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REGISTRATION NUMBER 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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THE CONTINUUM COMPANY, INC.
(Exact name of registrant as specified in its charter)
7372
(Primary standard industrial classification code number)
DELAWARE
(State or other jurisdiction of incorporation
or organization)
9500 ARBORETUM BOULEVARD
AUSTIN, TEXAS 78759-6399
(512) 345-5700
(Address, including zip code and telephone number,
including area code, of registrant's
principal executive offices)
74-1609363
(I.R.S. Employer Identification No.)
JOHN L. WESTERMANN III
CHIEF FINANCIAL OFFICER
9500 ARBORETUM BOULEVARD
AUSTIN, TEXAS 78759-6399
(512) 345-5700
(Name, address, including zip code and telephone
number, including area code, of agent for service)
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Copies to:
C. MICHAEL HARRINGTON
VINSON & ELKINS L.L.P.
3604 FIRST CITY TOWER
HOUSTON, TEXAS 77002-6760
(713) 758-2148
(713) 615-5306 (FAX)
R. EDWIN PEARCE
SENIOR VICE PRESIDENT LEGAL SERVICES
HOGAN SYSTEMS, INC.
5080 SPECTRUM DRIVE, SUITE 400E
DALLAS, TEXAS 75248
(214) 788-7038
(214) 458-1629 (FAX)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) PER SECURITY(1) PRICE(1) REGISTRATION FEE
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Common Stock, par value
$.10(2).................. 6,004,583 $32.87 $197,370,644 $68,059
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c), based on the average of the low
and high sales prices of Hogan Common Stock on the Nasdaq National Market
on December 19, 1995 of $11.6875 and the exchange ratio of 0.355555 of a
share of Continuum Common Stock for each share of Hogan Common Stock.
(2) Consists of 5,424,820 shares of Continuum Common Stock issuable upon the
conversion pursuant to the Merger of currently outstanding shares of Hogan
Common Stock and up to 579,763 shares of Continuum Common Stock issuable
upon the conversion pursuant to the Merger of shares of Hogan Common Stock
that may be issued prior to the consummation of the Merger pursuant to the
exercise of currently outstanding Hogan Options.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE CONTINUUM COMPANY, INC.
CROSS REFERENCE SHEET
BETWEEN ITEMS IN PART I OF THE REGISTRATION STATEMENT
(FORM S-4) AND PROSPECTUS PURSUANT TO ITEM 501(B)
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ITEM OF FORM S-4 LOCATION IN PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front Cover Page of Prospectus;
Available Information; Incorporation of
Certain Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information........... Outside Front Cover Page of Prospectus;
Summary
4. Terms of the Transaction.................. Outside Front Cover Page of Prospectus;
Summary; The Special Meetings: The
Merger; Certain Terms of the Merger
Agreement; Description of Continuum
Capital Stock; Comparative Rights of
Continuum and Hogan Stockholders
5. Pro Forma Financial Information........... Unaudited Pro Forma Condensed Financial
Information
6. Material Contacts with the Company Being
Acquired................................ The Merger; Certain Terms of the Merger
Agreement; Description of Continuum
Capital Stock
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters...................... *
8. Interests of Named Experts and Counsel.... *
9. Disclosure of Commission Position on
Indemnification For Securities Act
Liabilities............................. *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants............................. Incorporation of Certain Documents by
Reference; The Companies; The Merger;
Certain Terms of the Merger Agreement
11. Incorporation of Certain Information by
Reference............................... Incorporation of Certain Documents by
Reference
12. Incorporation with Respect to S-2 or S-3
Registrants............................. *
13. Incorporation of Certain Information by
Reference............................... *
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants....... *
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ITEM OF FORM S-4 LOCATION IN PROSPECTUS
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C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies............................... Incorporation of Certain Documents by
Reference; The Merger; Certain Terms of
the Merger Agreement
16. Information with Respect to S-2 or S-3
Companies............................... *
17. Information with Respect to Companies
other than S-3 or S-2 Companies......... *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations Are to be Solicited...... Outside Front Cover Page of Prospectus;
Summary; The Special Meetings; The
Merger; Certain Terms of the Merger
Agreement; Principal Stockholders of
Continuum and Hogan; Stockholders'
Proposals
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited
in an Exchange Offer.................... *
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* Not applicable or answer is negative.
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THE CONTINUUM COMPANY, INC.
9500 ARBORETUM BOULEVARD
AUSTIN, TEXAS 78759
January , 1996
To Our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
The Continuum Company, Inc. at Continuum's Headquarters, 9500 Arboretum
Boulevard, Austin, Texas, on February 29, 1996, at 10:00 a.m., local time.
At the Special Meeting, stockholders will be asked to approve the issuance
of Continuum Common Stock in connection with the proposed merger of a subsidiary
of Continuum with and into Hogan Systems, Inc., pursuant to the Agreement and
Plan of Merger dated as of December 10, 1995, among Continuum, Hogan and
Continuum Acquisition Corporation, a wholly-owned subsidiary of Continuum. The
Merger Agreement provides that, upon consummation of the merger, each issued and
outstanding share of common stock of Hogan will be converted into the right to
receive 0.355555 of a share of Continuum Common Stock. The Merger Agreement and
the proposed merger are discussed in more detail in the accompanying Joint Proxy
Statement/Prospectus. Please review and consider the enclosed materials
carefully.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE ISSUANCE OF THE CONTINUUM COMMON
STOCK IN THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF
CONTINUUM AND RECOMMENDS THAT YOU VOTE IN FAVOR OF SUCH ISSUANCE.
Whether or not you plan to be at the Special Meeting, please be sure to
sign, date and return the enclosed proxy card in the enclosed envelope as
promptly as possible so that your shares may be represented at the Special
Meeting and voted in accordance with your wishes. Your vote is important
regardless of the number of shares you own.
Sincerely,
/s/ RONALD C. CARROLL
RONALD C. CARROLL,
Chairman of the Board
/s/ W. MICHAEL LONG
W. MICHAEL LONG,
President and Chief Executive
Officer
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HOGAN SYSTEMS, INC.
5080 SPECTRUM DRIVE, SUITE 400E
DALLAS, TEXAS 75248
January , 1996
To Our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders to be
held at 10:00 a.m., local time, on February 29, 1996 at the Spectrum Conference
Center located at Hogan's headquarters at 5080 Spectrum Drive, Dallas, Texas.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger dated as of
December 10, 1995, providing for the merger of a wholly-owned subsidiary of The
Continuum Company, Inc. with and into Hogan Systems, Inc., pursuant to which
Hogan will become a wholly-owned subsidiary of Continuum. Under the terms of the
Merger Agreement, each outstanding share of common stock of Hogan will be
converted into the right to receive 0.355555 of a share of common stock of
Continuum (the "Exchange Ratio"). The Merger Agreement and the proposed merger
are discussed in more detail in the accompanying Joint Proxy
Statement/Prospectus.
The Board of Directors of Hogan has retained the investment banking firm of
Morgan Stanley & Co. Incorporated to advise it with respect to the fairness of
the consideration to be received by Hogan stockholders in the merger. Morgan
Stanley & Co. Incorporated has advised the Board that, in its opinion, the
Exchange Ratio is fair, from a financial point of view, to the holders of Hogan
common stock. A copy of the opinion of Morgan Stanley & Co. Incorporated is
included in the enclosed Joint Proxy Statement/Prospectus as Appendix II
thereto.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO AND IN THE BEST
INTERESTS OF HOGAN AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
The Merger Agreement and financial and other information concerning the
business of Continuum and Hogan are included in the enclosed Joint Proxy
Statement/Prospectus. Please review the Joint Proxy Statement/Prospectus
carefully.
If you have any questions prior to the Special Meeting or need further
assistance, please call D.F. King & Co., Inc., who will be assisting in
connection with the Special Meeting, at 1-800-788-3502.
The affirmative vote of the holders of a majority of the outstanding shares
of Hogan common stock is required to approve and adopt the Merger Agreement, so
failure to vote will have the same effect as a vote against the Merger
Agreement. Accordingly, we urge you to complete, sign and date the enclosed
proxy card and return it in the enclosed return envelope, whether or not you
plan to attend the meeting. Your vote is important.
Sincerely,
/s/ MICHAEL H. ANDERSON
MICHAEL H. ANDERSON,
Chairman of the Board, President and
Chief Executive Officer
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THE CONTINUUM COMPANY, INC.
9500 ARBORETUM BOULEVARD
AUSTIN, TEXAS 78759
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 29, 1996
To the Stockholders of The Continuum Company, Inc.:
A Special Meeting of Stockholders of The Continuum Company, Inc., a
Delaware corporation ("Continuum"), will be held on Thursday, February 29, 1996
at 10:00 a.m., local time, at Continuum's Headquarters, 9500 Arboretum
Boulevard, Austin, Texas, for the following purposes:
1. To consider and vote upon a proposal for the issuance and
reservation for issuance of up to 6,004,583 shares of common stock, $.10
par value, of Continuum ("Continuum Common Stock") in connection with the
Agreement and Plan of Merger dated as of December 10, 1995 (the "Merger
Agreement"), among Continuum, Hogan Systems, Inc. ("Hogan") and Continuum
Acquisition Corporation ("Merger Sub"), pursuant to which, among other
things, Merger Sub would merge with and into Hogan and each issued and
outstanding share of Hogan common stock, $.01 par value per share, would be
converted in the merger into the right to receive 0.355555 of a share of
Continuum Common Stock, all as more fully set forth in the accompanying
Joint Proxy Statement/Prospectus and in the Merger Agreement, a copy of
which is included as Appendix I thereto; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of record of shares of Continuum Common Stock at the close of
business on January 17, 1996 are entitled to notice of and to vote at the
meeting.
STOCKHOLDERS ARE URGED, WHETHER OR NOT THEY PLAN TO ATTEND THE MEETING, TO
SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED. No postage
is needed if it is mailed in the United States. If a stockholder who has
returned a proxy attends the meeting in person, such stockholder may revoke the
proxy and vote in person on all matters submitted at the meeting.
By Order of the Board of Directors,
JOHN L. WESTERMANN III,
Secretary
Austin, Texas
January , 1996
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HOGAN SYSTEMS, INC.
5080 SPECTRUM DRIVE, SUITE 400E
DALLAS, TEXAS 75248
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 29, 1996
To the Stockholders of Hogan Systems, Inc.:
A Special Meeting of Stockholders of Hogan Systems, Inc., a Delaware
corporation ("Hogan"), will be held on Thursday, February 29, 1996 at 10:00
a.m., local time, at the Spectrum Conference Center located at Hogan's
headquarters at 5080 Spectrum Drive, Dallas, Texas, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of December 10, 1995 (the "Merger
Agreement"), relating to the merger of a wholly-owned subsidiary of The
Continuum Company, Inc. with and into Hogan pursuant to which each
outstanding share of common stock, $.01 par value per share, of Hogan
("Hogan Common Stock") would be converted into the right to receive
0.355555 of a share of common stock, $.10 par value per share, of The
Continuum Company, Inc., all as more fully set forth in the accompanying
Joint Proxy Statement/Prospectus and in the Merger Agreement, a copy of
which is included as Appendix I thereto; and
2. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on January 17, 1996
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting or any adjournment thereof. Only holders of record of
shares of Hogan Common Stock at the close of business on the record date are
entitled to notice of and to vote at the meeting. A complete list of such
stockholders will be available for examination at the offices of Hogan in
Dallas, Texas during normal business hours by any Hogan stockholder, for any
purpose germane to the Special Meeting, for a period of 10 days prior to the
meeting. Stockholders of Hogan are not entitled to any appraisal or dissenters'
rights under the Delaware General Corporation Law in respect of the merger.
Your vote is important. The affirmative vote of the holders of a majority
of the outstanding shares of Hogan Common Stock is required for approval and
adoption of the Merger Agreement. Even if you plan to attend the meeting in
person, we request that you sign and return the enclosed proxy card and thus
ensure that your shares will be represented at the meeting if you are unable to
attend. If you do attend the meeting and wish to vote in person, you may
withdraw your proxy and vote in person.
By Order of the Board of Directors,
R. EDWIN PEARCE,
Secretary
Dallas, Texas
January , 1996
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 22, 1995
THE CONTINUUM COMPANY, INC.
HOGAN SYSTEMS, INC.
JOINT PROXY STATEMENT/PROSPECTUS
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This Joint Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of Continuum Acquisition Corporation, a Delaware corporation ("Merger
Sub"), a wholly-owned subsidiary of The Continuum Company, Inc., a Delaware
corporation ("Continuum"), with and into Hogan Systems, Inc., a Delaware
corporation ("Hogan"), with Hogan surviving the Merger as a wholly-owned
subsidiary of Continuum, pursuant to the Agreement and Plan of Merger dated as
of December 10, 1995, by and among Continuum, Merger Sub and Hogan (the "Merger
Agreement"). A copy of the Merger Agreement is attached hereto as Appendix I.
Under the terms of the Merger Agreement, each share of common stock, $.01
par value per share, of Hogan ("Hogan Common Stock") outstanding immediately
prior to the effective time of the Merger (other than Hogan Common Stock held
directly or indirectly by Continuum or Hogan, all of which will be canceled)
will be converted into the right to receive 0.355555 of a share of common stock,
$.10 par value per share, of Continuum ("Continuum Common Stock"), all as more
fully described in the Merger Agreement. See "Certain Terms of the Merger
Agreement -- Manner and Basis of Converting Shares."
