger versus a range of 0.8x to 11.4x, with a mean of 3.8x, for the
Selected Transactions; the multiple of adjusted purchase price to trailing
twelve month EBITDA was 24.7x for the Merger versus a range of 6.3x to 35.9x,
with a mean of 16.4x, for the Selected Transactions; and the multiple of
adjusted purchase price to trailing twelve month EBIT was 28.7x for the Merger
versus a range of 5.9x to 85.5x, with a mean of 24.1x, for the Selected
Transactions. Alex. Brown further noted that the multiple of equity purchase
price to trailing twelve month net income was 41.8x for the Merger versus a
range of 18.8x to 118.9x, with a mean of 42.2x, for the Selected Transactions.
In addition, Alex. Brown noted that the Selected Transactions were effected at a
range of the premium to the target company's per share market price one month
prior to announcement of 2.2% to 114.2%, with a mean of 45.8%, and to the target
company's per share market price one day prior to announcement of 3.7% to 56.5%,
with a mean of 23.4%, versus transaction premiums of 32.4% and 43.1%,
respectively, for the Merger (based on the per share market price one month
prior to, and one day prior to, the announcement of the proposed Merger). Based
on the foregoing, Alex. Brown concluded that the premium to be paid in the
Merger was within the range of premiums paid in the Selected Transactions. All
multiples for the Selected Transactions were based on public information
available at the time of announcement of such transaction, without taking into
account differing market and other conditions during the five-year period during
which the Selected Transactions occurred.
DISCOUNTED CASH FLOW ANALYSIS. Alex. Brown performed discounted cash flow
analyses for both AMISYS and HBOC. The discounted cash flow approach values a
business based on the current value of the future cash flow that the business
will generate. To establish a current value under this approach, future cash
flow must be estimated and an appropriate discount rate determined. Alex. Brown
used estimates of projected financial performance for AMISYS and HBOC for the
years 1997 through 2001 developed in discussions with the respective managements
of AMISYS and HBOC. For each company, Alex. Brown aggregated the present value
of the cash flows through 2001 with the present value of a range of terminal
values. Alex. Brown discounted these cash flows at discount rates ranging from
18.0% to 22.0% for AMISYS and from 15.0% to 19.0% for HBOC. The terminal value
was computed based on projected EBITDA in calendar year 2001 and a range of
terminal multiples from 12.0x to 16.0x. Alex. Brown arrived at such discount
rates based on its judgment of a number of factors including the estimated cost
of capital for AMISYS and HBOC, the weighted average cost of capital of the
Selected Companies and the risk based upon the uncertainty of the projected cash
flows, and arrived at such terminal value multiples based on its review of the
trading characteristics of the common stock of the Selected Companies as well as
its review of the Selected Transactions. This analysis indicated a range of
values for AMISYS of $18.87 to $26.35 per share and for HBOC of $46.59 to $68.73
per share.
PREMIUMS PAID ANALYSIS. Alex. Brown reviewed and analyzed the range of
premiums paid in 64 transactions between $150 million to $250 million in
purchase price for non-finance companies between January 1, 1994 and February 7,
1997. The range of premiums paid to the target company's stock price one month
prior to announcement and one day prior to announcement were -17.5% to 177.1%
with a mean of 48.8% and -26.7% to 181.2% with a mean of 36.1%, respectively.
Based on the foregoing, Alex. Brown noted that the premium to be paid in the
Merger one month prior to announcement of 32.4% was below the mean of the
premiums paid in such 64 transactions, and the premium paid in the Merger one
day prior to announcement of 43.1% was higher than the mean premium paid in such
64 transactions.
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HISTORICAL EXCHANGE RATIO ANALYSIS. Alex. Brown reviewed and analyzed the
historical ratio of the daily per share market closing prices of AMISYS Common
Stock divided by the corresponding prices of the HBOC Common Stock over the 180
trading days, the 90 trading days, 30 trading days, 15 trading days, 10 trading
days, one month prior to February 7, 1997 and as of February 7, 1997. Such
average exchange ratios for the aforementioned time periods and as of such dates
were 0.332, 0.288, 0.260, 0.255, 0.247, 0.269 and 0.245, respectively. Alex.
Brown then calculated the respective premiums over such exchange ratios
represented by the Exchange Ratio, which for the same time periods and as of
such dates were 5.5%, 21.6%, 34.6%, 37.3%, 41.9%, 30.0% and 43.1%, respectively.
Alex. Brown noted that the premiums over the average daily exchange ratios, for
such periods, represented by the Exchange Ratio generally increased over the
same periods prior to February 7, 1997 and as of February 7, 1997, reflecting
that the price of the HBOC Common Stock outperformed that of the AMISYS Common
Stock over these periods.
CONTRIBUTION ANALYSIS. Alex. Brown noted that on a pro forma basis AMISYS
stockholders would own approximately 3.0% of the combined company. Alex. Brown
then analyzed the relative contributions of AMISYS and HBOC to the pro forma
income statement of the combined company. This analysis showed that on a pro
forma combined basis (excluding an unusual reduction in income tax expense for
AMISYS of $275,000 in the fourth quarter of calendar year 1996), based on the
twelve month period ending December 31, 1996, AMISYS and HBOC would account for
approximately 5.5% and 94.5%, respectively, of the combined company's pro forma
revenue; approximately 2.7% and 97.3%, respectively, of the combined company's
pro forma EBITDA; approximately 3.0% and 97.0%, respectively, of the combined
company's pro forma EBIT; approximately 3.8% and 96.2%, respectively, of the
combined company's trailing twelve month net income; approximately 3.5% and
96.5%, respectively, of the combined company's projected 1997 net income based
on IBES estimates; approximately 3.2% and 96.8%, respectively, of the combined
company's adjusted 1997 net income based upon AMISYS's 1997 budgeted net income
and HBOC's 1997 net income based on the IBES estimate with a positive 15%
variance; approximately 3.5% and 96.5%, respectively, of the combined company's
projected 1998 net income based upon AMISYS's 1998 net income estimate developed
in discussions with AMISYS's management and HBOC's 1998 net income based on the
IBES estimate; approximately 3.2% and 96.8%, respectively, of the combined
company's adjusted 1998 net income based on AMISYS's 1998 net income estimate
developed in discussions with AMISYS's management and HBOC's 1998 net income
based on the IBES estimate with a positive 10% variance; and approximately 6.0%
and 94.0%, respectively, of the combined company's book value.
ACCRETION/DILUTION ANALYSIS. Alex. Brown analyzed certain pro forma effects
of the Merger. Based on such analysis, Alex. Brown computed the resulting
accretion/dilution to the combined company's EPS estimate for calendar year
1997, pursuant to the Merger before and after taking into account potential cost
savings and other synergies that AMISYS and HBOC could achieve if the Merger
were consummated and before nonrecurring costs related to the Merger. Alex.
Brown noted that before taking into account potential cost savings and other
synergies and before certain nonrecurring costs related to the Merger, the
Merger would be approximately 0.5% accretive to the combined company's EPS for
calendar year 1997. Alex. Brown also noted that after taking into account
potential cost savings and other synergies for calendar year 1997, before
nonrecurring costs relating to the Merger and assuming capitalization of 25% of
research and development expenses, the Merger would be approximately 1.7%
accretive to the combined company's EPS for calendar year 1997. Alex. Brown also
conducted a sensitivity analysis with respect to synergy amounts, which resulted
in accretion up to 2.6% if $3,000,000 in pro forma 1997 pre-tax synergies were
achieved. There can be no assurance that the combined company will be able to
realize savings and synergies in the amounts identified, or at all, following
the Merger.
No company used in the analysis of certain other publicly traded companies
nor any transaction used in the analysis of selected mergers and acquisitions
summarized above is identical to AMISYS, HBOC or the Merger. Accordingly, such
analyses must take into account differences in the financial and operating
characteristics of the Selected Companies, the companies in the Selected
Transactions and the companies
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in the Premiums Paid Analysis and other factors that would affect the public
trading value of the Selected Companies, and acquisition value of the companies
in the Selected Transactions and the companies in the Premiums Paid Analysis.
While the foregoing summary describes all analyses and factors that Alex.
Brown deemed material in its presentation to the AMISYS Board, it is not a
comprehensive description of all analyses and factors considered by Alex. Brown.
The preparation of a fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the applications of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Alex. Brown believes that its analyses must be considered as a
whole and that selecting portions of its analyses and of the factors considered
by it, without considering all analyses and factors, would create an incomplete
view of the evaluation process underlying the Alex. Brown Opinion. In performing
its analyses, Alex. Brown considered general economic, market and financial
conditions and other matters, many of which are beyond the control of AMISYS and
HBOC. The analyses performed by Alex. Brown are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than those suggested by such analyses. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. Additionally,
analyses relating to the value of a business do not purport to be appraisals or
to reflect the prices at which the business actually may be sold. Furthermore,
no opinion is being expressed as to the prices at which shares of HBOC Common
Stock may trade at any future time.
Pursuant to a letter agreement dated November 8, 1995, as amended on January
3, 1997, between AMISYS and Alex. Brown, the fee to date payable to Alex. Brown
for rendering the Alex. Brown Opinion is $250,000, which amount will be credited
against the final transaction fee of approximately $2.2 million, payable upon
consummation of the Merger. In addition, AMISYS has agreed to reimburse Alex.
Brown for its reasonable out-of-pocket expenses incurred in connection with
rendering financial advisory services, including fees and disbursements of its
legal counsel. AMISYS has agreed to indemnify Alex. Brown and its directors,
officers, agents, employees and controlling persons, for certain costs,
expenses, losses, claims, damages and liabilities related to or arising out of
its rendering of services under its engagement as financial advisor.
The AMISYS Board retained Alex. Brown to act as its advisor based upon its
prior relationship with Alex. Brown, which included Alex. Brown acting as the
lead manager for AMISYS's initial public offering in December 1995 and
subsequent offering in May 1996, and based upon Alex. Brown's qualifications,
reputation, experience and expertise. Alex. Brown has also provided various
financing services for AMISYS and HBOC and received customary fees for rendering
such services. Alex. Brown is an internationally recognized investment banking
firm and, as a customary part of its investment banking business, is engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiating underwritings, private placements and valuations for
corporate and other purposes. Alex. Brown may actively trade the equity
securities of AMISYS and HBOC for its own account and for the account of its
customers and accordingly may at any time hold a long or short position in such
securities. In addition, certain employees of Alex. Brown are limited partners
in ABS Capital Partners, L.P., an investor in AMISYS. See "Interests of Certain
Persons in Each of HBOC and AMISYS--Security Ownership of Certain Beneficial
Owners and Management of AMISYS." Alex. Brown maintains a market in AMISYS
Common Stock and HBOC Common Stock and regularly publishes research reports
regarding the healthcare industry and the businesses and securities of AMISYS,
HBOC and other publicly traded companies in that industry.
REASONS OF HBOC FOR ENGAGING IN THE MERGER
The HBOC Board believes that the acquisition of AMISYS will expand HBOC's
product portfolio and commercial HMO customer base and thereby expand its
presence within the traditional payer marketplace.
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TERMS OF THE MERGER
THE FOLLOWING SUMMARY OF THE TERMS AND CONDITIONS OF THE MERGER AGREEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TERMS OF THE MERGER
AGREEMENT, WHICH IS ATTACHED HERETO AS APPENDIX A AND IS HEREBY INCORPORATED BY
REFERENCE HEREIN.
EFFECTIVE TIME. The Merger will become effective when both (i) the Merger
Agreement is adopted and approved by the stockholders of AMISYS in accordance
with the applicable provisions of the DGCL and (ii) the Certificate of Merger is
filed with the Secretary of State of Delaware.
GENERAL EFFECTS OF THE MERGER. At the Effective Time, AMISYS will be merged
with and into HBOC-GA, which will be the surviving corporation.
CONVERSION OF SHARES. Each outstanding share of AMISYS Common Stock issued
and outstanding immediately prior to the Effective Time, will, at the Effective
Time, be converted into the right to receive .35 of a share of HBOC Common Stock
(the "Exchange Ratio").
FRACTIONAL SHARES. No certificates or scrip representing fractional shares
of HBOC Common Stock shall be issued pursuant to the Merger, but in lieu
thereof, any holder of AMISYS Common Stock shall be entitled to receive a cash
payment therefor, without interest, at a PRO RATA amount based on the average
closing market price per share (or if there is no sale on any such day, then the
average between the closing bid and ask prices on any such day) for shares of
HBOC Common Stock during the fifteen (15) consecutive trading days ending on the
third trading day prior to the date of the Meeting (the "Market Value").
STOCK PLANS. Options to purchase shares of AMISYS Common Stock outstanding
at the Effective Time of the Merger will be effectively assumed by HBOC, by
which assumption the optionee will have the right to purchase the number of
shares (rounded down to the nearest whole share) of HBOC Common Stock into which
the number of shares of AMISYS Common Stock the optionee was entitled to
purchase under the existing option would have been converted pursuant to the
terms of the Merger. The aggregate price for the total number of shares of HBOC
Common Stock issuable pursuant to an option will be the aggregate price at which
the option was exercisable for the total number of shares of AMISYS Common Stock
issuable thereunder, reduced (as necessary for rounding down) to that price that
will buy the number of whole shares of HBOC Common Stock issuable thereunder,
and the purchase price per share of HBOC Common Stock shall be such aggregate
price divided by the total number of shares of HBOC Common Stock issuable
thereunder. No other terms of the options will be modified. In addition, each
outstanding share of AMISYS Common Stock subject to restriction or risk of
forfeiture under the 1994 Equity Incentive Plan shall be converted into a share
of HBOC Common Stock, pursuant to the terms of the Merger, and shall remain
subject to such restriction or risk of forfeiture. For purposes of any
restriction or risk of forfeiture relating to continued employment, employment
by HBOC, HBOC-GA or one of their respective subsidiaries shall constitute
employment by AMISYS. Pursuant to the terms of the 1994 Equity Incentive Plan,
at the Effective Time of the Merger, 50% of all unvested and unexercisable
restricted stock awards and option grants will vest and become exercisable. The
accelerated vesting will result in a one-time charge to HBOC earnings related to
the Merger of approximately $65,000.
EXCHANGE OF CERTIFICATES. HBOC has designated SunTrust Bank, Atlanta as
Exchange Agent in connection with the Merger. At the Effective Time, HBOC shall
provide the Exchange Agent with a sufficient number of shares of HBOC Common
Stock and cash to deliver the Merger Consideration to each holder of shares of
AMISYS Common Stock converted by reason of the Merger. Promptly after the
Effective Time, the Exchange Agent will mail to each record holder (as of the
Effective Time) of an outstanding certificate or certificates that immediately
prior to the Effective Time represented outstanding shares of AMISYS Common
Stock (the "Certificates"), a letter of transmittal and instructions for use in
effecting the surrender of the Certificates for exchange and/or payment
therefor.
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Upon surrender to the Exchange Agent of a Certificate, together with such
letter of transmittal properly completed and duly executed, and any other
required documents, the holder of such Certificate shall be entitled to receive
the Merger Consideration, and such Certificate shall forthwith be cancelled. If
payment is to be made to a person other than the person in whose name the
Certificate surrendered is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the Certificate surrendered or establish to the
satisfaction of HBOC or HBOC-GA that such tax has been paid or is not
applicable. Until surrendered, each Certificate shall represent for all purposes
only the right to receive the Merger Consideration, without any interest on the
value thereof.
Notwithstanding the foregoing, neither HBOC nor HBOC-GA shall be liable to
any holder of Certificates formerly representing shares of AMISYS Common Stock
for any property properly delivered or amount paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
PAYMENT OF DIVIDENDS. No cash or stock dividend payable, no certificate
representing split shares deliverable, and no other distribution payable or
deliverable to holders of record of HBOC Common Stock at any time subsequent to
the Effective Time shall be paid or delivered to the holder of any Certificate
unless and until such Certificate is surrendered to the Exchange Agent. However,
subject to any applicable escheat laws, upon such surrender, there shall be paid
or delivered to the holder of record of the certificate or certificates for HBOC
Common Stock issued and exchanged therefor, the certificates for shares and/or
other property resulting from any such dividends, splits, or other
distributions, as the case may be, that shall have theretofore become payable or
deliverable with respect to HBOC Common Stock subsequent to the Effective Time,
without interest thereon.
LIMITATIONS ON TRANSFERABILITY OF HBOC COMMON STOCK. Shares of HBOC Common
Stock received by certain persons deemed to be "affiliates" of AMISYS for
purposes of Rule 145 under the Securities Act will be subject to the
restrictions imposed by such rule. In accordance with Rule 145, an affiliate of
AMISYS receiving HBOC Common Stock issued in the Merger may not sell such shares
except pursuant to the volume and manner of sale limitations and other
requirements specified therein or pursuant to an effective registration
statement under the Securities Act. It is a condition to the obligation of HBOC
to consummate the Merger that HBOC shall have received from each affiliate of
AMISYS a letter agreement confirming that such person will not sell or otherwise
dispose of the shares of HBOC Common Stock received by such person as a result
of the Merger other than in compliance with Rule 145 or pursuant to an effective
registration statement or pursuant to any other available exemptions from the
registration requirements of the Securities Act. In general, directors, officers
and substantial beneficial owners of a corporation's securities may be deemed to
be "affiliates" of a corporation. In addition, AMISYS affiliates are subject to
certain restrictions on transfer of both AMISYS Common Stock and HBOC Common
Stock during certain periods prior to and following the Effective Time of the
Merger to support pooling of interests accounting treatment of the transaction.
CONDITIONS; WAIVER. The obligations of HBOC and HBOC-GA, on the one hand,
and of AMISYS, on the other hand, to consummate the Merger are contingent upon
and subject to the satisfaction or waiver of the following conditions: (i) the
absence of certain legal or regulatory proceedings with respect to the Merger;
(ii) the expiration or termination of the waiting period under the HSR Act;
(iii) the approval of the Merger and the Merger Agreement by holders of the
requisite number of shares of AMISYS Common Stock; (iv) the Registration
Statement shall have been declared effective and no stop order shall have been
issued with respect hereto and shares of HBOC Common Stock being issued in the
Merger shall have been registered or shall be exempt from registration under all
applicable blue sky laws; (v) the HBOC Common Stock issuable in the Merger shall
have been listed or approved for listing upon notice of issuance by the Nasdaq
NM; and (vi) receipt of a fairness opinion of Alex. Brown.
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The obligations of HBOC and HBOC-GA to consummate the Merger are contingent
upon and subject to the satisfaction or waiver of the following additional
conditions: (i) the representations and warranties of AMISYS shall remain true
and correct at and as of the Closing Date other than breaches of such
representations and warranties which do not constitute a material adverse effect
on the business, financial condition or results of operations (a "Material
Adverse Effect") of AMISYS; (ii) the performance of all covenants, agreements
and conditions by AMISYS as provided in the Merger Agreement; (iii) there shall
have been no change in the business or operations of AMISYS which constitutes a
Material Adverse Effect; (iv) receipt of a certificate of the President of
AMISYS regarding certain matters, including those listed in (i) through (iii)
above; (v) receipt of certain legal opinions, including an opinion of Jones Day
to the effect that the Merger will qualify as a reorganization pursuant to
Section 368(a) of the Code; (vi) receipt of letters from affiliates of AMISYS
regarding compliance with Rule 145 and certain pooling of interests
requirements; (vii) delivery of certain additional certificates and documents by
AMISYS, including consents of third parties; (viii) receipt of letters from
Coopers & Lybrand L.L.P. and Arthur Andersen LLP regarding the appropriateness
of accounting for the Merger as a pooling of interests; (ix) receipt of letters
from Coopers & Lybrand L.L.P. regarding information about AMISYS included in the
Registration Statement; (x) receipt of non-competition agreements from certain
key employees of AMISYS; (xi) the absence of any fees or expenses payable to any
investment banking firm or similar entity that will be incurred by AMISYS in
connection with the Merger, except fees and expenses of Alex. Brown not to
exceed $2,750,000; (xii) termination of certain agreements granting special
rights to certain stockholders of AMISYS; and (xiii) use by AMISYS of its
reasonable best efforts to obtain employee agreements from substantially all of
the employees of AMISYS related to, among other things, non-disclosure of
proprietary information.
The obligation of AMISYS to consummate the Merger is contingent upon, and
subject to the satisfaction or waiver of, the following additional conditions:
(i) the representations and warranties of HBOC and HBOC-GA shall remain true and
correct at and as of the Closing Date other than breaches of such
representations and warranties which do not constitute a Material Adverse Effect
on HBOC and HBOC-GA taken as a whole; (ii) the performance of all covenants,
agreements and conditions by HBOC and HBOC-GA as provided in the Merger
Agreement; (iii) receipt of a certificate of the President of each of HBOC and
HBOC-GA regarding the matters in (i) and (ii) above; and (iv) receipt of certain
legal opinions, including an opinion from Hogan & Hartson to the effect that the
Merger will qualify as a reorganization pursuant to Section 368(a) of the Code.
HART-SCOTT-RODINO. The Merger is subject to the requirements of the HSR
Act, which provides that certain transactions (including the Merger) may not be
consummated until certain information has been furnished to the Antitrust
Division and the FTC and certain waiting period requirements have been
satisfied. HBOC and AMISYS filed the required information with the Antitrust
Division and the FTC on February 20, 1997 and February 19, 1997, respectively,
and were notified that the waiting period was terminated March 6, 1997.
Satisfaction of the waiting period requirement does not preclude the Antitrust
Division, the FTC or any other party from challenging or seeking to delay or
enjoin the Merger on antitrust or other grounds.
NO SOLICITATION. AMISYS has agreed that prior to the Effective Time of the
Merger or earlier termination of the Merger Agreement, AMISYS shall not,
directly or indirectly, solicit, initiate, encourage, endorse or enter into any
agreement with respect to, or take any other action to facilitate, any inquiries
or the making of any proposal or offer for any tender or exchange offer,
proposal for a merger, share exchange or other business combination involving
AMISYS or any proposal or offer to acquire in any manner a substantial equity
interest in AMISYS or a substantial portion of the assets of AMISYS with any
person or entity; provided, however, that the AMISYS Board may furnish
information to or enter into discussions or negotiations with any unsolicited
person or entity if, and only to the extent that, the AMISYS Board determines in
good faith that such action would be required in the exercise of its fiduciary
duties based upon advice of outside counsel or in order to comply with Rule
14e-2 under the Exchange
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<PAGE>
Act. AMISYS has agreed to advise HBOC-GA of any such proposals or any such
inquiries or discussions with respect thereto.
TERMINATION. The Merger may be terminated at any time prior to the
Effective Time of the Merger by: (i) mutual consent of the HBOC Board and the
AMISYS Board, notwithstanding the prior approval of the AMISYS stockholders;
(ii) the HBOC Board, in the event of material condemnation, destruction, loss or
damage to the business or assets of AMISYS; (iii) the HBOC-GA Board or the
AMISYS Board, after June 30, 1997, if the other party fails to fulfill any of
its conditions, unless fulfillment has been frustrated or made impossible by the
party seeking termination; (iv) the AMISYS Board, if, in the good faith exercise
of its fiduciary duties to the stockholders of AMISYS in the context of a
proposal to acquire AMISYS by another party, the AMISYS Board decides that such
termination is required; and (v) the AMISYS Board, if the Market Value of HBOC
Common Stock is less than $53.33 per share.
If the Merger is terminated by AMISYS in accordance with (iv) above, or by
HBOC, HBOC-GA or AMISYS because the Merger and Merger Agreement were not
approved by holders of the requisite number of shares of AMISYS Common Stock,
AMISYS will be obligated to pay (i) all reasonable costs and expenses of HBOC
and HBOC-GA incurred in connection with the negotiation and performance of the
Merger Agreement including, without limitation, fees and expenses of counsel,
fees and expenses of independent public accountants, printing expenses and
registration fees and (ii) to HBOC-GA, a fee in the amount of $5,825,000.
