<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1997
REGISTRATION NO. 333--27045
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
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. JEFFREY A. SCHUMACHER, ESQ.
Jones, Day, Reavis & Pogue Sachnoff & Weaver, Ltd.
3500 One Peachtree Center 30 South Wacker Drive
303 Peachtree Street, N.E. Chicago, Illinois 60606-7484
Atlanta, Georgia 30308-3242 (312) 207-6414
(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>
ENTERPRISE SYSTEMS, INC.
1400 SOUTH WOLF ROAD
WHEELING, ILLINOIS 60090-6524
May 29, 1997
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders (the
"Meeting") of Enterprise Systems, Inc. ("Enterprise") to be held at the
corporate offices of Enterprise, 1400 South Wolf Road, Wheeling, Illinois
60090-6524 at 10:00 a.m., local time, on June 26, 1997.
At the Meeting, you will be asked to consider and take action upon the
following matters:
(1) A proposal to approve an Agreement of Merger dated March 13, 1997 (the
"Merger Agreement") among Enterprise, 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) Enterprise will merge with and into HBOC-GA (the "Merger") and (b)
each outstanding share of common stock, $.01 par value per share, of Enterprise
("Enterprise Common Stock") and each right to acquire a share of Enterprise
Common Stock will be converted into the right to receive (i) .50 of a share of
common stock, $.05 par value per share, of HBOC (the "HBOC Common Stock") if the
average closing price per share as reported by The Nasdaq Stock Market National
Market ("Nasdaq NM") of the HBOC Common Stock during the twenty (20) consecutive
trading days ending on the third day prior to the date of the Meeting (the
"Market Value") is less than $60.00, (ii) a fractional share of HBOC Common
Stock which, when multiplied by the Market Value, will equal $30.00 if the
Market Value is equal to or greater than $60.00 but not greater than $68.00,
(iii) .4412 of a share of HBOC Common Stock if the Market Value is greater than
$68.00 but not greater than $72.00, and (iv) a fractional share of HBOC Common
Stock which, when multiplied by the Market Value, will equal $31.77 if the
Market Value is greater than $72.00 (whichever basis is applicable being
referred to as the "Exchange Ratio"), and less the amount of any fractional
share, which will be paid in cash; and
(2) A proposal to approve an amendment to the Enterprise Systems, Inc.
Long-Term Incentive Plan (the "Enterprise Stock Plan") to increase the number of
shares issuable thereunder from 1,114,846 shares to 1,414,846 shares.
Details of the foregoing matters 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.
As a result of the Merger, holders of Enterprise Common Stock or rights to
acquire shares of Enterprise Common Stock will receive an aggregate of up to
4,716,442 shares of HBOC Common Stock, assuming an Exchange Ratio of .50 (less
the aggregate amount of any fractional shares, which will be paid in cash). In
the event that the Market Value of the HBOC Common Stock exceeds $72.00, the
Merger Agreement provides for the issuance of a fractional share of HBOC Common
Stock which, when multiplied by the Market Value, will equal $31.77 in respect
of each share or right to acquire a share of Enterprise Common Stock and,
accordingly, there is no assurance that any minimum number of shares of HBOC
Common Stock will be issued in the Merger or that any minimum fractional share
of HBOC Common Stock will be issuable in respect of a share of Enterprise Common
Stock or that the value thereof will equal or exceed the then current market
value of the Enterprise Common Stock. Although the Board of Directors of
Enterprise has the right to terminate the Merger Agreement if the Market Value
of HBOC Common Stock is less than $50.00 per share, it is not obligated to do
so.
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, Enterprise 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 Broadview
Associates LLC that, in its opinion, the consideration to be received by the
Enterprise stockholders is fair, from a financial point of view, to such
stockholders as of the date of such opinion. A copy of such opinion is attached
to the Proxy
<PAGE>
Statement/Prospectus as Appendix B. Additionally, the Board of Directors has
unanimously approved the amendment to the Enterprise Stock Plan to increase the
number of shares issuable thereunder, has determined that such amendment is in
the best interests of Enterprise and its stockholders and unanimously recommends
that stockholders vote FOR approval thereof.
It is important that you vote your shares whether or not you plan to attend
the Meeting. To be sure your vote is counted, we urge you to carefully review
the Proxy Statement/Prospectus and to vote your choices. PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE AS SOON AS POSSIBLE.
Alternatively, you may submit your proxy by facsimile to (212) 809-8839. Any
adjustment to the Exchange Ratio of HBOC Common Stock for Enterprise Common
Stock, pursuant to the Merger Agreement, will be finally determined on June 23,
1997. If you have any questions concerning the Meeting or any of the proposals,
or if you wish to obtain current stock price information or the applicable
Exchange Ratio, please contact D.F. King & Co., Inc., our proxy solicitors, at
(800) 431-9633. You may revoke and change your proxy vote at any time prior to
the Meeting (including by facsimile), and such signed, dated and submitted proxy
will supersede any earlier proxy submitted by you. If you attend the Meeting and
wish to vote in person, the ballot that you submit at the Meeting will supersede
your proxy.
Thank you for your cooperation.
Sincerely,
/s/ GLEN E. TULLMAN
GLEN E. TULLMAN
CHIEF EXECUTIVE OFFICER
<PAGE>
ENTERPRISE SYSTEMS, INC.
1400 SOUTH WOLF ROAD
WHEELING, ILLINOIS 60090-6524
------------------------
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
------------------------
To the Stockholders of Enterprise Systems, Inc.:
A Special Meeting of Stockholders (the "Meeting") of Enterprise Systems,
Inc., a Delaware corporation ("Enterprise"), will be held at the corporate
offices of Enterprise, 1400 South Wolf Road, Wheeling, Illinois 60090-6524, on
Thursday, June 26, 1997, at 10:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement of Merger
dated March 13, 1997 (the "Merger Agreement") among Enterprise, 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) Enterprise will
merge with and into HBOC-GA (the "Merger") and (b) each outstanding share
of common stock, $.01 par value per share, of Enterprise ("Enterprise
Common Stock") and each right to acquire a share of Enterprise Common
Stock will be converted into the right to receive (i) .50 of a share of
common stock, $.05 par value per share, of HBOC (the "HBOC Common Stock")
if the average closing price per share as reported by The Nasdaq Stock
Market National Market ("Nasdaq NM") of the HBOC Common Stock during the
twenty (20) consecutive trading days ending on the third day prior to the
date of the Meeting (the "Market Value") is less than $60.00, (ii) a
fractional share of HBOC Common Stock which, when multiplied by the
Market Value, will equal $30.00 if the Market Value is equal to or
greater than $60.00 but not greater than $68.00, (iii) .4412 of a share
of HBOC Common Stock if the Market Value is greater than $68.00 but not
greater than $72.00, and (iv) a fractional share of HBOC Common Stock
which, when multiplied by the Market Value, will equal $31.77 if the
Market Value is greater than $72.00 (whichever basis is applicable being
referred to as the "Exchange Ratio"), and less the amount of any
fractional share, which will be paid in cash; and
2. To consider and vote upon a proposal to amend the Enterprise Systems,
Inc. Long-Term Incentive Plan (the "Enterprise Stock Plan") to increase
the number of shares issuable thereunder from 1,114,846 shares to
1,414,846 shares.
As a result of the Merger, holders of Enterprise Common Stock or rights to
acquire shares of Enterprise Common Stock will receive an aggregate of up to
4,716,442 shares of HBOC Common Stock, assuming an Exchange Ratio of .50 (less
the aggregate amount of any fractional shares, which will be paid in cash). In
the event that the Market Value of the HBOC Common Stock exceeds $72.00, the
Merger Agreement provides for the issuance of a fractional share of HBOC Common
Stock which, when multiplied by the Market Value, will equal $31.77 in respect
of each share or right to acquire a share of Enterprise Common Stock and,
accordingly, there is no assurance that any minimum number of shares of HBOC
Common Stock will be issued in the Merger or that any minimum fractional share
of HBOC Common Stock will be issuable in respect of a share of Enterprise Common
Stock or that the value thereof will equal or exceed the then current market
value of the Enterprise Common Stock. Although the Board of Directors of
Enterprise has the right to terminate the Merger Agreement if the Market Value
of HBOC Common Stock is less than $50.00 per share, it is not obligated to do
so.
The Board of Directors of Enterprise (the "Enterprise Board") has
unanimously approved the Merger proposal and has determined that the Merger is
fair to, and in the best interests of, Enterprise and its stockholders.
Accordingly, the Enterprise Board unanimously recommends that you vote FOR
approval of the Merger Agreement. Additionally, the Enterprise Board has
unanimously approved the amendment to the Enterprise Stock Plan to increase the
number of shares issuable thereunder, has determined that such amendment is in
the best interests of Enterprise and its stockholders and unanimously recommends
that stockholders vote FOR approval thereof. Any adjustment to the Exchange
Ratio of HBOC Common Stock for Enterprise Common Stock, pursuant to the Merger
Agreement, will be finally determined on June 23, 1997, three trading days prior
to the Meeting date. Holders of record of Enterprise Common Stock with questions
concerning the Meeting or any of the proposals, or who wish to obtain current
stock price information or the applicable Exchange Ratio, may contact D.F. King
& Co., Inc., Enterprise's proxy solicitors, at (800) 431-9633.
<PAGE>
The Enterprise Board has fixed the close of business on May 22, 1997 as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Meeting. Only holders of record of Enterprise Common Stock 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 proposed Merger, the proposal to amend the Enterprise Stock
Plan and other important information concerning Enterprise 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.
EACH HOLDER OF RECORD MAY REVOKE AND CHANGE HIS PROXY VOTE AT ANY TIME PRIOR TO
THE MEETING (INCLUDING BY FACSIMILE), AND SUCH SIGNED, DATED AND SUBMITTED PROXY
WILL SUPERSEDE ANY EARLIER PROXY SUBMITTED. IF A HOLDER OF RECORD OF ENTERPRISE
COMMON STOCK ATTENDS THE MEETING AND WISHES TO VOTE IN PERSON, ANY BALLOT
SUBMITTED BY SUCH HOLDER AT THE MEETING WILL SUPERSEDE ANY EARLIER SUBMITTED
PROXY.
For the Board of Directors,
/s/ JOSEPH E. CAREY
JOSEPH E. CAREY
PRESIDENT AND SECRETARY
Wheeling, Illinois
May 29, 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 29, 1997
PROXY STATEMENT
OF
ENTERPRISE SYSTEMS, INC.
FOR SPECIAL MEETING OF STOCKHOLDERS
---------------------
PROSPECTUS
OF
HBO & COMPANY
---------------
This Proxy Statement/Prospectus is being furnished to holders of common
stock, $.01 par value per share ("Enterprise Common Stock"), of Enterprise
Systems, Inc., a Delaware corporation ("Enterprise"), as a proxy statement in
connection with the solicitation of proxies by the Board of Directors of
Enterprise (the "Enterprise Board") for use at the Special Meeting of
Stockholders (the "Meeting") of Enterprise to be held on June 26, 1997, at the
corporate offices of Enterprise, 1400 South Wolf Road, Wheeling, Illinois
60090-6524, commencing at 10:00 a.m., local time, and at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Special Meeting of Stockholders of Enterprise.
This Proxy Statement/Prospectus also constitutes the prospectus of HBO &
Company, a Delaware corporation ("HBOC"), with respect to up to 4,716,442 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 Enterprise 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 Enterprise Common Stock. In the Merger, subject
to the terms of the Agreement of Merger dated March 13, 1997 among Enterprise,
HBOC and HBOC-GA (the "Merger Agreement"), each outstanding share of Enterprise
Common Stock and each right to acquire a share of Enterprise Common Stock will
be converted into the right to receive (i) .50 of a share of HBOC Common Stock
if the average closing price per share as reported by The Nasdaq Stock Market
National Market ("Nasdaq NM") of the HBOC Common Stock during the twenty (20)
consecutive trading days ending on the third trading day prior to the date of
the Meeting (the "Market Value") is less than $60.00, (ii) a fractional share of
HBOC Common Stock which, when multiplied by the Market Value, will equal $30.00
if the Market Value is equal to or greater than $60.00 but not greater than
$68.00, (iii) .4412 of a share of HBOC Common Stock if the Market Value is
greater than $68.00 but not greater than $72.00, and (iv) a fractional share of
HBOC Common Stock which, when multiplied by the Market Value, will equal $31.77
if the Market Value is greater than $72.00 (whichever basis is applicable being
referred to as the "Exchange Ratio"), and less the amount of any fractional
shares, which will be paid in cash. The Enterprise Board may terminate the
Merger Agreement if the Market Value is less than $50.00 per share.
Outstanding and unexercised options to purchase shares of Enterprise Common
Stock will be assumed by HBOC upon consummation of the Merger, provided however,
that outstanding options to purchase 296,339 shares (the "1996-1997 Options")
will be assumed only in the event that the proposal to approve the amendment of
the Enterprise Systems, Inc. Long-Term Incentive Plan (the "Enterprise Stock
Plan") is approved. As a result of the assumption of options to purchase
Enterprise Common Stock, holders will have the right to purchase that number of
shares of HBOC Common Stock into which the shares of Enterprise Common Stock
subject to such options would have been converted in the Merger.
As a result of the Merger, holders of shares of Enterprise Common Stock or
rights to acquire shares of Enterprise Common Stock will receive an aggregate of
up to 4,716,442 shares of HBOC Common Stock, assuming an Exchange Ratio of .50
(less the aggregate amount of any fractional shares, which will be paid in
cash). Shares of HBOC Common Stock and Enterprise Common Stock are currently
approved for quotation on the Nasdaq NM under the symbols "HBOC" and "ESIX,"
respectively. On May 28, 1997, the reported closing sale prices of a share of
HBOC Common Stock and Enterprise Common Stock on the Nasdaq NM were $65.125 and
$29.00, respectively.
This Proxy Statement/Prospectus and the related Notice of Special Meeting
and proxy card are first being mailed on or about May 29, 1997, to stockholders
of record at the close of business on May 22, 1997 (the "Record Date"). There
were 8,271,255 shares of Enterprise Common Stock outstanding at the close of
business on the Record Date. Only holders of Enterprise 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. Each such holder of record may vote
such holder's shares of Enterprise Common Stock prior to the Meeting by signing,
dating and returning the proxy card provided by Enterprise as soon as possible
either by mail, in the envelope provided, or by facsimile to (212) 809-8839. Any
adjustment to the Exchange Ratio of HBOC Common Stock for Enterprise Common
Stock, pursuant to the Merger Agreement, will be finally determined on June 23,
1997, three trading days prior to the Meeting date. Holders of record of
Enterprise Common Stock with questions concerning the Meeting or any of the
proposals, or who wish to obtain current stock price information or the
applicable Exchange Ratio, may contact D.F. King & Co., Inc., Enterprise's proxy
solicitors, at (800) 431-9633. Each holder of record may revoke and change his
proxy vote at any time prior to the Meeting (including by facsimile), and such
signed, dated and submitted proxy will supersede any earlier proxy submitted. If
a holder of record of Enterprise Common Stock attends the Meeting and wishes to
vote in person, any ballot submitted by such holder at the Meeting will
supersede any earlier submitted proxy.
The above matters are discussed in detail in this Proxy
Statement/Prospectus. Stockholders of Enterprise are strongly urged to read and
consider this Proxy Statement/Prospectus in its entirety.
SEE "RISK FACTORS," ON PAGE 21 OF THIS PROXY STATEMENT/PROSPECTUS, FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY ENTERPRISE
STOCKHOLDERS IN DETERMINING HOW TO VOTE ON THE MERGER AGREEMENT.
---------------------
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 29, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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
Amendment of Enterprise Systems, Inc. Long-Term Incentive Plan........................................... 11
Summary Financial Data................................................................................... 12
Pro Forma Financial Information.......................................................................... 13
Comparative Per Share Data............................................................................... 18
RISK FACTORS............................................................................................... 21
Exchange Ratio........................................................................................... 21
Interests of Certain Enterprise Officers and Directors in the Merger..................................... 21
CERTAIN MARKET INFORMATION................................................................................. 21
HBOC..................................................................................................... 21
Enterprise............................................................................................... 22
THE MEETING................................................................................................ 23
THE MERGER PROPOSAL........................................................................................ 23
Background of the Merger................................................................................. 23
Reasons of Enterprise for Engaging in the Merger; Recommendation of the Enterprise Board................. 26
Opinion of Financial Advisor of Enterprise............................................................... 28
Public Company Comparables Analysis.................................................................... 29
Transaction Comparables Analysis....................................................................... 29
Transaction Premiums Paid Analysis..................................................................... 30
Stock Performance Analysis............................................................................. 31
Pro Forma Pooling Model Analysis....................................................................... 31
Exchange Ratio Analysis................................................................................ 31
Consideration of the Discounted Cash Flow Valuation Methodology........................................ 31
Reasons of HBOC for Engaging in the Merger............................................................... 32
Terms of the Merger...................................................................................... 32
Effective Time......................................................................................... 32
General Effects of the Merger.......................................................................... 32
Conversion of Shares................................................................................... 32
Fractional Shares...................................................................................... 32
Stock Plans............................................................................................ 33
Exchange of Certificates............................................................................... 33
Payment of Dividends................................................................................... 33
Limitations on Transferability of HBOC Common Stock.................................................... 33
Conditions; Waiver..................................................................................... 34
Hart-Scott-Rodino...................................................................................... 35
No Solicitation........................................................................................ 35
Termination............................................................................................ 35
Accounting Treatment..................................................................................... 36
Certain Federal Income Tax Consequences.................................................................. 36
No Appraisal Rights...................................................................................... 37
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
APPROVAL OF AMENDMENT OF ENTERPRISE SYSTEMS, INC. LONG-TERM INCENTIVE PLAN................................. 37
Discussion of Proposal................................................................................... 37
Description of the Plan.................................................................................. 38
General................................................................................................ 38
Terms and Conditions of Awards Under the Enterprise Stock Plan......................................... 38
Federal Income Tax Effects............................................................................. 40
New Plan Benefits........................................................................................ 41
Vote Required; Recommendation of the Enterprise Board.................................................... 41
INTERESTS OF CERTAIN PERSONS IN EACH OF HBOC AND ENTERPRISE................................................ 41
Security Ownership of Certain Beneficial Owners and Management of HBOC................................... 41
Security Ownership of Certain Beneficial Owners and Management of Enterprise............................. 43
Interests of Certain Enterprise Persons in Matters to be Acted Upon...................................... 44
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF HBOC COMMON STOCK AND ENTERPRISE COMMON STOCK......... 46
Introduction............................................................................................. 46
Authorized Capital Stock................................................................................. 46
Board or Stockholder Approved Preferred Stock............................................................ 46
Voting Rights............................................................................................ 46
Number of Directors...................................................................................... 47
Election of Board of Directors........................................................................... 47
Vote on Merger, Consolidation or Sale of Substantially All Assets........................................ 47
Special Meetings of Stockholders......................................................................... 47
Stockholder Action by Written Consent.................................................................... 48
Amendment of Certificate of Incorporation................................................................ 48
Amendment of Bylaws...................................................................................... 48
Liability and Indemnification of Officers and Directors.................................................. 48
Payment of Dividends..................................................................................... 49
Anti-Takeover Protection................................................................................. 49
Appraisal Rights......................................................................................... 49
BUSINESS OF HBOC........................................................................................... 50
General.................................................................................................. 50
Recent Developments...................................................................................... 50
BUSINESS OF ENTERPRISE..................................................................................... 50
STOCKHOLDER PROPOSALS...................................................................................... 51
OTHER MATTERS.............................................................................................. 51
CERTAIN LEGAL MATTERS...................................................................................... 51
EXPERTS.................................................................................................... 51
APPENDIX A--Agreement of Merger dated March 13, 1997..................................................... A-1
APPENDIX B--Opinion of Broadview Associates LLC.......................................................... B-1
</TABLE>
3
<PAGE>
AVAILABLE INFORMATION AND SOURCES OF INFORMATION
Each of HBOC and Enterprise 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 Enterprise 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 Enterprise 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
Enterprise has been supplied by Enterprise, information regarding the Merger
proposal has been supplied by Enterprise and/or HBOC and all other information
has been supplied by HBOC. References to Enterprise and HBOC in this Proxy
Statement/Prospectus mean the respective corporations and their respective
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,
ENTERPRISE 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
ENTERPRISE 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. Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, dated
and filed with the Commission on May 15, 1997, as amended by Form 10-Q/A dated
and filed with the Commission on May 15, 1997;
3. Current Reports on Form 8-K: (i) dated and filed with the Commission on
February 11, 1997; and (ii) dated and filed with the Commission on March 19,
1997;
4. 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
5. 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 documents filed by Enterprise with the
Commission (File No. 0-26794) 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 31, 1997; and
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, dated
and filed with the Commission on May 15, 1997.
All documents filed by HBOC and Enterprise 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 Enterprise 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 ENTERPRISE DOCUMENTS, TO ENTERPRISE SYSTEMS, INC., 1400 SOUTH WOLF ROAD,
WHEELING, ILLINOIS 60090-6524, ATTENTION: KATHLEEN SHARO, TELEPHONE: (847)
537-4800, EXTENSION 7367. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS
PRIOR TO THE MEETING, ANY SUCH REQUESTS SHOULD BE MADE BY JUNE 19, 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. THIS PROXY STATEMENT/PROSPECTUS CONTAINS
CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES. THE WORDS "ANTICIPATE," "BELIEVE," "INTEND," "ESTIMATE" AND
"EXPECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY CERTAIN OF SUCH
FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD
DIFFER MATERIALLY FROM THE RESULTS EXPRESSED IN, OR IMPLIED BY, THESE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE THOSE DISCUSSED IN "RISK FACTORS" AND "THE MERGER
PROPOSAL--REASONS OF ENTERPRISE FOR ENGAGING IN THE MERGER; RECOMMENDATION OF
THE ENTERPRISE BOARD."
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 has entered into an Agreement of Merger dated
February 10, 1997 among HBOC, HBOC-GA and AMISYS Managed Care Systems, Inc.
("AMISYS"). If such agreement is approved by the stockholders of AMISYS at a
special meeting scheduled to occur on June 13, 1997 and all other closing
conditions set forth under such agreement are satisfied, up to 3,089,217 shares
of HBOC Common Stock will be issued to such stockholders in connection with the
merger of AMISYS with and into HBOC-GA. AMISYS develops, markets and supports
managed healthcare information systems for payers and providers who offer
managed care products and services.
ENTERPRISE SYSTEMS, INC.
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. These
resource management systems, which are sold primarily to acute care hospitals,
focus on materials and financial management, operating room logistics, patient
and staff scheduling and decision support systems. These systems enable
healthcare providers to improve productivity through the redesign and automation
of operational processes and to obtain the information necessary to measure and
control costs. Enterprise's healthcare information systems operate on personal
computer networks and
6
<PAGE>
make extensive use of electronic data interchange, enabling Enterprise's
customers to redesign their resource management functions to enhance efficiency
and productivity.
The address and telephone number of the principal executive offices of
Enterprise are 1400 South Wolf Road, Wheeling, Illinois 60090-6524, (847)
537-4800.
THE MEETING
The Meeting will be held on June 26, 1997 at 10:00 a.m., local time, at the
corporate offices of Enterprise, 1400 South Wolf Road, Wheeling, Illinois
60090-6524. The purposes of the Meeting are to consider and take action upon a
proposal to approve the Merger Agreement and a proposal to amend the Enterprise
Stock Plan to increase the number of shares of Enterprise Common Stock issuable
thereunder. The Enterprise Board has fixed the close of business on May 22,
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 Enterprise 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 Enterprise Common Stock, and
the amendment of the Enterprise Stock Plan must be approved by a majority of the
shares of Enterprise Common Stock present in person or represented by proxy at
the Meeting and entitled to vote. See "The Meeting."
THE MERGER PROPOSAL
RECOMMENDATION OF THE ENTERPRISE BOARD; OPINION OF FINANCIAL ADVISOR
The Enterprise Board has unanimously approved the Merger Agreement and has
determined that the Merger is fair to, and in the best interests of, Enterprise
and its stockholders. Accordingly, the Enterprise Board unanimously recommends
that Enterprise's stockholders vote FOR approval of the Merger Agreement. In
approving the Merger Agreement, the Enterprise Board considered, among other
things, the opinion of Broadview Associates LLC ("Broadview") regarding the
fairness, from a financial point of view, of the consideration to be received in
the Merger by the stockholders of Enterprise. A copy of the opinion is attached
hereto as Appendix B. See "The Merger Proposal--Reasons of Enterprise for
Engaging in the Merger; Recommendation of the Enterprise Board" and "--Opinion
of Financial Advisor of Enterprise."
