<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1998
REGISTRATION NO. 333-62081
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. T. CLARK FITZGERALD III, ESQ.
Jones, Day, Reavis & Pogue Arnall Golden & Gregory, LLP
3500 SunTrust Plaza 1201 W. Peachtree Street
303 Peachtree Street, N.E. Atlanta, Georgia 30309
Atlanta, Georgia 30308-3242 (404) 873-8500
(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: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
IMNET SYSTEMS, INC.
3015 WINDWARD PLAZA
WINDWARD FAIRWAYS II
ALPHARETTA, GEORGIA 30005
October 1, 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of IMNET Systems, Inc. ("IMNET") to be held at the Holiday
Inn, 1075 Holcomb Bridge Road, Roswell, Georgia 30076 at 9:00 a.m., local time,
on October 30, 1998.
At the Special Meeting, you will be asked to consider and take action upon a
proposal to approve an Agreement of Merger dated July 23, 1998 (the "Merger
Agreement") among IMNET, 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) IMNET will merge
with and into HBOC-GA (the "Merger") and (b) each outstanding share of common
stock, $.01 par value per share, of IMNET (the "IMNET Common Stock") and each
outstanding right to acquire a share of IMNET Common Stock will be converted
into the right to receive eighty-four one hundredths (.84) of a share of common
stock, $.05 par value per share, of HBOC (the "HBOC Common Stock"); provided,
however that (i) if the average closing price per share (or if there is no sale
on such date, then the average between the closing bid and ask prices on any
such date) for shares of HBOC Common Stock as reported by the Nasdaq Stock
Market, Inc. during the 20 consecutive trading days ending on the second trading
day prior to the date of the Special Meeting (the "Market Value") is equal to or
greater than $22.50 but less than $30.00, then each share of IMNET Common Stock
will be converted into a fractional share of HBOC Common Stock having a Market
Value of $25.00, and (ii) if the Market Value is less than $22.50, then each
share of IMNET Common Stock will be converted into 1.1111 shares of HBOC Common
Stock (whichever basis is applicable, being referred to as the "Exchange
Ratio"), and, in each case, less the amount of any fractional share, which will
be paid in cash.
Details of the proposed Merger and the Merger Agreement are set forth in the
accompanying Proxy Statement/Prospectus, which you are urged to review
carefully. A copy of the Merger Agreement is also attached to the Proxy
Statement/Prospectus as Appendix A.
IMNET's 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, IMNET and its stockholders. Accordingly, the Board of
Directors unanimously recommends that stockholders vote FOR approval of the
Merger Agreement. The Board of Directors has received the written opinion of The
Robinson-Humphrey Company, LLC to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the
Exchange Ratio was fair, from a financial point of view, to the holders of IMNET
Common Stock. A copy of such opinion is attached to the Proxy
Statement/Prospectus as Appendix B and should be read carefully in its entirety.
It is important that you vote your shares whether or not you plan to attend
the Special Meeting. To be sure your vote is counted, we urge you to carefully
review the Proxy Statement/Prospectus and to vote your shares as you choose.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING
ENVELOPE AS SOON AS POSSIBLE. You may revoke and change your proxy vote at any
time prior to the Special Meeting, and any such signed, dated and submitted
proxy will supersede any earlier proxy submitted by you. If you attend the
Special Meeting and wish to vote in person, the ballot that you submit at the
Special Meeting will supersede your proxy.
Thank you for your cooperation.
Very truly yours,
/s/ Kenneth D. Rardin
KENNETH D. RARDIN,
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
<PAGE>
IMNET SYSTEMS, INC.
3015 WINDWARD PLAZA
WINDWARD FAIRWAYS II
ALPHARETTA, GEORGIA 30005
------------------------
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Special
Meeting") of IMNET Systems, Inc., a Delaware corporation ("IMNET"), will be held
on Friday, October 30, 1998, at 9:00 a.m., local time, at the Holiday Inn, 1075
Holcomb Bridge Road, Roswell, Georgia 30076 for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement of Merger
dated July 23, 1998 (the "Merger Agreement") among IMNET, 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) IMNET will merge with
and into HBOC-GA (the "Merger") and (b) each outstanding share of common
stock, $.01 par value per share (the "IMNET Common Stock"), of IMNET and
each outstanding right to acquire a share of IMNET Common Stock will be
converted into the right to receive eighty-four one hundredths (.84) of
a share of common stock, $.05 par value per share, of HBOC (the "HBOC
Common Stock"); provided, however that (i) if the average closing price
per share (or if there is no sale on such date, then the average between
the closing bid and ask prices on any such date) for shares of HBOC
Common Stock as reported by the Nasdaq Stock Market, Inc. during the 20
consecutive trading days ending on the second trading day prior to the
date of the Special Meeting (the "Market Value") is equal to or greater
than $22.50 but less than $30.00, then each share of IMNET Common Stock
will be converted into a fractional share of HBOC Common Stock having a
Market Value of $25.00, and (ii) if the Market Value is less than
$22.50, then each share of IMNET Common Stock will be converted into
1.1111 shares of HBOC Common Stock, and, in each case, less the amount
of any fractional share, which will be paid in cash; and
2. To transact such other business as may properly come before the meeting
or any postponements or adjournments thereof.
The Board of Directors of IMNET (the "IMNET Board") has unanimously approved
the Merger proposal and has determined that the Merger is fair to, and in the
best interests of, IMNET and its stockholders. Accordingly, the IMNET Board
unanimously recommends that you vote FOR approval of the Merger Agreement.
The IMNET Board has fixed the close of business on September 25, 1998 as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Special Meeting. Accordingly, only stockholders of record of IMNET
Common Stock at the close of business on that date will be entitled to notice
of, and to vote at, the Special Meeting or any adjournment or postponement
thereof.
Details of the proposed Merger and other important information concerning
IMNET and HBOC are more fully described in the accompanying Proxy
Statement/Prospectus. Whether or not you plan to attend the Special Meeting, you
are urged to study the Proxy Statement/Prospectus carefully and then to
complete, sign and date the proxy and return it promptly in the enclosed return
envelope, which requires no postage if mailed in the United States.
By Order of the Board of Directors,
/s/ Kenneth D. Rardin
KENNETH D. RARDIN,
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Alpharetta, Georgia
Date: October 1, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE REQUESTED TO
SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF IMNET. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
<PAGE>
SUBJECT TO COMPLETION DATED OCTOBER 1, 1998
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>
PROXY STATEMENT
OF
IMNET 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 (the "IMNET Common Stock"), of IMNET Systems,
Inc., a Delaware corporation ("IMNET"), as a proxy statement in connection with
the solicitation of proxies by the Board of Directors of IMNET (the "IMNET
Board") for use at the Special Meeting of Stockholders (the "Special Meeting")
of IMNET to be held on October 30, 1998, at the Holiday Inn, 1075 Holcomb Bridge
Road, Roswell, Georgia 30076 commencing at 9:00 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.
This Proxy Statement/Prospectus also constitutes the prospectus of HBO &
Company, a Delaware corporation ("HBOC"), with respect to up to 12,746,019
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 IMNET 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 IMNET Common Stock. In the
Merger, subject to the terms of the Agreement of Merger dated July 23, 1998
among IMNET, HBOC and HBOC-GA (the "Merger Agreement"), each outstanding share
of IMNET Common Stock and right to acquire a share of IMNET Common Stock will be
converted into the right to receive eighty-four one hundredths (.84) of a share
of HBOC Common Stock; provided, however that (i) if the average closing price
per share (or if there is no sale on such date, then the average between the
closing bid and ask prices on any such date) for shares of HBOC Common Stock as
reported by the Nasdaq Stock Market, Inc. ("Nasdaq") during the 20 consecutive
trading days ending on the second trading day prior to the date of the Special
Meeting (the "Market Value") is equal to or greater than $22.50 but less than
$30.00, then each share of IMNET Common Stock will be converted into a
fractional share of HBOC Common Stock having a Market Value of $25.00, and (ii)
if the Market Value is less than $22.50, then each share of IMNET Common Stock
will be converted into 1.1111 shares of HBOC Common Stock (whichever basis is
applicable being referred to as the "Exchange Ratio"), and, in each case, less
the amount of any fractional shares, which will be paid in cash. If the Market
Value is less than $22.50, the IMNET Board may, but is not obligated to,
terminate the Merger Agreement prior to the consummation of the Merger.
Outstanding options to purchase shares of IMNET Common Stock will be assumed
by HBOC upon consummation of the Merger such that the holders will have the
right to purchase that number of shares of HBOC Common Stock into which the
shares of IMNET Common Stock subject to such options would have been converted
in the Merger. Additionally, rights to purchase IMNET Common Stock under the
IMNET Systems, Inc. 1996 Employee Discount Stock Purchase Plan will be assumed
by HBOC and adjusted in the same manner provided for in respect of outstanding
options.
As a result of the Merger and assuming the Exchange Ratio is .84 of a share
of HBOC Common Stock for each share of IMNET Common Stock, holders of shares of
IMNET Common Stock or rights to acquire shares of IMNET Common Stock will
receive an aggregate of up to 9,636,087 shares of HBOC Common Stock (less the
aggregate amount of any fractional shares, which will be paid in cash). The
number of shares of HBOC Common Stock issuable in the Merger is subject to
adjustment in accordance with the Merger Agreement. Assuming the Market Value
were $25.00, resulting in an Exchange Ratio of one share of HBOC Common Stock
for each share of IMNET Common Stock, an aggregate of 11,471,532 shares of HBOC
Common Stock would be issuable in the Merger. Assuming the Market Value were
less than $22.50 per share, resulting in an Exchange Ratio of 1.1111 shares of
HBOC Common Stock for each share of IMNET Common Stock, an aggregate of
12,746,019 shares of HBOC Common Stock would be issuable in the Merger.
Shares of HBOC Common Stock and IMNET Common Stock are currently approved
for quotation on the Nasdaq National Market (the "Nasdaq NM") under the symbols
"HBOC" and "IMNT," respectively. On September 30, 1998, the reported closing
sale prices of a share of HBOC Common Stock and IMNET Common Stock on the Nasdaq
NM were $28.875 and $24.00, respectively.
This Proxy Statement/Prospectus and the related Notice of Special Meeting
and proxy card are first being mailed on or about October 1, 1998, to
stockholders of record at the close of business on September 25, 1998 (the
"Record Date"). There were 9,808,550 shares of IMNET Common Stock outstanding at
the close of business on the Record Date. Only holders of IMNET Common Stock of
record on the Record Date will be entitled to notice of, and to vote at, the
Special Meeting or any adjournment or postponement thereof. Each holder of
record may revoke and change his proxy vote at any time prior to the Special
Meeting and each such signed, dated and submitted proxy will supersede any
earlier proxy submitted. If a holder of record of IMNET Common Stock attends the
Special Meeting and wishes to vote in person, any ballot submitted by such
holder at the Special Meeting will supersede any earlier submitted proxy.
The above matters are discussed in detail in this Proxy
Statement/Prospectus. Stockholders of IMNET are strongly urged to read and
consider this Proxy Statement/Prospectus in its entirety.
SEE "RISK FACTORS," ON PAGE 20 OF THIS PROXY STATEMENT/PROSPECTUS, FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY IMNET 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 OCTOBER 1, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
---------
<S> <C>
AVAILABLE INFORMATION AND SOURCES OF INFORMATION.......................................................... 1
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................................................... 1
SUMMARY................................................................................................... 3
The Parties........................................................................................... 3
The Special Meeting................................................................................... 4
The Merger Proposal................................................................................... 4
Summary Financial Data................................................................................ 9
Pro Forma Financial Information....................................................................... 11
Comparative Per Share Data............................................................................ 17
RISK FACTORS.............................................................................................. 20
Exchange Ratio Does Not Assure Any Minimum Value...................................................... 20
Interests of Certain IMNET Officers and Directors in the Merger Differ from Other Stockholders........ 20
Forward-Looking Statements May Prove Inaccurate....................................................... 20
CERTAIN MARKET INFORMATION................................................................................ 21
HBOC.................................................................................................. 21
IMNET................................................................................................. 21
THE SPECIAL MEETING....................................................................................... 23
THE MERGER PROPOSAL....................................................................................... 24
Background of the Merger.............................................................................. 24
Reasons of IMNET for Engaging in the Merger; Recommendation of the IMNET Board........................ 26
Opinion of Financial Advisor to IMNET................................................................. 28
Reasons of HBOC for Engaging in the Merger............................................................ 34
Terms of the Merger................................................................................... 34
Effective Time.................................................................................... 34
General Effects of the Merger..................................................................... 34
Conversion of Shares.............................................................................. 34
Right to Terminate if HBOC Market Value is Less Than $22.50....................................... 35
Fractional Shares................................................................................. 35
Stock Plans....................................................................................... 35
Employee Stock Purchase Plan...................................................................... 36
Exchange of Certificates.......................................................................... 36
Payment of Dividends.............................................................................. 36
Limitations on Transferability of HBOC Common Stock............................................... 36
Conditions; Waiver................................................................................ 37
Hart-Scott-Rodino................................................................................. 37
No Solicitation................................................................................... 38
Termination....................................................................................... 38
Accounting Treatment.................................................................................. 38
Certain Federal Income Tax Consequences............................................................... 38
No Appraisal Rights................................................................................... 40
INTERESTS OF CERTAIN PERSONS IN EACH OF HBOC AND IMNET.................................................... 40
Security Ownership of Certain Beneficial Owners and Management of HBOC................................ 40
Security Ownership of Certain Beneficial Owners and Management of IMNET............................... 41
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Interests of Certain IMNET Persons in Matters to be Acted Upon........................................ 43
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF HBOC COMMON STOCK AND IMNET COMMON STOCK............. 45
Introduction.......................................................................................... 45
Authorized Capital Stock.............................................................................. 45
Board or Stockholder Approved Preferred Stock......................................................... 45
Voting Rights......................................................................................... 45
Number of Directors................................................................................... 46
Election of Board of Directors........................................................................ 46
Vote on Merger, Consolidation or Sale of Substantially All Assets..................................... 46
Special Meetings of Stockholders...................................................................... 46
Stockholder Action by Written Consent................................................................. 46
Amendment of Certificate of Incorporation............................................................. 47
Amendment of Bylaws................................................................................... 47
Liability and Indemnification of Officers and Directors............................................... 47
Payment of Dividends.................................................................................. 48
Anti-Takeover Protection.............................................................................. 48
Appraisal Rights...................................................................................... 48
BUSINESS OF HBOC.......................................................................................... 49
General............................................................................................... 49
Recent Developments................................................................................... 49
BUSINESS OF IMNET......................................................................................... 50
STOCKHOLDER PROPOSALS..................................................................................... 50
OTHER MATTERS............................................................................................. 50
CERTAIN LEGAL MATTERS..................................................................................... 50
EXPERTS................................................................................................... 51
APPENDIX A--Agreement of Merger dated July 23, 1998....................................................... A-1
APPENDIX B--Opinion of The Robinson-Humphrey Company, LLC................................................. B-1
</TABLE>
ii
<PAGE>
AVAILABLE INFORMATION AND SOURCES OF INFORMATION
Each of HBOC and IMNET 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 IMNET with the
Commission can be inspected and copied at the Public Reference Room 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 Room 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 IMNET 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 and to which reference is hereby
made. 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 IMNET
has been supplied by IMNET, information regarding the Merger proposal has been
supplied by IMNET and/or HBOC and all other information has been supplied by
HBOC. References to IMNET 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, IMNET
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 IMNET since the date
hereof or that the information herein is correct as of any time subsequent to
the date hereof.
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, 1997,
filed with the Commission on March 12, 1998;
2. Quarterly Reports on Form 10-Q for the quarters ended: (i) March 31,
1998, dated and filed with the Commission on May 11, 1998; and (ii) June 30,
1998, dated and filed with the Commission on August 3, 1998;
1
<PAGE>
3. Current Reports on Form 8-K: (i) dated and filed with the Commission on
February 10, 1998; (ii) dated and filed with the Commission on February 12,
1998; (iii) dated and filed with the Commission on May 19, 1998; and (iv) dated
and filed with the Commission on July 27, 1998;
4. Proxy Statement dated as of April 3, 1998 and filed in definitive form
on April 2, 1998 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 document filed by IMNET with the Commission
(File No. 0-26306) pursuant to the Exchange Act is incorporated by reference in
this Proxy Statement/Prospectus: Annual Report on Form 10-K for the fiscal year
ended June 30, 1998, filed with the Commission on August 5, 1998.
All documents filed by HBOC and IMNET 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 Special 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 IMNET 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 IMNET DOCUMENTS, TO IMNET SYSTEMS, INC., 3015 WINDWARD PLAZA, WINDWARD
FAIRWAYS II, ALPHARETTA, GEORGIA 30005, ATTENTION: SCOTT A. REMLEY, TELEPHONE:
(770) 521-5600. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE
SPECIAL MEETING, ANY SUCH REQUESTS SHOULD BE MADE BY OCTOBER 23, 1998.
FORWARD-LOOKING STATEMENTS. This Proxy Statement/Prospectus and the HBOC
documents incorporated by reference herein may contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements relate to expectations concerning matters that are not
historical facts. Although HBOC believes that the expectations reflected in such
forward-looking statements are reasonable, HBOC can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from such expectations ("Cautionary
Statements") are disclosed herein and therein, including, without limitation, in
conjunction with the forward-looking statements included under "Risk Factors."
All forward-looking statements attributable to HBOC are expressly qualified in
their entirety by the Cautionary Statements described herein and in HBOC's
reports filed with the Commission, including the Annual Report on Form 10-K for
the year ended December 31, 1997 and the quarterly reports on Form 10-Q for the
quarters ended March 31, 1998 and June 30, 1998.
2
<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, INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS. ALL SHARE AND PER SHARE DATA REGARDING HBOC COMMON STOCK
IN THIS PROXY STATEMENT/PROSPECTUS HAVE BEEN ADJUSTED TO GIVE EFFECT TO A
TWO-FOR-ONE STOCK SPLIT OF THE HBOC COMMON STOCK EFFECTED IN THE FORM OF A STOCK
DIVIDEND, PAID JUNE 9, 1998 TO STOCKHOLDERS OF RECORD ON MAY 27, 1998.
THE PARTIES
HBO & COMPANY
GENERAL. HBOC provides 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 healthcare
organizations to add incremental capabilities to their 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, medical call centers, 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 payors. 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. On September 28, 1998, HBOC announced that it had
entered into an Agreement of Merger by and among HBOC, HBOC-GA and Access
Health, Inc. ("Access") pursuant to which HBOC will acquire all of the
outstanding shares of Access and Access will merge with a subsidiary of HBOC.
Such agreement is subject, among other things, to regulatory approval and
approval by the stockholders of Access. Access provides clinically based care
management programs and healthcare information services.
HBOC has entered into an Agreement of Merger dated July 20, 1998 among HBOC,
HBOC-GA and US Servis, Inc. ("US Servis"), a management services company that
provides outsourced billing, accounts receivable and other business and
information management services to physicians and physician networks, hospital
business offices and ambulatory care centers. Such agreement was approved by the
stockholders of US Servis at a meeting held on September 29, 1998. HBOC
anticipates that the merger will be consummated on or about October 1, 1998, and
that HBOC will issue shares of HBOC Common Stock valued at approximately $50.0
million in connection with the merger.
IMNET SYSTEMS, INC.
IMNET develops, markets, installs and services electronic information and
document management systems to meet the needs of the healthcare industry and
other document-intensive businesses. IMNET's hardware and software systems
electronically capture, index, store and retrieve information which is
3
<PAGE>
resident on most storage media, including magnetic disk, optical disk,
microfilm, paper and x-ray film. IMNET's information management solution, the
IMNET Electronic Information Warehouse-TM-, allows users to re-engineer their
information management processes to access information on a cost-effective basis
and to achieve immediate cost savings through productivity increases. The IMNET
Electronic Information Warehouse is used by healthcare providers and healthcare
information systems vendors to create an electronic medical record by
integrating current and historical patient information with existing information
management systems. See "Business of IMNET."
The address and telephone number of the principal executive offices of IMNET
are 3015 Windward Plaza, Windward Fairways II, Alpharetta, Georgia 30005, (770)
521-5600.
THE SPECIAL MEETING
The Special Meeting will be held on October 30, 1998 at 9:00 a.m., local
time, at the Holiday Inn, 1075 Holcomb Bridge Road, Roswell, Georgia 30076. The
purpose of the Special Meeting is to consider and take action upon a proposal to
approve the Merger Agreement. The IMNET Board has fixed the close of business on
September 25, 1998, as the Record Date for the determination of stockholders
entitled to vote at the Special Meeting. The presence at the Special Meeting, in
person or by proxy, of the holders of at least a majority of the shares of IMNET
Common Stock issued and outstanding and entitled to vote on such date is
necessary to constitute a quorum at the Special Meeting. The proposed Merger
Agreement requires the affirmative vote of the holders of a majority of the
issued and outstanding shares of IMNET Common Stock in order to be approved.
Pursuant to certain voting agreements (the "Voting Agreements") entered into
with the directors and executive officers of IMNET and their affiliates at the
same time as the Merger Agreement, HBOC holds proxies to vote approximately
15.1% of the issued and outstanding shares of IMNET Common Stock as of the
Record Date in favor of approval of the Merger Agreement. See "The Special
Meeting."
THE MERGER PROPOSAL
RECOMMENDATION OF THE IMNET BOARD; OPINION OF FINANCIAL ADVISOR TO IMNET
The IMNET Board has approved the Merger Agreement by unanimous vote and has
determined that the Merger is fair to, and in the best interests of, IMNET and
its stockholders. Accordingly, the IMNET Board unanimously recommends that
IMNET's stockholders vote FOR approval of the Merger Agreement. In approving the
Merger Agreement, the IMNET Board considered various factors described under the
caption "The Merger Proposal--Reasons of IMNET for Engaging in the Merger;
Recommendation of the IMNET Board." In addition, the IMNET Board has received an
opinion of The Robinson-Humphrey Company, LLC ("Robinson-Humphrey") regarding
the fairness, from a financial point of view, of the Exchange Ratio to the
holders of IMNET Common Stock. The full text of the opinion of Robinson-Humphrey
is attached hereto as Appendix B. See "The Merger Proposal--Opinion of Financial
Advisor to IMNET."
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 IMNET 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"). At the Effective Time,
IMNET will be merged with and into HBOC-GA, which will be the surviving
corporation.
4
<PAGE>
CONVERSION OF SHARES. As a result of the Merger, IMNET stockholders will
receive a fractional share of HBOC Common Stock for each share of IMNET Common
Stock, the amount of which will vary depending upon the Market Value of HBOC
Common Stock. If the Market Value of HBOC Common Stock is $30.00 or more, IMNET
stockholders will receive .84 of a share of HBOC Common Stock for each share of
IMNET Common Stock that they own. If the Market Value of HBOC Common Stock is
equal to or greater than $22.50 but less than $30.00, IMNET stockholders will
receive a fractional share of HBOC Common Stock determined by dividing $25.00 by
the Market Value for each share of IMNET Common Stock. If the Market Value of
HBOC Common Stock is less than $22.50, IMNET stockholders will receive 1.1111
shares of HBOC Common Stock for each share of IMNET Common Stock, provided that
in such case, the IMNET Board does not elect to exercise its right to terminate
the Merger Agreement prior to the Effective Time. The shares of HBOC Common
Stock and any cash in lieu of fractions thereof receivable by IMNET stockholders
are hereinafter referred to as the "Merger Consideration."
The Exchange Ratio of .84, applicable at Market Values of $30.00 or more,
was calculated in June 1998 based on recent prices of HBOC Common Stock, with
the intention of providing HBOC Common Stock valued at approximately $25.00 for
each share of IMNET Common Stock. Assuming the Record Date, September 25, 1998,
were the Closing Date, the Market Value would have been $26.64 and the Exchange
Ratio would have been .9384. The following table shows the Exchange Ratio at
various assumed Market Values, together with the estimated value per share of
IMNET Common Stock in each case. The actual market price of HBOC Common Stock at
the Effective Time could be more or less than the Market Value used to determine
the Exchange Ratio, and the actual value of the shares issued in the Merger at
the Effective Time therefore could be more or less than the estimated market
value for each share of IMNET Common Stock indicated. Similarly, the value of
the aggregate Merger Consideration could be more or less than the aggregate
estimated Merger Consideration.
<TABLE>
<CAPTION>
VALUE OF HBOC COMMON VALUE OF HBOC COMMON
STOCK TO BE ISSUED STOCK TO BE ISSUED
FOR FOR
ASSUMED MARKET VALUE OF EACH SHARE OF IMNET ALL SHARES OF IMNET
HBOC COMMON STOCK EXCHANGE RATIO COMMON STOCK COMMON STOCK(1)
- ----------------------- --------------- --------------------- --------------------
<S> <C> <C> <C>
$35.00 .8400 $ 29.40 $ 288,371,370
$32.50 .8400 $ 27.30 $ 267,773,415
$30.00 .8400 $ 25.20 $ 247,175,460
$27.50 .9091 $ 25.00 $ 245,213,750
$25.00 1.0000 $ 25.00 $ 245,213,750
$22.50 1.1111 $ 25.00 $ 245,213,750
$ 20.00 (2) 1.1111 $ 22.22 $ 217,945,981
</TABLE>
- ------------------------
(1) The aggregate estimated Merger Consideration is calculated by multiplying
the estimated market value per IMNET share by 9,808,550, which is the number
of outstanding shares of IMNET Common Stock on the Record Date.
(2) Assumes the IMNET Board does not terminate the Merger Agreement.
RIGHT TO TERMINATE IF HBOC MARKET VALUE IS LESS THAN $22.50. If the Market
Value is less than $22.50, then the IMNET Board has the right, but not the
obligation, to terminate the Merger Agreement prior to the Effective Time. In
that case, and assuming the Merger is approved by IMNET stockholders, the IMNET
Board may decide to terminate the Merger Agreement or to consummate the Merger
without resoliciting IMNET stockholders. In considering whether to consummate
the Merger without resolicitation, the IMNET Board expects to consider,
consistent with its fiduciary duties, all relevant factors including
then-existing economic conditions, the respective business, financial condition,
results of operations and prospects of each of HBOC and IMNET and their
industries, and the factors considered in deciding to enter into the Merger
Agreement. The IMNET Board may also consult with Robinson-
5
<PAGE>
Humphrey, its financial advisor, and may obtain an updated fairness opinion. An
additional factor to consider is HBOC's right to terminate the Merger Agreement
after November 30, 1998. IMNET might not be able to obtain an extension of the
November 30, 1998 date in order to resolicit stockholders, if it chose to do so.