ACCOUNTING TREATMENT
It is a condition to the consummation of the Merger, that each of the
parties to the Merger Agreement shall have received letters, dated as of the
date hereof and as of the Closing Date, from Coopers & Lybrand L.L.P. that no
conditions exist that would preclude accounting for the Merger as a pooling of
interests under Accounting Principles Board Opinion No. 16 and from Arthur
Andersen LLP regarding the appropriateness of accounting for the Merger as a
pooling of interests under Accounting Principles Board Opinion No. 16 if the
transaction is closed and consummated in accordance with the Merger Agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary, based upon current law, is a general discussion of
the principal federal income tax consequences of the Merger, assuming the Merger
is consummated as contemplated herein. This summary is based upon the Code,
applicable regulations promulgated under the Code by the Treasury Department
("Treasury Regulations") and administrative rulings and judicial authority as of
the date hereof, all of which are subject to change, possibly with retroactive
effect. Any such change could affect the continuing validity of this summary.
This summary applies to holders of AMISYS Common Stock who hold their shares of
AMISYS Common Stock as capital assets. This summary does not discuss all aspects
of income taxation that may be relevant to a particular holder of AMISYS Common
Stock in light of such holder's specific circumstances or to certain types of
holders subject to special treatment under the federal income tax laws (for
example, foreign persons, dealers in securities, banks and other financial
institutions, insurance companies, tax-exempt organizations, and holders who
acquired AMISYS Common Stock pursuant to the exercise of options or otherwise as
compensation), and it does not discuss any aspect of state, local, foreign or
other tax laws. Consequently, each holder of AMISYS Common Stock should consult
its own tax advisor as to the specific tax consequences of the Merger to that
stockholder.
As of the date of this Proxy Statement/Prospectus, Hogan & Hartson has
advised AMISYS that in its opinion (i) the Merger will qualify as a
reorganization pursuant to Section 368(a) of the Code, and (ii) no gain or loss
will be recognized by an AMISYS stockholder upon the exchange of the shares of
AMISYS Common Stock for shares of HBOC Common Stock pursuant to the Merger,
except on the receipt of cash in lieu of a fractional share interest in HBOC
Common Stock.
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<PAGE>
As of the date of this Proxy Statement/Prospectus, Jones Day has advised
HBOC and HBOC-GA that in its opinion (i) the Merger will qualify as a
reorganization pursuant to Section 368(a) of the Code and (ii) no gain or loss
will be recognized by either HBOC, HBOC-GA or AMISYS as the result of the
consummation of the Merger.
The opinions of Hogan & Hartson and Jones Day referred to herein are based
upon certain representations and warranties of HBOC, HBOC-GA and AMISYS that are
customarily made in connection with such opinions. In particular, the opinions
have been issued in reliance on certain representations from AMISYS and certain
holders of AMISYS Common Stock with respect to the satisfaction of the
"continuity of interest" requirement of the regulations interpreting Section 368
of the Code. In general, the "continuity of interest" requirement is considered
to be satisfied if 50% or more of the capital stock issued in a merger is held
by the recipient stockholders of the acquired entity following the merger other
than under a plan or intent to dispose of such shares. To satisfy this
requirement, the Merger Agreement provides that, prior to the Effective Time of
the Merger, AMISYS will deliver to HBOC and HBOC-GA letters to the reasonable
satisfaction of HBOC and HBOC-GA from AMISYS and certain of its stockholders
that provide assurance that there is no plan or intention on the part of the
holders of AMISYS Common Stock (or knowledge of such plan or intent with respect
to holders of less than 5% of AMISYS Common Stock) to sell, exchange or
otherwise dispose of a number of shares of HBOC Common Stock received in the
Merger that would reduce AMISYS's stockholders' ownership of HBOC Common Stock
received in the Merger to a number of shares having a value, as of the Effective
Time of the Merger, of less than 50% of the value of all of the outstanding
AMISYS Common Stock immediately prior to the Effective Time of the Merger.
Consummation of the Merger is conditioned upon the non-withdrawal or
material modification of the opinions described above as of the Closing Date. No
ruling, however, has been requested from the Internal Revenue Service in
connection with the Merger, and the opinions referred to above would neither be
binding upon the Internal Revenue Service nor preclude it from adopting a
contrary position.
Provided that the Merger constitutes a tax-free reorganization, the
aggregate adjusted tax basis of the HBOC Common Stock received (including any
fractional share interests deemed received) by a stockholder of AMISYS as a
result of the Merger will be the same as the aggregate adjusted tax basis of the
shares of AMISYS Common Stock surrendered in exchange therefor. The holding
period of the HBOC Common Stock received (including any fractional share
interests deemed received) by a stockholder of AMISYS as a result of the Merger
will include the holding period of the shares of AMISYS Common Stock surrendered
in exchange therefor. Any cash that a stockholder of AMISYS receives in lieu of
a fractional interest in HBOC Common Stock will be treated as if the fractional
share were distributed in the Merger and then redeemed, resulting in gain or
loss upon receipt of such cash taxed as provided in Section 302 of the Code.
To prevent "backup withholding" of federal income tax on any payments of
cash to an AMISYS stockholder in the Merger, an AMISYS stockholder must, unless
an exception applies under the applicable law and regulations, provide the payor
of such cash with such holder's correct taxpayer identification number ("TIN")
on a substitute Form W-9 and certify under penalties of perjury that such number
is correct and that such holder is not subject to backup withholding. The
exceptions provide that certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, however, he or she must submit a signed
statement (I.E., Certificate of Foreign Status on Form W-8) attesting to his or
her exempt status. A Substitute Form W-9 will be provided to each AMISYS
stockholder in the letter of transmittal to be mailed to each holder after the
Effective Time. If the correct TIN and certifications are not provided, a $50
penalty may be imposed on an AMISYS stockholder by the Internal Revenue Service,
and any cash received by such stockholder may be subject to backup withholding
at a rate of 31%.
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<PAGE>
THE DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATION ONLY AND IS BASED ON EXISTING LAW AS OF THE DATE OF THIS
PROXY STATEMENT/PROSPECTUS. STOCKHOLDERS OF AMISYS ARE URGED TO CONSULT THEIR
TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER
(INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS).
NO APPRAISAL RIGHTS
Because AMISYS Common Stock is a Nasdaq NM security, the holders of shares
of AMISYS Common Stock will not be entitled to appraisal rights pursuant to
Section 262 of the DGCL in connection with the Merger.
INTERESTS OF CERTAIN PERSONS IN EACH OF HBOC AND AMISYS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF HBOC
The following table sets forth, as of April 30, 1997, unless otherwise
indicated, certain information with respect to all stockholders known to HBOC to
beneficially own more than five percent of the HBOC Common Stock, and
information with respect to HBOC Common Stock beneficially owned by each
director of HBOC, the Chief Executive Officer of HBOC and HBOC's other executive
officers who were the most highly compensated for the year ended December 31,
1996, and all directors and executive officers of HBOC as a group. Except as
otherwise indicated, the stockholders listed in the table have sole voting and
investment powers with respect to HBOC Common Stock owned by them and beneficial
ownership is determined in accordance with the rules of the Commission.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
- ------------------------------------------------------------------------- ---------------------- -----------------
<S> <C> <C>
FMR Corp. ............................................................... 4,898,890(1) 5.3%
82 Devonshire Street
Boston, Massachusetts 02109
Putnam Investments, Inc. ................................................ 6,319,053(2) 6.9%
One Post Office Square
Boston, Massachusetts 02109
Alfred C. Eckert III..................................................... 35,000(3) *
Holcombe T. Green, Jr.................................................... 1,238,860(4) 1.4%
Philip A. Incarnati...................................................... 35,000(5) *
Alton F. Irby III........................................................ 33,000(3) *
Gerald E. Mayo........................................................... 72,000(5) *
Charles W. McCall........................................................ 1,121,738(6) 1.3%
James V. Napier.......................................................... 65,488(7) *
Donald C. Wegmiller...................................................... 15,000(5) *
Jay P. Gilbertson........................................................ 79,549(8) *
Albert J. Bergonzi....................................................... 31,806(3) *
Jay M. Lapine............................................................ 191 *
Russell G. Overton....................................................... 27,889(9) *
All Directors and Executive Officers as a Group (12 persons)............. 2,755,521(10) 3.0%
</TABLE>
- ------------------------
* Less than 1%
(1) According to the joint Schedule 13G as of December 31, 1996, of FMR Corp.
("FMR"), FMR has sole dispositive power with respect to all of such shares
and sole voting power with respect to 138,080 shares.
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<PAGE>
(2) According to the joint Schedule 13G as of December 31, 1996, of Putnam
Investments, Inc. ("PI"), its parent, March & McLennan Companies, Inc. and
PI's subsidiaries, Putnam Investment Management, Inc. ("PIM") and The Putnam
Advisory Company, Inc. ("PAC"), PAC has shared voting and shared dispositive
power with respect to 776,300 and 1,213,065 of such shares, PIM has shared
dispositive power with respect to 5,105,988 of such shares and PI has shared
voting and shared dispositive power with respect to 776,300 and 6,319,053 of
such shares.
(3) Includes 30,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(4) Includes 440,000 shares that Mr. Green may acquire through the exercise of
presently exercisable stock options; 11,460 shares held in an IRA for the
benefit of Mr. Green; 663,300 shares held by a limited partnership of which
Mr. Green's wife is a general partner and with respect to which beneficial
ownership is disclaimed, except to the extent of his pecuniary interest
therein; and 124,100 shares held by HTG Corp. which is wholly owned by Mr.
Green.
(5) Represents shares that may be acquired through the exercise of presently
exercisable stock options.
(6) Includes 173,332 shares that may be acquired through the exercise of
presently exercisable stock options.
(7) Includes 700 shares owned by Mr. Napier's daughter and 40,000 shares that
may be acquired through the exercise of presently exercisable stock options.
(8) Includes 70,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(9) Includes 8,464 shares that may be acquired through the exercise of
presently exercisable stock options.
(10) Includes 943,796 shares that may be acquired through the exercise of
presently exercisable stock options.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF AMISYS
The following table sets forth, as of April 25, 1997 unless otherwise
indicated, certain information with respect to all stockholders known to AMISYS
to beneficially own more than five percent of the AMISYS Common Stock, and
information with respect to AMISYS Common Stock beneficially owned by each
director of AMISYS, the Chief Executive Officer of AMISYS and AMISYS's four
other most highly compensated executive officers for the year ended December 31,
1996, and all directors and executive officers of AMISYS as a group. Except as
otherwise indicated, the stockholders listed in the table have sole voting and
investment powers with respect to AMISYS Common Stock owned by them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP PERCENT OF SHARES
- ---------------------------------------------------- ---------------------- -----------------
<S> <C> <C>
Greylock Equity Limited Partnership ................ 1,430,163 18.37%
1 Federal Street
Boston, MA 02110
New Enterprise Associates VI, ...................... 1,237,163 15.89%
Limited Partnership
1119 St. Paul Street
Baltimore, MD 21202
ABS Capital Partners, L.P. ......................... 572,174 7.35%
1 South Street
Baltimore, MD 21202
Franklin Resources, Inc. ........................... 580,000(1) 7.45%
770 Mariners Island Blvd.
San Mateo, CA 94404
Peter J. Barris..................................... 1,240,163(2) 15.93%
Kevin R. Brown...................................... 254,000 3.23%
Michael L. Carlay................................... 24,000 *
Howard E. Cox, Jr................................... 1,433,163(3) 18.40%
Hugh McElderry...................................... -- --
Gary Greenfield..................................... 9,400 *
Thomas Pyle......................................... 7,400 *
Donald B. Hebb, Jr.................................. 575,174(4) 7.39%
Arthur Marks........................................ 1,240,163(2) 15.93%
Robert J. Sullivan.................................. 60,000 *
Mark A. Walters..................................... 24,400(5) *
All Directors and Officers as a Group (14
persons).......................................... 3,667,060(6) 47.09%
</TABLE>
- ------------------------
* Less than 1%.
(1) Based upon a Schedule 13G filed with the Commission on February 14, 1997 or
otherwise furnished by the beneficial owner.
(2) Represents shares held of record by New Enterprise Associates VI, Limited
Partnership ("NEA"), of whose general partner Messrs. Barris and Marks are
general partners and shares held by other affiliates of NEA and individual
options to acquire 3,000 shares of AMISYS Common Stock issued to each of
Messrs. Barris and Marks as directors of AMISYS.
(3) Represents shares held of record by Greylock Equity Limited Partnership
("Greylock") of which Mr. Cox is a general partner and options to acquire
3,000 shares of AMISYS Common Stock issued to Mr. Cox as a director of
AMISYS.
(4) Represents shares held of record by ABS Capital Partners, L.P. of whose
general partner Mr. Hebb is a general partner and options to acquire 3,000
shares of AMISYS Common Stock issued to Mr. Hebb as a director of AMISYS.
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<PAGE>
(5) Includes options to acquire 13,880 shares of AMISYS Common Stock,
exercisable within 60 days of April 25, 1997.
(6) Includes options to acquire 62,800 shares of AMISYS Common Stock,
exercisable within 60 days of April 25, 1997.
INTERESTS OF CERTAIN AMISYS PERSONS IN MATTERS TO BE ACTED UPON
In considering the Merger, holders of AMISYS Common Stock should be aware
that the directors and executive officers of AMISYS have interests in the Merger
in addition to their interests as stockholders of AMISYS generally, as described
below.
Pursuant to certain agreements, certain executive officers of AMISYS are
entitled to receive severance payments if their employment is terminated without
cause. Accordingly, if the employment of any of Kevin R. Brown, Michael L.
Carlay, Homer Fiuzat, Kathy Hall-Lyons, Earle Kirkland, Hugh McElderry, Robert
J. Sullivan or Mark A. Walters is terminated without cause, then such executive
officer will be entitled to receive his or her base salary for a period of
twelve months, and if the employment of either Rick Enright or Patrice Wolfe is
terminated without cause, such executive officer is entitled to receive his or
her base salary for a period of nine months, subject in each case to compliance
with certain non-compete and similar agreements. The amount of severance
payments received by Messrs. Brown and Walters will be reduced by any amounts
received if such executive obtains another position during the twelve-month
period. Currently the base salary of each of these executive officers is as
follows: Mr. Brown: $225,750; Mr. Carlay: $183,750; Mr. Enright: $130,000; Mr.
Fiuzat: $125,213; Ms. Hall-Lyons: $120,000; Mr. Kirkland: $113,000; Mr.
McElderry: $200,000; Mr. Sullivan: $160,000; Mr. Walters: $131,250; and Ms.
Wolfe: $120,000.
Pursuant to the provisions of the AMISYS 1994 Equity Incentive Plan, at the
Effective Time of the Merger, 50% of all unvested and unexercisable restricted
stock awards and option grants held by any person will vest and become
exercisable. Accordingly, upon the Closing, restricted stock awards held by the
following executive officers will vest as to the following number of shares of
AMISYS Common Stock: Mr. Brown: 54,000 shares; Homer Fiuzat: 9,000 shares; and
Robert J. Sullivan: 22,500 shares. Additionally, options held by the following
directors and executive officers will vest as to the following number of shares
of AMISYS Common Stock: Mr. Brown: 75,000 shares; Mr. Carlay: 36,000 shares; Mr.
Enright: 20,000 shares; Mr. McElderry: 30,000 shares; Mr. Fiuzat: 25,410 shares;
Ms. Hall-Lyons: 18,440 shares; Mr. Kirkland: 24,220 shares; Mr. Pyle: 8,800
shares; Mr. Greenfield: 8,800 shares; Mr. Sullivan: 30,000 shares; Mr. Walters:
37,760 shares; and Ms. Wolfe: 12,500 shares.
HBOC-GA has agreed that subsequent to the Closing Date, it will provide to
the directors and officers of AMISYS indemnification in accordance with the
current provisions of the Certificate of Incorporation and Bylaws of AMISYS with
respect to matters occurring prior to the Effective Time, including, without
limitation, the Merger Agreement and the transactions contemplated thereby, for
a period of six years from the Effective Time or until any known matters are
resolved. See "Comparison of Rights of Holders of Shares of Each of HBOC Common
Stock and AMISYS Common Stock--Liability and Indemnification of Officers and
Directors." Additionally, HBOC has agreed to maintain in effect for twelve
months following the Closing Date the policies of directors' and officers'
liability insurance currently maintained by AMISYS, provided that the premiums
therefor are no greater than 110% of the annual premiums for such coverage as of
the date of the Merger Agreement.
40
<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF
HBOC COMMON STOCK AND AMISYS COMMON STOCK
INTRODUCTION
HBOC and AMISYS are each incorporated under the laws of the State of
Delaware. The holders of shares of AMISYS Common Stock, whose rights as
stockholders are currently governed by Delaware law, the Amended and Restated
Certificate of Incorporation of AMISYS (the "AMISYS Charter"), and the Amended
and Restated By-laws of AMISYS (the "AMISYS Bylaws"), will, upon the exchange of
their shares pursuant to the Merger, become holders of shares of HBOC Common
Stock, and their rights as such will be governed by Delaware law, the HBOC
Certificate of Incorporation, as amended (the "HBOC Charter"), and the Amended
and Restated Bylaws of HBOC (the "HBOC Bylaws"). The material differences
between the rights of holders of shares of AMISYS Common Stock and of the rights
of holders of shares of HBOC Common Stock result from differences in their
governing corporate documents and are summarized below.
The following summary does not purport to be a complete statement of the
rights of holders of shares of HBOC Common Stock under applicable Delaware law,
the HBOC Charter and HBOC Bylaws or a comprehensive comparison with the rights
of the holders of shares of AMISYS Common Stock under applicable Delaware law,
the AMISYS Charter and AMISYS Bylaws, or a complete description of the specific
provisions referred to herein. The identification of specific differences is not
meant to indicate that other equally or more significant differences do not
exist. This summary is qualified in its entirety by reference to the DGCL and
the governing corporate documents of HBOC and AMISYS, to which holders of shares
of AMISYS Common Stock are referred. See "Incorporation of Certain Information
by Reference."
AUTHORIZED CAPITAL STOCK
The DGCL requires that a corporation's certificate of incorporation set
forth the total number of shares of all classes of stock which the corporation
has authority to issue and a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof. The HBOC Charter provides that HBOC has authority to issue (i)
250,000,000 shares of HBOC Common Stock and (ii) 1,000,000 shares of preferred
stock, no par value. The AMISYS Charter provides that AMISYS has the authority
to issue (i) 25,000,000 shares of AMISYS Common Stock and (ii) 5,000,000 shares
of preferred stock, par value $.01 per share.
BOARD OR STOCKHOLDER APPROVED PREFERRED STOCK
The DGCL permits a corporation's certificate of incorporation to allow its
board of directors to issue, without stockholder approval, one or more series of
preferred or preference stock and to designate their rights, preferences,
privileges and restrictions. The HBOC Charter grants such power to the HBOC
Board. The HBOC Board has designated one series of preferred stock, the Series A
Junior Participating Preferred Stock. See "Incorporation of Certain Information
by Reference." The AMISYS Charter also grants such power to the AMISYS Board.
The AMISYS Board has not designated any series of preferred stock.
VOTING RIGHTS
The DGCL states that, unless a corporation's certificate of incorporation
or, with respect to clauses (ii) and (iii), the bylaws, specify otherwise, (i)
each share of its capital stock is entitled to one vote, (ii) a majority of
voting power of the shares entitled to vote, present in person or represented by
proxy, shall constitute a quorum at a stockholders' meeting, and (iii) in all
matters other than the election of directors, the affirmative vote of a majority
of the voting power of shares, present in person or represented by proxy at the
meeting and entitled to vote on the subject matter, shall be the action of the
stockholders. The holders of shares of HBOC Common Stock are entitled to one
vote per share on all matters to be
41
<PAGE>
voted on by the stockholders of HBOC. The holders of shares of AMISYS Common
Stock are entitled to one vote per share on all matters to be voted on by the
stockholders of AMISYS.
NUMBER OF DIRECTORS
Under the DGCL, unless a corporation's certificate of incorporation
specifies the number of directors, such number shall be fixed by, or in the
manner provided in, its bylaws. If a corporation's certificate of incorporation
expressly authorizes its board of directors to amend its bylaws, its board of
directors may change the authorized number of directors by an amendment to the
corporation's bylaws, if fixed therein, or in such manner as is provided
therein. If such certificate of incorporation specifies the number of directors,
the number of directors can only be changed by amending the certificate of
incorporation. The HBOC Bylaws provide that the number of members of the HBOC
Board shall be not less than three nor more than fifteen, such number to be
established by the HBOC Board or stockholders. The number of directors on the
HBOC Board is currently eight. The AMISYS Charter specifies that the number of
directors shall be not less than three nor more than twelve with the exact
number of directors to be stated in the AMISYS Bylaws. The AMISYS Charter
further provides that the AMISYS Board shall be divided into three classes, as
nearly equal in number as possible. The number of directors constituting the
AMISYS Board is currently seven.
ELECTION OF BOARD OF DIRECTORS
The DGCL provides that a corporation's directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors. Under the
DGCL, a corporation's certificate of incorporation may provide that stockholders
of a corporation can elect directors by cumulative voting. Neither the HBOC
Charter nor the AMISYS Charter provides for cumulative voting.
VOTE ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS
The DGCL generally requires approval of any merger, consolidation or sale of
substantially all the assets of a corporation at a meeting of stockholders by
vote of the holders of a majority of all outstanding shares of the corporation
entitled to vote thereon. The certificate of incorporation of a Delaware
corporation may provide for a greater vote. The HBOC Charter generally requires
the affirmative vote of four-fifths of the outstanding HBOC Common Stock to
approve certain business combinations, except under certain circumstances. The
AMISYS Charter does not contain any provision requiring a greater vote with
respect to business combinations. See "--Anti-Takeover Protection."
SPECIAL MEETINGS OF STOCKHOLDERS
Under the DGCL, special stockholder meetings of a corporation may be called
by its board of directors and by any person or persons authorized to do so by
its certificate of incorporation or bylaws. Under the HBOC Charter and Bylaws,
special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the Chairman of the Board or
the President or by holders of four-fifths of the outstanding shares of HBOC
Common Stock and shall be called by the Chairman of the Board or President at
the request in writing of three-fourths of the directors of HBOC. Such requests
shall state the purpose or purposes of the proposed meeting. The AMISYS Bylaws
provide that special meetings of stockholders may be called by the AMISYS Board,
the Chairman of the AMISYS Board, or by the Chief Executive Officer or the
Secretary at the written request of the owners of 30% or more of the outstanding
capital stock of AMISYS, issued and outstanding and entitled to vote. The
written notice of a special meeting shall state the purpose or purposes for
which the meeting is called.
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<PAGE>
STOCKHOLDER ACTION BY WRITTEN CONSENT
Under the DGCL, any action by a corporation's stockholders must be taken at
a meeting of such stockholders, unless a consent in writing setting forth the
action so taken is signed by the stockholders having not less than the minimum
number of votes necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Actions by written
consent, however, may not be taken if otherwise provided for in the certificate
of incorporation. The HBOC Charter and the AMISYS Charter expressly prohibit
written consents by stockholders.
AMENDMENT OF CERTIFICATE OF INCORPORATION
The DGCL allows amendment of a corporation's certificate of incorporation if
its board of directors adopts a resolution setting forth the amendment proposed,
declaring its advisability, and the stockholders thereafter approve such
proposed amendment, either at a special meeting called by the board for the
purpose of approval of such amendment by the stockholders or, if so directed by
the board, at the next annual stockholders' meeting. At any such meeting, the
proposed amendment generally must be approved by a majority of the outstanding
shares entitled to vote. The holders of the outstanding shares of a class are
entitled to vote as a separate class upon a proposed amendment, whether or not
entitled to vote thereon by the certificate of incorporation, if the amendment
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class, or alter
or change the powers, preferences, or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences, or special rights of one or more series of any class so
as to affect them adversely, but not affect the entire class, then only the
shares of the series so affected by the amendment will be considered a separate
class for the purposes of a vote on the amendment. Under the DGCL, a
corporation's certificate of incorporation also may require, for action by the
board or by the holders of any class or series of voting securities, the vote of
a greater number or proportion than is required by the DGCL and the provision of
the certificate of incorporation requiring such greater vote cannot be altered,
amended or repealed except by such greater vote.
The HBOC Charter contains no provisions requiring a vote greater than that
specified in the DGCL to amend the HBOC Charter, except for those provisions
relating to business combinations. The AMISYS Charter contains no provisions
requiring a vote greater than that specified in the DGCL to amend the AMISYS
Charter.
