<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 1997
REGISTRATION NO. 333-16079.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
HEALTHPLAN SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3787901
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
3501 FRONTAGE ROAD, TAMPA, FLORIDA 33607 (813) 289-1000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------------
JAMES K. MURRAY, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HEALTHPLAN SERVICES CORPORATION
3501 FRONTAGE ROAD
TAMPA, FLORIDA 33607
(813) 289-1000
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
---------------------
COPIES TO:
DAVID C. SHOBE, ESQ.
FOWLER, WHITE, GILLEN, BOGGS, VILLAREAL AND BANKER, P.A.
501 EAST KENNEDY BOULEVARD, SUITE 1700
TAMPA, FLORIDA 33602
---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
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(c)
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PROSPECTUS
1,561,067 SHARES
HEALTHPLAN SERVICES CORPORATION
COMMON STOCK
---------------------
This Prospectus relates to 1,561,067 shares (the "Shares") of common stock,
par value $0.01 per share (the "Common Stock"), of HealthPlan Services
Corporation (the "Company") held by the Selling Stockholders. See "Selling
Stockholders -- Shares Covered by this Prospectus." The Shares are being
registered for sale by the Selling Stockholders. See "Plan of Distribution." The
Company will not receive any of the proceeds from the sale of Shares by the
Selling Stockholders.
The Company's Common Stock is listed on the New York Stock Exchange and is
quoted under the symbol "HPS." On February 12, 1997, the last reported sale
price for the Common Stock as reported on the New York Stock Exchange Composite
Tape was $21.50 per share. Sales of the Shares by the Selling Stockholders may
be made on one or more exchanges, in the over-the-counter market, or otherwise
in one or more transactions at prices and at terms then prevailing or at prices
related to the then current market price, or in negotiated transactions. See
"Plan of Distribution."
---------------------
SEE "RISK FACTORS" BEGINNING AT PAGE 4 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS
OF THE COMMON STOCK OFFERED HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is February 14, 1997
<PAGE> 3
FORWARD-LOOKING STATEMENTS
This Prospectus includes and incorporates by reference forward-looking
statements based on current plans and expectations of the Company, relating to,
among other matters, analyses, and estimates of amounts that are not yet
determinable. Such forward-looking statements are contained in the sections
entitled "The Company," "Risk Factors," and other sections of this Prospectus
(including documents incorporated herein by reference, see "Incorporation of
Certain Documents by Reference"). Such statements involve risks and
uncertainties which may cause actual future activities and results of operations
to be materially different from those suggested in this Prospectus, including,
among others, the risks and uncertainties present in the Company's business and
the competitive health care marketplace where clients and vendors commonly
experience mergers or acquisitions, volume fluctuations, participant enrollment
fluctuations, fixed price contracts, contract disputes, contract modifications,
contract renewals and nonrenewals, various business reasons for delaying
contract closings, and the operational challenges of matching case volume with
optimum staffing, having fully trained staff, having computer and telephonic
supported operations, and managing turnover of key employees and outsourced
services to performance standards, as well as other factors described elsewhere
in this Prospectus. See "Risk Factors."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its
regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates, or through the World Wide Web (http://www.sec.gov). The
Company's Common Stock is listed on the NYSE, and such reports, proxy statements
and other information concerning the Company are available for inspection and
copying at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement") with the Commission under the Securities Act of 1933,
as amended, in respect of the Common Stock offered hereby. For purposes of this
Prospectus, the term "Registration Statement" means the initial Registration
Statement and any and all amendments thereto. This Prospectus omits certain
information contained in the Registration Statement as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits thereto. Statements contained
herein concerning the contents of any document are not necessarily complete, and
in each instance, reference is made to the copy of such document filed with the
Commission as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No.
1-13772) are incorporated in this Prospectus by reference: (a) the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995; (b) the
Company's Quarterly Reports on Form 10-Q for the quarterly periods ended March
31, 1996, June 30, 1996 and September 30, 1996, as amended; (c) the Company's
Current Report on Form 8-K filed with the Commission on July 15, 1996, Amendment
No. 1 thereto on Form 8-K/A filed with the Commission on September 13, 1996 and
Amendment No. 2 thereto on Form 8-K/A filed with the Commission on February 14,
1997; and the Company's Current Report on Form 8-K filed with the Commission on
July 16, 1996, Amendment No. 1 thereto on Form 8-K/A filed with the Commission
on September 13, 1996 and Amendment No. 2 thereto on Form 8-K/A filed with the
Commission on
2
<PAGE> 4
February 14, 1997; (d) the description of the Company's Common Stock contained
in the Company's Registration Statement on Form 8-A, dated May 12, 1995, as
amended; and (e) all documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
subsequent to the date of this Prospectus and prior to the termination of the
Shares offered hereby.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded,
for purposes of this Prospectus, to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or verbal request of such person, a copy
of any or all of the documents incorporated herein by reference (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into the document that this Prospectus incorporates by reference).
Requests should be directed to James K. Murray III, Chief Financial Officer,
HealthPlan Services Corporation, 3501 Frontage Road, Tampa, Florida 33607,
telephone number (813) 289-1000.
3
<PAGE> 5
RISK FACTORS
Prospective purchasers should carefully consider the following information
in addition to the other information contained in this Prospectus in evaluating
an investment in the shares of Common Stock offered hereby.
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus.
RISKS RELATED TO NEW BUSINESS STRATEGY
From 1990 to 1995, the Company's annual revenues declined from
approximately $129 million to approximately $100 million. Effective September
30, 1994, the Company, formerly known as Plan Services, Inc., a division of The
Dun & Bradstreet Corporation ("D & B"), was acquired from D & B by the Noel
Group, Inc. ("Noel"), James K. Murray, Jr., the Company's current President and
Chief Executive Officer, and certain other investors. A new management team was
recruited to implement a new business strategy aimed at growing revenue through
strengthening its relationships with managed care companies, adding new payors
as customers (such as preferred provider organizations ("PPOs"), health
maintenance organizations ("HMOs"), and integrated delivery systems), and
consolidating the fragmented third party administrator industry.
The Company believes that the decline in revenue during the 1990-1995
period is attributable primarily to a slow transition by its major customers
from offering traditional "fee for service" health care plans to managed care
products. The cost of traditional health insurance increased significantly
during this period, and the Company did not expand distribution by developing
relationships with HMOs or PPOs. As a result, many of the Company's small
business customers elected to seek alternative coverage or became self-insured.
In order to combat this trend, the Company's management is committed to
expand distribution and develop client relationships with established HMOs. The
Company will seek to build economies of scale by continuing to pursue vigorously
these relationships, as well as by executing an acquisition strategy aimed at
consolidating the third party administrator industry. In addition, the Company
expects to pursue administrative services contracts with large employers to
administer their self-insured health care plans, and it may also invest in the
development of information based products for its payors and their customers.
Starting in 1994, the Company has also pursued contracts with state
sponsored health care purchasing alliances, initially in Florida, and in
1995-1996, with additional contracts in North Carolina, Kentucky, and
Washington. The Company has incurred substantial expenses in connection with the
start up of these contracts, and, to date, the alliance business has been
unprofitable. The primary material risks associated with alliance contracts are
(i) private enterprises will not accept the use of a government-sponsored
program and will therefore fail to provide an adequate number of enrollees to
support a revenue base (over which fixed costs may be spread); (ii) the number
of enrollees per group will be so low that margins are insufficient to cover the
fixed costs of set up for the group; (iii) the level of marketing, enrollment,
and customer service required will be materially higher than expected, therefore
increasing the variable costs required under the contract; and (iv) the
independent agents on whom the Company relies to distribute the product are not
enthusiastic about the alliance program and, as a result, program enrollment
fails to meet expectations. During the quarter ended December 31, 1994, the
Company recorded a pre-tax charge of approximately $3.6 million related to state
sponsored and private health care purchasing alliances. The Company has also
announced that an additional charge in the amount of $2.6 million was taken in
the third quarter of 1996. There can be no assurance that the Company will be
able to recoup its investment in developing these relationships or that these
operations will ultimately be profitable.
The implementation of this overall strategy involves substantial risks, and
there can be no assurance that this strategy will be effectively implemented. In
addition, it is likely that the Company will experience a flattening or decrease
in net margins as it pursues this aggressive expansion strategy.
4
<PAGE> 6
RISKS RELATED TO GROWTH THROUGH ACQUISITIONS
The Company's strategy has included the acquisition of other managed care
services companies, as well as the acquisition of blocks of health care
administrative services business. Growth through acquisition involves
substantial risks, including the risk of improper valuation of the acquired
business. In addition, the value of such an acquired business or block of
business could be impaired if the Company is not successful in integrating the
business or block of business into its existing operations. These risks are
increased when the Company elects to make such acquisitions on a leveraged
basis. In 1995, the Company acquired, in two separate transactions, two
administrative services businesses for a total consideration of $17.6 million
($5.0 million of which is being held in escrow). On July 1, 1996, the Company
acquired all of the issued and outstanding shares of capital stock of
Consolidated Group, Inc., Consolidated Group Claims, Inc., Consolidated Health
Coalition, Inc., and Group Benefit Administrators Insurance Agency, Inc.
(collectively, the "Consolidated Group") for a purchase price of $61.9 million,
subject to a post-closing adjustment based on the balance sheet of the
Consolidated Group as of June 30, 1996. Consolidated Group, like the Company,
provides distribution and administrative services to payors interested in
accessing the small group market. On July 1, 1996, the Company acquired all of
the issued and outstanding shares of capital stock of Harrington Services
Corporation ("Harrington") for a purchase price consisting of (i) approximately
$32.5 million in cash, and (ii) 1,400,110 shares of the Company's Common Stock.
Harrington's principal business is the administration of medical benefits for
self-funded health care plans of primarily large employer groups. The combined
1995 revenues of Harrington and the Consolidated Group exceeded the Company's
1995 revenues.
On September 12, 1996, the Company entered into a Plan and Agreement of
Merger (the "Merger Agreement") with HealthPlan Services Alpha Corporation, a
Delaware corporation and wholly-owned subsidiary of the Company, and Health Risk
Management, Inc., a Minnesota corporation ("Health Risk"), which provides for
the acquisition of Health Risk by the Company in a merger transaction (the
"Health Risk Merger"). Health Risk provides comprehensive, integrated healthcare
management, information and health benefit administration services to employers,
insurance companies, unions, HMOs, PPOs, physician hospital associations
("PHOs"), hospitals, providers and governmental units in the United States and
Canada. The acquisition of Health Risk will constitute the Company's third major
acquisition. Consummation of the Health Risk Merger is subject to approval by
Health Risk's shareholders and other customary closing conditions, including
receipt of regulatory approval. While the Company's management remains committed
to consummating the Health Risk Merger, there can be no assurance that the
consents and approvals required will be obtained, that the other conditions
necessary for the consummation of such acquisitions will be satisfied or that
the Health Risk Merger will otherwise be consummated. The Merger Agreement may
be terminated by either party if the Health Risk Merger is not consummated by
February 28, 1997, or such other date as shall be agreed upon by the parties.