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 Enterprise 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 Enterprise Common Stock issued and
outstanding immediately prior to the Effective Time, will, at the Effective
Time, be converted into the right to receive (i) .50 of a share of HBOC Common
Stock if the Market Value is less than $60.00, (ii) a fractional share of HBOC
Common Stock which, when multiplied by the Market Value, will equal $30.00 if
the Market Value is equal to or greater than $60.00 but not greater than $68.00,
(iii) .4412 of a share of HBOC Common Stock if the Market Value is greater than
$68.00 but not greater than $72.00, and (iv) a fractional share of HBOC Common
Stock which, when multiplied by the Market Value, will equal $31.77 if the
Market Value is greater than $72.00 (whichever basis is applicable being
referred to as the "Exchange Ratio"), and less the
7
<PAGE>
amount of any fractional share, which will be paid in cash. The shares of HBOC
Common Stock and any cash in lieu of fractions thereof receivable by holders of
Enterprise Common Stock are hereinafter referred to as the "Merger
Consideration."
The following table indicates the fractional share of HBOC Common Stock
issuable in respect of a share of Enterprise Common Stock at each assumed Market
Value and Exchange Ratio indicated:
<TABLE>
<CAPTION>
ASSUMED MARKET
VALUE PER SHARE IMPLIED VALUE PER
OF ASSUMED EXCHANGE SHARE OF ENTERPRISE
HBOC COMMON STOCK RATIO COMMON STOCK
- ----------------- ----------------- -------------------
<S> <C> <C>
$ 43.63(1) .50000 $ 21.82
$ 60.00 .50000 $ 30.00
$ 64.00 .46875 $ 30.00
$ 70.00 .44120 $ 30.88
$ 71.88(2) .44120 $ 31.71
$ 75.00 .42360 $ 31.77
</TABLE>
- ------------------------
(1) Lowest closing sales price per share of HBOC Common Stock in the last year
as furnished by Nasdaq.
(2) Highest closing sales price per share of HBOC Common Stock in the last year
as furnished by Nasdaq.
RIGHT TO TERMINATE IF MARKET VALUE OF HBOC COMMON STOCK IS LESS THAN
$50.00. If the Market Value of HBOC Common Stock is less than $50.00 per share,
the Enterprise Board may terminate the Merger Agreement at any time prior to the
Effective Time. In the event that this termination right is triggered, the
Enterprise Board does not intend to resolicit Enterprise stockholders to ratify
its decision to proceed with or terminate the Merger Agreement. In considering
whether or not to proceed with or terminate the Merger Agreement, the Enterprise
Board will exercise its fiduciary duties in good faith to determine if the
Merger is fair to, and in the best interests of, Enterprise and its stockholders
under the circumstances existing at that time. Such a determination will be
based upon the facts and circumstances present if and when the termination right
is triggered, which factors cannot be accurately predicted at this time.
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 Enterprise Common Stock shall be entitled to receive a
cash payment therefor, without interest, at a pro rata amount based on the
Market Value.
STOCK PLANS. Options to purchase shares of Enterprise Common Stock
outstanding at the Effective Time of the Merger will be assumed by HBOC,
provided, however, that the 1996-1997 Options will be assumed only in the event
that the proposal to amend the Enterprise Stock Plan is approved. See "Approval
of Amendment of Enterprise Systems, Inc. Long-Term Incentive Plan." As a result
of the assumption of options to purchase Enterprise Common Stock, the optionee
will have the right to purchase that number of shares (rounded down to the
nearest whole share) of HBOC Common Stock into which the number of shares of
Enterprise Common Stock the optionee was entitled to purchase under the existing
option would have been converted pursuant to the terms of the Merger. 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 Enterprise Common
Stock (the "Certificates") a letter of transmittal and instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration payable in respect of the shares of Enterprise Common Stock
represented thereby. Until surrendered, each Certificate shall represent for all
8
<PAGE>
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 Enterprise 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
Enterprise 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. In addition, Enterprise affiliates are
subject to certain restrictions on transfer of both Enterprise 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 Enterprise, 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 Enterprise 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 Enterprise filed the required information with the Antitrust
Division and the FTC on April 2, 1997, and the waiting period has expired. See
"The Merger Proposal--Terms of the Merger--Hart-Scott-Rodino."
NO SOLICITATION. Enterprise has agreed, subject to certain exceptions, that
prior to the Effective Time of the Merger or earlier termination of the Merger
Agreement, Enterprise shall not, and shall not permit its subsidiary to,
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 Enterprise or its subsidiary. 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 Enterprise Board, notwithstanding the prior
approval of the Enterprise stockholders; (ii) the HBOC Board, in the event of
material condemnation, destruction, loss or damage to the business or assets of
Enterprise or its subsidiary; (iii) the Board of Directors of HBOC-GA (the
"HBOC-GA Board") or the Enterprise Board, after July 31, 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 Enterprise Board, if, in the good faith exercise of its
fiduciary duties to the stockholders of Enterprise in the context of a proposal
to acquire Enterprise by another party, the Enterprise Board decides that such
termination is required; and (v) the Enterprise Board, if the Market Value of
HBOC Common Stock is less than $50.00 per share.
If the Merger is terminated by Enterprise in accordance with (iv) above,
Enterprise 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 in an aggregate amount not to exceed $750,000 and to pay to
HBOC-GA a fee in the amount of $8,800,000. The Merger Agreement also provides
for such reimbursement and fee to be paid to HBOC-GA if the Merger Agreement is
terminated by any of the
9
<PAGE>
parties because it was not approved by the requisite number of shares of
Enterprise Common Stock but only if certain designated stockholders failed to
deliver agreements to vote in favor of the Merger Agreement (the "Voting
Agreements") to HBOC-GA within 20 days of the date of the Merger Agreement.
Because Thomas R. Pirelli, Morgan Stanley Venture Capital Fund II, L.P., Morgan
Stanley Venture Capital Fund II, C.V. and Morgan Stanley Venture Capital Fund
Investors, L.P. (the "Designated Stockholders"), who hold an aggregate of
2,091,580 shares of Enterprise Common Stock, representing approximately 25.3% of
the outstanding Enterprise Common Stock as of the Record Date, delivered the
Voting Agreements, dated as of April 1, 1997, such fee shall not be payable by
Enterprise to HBOC-GA in the event the Merger Agreement is not approved by the
requisite number of shares of Enterprise Common Stock. See "The Merger
Proposal--Terms of the Merger--Termination."
ACCOUNTING TREATMENT
It is a condition to the consummation of the Merger that HBOC shall have
received letters, dated as of the date hereof and as of the Closing Date, from
KPMG Peat Marwick LLP and Arthur Andersen LLP to the effect that each of
Enterprise and HBOC, respectively, satisfies the tests applicable to it such
that the Merger can be accounted for as a pooling of interests under Accounting
Principles Board Opinion No. 16, if the Merger 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 Enterprise 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 Enterprise stockholder upon the exchange
of the shares of Enterprise 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 Enterprise Common Stock is a Nasdaq NM security, the holders of
shares of Enterprise 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."
INTERESTS OF CERTAIN PERSONS
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS. As of the Record
Date, directors and executive officers of Enterprise and their affiliates were
beneficial owners of 441,344 outstanding shares of Enterprise Common Stock
representing approximately 5.3% of the total issued and outstanding Enterprise
Common Stock. Holders of all of such shares have advised Enterprise that they
presently intend to vote or direct the vote of all shares of Enterprise Common
Stock over which they have voting control in favor of the Merger Agreement. In
addition, an aggregate of 2,091,580 of such shares of Enterprise Common Stock,
representing approximately 25.3% of the total issued and outstanding shares of
Enterprise Common Stock as of the Record Date, are subject to the Voting
Agreements, which provide that such shares will be voted in favor of approval of
the Merger Agreement. Directors and executive officers of HBOC and their
affiliates beneficially owned approximately 3.0% of the outstanding shares
(giving effect to the exercise of their presently exercisable stock options) of
HBOC Common Stock at April 30, 1997. See "Interests of Certain Persons in Each
of HBOC and Enterprise."
INTERESTS OF CERTAIN ENTERPRISE PERSONS IN MATTERS TO BE ACTED
UPON. Certain officers and the directors of Enterprise have interests in the
Merger that differ from those of Enterprise stockholders generally. Such
interests include severance payments, vesting of unvested and unexercisable
stock options, payment of a
10
<PAGE>
fee related to the Merger and continuing indemnification against certain
liabilities. As a result, such 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 Enterprise--Interests of Certain Enterprise
Persons in Matters to be Acted Upon."
COMPARISON OF STOCKHOLDER RIGHTS
HBOC and Enterprise are each incorporated under Delaware law. For a summary
of material differences between the rights of holders of shares of each of
Enterprise Common Stock and HBOC Common Stock, see "Comparison of Rights of
Holders of Shares of Each of HBOC Common Stock and Enterprise Common Stock."
CERTAIN MARKET INFORMATION
HBOC Common Stock and Enterprise Common Stock are traded on the Nasdaq NM
under the symbols "HBOC" and "ESIX," respectively. The closing sale prices per
share of HBOC Common Stock and Enterprise Common Stock on March 13, 1997, the
last trading day preceding the announcement of the proposed Merger, were $55.00
and $27.63, respectively. Because the market price of HBOC Common Stock is
subject to fluctuation, Enterprise stockholders are urged to obtain current
market quotations for HBOC Common Stock. See "Certain Market Information."
RISK FACTORS
The stockholders of Enterprise should carefully review the matters set forth
under "Risk Factors."
AMENDMENT OF ENTERPRISE SYSTEMS, INC. LONG-TERM INCENTIVE PLAN
The Enterprise Board has unanimously approved an amendment to the Enterprise
Stock Plan to increase the number of shares issuable thereunder, has determined
that such amendment is in the best interests of Enterprise and its stockholders
and unanimously recommends that stockholders vote FOR approval thereof. See
"Approval of Amendment of Enterprise Systems, Inc. Long-Term Incentive Plan."
As of the Record Date, directors and executive officers of Enterprise and
their affiliates were beneficial owners of 441,344 outstanding shares of
Enterprise Common Stock, or approximately 5.3% of the total issued and
outstanding Enterprise Common Stock. Holders of all of such shares have advised
Enterprise that they presently intend to vote or direct the vote of all shares
of Enterprise Common Stock over which they have voting control in favor of the
amendment to the Enterprise Stock Plan.
11
<PAGE>
SUMMARY FINANCIAL DATA
The following summary historical financial data for each of HBOC and
Enterprise should be read in conjunction with the financial statements and notes
thereto of HBOC and Enterprise, incorporated by reference in this Proxy
Statement/Prospectus.
HBO & COMPANY(1)
(FROM CONTINUING OPERATIONS)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
AT AND FOR THE THREE
MONTHS ENDED
AT AND FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995(2) 1996(3) 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................................ $ 324,349 $ 364,697 $ 453,979 $ 607,242 $ 796,578 $ 172,515 $ 219,897
Operating Income (Loss)................ $ 29,858 $ 29,995 $ 57,103 $ (32,457) $ 118,250 $ 35,028 $ 57,847
Income (Loss) Before Income Taxes...... $ 30,098 $ 34,298 $ 58,257 $ (31,917) $ 122,352 $ 35,946 $ 59,560
Net Income (Loss)...................... $ 20,232 $ 17,682 $ 36,469 $ (17,569) $ 73,954 $ 21,867 $ 35,736
Primary Earnings (Loss) Per Share...... $ .26 $ .22 $ .45 $ (.21) $ .79 $ .24 $ .38
Fully Diluted Earnings (Loss) Per
Share................................ $ .26 $ .22 $ .44 $ (.21) $ .79 $ .24 $ .38
Weighted Average Shares Outstanding
(Fully Diluted)...................... 78,477 80,940 82,064 84,224 93,162 92,678 94,060
Cash Dividends Per Share............... $ .075 $ .075 $ .08 $ .08 $ .08 $ .02 $ .02
BALANCE SHEET DATA:
Working Capital........................ $ 43,842 $ 83,193 $ 39,905 $ 83,626 $ 203,405 $ 104,940 $ 267,005
Total Assets........................... $ 218,869 $ 266,394 $ 380,410 $ 649,417 $ 848,947 $ 659,775 $ 872,938
Long-Term Debt......................... $ 7,200 $ 6,133 $ 4,715 $ 3,642 $ 192 $ 3,160 $ 174
Stockholders' Equity................... $ 125,882 $ 164,836 $ 203,515 $ 408,190 $ 525,343 $ 435,008 $ 585,573
</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 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 nonrecurring charges.
ENTERPRISE SYSTEMS, INC.
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
AT AND FOR THE THREE
MONTHS ENDED
AT AND FOR THE YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------- --------------------
1992 1993 1994 1995 1996(1) 1996 1997
--------- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue....................................... $ 17,024 $ 20,427 $ 24,712 $ 33,248 $ 52,316 $ 9,597 $ 13,901
Net Income (Loss)............................. $ 759 $ 749 $ 28 $ 800 $ (939) $ 356 $ 502
Net Income (Loss) Per Share................... $ .16 $ .15 $ .01 $ .13 $ (.12) $ .04 $ .06
Weighted Average Shares Outstanding........... 4,711 4,886 5,383 6,279 7,619 8,030 8,621
Cash Dividends Per Share...................... $ -- $ -- $ -- $ -- $ -- $ -- $ --
BALANCE SHEET DATA:
Working Capital............................... $ 3,303 $ 3,046 $ 4,924 $ 30,368 $ 39,485 $ 30,665 $ 39,697
Total Assets.................................. $ 9,963 $ 12,842 $ 15,752 $ 48,926 $ 66,231 $ 48,327 $ 67,342
Long-Term Debt, Less Current Portion.......... $ 1,057 $ 291 $ -- $ -- $ -- $ -- $ --
Stockholders' Equity.......................... $ 2,769 $ 5,028 $ 8,737 $ 40,406 $ 54,826 $ 41,406 $ 55,663
</TABLE>
- ------------------------------
(1) 1996 Income Statement related items include nonrecurring charges of $8,453
related to a 1996 acquisition and exclude the dilutive effect of stock
options. Net income was $4,261 and net income per share was $.52 excluding
nonrecurring charges and including the dilutive effect of stock options.
12
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following pro forma combined condensed financial statements give effect
to the acquisition of Enterprise by HBOC in the Merger accounted for as a
pooling of interests. 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 financial position of HBOC. The
pro forma combined condensed financial statements should be read in conjunction
with the historical consolidated financial statements of HBOC and Enterprise
incorporated elsewhere herein.
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AT MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HBOC/
ENTERPRISE
PRO FORMA PRO FORMA
HBOC ENTERPRISE ADJUSTMENTS COMBINED
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents................................... $ 200,820 $ 15,640 $ $ 216,460
Short-Term Investments...................................... 18,900 -- 18,900
Receivables, Net............................................ 277,482 24,844 302,326
Current Deferred Income Taxes............................... 26,639 4,598 31,237
Inventories................................................. 9,524 -- 9,524
Prepaids and Other Current Assets........................... 12,751 4,309 17,060
---------- ----------- ----------- -----------
Total Current Assets.................................. 546,116 49,391 -- 595,507
---------- ----------- ----------- -----------
Investment Securities........................................... -- 4,166 4,166
Capitalized Software, Net....................................... 61,082 4,531 65,613
Property and Equipment, Net..................................... 48,281 4,549 52,830
Intangibles, Net................................................ 173,801 3,337 177,138
Deferred Income Taxes........................................... 33,794 -- (1,985)(1) 31,809
Other Noncurrent Assets, Net.................................... 9,864 1,368 11,232
---------- ----------- ----------- -----------
Total Assets.................................................... $ 872,938 $ 67,342 $ (1,985) $ 938,295
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities............................................. $ 279,111 $ 9,694 $ $ 288,805
Deferred Income Taxes........................................... -- 1,985 (1,985)(1) --
Long-Term Debt.................................................. 174 -- 174
Other Long-Term Liabilities..................................... 8,080 -- 8,080
Stockholders' Equity............................................ 585,573 55,663 641,236
---------- ----------- ----------- -----------
Total Liabilities and Stockholders' Equity...................... $ 872,938 $ 67,342 $ (1,985) $ 938,295
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</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 THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/
ENTERPRISE
PRO FORMA PRO FORMA
HBOC ENTERPRISE ADJUSTMENTS COMBINED
---------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Revenue..................................................... $ 219,897 $ 13,901 $ $ 233,798
Operating Expense:
Cost of Operations........................................ 95,447 5,049 100,496
Marketing................................................. 30,885 3,735 34,620
Research and Development.................................. 15,473 2,648 18,121
General and Administrative................................ 20,245 1,857 22,102
---------- ----------- ------ -----------
Total Operating Expense................................. 162,050 13,289 -- 175,339
---------- ----------- ------ -----------
Operating Income............................................ 57,847 612 -- 58,459
Other Income, Net........................................... 1,713 246 1,959
---------- ----------- ------ -----------
Income Before Income Taxes.................................. 59,560 858 -- 60,418
Income Taxes................................................ 23,824 356 24,180
---------- ----------- ------ -----------
Net Income.................................................. $ 35,736 $ 502 $ -- $ 36,238
---------- ----------- ------ -----------
---------- ----------- ------ -----------
Earnings Per Share.......................................... $ .38 $ .06 $ .37
---------- ----------- -----------
---------- ----------- -----------
Weighted Average Shares Outstanding......................... 94,060 8,621 (4,311)(2) 98,370
---------- ----------- ------ -----------
---------- ----------- ------ -----------
</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 STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/
ENTERPRISE
PRO FORMA PRO FORMA
HBOC ENTERPRISE ADJUSTMENTS COMBINED
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue..................................................... $ 796,578 $ 52,316 $ $ 848,894
Operating Expense:
Cost of Operations........................................ 351,139 17,974 369,113
Marketing................................................. 115,660 11,650 127,310
Research and Development.................................. 64,096 9,522 73,618
General and Administrative................................ 86,019 6,713 92,732
Nonrecurring Charge....................................... 61,414 8,453 69,867
---------- ----------- ----------- -----------
Total Operating Expense................................. 678,328 54,312 -- 732,640
---------- ----------- ----------- -----------
Operating Income (Loss)..................................... 118,250 (1,996) -- 116,254
Other Income, Net........................................... 4,102 749 4,851
---------- ----------- ----------- -----------
Income (Loss) Before Income Taxes........................... 122,352 (1,247) -- 121,105
Income Taxes................................................ 48,398 (308) 48,090
---------- ----------- ----------- -----------
Net Income (Loss)........................................... $ 73,954 $ (939) $ -- $ 73,015
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Earnings (Loss) Per Share................................... $ .79 $ (.12) $ .75
---------- ----------- -----------
---------- ----------- -----------
Weighted Average Shares Outstanding......................... 93,162 7,619 (3,541)(2) 97,240
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</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, 1995
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/
ENTERPRISE
PRO FORMA PRO FORMA
HBOC ENTERPRISE ADJUSTMENTS COMBINED
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue..................................................... $ 607,242 $ 33,248 $ $ 640,490
Operating Expense:
Cost of Operations........................................ 285,756 11,528 297,284
Marketing................................................. 90,852 8,832 99,684
Research and Development.................................. 53,847 7,536 61,383
General and Administrative................................ 72,763 3,887 76,650
Nonrecurring Charge....................................... 136,481 -- 136,481
---------- ----------- ----------- -----------
Total Operating Expense............................... 639,699 31,783 -- 671,482
---------- ----------- ----------- -----------
Operating Income (Loss)..................................... (32,457) 1,465 -- (30,992)
Other Income, Net........................................... 540 17 557
---------- ----------- ----------- -----------
Income (Loss) Before Income Taxes........................... (31,917) 1,482 -- (30,435)
Income Taxes................................................ (14,348) 682 (13,666)
---------- ----------- ----------- -----------
Net Income (Loss)........................................... $ (17,569) $ 800 $ -- $ (16,769)
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Earnings (Loss) Per Share................................... $ (.21) $ .13 $ (.19)
---------- ----------- -----------
---------- ----------- -----------
Weighted Average Shares Outstanding......................... 84,224 6,279 (3,470 (2) 87,033
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
16
<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/
ENTERPRISE
PRO FORMA PRO FORMA
HBOC ENTERPRISE ADJUSTMENTS COMBINED
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue..................................................... $ 453,979 $ 24,712 $ $ 478,691
Operating Expense:
Cost of Operations........................................ 225,546 9,311 234,857
Marketing................................................. 64,127 5,984 70,111
Research and Development.................................. 42,919 6,377 49,296
General and Administrative................................ 64,284 2,878 67,162
Nonrecurring Charge....................................... -- -- --
---------- ----------- ----------- -----------
Total Operating Expense................................. 396,876 24,550 -- 421,426
---------- ----------- ----------- -----------
Operating Income............................................ 57,103 162 -- 57,265
Other Income (Expense), Net................................. 1,154 (114) 1,040
---------- ----------- ----------- -----------
Income Before Income Taxes.................................. 58,257 48 -- 58,305
Provision for Income Taxes.................................. 21,788 20 21,808
---------- ----------- ----------- -----------
Net Income.................................................. $ 36,469 $ 28 $ -- $ 36,497
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Earnings Per Share.......................................... $ .44 $ .01 $ .43
---------- ----------- -----------
---------- ----------- -----------
Weighted Average Shares Outstanding......................... 82,064 5,383 (2,692)(2) 84,755
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(1) Reclassification of Enterprise noncurrent Deferred Income Taxes to conform
to HBOC presentation.
(2) Enterprise shares were converted using the maximum exchange ratio of .50.
For the 1996 Pro Forma Combined Income Statement, Enterprise weighted
average shares are adjusted to include the dilutive effect of stock options
due to net income for HBOC/Enterprise Pro Forma Combined. For the 1995 Pro
Forma Combined Income Statement, Enterprise weighted average shares are
adjusted to exclude the dilutive effect of stock options due to a loss for
HBOC/Enterprise Pro Forma Combined.
17
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables set forth certain per share data for HBOC and
Enterprise on a historical basis, certain historical equivalent per share data
for Enterprise and certain pro forma per share data for HBOC and Enterprise on a
combined basis, giving effect to the Merger using the pooling of interests
method of accounting. 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 Enterprise, which are incorporated
by reference in this Proxy Statement/Prospectus.
HISTORICAL
HBO & COMPANY(1)
<TABLE>
<CAPTION>
AT AND
FOR THE
THREE
MONTHS
ENDED
AT AND FOR THE YEAR ENDED DECEMBER MARCH
31, 31,
---------------------------------- --------
1994 1995 1996 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $ 2.58 $ 4.59 $ 5.80 $ 4.87
Cash Dividends Declared............................................. $ .08 $ .08 $ .08 $ .02
Fully Diluted Earnings (Loss)....................................... $ .44 $ (.21)(2) $ .79(3) $ .24
<CAPTION>
1997
--------
<S> <C>
Per Share Data:
Book Value.......................................................... $ 6.42
Cash Dividends Declared............................................. $ .02
Fully Diluted Earnings (Loss)....................................... $ .38
</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.
ENTERPRISE SYSTEMS, INC.
<TABLE>
<CAPTION>
AT AND
FOR THE
THREE
MONTHS
ENDED
AT AND FOR THE YEAR ENDED DECEMBER MARCH
31, 31,
---------------------------------- --------
1994 1995 1996 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $ 1.67 $ 5.49 $ 6.74 $ 5.54
Cash Dividends Declared............................................. $ -- $ -- $ -- $ --
Net Income (Loss)................................................... $ .01 $ .13 $ (.12)(1) $ .04
<CAPTION>
1997
--------
<S> <C>
Per Share Data:
Book Value.......................................................... $ 6.74
Cash Dividends Declared............................................. $ --
Net Income (Loss)................................................... $ .06
</TABLE>
- ------------------------
(1) Including the effect of $8.453 million of nonrecurring charges related to a
1996 acquisition and excluding the dilutive effect of stock options.
18
<PAGE>
ENTERPRISE SYSTEMS, INC.