AMENDMENT OF BYLAWS
Under the DGCL, the power to adopt, amend or repeal a corporation's bylaws
resides with the stockholders entitled to vote thereon, and with the directors
of such corporation if such power is conferred upon the board of directors by
the certificate of incorporation. The HBOC Charter authorizes the HBOC Board to
make, alter or repeal the HBOC Bylaws. The AMISYS Charter also authorizes the
AMISYS Board to adopt, amend and repeal the AMISYS Bylaws.
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The DGCL provides that a corporation may limit or eliminate a director's
personal liability for monetary damages to the corporation or its stockholders
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to such corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for paying or
approving a stock repurchase in violation of Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit. Both the HBOC Charter and the AMISYS Charter provide for elimination of
personal liability subject to the statutory exceptions.
Under the DGCL, directors and officers as well as other employees and
individuals may be indemnified against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in
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connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation as a derivative action) if they acted in good faith and
in a manner they reasonably believed to be in, or not opposed to, the best
interest of the corporation, and, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful. The HBOC Bylaws and the AMISYS Bylaws provide to directors and
officers of HBOC and AMISYS, respectively, indemnification to the fullest extent
provided by law. Additionally, the HBOC Bylaws and the AMISYS Charter provide
that expenses incurred by a person in defending a civil or criminal action, suit
or proceeding by reason of the fact that he or she is a director, officer,
employee or agent may be paid in advance of the final disposition of such
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
such director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he or she is entitled to be indemnified by HBOC or
AMISYS, as the case may be, as authorized by relevant Delaware law.
PAYMENT OF DIVIDENDS
The DGCL permits the payment of dividends and the redemption of shares out
of a corporation's surplus. Under the DGCL, if a dividend is paid out of capital
surplus, stockholders need not be so notified, and the dividends may in certain
cases also be paid out of net profits for the fiscal year in which declared or
out of net profits for the preceding fiscal year. Neither the HBOC Charter nor
the AMISYS Charter has provisions limiting the payment of dividends.
ANTI-TAKEOVER PROTECTION
Under the DGCL, a merger or consolidation generally must be approved by the
affirmative vote of the holders of a majority of all of the outstanding shares
of stock entitled to vote thereon. However, no stockholder approval is required
if the acquiring corporation owns 90% or more of the outstanding shares of the
acquired corporation.
In addition to the DGCL's general requirements, Section 203 of the DGCL,
"Business Combinations with Interested Stockholders," prohibits a corporation
that does not opt out of its provisions from entering into certain business
combination transactions with "interested stockholders" (generally defined to
include persons beneficially owning 15% or more of the corporation's outstanding
capital stock) unless certain super-majority votes are obtained. HBOC has opted
out of Section 203 in its Bylaws. However, the HBOC Charter places certain
restrictions on "Business Combinations" (such as a merger) with "Controlling
Persons" (generally a person holding more than 10% of the HBOC Common Stock)
unless, generally speaking, the Business Combination has been approved by the
affirmative vote of the holders of four-fifths of the outstanding HBOC Common
Stock not held by the Controlling Person or its related entities or by a
majority of directors who were directors prior to the time the Controlling
Person became a Controlling Person and who are not affiliated with the
Controlling Person. Such provisions do not apply to the Merger. AMISYS has not
opted out of Section 203 in the AMISYS Charter or Bylaws. Neither the HBOC
Charter provisions nor Section 203 apply to the Merger.
APPRAISAL RIGHTS
Generally, no appraisal rights are available under the DGCL for shares of
any class of stock which are (1) 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. Further, under the DGCL, stockholders of
corporations being acquired pursuant to a merger have the right to serve upon
the corporation a written demand for appraisal of their shares when the
stockholders receive any form of consideration for their shares other than (a)
shares of the surviving corporation, (b) shares of any other corporation (i)
listed on a national securities exchange, (ii) designated as a national market
system security on an inter-dealer quotation system by the National Association
of Securities Dealers, Inc. or (iii) held of record by more than 2,000
stockholders or (c) cash in
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lieu of fractional shares, or any combination thereof. Stockholders entitled to
appraisal rights subsequently receive cash from the corporation equal to the
value of their shares as established by judicial appraisal. Corporations may
enlarge these statutory rights by including in their certificate of
incorporation a provision allowing appraisal rights in any merger in which the
corporation is a constituent corporation. Neither the HBOC Charter nor the
AMISYS Charter contains such a provision on appraisal rights.
The holders of shares of AMISYS Common Stock are not entitled to appraisal
rights in connection with the Merger pursuant to Section 262 of the DCGL because
AMISYS Common Stock is designated as a national market system security on the
Nasdaq NM.
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BUSINESS OF HBOC
GENERAL
HBOC develops integrated patient care, clinical, financial, managed care and
strategic management software solutions for the healthcare industry. These open
systems applications facilitate the integration of clinical, financial and
administrative data from a wide range of customer systems and software. HBOC's
broad product portfolio can be implemented in a variety of combinations from
stand-alone to enterprisewide, enabling customers to add incremental
capabilities to existing information systems without making prior capital
investments obsolete. HBOC also provides a full complement of network
communications technologies, including wireless capabilities, as well as
outsourcing services that are offered under contract management agreements
whereby its staff manages and operates data centers, information systems,
organizations and business offices of healthcare institutions of various sizes
and structures. In addition, HBOC offers a wide range of electronic commerce
services, including electronic medical claims and remittance advice services as
well as statement processing.
HBOC markets its products and services to integrated health delivery
networks, hospitals, physicians' offices, home health providers, pharmacies,
reference laboratories, managed care providers and payers. HBOC also sells its
products and services internationally through subsidiaries and/or distribution
agreements in the United Kingdom, Canada, Ireland, Saudi Arabia, Kuwait,
Australia, Puerto Rico and New Zealand.
As of December 31, 1996, HBOC had 4,404 employees worldwide.
RECENT DEVELOPMENTS
HBOC, HBOC-GA and Enterprise entered into an Agreement of Merger dated March
13, 1997. If such agreement is approved by the stockholders of Enterprise and
all other closing conditions set forth under the terms of such agreement are
satisfied, up to 4,675,886 shares of HBOC Common Stock will be issued to such
stockholders in connection with the merger of Enterprise with and into HBOC-GA.
Enterprise is a healthcare information services company that develops,
implements and services an integrated suite of resource management software to
assist healthcare providers in managing operations and reducing costs.
On April 9, 1997, HBOC announced that for the quarter ended March 31, 1997,
revenues were $219.9 million, net income was $35.7 million and earnings per
share were $0.38.
BUSINESS OF AMISYS
GENERAL
AMISYS develops, markets and supports managed healthcare information systems
for payers and providers who offer managed care products and services. AMISYS
provides an integrated system solution, which includes AMISYS's proprietary
AMISYS software, third-party hardware and software and implementation services
(the "AMISYS System") that automate most of the operational underpinnings of
AMISYS's managed care clients. These products and services are directed at
supporting critical "risk-management" operational functions that help ensure the
proper balance of premium revenue against healthcare utilization costs,
availability and quality. The AMISYS software contains 29 fully integrated
applications designed to support the full range of operations in managed care
and risk-management administrative functions, including premium billing and
receivables, capitation, utilization management and claims adjudication and
payment.
Historically, AMISYS's client base consisted primarily of HMOs. Since 1992,
as managed care initiatives have spread throughout the healthcare system, AMISYS
has broadened its client base to include many new entities that manage
healthcare risk or administer managed healthcare products. AMISYS's installed
base now includes commercial and Medicaid HMOs, indemnity insurers, integrated
delivery
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systems, physician-hospital organizations, third-party administrators and mental
health and other specialty managed care organizations. AMISYS currently has
licenses with 80 clients supporting 87 sites nationwide. AMISYS estimates that
its clients are utilizing or installing the AMISYS System to administer risk for
approximately 8.2 million covered lives.
As of December 31, 1996, AMISYS had 255 employees.
RECENT DEVELOPMENTS
On May 1, 1997, AMISYS announced that for the quarter ended March 31, 1997,
revenues were $12.3 million, net income was $1.0 million and earnings per share
were $0.12.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at AMISYS's 1997 annual
meeting of stockholders were required to be received by AMISYS by December 1,
1996 for inclusion in AMISYS's proxy materials relating to such meeting. In the
event the Merger is consummated, there will not be a 1997 annual meeting of
stockholders of AMISYS.
OTHER MATTERS
The management of AMISYS knows of no other matters that may come before the
Meeting. However, if matters other than those referred to above should properly
come before the Meeting, it is the intention of the persons named on the
enclosed form of proxy to vote such proxy in accordance with their best
judgment.
CERTAIN LEGAL MATTERS
The validity of the shares of HBOC Common Stock offered hereby will be
passed upon for HBOC by Jones, Day, Reavis & Pogue, Atlanta, Georgia. Certain
tax matters in connection with the Merger have been passed upon for AMISYS by
Hogan & Hartson L.L.P., Baltimore, Maryland.
EXPERTS
The audited financial statements and schedule of HBOC incorporated by
reference in this Proxy Statement/Prospectus and elsewhere in the Registration
Statement of which this Proxy Statement/Prospectus is a part, to the extent and
for the periods indicated in their reports, have been audited by Arthur Andersen
LLP, independent public accountants, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
The consolidated financial statements of AMISYS in AMISYS's Annual Report
(Form 10-K) for the year ended December 31, 1996, which is referred to and made
a part of this Proxy Statement/Prospectus and the Registration Statement, have
been audited by Coopers & Lybrand L.L.P., independent public accountants, as set
forth in their report thereon and incorporated herein by reference, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
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APPENDIX A
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, made this 10th day of February, 1997, by and among
HBO & Company, a Delaware corporation ("Parent"); HBO & Company of Georgia, a
Delaware corporation (hereinafter referred to as "Purchaser"); and AMISYS
Managed Care Systems, Inc., a Delaware corporation (hereinafter referred to as
the "Acquired Company");
WITNESSETH:
WHEREAS, the Boards of Directors of the Acquired Company, Parent and
Purchaser deem it advisable and in the best interests of their respective
stockholders that the Acquired Company be merged with and into Purchaser, and,
on or prior to the date hereof, such Boards of Directors have approved the
merger of the Acquired Company with and into Purchaser upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
receipt, sufficiency and adequacy of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as follows:
I. DEFINITIONS.
As used herein, the following terms shall have the following meanings unless
the context otherwise requires:
1.1 "Acquired Company" shall mean AMISYS Managed Care Systems, Inc., a
Delaware corporation.
1.2 "Acquired Company Information" shall have the meaning set forth in
Section 2.3.1.
1.3 "Acquired Company Reports" shall have the meaning set forth in
Section 3.21.
1.4 "Acquired Company Software" shall have the meaning set forth in
Section 3.14.2(iii).
1.5 "Acquired Company Stock" shall mean the common stock, $.001 par
value per share, of the Acquired Company.
1.6 "Agreement" shall mean this Agreement of Merger.
1.7 "Assumed Option" shall have the meaning set forth in Section 2.1.7.
1.8 "Benefit Plans" shall have the meaning set forth in Section 3.16.
1.9 "Certificate of Merger" shall have the meaning set forth in Section
2.1.2.
1.10 "Certificates" shall have the meaning set forth in Section 2.2.2.
1.11 "Closing" shall have the meaning set forth in Section 2.1.9.
1.12 "Closing Date" shall mean the date on which the Closing occurs
pursuant to Section 8.1.
1.13 "Covenants Not to Compete" shall mean the Covenants Not to Compete
referred to in Section 6.11.
1.14 "Customer Contracts" shall have the meaning set forth in Section
3.12.1.
1.15 "Delaware Code" shall mean the Delaware General Corporation Law.
1.16 "DOL" shall mean the United States Department of Labor.
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1.17 "Effective Time" shall mean the time the Merger becomes effective,
as set forth in Section 2.1.2.
1.18 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.19 "ERISA Affiliate" shall mean, with respect to a Person, any other
Person that is required to be aggregated with such Person under Tax Code
Section 414(b), (c), (m) and/or (o) at any time prior to the Closing Date.
1.20 "ERISA Plan" shall have the meaning set forth in Section 3.16.
1.21 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.22 "Exchange Agent" shall mean the person designated by Purchaser as
the Exchange Agent pursuant to Section 2.2.1 hereof.
1.23 "Exchange Ratio" shall mean the ratio of exchange pursuant to the
Merger between each share of Acquired Company Stock and each share of Parent
Stock, as determined pursuant to the provisions of Section 2.1.6.
1.24 "Existing Option" shall have the meaning set forth in Section
2.1.7.
1.25 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
1.26 "Hazardous Substance" shall have the meaning set forth in Section
3.18.
1.27 "IRS" shall mean the United States Internal Revenue Service.
1.28 "Licensed Software" shall have the meaning set forth in Section
3.14.2(ii).
1.29 "Material Adverse Effect" shall mean a material adverse effect on
the business, financial condition or results of operations of the
corporation in question.
1.30 "Material Contract" shall have the meaning set forth in Section
3.12.9.
1.31 "Merger" shall mean the merger of the Acquired Company with and
into Purchaser, as set forth in Section 2.1.1.
1.32 "Merger Consideration" shall have the meaning set forth in Section
2.1.6(c).
1.33 "Nasdaq" shall mean the National Association of Securities Dealers
Automated Quotation System.
1.34 "1933 Act" shall mean the Securities Act of 1933, as amended.
1.35 "1994, 1995 and 1996 Financial Statements" shall have the meaning
set forth in Section 3.5.1.
1.36 "Owned Software" shall have the meaning set forth in the first
paragraph of Section 3.13.
1.37 "Parent" shall mean HBO & Company, a Delaware corporation, which is
the sole stockholder of Purchaser.
1.38 "Parent Reports" shall have the meaning set forth in Section 4.5.
1.39 "Parent Stock" shall mean the common stock, $0.05 par value per
share, of Parent.
1.40 "PBGC" shall mean the Pension Benefit Guaranty Corporation
established under Title IV of ERISA.
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1.41 "Person" shall include, but is not limited to, an individual, a
trust, an estate, a partnership, an association, a company, a corporation, a
sole proprietorship, a professional corporation or a professional
association.
1.42 "Purchaser" shall mean HBO & Company of Georgia, a Delaware
corporation, and wholly-owned subsidiary of Parent.
1.43 "Real Property" shall have the meaning set forth in Section 3.18.
1.44 "Registration Statement" shall have the meaning set forth in
Section 2.3.1.
1.45 "SEC" shall mean the Securities and Exchange Commission.
1.46 "Stock Plans" shall mean the 1994 Equity Incentive Plan and the
Directors' Stock Option Plan.
1.47 "Surviving Corporation" shall have the meaning set forth in Section
2.1.1 hereof.
1.48 "Takeover Proposal" shall have the meaning set forth in Section
2.11 hereof.
1.49 "Tax Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.50 "401(k) Plan" shall mean the AMISYS Managed Care Systems, Inc.
Employee 401(k) Plan.
II. COVENANTS AND UNDERTAKINGS.
2.1 TERMS AND APPROVAL OF MERGER.
2.1.1. TERMS OF THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
Code, the Acquired Company shall be merged with and into Purchaser (the
"Merger"), as soon as practicable following the satisfaction or waiver of
the conditions set forth in Articles V, VI and VII hereof. Following the
Merger, Purchaser shall continue as the surviving corporation (the
"Surviving Corporation") and the separate corporate existence of the
Acquired Company shall cease.
2.1.2. EFFECTIVE TIME; EFFECTS OF THE MERGER. The Merger shall become
effective when both (i) this Agreement shall be adopted and approved by the
stockholders of the Acquired Company in accordance with the applicable
provisions of the Delaware Code and (ii) a Certificate of Merger (the
"Certificate of Merger"), executed in accordance with the relevant
provisions of the Delaware Code is filed with the Secretary of State of
Delaware (the time the Merger becomes effective being referred to as the
"Effective Time"). The Merger shall have the effects set forth in the
Delaware Code.
2.1.3. CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of Purchaser as in effect immediately preceding the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation.
The Bylaws of Purchaser as in effect immediately preceding the Effective
Time shall be the Bylaws of the Surviving Corporation.
2.1.4. DIRECTORS. The directors of Purchaser immediately prior to the
Effective Time shall be the directors of the Surviving Corporation and shall
hold office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law.
2.1.5. OFFICERS. The officers of Purchaser immediately prior to the
Effective Time shall be the officers of the Surviving Corporation and shall
hold office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law.
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2.1.6. CONVERSION OF SHARES. (a) Subject to Section 2.1.6(g) below,
each outstanding share of Acquired Company Stock issued and outstanding
immediately prior to the Effective Time, shall, at the Effective Time, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into thirty five hundredths (0.35) of a share of
Parent Stock, deliverable to the holder thereof without interest on the
value thereof.
(b) Each share of Acquired Company Stock held in the treasury of the
Acquired Company shall, at the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof, be cancelled
and retired and cease to exist.
(c) Subject to any applicable escheat laws, until surrendered and
exchanged pursuant hereto, each certificate that immediately prior to the
Effective Time represented outstanding shares of Acquired Company Stock
shall be deemed for all corporate purposes of Parent, subject, however,
to the other provisions of this Section 2.1.6, to evidence the ownership
of the number of whole shares of Parent Stock into which the shares of
Acquired Company Stock represented thereby shall have been converted,
together with the right to receive the amount of cash in lieu of a
fractional share, if any, pursuant to subsections (a) and (d) of this
Section 2.1.6. (The shares of Parent Stock, and any cash in lieu of a
fraction thereof, receivable by each Acquired Company stockholder as
described in Sections 2.1.6(a) above and 2.1.6(d) below, are referred to
hereinafter as the "Merger Consideration."). No cash or stock dividend
payable, no certificate representing split shares deliverable, and no
other distribution payable or deliverable to holders of record of Parent
Stock at any time subsequent to the Effective Time shall be paid or
delivered to the holder of any certificate that at the Effective Time
represented Acquired Company Stock unless and until such certificate is
surrendered to the Exchange Agent. However, subject to any applicable
escheat laws, upon such surrender, there shall be paid or delivered to
the holder of record of the certificate or certificates for Parent Stock
issued and exchanged therefor, the certificates for shares and/or other
property resulting from any such dividends, splits, or other
distributions, as the case may be, that shall have theretofore become
payable or deliverable with respect to Parent Stock subsequent to the
Effective Time. No interest shall be payable with respect to such payment
or delivery of any dividends or other distributions upon the surrender of
certificates that represented Acquired Company Stock at the Effective
Time.
(d) No certificates or scrip representing fractional shares of Parent
Stock shall be issued upon surrender of certificates representing
Acquired Company Stock converted pursuant hereto, and no dividend, stock
split, or other distribution of Parent shall relate to any such
fractional share interest, and no such fractional share interest shall
entitle the owner thereof to vote or to any other rights of a stockholder
of Parent. In lieu of any such fractional share, any holder of Acquired
Company Stock shall be entitled, upon surrender in accordance herewith of
such holder's certificate or certificates representing Acquired Company
Stock, to receive a cash payment therefor, without interest, at a PRO
RATA amount based on the average closing market price per share (or if
there is no sale on any such day, then the average between the closing
bid and ask prices on any such day) for shares of Parent Stock during the
fifteen (15) consecutive trading days ending on the third trading day
prior to the date of the special meeting of stockholders of the Acquired
Company held to approve the Merger, as reported by Nasdaq (the "Market
Value"). No interest shall accrue with respect to any cash held for the
benefit of holders of unsurrendered certificates theretofore representing
shares of Acquired Company Stock at the Effective Time.
(e) All shares of Parent Stock into which shares of the Acquired
Company Stock have been converted pursuant to this Section 2.1.6 shall be
deemed to have been issued in full satisfaction of all rights pertaining
to such converted shares and shall, when issued pursuant to the
provisions hereof, be fully paid and nonassessable.
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(f) The stock transfer books of Acquired Company Stock shall be
closed at the Effective Time, and thereafter no transfer of any such
shares of Acquired Company Stock shall be recorded thereon. In the event
a transfer of ownership of shares of Acquired Company Stock is not
recorded on the stock transfer books of the Acquired Company, a
certificate or certificates representing the number of whole shares of
Parent Stock into which such shares of Acquired Company Stock shall have
been converted in connection with the Merger may be issued to the
transferee of such shares of Acquired Company Stock if the certificate or
certificates representing such shares of Acquired Company Stock is or are
surrendered to the Exchange Agent accompanied by all documents deemed
necessary by the Exchange Agent to evidence and effect such transfer of
ownership of shares of Acquired Company Stock and by the payment of any
applicable stock transfer tax with respect to such transfer, subject to
compliance with any restrictions or conditions contained herein with
respect to the transfer of shares of Acquired Company Stock.
(g) In the event that Parent at any time or from time to time after
the date of this Agreement but prior to the Effective Time effects a
subdivision (by means of a stock split, stock dividend or similar event)
or combination of the outstanding Parent Stock into a greater or lesser
number of shares, then and in each such event the Exchange Ratio and the
Market Value shall be increased or decreased proportionately and the
other provisions of this Section 2.1.6 shall be construed to give effect
thereto.
2.1.7. STOCK PLANS. (a) At the Effective Time, Parent shall assume the
Acquired Company's rights and obligations under each of the outstanding
options previously granted under the Stock Plans (each such option existing
immediately prior to the Effective Time being called an "Existing Option,"
and each such option so assumed by Parent being called an "Assumed Option"),
by which assumption the optionee shall have the right to purchase that
number of shares of Parent Stock (rounded down to the nearest whole) into
which the number of shares of Acquired Company Stock the optionee was
entitled to purchase under the Existing Option would have been converted
pursuant to the terms of the Merger as described in Section 2.1.6 hereof.
Each Assumed Option shall constitute a continuation of the Existing Option,
substituting Parent for Acquired Company as issuer and employment by Parent,
Purchaser or one of their respective subsidiaries for employment by the
Acquired Company. The aggregate price for the total number of shares of
Parent Stock at which the Assumed Option may be exercised shall be the
aggregate price at which the Existing Option was exercisable for the total
number of shares of Acquired Company Stock, reduced (as necessary for
purposes of rounding down) to the price that will buy the number of whole
shares for which the Assumed Option will be exercisable in accordance with
this paragraph (a), and the purchase price per share of Parent Stock
thereunder shall be such aggregate price divided by the total number of
shares of Parent Stock covered thereby. The assumption of the Assumed
Options by Parent as provided in this Section 2.1.7 shall not, except as
provided herein, provide the holders thereof additional benefits which they
did not have immediately prior to the Effective Time or relieve the holders
thereof of any obligations or restrictions applicable to the Assumed Options
or the shares of Parent Stock obtainable upon exercise of the Assumed
Options. EXHIBIT 2.1.7 sets forth all outstanding stock options, stock
appreciation rights, phantom stock awards, performance share unit awards,
equity participation rights, or similar awards outstanding under the Stock
Plans or any other Benefit Plan as of the date hereof.
(b) At the Effective Time, each outstanding share of Acquired Company
Stock subject to restriction or risk of forfeiture under the 1994 Equity
Incentive Plan shall be converted into a share of Parent Stock in
accordance with Section 2.1.6 and shall remain subject to such
restriction or risk of forfeiture to the extent provided in such plan or
the related agreement. For purposes of any restriction or risk of
forfeiture relating to continued employment, employment by Parent,
Purchaser or one of their respective subsidiaries shall constitute
employment by the Acquired Company.
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2.1.8. STOCKHOLDERS' MEETING. The Acquired Company, acting through its
Board of Directors, shall:
(a) promptly furnish a copy of the proxy statement/prospectus
included in the Registration Statement to each of its stockholders after
the Registration Statement has become effective with the SEC;
(b) duly call, give notice of, convene and hold a special meeting of
its stockholders and submit this Agreement and the Merger and any related
matters, as appropriate, to a vote of the Acquired Company's stockholders
as soon as practicable for the purpose of considering and taking action
upon this Agreement and any such related matters; and
(c) use its reasonable best efforts, subject to the provisions of
Section 2.11, to obtain the necessary approval of the Merger by its
stockholders.
2.1.9. CLOSING; FILING OF CERTIFICATE OF MERGER. Upon the terms and
subject to the conditions hereof, as soon as practicable following the
satisfaction or waiver of the conditions set forth in Articles V, VI and VII
hereof, the Acquired Company and Purchaser shall execute and file the
Certificate of Merger referred to in Section 2.1.2 in the manner required by
the Delaware Code, and the parties hereto shall take all such other and
further actions as may be required by law to make the Merger effective.