The issuance of additional shares of Common Stock and the operation of Health
Risk upon closing of the Health Risk Merger may have a dilutive effect on
earnings per share if the Company is unable to effect meaningful synergies
within an appropriate period of time, and will have a dilutive effect on the
voting rights of the holders of Common Stock.
There can be no assurance that the Company will successfully and profitably
integrate the businesses of Harrington, Consolidated Group and Health Risk
(assuming the Health Risk Merger is completed) into its existing operations. In
addition, certain costs will be incurred to successfully integrate these
acquired companies.
The Company may compete for acquisition and expansion opportunities with
companies which have significantly greater resources than the Company. There can
be no assurance that suitable acquisition candidates will be available, that
financing for such acquisitions will be obtainable on terms acceptable to the
Company, that such acquisitions can be consummated, or that acquired businesses
or blocks of business can be integrated successfully and profitably into the
Company's operations.
SIGNIFICANT BORROWINGS
In connection with its growth strategy, the Company has incurred
significant indebtedness with relatively short-term repayment schedules under
its primary credit facility (the "Line of Credit"). On September 13,
5
<PAGE> 7
1996, the Company announced an expansion of its credit facility from $85 million
to $175 million. First Union National Bank of North Carolina is the "agency
bank," and the participating banks are Barnett Bank, N.A., Fleet Bank N.A., The
Fifth Third Bank of Columbus, NationsBank, N.A., SouthTrust Bank of Alabama and
SunTrust Bank, Tampa Bay. After the completion of the acquisition of Health
Risk, the Company expects that its total indebtedness under the Line of Credit
will be approximately $120 million, of which approximately 13.3% will be due on
November 30, 1998. An additional 13.3% will be due on April 30, 1999. On both
November 30, 1999 and April 30, 2000, an additional 16.7% will be due. Finally,
on both November 30, 2000 and April 30, 2001, an additional 20% will be due. The
Company's borrowing under the Line of Credit will result in interest expense
that will range from LIBOR plus 125 to 175 basis points or New York prime plus
25 to 75 basis points. For 1996 and 1997, interest expense will approximate $2.5
million and $9.0 million, respectively, based on currently prevailing interest
rates and assuming the outstanding indebtedness is paid in accordance with the
existing payment schedule without any prepayment or additional borrowings. Such
interest payments must be made regardless of the Company's operating results.
The Line of Credit is guaranteed by the Company's subsidiaries and secured by
the stock of such subsidiaries, and upon completion of the Health Risk Merger
will be guaranteed by and secured by all of the stock of Health Risk.
On September 13, 1996, the Company entered into an interest rate swap
agreement with NationsBank, N.A. ("NationsBank"). According to the terms of the
agreement, the Company is obligated to pay NationsBank on the 17th of each
month, commencing October 17, 1996 and ending September 17, 2001, monthly
interest at a fixed per annum rate of 6.61% on the principal amount of the swap,
which is $25 million. In exchange, NationsBank will reimburse the Company based
on the prevailing one month LIBOR rate, thereby matching the floating rate index
as required on the Line of Credit.
On October 21, 1996, the Company entered into an interest rate swap
agreement with First Union National Bank of North Carolina ("First Union").
According to the terms of the agreement, the Company is obligated to pay First
Union on the 22nd of each month, commencing November 22, 1996 and ending October
22, 1999, monthly interest at a fixed per annum rate of 6.10% on the principal
amount of the swap, which is $15 million. In exchange, First Union will
reimburse the Company based on the prevailing one month LIBOR rate, thereby
matching the floating rate index as required on the Line of Credit.
RISKS RELATED TO GOODWILL
In March 1995, the Financial Accounting Standards Board issued its
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("FASB 121"), which became effective for fiscal years beginning after December
15, 1995. In addition to the adoption of FASB 121 on January 1, 1996, the
Company will continue to evaluate, where appropriate and on a regular basis,
whether events and circumstances have occurred that indicate the carrying amount
of goodwill warrants revision or is not recoverable, based on estimated future
undiscounted cash flows from operations, in accordance with Accounting
Principles Board Opinion 17, "Intangible Assets".
FASB 121 established standards for determining when impairment losses on
long-lived assets, including goodwill, have occurred and how impairment losses
should be measured. The Company is required to review long-lived assets and
certain intangibles, to be held and used, for impairment whenever events or
changes in circumstances indicate that the carrying value of such assets may not
be recoverable. In performing such a review for recoverability, the Company is
required to compare the expected future cash flows to the carrying values of the
long-lived assets and identifiable intangibles at the lowest level of
identifiable cash flows. If the sum of the expected future undiscounted cash
flows is less than the carrying amount of such assets and intangibles, the
assets are impaired, and the assets must be written down to their estimated fair
value. The Company estimates the discounted future value of anticipated future
cash flows as a measure of the fair value, using a discount rate of 16%, which
approximates management's estimate of the Company's estimated weighted average
cost of capital.
After performing a review for impairment of goodwill related to each of the
Company's acquired businesses and applying the principles of measurement
contained in FASB 121, the Company recorded a pre-tax charge against earnings of
$13.7 million in the third quarter of 1996, representing approximately 7.6% of
6
<PAGE> 8
the Company's pre-charge goodwill. The pre-tax charge is attributable to
impairment of goodwill recorded on the following acquisitions: Diversified Group
Brokerage Corporation (acquired in October 1995), $6.6 million and Third Party
Claims Management, Inc. (acquired in August 1995), $7.1 million.
The assets of DGB were acquired by the Company's wholly-owned subsidiary,
HPS, on October 12, 1995. DGB, located in Marlborough, Connecticut, is a third
party administrator providing managed health care administrative services to
self-funded employers, typically having between 250 and 2,000 employees in the
New England market. At the time of this acquisition, the Company projected a 10%
to 15% growth rate in net cash flows and paid a purchase price which resulted in
$9.8 million excess of purchase price over the fair value of the assets
acquired. Since this acquisition, the Company has not achieved, and does not
expect to achieve, the revenue and net cash flow projections prepared at the
time of the acquisition due to, among other things, higher than originally
expected attrition rates resulting in ongoing decreases in net revenues on a
quarterly basis (due in part to increased pricing resulting from a reinsurance
carrier's departure from DGB's market), and an inadequate distribution system,
as evidenced by an underperforming sales force and greater than anticipated
operating costs. The Company's efforts to correct these deficiencies have not
enabled it to meet its original projections. The Company has determined that its
revised projected results would not support the goodwill balance of $8.8
million. Accordingly, the Company has written off $6.6 million of goodwill
associated with the DGB acquisition. Any further significant declines in the
Company's projected net cash flows may result in additional write-downs of
remaining goodwill.
TPCM was acquired by the Company's wholly-owned subsidiary, HPS, on August
31, 1995. TPCM is a third party administrator providing managed health care
administrative services to hospitals and other health care institutions which
offer self-funded health care benefits. At the time of this acquisition, the
Company projected a 10% to 15% growth rate in net cash flows and paid a purchase
price which resulted in $8.1 million excess of purchase price over fair market
value of assets acquired. Since this acquisition, the Company has not achieved,
and does not expect to achieve, the revenue and net cash flow projections
prepared at the time of the acquisition due to, among other things, higher than
originally expected attrition rates, significantly higher than expected claims
experience (claims filed per enrollee), and greater than anticipated operating
costs due to the limited capability of TPCM's infrastructure. The Company's
efforts to correct these deficiencies have not enabled it to meet its original
projections. In fact, TPCM revenues have decreased from $2.8 million for the
three months ended December 31, 1995, to $1.8 million for the same period in
1996. In addition, lives covered at TPCM have decreased by 32,000 during the
last twelve months. The Company has determined that its revised projected
results would not support the goodwill balance of $7.5 million. Accordingly, the
Company has written off $7.1 million of goodwill associated with the TPCM
acquisition. Any further significant declines in the Company's projected net
cash flows may result in additional write-downs of remaining goodwill.
To understand how the Company books acquisitions in purchase transactions,
an understanding of the unique nature of the business is essential. Because
administrators can operate with a minimal amount of capital, acquired companies
typically have modest tangible asset bases. As evidenced by the Company's recent
experiences at Harrington and CGI, other than the underlying business, there are
no intangible long-lived assets such as work force, customer base, or supplier
relationships to which the Company could assign significant value, as these are
relationships that routinely turn over and are replaced in the ordinary course
of business. No single customer is a significant part of the business, and
customers typically have annual contracts which may or may not be renewed. In
fact, renewal rates can vary significantly on an annual basis. Accordingly, it
is the Company's view that values cannot and should not be assigned to
individual customers or contracts. Thus goodwill is often a significant portion
of the purchase price.
Although Harrington and Consolidated Group are significantly larger
companies with a broader customer base over which to spread risk, more
infrastructure, and longer histories of servicing customers, and management
remains optimistic about the future, there can be no assurance that adverse
renewals will not occur in the future.
The Company will continue to evaluate on a regular basis whether events and
circumstances have occurred that indicate the carrying amount of goodwill may
warrant revision or may not be recoverable. Although the net unamortized balance
of goodwill is not considered to be impaired, any such future
7
<PAGE> 9
determination requiring the write-off of a significant portion of unamortized
goodwill could materially adversely affect the Company's results.
RELIANCE ON SMALL NUMBER OF PAYORS
The Company derives a significant portion of its revenues from a small
number of payors. On a pro forma basis giving effect to the acquisitions of
Harrington and the Consolidated Group prior to the completion of the Health Risk
Merger, New England Mutual Life Insurance Company ("The New England"), Celtic
Life Insurance Company, Ameritas Life Insurance Corporation and MetraHealth
Division of United Healthcare accounted for, in the aggregate, 54.8%, 53.0% and
59.7% of total revenues in 1995, 1994 and 1993, respectively. In 1995, on a pro
forma basis, The New England, Celtic Life Insurance Company, Ameritas Life
Insurance Corporation and MetraHealth Division of United Healthcare accounted
for 12.5%, 9.3%, 7.0% and 26.0%, respectively, of the Company's total revenues.