In that event, the IMNET Board may need to either terminate the Merger Agreement
or consummate the Merger, thereby avoiding the possible payment of a $7,500,000
fee to HBOC. See "The Merger Proposal--Terms of the Merger--Termination." The
determinations by the IMNET Board as to whether to proceed with the Merger and
whether to resolicit IMNET stockholders will be based on facts and circumstances
existing if and when the termination right occurs. Those 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 IMNET 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 IMNET Common Stock outstanding
at the Effective Time of the Merger will be assumed by HBOC, and 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
IMNET Common Stock the optionee was entitled to purchase under the existing
option would have been converted pursuant to the terms of the Merger. At the
Effective Time, options held by executive officers of IMNET will, pursuant to
their terms, become immediately and fully exercisable. See "The Merger
Proposal--Terms of the Merger--Stock Plans" and "Interests of Certain Persons in
Each of HBOC and IMNET--Interests of Certain IMNET Persons in Matters to be
Acted Upon."
EMPLOYEE STOCK PURCHASE PLAN. At the Effective Time, HBOC will assume
IMNET's rights and obligations under the IMNET Systems, Inc. 1996 Employee
Discount Stock Purchase Plan (the "Employee Stock Purchase Plan"), and each
outstanding right to purchase IMNET Common Stock thereunder will be adjusted in
the same manner provided for in respect of outstanding options.
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 IMNET 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 IMNET Common Stock represented
thereby. Until surrendered, each Certificate shall represent for all purposes
only the right to receive the Merger Consideration, without any interest on the
value thereof. See "The Merger Proposal--Terms of the Merger--Exchange of
Certificates."
LIMITATIONS ON TRANSFERABILITY OF HBOC COMMON STOCK. Shares of HBOC Common
Stock received by certain persons deemed to be "affiliates" of IMNET 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
IMNET 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, IMNET affiliates are subject to
certain restrictions on transfer of both IMNET 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 IMNET, 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
6
<PAGE>
shares of IMNET 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 IMNET filed the required information with the Antitrust
Division and the FTC on August 6 and August 5, 1998, respectively, and received
notification of early termination of the waiting period on August 27, 1998. See
"The Merger Proposal--Terms of the Merger--Hart-Scott-Rodino."
NO SOLICITATION. IMNET has agreed, subject to certain exceptions, that,
prior to the Effective Time of the Merger or earlier termination of the Merger
Agreement, IMNET shall not, and shall not permit any of its subsidiaries or
their respective representatives to 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 IMNET or any of its subsidiaries.
See "The Merger Proposal--Terms of the Merger--No Solicitation."
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time of the Merger by, among other things: (i) mutual written
consent of the Board of Directors of HBOC (the "HBOC Board") and the IMNET
Board, notwithstanding the prior approval by the IMNET stockholders; (ii) the
HBOC Board, in the event of material condemnation, destruction, loss or damage
to the business or assets of IMNET and its subsidiaries, taken as a whole; (iii)
the Board of Directors of HBOC-GA (the "HBOC-GA Board") or the IMNET Board,
after November 30, 1998, if any of the conditions to such party's obligation to
consummate the Merger has not been fulfilled or waived, unless fulfillment has
been frustrated or made impossible by the party seeking termination; (iv) the
IMNET Board, if, in the good faith exercise of its fiduciary duties to the
stockholders of IMNET in the context of a proposal to acquire IMNET by another
party, the IMNET Board decides that such termination is required; and (v) the
IMNET Board, if the Market Value of HBOC Common Stock is less than $22.50.
If the Merger Agreement is terminated by IMNET in accordance with (iv) above
or by IMNET or HBOC-GA because the IMNET stockholders do not approve the Merger
Agreement, IMNET will be obligated to pay to HBOC-GA a fee in the amount of
$7,500,000, plus all reasonable costs and expenses of HBOC and HBOC-GA incurred
in connection with the negotiation and performance of the Merger Agreement.
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, in their capacity as independent public accountants for
IMNET, setting forth their concurrence with the conclusion of IMNET's management
that no conditions exist with respect to IMNET that would preclude accounting
for the Merger as a pooling of interests, and from Arthur Andersen LLP, in their
capacity as independent public accountants for HBOC, to the effect that HBOC
satisfies the tests applicable to it such that the Merger can be accounted for
as a pooling of interests, in each case under Accounting Principles Board
Opinion No. 16 and assuming that the Merger is closed and consummated in
accordance with the Merger Agreement.
7
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
IMNET has 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"). If the Merger so qualifies, no gain or loss will be recognized by an
IMNET stockholder upon the exchange of the shares of IMNET 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. See "The
Merger Proposal--Certain Federal Income Tax Consequences."
NO APPRAISAL RIGHTS
Because IMNET Common Stock is a Nasdaq NM security, the holders of shares of
IMNET 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 OF IMNET AND
HBOC. As of the Record Date, directors and executive officers of IMNET and
their affiliates were beneficial owners of 1,479,531 outstanding shares of IMNET
Common Stock, representing approximately 15.1% of the issued and outstanding
IMNET Common Stock. Pursuant to the Voting Agreements, HBOC holds proxies to
vote all of such shares of IMNET Common Stock in favor of approval of the Merger
Agreement. Directors and executive officers of HBOC and their affiliates
beneficially owned approximately 5,351,642, or 1.2%, of the outstanding shares
(giving effect to the exercise of their presently exercisable stock options) of
HBOC Common Stock as of July 31, 1998. See "Interests of Certain Persons in Each
of HBOC and IMNET."
INTERESTS OF CERTAIN IMNET PERSONS IN MATTERS TO BE ACTED UPON. Certain
officers and the directors of IMNET have interests in the Merger that differ
from those of IMNET stockholders generally. Such interests include severance
payments, vesting of unvested and unexercisable stock options 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
IMNET--Interests of Certain IMNET Persons in Matters to be Acted Upon."
COMPARISON OF STOCKHOLDER RIGHTS
HBOC and IMNET are each incorporated under Delaware law. For a summary of
material differences between the rights of holders of shares of each of IMNET
Common Stock and HBOC Common Stock, see "Comparison of Rights of Holders of
Shares of Each of HBOC Common Stock and IMNET Common Stock."
CERTAIN MARKET INFORMATION
HBOC Common Stock and IMNET Common Stock are traded on the Nasdaq NM under
the symbols "HBOC" and "IMNT," respectively. The closing sale prices per share
of HBOC Common Stock and IMNET Common Stock on July 22, 1998, the last trading
day preceding the announcement of the proposed Merger, were $32.875 and $16.250,
respectively. See "Certain Market Information."
RISK FACTORS
The stockholders of IMNET should carefully review the matters set forth
under "Risk Factors."
8
<PAGE>
SUMMARY FINANCIAL DATA
The following summary historical financial data for each of HBOC and IMNET
should be read in conjunction with the financial statements and notes thereto of
HBOC and IMNET, incorporated by reference in this Proxy Statement/Prospectus.
HBO & COMPANY(1)
(FROM CONTINUING OPERATIONS)
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1993 1994(2) 1995(3) 1996(4) 1997(5) 1997(5) 1998(6)
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue.................................... $ 409,354 $ 525,490 $ 715,902 $ 950,911 $1,203,204 $ 554,786 $ 719,539
Net Income (Loss).......................... $ 19,893 $ 34,500 $ (7,895) $ 82,333 $ 143,537 $ 64,488 $ 140,474
Diluted Earnings (Loss) Per Share.......... $ .06 $ .09 $ (.02) $ .20 $ .33 $ .15 $ .32
Weighted Average Shares Outstanding
(Diluted)................................ 349,371 364,547 370,060 421,768 428,925 426,574 438,873
Cash Dividends Per Share................... $ .02 $ .02 $ .02 $ .02 $ .03 $ .01 $ .03
BALANCE SHEET DATA:
Working Capital............................ $ 89,723 $ 53,330 $ 156,488 $ 295,240 $ 519,140 $ 402,667 $ 726,148
Total Assets............................... $ 296,781 $ 425,093 $ 771,550 $1,012,749 $1,312,586 $1,097,286 $1,424,124
Long-Term Debt............................. $ 6,700 $ 15,067 $ 4,054 $ 769 $ 1,022 $ 448 $ 781
Stockholders' Equity....................... $ 176,242 $ 215,848 $ 500,787 $ 650,646 $ 900,582 $ 765,043 $1,102,635
</TABLE>
- ------------------------
(1) All share and per share amounts have been restated to reflect the 1998
two-for-one stock split effected in the form of a stock dividend.
(2) 1994 Income Statement related items include nonrecurring charges of $6,927.
Net income was $38,650 and diluted earnings per share was $.11 excluding
nonrecurring charges.
(3) 1995 Income Statement related items include nonrecurring charges of $130,270
and exclude the dilutive effect of stock options. Net income was $70,321 and
diluted earnings per share was $.18 excluding nonrecurring charges and
including the dilutive effect of stock options.
(4) 1996 Income Statement related items include nonrecurring charges of $70,203.
Net income was $124,456 and diluted earnings per share was $.30 excluding
nonrecurring charges.
(5) Year ended December 31, 1997 Income Statement related items include
nonrecurring charges of $95,250. Net income was $200,664 and diluted
earnings per share was $.47 excluding nonrecurring charges. Six months ended
June 30, 1997 Income Statement related items include nonrecurring charges of
$35,420. Net income was $85,810 and diluted earnings per share was $.20
excluding nonrecurring charges.
(6) Six months ended June 30, 1998 Income Statement related items include a
nonrecurring credit of $3,000. Net income was $138,674 and diluted earnings
per share was $.32 excluding the nonrecurring credit.
9
<PAGE>
IMNET SYSTEMS, INC.
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED
JUNE 30,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996(1) 1997(2) 1998(3)
--------- --------- --------- --------- ---------
INCOME STATEMENT DATA:
Revenue.................................................. $ 6,341 $ 11,274 $ 29,380 $ 50,184 $ 54,645
Net Income (Loss)........................................ $ (5,376) $ (4,079) $ (6,027) $ 6,982 $ (1,875)
Diluted Earnings (Loss) Per Share........................ $ (1.38) $ (.77) $ (.69) $ .69 $ (.19)
Cash Dividends Per Share (4)............................. $ -- $ -- $ -- $ -- $ --
BALANCE SHEET DATA:
Working Capital.......................................... $ 3,276 $ 4,873 $ 49,407 $ 42,771 $ 41,590
Total Assets............................................. $ 9,405 $ 11,303 $ 70,915 $ 85,853 $ 82,595
Long-Term Debt........................................... $ -- $ -- $ -- $ -- $ --
Stockholders' Equity..................................... $ 6,552 $ 8,071 $ 60,823 $ 69,790 $ 68,412
</TABLE>
- ------------------------
(1) 1996 Income Statement related items include nonrecurring charges of $10,370.
Net income was $4,343 and diluted earnings per share was $.47 excluding
nonrecurring charges.
(2) 1997 Income Statement related items include nonrecurring charges of $2,586.
Net income was $9,568 and diluted earnings per share was $.95 excluding
nonrecurring charges.
(3) 1998 Income Statement related items include nonrecurring charges of $1,486.
Net loss was $(389) and loss per share was $(.04) excluding nonrecurring
charges.
(4) Excludes dividends paid by Hunter International, Inc., which was acquired in
fiscal year 1997 in an acquisition accounted for using the pooling of
interests method of accounting.
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<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following pro forma combined condensed financial statements give effect
to the acquisition of IMNET 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 future results or financial position of HBOC in the future. The
pro forma combined condensed financial statements should be read in conjunction
with the historical consolidated financial statements of HBOC and IMNET
incorporated by reference in this Proxy Statement/Prospectus.
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AT JUNE 30, 1998
(000 OMITTED)
<TABLE>
<CAPTION>
HBOC/IMNET
PRO FORMA PRO FORMA
HBOC IMNET ADJUSTMENTS COMBINED
---------- ------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents................................................... $ 491,631 $15,666 $ $ 507,297
Short-Term Investments...................................................... 5,223 2,132 7,355
Receivables, Net............................................................ 488,801 32,677 (7,045)(1) 514,433
Current Deferred Income Taxes............................................... 21,799 -- 21,799
Inventories................................................................. 9,746 2,071 11,817
Prepaids and Other Current Assets........................................... 21,994 2,444 (532)(1) 23,906
---------- ------- ----------- ----------
Total Current Assets...................................................... 1,039,194 54,990 (7,577) 1,086,607
Capitalized Software, Net..................................................... 77,619 4,906 82,525
Property and Equipment, Net................................................... 108,678 6,715 115,393
Intangibles, Net.............................................................. 161,748 15,340 177,088
Deferred Income Taxes......................................................... 31,554 -- 31,554
Other Noncurrent Assets, Net.................................................. 5,331 644 5,975
---------- ------- ----------- ----------
TOTAL ASSETS.................................................................... $1,424,124 $82,595 $ (7,577) $1,499,142
---------- ------- ----------- ----------
---------- ------- ----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities........................................................... $ 313,046 $13,400 $ (7,577)(1) $ 318,869
Long-Term Debt................................................................ 781 -- 781
Other Long-Term Liabilities................................................... 7,662 783 8,445
Stockholders' Equity.......................................................... 1,102,635 68,412 1,171,047
---------- ------- ----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................... $1,424,124 $82,595 $ (7,577) $1,499,142
---------- ------- ----------- ----------
---------- ------- ----------- ----------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
11
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/IMNET
PRO FORMA PRO FORMA
HBOC IMNET ADJUSTMENTS COMBINED
-------- ------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue......................................................................... $719,539 $30,601 $ (8,146)(1) $741,994
Operating Expense:
Cost of Operations............................................................ 302,848 14,182 (8,146)(1) 308,884
Marketing..................................................................... 99,385 8,651 108,036
Research and Development...................................................... 45,967 4,365 50,332
General and Administrative.................................................... 49,327 2,445 51,772
Nonrecurring Charge (Credit).................................................. (3,000) 1,247 (1,753)
-------- ------- ----------- ----------
Total Operating Expense................................................... 494,527 30,890 (8,146) 517,271
-------- ------- ----------- ----------
Operating Income (Loss)......................................................... 225,012 (289) -- 224,723
Other Income, Net............................................................... 9,111 111 9,222
-------- ------- ----------- ----------
Income (Loss) Before Income Taxes............................................... 234,123 (178) -- 233,945
Income Taxes.................................................................... 93,649 30 93,679
-------- ------- ----------- ----------
Net Income (Loss)............................................................... $140,474 $ (208) $ -- $140,266
-------- ------- ----------- ----------
-------- ------- ----------- ----------
Diluted Earnings (Loss) Per Share............................................... $ .32 $ (.02) $ .31
-------- ------- ----------
-------- ------- ----------
Weighted Average Shares Outstanding (Diluted)................................... 438,873 9,778 (1,305)(2) 447,346
-------- ------- ----------- ----------
-------- ------- ----------- ----------
Excluding Nonrecurring Charge (Credit) (3):
Net Income.................................................................... $138,674 $ 1,039 $139,713
-------- ------- ----------
-------- ------- ----------
Diluted Earnings Per Share.................................................... $ .32 $ .10 $ .31
-------- ------- ----------
-------- ------- ----------
Weighted Average Shares Outstanding (Diluted)................................. 438,873 10,087 (1,614)(2) 447,346
-------- ------- ----------- ----------
-------- ------- ----------- ----------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
12
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/IMNET
PRO FORMA PRO FORMA
HBOC IMNET(4) ADJUSTMENTS COMBINED
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue.................................................................... $1,203,204 $53,458 $(18,908)(1) $1,237,754
Operating Expense:
Cost of Operations....................................................... 511,082 19,048 (18,908)(1) 511,222
Marketing................................................................ 176,194 15,011 191,205
Research and Development................................................. 89,059 6,953 96,012
General and Administrative............................................... 108,811 7,648 116,459
Nonrecurring Charge...................................................... 95,250 2,075 97,325
---------- -------- ----------- ----------
Total Operating Expense.............................................. 980,396 50,735 (18,908) 1,012,223
---------- -------- ----------- ----------
Operating Income........................................................... 222,808 2,723 -- 225,531
Other Income, Net.......................................................... 16,382 1,113 17,495
---------- -------- ----------- ----------
Income Before Income Taxes................................................. 239,190 3,836 -- 243,026
Income Taxes............................................................... 95,653 861 96,514
---------- -------- ----------- ----------
Net Income................................................................. $ 143,537 $ 2,975 $ -- $ 146,512
---------- -------- ----------- ----------
---------- -------- ----------- ----------
Diluted Earnings Per Share................................................. $ .33 $ .29 $ .33
---------- -------- ----------
---------- -------- ----------
Weighted Average Shares Outstanding (Diluted).............................. 428,925 10,224 (1,636)(2) 437,513
---------- -------- ----------- ----------
---------- -------- ----------- ----------
Excluding Nonrecurring Charge (3):
Net Income............................................................... $ 200,664 $ 5,050 $ 205,714
---------- -------- ----------
---------- -------- ----------
Diluted Earnings Per Share............................................... $ .47 $ .49 $ .47
---------- -------- ----------
---------- -------- ----------
Weighted Average Shares Outstanding (Diluted)............................ 428,925 10,224 (1,636)(2) 437,513
---------- -------- ----------- ----------
---------- -------- ----------- ----------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
13
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/IMNET
PRO FORMA PRO FORMA
HBOC IMNET(4) ADJUSTMENTS COMBINED
-------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue.................................................................... $950,911 $39,387 $ (8,038)(1) $982,260
Operating Expense:
Cost of Operations....................................................... 413,471 13,566 (8,038)(1) 418,999
Marketing................................................................ 146,207 11,089 157,296
Research and Development................................................. 83,984 4,781 88,765
General and Administrative............................................... 107,810 4,889 112,699
Nonrecurring Charge...................................................... 70,203 5,379 75,582
-------- -------- ----------- ----------
Total Operating Expense.............................................. 821,675 39,704 (8,038) 853,341
-------- -------- ----------- ----------
Operating Income (Loss).................................................... 129,236 (317) -- 128,919
Other Income, Net.......................................................... 7,222 1,917 9,139
-------- -------- ----------- ----------
Income Before Income Taxes................................................. 136,458 1,600 -- 138,058
Income Taxes............................................................... 54,125 -- 54,125
-------- -------- ----------- ----------
Net Income................................................................. $ 82,333 $ 1,600 $ -- $ 83,933
-------- -------- ----------- ----------
-------- -------- ----------- ----------
Diluted Earnings Per Share................................................. $ .20 $ .16 $ .20
-------- -------- ----------
-------- -------- ----------
Weighted Average Shares Outstanding (Diluted).............................. 421,768 9,920 (1,587)(2) 430,101
-------- -------- ----------- ----------
-------- -------- ----------- ----------
Excluding Nonrecurring Charge (3):
Net Income............................................................... $124,456 $ 6,979 $131,435
-------- -------- ----------
-------- -------- ----------
Diluted Earnings Per Share............................................... $ .30 $ .70 $ .31
-------- -------- ----------
-------- -------- ----------
Weighted Average Shares Outstanding (Diluted)............................ 421,768 9,920 (1,587)(2) 430,101
-------- -------- ----------- ----------
-------- -------- ----------- ----------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
14
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/IMNET
PRO FORMA PRO FORMA
HBOC IMNET(4) ADJUSTMENTS COMBINED
-------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue.................................................................... $715,902 $17,256 $ $733,158
Operating Expense:
Cost of Operations....................................................... 329,684 6,724 336,408
Marketing................................................................ 114,994 7,055 122,049
Research and Development................................................. 68,293 2,765 71,058
General and Administrative............................................... 89,213 3,499 92,712
Nonrecurring Charge...................................................... 130,270 5,740 136,010
-------- -------- ----------- ----------
Total Operating Expense.............................................. 732,454 25,783 -- 758,237
-------- -------- ----------- ----------
Operating Loss............................................................. (16,552) (8,527) -- (25,079)
Other Income, Net.......................................................... 605 1,019 1,624
-------- -------- ----------- ----------
Loss Before Income Taxes................................................... (15,947) (7,508) -- (23,455)
Income Tax Benefit......................................................... (8,052) -- (8,052)
-------- -------- ----------- ----------
Net Loss................................................................... $ (7,895) $(7,508) $ -- $(15,403)
-------- -------- ----------- ----------
-------- -------- ----------- ----------
Loss Per Share............................................................. $ (.02) $ (.91) $ (.04)
-------- -------- ----------
-------- -------- ----------
Weighted Average Shares Outstanding........................................ 370,060 8,219 (1,315)(2) 376,964
-------- -------- ----------- ----------
-------- -------- ----------- ----------
Excluding Nonrecurring Charge (3):
Net Income (Loss)........................................................ $ 70,321 $(1,768) $ 68,553
-------- -------- ----------
-------- -------- ----------
Diluted Earnings (Loss) Per Share........................................ $ .18 $ (.22) $ .17
-------- -------- ----------
-------- -------- ----------
Weighted Average Shares Outstanding (Diluted)............................ 391,121 8,219 (1,003)(2) 398,337
-------- -------- ----------- ----------
-------- -------- ----------- ----------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
15
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(1) Elimination of intercompany transactions between HBOC and IMNET.
(2) Shares of IMNET Common Stock were converted using an assumed Exchange Ratio
of .8400. Exchange Ratios of 1.1111 and .9524 have an immaterial effect on
diluted earnings per share. See "Comparative Per Share Data" presented
elsewhere in this Proxy Statement/Prospectus. For the June 1998 Pro Forma
Combined Condensed Income Statement, IMNET weighted average shares are
adjusted to include the dilutive effect of stock options due to the net
income for HBOC/IMNET Pro Forma Combined. For the 1995 Pro Forma Combined
Condensed Income Statement (excluding nonrecurring charges), IMNET weighted
average shares are adjusted to include the dilutive effect of stock options
due to net income for HBOC/IMNET Pro Forma Combined.
(3) Presentation is also made of Net Income (Loss), Diluted Earnings (Loss) Per
Share and Weighted Average Shares Outstanding (Diluted) excluding the effect
of nonrecurring charges and credits because HBOC management believes that
this is a better indication of actual operating results.
(4) The fiscal year of IMNET ends on June 30. HBOC Pro Forma Combined Condensed
Income Statements for the years ended December 31, 1995, 1996 and 1997 have
been completed by restating IMNET financial information on a calendar year
basis. HBOC believes that the differences in such periods, in all cases
presented, have an immaterial impact on the pro forma statements.
16
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables set forth certain per share data for HBOC and IMNET on
a historical basis, certain historical equivalent per share data for IMNET and
certain pro forma per share data for HBOC and IMNET on a combined basis, giving
effect to the Merger using the pooling of interests method of accounting. All
share and per share amounts have been restated to reflect the HBOC 1998
two-for-one stock split effected in the form of a stock dividend. 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
IMNET incorporated by reference in this Proxy Statement/Prospectus.
HISTORICAL
HBO & COMPANY
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------------- ---------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
Per Share Data:
Book Value.................................................................... $1.28 $1.59 $2.13 $1.84 $2.56
Cash Dividends Declared....................................................... $ .02 $ .02 $ .03 $ .01 $ .03
Diluted Earnings (Loss)....................................................... $(.02)(1) $ .20(2) $ .33(3) $ .15(4) $ .32(5)
</TABLE>
- ------------------------
(1) Including the effect of the $130 million nonrecurring charge related to 1995
acquisitions and excluding the dilutive effect of stock options.
(2) Including the effect of the $70 million nonrecurring charge related to 1996
acquisitions.
(3) Including the effect of the $95 million nonrecurring charge related to 1997
acquisitions.
(4) Including the effect of the $35 million nonrecurring charge related to 1997
acquisitions.
(5) Including the effect of the $3 million nonrecurring credit related to 1997
acquisitions.
IMNET SYSTEMS, INC.
<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED
JUNE 30,
------------------------------
<S> <C> <C> <C>
1996 1997 1998
----- -------- -----
Per Share Data:
Book Value.................................................................... $6.34 $7.16 $6.99
Cash Dividends Declared (4)................................................... $-- $-- $--
Diluted Earnings (Loss)....................................................... $(.69)(1) $ .69(2) $(.19)(3)
</TABLE>
- ------------------------
(1) Including the effect of the $10 million nonrecurring charges related to
fiscal year 1996 acquisitions and the HBOC distribution agreements.
(2) Including the effect of the $3 million nonrecurring charges related to
fiscal year 1997 acquisitions, write down of technology and relocation costs
associated with IMNET's move to new headquarter facilities.
(3) Including the effect of the $1 million nonrecurring charges related to a
settlement of a claim against IMNET and legal and other costs incurred by
IMNET related to a series of anonymous letters.
(4) Excludes dividends paid by Hunter International, Inc., which was acquired in
fiscal year 1997 in an acquisition accounted for using the pooling of
interests method of accounting.
17
<PAGE>
IMNET SYSTEMS, INC.
HISTORICAL EQUIVALENT DATA
Using an assumed Market Value per share of HBOC Common Stock
of $22.50 or less and an assumed Exchange Ratio of 1.1111
<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED
JUNE 30,
---------------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Per Share Data:
Book Value.................................................................... $5.71 $6.45 $6.30
Cash Dividends Declared (4)................................................... $-- $-- $--
Diluted Earnings (Loss)....................................................... $(.62)(1) $ .62(2) $(.17)(3)
</TABLE>
Using an assumed Market Value per share of HBOC Common Stock
of $26.25 and an assumed Exchange Ratio of .9524
<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED
JUNE 30,
---------------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Per Share Data:
Book Value.................................................................... $6.66 $7.52 $7.34
Cash Dividends Declared (4)................................................... $-- $-- $--
Diluted Earnings (Loss)....................................................... $(.72)(1) $ .73(2) $(.20)(3)
</TABLE>
Using an assumed Market Value per share of HBOC Common Stock
of $30.00 or greater and an assumed Exchange Ratio of .8400
<TABLE>
<CAPTION>
AT AND FOR THE YEAR ENDED
JUNE 30,
---------------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Per Share Data:
Book Value.................................................................... $7.55 $8.53 $8.33
Cash Dividends Declared (4)................................................... $-- $-- $--
Diluted Earnings (Loss)....................................................... $(.82)(1) $ .83(2) $(.23)(3)
</TABLE>
- ------------------------
(1) Including the effect of the $10 million nonrecurring charges related to
fiscal year 1996 acquisitions and the HBOC distribution agreements.