Prior to the filing referred to in this Section 2.1.9, a closing (the
"Closing") will be held as set forth in Section 8.1 hereof, for the purpose
of confirming all of the foregoing.
2.1.10. QUALIFIED PLANS. Prior to the Closing Date, the Acquired
Company shall adopt appropriate resolutions and take any and all further
actions necessary to terminate the 401(k) Plan effective as of the date
immediately preceding the Closing Date. In addition, participants in the
401(k) Plan shall make no further deferrals under such plan and the Acquired
Company shall make no further contributions to the 401(k) Plan, except for
contributions necessary to fulfill obligations incurred through the
termination date of the 401(k) Plan. Parent and Purchaser shall take such
action that will permit current participants in the 401(k) Plan who are
employed by Purchaser on the date of distribution of the participant's
account balance under the 401(k) Plan to effect a direct rollover of such
distribution to the HBO & Company Profit Sharing and Savings Plan. Parent
and Purchaser shall also take such action as necessary to credit each 401(k)
Plan participant who becomes employed by Purchaser on the Closing Date with
such participant's years of service under the 401(k) Plan for purposes of
calculating vesting in contributions under the HBO & Company Profit Sharing
and Savings Plan, up to a maximum of five (5) years.
2.2 DELIVERY OF MERGER CONSIDERATION.
2.2.1. EXCHANGE AGENT. Prior to the Effective Time, Purchaser shall
designate a bank or trust company to act as exchange agent in connection
with the Merger (the "Exchange Agent"). At the Effective Time, Purchaser or
Parent shall take all steps necessary to enable and cause Parent or the
Surviving Corporation to provide the Exchange Agent with the shares of
Parent Stock and cash in respect of fractional shares necessary to deliver
the Merger Consideration to each holder of Acquired Company Stock as
contemplated by Section 2.1.6 hereof prior to the time that such deliveries
are required to be made by the Exchange Agent as provided in this Section
2.2.
2.2.2. SURRENDER OF CERTIFICATES AND DELIVERY OF MERGER
CONSIDERATION. Promptly after the Effective Time, the Exchange Agent shall
mail to each record holder (as of the Effective Time) of an outstanding
certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Acquired Company Stock (the
"Certificates"), a letter of transmittal in customary form (which specifies
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) and instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration payable in respect
of the shares of Acquired Company Stock formerly represented by
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such Certificate. Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal properly completed and duly
executed, together with any other required documents, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration payable in respect of the shares of Acquired Company Stock
formerly represented by such Certificate, and such Certificate shall
forthwith be cancelled. If payment is to be made to a Person other than the
Person in whose name the Certificate surrendered is registered, it shall be
a condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the Person
requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a Person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of Parent or the
Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this Section 2.2.2,
each Certificate shall represent for all purposes only the right to receive
the Merger Consideration, without any interest on the value thereof.
2.2.3. ESCHEAT LAWS. Notwithstanding any provision of this Article II
to the contrary, neither Parent nor the Surviving Corporation shall be
liable to any holder of Certificates formerly representing shares of
Acquired Company Stock for any property properly delivered or amount paid to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
2.3 SEC REGISTRATION.
2.3.1. The Acquired Company shall furnish to Parent such information,
including information about the Acquired Company (including its affiliates),
as may be necessary to enable Parent to prepare and file with the SEC a
Registration Statement on Form S-4 under the 1933 Act, and the rules and
regulations promulgated thereunder, in respect of the Parent Stock to be
issued by reason of the Merger (such registration statement, including the
prospectus and included therein the proxy statement to be furnished to the
holders of the Acquired Company Stock, in each case together with any
amendments or supplements thereto, being referred to in this Agreement as
the "Registration Statement"). Each party will provide to the other parties,
or their counsel, drafts of the information related to or customarily
provided by such party to be included in the Registration Statement on Form
S-4 and will generally cooperate with each other in the preparation thereof.
The Acquired Company covenants that the Acquired Company Information (as
defined below) included in the Registration Statement shall not, at the time
the Registration Statement is declared effective, at the time the proxy
statement/prospectus contained therein is first mailed to the Acquired
Company's stockholders, or at the time of the meeting of the Acquired
Company's stockholders held to approve the Merger Agreement, contain any
statement which, at the time and in light of the circumstances under which
it is made, is false or misleading with respect to any material fact, or
which omits to state any material fact necessary in order to make the
statements therein not false or misleading. If at any time prior to the
Effective Time any event or circumstance should come to the attention of the
Acquired Company with respect to the Acquired Company Information that is
required to be set forth in an amendment or supplement to the Registration
Statement, the Acquired Company shall immediately notify Parent and shall
assist Parent in appropriately amending or supplementing the Registration
Statement in the manner contemplated in Section 2.3.4 below. An amendment or
supplement may be accomplished, to the extent permitted by law, rule or
regulation, by including such information in a filing under the Exchange Act
that is incorporated by reference into the Registration Statement. The
Registration Statement insofar as it relates to information concerning the
Acquired Company or its business, assets, directors, officers, or
stockholders or any of its affiliates or other matters pertaining to the
Acquired Company that is supplied by the Acquired Company for inclusion in
the Registration Statement, including by incorporation by reference to SEC
filings (the "Acquired Company Information") shall comply as to form and
substance in all material respects with the applicable requirements of the
Securities Act and the rules and regulations thereunder and the
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Exchange Act and the rules and regulations thereunder; except that the
Acquired Company shall have no liability or obligation for any information
other than the Acquired Company Information.
2.3.2. The Acquired Company shall instruct its accountants, Coopers &
Lybrand L.L.P., to deliver and shall use its reasonable best efforts to
cause such accountants to deliver to Parent letters dated at the time the
Registration Statement becomes effective and as of the Closing Date,
addressed to Parent, each containing both (i) its concurrence with the
conclusion of the Acquired Company's management that no conditions exist
with respect to the Acquired Company that would preclude accounting for the
Merger as a "pooling of interests," which letters shall be substantially in
the form of the opinion letter attached as EXHIBIT 2.3.2(A) hereto; and (ii)
such matters as are customarily contained in auditors' letters regarding
information about the Acquired Company included in the Registration
Statement, which auditors' letters shall be in form and substance reasonably
satisfactory to Parent. Parent shall use its reasonable best efforts to
cause its accountants, Arthur Andersen LLP, to deliver to the Acquired
Company letters at such times to the effect that the Parent satisfies the
tests applicable to it such that the Merger can be accounted for as a
"pooling of interests", which letters shall be substantially in the form of
the letter attached as EXHIBIT 2.3.2(B) hereto.
2.3.3. Parent shall file the Registration Statement and use its
reasonable best efforts to have it declared effective by the SEC as promptly
as practicable, and shall use its reasonable best efforts to take any action
required to be taken to comply in all material respects with any applicable
federal or state securities laws in connection with the issuance of Parent
Stock in the Merger; except that such covenant of Parent is made, as to
those portions of the Registration Statement containing or required to
contain Acquired Company Information, assuming and relying solely on timely
and full compliance with Sections 2.3.1 and 2.3.2. Parent will, in a timely
manner, provide the Acquired Company with copies of any written
communications to or from the SEC and notify the Acquired Company of any
material oral communications to or from the SEC with respect to the
Registration Statement or the transactions contemplated thereby.
2.3.4. Parent covenants that the information included in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, at the time the proxy statement/prospectus contained
therein is first mailed to the Acquired Company's stockholders, or at the
time of the meeting of the Acquired Company's stockholders held to approve
the Merger, contain any statement which, at the time and in light of the
circumstances under which it is made, is false or misleading with respect to
any material fact, or which omits to state any material fact necessary in
order to make the statements therein not false or misleading; except that
Parent makes no covenant as to those portions of the Registration Statement
containing or required to contain Acquired Company Information. If at any
time prior to the Effective Time any event or circumstance should come to
the attention of Parent that is required to be set forth in an amendment or
supplement to the Registration Statement, Parent shall promptly, taking into
account all then existing circumstances, amend or supplement appropriately
the Registration Statement. An amendment or supplement may be accomplished,
to the extent permitted by law, rule or regulation, by including such
information in a filing under the Exchange Act that is incorporated by
reference into the Registration Statement.
2.3.5. The Registration Statement and all other documents required to
be filed by Parent with the SEC in connection with the transactions
contemplated herein shall comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder; except that Parent shall have no liability or
obligation for any failure to comply with such requirements arising out of
the Acquired Company Information.
2.3.6. Parent shall use all reasonable best efforts to take such action
as may be necessary to ensure that the requirements of Rule 144(c) under the
Securities Act are satisfied so as to enable any "affiliates" of the
Acquired Company (as that term is used in Rule 145 under the Securities Act)
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to offer or sell the Parent Stock received by them in the Merger pursuant to
paragraph (d) of Rule 145 (subject to compliance with the provisions of
paragraphs (e), (f) and (g) of Rule 144).
2.3.7. Parent shall use all reasonable best efforts to obtain prior to
the effective date of the Registration Statement all necessary "Blue Sky"
permits and approvals, if any, required to consummate the Merger.
2.3.8. As soon as reasonably practicable following the Closing Date,
Parent shall file a registration statement on Form S-8 covering shares of
Parent Stock issuable pursuant to the Stock Plans; although such obligation
is subject to and conditional on the Acquired Company providing Parent with
all information requested by Parent in connection therewith.
2.4 AFFILIATES.
(a) The Acquired Company shall use its reasonable best efforts to
cause each person that is an "affiliate" of the Acquired Company under
the Securities Act on the date of the Acquired Company's stockholder
meeting held to approve the Merger to deliver to Parent at the Closing a
written agreement substantially in the form attached hereto as EXHIBIT
2.4(A) ("Rule 145 Letters").
(b) The Acquired Company shall use its reasonable best efforts to
cause each person that is an "affiliate" of the Acquired Company under
the Securities Act 31 days prior to the date of the Acquired Company's
stockholder meeting to deliver to the Parent on such date a written
agreement substantially in the form attached hereto as EXHIBIT 2.4(B)
("Pooling Letters").
2.5 TRADING PROHIBITIONS. Each of Parent, Purchaser and the Acquired
Company hereby acknowledges that as a result of disclosures by Parent, Purchaser
and the Acquired Company contemplated under this Agreement, Parent, Purchaser
and the Acquired Company and their respective affiliates may, from time to time,
have material, non-public information concerning each other. Each of Parent,
Purchaser and the Acquired Company confirms that it and its respective
affiliates are aware, and that it has advised its representatives that, (i) the
United States securities laws may prohibit a person who has material, non-public
information from purchasing or selling securities of any company to which such
information relates, and (ii) material non-public information shall not be
communicated to any other person except as permitted herein.
2.6 CONDUCT OF THE BUSINESS OF THE ACQUIRED COMPANY PRIOR TO CLOSING.
2.6.1. Except (i) as set forth on EXHIBIT 2.6, (ii) with the prior
consent in writing of Purchaser, (iii) as may be required to effect the
transactions contemplated by this Agreement, or (iv) as provided otherwise
in this Agreement, the Acquired Company covenants that, between the date of
this Agreement and the Effective Time, the Acquired Company will conduct its
business in the ordinary course, and that it will:
(a) preserve the organization of the Acquired Company intact and use
its reasonable best efforts to preserve the goodwill of customers and
others having business relations with the Acquired Company;
(b) maintain the properties of the Acquired Company in substantially
the same working order and condition as such properties are in as of the
date of this Agreement, reasonable wear and tear excepted;
(c) not effect any sale, assignment or transfer of any of its assets
except in the ordinary course of business;
(d) keep in force at no less than their present limits all existing
policies of insurance or comparable replacements thereof insuring the
Acquired Company and its properties;
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(e) not enter into any contract, commitment, arrangement or
transaction of the type described in Section 3.12 hereof or suffer,
permit or incur any of the transactions or events described in Section
3.9 hereof to the extent such events or transactions are within the
control of the Acquired Company (except that the Acquired Company may
enter into new license agreements and support and maintenance agreements
and other agreements with customers and continue to make purchases from
equipment and hardware vendors, all in the ordinary course of business on
terms and prices consistent with historical practices);
(f) not make or permit any change in the Acquired Company's
Certificate of Incorporation or Bylaws, or in its authorized, issued or
outstanding securities (except for the issuance of Acquired Company Stock
pursuant to exercise of stock options pursuant to the Stock Plans);
(g) not grant any stock option or right to purchase any security of
the Acquired Company, issue any security convertible into such
securities, purchase, redeem, retire or otherwise acquire any of such
securities, or agree to do any of the foregoing or declare, set aside or
pay any dividend, make any other distribution or declare any split in
respect of such securities;
(h) not adopt any new Benefit Plan or amend, supplement, or
accelerate the timing of payments or vesting under any existing Benefit
Plan, and not make any contribution to or distribution from any employee
benefit plan, pension plan, stock bonus plan, 401(k) plan or profit
sharing plan (except for the payment of any health, disability and life
insurance premiums that may become due and except for contributions,
vesting or distributions required (and not discretionary) pursuant to the
terms of any Benefit Plans);
(i) not change the amortization or capitalization policies for Owned
Software or otherwise make any changes in the accounting policies of the
Acquired Company;
(j) not issue any notes, bonds or other debt security, or create,
incur, assume or guarantee any indebtedness for borrowed money unless
approved in writing by Purchaser;
(k) not issue any shares of Acquired Company Stock other than shares
issuable upon exercise of presently exercisable options;
(l) not alter in any manner the terms, conditions or dates of vesting
or exercise of any of the Options;
(m) not effect any acquisition, by purchase of stock, assets or
otherwise, of any business or portion thereof or of any Person; and
(n) promptly advise Purchaser in writing of any matters arising of
which the Acquired Company becomes aware after the date of this Agreement
that, if existing or known at the date hereof, would be required to be
set forth or described in this Agreement or the Exhibits hereto.
2.6.2. Except after prior notification to, and with the prior written
consent of, Purchaser, which consent shall not be unreasonably withheld, the
Acquired Company shall not make, between the date of this Agreement and the
Effective Time, any change in its banking or safe deposit arrangements or
grant any powers of attorney.
2.7 FILING OF TAX RETURNS. The Acquired Company shall cause all of the
Acquired Company's federal, state and local tax returns required to be timely
filed before the Effective Time to be timely and accurately filed with the
appropriate taxing authorities. For purposes of this Section 2.7, such returns
shall be deemed timely filed if the Acquired Company has obtained an extension
from the appropriate taxing authority as to the time in which it may file such
tax returns. The Acquired Company shall submit all such tax returns to Purchaser
at least fifteen (15) days prior to the date they must be filed, and Purchaser
shall have the opportunity to comment on and approve such returns, which
approval shall not unreasonably be withheld.
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2.8 EXAMINATION OF PROPERTY AND RECORDS; CONFIDENTIALITY OF INFORMATION.
2.8.1. Between the date of this Agreement and the Effective Time, the
Acquired Company shall allow Purchaser, its counsel and other
representatives full access to all the books, records, files, documents,
assets, properties, contracts and agreements of the Acquired Company that
may be reasonably requested, and the Acquired Company shall furnish
Purchaser, its officers and representatives during such period with all
information concerning the affairs of the Acquired Company that may be
reasonably requested. Between the date of this Agreement and the Effective
Time Parent shall provide, upon reasonable prior notice, to the Acquired
Company such information about the Parent as the Chief Executive Officer or
Chief Financial Officer of the Acquired Company reasonably may request in
the context of the transactions provided for herein. All such requests shall
be directed to the Chief Financial Officer of the Parent. Each party shall
conduct any investigation in a manner that will not unreasonably interfere
with the businesses of the other party.
2.8.2. All non-public information acquired by any party hereto pursuant
to this Section 2.8 or otherwise, whether or not in writing, concerning the
business, operations and affairs of any other party to this Agreement, will
be kept confidential and will not be disclosed to any Person other than the
parties hereto or their authorized representatives (who shall be subject to
the same obligations) and will not be used for any purpose other than the
consummation of the Merger and the related transactions described herein,
subject to any legal disclosure obligation of any party upon advice from
counsel and prior notice to the other party. Promptly upon termination of
this Agreement, and at the request of any party hereto, all written
materials thus obtained by any other party or any of its representatives and
all copies and extracts of such materials will be delivered to the
disclosing party or destroyed, if requested by the disclosing party.
2.9 CONSENTS AND APPROVALS. The Acquired Company shall use its reasonable
best efforts (without requiring the payment of money) to obtain the waiver,
consent and approval of all persons whose waiver, consent or approval (i) is
required in order to consummate the transactions contemplated by this Agreement
or (ii) is required by any Material Contract, or any judgment, decree or order
to which the Acquired Company is a party or subject on the Effective Time and
(a) that would prohibit or require the waiver, consent or approval of any person
to such transactions or (b) under which, without such waiver, consent or
approval, such transactions would constitute an occurrence of default under the
provisions thereof, result in the acceleration of any obligation thereunder or
give rise to a right of any party thereto to terminate its obligations
thereunder. All obtained written waivers, consents and approvals shall be
produced at Closing in form and content reasonably satisfactory to Purchaser.
2.10 SUPPLYING OF FINANCIAL STATEMENTS. The Acquired Company shall deliver
to Purchaser all regularly prepared audited and unaudited consolidated and
consolidating financial statements of the Acquired Company prepared after the
date of this Agreement, in format historically published or utilized internally
(as applicable), and any financial statements prepared for filing with the SEC,
as soon as each is available.
2.11 NO SOLICITATION. The Acquired Company shall not and the Acquired
Company shall not authorize or permit any officer, director or employee of, or
any financial advisor, attorney, accountant or other advisor or representative
retained by, the Acquired Company to solicit, initiate, encourage (including by
way of furnishing information), endorse or enter into any agreement with respect
to, or take any other action to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal (as hereafter defined). The Acquired Company shall as soon as
reasonably practicable advise Purchaser of any Takeover Proposal or any
inquiries or discussions with respect thereto. Neither the Board of Directors of
the Acquired Company nor any committee thereof shall (a) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Purchaser the approval or
recommendation by the Board of Directors of the Acquired Company of the Merger
or this Agreement or (b) approve or recommend, or propose to approve or
recommend, any Takeover Proposal or any other
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acquisition of outstanding shares of Acquired Company Stock other than pursuant
to the Merger or this Agreement. Notwithstanding the foregoing, nothing
contained in this Agreement shall prevent the Board of Directors of the Acquired
Company from furnishing information to or entering into discussions or
negotiations with any unsolicited person or entity if and only to the extent
that the Board of Directors of the Acquired Company shall have determined in
good faith that such action is required in the exercise of its fiduciary duties,
based upon the advice of outside counsel or complying with Rule 14e-2
promulgated under the Securities Exchange Act of 1934, as amended. The Acquired
Company will as soon as reasonably practicable notify the Purchaser if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or continued
with the Acquired Company. As used in this Agreement, "Takeover Proposal" shall
mean any tender or exchange offer, or proposal, other than a proposal by
Purchaser or any of its affiliates, for a merger, share exchange or other
business combination involving the Acquired Company or any proposal or offer to
acquire in any manner a substantial equity interest in the Acquired Company or a
substantial portion of the assets of the Acquired Company.
2.12 HSR ACT FILINGS. Parent and the Acquired Company shall each, in
cooperation with the other, make the required filings in connection with the
transactions contemplated by this Agreement under the HSR Act with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice, and shall request early termination of the waiting period with respect
to such filings. As promptly as practicable from time to time after the date of
this Agreement, each party shall make all such further filings and submissions,
and take such further action, as may be required in connection therewith, and
shall furnish the other all information in its possession necessary therefor.
Parent and the Acquired Company shall each notify the other immediately upon
receiving any request for additional information with respect to such filings
from either the Antitrust Division of the Department of Justice or the Federal
Trade Commission, and the party receiving the request shall use its reasonable
best efforts to comply with such request as soon as possible. Neither such party
shall withdraw any such filing or submission without the written consent of the
other.
2.13 TAX REPORTING. For federal and state tax purposes, Purchaser and
Parent shall report the transactions contemplated by this Agreement as a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Tax Code and similar state laws. Prior to the Effective Time, the Acquired
Company will deliver to Purchaser and Parent letters to the reasonable
satisfaction of Purchaser and Parent from the Acquired Company and certain of
its stockholders that when read together provide assurance that there is no plan
or intention on the part of the stockholders of the Acquired Company (or
knowledge of such plan or intent to the extent the Acquired Company provides a
representation with respect to holders of less than five percent (5%) of the
Acquired Company Stock) to sell, exchange or otherwise dispose of a number of
shares of Parent Stock received in the Merger that would reduce the Acquired
Company's stockholders' ownership of Parent Stock received in the Merger to a
number of shares having a value, as of the Effective Time, of less than fifty
percent (50%) of the value of all of the outstanding stock of Acquired Company
immediately prior to the Effective Time.
2.14 INDEMNIFICATION OF ACQUIRED COMPANY OFFICERS AND DIRECTORS. The
Purchaser agrees that subsequent to the Closing it will provide to the directors
and officers of the Acquired Company indemnification in accordance with the
current provisions of the Certificate of Incorporation and By-Laws of the
Acquired Company with respect to matters occurring prior to the Effective Time,
for a period of six years from the Effective Time (or, in the case of matters
occurring prior to the Effective Time which have not been resolved prior to the
sixth anniversary of the Effective Time, until such matters are finally
resolved). Parent shall cause to be maintained in effect for twelve (12) months
following the Closing the current policies of directors' and officers' liability
insurance currently maintained by the Acquired Company, which policies are
described on EXHIBIT 3.19, at no greater than one hundred ten percent (110%) of
the annual premiums for such coverage as of the date hereof (as reflected on
such EXHIBIT 3.19), provided that the Parent may substitute therefor policies of
at least the same coverage containing terms and conditions that are no less
advantageous (including, without limitation, coverage under Parent's existing
policies of directors' and
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officers' liability insurance). In the event that the premiums for the continued
coverage exceed 110% of the premiums for the coverage as of the date hereof (the
"110% Amount"), Purchaser shall either substitute coverage meeting the
requirements of the proviso in the preceding sentence or continue the existing
insurance but reduce the maximum amount of coverage to that available for
premiums equal to the 110% Amount.
2.15 CERTAIN REPORTS. In the event the Merger is effective in the month of
April, 1997, Parent will use its reasonable best efforts to make publicly
available through a filing with the SEC the combined results of operations of
Parent, Purchaser and the Acquired Company for the month of May, 1997 by June
20, 1997. In the event the Merger is effective later than April 30, 1997, Parent
will use its reasonable best efforts to include the combined results of
operations of Parent, Purchaser and the Acquired Company for the thirty (30)
days following the effective date of the Merger in Parent's 10-Q Quarterly
Report for the quarter ending June 30, 1997.
III. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANY.
The Acquired Company represents and warrants to Purchaser and Parent as
follows:
3.1 ORGANIZATION, STANDING AND FOREIGN QUALIFICATION.
3.1.1. The Acquired 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 to carry on its business in
the places and as it is now being conducted and to own and lease the
properties and assets that it now owns or leases.
3.1.2. The Acquired Company is duly qualified and/or licensed to
transact business and is in good standing as a foreign corporation in the
jurisdictions listed in EXHIBIT 3.1 hereto except where the failure to be so
qualified would not individually or in the aggregate have a Material Adverse
Effect upon the Acquired Company, and the character of the property owned or
leased by the Acquired Company and the nature of the business conducted by
it do not require such qualification and/or licensing in any other
jurisdiction where the failure to so qualify would have a Material Adverse
Effect upon the Acquired Company.
3.2 AUTHORITY AND STATUS.
3.2.1. The Board of Directors of the Acquired Company, by unanimous
vote of all directors present at a meeting duly called and held, has (i)
determined that the Merger is fair to and in the best interests of the
stockholders of the Acquired Company and (ii) resolved to submit the Merger
to and recommend approval of the Merger by the stockholders of the Acquired
Company.