This Joint Proxy Statement/Prospectus is being furnished to holders of
Continuum Common Stock and Hogan Common Stock in connection with the
solicitation of proxies by the respective Boards of Directors of Continuum and
Hogan for use at special meetings of stockholders of each company to be held on
February 29, 1996 or at any adjournment thereof. This Joint Proxy
Statement/Prospectus and the accompanying forms of proxies are first being
mailed to stockholders of Continuum and Hogan on or about January , 1996.
At the Hogan special meeting, holders of Hogan Common Stock will be asked
to approve and adopt the Merger Agreement. At the Continuum special meeting,
holders of Continuum Common Stock will be asked to approve the issuance and
reservation for issuance of up to 6,004,583 shares of Continuum Common Stock
pursuant to the Merger Agreement.
This Joint Proxy Statement/Prospectus also constitutes a prospectus of
Continuum with respect to up to 6,004,583 shares of Continuum Common Stock to be
issued pursuant to the Merger Agreement in exchange for currently outstanding
shares of Hogan Common Stock and additional shares of Hogan Common Stock which
may become outstanding prior to the Merger pursuant to the exercise of
outstanding options to purchase Hogan Common Stock ("Hogan Options"). It is a
condition to consummation of the Merger that the shares of Continuum Common
Stock issuable pursuant to the Merger be approved for listing on the New York
Stock Exchange ("NYSE"), subject to official notice of business.
On December 21, 1995, the closing prices of Continuum Common Stock and
Hogan Common Stock, as reported on the NYSE Composite Tape and the Nasdaq
National Market, respectively, were $36 1/4 and $12 7/16, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY OTHER 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 JOINT PROXY STATEMENT/PROSPECTUS IS JANUARY , 1996.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE
OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CONTINUUM OR
HOGAN. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF THE SECURITIES OFFERED HEREBY SHALL UNDER ANY CIRCUMSTANCES
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CONTINUUM
OR HOGAN SINCE THE DATE HEREOF OR THAT THE INFORMATION SET FORTH OR INCORPORATED
BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS JOINT
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION.
AVAILABLE INFORMATION
Continuum and Hogan are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, file reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, reports, proxy statements and other information concerning
Continuum may be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005, and, with respect to Hogan, at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
Continuum has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Continuum Common Stock to be issued
pursuant to the Merger Agreement. The information contained herein with respect
to Continuum and its affiliates, including Merger Sub, has been provided by
Continuum, and the information contained herein with respect to Hogan and its
affiliates has been provided by Hogan. This Joint Proxy Statement/Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which were omitted in accordance with the rules and regulations
of the Commission. For further information, reference is hereby made to the
Registration Statement. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission are not necessarily complete, and in each
instance reference is made to the copy of such document so filed. Each such
statement is qualified in its entirety by such reference. The Registration
Statement is also available for inspection and copying as set forth above.
2
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission pursuant
to the Exchange Act, are incorporated herein by reference:
1. Continuum's Annual Report on Form 10-K for its fiscal year ended
March 31, 1995.
2. Continuum's Quarterly Reports on Form 10-Q for the periods ended
June 30, 1995 and September 30, 1995.
3. Continuum's Current Report on Form 8-K dated December 11, 1995.
4. Hogan's Annual Report on Form 10-K for its fiscal year ended March
31, 1995 (as amended by Form 10-K/A dated July 28, 1995).
5. Hogan's Quarterly Reports on Form 10-Q for the periods ended June
30, 1995 and September 30, 1995.
6. Hogan's Current Reports on Form 8-K dated June 16, 1995 and
December 13, 1995.
All documents filed by Continuum or Hogan pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Joint Proxy
Statement/Prospectus and prior to the date of the special meetings of the
stockholders of each company shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. 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 Joint Proxy Statement/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
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Joint Proxy
Statement/Prospectus.
Continuum and Hogan each undertake to provide copies of such documents
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference), without charge, to any person, including any
beneficial owner, to whom this Joint Proxy Statement/Prospectus is delivered,
upon written or oral request to, in the case of documents relating to Continuum,
John L. Westermann III, Chief Financial Officer, The Continuum Company, Inc.,
9500 Arboretum Boulevard, Austin, Texas 78759 (telephone (512) 345-5700), and,
in the case of documents relating to Hogan, R. Edwin Pearce, Senior Vice
President, Legal Services, General Counsel and Secretary, Hogan Systems, Inc.,
5080 Spectrum Drive, Suite 400E, Dallas, Texas 75248 (telephone (214) 386-0020).
In order to ensure delivery of documents prior to the applicable stockholders'
meeting, requests should be received by February 22, 1996.
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The following service mark owned by Continuum appears in this Joint Proxy
Statement/Prospectus: Continuum(R). The following trademark owned by Hogan
appears herein: Hogan Systems plus design(R). The following trademark owned by
International Business Machines Corporation ("IBM") appears herein: AS/400(R).
3
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TABLE OF CONTENTS
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Available Information........................... 2
Incorporation of Certain Documents by
Reference..................................... 3
Summary......................................... 4
The Companies................................. 4
The Special Meetings.......................... 4
The Merger and the Merger Agreement........... 6
Certain Federal Income Tax Consequences....... 10
Anticipated Accounting Treatment.............. 10
No Appraisal Rights........................... 10
Exchange of Hogan Common Stock Certificates... 10
Interests of Certain Persons in the Merger.... 10
Comparative Rights of Hogan and Continuum
Stockholders................................ 10
Market Price and Dividend Data................ 11
Continuum Selected Historical Consolidated
Financial Information....................... 12
Hogan Selected Historical Consolidated
Financial Information....................... 13
Selected Pro Forma Financial Information...... 14
Comparative Per Share Data.................... 15
The Companies................................... 16
Continuum and Merger Sub...................... 16
Hogan......................................... 16
The Special Meetings............................ 17
Time, Date, Place and Purpose of Special
Meetings.................................... 17
Record Date and Outstanding Shares............ 17
Voting and Revocation of Proxies.............. 18
Vote Required................................. 18
Solicitation of Proxies....................... 18
Other Matters................................. 19
The Merger...................................... 19
General Description of the Merger............. 19
Background.................................... 19
Certain Information........................... 21
Continuum's Reasons for the Merger;
Recommendation of Board of Directors of
Continuum................................... 21
Hogan's Reasons for the Merger; Recommendation
of Board of Directors of Hogan.............. 26
Opinion of Hogan's Financial Advisor.......... 27
Interests of Certain Persons in the Merger.... 28
Certain Federal Income Tax Consequences....... 31
Accounting Treatment.......................... 32
Governmental and Regulatory Approvals......... 32
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Restrictions on Resales by Affiliates......... 32
Rights of Dissenting Stockholders............. 33
Certain Terms of the Merger Agreement........... 33
Effective Time of the Merger.................. 33
Manner and Basis of Converting Shares......... 33
Hogan Options................................. 34
Conditions to the Merger...................... 34
Representations and Warranties................ 35
Certain Covenants; Conduct of Business Prior
to the Merger............................... 36
No Solicitation............................... 37
Certain Post-Merger Matters................... 37
Termination or Amendment of the Merger
Agreement................................... 37
Expenses and Termination Fee.................. 38
Certain Benefit Plans and Severance........... 39
Indemnification............................... 39
Market Prices of Common Stock and Dividend
Information................................... 40
Unaudited Pro Forma Combined Condensed Financial
Information................................... 41
Principal Stockholders of Continuum and Hogan... 49
Continuum..................................... 49
Hogan......................................... 50
Description of Continuum Capital Stock.......... 51
Preferred Stock............................... 51
Common Stock.................................. 51
Comparative Rights of Continuum and
Hogan Stockholders............................ 51
Cumulative Voting............................. 51
Number of Directors........................... 52
Power to Call Special Meetings................ 52
Action by Written Consent..................... 52
Stockholder Proposals......................... 52
Stockholder Vote Required for Certain
Transactions................................ 52
Auditors........................................ 53
Legal Matters................................... 53
Experts......................................... 53
Stockholders' Proposals......................... 53
Appendices:
I -- Merger Agreement........................ AI-1
II -- Morgan Stanley Fairness Opinion......... AII-1
</TABLE>
4
<PAGE> 12
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained in or
incorporated by reference in this Joint Proxy Statement/Prospectus and the
Appendices hereto. Stockholders are urged to carefully read this Joint Proxy
Statement/Prospectus and the Appendices hereto in their entirety. As used in
this Joint Proxy Statement/Prospectus, unless otherwise required by the context,
the term "Continuum" means The Continuum Company, Inc. and its consolidated
subsidiaries and the term "Hogan" means Hogan Systems, Inc. and its consolidated
subsidiaries. Capitalized terms used herein without definition are, unless
otherwise indicated, defined in the Merger Agreement and used herein with such
meanings.
THE COMPANIES
Continuum and Merger Sub. Continuum is an international consulting and
computer services firm supplying information technology solutions to the
insurance and financial services industry. Merger Sub is a wholly-owned
subsidiary of Continuum incorporated on November 30, 1995. The principal
executive offices of Continuum, a Delaware corporation, are located at 9500
Arboretum Boulevard, Austin, Texas 78759, and its telephone number at such
offices is (512) 345-5700.
Hogan. Hogan provides integrated software applications and related
professional services to financial institutions worldwide. The principal
executive offices of Hogan, a Delaware corporation, are located at 5080 Spectrum
Drive, Suite 400E, Dallas, Texas 75248, and its telephone number at such offices
is (214) 386-0020.
Combined Company. Continuum views its expansion into banking software and
services by combining with Hogan as a logical expansion into a closely related
industry that Continuum is well positioned to serve through its existing
customer relationships and international infrastructure. Continuum believes the
Merger is an essential long-term strategic move that will position the combined
company to serve the emerging global diversified financial services industry,
while at the same time providing it with attractive near-term opportunities for
increased revenues and cost savings. See "The Merger -- Continuum's Reasons for
the Merger; Recommendation of Board of Directors of Continuum."
THE SPECIAL MEETINGS
DATE; TIME AND PLACE
Continuum. The Special Meeting of Stockholders of Continuum (the "Continuum
Special Meeting") will be held on Thursday, February 29, 1996, at Continuum's
Headquarters, 9500 Arboretum Boulevard, Austin, Texas, commencing at 10:00 a.m.
local time.
Hogan. The Special Meeting of Stockholders of Hogan (the "Hogan Special
Meeting") will be held on Thursday, February 29, 1996, at the Spectrum
Conference Center located at Hogan's headquarters at 5080 Spectrum Drive, Dallas
Parkway, Dallas, Texas, commencing at 10:00 a.m. local time.
PURPOSES OF THE SPECIAL MEETINGS
Continuum. The purpose of the Continuum Special Meeting is to consider and
vote upon (i) a proposal to approve, as required by the rules of the NYSE, the
issuance and reservation for issuance of up to 6,004,583 shares of Continuum
Common Stock pursuant to the Merger Agreement and (ii) such other matters as may
properly be brought before the Continuum Special Meeting.
Hogan. The purpose of the Hogan Special Meeting is to consider and vote
upon (i) a proposal to approve and adopt the Merger Agreement and (ii) such
other matters as may properly be brought before the Hogan Special Meeting.
5
<PAGE> 13
RECORD DATES; SHARES ENTITLED TO VOTE
Continuum. Only holders of record of shares of Continuum Common Stock at
the close of business on January 17, 1996 (the "Record Date") are entitled to
notice of and to vote at the Continuum Special Meeting. On such date, there were
shares of Continuum Common Stock outstanding, each of which will be
entitled to one vote on each matter to be acted upon at the Continuum Special
Meeting.
Hogan. Only holders of record of shares of Hogan Common Stock at the close
of business on the Record Date are entitled to notice of and to vote at the
Hogan Special Meeting. On such date, there were shares of Hogan Common
Stock outstanding, each of which will be entitled to one vote on each matter to
be acted upon at the Hogan Special Meeting.
QUORUM; VOTE REQUIRED
Continuum. The presence, in person or by proxy, at the Continuum Special
Meeting of the holders of a majority of the shares of Continuum Common Stock
outstanding and entitled to vote at the Continuum Special Meeting is necessary
to constitute a quorum at the meeting. Under the rules of the NYSE, the
affirmative vote of a majority of the votes cast at the Continuum Special
Meeting is required to approve the issuance and reservation for issuance of up
to 6,004,583 shares of Continuum Common Stock pursuant to the Merger Agreement,
provided that the total vote cast thereon represents over 50% of the total
number of shares of Continuum Common Stock entitled to vote on the proposal.
Hogan. The presence, in person or by proxy, at the Hogan Special Meeting of
the holders of a majority of the shares of Hogan Common Stock outstanding and
entitled to vote at the Hogan Special Meeting is necessary to constitute a
quorum at the meeting. The affirmative vote of the holders of a majority of the
shares of Hogan Common Stock outstanding and entitled to vote thereon at the
Hogan Special Meeting is required to approve and adopt the Merger Agreement.
SECURITY OWNERSHIP OF MANAGEMENT
Continuum. As of the Record Date for the Continuum Special Meeting, the
directors and executive officers of Continuum owned approximately % of the
outstanding shares of Continuum Common Stock entitled to vote at such meeting.