(2) Including the effect of the $3 million nonrecurring charges related to
fiscal year 1997 acquisitions, write down of technology and relocation costs
associated with IMNET's move to new headquarter facilities.
(3) Including the effect of the $1 million nonrecurring charges related to a
settlement of a claim against IMNET and legal and other costs incurred by
IMNET related to a series of anonymous letters.
(4) Excludes dividends paid by Hunter International, Inc., which was acquired in
fiscal year 1997 in an acquisition accounted for using the pooling of
interests method of accounting.
18
<PAGE>
PRO FORMA COMBINED HBO & COMPANY AND IMNET SYSTEMS, INC.
Using an assumed Market Value per share of HBOC Common Stock
of $22.50 or less and an assumed Exchange Ratio of 1.1111
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------------- ----------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $1.36 $1.70 $2.23 $1.95 $2.65
Cash Dividends Declared............................................. $ .02 $ .02 $ .03 $ .01 $ .03
Diluted Earnings (Loss)............................................. $(.04)(1) $ .19(2) $ .33(3) $ .16(4) $ .31(5)
</TABLE>
Using an assumed Market Value per share of HBOC Common Stock
of $26.25 and an assumed Exchange Ratio of .9524
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------------- ----------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $1.37 $1.71 $2.24 $1.96 $2.66
Cash Dividends Declared............................................. $ .02 $ .02 $ .03 $ .01 $ .03
Diluted Earnings (Loss)............................................. $(.04)(1) $ .19(2) $ .33(3) $ .16(4) $ .31(5)
</TABLE>
Using an assumed Market Value per share of HBOC Common Stock
of $30.00 or greater and an assumed Exchange Ratio of .8400
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------------- ----------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Per Share Data:
Book Value.......................................................... $1.37 $1.71 $2.25 $1.96 $2.67
Cash Dividends Declared............................................. $ .02 $ .02 $ .03 $ .01 $ .03
Diluted Earnings (Loss)............................................. $(.04)(1) $ .20(2) $ .33(3) $ .16(4) $ .31(5)
</TABLE>
- ------------------------
(1) Including the effect of the $130 million nonrecurring charge related to
HBOC's 1995 acquisitions, IMNET's $6 million nonrecurring charge related to
1995 acquisitions and excluding the dilutive effect of stock options.
(2) Including the effect of the $70 million nonrecurring charge related to
HBOC's 1996 acquisitions and IMNET's $5 million nonrecurring charges related
to 1996 acquisitions and the HBOC distribution agreements.
(3) Including the effect of the $95 million nonrecurring charge related to
HBOC's 1997 acquisitions and IMNET's $2 million nonrecurring charges related
primarily to the write-down of technology and relocation costs associated
with IMNET's move to new headquarter facilities.
(4) Including the effect of the $35 million nonrecurring charge related to
HBOC's 1997 acquisitions and IMNET's $2 million nonrecurring charges related
to the write-down of technology and relocation costs associated with IMNET's
move to new headquarter facilities.
(5) Including the effect of the $3 million nonrecurring credit related to HBOC's
1997 acquisitions and IMNET's $1 million nonrecurring charges related to the
settlement of a claim against IMNET and legal and other costs incurred by
IMNET related to a series of anonymous letters.
19
<PAGE>
RISK FACTORS
EXCHANGE RATIO DOES NOT ASSURE ANY MINIMUM VALUE
Stockholders of IMNET should consider that if the Market Value is less than
$22.50 they will receive 1.1111 shares of HBOC Common Stock for each share of
IMNET Common Stock, regardless of the Market Value of the HBOC Common Stock.
Although the IMNET Board has the right to terminate the Merger Agreement if the
Market Value is less than $22.50, it is not obligated to do so. Accordingly, if
the Market Value of HBOC Common Stock is less than $22.50, the Merger proposal
is approved by IMNET stockholders and the IMNET Board determines not to exercise
its right to terminate the Merger Agreement, IMNET stockholders could receive
Merger Consideration that is less than the then current market value of their
shares of IMNET Common Stock. There can be no assurance that the Market Value
will be equal to or greater than $22.50 or that the value of the fractional
share of HBOC Common Stock to be issued in respect of a share of IMNET Common
Stock will equal or exceed the then current market value of the IMNET Common
Stock. In addition, because the Market Value is calculated over a period of
time, it may exceed the actual value of the HBOC Common Stock at the Closing
Date or thereafter. See "Certain Market Information" below for historical stock
price information concerning HBOC Common Stock and IMNET Common Stock, and "The
Merger Proposal--Terms of the Merger."
INTERESTS OF CERTAIN IMNET OFFICERS AND DIRECTORS IN THE MERGER DIFFER FROM
OTHER STOCKHOLDERS
Certain officers and the directors of IMNET have interests in the Merger
that differ from those of IMNET stockholders generally. Such interests include
severance payments, vesting of unvested and unexercisable stock options and
continuing indemnification against certain liabilities. As a result, such
officers and directors could be more likely to favor consummation of the Merger
than IMNET stockholders generally. See "Interests of Certain Persons in Each of
HBOC and IMNET--Interests of Certain IMNET Persons in Matters to be Acted Upon."
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
Statements made herein or in documents incorporated by reference herein by
IMNET which are not historical facts, including projections, statements of
plans, objectives, expectations, the synergies and other benefits expected to be
realized as a result of the Merger, or future economic performance, as well as
the analyses of the financial advisors of IMNET, are forward-looking statements
that involve risks and uncertainties and are subject to the safe harbor created
by the Private Securities Litigation Reform Act of 1995. IMNET's future
financial performance could differ significantly from that set forth herein and
from the expectations of management. Important factors that could cause IMNET's
financial performance to differ materially from past results and from those
expressed in any forward-looking statements include, in addition to the factors
listed above in this section and without limitation, its limited operating
history, variability in quarterly operating results, customer concentration,
product acceptance, a long sales and delivery cycle, a backlog that includes
long-term contracts, dependence on business partners, ability to manage growth,
emerging technological standards and risks associated with acquisitions. For
further information on these and other risk factors, please refer to IMNET's
Form 10-K for the year ended June 30, 1998, including the "Business--Risk
Factors" section thereof. See "Incorporation of Certain Information by
Reference."
20
<PAGE>
CERTAIN MARKET INFORMATION
HBOC
HBOC Common Stock is traded on the Nasdaq NM under the symbol "HBOC." The
table below presents the quarterly high and low closing sales prices and
dividend information for HBOC Common Stock as furnished by Nasdaq for the
periods indicated after restating for the 1998 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>
1996
First Quarter................................................ $ 12.74 $ 8.19 $ .005
Second Quarter............................................... $ 17.69 $ 11.94 $ .005
Third Quarter................................................ $ 17.50 $ 12.63 $ .005
Fourth Quarter............................................... $ 18.13 $ 12.50 $ .005
1997
First Quarter................................................ $ 18.07 $ 11.88 $ .005
Second Quarter............................................... $ 18.03 $ 10.63 $ .005
Third Quarter................................................ $ 21.13 $ 17.13 $ .010
Fourth Quarter............................................... $ 24.32 $ 18.50 $ .010
1998
First Quarter................................................ $ 30.47 $ 21.69 $ .010
Second Quarter............................................... $ 35.56 $ 28.00 $ .020
Third Quarter................................................ $ 37.50 $ 21.25 $ .020
</TABLE>
As of August 12, 1998, there were approximately 3,983 holders of record of
shares of HBOC Common Stock.
IMNET
IMNET Common Stock is traded on the Nasdaq NM under the symbol "IMNT." The
following table sets forth the quarterly high and low closing sales prices for
IMNET Common Stock as furnished by Nasdaq for the periods indicated. IMNET has
never declared a cash dividend on the IMNET Common Stock.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30: HIGH LOW
- --------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
1997
First Quarter ended September 30, 1996................................... $ 33.50 $ 14.63
Second Quarter ended December 31, 1996................................... $ 25.00 $ 11.50
Third Quarter ended March 31, 1997....................................... $ 30.00 $ 13.75
Fourth Quarter ended June 30, 1997....................................... $ 31.06 $ 13.50
1998
First Quarter ended September 30, 1997................................... $ 40.44 $ 26.88
Second Quarter ended December 31, 1997................................... $ 24.75 $ 15.13
Third Quarter ended March 31, 1998....................................... $ 25.69 $ 16.44
Fourth Quarter ended June 30, 1998....................................... $ 23.00 $ 9.88
1999
First Quarter ended September 30, 1998................................... $ 25.25 $ 14.63
</TABLE>
21
<PAGE>
As of September 25, 1998, there were approximately 87 holders of record of
shares of IMNET Common Stock.
The following table sets forth the closing sales price for a share of each
of the indicated stocks on July 22, 1998, the last trading day preceding the
announcement of the proposed Merger, and the IMNET equivalent share value.
<TABLE>
<CAPTION>
CLOSING
SALES
PRICE ON
JULY 22,
1998
------------
<S> <C>
HBOC............................................................................ $ 32.875
IMNET--Historical............................................................... $ 16.250
IMNET--Equivalent at an assumed Exchange Ratio of .84........................... $ 27.615
</TABLE>
22
<PAGE>
THE SPECIAL MEETING
This Proxy Statement/Prospectus and the accompanying Notice of Special
Meeting and proxy card are being furnished to the stockholders of IMNET in
connection with the solicitation of proxies by the IMNET Board for the Special
Meeting to be held on October 30, 1998 at the time and place and for the
purposes set forth in the accompanying Notice of Special Meeting.
Any IMNET 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 IMNET prior to the Special Meeting
either a written revocation of such proxy or a duly executed proxy bearing a
later date or (ii) attending the Special 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 approval of the Merger Agreement and, with
respect to such other matters as may properly come before the Special Meeting,
including consideration of a motion to adjourn the Special Meeting to another
time and/or place, in the discretion of the appointed proxy holders.
Only holders of record of IMNET Common Stock as of the close of business on
September 25, 1998, the Record Date, will be entitled to vote at the Special
Meeting. At that date, there were 9,808,550 shares of IMNET Common Stock
outstanding and entitled to vote, 1,479,531 of which, or 15.1%, were
beneficially owned by directors and executive officers of IMNET and their
affiliates (excluding shares subject to options). Pursuant to the Voting
Agreements, HBOC holds proxies to vote all such shares of IMNET Common Stock in
favor of approval of the Merger Agreement. Stockholders of record on the Record
Date are entitled to one vote for each share of IMNET Common Stock held on all
matters to be voted upon at the Special Meeting. The presence at the Special
Meeting, in person or by proxy, of the holders of at least a majority of the
shares of IMNET Common Stock issued and outstanding and entitled to vote on the
Record Date is necessary to constitute a quorum at the Special Meeting. The
Merger Agreement requires the affirmative vote of the holders of a majority of
the issued and outstanding shares of IMNET Common Stock in order to be approved.
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 Special Meeting for purposes of determining a quorum and will
also have the effect of a negative vote because a majority of the outstanding
shares, and not merely a majority of those shares present and entitled to vote,
is required for approval of the Merger Agreement.
In the event that there are not sufficient votes to adopt the Merger
Agreement represented in person or by proxy at the Special Meeting, the Merger
Agreement will not be approved unless the Special Meeting is adjourned in order
to permit further solicitation of proxies from IMNET stockholders. Proxies that
are being solicited by the IMNET Board grant the discretionary authority to vote
for any such adjournment. If it is necessary to adjourn the Special Meeting, and
such adjournment is for a period of less than 30 days, no notice of the time and
place of the adjourned meeting is required to be given to stockholders other
than the announcement of such time and place at the Special Meeting. A majority
of the voting power represented and voting at the Special Meeting is required to
approve any such adjournment whether or not a quorum is present at the Special
Meeting.
The cost of soliciting proxies in the form enclosed herewith will be borne
entirely by IMNET. In addition to the solicitation of proxies by mail, proxies
may be solicited by directors, officers and employees of IMNET, without
additional remuneration, by personal interviews, telephone, facsimile or
otherwise. IMNET 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. IMNET
has retained Corporate Investor Communications, Inc., a proxy solicitation firm,
to solicit proxies in connection with the Special Meeting and estimates that the
costs for such services will be less than $10,000.
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THE MERGER PROPOSAL
BACKGROUND OF THE MERGER
In March 1996, IMNET signed agreements with HBOC relating to HBOC's acting
as a distributor of certain of IMNET's products on a private label basis. Under
the agreements, HBOC markets the IMNET Electronic Information Warehouse as part
of HBOC's information systems solutions made available to its customers. The
agreements also restrict HBOC's right to market competing products. Under the
terms of these distribution agreements, IMNET paid an aggregate of $3.0 million
to HBOC in exchange for the seven-year exclusive distribution rights and IMNET
is also obligated to support customers of HBOC's First Perspective product line,
which competed with IMNET's products prior to the distribution agreements. HBOC
has become IMNET's largest distribution partner. During each of IMNET's fiscal
years ended June 30, 1998 and June 30, 1997, HBOC accounted for approximately
31% of IMNET's total revenues.
On April 24, 1998, Kenneth D. Rardin, IMNET's Chairman of the Board,
President and Chief Executive Officer, met informally with the other members of
the IMNET Board in Des Moines, Iowa, to review the distribution partner
relationship between IMNET and HBOC. The discussion focused on the potential
impact of HBOC's influence on IMNET due to its position as IMNET's largest
distribution partner and IMNET's perception of the priority HBOC was giving to
IMNET products. The members of the IMNET Board discussed potential ways to
address these concerns and determined that one solution was a business
combination of IMNET and HBOC. The directors discussed a potential valuation for
IMNET shares of $32.00. The directors agreed that Mr. Rardin should discuss his
concerns with HBOC, as well as the possibility of a business combination between
HBOC and IMNET.
Mr. Rardin met with Albert J. Bergonzi, President and Co-Chief Operating
Officer of HBOC, on May 9, 1998, to address the issues, including the
relationship between the parties and the possibility of a business combination.
Mr. Bergonzi indicated his understanding of the points made by Mr. Rardin. He
indicated that he believed the possibility of a business combination had merit,
but that, in his view, the exchange ratio IMNET sought, which would have
converted each share of IMNET Common Stock into a fraction of a share of HBOC
Common Stock with a then-current market value of approximately $32.00, was too
high.
Although subsequent to such meeting there were several phone calls between
Mr. Rardin and Mr. Bergonzi, and between Mr. Rardin and Charles W. McCall,
HBOC's Chairman of the Board, President and Chief Executive Officer, no further
substantive discussions were held until May 20, 1998, at which time Mr. Rardin,
accompanied by Raymond L. Brown, IMNET's Senior Vice President-Business
Development, and representatives of IMNET's outside counsel met with Mr. McCall
and Jay M. Lapine, HBOC's Senior Vice President and General Counsel, who were
accompanied by representatives of HBOC's outside counsel. At this meeting, Mr.
Rardin reviewed IMNET's concerns regarding the relationship of the parties, as
well as IMNET's proposal as to a possible business combination. Mr. McCall
responded that HBOC would like to consider the possible acquisition of IMNET,
but that HBOC was not in a position to offer the price suggested by IMNET. Mr.
McCall indicated that HBOC might consider making an offer of a fractional share
of HBOC Common Stock valued in the range of $15.00 for each share of IMNET
Common Stock, which the IMNET representatives indicated was unacceptable. Mr.
Rardin then proposed several changes in the distribution agreements, which
included a minimum order level and a change in the commission structure, which
Mr. McCall rejected, although he indicated a willingness to make several minor
changes in the business relationship. Mr. McCall subsequently sent a letter to
Mr. Rardin to the effect that HBOC did not consider IMNET's proposals to be
viable.
On May 28, 1998, Mr. McCall initiated a brief telephone conference call with
James A. Gordon and Daniel P. Howell, IMNET's non-employee directors, regarding
the issues under discussion and the possibility of a business combination. Mr.
McCall expressed an interest in acquiring IMNET, but not at the price IMNET had
presented. Subsequent to that telephone call, IMNET requested the opportunity to
present its business combination analysis to HBOC's management to justify a
price well in excess of that proposed by Mr. McCall. The parties scheduled a
meeting for this purpose, to be held on June 6, 1998. On
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June 5, 1998, the IMNET Board met informally to review the material Mr. Rardin
and Mr. Brown planned to present to HBOC and directed Mr. Rardin to continue
discussions of a possible business combination with HBOC on behalf of IMNET,
subject to certain conditions, including further approval of the IMNET Board.
On June 6, 1998, Mr. Rardin and Mr. Brown met with Jay P. Gilbertson,
President, Co-Chief Operating Officer and Chief Financial Officer of HBOC, and
Russell G. Overton, Senior Vice President-- Business Development of HBOC, to
review IMNET's financial analysis underlying its proposal as to a possible
business combination, which, in the view of IMNET, justified the valuation it
had originally proposed.
On June 7, 1998, Mr. Rardin and Mr. Gilbertson met and held several
subsequent telephone discussions to review possible synergies, and negotiate a
valuation. Messrs. Rardin and Gilbertson tentatively agreed to a valuation
providing for exchange of a fractional share of HBOC Common Stock with a
then-current market value of $25.00 for each share of IMNET Common Stock,
subject to certain adjustments to reflect subsequent changes in the market value
of HBOC Common Stock.
On June 8, 1998, Mr. Rardin and Mr. Gilbertson reached a preliminary
understanding to the effect that HBOC and IMNET might agree on a merger
transaction whereby IMNET would be acquired by HBOC at an exchange ratio of .84
of a share of HBOC Common Stock for each share of IMNET Common Stock.
Adjustments in the exchange ratio would be made, if necessary, to ensure IMNET
stockholders would receive shares of HBOC Common Stock with a minimum market
value of approximately $25.00 per share of IMNET Common Stock (based upon the
average closing price per share of HBOC Common Stock over a period of 20 trading
days ending on the second trading day prior to the meeeting of IMNET
stockholders), unless HBOC's market value over that period declined to less than
$22.50 per share. It was further agreed that in that event, the number of shares
of HBOC Common Stock to be issued in respect of each share of IMNET Common Stock
would not increase beyond 1.1111; however, IMNET could elect not to consummate
the transaction. On June 9, 1998, a draft term sheet was circulated, and the
IMNET Board provided a preliminary approval of the proposed transaction. Mr.
Rardin conveyed the approval to HBOC, which was subject to further due
diligence, negotiation of a definitive agreement, and receipt of a fairness
opinion by the IMNET Board.
On June 9, 1998, IMNET and IMNET's outside corporate counsel, Arnall Golden
& Gregory, LLP ("Arnall Golden"), received a due diligence document request and
began to produce documents. Beginning June 11, 1998, IMNET representatives met
several times with HBOC representatives to present information and answer
questions about IMNET's business, financial performance and prospects, as well
as potential synergies that might be achieved by the combined companies.
Additional meetings were held on June 18 and June 19, 1998. These meetings were
attended, on behalf of HBOC, by Mr. Bergonzi, Charles Miller, Senior Vice
President--Enterprise Operations; Mr. Overton; Michael Kappel, Senior Vice
President--Corporate Planning; Mr. Lapine; Timothy Heyerdahl, Senior Vice
President--Finance & Treasury; Sally Love Connally, Vice President--Business
Partner Solutions Group; Eric Lindsay, Manager--Corporate Business Development;
and Elizabeth Dalton, Investor Relations; and, on behalf of IMNET, by Mr.
Rardin; Gary Bowers, Executive Vice President, Product Technology; Mr. Brown;
Paul Collins, Senior Vice President, Marketing and Education; James Hall, Senior
Vice President, Sales; Thomas Underwood, Senior Vice President, Client Services;
and William Bain, Associate General Counsel.
On June 13, 1998, Jones, Day, Reavis & Pogue ("Jones Day"), HBOC's outside
corporate counsel, delivered a draft of the definitive agreement to IMNET and
representatives of Arnall Golden. During the period from June 16, 1998 to July
13, 1998, representatives of IMNET and Arnall Golden, and HBOC and Jones Day
continued due diligence document production and negotiation of the definitive
agreement.
On June 18, 1998, Mr. Rardin and Mr. Brown met with representatives of
Robinson-Humphrey to discuss the possible engagement of Robinson-Humphrey by
IMNET to provide a fairness opinion to the IMNET Board. On June 30, 1998, the
IMNET Board met, received a report on the status of negotiations
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with HBOC, and authorized Mr. Rardin to engage Robinson-Humphrey to provide a
fairness opinion. On June 30, 1998, IMNET and Robinson-Humphrey executed an
engagement letter pursuant to which Robinson-Humphrey agreed to provide a
fairness opinion.
On July 14, 1998, Mr. Rardin and Mr. Brown met with Mr. Lapine and Mr.
Overton by telephone to review progress on the agreement. On July 16, 1998, Mr.
Rardin and Mr. Brown met with Mr. Gilbertson and Mr. Overton by telephone to
negotiate the open items. The material terms still under discussion included
HBOC's obligation to proceed with the Merger if IMNET's business were adversely
impacted by the announcement of the Merger, the events which could lead to the
payment of "break-up" fees, the amount of the "break-up" fees, the terms of
certain non-competition agreements, and several severance related items. From
July 17, 1998 to July 20, 1998, Mr. Gilbertson, Mr. Lapine, Mr. Overton, Mr.
Rardin and Mr. Brown met several times by telephone and continued to negotiate
the definitive agreement.
On July 20, 1998, Jones Day provided a revised draft of the merger agreement
to IMNET and Arnall Golden. Also on that date, Mr. Bowers and Scott A. Remley,
Senior Vice President and Chief Financial Officer of IMNET, met with Mr.
Heyerdahl and Monika Brown, Director of Investor Relations of HBOC. The purpose
of the meeting was to permit representatives of IMNET to conduct a financial due
diligence review of HBOC.
On the evening of July 20, 1998, a special meeting of the IMNET Board was
held. All of the directors were present. Also present by invitation were Mr.
Remley and a representative of Arnall Golden, as well as representatives of
Robinson-Humphrey. Mr. Rardin, Mr. Remley and the representative of Arnall
Golden updated the IMNET Board as to the status of negotiations. The
representative of Arnall Golden reviewed the IMNET Board's fiduciary duties in
the context of the proposed merger. The Robinson-Humphrey representatives then
presented their detailed financial analysis of the proposed transaction. The
Robinson-Humphrey representatives also provided the IMNET Board with an oral
opinion (subsequently confirmed in writing on July 23, 1998) to the effect that,
as of the date of such opinion, the proposed exchange ratio was fair, from a
financial point of view, to holders of IMNET Common Stock. The IMNET Board then
unanimously approved the Merger Agreement, authorized the finalization and
execution thereof by the officers of IMNET, and recommended that the
stockholders of IMNET approve the Merger Agreement.
Mr. Rardin, Mr. Brown, representatives of Arnall Golden and Mr. Gilbertson,
Mr. Lapine, Mr. Overton and representatives of Jones Day participated in one or
more of several telephone conferences from July 21, 1998 through July 23, 1998,
in order to resolve the remaining open issues, which included HBOC's obligation
to proceed with the Merger if IMNET's business were adversely affected by the
announcement of the Merger, the terms of certain non-competition agreements and
certain updates and changes in the exhibits to the definitive agreement. On July
23, 1998, IMNET and HBOC resolved all remaining open items. IMNET provided
Robinson-Humphrey with an update as to the final terms of the definitive
agreement, and received assurance from Robinson-Humphrey that
Robinson-Humphrey's opinion was still in effect. Thereupon, IMNET and HBOC
executed the definitive agreement, and Robinson-Humphrey executed and delivered
its written opinion that, as of the date thereof, and based upon and subject to
certain matters stated therein, the Exchange Ratio was fair, from a financial
point of view, to holders of IMNET Common Stock.
REASONS OF IMNET FOR ENGAGING IN THE MERGER; RECOMMENDATION OF THE IMNET BOARD
The IMNET Board has unanimously approved the proposed Merger and believes
the Merger is in the best interests of IMNET and its stockholders. In reaching
their decision, the IMNET Board considered, with the assistance of management
and its legal and financial advisors, the following factors:
1. The Merger will provide IMNET stockholders the opportunity to continue to
participate in IMNET's business through an ownership interest in HBOC. IMNET
management believes that the business opportunity inherent in IMNET's business
will be enhanced by the Merger in that HBOC will have a greater incentive to
sell IMNET's products since HBOC will no longer be required to pay a substantial
share of the proceeds of such transactions to a third party;
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2. The market price of the IMNET Common Stock has fluctuated significantly
since IMNET's initial public offering in July 1995. As noted in IMNET's prior
filings with the Commission and press releases, IMNET's quarterly revenues and
results of operations have also fluctuated significantly due in part to a
variety of factors, including the volume, timing and mix (direct or indirect) of
system sales. Since IMNET has recently emphasized larger sales, including
multi-site licenses, and has a long sales and delivery cycle, the failure to
obtain orders and deliver product as expected has resulted in, and may in the
future result in, significant fluctuations in IMNET's revenues and results of
operations. IMNET management believes that the impact of these factors on HBOC's
operations will be much less, and that IMNET stockholders will benefit from
decreased volatility in the market price of shares of HBOC Common Stock as
compared to shares of IMNET Common Stock;
3. The Merger offers IMNET stockholders an opportunity to receive shares in
a significantly larger company with historically strong performance, capital
resources significantly greater than IMNET's and demonstrated ability to
successfully implement a growth strategy that has resulted in historical
profitability and growth;
4. The Merger provides IMNET stockholders with HBOC Common Stock in a
tax-free exchange at a substantial premium over the market price of their shares
of IMNET Common Stock prior to the announcement of the Merger Agreement. In
addition, the Merger Agreement provides potential protection to the IMNET
stockholders by providing the IMNET Board the right to terminate the transaction
if the Market Value of HBOC Common Stock falls below $22.50. The Merger
Agreement also permits the IMNET Board to terminate the Merger Agreement
(subject to the payment of a termination fee of $7,500,000 plus expenses) if the
IMNET Board determines that termination of the Merger Agreement would be in the
best interests of IMNET's stockholders and is required in the exercise of its
fiduciary duties to the stockholders of IMNET in the context of a competing
offer;
5. Potential operating synergies and cost savings of the combined
enterprise, including possible synergies and cost savings with respect to (a)
the consolidation of administrative and support functions, (b) the combination
of sales forces and research and development and support capabilities and (c)
the elimination of public reporting obligations and attendant costs of IMNET;
6. 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 IMNET and the relative likelihood
of achieving those prospects on both a combined and separate basis;
7. The financial presentation and opinion provided to the IMNET Board on
July 20, 1998, confirmed by a written fairness opinion dated July 23, 1998, of
Robinson-Humphrey (which opinion has been confirmed by delivery of a written
opinion dated the date of this Proxy Statement/Prospectus) to the effect that,
as of the date of such opinion and based upon and subject to certain matters
stated therein, the Exchange Ratio was fair, from a financial point of view, to
the holders of IMNET Common Stock;
8. That the Merger is expected to be accounted for as a "pooling of
interests" and will not require approval by HBOC stockholders; and
9. Publicly-available information concerning the financial performance,
condition, prospects and operations of each of IMNET and HBOC.