HISTORICAL EQUIVALENT DATA
USING AN ASSUMED MARKET VALUE PER SHARE OF HBOC COMMON STOCK
OF $60.00 OR LESS AND AN ASSUMED EXCHANGE RATIO OF .50
<TABLE>
<CAPTION>
AT AND
FOR THE
THREE
MONTHS
ENDED
AT AND FOR THE YEAR ENDED DECEMBER MARCH
31, 31,
---------------------------------- --------
1994 1995 1996 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $ 3.34 $ 10.98 $ 13.49 $ 11.07
Cash Dividends Declared............................................. $ -- $ -- $ -- $ --
Net Income (Loss)................................................... $ .01 $ .25 $ (.25)(1) $ .09
<CAPTION>
1997
--------
<S> <C>
Per Share Data:
Book Value.......................................................... $ 13.47
Cash Dividends Declared............................................. $ --
Net Income (Loss)................................................... $ .12
</TABLE>
USING AN ASSUMED MARKET VALUE PER SHARE OF HBOC COMMON STOCK
OF $64.00 PER SHARE AND AN ASSUMED EXCHANGE RATIO OF .46875
<TABLE>
<CAPTION>
AT AND
FOR THE
THREE
MONTHS
ENDED
AT AND FOR THE YEAR ENDED DECEMBER MARCH
31, 31,
---------------------------------- --------
1994 1995 1996 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $ 3.56 $ 11.72 $ 14.38 $ 11.81
Cash Dividends Declared............................................. $ -- $ -- $ -- $ --
Net Income (Loss)................................................... $ .01 $ .27 $ (.26)(1) $ .09
<CAPTION>
1997
--------
<S> <C>
Per Share Data:
Book Value.......................................................... $ 14.37
Cash Dividends Declared............................................. $ --
Net Income (Loss)................................................... $ .12
</TABLE>
USING AN ASSUMED MARKET VALUE PER SHARE OF HBOC COMMON STOCK
OF $70.00 AND AN ASSUMED EXCHANGE RATIO OF .4412
<TABLE>
<CAPTION>
AT AND
FOR THE
THREE
MONTHS
ENDED
AT AND FOR THE YEAR ENDED DECEMBER MARCH
31, 31,
---------------------------------- --------
1994 1995 1996 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $ 3.79 $ 12.45 $ 15.28 $ 12.55
Cash Dividends Declared............................................. $ -- $ -- $ -- $ --
Net Income (Loss)................................................... $ .01 $ .29 $ (.28)(1) $ .10
<CAPTION>
1997
--------
<S> <C>
Per Share Data:
Book Value.......................................................... $ 15.27
Cash Dividends Declared............................................. $ --
Net Income (Loss)................................................... $ .13
</TABLE>
USING AN ASSUMED MARKET VALUE PER SHARE OF HBOC COMMON STOCK
OF $75.00 AND AN ASSUMED EXCHANGE RATIO OF .4236
<TABLE>
<CAPTION>
AT AND
FOR THE
THREE
MONTHS
ENDED
AT AND FOR THE YEAR ENDED DECEMBER MARCH
31, 31,
---------------------------------- --------
1994 1995 1996 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $ 3.94 $ 12.97 $ 15.92 $ 13.07
Cash Dividends Declared............................................. $ -- $ -- $ -- $ --
Net Income (Loss)................................................... $ .01 $ .30 $ (.29)(1) $ .10
<CAPTION>
1997
--------
<S> <C>
Per Share Data:
Book Value.......................................................... $ 15.90
Cash Dividends Declared............................................. $ --
Net Income (Loss)................................................... $ .14
</TABLE>
- ------------------------
(1) Including the effect of $8.453 million of nonrecurring charges related to a
1996 acquisition and excluding the dilutive effect of stock options.
19
<PAGE>
PRO FORMA COMBINED HBO & COMPANY AND ENTERPRISE SYSTEMS, INC.
USING AN ASSUMED MARKET VALUE PER SHARE OF HBOC COMMON STOCK
OF $60.00 OR LESS AND AN ASSUMED EXCHANGE RATIO OF .50
<TABLE>
<CAPTION>
AT AND
FOR THE
THREE
MONTHS
ENDED
AT AND FOR THE YEAR ENDED DECEMBER MARCH
31, 31,
---------------------------------- --------
1994 1995 1996 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $ 2.61 $ 4.84 $ 6.13 $ 5.12
Cash Dividends Declared............................................. $ .08 $ .08 $ .08 $ .02
Fully Diluted Earnings (Loss)....................................... $ .43 $ (.19)(1) $ .75(2) $ .23
<CAPTION>
1997
--------
<S> <C>
Per Share Data:
Book Value.......................................................... $ 6.72
Cash Dividends Declared............................................. $ .02
Fully Diluted Earnings (Loss)....................................... $ .37
</TABLE>
USING AN ASSUMED MARKET VALUE PER SHARE OF HBOC COMMON STOCK
OF $64.00 PER SHARE AND AN ASSUMED EXCHANGE RATIO OF .46875
<TABLE>
<CAPTION>
AT AND
FOR THE
THREE
MONTHS
ENDED
AT AND FOR THE YEAR ENDED DECEMBER MARCH
31, 31,
---------------------------------- --------
1994 1995 1996 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $ 2.61 $ 4.86 $ 6.15 $ 5.13
Cash Dividends Declared............................................. $ .08 $ .08 $ .08 $ .02
Fully Diluted Earnings (Loss)....................................... $ .43 $ (.19)(1) $ .75(2) $ .23
<CAPTION>
1997
--------
<S> <C>
Per Share Data:
Book Value.......................................................... $ 6.74
Cash Dividends Declared............................................. $ .02
Fully Diluted Earnings (Loss)....................................... $ .37
</TABLE>
USING AN ASSUMED MARKET VALUE PER SHARE OF HBOC COMMON STOCK
OF $70.00 AND AN ASSUMED EXCHANGE RATIO OF .4412
<TABLE>
<CAPTION>
AT AND
FOR THE
THREE
MONTHS
ENDED
AT AND FOR THE YEAR ENDED DECEMBER MARCH
31, 31,
---------------------------------- --------
1994 1995 1996 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $ 2.62 $ 4.87 $ 6.16 $ 5.14
Cash Dividends Declared............................................. $ .08 $ .08 $ .08 $ .02
Fully Diluted Earnings (Loss)....................................... $ .43 $ (.19)(1) $ .75(2) $ .23
<CAPTION>
1997
--------
<S> <C>
Per Share Data:
Book Value.......................................................... $ 6.76
Cash Dividends Declared............................................. $ .02
Fully Diluted Earnings (Loss)....................................... $ .37
</TABLE>
USING AN ASSUMED MARKET VALUE PER SHARE OF HBOC COMMON STOCK
OF $75.00 AND AN ASSUMED EXCHANGE RATIO OF .4236
<TABLE>
<CAPTION>
AT AND
FOR THE
THREE
MONTHS
ENDED
AT AND FOR THE YEAR ENDED DECEMBER MARCH
31, 31,
---------------------------------- --------
1994 1995 1996 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $ 2.62 $ 4.87 $ 6.17 $ 5.15
Cash Dividends Declared............................................. $ .08 $ .08 $ .08 $ .02
Fully Diluted Earnings (Loss)....................................... $ .43 $ (.19)(1) $ .76(2) $ .23
<CAPTION>
1997
--------
<S> <C>
Per Share Data:
Book Value.......................................................... $ 6.77
Cash Dividends Declared............................................. $ .02
Fully Diluted Earnings (Loss)....................................... $ .37
</TABLE>
- ------------------------
(1) Including the effect of the HBOC $136 million nonrecurring charges related
to 1995 acquisitions and excluding the dilutive effect of stock options.
(2) Including the effect of the HBOC $61 million nonrecurring charges related to
1996 acquisitions and including the effect of the Enterprise $8 million
nonrecurring charges related to a 1996 acquisition.
20
<PAGE>
RISK FACTORS
EXCHANGE RATIO
Stockholders should consider that the fractional share of HBOC Common Stock
to be issued in respect of each share of Enterprise Common Stock is dependent on
the Market Value of HBOC Common Stock. In the event the Market Value of HBOC
Common Stock is equal to or less than $60.00 per share, the Exchange Ratio will
be .50 and will not be adjusted if the Market Value per share of the HBOC Common
Stock is below $60.00. Although the Enterprise Board has the right to terminate
the Merger Agreement if the Market Value of HBOC Common Stock is less than
$50.00 per share, it is not obligated to do so. Accordingly, if the Market Value
of HBOC Common Stock is less than $50.00 per share, the Merger proposal is
approved by Enterprise stockholders and the Enterprise Board determines not to
exercise its right to terminate the Merger Agreement, Enterprise stockholders
could receive Merger Consideration that does not exceed the then current market
value of their shares of Enterprise Common Stock. There can be no assurance that
the Market Value of HBOC Common Stock will not be less than $50.00 per share or
that any minimum fractional share of HBOC Common Stock will be issuable in
respect of a share of Enterprise Common Stock or that the value thereof will
equal or exceed the then current market value of the Enterprise Common Stock.
Additionally, if the Market Value of HBOC Common Stock is greater than $72.00
per share, each share of Enterprise Common Stock will be converted into a
fraction of a share of HBOC Common Stock which, when multiplied by the Market
Value will equal $31.77, which will not be adjusted if the Market Value of HBOC
Common Stock exceeds $72.00 per share. Enterprise stockholders are urged to
obtain current market quotations for HBOC Common Stock or to call (800) 431-9633
for price information or the applicable Exchange Ratio prior to deciding how to
vote on the Merger proposal. See "Certain Market Information" below for
historical stock price information concerning HBOC Common Stock and Enterprise
Common Stock, and see "The Merger Proposal--Terms of the Merger."
INTERESTS OF CERTAIN ENTERPRISE OFFICERS AND DIRECTORS IN THE MERGER
Certain officers and the directors of Enterprise have interests in the
Merger that differ from those of Enterprise stockholders generally. Such
interests include severence payments, vesting of unvested and unexercisable
stock options, payment of a fee related to the Merger and continuing
indemnification against certain liabilities. As a result, such 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
Enterprise-- Interests of Certain Enterprise 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
21
<PAGE>
Stock as furnished by Nasdaq 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 28, 1997).................................... $ 65.13 $ 43.63 $ .02
</TABLE>
As of April 30, 1997, there were approximately 3,286 holders of record of
shares of HBOC Common Stock.
ENTERPRISE
Enterprise Common Stock has traded on the Nasdaq NM under the symbol "ESIX"
since its initial public offering on October 20, 1995. The following table sets
forth the quarterly high and low sales prices for Enterprise Common Stock as
furnished by Nasdaq for the periods indicated. Enterprise has never declared a
dividend on the Enterprise Common Stock.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31: HIGH LOW
- --------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
1995
Fourth Quarter (from October 20, 1995
through December 31, 1995)......................................................... $ 37.75 $ 17.75
1996
First Quarter........................................................................ $ 30.50 $ 23.00
Second Quarter....................................................................... $ 39.63 $ 27.25
Third Quarter........................................................................ $ 28.25 $ 18.88
Fourth Quarter....................................................................... $ 25.50 $ 13.50
1997
First Quarter........................................................................ $ 28.25 $ 19.00
Second Quarter (through May 28, 1997)................................................ $ 29.25 $ 21.63
</TABLE>
As of May 22, 1997, there were approximately 105 holders of record of shares
of Enterprise Common Stock.
The following table sets forth the closing sales price for a share of each
of the indicated stocks, on March 13, 1997, the last trading day preceding the
announcement of the proposed Merger, and the Enterprise equivalent share value.
<TABLE>
<CAPTION>
CLOSING SALES
PRICE ON
MARCH 13, 1997
---------------
<S> <C>
HBOC..................................................................................... $ 55.00
Enterprise--Historical................................................................... $ 27.63
Enterprise--Equivalent at an Assumed Exchange Ratio of .50000............................ $ 27.50
</TABLE>
For additional information concerning the implied value per share of
Enterprise Common Stock at various assumed Market Values and Exchange Ratios,
see "Summary--The Merger Proposal--Terms of the Merger--Conversion of Shares."
22
<PAGE>
THE MEETING
This Proxy Statement/Prospectus and the accompanying Notice of Special
Meeting and proxy card are being furnished to the stockholders of Enterprise in
connection with the solicitation of proxies by the Enterprise Board for the
Meeting to be held on June 26, 1997 at the time and place and for the purposes
set forth in the accompanying Notice of Special Meeting.
Any Enterprise 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 Enterprise 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,
regardless of whether a proxy has previously been given. All valid, unrevoked
proxies will be voted as directed. In the absence of any contrary directions,
proxies will be voted in favor of the proposals 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 Enterprise Common Stock as of the close of
business on May 22, 1997, the Record Date, will be entitled to vote at the
Meeting. At that date, there were 8,271,255 shares of Enterprise Common Stock
outstanding and entitled to vote, 441,344 of which, or 5.3%, were beneficially
owned by directors and executive officers of Enterprise and their affiliates. An
aggregate of 2,091,580 of such shares of Enterprise Common Stock, representing
approximately 25.3% of the total issued and outstanding shares of Enterprise
Common Stock on the Record Date, are subject to the Voting Agreements, which
provide that such shares will be voted in favor of approval of the Merger
Agreement. Stockholders of record on the Record Date are entitled to one vote
for each share of Enterprise 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 Enterprise 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 Enterprise Common
Stock. The amendment of the Enterprise Stock Plan must be approved by a majority
of the shares of Enterprise Common Stock present in person or represented by
proxy at the Meeting and entitled to vote. 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 in the form enclosed herewith will be borne
entirely by Enterprise. In addition to the solicitation of proxies by mail,
proxies may be solicited by directors, officers and employees of Enterprise,
without extra remuneration, by personal interviews, telephone, facsimile or
otherwise. Enterprise 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. Enterprise has retained D.F. King & Co., Inc. to solicit proxies by
mail, in person or by telephone at an estimated cost of $6,500 plus
reimbursement of reasonable out-of-pocket expenses.
THE MERGER PROPOSAL
BACKGROUND OF THE MERGER
Enterprise has utilized Broadview for investment banking and financial
advisory services since 1992. Following conversations regarding HBOC's strategic
direction and acquisition interests between Alec Ellison, a Managing Director of
Broadview, and Russell G. Overton, Senior Vice President--Business Development
of HBOC, in late December 1996, HBOC executed a non-disclosure agreement with
23
<PAGE>
Enterprise on January 3, 1997. On January 9, 1997, Enterprise and Broadview
entered into an engagement letter. Also on January 9, 1997, Glen Tullman, Chief
Executive Officer of Enterprise, David Mullen, Chief Financial Officer of
Enterprise, Mr. Ellison, and Eric Schoenberg, a Principal of Broadview, met with
Jay P. Gilbertson, Chief Financial Officer of HBOC, and Mr. Overton in Chicago
to discuss the possibility of HBOC entering into a strategic business
combination with Enterprise. At this meeting, the parties exchanged information
and presented general overviews of their respective businesses, strategic
direction, products, services, market presence and management personnel.
On January 14, 1997, Mr. Gilbertson called Mr. Ellison and proposed a merger
of Enterprise with HBOC in which the stockholders of Enterprise would receive
shares of HBOC, on a tax-free basis. Mr. Gilbertson proposed that Enterprise
stockholders receive (i) HBOC Common Stock with a value of $28.00 for each share
of Enterprise Common Stock if HBOC's average share price for a period preceding
the transaction were between $62.22 and $68.50, (ii) .409 of a share of HBOC for
each share of Enterprise Common Stock if the value of the HBOC Common Stock were
between $68.50 and $74.00, (iii) HBOC Common Stock with a value of $30.25 for
each share of Enterprise Common Stock if the value of the HBOC Common Stock were
above $74.00, and (iv) .45 of a share of HBOC Common Stock for each share of
Enterprise Common Stock if the value of the HBOC Common Stock were below $62.22.
On January 16, 1997, a special meeting of the Enterprise Board was held via
conference call. All members of the Enterprise Board and representatives of
Broadview and Sachnoff & Weaver, Ltd., counsel to Enterprise ("Sachnoff &
Weaver"), were present. During that meeting, Mr. Tullman apprised the Enterprise
Board of the recent discussions with HBOC, including the proposed offer
regarding a merger. Mr. Tullman presented the Enterprise Board with information
on HBOC and the strategic rationale for a merger. Messrs. Ellison and Schoenberg
were then asked to present an analysis of the proposed transaction. In
connection with this analysis, a report had been distributed previously for the
Enterprise Board's consideration. This report included the following detailed
information: (i) a description of the transaction; (ii) an analysis of the
implied offer premium over Enterprise's share price; (iii) an analysis of the
historic share price performance of HBOC; (iv) a review of equity analysts'
recommendations and earnings estimates for HBOC; (v) an analysis of the historic
relative share prices of HBOC and Enterprise; (vi) a review of HBOC's prior
acquisitions, including prices paid in terms of multiples of revenue and
earnings; (vii) an analysis of premiums paid for public software companies in
merger and acquisition transactions; and (viii) a sensitivity analysis of the
accretion (dilution) from the proposed transaction. Messrs. Ellison and
Schoenberg reviewed in detail the foregoing information with the Enterprise
Board and responded to extensive questions and comments from members of the
Enterprise Board during the course of their presentation. The Enterprise Board
determined that the offer, in light of the then-current market conditions, was
unacceptable, but instructed Enterprise management, in conjunction with
Broadview, to determine if HBOC would be willing to enhance the terms of its
offer. Later that day, Mr. Ellison spoke with Mr. Gilbertson and indicated that
a higher exchange ratio would be necessary to gain Enterprise Board approval.
Mr. Gilbertson responded that he thought it unlikely HBOC would be prepared to
increase its offer.
On January 24, 1997, Mr. Tullman spoke with Mr. Overton and on January 26,
1997, Mr. Ellison spoke with Mr. Gilbertson. In both conversations HBOC was
informed that without some enhancement of the offer by HBOC further discussions
were effectively put on hold.
On February 18, 1997, while attending an industry conference, Messrs.
Tullman, Mullen and Ellison met with representatives of another possible
strategic partner for Enterprise ("Company No. 1"). That same day, Mr.
Gilbertson met with Mr. Ellison and indicated that HBOC was prepared to discuss
changing the terms of its offer.
On February 20, 1997, Mr. Gilbertson called Messrs. Ellison and Schoenberg
and proposed a merger of Enterprise with HBOC in which the stockholders of
Enterprise would receive, on a tax-free basis, (i) .4839 of a share of HBOC
Common Stock for each share of Enterprise Common Stock if the value of
24
<PAGE>
the HBOC Common Stock for a period preceding the transaction were below $62.00,
(ii) HBOC Common Stock with a value of $30.00 for each share of Enterprise
Common Stock if HBOC's average share price for such period were between $62.00
and $68.00, (iii) .4412 of a share of HBOC Common Stock for each share of
Enterprise Common Stock if the value of the HBOC Common Stock for such period
were between $68.00 and $75.00, and (iv) HBOC Common Stock with a value of
$33.09 for each share of Enterprise Common Stock if the value of the HBOC Common
Stock were above $75.00. Further, Enterprise would have the right to terminate
the transaction if the average share price of HBOC Common Stock for such period
dropped below $50.00 per share.
On February 21, 1997, a special meeting of the Enterprise Board was held via
conference call. All members of the Enterprise Board and representatives of
Broadview participated. During that meeting, Mr. Tullman updated the Enterprise
Board on the conversations held with both HBOC and Company No. 1 since the
January 16th meeting of the Enterprise Board. Messrs. Ellison and Schoenberg
were then asked to present an analysis of the proposed transaction. In
connection with this analysis, an updated report previously had been distributed
for the Enterprise Board's consideration. This report included the same
information as had been presented at the January 16th meeting of the Enterprise
Board updated as necessary to reflect the revised proposed terms. Messrs.
Ellison and Schoenberg reviewed such information in detail with the Enterprise
Board and responded to extensive questions and comments from members of the
Enterprise Board during the course of their presentation. Following these
discussions, the Enterprise Board concluded that it would be in the best
interests of Enterprise and its stockholders to explore further the possibility
of a business combination with HBOC and authorized management, in conjunction
with Broadview, to negotiate further with HBOC.
On February 24, 1997, Mr. Ellison informed Mr. Gilbertson that Enterprise
would be willing to proceed on the basis of the February 20th offer, subject to
an increase in the maximum potential value of the offer.
On February 25, 1997, Mr. Gilbertson called Mr. Ellison and indicated that
HBOC would be willing to increase the maximum value per share of Enterprise
Common Stock to $34.41 if the market price of HBOC Common Stock were $78.00 per
share or greater. They then agreed to initiate the due diligence process and
simultaneously proceed with negotiation of a definitive agreement.
On February 27, 1997, Messrs. Tullman and Mullen met with a third possible
strategic partner for Enterprise which had approached Enterprise independently
("Company No. 2"). Following that meeting, in consultation with Mr. Ellison,
Enterprise determined that Company No. 2 did not have sufficient interest in a
merger with Enterprise to warrant further discussions.
On February 28, 1997, Mr. Ellison spoke with a representative of Company No.
1, who indicated that it would not be feasible to consider an acquisition of
Enterprise in the near future, although a business relationship should be
explored.
On March 11, 1997, Mr. Gilbertson met with Messrs. Tullman, Mullen and
Schoenberg. As part of this discussion, Mr. Tullman expressed concern that a
recent decline in the price of HBOC Common Stock had caused the HBOC share price
to fall below the bottom of the proposed collar and asked whether HBOC would be
willing to consider a revision in the collar structure. Mr. Gilbertson stated
that HBOC might accept a reduction from $62.00 to $60.00 in the minimum HBOC
average share price at which Enterprise stockholders would receive a fractional
share of HBOC Common Stock valued at $30.00 for each share of Enterprise Common
Stock, if, in return, the maximum HBOC share price at which Enterprise
stockholders would receive .4412 of a share of HBOC Common Stock for each share
of Enterprise Common Stock were reduced from $78.00 to $72.00.
25
<PAGE>
Also on March 11, 1997, a special meeting of the Enterprise Board was held
in Chicago. All members of the Enterprise Board, as well as representatives of
Broadview, Sachnoff & Weaver, and KPMG Peat Marwick LLP, Enterprise's
independent public accountants, were present. Messrs. Tullman and Mullen updated
the Enterprise Board as to the status of discussions, including HBOC's
willingness to consider the revisions in the collar structure that Mr.
Gilbertson had proposed earlier that day. The representatives of Sachnoff &
Weaver described to the Enterprise Board the fiduciary duties applicable to
directors in considering a strategic business combination and alternative
proposals. Messrs. Ellison and Schoenberg then presented a revised and expanded
version of their presentation of February 21. This report included the following
detailed information: (i) a description of the transaction; (ii) a chronology of
events since January 3, 1997; (iii) a valuation analysis of Enterprise based on
comparable public healthcare application software companies, comparable merger
and acquisition transactions, involving both public and private healthcare
application software companies, and premiums paid for public software companies
in merger and acquisition transactions; (iv) an analysis of historic share
prices of both HBOC and Enterprise; (v) an analysis of the historic relative
share prices of HBOC and Enterprise; (vi) an analysis of the implied offer
premium over Enterprise's share price; and (vii) a pooling analysis and pro
forma projection for the combined entity. After extensive discussion, the
Enterprise Board authorized management to continue negotiating a definitive
agreement under the terms of the revised collars. Later that day, Messrs.
Mullen, Ellison, and Schoenberg spoke with Mr. Gilbertson who confirmed HBOC's
willingness to change the collar structure as described above.
On March 12, 1997, a special meeting of the Enterprise Board was held via
conference call. All members of the Enterprise Board participated. A
representative of Sachnoff & Weaver reported on the status of negotiations with
respect to the Merger Agreement, and Messrs. Tullman and Mullen updated the
Enterprise Board as to the status of discussions.
On March 13, 1997, a special meeting of the Enterprise Board was held via
conference call in which all members of the Enterprise Board and representatives
of Sachnoff & Weaver and Broadview participated. Messrs. Tullman and Mullen
informed the Board that the merger agreement, a draft of which had been
distributed previously to the Enterprise Board, had been finalized.
Representatives of Broadview presented an oral opinion to the Enterprise Board
that the consideration to be received by Enterprise stockholders in the Merger
was fair, from a financial point of view, which opinion was subsequently
confirmed in writing. After further deliberation, the Enterprise Board
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 Enterprise Common Stock. Subsequent to this meeting, each company
executed and delivered the Merger Agreement. The execution of the Merger
Agreement was announced on March 14, 1997 by issuance of a press release.
REASONS OF ENTERPRISE FOR ENGAGING IN THE MERGER; RECOMMENDATION OF THE
ENTERPRISE BOARD
The Enterprise Board has unanimously approved the proposed Merger and the
Merger Agreement and recommends approval of the Merger Agreement by stockholders
of Enterprise based on its belief that the Merger is in the best interests of
Enterprise and its stockholders. In reaching its decision, the Enterprise Board
considered the following material factors:
(i) The Merger offers Enterprise stockholders an opportunity to receive
shares in a significantly larger company with strong historical performance,
capital resources significantly greater than Enterprise's and demonstrated
ability to successfully implement its growth strategy that has resulted in
historical increases in revenue and earnings, while affording them the
opportunity to continue to participate in the long-term growth and
appreciation of Enterprise's business through an ownership interest in HBOC;
26
<PAGE>
(ii) The presentations, financial analyses and advice of its financial
advisor, Broadview, and the opinion of Broadview that, as of March 13, 1997,
the consideration to be received in the Merger was fair, from a financial
point of view, to the Enterprise stockholders;
(iii) The strategic fit between Enterprise and HBOC and the complementary
nature of their respective businesses, particularly in light of the fact
that Enterprise's materials management and other resource management systems
will provide a significant enhancement to the overall product line of HBOC;
(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
leverage from a joint sales force and research and development activity and
(c) the elimination of public reporting obligations and attendant costs of
Enterprise;
(v) 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 Enterprise and the
likelihood of achieving those prospects on both a combined and separate
basis;
(vi) The likelihood that the Merger would be consummated, including the
experience, reputation and financial capability of HBOC;
(vii) Publicly available information concerning the financial
performance, condition, prospects and operations of each of Enterprise and
HBOC;
(viii) The proposed terms, timing and structure of the Merger and the
Merger Agreement, including the fact that the Merger is expected to be a
tax-free exchange and accounted for as a "pooling of interests"; and
(ix) The possible increase in competition which Enterprise might
experience if the Merger was not consummated and HBOC sought a business
combination with another company offering a materials management solution.