Each of such directors and executive officers has advised Continuum that he or
she plans to vote or direct the vote of all such shares of Continuum Common
Stock in favor of the proposal to approve the issuance and reservation for
issuance of Continuum Common Stock pursuant to the Merger Agreement. DST
Systems, Inc. ("DST"), the largest stockholder of Continuum, has entered into an
agreement with Hogan pursuant to which DST has agreed to support the affirmative
recommendation of the Board of Directors of Continuum to its stockholders
regarding such proposal and to vote its 5,544,553 shares (approximately %)
of Continuum Common Stock in favor of such proposal.
Hogan. As of the Record Date for the Hogan Special Meeting, the directors
and executive officers of Hogan owned approximately % of the outstanding
shares of Hogan Common Stock entitled to vote at such meeting. Each of such
directors and executive officers of Hogan has advised Hogan that he or she plans
to vote or direct the vote of all such shares of Hogan Common Stock in favor of
the proposal to approve and adopt the Merger Agreement.
THE MERGER AND THE MERGER AGREEMENT
TERMS OF THE MERGER
At the Effective Time (as hereinafter defined), Merger Sub will merge with
and into Hogan, with Hogan being the surviving corporation and a wholly-owned
subsidiary of Continuum (the "Surviving Corporation"). In the Merger, each
outstanding share of Hogan Common Stock (other than shares held directly or
indirectly by Continuum or Hogan) will be converted into the right to receive
0.355555 of a share of Continuum Common Stock (the "Exchange Ratio"), all as
more fully set forth in the Merger Agreement. Any resulting fractional shares
will be settled in cash. The full text of the Merger Agreement is attached to
this Joint Proxy Statement/Prospectus as Appendix I.
6
<PAGE> 14
Based on the number of shares of Continuum Common Stock and Hogan Common
Stock outstanding as of the Record Date for the Continuum Special Meeting and
the Hogan Special Meeting, shares of Continuum Common Stock will be
issuable pursuant to the Merger Agreement (assuming no exercise prior to the
Effective Time of the Hogan Options and disregarding fractional shares to be
settled in cash), representing approximately % of the total Continuum
Common Stock to be outstanding after such issuance.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Board of Directors of Continuum has determined that the Merger is fair
to, and in the best interests of, the stockholders of Continuum and recommends
that the stockholders of Continuum approve the issuance and reservation for
issuance of Continuum Common Stock pursuant to the terms of the Merger
Agreement. See "The Merger -- Background" and "-- Continuum's Reasons for the
Merger; Recommendation of Board of Directors of Continuum."
The Board of Directors of Hogan has determined that the Merger is fair to,
and in the best interests of, the stockholders of Hogan and recommends that the
stockholders of Hogan approve and adopt the Merger Agreement. See "The
Merger -- Background" and "-- Hogan's Reasons for the Merger; Recommendation of
the Board of Directors of Hogan." In considering the recommendation of the Hogan
Board with respect to the Merger, Hogan stockholders should be aware that
certain officers and directors of Hogan have certain interests respecting the
Merger, apart from their interests as stockholders of Hogan. See "The
Merger -- Interests of Certain Persons in the Merger."
OPINION OF HOGAN'S FINANCIAL ADVISOR
Morgan Stanley & Co. Incorporated ("Morgan Stanley") has delivered its
written opinion (the "Morgan Stanley Opinion") dated December 10, 1995 to the
Board of Directors of Hogan that, as of such date, the Exchange Ratio is fair,
from a financial point of view, to the holders of Hogan Common Stock. For
information regarding the Morgan Stanley Opinion, including the assumptions
made, matters considered and limits of such opinion, see "The Merger -- Opinion
of Hogan's Financial Advisor." Stockholders are urged to read in its entirety
the Morgan Stanley Opinion, attached as Appendix II to this Joint Proxy
Statement/Prospectus.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware (the "Effective Time"),
unless the Certificate of Merger specifies a later Effective Time. Assuming all
conditions to the Merger contained in the Merger Agreement are satisfied or
waived prior thereto, it is anticipated that the Effective Time of the Merger
will occur as soon as practicable following the Special Meetings.
CERTAIN CONDITIONS TO THE CONSUMMATION OF THE MERGER
The respective obligations of Continuum and Hogan to consummate the Merger
are subject to the satisfaction of certain conditions, including the following:
(i) approval by the stockholders of Continuum of the issuance of Continuum
Common Stock pursuant to the Merger Agreement, and approval and adoption of the
Merger Agreement by the stockholders of Hogan; (ii) the approval for listing on
the NYSE of the Continuum Common Stock to be issued in the Merger; (iii)
expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); (iv) the absence of any governmental or judicial enactment or order
making the Merger illegal or otherwise prohibiting consummation of the Merger;
(v) the effectiveness of the Registration Statement of which this Joint Proxy
Statement/Prospectus is a part; (vi) Ernst & Young LLP and Price Waterhouse LLP
having confirmed their earlier written advice to Continuum and Hogan,
respectively, which advice cumulatively is that the Merger should be treated for
financial accounting purposes as a "pooling of interests"; (vii) the accuracy of
the representations and warranties of each party and compliance with all
agreements and covenants by each party; and (viii) the receipt of certain tax
opinions.
7
<PAGE> 15
Continuum and Hogan anticipate that all of the conditions to the
consummation of the Merger (other than obtaining the required approvals of the
stockholders of Continuum and Hogan) will be satisfied prior to or at the time
of the Continuum Special Meeting and the Hogan Special Meeting. Either Continuum
or Hogan may extend the time for performance of any of the obligations of the
other party or may waive compliance with any such obligations at its discretion.
See "Certain Terms of the Merger Agreement -- Conditions to the Merger."
GOVERNMENTAL APPROVALS
On December , 1995, Continuum and Hogan each filed a notification and
report, together with requests for early termination of the waiting period,
under the HSR Act with the Federal Trade Commission ("FTC") and the Antitrust
Division of the Department of Justice in respect of the Merger. Expiration or
early termination of the applicable waiting period under the HSR Act is a
condition to the obligations of Continuum and Hogan to consummate the Merger.
The waiting period will expire on January , 1996, unless a request for
additional information is received before such date. See "The
Merger -- Governmental and Regulatory Approvals." Neither Continuum nor Hogan is
aware of any other governmental or regulatory approval required for consummation
of the Merger, other than compliance with applicable securities laws.
NO SOLICITATION
The Merger Agreement provides that Hogan will not knowingly encourage,
solicit, initiate or participate in discussions or negotiations with, or
knowingly provide any information to, any person or group (other than Continuum
or its affiliates or associates) concerning any merger of Hogan, sale of
substantially all of its assets, sale of shares of its capital stock or similar
transactions involving Hogan; provided, however, that the Board of Directors of
Hogan may (i) take and disclose to Hogan's stockholders a position with respect
to a tender offer for Hogan Common Stock pursuant to the Exchange Act, (ii) make
such disclosure to Hogan's stockholders as, in the judgment of such Board of
Directors, may be required under applicable law or (iii) participate in
discussions or negotiations with, or provide information to, any person in
connection with an unsolicited written proposal by such person to acquire Hogan,
if, and only to the extent that, (A) the Board of Directors of Hogan, after
consultation with and based upon the advice of independent legal counsel,
determines in good faith that such action is necessary for such Board of
Directors to comply with its fiduciary duties to stockholders under applicable
law and (B) prior to entering into discussions or negotiations with, or
providing such information to, such person Hogan notifies Continuum and enters
into with such person a confidentiality agreement. See "Certain Terms of the
Merger Agreement -- No Solicitation."
TERMINATION OF THE MERGER AGREEMENT
By Either Party. The Merger Agreement may be terminated prior to the
Effective Time (i) by mutual written consent authorized by the Boards of
Directors of Continuum and Hogan or (ii) by either party if (A) the merger has
not been consummated on or before April 30, 1996, or (B) the required approvals
of the stockholders of Continuum or Hogan are not received at the applicable
meeting of stockholders.
By Continuum. Continuum may terminate the Merger Agreement (i) upon a
breach of any representation, warranty, covenant or agreement on the part of
Hogan set forth in the Merger Agreement, or if any such representation or
warranty shall become untrue, in either case such that Continuum's conditions to
closing of the Merger would be incapable of being satisfied by April 30, 1996,
(ii) if the Board of Directors of Hogan withdraws, modifies or changes its
recommendation of the Merger Agreement or the Merger in a manner adverse to
Continuum or resolves to do so, (iii) if the Morgan Stanley Opinion is withdrawn
or (iv) if a tender or exchange offer for 30% or more of the outstanding shares
of Hogan Common Stock is commenced, and the Board of Directors of Hogan has not
timely filed a Schedule 14D-9 recommending that stockholders not tender their
shares into such tender or exchange offer.
By Hogan. Hogan may terminate the Merger Agreement (i) upon a breach of any
representation, warranty, covenant or agreement on the part of Continuum or
Merger Sub set forth in the Merger Agreement, or if any such representation or
warranty shall become untrue, in either case such that Hogan's conditions to
8
<PAGE> 16
closing would be incapable of being satisfied by April 30, 1996 or (ii) if the
Board of Directors of Hogan, after consultation with and based upon the advice
of independent legal counsel, determines in good faith that such action is
necessary for such Board of Directors to comply with its fiduciary duties to
stockholders under applicable law.
See "Certain Terms of the Merger Agreement -- Termination or Amendment of
the Merger Agreement."
TERMINATION FEE
The Merger Agreement obligates Hogan to pay to Continuum $5,000,000, which
amount will be inclusive of all of Continuum's expenses, if the Merger Agreement
is terminated in accordance with its terms under certain circumstances. See
"Certain Terms of the Merger Agreement -- Expenses and Termination Fee."
ASSUMPTION OF HOGAN OPTIONS
As of the Effective Time, Continuum will assume each Hogan Option that
remains unexercised in whole or in part. Accordingly, each Hogan Option will be
deemed to remain outstanding as an option to purchase, in place of the shares of
Hogan Common Stock previously subject thereto, that number of shares of
Continuum Common Stock equal to the product of the number of shares of Hogan
Common Stock subject to the Hogan Option multiplied by the Exchange Ratio. The
exercise price per share of Continuum Common Stock will be equal to the previous
exercise price per share under the Hogan Option divided by the Exchange Ratio.
See "Certain Terms of the Merger Agreement -- Hogan Options."
EMPLOYEE BENEFITS AND SEVERANCE
The Merger Agreement provides that Continuum will honor, without
modification (except in connection with Continuum's assumption of the Hogan
Options), all contracts, agreements and commitments of Hogan authorized prior to
the date of the Merger Agreement that apply to any current or former employee or
director of Hogan, including the severance agreements between Hogan and certain
of its senior officers. See "The Merger -- Interests of Certain Persons in the
Merger." Further, the Merger Agreement obligates Continuum to provide to
officers and employees of Hogan who become or remain regular (full-time)
employees of Continuum, employee benefits, other than stock options, no less
favorable than the most favorable of (i) benefits which are substantially
comparable to those provided by Hogan to its officers or employees as of
September 30, 1995, or (ii) those provided by Continuum to its similarly
situated officers and employees; provided, however, that if (i) above is more
favorable, Continuum will only be obligated to provide such benefits through
September 30, 1996, after which time Continuum will only be obligated to provide
benefits in accordance with (ii) above. The Merger Agreement also provides that,
promptly after March 31, 1996, the Surviving Corporation will determine and pay
bonuses under Hogan's executive (including management) bonus program for the
fiscal year ending March 31, 1996. See "Certain Terms of the Merger Agreement --
Certain Benefit Plans and Severance."
INDEMNIFICATION
The Merger Agreement also provides that, after the Effective Time, the
Surviving Corporation will indemnify and hold harmless each current or former
officer or director of Hogan against all losses, claims, damages, costs,
expenses, settlement payments or liabilities arising out of or connected with
(i) their position with Hogan or (ii) the Merger Agreement or the Merger, in
each case to the fullest extent required or permitted under applicable law or
the Surviving Corporation's certificate of incorporation or bylaws. Further, the
Surviving Corporation (i) will not amend its certificate of incorporation or
bylaws in a manner that adversely affects the rights of any such indemnified
person thereunder or under the Merger Agreement, unless otherwise required by
applicable law, and (ii) will maintain, for not less than five years after the
Effective Time, director's and officer's liability insurance covering each such
indemnified person on terms not materially less favorable than the insurance
maintained by Hogan on the date of the Merger Agreement, subject to certain
limitations. Continuum has guaranteed the foregoing indemnification obligations
of the Surviving Corporation.
9
<PAGE> 17
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a reorganization under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and should,
therefore, constitute a non-taxable transaction for holders of Hogan Common
Stock, except to the extent of cash received, if any, in lieu of fractional
shares of Continuum Common Stock. For a discussion of these and other federal
income tax considerations in connection with the Merger, see "The
Merger -- Certain Federal Income Tax Consequences."
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to be accounted for as a "pooling of interests" for
financial accounting purposes. See "The Merger -- Accounting Treatment."
NO APPRAISAL RIGHTS
Neither Continuum's nor Hogan's stockholders will be entitled to any
appraisal or dissenters' rights in connection with the Merger. See "The
Merger -- Rights of Dissenting Stockholders."
EXCHANGE OF HOGAN COMMON STOCK CERTIFICATES
Promptly after consummation of the Merger, the Exchange Agent will mail a
letter of transmittal with instructions to each holder of record of Hogan Common
Stock immediately before the Effective Time for use in exchanging certificates
formerly representing shares of Hogan Common Stock for certificates representing
shares of Continuum Common Stock and cash in lieu of any fractional shares.