The IMNET Board also considered the following potentially negative factors
in its deliberations concerning the Merger:
1. The possible adverse impact on IMNET's business from the announcement of
the proposed Merger, as well as the consummation of the Merger, which may occur
if certain of IMNET's other distribution partners, which compete with HBOC,
elect to terminate their offering of IMNET products, or to devote less resources
to marketing them;
2. 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
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3. The high price to earnings ratio of HBOC Common Stock and the possibility
of a decrease in the market value of the HBOC Common Stock after the Merger.
The foregoing discussion of information and factors considered by the IMNET
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
IMNET Board did not find it practical to, and did not, quantify or otherwise
assign relative weight to the specific factors considered, and individual
directors may have given differing weights to different factors.
After taking into consideration all of the factors set forth above, the
IMNET Board unanimously approved the Merger at the meeting and determined that
the Merger is fair to, and in the best interests of, IMNET and its stockholders
and has unanimously determined that IMNET should proceed with the Merger at this
time. ACCORDINGLY, THE IMNET BOARD UNANIMOUSLY RECOMMENDS THAT IMNET
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR TO IMNET
SUMMARY OF FINANCIAL ANALYSES
On July 20, 1998, Robinson-Humphrey delivered its oral opinion to the IMNET
Board that as of such date the Exchange Ratio was fair to the stockholders of
IMNET from a financial point of view. Robinson-Humphrey delivered its written
opinion to the IMNET Board on the morning of July 23, 1998, reaffirming its
opinion as of that time, and has delivered an updated opinion as of the date of
this Proxy Statement/ Prospectus.
The full text of the opinion of Robinson-Humphrey, dated the date of this
Proxy Statement/ Prospectus, which sets forth the assumptions made, procedures
followed, other matters considered and limitations on the review undertaken in
connection with the opinion, is attached hereto as Appendix B. IMNET
stockholders are urged to read the opinion carefully and in its entirety.
Robinson-Humphrey's opinion is directed only to the fairness, from a financial
point of view, of the Exchange Ratio to the stockholders of IMNET in the Merger.
Robinson-Humphrey's opinion was delivered for the information of the IMNET Board
and does not constitute a recommendation to any stockholder as to how such
stockholder should vote at the Special Meeting. Robinson-Humphrey did not
participate in the discussions leading up to the Merger or negotiations of the
terms and conditions of the Merger Agreement. Robinson-Humphrey conducted
valuation analyses of the IMNET Common Stock and evaluated the Exchange Ratio,
but was not asked to and did not recommend a specific per share price to be paid
by HBOC for IMNET Common Stock. The summary of the opinion of Robinson-Humphrey,
dated the date of this Proxy Statement/Prospectus, set forth below, is qualified
in its entirety by reference to the full text of such opinion.
MATERIAL INFORMATION CONSIDERED WITH RESPECT TO THE MERGER
In connection with its opinion, Robinson-Humphrey conducted, among other
analyses: (i) a review of the Merger Agreement; (ii) a review of certain
publicly-available information concerning IMNET and HBOC; (iii) a review of
certain internal financial statements and other financial and operating data
concerning IMNET prepared by the management of IMNET; (iv) an analysis of
certain projections and financial assumptions prepared by IMNET; (v) analyses of
certain projections and financial assumptions published by recognized equity
research analysts concerning IMNET and HBOC; (vi) a review of the historical and
current market prices and trading patterns of the IMNET and HBOC Common Stock;
(vii) a review of the historical market prices and trading activity for the
IMNET and HBOC Common Stock and a comparison with those of certain
publicly-traded companies engaged in businesses similar to IMNET; (viii) a
review of the results of operations and present financial condition of IMNET and
HBOC and a comparison with those of certain publicly-traded companies engaged in
businesses similar to IMNET; (ix) a review and analysis of the financial terms
of certain merger and acquisition transactions involving companies engaged in
businesses similar to IMNET; (x) a review and analysis of prices and premiums
paid
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in, and other terms of, certain merger and acquisition transactions involving
companies engaged in businesses similar to IMNET and in the market in general;
and (xi) a discounted cash flow analysis of IMNET. Robinson-Humphrey also held
discussions with members of the senior management of IMNET regarding IMNET's
past and current business operations, financial condition and future prospects.
Robinson-Humphrey requested a meeting for the purpose of holding similar
discussions with the senior management of HBOC, but the management of HBOC
declined such request.
Robinson-Humphrey relied without independent verification upon the accuracy
and completeness of all of the financial and other information reviewed by it
for purposes of its opinion. In that regard, with respect to the information
relating to the prospects of IMNET, Robinson-Humphrey assumed that such
information was reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the senior management of IMNET as to the
future financial performance of IMNET. Robinson-Humphrey also assumed that the
Merger would qualify for pooling-of-interests accounting treatment and as a
tax-free transaction for the holders of IMNET Common Stock. In addition,
Robinson-Humphrey was not requested or authorized to solicit, and did not
solicit, interest from any party with respect to an acquisition of all or any
portion of the outstanding IMNET Common Stock, IMNET or its constituent
businesses. Robinson-Humphrey's opinion does not address the price at which HBOC
Common Stock may trade after the Merger is consummated. Robinson-Humphrey's
opinion is necessarily based upon economic, market, financial and other
conditions as they existed as of July 23, 1998 and the date of this Proxy
Statement/Prospectus and on the information made available to Robinson-Humphrey
as of such dates and on the review and analysis conducted by Robinson-Humphrey
as of such dates.
The following is a summary of the presentations by Robinson-Humphrey to the
IMNET Board on July 20, 1998 and in connection with its July 23, 1998 fairness
opinion:
ANALYSIS OF IMNET
HISTORICAL STOCK PRICE ANALYSIS. Robinson-Humphrey analyzed the prices at
which the IMNET Common Stock traded since its initial public offering on July
20, 1995. In calendar 1995, the high price was $28.00 and the low price was
$16.50. In calendar 1996, the high price was $36.13 and the low price was
$11.50. In calendar 1997, the high price was $40.44 and the low price was
$13.50. In calendar 1998, through July 17, 1998 (the last trading day prior to
the July 20, 1998 opinion), the high price was $25.69 and the low price was
$9.88. Over the period from July 20, 1995 to July 17, 1998, Robinson-Humphrey
observed that approximately 80% of the outstanding shares were traded in a price
range of $11.00 to $28.40. Over the period from January 1, 1998 to July 17,
1998, Robinson-Humphrey observed that more than 84% of the outstanding shares
were traded in a price range of $9.00 to $22.60. The price per share of IMNET
Common Stock implied by the Exchange Ratio, based upon the average closing stock
price of HBOC Common Stock for the 20 consecutive trading days ended July 17,
1998, was $28.86.
VALUATION SUMMARY OF SELECTED COMPARABLE PUBLICLY-TRADED
COMPANIES. Robinson-Humphrey reviewed and compared certain financial, operating
and stock market information of IMNET and two groups of publicly traded
companies in the healthcare information technology industry. The healthcare
information systems (HIS) Software Based publicly-traded companies included in
Robinson-Humphrey's analysis were Dynamic Healthcare Technologies, Inc.,
LanVision Systems, Inc., Medplus, Inc., Optika Imaging Systems, Inc., Shared
Medical Systems Corporation, IDX Systems Corporation, Medical Manager
Corporation, Cerner Corporation, Citation Computer Systems, Inc., Oacis
Healthcare Holdings Corp., Spacelabs Medical Inc., Apache Medical Systems, Inc.,
Healthdyne Information Enterprises, Inc., Health Systems Design Corporation,
Simione Central Holdings, Inc., and Transition Systems, Inc. The HIS Outsourcing
and Information Content publicly-traded companies included in
Robinson-Humphrey's analysis were Access Health, Inc., ENVOY Corporation, Health
Management Systems Inc., Healthcare Recoveries, Inc., Healthplan Services
Corporation, Health Risk Management, Inc., Medquist Inc., Medaphis Corporation,
Transcend Services, Inc., Quadramed Corp., Core, Inc., HCIA Inc., Medirisk,
Inc., OVID Technologies, Inc., and Summit Medical Systems, Inc.
Robinson-Humphrey calculated, among other things, current market price as a
multiple of: (i) book value; (ii) latest twelve months earnings per share
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("EPS"); (iii) estimated calendar 1998 EPS; and (iv) estimated calendar 1999
EPS. The calendar 1998 and 1999 EPS estimates were based on the mean of publicly
available earnings estimates made by research analysts as provided by First Call
Research System. In addition, Robinson-Humphrey calculated, for each of the
publicly-traded companies, firm value (market capitalization plus debt minus
cash) as a multiple of: (i) latest twelve months revenues; (ii) latest twelve
months earnings before interest, taxes, depreciation and amortization
("EBITDA"); and (iii) latest twelve months earnings before interest and taxes
("EBIT"). All multiples were based on closing stock prices on July 17, 1998.
Robinson-Humphrey averaged the multiples of the publicly-traded comparable
companies in order to apply these multiples to IMNET's values. To accurately
reflect average values for statistical purposes, Robinson-Humphrey excluded
certain outlying values that differed from the relative groupings of the other
values. Robinson-Humphrey believes that these outlying values for certain
companies reflect temporary market aberrations that can skew mean values.
The latest twelve months price/earnings ratios for the HIS Software Based
companies ranged from 20.3x to 75.0x with an average of 42.2x. The latest twelve
months price/earnings ratios for the HIS Outsourcing and Information Content
companies ranged from 11.4x to 87.0x with an average of 33.8x. Robinson-Humphrey
noted that IMNET incurred a net loss for the latest twelve months and therefore
its latest twelve months price/earnings ratio was not meaningful.
The estimated calendar 1998 price/earnings ratios for the HIS Software Based
companies ranged from 18.1x to 241.7x with an average of 35.5x. The estimated
calendar 1998 price/earnings ratios for the HIS Outsourcing and Information
Content companies ranged from 13.9x to 562.5x with an average of 29.1x. Based on
the average closing stock price of HBOC Common Stock for the 20 consecutive
trading days ended July 17, 1998 and the average forecast earnings estimates for
IMNET, the Exchange Ratio equated to an implied price/earnings multiple of 86.2x
for IMNET for calendar 1998.
The estimated calendar 1999 price/earnings ratios for the HIS Software Based
companies ranged from 7.2x to 33.1x with an average of 14.4x. The estimated
calendar 1999 price/earnings ratios for the HIS Outsourcing and Information
Content companies ranged from 8.5x to 259.4x with an average of 21.9x. Based on
the average closing stock price of HBOC Common Stock for the 20 consecutive
trading days ended July 17, 1998 and the average forecast earnings estimates for
IMNET, the Exchange Ratio equated to an implied price/earnings multiple of 33.1x
for IMNET for calendar 1999.
The current market value to book value multiples for the HIS Software Based
companies ranged from 1.0x to 16.1x with an average of 2.8x. The current market
value to book value multiples for the HIS Outsourcing and Information Content
companies ranged from 0.8x to 21.2x with an average of 3.0x. Based on the
average closing stock price of HBOC Common Stock for the 20 consecutive trading
days ended July 17, 1998, the Exchange Ratio equated to an implied book value
multiple of 4.2x.
The firm value to latest twelve months revenue multiples for the HIS
Software Based companies ranged from 0.6x to 7.1x with an average of 2.8x. The
firm value to latest twelve months revenue multiples for the HIS Outsourcing and
Information Content companies ranged from 1.0x to 7.9x with an average of 2.9x.
Based on the average closing stock price of HBOC Common Stock for the 20
consecutive trading days ended July 17, 1998, the Exchange Ratio equated to an
implied firm value to latest twelve months revenue multiple of 5.1x for IMNET.
The firm value to latest twelve months EBITDA multiples for the HIS Software
Based companies ranged from 8.4x to 101.8x with an average of 20.8x. The firm
value to latest twelve months EBITDA multiples for the HIS Outsourcing and
Content companies ranged from 4.7x to 69.0x with an average of 16.7x. Based on
the average closing stock price of HBOC Common Stock for the 20 consecutive
trading days ended July 17, 1998, the Exchange Ratio equated to an implied
EBITDA multiple for IMNET of 76.6x. The firm value to latest twelve months EBIT
multiples for the HIS Software Based companies ranged from 9.1x to 67.3x with an
average of 26.8x. The firm value to latest twelve months EBIT multiples for the
HIS Outsourcing and Content companies ranged from 6.7x to 80.4x with an average
of 20.1x. Robinson-Humphrey noted that IMNET incurred a net operating loss for
the latest twelve months and therefore its latest twelve months EBIT multiple
was not meaningful.
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DISCOUNTED CASH FLOW ANALYSIS. Robinson-Humphrey performed a discounted
cash flow analysis using the average forecast scenario published by investment
banking analysts for IMNET for the fiscal year ended June 30, 1999 and a
constant growth rate thereafter. Using the discounted cash flow analysis,
Robinson-Humphrey estimated the present value of the future cash flows of IMNET
set forth in these projections. Robinson-Humphrey calculated the net present
value of free cash flows (defined as earnings before interest after taxes plus
depreciation and amortization less capital expenditures and any increase in net
working capital) for the fiscal years ending June 30, 1999 through 2002 using a
range of discount rates. Robinson-Humphrey calculated IMNET's terminal values in
fiscal 2002, based on multiples of EBIT and EBITDA. The discounted cash flow
analysis using a terminal value of fiscal 2002 EBIT yielded a derived equity
value of $22.17 per share for IMNET. The discounted cash flow analysis using a
terminal value of fiscal 2002 EBITDA yielded a derived equity value of $28.35
per share for IMNET. Robinson-Humphrey noted that each of the mid-point
valuations derived under the discounted cash flow analysis was lower than the
per share valuation implied by the Exchange Ratio based on the average closing
stock price of HBOC Common Stock for the 20 consecutive trading days ended July
17, 1998.
COMPARABLE MERGER AND ACQUISITION TRANSACTION ANALYSIS. Robinson-Humphrey
reviewed and compared 26 selected mergers and acquisitions in the healthcare
information technology industry with the Merger in relation to certain financial
data of IMNET. The transactions reviewed were: (i) QuadraMed Corporation's
acquisition of Pyramid Health Group, Inc.; (ii) ENVOY Corporation's acquisition
of Automated Revenue Management, Inc. and Professional Office Services, Inc.;
(iii) ENVOY Corporation's acquisition of XPIdata, Inc.; (iv) QuadraMed
Corporation's acquisition of Medicus Systems Corp.; (v) National Data
Corporation's acquisition of Physician Support Systems, Inc.; (vi) HBOC's
acquisition of HPR Inc.; (vii) Misys, PLC's acquisition of Medic Computer
Systems, Inc.; (viii) National Data Corporation's acquisition of Source
Informatics, Inc.; (ix) ENVOY Corporation's acquisition of Healthcare Data
Interchange; (x) HBOC's acquisition of National Health Enhancement Systems,
Inc.; (xi) HBOC's acquisition of Enterprise Systems, Inc., (xii) IDX Systems
Corporation's acquisition of Phamis, Inc.; (xiii) HBOC's acquisition of AMISYS
Managed Care Systems, Inc.; (xiv) National Data Corporation's acquisition of
Health Communication Services, Inc.; (xv) National Data Corporation's
acquisition of Equifax Health EDI Services, Inc.; (xvi) HBOC's acquisition of
GMIS Inc.; (xvii) Healthplan Services Corp.'s acquisition of Health Risk
Management, Inc.; (xviii) Access Health Inc.'s acquisition of Informed Access
Systems, Inc.; (xix) HCIA's acquisition of LBA Health Care Management, Inc.;
(xx) Medaphis Corporation's acquisition of Health Data Sciences Corp.; (xxi)
HBOC's acquisition of CyCare Systems, Inc.; (xxii) Health Management Systems,
Inc.'s acquisition of CDR Associates, Inc.; (xxiii) National Data Corporation's
acquisition of CIS Technologies, Inc.; (xxiv) Medaphis Corp.'s acquisition of
BSG Corp.; (xxv) ENVOY Corporation's acquisition of National Electronic
Information Corp.; and (xxvi) Medaphis Corporation's acquisition of Medical
Management Sciences, Inc. Robinson-Humphrey calculated, among other things,
equity purchase price as a multiple of: (i) book value; (ii) historical net
income; and (iii) projected net income, and firm value (equity purchase price
plus debt less cash) as a multiple of: (i) revenues; (ii) EBITDA; and (iii)
EBIT. Robinson-Humphrey also calculated the premiums paid on the closing price
of the target's shares at one day, one week and four weeks prior to the
announcement for selected transactions in the healthcare information technology
industry and for selected transactions completed by HBOC between January 1, 1996
and July 15, 1998, for which there were publicly-available statistics. In
addition, Robinson-Humphrey completed the above analysis for selected mergers
and acquisitions between $100 million and $300 million in transaction value in
the market in general between July 15, 1997 and July 15, 1998, for which there
were publicly-available statistics. Robinson-Humphrey averaged the multiples for
the comparable merger and acquisition transactions in order to apply these
multiples to IMNET's values. To accurately reflect average values for
statistical purposes, Robinson-Humphrey excluded certain outlying values that
differed from the relative groupings of the other values. Robinson-Humphrey
believes that these outlying values for certain companies reflect temporary
market aberrations that can skew mean values.
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The equity purchase price to historical net income multiples for all
transactions in the healthcare information technology sector ranged from 6.7x to
146.7x with an average of 45.4x. The firm value to EBITDA multiples ranged from
7.5x to 179.8x with an average of 27.2x. The firm value to EBIT multiples ranged
from 7.7x to 84.1x with an average of 38.1x. Robinson-Humphrey also noted that
for transactions completed by HBOC during this time period the equity purchase
price to historical net income, firm value to EBITDA and firm value to EBIT
multiples were: 36.7x to 118.3x (average of 68.2); 10.1x to 60.1x (average of
26.8); and 7.7x to 84.1x (average of 44.9), respectively. Robinson-Humphrey
noted that IMNET's latest twelve months net income and EBIT were negative and
therefore its net income and EBIT multiples were not meaningful. Based on the
average closing stock price of HBOC Common Stock for the 20 consecutive trading
days ended July 17, 1998, the Exchange Ratio equated to an implied firm value to
EBITDA multiple of 76.6x.
The equity purchase price to book value multiples for all transactions in
the healthcare information technology sector ranged from 3.1x to 115.9x with an
average of 7.0x. The equity purchase price to book value multiples for
transactions completed by HBOC ranged from 3.9x to 10.5x with an average of
6.4x. Based on the average closing stock price of HBOC Common Stock for the 20
consecutive trading days ended July 17, 1998, the Exchange Ratio equated to an
implied multiple of 4.2x book value for IMNET. The firm value to latest twelve
months revenues multiples for all transactions in the healthcare information
technology sector ranged from 1.5x to 42.8x with an average of 4.1x. The firm
value to latest twelve months revenues multiples for transactions completed by
HBOC ranged from 3.3x to 7.8x with an average of 5.1x. Based on the average
closing stock price of HBOC Common Stock for the 20 consecutive trading days
ended July 17, 1998, the Exchange Ratio equated to an implied multiple of 5.1x
latest twelve months revenues for IMNET.
Robinson-Humphrey calculated average premiums of: 29.2%, 30.6% and 38.6% at
one day, one week and four weeks prior to announcement, respectively, for all
transactions in the healthcare information technology sector; 30.0%, 36.3% and
50.5% at one day, one week and four weeks prior to announcement, respectively,
for all transactions completed by HBOC; and 23.3%, 29.3% and 36.9% at one day,
one week and four weeks prior to announcement, respectively, for selected
mergers and acquisitions between $100 million and $300 million in transaction
value in the market in general. These premiums, based on an assumed announcement
date of July 20, 1998, imply per share equity values for IMNET of $21.16, $20.41
and $19.22, respectively, in the case of all healthcare information technology
transactions, $21.28, $21.30 and $20.89, respectively, in the case of all
transactions completed by HBOC, and $20.19, $20.21 and $19.00, respectively, in
the case of selected mergers and acquisitions between $100 million and $300
million in transaction value in the market in general.
ACCRETION/DILUTION ANALYSIS. Robinson-Humphrey analyzed the pro forma
effect of the Merger on the earnings per share of HBOC in calendar year 1998 and
calendar year 1999 based, in the case of IMNET, on EPS estimates of the
management of IMNET (which reflect the consensus analysts' EPS estimates) and,
in the case of HBOC, on EPS estimates provided in a research report issued by
Morgan Stanley Dean Witter & Co. Robinson-Humphrey completed this analysis both
before and after giving effect to certain cost savings and other potential
synergies, including utilizing a potential tax loss carry-forward (excluding
non-recurring costs resulting from the Merger), which may result from the
Merger. Estimates of potential cost savings and other potential synergies were
provided by the management of IMNET based upon their discussions with HBOC. This
analysis indicated that the Merger could be dilutive to HBOC's EPS by
approximately 1.9% in calendar year 1998, and accretive to HBOC's EPS in
calendar 1999 by approximately 0.2%, without giving effect to certain cost
savings and other potential synergies. This analysis indicated that the Merger
could be accretive to HBOC's EPS by approximately 0.4% to 3.0% in calendar 1998,
and accretive to HBOC's EPS by approximately 3.4% to 3.9% in calendar 1999,
assuming certain levels of cost savings and other potential synergies were
achieved (excluding non-recurring costs resulting from the Merger). The actual
operating or financial results achieved by the pro forma combined company after
the Merger may vary from projected results and variations may be material as a
result of business and
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market risks, the timing and amount of synergies, the costs associated with
achieving such synergies and other factors.
HISTORICAL AND PRO FORMA COMPARISON. In connection with its opinion,
Robinson-Humphrey also reviewed and considered, among other things: (i)
historical and pro forma financial information for IMNET and HBOC; (ii)
historical trading volumes and market prices for IMNET Common Stock and HBOC
Common Stock, and the historical relationship between IMNET Common Stock and
HBOC Common Stock relative to the S&P 500 Index, the Dow Jones Industrial
Average, the Nasdaq Composite Index and the common stock of the selected
comparable companies; (iii) analysts' reports, including growth rate estimates,
with respect to IMNET and HBOC; and (iv) the ownership profiles of IMNET and
HBOC.
SUMMARY
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analysis or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the process
underlying Robinson-Humphrey's opinion. In arriving at its fairness
determination, Robinson-Humphrey considered the results of all such analyses.
Robinson-Humphrey did not separately consider the extent to which any one of the
analyses supported or did not support the fairness opinion. No company or
transaction used in the above analyses as a comparison is identical to IMNET or
the proposed Merger. The analyses were prepared solely for purposes of
Robinson-Humphrey in providing its opinion to the IMNET Board as to the fairness
of the Exchange Ratio to the stockholders of IMNET in the Merger and do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors, none of IMNET, the IMNET Board, Robinson-Humphrey or any other person
assumes responsibility if future results are materially different from those
forecast.
As described above, Robinson-Humphrey's opinion to the IMNET Board was one
of the factors taken into consideration by the IMNET Board in making its
determination to approve the Merger Agreement. The foregoing summary does not
purport to be a complete description of all of the analyses performed by
Robinson-Humphrey, but does include a summary description of all material
analyses, and is qualified by reference to the written opinion of
Robinson-Humphrey, dated the date of this Proxy Statement/ Prospectus, set forth
as Appendix B hereto.
INFORMATION CONCERNING IMNET'S FINANCIAL ADVISOR
Robinson-Humphrey, as a customary part of its investment banking business,
is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the ordinary course of business,
Robinson-Humphrey and its affiliates may actively trade securities of both IMNET
and HBOC for their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
The IMNET Board selected Robinson-Humphrey as financial advisor to the IMNET
Board because it is a nationally recognized investment banking firm that has
substantial experience in transactions similar to the Merger and because of
Robinson-Humphrey's historical investment banking relationship with IMNET.
Pursuant to the terms of the June 30, 1998 engagement letter between
Robinson-Humphrey and IMNET, Robinson-Humphrey will receive an aggregate fee of
$450,000 in connection with the delivery of the fairness opinions, and
Robinson-Humphrey will be reimbursed by IMNET for certain of its expenses
incurred in connection with its engagement. IMNET previously engaged
Robinson-Humphrey in July 1996, to advise and assist IMNET in connection with
its acquisition of Hunter International, Inc., for which services IMNET paid
Robinson-Humphrey $95,000.
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REASONS OF HBOC FOR ENGAGING IN THE MERGER
The HBOC Board believes that the addition of IMNET's electronic information
and document management products to its product line will allow HBOC to offer
its customers the ability to create a complete electronic medical record.
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 IMNET 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, IMNET will be merged
with and into HBOC-GA, which will be the surviving corporation.
CONVERSION OF SHARES. As a result of the Merger, IMNET stockholders will
receive a fractional share of HBOC Common Stock for each share of IMNET Common
Stock, the amount of which will vary depending upon the Market Value of HBOC
Common Stock. If the Market Value of HBOC Common Stock is $30.00 or more, IMNET
stockholders will receive .84 of a share of HBOC Common Stock for each share of
IMNET Common Stock that they own. If the Market Value of HBOC Common Stock is
equal to or greater than $22.50 but less than $30.00, IMNET stockholders will
receive a fractional share of HBOC Common Stock determined by dividing $25.00 by
the Market Value for each share of IMNET Common Stock. If the Market Value of
HBOC Common Stock is less than $22.50, IMNET stockholders will receive 1.1111
shares of HBOC Common Stock for each share of IMNET Common Stock, provided that
in such case, the IMNET Board does not elect to exercise its right to terminate
the Merger Agreement prior to the Effective Time. The shares of HBOC Common
Stock and any cash in lieu of fractions thereof receivable by IMNET stockholders
are hereinafter referred to as the "Merger Consideration."