The Enterprise 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; and
(ii) 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.
The foregoing discussion of information and factors considered by the
Enterprise 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 Enterprise directors 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, Broadview and legal
counsel, the Enterprise Board unanimously approved the Merger and determined
that the Merger is fair to, and in the best interests of, Enterprise and its
stockholders and that Enterprise should proceed with the Merger at this time.
ACCORDINGLY, THE ENTERPRISE BOARD UNANIMOUSLY RECOMMENDS THAT THE ENTERPRISE
STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
27
<PAGE>
OPINION OF FINANCIAL ADVISOR OF ENTERPRISE
At the meeting of the Enterprise Board on March 13, 1997, Broadview rendered
its written opinion (the "Broadview Opinion") that, as of such date, based upon
the various considerations set forth in the Broadview Opinion, the consideration
to be received in the Merger was fair from a financial point of view to the
Enterprise stockholders.
The full text of the Broadview Opinion (updated as of the date indicated),
which sets forth assumptions made, matters considered, and limitations on the
review undertaken, is attached as Appendix B to this Proxy Statement/Prospectus.
Enterprise stockholders are urged to read the Broadview Opinion carefully in its
entirety. The Broadview Opinion addresses only the fairness of the consideration
to be received by Enterprise stockholders in the Merger from a financial point
of view and does not constitute a recommendation to any stockholder of
Enterprise as to how such stockholder should vote at the Meeting. In addition,
Broadview will receive a fee from Enterprise contingent upon the successful
conclusion of the Merger. The summary of the Broadview Opinion set forth in this
Proxy Statement/Prospectus is qualified in its entirety by reference to the full
text of such opinion.
In rendering its opinion, Broadview, among other actions: (i) reviewed the
terms of the Merger Agreement and the associated exhibits thereto; (ii) reviewed
the audited financial statements of Enterprise for its fiscal years ended
December 31, 1994 and 1995, the unaudited financial statements of Enterprise for
the nine months ended September 30, 1996 included within Enterprise's Form 10-Q
for such period and the unaudited financial information of Enterprise for its
fiscal year ended December 31, 1996 included in an Enterprise press release
dated February 10, 1997; (iii) reviewed financial projections for Enterprise
prepared and provided to Broadview by Enterprise management; (iv) participated
in discussions with Enterprise management concerning the operations, business
strategy, financial performance and prospects for Enterprise; (v) discussed with
Enterprise management its view of the strategic rationale for the Merger; (vi)
reviewed the reported closing prices and trading activity for Enterprise Common
Stock; (vii) compared certain aspects of the financial performance of Enterprise
with public companies deemed comparable; (viii) analyzed available information,
both public and private, concerning other mergers and acquisitions believed to
be comparable in whole or in part to the Merger; (ix) reviewed HBOC's annual
report and Form 10-K for the fiscal years ended December 31, 1994 and 1995 and
HBOC's Form 10-K for the fiscal year ended December 31, 1996, including the
financial statements included therein; (x) participated in discussions with HBOC
management concerning the operations, business strategy, financial performance
and prospects for HBOC; (xi) discussed with HBOC management its view of the
strategic rationale for the Merger; (xii) reviewed the reported closing prices
and trading activity for HBOC Common Stock; (xiii) considered the total number
of shares of HBOC Common Stock outstanding, the average weekly trading volume of
HBOC Common Stock, and the maximum time period for Enterprise stockholders to
liquidate their HBOC Common Stock given Commission regulations; (xiv) reviewed
recent equity analysts' reports covering HBOC; (xv) analyzed the anticipated
effect of the Merger on the future financial performance of the consolidated
entity; (xvi) participated in negotiations and discussions related to the Merger
among Enterprise, HBOC and their financial and legal advisors; and (xvii)
conducted other financial studies, analyses and investigations as deemed
appropriate for purposes of its opinion.
In rendering the Broadview Opinion, Broadview relied, without independent
verification, on the accuracy and completeness of all the financial and other
information (including without limitation the representations and warranties
contained in the Merger Agreement) that was publicly available or furnished by
Enterprise or HBOC. All analyses relying on future projections of Enterprise
utilized forecasts developed by Enterprise management, which Broadview assumed
were reasonably prepared and reflected the best available estimates and good
faith judgments of the management of Enterprise as to the future performance of
Enterprise. Broadview neither made nor obtained an independent appraisal or
valuation of any of Enterprise's assets. Broadview did not review any internal
financial projections prepared by HBOC management as such were not provided by
HBOC management.
28
<PAGE>
The following is a summary explanation of the various sources of information
and valuation methodologies employed by Broadview in conjunction with rendering
the Broadview Opinion on March 13, 1997 regarding the proposed transaction:
PUBLIC COMPANY COMPARABLES ANALYSIS. Broadview employed a Total Market
Capitalization/Revenue ("TMC/R") ratio in this analysis because it enables two
critical balance sheet items, cash and debt, to be factored directly into the
valuation. The formula for the TMC/R ratio is as follows: ((market value of
equity) + (short term debt + long term debt) - (cash and equivalents))/revenue.
To determine value using this approach, the first step is to calculate the
appropriate TMC/R ratio. Next, the revenue of the company is multiplied by the
appropriate TMC/R ratio determined in the first step. This provides a total
"entity" value which represents the company's value based on its operating
performance, I.E., excluding the effects of capitalization. The final step is to
subtract all short term and long term debt from the total entity value and then
add back cash and equivalents. The result is one measure of the fair market
value of a company's equity.
TMC/R and Price/Earnings ("P/E") multiples indicate the value public markets
place on companies in a particular market segment. Although there are a limited
number of public company "pure plays" (companies directly competitive with and
comparable to Enterprise) in the markets in which Enterprise competes, several
companies are comparable to Enterprise based on revenue size, products offered,
business model, management structure and market position. Broadview reviewed
nine public company comparables in the healthcare information systems ("HCIS")
market from a financial point of view including each company's: Trailing Twelve
Month ("TTM") Revenue; TTM Revenue Growth; TTM Operating Margin; 5-year EPS
Compound Annual Growth Rate ("CAGR"); Equity Market Capitalization; TTM P/E
ratio; Price/Forward 1997 Calendar EPS ratio ("Forward P/E"); Growth Adjusted
Forward P/E ratio; and TMC/R ratio. The public company comparables were selected
from the Broadview Barometer, a proprietary database of publicly-traded
information technology ("IT") companies maintained by Broadview and broken down
by industry segment. In order of descending TMC/R, the public company
comparables consist of: (i) HBOC; (ii) Transition Systems, Inc.; (iii) IMNET
Systems, Inc.; (iv) Medic Computer Systems, Inc.; (v) IDX Systems Corp.; (vi)
Cerner Corp.; (vii) Sunquest Information Systems, Inc.; (viii) PHAMIS Inc.; and
(ix) Shared Medical Systems Corp.
These comparables have a TTM P/E ratio range of 22.9 to 59.6 with a median
of 39.0; Forward P/E ratio range of 18.8 to 39.5 with a median of 28.4; Growth
Adjusted Forward P/E ratio range of 21.2 to 61.7 with a median of 38.5; and
TMC/R ratio range of 1.7 to 6.0 with a median of 3.6.
The per share valuation of the Enterprise Common Stock implied by the median
TTM P/E multiple is $20.34. The per share valuation of Enterprise Common Stock
implied by the median Forward P/E multiple is $21.56. The per share valuation of
Enterprise Common Stock implied by the median Growth-Adjusted Forward P/E
multiple is $29.24. The per share valuation of Enterprise Common Stock implied
by the median TMC/R multiple is $22.96.
TRANSACTION COMPARABLES ANALYSIS. Valuation statistics from transaction
comparables indicate the Price/Revenue ("P/R") and Price/Pretax ("P/Pretax")
multiples acquirers have paid for comparable companies in a particular market
segment. Broadview reviewed sixteen comparable merger and acquisition ("M&A")
transactions from 1994 through March 12, 1997 with consideration over $20
million which involve sellers sharing many characteristics with Enterprise,
including revenue size, products offered, business model and management
structure. Transactions were selected from Broadview's proprietary database of
published and confidential M&A transactions in the IT industry. These
transactions represent six public sellers and ten private sellers or
divestitures in the HCIS segment of the software market. In order of descending
price, the public seller transactions used are the acquisition of: (i) CyCare
Systems, Inc. by HBOC; (ii) GMIS Inc. by HBOC; (iii) CliniCom Incorporated by
HBOC; (iv) AMISYS by HBOC (pending); (v) C.I.S. Technologies, Inc. by National
Data Corp.; and (vi) Serving Software, Inc. by HBOC. In order of descending
price, the private seller or divestiture transactions used are the acquisition
29
<PAGE>
of: (i) Health Data Sciences Corp. by Medaphis Corporation; (ii) Confidential;
(iii) Confidential; (iv) Versyss, Inc. by Physicians Computer Network, Inc.; (v)
Confidential; (vi) Confidential; (vii) Management Software, Inc. by HBOC; (viii)
IBAX Healthcare Systems by HBOC; (ix) Compusystems, Inc. by Medic Computer
Systems, Inc.; and (x) Confidential. A "Confidential" transaction is a
transaction for which Broadview has received relevant information in confidence
and cannot reveal the names of the involved parties.
The P/R multiples of the six public seller transactions range from 2.6 to
5.9 with a median of 3.7. The P/Pretax multiples of the six public seller
transactions range from 26.8 to 41.6 with a median of 32.1. The P/ R multiples
of the ten private seller transactions range from 0.7 to 10.9 with a median of
3.1. The P/Pretax multiples of the ten private seller transactions range from
6.2 to 22.3 with a median of 12.8. The median P/ R ratio for all sixteen
transactions was 3.3 and the median P/Pretax multiple for all sixteen
transactions was 24.6.
The per share valuation of Enterprise Common Stock implied by the median P/R
multiple using public comparables is $23.75. The per share valuation of
Enterprise Common Stock implied by the median P/Pretax multiple using public
comparables is $26.31. The per share valuation of Enterprise Common Stock
implied by the median P/R multiple using all comparables, public and private, is
$21.18. The per share valuation of Enterprise Common Stock implied by the median
P/Pretax multiple using all comparables is $20.10.
TRANSACTION PREMIUMS PAID ANALYSIS. Premiums paid in comparable public
seller transactions indicate the amount of consideration acquirers are willing
to pay above the sellers' equity market capitalizations. In this analysis, the
value of consideration paid in transactions involving stock is computed using
the buyers' stock prices immediately prior to announcement, while the sellers'
equity market capitalizations are measured one day prior and thirty days prior
to announcement. Broadview reviewed 41 comparable M&A transactions from January
1, 1994 to March 12, 1997 with total consideration greater than $50 million. All
transactions involved public sellers in the software sector of the IT market.
Transactions were selected from Broadview's proprietary database of published
and confidential M&A transactions in the IT industry. In order of descending
premium paid 30 days prior to the date the transaction was announced, the
transactions used were the acquisition of: (i) Sierra On-Line, Inc. by CUC
International, Inc.; (ii) High Level Design Systems Inc. by Cadence Design
Systems Inc.; (iii) GMIS Inc. by HBOC; (iv) Lotus Development Corp. by IBM
Corp.; (v) Softdesk Inc. by Autodesk Inc. (pending); (vi) Triad Systems Corp. by
Cooperative Computing, Inc.; (vii) Aldus Corp. by Adobe Systems, Inc.; (viii)
Intuit, Inc. by Microsoft Corp. (transaction not completed); (ix) Legent Corp.
by Computer Associates International; (x) Landmark Graphics Corp. by Halliburton
Co.; (xi) Knowledgeware, Inc. by Sterling Software, Inc.; (xii) TGV Software,
Inc. by Cisco Systems, Inc.; (xiii) Open Environment Corp. by Borland
International, Inc.; (xiv) Cheyenne Software, Inc. by Computer Associates
International; (xv) Davidson & Associates, Inc. by CUC International, Inc.;
(xvi) Alias Research, Inc. by Silicon Graphics, Inc.; (xvii) CyCare Systems,
Inc. by HBOC; (xviii) ASK Group, Inc. by Computer Associates International;
(xix) Software Toolworks, Inc. by Pearson Plc; (xx) Datalogix International,
Inc. by Oracle Corp.; (xxi) PDA Engineering by Macneal-Schwendler Corp.; (xxii)
SQA Inc. by Rational Software Corp.; (xxiii) OpenVision Technologies, Inc. by
VERITAS Software Corp. (pending); (xxiv) Continuum Co., Inc. by Computer
Sciences Corp.; (xxv) Trinzic Corp. by Platinum Technology, Inc.; (xxvi) Delrina
Corp. by Symantec Corp.; (xxvii) AMISYS by HBOC (pending); (xxviii) Frame
Technology Corp. by Adobe Systems, Inc.; (xxix) CliniCom Incorporated by HBOC;
(xxx) Tivoli Systems, Inc. by IBM Corp.; (xxxi) Hogan Systems, Inc. by Continuum
Co., Inc.; (xxxii) C.I.S. Technologies, Inc. by National Data Corp.; (xxxiii)
Wavefront Technologies, Inc. by Silicon Graphics, Inc.; (xxxiv) Microtec
Research, Inc. by Mentor Graphics Corp.; (xxxv) Powersoft Corp. by Sybase, Inc.;
(xxxvi) Cooper & Chyan Technology, Inc. by Cadence Design Systems Inc.
(pending); (xxxvii) Epic Design Technology Inc. by Synopsys Inc. (pending);
(xxxviii) Softimage, Inc. by Microsoft Corp.; (xxxix) Atria Software Inc. by
Pure Software Inc.; (xxxx) Fractal Design Corp. by MetaTools Inc. (pending); and
(xxxxi) Integrated Silicon Systems, Inc. by Arcsys, Inc.
30
<PAGE>
Based upon Broadview's analysis of premiums paid in comparable transactions,
Broadview found that premiums (discounts) paid to sellers' equity market
capitalizations (using the buyers' share price on the day prior to the date of
announcement of the transaction to calculate consideration in stock
transactions) 30 days prior to the date the transaction was announced ranged
from (21.6%) to 137.1% with a median of 52.2%. The premiums (discounts) paid to
sellers' equity market capitalizations one day prior to the date the transaction
was announced ranged from (25.0%) to 138.3% with a median of 36.3%.
The per share valuation of Enterprise Common Stock implied by the median
premium paid 30 days prior to the date the Merger was announced is $34.82. The
per share valuation implied by the median premium paid one day prior to the date
the Merger was announced is $37.66. The difference in these values is a function
of an increase in the price of Enterprise Common Stock during the 30 days prior
to announcement.
STOCK PERFORMANCE ANALYSIS. For comparative purposes, Broadview examined
the historical volume and trading prices for both Enterprise Common Stock and
HBOC Common Stock. Broadview examined the following: (i) HBOC and Enterprise
actual share prices and trading volumes from October 20, 1995 (the date of
Enterprise's initial public offering) to March 13, 1997; (ii) HBOC and
Enterprise relative share price performance from October 20, 1995 to March 13,
1997; and (iii) HBOC, Enterprise and the set of public company comparables
indexed share prices from October 20, 1995 to March 13, 1997.
PRO FORMA POOLING MODEL ANALYSIS. A pro forma merger analysis calculates
the EPS accretion/ dilution of the pro forma combined entity taking into
consideration various financial effects which will result from a consummation of
the Merger. This analysis relies upon certain financial and operating
assumptions provided by equity research analysts and on publicly available data
about Enterprise and HBOC. Based on the analysts' forecasts and Broadview's
assumption of $1 million of pretax contribution derived from revenue enhancement
and cost savings, the pro forma pooling analysis indicates EPS accretion without
acquisition expenses for the fiscal years ending December 31, 1997 and 1998 of
0.2% and 0.3%, respectively.
EXCHANGE RATIO ANALYSIS. An analysis of a range of HBOC Common Stock share
prices and the implied exchange ratio calculates the implied purchase price of
Enterprise Common Stock. An HBOC 20 day average share price range of $50.00 to
$68.00 implies a premium over Enterprise's actual price one day before
announcement of the transaction that ranges from (9.5%) to 8.6%. An HBOC 20 day
average share price range of $50.00 to $68.00 implies a premium over
Enterprise's actual price 30 days before announcement that ranges from 9.3% to
31.1%. The difference in these values is a function of an increase in the price
of Enterprise Common Stock during the 30 days prior to announcement. The premium
also assumes that the 20 day average share price equals the closing share price
on the day before the consummation of the transaction.
CONSIDERATION OF THE DISCOUNTED CASH FLOW VALUATION METHODOLOGY. While
discounted cash flow is a commonly used valuation methodology, Broadview did not
employ such an analysis for the purposes of the Broadview Opinion. Discounted
cash flow analysis is most appropriate for companies which exhibit relatively
steady or somewhat predictable streams of future cash flow. For a rapidly
growing company such as Enterprise, a preponderance of the value in a valuation
based on discounted cash flow will be in the terminal value of the entity, which
is extremely sensitive to assumptions about the sustainable long-term growth
rate of the company. Given the uncertainty in estimating a sustainable long-term
growth rate for Enterprise, Broadview considered a discounted cash flow analysis
inappropriate for valuing Enterprise.
The Enterprise Board selected Broadview as its financial advisor on the
basis of Broadview's reputation and experience in the information technology
sector and the computer software industry in particular, as well as Broadview's
historical relationship with Enterprise. Pursuant to the terms of an engagement
letter between Enterprise and Broadview, the fees payable by Enterprise to
Broadview upon completion of the Merger are calculated as 1% of the first $100
million of consideration received by Enterprise's stockholders, and 0.4% of any
additional consideration received, including contingent consideration. A fee of
$300,000 paid in connection with the delivery of the fairness opinion will be
credited
31
<PAGE>
against such amount. Broadview will be reimbursed by Enterprise for certain of
its expenses incurred in connection with its engagement. The terms of the fee
arrangement with Broadview, which Enterprise and Broadview believe are customary
in transactions of this nature, were negotiated at arms' length between
Enterprise and Broadview, and the Enterprise Board of Directors was aware of the
nature of the fee arrangement, including the fact that a significant portion of
the fees payable to Broadview is contingent upon completion of the Merger. Mr.
Bernard Goldstein, a member of the Enterprise Board, is a Director of Broadview.
See "Interest of Certain Persons in Each of HBOC and Enterprise -- Interests of
Certain Enterprise Persons in Matters to be Acted Upon."
The above summary of the presentations by Broadview to the Enterprise Board
does not purport to be a complete description of such presentations or of all
the advice rendered by Broadview. Broadview believes that its analyses and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, could create an
incomplete view of the process underlying the analyses set forth in Broadview's
presentations to the Enterprise Board and in the Broadview Opinion. In
performing its analyses, Broadview made numerous assumptions with respect to
software industry performance and general economic conditions, many of which are
beyond the control of Enterprise. The analyses performed by Broadview are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses.
REASONS OF HBOC FOR ENGAGING IN THE MERGER
The HBOC Board believes that the acquisition of Enterprise will expand
HBOC's enterprisewide suite of information systems by adding Enterprise's
materials management solutions.
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 Enterprise 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, Enterprise will be
merged with and into HBOC-GA, which will be the surviving corporation.
CONVERSION OF SHARES. Each outstanding share of Enterprise Common Stock
issued and outstanding immediately prior to the Effective Time, will, at the
Effective Time, be converted into the right to receive (i) .50 of a share of
HBOC Common Stock if the Market Value is less than $60.00, (ii) a fractional
share of HBOC Common Stock which, when multiplied by the Market Value, will
equal $30.00 if the Market Value is equal to or greater than $60.00 but not
greater than $68.00, (iii) .4412 of a share of HBOC Common Stock if the Market
Value is greater than $68.00 but not greater than $72.00, and (iv) a fractional
share of HBOC Common Stock which, when multiplied by the Market Value, will
equal $31.77 if the Market Value is greater than $72.00 (whichever basis is
applicable being referred to as the "Exchange Ratio"), and less the amount of
any fractional share, which will be paid in cash. The shares of HBOC Common
Stock and any cash in lieu of fractions thereof receivable by each Enterprise
stockholder in the Merger are referred to herein as the "Merger Consideration."
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 Enterprise Common Stock shall be entitled to receive a
cash payment therefor, without interest, at a pro rata amount based on the
Market Value.
32
<PAGE>
STOCK PLANS. Options to purchase shares of Enterprise Common Stock
outstanding at the Effective Time of the Merger will be assumed by HBOC,
provided, however, that the 1996-1997 Options to purchase 296,339 shares will be
assumed only in the event that the proposal to amend the Enterprise Stock Plan
is approved. See "Approval of Amendment of Enterprise Systems, Inc. Long-Term
Incentive Plan." As a result of the assumption of options to purchase Enterprise
Common Stock, 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 Enterprise 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 Enterprise 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.
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
Enterprise 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 Enterprise Common
Stock (the "Certificates"), a letter of transmittal and instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration payable in respect of the shares of Enterprise Common Stock
represented thereby.
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 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-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 Enterprise 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 Enterprise 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
33
<PAGE>
Enterprise 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
Enterprise 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, Enterprise affiliates
are subject to certain restrictions on transfer of both Enterprise 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 Enterprise, 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 and any related
matters by holders of the requisite number of shares of Enterprise 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 by the Enterprise Board of
a fairness opinion of Broadview.
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 Enterprise shall remain
true and correct at and as of the Closing Date, other than breaches of such
representations which do not individually or in the aggregate constitute a
material adverse effect on the businesses, properties, rights, financial
condition or results of operations (a "Material Adverse Effect") of Enterprise
and its subsidiary, taken as a whole; (ii) the performance of all covenants,
agreements and conditions by Enterprise as provided in the Merger Agreement;
(iii) there shall have been no change in the business, properties, rights or
operations of Enterprise or its subsidiary which, individually or in the
aggregate, constitutes a Material Adverse Effect; (iv) receipt of a certificate
of the Chief Executive Officer of Enterprise regarding certain matters,
including those listed in (i) through (iii) above; (v) receipt of certain legal
opinions, including an opinion of Jones, Day, Reavis & Pogue, counsel to HBOC,
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
Enterprise regarding compliance with Rule 145 and certain pooling of interests
requirements; (vii) delivery of certain additional certificates and documents by
Enterprise, including consents of third parties; (viii) receipt of letters from
KPMG Peat Marwick LLP and Arthur Andersen LLP advising HBOC that each of
Enterprise and HBOC, respectively, satisfies the tests applicable to it such
that the Merger can be accounted for as a pooling of interests; (ix) receipt of
letters from KPMG Peat Marwick LLP regarding information about Enterprise
included in the Registration Statement; (x) receipt of non-competition
agreements from certain key employees of Enterprise; (xi) the absence of any
fees or expenses payable to any investment banking firm or similar entity that
will be incurred by Enterprise in connection with the Merger, except fees and
expenses of Broadview not to exceed $1,900,000 in the aggregate; (xii)
termination of certain agreements granting special rights to certain
stockholders of Enterprise; and (xiii) Enterprise shall have remedied any
default or item of noncompliance with respect to certain software licensed from
third parties and shall have obtained the assignments of intellectual property
rights from certain persons and entities.
34
<PAGE>
The obligation of Enterprise 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 in all material respects at and as of the Closing Date;
(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
Sachnoff & Weaver, 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 Enterprise filed the required information with the Antitrust
Division and the FTC on April 2, 1997, and the waiting period has expired.
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. Enterprise has agreed that prior to the Effective Time of
the Merger or earlier termination of the Merger Agreement, Enterprise shall not,
and shall not permit its subsidiary to, directly or indirectly, 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 or offer for any tender
or exchange offer, proposal for a merger, share exchange or other business
combination involving Enterprise or its subsidiary or any proposal or offer to
acquire in any manner a substantial equity interest in Enterprise or its
subsidiary or a substantial portion of the assets of Enterprise or its
subsidiary with any person or entity; provided, however, that the Enterprise
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 Enterprise
Board determines in good faith, after receiving written advice of its counsel,
that such action would be required under applicable law in the exercise of its
fiduciary duties. Enterprise has agreed to notify HBOC-GA immediately 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
Enterprise Board, notwithstanding the prior approval of the Enterprise
stockholders; (ii) the HBOC Board, in the event of material condemnation,
destruction, loss or damage to the business or assets of Enterprise and its
subsidiary, taken as a whole; (iii) the HBOC-GA Board or the Enterprise Board,
after July 31, 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 Enterprise Board, if, in the good faith exercise of its
fiduciary duties to the stockholders of Enterprise in the context of a proposal
to acquire Enterprise by another party, the Enterprise Board decides that such
termination is required; and (v) the Enterprise Board, if the Market Value of
HBOC Common Stock is less than $50.00 per share.