Certificates should not be surrendered by the holders of Hogan Common Stock
until they have received the letter of transmittal from the Exchange Agent. See
"Certain Terms of the Merger Agreement -- Manner and Basis of Converting
Shares."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Hogan's Board of Directors and management have certain
interests respecting the Merger separate from their interests as holders of
Hogan Common Stock, including those referred to above under "-- Assumption of
Hogan Options," "-- Employee Benefits and Severance" and "-- Indemnification."
In addition, certain members of Hogan's Board of Directors and management have
entered into employment agreements with Continuum or Hogan, which will become
effective at the Effective Time. See "The Merger -- Interests of Certain Persons
in the Merger."
COMPARATIVE RIGHTS OF HOGAN AND CONTINUUM STOCKHOLDERS
Rights of stockholders of Hogan are currently governed by Delaware law, the
Restated Certificate of Incorporation of Hogan (the "Hogan Charter") and Hogan's
bylaws. Upon consummation of the Merger, Hogan stockholders will become
stockholders of Continuum and their rights as stockholders of Continuum will be
governed by Delaware law, the Certificate of Incorporation, as amended, of
Continuum (the "Continuum Charter") and Continuum's bylaws. There are various
differences between the rights of Hogan stockholders and the rights of Continuum
stockholders. See "Comparative Rights of Continuum and Hogan Stockholders" and
"Description of Continuum Capital Stock."
10
<PAGE> 18
MARKET PRICE AND DIVIDEND DATA
Continuum Common Stock is traded on the NYSE under the symbol "CNU," and
Hogan Common Stock is traded on the Nasdaq National Market under the symbol
"HOGN." The following table sets forth, for the fiscal periods indicated, the
range of high and low per share sale prices for Continuum Common Stock and Hogan
Common Stock, as reported on the NYSE Composite Tape and the Nasdaq National
Market, respectively, and the cash dividends paid on each share of Hogan Common
Stock.
<TABLE>
<CAPTION>
CONTINUUM HOGAN
-------------- ----------------------------
HIGH LOW HIGH LOW DIVIDEND
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Fiscal 1994*
First Quarter..................................... $21 3/8 $17 5/8 $ 8 1/8 $ 6 1/4 $.17
Second Quarter.................................... 18 1/8 14 1/2 11 3/4 8 --
Third Quarter..................................... 21 1/4 16 1/4 11 3/4 7 3/4 --
Fourth Quarter.................................... 25 18 5/8 10 3/4 7 7/8 --
Fiscal 1995*
First Quarter..................................... $25 5/8 $19 3/4 $10 3/4 $ 6 3/8 $.17
Second Quarter.................................... 23 3/4 18 8 1/8 5 7/8 --
Third Quarter..................................... 30 1/2 20 3/4 7 5 1/8 --
Fourth Quarter.................................... 32 1/4 27 7 4 5/8 --
Fiscal 1996*
First Quarter..................................... $34 $29 3/4 $11 3/4 $ 5 7/8 --
Second Quarter.................................... 39 1/2 32 1/2 12 9 --
Third Quarter (through December 21)............... 41 3/4 33 5/8 13 7/8 8 1/4 --
</TABLE>
- ---------------
* Fiscal quarters. The fiscal years of Continuum and Hogan end on March 31.
On December 8, 1995, the last trading day prior to the announcement by
Continuum and Hogan that they had executed the Merger Agreement, the closing per
share sale prices of Continuum Common Stock and Hogan Common Stock, as reported
on the NYSE Composite Tape and the Nasdaq National Market, respectively, were
$40 5/8 and $11 5/8, respectively. See the cover page of this Joint Proxy
Statement/Prospectus for recent closing prices of Continuum Common Stock and
Hogan Common Stock.
Following the Merger, Continuum Common Stock will continue to be traded on
the NYSE. Following the Merger, Hogan Common Stock will cease to be traded on
the Nasdaq National Market, and there will be no further market for such stock.
Continuum has not paid cash dividends on Continuum Common Stock since the
first quarter of its fiscal year ended March 31, 1987. See "Market Prices of
Common Stock and Dividend Information" respecting Continuum's post-Merger
dividend policy.
11
<PAGE> 19
CONTINUUM
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION*
The selected historical consolidated financial information of Continuum
shown below for the five fiscal years ended March 31, 1995 has been derived from
Continuum's audited consolidated financial statements, and for the six-month
periods ended September 30, 1995 and 1994 has been derived from Continuum's
unaudited consolidated financial statements that include, in the opinion of
Continuum's management, all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the information for such periods. This
information should be read in conjunction with the consolidated financial
statements included in Continuum's Annual Report on Form 10-K for the fiscal
year ended March 31, 1995 and Continuum's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, incorporated by reference in this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED SEPTEMBER 30 YEARS ENDED MARCH 31
------------------- ----------------------------------------------------
1995 1994 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............... $194,531 $150,208 $323,536 $242,949 $238,934 $263,590 $259,758
Income (loss) from
continuing
operations.......... 16,430 11,878 26,204 (29,750) (5,361) (16,116) (7,462)
Earnings (loss) per
common share from
continuing
operations.......... .83 .63 1.38 (1.79) (.37) (1.11) (.55)
BALANCE SHEET DATA (END
OF PERIOD):
Total assets........... $215,570 $169,676 $199,700 $173,690 $170,909 $200,874 $227,939
Long-term debt......... 18,051 22,168 25,379 19,149 24,513 13,000 18,538
Stockholders' equity... 99,680 66,020 82,291 50,842 36,823 40,627 65,156
Dividends per common
share............... -- -- -- -- -- -- --
</TABLE>
- ---------------
* During the quarter ended September 30, 1993, Continuum acquired Paxus
Corporation Limited ("Paxus") and Vantage Computer Systems, Inc. ("Vantage").
The selected financial data has been restated to include the results of Paxus,
accounted for as a pooling of interests, for all periods presented and
Vantage, accounted for as a purchase, is included from September 30, 1993. In
connection with the Vantage and Paxus acquisitions, Continuum charged to
operations purchased research and development of $15,963,000 and restructuring
costs of $32,629,000, resulting in a loss for fiscal 1994. Losses prior to
fiscal 1994 result from retroactively including the operating losses of Paxus.
See "The Companies -- Continuum and Merger Sub -- Recent Developments" for
information regarding Continuum's pending acquisition of SOCS.
12
<PAGE> 20
HOGAN
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The selected historical consolidated financial information of Hogan and
subsidiaries shown below for the five fiscal years ended March 31, 1995 has been
derived from Hogan's audited consolidated financial statements, and for the
six-month periods ended September 30, 1995 and 1994 has been derived from
Hogan's unaudited consolidated financial statements that include, in the opinion
of Hogan's management, all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the information for such periods. This
information should be read in conjunction with Hogan's consolidated financial
statements and related notes and the audit report, which refers to a change in
the method of accounting for income taxes during the fiscal year ended March 31,
1994, included in Hogan's Annual Report on Form 10-K for the fiscal year ended
March 31, 1995 and Hogan's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, incorporated by reference in this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED SEPTEMBER
30 YEARS ENDED MARCH 31
----------------- -----------------------------------------------
1995 1994 1995 1994 1993 1992 1991
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues...................... $51,251 $43,471 $92,907 $72,485 $65,901 $57,636 $46,537
Income from continuing
operations................. 4,110 1,423 6,294 5,892 5,480 2,690 6,638
Earnings per common share from
continuing operations...... .27 .10 .43 .39 .38 .19 .49
BALANCE SHEET DATA (END OF
PERIOD):
Total assets.................. $98,358 $87,212 $96,681 $83,490 $71,645 $61,419 $59,666
Stockholders' equity.......... 61,212 51,343 56,670 52,129 49,805 43,927 42,512
Dividends per common share.... -- .17 .17 .17 .15 .15 --
</TABLE>
13
<PAGE> 21
SELECTED PRO FORMA FINANCIAL INFORMATION
The following unaudited selected pro forma financial information is based
on the historical consolidated balance sheets and related consolidated
statements of operations of Continuum and Hogan adjusted to give effect to the
Merger using the pooling of interests method of accounting for business
combinations.
The unaudited pro forma combined condensed balance sheets as of September
30, 1995 and March 31, 1995, 1994 and 1993 assume that the Merger occurred as of
those dates. The unaudited pro forma combined condensed statements of operations
for the six months ended September 30, 1995 and for the fiscal years ended March
31, 1995, 1994 and 1993 assume that the Merger occurred at the beginning of the
periods presented.
This pro forma financial information should be read in conjunction with the
unaudited pro forma combined condensed financial information and notes thereto
included elsewhere in this Joint Proxy Statement/Prospectus. The unaudited pro
forma financial information is not necessarily indicative of the operating
results or financial position that would have occurred had the Merger been
consummated on the dates indicated in the preceding paragraph nor is it
necessarily indicative of future operating results or financial position of the
combined companies.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED MARCH 31
SEPTEMBER 30, -------------------------------------------------
1995 1995 1994 1993
------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................... $ 245,782 $ 416,443 $ 315,434 $ 304,835
Income (loss) from continuing operations.... 20,540 32,498 (23,858) 119
Earnings (loss) per common share from
continuing operations.................... .81 1.34 (1.08) 0.01
BALANCE SHEET DATA (END OF PERIOD):
Total assets................................ $ 293,928 $ 296,381 $ 257,180 $ 242,554
Long-term debt.............................. 18,051 25,379 19,149 24,513
Stockholders' equity........................ 138,172 138,961 102,971 86,628
Dividends per common share.................. -- -- -- --
</TABLE>
See "The Companies -- Continuum and Merger Sub -- Recent Developments" for
information regarding Continuum's pending acquisition of SOCS.
14
<PAGE> 22
COMPARATIVE PER SHARE DATA
Set forth below are certain per common share data of Continuum and Hogan on
an historical basis, a pro forma basis for Continuum, and an equivalent pro
forma basis for Hogan. The Continuum pro forma data was derived by combining
historical consolidated financial information of Continuum and Hogan, giving
effect to the Merger under the pooling of interests method of accounting for
business combinations. Continuum's pro forma dividends per common share assume
no dividend payments in accordance with Continuum's historical dividend policy.
The equivalent pro forma data for Hogan was calculated by multiplying the
Continuum pro forma per common share data by the Exchange Ratio.
This information should be read in conjunction with the historical
financial statements of Continuum and Hogan incorporated by reference in this
Joint Proxy Statement/Prospectus and the unaudited pro forma combined condensed
financial information included elsewhere in this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED MARCH 31
SEPTEMBER 30, --------------------------
1995 1995 1994 1993
------------- ----- ------ -----
<S> <C> <C> <C> <C>
CONTINUUM
HISTORICAL PER COMMON SHARE DATA:
Income (loss) from continuing operations......... $ .83 $1.38 $(1.79) $(.37)
Dividends........................................ -- -- -- --
Book value....................................... 5.19 4.30
PRO FORMA PER COMMON SHARE DATA:
Income (loss) from continuing operations......... $ .81 $1.34 $(1.08) $ .01
Dividends........................................ -- -- -- --
Book value....................................... 5.67 5.73
HOGAN
HISTORICAL PER COMMON SHARE DATA:
Income from continuing operations................ $ .27 $ .43 $ .39 $ .38
Dividends........................................ -- .17 .17 .15
Book value....................................... 4.22 3.94
EQUIVALENT PRO FORMA PER COMMON SHARE DATA:
Income (loss) from continuing operations......... $ .29 $ .48 $ (.38) $ --
Dividends........................................ -- -- -- --
Book value....................................... 2.02 2.04
</TABLE>
Per share amounts for income (loss) from continuing operations were
computed based on the number of average shares outstanding during the period and
the dilutive effect of common stock equivalents. Per share amounts for book
value were computed based on the number of shares outstanding as of the end of
the period presented.
See "The Companies -- Continuum and Merger Sub -- Recent Developments" for
information regarding Continuum's pending acquisition of SOCS.
15
<PAGE> 23
THE COMPANIES
CONTINUUM AND MERGER SUB
General. Continuum is an international consulting and computer services
firm supplying information technology solutions to the insurance and financial
services industry. Continuum's revenues are principally derived from providing
outsourcing services, including third party administrative services to the
insurance industry, licensing sophisticated insurance software systems and
providing related software development, installation, customization, enhancement
and maintenance services. Outsourcing services offered by Continuum range from
providing a customer with remote processing of a single insurance software
application, to the complete replacement of a customer's data processing
department, as well as the provision of third party administration services. The
software systems marketed by Continuum streamline the work processes and
automate the administrative functions of insurance companies, such as issuing
policies, paying agents' commissions and complying with complex government
regulations and reporting requirements. Continuum offers a wide range of life
insurance, general insurance (also known as non-life or property and casualty
insurance), reinsurance and healthcare software applications, including products
with extensive adaptations to the specific regional requirements of the world's
major insurance markets. Continuum's product line includes systems designed for
use on mainframe computers, mid-range platforms, workstations and local area
networks.