The Exchange Ratio of .84, applicable at Market Values of $30.00 or more,
was calculated in June 1998 based on recent prices of HBOC Common Stock, with
the intention of providing HBOC Common Stock valued at approximately $25.00 for
each share of IMNET Common Stock. Assuming the Record Date, September 25, 1998,
were the Closing Date, the Market Value would have been $26.64 and the Exchange
Ratio would have been .9384. The following table shows the Exchange Ratio at
various assumed Market Values, together with the estimated value per share of
IMNET Common Stock in each case. The actual market price of HBOC Common Stock at
the Effective Time could be more or less than the Market Value used to determine
the Exchange Ratio, and the actual value of the shares issued in the Merger at
the Effective Time therefore could be more or less than the estimated market
value for each share of IMNET Common Stock indicated. Similarly, the value of
the aggregate Merger Consideration could be more or less than the aggregate
estimated Merger Consideration.
<TABLE>
<CAPTION>
VALUE OF HBOC COMMON VALUE OF HBOC COMMON
STOCK TO BE ISSUED FOR STOCK TO BE ISSUED FOR
ASSUMED MARKET VALUE OF EACH SHARE OF IMNET ALL SHARES OF IMNET
HBOC COMMON STOCK EXCHANGE RATIO COMMON STOCK COMMON STOCK(1)
- ----------------------- --------------- ----------------------- -----------------------
<S> <C> <C> <C>
$35.00 .8400 $ 29.40 $ 288,371,370
$32.50 .8400 $ 27.30 $ 267,773,415
$30.00 .8400 $ 25.20 $ 247,175,460
$27.50 .9091 $ 25.00 $ 245,213,750
$25.00 1.0000 $ 25.00 $ 245,213,750
$22.50 1.1111 $ 25.00 $ 245,213,750
$20.00 (2) 1.1111 $ 22.22 $ 217,945,981
</TABLE>
- ------------------------
(1) The aggregate estimated Merger Consideration is calculated by multiplying
the estimated market value per IMNET share by 9,808,550, which is the number
of outstanding shares of IMNET Common Stock on the Record Date.
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<PAGE>
(2) Assumes the IMNET Board does not terminate the Merger Agreement.
RIGHT TO TERMINATE IF HBOC MARKET VALUE IS LESS THAN $22.50. If the Market
Value is less than $22.50, then the IMNET Board has the right, but not the
obligation, to terminate the Merger Agreement prior to the Effective Time. In
that case, and assuming the Merger is approved by IMNET stockholders, the IMNET
Board may decide to terminate the Merger Agreement or to consummate the Merger
without resoliciting IMNET stockholders. In considering whether to consummate
the Merger without resolicitation, the IMNET Board expects to consider,
consistent with its fiduciary duties, all relevant factors including
then-existing economic conditions, the respective business, financial condition,
results of operations and prospects of each of HBOC and IMNET and their
industries, and the factors considered in deciding to enter into the Merger
Agreement. The IMNET Board may also consult with Robinson-Humphrey, its
financial advisor, and may obtain an updated fairness opinion. An additional
factor to consider is HBOC's right to terminate the Merger Agreement after
November 30, 1998. IMNET might not be able to obtain an extension of the
November 30, 1998 date in order to resolicit stockholders, if it chose to do so.
In that event, the IMNET Board may need to either terminate the Merger Agreement
or consummate the Merger, thereby avoiding the possible payment of a $7,500,000
fee to HBOC. See "The Merger Proposal--Terms of the Merger--Termination." The
determinations by the IMNET Board as to whether to proceed with the Merger and
whether to resolicit IMNET stockholders will be based on facts and circumstances
existing if and when the termination right occurs. Those 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 IMNET 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 IMNET Common Stock outstanding
at the Effective Time of the Merger will be assumed by HBOC and, as a result of
such assumption, the optionee will have the right to purchase the number of
shares (rounded down to the nearest whole share) of HBOC Common Stock into which
the number of shares of IMNET 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 IMNET 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.
At the Effective Time, options held by executive officers of IMNET will,
pursuant to their terms, become immediately and fully exercisable. No other
terms of the options assumed by HBOC will be modified pursuant to the terms of
the Merger Agreement. See "Interests of Certain Persons in Each of HBOC and
IMNET--Interests of Certain IMNET Persons in Matters to be Acted Upon."
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EMPLOYEE STOCK PURCHASE PLAN. At the Effective Time, HBOC will assume
IMNET's rights and obligations under the Employee Stock Purchase Plan, and each
outstanding right to purchase IMNET Common Stock will be adjusted in the same
manner provided for in respect of outstanding options.
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
IMNET 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 IMNET 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 IMNET Common Stock represented
thereby.
Upon surrender to the Exchange Agent of a Certificate, together with such
letter of transmittal properly completed and duly executed and any other
required documents, the holder of such Certificate shall be entitled to receive
the Merger Consideration, and such Certificate shall forthwith be canceled. If
payment is to be made to a person other than the person in whose name the
Certificate surrendered is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the Certificate surrendered or establish to the
satisfaction of HBOC or HBOC-GA that such tax has been paid or is not
applicable. Until surrendered, each Certificate shall represent for all purposes
only the right to receive the Merger Consideration, without any interest on the
value thereof.
Notwithstanding the foregoing, neither HBOC nor HBOC-GA shall be liable to
any holder of Certificates formerly representing shares of IMNET 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 IMNET 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
IMNET 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
IMNET 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 exemption 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, IMNET affiliates are subject to
certain restrictions on transfer of both IMNET Common Stock and HBOC Common
Stock during certain
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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 IMNET, 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 IMNET Common Stock; (iv)
the Registration Statement shall have been declared effective by the Commission
and no stop order shall have been issued with respect thereto 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) the receipt by the IMNET Board of
a fairness opinion of Robinson-Humphrey dated as of the date of this Proxy
Statement/Prospectus.
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 IMNET 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 business, properties, rights or operations (a
"Material Adverse Effect") of IMNET or its subsidiaries, taken as a whole; (ii)
the performance of all covenants, agreements and conditions by IMNET as provided
in the Merger Agreement; (iii) there shall have been no change in the business,
properties, rights or operations of IMNET or its subsidiaries, which
individually or in the aggregate constitute a Material Adverse Effect on IMNET;
(iv) receipt of a certificate of the President of IMNET regarding satisfaction
of certain conditions, including those listed in (i) through (iii) above; (v)
receipt of certain legal opinions, including an opinion of Jones Day, 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 IMNET
regarding compliance with Rule 145 and certain pooling of interests
requirements; (vii) delivery of certain additional certificates and documents by
IMNET, including consents of certain third parties; (viii) receipt of letters
from KPMG Peat Marwick LLP and Arthur Andersen LLP, in their capacities as
independent public accountants for IMNET and HBOC, respectively, regarding the
appropriateness of accounting for the Merger as a pooling of interests; (ix)
receipt of letters from KPMG Peat Marwick LLP, IMNET's independent public
accountants, regarding certain information about IMNET included in the
Registration Statement; (x) receipt of non-competition agreements from certain
employees of IMNET; (xi) receipt of agreements related to non-disclosure,
inventions and similar matters from substantially all of the employees of IMNET;
(xii) the absence of any fees or expenses payable to any investment banking firm
or similar entity that will be incurred by IMNET in connection with the Merger,
except fees and expenses of Robinson-Humphrey, not to exceed the limitations set
forth in the Merger Agreement; (xiii) receipt of the Voting Agreements from
certain stockholders of IMNET; and (xiv) termination of certain agreements
granting registration rights to certain stockholders of IMNET.
The obligation of IMNET to consummate the Merger is contingent upon, and
subject to the satisfaction or waiver of, the following additional conditions:
(i) the representations and warranties of HBOC and HBOC-GA shall remain true and
correct at and as of the Closing Date; (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 Arnall Golden, 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 IMNET filed the required information with the Antitrust
Division and the FTC on
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August 6 and 5, 1998, respectively, and received notification of early
termination of the waiting period on August 27, 1998. 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. IMNET has agreed that, prior to the Effective Time of the
Merger or earlier termination of the Merger Agreement, IMNET shall not, and
shall not permit any of its subsidiaries to, and IMNET and its subsidiaries
shall not authorize or permit any officer, director, employee or representative
of IMNET or its subsidiaries to, solicit, initiate, encourage (including by way
of furnishing information), endorse or enter into any agreement with respect to,
or take any other action to facilitate, any inquiries or the making of any
proposal or offer for any tender or exchange offer, proposal for a merger, share
exchange or other business combination involving IMNET or any of its
subsidiaries or any proposal or offer to acquire in any manner a substantial
equity interest in IMNET or any of its subsidiaries or a substantial portion of
the assets of IMNET or any of its subsidiaries with any person or entity;
provided, however, that the IMNET 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 IMNET Board determines 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. IMNET has agreed to
notify HBOC-GA immediately of its receipt of any such proposals or any such
inquiries or discussions with respect thereto.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time of the Merger by: (i) mutual written consent of the HBOC
Board and the IMNET Board, notwithstanding the prior approval by the IMNET
stockholders; (ii) the HBOC Board, in the event of material condemnation,
destruction, loss or damage to the business of IMNET and its subsidiaries, taken
as a whole; (iii) the HBOC-GA Board or the IMNET Board, after November 30, 1998,
if any of the conditions to such party's obligation to consummate the Merger
have not been fulfilled or waived, unless fulfillment has been frustrated or
made impossible by the party seeking termination; (iv) the IMNET Board, if, in
the good faith exercise of its fiduciary duties to the stockholders of IMNET in
the context of a proposal to acquire IMNET by another party, the IMNET Board
decides that such termination is required; (v) the IMNET Board (at its option),
if the Market Value of HBOC Common Stock is less than $22.50.
If the Merger Agreement is terminated by IMNET in accordance with (iv) above
or by IMNET or HBOC-GA because the IMNET stockholders do not approve the Merger
Agreement, IMNET will be obligated to pay to HBOC-GA a fee in the amount of
$7,500,000, plus all reasonable costs and expenses of HBOC and HBOC-GA incurred
in connection with the negotiation and performance of the Merger Agreement.
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 setting forth their concurrence with the conclusion of
IMNET's management that no conditions exist with respect to IMNET that would
preclude accounting for the Merger as a pooling of interests, and from Arthur
Andersen LLP to the effect that HBOC satisfies the tests applicable to it such
that the Merger can be accounted for as a pooling of interests, in each case
under Accounting Principles Board Opinion No. 16 and assuming that 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
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Department 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 IMNET Common Stock who hold their shares of IMNET
Common Stock as capital assets. This summary does not discuss all aspects of
income taxation that may be relevant to a particular holder of IMNET 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 IMNET 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 IMNET 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, Arnall Golden has advised
IMNET 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 IMNET as a result of the consummation of the Merger and (iii) no gain or loss
will be recognized by an IMNET stockholder upon the exchange of the shares of
IMNET 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 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 IMNET as the result of the
consummation of the Merger.
The opinions of Arnall Golden and Jones Day referred to herein are based
upon certain representations and warranties of HBOC, HBOC-GA and IMNET. In
addition, consummation of the Merger is subject to the condition that as of the
Closing Date the opinions described above shall not have been withdrawn or
materially modified. No ruling, however, has been requested from the Internal
Revenue Service in connection with the Merger, and the opinions referred to
above would neither be binding upon the Internal Revenue Service nor preclude it
from adopting a contrary position.
Provided that the Merger constitutes a tax-free reorganization, the
aggregate adjusted tax basis of the HBOC Common Stock received (including any
fractional share interests deemed received) by a stockholder of IMNET as a
result of the Merger will be the same as the aggregate adjusted tax basis of the
shares of IMNET 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 IMNET as a result of the Merger
will include the holding period of the shares of IMNET Common Stock surrendered
in exchange therefor. Any cash that a stockholder of IMNET receives in lieu of a
fractional interest in a share of HBOC Common Stock will be treated as if the
fractional share were distributed in the Merger and were then redeemed for the
cash payment, 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 IMNET stockholder in the Merger, an IMNET 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 IMNET
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 IMNET stockholder by the
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<PAGE>
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 IMNET 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 IMNET Common Stock is a Nasdaq NM security, the holders of shares of
IMNET Common Stock will not be entitled to appraisal rights pursuant to Section
262 of the DGCL in connection with the Merger.
INTERESTS OF CERTAIN PERSONS IN EACH OF HBOC AND IMNET
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF HBOC
The following table sets forth, as of July 31, 1998, unless otherwise
indicated, certain information with respect to all stockholders known to HBOC to
beneficially own more than five percent of the HBOC Common Stock and information
with respect to HBOC Common Stock beneficially owned by each director of HBOC,
the Chief Executive Officer of HBOC and HBOC's other executive officers who were
the most highly compensated for the year ended December 31, 1997, 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 the 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(1) PERCENT OF CLASS
- --------------------------------------------------------------------- ---------------------- -------------------
<S> <C> <C>
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109........................................ 22,932,430(2) 5.3%
Putnam Investments, Inc.
One Post Office Square
Boston, Massachusetts 02109........................................ 33,903,532(3) 7.9%
Alfred C. Eckert III................................................. 42,000(4) *
Philip A. Incarnati.................................................. 100,000(5) *
Alton F. Irby III.................................................... 192,000(6) *
M. Christine Jacobs.................................................. 20,000(5) *
Gerald E. Mayo....................................................... 268,000(5) *
Charles W. McCall.................................................... 4,162,240 1.0%
James V. Napier...................................................... 301,552(7) *
Donald C. Wegmiller.................................................. 40,000(5) *
Jay P. Gilbertson.................................................... 109,440(8) *
Albert J. Bergonzi................................................... 12,368 *
Russell G. Overton................................................... 71,684 *
Jay M. Lapine........................................................ 32,358(9) *
All Directors and Executive Officers as a Group (12 persons)......... 5,351,642(10) 1.2%
</TABLE>
- ------------------------
* Less than 1%.
(1) In accordance with the rules of the Commission, a person is deemed to be the
beneficial owner of any securities such person has the right to acquire
within 60 days of the date on which beneficial
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<PAGE>
ownership is determined. Accordingly, options exercisable within such period
are reported as presently exercisable.
(2) According to the Schedule 13G as of December 31, 1997, of FMR Corp. ("FMR"),
FMR has sole dispositive power with respect to all of such shares and sole
voting power with respect to 1,311,902 shares.
(3) According to the joint Schedule 13G as of December 31, 1997, 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 4,018,800 and 5,767,160 of such shares, respectively,
PIM has shared dispositive power with respect to 28,136,372 of such shares
and PI has shared voting and shared dispositive power with respect to
4,018,800 and 33,903,532 of such shares, respectively.
(4) Includes 20,000 shares that may be acquired through the exercise of
presently exercisable stock options and 2,000 shares that are held by Mr.
Eckert's wife's IRA.
(5) Represents shares that may be acquired through the exercise of presently
exercisable stock options.
(6) Includes 180,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(7) Includes 220,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(8) Includes 40,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(9) Includes 30,900 shares that may be acquired through the exercise of
presently exercisable stock options.
(10) Includes 818,900 shares that may be acquired through the exercise of
presently exercisable stock options.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF IMNET
The following table sets forth, as of the Record Date, unless otherwise
indicated, certain information with respect to all stockholders known to IMNET
to beneficially own more than five percent of the IMNET Common Stock, and
information with respect to IMNET Common Stock beneficially owned by each
director of IMNET, the Chief Executive Officer of IMNET and IMNET's other
executive officers for the year ended June 30, 1998, James A. Gilbert (IMNET's
former President and Chief Operating Officer) and all directors and executive
officers of IMNET as a group. Except as otherwise indicated, the stockholders
listed in the table have sole voting and investment powers with respect to IMNET
Common Stock owned by them and beneficial ownership is determined in accordance
with the rules of the Commission.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ---------------------------------------------------------------------- ----------------------- ----------------
<S> <C> <C>
Edgewater Private Equity Fund, L.P.
666 Grand Avenue
Suite 200
Des Moines, Iowa 50309.............................................. 706,896(1) 7.2%
Mesirow Capital
350 North Clark Street
Chicago, Illinois 60610............................................. 644,396(2) 6.6%
Kenneth D. Rardin..................................................... 361,430(3) 3.6%
Gary D. Bowers........................................................ 55,516(4) *
Thomas D. Underwood................................................... 49,400(5) *
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ---------------------------------------------------------------------- ----------------------- ----------------
<S> <C> <C>
Raymond L. Brown...................................................... 37,649(6) *
Scott A. Remley....................................................... 22,484(7) *
James L. Hall......................................................... 26,614(8) *
Paul L. Collins, Jr................................................... 22,315(9) *
Charles F. Warner..................................................... 3,260(10) *
James A. Gilbert...................................................... 259,092(11) 2.6%
James A. Gordon....................................................... 714,416(1)(12) 7.3%
Daniel P. Howell...................................................... 651,916(2)(12) 6.6%
All Officers and Directors as a Group (10 persons).................... 1,945,000(1)(2)(13) 18.9%
J.P. Morgan & Co. Incorporated
60 Wall Street
New York, New York 10260............................................ 670,200 6.8%
John Hancock Advisors, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199......................................... 500,000(14) 5.1%
</TABLE>
- ------------------------
* Less than 1%.
(1) The shares beneficially owned include 706,896 shares held by Edgewater
Private Equity Fund, L.P. ("Edgewater"). Gordon Management, Inc. serves as
general partner of Edgewater. Mr. Gordon is the President and a principal of
Gordon Management, Inc. Mr. Gordon may therefore be deemed to be the
beneficial owner of the shares held by Edgewater.
(2) The shares beneficially owned include 520,287 shares held by Mesirow V and
124,109 shares held by Mesirow VI. Mr. Howell is a principal and the Senior
Managing Director of Mesirow Private Equity Investments, Inc., the General
Partner of Mesirow V and Mesirow VI. Mr. Howell may therefore be deemed to
be the beneficial owner of the shares held by Mesirow V and Mesirow VI.
(3) Includes 3,760 shares held by Mr. Rardin's daughter. Also includes stock
options to purchase 253,922 shares which are either currently exercisable or
which become exercisable within 60 days of the Record Date.
(4) Includes stock options to purchase 40,741 shares which are either currently
exercisable or which become exercisable within 60 days of the Record Date.
(5) Includes stock options to purchase 49,400 shares which are either currently
exercisable or which become exercisable within 60 days of the Record Date.
(6) Includes stock options to purchase 37,000 shares which are either currently
exercisable or which become exercisable within 60 days of the Record Date.
(7) Includes 100 shares held by Mr. Remley's daughter. Also includes 20,000
shares which are either currently exercisable or which become exercisable
within 60 days of the Record Date.
(8) Includes stock options to purchase 26,000 shares which are either currently
exercisable or which become exercisable within 60 days of the Record Date.
(9) Includes stock options to purchase 21,490 shares which are either currently
exercisable or which become exercisable within 60 days of the Record Date.
(10) Includes stock options to purchase 1,876 shares which are either currently
exercisable or which become exercisable within 60 days of the Record Date.
(11) Includes stock options to purchase 250,000 shares which are currently
exercisable.
(12) Includes stock options to purchase 7,520 shares which are either currently
exercisable or which become exercisable within 60 days of the Record Date.
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<PAGE>
(13) Includes stock options to purchase 465,469 shares which are currently
exercisable or which become exercisable within 60 days of the Record Date.
(14) Based upon information contained in a Schedule 13G filed with the
Securities and Exchange Commission, and is as of January 29, 1998. Includes
shares held by John Hancock Special Equities Fund, over which John Hancock
Advisors, Inc. has sole voting and dispositive power under an advisory
agreement.
INTERESTS OF CERTAIN IMNET PERSONS IN MATTERS TO BE ACTED UPON
In considering the Merger, holders of IMNET Common Stock should be aware
that the directors and executive officers of IMNET have interests in the Merger
in addition to their interests as stockholders of IMNET generally, as described
below.
IMNET entered into an employment agreement with Mr. Rardin in May 1992,
which was amended effective January 1, 1995, May 2, 1996, September 15, 1996,
and November 6, 1997, for a term expiring December 31, 2000. The employment
agreement, as amended, establishes Mr. Rardin's base salary and provides that he
is entitled to receive incentive bonuses if IMNET achieves certain earnings
targets and to participate in insurance and other benefit, pension or health
plans provided by IMNET to its key executive employees. Under the agreement,
IMNET also has agreed to pay the premiums with respect to certain life and
disability insurance for Mr. Rardin. The agreement also contains a one-year
non-competition provision. Mr. Rardin is entitled to severance through December
31, 2000 upon termination of his employment prior to January 1, 2000 (i) by
reason of termination by IMNET other than for cause or disability, or (ii) at
his election within the six month period following a Severance Event (as defined
therein). The consummation of the Merger will be a Severance Event. In the event
that Mr. Rardin's employment with IMNET is terminated on or after January 1,
2000 for any of the reasons set forth above, Mr. Rardin is entitled to severance
for a period of 12 months from the date of termination of his employment,
subject to certain conditions. Such severance includes continued compensation
payments at the base salary rate in effect at the time of the termination of
employment, continued payment of life and disability insurance premiums and
continued ability to participate in employee fringe benefit and pension plans,
each as Mr. Rardin would have been entitled to receive during the term of his
employment. In the event that Mr. Rardin's employment with IMNET terminates by
reason of: (a) termination by IMNET other than for cause; (b) disability; (c)
death; or (d) a Severance Event, Mr. Rardin is entitled to receive a pro rata
portion of the bonus which he would otherwise have been entitled to receive,
prorated to reflect the actual number of days worked by Mr. Rardin during the
fiscal year in which such termination occurs. Mr. Rardin's base salary is
currently $326,420. Mr. Rardin has agreed to forego any bonus for the first
quarter of fiscal year 1998 to provide for additional bonuses for the other
executive officers of IMNET as an incentive to achieve IMNET's profit
objectives.
Messrs. Bowers, Underwood, Brown, Remley, Hall, Collins and Charles F.
Warner, Vice President and Assistant to the Chairman (collectively, the
"Officers") entered into employment agreements with IMNET dated May 22, 1992 (as
amended April 24, 1998), July 5, 1995, November 17, 1995, November 6, 1997,
October 14, 1996 (as amended June 12, 1998), March 13, 1995 and June 12, 1998,
respectively. The agreements are terminable at any time upon three months'
written notice by either party; automatically in the event of the death of the
employee; immediately upon written notice if termination is for cause as defined
therein and at any time upon the mutual current agreement of the Company and the
employee. Each of the agreements specifies minimum base salaries for each of the
Officers and provides that the Officers are eligible to receive incentive
bonuses. Each Officer other than Mr. Bowers is entitled to receive six months'
severance pay at the monthly rate of their respective then-current base salaries
upon termination of his employment for any reason other than cause. Mr. Bowers'
agreement provides that in the event of termination of his employment for any
reason other than cause or in the event Mr. Rardin's employment with IMNET is
terminated and Mr. Bowers elects to terminate his employment within 30 days
thereafter, he will receive 12 months' severance and be reimbursed for certain
relocation expenses, subject to certain conditions. Mr. Bowers' agreement
contains a six month non-competition provision and the
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<PAGE>
other Officers' agreements contain a one year non-competition agreement. With
respect to each of the Officers, all such severance payments terminate upon
acceptance of full-time employment with a subsequent employer during the
severance period. Currently, the base salary of each of the Officers is as
follows: Mr. Bowers: $200,000; Mr. Underwood: $160,998; Mr. Brown: $150,755; Mr.
Remley: $162,720; Mr. Hall: $141,816; Mr. Collins: $141,816; and Mr. Warner:
$100,000.
HBOC intends to issue to each of Messrs. Bowers, Underwood, Hall and Warner
employment offer letters, contingent on consummation of the Merger, which would
terminate their respective existing employment agreements effective on the
Merger, provided that if such employee is terminated without cause or terminates
voluntarily within six months thereafter, he would receive his salary for nine
months thereafter, except for Mr. Bowers who would receive his salary for twelve
months, and, in each case, subject to certain conditions. Pursuant to the
letters, the base salaries for the individuals are the same as their current
salaries. In addition, Messrs. Bowers, Underwood and Hall would be entitled to
participation in the HBOC Management Incentive Plan and Mr. Hall would be
entitled to participation in a sales incentive and commission plan.
Pursuant to the terms of certain outstanding options to purchase IMNET
Common Stock, in the event of certain transactions involving a change of control
of the IMNET, which would include the Merger, such options held by executive
officers of IMNET that are not currently exercisable will become exercisable in
full. The number of shares of IMNET Common Stock subject to currently
unexercisable options held by each of the executive officers of IMNET is as
follows: Mr. Rardin: 250,570; Mr. Bowers: 67,459; Mr. Underwood: 88,600; Mr.
Brown: 80,000; Mr. Remley: 100,000; Mr. Hall: 70,000; Mr. Collins: 52,489; and
Mr. Warner: 21,748.
Pursuant to IMNET's non-qualified deferred compensation plan, each officer
that is a participant therein has elected to receive a lump sum distribution of
his deferred compensation in the event of certain changes of control. The Merger
will constitute such a change of control and, accordingly, the following
executive officers will be entitled to lump sum payments with respect to the
amount of deferred compensation indicated (plus accrued investment earnings
thereon): Mr. Rardin: $200,916; Mr. Bowers: $21,223; Mr. Underwood: $21,330; and
Mr. Brown: $76,404. James A. Gilbert, a former officer and director of IMNET,
will receive a lump sum payment of $72,027.
HBOC-GA has agreed that, subsequent to the Closing Date, it will provide to
the directors and officers of IMNET indemnification in accordance with current
provisions of the Amended and Restated Certificate of Incorporation and the
Amended and Restated Bylaws, as amended, of IMNET and certain indemnification
agreements between IMNET and each such director and officer, with respect to
matters occurring prior to the Effective Time, for a period of five years from
the Effective Time or until any known matters are resolved. 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 IMNET, or an equivalent substitute, provided that the premiums are
no more than 105% of the annual premiums for such coverage as of the date of the
Merger Agreement. If the premiums exceed such 105% amount, HBOC has the option
to provide substitute insurance or to reduce the maximum amount of coverage to
that available for such amount.
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<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF
HBOC COMMON STOCK AND IMNET COMMON STOCK
INTRODUCTION
HBOC and IMNET are each incorporated under the laws of the State of
Delaware. The holders of shares of IMNET Common Stock, whose rights as
stockholders are currently governed by Delaware law, the Amended and Restated
Certificate of Incorporation of IMNET (the "IMNET Charter") and the Amended and
Restated By-laws of IMNET, as amended (the "IMNET 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 IMNET 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 IMNET Common Stock under applicable Delaware law,
the IMNET Charter and IMNET 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 IMNET, to which holders of shares
of IMNET 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)
1,000,000,000 shares of HBOC Common Stock and (ii) 1,000,000 shares of preferred
stock, no par value. The IMNET Charter provides that IMNET has the authority to
issue (i) 25,000,000 shares of IMNET Common Stock and (ii) 1,207,500 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 IMNET Charter also grants such power to the IMNET Board. The
IMNET Charter includes designations for Series A Preferred Stock, Series I
Convertible Preferred Stock and Series II Convertible Preferred Stock. No shares
of such preferred stock of IMNET are currently outstanding.