3.2.2. The Acquired Company has the capacity and authority to execute
and deliver this Agreement, to perform hereunder and, upon approval of the
transactions provided for herein by the stockholders of the Acquired
Company, to consummate the transactions contemplated hereby without any
other corporate or stockholder approval. The execution, delivery and
performance by the Acquired Company of this Agreement and each and every
other agreement, document and instrument provided for herein have been duly
authorized and approved by the Board of Directors of the Acquired Company.
Assuming this Agreement and each and every agreement, document or instrument
to be executed, delivered and performed by the Acquired Company in
connection herewith are valid and legally binding obligations of Purchaser
and Parent, this Agreement and, subject to the approval referred to in
Section 5.4 hereof, each and every agreement, document and instrument to be
executed, delivered and performed by the Acquired Company in connection
herewith, constitute or will, when executed and delivered, constitute the
valid and legally binding obligation of the Acquired Company enforceable
against it in accordance with their respective terms, except as
enforceability may be limited by applicable equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws from
time to time in effect affecting the enforcement of creditors' rights
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generally. Attached hereto as EXHIBIT 3.2 are true, correct and complete
copies of the current Certificate of Incorporation and Bylaws of the
Acquired Company.
3.2.3. The Board of Directors of the Acquired Company received an
opinion from Alex. Brown & Sons Incorporated, its financial advisor,
concurrently with the approval described in Section 3.2.1 above to the
effect that the Exchange Ratio is fair, from a financial point of view, to
the Acquired Company's stockholders.
3.3 CAPITALIZATION. The entire authorized capital stock of the Acquired
Company consists of thirty million (30,000,000) shares of stock, of which
twenty-five million (25,000,000) shares are designated Common Stock, par value
$.001 per share, and five million (5,000,000) shares are designated Preferred
Stock, par value $.01 per share. Of the total authorized Common Stock, as of
February 7, 1997, seven million seven hundred fifty-eight thousand three hundred
(7,758,300) shares were issued and outstanding and no shares were held in the
Acquired Company's treasury. Of the total authorized Preferred Stock, no shares
were issued and outstanding. As of February 7, 1997, there were options
outstanding under the Stock Plans entitling the optionees thereunder upon valid
exercise to acquire in the aggregate one million sixty-eight thousand
thirty-four (1,068,034) shares of Common Stock. All of the outstanding shares of
Acquired Company Stock (and any shares issued pursuant to presently outstanding
options, if exercised and purchased at the applicable exercise price) were duly
authorized (or will be when issued and the option price paid), validly issued,
fully paid and nonassessable. None of the capital stock of the Acquired Company
is entitled to or subject to preemptive rights. Other than the requisite
stockholder vote to consummate the Merger, the authorization or consent of no
other person or entity is required in order to consummate the transactions
contemplated herein by virtue of any such person or entity having an equitable
or beneficial interest in the Acquired Company or the capital stock of the
Acquired Company. Except as set forth on EXHIBIT 3.3, there are no outstanding
options, warrants, calls, commitments or plans by the Acquired Company to issue
any additional shares of its capital stock, to pay any dividends on such shares
or to purchase, redeem, or retire any outstanding shares of their capital stock,
nor are there outstanding any securities or obligations that are convertible
into or exchangeable for any shares of capital stock of the Acquired Company.
There are not now, and at the Effective Time there will not be, any voting
trusts or other agreements or understandings to which the Acquired Company is a
party or is bound with respect to the voting of the capital stock of the
Acquired Company.
3.4 ABSENCE OF EQUITY INVESTMENTS. Except as described in EXHIBIT 3.4
hereto, the Acquired Company does not, either directly or indirectly, own of
record or beneficially any shares or other equity interests in any corporation,
partnership, limited partnership, joint venture, trust or other business entity.
3.5 LIABILITIES AND OBLIGATIONS OF THE ACQUIRED COMPANY.
3.5.1. Attached hereto as EXHIBIT 3.5.1 are true, correct and complete
copies of the Acquired Company's audited balance sheets as of December 31,
1994, December 31, 1995 and unaudited balance sheets as of December 31, 1996
and the related consolidated statements of income, stockholders' equity and
cash flows for the years then ended, together with any reports of Coopers &
Lybrand L.L.P. thereon (respectively, the "1994, 1995 and 1996 Financial
Statements"). The 1994, 1995 and 1996 Financial Statements are complete,
have been prepared in accordance with generally accepted accounting
principles, consistently applied, fairly present in all material respects
the financial condition of the Acquired Company as of the respective dates
thereof (subject in the case of the 1996 Financial Statement, to the absence
of footnotes), and disclose all liabilities of the Acquired Company, whether
absolute, contingent, accrued or otherwise, existing as of the date thereof
that are of a nature required to be reflected in financial statements
prepared in accordance with generally accepted accounting principles.
3.5.2. The Acquired Company has no liability or obligation (whether
accrued, absolute, contingent or otherwise) including, without limitation,
any liability that might result from an audit of their tax returns by any
appropriate authority, except for (a) the liabilities and obligations of the
Acquired
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Company that are disclosed or reserved against in the 1996 Financial
Statements or EXHIBIT 3.5.2 hereto, to the extent and in the amounts so
disclosed or reserved against, (b) liabilities incurred or accrued in the
ordinary course of business since December 31, 1996 and liabilities incurred
in connection with the transactions referred to herein and (c) any other
liabilities that would not individually or in the aggregate have a Material
Adverse Effect on the Acquired Company.
3.5.3. Except as disclosed in the 1996 Financial Statements or EXHIBIT
3.5.2, the Acquired Company is not in default with respect to any
liabilities or obligations, except for such defaults that would not
individually or in the aggregate have a Material Adverse Effect on the
Acquired Company and all such liabilities or obligations shown or reflected
in the 1996 Financial Statements or EXHIBIT 3.5.2 and such liabilities
incurred or accrued subsequent to December 31, 1996 have been, or are being,
paid and discharged as they become due, and all such liabilities and
obligations were incurred in the ordinary course of business except as
indicated in EXHIBIT 3.5.2.
3.6 TAX RETURNS.
3.6.1. The Acquired Company has, as of the date hereof, and prior to
the Effective Time will have, timely and accurately filed all federal,
state, foreign and local income, franchise, sales, real and personal
property and other tax returns and reports required to be filed by it prior
to such dates and have timely paid, or will prior to the Effective Time
timely pay, all taxes shown on such returns as owed for the periods of such
returns, including all withholding or other payroll related taxes shown on
such returns, except where the failure to so file any such return or report
would not individually or in the aggregate have a Material Adverse Effect
upon the Acquired Company. The tax basis of all assets of the Acquired
Company as reflected on its books and records is correct and accurate in all
material aspects. Except as described on EXHIBIT 3.6, the Acquired Company
is not, nor will it become, subject to any additional taxes, interest,
penalties or other similar charges with respect to the tax returns and
reports referred to in the first sentence of this Section 3.6. No
assessments or notices of deficiency or other communications have been
received by the Acquired Company, nor to the knowledge of the Acquired
Company have any been threatened, with respect to any such tax return that
has not been paid, discharged or fully reserved in the 1996 Financial
Statements or EXHIBIT 3.6 hereto, and no amendments or applications for
refund have been filed or are planned with respect to any such return.
Except as set forth on EXHIBIT 3.6, there are no agreements between the
Acquired Company and any taxing authority, including, without limitation,
the IRS, waiving or extending any statute of limitations with respect to any
tax return, and the Acquired Company has not filed any consent or election
under the Tax Code, including, without limitation, any election under
Section 341(f) of the Tax Code.
3.6.2. The Acquired Company has not made any parachute payments as such
term is defined in Section 280G of the Tax Code, is not obligated to make
any parachute payments, and is not a party to any agreement that under
certain circumstances could obligate it, or any successor in interest, to
make any parachute payments that will not be deductible under Section 280G
of the Tax Code.
3.6.3. The Acquired Company (a) has withheld proper and accurate
amounts in compliance with the tax withholding provisions of all applicable
laws for all compensation paid to the officers and employees of the Acquired
Company, (b) has correctly and properly prepared and duly and timely filed
all returns and reports relating to those amounts withheld from its officers
and employees and to its employer liability for employment taxes under the
Tax Code and applicable state and local laws and (c) has duly and timely
paid and remitted to the appropriate taxing authorities the amounts withheld
from its officers and employees and any additional amounts that represent
its employer liability under applicable law for employment taxes.
3.6.4. Except as described on Exhibit 3.6, no issue has been raised by
the IRS, any state or local taxing authority, or any other investigation or
audit, that would have individually or in the aggregate, if determined
adversely, a Material Adverse Effect on the Acquired Company.
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3.6.5. The Audited Financial Statements and the Interim Financial
Statements include, and the accounts of the Acquired Company will include,
for all periods up to and including the most recent balance sheet date
included within such accounts, adequate provision for all unpaid applicable
taxes, assessments, fees and charges relating to the Acquired Company.
3.6.6. The Acquired Company is not a "United States real property
holding corporation" as defined in Section 897(c)(2) of the Tax Code.
3.7. OWNERSHIP OF ASSETS. The Acquired Company has title to all of its
respective properties and assets, other than leased or licensed property, in
each case free and clear of any liens, security interests, claims, charges,
options, rights of tenants or other encumbrances, except (i) for those
encumbrances or defects in title not material to the continued use or ownership
of any such properties and assets in the ordinary course, (ii) as disclosed or
reserved against in EXHIBIT 3.7 or reserved against in the 1996 Financial
Statements (to the extent and in the amounts so disclosed or reserved against)
and (iii) for liens arising from current taxes not yet due and payable. The
Acquired Company has not received any payment from a lessor or licensor in
connection with or as inducement for entering into a lease or license in which
the Acquired Company is a lessee or licensee, except licenses, fees and similar
payment in historical amounts and in the ordinary course of business. All
buildings and material items of machinery and equipment owned or leased by the
Acquired Company are in good operating condition and reasonable state of repair,
subject only to ordinary wear and tear. Except as reserved against in the 1996
Financial Statements, the inventories of the Acquired Company consist only of
items of supplies and equipment of a quality and quantity usable in the normal
course of its business. The Acquired Company has received no notice of violation
of any applicable zoning regulation, ordinance or other law, regulation or
requirement relating to its operations and properties, whether owned or leased,
which such violations would have individually or in the aggregate a Material
Adverse Effect on the Acquired Company. All of the accounts receivable of the
Acquired Company as of the Effective Time will reflect actual transactions and
will have arisen in the ordinary course of business.
3.8 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. Except as set forth on
EXHIBIT 3.8 hereto, the execution and delivery of this Agreement by the Acquired
Company does not, and the consummation of the transactions contemplated hereby
will not, violate any provision of the Certificate of Incorporation, as amended,
or Bylaws, as amended, of the Acquired Company or violate or constitute an
occurrence of default under any provision of, or conflict with, or result in
acceleration of any obligation under, or give rise to a right by any party to
terminate its obligations under, any Material Contract, or any order, judgment
or decree to which the Acquired Company is a party or is bound or by which the
Acquired Company's assets are affected. Except for the applicable requirements
of the HSR Act, the 1933 Act, the Exchange Act and applicable Blue Sky laws, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental entity is required to be obtained or made by or
with respect to the Acquired Company, or any assets, properties or operations of
the Acquired Company in connection with the execution and delivery by the
Acquired Company of this Agreement or the consummation of the transactions
contemplated hereby.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed on EXHIBIT
3.9, since December 31, 1996, the Acquired Company has operated in the ordinary
course of business and there has not been (i) any material damage, destruction
or other casualty loss with respect to property owned or leased by the Acquired
Company whether or not covered by insurance, or any strike, work stoppage or
slowdown or other labor trouble involving the Acquired Company; (ii) any
increase in dividends or employee compensation or benefits payable by the
Acquired Company, except for increases in compensation consistent, in amounts
and timing, with policies of the Acquired Company approved on or prior to
January 1, 1997 by its Board of Directors or a Committee thereof; (iii) any
change in accounting methods; or (iv) any transaction, commitment, dispute or
other event or condition that has individually or in the aggregate resulted in
any Material Adverse Effect in respect of the Acquired Company.
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3.10 LITIGATION. Except as otherwise set forth in EXHIBIT 3.10 hereto,
there is no suit, action, arbitration, proceeding, claim or investigation
pending or, to the best knowledge and belief of the Acquired Company, threatened
against or affecting the Acquired Company that would individually or in the
aggregate have a Material Adverse Effect, and, to the best knowledge and belief
of the Acquired Company, there exists no reasonable basis or grounds for any
such suit, action, arbitration, proceeding, claim or investigation.
3.11 LICENSES AND PERMITS; COMPLIANCE WITH LAW. The Acquired Company holds
all licenses, certificates, permits, franchises and rights from all appropriate
federal, state or other public authorities necessary for the conduct of its
business and the use of its assets, except for such licenses, certificates,
permits, franchises and rights the absence of which would not individually or in
the aggregate have a Material Adverse Effect on the Acquired Company. Except as
noted in EXHIBIT 3.11, and except for any matters which will not individually or
in the aggregate have a Material Adverse Effect in respect of the Acquired
Company, the Acquired Company presently is conducting its business so as to
comply with all applicable statutes, ordinances, rules, regulations and orders
of any governmental authority. Further, except as described on Exhibit 3.11 the
Acquired Company is not presently charged with, or, to its knowledge, under
governmental investigation with respect to, any actual or alleged violation of
any statute, ordinance, rule or regulation, or presently the subject of any
pending or, to its knowledge, threatened adverse proceeding by any regulatory
authority having jurisdiction over their respective businesses, properties or
operations. Except as disclosed on Exhibit 3.11 or as would not individually or
in the aggregate have a Material Adverse Effect on the Acquired Company, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the termination of any license,
certificate, permit, franchise or right held by the Acquired Company, and all
such licenses, certificates, permits, franchises and rights will inure to the
benefit of the Surviving Corporation after the consummation of the transactions
contemplated by this Agreement.
3.12 CONTRACTS, AGREEMENTS AND INSTRUMENTS GENERALLY. EXHIBIT 3.12 hereto
consists of a true and complete list of all contracts, agreements, commitments
and other instruments (whether oral or written) to which the Acquired Company is
a party that involve a receipt or an expenditure by the Acquired Company or
require the performance of services or delivery of goods to, by, through, on
behalf of or for the benefit of the Acquired Company, which in each case relates
to a contract, agreement, commitment or instrument that requires payments or
receipts in excess of $60,000 per year. EXHIBIT 3.12 also identifies (by title,
date, parties and term) (whether oral or written) all:
3.12.1. contracts, agreements, commitments or other instruments in
effect with any customer of the Acquired Company, including without
limitation all management agreements, data processing agreements, consulting
services agreements, software license agreements or other licenses, software
development agreements, purchase commitments or installation agreements and
maintenance or service agreements, if any, in each case in excess of $60,000
per year (hereinafter referred to as the "Customer Contracts" and identified
as such on EXHIBIT 3.12);
3.12.2. leases, rental agreements or other contracts or commitments
affecting the ownership or leasing of, title to or use of any interest in
real or personal property with payments equal to or greater than $5,000 per
month and all maintenance or service agreements relating to any real or
personal property with payments equal to or greater than $5,000 per month;
3.12.3. contracts or commitments providing for payments based in any
manner upon the sales, purchases, receipts, income or profits of the
Acquired Company;
3.12.4. franchise agreements, marketing agreements or royalty
agreements involving amounts in excess of $60,000 per year (and with respect
to each such agreement, EXHIBIT 3.12 sets forth the aggregate royalties or
similar payment paid or payable thereunder by the Acquired Company as of the
date hereof);
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3.12.5. employment contracts or arrangements regarding employees or
independent contractors (including without limitation any standard form
contracts such as employee nondisclosure agreements), or for any continuing
payment of any type or nature, including, without limitation, any severance,
termination, parachute, or other payments (whether due to a change in
control, termination or otherwise) and bonuses and vested commissions.
EXHIBIT 3.12 also includes a listing of all such agreements, if any, for
which the standard form was materially or substantially modified or
materially or substantially altered, and any contracts that are not in the
standard form. Other than the standard form agreements listed on EXHIBIT
3.12, those listed variations from the standard form agreements and those
listed agreements that are not in the standard form, there are no other
agreements of the type referred to in this Section 3.12.5;
3.12.6. contracts, agreements, understandings or arrangements
restricting the Acquired Company from carrying on its business anywhere in
the world;
3.12.7. instruments or arrangements evidencing or related to
indebtedness for money borrowed or to be borrowed, whether directly or
indirectly, by way of purchase-money obligation, guaranty, subordination,
conditional sale, lease-purchase or otherwise providing for payments in
excess of $5,000 per month;
3.12.8. joint product development agreement with any party other than
the Purchaser, other than Customer Contracts; and
3.12.9. contracts or agreements with vendors of material equipment
purchased by the Acquired Company or appointing the Acquired Company as a
reseller of equipment, other than purchase orders in the ordinary course of
business.
The contracts, agreements and commitments listed or required to be listed on
EXHIBIT 3.12 or listed on an Exhibit referred to in Section 3.14 hereof are
herein referred to as the "Material Contracts."
All the Material Contracts are valid and binding upon the Acquired Company
and, to the knowledge of the Acquired Company, the other parties thereto and are
in full force and effect and enforceable in accordance with their terms, except
as enforceability may be affected by bankruptcy, insolvency, moratorium or
similar laws affecting creditors rights generally and general principles of
equity relating to the availability of equitable remedies. Neither the Acquired
Company, nor, to the best knowledge and belief of the Acquired Company, any
other party to any Material Contract, has breached any provision of, or is in
default under, the terms of any Material Contract; and there are no existing
facts or circumstances that would prevent in any material respect the work in
process of the Acquired Company or its contracts and agreements from maturing
upon performance by the Acquired Company into collectible accounts receivable in
the aggregate in amounts consistent with historical experience. Except as set
forth on EXHIBIT 3.12, there are no contracts or commitments that require the
performance of services or provision of goods by the Acquired Company at a
direct cost or with a value for each such contract or commitment in excess of
the revenue to be derived pursuant to the terms of such contract or commitment.
Except for terms specifically described in EXHIBIT 3.12, the Acquired Company
has not received any payment from any contracting party in connection with or as
an inducement for entering into any contract, agreement, policy or instrument
except for payment for actual services rendered or to be rendered by the
Acquired Company consistent with amount historically charged for such services.
3.13 CUSTOMER CONTRACTS. Each Customer Contract conforms substantially to
one of the forms attached hereto as EXHIBIT 3.13(A) (the "Customer Contract
Forms"), except for deviations which do not individually or in the aggregate
materially adversely affect the rights or benefits of the Acquired Company
thereunder, or except for matters listed on EXHIBIT 3.13(B). EXHIBIT 3.13(A)
also includes copies of standard forms employed by the Acquired Company in
respect of current customers the contracts for which do not constitute "Customer
Contracts" by reason of the dollar threshold provided for in the definition
therefor in Section 3.12.1. With respect to each Customer Contract, (i) each
customer to which computer software
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represented as owned by or proprietary to the Acquired Company (the "Owned
Software") has been licensed pursuant to such Customer Contract and tendered or
certified as operational by the Acquired Company (each such customer being
referred to in this Section 3.13 as the "Vendor") has accepted such software to
the extent and on the terms and conditions provided for in such Customer
Contract; (ii) in each case in which the Customer Contract pursuant to which
Owned Software is licensed incorporates response(s) by Vendor to a Request for
Proposal by the customer, such software has met all material requirements set
forth in such response(s); and (iii) all performance warranties with respect to
Owned Software made by the Vendor in any Customer Contract, including warranties
with respect to capacity, availability, downtime and response time, have been
satisfied in all material respects upon the terms and conditions and to the
extent provided for in such Customer Contract. In addition, none of the Customer
Contracts, except as listed on EXHIBIT 3.13(B) contains any of the following
deviations from the Customer Contract Forms:
3.13.1. any term for acceptance of any Owned Software that fails to
specify a period of time or date for acceptance or standards applicable
thereto;
3.13.2. any provision granting the customer a right to a whole or
partial refund of fees previously paid upon the non-acceptance or failure of
any Owned Software to perform as warranted;
3.13.3. any provision obligating the Vendor to indemnify a customer
against consequential damages;
3.13.4. any commitment by the Vendor to provide a hardware upgrade in
response to or as a remedy for a breach of any software-related
response-time warranty unless the customer party to the Customer Contract in
which the commitment is made is required to pay the cost of such upgrade and
such costs are specified or described in such contract;
3.13.5. any material deviation from the provisions regarding
confidentiality of the Owned Software;
3.13.6. any provision granting an ownership interest (other than a
license) in any Owned Software to a customer;
3.13.7. any license for use by more than a single entity of any Owned
Software unless the customer that is a party to such Customer Contract has
agreed to pay a fee or fees with respect to each entity's use thereof;
3.13.8. any provision naming a customer as an insured on any policy of
insurance owned by the Vendor;
3.13.9. any joint product development agreement with any other party;
3.13.10. any commitment or warranty made or given by the Vendor to
design or modify any Owned Software so as to comply with any governmental
regulations;
3.13.11. any restrictions in any Customer Contract on the ability of
the Vendor to increase the fees for maintenance of any Owned Software
applicable to any period beyond the period specified in such contract during
which the customer that is a party to such contract is obligated to pay
maintenance fees;
3.13.12. any commitment by the Vendor to sell or maintain computer
hardware;
3.13.13. any commitment by the Vendor to provide emergency back-up for
either software or hardware; or
3.13.14. any commitment by the Vendor to provide existing customers
products developed in the future as a credit to existing payment obligations
or for less than normal prices.
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3.14 INTELLECTUAL PROPERTY; COMPUTER SOFTWARE.
3.14.1. EXHIBIT 3.14.1 hereto sets forth a complete and correct list
of all trademarks, trade names, service marks, service names, and brand
names (whether or not any of the same are registered), and all patent and
registered copyrights and all applications for the foregoing, if any,
(setting forth the registration, issue or serial number of the same and a
description of the same) applicable to or used in the current business of
the Acquired Company; (ii) the owner of such intellectual property and any
registration thereof or application therefor; and (iii) a complete list of
all licenses granted by or to the Acquired Company with respect to any of
the above (apart from Customer Contracts or contracts which do not
constitute Customer Contracts by reason of the dollar threshold provided for
in the definition thereof in Section 3.12.1). All such trademarks, trade
names, service marks, service names, brand names, copyrights and patents are
owned by the Acquired Company free and clear of all liens, claims, security
interests and encumbrances. Except as set forth on EXHIBIT 3.14.1, the
Acquired Company is not currently in receipt of any notice of any violation
of, and the Acquired Company is not violating in any respect which would
have individually or in the aggregate a Material Adverse Effect on the
Acquired Company, the rights of others in any trademark, trade name, service
mark, copyright, patent, trade secret, know-how or other intangible asset.
3.14.2.(i) EXHIBIT 3.14.2(I) contains a complete and accurate list of
all Owned Software. Except as set forth on EXHIBIT 3.14.2(I), the Acquired
Company has title to the Owned Software, free and clear of all claims,
including claims or rights of employees, agents, consultants, inventors,
customers, licensees or other parties involved in the development, creation,
marketing, maintenance, enhancement or licensing of such computer software.
Except as set forth on EXHIBIT 3.14.2(I) and except for commercially
available, over-the-counter "shrink-wrap" software, the Owned Software is
not dependent on any Licensed Software (as defined in subsection (ii) below)
in order to operate fully in the manner in which it is intended. No Owned
Software has been published or disclosed to any other parties, except as set
forth on EXHIBIT 3.14.2(I), and except pursuant to contracts requiring such
other parties to keep the Owned Software confidential. To the best knowledge
and belief of the Acquired Company, no such other party has breached any
such obligation of confidentiality.