Continuum's fee-based services business (a portion of which may be
characterized as outsourcing relationships), which currently provides over 90%
of Continuum's revenues, is built around Continuum's proprietary application
software systems, and emphasizes the cultivation and preservation of long-term
relationships with customers. Continuum's outsourcing contracts tend to be
long-term relationships with tendencies for on-going renewal. The implementation
of Continuum's software systems often generates significant service revenues
because the unique nature of each insurance company's products and operations
requires customization. Continuum's workforce of approximately 3,500 persons is
composed principally of skilled and experienced professionals with specialized
knowledge of software development, data processing and insurance operations.
Continuum was incorporated under the laws of the State of Texas in 1968,
and reincorporated in the State of Delaware in August 1987. The principal
executive offices of Continuum are located at 9500 Arboretum Boulevard, Austin,
Texas 78759-6399, and its telephone number at such offices is (512) 345-5700.
Merger Sub is a wholly-owned subsidiary of Continuum, incorporated on
November 30, 1995. Merger Sub conducted no business prior to entering into the
Merger Agreement.
Recent Developments. On December 15, 1995, Continuum announced it has
agreed to acquire all of the shares of SOCS Groupe, SA, a Paris-based software
and services company ("SOCS"), for FF 178 million (approximately $35 million).
SOCS is the leading provider of insurance application software and related
services to the French insurance industry. SOCS employs 200 people and generated
approximately $20 million in revenues for the fiscal year ended September 30,
1995. The acquisition is expected to be completed on or about December 28, 1995.
The acquisition will be accounted for using the purchase method of accounting
and, accordingly, the operating results of SOCS will be included in the
financial statements from the date of acquisition. SOCS' tangible assets and
liabilities are estimated at $10 million and $14 million, respectively. The
excess purchase price will be allocated to purchased software, goodwill and
purchased research and development. Based on preliminary information, it is
estimated that $24 million related to purchased research and development and $5
million of restructuring and other costs will be expensed after the acquisition.
In December 1995, Continuum renewed and increased its $20 million revolving
bank line of credit to $60 million. A portion of the credit line will be used to
fund the acquisition of SOCS.
HOGAN
Hogan is a leading provider of integrated software applications and related
consulting services to financial institutions worldwide. This marketplace
includes over 600 international and regional banks, money centers, thrifts,
building societies, credit unions, card-processing services and other
institutions, generally with asset
16
<PAGE> 24
bases in excess of $3 billion (collectively referred to as the "Financial
Industry"). The Financial Industry utilizes Hogan's software applications to
assist in conducting various data processing, information, management and
marketing activities. Included in these activities are deposits and loans
accounting, new product introduction, customer profile analysis, profitability
analysis, budget and forecasting, credit risk management, branch automation and
plastic card transaction processing. Hogan's software products are modular in
structure to enable the application of upgrades and enhancements. In addition,
the modular design allows Hogan's software to greatly reduce the cost of changes
to applications programs and facilitates upward compatibility for changes in
computer hardware and systems software. By incorporating the latest in both
mainframe and client/server technology within a unique application architecture,
Hogan's applications provide customers with significant functionality,
flexibility and processing performance. As a result, Hogan is well positioned to
benefit from the evolving requirements of interstate banking within the United
States and the growing international demand for general banking systems.
Hogan provides consulting services to the users of its banking
applications. Hogan's applications are complemented by a comprehensive range of
consulting services that includes systems implementation, consultation and
planning, customization and education, as well as special projects, such as the
introduction of new banking products, conversion of branch facilities and
integration of system upgrades. Hogan also provides maintenance support services
for its products.
Hogan primarily markets its products through direct sales efforts. It
maintains sales and sales support offices in England, Germany, Australia and
Italy as well as in its Dallas, Texas headquarters.
Founded in Dallas, Texas in 1977, Hogan is incorporated in the State of
Delaware. The principal executive offices of Hogan are located at 5080 Spectrum
Drive, Suite 400E, Dallas, Texas 75270-2014, and its telephone number at such
offices is (214) 386-0020.
THE SPECIAL MEETINGS
TIME, DATE, PLACE AND PURPOSE OF SPECIAL MEETINGS
The Continuum Special Meeting will be held at 10:00 a.m., local time, on
February 29, 1996, at Continuum's Headquarters, 9500 Arboretum Boulevard,
Austin, Texas for the purpose of approving the issuance and reservation for
issuance of up to 6,004,583 shares of Continuum Common Stock (the "Continuum
Issuance of Common Stock") pursuant to the Merger Agreement, as required by the
rules of the NYSE. The Hogan Special Meeting will be held at 10:00 a.m., local
time, on February 29, 1996, at the Spectrum Conference Center located at Hogan's
headquarters at 5080 Spectrum Drive, Dallas Parkway, Dallas, Texas for the
purpose of approving and adopting the Merger Agreement, as required by Delaware
law.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Continuum Common Stock outstanding at the close
of business on the Record Date (January 17, 1996), are entitled to notice of,
and to vote at, the Continuum Special Meeting. Only holders of record of Hogan
Common Stock at the close of business on the Record Date are entitled to notice
of, and to vote at, the Hogan Special Meeting.
On the Record Date, there were holders of record of Continuum
Common Stock, with shares of Continuum Common Stock issued and
outstanding. Each share of Continuum Common Stock entitles the holder thereof to
one vote on each matter submitted for stockholder approval. See "Principal
Stockholders of Continuum and Hogan -- Continuum" for information regarding
persons known to the management of Continuum to be the beneficial owners of more
than 5% of the outstanding Continuum Common Stock.
There were holders of record of Hogan Common Stock on the Record
Date, with shares of Hogan Common Stock issued and outstanding. Each
share of Hogan Common Stock entitles the holder thereof to one vote on each
matter submitted for stockholder approval. See "Principal Stockholders of
Continuum and Hogan -- Hogan" for information regarding persons known to the
management of Hogan to be the beneficial owners of more than 5% of the
outstanding Hogan Common Stock.
17
<PAGE> 25
VOTING AND REVOCATION OF PROXIES
All properly executed proxies that are not revoked will be voted at the
Continuum Special Meeting and the Hogan Special Meeting, as applicable, in
accordance with the instructions contained therein. If a holder of Continuum
Common Stock executes and returns a proxy and does not specify otherwise, the
shares represented by such proxy will be voted "for" approval of the Continuum
Issuance of Common Stock in accordance with the recommendation of the Board of
Directors of Continuum. If a holder of Hogan Common Stock executes and returns a
proxy and does not specify otherwise, the shares represented by such proxy will
be voted "for" approval and adoption of the Merger Agreement in accordance with
the recommendation of the Board of Directors of Hogan. A stockholder of
Continuum or a stockholder of Hogan who has executed and returned a proxy may
revoke it at any time before it is voted at the appropriate Special Meeting by
(i) executing and returning a proxy bearing a later date, (ii) filing written
notice of such revocation with the Secretary of Continuum or Hogan, as
appropriate, stating that the proxy is revoked or (iii) attending the
appropriate Special Meeting and voting in person.
VOTE REQUIRED
Continuum. Continuum's bylaws provide that the presence at the Continuum
Special Meeting, in person or by proxy, of the holders of a majority of the
outstanding shares of Continuum Common Stock entitled to vote thereat will
constitute a quorum for the transaction of business. The Continuum Issuance of
Common Stock does not, under state law, require stockholder approval. However,
the rules of the NYSE require, as a prerequisite to the listing on the NYSE of
the shares of Continuum Common Stock that are issued pursuant to the Merger
Agreement, that such issuance be approved by a majority of the votes cast on the
proposal, provided that the total vote cast on the proposal represents over 50%
of the shares of Continuum Common Stock entitled to vote on the proposal.
Abstentions and broker non-votes contained on a returned proxy card will be
counted towards a quorum, but will not be included in the total vote. Assuming
that holders of over 50% of the shares of Continuum Common Stock entitled to
vote on the proposal cast votes in favor of or against the proposal, abstentions
and broker non-votes will have no effect upon the outcome of the vote. DST has
entered into an agreement with Hogan pursuant to which DST has agreed to support
the affirmative recommendation of the Board of Directors of Continuum to its
stockholders regarding the Continuum Issuance of Common Stock and to vote its
5,544,553 shares (approximately %) of Continuum Common Stock in favor of
the Continuum Issuance of Common Stock.
Hogan. The presence at the Hogan Special Meeting, in person or by proxy, of
the holders of a majority of the outstanding shares of Hogan Common Stock
entitled to vote thereat will constitute a quorum for the transaction of
business, and approval and adoption of the Merger Agreement requires the
affirmative vote of a majority of the issued and outstanding Hogan Common Stock
entitled to vote thereon. Both abstentions and broker non-votes contained on a
returned proxy card will be counted towards a quorum. In determining whether the
Merger Agreement has received the requisite number of affirmative votes,
abstentions and broker non-votes will have the same effect as a vote against the
Merger Agreement. On the Record Date, the directors and executive officers of
Hogan held approximately % of the outstanding shares of Hogan Common Stock.
Each of such persons has advised Hogan that he or she plans to vote or direct
the vote of all such shares of Hogan Common Stock in favor of the proposal to
approve and adopt the Merger Agreement.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, employees and
agents of each of Continuum and Hogan may solicit proxies from their respective
stockholders by personal interview, telephone, telegram or otherwise. Continuum
and Hogan will each bear the costs of the solicitation of proxies from their
respective stockholders, except that Continuum and Hogan will each pay one-half
of the cost of printing this Joint Proxy Statement/Prospectus. Arrangements will
also be made with brokerage firms and other custodians, nominees and fiduciaries
who hold of record voting securities of Continuum or Hogan for the forwarding of
solicitation materials to the beneficial owners thereof. Continuum and Hogan
will reimburse such brokers, custodians, nominees and fiduciaries for the
reasonable out-of-pocket expenses incurred by them in connection therewith.
Hogan has engaged the services of D. F. King & Co., Inc. to distribute proxy
solicitation materials to brokers,
18
<PAGE> 26
banks and other nominees and to assist in the solicitation of proxies from Hogan
stockholders for a fee of $4,500 plus reasonable out-of-pocket expenses.
An automated system administered by Continuum's transfer agent, American
Stock Transfer & Trust Company, will be used to tabulate votes at the Continuum
Special Meeting. An automated system administered by Hogan's transfer agent,
KeyCorp Shareholder Services, Inc., will be used to tabulate votes at the Hogan
Special Meeting.
OTHER MATTERS
At the date of this Joint Proxy Statement/Prospectus, the Boards of
Directors of Continuum and Hogan do not know of any business to be presented at
their respective Special Meetings other than as set forth in the notices
accompanying this Joint Proxy Statement/Prospectus. If any other matters should
properly come before the respective Special Meetings, it is intended that the
shares represented by proxies will be voted with respect to such matters in
accordance with the judgment of the persons voting such proxies.
THE MERGER
GENERAL DESCRIPTION OF THE MERGER
The Merger Agreement provides that, at the Effective Time, Merger Sub will
merge with and into Hogan, with Hogan becoming the Surviving Corporation, and
each share of Hogan Common Stock outstanding immediately prior to the Effective
Time (other than Hogan Common Stock held directly or indirectly by Continuum or
by any direct or indirect wholly-owned subsidiary of Continuum or of Hogan, all
of which will be canceled), will be converted into the right to receive 0.355555
of a share of Continuum Common Stock, all as more fully described in the Merger
Agreement. See "Certain Terms of the Merger Agreement -- Manner and Basis of
Converting Shares."
Based on the number of shares of Continuum Common Stock and Hogan Common
Stock outstanding as of the Record Date, shares of Continuum Common
Stock will be issuable pursuant to the Merger Agreement (assuming no exercise
prior to the Effective Time of the Hogan Options), representing approximately
% of the total Continuum Common Stock to be outstanding after such
issuance.
BACKGROUND
In December 1994, with a view to broadening Hogan's marketing and
distribution capabilities as well as enhancing its efforts to promote its
products and to maximize stockholder value, Hogan's Board authorized Hogan
management to engage Morgan Stanley as financial advisors to Hogan for the
purpose of conducting a general review and financial analysis of Hogan. Morgan
Stanley made preliminary presentations to Hogan's Board in early 1995 relating
to Hogan's strategic alternatives and, based on the recommendations made during
those presentations, on June 7, 1995, Hogan announced that it had retained
Morgan Stanley as its financial advisor for the purpose of evaluating strategic
alternatives to maximize stockholder value.
Morgan Stanley identified several prospective strategic partners and
financial buyers for Hogan, and distributed to them, subject to the terms of
confidentiality agreements, a copy of a confidential memorandum containing
information about Hogan. On October 24, 1995, Morgan Stanley made a detailed
presentation to Hogan's Board describing the various strategic alternatives
available to Hogan, including a detailed valuation presentation of Hogan based
on projected cash flows, precedent transaction premiums and pro forma analysis
with respect to certain strategic partners. Morgan Stanley indicated that a
number of parties had expressed an interest in Hogan. One of the interested
parties was Continuum.
On November 1, 1995 Continuum's management made a general presentation to
its Board of Directors regarding possible new lines of business, including
software applications relating to banks. Hogan was discussed as part of this
general presentation, but no transaction was proposed at this meeting. Prior to
the November 1, 1995 meeting, Continuum management provided its Board of
Directors with background
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<PAGE> 27
research material on the converging financial services industry and the market
for banking related technology solutions.