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
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<PAGE>
holders of shares of HBOC Common Stock and IMNET Common Stock are entitled to
one vote per share on all matters to be voted on by the stockholders of HBOC and
IMNET, respectively.
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 IMNET Bylaws specify that the number of
directors shall be three. The number of directors on the IMNET Board is
currently three.
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 IMNET Charter provides for cumulative voting.
VOTE ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS
The DGCL generally requires approval of any merger, consolidation or sale of
substantially all the assets of a corporation at a meeting of stockholders by
vote of the holders of a majority of all outstanding shares of the corporation
entitled to vote thereon. The certificate of incorporation of a Delaware
corporation may provide for a greater vote. The HBOC Charter generally requires
the affirmative vote of four-fifths of the outstanding HBOC Common Stock to
approve certain business combinations, except under certain circumstances. The
IMNET 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 HBOC
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 special meeting.
The IMNET Bylaws provide that special meetings of stockholders may be called at
any time by the President and shall be called by the President or Secretary at
the request of either a majority of the IMNET Board or the holders of not less
than one-fifth of all outstanding shares entitled to vote on the matter for
which the special meeting is called. The written notice of a special meeting
shall state the time, place and purpose or purposes for which the meeting is
called.
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
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having not less than the minimum number of votes necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Actions by written consent, however, may not be taken if
otherwise provided for in the certificate of incorporation. The HBOC Charter
expressly prohibits written consents by stockholders. The IMNET Bylaws provide
that stockholders may act by written consent, provided that prompt notice of
such action must be given to those stockholders who did not sign such written
consent.
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 IMNET Charter contains no
provisions requiring a vote greater than that specified in the DGCL to amend the
IMNET Charter.
AMENDMENT OF BYLAWS
Under the DGCL, the power to adopt, amend or repeal a corporation's bylaws
resides with the stockholders entitled to vote thereon, and with the directors
of such corporation if such power is conferred upon the board of directors by
the certificate of incorporation. The HBOC Charter authorizes the HBOC Board to
make, alter or repeal the HBOC Bylaws. The IMNET Charter provides that the IMNET
Board is expressly authorized to make, alter or repeal the IMNET Bylaws. The
IMNET Bylaws provide that the IMNET Board may alter, amend or repeal the IMNET
Bylaws or adopt new bylaws, except that the provision relating to the calling of
special meetings of stockholders may not be altered, amended or repealed except
by the affirmative vote of not less than two-thirds of all outstanding shares
entitled to vote thereon.
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The DGCL provides that a corporation may limit or eliminate a director's
personal liability for monetary damages to the corporation or its stockholders
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to such corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for paying or
approving a stock repurchase in violation of Section 174 of the DGCL or (iv) for
any transaction from which the director derived an improper personal benefit.
Both the HBOC Charter and the IMNET Charter provide for elimination of personal
liability subject to the statutory exceptions.
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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 interests 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
IMNET Charter provide to directors and officers of HBOC and IMNET, respectively,
indemnification to the fullest extent provided by law. Additionally, the HBOC
Bylaws and the IMNET Bylaws 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 or officer, 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 or officer to repay such amount, unless it
shall ultimately be determined that he or she is entitled to be indemnified by
HBOC or IMNET, 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 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. The HBOC Charter has no
provisions limiting the payment of dividends. The IMNET Charter provides that,
subject to the rights expressly granted to the holders of preferred stock of
IMNET, the holders of shares of IMNET Common Stock are entitled pro rata to
dividends, but only when, as and if declared by the IMNET Board.
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. IMNET has not
opted out of Section 203 in the IMNET Charter or IMNET 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. (the "NASD") or
(ii) held of record by more than 2,000 holders. Further, under the DGCL,
stockholders of corporations being acquired pursuant to a merger have the right
to serve upon the corporation a written demand for appraisal of their shares
when the stockholders receive any form of consideration for their shares other
than
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(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 NASD 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 IMNET Charter contains
such a provision on appraisal rights.
The holders of shares of IMNET Common Stock are not entitled to appraisal
rights in connection with the Merger pursuant to Section 262 of the DGCL because
the IMNET Common Stock is designated as a national market system security on the
Nasdaq NM.
BUSINESS OF HBOC
GENERAL
HBOC provides 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 healthcare organizations to add
incremental capabilities to their 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,
medical call centers, 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 payors. 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, 1997, HBOC had 6,286 employees worldwide.
RECENT DEVELOPMENTS
On September 28, 1998, HBOC announced that it had entered into an Agreement
of Merger by and among HBOC, HBOC-GA and Access pursuant to which HBOC will
acquire all of the outstanding shares of Access and Access will merge with a
subsidiary of HBOC. Such agreement is subject, among other things, to regulatory
approval and approval by the stockholders of Access. Access provides clinically
based care management programs and healthcare information services.
HBOC has entered into an Agreement of Merger dated July 20, 1998 among HBOC,
HBOC-GA and US Servis, a management services company that provides outsourced
billing, accounts receivable and other business and information management
services to physicians and physician networks, hospital business offices and
ambulatory care centers. Such agreement was approved by the stockholders of US
Servis at a meeting held on September 29, 1998. HBOC anticipates that the merger
will be consummated on or about October 1, 1998 and that HBOC will issue shares
of HBOC Common Stock valued at approximately $50.0 million in connection with
the merger.
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BUSINESS OF IMNET
IMNET develops, markets, installs and services electronic information and
document management systems to meet the needs of the healthcare industry and
other document-intensive businesses. IMNET's hardware and software systems
electronically capture, index, store and retrieve information which is resident
on most storage media, including magnetic disk, optical disk, microfilm, paper
and x-ray film. IMNET's information management solution, the IMNET Electronic
Information Warehouse-TM-, allows users to re-engineer their information
management processes to access information on a cost-effective basis and to
achieve immediate cost savings through productivity increases. The IMNET
Electronic Information Warehouse is used by healthcare providers and healthcare
information systems vendors to create an electronic medical record by
integrating current and historical patient information with existing information
management systems.
Pursuant to certain distribution agreements entered into in March 1996, HBOC
has been the largest distributor of IMNET's products. During each of the years
ended June 30, 1997 and 1998, HBOC accounted for 31% of IMNET's revenues.
Pursuant to such agreements, HBOC received exclusive distribution rights to the
IMNET Electronic Information Warehouse, which has been integrated with HBOC's
clinical and information solutions and agreed not to market competing products,
while IMNET assumed certain customer support and conversion obligations with
respect to HBOC customers. Such agreements provide for a seven-year term and
payment to HBOC of $3.0 million.
As of June 30, 1998, IMNET had 353 full-time employees.
STOCKHOLDER PROPOSALS
If the Merger is not consummated because the Merger Agreement is not
approved by the IMNET stockholders at the Special Meeting or any adjournments or
postponements thereof or for any other reason, IMNET intends to hold its next
Annual Meeting of Stockholders on or about January 15, 1998. Any stockholder of
IMNET who desired to submit a proposal for inclusion in the proxy statement or
form of proxy for presentation at such annual meeting pursuant to the
stockholder proposal rules (Rule 14a-8) promulgated under the Exchange Act was
required to have submitted such proposal to the Secretary of IMNET on or before
August 18, 1998. In addition, all stockholder proposals submitted outside of the
stockholder proposal rules must be received by IMNET, addressed to the attention
of the Secretary, not less than 50 days nor more than 75 days prior to the
annual meeting in order to be considered timely. If the date of the next annual
meeting is changed by more than 30 calendar days, IMNET shall, in a timely
manner, inform its stockholders of the change, and the date by which proposals
of stockholders must be received.
OTHER MATTERS
The management of IMNET knows of no other matters that may come before the
Special Meeting. However, if matters other than those referred to above should
properly come before the Special 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 IMNET by
Arnall Golden & Gregory, LLP, Atlanta, Georgia.
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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
three and six months ended June 30, 1997 and 1998, 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 and schedule of IMNET Systems, Inc.
and subsidiaries as of June 30, 1998 and 1997 and for each of the years in the
three-year period ended June 30, 1998 have been incorporated by reference herein
and in the Registration Statement in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
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APPENDIX A
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, made this 23rd day of July, 1998, by and among HBO
& COMPANY, a Delaware corporation ("Parent"); HBO & COMPANY OF GEORGIA, a
Delaware corporation (hereinafter referred to as "Purchaser"); and IMNET
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 IMNET 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.
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 have the meaning set forth in Section
3.12.1.
1.15 "Delaware Code" shall mean the Delaware General Corporation Law.
1.16 "DOL" shall mean the United States Department of Labor.
1.17 "Effective Time" shall mean the time the Merger becomes effective, as
set forth in Section 2.1.2.
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1.18 "Employee Agreements" shall mean the Employee Agreements referred to in
Section 6.12.
1.19 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
1.20 "ERISA Affiliate" shall mean, with respect to a Person, any other
Person that is required to be aggregated with such Person under Tax Code Section
414(b), (c), (m) and/or (o) at any time prior to the Closing Date.
1.21 "ERISA Plan" shall have the meaning set forth in Section 3.16.
1.22 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.23 "Exchange Agent" shall mean the person designated by Purchaser as the
Exchange Agent pursuant to Section 2.2.1 hereof.
1.24 "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.
1.25 "Existing Option" shall have the meaning set forth in Section 2.1.7.
1.26 "401(k) Plan" shall mean the IMNET Systems, Inc. Retirement Savings
Plan.
1.27 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust and Improvements
Act of 1976, as amended.
1.28 "Hazardous Substance" shall have the meaning set forth in Section 3.18.
1.29 "Immigration Laws" shall have the meaning set forth in Section 3.15.
1.30 "Indemnification Agreements" shall mean the indemnification agreements
entered into between the Acquired Company and its directors and officers on or
before the date of this Agreement.
1.31 "IRS" shall mean the United States Internal Revenue Service.
1.32 "Licensed Software" shall have the meaning set forth in Section
3.14.2(ii).
1.33 "Market Value" shall have the meaning set forth in Section 2.1.6(a).
1.34 "Material Adverse Change" shall have the meaning set forth in Section
6.3.
1.35 "Material Adverse Effect" shall mean a material adverse effect on the
businesses, properties, rights, financial condition, results of operations or
prospects of the corporation in question and its subsidiaries, taken as a whole.
1.36 "Material Contract" shall have the meaning set forth in Section 3.12.
1.37 "Merger" shall mean the merger of the Acquired Company with and into
Purchaser, as set forth in Section 2.1.1.
1.38 "Merger Consideration" shall have the meaning set forth in Section
2.1.6(c).
1.39 "Nasdaq" shall mean the Nasdaq National Market of the Nasdaq Stock
Market, Inc.
1.40 "1998 Financial Statements" shall have the meaning set forth in Section
3.5.1.
1.41 "1995, 1996, 1997 and Interim Financial Statements" shall have the
meaning set forth in Section 3.5.1.
1.42 "1996 Informal Stock Plan" shall mean the resolutions of the Board of
Directors of the Acquired Company adopted in September, 1996, authorizing the
issuance of certain options.
1.43 "1933 Act" shall mean the Securities Act of 1933, as amended.
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1.44 "Owned Software" shall have the meaning set forth in the first
paragraph of Section 3.13.
1.45 "Parent" shall mean HBO & Company, a Delaware corporation, which is the
sole stockholder of Purchaser.
1.46 "Parent Reports" shall have the meaning set forth in Section 4.5.
1.47 "Parent Stock" shall mean the common stock, $0.05 par value per share,
of Parent.
1.48 "PBGC" shall mean the Pension Benefit Guaranty Corporation established
under Title IV of ERISA.
1.49 "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.
1.50 "Pooling Letter" shall have the meaning set forth in Section 2.4(b).
1.51 "Purchaser" shall mean HBO & Company of Georgia, a Delaware
corporation.
1.52 "Real Property" shall have the meaning set forth in Section 3.18.
1.53 "Registration Statement" shall have the meaning set forth in Section
2.3.1.
1.54 "Rule 145 Letters" shall have the meaning set forth in Section 2.4(a).
1.55 "SEC" shall mean the Securities and Exchange Commission.
1.56 "Stock Plans" shall mean the IMNET Systems, Inc. 1993 Employee Stock
Option and Rights Plan, as amended, the IMNET Systems, Inc. 1995 Non-Employee
Directors Stock Option Plan, the IMNET Systems, Inc. 1996 Informal Stock Option
Plan, and the IMNET Systems, Inc. 1997 Long-Term Incentive Plan.
1.57 "Subsidiaries" shall mean the subsidiaries of the Acquired Company,
which are listed on EXHIBIT 3.2.
1.58 "Surviving Corporation" shall have the meaning set forth in Section
2.1.1 hereof.
1.59 "Takeover Proposal" shall have the meaning set forth in Section 2.11
hereof.
1.60 "Tax Code" shall mean the Internal Revenue Code of 1986, as amended.
1.61 "Voting Agreements" shall mean the Voting Agreements referred to in
Section 6.14.
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
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Secretary of State of Delaware (the time the Merger becomes effective being
referred to as the "Effective Time"). The Merger shall have the effects set
forth in the Delaware Code.
2.1.3. CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of Purchaser as in effect immediately preceding the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation. The
Bylaws of Purchaser as in effect immediately preceding the Effective Time shall
be the Bylaws of the Surviving Corporation.
2.1.4. DIRECTORS. The directors of Purchaser immediately prior to the
Effective Time shall be the directors of the Surviving Corporation and shall
hold office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
2.1.5. OFFICERS. The officers of Purchaser immediately prior to the
Effective Time shall be the officers of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
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 eighty-four one hundredths (.84) of a share of Parent
Stock, deliverable to the holder thereof without interest on the value
thereof; provided, however, that:
(i) If the average closing price per share (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 second trading day prior to the date of the
Special Meeting of stockholders of the Acquired Company held to approve
the Merger as reported by Nasdaq (the "Market Value"), is equal to or
greater than $22.50 per share, but less than $30 per share, then the
Exchange Ratio shall be increased to that fraction that will allow each
share of Acquired Company Stock to be converted into a fractional share
of Parent Stock having a Market Value of $25 (for example, if the Market
Value were $28.00, each share of Acquired Company Stock would be
convertible into 25/28 shares of Parent Stock); and
(ii) If the Market Value is less than $22.50 per share, then each
share of Acquired Company Stock shall be converted, as stated above, into
one and one thousand one hundred eleven ten thousandths (1.1111) shares
of Parent Stock; PROVIDED, HOWEVER, in the event that the Market Value is
less than $22.50, then the Acquired Company shall have the right, but not
the obligation, to terminate this Agreement prior to Closing pursuant to
Section 10.1.6.
(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 canceled 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 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
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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.
(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.
2.1.7. STOCK PLANS.
(a) At the Effective Time, Parent shall assume the Acquired Company's
rights and obligations under each of the outstanding options previously
granted under the Stock Plans (each such option existing immediately prior
to the Effective Time being called an "Existing Option," and each such
option so assumed by Parent being called an "Assumed Option"), by which
assumption the optionee shall have the right to purchase that number of
shares of Parent Stock (rounded down to the nearest
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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.
(b) At the Effective Time, Parent shall assume the Acquired Company's
rights and obligations under the IMNET Systems, Inc. 1996 Employee Discount
Stock Purchase Plan, and each outstanding right to purchase stock under such
plan shall be adjusted in the manner provided for in subsection (a)
hereinabove in respect of 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
(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. 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 as of the date 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 participate in, effective as soon
as reasonably practicable after the Closing Date, the HBO & Company Profit
Sharing and Savings Plan (the "Purchaser Plan") and to effect a direct rollover
of distributions from
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the 401(k) Plan to the Purchaser Plan, a copy of which has been furnished by
Parent to the Acquired Company. Parent and Purchaser shall also take or cause to
be taken such action as necessary to credit each 401(k) Plan participant who
becomes employed by Purchaser on the Closing Date with such participant's
service and years of service under the 401(k) Plan for purposes of calculating
eligibility for participation and vesting in contributions under the Purchaser
Plan.
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 canceled. If payment is to be made to a Person other than the Person in whose
name the Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the Person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a Person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of Parent or the Surviving Corporation that such
tax has been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 2.2.2, each Certificate shall represent for all
purposes only the right to receive the Merger Consideration, without any
interest on the value thereof.
2.2.3. ESCHEAT LAWS. Notwithstanding any provision of this Article II to
the contrary, neither Parent nor the Surviving Corporation shall be liable to
any holder of Certificates formerly representing shares of Acquired Company
Stock for any property properly delivered or amount paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.3 SEC REGISTRATION.
2.3.1. The Acquired Company shall furnish to Parent such information,
including information about the Acquired Company 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 proxy statement/prospectus included therein which is 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
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Acquired Company's stockholders, or at the time of the meeting of the Acquired
Company's stockholders held to approve the Merger Agreement, contain any
statement which, at the time and in light of the circumstances under which it is
made, is false or misleading with respect to any material fact, or omit to state
a material fact necessary in order to make the statements therein not false or
misleading. If at any time prior to the Effective Time any event or circumstance
should come to the attention of the Acquired Company with respect to the
Acquired Company Information that is required to be set forth in an amendment or
supplement to the Registration Statement, the Acquired Company shall immediately
notify Parent and shall assist Parent in appropriately amending or supplementing
the Registration Statement in the manner contemplated in Section 2.3.4 below. An
amendment or supplement may be accomplished, to the extent permitted by law,
rule or regulation, by including such information in a filing under the Exchange
Act that is incorporated by reference into the Registration Statement. The
Acquired Company covenants that 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.
The Acquired Company represents that it is eligible for registration of its
securities on Form S-3. In addition, the Acquired Company covenants to file on
Form 8-K or any other then available form, the 1998 Financial Statements with
the SEC as soon as reasonably practicable, and in any event prior to August 31,
1998, unless the Registration Statement is declared effective on or before
August 31, 1998.
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 concurrence with the conclusion of the Acquired
Company's management that no conditions exist with respect to the Acquired
Company that would preclude accounting for the Merger as a "pooling of
interests", which letters shall be substantially in the form of the opinion
letter attached as EXHIBIT 2.3.2(A) hereto; and (ii) such matters as are
customarily contained in auditors' letters regarding information about the
Acquired Company included in the Registration Statement, which auditors' letters
shall be in form and substance reasonably satisfactory to Parent. Parent shall
use its reasonable best efforts to cause its accountants, Arthur Andersen LLP,
to deliver to the Acquired Company letters at such times to the effect that the
Parent satisfies the tests applicable to it such that the Merger can be
accounted for as a "pooling of interests", which letters shall be substantially
in the form of the letter attached as EXHIBIT 2.3.2(B) hereto.
2.3.3. Parent shall file the Registration Statement and use its reasonable
best efforts to have it declared effective by the SEC as promptly as
practicable, and shall use its reasonable best efforts to take any action
required to be taken to comply in all material respects with any applicable
federal or state securities laws in connection with the issuance of Parent Stock
in the Merger; except that such covenant of Parent is made, as to those portions
of the Registration Statement containing or required to contain Acquired Company
Information, assuming and relying solely on timely and full compliance with
Sections 2.3.1 and 2.3.2. Parent will, in a timely manner, provide the Acquired
Company with copies of any written communications to or from the SEC and notify
the Acquired Company of any material oral communications to or from the SEC with
respect to the Registration Statement or the transactions contemplated thereby.
2.3.4. Parent covenants that the information included in the Registration
Statement shall not, at the time the Registration Statement is declared
effective, at the time the proxy statement/prospectus contained therein is first
mailed to the Acquired Company's stockholders, or at the time of the meeting of
the
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Acquired Company's stockholders held to approve the Merger, contain any
statement which, at the time and in light of the circumstances under which it is
made, is false or misleading with respect to any material fact, or omit to state
a material fact necessary in order to make the statements therein not false or
misleading; except that Parent makes no covenant as to those portions of the
Registration Statement containing or required to contain Acquired Company
Information. If at any time prior to the Effective Time any event or
circumstance should come to the attention of Parent that is required to be set
forth in an amendment or supplement to the Registration Statement, Parent shall
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. The Registration Statement and all other documents required to be
filed by Parent with the SEC in connection with the transactions contemplated
herein shall comply as to form and substance in all material respects with the
applicable requirements of the Securities Act and the rules and regulations
thereunder and the Exchange Act and the rules and regulations thereunder; except
that Parent shall have no liability or obligation for any failure to comply with
such requirements arising out of the Acquired Company Information.
2.3.6. Parent shall use all reasonable efforts to take such action as may be
necessary to ensure that the requirements of Rule 144(c) under the Securities
Act are satisfied so as to enable any "affiliates" of the Acquired Company (as
that term is used in Rule 145 under the Securities Act) 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. As soon as reasonably practicable, but not later than thirty (30)
days following the Closing Date, Parent shall use all reasonable efforts to file
a registration statement on Form S-8 covering shares of Parent Stock issuable
pursuant to the Stock Plans; provided that such obligation is subject to and
conditional on the Acquired Company providing Parent with all information
requested by Parent in connection therewith prior to the Closing Date.
2.3.8. Each party will provide to the other parties, or their counsel,
drafts of the information related to or customarily provided by such party to be
included in the Registration Statement on Form S-4 and will generally cooperate
with each other in the preparation thereof.
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 immediately preceding the date of the filing of the
Registration Statement to deliver to Parent on such date a written agreement
substantially in the form attached hereto as EXHIBIT 2.4(A) ("Rule 145
Letters"), and, in the event that any other person becomes an affiliate of
the Acquired Company thereafter, to cause such person to provide a Rule 145
Letter to Parent at the Closing.
(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 on the date immediately preceding the date of the filing of the
Registration Statement to deliver to Parent on such date a written agreement
substantially in the form attached hereto as EXHIBIT 2.4(B) ("Pooling
Letters"), and, in the event any other person becomes an affiliate of the
Acquired Company thereafter, to cause such person to provide a Pooling
Letter to Parent at the Closing.
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 affiliates are aware, and that it
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has advised its representatives that, (i) the United States securities laws may
prohibit a person who has material, non-public information from purchasing or
selling securities of any company to which such information relates, and (ii)
material non-public information shall not be communicated to any other person
except as permitted herein. Parent will use its reasonable best efforts to
instruct each person that is an "affiliate" of Parent under the 1933 Act not to
enter into any transaction which would have the effect of preventing accounting
for the Merger as a pooling of interests.
2.6 CONDUCT OF THE BUSINESS OF THE ACQUIRED COMPANY AND ITS SUBSIDIARIES
PRIOR TO CLOSING.
2.6.1. Except (i) with the prior written consent 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) except as set forth on EXHIBIT 2.6.1, 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) 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) 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 contract, commitment, arrangement or transaction
of the type described in Section 3.12 hereof or suffer, permit or incur any
of the transactions or events described in Section 3.9 hereof to the extent
such events or transactions are within the control of the Acquired Company
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 consistent with historical
practices);
(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 securities (except for the issuance
of Acquired Company Stock pursuant to exercise of stock options pursuant to
the Stock Plans);
(g) not grant any stock option or right to purchase any security of the
Acquired Company 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 set forth on EXHIBIT 2.6.1, 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);
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(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 and except as required by generally
accepted accounting principles;
(j) not issue any notes, bonds or other debt security, or create, incur,
assume or guarantee any indebtedness for borrowed money;
(k) not issue any shares of Acquired Company Stock or of any Subsidiary
other than shares of Acquired Company Stock issuable upon exercise of
exercisable options pursuant to the Stock Plans;
(l) not take any action with respect to any awards under the Stock Plans
(other than honoring exercises thereof) and not alter in any manner the
terms, conditions or dates of vesting or exercise of any of the options to
purchase or other rights with respect to Acquired Company Stock;
(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.
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
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request of any party hereto, all written materials thus obtained by any other
party or any of its representatives and all copies and extracts of such
materials will be delivered to the disclosing party, or destroyed, if requested
by the disclosing party.
2.9 CONSENTS AND APPROVALS. The Acquired Company shall use its, 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
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 material agreement, lease, instrument,
arrangement, or 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. All obtained written waivers,
consents and approvals shall be produced at Closing in form and content
reasonably satisfactory to Purchaser.
2.10 SUPPLYING OF FINANCIAL STATEMENTS. The Acquired Company shall deliver
to Purchaser all regularly prepared audited and unaudited consolidated and
consolidating financial statements of the Acquired Company 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, including, without
limitation, the 1998 Financial Statements.
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 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 and shall promptly, but in any event within one (1) business
day of receipt, furnish to Parent a copy of any such written proposal or a
written summary of any such oral proposal. 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.
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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. Each party shall keep the other party promptly informed of all
developments regarding the filings, requests and responses referred to in this
Section 2.12.
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.
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 and
indemnification agreements of the Acquired Company with respect to matters
occurring prior to the Effective Time, for a period of five 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 fifth anniversary of the Effective
Time, until such matters are finally resolved). Parent shall cause to be
maintained in effect for twelve (12) months following the Closing 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 five percent (105%) 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 105% of the premiums for the coverage as of
the date hereof (the "105% 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 105% Amount.
2.15 SUBSIDIARIES. The parties hereto agree that on the Closing Date,
except as provided on EXHIBIT 2.15, 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. Subject to EXHIBIT 2.16, Parent will use its
reasonable best efforts to make publicly available through a filing with the SEC
the combined results of operations of Parent, Purchaser and the Acquired Company
for the first full calendar month following Closing, on or before the twentieth
(20th) day of the second calendar month following Closing, unless the Merger is
effective during the second month of Parent's fiscal quarter, in which event
Parent will use its reasonable best efforts to include the combined results of
operations of Parent, Purchaser and the Acquired Company for the first full
calendar month following Closing in Parent's Quarterly Report on Form 10-Q for
such fiscal quarter.
III. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANY.
The Acquired Company represents and warrants to Purchaser and Parent as
follows:
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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.
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 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 The Robinson-Humphrey Company, Inc., its financial advisors, concurrently
with the approval described in Section 3.2.1 above to the effect that the
Exchange Ratio is fair, from a financial point of view, to the Acquired
Company's stockholders.