3.14.2(ii) EXHIBIT 3.14.2(II) contains a complete and accurate list of
all software (other than commercially available over-the-counter
"shrink-wrap" software) under which the Acquired Company is a licensee,
lessee or otherwise has obtained the right to use (the "Licensed Software"),
and lists the licenses, leases or similar agreements by which Acquired
Company has obtained such right. The Acquired Company has the right and
license to use, sublicense, modify and copy Licensed Software as set forth
in the respective license, lease or similar agreement pursuant to which the
Licensed Software is licensed to the Acquired Company, free of any other
limitations or encumbrances, and the Acquired Company is in compliance with
all applicable provisions of such agreements except where non-compliance
would not individually or in the aggregate have a Material Adverse Effect on
the Acquired Company. Except as disclosed on EXHIBIT 3.14.2(II), none of the
Licensed Software has been incorporated into or made a part of any Owned
Software or any other Licensed Software. EXHIBIT 3.14.2(II) states with
respect to any items disclosed thereon the duration of the applicable
license. The Acquired Company has not published or disclosed any Licensed
Software to any other party except, in the case of Licensed Software that
the Acquired Company leases or markets to others, in accordance with and as
permitted by any license, lease or similar agreement relating to the
Licensed Software and except pursuant to contracts requiring such other
parties to keep the Licensed Software confidential. No party to whom the
Acquired Company has disclosed Licensed Software has, to the best knowledge
and belief of the Acquired Company, breached such obligation of
confidentiality.
3.14.2(iii) The Owned Software and Licensed Software and commercially
available over-the-counter "shrink-wrap" software constitute all software
used in the business of the Acquired Company (collectively, the "Acquired
Company Software"). EXHIBIT 3.14.2(III) sets forth a list of all contract
programmers, independent contractors, nonemployee agents and persons or
other entities (other than
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employees) who have performed, since May 26, 1994, computer programming
services for the Acquired Company and identifies all contracts and
agreements pursuant to which such services were performed. The transactions
contemplated herein will not cause a breach or default under any licenses,
leases or similar agreements relating to the Acquired Company Software or
impair Purchaser's or the Acquired Company's ability to use the Acquired
Company Software in the same manner as such computer software is currently
used by the Acquired Company. The Acquired Company is not infringing any
intellectual property rights of any other person or entity with respect to
the Acquired Company Software, except for infringements that are unknown or,
with reasonable diligence, could not be known, to the Acquired Company which
would not individually or in the aggregate have a Material Adverse Effect on
the Acquired Company and, to the best knowledge and belief of the Acquired
Company, no other person or entity is infringing any intellectual property
rights of the Acquired Company with respect to the Acquired Company
Software.
3.14.2(iv) EXHIBIT 3.14.2(IV)(A) lists and separately identifies all
agreements pursuant to which the Acquired Company has been granted rights to
market software owned by third parties, and EXHIBIT 3.14.2(IV)(B) lists and
separately identifies all agreements pursuant to which the Acquired Company
has granted marketing rights in the Acquired Company Software to third
parties.
3.14.2(v) The Acquired Company has not taken or, to its knowledge,
failed to take any actions under the law of any applicable foreign
jurisdictions where the Acquired Company has marketed or licensed Acquired
Company Software that would restrict or limit the ability of the Acquired
Company to protect, or prevent it from protecting, its ownership interests
in, confidentiality rights of, and rights to market, license, modify or
enhance, the Acquired Company Software.
3.15 LABOR MATTERS. Except as set forth on EXHIBIT 3.15, within the last
three (3) years the Acquired Company has not been the subject of any union
activity or labor dispute, nor has there been any strike of any kind called or,
to the best knowledge and belief of the Acquired Company, threatened to be
called against it. The Acquired Company has not violated in any material respect
any applicable federal or state law or regulation relating to labor or labor
practices. EXHIBIT 3.15 sets forth a true, correct and complete list of employer
loans or advances from the Acquired Company to its employees. The Acquired
Company is in substantial compliance in all material respects with all
applicable requirements of the Immigration and Nationality Act of 1952, as
amended by the Immigration Reform and Control Act of 1986 and the regulations
promulgated thereunder (hereinafter collectively referred to as the "Immigration
Laws").
3.16 BENEFIT PLANS.
3.16.1. EXHIBIT 3.16 lists every pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance
pay, vacation, bonus or other incentive plan; any medical, vision, dental or
other health plan; any life insurance plan or any other employee benefit
plan or fringe benefit plan; any payroll practice, other written or
unwritten employee program, arrangement, agreement or understanding;
commitments or methods of contribution or compensation (whether arrived at
through collective bargaining or otherwise), whether formal or informal, and
whether funded or unfunded; including, without limitation, any "employee
benefit plan," as that term is defined in Section 3(3) of ERISA; that is
currently or was adopted since May 26, 1994, maintained, sponsored in whole
or in part, or contributed to by the Acquired Company or any ERISA Affiliate
of the Acquired Company, for the benefit of, providing any remuneration or
benefits to, or covering any current or former employee, retiree, dependent,
spouse or other family member or beneficiary of such employee or retiree,
director, independent contractor, stockholder, officer or consultant of the
Acquired Company or any ERISA Affiliate of the Acquired Company or under (or
in connection with) which the Acquired Company or an ERISA Affiliate of the
Acquired Company has any contingent or noncontingent liability of any kind,
whether or not probable of assertion (collectively, the "Benefit Plans").
Any of the Benefit Plans that is an "employee pension benefit plan," or an
"employee welfare benefit plan" as that term is defined in Section 3(1) of
ERISA, is referred to
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herein as an "ERISA Plan." No Benefit Plan is or has been a multiemployer
plan within the meaning of Section 3(37) of ERISA.
3.16.2. EXHIBIT 3.16 also lists, with respect to all Benefit Plans
listed in EXHIBIT 3.16: (a) all trust agreements or other funding
arrangements, including insurance contracts, all annuity contracts,
actuarial statements or valuations, fidelity bonds, fiduciary liability
policies, investment manager or advisory contracts, and all amendments (if
any) thereto, (b) where applicable, with respect to any such plans or plan
amendments, the most recent determination letters issued by the IRS, and (c)
the most recent summary plan descriptions, any material modifications
thereto, and all material employee communications with respect to such
Benefit Plans. Contemporaneous with the delivery of the Exhibits to this
Agreement, the Acquired Company has delivered a true and complete copy of
each such Benefit Plan, agreement, most recent IRS letter or ruling,
opinion, return, financial statement and summary plan description described
in Sections 3.16.1 or 3.16.2 hereof, certified as such by the chief
financial officer of the Acquired Company, together with the annual report
(Form 5500 Series) for the two most recent plan years for any Benefit Plan
subject to such reporting requirements.
3.16.3. All the Benefit Plans and any related trusts subject to ERISA
comply in all material respects with and have been administered in
substantial compliance with the provisions of ERISA, all applicable
provisions of the Tax Code relating to qualification and tax exemption under
Tax Code Sections 401(a) and 501(a) or otherwise necessary to secure
intended tax consequences, all applicable state or federal securities laws
and all other applicable laws, rules and regulations, and the Acquired
Company has not received any notice from any governmental agency or
instrumentality questioning or challenging such compliance. Any
noncompliance or failure properly to maintain, operate or administer a
Benefit Plan or related trust has not rendered nor will render (i) such
Benefit Plan or related trust or the Parent, Purchaser or Acquired Company
subject to or liable for any material taxes, penalties, or liabilities to
any Person; (ii) the Benefit Plan subject to disqualification; or (iii) the
trust subject to loss of tax-exempt status.
3.16.4. Neither the Acquired Company, nor, to the best knowledge and
belief of the Acquired Company, any administrator or fiduciary of any such
Benefit Plan (or agent or delegate of any of the foregoing) has engaged in
any transaction or acted or failed to act in any manner that could subject
the Acquired Company to any direct or indirect liability (by indemnity or
otherwise) for a breach of any fiduciary, co-fiduciary or other duty under
ERISA. No material oral or written representation or communication with
respect to any aspect of the Benefit Plans has been or will be made to
employees of the Acquired Company prior to the Closing Date that is not in
accordance with the written or otherwise preexisting terms and provisions of
such Benefit Plans in effect immediately prior to the Closing Date, except
for any amendments or terminations required by the terms of this Agreement.
There are no unresolved claims or disputes under the terms of, or in
connection with, the Benefit Plans (other than routine undisputed claims for
benefits), and no action, legal or otherwise, has been commenced with
respect to any claim.
3.16.5. All annual reports or returns, audited or unaudited financial
statements, actuarial valuations, summary annual reports and summary plan
descriptions issued with respect to the Benefit Plans are correct and
accurate in all material respects as of the dates thereof; and there have
been no amendments filed to any of such reports, returns, statements,
valuations or descriptions or required to make the information therein true
and accurate. All annual reports (Form 5500 series) required to be filed
with respect to any Benefit Plan have been or will be timely filed.
3.16.6. No non-exempt "prohibited transaction" (within the meaning of
Section 4975(c) of the Tax Code) involving any Benefit Plan has occurred.
None of the assets of any ERISA Plan is an "employer security" (within the
meaning of Section 407(d)(1) of ERISA) or "employer real property" (within
the meaning of Section 407(d)(2) of ERISA).
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3.16.7. Each Benefit Plan that is or has been an "employee pension
benefit plan" as defined in Section 3(2) of ERISA is a defined contribution
plan qualified under Section 401(a) of the Tax Code and its related trust is
exempt from tax under Section 501(a) of the Tax Code (a "Qualified Plan")
and no circumstances exist that could result in disqualification of any
Qualified Plan or loss of tax-exempt status for its related trust. No
Qualified Plan (nor any predecessor to a Qualified Plan) has ever been
subject to the provisions of Title IV of ERISA or to the minimum funding
standards of Section 412 of the Tax Code.
3.16.8. As of December 31, 1996, the Acquired Company had no current or
future liability with respect to any events or matters occurring, arising or
accruing on or prior to such date under any Benefit Plan that was not
reflected in the 1996 Financial Statements.
3.16.9. The Acquired Company does not maintain any Benefit Plan
providing deferred or stock based compensation that is not reflected in the
Interim 1996 Financial Statements.
3.16.10. Neither the Acquired Company nor any ERISA Affiliate of the
Acquired Company has maintained, and neither now maintains, a Benefit Plan
providing welfare benefits (as defined in ERISA Section 3(1)) to employees
after retirement or other separation of service except to the extent
required under Part 6 of Title I of ERISA and Tax Code Section 4980B.
3.16.11. The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee (or any
spouse, dependent or other family member of such employee) of the Acquired
Company to severance pay, unemployment compensation or any payment
contingent upon a change in control or ownership of the Acquired Company, or
(ii) accelerate the time of payment or vesting, or increase the amount, of
any compensation due to any such employee or former employee (or any spouse,
dependent or other family member of such employee).
3.16.12. Set forth on EXHIBIT 3.16.12 is a complete list of all
agreements, contracts or commitments of the Acquired Company (description to
include title of agreement or indicate if letter agreement, together with
employee's name and date) in favor of any of the persons listed on EXHIBIT
6.11 that provide for continuation of salary or any severance benefit
payable on or after termination of employment in respect of any of the
officers of the Acquired Company, including without limitation those persons
listed on EXHIBIT 6.11.
3.17 CUSTOMERS. The Acquired Company has not received any notice from, or
has any knowledge that, any customer of the Acquired Company as of December 31,
1995 or any date subsequent thereto has taken or will take any steps that could
disrupt the business relationship of the Acquired Company with such customer in
any material respect, including without limitation any cancellation of contract,
diminution of business or failure to renew, or any intention to do any of the
foregoing. None of the Acquired Company, any director, officer, agent, employee,
or other Person acting on behalf of the Acquired Company has, directly or
indirectly (i) used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity; (ii)
made any unlawful payment to domestic or foreign government officials or
employees, or to domestic or foreign political parties or campaigns, from
corporate funds; (iii) violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended; (iv) established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; (v) made any false or
fictitious entry on the books or records of Acquired Company; (vi) made any
bribe, rebate, payoff, influence payment, kickback, or other unlawful payment;
(vii) given any favor or gift which is not deductible for federal income tax
purposes; or (viii) made any bribe, kickback, or other payment of a similar or
comparable nature, whether lawful or not, to any person or entity, private or
public, regardless of form, whether in money, property, or services, to obtain
favorable treatment in securing business or to obtain special concessions, or to
pay for favorable treatment for business secured or for special concessions
already obtained. The Acquired Company has complied in all material respects
with all applicable statutes, ordinances, rules, regulations and orders relating
to seeking, bidding,
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obtaining, performing under or otherwise complying with, contracts with
governmental and quasi-governmental authorities, agencies or other entities.
3.18 ENVIRONMENTAL MATTERS. Except as set forth in EXHIBIT 3.18, no real
property now or previously owned or used by the Acquired Company or now or
previously owned or leased by the Acquired Company (the "Real Property") has
been used by the Acquired Company or, to the best knowledge and belief of the
Acquired Company, any other party for the handling, treatment, storage or
disposal of any Hazardous Substance. Except as set forth in EXHIBIT 3.18, no
release, discharge, spillage or disposal into the environment of any Hazardous
Substance and no soil, water or air contamination by any Hazardous Substance has
occurred or is occurring in, from or on the Real Property (a) by virtue of the
actions or failure to act of any of the Acquired Company or (b) to the knowledge
of the Acquired Company, by virtue of the actions or failure to act of any other
party. Except as set forth in EXHIBIT 3.18, the Acquired Company has complied in
all material respects with all reporting requirements under any applicable
federal, state or local environmental laws and any permits with respect to the
Real Property, and there are no existing violations by the Acquired Company of
any such environmental laws or permits with respect to the Real Property. Except
as set forth in EXHIBIT 3.18, there are no claims, actions, suits, proceedings
or investigations related to the presence, release, production, handling,
discharge, spillage, transportation or disposal of any Hazardous Substance or
ambient air conditions or contamination of soil, water or air by any Hazardous
Substance pending or threatened (1) with respect to the Real Property (a) by
virtue of the actions or failure to act of the Acquired Company or (b) to the
knowledge of the Acquired Company, by virtue of the actions or failure to act of
any other party, or (2) otherwise against the Acquired Company, in any court or
before any state, federal or other governmental agency or private arbitration
tribunal and, to the knowledge of the Acquired Company, there is no basis for
any such claim, action, suit, proceeding or investigation (i) with respect to
the Real Property (a) by virtue of the actions or failure to act of the Acquired
Company or (b) to the knowledge of the Acquired Company, by virtue of the
actions or failure to act of any other party, or (ii) otherwise against the
Acquired Company. Except as disclosed on EXHIBIT 3.18, to the knowledge of the
Acquired Company, there are no underground storage tanks on the Real Property.
To the knowledge of the Acquired Company, no building or other improvement
included in the Real Property contains any exposed or friable asbestos or any
asbestos-containing materials, and such buildings and improvements are free from
radon contamination. For the purposes of this Agreement, "Hazardous Substance"
shall mean any hazardous or toxic substance or waste as those terms are defined
by any applicable federal, state or local law, ordinance, regulation, policy,
judgment, decision, order or decree, including, without limitation, the
Comprehensive Environmental Recovery Compensation and Liability Act, 42 U.S.C.
9601 ET SEQ., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801
ET SEQ. and the Resource Conservation and Recovery Act, 42 U.S.C. 6901 ET SEQ.,
and petroleum, petroleum products and oil.
3.19 INSURANCE. Set forth in EXHIBIT 3.19 is a complete list of all
material insurance policies that the Acquired Company maintained with respect to
its businesses, properties or employees since May 26, 1994. Except as set forth
in EXHIBIT 3.19, such policies are in full force and effect and no event has
occurred that would give any insurance carrier a right to terminate any such
policy. Such policies are adequate to insure against risks to which the Acquired
Company, and its properties and assets are exposed in the operation of its
business in such amounts and types of coverage as are commercially reasonable
and are consistent with practices in the industry in which the Acquired Company
operates. Except as set forth in EXHIBIT 3.19, since December 31, 1996, there
has not been any change in the Acquired Company's relationship with its insurers
or in the premiums payable pursuant to such policies.
3.20 RELATED PARTY RELATIONSHIPS. Except as set forth in EXHIBIT 3.20, no
stockholder owning greater than a five-percent (5%) interest in the Acquired
Company, or officer or Director of the Acquired Company, and, to the knowledge
of the Acquired Company, no affiliate or member of the immediate family of any
such stockholder, officer or director, possesses, directly or indirectly, any
beneficial interest in, or is a director, officer or employee of, or member of
the immediate family of a director, officer or
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employee of, any corporation, partnership, firm, association or business
organization that is a client, supplier, customer, lessor, lessee, lender,
creditor, borrower, debtor or contracting party with or of the Acquired Company
(except as a stockholder holding less than a one-percent 1% interest in a
corporation whose shares are traded on a national or regional securities
exchange or in the over-the-counter market).
3.21 INFORMATION. The Acquired Company has made accessible to Purchaser or
Parent each registration statement, schedule, report, proxy statement or
information statement it has filed with the SEC since January 1, 1995,
including, without limitation, (a) the Acquired Company's Annual Report on Form
10-K for the year ended December 31, 1995, including all documents incorporated
therein, (b) the Acquired Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30 and September 30, 1996, and (c) all Reports of
Acquired Company on Form 8-K since December 31, 1996 (collectively, the
"Acquired Company Reports"). As of the date of this Agreement, the Acquired
Company Reports, taken together with information previously furnished by the
Acquired Company to Parent or Purchaser, did 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
in which they were made, not misleading. As used in this Section 3.21,
"material" means material to the financial condition, business or operations of
the Acquired Company.
3.22 POOLING OF INTERESTS. The Acquired Company is not aware of any facts
or circumstances in respect of it or its accounting procedures which would have
the effect of precluding accounting for the transactions contemplated hereby as
a "pooling of interests."
3.23 EXHIBITS. All Exhibits attached hereto are true, correct and complete
as of the date of this Agreement and will be true, correct and complete as of
the Closing Date, except to the extent that such Exhibits may be untrue,
incorrect or incomplete due to changes occurring due to the operation of the
Acquired Company in the ordinary course, which shall not individually or in the
aggregate have a Material Adverse Effect on the Acquired Company. Matters
disclosed on each Exhibit shall be deemed disclosed only for purposes of the
matters to be disclosed on such Exhibit and shall not be deemed to be disclosed
for any other purpose unless expressly provided therein.
3.24 DISCLOSURE AND ABSENCE OF UNDISCLOSED LIABILITIES. No statement
contained herein or in any certificate, schedule, list, exhibit or other
instrument furnished by the Acquired Company or required to be furnished by the
Acquired Company to Purchaser pursuant to the provisions hereof contains, or
will at the time it is furnished contain, any untrue statement of any material
fact or omits or omit to state any material fact necessary to make the
statements herein or therein not false or misleading. As used in this Section,
"material" means material to the financial condition, business or operations of
the Acquired Company.
3.25 NO SPECIAL STOCKHOLDER RIGHTS. Except as disclosed on Exhibit 3.25,
the Acquired Company has no agreement with any individual or entity that grants
such person any rights as a stockholder of Acquired Company Stock that are in
addition to such holder's rights under the Acquired Company's Certificate of
Incorporation or Bylaws (including, without limitation, registration rights,
preemptive rights, put rights, rights of co-sale or rights to Board
representation).
IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT.
Purchaser and Parent, jointly and severally, represent and warrant to the
Acquired Company as follows:
4.1 ORGANIZATION AND STANDING.
4.1.1. Each of Purchaser and Parent is a corporation duly organized,
validly existing and is in good standing under the laws of the respective
jurisdiction of its incorporation and has the requisite corporate power and
authority to carry on its business in the places and as it is now being
conducted and to own and lease the properties and assets that it now owns or
leases.
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4.1.2. Each of Purchaser and Parent is duly qualified and/or licensed
to transact business and is in good standing as a foreign corporation in
jurisdictions where the character of the property owned or leased by
Purchaser and Parent and the nature of the business conducted by them
requires such qualification and/or licensing, except where the failure to so
qualify would not individually or in the aggregate have a Material Adverse
Effect upon Purchaser and Parent, taken as a whole.
4.2 CORPORATE POWER AND AUTHORITY. Each of Purchaser and Parent has the
capacity and authority to execute and deliver this Agreement, to perform
hereunder and to consummate the transactions contemplated hereby without the
necessity of any act or consent of any other Person whomsoever. The execution,
delivery and performance by Purchaser and Parent of this Agreement and each and
every agreement, document and instrument provided for herein have been duly
authorized and approved by their respective Boards of Directors (or Executive
Committees thereof). No approval of the stockholders of either Parent or
Purchaser is required to consummate the Merger. Assuming this Agreement, and
each and every other agreement, document and instrument to be executed,
delivered and performed by Purchaser and Parent in connection herewith are valid
and legally binding on the Acquired Company, this Agreement, and each and every
other agreement, document and instrument to be executed, delivered and performed
by Purchaser and Parent in connection herewith, constitute or will, when
executed and delivered, constitute the valid and legally binding obligations of
Purchaser and Parent as applicable, enforceable against each of them in
accordance with their respective terms, except as enforceability may be limited
by applicable equitable principles, or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally. Purchaser is a
wholly-owned subsidiary of Parent.
4.3 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. The execution and
delivery of this Agreement by Purchaser and Parent do not, and the consummation
of the transactions contemplated hereby will not, violate any provisions of the
Certificate of Incorporation, as amended, or Bylaws, as amended, of Purchaser or
of Parent, and violate or constitute an occurrence of default under any
provision of, or conflict with, result in acceleration of any obligation under,
or give rise to a right by any party to terminate its obligations under, any
mortgage, deed of trust, conveyance to secure debt, note, loan, lien, lease,
agreement, instrument, or any order, judgment, decree or other arrangement to
which Purchaser or Parent is a party or is bound or by which any of their
respective assets are affected. Except for the applicable requirements of the
HSR Act, the 1933 Act, the Exchange Act, and applicable Blue Sky laws, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental entity is required to be obtained or made by or
with respect to Purchaser or Parent or any assets, properties or operations of
Purchaser or Parent in connection with the execution and delivery by Purchaser
and Parent of this Agreement or the consummation of the transactions
contemplated hereby.
4.4 RESERVATION OF SHARES. Purchaser will, prior to the Merger, in
accordance with the terms thereof, have available shares of Parent Stock
sufficient to complete the Merger. The shares of Parent Stock will, upon
issuance in the Merger, be validly issued, fully paid and non-assessed.
4.5 INFORMATION. Parent has made available to the Acquired Company each
registration statement, schedule, report, proxy statement or information
statement it has filed with the Securities and Exchange Commission since January
1, 1995, including, without limitation, (a) Parent's Annual Report on Form 10-K
for the year ended December 31, 1995, including all documents incorporated
therein, (b) Parent's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1996 and (c) Reports of Parent on Form 8-K
since December 31, 1996 (collectively, the "Parent Reports"). As of the date of
this Agreement, the Parent Reports, taken together with information previously
furnished by Parent to the Acquired Company, did 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 in which they were made, not misleading. Since January 1, 1997,
Parent has timely filed all reports required to be filed by it under the
Securities Exchange Act of 1934, as amended. As used in this Section, "material"
means material to the financial condition, results of operations, business,
assets or
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properties of Parent together with its subsidiaries (including Purchaser), taken
as a whole. Since December 31, 1996, there has not occurred any event or
condition that has resulted in any Material Adverse Effect in respect of the
Parent and Purchaser, taken as a whole; provided, however, that notwithstanding
anything to the contrary provided for in this Agreement, the representation set
forth in this sentence shall not be deemed breached if the event or condition
referred to above is publicly disclosed by Parent at least one (1) business day
prior to the commencement of the fifteen (15)-day trading period used to compute
Market Value pursuant to Section 2.1.6(d).
4.6 CAPITALIZATION. The entire authorized capital stock of the Parent
consists of 251,000,000 shares of stock, of which 250,000,000 shares are
designated Common Stock, par value $.05 per share, and 1,000,000 shares are
designated Preferred Stock, without par value. Of the total authorized Common
Stock, as of December 31, 1996, approximately ninety million six hundred one
thousand four hundred ninety-three (90,601,493) shares were issued and
outstanding and approximately thirty-one million five hundred thirty-four
thousand nine hundred fourteen (31,534,914) shares were held in the Parent's
treasury. Of the total authorized Preferred Stock, no shares have been issued.
As of December 31, 1996, there were options outstanding entitling the optionees
thereunder, to acquire in the aggregate approximately six million seven hundred
fourteen thousand one hundred ninety-six (6,714,196) shares of the Parent Stock.