On November 6, 1995, Michael H. Anderson, Hogan's Chairman and Chief
Executive Officer, met with W. Michael Long, Continuum's President and Chief
Executive Officer, to discuss Continuum's interest in Hogan and Continuum's
vision of a combined Continuum-Hogan entity for the purpose of reporting to
Hogan's Board the merits of a transaction with Continuum. After lengthy
discussions relating to the overall strategies of the two organizations, it was
agreed that Continuum and Hogan should proceed to perform substantial
investigations and reviews of each other's businesses for purposes of evaluating
the benefits of a possible combination.
During the month of November, Hogan and representatives of Morgan Stanley
continued discussions with other interested parties and began a due diligence
review of Continuum, including discussions with Continuum's management. Based on
the preliminary information received by Hogan during the due diligence process,
Hogan's Chairman called a telephonic meeting of Hogan's Board on November 20,
1995. At the meeting, Hogan's Board instructed its Chairman to have Morgan
Stanley and the management of Hogan continue due diligence on Continuum to help
better evaluate the benefits of a potential combination and formed a special
committee comprised exclusively of outside directors (the "Hogan Special
Committee") for the purpose of considering a possible transaction for Hogan's
acquisition by or merger with Continuum or any third party which Hogan
management might propose to Hogan's Board. On November 27, 1995, certain members
of Hogan's management and Continuum's management, along with their respective
legal advisors, met to begin negotiating the terms of a possible transaction.
Representatives of Morgan Stanley rendered advice in conjunction with such
negotiations.
On December 3, 1995, Hogan's Chairman and Continuum's Chief Executive
Officer met telephonically to continue discussions aimed at narrowing the range
of prices at which Continuum might be willing to acquire Hogan, and, after
substantial negotiation, tentatively agreed to present to their respective
Boards a fixed exchange ratio of 0.355555 shares of Continuum Common Stock
(previously defined as the "Exchange Ratio") for each share of Hogan Common
Stock. On December 4, 1995, Hogan's Chairman convened a meeting of Hogan's
Board, attended by Hogan management and representatives of Morgan Stanley, in
which he outlined points of agreement and presented the issues on which closure
had not been reached with Continuum. He indicated to Hogan's Board that the
proposed Exchange Ratio represented in excess of $14 per share of Hogan Common
Stock based on the recent trading prices of Continuum Common Stock. Hogan
management presented its view of the synergistic opportunities and the strategic
rationale of the combination. Thereafter, Morgan Stanley presented an analysis
of the transaction, based on the fixed Exchange Ratio, which described, among
other things, the business and historic results of Continuum and the results of
Morgan Stanley's due diligence, Hogan management's view of the synergistic
opportunities of the combination, Continuum's trading value range, the historic
trading ranges of Hogan and Continuum stock, Hogan management's view of the
strategic rationale for the acquisition and the effect of the transaction and
certain synergies on Continuum's earnings per share. Morgan Stanley then
indicated that it had been made aware by Continuum management of a pending
transaction in which Continuum would acquire SOCS, but that it did not have
enough information to provide a meaningful analysis of the transaction to
Hogan's Board. Following its presentation, Morgan Stanley rendered its oral
opinion that as of December 4, 1995, subject to the favorable resolution of
certain key issues and a review of the SOCS transaction, the Exchange Ratio was
fair from a financial point of view to the holders of Hogan Common Stock. The
representatives of Morgan Stanley were questioned by members of Hogan's Board as
to the risks involved in having a fixed exchange ratio without a collar to
protect Hogan stockholders from unexpected fluctuations in Continuum's stock
price, and Morgan Stanley's representatives provided Hogan's Board with its
analysis of the factors which may contribute to either upward or downward
movements in Continuum's stock price. Members of Hogan's Board then questioned
the representatives of Morgan Stanley about the existence of other competitive
bids for Hogan and the prospects of more advantageous bids from other
prospective purchasers, and Morgan Stanley's representatives noted that of those
contacted, no other party submitted a proposal for a transaction with Hogan at a
level above Continuum's proposal.
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<PAGE> 28
After the presentation, the Hogan Special Committee met and determined that
if, prior to signing the Merger Agreement, Hogan received an executed letter
agreement from DST that DST would vote in favor of the issuance of shares in the
Merger to Hogan's stockholders, Hogan's Board received additional information
about the SOCS transaction, Hogan protected its stockholders from any material
dilutive impact that the issuance of any Continuum securities might have and the
requirement that certain key employees of Hogan execute continuing employment
agreements with Continuum as a condition to the Merger was satisfied, the
transaction would be favorable to Hogan stockholders, and subject to those
requirements and the favorable resolution of other remaining issues, approved
the transaction to Hogan's Board.
On December 5, 1995, Continuum convened a telephonic meeting of its entire
Board of Directors. Several days prior to the meeting, Continuum management
provided each member of its Board of Directors with an extensive written report
describing the findings of Continuum's due diligence review of Hogan and
presenting Continuum management's financial and business analysis of the
proposed Merger. After extensive questioning of Continuum management and
discussion of the potential risks and benefits of the proposed transaction,
Continuum's Board unanimously approved the acquisition of Hogan, but without
obligation of DST to vote its shares for the Continuum Issuance of Common Stock.
Also on December 5, Hogan convened a telephonic meeting of its Board of
Directors in which Morgan Stanley presented its analysis of the SOCS
transaction. In addition, Hogan's legal counsel indicated that a floor of $13
had been negotiated to protect Hogan stockholders from the dilutive impact of an
issuance of Continuum securities or the issuance of a press release related
thereto. See "Certain Terms of the Merger Agreement -- Manner and Basis of
Converting Shares." Hogan's Board then reaffirmed its position that it would not
sign an agreement without a letter agreement from DST.
On December 8, 1995, DST executed the letter agreement and the next day,
certain executives of Hogan agreed to continuing employment agreements. On
December 10, 1995, after favorably resolving the remaining issues, Hogan,
Continuum and Merger Sub entered into the Merger Agreement.
CERTAIN INFORMATION
In connection with Continuum's due diligence investigation of Hogan, Hogan
disclosed to Continuum management's goals for Hogan's operating results for
fiscal years 1996 through 1998. Such goals indicated revenue growth of
approximately 20% per year and net income improving to 13% of revenues by fiscal
year 1998. The foregoing goals were prepared by Hogan management for internal
planning purposes and not with a view to public disclosure and are included
herein only because the information was provided to Continuum. The goals are
necessarily based on numerous assumptions regarding general business and
economic conditions, the success of sales efforts, and other matters, many of
which are unpredictable or beyond management's control. There can be no
assurance that these goals will actually be achieved.
CONTINUUM'S REASONS FOR THE MERGER; RECOMMENDATION OF BOARD OF DIRECTORS OF
CONTINUUM
Introduction. Continuum views its expansion into banking software and
services by combining with Hogan as a logical expansion into a closely related
industry that Continuum is well positioned to serve through its existing
customer relationships and international infrastructure. Continuum believes the
Merger is an essential long-term strategic move that will position the combined
company to serve the emerging global diversified financial services industry,
while at the same time providing it with attractive near-term opportunities for
increased revenues and cost savings.
Continuum believes that, in important markets around the world, the
barriers are dropping between the various financial services sectors, such as
insurance, banking and mutual funds. Globally, regulatory restrictions are
easing, allowing integrated financial services organizations to expand their
products and services. In addition, individual providers are forming
partnerships and alliances to deliver comprehensive sets of financial services
offerings through varied points of contact with the consumer, including direct
response, home computers and telephones, kiosks, financial planners and sales
representatives. The evolution of these
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<PAGE> 29
"virtual" organizations is being driven by consumer demand for financial
products and services that are low cost, convenient, flexible and high quality.
As financial sectors converge, the complexity of the resulting financial
services businesses and increasing cost competition are forcing the players to
focus on their core competencies while turning to specialist partners to manage
non-core functions such as information technology, back-office administration
and telesales and teleservices. The Merger, combined with Continuum's strategic
alliance with DST, advances Continuum's strategy to become the leading provider
of information technology and outsourcing services to this integrated financial
services industry. Continuum intends to capitalize on the combined assets of
Continuum and Hogan, including:
- Intellectual property comprising the industry's most comprehensive
inventory of banking and insurance software systems;
- An extensive pool of 4,200 professionals with industry-specific expertise
in insurance and banking; and
- A broad global customer base of approximately 800 financial institutions.
Convergence of Financial Services Industry. Rapid creation of consumer
wealth and shifting consumer demographics, especially the aging of the worldwide
population and the resulting growth of unfunded pension liabilities, are causing
increased consumer investment in financial products and services. This has
created a large and growing market that insurance companies, banks and mutual
fund providers are all competing to serve. It is this competition for both the
investment dollars and ownership of the customer relationship that is driving
the virtual and physical convergence of financial services.
This convergence is more advanced outside the U.S., where significant
deregulation has already occurred. In Europe, banks are well established
providers of insurance (called "bancassurance") and increasingly, insurers are
adding traditional banking products to their portfolios. For example, more than
half of life insurance sales in France are by banks.
Inside the U.S., regulations from the Depression Era continue to restrict
full-scale entry of banks and insurers into each others' businesses. Continuum
expects continuing relaxation of regulatory restrictions. U.S. financial
services providers are already joining in alliances and partnerships to provide
comprehensive offerings to consumers. For example, banks are distributing
annuities manufactured by insurers, and mutual funds providers are managing the
underlying funds in insurers' variable products.
To meet changing consumer demands, both banks and insurers are responding
with new products, new distribution channels, new organizational structures and
new uses of technology. For example, U.S. life insurers, historically
Continuum's largest market, have shifted their product offerings from
traditional cash value-based offerings to investment based products. Currently,
more than half of U.S. life insurers' assets are derived from investment-based
policies. Similarly, banks have diversified their products to include mutual
funds and annuities. Last year approximately one-third ($25 billion) of
individual annuities in the U.S. were sold by banks. This growing shift in
business composition has put life insurers and banks in direct competition with
other financial services providers, which have considerably lower distribution
and administrative costs.
Continuum's Strategy. Continuum's recognition of the opportunities these
trends bring is not new. A significant number of Continuum's newest customers
are European and Asia-Pacific financial services companies engaged in both
banking and insurance. Before the Merger, Continuum's bancassurance customers
numbered approximately 30. Today Continuum and Hogan share common customers who
use Hogan software for their banking activities and Continuum solutions for
their insurance activities.
Hogan's extensive integrated banking software systems and Continuum's
market-leading insurance systems will enable Continuum to provide comprehensive
information technology products to both banks and insurers. In addition,
Continuum and Hogan together support business requirements that are common to
both banks and insurers, with products for client relationship management,
workflow management, telebusiness technology, point-of-sale automation, decision
support, executive information and data warehousing.
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<PAGE> 30
Currently, outside professional and outsourcing services approximate 10% of
the estimated $50 billion that insurers spend annually on information
technology. Continuum has recently developed an extensive set of outsourcing
services for information technology and business processes that are helping
insurers reach new levels of cost efficiency and flexibility. Though insurers
have been late adopters of outsourcing solutions, since 1993 Continuum has built
an insurance outsourcing business that now approximates 40% of Continuum's
revenues. Continuum believes that this outsourcing trend is accelerating and
represents significant revenue growth opportunities for the company.
Continuum and Hogan together will bring an expanded, flexible definition of
outsourcing to the banking industry. Although mid-tier banks were early
outsourcing adopters, larger banks are only now broadening their use of these
services. Industry forecasts indicate that by 1999 the annual expenditure by
banks on professional and outsourcing information technology services will
exceed $35 billion. The addition of Hogan's products, customer relationships and
industry expertise to Continuum's proven applications and methodologies will
well position Continuum to serve the needs of banks, insurers and the emerging
integrated financial services companies with outsourcing services.
As a result of the financial services industry convergence and ongoing
consolidations, Continuum expects the dominant financial services players to be
large, multi-national companies offering comprehensive products and services. Of
the 120 financial services providers listed in Fortune's "Global 500,"
approximately 45% are currently Continuum and Hogan customers. The Merger with
Hogan will position Continuum to be the leading provider of information
technology solutions to these integrated financial services companies.
Expanded Near-Term Opportunities for Continuum and Hogan Software and
Services. The Merger presents significant near-term opportunities for revenue
growth as well as serving Continuum's long-term strategy. Outsourcing,
international sales and cross-selling of products and services are major areas
in which Continuum sees initial sales and servicing synergies.
Outsourcing
Continuum believes the Merger will provide Continuum with the opportunity
to expand its outsourcing business due to the following factors:
o Continuum's outsourcing expertise,
o The sales capability of Continuum's outsourcing division, Continuum
Strategic Solutions International,
o Access to the data processing resources of DST,
o Hogan's proprietary software, banking expertise and market position and
o Increased financial strength and infrastructure of the combined company.
Continuum plans to focus its outsourcing marketing efforts in at least five
areas:
o Hogan's proprietary software systems, particularly its core deposit and
loans systems, are in use by approximately 130 large banking institutions.
Continuum will offer these banks the option of retaining the management
and support responsibility for these complex applications or contracting
with Continuum to satisfy their business requirements through outsourcing
arrangements.
o The Hogan banking products were initially developed to meet the needs of
large, global banks. Continuum believes the business requirements of
mid-tier banking organizations competing in interstate and international
markets are becoming as sophisticated as large, global banks, but are not
being adequately addressed by currently available product or outsourcing
solutions. Continuum intends to offer these banks both product and
outsourcing solutions, with outsourcing services supported by Hogan's
extensive integrated banking software systems.
o Continuum believes the addition of Hogan's proprietary software and
banking expertise will position Continuum to meet the needs of emerging
integrated financial services companies with outsourcing services.