3.3 CAPITALIZATION. The entire authorized capital stock of the Acquired
Company consists of twenty-five million (25,000,000) shares of Common Stock, and
1,000,000 shares of Preferred Stock which are not yet designated as part of a
series. Of the total authorized Acquired Company Stock, as of June 20, 1998,
nine million eight hundred eighteen thousand seven hundred eighty-six
(9,818,786) shares were issued, nine million seven hundred eighty-one thousand
one hundred forty-nine (9,781,149) were outstanding and thirty-seven thousand
six hundred thirty-seven (37,637) shares were held in the Acquired Company's
treasury. As of June 20, 1998, no shares of Preferred Stock were outstanding. As
of July 17, 1998, there were options outstanding under the Stock Plans entitling
the optionees thereunder upon valid exercise to acquire in the aggregate
1,663,587 shares of Acquired Company Stock. With the exception of the right to
acquire shares of Acquired Company Stock pursuant to options under the Stock
Plans, there are no outstanding rights to acquire capital stock of the Acquired
Company. All the issued and outstanding shares
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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 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 Plans
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, nor are there
outstanding any securities or obligations that are convertible into or
exchangeable for any shares of capital stock of the Acquired Company. Following
the Merger, the Acquired Company will have no obligation to issue, transfer or
sell any shares of capital stock of any of the Subsidiaries. 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 June
30, 1995, June 30, 1996, June 30, 1997, and unaudited consolidated balance sheet
as of March 31, 1998, and the related consolidated statements of income,
stockholders' equity and cash flows for the years and nine months then ended,
together (except in the case of the financial statements dated March 31, 1998)
with the reports of KPMG Peat Marwick LLP thereon (respectively, the "1995,
1996, 1997 and Interim Financial Statements"). As soon as they are available,
the Acquired Company will attach as part of EXHIBIT 3.5.1 a true, correct and
complete copies of the Acquired Company's audited consolidated balance sheet as
of June 30, 1998, and the related consolidated statements of income,
stockholders' equity and cash flows for the year then ended, together with the
report of KPMG Peat Marwick LLP thereon (the "1998 Financial Statements"). The
1995, 1996, and 1997 Financial Statements are and the 1998 Financial Statements
will be, complete, have been, and in the case of the 1998 Financial Statements
will have been, prepared in accordance with generally accepted accounting
principles, consistently applied, fairly present, and in the case of the 1998
Financial Statements will fairly present, in all material respects the financial
condition of the Acquired Company and the Subsidiaries as of the respective
dates thereof, and disclose, and in the case of the 1998 Financial Statements
will 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 its tax
returns by any appropriate authority, except for immaterial liabilities and (a)
the liabilities and obligations of the Acquired Company and the Subsidiaries
that are disclosed or reserved
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against in the Interim Statements or EXHIBIT 3.5.2 hereto, to the extent and in
the amounts so disclosed or reserved against, and (b) liabilities incurred or
accrued in the ordinary course of business since March 31, 1998 and liabilities
incurred in connection with the transactions referred to herein.
3.5.3. Except as disclosed in the Interim Financial Statements or EXHIBIT
3.5.2, neither the Acquired Company nor any Subsidiary is in default with
respect to any liabilities or obligations, except for immaterial defaults, and
all such liabilities or obligations shown or reflected in the Interim Financial
Statements or EXHIBIT 3.5.2 and such liabilities incurred or accrued subsequent
to March 31, 1998 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 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 3.6.1, 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. 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
Interim Financial Statements or EXHIBIT 3.6.1 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 3.6.1, 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. Except as set forth on EXHIBIT 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. Except as set forth on EXHIBIT 3.6.2, the Acquired Company is not
obligated to make reimbursement or gross-up payments to any person in respect to
excess parachute payments.
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 June 30, 1993, and all taxes,
deficiencies, penalties and interest relating to such tax years have been fully
paid and satisfied by the Acquired Company.
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3.6.5. 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 1995, 1996, 1997 and Interim Financial Statements include, and
the 1998 Financial Statements and 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.
3.7 OWNERSHIP OF ASSETS. The Acquired Company and the Subsidiaries have
title to all of their respective properties and assets, other than leased or
licensed property, in each case free and clear of any liens, security interests,
claims, charges, options, rights of tenants or other encumbrances, except as
disclosed or reserved against in EXHIBIT 3.7 or reserved against in the Interim
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. 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. 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 Interim 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, 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 March 31, 1998, 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
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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. None of the matters disclosed on EXHIBIT 3.10, singly or in the
aggregate, may reasonably be expected to or will have a Material Adverse Effect
on the Acquired Company.
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. The Acquired Company and the
Subsidiaries hold all registrations, approvals, licenses, permits or other
authorizations from the Food and Drug Administration and any other applicable
federal, state or other public authority necessary to manufacture, license and
sell their products. Except as noted in EXHIBIT 3.11, 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, except as set forth on EXHIBIT 3.11, 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. Except as set forth on EXHIBIT 3.11,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the termination of any
governmental license, certificate, permit, franchise or right held by the
Acquired Company or any Subsidiary, 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. None of the matters disclosed on EXHIBIT 3.11, singly or in the
aggregate, will 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 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. contracts, agreements, commitments or other instruments in effect
with any customer of the Acquired Company or any Subsidiary, including without
limitation all management agreements, data processing agreements, consulting
services agreements, software license agreements or other licenses, software
development agreements, purchase commitments or installation agreements and
maintenance or service agreements, which require payments or provide for future
receipts in excess of $200,000 if a one-time type of payment or $100,000 per
year if a recurring type of payment (hereinafter referred to as the "Customer
Contracts" and identified as such on EXHIBIT 3.12);
3.12.2. leases, rental agreements or other contracts or commitments
affecting the ownership or leasing of, title to or use of any interest in real
or personal property with payments equal to or greater than $5,000
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per month and all maintenance or service agreements relating to any real or
personal property with payments equal to or greater than $5,000 per month;
3.12.3. contracts or commitments providing for payments based in any manner
upon the sales, purchases, receipts, income or profits of the Acquired Company
or any Subsidiary;
3.12.4. 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);
3.12.5. employment contracts or arrangements regarding employees or
independent contractors (including without limitation any standard form
contracts such as employee nondisclosure agreements), or for any continuing
payment of any type or nature, including, without limitation, any severance,
termination, parachute, or other payments (whether due to a change in control,
termination or otherwise) and bonuses and vested commissions. EXHIBIT 3.12 also
includes a listing of all such agreements, if any, for which the standard form
was materially or substantially modified or materially or substantially altered,
and any contracts that are not in the standard form. Other than the standard
form agreements listed on EXHIBIT 3.12, those listed variations from the
standard form agreements and those listed agreements that are not in the
standard form, there are no other agreements of the type referred to in this
Section 3.12.5;
3.12.6. contracts, agreements, understandings or arrangements restricting
the Acquired Company or any Subsidiary from carrying on its business anywhere in
the world;
3.12.7. instruments or arrangements evidencing or related to indebtedness
for money borrowed or to be borrowed, whether directly or indirectly, by way of
purchase-money obligation, guaranty, subordination, conditional sale,
lease-purchase or otherwise providing for payments in excess of $5,000 per
month;
3.12.8. joint product development agreement with any party other than the
Purchaser, other than Customer Contracts; and
3.12.9. contracts or agreements with vendors of material equipment purchased
by the Acquired Company or appointing the Acquired Company as a reseller of
equipment, other than purchase orders in the ordinary course of business.
The contracts, agreements, 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 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. 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 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 collectible accounts receivable in the aggregate in amounts consistent with
historical experience. Except as set forth on EXHIBIT 3.12, there are no
contracts or commitments that require the performance of services or provision
of goods by the Acquired Company at a direct cost or with a value for each such
contract or commitment in excess of the revenue to be derived pursuant to the
terms of such contract or commitment, except to the extent specifically reserved
against in the Financial Statements. 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,
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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 CUSTOMER CONTRACTS. Except as set forth on EXHIBIT 3.13(A), each
Customer Contract conforms substantially to one of the forms attached hereto as
EXHIBIT 3.13(B) (the "Customer Contract Forms"). EXHIBIT 3.13(B) also includes
copies of standard forms employed by the Acquired Company and the Subsidiaries
in respect of current customers the contracts for which do not constitute
"Customer Contracts" by reason of the dollar threshold provided for in the
definition therefor in Section 3.12.1. With respect to each Customer Contract,
(i) each customer to which computer software represented as owned by or
proprietary to the Acquired Company or a Subsidiary (the "Owned Software") has
been licensed pursuant to such 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 such
software to the extent and on the terms and conditions provided for in such
Customer Contract; (ii) in each case in which the Customer Contract pursuant to
which Owned Software is licensed incorporates response(s) by Vendor to a Request
for Proposal by the customer, such software has met all material requirements
set forth in such response(s); and (iii) all performance warranties with respect
to Owned Software made by the Vendor in any Customer Contract, including
warranties with respect to capacity, availability, downtime and response time,
and Year 2000 compliance have been satisfied in all material respects upon the
terms and conditions and to the extent provided for in such Customer Contract.
In addition, except as set forth on EXHIBIT 3.13(A), none of the Customer
Contracts contains any of the following deviations from the Customer Contract
Forms:
3.13.1. any term for acceptance of any Owned Software that fails to specify
a period of time or date for acceptance or standards applicable thereto;
3.13.2. any provision granting the customer a right to a whole or partial
refund of fees previously paid upon the non-acceptance or failure of any Owned
Software to perform as warranted;
3.13.3. any provision obligating the Vendor to indemnify a customer against
consequential damages;
3.13.4. any commitment by the Vendor to provide a hardware upgrade in
response to or as a remedy for a breach of any software-related response-time
warranty unless the customer party to the Customer Contract in which the
commitment is made is required to pay the cost of such upgrade and such costs
are specified or described in such contract;
3.13.5. any material deviation from the provisions regarding confidentiality
of the Owned Software;
3.13.6. any provision granting an ownership interest (other than a license)
in any Owned Software to a customer;
3.13.7. any license for use by more than a single entity of any Owned
Software unless the customer that is a party to such Customer Contract has
agreed to pay a fee or fees with respect to each entity's use thereof;
3.13.8. any provision naming a customer as an insured on any policy of
insurance owned by the Vendor;
3.13.9. any joint product development agreement with any other party;
3.13.10. any commitment or warranty made or given by the Vendor to design or
modify any Owned Software so as to comply with any governmental regulations;
3.13.11. any restrictions in any Customer Contract on the ability of the
Vendor to increase the fees for maintenance of any Owned Software applicable to
any period beyond the period specified in such contract during which the
customer that is a party to such contract is obligated to pay maintenance fees;
3.13.12. any commitment by the Vendor to sell or maintain computer hardware;
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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.
3.14 INTELLECTUAL PROPERTY; COMPUTER SOFTWARE.
3.14.1. EXHIBIT 3.14.1 hereto sets forth a complete and correct list of all
trademarks, trade names, service marks, service names, and brand names (whether
or not any of the same are registered), and all patent and registered copyrights
and all applications for the foregoing, if any, (setting forth the registration,
issue or serial number of the patents and registered copyrights 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 (identified by title, date and parties) (not inclusive of
Customer Contracts or contracts which do constitute Customer Contracts by virtue
of the dollar threshold provided for in the definition in Section 3.12.1). All
such trademarks, trade names, service marks, service names, brand names,
copyrights and patents are owned by the Acquired Company 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.
3.14.2. (i) EXHIBIT 3.14.2(I) contains a complete and accurate list of all
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 as set forth on EXHIBIT 3.14.2(I)and except for
commercially available, over-the-counter "shrink-wrap" software, the Owned
Software is not dependent on any Licensed Software (as defined in subsection
(ii) below) in order to operate fully in the manner in which it is intended. No
Owned Software has been published or disclosed to any other parties, except as
set forth on EXHIBIT 3.14.2(I), and except pursuant to contracts requiring such
other parties to keep the Owned Software confidential. To the knowledge of the
Acquired Company, no such other party has breached any such obligation of
confidentiality.
3.14.2 (ii) EXHIBIT 3.14.2(II) contains a complete and accurate list of all
software (other than commercially available over-the-counter "shrink-wrap"
software) under which the Acquired Company or any Subsidiary is a licensee,
lessee or otherwise has obtained the right to use (the "Licensed Software"), and
identifies by title, date and party, the license or other agreement by which
such right to use has been obtained, and the duration or term thereof. The
Acquired Company and any Subsidiary utilizing such Licensed Software has the
right and license to use, sublicense, modify and copy Licensed Software as set
forth in the respective license, lease or similar agreement pursuant to which
the Licensed Software is licensed to the Acquired Company or any Subsidiary,
free of any other limitations or encumbrances, and the Acquired Company and each
of the Subsidiaries are in full compliance with all applicable provisions of
such agreements. Except as disclosed on EXHIBIT 3.14.2(II), none of the Licensed
Software has been incorporated into or made a part of any Owned Software or any
other Licensed Software. Neither the Acquired Company nor any Subsidiary has
published or disclosed any Licensed Software to any other party except, in the
case of Licensed 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 Licensed Software and except pursuant to
contracts requiring such other parties to keep the Licensed
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Software confidential. No party to whom the Acquired Company or a Subsidiary has
disclosed Licensed Software has, to the knowledge of the Acquired Company,
breached such obligation of confidentiality.
3.14.2 (iii) The Owned Software and Licensed Software and commercially
available over-the-counter "shrink-wrap" software constitute all software used
in the businesses of the Acquired Company and the Subsidiaries (collectively,
the "Acquired Company Software"). EXHIBIT 3.14.2(III) sets forth a list of all
contract programmers, independent contractors, nonemployee agents and persons or
other entities (other than employees) who have performed, within the last three
(3) years, computer programming services for the Acquired Company or any
Subsidiary and identifies all contracts and agreements pursuant to which such
services were performed. The transactions contemplated herein will not cause a
breach or default under any licenses, leases or similar agreements relating to
the Acquired Company Software or impair Purchaser's, 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 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, 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 known 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 in any material respect any applicable federal or
state law or regulation relating to labor or labor practices. EXHIBIT 3.15 sets
forth a true, correct and complete list of employer loans or advances from the
Acquired Company and each Subsidiary to their respective employees. The Acquired
Company and all Subsidiaries are in substantial compliance with all applicable
requirements of the Immigration and Nationality Act of 1952, as amended by the
Immigration Reform and Control Act of 1986 and the regulations promulgated
thereunder (hereinafter collectively referred to as the "Immigration Laws").
3.16 BENEFIT PLANS.
3.16.1. EXHIBIT 3.16 lists every pension, retirement, profit-sharing,
deferred compensation, stock option, stock award, 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 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,
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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," as defined in
Section 3(2) of ERISA, 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 multi-employer 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. No
material oral or written representation or communication with respect to any
aspect of the Benefit Plans has been or will be made to employees of the
Acquired Company prior to the Closing Date that is not in accordance with the
written or otherwise preexisting terms and provisions of such Benefit Plans in
effect immediately prior to the Closing Date, except for any amendments or
terminations required by the terms of this Agreement. There are no unresolved
claims or disputes under the terms of, or in connection with, the Benefit Plans
(other than routine undisputed claims for benefits), and no action, legal or
otherwise, has been commenced with respect to any claim.
3.16.5. All annual reports or returns, audited or unaudited financial
statements, actuarial valuations, summary annual reports and summary plan
descriptions issued with respect to the Benefit Plans are correct and accurate
in all material respects as of the dates thereof; and there have been no
amendments filed to any of such reports, returns, statements, valuations or
descriptions or required to make the information therein true and accurate. All
annual reports (Form 5500 series) required to be filed with respect to any
Benefit Plan have been or will be timely filed.
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3.16.6. No non-exempt "prohibited transaction" (within the meaning of
Section 4975(c) of the Tax Code) involving any Benefit Plan has occurred. None
of the assets of any ERISA Plan is an "employer security" (within the meaning of
Section 407(d)(1) of ERISA) or "employer real property" (within the meaning of
Section 407(d)(2) of ERISA).
3.16.7. Each Benefit Plan that is or has been an "employee pension benefit
plan" as defined in Section 3(2) of ERISA is a defined contribution plan
qualified under Section 401(a) of the Tax Code and its related trust is exempt
from tax under Section 501(a) of the Tax Code (a "Qualified Plan") and no
circumstances exist that could result in disqualification of any Qualified Plan
or loss of tax-exempt status for its related trust (other than any operational
defect that could reasonably be expected to be corrected without material cost
under an IRS compliance resolution program). 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 March 31, 1998, 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
Interim Financial Statements.
3.16.9. The Acquired Company does not maintain any Benefit Plan providing
deferred or stock based compensation that is not reflected in the Interim
Financial Statements. All deferred compensation plans or arrangements will
terminate upon the effectiveness of the Merger.
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 obtained from each of those persons listed
on EXHIBIT 6.11(A) an executed Covenant Not to Compete in the form of EXHIBIT
6.11(B), and from each of those persons listed on EXHIBIT 6.14(A) an executed
Voting Agreement in the form of EXHIBIT 6.14(B).
3.17 CUSTOMERS. Except as set forth on EXHIBIT 3.17, none of the Acquired
Company and the Subsidiaries has received any notice from, or has any knowledge
that, any customer of the Acquired Company or any Subsidiary as of January 1,
1998 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. None of the Acquired Company, any
Subsidiary, any director, officer, agent, employee, or other Person associated
with or acting on behalf of the Acquired Company or any Subsidiary has, directly
or indirectly (i) used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity; (ii)
made any unlawful payment to domestic or foreign government officials or
employees, or to domestic or foreign political parties or campaigns, from
corporate funds; (iii) violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended; (iv) established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; (v) made any false or
fictitious entry on the books or records of Acquired Company or any Subsidiary;
(vi) made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment; (vii) given any favor or gift which is not deductible for
federal income tax
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purposes; or (viii) made any bribe, kickback, or other payment of a similar or
comparable nature, whether lawful or not, to any person or entity, private or
public, regardless of form, whether in money, property, or services, to obtain
favorable treatment in securing business or to obtain special concessions, or to
pay for favorable treatment for business secured or for special concessions
already obtained. The Acquired Company and the Subsidiaries have complied with
all applicable statutes, ordinances, rules, regulations and orders relating to
seeking, bidding, obtaining, performing under or otherwise complying with,
contracts with governmental and quasi-governmental authorities, agencies or
other entities.
3.18 ENVIRONMENTAL MATTERS. Except as set forth in EXHIBIT 3.18, no real
property now or previously owned, 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 or any asbestos-containing materials, and such buildings and
improvements are free from radon contamination. For the purposes of this
Agreement, "Hazardous Substance" shall mean any hazardous or toxic substance or
waste as those terms are defined by any applicable federal, state or local law,
ordinance, regulation, policy, judgment, decision, order or decree, including,
without limitation, the Comprehensive Environmental Recovery Compensation and
Liability Act, 42 U.S.C. 9601 ET SEQ., the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 ET. SEQ. and the Resource Conservation and Recovery
Act, 42 U.S.C. 6901 ET SEQ., and petroleum, petroleum products and oil.
3.19 INSURANCE. Set forth in EXHIBIT 3.19 is a complete list of all
material insurance policies that the Acquired Company and the Subsidiaries
maintained with respect to its businesses, properties or employees within the
preceding thirty-six (36) months. Except as set forth in EXHIBIT 3.19, such
policies are in full force and effect and no event has occurred that would give
any insurance carrier a right to terminate any such policy. Such policies are
adequate to insure against risks to which the Acquired Company, and 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 January 1, 1997, there has not been any change in the
Acquired Company's or any
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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, no stockholder owning greater than
a five-percent (5%) interest in the Acquired Company, or officer or director of
the Acquired Company or any Subsidiary, or affiliate or member of the immediate
family of any such stockholder, officer or director, possesses, directly or
indirectly, any beneficial interest in, or is a director, officer or employee
of, or member of the immediate family of a director, officer or 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 written agreement (delivered herewith to Parent) to enter into
same as of the dates indicated in Section 2.4.
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 on or after June 30, 1997,
including, without limitation, (a) the Acquired Company's Annual Report on Form
10-K for the year ended June 30, 1997, including all documents incorporated
therein, (b) the Acquired Company's Quarterly Reports on Form 10-Q for the
quarters ended September 30 and December 31, 1997, and March 31, 1998, and (c)
all Reports of the Acquired Company on Form 8-K since March 31, 1998
(collectively, the "Acquired Company Reports"). As of the date of this
Agreement, the Acquired Company Reports, taken together with information
previously furnished by the Acquired Company to Parent or Purchaser, did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading. As used
in this Section 3.21, "material" means material to the financial condition,
business, properties, rights or operations of the Acquired Company together with
the Subsidiaries, taken as a whole.
3.22 POOLING OF INTERESTS. The Acquired Company is not aware of any facts
or circumstances in respect of it or its accounting procedures which would have
the effect of precluding accounting for the transactions contemplated hereby as
a "pooling of interests."
3.23 EXHIBITS. All Exhibits attached hereto are true, correct and complete
as of the date of this Agreement and will be true, correct and complete as of
the Closing Date, except to the extent that such Exhibits may be untrue,
incorrect or incomplete due to changes occurring due to the operation of the
Acquired Company and the Subsidiaries in the ordinary course, which shall not
individually or in the aggregate have a Material Adverse Effect. Matters
disclosed on each Exhibit shall be deemed disclosed only for purposes of the
matters to be disclosed on such Exhibit and shall not be deemed to be disclosed
for any other purpose unless expressly provided therein.
3.24 DISCLOSURE. 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 material fact necessary to make the statements herein
or therein not false or misleading. As used in this Section, "material" means
material to the financial condition, business, properties, rights or operations
of the Acquired Company and its Subsidiaries, taken as a whole.
3.25 NO SPECIAL STOCKHOLDER RIGHTS. Except as set forth on EXHIBIT 3.25,
the Acquired Company has no agreement with any individual or entity that grants
such person any rights as a stockholder of Acquired Company Stock that are in
addition to such holder's rights under the Acquired Company's Certificate of
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Incorporation or Bylaws (including, without limitation, registration rights,
preemptive rights, put rights, rights of co-sale or rights to Board
representation).
IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT.
Purchaser and Parent, jointly and severally, represent and warrant to the
Acquired Company as follows:
4.1 ORGANIZATION AND STANDING.
4.1.1. Each of the 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 the Purchaser and the 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 the
Purchaser and the Parent and the nature of the business conducted by them
requires such qualification and/or licensing, except where the failure to so
qualify would not individually or in the aggregate have a Material Adverse
Effect upon the Purchaser and the Parent, taken as a whole.
4.2 CORPORATE POWER AND AUTHORITY. Each of Purchaser and Parent has the
capacity and authority to execute and deliver this Agreement, to perform
hereunder and to consummate the transactions contemplated hereby without the
necessity of any act or consent of any other Person whomsoever. The execution,
delivery and performance by Purchaser and Parent of this Agreement and each and
every agreement, document and instrument provided for herein have been duly
authorized and approved by their respective Boards of Directors (or Executive
Committees thereof). Assuming this Agreement, and each and every other
agreement, document and instrument to be executed, delivered and performed by
Purchaser and Parent in connection herewith are valid and legally binding on the
Acquired Company, this Agreement, and each and every other agreement, document
and instrument to be executed, delivered and performed by Purchaser and Parent
in connection herewith, constitute or will, when executed and delivered,
constitute the valid and legally binding obligations of Purchaser and Parent as
applicable, enforceable against each of them in accordance with their respective
terms, except as enforceability may be limited by applicable equitable
principles, or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws from time to time in effect affecting the enforcement of creditors' rights
generally. Purchaser is a wholly-owned subsidiary of Parent.
4.3 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. The execution and
delivery of this Agreement by Purchaser and Parent do not, and the consummation
of the transactions contemplated hereby will not, violate any provisions of the
Certificate of Incorporation, as amended, or Bylaws, as amended, of Purchaser or
of Parent, and, 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.
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4.4 RESERVATION OF SHARES. Purchaser will, prior to the Merger, in
accordance with the terms thereof, have available shares of Parent Stock
sufficient to complete the Merger. The shares of Parent Stock will, upon
issuance in the Merger, or upon issuance after the exercise of options and
payment therefor pursuant to the Stock Plans, be validly issued, fully paid and
non-assessable.
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, 1997, including, without limitation, (a) Parent's Annual Report on Form 10-K
for the year ended December 31, 1997, including all documents incorporated
therein, (b) Parent's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998, and (c) any Reports of Parent on Form 8-K since March 31, 1998
(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 its subsidiaries (including Purchaser), taken as a
whole.
4.6 CAPITALIZATION. The entire authorized capital stock of the Parent
consists of 1,001,000,000 shares of stock, of which 1,000,000,000 shares are
designated Common Stock, par value $0.05 per share, and 1,000,000 shares are
designated Preferred Stock, without par value. Of the total authorized Common
Stock, as of June 30, 1998, four hundred thirty-seven million seven hundred
seventy-six thousand one hundred twenty-five (437,776,125) shares were issued
and outstanding and no shares were held in the Parent's treasury. Of the total
authorized Preferred Stock, no shares have been issued. As of June 30, 1998,
there were options outstanding entitling the optionees thereunder, to acquire in
the aggregate approximately twenty-four million one hundred ninety thousand four
hundred seventy-four (24,190,474) shares of the Parent Stock. 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 and are (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.
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 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
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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 of the
holders of the outstanding shares of Acquired Company Stock by the vote 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 Nasdaq.
5.7 FAIRNESS OPINION. The Acquired Company shall have received an opinion
from The Robinson-Humphrey Company, LLC, its financial advisor, dated as of the
date of the mailing of the proxy statement/
prospectus included within the Registration Statement confirming the opinion
referred to in Section 3.2.3 hereof.
VI. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND PARENT.
In addition to the conditions set forth in Article V above, all the
obligations of Purchaser and Parent to consummate, or cause to be consummated,
the Merger shall be contingent upon and subject to the satisfaction, on or
before the Closing, of each and every one of the following conditions. The
following conditions are for the sole benefit of Purchaser and Parent and may be
asserted by Purchaser or Parent regardless of the circumstances giving rise to
any such condition and may be waived by Purchaser or Parent (which action shall
be deemed a waiver by both Purchaser and Parent), in whole or in part, at any
time and from time to time, in the sole discretion of Purchaser or Parent. The
failure by either Purchaser or Parent at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any other right, and each right
shall be deemed an ongoing right that may be asserted at any time and from time
to time.