These Companies accounted for 11.9%, 8.9%, 5.8%, and 19%, respectively, of the
Company's consolidated revenue for the quarter ended September 30, 1996. There
can be no assurance that these or any other payors will continue their contracts
with the Company for any particular period of time. Typically, the Company's
insurance, PPO, HMO and managed care payors sign contracts with the Company that
are cancelable without penalty by either party upon written notice, ranging from
90 days to one year, and are also cancelable upon a change of ownership of the
Company. Over the past several years, a number of payors have elected to abandon
or de-emphasize their involvement in the small group health insurance market. In
the third quarter of 1996, Metropolitan Life Insurance Company completed its
acquisition of The New England. The Company is unable to predict what effect, if
any, such merger will have on the Company's relationship with The New England.
The abandonment of the small group market by The New England, Celtic Life
Insurance Company, Ameritas Life Insurance Corporation or MetraHealth Division
of United Healthcare could have a material adverse effect on the Company. In
addition, a decision by any one of these payors to administer and distribute a
significant portion of its products directly to small businesses could also have
a material adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a large degree upon the efforts of
its executive officers, the loss of whose services could have a material adverse
effect on its business and prospects. The Company does not generally enter into
employment agreements with its executive officers, and such executive officers
are generally not bound by any noncompetition agreement following termination of
their employment.
UNCERTAINTIES RELATING TO HEALTH CARE REFORM INITIATIVES
Since 1993, many competing proposals have been introduced in Congress and
various state legislatures have called for general health care insurance market
reforms to increase the access and availability of group health insurance and to
require that all businesses offer health insurance coverage to their employees.
For example, the Health Insurance Portability and Accountability Act of 1996 was
signed into law in August 1996. This law, among other things, provides for
insurance portability for individuals who lose or change jobs, limits exclusions
for pre-existing conditions, and establishes a pilot program for medical savings
accounts. It is uncertain what additional health care reform legislation, if
any, will ultimately be implemented or whether other changes in the
administration or interpretation of governmental health care programs will
occur. Although recent proposals on health care reform have focused primarily on
Medicare and Medicaid reform, it is not possible to predict if proposals calling
for broad insurance market reform will be reintroduced in Congress or in any
state legislature in the future, or if and when any such proposal may be
enacted. Additionally, the adoption of a publicly-financed, single payor,
national or state health plan not requiring the marketing, distribution and
administrative services currently delivered by the Company would have a material
adverse effect on the Company's business. It is possible that health care reform
at the federal or state level, whether implemented through legislation or
through action by federal or state administrative agencies, would require the
Company to make significant changes to the way it conducts its business.
Although it is not possible at this time to predict accurately the nature or
effects of health care reform or whether it will be
8
<PAGE> 10
adopted and implemented, if at all, no assurances can be given that health care
reform will not materially and adversely affect the Company's business.
GOVERNMENT REGULATION
The Company is subject to regulation under the health care and insurance
laws and other statutes and regulations of all 50 states, the District of
Columbia and Puerto Rico. Many states in which the Company provides claims
administration services require the Company or its employees to receive
regulatory approval or licensure to conduct such business. Provider networks are
also regulated in many states, and certain states require the licensure of
companies, such as the Company, which provide utilization review services. The
Company's operations are dependent upon its continued good standing under
applicable licensing laws and regulations. Such laws and regulations are subject
to amendment or interpretation by regulatory authorities in each jurisdiction.
Generally, such authorities have relatively broad discretion when granting,
renewing, or revoking licenses or granting approvals. These laws and regulations
are intended to protect insured parties rather than stockholders, and differ in
content, interpretation and enforcement practices from state to state. Moreover,
with respect to many issues affecting the Company, there is a lack of guiding
judicial and administrative precedent. Certain of these laws could be construed
by state regulators to prohibit or restrict practices which have been
significant factors in the Company's operating procedure for many years. The
Company could risk major erosion and even "rebate" exposure in these states if
state regulators were to deem the Company's practices to be impermissible.
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
governs the relationships between certain health benefit plans and the
fiduciaries of those plans. In general, ERISA is designed to protect the
ultimate beneficiaries of the plans from wrongdoing by the fiduciaries. ERISA
provides that a person is a fiduciary of a plan to the extent that such person
has discretionary authority in the administration of the plan or with respect to
the plan's assets. Each employer is a fiduciary of the plan it sponsors, but
there can also be other fiduciaries of a plan. ERISA imposes various express
obligations on fiduciaries. These obligations include barring a fiduciary from
permitting a plan to engage in certain prohibited transactions with parties in
interest or from acting under an impermissible conflict of interest with a plan.
Generally, a party in interest with respect to a plan includes a fiduciary of
the plan and persons that provide services to the plan. Violations of ERISA by
fiduciaries can result in the rescission of any affected agreement, the
imposition of substantial civil penalties on fiduciaries and parties in interest
and the imposition of excise taxes under the Internal Revenue Code on parties in
interest.
Currently, the Company's Consolidated Group subsidiary is undergoing a
Department of Labor (the "DOL") audit in which the DOL has raised various
questions about the application of ERISA to the way that subsidiary does
business. This audit is ongoing and there can be no assurance that the DOL will
not take positions which could require changes to the way this subsidiary
operates or result in the assertion or the imposition of administrative fines
and penalties.
The application of ERISA to the operations of the Company and its customers
is an evolving area of law and is subject to ongoing regulatory and judicial
interpretations of ERISA. Although the Company strives to minimize the
applicability of ERISA to its business and to ensure that the Company's
practices are not inconsistent with ERISA, there can be no assurance that courts
or the DOL will not take positions contrary to the current or future practices
of the Company. Any such contrary positions could require changes to the
Company's business practices (as well as industry practices generally) or result
in liabilities of the type referred to above. Similarly, there can be no
assurance that future statutory changes to ERISA will not significantly affect
the Company and its industry.
COMPETITION
The Company faces competition and potential competition from traditional
indemnity insurance carriers, Blue Cross/Blue Shield organizations, managed care
organizations, third party administrators, utilization review companies, risk
management companies, and health care informatics companies. The Company
competes principally on the basis of the price and quality of its services. Many
large insurers have actively
9
<PAGE> 11
sought the claims administration business of self-funded programs and have begun
to offer utilization review and other managed health care services similar to
the services offered by the Company. Many of the Company's competitors and
potential competitors are considerably larger and have significantly greater
resources than the Company. There can be no assurance that the Company will be
able to compete effectively against such competitors in the future.
AUTHORIZATION OF PREFERRED STOCK; EFFECT OF DELAWARE GENERAL CORPORATION LAW
The Company's Certificate of Incorporation authorizes the issuance of
preferred stock with such designation, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the
Company's Common Stock. The ability of the Company to issue preferred stock and
the application of Section 203 of the Delaware General Corporation Law could
have the effect of discouraging, delaying or preventing a change in control of
the Company. Section 203 of the Delaware General Corporation Law prohibits a
Delaware corporation from engaging in a wide range of specified transactions
with any interested stockholder, defined to include, among others, any person or
entity who in the previous three years obtained 15% or more of any class or
series of stock entitled to vote in the election of directors, unless, among
other exceptions, the transaction is approved by (i) the Board of Directors
prior to the date the interested stockholder obtained such status or (ii) the
holders of two-thirds of the outstanding shares of each class or series not
owned by the interested stockholder.
RISK OF CONTRACTING WITH GOVERNMENT AGENCIES.
An increasing number of states, including some of the principal states in
which the Company does business, are providing for the statutory creation of
health care purchasing alliances. As part of its business strategy, the Company
is aggressively seeking to provide administrative and related services to these
state-sponsored health care purchasing alliances. The competitive bidding
processes in which the Company typically is required to participate in order to
obtain this business may limit the profitability of this business and lengthen
the amount of time required to recover start-up expenses. There can be no
assurance that the health care purchasing alliance contracts obtained by the
Company will ultimately be profitable for the Company. Additionally, changes in
governmental policy could make the alliances substantially less attractive to
small businesses and could materially and adversely affect the Company's health
care purchasing alliance revenues. Also, the health care purchasing alliance
contracts currently held by the Company contain broad cancellation provisions
which enable the health care purchasing alliance to cancel the administration
contracts on relatively short notice without penalty.
CONTROL BY NOEL ET AL.
As of December 31, 1996, Noel beneficially owned approximately 37% of the
Company's Common Stock, and the Company's executive officers and directors
beneficially owned in the aggregate approximately 20% of the Common Stock. On
February 7, 1997, Automatic Data Processing, Inc. ("ADP") purchased 1,320,000
shares of the Company's Common Stock from Noel, which represents approximately
9% of the Company's outstanding Common Stock. This ownership, in all likelihood,
gives Noel, together with ADP and the executive officers and directors of the
Company, the ability to control the vote on all matters submitted to a vote of
stockholders including the election of all directors. This may have the effect
of discouraging unsolicited offers to acquire the Company.
SHARES ELIGIBLE FOR FUTURE SALE.
Sales of substantial amounts of the Company's Common Stock in the public
market under Securities Act Rule 144 ("Rule 144") or otherwise, or the
perception that such sales could occur, may adversely affect prevailing market
prices of the Common Stock and could impair the future ability of the Company to
raise capital through an offering of its equity securities. As of December 31,
1996, the Company had approximately 14,974,126 shares of Common Stock
outstanding. Of those, approximately 4,030,000 shares were freely
10
<PAGE> 12
tradable in the public market and approximately 9,370,000 shares of the
Company's Common Stock become eligible for sale in the public market, pursuant
to Rule 144, in the fourth quarter of 1996. In addition, certain stockholders
owning approximately 3,774,511 shares, and the holders of the 1,561,067 Shares
to which this Prospectus relates, have the right to have their shares of the
Company's Common Stock included in future registered public offerings of Common
Stock.
On May 21, 1996, the Board of Directors of Noel adopted a Plan of Complete
Liquidation and Dissolution of Noel (the "Plan") subject to shareholder approval
at a special meeting of shareholders of Noel to be held as soon as practicable.