If the Merger is terminated by Enterprise in accordance with (iv) above,
Enterprise 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 in an aggregate amount not to exceed $750,000 and (ii) to
HBOC-GA, a fee in the amount of $8,800,000. The Merger Agreement also provides
for such reimbursement and fee to be paid to HBOC-GA if the Merger Agreement is
terminated by any of the parties because it was not approved by the requisite
number of shares of Enterprise Common Stock but only if the Designated
Stockholders failed to deliver the Voting Agreements to HBOC-GA within 20 days
of the date of the Merger Agreement. Because the Designated Stockholders
delivered the Voting Agreements dated as of April 1, 1997, such fee shall not be
payable by
35
<PAGE>
Enterprise to HBOC-GA in the event the Merger Agreement is not approved by the
requisite number of shares of Enterprise Common Stock. Pursuant to the Voting
Agreements, each of the Designated Stockholders has irrevocably appointed
HBOC-GA as its proxy to vote all of the shares of Enterprise Common Stock held
by such Designated Holder in favor of any proposal to approve and adopt the
Merger Agreement and the Merger and any transactions contemplated thereby, other
than the proposal to approve the amendment of the Enterprise Stock Plan, and to
vote against (but not in favor of) any merger of Enterprise with, or sale of the
assets of Enterprise to, a company other than HBOC-GA.
ACCOUNTING TREATMENT
It is a condition to the consummation of the Merger that HBOC shall have
received letters, dated as of the date hereof and as of the Closing Date, from
KPMG Peat Marwick LLP and Arthur Andersen LLP to the effect that each of
Enterprise and HBOC, respectively, satisfies the tests applicable to it such
that the Merger can be accounted for as a pooling of interests under Accounting
Principles Board Opinion No. 16, if the Merger 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 Enterprise Common Stock who hold their shares
of Enterprise Common Stock as capital assets. This summary does not discuss all
aspects of income taxation that may be relevant to a particular holder of
Enterprise 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 Enterprise 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 Enterprise 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, Sachnoff & Weaver has
advised Enterprise that in its opinion (i) the Merger will qualify as a
reorganization pursuant to Section 368(a) of the Code, (ii) no gain or loss will
be recognized by Enterprise as a result of the consummation of the Merger, and
(iii) no gain or loss will be recognized by an Enterprise stockholder upon the
exchange of the shares of Enterprise 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.
As of the date of this Proxy Statement/Prospectus, Jones, Day, Reavis &
Pogue 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 Enterprise as the
result of the consummation of the Merger.
The opinions of Sachnoff & Weaver and Jones, Day, Reavis & Pogue referred to
herein are based upon certain representations and warranties of HBOC, HBOC-GA
and Enterprise that are customarily made in connection with such opinions. In
addition, consummation of the Merger is conditioned upon the receipt by
Enterprise, HBOC and HBOC-GA of the opinions described above dated 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.
36
<PAGE>
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 Enterprise as a
result of the Merger will be the same as the aggregate adjusted tax basis of the
shares of Enterprise 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 Enterprise as a result of the
Merger will include the holding period of the shares of Enterprise Common Stock
surrendered in exchange therefor. Any cash that a stockholder of Enterprise
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 Enterprise stockholder in the Merger, an Enterprise 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
Enterprise 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 Enterprise stockholder by the
Internal Revenue Service, and any cash received by such stockholder may be
subject to backup withholding at a rate of 31%.
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 ENTERPRISE 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 Enterprise Common Stock is a Nasdaq NM security, the holders of
shares of Enterprise Common Stock will not be entitled to appraisal rights
pursuant to Section 262 of the DGCL in connection with the Merger.
APPROVAL OF AMENDMENT OF ENTERPRISE SYSTEMS, INC. LONG-TERM INCENTIVE PLAN
DISCUSSION OF PROPOSAL
The Enterprise Board has adopted, subject to stockholder approval, an
amendment to the Enterprise Stock Plan. The purpose for amending the Enterprise
Stock Plan is to increase the number of shares available for grant thereunder.
Under the Enterprise Stock Plan, a total of 1,114,846 shares of Enterprise
Common Stock has been reserved for issuance. Because of Enterprise's decision to
make the Enterprise Stock Plan available to greater numbers of employees (and
broader classes of employees) and Enterprise's need for flexibility in
compensating its key employees, the Enterprise Board has adopted, subject to
stockholder approval, an amendment to increase by 300,000 the aggregate number
of shares reserved for issuance under the Enterprise Stock Plan, 296,339 of
which (the "1996-1997 Options") have been the subject of option grants. The
amendment and the grant of options are subject to stockholder approval. Based on
the market price per share of Enterprise Common Stock on May 28, 1997, the
market value of the 300,000 additional shares reserved for issuance under the
Enterprise Stock Plan was $8,700,000. Upon
37
<PAGE>
stockholder approval, Enterprise will be required to record compensation expense
for the difference between the fair market value per share of the Enterprise
Common Stock on the date of the stockholder approval and the exercise price per
share of $15.50 applicable to the 1996-1997 Options.
DESCRIPTION OF THE PLAN
GENERAL. The purpose of the Enterprise Stock Plan, which was originally
adopted by the Enterprise Board on September 28, 1995 and subsequently approved
by the stockholders on October 4, 1995, is to assist Enterprise in attracting
and retaining key employees, as well as independent contractors, non-employee
directors and consultants, and to give such persons a greater proprietary
interest in, and closer identity with, Enterprise and its financial success. The
Enterprise Stock Plan authorizes Enterprise to make grants ("Awards") of
Incentive Stock Options (within the meaning of Section 422 of the Code), Non-
Qualified (or non-statutory) Stock Options (the Incentive and Non-Qualified
Stock Options issued under the Enterprise Stock Plan are referred to
collectively as "Options"), Restricted Stock, Stock Appreciation Rights ("SARs")
and cash awards.
The Enterprise Stock Plan is administered by a committee of the Enterprise
Board consisting of two or more Enterprise Board members (the "Committee").
Currently, the Committee consists of three members. The Committee has complete
discretion to determine which employees and non-employees will be recipients of
Awards under the Enterprise Stock Plan (the "Participants") and to establish the
terms, conditions and limitations of each Award (subject to the terms of the
Enterprise Stock Plan and the applicable provisions of the Code), including the
type and amount of the Award, the number of shares of Enterprise Common Stock to
be subject to Options or issued as Restricted Stock, or the amount of cash to be
included in any Award, the exercise price of any Options and the date or dates
upon which the Options become exercisable or upon which any restrictions
applicable to any Enterprise Common Stock included in the Award lapse. The
Committee also has full power to construe and interpret the Enterprise Stock
Plan and the Awards granted thereunder, and to establish rules and regulations
necessary or advisable for its administration. Cash payments received pursuant
to stock options by Enterprise under the Enterprise Stock Plan will be used for
general corporate purposes. No more than 200,000 shares may be granted under the
Enterprise Stock Plan in any one calendar year to any one employee.
Awards under the Enterprise Stock Plan may be granted only to key employees
and key non-employees (non-employee directors, consultants, or independent
contractors) of Enterprise and its subsidiaries. The Committee determines
whether a particular employee or non-employee qualifies as a "Key Employee" or
"Key Non-Employee." Awards may be granted to a prospective employee, conditioned
upon such person becoming an employee.
TERMS AND CONDITIONS OF AWARDS UNDER THE ENTERPRISE STOCK PLAN. Awards
under the Enterprise Stock Plan may consist of any combination of one or more
Options, Restricted Stock, SARs, or cash awards, on a stand alone, combination
or tandem basis. The Committee may specify that Awards other than Options will
be paid in cash, shares of Enterprise Common Stock, or a combination of cash and
Enterprise Common Stock.
The Committee is permitted to cancel any unexpired, unpaid, unexercised or
deferred Awards at any time if a Participant (a) provides services for a
competitor, (b) discloses confidential information of Enterprise, or (c) fails
to disclose and convey to Enterprise any invention or idea developed by the
Participant during employment by Enterprise and relating to the business of
Enterprise. Unless otherwise described below for Options, or as may be provided
in the Award, all unexpired, unpaid, unexercised or deferred Awards will be
canceled immediately if a Participant ceases his or her employment with
Enterprise and its subsidiary, except for (a) retirement under an Enterprise
retirement plan, (b) retirement in the best interests of Enterprise (as
determined by Enterprise's chief executive or other designated senior officer)
or (c) termination of the Participant's employment upon his or her death or
disability. Upon retirement under an Enterprise retirement plan or termination
in the best interests of Enterprise, the
38
<PAGE>
Committee may permit Awards to continue and may accelerate exercisability and
vesting. Upon the death or disability of a Participant, his or her estate or
beneficiaries (or the Participant in the case of disability) may exercise or
receive benefits under the Award until the original expiration date as provided
in the Award (or within one year in the case of Options) and the Committee may,
in its discretion, accelerate the vesting or terminate the restrictions to which
the Award is subject.
Upon any change in the nature or number of outstanding shares of Enterprise
Common Stock due to stock split, stock dividend, merger, reorganization or
similar event, adjustments will be made to the numbers of shares and the
applicable exercise and base prices under outstanding Awards to prevent dilution
or enlargement of the Awards previously granted.
Both Incentive and Non-Qualified Options may be granted pursuant to the
Enterprise Stock Plan. Incentive Options must have an exercise price per share
equal to at least the fair market value of a share at the time the Award is
granted. As required by the Code, if an Incentive Option is granted to a
Participant who owns more than ten percent of the voting power of Enterprise (a
"Significant Stockholder"), then the exercise price per share will be not less
than one hundred ten percent (110%) of fair market value on the date of grant.
Fair market value equals the closing sales price of the Enterprise Common Stock
on the date of grant. The exercise price for Non-Qualified Options is determined
by the Committee in its sole discretion on the date of grant, and, except as may
be determined to be appropriate by the Committee pursuant to Section 162(m) of
the Code, may be less than fair market value. The maximum term of all Incentive
Options granted under the Enterprise Stock Plan is ten years; provided that
Incentive Options granted to a Significant Stockholder have a maximum term of
five years. The term of Non-Qualified Options may be set by the Committee in its
discretion. No Options may be granted more than ten years from the date the
Enterprise Stock Plan was adopted. All Options are non-transferable and may be
exercised during a Participant's lifetime only by the Participant.
At the time an Option is awarded, the Committee specifies the date or dates
upon which the Option, or portions of the Option, becomes exercisable. The
permissible manner of payment for the purchase price upon exercise of the Option
(such as cash, check, or the transfer of previously owned, fully paid shares of
Enterprise Common Stock) is set by the Committee in the particular Award
agreement or by general rules.
A Participant who ceases to be an employee or "Key Non-Employee" of
Enterprise or its subsidiary is permitted to exercise any Option, to the extent
it is exercisable on the date of such cessation, but only within one month of
such cessation, provided that if a Participant voluntarily ceases employment
after reaching age 60, he or she is allowed three months in which to exercise
the Option, to the extent to which it is exercisable upon termination of
employment. A Participant who is terminated for "cause," as defined in the
Enterprise Stock Plan, will immediately lose all rights to exercise any Options.
If a Participant dies, his or her estate or personal representative may exercise
the Option, to the extent it is exercisable on the date of death. If a
Participant becomes permanently disabled, he or she may exercise an Option to
the extent it is exercisable at the time of the onset of the disability or, if
the Option vests periodically, to the extent it would have been exercisable as
of the next vesting date. In the case of either death or disability, the Option
must be exercised within three months after the date of death or onset of
disability, and prior to the original expiration date of the Option.
The Committee may award shares of Enterprise Common Stock (or grant an Award
denominated in units consisting of shares of Enterprise Common Stock) on a
restricted basis. The terms of a Restricted Stock Award, including the
consideration, if any, to be paid by the Participant to acquire the stock and
the restrictions placed upon such shares and the time or times or event or
events upon which such restrictions will lapse, are determined by the Committee
at the time the Award is made and are described in the Award agreement. After
the Restricted Stock is awarded, the Participant is a stockholder with respect
to such stock, and has rights to vote and receive dividends with respect to such
stock. Shares of Restricted Stock may not be transferred, assigned or pledged
prior to the lapse of the applicable restrictions. The Committee, in its
discretion, may accelerate the date on which the restrictions lapse.
39
<PAGE>
The Committee may award SARs either alone, in tandem or in combination with
an Option or other Award. A SAR will permit the Participant to receive, upon
exercise, cash or shares of Enterprise Common Stock equal in value to the excess
of the fair market value of a share of Enterprise Common Stock as of the
exercise date over the base price set by the Committee at the time the SAR is
granted, multiplied by the number of shares of Enterprise Common Stock then
being exercised under the SAR. The base price will be at least the fair market
value of a share of Enterprise Common Stock on the date of grant, unless a lower
base price is approved by the Enterprise Board. SARs become exercisable upon the
date or dates, or the occurrence of the events, set by the Committee at the time
of grant. A SAR may only be exercised by the Participant or, if applicable, by
the Participant's personal representative.
Under the provisions of the Enterprise Stock Plan, all members of the
Enterprise Board who are not employees of Enterprise will receive an option to
purchase 5,000 shares of Enterprise Common Stock. The Option is granted on the
date such person is first appointed or elected to the Enterprise Board. Each
Option issued to a non-employee member of the Enterprise Board becomes
exercisable in equal annual installments on the first through third
anniversaries of the date of grant; provided, however, each such Option becomes
immediately exercisable if the non-employee director ceases to be a director
because of death or disability.
The Committee may award cash payments under the Enterprise Stock Plan,
subject to restrictions and conditions and other terms as determined by the
Committee at the time of the Award. A cash Award will be subject to cancellation
or forfeiture upon the terms set forth above.
FEDERAL INCOME TAX EFFECTS. Under the Code, as presently in effect, the
grant of an Option or SAR or the award of Restricted Stock under the Enterprise
Stock Plan will not generate federal income to a Participant or a deduction to
Enterprise.
Upon exercise of a Non-Qualified Option or a SAR, the Participant is
normally deemed to have received ordinary income in an amount equal to the
difference between the exercise price for the Option and the fair market value
of Enterprise's Common Stock on the exercise date or, in the case of a SAR,
equal to the amount of payment received from Enterprise (less any exercise
price, if applicable). Enterprise is generally entitled to a tax deduction in
the same amount as is recognized by the Participant and at the same time. Upon a
disposition of shares acquired upon exercise of a Non-Qualified Option, any
amount received in excess of the market value of the shares at the time of
exercise of the Option generally is treated as long-term or short-term capital
gain, depending on the holding period of the shares. Enterprise is not entitled
to any tax deduction upon such subsequent disposition.
In the case of Incentive Options, the Participant recognizes no ordinary
income on the date of grant or exercise. If the Participant holds the stock
acquired through exercise of an Incentive Option for one year from the date of
exercise and two years from the date of grant, the Participant thereafter
recognizes long-term capital gain or loss upon a subsequent sale of the stock,
based on the difference between the Incentive Option's exercise price and the
sale price. If the stock is sold before the requisite holding period, the
Participant recognizes ordinary income based upon the difference between the
exercise price and the lesser of the sales price or the fair market value upon
the date of exercise. Enterprise generally is allowed a business expense
deduction only if, and to the extent, the Participant recognizes ordinary
income.
For Awards of Restricted Stock, the fair market value of the stock is not
taxable to the Participant as ordinary income until the year the Participant's
interest is freely transferable or no longer subject to a substantial risk of
forfeiture. Section 83 of the Code, however, permits a Participant to elect to
have the fair market value of the stock taxed as ordinary income in the year the
Award is received. Dividends on Restricted Stock are treated as ordinary income
at the time paid. Enterprise generally is entitled to a deduction equal to the
amount of ordinary income recognized by the Participant.
40
<PAGE>
Upon the grant of a cash award, the Participant recognizes ordinary income
equal to the amount of the Award, which amount will be includable in the
Participant's taxable income in the year such cash award is paid. Enterprise is
entitled to a deduction in the same year equal to the amount of the Award.
NEW PLAN BENEFITS
Subject to the approval of the amendment of the Enterprise Stock Plan by
Enterprise's stockholders, options to purchase an aggregate of 296,339 shares of
Enterprise Common Stock will be received by or allocated to each of the
following:
<TABLE>
<CAPTION>
OPTION AWARDS(1)
NAME OF PERSON OR IDENTITY OF GROUP (NO. OF SHARES)
- -------------------------------------------------------------------------------------- ----------------
<S> <C>
Glen E. Tullman....................................................................... 20,000
Chief Executive Officer
Joseph E. Carey....................................................................... 20,000
President
David B. Mullen....................................................................... 20,000
Chief Financial Officer
Steven M. Katz........................................................................ 20,000
Chief Operating Officer
David A. Carlson...................................................................... 5,000
Executive Vice President
Executive Group....................................................................... 135,800
Non-Executive Director Group.......................................................... 86,667
Non-Executive Officer Employee Group.................................................. 73,872
</TABLE>
- ------------------------
(1) The stock options have a term of ten years, but are subject to earlier
cancellation under certain circumstances. The exercise price is $15.50, the
closing price of Enterprise Common Stock on the date of grant.
VOTE REQUIRED; RECOMMENDATION OF THE ENTERPRISE BOARD
The amendment to the Enterprise Stock Plan became effective on December 5,
1996 by resolution of the Enterprise Board, subject to its approval by
Enterprise stockholders. Accordingly, approval of the Enterprise Stock Plan
requires the affirmative vote of the holders of a majority of the shares of
Enterprise Common Stock outstanding as of the Record Date and present in person
or by proxy at the Meeting. If the amendment and the Merger are both approved by
the holders of Enterprise Common Stock, the 1996-1997 Options will vest and,
pursuant to the terms of the Merger Agreement, will be assumed by HBOC.
Regardless of whether the Merger is approved, if the amendment is not approved,
the 1996-1997 Options will be cancelled. Approval of the amendment will not
affect the Exchange Ratio or the number of shares of HBOC Common Stock issuable
to holders of Enterprise Common Stock. THE ENTERPRISE BOARD RECOMMENDS A VOTE
FOR APPROVAL OF THE AMENDMENT OF THE ENTERPRISE STOCK PLAN. THE PROXIES
SOLICITED BY AND ON BEHALF OF THE ENTERPRISE BOARD WILL BE VOTED FOR APPROVAL OF
THE AMENDMENT OF THE ENTERPRISE STOCK PLAN, UNLESS A CONTRARY CHOICE IS
SPECIFIED IN THE PROXY.
INTERESTS OF CERTAIN PERSONS IN EACH OF HBOC AND ENTERPRISE
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
41
<PAGE>
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) ............ 2,747,371(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.
(2) According to the joint Schedule 13G as of December 31, 1996, of Putnam
Investments, Inc. ("PI"), its parent, Marsh & 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 though 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.
42
<PAGE>
(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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ENTERPRISE
The following table sets forth, as of May 22, 1997, unless otherwise
indicated, certain information with respect to all stockholders known to
Enterprise to beneficially own more than five percent of the Enterprise Common
Stock, and information with respect to Enterprise Common Stock beneficially
owned by each director of Enterprise, the Chief Executive Officer of Enterprise
and Enterprise's four other most highly compensated executive officers for the
year ended December 31, 1996, and all directors and executive officers of
Enterprise as a group. Except as otherwise indicated, the stockholders listed in
the table have sole voting and investment powers with respect to Enterprise
Common Stock owned by them, subject to community property laws where applicable,
and beneficial ownership is determined in accordance with the rules of the
Commission.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP SHARES(1)
- ----------------------------------------------------------------------------- ---------------------- ---------------
<S> <C> <C>
Enterprise 401(k) Retirement Plan............................................ 747,604(2) 9.0%
Glen E. Tullman.............................................................. 170,599(3) 2.1%
Joseph E. Carey.............................................................. 77,870(4) *
David B. Mullen.............................................................. 50,150(5) *
Steven M. Katz............................................................... 36,443(6) *
David A. Carlson............................................................. 142,200(7) 1.7%
Thomas R. Hutchison.......................................................... 121,667(8) 1.5%
Robert A. Compton............................................................ 13,723(9) *
M. Fazle Husain.............................................................. -- (10) --
Bernard Goldstein............................................................ 104,228(11) 1.3%
Thomas R. Pirelli............................................................ 1,448,723(12) 17.5%
Putnam Investments, Inc...................................................... 568,200(13) 6.9%
Morgan Stanley Venture Capital Fund II, L.P.................................. 657,857(14) 7.9%
All Directors and Executive Officers as a Group (11 persons)................. 735,214(15) 8.6%
</TABLE>
- ------------------------
* Less than 1%.
(1) Applicable percentage of ownership as of May 22, 1997 is based upon
8,271,255 shares of Common Stock outstanding. Shares of Enterprise Common
Stock subject to options currently exercisable or exercisable prior to July
21, 1997 are deemed outstanding for computing the percentage ownership of
the person holding such options, but are not deemed outstanding for
computing the percentage ownership of any other person.
(2) Includes 20,802, 21,984 and 29,496 shares held in the Enterprise 401(k)
Retirement Plan (the "401(k) Plan") beneficially owned by Messrs. Carey,
Carlson and Pirelli, respectively. The trustee of the 401(k) Plan is Emjay
Corporation, 725 West Glendale Avenue, Glendale, Wisconsin 53209.
(3) Includes options to purchase 44,907 shares of Enterprise Common Stock.
(4) Includes options to purchase 56,668 shares of Enterprise Common Stock and
20,802 shares of Enterprise Common Stock held in the 401(k) Plan.
43
<PAGE>
(5) Includes options to purchase 46,250 shares of Enterprise Common Stock.
(6) Includes options to purchase 36,043 shares of Enterprise Common Stock.
(7) Includes options to purchase 56,667 shares of Enterprise Common Stock,
21,984 shares of Enterprise Common Stock held in the 401(k) Plan, and 63,549
shares of Enterprise Common Stock held in the David A. Carlson Trust dated
October 12, 1992.
(8) Includes options to purchase 6,667 shares of Enterprise Common Stock. Mr.
Hutchison serves as the trustee of an irrevocable trust for each of Mr.
Pirelli's two daughters and has beneficial ownership of 100,000 shares of
Enterprise Common Stock held in such trusts (the "Trusts"). Mr. Pirelli is a
principal stockholder of Enterprise.
(9) Includes options to purchase 6,667 shares of Enterprise Common Stock.
(10) Mr. Husain disclaims beneficial ownership of the shares held by Morgan
Stanley Venture Capital Fund II, L.P. and affiliated entities. See note 14
below.
(11) Includes options to purchase 21,667 shares of Enterprise Common Stock.
(12) Includes 29,496 shares of Enterprise Common Stock held in the 401(k) Plan,
1,356,119 shares of Enterprise Common Stock held in the Thomas R. Pirelli
Trust U/A/D January 26, 1990 and 43,445 shares held by the Thomas R. Pirelli
Foundation. Mr. Pirelli is a trustee of the foundation. Mr. Pirelli
disclaims beneficial ownership in the 100,000 shares of Enterprise Common
Stock held in the Trusts. Mr. Pirelli's address is 909 East Oakhurst,
Riverwoods, Illinois 60015.
(13) The address of Putnam Investments, Inc. is One Post Office Square, Boston,
Massachusetts 02109.
(14) Includes options to purchase 15,000 shares of Enterprise Common Stock and
161,266 shares of Enterprise Common Stock held by Morgan Stanley Venture
Investors, L.P. ("MSVI") and 78,713 shares of Enterprise Common Stock held
by Morgan Stanley Venture Capital Fund II, C.V. ("MSCV"). The managing
general partner of Morgan Stanley Venture Capital Fund II, L.P., MSVI and
MSCV is Morgan Stanley Venture Capital II, Inc., a wholly owned subsidiary
of Morgan Stanley Group Inc. The address of each of Morgan Stanley Venture
Capital Fund II, L.P., MSVI and MSCV is 1221 Avenue of the Americas, New
York, New York 10020.
(15) Includes options to purchase 293,870 shares of Enterprise Common Stock and
42,786 shares of Enterprise Common Stock held in the 401(k) Plan.
INTERESTS OF CERTAIN ENTERPRISE PERSONS IN MATTERS TO BE ACTED UPON
In considering the Merger, holders of Enterprise Common Stock should be
aware that the directors and executive officers of Enterprise have interests in
the Merger in addition to their interests as stockholders of Enterprise
generally, as described below.
Pursuant to certain agreements, certain persons who have served as executive
officers of Enterprise at any time since January 1, 1996 are entitled to receive
severance payments if their employment is terminated under certain
circumstances. If Enterprise elects not to renew the employment of Joseph E.