6.1 REPRESENTATIONS OF ACQUIRED COMPANY. All representations and
warranties of the Acquired Company contained in this Agreement (except as
affected by the transactions contemplated by this Agreement), in the statements
contained in the Exhibits hereto or in any certificate delivered by the Acquired
Company pursuant to this Agreement shall be true and correct when made, and
shall be true and 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
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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 (a
"Material Adverse Change"), except for the matters disclosed, or as otherwise
indicated, on EXHIBIT 6.3.
6.4 CERTIFICATE. Purchaser shall have received a certificate of the
President of the Acquired Company, dated as of the Closing Date, certifying as
to the matters set forth in Sections 6.1 through 6.3 above. In addition, Parent
shall have received both a certificate dated as of the effective date of the
Registration Statement and a certificate dated as of the Closing Date certifying
that the covenants set forth in Sections 2.3.1 and 2.3.2 hereof have been
performed and that the representations set forth in Sections 3.21 and 3.24
hereof are true and correct as of such dates.
6.5 OPINION OF ACQUIRED COMPANY'S COUNSEL. Purchaser and Parent shall have
received an opinion of counsel for the Acquired Company in customary form
reasonably acceptable to Purchaser.
6.6 TAX OPINION. Purchaser and Parent shall have received an opinion from
their counsel, dated as of the date the Registration Statement is declared
effective and not withdrawn or materially modified 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.
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 be reasonably satisfactory in form and substance to Parent and
Purchaser and their counsel, including, without limitation, those consents,
waivers and approvals referred to in Section 2.9 hereof.
6.9 ACCOUNTANTS' POOLING LETTERS. Parent shall have received letters from
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, regarding the
appropriateness of accounting for the Merger as a pooling of interests, which
letters shall be substantially in the form of EXHIBITS 2.3.2(A) and 2.3.2(B),
respectively.
6.10 ACCOUNTANT'S COMFORT LETTERS. Purchaser and Parent shall have
received letters from 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
auditors' letters regarding the Acquired Company Information provided expressly
for inclusion in such Registration Statement, and in form and substance
reasonably satisfactory to Parent.
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6.11 COVENANTS NOT TO COMPETE. Purchaser shall have received from each of
those persons listed on EXHIBIT 6.11(A) hereto, originals of the Covenants Not
to Compete in the form of EXHIBIT 6.11(B) hereto (the "Covenants Not to
Compete"), which were executed contemporaneously herewith, and such Covenants
Not to Compete shall be in full force and effect.
6.12 EMPLOYEE AGREEMENTS. The Acquired Company shall have obtained from
substantially all of its employees executed "Employee Agreements," to be
effective as of the Closing Date, in the form customarily used by Purchaser
(which has been furnished to Acquired Company) relating to non-disclosure,
inventions and similar matters.
6.13 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
The Robinson-Humphrey Company, LLC, which shall be consistent with the
engagement letter dated June 30, 1998, attached hereto as EXHIBIT 6.13.
6.14 VOTING AGREEMENTS. Purchaser and Parent shall have received from the
stockholders of the Company identified on EXHIBIT 6.14(A) hereto, originals of
the Voting Agreements in the form of EXHIBIT 6.14(B) hereto (the "Voting
Agreements"), which were executed contemporaneously herewith, and such Voting
Agreements shall be in full force and effect.
6.15 TERMINATION OF CERTAIN AGREEMENTS. Each of the Agreements described
on EXHIBIT 3.25 shall have been terminated.
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), in the statements contained in
the Exhibits hereto or in any certificate delivered by the Purchaser and Parent
pursuant to this Agreement shall be true and correct when made, at and as of the
Closing Date as though such representations and warranties were made or given on
and as of the Closing Date.
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 counsel to Parent and Purchaser, dated as of
the Closing Date, in customary form reasonably acceptable to Acquired Company.
7.5 TAX OPINION. The Acquired Company shall have received for the benefit
of its stockholders an opinion from its tax counsel, dated as of the date the
Registration Statement is declared effective and not
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withdrawn or materially modified 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.
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 counsel to Parent and Purchaser, in Atlanta, Georgia, 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 Rule 145 Letters and Pooling Letters described in Section 2.4;
(k) the letters described in Section 2.3.2 hereof;
(l) the letters from KPMG Peat Marwick LLC to be delivered by the Closing
Date as described in Section 6.9;
(m) the executed Covenants Not to Compete described in Section 6.11;
(n) the executed Employee Agreements described in Section 6.12;
(o) the executed Voting Agreements described in Section 6.14; and
(p) such other evidence of the performance of all covenants and
satisfaction of all conditions required of the Acquired Company by
this Agreement, at or prior to the Closing, as Purchaser, Parent or
their counsel may reasonably require.
8.2.2. PERFORMANCE BY PURCHASER AND PARENT. At the Closing, Purchaser
or Parent, as appropriate, shall deliver to the Acquired Company the
following:
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(a) the certificate described in Section 7.3;
(b) certificates of incumbency of the officers of Purchaser and of Parent
who are executing this Agreement and the other documents contemplated
hereunder;
(c) certified copies of resolutions of the Boards of Directors of each of
Purchaser and Parent (or Executive Committees thereof) approving the
transactions set forth in this Agreement;
(d) Certificate of Merger and a Plan of Merger, each in form and content
that complies with the Delaware Code, executed by Purchaser;
(e) the opinion of counsel for Purchaser and Parent referenced in Section
7.4; and
(f) such other evidence of the performance of all the covenants and
satisfaction of all of the conditions required of Purchaser and of
Parent by this Agreement at or before the Closing as the Acquired
Company or its counsel may reasonably require.
IX. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
9.1 Except for the covenants contained in Sections 2.1.6, 2.1.7, 2.1.10,
2.2.2, 2.3.6, 2.3.8, 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 (tortious or illegal) 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 November
30, 1998, 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 November 30, 1998, 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.
10.1.6. By the Board of Directors of the Acquired Company, if the Market
Value of the Parent Stock is less than $22.50 per share.
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10.1.7. By Purchaser as provided in EXHIBIT 3.14.2(III) or Exhibit
10.1.7.
10.2 EFFECT OF TERMINATION.
10.2.1. Except as provided in Section 10.2.2, and except as provided in
the immediately succeeding sentence, in the event of a termination of this
Agreement pursuant to Section 10.1 hereof, each party shall pay the costs
and expenses incurred by it in connection with this Agreement, and no party
(or any of its officers, directors, employees, agents, representatives or
stockholders) shall be liable to any other party for any costs, expenses,
damage or loss of anticipated profits hereunder. In the event of any
termination of this Agreement, the parties shall retain any and all rights
attendant to a breach of any covenant, representation or warranty made
hereunder. Section 2.8.2 of this Agreement shall survive termination hereof.
10.2.2. In the event this Agreement is terminated by the Acquired
Company in accordance with Section 10.1.5 or 10.1.3 (in the latter case only
if by reason of the failure to meet the condition set forth in Section 5.4)
hereof, or by the Parent, Purchaser or Acquired Company in accordance with
Section 10.1.4 (only if by reason of the failure to meet the condition set
forth in Section 5.4) hereof, then the Acquired Company shall promptly pay
(i) all reasonable costs and expenses of Purchaser and Parent incurred in
connection with the negotiation and performance of this Agreement including
without limitation fees and expenses of counsel, fees and expenses of
independent public accountants, printing expenses and registration fees and
(ii) to Purchaser a fee in the amount of $7,500,000. In the case of the
payment of the fee described in the preceding sentence, and provided the
Acquired Company has not breached any of the covenants provided for in
Section 2.1.8 or 2.11 hereof other than in an immaterial respect, payment of
such amount shall constitute liquidated damages and shall be the sole and
exclusive remedy of Parent and Purchaser for any and all damages arising
under or in connection with this Agreement, and, upon payment of such
amount, neither the Acquired Company nor any officers, directors, employees,
agents, representatives or stockholders of the Acquired Company shall have
any liability or further obligation to Parent or Purchaser under or in
connection with this Agreement or any termination hereof.
10.3 RISK OF LOSS. The Acquired Company retains all risk of condemnation,
destruction, loss or damage due to fire or other casualty from the date of this
Agreement up to the Effective Time. If the condemnation, destruction, loss, or
damage is such that the business of the Acquired Company 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:
IMNET Systems, Inc.
3015 Windward Plaza
Windward Fairways II
Alpharetta, Georgia 30005
Attn: Mr. Kenneth D. Rardin
and to:
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Arnall Golden & Gregory
2800 One Atlantic Center
1201 West Peachtree
Atlanta, Georgia 30309-3450
Attn: T. Clark Fitzgerald, 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 SunTrust Plaza
303 Peachtree Street, NE
Atlanta, Georgia 30308-3242
Attn: 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 The Robinson-Humphrey Company, 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 The Robinson-Humphrey Company,
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 The Robinson-Humphrey Company, 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.
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11.5 EXPENSES. Except as provided in 10.2.2, all expenses incurred by the
parties hereto in connection with or related to the authorization, preparation
and execution of this Agreement and the closing of the transactions contemplated
hereby, including, without limitation of the generality of the foregoing, all
fees and expenses of agents, representatives, counsel and accountants employed
by any such party, shall be borne solely and entirely by the party that has
incurred the same.
11.6 PRESS RELEASES AND DISCLOSURE. In the event that either party
proposes to issue, make or distribute any press release, public announcement or
other written publicity or disclosure prior to the Closing Date that refers to
the transactions contemplated herein, the party proposing to make such
disclosure shall provide a copy of such disclosure to the other parties and
shall afford the other parties reasonable opportunity (subject to any legal
obligation of prompt disclosure) to comment on such disclosure or the portion
thereof which refers to the transactions contemplated herein prior to making
such disclosure.
11.7 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
executors, administrators, successors and assigns.
11.8 HEADINGS. The section and other headings in this Agreement are
inserted solely as a matter of convenience and for reference, and are not a part
of this Agreement.
11.9 ENTIRE AGREEMENT. This Agreement and all agreements referenced
specifically in this Agreement and executed as required by this Agreement
constitute the entire agreement among the parties hereto and supersede and
cancel any prior agreements, representations, warranties, or communications,
whether oral or written, among the parties hereto relating to the transactions
contemplated hereby or the subject matter herein. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by an agreement in writing signed by the party against whom or which the
enforcement of such change, waiver, discharge or termination is sought.
11.10 GOVERNING LAW. Except to the extent the transactions contemplated
hereby are governed by the Delaware Code, this Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia.
11.11 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-36
<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.
<TABLE>
<S> <C> <C>
"PURCHASER"
HBO & COMPANY OF GEORGIA
By: /s/ JAY P. GILBERTSON
----------------------------------------
TITLE: PRESIDENT AND CHIEF FINANCIAL OFFICER
"PARENT"
HBO & COMPANY
By: /s/ JAY P. GILBERTSON
----------------------------------------
TITLE: PRESIDENT, CO-CHIEF OPERATING OFFICER
AND
CHIEF FINANCIAL OFFICER
"ACQUIRED COMPANY"
IMNET SYSTEMS, INC.
By: /s/ KENNETH D. RARDIN
----------------------------------------
TITLE: CHAIRMAN, PRESIDENT AND CHIEF
FINANCIAL OFFICER
</TABLE>
A-37
<PAGE>
APPENDIX B
[Letterhead of The Robinson-Humphrey Company, LLC]
October 1, 1998
Board of Directors
IMNET Systems, Inc.
3015 Windward Plaza
Windward Fairways II
Alpharetta, GA 30005
Members of the Board:
On July 23, 1998, IMNET Systems, Inc. ("IMNET" or the "Company") entered
into an Agreement of Merger (the "Merger Agreement") with HBO & Company
("HBOC"), and HBO & Company of Georgia, a Delaware corporation ("HBOC-GA") and a
wholly-owned subsidiary of HBOC. Pursuant to the terms of the Merger Agreement,
HBOC has agreed to acquire 100% of the Common Stock of IMNET (the "IMNET Common
Stock") through a merger under which IMNET will be merged into HBOC-GA (the
"Merger"). All holders of IMNET Common Stock will receive as consideration a
pro-rata amount of registered HBOC Common Stock in a tax-free exchange in a
ratio that would be the equivalent to eighty-four one hundredths (.84) of a
share (the "Exchange Ratio") of HBOC (the "HBOC Common Stock") for each
outstanding share of IMNET. This exchange ratio may increase if the share price
of HBOC Common Stock falls below certain price levels. The terms and conditions
pertaining to the proposed Merger, including adjustments to the Exchange Ratio,
are more fully described in the Merger Agreement.
You have requested our opinion (the "Opinion") as to whether the Exchange
Ratio is fair, from a financial point of view, to holders of IMNET Common Stock.
We have not been requested to opine as to, and our opinion does not in any
manner address, the Company's underlying business decision to proceed with,
effect or consummate the Merger.
In connection with the Opinion, we have reviewed certain publicly available
financial information and other information concerning IMNET and HBOC and
certain internal analyses and other information furnished to us by IMNET. We
have also held discussions with members of the senior management of IMNET
regarding the business, operations and prospects of the Company. We have not
been given the opportunity to have such discussion with the management of HBOC.
In addition we have:
(i) reviewed and analyzed the terms of the Merger Agreement;
(ii) reviewed the reported prices and trading activity for the common
stock of both IMNET and HBOC;
(iii) reviewed and analyzed the Company's financial statements including
its audited statements for the fiscal years June 30, 1993 to June 30, 1997,
and its interim financial statements for the 3 months ended March 31, 1998,
the Quarterly Report on Form 10-Q for the periods ended September 30, 1996,
December 31, 1996, March 31, 1997, September 30, 1997, December 31, 1997,
and March 31, 1998, its annual report on Form 10-K for the year ended June
30, 1998, news releases and research reports;
(iv) reviewed and analyzed certain operating information with respect to
the business, operations and prospects of IMNET furnished to us by IMNET's
management;
(v) performed a comparison of the financial terms of the Merger
Agreement with certain other transactions which we deemed relevant;
B-1
<PAGE>
(vi) compared the financial terms of the Merger with the financial and
stock market information of selected publicly-traded companies which we
deemed comparable to IMNET;
(vii) reviewed certain publicly available information on HBOC, including
the 1995 -- 1997 Annual Reports, the 1995 -- 1997 Annual Reports on Form
10-K, the Quarterly Report on Form 10-Q for the periods ended September 30,
1996, March 31, 1997, June 30, 1997, September 30, 1997, March 31, 1998, and
June 30, 1998, news releases and research reports; and
(viii) performed such other studies and analyses and considered other
factors as we deemed appropriate.
We have not independently verified the information described above and for
purposes of this Opinion have assumed the accuracy, completeness and fairness
thereof, and have further relied upon the assurances of management of IMNET that
they are not aware of any facts that would make such information inaccurate or
misleading. With respect to the information relating to the prospects of IMNET
we have assumed that such information reflects the best currently available
judgements and estimates of the management of IMNET as to the likely future
financial performance of the Company and of the combined entity. In addition, we
have not made or obtained any independent evaluation or appraisal of the assets
or liabilities of IMNET, nor have we been furnished with any such evaluations or
appraisals. The Opinion is based on the market, economic and other conditions as
they exist and can be evaluated as of the date of this letter.
The Opinion expressed herein was prepared for the use of the Board of
Directors of IMNET and does not constitute a recommendation to IMNET's
stockholders as to how they should vote at the stockholder's meeting in
connection with the Merger.
In connection with the preparation of the Opinion, we have not solicited
third party indications of interest for the sale or merger of any or all parts
of the Company nor have we participated in the discussions or negotiations
leading up to the Merger or to the terms and conditions of the Merger Agreement.
Robinson-Humphrey maintains a market in the common stock of IMNET and HBOC and
regularly publishes research reports regarding the health care industry and the
businesses and securities of publicly owned companies in that industry. In the
ordinary course of business, Robinson-Humphrey may actively trade the securities
of both IMNET and HBOC for our own account and the account of our customers and,
accordingly, may at any time hold a long or short position in securities of
IMNET and HBOC.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Exchange Ratio is fair, from a financial point of view,
to holders of IMNET Common Stock.
Very truly yours,
/s/ THE ROBINSON-HUMPHREY COMPANY, LLC
THE ROBINSON-HUMPHREY COMPANY, LLC
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<PAGE>
PROXY
IMNET SYSTEMS, INC.
3015 WINDWARD PLAZA
WINDWARD FAIRWAYS II
ALPHARETTA, GEORGIA 30005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenneth D. Rardin, Scott A. Remley and
Raymond L. Brown, 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 IMNET
Systems, Inc. ("IMNET"), held of record by the undersigned on September 25,
1998, at a Special Meeting of Stockholders to be held on October 30, 1998, or
any adjournment thereof upon the following matter, as set forth in the Notice of
said Meeting, a copy of which has been received by the undersigned.
<TABLE>
<S> <C> <C> <C>
1. APPROVAL OF AGREEMENT OF MERGER dated July 23, 1998, by and among IMNET, HBO & Company and HBO & Company of
Georgia.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C> <C>
2. In their discretion, the Proxies are authorized to vote upon such other matters that may properly come
before the meeting or any adjournments thereof.
</TABLE>
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PRE-PAID ENVELOPE.
SIGNATURE: ____________________________________ DATE _______________
SIGNATURE: ____________________________________ DATE _______________
<TABLE>
<S> <C>
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.
Please enter your Social Security or Federal Employer
Identification Number here:
</TABLE>
<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. Pursuant to Item 601 of Regulation S-K, 17 C.F.R. Section
229.601(b)(4)(iii)(A), HBOC has excluded from Exhibit 2 the exhibits thereto.
HBOC agrees to furnish copies of such exhibits to the Commission upon request.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2 Agreement of Merger dated July 23, 1998 by and among HBO & Company,
HBO & Company of Georgia and IMNET 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 Arnall Golden & Gregory, LLP 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 Arnall Golden & Gregory, LLP (included in Exhibit 8).
24(e) Consent of The Robinson-Humphrey Company, LLC.
* 24 Power of Attorney (included on 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
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S> <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.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S> <C>
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.
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 of HBO & Company.
ON MAY 9, 1995, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-59173):
4 -- HBO & Company 1986 Nonqualified Stock Option Agreement, HBO & Company 1991 Nonqualified Stock
Option Agreement 1 and HBO & Company 1991 Nonqualified Stock Option Agreement 2.
ON OCTOBER 5, 1995, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-63213):
4 -- 1985 Employee Stock Option Plan of CliniCom Incorporated.
ON 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.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S> <C>
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.
ON JUNE 17, 1997, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-29365):
4 -- AMISYS Managed Care System, Inc. Directors' Stock Option Plan.
ON JUNE 17, 1997, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-29367):
4 -- AMISYS Managed Care System, Inc. 1994 Equity Incentive Plan.
ON JUNE 30, 1997, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-30373):
4 -- Enterprise Systems, Inc. Long Term Incentive Plan.
ON DECEMBER 22, 1997, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-42871):
4 -- HBO & Company 1998 Employee Discount Stock Purchase Plan.
ON DECEMBER 29, 1997, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-43375):
4 -- HPR Inc. 1995 Eligible Directors Stock Plan.
ON DECEMBER 29, 1997, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-43377):
4 -- HPR Inc. Amended and Restated 1995 Stock Plan and HPR Inc. Amended and Restated 1991 Stock Plan.
ON JANUARY 2, 1998, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-43673):
4 -- National Health Enhancement Systems, Inc. Amended 1998 Stock Option Plan.
ON JANUARY 2, 1998, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-43679):
4 -- Expert Systems, Inc. 1993 Stock Option Plan.
ON MAY 19, 1998, AS PART OF ITS FORM 8-K, DATED AND FILED WITH THE COMMISSION ON
MAY 19, 1998:
3(i) -- HBO & Company Certificate of Incorporation, as amended.
ON JUNE 11, 1998, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-56579):
4(a) -- Non-Qualified Stock Option Agreement, dated May 26, 1998, by and between
HBO & Company and Duane Tiseth.
4(b) -- Non-Qualified Stock Option Agreement, dated May 26, 1998, by and between
HBO & Company and David S. Tiseth.
</TABLE>
(b) Financial Statement Schedules.
No financial statement schedules are required to be filed herewith.
(c) The opinion of The Robinson-Humphrey Company, LLC is included as
Appendix B to the Proxy Statement/Prospectus contained in Part I of this
Registration Statement.
II-4
<PAGE>
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-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to its 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 30th day of September, 1998.
<TABLE>
<S> <C> <C>
HBO & COMPANY
By: /s/ JAY P. GILBERTSON
-----------------------------------------
Jay P. Gilbertson
PRESIDENT, CO-CHIEF OPERATING OFFICER
AND CHIEF FINANCIAL OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
Chairman, President and
* Chief Executive Officer
- ------------------------------ (Principal Executive
(Charles W. McCall) Officer)
President, Co-Chief
Operating Officer, Chief
Financial Officer,
/s/ JAY P. GILBERTSON Principal Accounting
- ------------------------------ Officer, Treasurer and September 30, 1998
(Jay P. Gilbertson) Secretary (Principal
Financial Officer and
Principal Accounting
Officer)
* Director
- ------------------------------
(Alfred C. Eckert III)
* Director
- ------------------------------
(Philip A. Incarnati)
* Director
- ------------------------------
(Alton F. Irby III)
* Director
- ------------------------------
(M. Christine Jacobs)
* Director
- ------------------------------
(Gerald E. Mayo)
* Director
- ------------------------------
(James V. Napier)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
* Director
- ------------------------------
(Donald C. Wegmiller)
</TABLE>
<TABLE>
<S> <C> <C> <C>
By: /s/ JAY P. GILBERTSON
-------------------------
* Jay P. Gilbertson September 30, 1998
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE
- --------- ---------
<C> <S> <C>
2 Agreement of Merger dated July 23, 1998 by and among HBO & Company, HBO & Company of Georgia
and IMNET 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 Arnall Golden & Gregory, LLP 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 Arnall Golden & Gregory, LLP (included in Exhibit 8).
23(e) Consent of The Robinson-Humphrey Company, LLC.
* 24 Power of Attorney (included on signature page).
</TABLE>
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* Previously filed.
<PAGE>
EXHIBIT 5
JONES, DAY, REAVIS & POGUE
3500 SUNTRUST PLAZA
303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308
(404) 521-3939
September 30, 1998
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 12,746,019 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.
333-62081) (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>
EXHIBIT 8
[ARNALL, GOLDEN & GREGORY LETTERHEAD]
October 1, 1998
IMNET Systems, Inc.
3015 Windward Plaza
Windward Fairways II
Alpharetta, Georgia 30005
Ladies and Gentlemen:
This opinion is being delivered in connection with the Agreement of Merger
("Merger Agreement"), dated as of July 23, 1998, by and among HBO & Company
("Parent"), HBO & Company of Georgia ("Purchaser"), and IMNET Systems, Inc.
("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 of Parent and Acquired Company contained in the
Registration Statement on Form S-4 of Parent (File No. 333-62081) (the
"Registration Statement").
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 of Parent and Acquired Company;
3. The representation letter from Parent and Purchaser to us;
4. The representation letter from Acquired Company to us;
5. Such other documents, records and matters of law as in our judgment
were necessary or appropriate.
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. We have
assumed that the Merger will be consummated pursuant to applicable state law in
accordance with the Merger Agreement and as described in the Proxy
Statement/Prospectus.
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;
2. No gain or loss will be recognized by Acquired Company as the result
of the consummation of the Merger;
3. No gain or loss will be recognized by an Acquired Company stockholder
upon the exchange of the shares 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;
4. The aggregate adjusted tax basis of shares of Parent Common Stock
received (including fractional share interests deemed received) by an
Acquired Company stockholder as the result of the
<PAGE>
IMNET Systems, Inc.
October 1, 1998
Page 2
Merger will be the same as the aggregate adjusted tax basis of the shares of
Acquired Company Common Stock surrendered in exchange therefor;
5. The holding period of the shares of Parent Common Stock received
(including fractional share interests deemed received) by an Acquired
Company stockholder as a result of the Merger will include the holding
period of the shares of Acquired Company Common Stock surrendered in
exchange therefor, provided that such Acquired Company Common Stock is held
as a capital asset by the Acquired Company stockholder at the consummation
of the Merger; and
6. An Acquired Company stockholder who receives cash in lieu of a
fractional interest in a share of Parent Common Stock will be treated as if
the fractional share were distributed as part of the exchange and were then
redeemed for the cash payment, resulting in gain or loss equal to the
difference between the cash amount received and the portion of the
stockholder's basis in Acquired Company Common Stock allocable to the
fractional share.
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 Federal income 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 such 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 the representations, warranties, statements or assumptions upon which we
have relied is incorrect, this opinion may be adversely affected and some or
all of the conclusions stated above may not apply.
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 and the references to this firm under the headings
"Certain Federal Income Tax Consequences" and "Certain Legal Matters" in
such Registration Statement.
Very truly yours,
/s/ ARNALL GOLDEN & GREGORY, LLP
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Arnall Golden & Gregory, LLP
2
<PAGE>
EXHIBIT 23(A)
[LOGO]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our reports dated
February 6, 1998 included or incorporated by reference in HBO & Company's Form
10-K for the year ended December 31, 1997 and to all references to our firm
included in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Atlanta, Georgia
October 1, 1998
<PAGE>
EXHIBIT 23(B)
The Board of Directors
IMNET Systems, Inc.
We consent to the incorporation by reference in the registration statement
on Form S-4 (amendment no. 1) to be filed by HBO & Company of our report dated
July 31, 1998, with respect to the consolidated balance sheets of IMNET Systems,
Inc. and subsidiaries as of June 30, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended June 30, 1998, which report appears in the
annual report on Form 10-K of IMNET Systems, Inc.
/s/ KPMG PEAT MARWICK LLP
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KPMG Peat Marwick LLP
Atlanta, Georgia
September 30, 1998
<PAGE>
EXHIBIT 23(E)
October 1, 1998
The Robinson-Humphrey Company, LLC ("R-H") hereby consents to the inclusion
in the Proxy Statement/Prospectus of IMNET Systems, Inc. and HBO & Company,
filed as a part of this Registration Statement on Form S-4 of HBO & Company, of
its opinion, and to the references made to R-H in the "Summary" and "The Merger
Proposal--Opinion of Financial Advisor to IMNET" sections of such Proxy
Statement/Prospectus. In giving such consent, we do not hereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
Very truly yours,
THE ROBINSON-HUMPHREY COMPANY, LLC
BY: /S/ THE ROBINSON-HUMPHREY COMPANY,
LLC
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