If the Plan is approved by the shareholders, Noel will be liquidated (i) by the
sale of such of its assets as are not to be distributed in-kind to its
shareholders, and (ii) after paying or providing for all its claims, obligations
and expenses, by cash and in-kind distributions to its shareholders pro rata
and, if required by the Plan or deemed necessary by Noel's Board of Directors,
by distributions of its assets from time to time to one or more liquidating
trusts established for the benefit of the then shareholders, or by a final
distribution of its then remaining assets to a liquidating trust established for
the benefit of the then shareholders. Noel held 5,595,846 shares of the
Company's Common Stock at December 31, 1996 and has announced that it currently
intends to distribute most of its shares of the Company's Common Stock to its
shareholders, but Noel may engage in a private or registered public sale of a
sufficient number of shares to raise cash to pay the taxes payable upon
distribution or sale of Noel's assets if such cash is not available from
existing cash resources or defrayed by the proceeds from the sale of other
assets. In addition, Noel may sell a portion of its holdings of the Company in
public or private sales as market conditions permit. As noted above, on February
7, 1997, Noel sold 1,320,000 shares of Company Common Stock to ADP.
LEGAL PROCEEDINGS
In 1995, Self Funded Strategies, L.L.C. ("SFS"), a former provider of
marketing services for the Company, filed a complaint against the Company
claiming wrongful termination of an exclusive marketing agreement and breach of
contract. The complaint asserted damages of $25,000,000. The parties to the
dispute agreed to binding arbitration and the arbitration proceedings occurred
during the week of October 29, 1996. The arbitration panel's decision, rendered
in December 1996, is not expected to materially alter the amount or timing of
future payments that the Company is contractually obligated to make to SFS under
the marketing agreement, and thus is not expected to materially affect the cash
flows of the Company's business.
In connection with the acquisition of Harrington, the Company agreed to use
its best efforts to cause a registration statement sufficient to permit the
public offering and sale of the shares of the Company's Common Stock issued to
the Harrington stockholders in the acquisition, through the facilities of all
appropriate securities exchanges and the over-the-counter market, provided that
in all events, such registration statement shall have become effective on or
before October 31, 1996. On October 30, 1996, the Company received a letter from
Harrington's shareholders, representative notifying the Company that it was in
apparent violation of such agreement and reserving all rights under such
agreement. Due to the inability of both parties to finalize the closing balance
sheet for the transaction, and due to the disclosure requirements for the
pending Health Risk Merger, the Company was not able to have such registration
statement declared effective by October 31, 1996. While the Company believes it
has meritorious defenses against any possible claim, as of the date hereof, it
is not possible for the Company to evaluate what, if any, damages might result
from such notice.
The Company is involved in various claims arising in the normal course of
business. In the opinion of the Company's management, although the outcomes of
these claims arising in the normal course of business are uncertain, in the
aggregate they are not likely to have a material adverse effect on the Company's
business, financial condition and results of operations.
11
<PAGE> 13
COMPANY SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth summary historical consolidated financial
information of the Company and has been derived from and should be read in
conjunction with the Company's audited consolidated financial statements,
unaudited interim consolidated financial statements, and other financial
information, including the notes thereto, incorporated by reference in this
Prospectus. See "Incorporation of Certain Documents by Reference." Unaudited
interim data reflects, in the opinion of the Company's management, all
adjustments considered necessary for a fair presentation of results for such
interim periods. Results of operations for unaudited interim periods are not
necessarily indicative of results which may be expected for any other interim or
annual period.
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR COMPANY(1)
------------------------------- ------------------------------------------
NINE MONTHS PRO FORMA THREE NINE
ENDED YEAR YEAR MONTHS MONTHS
--------------------- ENDED ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
SEPT. 30, SEPT. 30, DEC. 31, DEC. 31, DEC. 31, SEPT. 30, ------------------------------
1996(2) 1995 1995 1994(3) 1994 1994 1993 1992 1991
--------- --------- -------- --------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................... $129,876 $ 70,889 $100,250 $107,178 $ 25,233 $81,945 $113,863 $124,165 $123,868
Net income (loss).......... $ (1,187) $ 6,551 $ 9,535 $ 6,467 $ 231 $ 1,747 $ 6,960 $ 11,559 $ 11,763
Dividends on redeemable
preferred stock.......... -- 285 285 -- 285
Net income (loss)
attributable to common
stock.................... $ (1,187) $ 6,266 $ 9,250 $ 6,467 $ (54)
Pro forma net income (loss)
per share(4)............. n/a $ 0.49 $ 0.71 $ 0.69 $ 0.03
Pro forma weighted average
shares outstanding(4).... n/a 13,407 13,414 9,339 9,339
Historical weighted average
net income (loss) per
share.................... $ (0.09) $ 0.59 $ 0.82 n/a n/a
Historical weighted average
shares outstanding....... 13,834 10,635 11,336 n/a n/a
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA DECEMBER 31,
SEPT. 30, SEPT. 30, DEC. 31, DEC. 31, DEC. 31, SEPT. 30, ------------------------------
1996 1995 1995 1994(3) 1994 1994 1993 1992 1991
--------- --------- -------- --------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............... $251,404 $112,455 $112,667 $ 53,189 $ 53,189 $27,884 $ 31,851 $ 19,853 $ 21,872
Total debt................. 67,874 1,283 1,282 1,300 1,300 1,254 1,450 -- --
Redeemable preferred stock
(Series A & B), including
accrued dividends........ -- -- -- -- 19,285 -- -- -- --
Common stockholders' equity
(divisional equity
(deficit))............... 112,756 77,923 80,966 20,292 1,007 2,170 634 (1,897) (4,404)
</TABLE>
- ---------------
(1) Represents the historical results of operations of Plan Services, Inc. -
HealthPlan Services Division (the "Predecessor Company") of The Dun &
Bradstreet Corporation ("D & B") which was purchased by the Company from D
& B on September 30, 1994 (the "Acquisition"). See "The Company." The
Company's historical financial statements reflect certain expenses,
including expenses attributable to employee benefit programs, retirement
and health plans, treasury and insurance, which were incurred by the
Predecessor Company and allocated to the Company on a pro rata basis.
(2) In the third quarter of 1996, the Company took a pre-tax charge of
approximately $4.7 million in restructuring and contract commitment
expenses. Additionally, the Company recorded a pre-tax charge of $13.7
million for the impairment of goodwill. See "Risk Factors -- Risks Related
to Goodwill."
(3) Gives effect to the Acquisition and the Recapitalization as if such
transactions had occurred on January 1, 1994.
(4) Gives effect to the recapitalization of all 19,000,000 shares of Preferred
Stock (plus the right to receive dividends accrued thereon), which were
exchanged for 1,397,857 shares of the Company's Common Stock
contemporaneously with consummation of the Company's initial public
offering on May 19, 1995 (the "Recapitalization"), for all periods
presented.
12
<PAGE> 14
THE COMPANY
HealthPlan Services Corporation was incorporated in August 1994 as a
Delaware corporation. Unless the context otherwise requires, as used in this
Prospectus the "Company" refers to HealthPlan Services Corporation and its
direct and indirect wholly owned subsidiaries for periods subsequent to
September 30, 1994, and to its predecessor for prior periods. The Company's
principal executive offices are located at 3501 Frontage Road, Tampa, Florida
33607. The Company's telephone number is (813) 289-1000.
The Company's initial principal operating subsidiary, HealthPlan Services,
Inc., was founded in 1970 by James K. Murray, Jr., the Company's current
President and Chief Executive Officer, Charles H. Guy, Jr., and Trevor G. Smith
(the "Founders"), each of whom currently serves as a director of the Company.
D&B purchased the business in 1978 and operated it as a division. Mr. Murray
continued to play an active role in the business until 1987, when he left to
assume roles of increasing responsibility within D&B, which included serving as
president of two of its largest operating divisions. On September 30, 1994, the
Founders, Noel Group, Inc., a publicly-traded company based in New York, and
three funds in which Trinity Ventures, Ltd., a privately-held venture capital
company, is the general partner (the "Initial Investors"), purchased the
business (the "Acquisition"), which was then called Plan Services, Inc., from
D&B Plan Services Corporation, a Delaware corporation.
The Company, including its newly acquired operating units, Consolidated
Group, Inc. ("Consolidated Group") and Harrington Services Corporation
("Harrington"), is a leading provider of marketing, administrative, and risk
management services and solutions for benefit programs. The Company provides
these services for over 125,000 small businesses and large, self-funded
organizations, covering more than three million members in the United States.
The Company's clients include managed care organizations, insurance companies,
integrated health care delivery systems, self-funded benefit plans, and health
care purchasing alliances. The Company and its operating units function solely
as service providers generating fee-based income and do not assume any
underwriting risk.
On July 1, 1996, the Company completed the acquisition of Consolidated
Group, Inc., a health benefit administrator specializing in the small group
market. On July 1, 1996, the Company completed the acquisition of Harrington
Services Corporation, a large-group benefits administrator. Revenues for the
twelve months ended December 31, 1995 for the Company, Consolidated Group, and
Harrington were approximately $100 million, $74 million, and $72 million,
respectively.
STRATEGY
The Company's strategy is to grow revenue and increase earnings through new
product development, broader distribution of existing managed care products, and
the addition of new payors, such as health maintenance organizations ("HMOs"),
integrated health care delivery systems, and other managed care providers. The
Company will seek to build economies of scale by adding administrative services
contracts with larger groups and by opportunistic expansion of its small
employer business. The Company also intends to further support the development
of information-based products for its payors and other customers.
PENDING ACQUISITIONS
Health Risk Management, Inc.
On September 12, 1996, the Company entered into a Plan and Agreement of
Merger (the "Merger Agreement") with HealthPlan Services Alpha Corporation, a
Delaware corporation and wholly owned subsidiary of the Company, and Health Risk
Management, Inc., a Minnesota corporation ("HRM"), which provides for the
acquisition of HRM by the Company in a merger transaction (the "HRM Merger").
HRM provides comprehensive, integrated healthcare management, information, and
health benefit administration services to employers, insurance companies,
unions, HMOs, preferred provider organizations ("PPOs"), physician hospital
organizations ("PHOs"), hospitals, and governmental units in the United States
and Canada. The Merger Agreement provides that each share of HRM common stock
outstanding at the effective time of the Merger will be converted into the right
to receive $9.68603 in cash and 0.360208 of a share of the
13
<PAGE> 15
Company's Common Stock, which share exchange ratio is subject to possible
increase or decrease as set forth in the Merger Agreement. On September 12,
1996, HRM had 4,180,476 shares of common stock outstanding, as represented by
HRM in the Merger Agreement. The HRM Merger will be accounted for using the
purchase method of accounting and is intended to be partially tax-free to HRM
shareholders. Consummation of the HRM Merger is subject to approval by HRM's
shareholders and other customary closing conditions, including completion of due
diligence and receipt of regulatory approval. The Merger Agreement may be
terminated by either party if the Merger is not consummated by February 28, 1997
or such other date as is agreed upon by the parties. In the event that the HRM
Merger is consummated, it is anticipated that Gary T. McIlroy, M.D. will be
appointed to the Board of Directors of the Company.