Carey, David A. Carlson, Stanley A. Crane, Steven M. Katz, David B. Mullen,
Robert W. Rook, Jr. or Glen E. Tullman at the end of the term of his respective
employment agreement or if Enterprise terminates any such executive officer's
employment without cause, as defined in the agreements, such executive officer
would be entitled to (i) his salary through his final date of active employment
plus any accrued but unused vacation pay, (ii) an amount equal to his then
current salary, payable over a twelve month period, and (iii) any benefits
mandated by the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
or required under any death, insurance or retirement plan, program or agreement
provided by Enterprise or to which such executive officer is a party or
participant. If within twelve months of a change in control, such as the Merger,
any such executive officer's employment is terminated without cause or if the
executive
44
<PAGE>
officer elects to terminate his employment within 30 days of either a material
modification, without his consent, of his principal duties or a request that he
relocate, without his consent, his residence greater than 50 miles from his then
current residence, then such executive officer shall receive the following
additional benefits: (1) any unvested options to purchase Enterprise Common
Stock granted to such executive officer shall immediately vest; (2) 100% of the
bonus to which such executive officer would have been entitled had he remained
employed until the last day of the then current calendar year (and then been
terminated); and (3) payment of health insurance premiums for the duration of
the COBRA continuation period for such executive officer and any dependents.
Each agreement has an initial term of one year, is renewable for successive
periods of one year after expiration of each term and is terminable by either
party by written notice at least 30 days prior to the expiration of such term.
Currently the base salary of each of these executive officers is as follows: Mr.
Carey: $205,000; Mr. Carlson: $135,000; Mr. Crane: $170,000; Mr. Katz: $220,000;
Mr. Mullen: $230,000; Mr. Rook: $130,000; and Mr. Tullman: $275,000.
Enterprise has granted a number of the 1996-1997 Options to certain persons
who have served as executive officers and directors of Enterprise at any time
since January 1, 1996. Such grants are contingent upon the approval of the
proposal to amend the Enterprise Stock Plan to increase the number of shares
issuable thereunder. See "Approval of Amendment of Enterprise Systems, Inc.
Long-Term Incentive Plan." If the amendment of the Enterprise Stock Plan is
approved by the Enterprise stockholders, the 1996-1997 Options will vest as to
the following number of shares of Enterprise Common Stock: Mr. Carey: 20,000
shares; Mr. Carlson: 5,000 shares; Mr. Compton: 20,000 shares; Mr. Crane: 20,000
shares; Mr. Goldstein: 20,000 shares; MSVI: 20,000 shares; Mr. Hutchison: 26,667
shares; Mr. Katz: 20,000 shares; Mr. Mullen: 20,000 shares; Mr. Rook: 30,800
shares; and Mr. Tullman: 20,000 shares.
Pursuant to the provisions of the Enterprise Stock Plan, as a result of the
Merger, all unvested and unexercisable option grants will vest and become
exercisable. Accordingly, as a result of the Merger, options held by the
following directors and executive officers will vest as to the following number
of shares of Enterprise Common Stock, including the 1996-1997 Options: Mr.
Carey: 39,166 shares; Mr. Carlson: 10,833 shares; Mr. Compton: 13,333 shares;
Mr. Crane: 41,666 shares; Mr. Goldstein: 13,333 shares; MSVI: 20,000 shares; Mr.
Hutchison: 20,000 shares; Mr. Katz: 52,916 shares; Mr. Mullen: 56,250 shares;
Mr. Rook: 30,800 shares; and Mr. Tullman: 77,939 shares.
Bernard Goldstein, a director of Enterprise, is a Director of Broadview.
Pursuant to an agreement between Enterprise and Broadview, Broadview will
receive a fee of approximately $1.4 million upon consummation of the Merger and
will be reimbursed for reasonable out-of-pocket expenses incurred in connection
therewith. See "The Merger Proposal -- Opinion of Financial Advisor of
Enterprise."
HBOC-GA has agreed that subsequent to the Closing Date, it will provide to
the directors and officers of Enterprise indemnification in accordance with the
current provisions of the Certificate of Incorporation and By-laws of Enterprise
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 Enterprise 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 Enterprise, provided that
the premiums therefor are no greater than 100% of the annual premiums for such
coverage as of the date of the Merger Agreement.
45
<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF
HBOC COMMON STOCK AND ENTERPRISE COMMON STOCK
INTRODUCTION
HBOC and Enterprise are each incorporated under the laws of the State of
Delaware. The holders of shares of Enterprise Common Stock, whose rights as
stockholders are currently governed by Delaware law, the Amended and Restated
Certificate of Incorporation of Enterprise (the "Enterprise Charter") and the
Amended and Restated By-laws of Enterprise (the "Enterprise 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 Enterprise Common Stock
and 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 Enterprise Common Stock under applicable Delaware
law, the Enterprise Charter and Enterprise 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 Enterprise, to
which holders of shares of Enterprise 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 Enterprise Charter provides that Enterprise has the
authority to issue (i) 30,000,000 shares of Enterprise Common Stock and (ii)
1,000,000 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 Enterprise Charter also grants such power to the Enterprise
Board. The Enterprise 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 voted on
46
<PAGE>
by the stockholders of HBOC. The holders of shares of Enterprise Common Stock
are entitled to one vote per share on all matters to be submitted to a vote of
the stockholders of Enterprise.
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 Enterprise Charter specifies that the number
of directors shall be not less than six nor more than nine, such number to be
established by the Enterprise Board. The Enterprise Charter further provides
that the Enterprise Board shall be divided into three classes, as nearly equal
in number as possible. The number of directors constituting the Enterprise Board
is currently five.
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 Enterprise 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 shares of HBOC Common
Stock to approve certain business combinations, except under certain
circumstances. The Enterprise 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 Enterprise
Charter and the Enterprise Bylaws provide that special meetings of stockholders
may be called by a majority of the Enterprise Board or upon the written request
of stockholders owning at least 50% of the entire capital stock of Enterprise
issued, outstanding and entitled to vote. The written notice of a special
meeting shall state the purpose or purposes for which the meeting is called.
47
<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. Both the HBOC Charter and the Enterprise 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
and 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 may also provide
that such provision 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 Enterprise Charter contains no provisions
requiring a vote greater than that specified in the DGCL to amend the Enterprise
Charter, except for those provisions relating to its board of directors and
actions of stockholders.
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 Enterprise Charter provides that the
Enterprise Bylaws may be adopted, amended or repealed either by the Enterprise
Board or by holders of at least two-thirds of the voting power of the shares of
Enterprise entitled to vote generally in the election of directors.
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 a
dividend 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
48
<PAGE>
Charter and the Enterprise 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 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 Enterprise
Charter provide to directors and officers of HBOC and Enterprise, respectively,
indemnification to the fullest extent provided by law. Additionally, the HBOC
Bylaws and the Enterprise 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 Enterprise, 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 Enterprise 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. Enterprise has
not opted out of Section 203 in the Enterprise Charter or Bylaws.
APPRAISAL RIGHTS
Generally, no appraisal rights are available under the DGCL for shares of
any class of stock which are (i) listed on a national securities exchange or
designated as a national market system security on an inter-dealer 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
49
<PAGE>
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, (c) cash in lieu of fractional shares or (d) 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 Enterprise Charter contains such a
provision on appraisal rights.
The holders of shares of Enterprise Common Stock are not entitled to
appraisal rights in connection with the Merger pursuant to Section 262 of the
DGCL because Enterprise Common Stock is designated as a national market system
security on the Nasdaq NM.
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 has entered into an Agreement of Merger dated February 10, 1997 among
HBOC, HBOC-GA and AMISYS. If such agreement is approved by the stockholders of
AMISYS at a special meeting scheduled to occur on June 13, 1997 and all other
conditions to closing are satisfied, up to 3,089,217 shares of HBOC Common Stock
will be issued to such stockholders in connection with the merger of AMISYS with
and into HBOC-GA. AMISYS develops, markets and supports managed healthcare
information systems for payers and providers who offer managed care products and
services.
BUSINESS OF ENTERPRISE
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. These
resource management systems, which are sold primarily to acute care hospitals,
focus on materials and financial management, operating room logistics, patient
and staff scheduling and decision support systems. These systems enable
healthcare providers to improve productivity through the
50
<PAGE>
redesign and automation of operational processes and to obtain the information
necessary to measure and control costs. Enterprise's healthcare information
systems operate on personal computer networks and make extensive use of
electronic data interchange, enabling Enterprise's customers to redesign their
resource management functions to enhance efficiency and productivity.
As of February 28, 1997, Enterprise had 436 full-time employees.
STOCKHOLDER PROPOSALS
If the Merger is not consummated, proposals of stockholders intended to be
presented at Enterprise's 1997 annual meeting of stockholders were required to
be received by Enterprise by December 20, 1996 for inclusion in Enterprise'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
Enterprise.
OTHER MATTERS
The management of Enterprise 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 have been
passed upon for HBOC by Jones, Day, Reavis & Pogue, Atlanta, Georgia. Certain
tax matters in connection with the Merger have been passed upon for Enterprise
by Sachnoff & Weaver, Ltd., Chicago, Illinois.
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.
With respect to the unaudited interim financial information of HBOC for the
quarters ended March 31, 1996 and 1997, which are incorporated by reference
herein, Arthur Andersen LLP has applied limited procedures in accordance with
professional standards for a review of that information. However, their separate
report thereon states that they did not audit and they do not express an opinion
on that interim financial information. Accordingly, the degree of reliance on
their report on that information should be restricted in light of the limited
nature of the review procedure applied. In addition, the accountants are not
subject to the liability provisions of Section 11 of the Securities Act, for
their report on the unaudited interim financial information because that report
is not a "report" or a "part" of the Registration Statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act.
The consolidated financial statements of Enterprise incorporated by
reference in Enterprise'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 KPMG
Peat Marwick LLP, independent auditors, as set forth in their report thereon
incorporated by reference therein 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.
With respect to the unaudited interim consolidated financial information for
Enterprise for the periods ended March 31, 1997 and 1996, incorporated by
reference in the Registration Statement on Form
51
<PAGE>
S-4 of HBO & Company, the independent certified public accountants, KPMG Peat
Marwick LLP, have reported that they applied limited procedures in accordance
with professional standards for a review of such information. However, their
separate report included in Enterprise's quarterly report on Form 10-Q for the
quarter ended March 31, 1997, and incorporated by reference herein, states that
they did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature of the review
procedures applied. The accountants are not subject to the liability provisions
of Section 11 of the Securities Act for their report on the unaudited interim
consolidated financial information because that report is not a "report" or a
"part" of the registration statement prepared or certified by the accountants
within the meaning of Sections 7 and 11 of the Securities Act.
52
<PAGE>
APPENDIX A
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, made this 13th day of March, 1997, by and among
HBO & Company, a Delaware corporation ("Parent"); HBO & Company of Georgia, a
Delaware corporation (hereinafter referred to as "Purchaser"); and Enterprise
Systems, Inc., a Delaware corporation (hereinafter referred to as the "Acquired
Company");
W I T N E S S E T H:
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 Purchaser acquire the Acquired Company, and, on or prior to
the date hereof, such Boards of Directors have approved the acquisition of the
Acquired Company 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 Enterprise 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, $.01 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
hereof.
1.11 "Closing" shall have the meaning set forth in Section 2.1.9 hereof.
1.12 "Closing Date" shall mean the date on which the Closing occurs
pursuant to Section 8.1 hereof.
1.13 "Covenants Not to Compete" shall mean the Covenants Not to Compete
referred to in Section 6.11.
1.14 "Customer Contracts" shall mean all contracts, agreements,
commitments or other instruments in effect with any customer of the Acquired
Company or any Subsidiary other than the Specified Customer Contracts.
1.15 "Delaware Code" shall mean the Delaware General Corporation Law.
1.16 "DOL" shall mean the United States Department of Labor.
<PAGE>
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 the Acquired Company,
any Person that is required to be aggregated with the Acquired Company 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 in respect of each share of Acquired Company Stock constituting a
fraction of a 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 "401(k) Plan" shall mean the Enterprise Systems, Inc. 401(k)
Retirement Plan.
1.26 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust and
Improvements Act of 1976, as amended.
1.27 "Hazardous Substance" shall have the meaning set forth in Section
3.18.
1.28 "1996 Financial Statements" shall have the meaning set forth in
Section 3.5.1.
1.29 "IRS" shall mean the United States Internal Revenue Service.
1.30 "Licensed Software" shall have the meaning set forth in Section
3.14.2(ii).
1.31 "Material Adverse Effect" shall mean a material adverse effect on
the businesses, properties, rights, financial condition or results of
operations of the corporation in question and its subsidiaries, taken as a
whole.
1.32 "Material Contract" shall have the meaning set forth in Section
3.12.
1.33 "Merger" shall mean the merger of the Acquired Company with and
into Purchaser, as set forth in Section 2.1.1.
1.34 "Merger Consideration" shall have the meaning set forth in Section
2.1.6(a).
1.35 "Nasdaq" shall mean the Nasdaq National Market of the Nasdaq Stock
Market, Inc.
1.36 "1994, 1995 and 1996 Financial Statements" shall have the meaning
set forth in Section 3.5.1.
1.37 "1933 Act" shall mean the Securities Act of 1933, as amended.
1.38 "Owned Software" shall have the meaning set forth in the first
paragraph of Section 3.13.
1.39 "Parent" shall mean HBO & Company, a Delaware corporation, which is
the sole stockholder of Purchaser.
1.40 "Parent Reports" shall have the meaning set forth in Section 4.5.
1.41 "Parent Stock" shall mean the common stock, $0.05 par value per
share, of Parent.
A-2
<PAGE>
1.42 "Parent Subsidiaries" shall mean the current subsidiaries of
Parent, as the same are identified in the Parent Reports.
1.43 "PBGC" shall mean the Pension Benefit Guaranty Corporation
established under Title IV of ERISA.
1.44 "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.
1.45 "Pooling Letter" shall have the meaning set forth in Section
2.4(b).
1.46 "Purchaser" shall mean HBO & Company of Georgia, a Delaware
corporation.
1.47 "Real Property" shall have the meaning set forth in Section 3.18.
1.48 "Registration Statement" shall have the meaning set forth in
Section 2.3.1.
1.49 "Rule 145 Letters" shall have the meaning set forth in Section
2.4(a).
1.50 "SEC" shall mean the Securities and Exchange Commission.
1.51 "Specified Customer Contracts" shall mean all contracts,
agreements, commitments and other instruments (whether oral or written) in
effect with any customer of the Acquired Company or any Subsidiary that
involve (i) software or other products not fully installed and with
remaining payments thereunder in excess of $100,000 as of the date hereof,
or (ii) maintenance, support or other services, which require payments or
provide for receipts in excess of $4,000 per month.
1.52 "Stock Plan" shall mean the Enterprise Systems, Inc. Long-Term
Incentive Plan which amended and restated the Enterprise Systems, Inc. 1993
Stock Option Plan, as supplemented.
1.53 "Subsidiaries" shall mean the subsidiaries of the Acquired Company
which are listed on EXHIBIT 3.1 hereto.
1.54 "Surviving Corporation" shall have the meaning set forth in Section
2.1.1 hereof.
1.55 "Takeover Proposal" shall have the meaning set forth in Section
2.11 hereof.
1.56 "Tax Code" shall mean the Internal Revenue Code of 1986, as
amended.
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.
A-3
<PAGE>
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.
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 the right to receive five tenths (.50) of a share
of Parent Stock, deliverable to the holder thereof without interest on the
value thereof, upon the surrender of the certificate(s) formerly
representing such outstanding share, provided, however, that:
(i) If the average closing price per share as reported by Nasdaq
(or if there is no sale on such date then the average between the
closing bid and ask prices on any such day) for shares of Parent
Stock during the twenty (20) 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 (the
"Market Value"), is equal to or greater than $60 per share but not
greater than $68 per share, then each share of Acquired Company Stock
shall be converted into that fraction of a share of Parent Stock
which, when multiplied by the Market Value, will equal to $30;
(ii) If the Market Value is less than $60 per share, then each
share of Acquired Company Stock shall be converted, as stated above,
into five tenths (.50) of a share of Parent Stock; provided, however,
that in the event that the Market Value is less than $50 per share,
then the Acquired Company shall have the right to terminate the
Merger prior to Closing pursuant to Section 10.1.6;
(iii) If the Market Value is greater than $68 per share, but is
$72 per share or less, then each share of Acquired Company Stock
shall be converted into four thousand four hundred twelve ten
thousandths(.4412) of a share of Parent Stock; and
(iv) If the Market Value is greater than $72 per share, then each
share of Acquired Company Stock shall be converted into a fraction of
a share of Parent Stock which, when multiplied by the Market Value,
will equal $31.77.
(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-4
<PAGE>
fractional shares, 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
fractions thereof, receivable by each Acquired Company stockholder as
described in Section 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 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.
(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.
A-5
<PAGE>
(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 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. In the event that Parent at any time or
from time to time shall fix a record date, which record date is after the
date of this Agreement but prior to the Effective Time, for the
determination of holders of Parent Stock entitled to receive a dividend
or other distribution payable in additional shares of Parent Stock, cash
(except Parent's regular quarterly dividend), or any other property, then
and in each such event, regardless of whether such dividend is to be paid
prior to or after the Effective Time, the Merger Consideration payable
hereunder per share of Acquired Company Stock shall be increased to
reflect such dividend or distribution as though each stockholder of the
Acquired Company were, as of such issuance or record date, a holder of
record of that number of shares of Parent Stock comprising the Merger
Consideration otherwise payable to such stockholder pursuant to Section
2.1.6(a).
2.1.7. STOCK PLAN. 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 Plan (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 Section 2.1.7, 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. Parent shall take all corporate action necessary to reserve and
make available for issuance a sufficient number of shares of Parent Stock
for delivery under the Assumed Options.
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
A-6
<PAGE>
(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. TERMINATION OF 401(K) PLAN. 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 immediately
preceding the Closing Date. In addition, participants in the 401(k) Plan
shall make no further deferrals with respect to compensation for services
performed after such termination date and the Acquired Company shall make no
further employer contributions to the 401(k) Plan after such date, other
than (i) employee compensation deferrals and (ii) matching contributions
with respect to employee deferrals of compensation for services through the
termination date. Parent and Purchaser shall take such action that will
permit current participants in the 401(k) Plan who are employed by Purchaser
to (x) participate in the HBO & Company Profit Sharing and Savings Plan
within ten (10) business days after the Closing Date and (y) credit each
such participant's years of service under the 401(k) Plan toward 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 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
A-7
<PAGE>
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 and the Subsidiaries
(including the respective affiliates of any of them), 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"). 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 untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein not 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, the Subsidiaries or any of their respective businesses, assets,
directors, officers, or stockholders or any other affiliates or other
matters pertaining to the Acquired Company or any of the Subsidiaries 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 1933 Act and the
rules and regulations thereunder and the 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, KPMG Peat
Marwick LLP, 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 opinion to the effect that
the Acquired Company satisfies the tests applicable to it such that the
Merger can be accounted for as a "pooling of interests", which opinion
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
A-8
<PAGE>
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.
2.3.4. Parent covenants that the Registration Statement, including
Parent Reports and other Parent SEC filings incorporated by reference
therein, 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 untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein not misleading; except 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. 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 immediately notify
the Acquired Company and use its reasonable efforts to 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. Parent covenants that 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 1933 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 and the Acquired Company shall use all their reasonable
best efforts to file all reports to be filed by each of them on a timely
basis under the 1933 Act or the Exchange Act and the rules and regulations
adopted by the SEC thereunder. Parent and the Acquired Company shall use
their reasonable best efforts to take such further action as may be
necessary to ensure that the requirements of Rule 144(c) under the 1933 Act
are satisfied so as to enable any "affiliates" of the Acquired Company (as
that term is used in Rule 145 under the 1933 Act) 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 its 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. Within five (5) days following the Closing Date, Parent shall
file a registration statement covering shares of Parent Stock issuable
pursuant to the Stock Plan; although such obligation is subject to and
conditional on the Acquired Company timely providing Parent with all
information requested by Parent in connection therewith.
A-9
<PAGE>
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 1933 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 1933 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,
the Acquired Company, the Subsidiaries 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 directors, officers, employees and affiliates are aware, and that it
has advised such persons 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 AND ITS SUBSIDIARIES
PRIOR TO CLOSING.
2.6.1. Except (i) with the prior consent in writing of Purchaser, (ii)
as may be required to effect the transactions contemplated by this
Agreement, or (iii) as provided otherwise in this Agreement, the Acquired
Company covenants that, between the date of this Agreement and the Effective
Time, the Acquired Company and the Subsidiaries will conduct their
respective business in the ordinary course, and that they will:
(a) preserve the organization of the Acquired Company and the
Subsidiaries intact and use its reasonable best efforts to preserve the
goodwill of customers and others having business relations with the
Acquired Company or the Subsidiaries;
(b) use its reasonable best efforts to maintain the properties of the
Acquired Company and the Subsidiaries 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 their
respective assets except in the ordinary course of business;
(d) use its reasonable best efforts to keep in force at no less than
their present limits all existing policies of insurance or comparable
replacements thereof insuring the Acquired Company, the Subsidiaries and
their respective properties;
(e) not enter into any Material Contract or Specified Customer
Contract, 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 or any of the Subsidiaries
(except that the Acquired Company and the Subsidiaries may enter into new
license agreements and support and maintenance agreements and other
agreements with customers in the ordinary course of business on terms and
prices generally consistent with historical practices giving due
consideration to the scope of any such agreement);
(f) not make or permit any change in the Acquired Company's or any of
the Subsidiaries' Articles or Certificates of Incorporation or Bylaws, or
in their authorized, issued or outstanding
A-10
<PAGE>
securities (except for the issuance of Acquired Company Stock pursuant to
exercise of stock options pursuant to the Stock Plan);
(g) except as otherwise set forth in EXHIBIT 2.6.1(G), not grant any
stock option or right to purchase any security of the Acquired Company or
any of the Subsidiaries, 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) except as otherwise set forth in EXHIBIT 2.6.1(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 and the Subsidiaries;
(j) not issue any notes, bonds or other debt security, or create,
incur, assume or guarantee any indebtedness for borrowed money other than
in the ordinary course of business under the Acquired Company's revolving
credit facility;
(k) not issue any shares of Acquired Company Stock or of any
Subsidiary other than shares of Acquired Company Stock 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 to purchase Acquired Company Stock
except as may occur automatically as a result of the operation of the
Stock Plan without amendment in connection with the Merger;
(m) except as otherwise set forth in EXHIBIT 2.6.1(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 or 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 or permit any Subsidiary to 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 and the Subsidiaries' 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
or the applicable Subsidiary 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.
A-11
<PAGE>
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 and the
Subsidiaries 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 and the
Subsidiaries that may be reasonably requested. Between the date of this
Agreement and the Effective Time Parent shall allow any executive officer of
the Acquired Company access to the Chief Financial Officer of Parent to make
inquiries and request and receive information in respect of Parent or
Purchaser deemed by such Chief Financial Officer in the exercise of his
judgment as reasonably requested by the Acquired Company in the context of
the transactions provided for herein. 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 under this Agreement, 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. In addition, the Parent and the Acquired
Company are parties to that certain Confidentiality Agreement dated January
2, 1997, which the parties hereto acknowledge and affirm shall remain in
full force and effect until the Closing Date.
2.9 CONSENTS AND APPROVALS. The Acquired Company shall use its, and shall
cause the Subsidiaries to use their, reasonable best efforts (without requiring
the payment of money) to obtain the waiver, consent and approval of all persons
(other than parties to Customer Contracts or Specified Customer Contracts except
to the extent identified on EXHIBIT 3.13(D)) whose waiver, consent or approval
(i) is required in order to consummate the transactions contemplated by this
Agreement, including without limitation, the Merger and the merger or
dissolution of the Subsidiaries pursuant to Section 2.15, or (ii) is required by
any agreement, lease, instrument, arrangement, judgment, decree, order or
license to which the Acquired Company or any Subsidiary 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, or otherwise conflict with or be in contravention of, 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. The failure of the Acquired Company to obtain such waiver, consent
or approval (after using its reasonable best efforts to do so) shall not
constitute a breach of, or a default under this Agreement.
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 and the Subsidiaries
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 shall not permit
any of the Subsidiaries to, and the Acquired Company and the Subsidiaries 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 or any of the Subsidiaries to, solicit, initiate, encourage
(including by way of
A-12
<PAGE>
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 immediately advise
Purchaser orally and in writing 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 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, after receiving written advice of its
outside counsel, that such action would be required under applicable law in the
exercise of its fiduciary duties. The Acquired Company will immediately 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 of the Subsidiaries or any proposal or offer to acquire in any
manner a substantial equity interest in the Acquired Company or any of the
Subsidiaries or a substantial portion of the assets of the Acquired Company or
any of the Subsidiaries.
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/or certain of
its stockholders that 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
A-13
<PAGE>
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). To the fullest extent permitted by applicable law, the Purchaser
shall advance expenses in connection with the foregoing indemnification. The
Parent shall cause to be maintained in effect for twelve (12) months following
the Closing Date 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 percent (100%) 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 officers' liability insurance). In the event that the
premiums for the continued coverage exceed 100% of the premiums for the coverage
as of the date hereof (the "100% 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 100% Amount.