All the issued and outstanding shares of each of the Parent Subsidiaries are
owned directly or indirectly by the Parent free and clear of all liens, claims,
charges and encumbrances of any nature whatsoever. All of the outstanding shares
of Parent Stock (and any shares issued pursuant to presently outstanding
options, if exercised and purchased at the applicable exercise price) were duly
authorized (or will be when issued and the option price paid), validly issued,
fully paid and nonassessable. None of the capital stock of the Parent is
entitled to or subject to preemptive rights. The authorization or consent of no
other person or entity is required in order to consummate the transaction
contemplated herein by virtue of any such person or entity having an equitable
or beneficial interest in the Parent or any Subsidiary.
4.7 DISCLOSURE AND ABSENCE OF UNDISCLOSED LIABILITIES. No statement
contained herein or in any certificate, schedule, list, exhibit or other
instrument furnished by Parent or Purchaser or required to be furnished by
Parent or Purchaser to the Acquired Company pursuant to the provisions hereof
contains, or will at the time it is furnished contain, any untrue statement of a
material fact or, given the limited scope of the materials furnished to the
Acquired Company, omits or omit to state any material fact necessary to make the
statements herein or therein not false or misleading. As used in this Section,
"material" means material to the financial condition, business or operations of
Parent and Purchaser, taken as a whole.
V. CONDITIONS PRECEDENT TO RESPECTIVE OBLIGATIONS OF THE PARTIES.
The obligations of Purchaser and Parent, on the one hand, and of the
Acquired Company, on the other hand, to consummate, or cause to be consummated,
the Merger shall be contingent upon and subject to the satisfaction, on or
before the Closing, of each and every one of the following conditions, any one
or more of which may be waived in writing by such parties.
5.1 ACTIONS OF GOVERNMENTAL AUTHORITIES. There shall not have been
instituted or be pending any action, proceeding, application, claim or
counterclaim by any government or governmental authority or agency, domestic or
foreign, and Purchaser, Parent or the Acquired Company shall not have been
notified by any such government, governmental authority or agency (or a
representative thereof) of its present intention to commence, or recommend the
commencement of, such an action or proceeding, that (i) challenges the
acquisition by Purchaser or Parent of the Acquired Company Stock, restrains or
prohibits or seeks to restrain or prohibit the making or consummation of the
Merger or restrains or prohibits or seeks to restrain or prohibit the
performance of this Agreement; (ii) prohibits or limits or seeks to prohibit or
limit the ownership or operation by Purchaser or Parent of all or any
substantial portion of the business or assets of the Acquired Company or of
Purchaser, Parent or any of their respective subsidiaries or compels or seeks to
compel Purchaser or Parent to dispose of or to hold separate all or any
substantial portion of the business or assets of the Acquired Company or of
Purchaser, Parent or any of their
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respective subsidiaries, or imposes or seeks to impose any material limitation
on the ability of Purchaser or Parent to conduct such business or to own such
assets; or (iii) imposes or seeks to impose limitations on the ability of
Purchaser or Parent (or any other affiliate of Purchaser) to acquire or hold or
to exercise full rights of ownership of the Surviving Corporation, including,
but not limited to, the right to vote such shares on all matters properly
presented to the stockholders of the Surviving Corporation.
5.2 OTHER LEGAL ACTIONS. There shall not have been any statute, rule,
regulation, order or injunction enacted, promulgated, entered, enforced, deemed
applicable to the Merger or this Agreement or proposed by any government,
governmental authority or agency or court, domestic or foreign, and no claim or
action shall have been instituted by any Person before a court, government or
governmental authority or agency, that could be reasonably expected to result in
any of the consequences referred to in clauses (i) through (iii) of Section 5.1
above.
5.3 LEGAL APPROVALS. The execution and the delivery of this Agreement and
the consummation of the transactions contemplated hereby shall have been
approved by all regulatory authorities whose approvals are required by law and
the waiting period under the HSR Act shall have expired or have been terminated.
5.4 STOCKHOLDER APPROVAL. This Agreement and the Merger and any related
matters shall have been adopted and approved by the affirmative vote or written
consent of the holders of the outstanding shares of Acquired Company Stock by
the vote or written consent required by, and in accordance with, the Delaware
Code and the Acquired Company's Certificate of Incorporation.
5.5 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective by the SEC, and no stop order suspending
effectiveness shall have been issued, and no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing. The shares of Parent Stock to be issued or sold
pursuant to the Registration Statement shall have been registered for issuance
under all applicable Blue Sky laws or shall be exempt from such registration,
and no stop order shall have been issued with respect to the issuance or sale of
such securities by any Blue Sky authority.
5.6 NASDAQ APPROVAL. The Parent Stock issuable in the Merger shall have
been listed or approved for listing upon notice of issuance by Nasdaq.
5.7 FAIRNESS OPINION. The Acquired Company shall have received an opinion
from Alex. Brown & Sons Incorporated, its financial advisor, dated as of the
date of the mailing to the stockholders of the Acquired Company of the proxy
statement/prospectus included within the Registration Statement confirming the
opinion referred to in Section 3.2.3 hereof.
VI. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND PARENT.
In addition to the conditions set forth in Article V above, all the
obligations of Purchaser and Parent to consummate, or cause to be consummated,
the Merger shall be contingent upon and subject to the satisfaction, on or
before the Closing, of each and every one of the following conditions. The
following conditions are for the sole benefit of Purchaser and Parent and may be
asserted by Purchaser or Parent regardless of the circumstances giving rise to
any such condition and may be waived by Purchaser or Parent (which action shall
be deemed a waiver by both Purchaser and Parent), in whole or in part, at any
time and from time to time, in the sole discretion of Purchaser or Parent. The
failure by either Purchaser or Parent at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any other right, and each right
shall be deemed an ongoing right that may be asserted at any time and from time
to time.
6.1 REPRESENTATIONS OF ACQUIRED COMPANY. All representations and
warranties of the Acquired Company contained in this Agreement (except as
affected by the transactions contemplated by this Agreement), in the statements
contained in the Exhibits hereto or in any certificate delivered by the Acquired
Company pursuant to this Agreement shall be true and correct when made, and
shall be true and
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correct at and as of the Closing Date as though such representations and
warranties were made or given on and as of the Closing Date, in each case as if
none of such representations and warranties contained any qualifications as to
materiality or the absence of Material Adverse Effect, provided however, that
notwithstanding the foregoing, this condition shall be deemed to be satisfied if
all breaches of such representations and warranties, after giving effect to the
foregoing, do not individually or in the aggregate constitute a Material Adverse
Effect on the Acquired Company.
6.2 COVENANTS OF ACQUIRED COMPANY. The Acquired Company shall have, or
shall have caused to be, performed and observed all covenants, agreements and
conditions hereto to be performed or observed at or before the Closing Date.
6.3 NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement there
shall not have been any change in the business or operations of the Acquired
Company, which constitute a Material Adverse Effect on the Acquired Company.
6.4 CERTIFICATE. Purchaser shall have received a certificate of the
President of the Acquired Company, dated as of the Closing Date, certifying as
to the matters set forth in Sections 6.1 through 6.3 above. In addition, Parent
shall have received both a certificate dated as of the effective date of the
Registration Statement and a certificate dated as of the Closing Date certifying
that the covenants set forth in Sections 2.3.1 and 2.3.2 hereof have been
performed and that the representations set forth in Sections 3.21 and 3.24
hereof are true and correct as of such dates.
6.5 OPINION OF ACQUIRED COMPANY'S COUNSEL. Purchaser and Parent shall have
received an opinion of counsel for the Acquired Company in customary form
reasonably acceptable to Purchaser.
6.6 TAX OPINION. Purchaser and Parent shall have received an opinion from
their counsel, dated as of the date the Registration Statement is declared
effective and as of the Closing Date, to the effect that the Merger will qualify
as a reorganization pursuant to Section 368(a) of the Tax Code, which opinion
shall be substantially in the form of EXHIBIT 6.6 hereto.
6.7 AFFILIATES AND PRINCIPAL STOCKHOLDERS. Purchaser and Parent shall have
received the Rule 145 Letters and the Pooling Letters from the persons and at
the times specified in Section 2.4, and the letters referenced in Section 2.13.
6.8 ADDITIONAL INSTRUMENTS. The Acquired Company shall have delivered to
Purchaser or Parent certified copies of resolutions duly adopted by the Acquired
Company's Board of Directors and stockholders, approving the Merger and
authorizing the transactions contemplated hereby, and such other or additional
instruments, consents, waivers, approvals, endorsements and documents as Parent
and Purchaser reasonably deem to be necessary to enable the Merger to be
consummated as provided in this Agreement. All other proceedings in connection
with the Merger and the other transactions contemplated hereby, and all
instruments, consents, waivers, approvals, endorsements and documents referred
to hereunder or otherwise incident to such transactions, shall be reasonably
satisfactory in form and substance to Parent and Purchaser and their counsel,
including, without limitation, those consents, waivers and approvals referred to
in Section 2.9 hereof.
6.9 ACCOUNTANTS' POOLING LETTERS. Parent shall have received letters from
Coopers & Lybrand L.L.P. and Arthur Andersen LLP, dated as of the effective date
of the Registration Statement and as of the Closing Date, in each case addressed
to Parent, as set forth in Section 2.3.2 hereof, regarding the appropriateness
of accounting for the Merger as a pooling of interests, which letters shall be
substantially in the form of EXHIBITS 2.3.2(A) and 2.3.2(B), respectively.
6.10 ACCOUNTANT'S COMFORT LETTERS. Purchaser and Parent shall have
received letters from Coopers & Lybrand L.L.P. dated as of the effective date of
the Registration Statement and as of the Closing Date, in each case addressed to
Purchaser and Parent, containing such matters as are customarily contained in
auditors' letters regarding the Acquired Company Information provided expressly
for inclusion in such Registration Statement, and in form and substance
reasonably satisfactory to Parent.
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6.11 COVENANTS NOT TO COMPETE. Purchaser shall have received executed
non-competition agreements from each of those persons listed on EXHIBIT 6.11, as
described in further detail on EXHIBIT 6.11.
6.12 FEE LIMITATION. The only fees and expenses to any investment banking
firm or similar entity that will be incurred by Acquired Company in connection
with the transaction with Parent and Purchaser will be the fees and expenses of
Alex. Brown & Sons Incorporated which shall be consistent with the terms of the
engagement letter, entered into by and between the Acquired Company and Alex.
Brown & Sons Incorporated dated November 8, 1995, as amended, and shall not
exceed $2,750,000 in the aggregate.
6.13 TERMINATION OF CERTAIN AGREEMENTS. Each of the agreements described
on Exhibit 3.25 shall have been terminated.
6.14 EMPLOYEE AGREEMENTS. The Acquired Company shall have used its
reasonable best efforts to obtain from substantially all of its employees
executed "Employee Agreements," to be effective as of the Closing Date, in the
form customarily used by Purchaser (which has been furnished to Acquired
Company) relating to non-disclosure, inventions, etc.
VII. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRED COMPANY.
All the obligations of the Acquired Company to consummate the Merger shall
be contingent upon and subject to the satisfaction, on or before the Closing, of
each and every one of the following conditions. The following conditions are for
the sole benefit of the Acquired Company and may be asserted by the Acquired
Company regardless of the circumstances giving rise to any such condition and
may be waived by the Acquired Company, in whole or in part, at any time and from
time to time, in the sole discretion of the Acquired Company for purposes of
consummating the transactions contemplated herein. The failure by the Acquired
Company at any time to exercise any of the foregoing rights shall not be deemed
a waiver of any other right, and each right shall be deemed an ongoing right
that may be asserted at any time and from time to time.
7.1 REPRESENTATIONS OF PURCHASER AND PARENT. All representations and
warranties of the Purchaser and Parent contained in this Agreement (except as
affected by the transactions contemplated by this Agreement), in the statements
contained in the Exhibits hereto or in any certificate delivered by the
Purchaser and Parent pursuant to this Agreement shall be true and correct when
made, at and as of the Closing Date as though such representations and
warranties were made or given on and as of the Closing Date, in each case as if
none of such representations and warranties contained any qualifications as to
materiality or the absence of Material Adverse Effect, provided however, that
notwithstanding the foregoing, this condition shall be deemed to be satisfied if
all breaches of such representations and warranties, after giving effect to the
foregoing, do not individually or in the aggregate constitute a Material Adverse
Effect on the Purchaser and Parent taken as a whole.
7.2 COVENANTS OF PURCHASER AND PARENT. Purchaser and Parent shall have, or
shall have caused to be, performed and observed in all respects all covenants,
agreements and conditions hereof to be performed or observed by them at or
before the Closing Date.
7.3 CERTIFICATE. The Acquired Company shall have received a certificate of
the President of each of Parent and Purchaser, dated as of the Closing Date,
certifying as to the matters set forth in Sections 7.1 and 7.2 above.
7.4 OPINION OF PARENT'S AND PURCHASER'S COUNSEL. The Acquired Company
shall have received an opinion of Jones, Day, Reavis & Pogue, counsel to Parent
and Purchaser, dated as of the Closing Date, in customary form reasonably
acceptable to Acquired Company.
7.5 TAX OPINION. The Acquired Company shall have received for the benefit
of its stockholders an opinion from its tax counsel, dated as of the date the
Registration Statement is declared effective and as of
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the Closing Date, to the effect that the Merger will qualify as a reorganization
pursuant to Section 368(a) of the Tax Code, which opinion shall be substantially
in the form of EXHIBIT 7.5 hereto.
VIII. CLOSING.
8.1 TIME AND PLACE OF CLOSING. Unless another place or date is agreed to
in writing by the Acquired Company and Purchaser, the Closing shall be held at
the offices of Jones, Day, Reavis & Pogue, 3500 One Peachtree Center, 303
Peachtree Street N.E., Atlanta, Georgia 30308-3242, commencing at 10:00 a.m.
Eastern Time, within two (2) business days of the last to occur of (i) the
expiration or termination of the waiting period under the HSR Act, (ii) the
Merger having been approved by the stockholders of the Acquired Company pursuant
to the Delaware Code and (iii) the satisfaction or waiver of the other
conditions set forth in Articles V, VI and VII. (The actual date of the Closing
is referred in this Agreement as the "Closing Date.")
8.2 TRANSACTIONS AT CLOSING. At the Closing, each of the following
transactions shall occur:
8.2.1. THE ACQUIRED COMPANY'S PERFORMANCE. At the Closing, the
Acquired Company shall deliver to Purchaser and Parent, the following:
(a) copies of the consents and waivers described in Section 2.9;
(b) satisfactory evidences of the approvals described in Section 5.4;
(c) the certificates described in Section 6.4 to be delivered on the
Closing Date;
(d) certificates of compliance or certificates of good standing of
the Acquired Company, as of the most recent practicable date, from the
State of Delaware;
(e) certified copies of resolutions of the Board of Directors and
stockholders of the Acquired Company approving the transactions set forth
in this Agreement;
(f) certificates of incumbency for the officers of the Acquired
Company;
(g) resignations of each trustee of each Benefit Plan;
(h) Certificate of Merger and a Plan of Merger, each in form and
content that complies with the Delaware Code, executed by the Acquired
Company;
(i) the opinion of counsel for the Acquired Company, referenced in
Section 6.5;
(j) the tax opinion described in Section 6.6;
(k) the Rule 145 Letters and Pooling Letters described in Section
2.4;
(l) the letters described in Section 2.13;
(m) the letters described in Section 2.3.2;
(n) the letters from Coopers & Lybrand L.L.P. to be delivered by the
Closing Date as described in Section 6.9;
(o) each of the Covenants Not to Compete fully executed and
delivered;
(p) such other evidence of the performance of all covenants and
satisfaction of all conditions required of the Acquired Company by this
Agreement, at or prior to the Closing, as Purchaser, Parent or their
counsel may reasonably require; and
(q) evidence of the termination of the agreements described in
Section 6.13.
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8.2.2. PERFORMANCE BY PURCHASER AND PARENT. At the Closing, Purchaser
or Parent, as appropriate, shall deliver to the Acquired Company the
following:
(a) the certificate described in Section 7.3;
(b) certificates of incumbency of the officers of Purchaser and of
Parent who are executing this Agreement and the other documents
contemplated hereunder;
(c) certified copies of resolutions of the Boards of Directors of
each of Purchaser and Parent (or Executive Committees thereof) approving
the transactions set forth in this Agreement;
(d) Certificate of Merger and a Plan of Merger, each in form and
content that complies with the Delaware Code, executed by Purchaser;
(e) the opinion of counsel for Purchaser and Parent referenced in
Section 7.4; and
(f) such other evidence of the performance of all the covenants and
satisfaction of all of the conditions required of Purchaser and of Parent
by this Agreement at or before the Closing as the Acquired Company or its
counsel may reasonably require.
IX. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
9.1 Except for the covenants contained in Sections 2.1.6, 2.1.7, 2.3.6,
2.3.8, 2.13, 2.14, 2.15 and 11.5, all representations, warranties and agreements
of the parties in this Agreement or in any instrument delivered pursuant to this
Agreement (other than the Covenants Not To Compete) shall not survive the
Closing, and thereafter no party hereto and no officer, director or employee of
any such party shall have any liability whatsoever with respect to any such
representation, warranty or agreement except for liabilities arising from fraud,
willful misconduct or criminal acts.
X. TERMINATION.
10.1 METHOD OF TERMINATION. This Agreement constitutes the binding and
irrevocable agreement of the parties to consummate the transactions contemplated
hereby, the consideration for which is (a) the covenants set forth in Article II
hereof, and (b) expenditures and obligations incurred and to be incurred by
Purchaser and Parent, on the one hand, and by the Acquired Company, on the other
hand, in respect of this Agreement, and this Agreement may be terminated or
abandoned only as follows:
10.1.1. By the mutual consent of the Boards of Directors of the
Acquired Company and Parent, notwithstanding prior approval by the
stockholders of any or all of such corporations;
10.1.2. By the Board of Directors of the Parent in accordance with its
rights under Section 10.3;
10.1.3. By the Board of Directors of the Acquired Company after June
30, 1997, if any of the conditions set forth in Articles V and VII hereof,
to which the Acquired Company's obligations are subject, have not been
fulfilled or waived, unless such fulfillment has been frustrated or made
impossible by any act or failure to act of it;
10.1.4. By Purchaser after June 30, 1997, if any of the conditions set
forth in Articles V and VI hereof, to which the obligations of Purchaser and
Parent are subject, have not been fulfilled or waived, unless such
fulfillment has been frustrated or made impossible by any act or failure to
act of Purchaser or Parent.
10.1.5. By the Board of Directors of the Acquired Company if in the
exercise of its good faith determination, as set forth in Section 2.11, as
to its fiduciary duties to the Acquired Company's stockholders imposed by
law, the Board of Directors of the Acquired Company decides that such
termination is required.
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10.1.6. By the Board of Directors of the Acquired Company, if the
Market Value of the Parent Stock is less than $53.33 per share.
10.2 EFFECT OF TERMINATION.
10.2.1. Except as provided in Section 10.2.2, and except as provided in
the immediately succeeding sentence, in the event of a termination of this
Agreement pursuant to Section 10.1 hereof, each party shall pay the costs
and expenses incurred by it in connection with this Agreement, and no party
(or any of its officers, directors, employees, agents, representatives or
stockholders) shall be liable to any other party for any costs, expenses,
damage or loss of anticipated profits hereunder. In the event of any
termination of this Agreement, the parties shall retain any and all rights
attendant to a breach of any covenant, representation or warranty made
hereunder. Section 2.8.2 of this Agreement shall survive termination
hereunder.
10.2.2. In the event this Agreement is terminated (a) by the Acquired
Company in accordance with Section 10.1.5, or (b) by the Parent, Purchaser
or Acquired Company in accordance with Section 10.1.3 or 10.1.4 by reason of
the failure of the condition set forth in Section 5.4 hereof, then the
Acquired Company shall promptly pay (i) all reasonable costs and expenses of
Purchaser and Parent incurred in connection with the negotiation and
performance of this Agreement including without limitation fees and expenses
of counsel, fees and expenses of independent public accountants, printing
expenses and registration fees and (ii) to Purchaser a fee in the amount of
$5,825,000. In the case of any termination of this Agreement under this
Section 10.2.2 and provided the Acquired Company has not breached any of the
covenants provided for in Section 2.1.8 or 2.11 hereof, payment of the
amount specified in the preceding sentence shall constitute liquidated
damages and shall be the sole and exclusive remedy of Parent and Purchaser
for any and all damages arising under or in connection with this Agreement,
and, upon payment of the amount specified in the preceding sentence, neither
the Acquired Company nor any officers, directors, employees, agents,
representatives or stockholders of the Acquired Company shall have any
liability or further obligation to the Parent or the Purchaser under or in
connection with this Agreement or any such termination hereof.
10.3 RISK OF LOSS. The Acquired Company retains all risk of condemnation,
destruction, loss or damage due to fire or other casualty from the date of this
Agreement up to the Effective Time. If the condemnation, destruction, loss, or
damage is such that the business of the Acquired Company is materially
interrupted or curtailed or the assets of the Acquired Company are materially
affected, then Purchaser shall have the right to terminate this Agreement.
XI. GENERAL PROVISIONS.
11.1 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
certified mail, return receipt requested, first class postage prepaid, or sent
by Federal Express or similar overnight delivery service with receipt
acknowledged addressed as follows:
11.1.1. If to the Acquired Company:
AMISYS Managed Care Systems, Inc.
30 West Gude Drive, 5th Floor
Rockville, MD 20850
Attn: Mr. Kevin Brown
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and to:
Hogan & Hartson, L.L.P.
111 South Calvert Street, Suite 1600
Baltimore, MD 21202
Attn: Michael J. Silver, Esq.
11.1.2. If to Purchaser or Parent:
HBO & Company
301 Perimeter Center North
Atlanta, GA 30346
Attn: Mr. Jay P. Gilbertson
and to:
Jones, Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
Attention: John E. Zamer, Esq.
11.1.3. If delivered personally, the date on which a notice, request,
instruction or document is delivered shall be the date on which such
delivery is made and, if delivered by mail or by overnight delivery service,
the date on which such notice, request, instruction or document is received
shall be the date of delivery. In the event any such notice, request,
instruction or document is mailed or shipped by overnight delivery service
to a party in accordance with this Section 11.1 and is returned to the
sender as nondeliverable, then such notice, request, instruction or document
shall be deemed to have been delivered or received on the fifth day
following the deposit of such notice, request, instruction or document in
the United States mails or the delivery to the overnight delivery service.
11.1.4. Any party hereto may change its address specified for notices
herein by designating a new address by notice in accordance with this
Section 11.1.
11.2 BROKERS. Purchaser and Parent, jointly and severally, represent and
warrant to the Acquired Company that no broker or finder has acted for them or
any entity controlling, controlled by or under common control with them in
connection with this Agreement. The Acquired Company represents and warrants to
Purchaser and Parent that, except for Alex. Brown & Sons Incorporated, no broker
or finder has acted for it or any entity controlling, controlled by or under
common control with it in connection with this Agreement. The Acquired Company
agrees to indemnify and hold harmless Purchaser and Parent against any fee,
loss, or expense arising out of any claim by Alex. Brown & Sons Incorporated, or
any other broker or finder employed or alleged to have been employed by it or
any of the Acquired Company's stockholders. The fees and expenses of Alex. Brown
& Sons Incorporated and any other broker or finder shall be paid by the Acquired
Company, subject to the limitations set forth in Section 6.12 in conjunction
with such other fees set forth in Section 11.5.
11.3 FURTHER ASSURANCES. Each party covenants that at any time, and from
time to time, after the Effective Time, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.
11.4 WAIVER. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived by any
other party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
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11.5 EXPENSES. Except as provided in 10.2.2, all expenses incurred by the
parties hereto in connection with or related to the authorization, preparation
and execution of this Agreement and the closing of the transactions contemplated
hereby, including, without limitation of the generality of the foregoing, all
fees and expenses of agents, representatives, counsel and accountants employed
by any such party, shall be borne solely and entirely by the party that has
incurred the same.
11.6 PRESS RELEASES AND DISCLOSURE. In the event that either party
proposes to issue, make or distribute any press release, public announcement or
other written publicity or disclosure prior to the Closing Date that refers to
the transactions contemplated herein, the party proposing to make such
disclosure shall provide a copy of such disclosure to the other parties and
shall afford the other parties reasonable opportunity (subject to any legal
obligation of prompt disclosure) to comment on such disclosure or the portion
thereof which refers to the transactions contemplated herein prior to making
such disclosure.