RECENT ACQUISITIONS AND COMPANY REORGANIZATION
Consolidated Group, Inc. and Harrington Services Corporation Acquisitions;
Company Reorganization
On July 1, 1996, the Company acquired all of the issued and outstanding
stock of Consolidated Group for approximately $62 million in cash. Consolidated
Group, headquartered in Framingham, Massachusetts, specializes in providing
medical benefits administration for health care plans. As of September 30, 1996,
Consolidated Group provided these services for over 23,000 small businesses
covering approximately 250,000 members. Consolidated Group was founded in 1971,
and was a principal competitor of the Company in the small employer market prior
to the acquisition. In connection with this transaction, James F. Carlin, Jr.
and Holyoke L. Whitney, the original founders of Consolidated Group, were
elected to the Company's Board of Directors. In 1995, Consolidated Group had
revenues of $74 million. On July 1, 1996, the Company acquired all of the issued
and outstanding stock of Harrington for $32.5 million cash and 1,400,110 shares
of the Company's Common Stock. Harrington, headquartered in Columbus, Ohio,
provides administrative services to large self-funded benefit plans covering
approximately 1,600,000 members. Its revenues in 1995 were $72 million.
In the third quarter of 1996, after the consummation of the Consolidated
Group and Harrington acquisitions, the Company implemented a reorganization of
its management structure. In connection with this reorganization, a chief
operating officer was appointed for each of the Company's four business units:
Alliances, Small Group Business, Large Group Business, and The New England.
Timothy T. Clifford, the President and Chief Executive Officer of Consolidated
Group, became Chief Operating Officer - Small Group Business, and Robert R.
Parker, the Chairman and Chief Executive Officer of Harrington, became Chief
Operating Officer - Large Group Business. Richard M. Bresee became Chief
Operating Officer - Alliances, and Gary L. Raeckers became Chief Operating
Officer - The New England.
Medirisk, Inc. Transaction
On January 8, 1996, the Company entered into an agreement with Medirisk,
Inc. ("Medirisk"), a provider of health care information, to purchase $2.0
million of Medirisk preferred stock. At September 30, 1996, this represented an
approximately 18.9% ownership interest on a fully diluted basis, which was
recorded under the cost method of accounting. In addition, the Company agreed to
lend up to $10.0 million over four years in the form of debt, for which the
Company would receive detachable warrants to purchase Medirisk common stock at
$0.01 per share. The funds have been used by Medirisk to finance its expansion
through the development of additional products and the acquisition of additional
health care information businesses. As of September 30, 1996, the Company had
purchased $2.0 million of preferred stock of Medirisk, and loaned Medirisk $6.9
million to finance the acquisition of two health care data companies. On January
29, 1997, Medirisk completed an initial public offering of 2.3 million shares of
its common stock at a purchase price of $11.00 per share, and Medirisk
subsequently fully satisfied its debt obligation to the Company. In connection
with the offering, the Company's Medirisk preferred stock was converted into
Medirisk common stock. As of January 29, 1996, the Company beneficially owned
480,442 shares (approximately 9.9%) of Medirisk Common Stock on a fully diluted
basis. Medirisk has granted underwriters a 30-day option to purchase up to
345,000 additional shares of common stock solely to cover over-allotments, at a
purchase price of $11.00 per share. Medirisk, which was founded in 1983 and is
headquartered in Atlanta, Georgia, is a provider of
14
<PAGE> 16
proprietary health care information products and services that track the price
and utilization of medical procedures.
Third Party Claims Management, Inc. and Diversified Group Brokerage Corporation
Acquisition
During 1995, the Company acquired two small self-funded benefits
administrators, Third Party Claims Management, Inc. ("TPCM") and Diversified
Group Brokerage Corporation ("DGB"). Both TPCM and DGB have experienced
declining revenue due to customer attrition. After performing a review for
impairment of goodwill related to TPCM and DGB, in the third quarter of 1996 the
Company recorded a charge against earnings of $7.1 million relating to the TPCM
transaction and $6.6 million relating to the DGB transaction. The Company has
elected to consolidate the operations of TPCM and DGB, resulting in the closing
of the Memphis, Tennessee office of TPCM in 1996.
THE COMPANY'S PRODUCTS & SERVICES
The Company provides marketing, administration, and risk management
outsourcing services and solutions for managed care organizations, insurance
companies, integrated health care delivery systems, self-funded benefit plans,
and health care purchasing alliances.
Marketing
The Company, through its Small Business Operating Unit, provides managed
care companies, insurance companies, and integrated health care delivery systems
with marketing services targeting the individual and small business market. The
Company's marketing activity includes sales support for insurance agents through
a direct field sales force and telephone sales representatives. Through these
representatives, the Company maintains relationships with over 100,000 insurance
agents, including independent brokers as well as captive insurance agents who
work exclusively for underwriters that have contracted with HPS to provide
individual and small group health plans through their agent force. This agent
relationship provides the Company with a significant distribution conduit to the
small business market in the United States. The Company also helps design
managed care products based on market research, actuarial analysis of claims
adjudicated, and interaction with payor organizations. These products often
include features that address the particular needs of the small business
employer, including specialized dental and disability coverage. On behalf of its
payors, the Company also designs and implements communications programs that are
aimed at educating insurance agents about the relative merits of particular
product offerings. In addition, the Company develops consumer awareness
programs, including advertising and media planning, for state-sponsored health
care purchasing alliances.
Administration
The Company provides enrollment, premium billing and collection, and claims
administration services for all types of benefit plans. The Company's enrollment
services include underwriting, issuance of enrollment cards, and case renewal.
As a provider of billing and collection services, the Company sends monthly
bills on behalf of payors to insured parties, receives premium payments from the
insureds, and pays service fees to agents. The Company also implements premium
changes due to rate changes, employee hiring or termination, and other group
changes. The Company's claims administration services include eligibility
verification, copayment calculation, repricing, claims adjudication, and
preparation of explanation of benefits forms. The Company also processes claims
on behalf of self-funded companies and other payors by issuing checks to health
care providers on payor accounts.
Risk Management
The Company's risk management products include traditional utilization
review services as well as information and analysis services. The Company
provides utilization review through its Care Management units. These units are
staffed by qualified nurses and other qualified medical personnel to provide
precertification approval (a review mechanism for screening costs in advance of
medical care); medical case management
15
<PAGE> 17
(to contain the costs of prolonged and catastrophic cases); and special claims
review services. The Company has broad reporting and analytic capabilities
relating to all aspects of its services. The Company's information services
include preparation of reports regarding agent production, enrollment, and
frequency and type of claims. The Company intends to continue to enhance its
information-based products. In particular, the Company plans to pursue
opportunities with its strategic partner, Medirisk, to develop information-based
products from the Company's database of administered claims. The Company also
expects to expand its risk management business unit significantly through the
consummation of the HRM Merger.
THE COMPANY'S CUSTOMERS
The Company provides services on behalf of a wide range of health care
payors, including managed care organizations, insurance companies, integrated
health care delivery systems, self-funded benefit plans, and health care
purchasing alliances.
Small Business Customers
The Company, through its Small Business Operating Unit, has over 25 years
of experience in helping insurance companies and other payors access the small
employer market. Since October 1994, the Company has expanded its customer base
from traditional indemnity carriers to include HMOs, PPOs, and other managed
care entities, and has worked with its traditional indemnity carriers to develop
managed care products. The Company provides marketing and administrative
services for several major managed care products through relationships with The
New England Mutual Life Insurance Company and New England Life Insurance Company
(together "The New England"), United HealthCare Corporation ("United
HealthCare"), Kaiser Permanente Insurance Company, and U.S. Healthcare, Inc. Pro
forma on an annualized basis as of September 30, 1996, the Company and
Consolidated Group collected over $600 million in health care premiums.
Effective January 1, 1997, the Company assumed marketing and administrative
services for TMG Life Insurance Company's ("TMG's") medical, dental, and group
life benefit business. Based on TMG's 1996 revenues, the Company expects that
TMG's employee benefits business will generate approximately $20 million in
revenue in 1997, provided that the business does not experience
greater-than-expected attrition. The Company recently assumed administrative
services for two large blocks of business.
The Company continues to pursue relationships with several new managed care
clients. In July 1995, the Company began providing services in Florida for an
affiliate of Physicians Corporation of America ("PCA"). In the first quarter of
1996, the Company expanded its services to include PCA's Alabama affiliate. In
the fourth quarter of 1996, PCA transferred its Alabama operations to Health
Partners of Alabama, Inc. The Company and Health Partners of Alabama, Inc. are
currently negotiating a continuation of the Alabama relationship. In April 1996,
the Company and an affiliate of Foundation Health Corporation, a national
managed care company, entered into an agreement whereby the Company will be
Foundation's exclusive marketer and administrator in the State of Florida for
individual and small group products (for groups with 15 or fewer employees). In
addition, the Company will market and administer Foundation's individual program
and will offer a dual option PPO/HMO for small groups with between 15 and 50
employees. In July 1996, the Company entered into an agreement with Provident
American Corporation to market and administer its managed indemnity product to
individuals in several states.
The Company has also established relationships with integrated delivery
systems. In May 1996, the Company entered into an agreement to provide
administrative services for the Florida Independent Physicians Association
("FIPA"), a network of independent physicians associations representing nearly
6,000 physicians in the State of Florida.
In 1996 the Company explored new distribution channels for its indemnity
and managed care products. In the third quarter of 1996, the Company established
a computer "home page" on the Internet. In addition to providing information
about the Company, the home page offers price quotations for a Celtic Life
Insurance Company product marketed through HPS.
16
<PAGE> 18
To date, the Company has not generated any significant revenue from any of
its new managed care, integrated delivery system, or distribution relationships,
and it is unclear when, if ever, significant revenue will materialize from these
ventures. In the first quarter of 1996, the Company and Employers Life Insurance
Company of Wausau ("ELOW") entered into an agreement to offer health care
products to small businesses in several states. In the fourth quarter of 1996,
the Company and ELOW agreed to discontinue this product offering due to
unexpected market conditions. In 1995, the Company entered into an agreement
with Coastal Healthcare Group, Inc. ("Coastal") regarding possible marketing and
administrative services arrangements. The Company has not entered into a
definitive agreement with Coastal regarding such arrangements and is not
currently engaged in negotiations with Coastal. In 1995 the Company and Mutual
of Omaha agreed to expand their existing marketing relationship to include
Mutual of Omaha's HMOs. The pricing and other terms of this relationship have
not been negotiated, and the Company is not currently providing services for
Mutual of Omaha's HMO product.