2.15 SUBSIDIARIES. The parties hereto agree that on the Closing Date,
Purchaser and Acquired Company will cause the Subsidiaries to be liquidated,
which may be effected, at the option of Purchaser, by corporate merger of the
Subsidiaries with and into Purchaser or any subsidiary or subsidiaries of
Purchaser or by corporate dissolution of the Subsidiaries.
2.16 CERTAIN REPORTS. In the event the Merger is effective in the month of
May, 1997, Parent will use its reasonable best efforts to include the combined
results of operations of Parent, Purchaser and Acquired Company for the first
full month following the effective date of the Merger in Parent's 10-Q Quarterly
Report for the quarter ending June 30, 1997. In the event the Merger is
effective after May, 1997, Parent agrees to use its reasonable best efforts to
make publicly available through a filing with the SEC the combined results of
operations of Parent, Purchaser and Acquired Company for the first full calendar
month subsequent to the Effective Date of the Merger, within thirty (30) days of
the close of such first full calendar month.
2.17 REASONABLE BEST EFFORTS. Parent, Purchaser and the Acquired Company
shall use their respective reasonable best efforts to (a) promptly make all
filings and seek to obtain all authorizations required under all applicable law
with respect to the Merger and the other transactions contemplated hereby and
will cooperate with each other with respect thereto; (b) promptly take all other
actions and do, or cause to be done, all other things necessary, proper or
appropriate to satisfy the conditions set forth in Articles V, VI, and VII and
to consummate and make effective the transactions contemplated by this Agreement
on the terms and conditions set forth herein as soon as practicable; and (c)
subject to the exercise in good faith by the directors or any officer of such
party of their fiduciary duties to such party or its stockholders, not take any
action which might reasonably be expected to impair the ability of the parties
to consummate the Merger prior to July 31, 1997 (regardless of whether such
action would otherwise be permitted or not prohibited hereunder).
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. Each of the Acquired Company and the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the respective jurisdiction of its incorporation as set forth in
EXHIBIT 3.1 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.
A-14
<PAGE>
3.1.2. Each of the Acquired Company and the Subsidiaries is duly
qualified and/or licensed to transact business and in good standing as a
foreign corporation in the jurisdictions listed in EXHIBIT 3.1 hereto, and
the character of the property owned or leased by the Acquired Company and
the Subsidiaries and the nature of the business conducted by them 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 and voting 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 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
generally. Attached hereto as EXHIBIT 3.2 are true, correct and complete
copies of the current Articles or Certificates of Incorporation and Bylaws
of the Acquired Company and the Subsidiaries.
3.2.3. The Board of Directors of the Acquired Company received an
opinion from Broadview Associates LLC, its financial advisor, concurrently
with the approval described in Section 3.2.1 above to the effect that the
consideration to be received by the Acquired Company's stockholders in the
Merger is fair to such stockholders from a financial point of view.
3.3 CAPITALIZATION. The entire authorized capital stock of the Acquired
Company consists of thirty-one million (31,000,000) shares of stock, of which
thirty million (30,000,000) shares are designated Common Stock, par value $.01
per share, and one million (1,000,000) shares are designated Preferred Stock,
par value $.01 per share. Of the total authorized Common Stock, as of March 7,
1997, eight million one hundred seventy-two thousand eighty-six (8,172,086)
shares were issued and outstanding and no shares were held in the Acquired
Company's treasury. Of the total authorized Preferred Stock, no shares have been
issued. As of March 8, 1997, there were options outstanding under the Stock Plan
entitling the optionees thereunder upon valid exercise to acquire in the
aggregate 1,179,685 shares of Common Stock. All the issued and outstanding
shares of each of the Subsidiaries are owned by the Acquired Company and are
held free and clear of all liens, claims, charges and encumbrances of any nature
whatsoever. 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
A-15
<PAGE>
equitable or beneficial interest in the Acquired Company or any Subsidiary or
the capital stock of the Acquired Company or any Subsidiary. EXHIBIT 3.3 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 Plan or any other Benefit Plan as of the date
hereof (and lists in respect of each option, award or right the holder, the date
of grant and any vesting or other terms governing exercise or receipt), and any
warrants, calls, commitments or plans by the Acquired Company or any Subsidiary
to issue any additional shares of their capital stock, to pay any dividends on
such shares or to purchase, redeem, or retire any outstanding shares of their
capital stock. There are no outstanding securities or obligations that are
convertible into or exchangeable for any shares of capital stock of the Acquired
Company. Other than as disclosed on EXHIBIT 3.3, 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 or any of the Subsidiaries is a
party or is bound with respect to the voting of the capital stock of the
Acquired Company or any of the Subsidiaries.
3.4 ABSENCE OF EQUITY INVESTMENTS. Except for the Subsidiaries and 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 AND THE
SUBSIDIARIES.
3.5.1. Attached hereto as EXHIBIT 3.5.1 are true, correct and complete
copies of the Acquired Company's audited consolidated balance sheets as of
December 31, 1994, December 31, 1995 and December 31, 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for
the years then ended, together with the reports of KPMG Peat Marwick LLP
thereon (respectively, the "1994, 1995 and 1996 Financial Statements"). The
1994, 1995, and 1996 Financial Statements, have been prepared in accordance
with generally accepted accounting principles, consistently applied, and
fairly present in all material respects the financial condition of the
Acquired Company and the Subsidiaries as of the respective dates thereof,
and disclose all liabilities of the Acquired Company and the Subsidiaries,
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. Neither the Acquired Company nor any Subsidiary has any
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 Company and the Subsidiaries
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, (c) any liabilities to the extent
disclosed in the Acquired Company Reports, and (d) any other liabilities
which would not have a Material Adverse Effect.
3.5.3 Except as disclosed in the 1996 Financial Statements or EXHIBIT
3.5.2, neither the Acquired Company nor any Subsidiary is in default with
respect to any liabilities or obligations, 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 and the Subsidiaries have, as of the date
hereof, and will prior to the Effective Time 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
A-16
<PAGE>
them 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 and the Subsidiaries as reflected on their books and
records is correct and accurate in all material aspects. Except as described
on EXHIBIT 3.6, neither the Acquired Company nor any Subsidiary is, nor will
any of them 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 that would individually or in
the aggregate have a Material Adverse Effect on the Acquired Company. No
assessments or notices of deficiency or other communications have been
received by the Acquired Company, nor 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 or any Subsidiary and any taxing authority,
including, without limitation, the IRS, waiving or extending any statute of
limitations with respect to any tax return, and neither the Acquired Company
nor any Subsidiary has 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. Neither the Acquired Company nor any Subsidiary has made any
parachute payments as such term is defined in Section 280G of the Tax Code,
neither is obligated to make any parachute payments, and neither is 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 and the Subsidiaries (a) have 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 and the Subsidiaries, (b) have
correctly and properly prepared and duly and timely filed all returns and
reports relating to those amounts withheld from their officers and employees
and to their employer liability for employment taxes under the Tax Code and
applicable state and local laws and (c) have duly and timely paid and
remitted to the appropriate taxing authorities the amounts withheld from
their officers and employees and any additional amounts that represent their
employer liability under applicable law for employment taxes.
3.6.4. The income tax returns of the Acquired Company have been audited
by the IRS for all tax years through the year ended December 31, 1993, and
all taxes, deficiencies, penalties and interest relating to such tax years
have been fully paid and satisfied by the Acquired Company.
3.6.5. To the knowledge of the Acquired Company, no issue has been
raised by the IRS, any state or local taxing authority, or any other
investigation or audit, that will have, or can be expected to have, a
Material Adverse Effect on the Acquired Company.
3.6.6. The 1994, 1995 and 1996 Financial Statements include, and the
accounts of the Acquired Company and the Subsidiaries will include, for all
periods up to and including the Closing Date, adequate provision for all
unpaid applicable taxes, assessments, fees and charges relating to the
Acquired Company and the Subsidiaries.
3.6.7. Neither the Acquired Company nor any Subsidiary is a "United
States real property holding corporation" as defined in Section 897(c)(2) of
the Tax Code.
A-17
<PAGE>
3.7. OWNERSHIP OF ASSETS. The Acquired Company and the Subsidiaries have
title to all of their respective properties and assets used or useful in their
respective businesses, other than leased property, licensed property and
immaterial items of personal property, in each case free and clear of any liens,
security interests, claims, charges, options, rights of tenants or other
encumbrances, except 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 except for liens arising from current taxes
not yet due and payable and other immaterial liens. Except as disclosed on
EXHIBIT 3.7, neither the Acquired Company, nor any Subsidiary, has 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 or a Subsidiary
is a lessee or licensee, except licenses, fees and similar payment in historical
amounts and in the ordinary course of business. Except as disclosed on EXHIBIT
3.7, all buildings and material items of machinery and equipment owned or leased
by the Acquired Company or any Subsidiary 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 and the Subsidiaries consist only of items of supplies and
equipment of a quality and quantity usable in the normal course of their
businesses. Neither the Acquired Company nor any Subsidiary has received any
notice of violation of any applicable zoning regulation, ordinance or other law,
regulation or requirement relating to their operations and properties, whether
owned or leased. All of the accounts receivable of the Acquired Company and the
Subsidiaries 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 (or, in respect of the Specified Customer Contracts, as set
forth on EXHIBIT 3.13(D) hereto), and except for Customer Contracts, the
execution and delivery of this Agreement by the Acquired Company does not, and
the consummation of all of the transactions contemplated hereby will not,
violate any provision of the Articles of Incorporation or Certificate of
Incorporation, as amended, or Bylaws, as amended, of the Acquired Company or any
Subsidiary 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 or any
Subsidiary is a party or is bound or by which the Acquired Company's or any
Subsidiaries' 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, any Subsidiary or any assets, properties
or operations of the Acquired Company or any Subsidiary 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 and each of the Subsidiaries
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 or any of the Subsidiaries, whether or
not covered by insurance, or any strike, work stoppage or slowdown or other
labor trouble involving the Acquired Company or any of the Subsidiaries; (ii)
any increase in dividends or employee compensation or benefits payable by the
Acquired Company, except for normal increases in compensation consistent, in
amounts and timing, with historical practices; (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.
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 knowledge of the Acquired Company, threatened against or
affecting the Acquired Company or any Subsidiary that would individually or in
the aggregate have a Material Adverse Effect on the Acquired Company, and, to
the knowledge of the Acquired Company, there exists no reasonable basis or
grounds for any such suit, action, arbitration, proceeding, claim or
investigation.
A-18
<PAGE>
3.11 LICENSES AND PERMITS; COMPLIANCE WITH LAW. The Acquired Company and
the Subsidiaries hold all licenses, certificates, permits, franchises and rights
from all appropriate federal, state or other public authorities necessary for
the conduct of their respective businesses and the use of their respective
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 have a Material Adverse Effect in respect
of the Acquired Company, the Acquired Company and the Subsidiaries presently are
conducting their respective businesses so as to comply with all applicable
statutes, ordinances, rules, regulations and orders of any governmental
authority. Further, the Acquired Company and the Subsidiaries are not presently
charged with, or 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 the knowledge of the Acquired Company,
threatened adverse proceeding by any regulatory authority having jurisdiction
over their respective businesses, properties or operations. 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 or any
Subsidiary that individually or in the aggregate would have a Material Adverse
Effect on 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 except
where the failure to so inure individually or in the aggregate would not have a
Material Adverse Effect on the Acquired Company.
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 (identified by title, date and parties)(whether oral or
written) to which the Acquired Company or any Subsidiary is a party (except for
Customer Contracts and Specified Customer Contracts that: involve a receipt or
an expenditure by the Acquired Company or any Subsidiary or require the
performance of services or delivery of goods to, by, through, on behalf of or
for the benefit of the Acquired Company or any Subsidiary, which in each case
relates to a contract, agreement, commitment or instrument that requires
payments or provides for receipts in excess of $60,000 per year. EXHIBIT 3.12
also identifies (identified by title, date and parties)(whether oral or written)
all:
3.12.1. 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;
3.12.2. contracts or commitments providing for payments by the Acquired
Company or any Subsidiary based in any manner upon the sales, purchases,
receipts, income or profits of the Acquired Company or any Subsidiary;
3.12.3. franchise agreements, marketing agreements or royalty
agreements (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 or any Subsidiary as of the date hereof);
3.12.4. employment contracts or commitments regarding employees or
independent contractors (except to the extent listed in EXHIBIT 3.14.2(III))
(including without limitation any standard form contracts such as employee
nondisclosure agreements, provided that to the extent substantially all
employees have executed any such standard form, a copy of such form is
attached in lieu of each individual contract and the Acquired Company
represents and warrants that substantially all employees have executed such
form), and any other contracts, plans or commitments providing 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
A-19
<PAGE>
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 3.12.4;
3.12.5. contracts, agreements, understandings or arrangements
restricting the Acquired Company or any Subsidiary from carrying on its
business anywhere in the world;
3.12.6. 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;
3.12.7. joint product development agreement with any party other than
the Purchaser, other than Customer Contracts and Specified Customer
Contracts; and
3.12.8. 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; or
3.12.9. contracts, agreements, commitments or understandings for the
issuance, transfer or sale of any shares of capital stock or assets of any
of the Subsidiaries.
The contracts, agreements, commitments and other instruments 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 and Specified Customer Contracts are valid and
binding upon the Acquired Company or the applicable Subsidiary and 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.
Except as set forth on EXHIBIT 3.12, none of the Acquired Company, the
applicable Subsidiary and, to the knowledge of the Acquired Company, any other
party to any such contract, commitment or arrangement has breached any provision
of, or is in default under, the terms thereof; and except as set forth on
EXHIBIT 3.12, there are no existing facts or circumstances that would prevent
the work in process of the Acquired Company or any Subsidiary or their contracts
and agreements from maturing upon performance by the Acquired Company or the
applicable Subsidiary into accounts receivable collectible in the aggregate in
amounts consistent in all material respects 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, neither the Acquired
Company nor any Subsidiary has 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 such Acquired Company or Subsidiary consistent with amounts
historically charged for such services.
3.13 SPECIFIED CUSTOMER CONTRACTS. EXHIBIT 3.13(A) hereto consists of a
true and correct list of all Specified Customer Contracts (identified by title,
date and parties). EXHIBIT 3.13(B) hereto is the Acquired Company's standard
form of Customer Contract (the "Customer Contract Form"). Except as set forth on
EXHIBIT 3.13(C) or EXHIBIT 3.13(D), each Specified Customer Contract entered
into during the eighteen (18) month period ending on the date hereof conforms
substantially to the Customer Contract Form, except for deviations which do not
individually or in the aggregate materially adversely affect the rights or
benefits of the Acquired Company thereunder. Except as set forth on EXHIBIT
3.13(C), with respect to each Specified Customer Contract, (i) each customer to
which computer software represented as owned by or proprietary to the Acquired
Company or a Subsidiary (the "Owned Software") has been licensed pursuant to
such
A-20
<PAGE>
Specified Customer Contract and tendered or certified as operational by the
Acquired Company or any Subsidiary (whichever is the case being referred to in
this Section 3.13 as the "Vendor") has accepted in all material respects such
software to the extent and on the terms and conditions provided for in such
Specified Customer Contract; (ii) in each case in which the Specified 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 Specified
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 Specified
Customer Contract. Except as set forth on EXHIBIT 3.13(D), none of the Specified
Customer Contracts contains any of the following deviations from the Customer
Contract Form:
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 by less than the lesser of 5% or the annual
increase in the Consumer Price Index, 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.
A-21
<PAGE>
3.14 INTELLECTUAL PROPERTY; COMPUTER SOFTWARE.
3.14.1. EXHIBIT 3.14.1 hereto sets forth (i) a complete and correct
list of all registered and material unregistered trademarks, trade names,
service marks, service names, and brand names, 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 businesses of the Acquired Company or
any Subsidiary; (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 or any Subsidiary with
respect to any of the above except pursuant to contracts with customers
(identified by title, date and parties). Except as set forth on EXHIBIT
3.14.1, all such trademarks, trade names, service marks, service names,
brand names, copyrights and patents are owned by the Acquired Company or a
Subsidiary free and clear of all liens, claims, security interests and
encumbrances. Except as set forth on EXHIBIT 3.14.1, neither the Acquired
Company nor any Subsidiary is currently in receipt of any notice of any
violation of, and neither the Acquired Company nor any Subsidiary is
violating, the rights of others in any trademark, trade name, service mark,
copyright, patent, trade secret, know-how or other intangible asset, except
where such violations individually or in the aggregate would not have a
Material Adverse Effect on the Acquired Company.
3.14.2.(i) EXHIBIT 3.14.2(I) contains a complete and accurate list of
all Owned Software, other than immaterial Owned Software which list
specifies which of the Acquired Company and the Subsidiaries is the owner
thereof. Except as set forth on EXHIBIT 3.14.2(I), the Acquired Company or
one of the Subsidiaries 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 claims that individually or in the aggregate
would not have a Material Adverse Effect on the Acquired Company. 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 and except where such
disclosures were both incidental and immaterial. To the knowledge of the
Acquired Company, no such other party has breached any such obligation of
confidentiality.
3.14.2(ii) All software (other than commercially available
over-the-counter "shrink-wrap" software) necessary for the Acquired Company
or any Subsidiary to license and deliver the Owned Software to customers is
set forth on EXHIBIT 3.14.2(II) ("Support Software"). The Acquired Company
has the right and license to use, sublicense, modify and copy all Support
Software and all other material software used in its business under which
the Acquired Company or any Subsidiary is a licensee, lessee or otherwise
has obtained the right to use (the "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 or any Subsidiary,
free of any other limitations or encumbrances. All Support Software
agreements to which the Acquired Company or any Subsidiary is a party will
be provided to Purchaser within ten days of the date of this Agreement. The
Acquired Company covenants to remedy any default or item of noncompliance
with respect to Support Software prior to Closing, and shall use its
reasonable best efforts to remedy any such default or item of noncompliance
with respect to Licensed Software prior to Closing. Except as disclosed on
EXHIBIT 3.14.2(II), none of the Support Software has been incorporated into
or made a part of any Owned Software or any other Licensed Software by the
Company or any Subsidiary. Neither the Acquired Company nor any Subsidiary
has published or disclosed any Support Software that the Acquired Company or
a Subsidiary leases or markets to others, in accordance with and as
permitted by any license, lease or similar agreement relating to the Support
Software and except pursuant to contracts requiring such other parties to
keep the Support Software confidential. No party to whom the Acquired
Company or a Subsidiary has disclosed Support Software has, to the knowledge
of the Acquired Company, breached any obligation of confidentiality imposed
on them by the Acquired Company or any Subsidiary.
A-22
<PAGE>
3.14.2(iii) The Owned Software, Support Software and Licensed Software
and commercially available over-the-counter "shrink-wrap" software
constitute all software used in the businesses of the Acquired Company and
the Subsidiaries (collectively, the "Acquired Company Software") other than
immaterial Owned Software and immaterial Licensed 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
employees of the Acquired Company or any Subsidiary) who have performed,
within the last three (3) years, computer programming services for the
Acquired Company or any Subsidiary and identifies the project on which such
services were performed. The Acquired Company shall use its reasonable best
efforts to obtain from each of the persons and entities identified on
EXHIBIT 3.14.2(III) as having provided such services, an assignment of all
intellectual property rights related to such services in form and substance
satisfactory to Purchaser prior to Closing. Except as disclosed on EXHIBIT
3.8, 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, the Acquired Company's or any
Subsidiary's ability to use the Acquired Company Software in the same manner
as such computer software is currently used by the Acquired Company or the
Subsidiaries. Neither the Acquired Company nor any Subsidiary is infringing
in any material respect any intellectual property rights of any other person
or entity with respect to the Acquired Company Software, and, to the
knowledge of the Acquired Company, no other person or entity is infringing
any intellectual property rights of the Acquired Company or any Subsidiary
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 or any Subsidiary 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 or any Subsidiary has granted marketing rights in
the Acquired Company Software to third parties.
3.14.2(v) None of the Acquired Company and the Subsidiaries has taken
or failed to take any actions under the law of any applicable foreign
jurisdictions where the Acquired Company or a Subsidiary has marketed or
licensed Acquired Company Software that would restrict or limit the ability
of the Acquired Company or any Subsidiary to protect, or prevent it from
protecting, in any material respect, 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 neither the Acquired Company nor any Subsidiary has been the
subject of any union activity or labor dispute, nor has there been any strike of
any kind called or, to the knowledge of the Acquired Company, threatened to be
called against any of them. Neither the Acquired Company nor any Subsidiary has
violated any applicable federal or state law or regulation relating to labor or
labor practices including, without limitation, any 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"), where such violation would
have a Material Adverse Effect on the Acquired Company. EXHIBIT 3.15 sets forth
a true, correct and complete list of employer loans or advances from the
Acquired Company and each Subsidiary to their respective employees.
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; any 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,
whether
A-23
<PAGE>
funded or unfunded, and whether legally binding or not; including, without
limitation, any "employee benefit plan," as that term is defined in Section
3(3) of ERISA; that is currently or previously adopted, 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 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 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. None of the Acquired Company, any of the Subsidiaries, and, to
the knowledge 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 which individually or in the aggregate would have a
Material Adverse Effect on the Acquired Company. 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 and except where such representation
or communication would not have a Material Adverse Effect on the Acquired
Company. There are no pending 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.
A-24
<PAGE>
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. Except as disclosed on EXHIBIT 3.16.5, all annual reports
(Form 5500 series) required to be filed with respect to any Benefit Plan
have been or will be timely filed prior to Closing.
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 "employer real property" (within the
meaning of Section 407(d)(2) of ERISA).
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 are likely to result in disqualification of
any Qualified Plan or loss of tax-exempt status for its related trust (or
monetary sanctions in lieu of disqualification or loss of tax exempt
status), except where the payment of such monetary sanctions would not have
a Material Adverse Effect on the Acquired Company. 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, which liability would have a
Material Adverse Effect on the Acquired Company.
3.16.9. The Acquired Company does not maintain any Benefit Plan
providing deferred or stock based compensation that is not reflected in the
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. Except as disclosed in EXHIBIT 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 or any of the Subsidiaries 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. The Acquired Company has provided to each of those persons
listed on EXHIBIT 6.11A the form of Covenant Not to Compete attached as
EXHIBIT 6.11B and obtained their agreement to enter into same in favor of
Purchaser as of the Closing Date.
3.17 CUSTOMERS. Except as disclosed on EXHIBIT 3.17, none of the Acquired
Company and the Subsidiaries has received any notice from, or has any knowledge
(which, for the purposes of this Section 3.17 only shall mean the knowledge of
the Acquired Company or any Subsidiary after having made reasonable inquiry of
managerial and customer account employees) that, any current customer of the
Acquired Company or any Subsidiary as of December 31, 1996 or any date
subsequent thereto has taken or will take any steps that could disrupt the
business relationship of the Acquired Company or the Subsidiaries 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.
A-25
<PAGE>
3.18 ENVIRONMENTAL MATTERS. Except as set forth in EXHIBIT 3.18, no real
property now or previously owned, leased or used by the Acquired Company or any
Subsidiary (the "Real Property") has been used by the Acquired Company or any
Subsidiary or, to the knowledge 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 any Subsidiary 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 and all Subsidiaries have 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 or any
Subsidiary 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 any Subsidiary 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 or any Subsidiary, 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 any
Subsidiary 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 or any Subsidiary. Except as disclosed on EXHIBIT 3.18, to the
knowledge of the Acquired Company or any Subsidiary, 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 currently required to be removed or otherwise treated under
applicable law. 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. 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 and the Subsidiaries
maintain with respect to its businesses, properties or employees. Except as set
forth in EXHIBIT 3.19, such policies are commensurate with all material
insurance policies in effect during the preceding thirty-six (36) months, are in
full force and effect and to the knowledge of the Acquired Company, no event has
occurred that would give any insurance carrier a right to terminate any such
policy. To the knowledge of the Acquired Company, such policies are adequate to
insure against risks to which the Acquired Company, and any Subsidiaries and
their respective properties and assets are exposed in the operation of their
respective businesses in such amounts and types of coverage as are commercially
reasonable and are consistent with practices in the industry in which the
Acquired Company and the Subsidiaries operate. Except as set forth in EXHIBIT
3.19, since December 31, 1996, there has not been any change in the Acquired
Company's or any Subsidiary's relationship with their respective insurers or in
the premiums payable pursuant to such policies.
3.20 RELATED PARTIES.
(a) Except as set forth in EXHIBIT 3.20, to the knowledge of the
Acquired Company, no stockholder owning greater than a five-percent (5%)
interest in the Acquired Company, no affiliate or member of the immediate
family of any such stockholder, and no officer or director or
A-26
<PAGE>
member of the immediate family of such officer or director of the
Acquired Company or any Subsidiary 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 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 or
any Subsidiary (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).