Initially in Europe and Asia-Pacific, Continuum believes these new
integrated companies that offer both banking and insurance products and
services have less allegiance to traditional organizational structures and
will be favorably disposed to using outsourcing services. Further,
Continuum believes
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these virtual companies would prefer a single, primary outsourcing
relationship if a supplier can provide the technical skills, solutions and
vertical market industry knowledge to assist them with the smooth
integration of diversified financial products and services. Continuum also
believes that these companies have a growing sense of urgency to identify
and select their specialist partners, creating an immediate opportunity
for Continuum.
o Recently insurers have begun to outsource specific business processes,
such as customer service, telesales and teleservicing along with the
underlying information technology. These arrangements have variable
pricing components dependent on transaction or volume usage. During 1995,
business process outsourcing has contributed to Continuum's backlog
arrangements with approximately $90 million in future revenues. Continuum
believes that business process outsourcing offerings can be developed and
marketed to banks and integrated financial services companies as well as
to insurers.
o Continuum believes that as network-based computing and electronic
commerce becomes more pervasive, many banks, insurers and integrated
financial services companies will opt for a more highly leveraged form of
outsourcing that relies on transaction or volume-based usage charges for
mission critical administrative applications rather than custom
outsourcing arrangements. Continuum believes the extensive proprietary
banking and insurance software systems to be combined by the Merger
uniquely position Continuum to deliver these systems capabilities globally
to financial institutions through networking, providing these customers
with economies of scale. Through this form of outsourcing, financial
institutions will be able to use and buy services based on what they need,
where they want it and when they require it, as frequently as they desire.
Improved Sales of Hogan Products and Services Outside the United States
Continuum has established sales and support offices in all major banking
and insurance markets and relationships with many diversified financial
institutions outside the United States. Continuum believes that this established
international presence will improve the prospects for sales of Hogan products
and services outside the United States in the following ways:
o Leveraging existing Continuum relationships with leading financial
services companies;
o Increasing awareness of local buying decisions, leading to participation
in more sales opportunities;
o Improving sales and marketing effectiveness resulting from inclusion of
local nationals who know the language, culture and business nuances; and
o Raising buyer confidence from dealing with a much larger company.
In addition, the cost of travel and other expenses (such as language
translation costs) associated with sales and services delivery will be lowered
through use of local Continuum resources. Local banking industry expertise will
be more easily obtained and supported through the existing Continuum
infrastructure.
Cross Industry Products and Services
The Merger provides new opportunities for cross-selling of products and
related services into Hogan's and Continuum's customers and prospects. Important
examples of these opportunities are:
o The workflow management software marketed by Continuum to insurance
companies is equally valuable to other financial services providers,
including banks seeking to improve the efficiency and quality of business
processes (i.e., mortgage processing and servicing) through automation.
o Client information systems and relationship management systems currently
offered by both companies can be implemented across financial services
segments, providing valuable consolidated information about customers and
all their relationships to financial services providers.
o Telecenter activity in both banking and insurance is increasing as
consumers seek more flexible ways of accessing services and as financial
services providers seek to lower costs. Continuum provides software
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and services for managing telesales and teleservice centers that have
immediate application to the banking industry.
o Point-of-sale automation, including Continuum's agency decision support
system, is valuable to bank sales representatives.
o Hogan's executive information systems, including the earnings analysis
system and the budgeting and planning system, can be used by insurers to
increase the quality of information at the point of decision making.
o Hogan's data warehousing offerings accelerate Continuum's plans to
provide these capabilities to insurance companies.
After the Merger, Continuum will represent a single source for
comprehensive banking and insurance administration systems to banks, insurers
and integrated financial services providers. These software systems represent
thousands of person years and hundreds of millions of dollars of research and
development, and it would take many years to replicate their function and
capabilities. Continuum intends to integrate and package these systems with
other products and services to provide immediate solutions for customers.
Continuum believes significant opportunity exists in systems integration
services. The convergence of the financial services sectors is bringing together
a variety of disparate, disconnected back office systems. These systems contain
valuable information that must be integrated for quality decision making, sales
and service. Continuum's and Hogan's products, including workflow management
systems, customer information systems, executive information systems and data
warehousing, surround these back-office systems and improve their utility and
productivity. Hogan's customer services to date have focused primarily on the
implementation of Hogan software products. Continuum has offered more
comprehensive consulting and systems integration services that will be offered
to banks to expand and extend the services relationship with Hogan's customers.
Cost Synergies. Continuum believes the Merger will lead to significant cost
savings for the combined entity. Continuum expects to achieve estimated cost
savings of approximately $12 million per year, with additional cost savings
probable but not yet quantifiable. Continuum has identified opportunities for
cost savings in the following areas:
Costs of Operations Outside the United States. Hogan currently incurs
significant costs to market its products and services outside the United
States and to staff its ongoing software implementation projects outside
the United States. Continuum intends to provide support and staffing for
Hogan marketing and implementation projects from Continuum's established
offices outside of the United States. Such local support by Continuum will
result in reduced travel costs as well as lower tax and compensation
expenses by reducing the use of US expatriates to provide services outside
the United States. Continuum has also identified opportunities for reduced
occupancy costs by eliminating duplicate facilities in certain locations
outside the United States.
Corporate Overheads. Continuum expects to achieve cost savings by
consolidating certain accounting, legal, human resources and marketing
functions. In addition, by combining two public companies into one,
corporate expenses related to annual reports, audits and shareholder
meetings will be substantially reduced.
Data Centers. Hogan operates a data center in Dallas, Texas. Continuum
expects to achieve cost savings by consolidating data processing
activities.
Product Development Savings. Hogan and Continuum have overlapping
investments in developing technology platforms for their application
software systems. Continuum expects to achieve cost savings through
consolidating these development activities.
Employee Benefit Expenses. Continuum expects to achieve savings by
combining employee benefit programs of Hogan and Continuum.
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Improved Cost Controls. Hogan's expenses in certain areas, including
travel expenses and independent contractor expenses, are high relative to
Continuum's experience. Continuum intends to implement cost control
policies and procedures to reduce costs in these areas.
For the foregoing reasons, the Board of Directors of Continuum believes
that the Exchange Ratio and the other terms of the Merger Agreement are fair to,
and in the best interests of, Continuum and the stockholders of Continuum. In
reaching its conclusion, Continuum's Board considered the judgment and advice of
Continuum's management, the prior operating performance and future business
prospects of Hogan, the reasonableness of achieving prospective cost savings and
future incremental revenues from the combined operation, the terms of the Merger
Agreement and the risks associated with achieving expected results. At the
special meeting held on December 5, 1995, all members of the Board of Directors
of Continuum expressed support for the Merger, approved the Merger Agreement and
recommended that the stockholders of Continuum vote "for" approval of the
Continuum Issuance of Common Stock.
HOGAN'S REASONS FOR THE MERGER; RECOMMENDATION OF BOARD OF DIRECTORS OF HOGAN
THE BOARD OF DIRECTORS OF HOGAN HAS UNANIMOUSLY APPROVED AND ADOPTED THE
MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF SHARES OF HOGAN
COMMON STOCK VOTE FOR ADOPTION OF THE MERGER AGREEMENT. In reaching its
decision, the Board of Directors of Hogan considered among other things: (i) the
participation of Hogan stockholders in the synergies and growth possibilities
created by the Merger; (ii) Continuum's worldwide distribution network and
experience in outsourcing; (iii) the relative stability of Continuum's stock
price as compared to Hogan's stock price; (iv) Hogan's challenge to successfully
implement a global distribution network as a stand-alone entity; (v) cultural
similarities and common goals and perspectives of Continuum's and Hogan's
management teams; (vi) the fact that Continuum's products complement Hogan's
products, providing a strong basis for the realization of synergies; (vii)
historic earnings strength of Continuum and favorable market perception of
Continuum stock; (viii) presentations and advice given by Morgan Stanley; (ix)
the opinion by Morgan Stanley as to the fairness from a financial point of view
of the Exchange Ratio to the holders of Hogan Common Stock; (x) the tax-free
nature of the transaction that provides the ability for Hogan stockholders to
defer recognition of taxable gains; and (xi) the fact that Continuum had
indicated that it would seek to expand Hogan's business and therefore most Hogan
employees would remain employed.
The foregoing discussion of the information and factors considered and
given weight by Hogan's Board of Directors is not intended to be exhaustive. In
view of the variety of factors considered in connection with its evaluation of
the Merger, Hogan's Board of Directors did not find it practicable to and did
not quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of
Hogan's Board may have given different weight to different factors.
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OPINION OF HOGAN'S FINANCIAL ADVISOR
Hogan retained Morgan Stanley to act as its financial advisor in connection
with the Merger. Morgan Stanley was selected by the Hogan Board to act as
Hogan's financial advisor based on Morgan Stanley's qualifications, expertise
and reputation.
On December 4, 1995, Morgan Stanley orally advised the Hogan Board that, as
of such date, subject to the favorable resolution of certain key issues and a
review of the SOCS transaction, the Exchange Ratio is fair from a financial
point of view to the holders of Hogan Common Stock. Such advice was confirmed,
after resolution of such issues and review of the SOCS transaction, in a written
opinion dated as of and delivered on December 10, 1995. No limitations were
imposed by the Hogan Board upon Morgan Stanley with respect to the
investigations made or procedures followed by it in rendering its opinion.
THE FULL TEXT OF THE OPINION OF MORGAN STANLEY DATED DECEMBER 10, 1995,
WHICH SETS FORTH ASSUMPTIONS MADE AND MATTERS CONSIDERED, IS SET FORTH AS
APPENDIX II HERETO. HOGAN STOCKHOLDERS ARE URGED TO READ THE OPINION CAREFULLY
AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION IS DIRECTED ONLY TO THE FAIRNESS
OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER OF HOGAN AS TO HOW SUCH STOCKHOLDER SHOULD
VOTE AT THE HOGAN SPECIAL MEETING. THE SUMMARY OF THE OPINION OF MORGAN STANLEY
SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
SUCH OPINION.
In rendering its opinion, Morgan Stanley, among other things: (i) analyzed
certain publicly available financial statements and other information of Hogan;
(ii) analyzed certain internal financial statements and other financial and
operating data concerning Hogan prepared by the management of Hogan; (iii)
analyzed certain financial projections prepared by the management of Hogan; (iv)
discussed the past and current operations and financial condition and the
prospects of Hogan with senior executives of Hogan; (v) analyzed certain
publicly available financial statements and other information of Continuum; (vi)
analyzed certain internal financial statements and other financial and operating
data concerning Continuum prepared by the management of Continuum; (vii)
analyzed certain financial projections prepared by the management of Continuum;
(viii) discussed the past and current operations and financial condition and
prospects of Continuum with senior executives of Continuum, and analyzed the pro
forma impact of the Merger on Continuum's earnings per share and consolidated
capitalization and financial ratios; (ix) reviewed the reported prices and
trading activity of Hogan Common Stock; (x) compared the financial performance
of Hogan and the prices and trading activity of Hogan Common Stock with that of
certain other comparable publicly traded companies and their securities; (xi)
reviewed the reported prices and trading activity of Continuum Common Stock;
(xii) compared the financial performance of Continuum and the prices and trading
activity of Continuum Common Stock with that of certain other comparable
publicly traded companies and their securities; (xiii) reviewed the financial
terms, to the extent publicly available, of certain comparable acquisition
transactions; (xiv) reviewed and discussed with the senior management of
Continuum the strategic rationale for the Merger; (xv) participated in
discussions and negotiations among representatives of Hogan and Continuum and
their legal advisors; (xvi) reviewed the Merger Agreement and certain related
documents; and (xvii) performed such other analyses as it deemed appropriate.
Morgan Stanley assumed and relied upon, without independent verification,
the accuracy and completeness of the information reviewed by it for the purpose
of rendering its opinion. With regard to the financial projections, including
estimates by the management of Hogan of the cost savings and other synergies
expected to be derived from the Merger, Morgan Stanley assumed that they were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the future financial performance of Continuum and Hogan,
respectively. Morgan Stanley did not make any independent valuation or
appraisals of the assets or liabilities of Hogan, nor were they furnished with
any such appraisals. Morgan Stanley's opinion states that it is necessarily
based on economic, market and other conditions as in effect on, and the
information made available to Morgan Stanley as of the date of such opinion.
The following is a brief summary of certain financial analyses performed by
Morgan Stanley in connection with the preparation of its opinion letter and its
presentation to the Hogan Board on December 4, 1995.
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Comparative Stock Price Performance. As part of its analysis, Morgan
Stanley reviewed the stock market performance of Hogan and Continuum and
compared them to the market performance of certain comparable companies. Morgan
Stanley compared historic stock price performance of Hogan with a group of
several publicly traded companies in the financial software, vertical
applications software and professional services industries. Financial software
companies included BISYS Group, Inc., Broadway & Seymour, Inc., Deluxe
Corporation, FIServ, Inc. ("FIServ"), SEI Corporation and Sunguard Data Systems,
Inc. Vertical applications software companies included Policy Management Systems
Corporation ("PMS"), MARCAM Corporation ("MARCAM"), System Software Associates,
Inc. and Walker Interactive Systems, Inc. Professional services companies
included Computer Sciences Corporation, Electronic Data Systems, Keane, Inc. and
Technology Solutions Company. Morgan Stanley also compared historic stock price
performance of Continuum with a group of publicly traded companies including
PMS, MARCAM, FIServ, System Software Associates and Hogan. In particular, such
analysis showed that Hogan's stock had experienced volatility throughout the
year and had only recently performed in accordance with its peer group and that
Continuum's stock had outperformed comparable companies over a 12-month period
ending December 1, 1995.