Typically, the Company' insurance and managed care payors sign contracts
with the Company that are cancelable by either party without penalty upon
advance written notice of between 90 days and one year, and are also cancelable
upon a significant change of ownership of the Company. The New England, Celtic
Life Insurance Company, and Ameritas Life Insurance Corporation accounted for
approximately 31.0%, 23.0%, and 10.7%, respectively, of the Company's total
revenue in 1995 and approximately 11.9%, 8.9%, and 5.8%, respectively, of the
Company's consolidated revenue for the quarter ended September 30, 1996. This
decline is due primarily to the Company's expansion through acquisition, which
has diluted its concentration of revenues from these sources.
In the third quarter of 1996, Metropolitan Life Insurance Company completed
a merger with The New England. The Company is unable to predict what effect such
merger will ultimately have on the Company's relationship with The New England.
Historically, the majority of Consolidated Group's business was written with
Travelers Insurance Company, which recently combined with the health insurance
business of Metropolitan Life Insurance Company to form MetraHealth.
Subsequently, MetraHealth was acquired by United HealthCare, one of the nation's
leading HMO companies. This business represents approximately 75% to 80% of
Consolidated Group's revenue, or approximately 19% of total consolidated the
Company' revenue as of the quarter ended September 30, 1996. The Company cannot
currently measure either the commitment United HealthCare will have to the small
group market or the success it will experience in converting the MetraHealth
block of business to United HealthCare's new products. Should the Company have
to move this block of business to another payor, it could experience higher than
normal lapse rates. The abandonment of the small group market by either The New
England, Celtic Life Insurance Company, or Ameritas Life Insurance Corporation,
and the degree to which the Company is successful with respect to the
MetraHealth conversion, could have a material adverse effect on the Company. A
decision by any one of these payors to administer and distribute a significant
portion of its products directly to small businesses could also have a material
adverse effect on the Company.
Large Group Customers
The Company has been in the administrative services only ("ASO") business
since 1987, when the Company assumed administrative responsibility for the
employee health insurance plan of D&B. Harrington, the Company's newly acquired
subsidiary, was founded in 1953 and is a leading administrator of self-funded
health care plans for large corporations, government sector employers,
Taft-Hartley plans, and associations. In addition to providing claims
administration services, the Large Group Operating Unit also offers its clients
workers' compensation and unemployment cost control programs. As a result of the
TPCM, DGB, and Harrington acquisitions, the Company added multiple operating
facilities throughout the country for its ASO business. Through these
acquisitions, as well as new business sales and case acquisition, in 1996 this
business unit provided administrative services to over 1,500 clients with over
850,000 employees, representing approximately 1.6 million members.
17
<PAGE> 19
Health Care Purchasing Alliances
During the 1990s, many small businesses were unable to obtain health care
coverage at affordable prices. In response, some states have formed
state-sponsored health care purchasing alliances. Several privately funded
groups also have formed health care purchasing alliances, in some cases with
state support. The Company has been selected to be the administrator for four
state-sponsored health care purchasing alliances (in Florida, Kentucky, North
Carolina, and the State of Washington) and two private alliances.
The Company is the administrator for each of the regional Florida Community
Health Purchasing Alliances ("CHPAs"), health care purchasing alliances
established by the State of Florida. In the fourth quarter of 1994, and in the
third quarter of 1996, the Company took significant write-downs to reflect the
estimated loss the Company would incur over the life of the Florida CHPA
contracts. In February 1995, the Company was selected as the statewide
administrator for North Carolina's State Health Plan Purchasing Alliance
program, which was launched in the fourth quarter of 1995. Insurance carriers in
North Carolina have not yet shown significant support for this alliance. In
April 1995, the Company was selected as the statewide administrator for
Kentucky's health care purchasing alliance program, which commenced in July
1995. In the third quarter of 1995, the Company opened an office in Lexington,
Kentucky to administer the Kentucky program. The Kentucky plan is fully
operational and was profitable in 1996, with over 170,000 enrollees. In February
1997, the Kentucky alliance announced that at the expiration of the current term
of the Company's contract on June 30, 1997, the alliance will break out various
services currently being performed under the contract and seek separate bids for
those services. In December 1995, the Company was selected to develop and
implement statewide marketing and selected administrative services for the
"Basic Health Plan," the State of Washington's health care purchasing alliance
program, beginning in the second quarter of 1996. The Washington contract is
still in the developmental stage, and its ultimate success and acceptance by the
residents of the State of Washington cannot be predicted at this time.
The Company has incurred substantial expenses in connection with the
start-up of its Florida, Kentucky, North Carolina, and Washington alliance
administration contracts and will incur similar start-up expenses in connection
with other state health care purchasing alliance business obtained by the
Company in the future. The Company does not anticipate recovering all of its
start-up expenses incurred in connection with the alliance administration
contracts during their initial terms, and there can be no assurance that the
health care purchasing alliance contracts will be profitable for the Company. In
addition, each of the health care purchasing alliance contracts currently held
by the Company contains a broad cancellation provision that enables the alliance
to cancel the contract on relatively short notice without penalty. The Company
has developed marketing expertise and proprietary software to handle the
enrollment, billing, disbursement, and reporting services required under the
Alliance contracts, including client-server technology. The Company believes
that its marketing expertise and proprietary software may provide it with a
competitive advantage in pursuing alliance contracts.
In September 1995, Small Business United of Texas ("SBUT"), a non-profit
business association, selected the Company to provide administrative services
for its affiliated health care purchasing alliance. The Company has not entered
into a definitive agreement with the SBUT alliance. In November 1995, the
Company began administering health care benefits for the South Broward Hospital
District self-funded benefits plans. In January 1996, the Company began
providing claims administration services for some of the member employers of
Healthcare Sarasota, Inc., a coalition of employers in Sarasota, Florida.
During the first half of 1996, the alliance sector, in aggregate, was still
not profitable. Management continues to review operating procedures to improve
profitability, and has entered into discussions with several Florida CHPA Boards
in order to renegotiate the existing contracts, which are scheduled to expire in
1997.
INFORMATION TECHNOLOGY
The Company's central data processing facilities are located in Tampa,
Florida, Framingham, Massachusetts, Columbus, Ohio, and El Monte, California.
The Company operates in a three-tiered architectural environment. A large IBM
mainframe and DEC platform supports the large volume of data and transactions
processed by the Company on an annual basis. Since 1990, the Company has
invested in client-server
18
<PAGE> 20
technology to support the front-end sales and marketing function. The Company
utilizes personal computer workstations in a local-area and wide-area network to
deliver information and images to the desktop. The Company also utilizes a
variety of other technologies to meet specific business needs, including
interactive voice response for sales and services, point-of-service devices for
claims processing, and optical character recognition for entry of data from
forms.
The Company has completed four acquisitions during 1995 and 1996 and
intends to create a common technology platform for all of its business
operations. In addition, the Company expects to eliminate redundant facilities
and personnel as part of its ongoing integration of acquired businesses. These
efforts could take several years and the costs, though significant, cannot be
determined at this time.
COMPETITION
The Company faces competition and potential competition from traditional
indemnity insurance carriers, Blue Cross/Blue Shield organizations, managed care
organizations, third party administrators, utilization review companies, risk
management companies, and health care informatics companies. The Company
competes principally on the basis of the price and quality of services. Many
large insurers have actively sought the claims administration business of
selffunded programs and have begun to offer utilization review and other managed
health care services similar to the services offered by the Company. Many of the
Company's competitors and potential competitors are considerably larger and have
significantly greater resources than the Company.
GOVERNMENT REGULATION
The Company is subject to regulation under the health care and insurance
laws and other statutes and regulations of all 50 states, the District of
Columbia, and Puerto Rico. Many states in which the Company provides claims
administration services require the Company or its employees to receive
regulatory approval or licensure to conduct such business. Provider networks are
also regulated in many states, and certain states require the licensure of
companies, such as the Company, which provide utilization review services. The
Company's operations are dependent upon its continued good standing under
applicable licensing laws and regulations. Such laws and regulations are subject
to amendment or interpretation by regulatory authorities in each jurisdiction.
Generally, such authorities have relatively broad discretion when granting,
renewing, or revoking licenses or granting approvals. These laws and regulations
are intended to protect insured parties rather than stockholders, and differ in
content, interpretation, and enforcement practices from state to state.
Moreover, with respect to many issues affecting the Company, there is a lack of
guiding judicial or administrative precedent. Certain of these laws could be
construed by state regulators to prohibit or restrict practices that have been
significant factors in the Company's operating procedure for many years. The
Company could risk major erosion and even "rebate" exposure in these states if
state regulators were to deem the Company's practices to be impermissible.
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
governs the relationships between certain health benefit plans and the
fiduciaries of those plans. In general, ERISA is designed to protect the
ultimate beneficiaries of the plans from wrongdoing by the fiduciaries. ERISA
provides that a person is a fiduciary of a plan to the extent that such person
has discretionary authority in the administration of the plan or with respect to
the plan's assets. Each employer is a fiduciary of the plan it sponsors, but
there can also be other fiduciaries of a plan. ERISA imposes various express
obligations on fiduciaries. These obligations include barring a fiduciary from
permitting a plan to engage in certain prohibited transactions with parties in
interest or from acting under an impermissible conflict of interest with a plan.
Generally, a party in interest with respect to a plan includes a fiduciary of
the plan and persons that provide services to the plan. The application of ERISA
to the operations of the Company and its customers is an evolving area of law
and is subject to ongoing regulatory and judicial interpretations of ERISA.
Although the Company strives to minimize the applicability of ERISA to its
business and to ensure that the Company's practices are not inconsistent with
ERISA, there can be no assurance that courts or the United States Department of
Labor will not in the future take positions contrary to the current or future
practices of the Company. Any such contrary positions could require changes to
the Company's business practices (as well as
19
<PAGE> 21
industry practices generally) or result in liabilities of the type referred to
above. Similarly, there can be no assurance that future statutory changes to
ERISA will not significantly affect the Company and its industry.
Currently, the Company's Consolidated Group subsidiary is undergoing a
Department of Labor ("DOL") audit in which the DOL has raised various questions
about the application of ERISA to the way that subsidiary does business. This
audit is ongoing, and there can be no assurance that the DOL will not take
positions that could require changes to the way this subsidiary operates, or
result in the imposition of administrative fines and penalties.