(b) The Acquired Company has provided to each of its "affiliates" as
identified in Section 2.4 copies of the Rule 145 Letters and Pooling
Letters and obtained their agreement to enter into same as of the Closing
Date. The Acquired Company has provided to the stockholders described in
Section 2.13 the form of letter referenced therein provided by the
Purchaser and obtained their agreement to enter into same as of the
Closing Date.
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 Reports 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 September 30, 1996 (collectively, the
"Acquired Company Reports"). As of the date of this Agreement, the Acquired
Company Reports, 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, properties, rights or operations of the Acquired
Company together with the Subsidiaries, taken as a whole. Since December 31,
1996, the Acquired Company has made all filings with the SEC in a timely manner
as required by law and no event has occurred that requires an additional filing
or any amendment to a prior filing.
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 DISCLOSURE AND ABSENCE OF UNDISCLOSED LIABILITIES. No statement
contained herein or in any certificate, schedule, list, exhibit or other
instrument furnished or required to be furnished 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 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, properties, rights or operations of the Acquired Company and its
Subsidiaries, taken as a whole.
3.24 NO SPECIAL STOCKHOLDER RIGHTS. Except as disclosed on EXHIBIT 3.24,
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).
A-27
<PAGE>
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.
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 do
so qualify would not individually or in the aggregate have a Material
Adverse Effect upon Parent.
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). 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. The Parent has provided to counsel for the Acquired Company a true
and correct copy of the Certificate of Incorporation and Bylaws, each as
amended, of the Parent and Purchaser.
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, except as set forth on EXHIBIT 4.3, 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,
applicable Blue Sky laws, and as set forth on EXHIBIT 4.3, 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 issued pursuant to
Article II will, when issued, be duly authorized, validly issued, fully paid and
nonassessable and no stockholder of the Parent will have any preemptive rights
of subscription or purchase in respect thereof.
A-28
<PAGE>
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 years ended December 31, 1995, and December 31, 1996, respectively,
including all documents incorporated therein, and (b) 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. As used in this
Section, "material" means material to the financial condition, results of
operations, business, assets or properties of Parent together with the Parent
Subsidiaries (including Purchaser), taken as a whole. Since December 31, 1996,
the Parent has made all filings with the SEC in a timely manner as required by
law and no event has occurred that requires an additional filing or any
amendment to a prior filing.
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.
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 any of
the Subsidiaries 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 any of the Subsidiaries or of Purchaser, Parent or any of
their respective subsidiaries, or imposes or seeks to impose any material
A-29
<PAGE>
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.
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 the Nasdaq Stock
Market, Inc.
5.7 FAIRNESS OPINION. The Acquired Company shall have received an opinion
dated as of a date not more than three (3) business days prior to the mailing of
the proxy statement/prospectus included within the Registration Statement to the
stockholders of the Acquired Company from Broadview Associates LLC, its
financial advisor, 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
A-30
<PAGE>
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
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 or changes in the business, properties, rights or
operations of the Acquired Company or its Subsidiaries, which individually or in
the aggregate constitute a Material Adverse Effect on the Acquired Company.
6.4 CERTIFICATE. Purchaser shall have received a certificate of the Chief
Executive Officer 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 Section 2.3.1 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 substantially in the
form of EXHIBIT 6.5.
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 have been
obtained and are 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
KPMG Peat Marwick LLP 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 advising it, as set forth in Section 2.3.2 hereof, that the Merger may be
accounted for 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 KPMG Peat Marwick LLP 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
A-31
<PAGE>
auditors' letters regarding the Acquired Company Information provided expressly
for inclusion in such Registration Statement, and in form and substance
reasonably satisfactory to Parent.
6.11 COVENANTS NOT TO COMPETE. Purchaser shall have received executed
non-competition agreements from each of those persons listed on EXHIBIT 6.11(A),
with each such agreement in the form of EXHIBIT 6.11(B) hereto (a "Covenant Not
to Compete").
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
Broadview Associates LLC and shall not exceed $1,900,000 in the aggregate.
6.13 TERMINATION OF CERTAIN AGREEMENTS. Each of the Agreements described
on EXHIBIT 3.24 shall have been terminated.
6.14 CERTAIN OTHER MATTERS. The Acquired Company shall have remedied any
default or item of noncompliance with respect to Support Software as described
in Section 3.14.2(ii), and shall have obtained the assignments of intellectual
property rights described in Section 3.14.2(iii) from all persons and entities
identified on EXHIBIT 3.14.2(III) which the Acquired Company is able to locate
after utilizing its reasonable best efforts.
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 made by Purchaser and Parent in this Agreement (except as affected by
the transactions contemplated by this Agreement) shall be true and correct in
all material respects at the Closing Date, with the same force and effect as if
such representations and warranties had been made at and as of the Closing Date.
7.2 COVENANTS OF PURCHASER AND PARENT. Purchaser and Parent shall have, or
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, substantially in the form of
EXHIBIT 7.4.
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 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.
A-32
<PAGE>
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 and of the Subsidiaries, as of the most recent
practicable date, from the appropriate governmental authority of the
jurisdiction of their respective incorporation and any other jurisdiction
that is set forth in EXHIBIT 3.1 hereto;
(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 hereof;
(m) the letters described in Section 2.3.2 hereof;
(n) the letters from KPMG Peat Marwick LLP 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) the executed Employee Agreements described in Section 6.12; and
(q) 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.
A-33
<PAGE>
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 2.1.7, 2.1.10, 2.2.2,
2.3.6, 2.13, 2.14, 2.16 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 July
31, 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 or the Subsidiaries;
10.1.4. By Purchaser after July 31, 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.
A-34
<PAGE>
10.1.6. By the Board of Directors of the Acquired Company, if the
Market Value of the Parent Stock is less than $50.00 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.
10.2.2. In the event this Agreement is terminated by the Acquired
Company in accordance with Section 10.1.5, or 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 to Purchaser (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 in an aggregate amount
not to exceed seven hundred fifty thousand dollars ($750,000) and (ii) to
Purchaser a fee in the amount of $8,800,000, provided, however, such fee
shall not be payable in the event of a termination pursuant to Section
10.1.3 or 10.1.4 by reason of a failure of the condition in Section 5.4
hereof if within twenty (20) days of the date hereof the stockholders of the
Acquired Company identified on EXHIBIT 10.2.2 hereto have executed Voting
Agreements with Purchaser in forms substantially similar to the form
heretofore provided by Purchaser to counsel for the Acquired Company.
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 and the Subsidiaries,
taken as a whole, is materially interrupted or curtailed or the assets of the
Acquired Company and the Subsidiaries, taken as a whole, 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:
Enterprise Systems, Inc.
1400 South Wolf Road
Wheeling, Illinois 60090-6524
Attn: Glen E. Tullman
and to:
Sachnoff & Weaver, Ltd.
30 South Wacker Drive, 29th Floor
A-35
<PAGE>
Chicago, Illinois 60606-7404
Attn: William N. Weaver, Esq.
11.1.2. If to Purchaser or Parent:
HBO & Company
301 Perimeter Center North
Atlanta, Georgia 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 Broadview Associates LLC, 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 Broadview Associates LLC, or any other
broker or finder employed or alleged to have been employed by it or any of the
Subsidiaries or any of the Acquired Company's stockholders. The fees and
expenses of Broadview Associates LLC 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.
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
A-36
<PAGE>
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 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.
11.12 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.
11.13 PRONOUNS. All pronouns used herein shall be deemed to refer to the
masculine, feminine or neuter gender as the context requires.
11.14 EXHIBITS INCORPORATED. All Exhibits attached hereto are an integral
part of this Agreement.
11.15 TIME OF ESSENCE. Time is of the essence in this Agreement.
A-37
<PAGE>
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":
ENTERPRISE SYSTEMS, INC.
By: /s/ GLEN E. TULLMAN
-----------------------------------
Title: Chief Executive Officer
---------------------------------
A-38
<PAGE>
BROADVIEW ASSOCIATES LLC
ONE BRIDGE PLAZA
FORT LEE, NEW JERSEY 07024
APPENDIX B
May 27, 1997
Board of Directors
Enterprise Systems, Inc.
1400 South Wolf Road
Suite 500
Wheeling, Illinois 60090
Dear Members of the Board:
We understand that Enterprise Systems, Inc. ("Enterprise" or the "Company"),
HBO & Company ("HBOC") and HBO & Company of Georgia (the "Purchaser") are
proposing a transaction (the "Transaction") pursuant to which, through the
merger of Enterprise with and into the Purchaser, each share of issued and
outstanding Enterprise common stock ("Enterprise Common Stock") shall be
converted into the right to receive a fraction of a share of HBOC common stock,
$0.05 par value per share ("HBOC Common Stock"), in accordance with the terms of
the Agreement (as defined below). The Transaction is intended to be a tax-free
reorganization within the meaning of section 368 of the United States Internal
Revenue Code of 1986, as amended, and to be accounted for as a pooling of
interests pursuant to Opinion No. 16 of the Accounting Principles Board. The
terms and conditions of the Transaction are more fully detailed in the
Agreement.
You have requested our opinion as to whether the consideration to be
received by Enterprise stockholders in the Transaction is fair, from a financial
point of view, to Enterprise stockholders.
Broadview Associates focuses on providing merger and acquisition advisory
services to information technology ("IT") companies. In this capacity, we are
continually engaged in valuing such businesses, and we maintain an extensive
database of IT mergers and acquisitions for comparative purposes. We are
currently acting as financial advisor to Enterprise's Board of Directors and
will receive a fee from Enterprise upon the successful conclusion of the
Transaction.
In rendering our opinion, we have, among other things:
1. reviewed the terms of the Agreement of Merger and the associated
exhibits thereto dated March 13, 1997 (the "Agreement");
2. reviewed the audited financial statements of Enterprise for its fiscal
years ended December 31, 1994, 1995 and 1996 prepared by KPMG Peat
Marwick LLP and the unaudited financial information of Enterprise for the
three months ended March 31, 1997 included in an Enterprise press release
dated April 22, 1997;
3. reviewed financial projections for Enterprise prepared and provided to
us by Enterprise management;
4. participated in discussions with Enterprise management concerning the
operations, business strategy, financial performance and prospects for
Enterprise;
5. discussed with Enterprise management its view of the strategic rationale
for the Transaction;
6. reviewed the reported closing prices and trading activity for Enterprise
Common Stock;
B-1
<PAGE>
7. compared certain aspects of the financial performance of Enterprise with
public companies we deemed comparable;
8. analyzed available information, both public and private, concerning
other mergers and acquisitions we believe to be comparable in whole or in
part to the Transaction;
9. reviewed HBOC's annual report and Form 10-K for the fiscal years ended
December 31, 1994 and 1995, HBOC's Form 10-K for the fiscal year ended
December 31, 1996, including the financial statements included therein
and the unaudited financial information of HBOC for the three months
ended March 31, 1997 included in an HBOC press release dated April 9,
1997;
10. participated in discussions with HBOC management concerning the
operations, business strategy, financial performance and prospects for
HBOC;
11. discussed with HBOC management its view of the strategic rationale for
the Transaction;
12. reviewed the reported closing prices and trading activity for HBOC
Common Stock;
13. considered the total number of shares of HBOC Common Stock outstanding,
the average weekly trading volume of HBOC Common Stock, and the maximum
time period for Enterprise stockholders to liquidate their HBOC Common
Stock given Securities and Exchange Commission regulations;
14. reviewed recent equity analysts' reports covering HBOC;
15. analyzed the anticipated effect of the Transaction on the future
financial performance of the consolidated entity;
16. participated in negotiations and discussions related to the Transaction
among Enterprise, HBOC and their financial and legal advisors; and
17. conducted other financial studies, analyses and investigations as we
deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied, without independent verification,
on the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by Enterprise or
HBOC. With respect to the financial projections examined by us, we have assumed
that they were reasonably prepared and reflected the best available estimates
and good faith judgments of the management of Enterprise as to the future
performance of Enterprise. We have neither made nor obtained an independent
appraisal or valuation of any of Enterprise's assets. We have not reviewed any
internal financial projections prepared by HBOC management as such projections
have not been made available to us.
Based upon and subject to the foregoing, we are of the opinion that the
consideration to be received by Enterprise stockholders in the Transaction is
fair, from a financial point of view, to Enterprise stockholders.
This opinion speaks only as of the date hereof. It is understood that this
opinion is for the information of the Board of Directors of Enterprise in
connection with its consideration of the Transaction and does not constitute a
recommendation to any Enterprise stockholder as to how such stockholder should
vote on the Transaction. Broadview Associates does not believe that any other
person other than the Board of Directors of Enterprise has the legal right under
state law to rely on this opinion, and, in the absence of any governing
precedents, we would resist any assertion otherwise by any such person. This
opinion may not be published or referred to, in whole or part, without our prior
written permission, which shall not be unreasonably withheld. Broadview
Associates hereby consents to references to and the inclusion of this opinion in
its entirety in the Proxy Statement/Prospectus to be distributed to Enterprise
stockholders in connection with the Transaction.
Sincerely,
/s/ BROADVIEW ASSOCIATES LLC
Broadview Associates LLC
B-2
<PAGE>
PROXY PROXY
ENTERPRISE SYSTEMS, INC.
1400 South Wolf Road
Wheeling, Illinois 60090-6524
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Glen E. Tullman and David B. Mullen and each
of them, as Proxies, each with the power to appoint his or her substitute,
and hereby authorizes them to represent, and to vote as designated on the
reverse side, all of the shares of Common Stock of Enterprise Systems, Inc.
("Enterprise"), held of record by the undersigned on May 22, 1997, at a
Special Meeting of Stockholders to be held on June 26, 1997, or any
adjournment thereof upon the following matter, as set forth in the Notice of
said Meeting dated May 29, 1997, a copy of which has been received by the
undersigned.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PRE-PAID ENVELOPE
Continued and to be signed on reverse side
<PAGE>
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For Against Abstain
1. APPROVAL OF AGREEMENT / / / / / / THE PROXY, WHEN PROPERLY
OF MERGER dated March 13, EXECUTED, WILL BE VOTED IN
1997, by and among Enterprise, THE MANNER DIRECTED
HBO & Company and HBO HEREIN BY THE UNDERSIGNED
& Company of Georgia STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY
WILL BE VOTED FOR THE
PROPOSALS.
For Against Abstain
2. APPROVAL OF AMENDMENT to / / / / / /
the Enterprise Long-Term
Incentive Plan
3. In their discretion, the
Proxies are authorized to
vote upon such other
matters that may properly
come before the meeting or any
adjournments thereof.
-------------------------
(Signature)
-------------------------
(Signature)
Dated: , 1997
-------------------
</TABLE>
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 Delaware General Corporation Law 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 March 13, 1997 by and among HBO & Company, HBO & Company of Georgia and
Enterprise 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 Sachnoff & Weaver, Ltd. re tax matters.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of KPMG Peat Marwick LLP.
23(c) Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
23(d) Consent of Sachnoff & Weaver, Ltd. (included in Exhibit 8).
23(e) Consent of Broadview Associates LLC (included in Appendix B to the Proxy Statement/ Prospectus combined
in Part I of this Registration Statement).
24* Power of Attorney (included in signature page).
</TABLE>
- ------------------------
* Previously filed.
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):
4 -- HBO & Company 1993 Stock Option Plan for Nonemployee Directors.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 HBO & Company 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 JUNE 23, 1995, AS PART OF ITS FORM 8-K DATED JUNE 23, 1995, AS AMENDED BY FORM 8-KA DATED JULY 31,
1995, AND FILED WITH THE COMMISSION ON JULY 31, 1995, AS FURTHER AMENDED BY FORM 8-KA2 DATED AUGUST 8,
1995 AND FILED WITH THE COMMISSION ON AUGUST 8, 1995:
2 -- Stock Purchase Agreement, dated as of May 16, 1995, among First Data Corporation, FDC Health, Inc.,
First Data Health Systems Corporation, HBO & Company, and HBO & Company of Georgia, as amended by letter
agreement dated June 17, 1995.
ON AUGUST 17, 1995, AS PART OF ITS FORM S-4 REGISTRATION STATEMENT DATED AUGUST 17, 1995, AS AMENDED BY
AMENDMENT NO. 1 TO FORM S-4 DATED SEPTEMBER 1, 1995, AND FILED WITH THE COMMISSION ON SEPTEMBER 1, 1995:
2 -- Agreement of Merger dated July 14, 1995, by and among HBO & Company, HBO & Company of Georgia and
CliniCom Incorporated.
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>
II-3
<PAGE>
(b) Financial Statement Schedules.
No financial statement schedules are required to be filed herewith.
(c) The opinion of Broadview Associates LLC is included as Appendix B to the
Proxy Statement/ Prospectus contained in Part I of this Registration Statement.
ITEM 22. UNDERTAKINGS.
(a) (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
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.
(b) 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.
(c) 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-4
<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 28th 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 28, 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 28, 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-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------------ --------------------
<S> <C> <C>
*
- --------------------------------- Director
(Donald C. Wegmiller)
</TABLE>
<TABLE>
<S> <C> <C> <C>
/s/ CHARLES W. MCCALL
---------------------------------
* Charles W. McCall May 28, 1997
By: ATTORNEY-IN-FACT
/s/ JAY P. GILBERTSON
---------------------------------
* Jay P. Gilbertson May 28, 1997
ATTORNEY-IN-FACT
By:
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE
- --------- -----
<S> <C> <C>
2 Agreement of Merger dated March 13, 1997 by and among HBO & Company, HBO & Company of Georgia and
Enterprise 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 Sachnoff & Weaver, Ltd. re tax matters.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of KPMG Peat Marwick LLP.
23(c) Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
23(d) Consent of Sachnoff & Weaver, Ltd. (included in Exhibit 8).
23(e) Consent of Broadview Associates LLC (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.
<PAGE>
EXHIBIT 5
JONES, DAY, REAVIS & POGUE
3500 ONE PEACHTREE CENTER
303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308
(404) 521-3939
May 28, 1997
HBO & Company
301 Perimeter Center North
Atlanta, Georgia 30346
Gentlemen:
We have acted as counsel to HBO & Company, a Delaware corporation (the
"Company"), in connection with the registration of 4,716,442 shares of Common
Stock, $.05 par value per share, of the Company (the "Shares"), to be issued by
the Company pursuant to a Registration Statement on Form S-4 (File No.
333-27045) (the "Registration Statement"), filed with the Securities and
Exchange Commission to which this opinion appears as Exhibit 5.
We have examined originals or certified or photostatic copies of such
records of the Company, certificates of officers of the Company, and public
officials and such other documents as we have deemed relevant or necessary as
the basis of the opinion set forth below in this letter. In such examination, we
have assumed the genuineness of all signatures, the conformity to original
documents submitted as certified or photostatic copies, and the authenticity of
originals of such latter documents. Based on the foregoing, we are of the
following opinion:
The Shares have been duly authorized and, when issued by the Company in
the manner described in the Registration Statement, will be validly issued,
fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and the reference to this Firm under the heading "Certain
Legal Matters" in the Proxy Statement/Prospectus constituting part of the
Registration Statement.
Sincerely,
/s/ JONES, DAY, REAVIS & POGUE
JONES, DAY, REAVIS & POGUE
<PAGE>
SACHNOFF & WEAVER LTD.
30 SOUTH WACKER DRIVE
SUITE 2900
CHICAGO, ILLINOIS 60606-7484
EXHIBIT 8
May 28, 1997
Enterprise Systems, Inc.
1400 South Wolf Road
Wheeling, IL 60090-6524
Attn: Glen E. Tullman
Re: Agreement of Merger dated March 13, 1997
Between HBO & Company, HBO & Company of Georgia
and Enterprise Systems, Inc.
Ladies and Gentlemen:
This opinion is being delivered in connection with the Agreement of Merger
(the "Merger Agreement"), dated as of March 13, 1997, by and among HBO &
Company, a Delaware corporation ("Parent"), HBO & Company of Georgia, a Delaware
corporation ("Purchaser"), and Enterprise Systems, Inc., a Delaware corporation
("Acquired Company"). Pursuant to the Merger Agreement, Acquired Company will
merge with and into Purchaser (the "Merger"), and Purchaser will be the
survivor. This opinion is issued with respect to certain Federal income tax
consequences of the Merger. Reference to such opinion is made in the Proxy
Statement/Prospectus (the "Proxy Statement/Prospectus") of Parent and Acquired
Company, contained in Part I of the Registration Statement on Form S-4 (the
"Registration Statement") to which this opinion appears as Exhibit 8.
All capitalized terms not otherwise defined herein have the meaning assigned
to them in the Merger Agreement. All section references, unless otherwise
indicated, are to the Internal Revenue Code of 1986, as amended (the "Code").
We have acted as legal counsel to Acquired Company in connection with the
Merger. As such, and for the purpose of rendering this opinion, we have examined
(or will examine on or prior to the Effective Time of the Merger) and are
relying (or will rely) upon (without any independent investigation or review
thereof) the truth and accuracy, at all relevant times, of the statements,
covenants, representations and warranties contained in the following documents:
1. The Merger Agreement;
2. The Proxy Statement/Prospectus;
3. Representations made to us by Parent and Purchaser in a letter
reproduced as Attachment A hereto;
4. Representations made to us by Acquired Company in a letter
reproduced as Attachment B hereto;
5. Such other documents, records and matters of law as in our judgment
were 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.
In connection with rendering this opinion, we have assumed (without any
independent investigation or review thereof) that original documents (including
signatures) are authentic, that documents submitted to us as copies conform to
the original documents, and 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 the effectiveness thereof.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, for Federal income tax purposes:
1. The Merger will qualify as a reorganization pursuant to Section
368(a) of the Code;
<PAGE>
2. No gain or loss will be recognized by Acquired Company as a result
of the consummation of the Merger; and
3. No gain or loss will be recognized by an Acquired Company
stockholder upon the exchange of Acquired Company Common Stock for shares of
Parent Common Stock pursuant to the Merger, except on the receipt of cash in
lieu of a fractional share interest in Parent Common Stock.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment
regarding the application of Federal income tax laws arising under the Code,
existing judicial decisions, administrative regulations and published
rulings and procedures. Our opinion is not binding upon the Internal Revenue
Service or the courts, and we cannot provide assurance that the Internal
Revenue Service will not assert a contrary position. Furthermore, we cannot
provide assurance that future legislative, judicial or administrative
changes would not, on either a prospective or retroactive basis, adversely
affect the accuracy of the conclusions stated herein. Moreover, we undertake
no responsibility to advise you of any new developments in the application
or interpretation of the Federal income tax laws as they might relate to
this opinion.
2. This opinion addresses only whether the Merger will qualify as a
reorganization under Section 368(a) of the Code and the tax consequences
listed above. The opinion does not address any other Federal, state, local
or foreign tax consequences that may result from the Merger or any other
transaction.
3. No opinion is expressed as to any transaction other than the Merger
as described in the Merger Agreement. Moreover, we have assumed that all the
transactions described in the Merger Agreement have been or will be
consummated in accordance with the terms of the Merger Agreement and without
waiver or breach of any material provision thereof and that all of the
representations, warranties, statements and assumptions upon which we have
relied remain true and accurate at all relevant times. In the event that any
of these assumptions upon which we have relied is incorrect, this opinion
may be adversely affected and be unable to be relied upon.
4. This opinion has been delivered to you for the purpose of satisfying
the condition set forth in Section 7.5 of the Merger Agreement and is
intended solely for your benefit. It may not be relied upon for any other
purpose or by any other person or entity, and may not be made available to
any other person or entity, without our prior written consent.
5. We hereby consent to the filing of this opinion as Exhibit 8 to the
Registration Statement on Form S-4 (File No. 333-27045) filed with the
Securities and Exchange Commission by Parent and the references to this firm
under the headings "Certain Federal Income Tax Consequences" and "Certain
Legal Matters" in such Registration Statement.
Our opinions are based upon our analysis of current case law, provisions of
the Internal Revenue Code and Treasury Regulations and Internal Revenue Service
rulings which we deem relevant as of this date. All of the foregoing are subject
to change, which may be effective retroactively. We have no obligation to advise
you of any such changes or their impact on our opinion, if it were issued at the
time of such changes.
A tax opinion is not a guarantee of the tax consequences of a transaction,
and the Internal Revenue Service may disagree with our conclusions.
We are not authorized to practice law in any state other than the State of
Illinois. Accordingly, our opinion is limited to matters of the laws of the
State of Illinois and federal law.
Very truly yours,
/s/ SACHNOFF & WEAVER, LTD
SACHNOFF & WEAVER, LTD.
<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 27, 1997
<PAGE>
EXHIBIT 23(B)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Enterprise Systems, Inc.:
We consent to the incorporation by reference in the registration statement
on Form S-4 of HBO & Company of our report dated February 10, 1997, relating to
the consolidated balance sheets of Enterprise Systems, Inc. and subsidiary as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1996 and to the reference to our firm under
the heading "Experts" in the registration statement on Form S-4 of HBO &
Company.
KPMG Peat Marwick LLP
Chicago, Illinois
May 28, 1997