11.7 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
executors, administrators, successors and assigns.
11.8 HEADINGS. The section and other headings in this Agreement are
inserted solely as a matter of convenience and for reference, and are not a part
of this Agreement.
11.9 ENTIRE AGREEMENT. This Agreement and all agreements referenced
specifically in this Agreement and executed as required by this Agreement
constitute the entire agreement among the parties hereto and supersede and
cancel any prior agreements, representations, warranties, or communications,
whether oral or written, among the parties hereto relating to the transactions
contemplated hereby or the subject matter herein. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by an agreement in writing signed by the party against whom or which the
enforcement of such change, waiver, discharge or termination is sought.
11.10 GOVERNING LAW. Except to the extent the transactions contemplated
hereby are governed by the Delaware Code, this Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia.
11.11 CONSENT TO ACQUISITION OF VOTING SECURITIES. Pursuant to Section 7
of the Letter Agreement entered into between Parent and Alex. Brown & Sons
Incorporated, dated as of November 9, 1995, the Acquired Company hereby consents
to the acquisition of the voting securities of the Acquired Company pursuant to
the terms of this Agreement.
11.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.13 NO AGREEMENT UNTIL EXECUTED. This Agreement shall not constitute or
be deemed to evidence a contract or agreement among the parties hereto unless
and until executed by all parties hereto, irrespective, of negotiations among
the parties or the exchanging of drafts of this Agreement.
11.14 PRONOUNS. All pronouns used herein shall be deemed to refer to the
masculine, feminine or neuter gender as the context requires.
11.15 EXHIBITS INCORPORATED. All Exhibits attached hereto are an integral
part of this Agreement.
11.16 TIME OF ESSENCE. Time is of the essence in this Agreement.
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IN WITNESS WHEREOF, each party hereto has executed or caused this Agreement
to be executed on its behalf, all on the day and year first above written.
"PURCHASER":
HBO & COMPANY OF GEORGIA
By: /s/ JAY P. GILBERTSON
-----------------------------------
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
"PARENT":
HBO & COMPANY
By: /s/ JAY P. GILBERTSON
-----------------------------------
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
"ACQUIRED COMPANY":
AMISYS MANAGED CARE SYSTEMS, INC.
By: /s/ KEVIN R. BROWN
-----------------------------------
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
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ALEX. BROWN & SONS INCORPORATED
ONE SOUTH STREET
BALTIMORE, MARYLAND 21202
APPENDIX B
May 13, 1997
Board of Directors
AMISYS Managed Care Systems, Inc.
30 West Gude Drive, Fifth Floor
Rockville, MD 20850
Dear Sirs:
AMISYS Managed Care Systems, Inc. ("AMISYS" or the "Acquired Company"), HBO
& Company ("HBOC" or the "Parent"), and HBO & Company of Georgia (the
"Purchaser"), a Delaware corporation and a wholly-owned subsidiary of Parent
(the "Merger Sub"), have entered into an Agreement of Merger dated as of
February 10, 1997 (the "Agreement"). Pursuant to the Agreement, the
implementation of which is contingent on stockholder approval by the Acquired
Company's stockholders, the Acquired Company shall be merged with and into
Purchaser (the "Merger"), and each share of AMISYS common stock issued and
outstanding immediately prior to the effective time of the Merger will be
converted into thirty-five hundredths (0.35) of a share (the "Exchange Ratio")
of common stock of HBOC. We have assumed, with your consent, that the Merger
will qualify for pooling-of-interests accounting treatment and as a tax-free
transaction for the stockholders of the Acquired Company. You have requested our
opinion as to whether the Exchange Ratio is fair, from a financial point of
view, to AMISYS's stockholders.
Alex. Brown & Sons Incorporated ("Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We have acted as financial advisor to the Board of Directors of AMISYS
in connection with the transaction described above and will receive a fee for
our services, a significant portion of which is contingent upon the consummation
of the Merger. In the past, we have provided various financing services for HBOC
and various financing and financial advisory services for AMISYS and received
customary fees for rendering such services. Alex. Brown maintains a market in
the common stock of AMISYS and HBOC and regularly publishes research reports
regarding the health care industry and the businesses and securities of publicly
owned companies in that industry, including AMISYS and HBOC. In addition,
certain employees of Alex. Brown are limited partners in ABS Capital Partners,
L.P., an investor in AMISYS. In the ordinary course of business, Alex. Brown may
actively trade the securities of both the Acquired Company and the Parent for
our own account and the account of our customers and, accordingly, may at any
time hold a long or short position in securities of the Acquired Company and the
Parent.
In connection with this opinion, we have reviewed certain publicly available
financial information and other information concerning AMISYS and HBOC and
certain internal analyses and other information furnished to us by AMISYS and
HBOC. We have also held discussions with members of the senior managements of
AMISYS and HBOC regarding the businesses and prospects of their respective
companies and the joint prospects of a combined company. In addition, we have
(i) reviewed the reported prices and trading activity for the common stock of
both AMISYS and HBOC, (ii) compared certain financial and stock market
information for AMISYS and HBOC with similar information for certain publicly
traded companies, (iii) reviewed the financial terms of certain recent business
combinations, (iv) reviewed the
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<PAGE>
terms of the Agreement, and (v) performed such other studies and analyses and
considered such other factors as we deemed appropriate.
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to the information relating to the prospects of AMISYS and
HBOC, we have assumed that such information reflects the best currently
available judgments and estimates of the managements of AMISYS and HBOC as to
the likely future financial performances of their respective companies. In
addition, we have not made nor been provided with an independent evaluation or
appraisal of the assets of AMISYS and HBOC, nor have we been furnished with any
such evaluations or appraisals. Our opinion is based on market, economic and
other conditions as they exist and can be evaluated as of the date of this
letter.
In arriving at our opinion, we were not authorized to initiate and did not
initiate or generally solicit discussions with any party with respect to the
acquisition of AMISYS or any of its assets.
Our advisory services and the opinion expressed herein were prepared for the
use of the Board of Directors of AMISYS and do not constitute a recommendation
to AMISYS's stockholders as to how they should vote at the stockholders' meeting
in connection with the Merger. We hereby consent, however, to the inclusion of
this opinion as an exhibit to any proxy or registration statement distributed in
connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Exchange Ratio is fair, from a financial point of view,
to AMISYS's stockholders.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
/s/ ALEX. BROWN & SONS INCORPORATED
----------------------------------------
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PROXY
AMISYS MANAGED CARE SYSTEMS, INC.
30 WEST GUDE DRIVE, FIFTH FLOOR
ROCKVILLE, MARYLAND 20850
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kevin R. Brown and Robert J. Sullivan, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent, and to vote as designated on the reverse
side, all of the shares of Common Stock of AMISYS Managed Care Systems, Inc.
("AMISYS"), held of record by the undersigned on April 25, 1997, at a Special
Meeting of Stockholders to be held on June 13, 1997, or any adjournment or
postponement thereof upon the following matter, as set forth in the notice of
said meeting dated May 13, 1997, a copy of which has been received by the
undersigned.
1. APPROVAL OF AGREEMENT OF MERGER dated February 10, 1997, by and among
AMISYS, HBO & Company and HBO & Company of Georgia.
/ / FOR / / AGAINST / / ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such other
matters that may properly come before the meeting or any adjournments
thereof.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE PROPOSAL.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED POSTAGE PRE-PAID ENVELOPE.
Signature: ____________ Date _____
Signature: ____________ Date _____
Please sign exactly as your name
appears on this proxy. If the
shares represented by this proxy
are held by joint tenants, both
must sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give
full title as such. If stockholder
is a corporation, please sign in
full corporate name by President
or other authorized officer. If
stockholder is a partnership,
please sign in partnership name by
authorized person.
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
HBO & Company's (the "Company") By-Laws (Article IX, Section 1) provide that
every person who was or is a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation or for its
benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
and pursuant to any procedure specified in the General Corporation Law of the
State of Delaware, as amended from time to time, against all expenses,
liabilities and losses (including attorneys' fees, judgments, fines and amounts
paid or to be paid in settlement) reasonably incurred or suffered by him in
connection therewith. Such right of indemnification shall be a contract right
that may be enforced in any manner by such person. Such right of indemnification
shall not be exclusive of any other right which such directors, officers or
representatives may have or thereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under such article.
Article IX, Section 2 of the Company's By-Laws provides that the Board of
Directors may cause the corporation to purchase and maintain insurance on behalf
of any person who is or was a director or officer of the corporation, or is or
was serving at the request of the corporation as a director or officer of
another corporation, or as its representative in a partnership, joint venture,
trust or other enterprise against any liability asserted against such person and
incurred in any such capacity or arising out of such status, whether or not the
corporation would have the power to indemnify such person.
With respect to indemnification of officers and directors, Section 145 of
the Delaware General Corporation Law provides that a corporation shall have the
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Under this provision of
the Delaware General Corporation Law, the termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Furthermore, the Delaware General Corporation Law provides that a
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee,
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses
(including attorneys' fees), actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation except that no indemnification shall be made
in respect of any claim, issue or matter as to
II-1
<PAGE>
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability, but in view of all circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
In addition, the General Corporation Law of Delaware enables a Delaware
corporation to include in its certificate of incorporation a provision
eliminating or limiting a director's liability to the corporation or its
stockholders for monetary damages for breaches of a director's fiduciary duty as
a director. The statute provides, however, that liability for (a) breach of the
director's duty of loyalty, (b) acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, (c) the unlawful purchase
or redemption of stock or unlawful dividends or (d) transactions from which a
director derived an improper personal benefit cannot be eliminated or limited in
this manner. The Company's Certificate of Incorporation contains such
provisions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following exhibits are filed as part of this Registration
Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
+2 Agreement of Merger dated February 10, 1997 by and among HBO & Company, HBO & Company of Georgia and
AMISYS Managed Care Systems, Inc. (included as Appendix A to the Proxy Statement/Prospectus contained in
Part I of this Registration Statement).
*5 Opinion of Jones, Day, Reavis & Pogue re legality.
+8 Opinion of Hogan & Hartson L.L.P. re tax matters.
+23(a) Consent of Arthur Andersen LLP.
+23(b) Consent of Coopers & Lybrand L.L.P.
*23(c) Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
+23(d) Consent of Hogan & Hartson L.L.P. (included in Exhibit 8).
+23(e) Consent of Alex. Brown & Sons Incorporated (included in Appendix B to the Proxy Statement/ Prospectus
contained in Part I of this Registration Statement).
*24 Power of Attorney (included in signature page).
</TABLE>
- ------------------------
* Previously filed.
+ Filed herewith.
The following exhibits filed with the Securities and Exchange Commission are
incorporated by reference as shown below.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ON MAY 13, 1981, AS PART OF ITS REGISTRATION STATEMENT ON FORM S-1 (REGISTRATION NUMBER 2-72275):
4(a) -- Specimen forms of certificates for Common Stock of Registrant.
ON FEBRUARY 15, 1991, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 2-75987):
4 -- HBO & Company 1981 Incentive Stock Option Plan, as amended.
ON FEBRUARY 22, 1991, AS PART OF ITS FORM 8-K:
4 -- HBO & Company Rights Agreement.
ON MARCH 27, 1991, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-12051):
4 -- HBO & Company 1986 Employee Nonqualified Stock Option Plan, as amended.
ON AUGUST 12, 1993, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-67300):
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
4 -- HBO & Company 1993 Stock Option Plan for Nonemployee Directors.
ON JULY 20, 1994, AS PART OF THE FORM S-4 REGISTRATION STATEMENT DATED JULY 19, 1994, AS AMENDED BY
AMENDMENT NO. 1 TO FORM S-4 DATED AUGUST 10, 1994, AND FILED WITH THE COMMISSION ON AUGUST 11, 1994, AND
FURTHER AMENDED BY AMENDMENT NO. 2 TO FORM S-4 DATED AUGUST 10, 1994, AND FILED WITH THE COMMISSION
AUGUST 11, 1994:
3 -- Amended Bylaws.
ON AUGUST 17, 1994, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-82962):
4 -- HBO & Company 1990 Executive Incentive Plan, as amended.
ON SEPTEMBER 15, 1994, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-84034):
4 -- 1986 Incentive Stock Option Plan of Serving Software, Inc.
ON MARCH 17, 1995, AS PART OF ITS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994:
4 -- Chief Executive Officer Incentive Plan.
ON MAY 9, 1995, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-59173):
4 -- HBO & Company 1986 Nonqualified Stock Option Agreement, HBO & Company 1991 Nonqualified Stock Option
Agreement 1 and HBO & Company 1991 Nonqualified Stock Option Agreement 2.
ON OCTOBER 5, 1995, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-63213):
4 -- 1985 Employee Stock Option Plan of CliniCom Incorporated.
ON MAY 21, 1996, AS PART OF ITS FORM 8-K DATED MAY 21, 1996, AND FILED WITH THE COMMISSION ON MAY 21,
1996:
3(i) -- HBO & Company Certificate of Incorporation, as amended.
ON AUGUST 22, 1996, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-10603):
4 -- CyCare Systems, Inc. 1995 Long-term Incentive Plan (Including the predecessor CyCare Systems, Inc. Stock
Option Plan).
ON DECEMBER 10, 1996, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-17583):
4(a) -- GMIS Inc. Non-Qualified Stock Option Agreement Between GMIS Inc. and Josephine G. Kaple.
4(b) -- GMIS Inc. Non-Qualified Stock Option Agreement Between GMIS Inc. and Lawrence Keonig.
ON DECEMBER 10, 1996, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-17551):
4 -- GMIS Inc. 1991 Stock Option Plan.
ON DECEMBER 10, 1996, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-17579):
4 -- Gabreili Medical Information Systems, Inc. 1984 Stock Option Plan.
ON DECEMBER 10, 1996, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-17555):
4 -- GMIS Inc. 1995 Stock Option Plan.
ON DECEMBER 10, 1996, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-10479):
4 -- Gabreili Medical Information Systems, Inc. 1985 Non-Qualified Common Stock Option Plan.
</TABLE>
(b) Financial Statement Schedules.
No financial statement schedules are required to be filed herewith.
(c) The opinion of Alex. Brown & Sons Incorporated is included as Appendix B
to the Proxy Statement/Prospectus contained in Part I of this Registration
Statement.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
II-3
<PAGE>
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
PROVIDED, HOWEVER, That paragraphs (1)(i) and (1)(ii) of this undertaking do
not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) (i) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(ii) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(iii) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
II-4
<PAGE>
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, in
the State of Georgia, on the 12th day of May, 1997.
HBO & COMPANY
By: /s/ CHARLES W. MCCALL
-----------------------------------------
Charles W. McCall
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------------ --------------------
<S> <C> <C>
/s/ CHARLES W. MCCALL Director, President and Chief
- --------------------------------- Executive Officer (Principal May 12, 1997
(Charles W. McCall) Executive Officer)
Executive Vice President, Chief
Financial Officer, Principal
/s/ JAY P. GILBERTSON Accounting Officer, Treasurer and
- --------------------------------- Secretary (Principal Financial May 12, 1997
(Jay P. Gilbertson) Officer and Principal Accounting
Officer)
- --------------------------------- Chairman of the Board of Directors
(Holcombe T. Green, Jr.)
- --------------------------------- Director
(Alfred C. Eckert III)
- --------------------------------- Director
(Philip A. Incarnati)
- --------------------------------- Director
(Alton F. Irby III)
- --------------------------------- Director
(Gerald E. Mayo)
- --------------------------------- Director
(James V. Napier)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------------ --------------------
<S> <C> <C>
*
- --------------------------------- Director
(Donald C. Wegmiller)
By: /s/ CHARLES W. MCCALL
- ---------------------------------
*Charles W. McCall, May 12, 1997
ATTORNEY-IN-FACT
By: /s/ JAY P. GILBERTSON
- ---------------------------------
*Jay P. Gilbertson, May 12, 1997
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE
- --------- -----
<S> <C> <C>
+2 Agreement of Merger dated February 10, 1997 by and among HBO & Company, HBO & Company of Georgia
and AMISYS Managed Care Systems, Inc. (included as Appendix A to the Proxy Statement/Prospectus
contained in Part I of this Registration Statement).
*5 Opinion of Jones, Day, Reavis & Pogue re legality.
+8 Opinion of Hogan & Hartson L.L.P. re tax matters.
+23(a) Consent of Arthur Andersen LLP.
+23(b) Consent of Coopers & Lybrand L.L.P.
*23(c) Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
+23(d) Consent of Hogan & Hartson L.L.P. (included in Exhibit 8).
+23(e) Consent of Alex. Brown & Sons Incorporated (included in Appendix B to the Proxy
Statement/Prospectus contained in Part I of this Registration Statement).
*24 Power of Attorney (included in signature page).
</TABLE>
- ------------------------
* Previously filed.
+ Filed herewith.
<PAGE>
EXHIBIT 8
HOGAN & HARTSON L.L.P.
COLUMBIA SQUARE
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004-1109
TEL (202) 637-5600
FAX (202) 637-5910
May 12, 1997
Members of the Board of Directors
AMISYS Managed Care Systems, Inc.
30 West Gude Drive, Fifth Floor
Rockville, Maryland 20850
Dear Board Members:
You have requested that we render to you our opinion with respect to certain
Federal income tax consequences of the proposed transaction in which AMISYS
Managed Care Systems, Inc. (the "Acquired Company"), a Delaware Corporation,
will be merged with and into HBO & Company of Georgia ("Purchaser"), a Delaware
corporation wholly owned by HBO & Company ("Parent"), a Delaware corporation.
In connection with the preparation of this opinion, we have examined and
relied upon the following documents (including all exhibits and schedules
thereto): (1) the Agreement of Merger dated as of February 10, 1997, by and
among Parent, Purchaser, and the Acquired Company (the "Agreement"); (2)
representations and certifications made to us by Parent and Purchaser (attached
hereto as EXHIBIT A); (3) representations and certifications made to us by the
Acquired Company and holders of five percent (5%) or more of the Acquired
Company stock (attached hereto as EXHIBITS B and C); (4) the Registration
Statement on Form S-4 filed with the Securities and Exchange Commission (the
"Registration Statement"); (5) such other instruments and documents related to
the formation, organization and operation of Parent, Purchaser and the Acquired
Company or to the consummation of the Merger and the transactions contemplated
thereby as we have deemed necessary or appropriate. In addition we have reviewed
the form of the opinion of counsel, received by Parent from Parent's counsel
with respect to the tax consequences of the proposed transaction (the "Jones,
Day Tax Opinion").(1)
THE PROPOSED TRANSACTION
Based solely upon our review of the documents set forth above, and upon such
information as Parent, Purchaser and the Acquired Company have provided to us
(which we have not attempted to verify in any respect), and in reliance upon
such documents and information, we understand that the proposed transaction and
the relevant facts with respect thereto are as follows:
Parent is a Delaware corporation and is the owner of all of the outstanding
stock of Purchaser, a Delaware corporation. Parent develops integrated patient
care, clinical, financial and strategic management software solutions for the
healthcare industry. Parent also provides a full complement of network
communications technologies, including wireless capabilities, as well as
outsourcing services that are offered under contract management agreements. In
addition, Parent offers a wide range of electronic commerce services, including
electronic medial claims and remittance advice services as well as statement
processing.
- ------------------------
(1) All capitalized terms used herein and not otherwise defined shall have the
same meaning as they have in the Agreement. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended
(the "Code").
<PAGE>
The Acquired Company
May 12, 1997
Page 2
The Acquired Company is Delaware corporation. The Acquired Company develops,
markets and supports managed healthcare information systems for payors and
providers who offer managed care products and services.
Because it is believed that the businesses of Parent and Acquired Company
would be complementary, it is proposed that pursuant to the Agreement and the
laws of the State of Delaware, the Acquired Company merge with and into
Purchaser (the "Merger"). The Acquired Company's separate corporate existence
will cease and Purchaser will be the surviving corporation. As the surviving
corporation, Purchaser will succeed to all of the assets and liabilities of the
Acquired Company under Delaware corporate law.
By virtue of the Merger, each share of the Acquired Company Stock issued and
outstanding immediately prior to the Effective Time will, at the Effective Time,
be converted into the right to receive .35 shares (the "Exchange Ratio") of
Parent Stock, less the amount of any fractional shares paid in cash.
Certificates or scrip for fractions of shares of Parent Stock will not be
issued. In lieu of a fraction of a share of Parent Stock, Parent will pay the
value of such fractional shares in cash, without interest, at a pro rata amount
based on the Market Value.
ASSUMPTIONS AND REPRESENTATIONS
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
1. All information contained in each of the documents we have examined and
relied upon in connection with the preparation of this opinion is accurate and
that all copies are accurate and that all signatures thereof are genuine. We
have also assumed that there has been (or will be by the Effective Time of the
Merger) due execution and delivery of all documents where due execution and
delivery are prerequisites to effectiveness thereof.
2. The Merger will be effective under the applicable state law.
3. All representations made in the exhibits hereto are true, correct, and
complete in all material respects. Any representation or statement made "to the
best of knowledge" or similarly qualified is correct without such qualification.
4. The Jones, Day Tax Opinion has been concurrently delivered and is not at
any time hereafter withdrawn.
OPINION--FEDERAL INCOME TAX CONSEQUENCES
Based upon and subject to the assumptions and qualifications set forth
herein, it is our opinion that for Federal income tax purposes the following
will result:
(a) The Merger will qualify as a reorganization under the provisions of
sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
(b) No gain or loss will be recognized to the Acquired Company stockholders
on the exchange of their Acquired Company Stock solely for Parent Stock (section
354(a)(1)).
(c) The payment of cash to an Acquired Company stockholder in lieu of
fractional share interests of Parent Stock will be treated for Federal income
tax purposes as if the fractional shares were distributed as part of the
exchange and then redeemed by Parent. These cash payments will be treated as
having been received as distributions in full payment in exchange for the stock
redeemed, as provided in section 302(a) of the Code (Rev. Rul. 66-365, 1966-2
C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B. 574).
<PAGE>
The Acquired Company
May 12, 1997
Page 3
(d) The basis of the Parent Stock to be received by the stockholders of the
Acquired Company will be the same as the basis of the Acquired Company Stock to
be surrendered in exchange therefor (section 358(a)(1)).
(e) The holding period of the Parent Stock received by the stockholders of
the Acquired Company will include the period during which Acquired Company Stock
surrendered was held, provided the Acquired Company Stock surrendered was held
as a capital asset by the stockholders of Acquired Company on the date of the
exchange (section 1223(1)).
Our opinion is intended to address only the tax consequences to the Acquired
Company stockholders of the Merger, and is not intended to address (nor may it
be relied upon for) the tax consequences to Parent, Purchaser or the Acquired
Company of the Merger. Our opinion set forth herein is based upon the
description of the contemplated transactions as set forth above in the section
captioned "The Proposed Transaction" and the Agreement. If the actual facts
relating to any aspect of the transactions differ from this description in any
material respect, our opinion may become inapplicable. Further, our opinion is
based upon the Code and the relevant regulations and interpretations and
judicial precedents as of the date hereof. If there is any change in the
applicable law or regulations, or if there is any new administrative or judicial
interpretations of the law or regulations, our opinion may become inapplicable.
We hereby consent to the use of this opinion letter as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement.
Sincerely yours,
/s/ HOGAN & HARTSON L.L.P.
Hogan & Hartson L.L.P.
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 6, 1997
included or incorporated by reference in HBO & Company's Form 10-K for the year
ended December 31, 1996 and to all references to our firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Atlanta, Georgia
May 12, 1997
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of HBO & Company on Form S-4 of our report, dated February 11, 1997, on our
audits of the balance sheets of AMISYS Managed Care Systems, Inc. ("the
Company"), as of December 31, 1995 and December 31, 1996, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
period from May 27, 1994 to December 31, 1994 and for the years ended December
31, 1995 and 1996, respectively, and the statements of operations, stockholders'
equity (deficit) and cash flows of American International Healthcare, Inc.
("AIHI"), a wholly owned subsidiary of American International Group, Inc., for
the period from January 1, 1994 to May 26, 1994 and the related financial
statement schedule, which report is included in the Company's Annual Report on
Form 10-K. We also consent to the reference to our firm under the caption
"Experts" in the Registration Statement.
/s/ COOPERS & LYBRAND L.L.P.
Washington, D.C
May 8, 1997