LEGAL PROCEEDINGS
In 1995, Self Funded Strategies, L.L.C. ("SFS"), a former provider of
marketing services for the Company, filed a complaint against the Company
claiming wrongful termination of an exclusive marketing agreement and breach of
contract. The complaint asserted damages of $25,000,000. The parties to the
dispute agreed to binding arbitration, and the arbitration proceedings occurred
during the week of October 29, 1996. The arbitration panel's decision, rendered
in December 1996, is not expected to materially alter the amount or timing of
future payments that the Company is contractually obligated to make to SFS under
the marketing agreement, and thus is not expected to materially affect the cash
flows of the Company's business.
In connection with the acquisition of Harrington, the Company agreed to use
its best efforts to file a registration statement sufficient to permit the
public offering and sale of the shares of the Company's Common Stock issued to
the Harrington stockholders in the acquisition, with such registration statement
to become effective on or before October 31, 1996. On October 30, 1996, the
Company received a letter from Harrington's shareholders representative
notifying the Company that the Company was in violation of such agreement and
reserving all rights under such agreement. As of the date hereof, it is not
possible for the Company to evaluate what, if any, damages might result from
such notice.
The Company is involved in various claims arising in the normal course of
business. In the opinion of the Company's management, although the outcomes of
these claims are uncertain, in the aggregate they are not likely to have a
material adverse effect on the Company's business, financial condition, or
results of operations.
EMPLOYEES
With the acquisitions of the Consolidated Group and Harrington, the Company
employed approximately 3,000 fulltime equivalent employees as of July 1, 1996.
The Company's labor force is not unionized with the exception of Harrington's
subsidiary, American Benefit Plan Administrators, Inc., which administers Taft-
Hartley plans. The Company believes its relationship with its employees is good.
TRADEMARKS
The Company utilizes various service marks, trademarks, and trade names in
connection with its products and services, most of which are the property of the
Company's payors. Although the Company considers its service marks, trademarks,
and trade names important in the operation of its business, the business of the
Company is not dependent on any individual service mark, trademark, or trade
name.
20
<PAGE> 22
SELLING STOCKHOLDERS--SHARES COVERED BY THIS PROSPECTUS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of October 30, 1996, and as adjusted
to reflect the sale of the Shares offered by this Prospectus, with respect to
the stockholders of the Company (the "Selling Stockholders") for whose account
the Shares are being offered from time to time pursuant to this Prospectus.
James F. Carlin and Holyoke L. Whitney are members of the Company's Board of
Directors. Robert R. Parker is President and Chairman of the Board of the
Company's Harrington subsidiary. Timothy T. Clifford is President and Chairman
of the Board of the Company's Consolidated Group subsidiary. Charles W. Berry
and Arthur T. Shultz are members of the Board of Directors of the Company's
Consolidated Group subsidiary. All other Selling Shareholders are neither
officers nor directors of the Company or any of its operating subsidiaries.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO OFFERING(1) SHARES OFFERING(1)(2)
------------------- BEING -------------------
NUMBER PERCENT OFFERED NUMBER PERCENT
-------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
APA Excelsior II................................ 499,736 3.3% 499,736 -- --
Apax Capital Risque............................. 33,072 * 33,072 -- --
Apax Capital Risque IIA......................... 44,979 * 44,979 -- --
Apax Capital Risque IIC......................... 19,512 * 19,512 -- --
APA Excelsior Venture Capital Holdings
(Jersey) Ltd.................................. 125,346 * 125,346 -- --
Apax Venture Capital Fund Ltd................... 24,473 * 24,473 -- --
Apax Ventures II Ltd............................ 73,422 * 73,422 -- --
Robert R. Parker................................ 269,297 1.8% 269,297 -- --
Warren G. Blue.................................. 52,089 * 52,089 -- --
Martin Rapaport................................. 22,762 * 22,762 -- --
Martin B. Rapaport, Trustee under Trust Agmt,
Dtd. 11/23/94................................. 2,041 * 2,041 -- --
Hannah Rapaport Salia........................... 20,721 * 20,721 -- --
Hannah Salia, Trustee for Rachel Fatima Salia... 2,041 * 2,041 -- --
Hannah Salia, Trustee for Mariama Sara Salia.... 2,041 * 2,041 -- --
Robert J. Covert................................ 53,082 * 53,082 -- --
Robert A. or Charlene M. Arthur................. 3,307 * 3,307 -- --
Michael S. Blue................................. 1,653 * 1,653 -- --
Steven J. Covert................................ 1,984 * 1,984 -- --
Jeffrey W. Covert............................... 330 * 330 -- --
Greystone Financial Group, Inc.................. 2,426 * 2,426 -- --
Clay R. Caroland, III........................... 2,731 * 2,731 -- --
Thomas Greene, Trustee.......................... 222 * 222 -- --
Jessie B. Greene................................ 34 * 34 -- --
Tom E. Greene, III.............................. 24,060 * 24,060 -- --
Pitt & Co....................................... 12,156 * 12,156 -- --
Mellon Bank, N.A., as Trustee for the Bell
Atlantic Master Pension Trust................. 4,583 * 4,583 -- --
Hank & Co....................................... 24,511 * 24,511 -- --
General Motors Corporation Salaried Retirement
Plan By Bankers Trust As Trustee.............. 12 * 12 -- --
General Motors Corporation Hourly Pension Plan
By Bankers Trust As Trustee................... 15 * 15 -- --
Mellon Bank, N.A., as Custodian for the
Commingled Employee Benefit Trust Small Cap
Fund.......................................... 123 * 123 -- --
Mellon Bank, N.A., as Custodian for the
Commingled Employee Benefit Trust Emerging
Health Fund................................... 37,834 * 37,834 -- --
Fairfield Investors II, L.P..................... 9,604 * 9,604 -- --
Private Equity Investment Fund, L.P............. 13,927 * 13,927 -- --
William T. Brake................................ 826 * 826 -- --
Steven J. Weber................................. 826 * 826 -- --
</TABLE>
21
<PAGE> 23
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO OFFERING(1) SHARES OFFERING(1)(2)
------------------- BEING -------------------
NUMBER PERCENT OFFERED NUMBER PERCENT
-------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
William R. Ash, Jr.............................. 2,479 * 2,479 -- --
Alan P. Fazer................................... 2,397 * 2,397 -- --
Thomas J. O'Neill............................... 826 * 826 -- --
Diana F. Butts.................................. 412 * 412 -- --
Kenneth L. Di Bella............................. 826 * 826 -- --
Phillip R. Parker............................... 1,653 * 1,653 -- --
Christopher E. Parker........................... 1,653 * 1,653 -- --
Jamie Parker Shepherd........................... 1,653 * 1,653 -- --
Garry L. Koch................................... 2,397 * 2,397 -- --
James F. Carlin................................. 13,270(3) * 10,870 2,400(3) *
Holyoke L. Whitney.............................. 122,400(3) * 120,000 2,400(3) *
John C. Naramore................................ 1,000 * 1,000 -- --
David H. Knight................................. 1,000 * 1,000 -- --
Michael V. Clark................................ 1,000 * 1,000 -- --
Timothy T. Clifford............................. 13,043 * 13,043 -- --
Charles W. Berry................................ 4,348 * 4,348 -- --
Arthur T. Schultz............................... 4,348 * 4,348 -- --
Donald R. Fitch................................. 4,348 * 4,348 -- --
Carolyn D. Shea................................. 1,000 * 1,000 -- --
</TABLE>
- ---------------
* Less than 1.0%.
(1) The percentages shown include the shares of Common Stock actually owned as
of October 30, 1996, and the shares of Common Stock that the Selling
Stockholder had the right to acquire within 60 days of such date. In
calculating the percentage of ownership, all shares of Common Stock that
the Selling Stockholder had the right to acquire within 60 days of October
30, 1996, upon the exercise of options are deemed to be outstanding for the
purpose of computing the percentage of the shares of Common Stock owned by
such Selling Stockholder, but are not deemed outstanding for the purpose of
computing the percentage of the shares of Common Stock owned by any other
person.
(2) Assumes the sale of all of the Shares of the Selling Stockholder offered
hereby.
(3) Includes 2,400 shares issuable upon exercise of options that are currently
exercisable.
The Company has agreed to indemnify each of the Selling Stockholders
against certain liabilities, including liabilities under the Securities Act of
1933, as amended, in connection with the sale of their Shares offered by this
Prospectus.
The Company will pay the expenses incurred in connection with the
preparation and filing of this Prospectus and the related Registration
Statement.
USE OF PROCEEDS
The proceeds from the sale of the Shares to which this Prospectus relates
will be received by the Selling Stockholders and no portion thereof will inure
to the benefit of the Company.
PLAN OF DISTRIBUTION
The Shares may be sold by the Selling Stockholders in one or more
transactions on the New York Stock Exchange.
Such transactions may be effected by the Selling Stockholders at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at negotiated prices or at fixed prices. The Selling Stockholders
may effect such transactions by selling Shares to or through broker-dealers, and
such broker-dealers will receive compensation in the form of discounts or
commissions from the Selling Stockholders and
22
<PAGE> 24
may receive commissions from the purchaser of Shares for whom they may act as
agent. A broker or dealer selling Shares for the Selling Stockholders or
purchasing such Shares from the Selling Stockholders for purposes of resale may
be deemed to be an underwriter under the Securities Act, and any compensation
received by any such broker or dealer may be deemed underwriting compensation.
Neither the Company nor the Selling Stockholders can presently estimate the
amount of such compensation which is to be paid by the Selling Stockholders;
however, the Company has been advised that such discounts or commissions from
the Selling Stockholder will not exceed those customary in the types of
transaction involved. In addition, any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this Prospectus.
Each of the Selling Stockholders has indicated to the Company that it
intends to sell its Shares on a delayed or continuous basis as it may determine.
The Company will file during any period in which offers or sales of Shares are
being made by the Selling Stockholders one or more post-effective amendments to
the Registration Statement of which this Prospectus is a part to describe any
material information with respect to the plan of distribution not previously
disclosed in this Prospectus or any material change to such information in this
Prospectus.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995 and 1994, and for the year ended December 31, 1995, and for the period from
inception (October 1, 1994 through December 31, 1994), incorporated in this
Prospectus by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting. The financial statements of the
Company as of September 30, 1994, and for the nine-month period ended September
30, 1994 and the year ended December 31, 1993 incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, have
been so incorporated in reliance on the report of Coopers & Lybrand L.L.P.,
independent certified public accountants, given on the authority of said firm as
experts in auditing and accounting.
The financial statements of Consolidated Group, Inc. and Affiliates, as of
December 31, 1995 and 1994, and for each of the three years ended December 31,
1995, and the financial statements of Consolidated Health Coalition, Inc., as of
December 31, 1995 and 1994 (year of inception) and for each of the two years
ended December 31, 1995, incorporated in this Prospectus by reference have been
so incorporated in reliance on the report of Bonanno, Savino & Davies, P.C.,
independent certified public accountants, given on the authority of said firm as
experts in auditing and accounting.
The financial statements of Harrington Services Corporation as of December
31, 1995 and 1994, and for each of the three years ended December 31, 1995,
incorporated in this Prospectus by reference have been so incorporated in
reliance on the report of Richard A. Eisner & Co., LLP, independent certified
public accountants, given on the authority of said firm as experts in auditing
and accounting.
LEGAL MATTERS
The validity of the Shares being offered hereby will be passed upon by
Fowler, White, Gillen, Boggs, Villareal and Banker, P.A., of Tampa, Florida.
23
<PAGE> 25
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING HEREIN CONTAINED, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO BUY
ANY SECURITY OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES, OR AN
OFFER TO OR SOLICITATION OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE FACTS HEREIN SET FORTH SINCE THE DATE
HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements............ 2
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Risk Factors.......................... 4
Company Summary Historical
Consolidated Financial
Information......................... 12
The Company........................... 13
Selling Stockholders -- Shares Covered
by this Prospectus.................. 21
Use of Proceeds....................... 22
Plan of Distribution.................. 22
Experts............................... 23
Legal Matters......................... 23
</TABLE>
------------------
======================================================
======================================================
1,561,067 SHARES
HEALTHPLAN SERVICES CORPORATION
COMMON STOCK
--------------------
PROSPECTUS
--------------------
FEBRUARY 14, 1997
======================================================
<PAGE> 26
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than the SEC registration fee) of the sale of the
shares of Common Stock are as follows:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 8,810.57
Legal fees and expenses..................................... 25,000.00
Accounting fees and expenses................................ 25,000.00
Printing and engraving expenses............................. 30,000.00
Miscellaneous fees and expenses............................. 5,000.00
----------
Total..................................................... $93,810.57
==========
</TABLE>
All such fees and expenses will be paid by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware (the "General
Corporation Law") grants each corporation organized thereunder the power to
indemnify its officers, directors, employees and agents on certain conditions
against liabilities arising out of any action or proceeding to which any of them
is a party by reason of being such officer, director, employee or agent. Section
102(b)(7) of the General Corporation Law permits a Delaware corporation, with
the approval of its stockholders, to include within its certificate of
incorporation a provision eliminating or limiting the personal liability of its
directors to such corporation or its stockholders for monetary damages resulting
from certain breaches of the directors' fiduciary duty of care, both in suits by
or on behalf of the corporation and in actions by stockholders of the
corporation.
The Company's certificate of incorporation (the "Certificate of
Incorporation") includes an Article which allows the Company to take advantage
of Section 102(b)(7) of the General Corporation Law. The Certificate of
Incorporation also provides for the indemnification, to the fullest extent
permitted by the General Corporation Law, of officers and directors of the
Company. The Company currently maintains policies of insurance under which the
directors and officers of the Company are insured, within the limits and subject
to the limitations of the policies, against certain expenses in connection with
the defense of actions, suits or proceedings, to which they are parties by
reason of being or having been such directors or officers.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as exhibits to this Registration
Statement:
<TABLE>
<C> <S> <C>
2.1 -- Plan and Agreement of Merger dated September 12, 1996, as
amended, among the Registrant, HealthPlan Services Alpha
Corporation and Health Risk Management, Inc. (included as
Exhibit 2.1 to the Registrant's Registration Statement on
Form S-4 filed with the Commission on November 13, 1996 and
incorporated herein by reference).
4.1 -- Form of Registration Rights Agreement dated as of July 1,
1996 (included as an Exhibit to the Schedule 13D filed on
August 5, 1996 reporting beneficial ownership of shares of
the Registrant (Commission File No. 5-46553) and
incorporated herein by reference).
4.2 -- Excerpts from Certificate of Incorporation, as amended, of
the Registrant (included as Exhibit 4.1 to the Registrant's
Registration Statement on Form S-8 (Commission File No.
333-07631) and incorporated herein by reference).
4.3 -- Excerpts from Bylaws of the Registrant (included as Exhibit
3.2 to the Registrant's Registration Statement on Form S-1
(Commission File No. 33-90472) and incorporated herein by
reference).
*5.1 -- Opinion of Fowler, White, Gillen, Boggs, Villareal and
Banker, P.A. with respect to legality of the securities
being registered.
*23.1 -- Consent of Fowler, White, Gillen, Boggs, Villareal and
Banker, P.A. (included in its opinion filed as Exhibit 5.1).
23.2 -- Consent of Price Waterhouse LLP.
</TABLE>
II-1
<PAGE> 27
<TABLE>
<S> <C>
23.3 -- Consent of Bonanno, Savino & Davies, P.C.
23.4 -- Consent of Richard A. Eisner & Company, LLP.
23.5 -- Exhibit 23.5 withdrawn. Such exhibit not required to be
filed.
23.6 -- Consent of Coopers & Lybrand L.L.P.
*24.1 -- Powers of Attorney of Directors and Executive Officers
(included on the Signature Pages of this Registration
Statement).
*27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) 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 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.
(c) 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 provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Tampa, State of Florida, on February 14, 1997.
HEALTHPLAN SERVICES CORPORATION
By: /s/ WILLIAM L. BENNETT
------------------------------------
William L. Bennett
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WILLIAM L. BENNETT Chairman of the Board, February 14, 1997
- ----------------------------------------------------- Director
William L. Bennett
* President and chief February 14, 1997
- ----------------------------------------------------- Executive Officer;
James K. Murray, Jr. Director (Principal
Executive Officer)
* Executive Vice President February 14, 1997
- ----------------------------------------------------- and Chief Financial
James K. Murray, III Officer (Principal
Financial and Accounting
Officer)
* Director February 14, 1997
- -----------------------------------------------------
Joseph A. Califano, Jr.
* Director February 14, 1997
- -----------------------------------------------------
Joseph S. DiMartino
* Director February 14, 1997
- -----------------------------------------------------
John R. Gunn
* Director February 14, 1997
- -----------------------------------------------------
Charles H. Guy, Jr.
* Director February 14, 1997
- -----------------------------------------------------
Nancy Kane
* Director February 14, 1997
- -----------------------------------------------------
David Nierenberg
* Director February 14, 1997
- -----------------------------------------------------
James G. Niven
* Director February 14, 1997
- -----------------------------------------------------
Samuel F. Pryor, IV
* Director February 14, 1997
- -----------------------------------------------------
Trevor G. Smith
</TABLE>
II-3
<PAGE> 29
<TABLE>
<S> <C> <C>
* Director February 14, 1997
- ------------------------------------------------------
Holyoke L. Whitney
* Director February 14, 1997
- ------------------------------------------------------
James F. Carlin
* /s/ WILLIAM S. BENNETT
- ------------------------------------------------------
William S. Bennett
as Attorney-in-fact
</TABLE>
II-4
<PAGE> 30
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
2.1 -- Plan and Agreement of Merger dated September 12, 1996, as
amended, among the Registrant, HealthPlan Services Alpha
Corporation and Health Risk Management, Inc. (included as
Exhibit 2.1 to the Registrant's Registration Statement on
Form S-4 filed with the Commission on November 13, 1996 and
incorporated herein by reference).
4.1 -- Form of Registration Rights Agreement dated as of July 1,
1996 (included as an Exhibit to the Schedule 13D filed on
August 5, 1996 reporting beneficial ownership of shares of
the Registrant (Commission File No. 5-46553) and
incorporated herein by reference).
4.2 -- Excerpts from Certificate of Incorporation, as amended, of
the Registrant (included as Exhibit 4.1 to the Registrant's
Registration Statement on Form S-8 (Commission File No.
333-07631) and incorporated herein by reference).
4.3 -- Excerpts from Bylaws of the Registrant (included as Exhibit
3.2 to the Registrant's Registration Statement on Form S-1
(Commission File No. 33-90472) and incorporated herein by
reference).
*5.1 -- Opinion of Fowler, White, Gillen, Boggs, Villareal and
Banker, P.A. with respect to legality of the securities
being registered.
*23.1 -- Consent of Fowler, White, Gillen, Boggs, Villareal and
Banker, P.A. (included in its opinion filed as Exhibit 5.1).
23.2 -- Consent of Price Waterhouse LLP.
23.3 -- Consent of Bonanno, Savino & Davies, P.C.
23.4 -- Consent of Richard A. Eisner & Company, LLP.
23.5 -- Exhibit 23.5 withdrawn. Such exhibit not required to be
filed.
23.6 -- Consent of Coopers & Lybrand L.L.P.
*24.1 -- Powers of Attorney of Directors and Executive Officers
(included on the Signature Pages of this Registration
Statement).
*27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
February 16, 1996 appearing on page 22 of HealthPlan Services Corporation's
Annual Report on Form 10-K for the year ended December 31, 1995. We also consent
to the reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Tampa, Florida
February 13, 1997
<PAGE> 1
EXHIBIT 23.3
[BONANNO, SAVINO & DAVIES, P.C.]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the reference to our firm under the caption "EXPERTS" and
to the use in the Proxy Statement/Prospectus constituting part of this
Registration Statement on Form S-3, Amendment No. 1, of HealthPlan Services
Corporation of our report dated March 15, 1996 relating to the financial
statements of Consolidated Group, Inc. and Affiliates, and of our report dated
March 15, 1996 relating to the financial statements of Consolidated Health
Coalition, Inc.
/s/ Bonanno, Savino & Davies, P.C.
Needham, Massachusetts
February 14, 1997
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion of our report dated February 16, 1996 on
our audit of the financial statements of Harrington Services Corporation as at
December 31, 1995 and for the year then ended in the Form 8-K/A Amendment
Number 2 and incorporated by reference in the Registration Statement of
HealthPlan Services Corporation on Form S-3 Amendment Number 1. We also
consent to the reference to our firm under the caption "Experts".
/s/ Richard A. Eisner & Company, LLP
New York, New York
February 14, 1997
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
HealthPlan Services Corporation on Form S-3 of our report dated December 2,
1994, on our audits of the financial statements of HealthPlan Services Division
(formerly Plan Services Division, a wholly-owned division of The Dun &
Bradstreet Corporation), as of September 30, 1994 and for the nine-month period
ended September 30, 1994 and the year ended December 31, 1993 which report is
included in the Annual Report on Form 10-K. We also consent to the reference to
our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Tampa Florida
February 13, 1997