Discounted Cash Flow Analysis. Morgan Stanley performed a discounted cash
flow analysis of Hogan for the fiscal years ended 1996 through 2000 based on
certain projections prepared by the management of Hogan. Morgan Stanley
discounted the unlevered free cash flows (net income plus depreciation and
amortization plus deferred taxes plus after-tax net interest expense less
capital expenditures and investment in working capital) over the forecast period
using a range of discount rates from 18% to 22%. The sum of the present values
of such free cash flows was then added to the present value of Hogan's terminal
value, calculated using terminal multiples of net income of 11 to 15 times and
discounted at the aforementioned range of discount rates. Based on this
analysis, Morgan Stanley noted that the per share values for Hogan Common Stock
ranged from approximately $11 to $15, based upon Hogan's fully diluted shares
outstanding.
Analysis of Selected Precedent Transactions. Morgan Stanley examined
selected precedent transactions involving professional software and services
companies. Morgan Stanley reviewed the following 10 software transactions since
1993: the merger or acquisition of Information Technology, Inc. by FIServ, ACT
Group plc by Misys plc, Easel Corporation by VMARK Software, Inc., Creative
Group Holdings by PMS, Digital Communications Associates, Inc. by Attachmate
Corporation, Manzanita Software Systems by State of the Art, Inc.,
KnowledgeWare, Inc. by Sterling Software, Inc., The ASK Group, Inc. by Computer
Associates International, Inc., Cybertek Corporation by PMS and Systems Center,
Inc. by Sterling Software, Inc. The transactions suggested a range of
approximately 20% to 50% premiums paid over the market price of the company one
day prior to announcement.
Pro Forma Analysis of the Merger. Morgan Stanley analyzed certain pro forma
effects of the Merger on the earnings and capitalization of the combined
company. These analyses were based on certain forecasts provided by Hogan senior
management regarding the financial performance of Hogan and Continuum and
research analyst estimates regarding the financial performance of Continuum.
Based on such analysis, Morgan Stanley computed the resulting effect on
Continuum's earnings per share estimates pursuant to the Merger including taking
into account certain potential synergies.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. Morgan
Stanley believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinion. In addition,
Morgan Stanley may have given various analyses more or less weight than other
analyses, and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting for any particular
analysis described above should not be taken to be Morgan Stanley's view of the
actual value of Hogan.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Hogan and Continuum. The
analyses performed by Morgan Stanley are not necessarily indicative of actual
values, which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as a part of Morgan Stanley's
analysis of the fairness of the Exchange Ratio
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from a financial point of view to the holders of Hogan Common Stock and were
provided to the Hogan Board in connection with the delivery of Morgan Stanley's
opinion dated December 10, 1995. The analyses do not purport to be appraisals or
to reflect the prices at which Hogan might actually be sold. Because such
estimates are inherently subject to uncertainty, none of Hogan, Morgan Stanley
or any other person assumes responsibility for their accuracy. In addition, as
described above, Morgan Stanley's opinion and presentation to the Hogan Board
was one of many factors taken into consideration by the Hogan Board in making
its determination to approve the merger. Consequently, the Morgan Stanley
analyses described above should not be viewed as determinative of the Hogan
Board's or Hogan management's opinion with respect to the value of Hogan or of
whether the Hogan Board of Hogan management would have been willing to agree to
a different exchange ratio.
Hogan retained Morgan Stanley based upon its experience and expertise.
Morgan Stanley is an internationally recognized investment banking and advisory
firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
primary and secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. In the ordinary
course of its trading and brokerage activities, Morgan Stanley or its affiliates
may, from time to time, have a long or short position in, may trade or otherwise
affect transactions for its own account or for the accounts of its customers in
securities of Hogan and Continuum. Morgan Stanley and its affiliates have
provided financial advisory and financing services to Hogan in the past and have
received customary fees in connection with these services.
Pursuant to a letter agreement dated April 17, 1995, between Hogan and
Morgan Stanley, Morgan Stanley is entitled to an advisory fee for its time and
efforts expended, which fee is estimated to be between $100,000 and $150,000
payable in the event the transaction is not consummated or a transaction fee of
approximately $2,000,000, which fee is payable upon consummation of the
transaction. Hogan has also agreed to reimburse Morgan Stanley for its
out-of-pocket expenses and to indemnify Morgan Stanley and its affiliates, their
respective directors, officers, agents and employees and each person, if any,
controlling Morgan Stanley, or any of its affiliates against certain
liabilities, including liabilities under federal securities laws, and expenses,
related to Morgan Stanley's engagement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of Hogan's Board of Directors with
respect to the Merger, Hogan's stockholders should be aware that certain members
of Hogan's Board and management have certain interests respecting the Merger
separate from their interests as holders of Hogan Common Stock, including those
referred to below.
Under the Merger Agreement, Continuum has agreed to take action as of the
Effective Time to assume each of the Hogan Options that remains unexercised in
whole or in part at such time. See "Certain Terms of the Merger
Agreement -- Hogan Options." Pursuant to such assumption, each assumed Hogan
Option will be exchanged for an option for the purchase of such number of shares
of Continuum Common Stock that the holder of the Hogan Option being assumed
would have received (without regard to any vesting schedule) upon consummation
of the Merger had such Hogan Option been exercised immediately prior to the
Effective Time, and appropriate adjustment will be made to the per share
exercise price. The currently unvested portion of all of the Hogan Options held
by each of the directors and executive officers of Hogan will be vested and
exercisable in full as a result of the Merger, either as a consequence of the
terms of the stock option plans pursuant to which such Hogan Options were issued
or separate agreements between Hogan and such persons. The following directors
of Hogan hold Hogan Options to purchase the aggregate number of shares of Hogan
Common Stock set forth after their names, with the currently unvested portion
thereof and the average exercise price of all options, including those the
vesting of which will be accelerated, shown in parentheses: Michael H.
Anderson -- 175,000 (175,000; $6.43); William H. Dougherty -- 30,000 (24,000;
$10); Carol F. Dressler -- 30,000 (12,000; $4.75); William O. Hunt -- 60,000 (0;
$4.13); and Paul J. Palmer -- 30,000 (18,000; $7.63). The executive officers of
Hogan as a group (including Mr. Anderson, who is also a director)
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hold Hogan Options to purchase an aggregate of 713,834 shares of Hogan Common
Stock, of which 668,000 are unvested, with an average exercise price of $6.60.
Mr. Anderson has an employment agreement with Hogan that currently
provides, among other things, for (i) a three-year term expiring in November
1998, with automatic renewals of the three-year term scheduled to occur on each
November 13, (ii) a minimum annual base salary of $315,000, (iii) a
discretionary annual performance bonus of up to 80% of base salary, and (iv) the
right, following a change in control of Hogan, to (A) payment of an amount equal
to his annual base salary at the time of termination for a period of three
years, in the event that Mr. Anderson's employment relationship is terminated
within two years of such change in control for reasons other than cause or
voluntary termination, (B) payment of an executive incentive cash bonus with
respect to the fiscal year in which such change of control occurs according to a
formula that considers the transaction price and an earnings per share trading
multiple, (C) the continuation of certain health insurance benefits and other
emoluments of employment for three years following any such termination of
employment and (D) full vesting of Mr. Anderson's Hogan Options upon such a
change in control.
In addition, Hogan has entered into severance agreements with each of its
five Senior Vice Presidents providing for, upon a change in control of Hogan,
(i) full vesting of their Hogan Options and (ii) payment of an executive
incentive cash bonus with respect to the fiscal year in which such change of
control occurs equal to that which the officer would have been otherwise
entitled according to a formula that considers the transaction price and an
earnings per share trading multiple. The severance agreements also obligate
Hogan, in the event of the involuntary termination of such Senior Vice
Presidents (except for cause) following such a change in control, to pay an
amount of severance equal to one year's base salary. These severance agreements
also provide for the continuation of certain health insurance benefits and other
emoluments of employment for one year following any such termination. Continuum
has agreed in the Merger Agreement that, after the Effective Time, it will not
permit the Surviving Corporation to terminate the employment of any of these
Senior Vice Presidents of Hogan prior to such time as financial statements
including at least 30 days of combined operations of Continuum and the Surviving
Corporation after the Merger have been publicly reported, and that during such
time the compensation of such officers will not be reduced below the levels
thereof as of September 30, 1995. Two of these Senior Vice Presidents have
entered into agreements with Continuum providing, subject to consummation of the
Merger, for (i) continuation of their employment by Hogan for two years after
the Effective Time, at substantially the same compensation and benefits and
without downgrades in their respective positions and responsibilities and (ii)
grants to each, as of the Effective Time, of nonqualified stock options to
purchase 50,000 shares of Continuum Common Stock at the closing price on the day
of the Effective Time. Such stock option grants will contain one-year covenants
not to compete with Continuum.
Continuum's bylaws permit the Board of Directors to appoint Advisory
Directors, and further provide that Advisory Directors have the right to attend
Board meetings but not to vote. Continuum has agreed to appoint, effective as of
the Effective Time, any two of the current directors of Hogan as Advisory
Directors, each of whom will hold office until the next annual meeting of the
Board of Directors of Continuum. Further, subsequent to consummation of the
Merger, Continuum will elect one current director of Hogan (who may be initially
one of such Advisory Directors) to the Board of Directors of Continuum,
effective no later than the third regular meeting of such Board of Directors
following the Effective Time, who will hold office until the next annual meeting
of Continuum's stockholders and until his or her successor has been elected and
qualified. The Board of Directors of Continuum has not yet decided which of
Hogan's directors will be appointed Advisory Directors of Continuum or elected
to its Board of Directors.
The Merger Agreement provides that, after the Effective Time, the Surviving
Corporation (i) will indemnify each person who served as an officer or director
of Hogan prior to the Effective Time against all liabilities arising out of such
service to the fullest extent permitted under applicable law or the Surviving
Corporation's charter or bylaws, (ii) will maintain certain indemnification and
limitation of liability provisions in Hogan's Charter and bylaws, and (iii) will
continue for five years Hogan's director's and officer's liability insurance,
subject to certain limitations. Continuum will guarantee the Surviving
Corporation's indemnification obligations under the Merger Agreement. See
"Certain Terms of the Merger Agreement -- Indemnification."
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See "Certain Terms of the Merger Agreement -- Certain Benefit Plans and
Severance" as to post-Merger arrangements respecting Hogan employee benefit
plans and severance agreements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material federal income tax
consequences of the Merger to the holders of Hogan Common Stock and is based
upon current provisions of the Code, existing regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
No attempt has been made to comment on all federal income tax consequences of
the Merger that may be relevant to particular holders, including holders that
are subject to special tax rules such as dealers in securities, foreign persons,
mutual funds, insurance companies, tax-exempt entities and holders who do not
hold their shares as capital assets. Holders of Hogan Common Stock are advised
and expected to consult their own tax advisors regarding the federal income tax
consequences of the Merger in light of their personal circumstances and the
consequences under state, local and foreign tax laws.
No ruling from the Internal Revenue Service ("IRS") has been or will be
requested in connection with the Merger. Continuum has received from its
counsel, Vinson & Elkins L.L.P., an opinion to the effect that the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, that Continuum, Merger Sub and Hogan will
each be a party to the reorganization within the meaning of Section 368(b) of
the Code, and that Continuum, Merger Sub and Hogan will not recognize any gain
or loss as a result of the Merger. It is a condition to the obligation of
Continuum to consummate the Merger that such opinion shall not have been
withdrawn or modified in any material respect. Hogan has received from its
counsel, Morgan, Lewis & Bockius LLP, an opinion to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, that Continuum, Merger Sub and Hogan will
each be a party to the reorganization within the meaning of Section 368(b) of
the Code, and that stockholders of Hogan will not recognize any gain or loss
from the receipt of Continuum Common Stock for their Hogan Common Stock, other
than with respect to cash received in lieu of a fractional share of Continuum
Common Stock. It is a condition to the obligation of Hogan to consummate the
Merger that such opinion shall not have been withdrawn or modified in any
material respect. Such opinions are subject to certain assumptions and based on
certain representations of Continuum, Merger Sub and Hogan. Stockholders of
Hogan should be aware that such opinions are not binding on the IRS and no
assurance can be given that the IRS will not adopt a contrary position or that
the IRS position would not be sustained by a court.
Assuming the Merger qualifies as a reorganization under Section 368(a) of
the Code, the following federal income tax consequences will occur:
(i) no gain or loss will be recognized by Continuum, Merger Sub or
Hogan in connection with the Merger;
(ii) no gain or loss will be recognized by a holder of Hogan Common
Stock upon the exchange of all of such holder's shares of Hogan Common
Stock solely for shares of Continuum Common Stock in the Merger;
(iii) the aggregate basis of the shares of Continuum Common Stock
received by a Hogan stockholder in the Merger (including any fractional
share deemed received) will be the same as the aggregate basis of the
shares of Hogan Common Stock surrendered in exchange therefor;
(iv) the holding period of the shares of Continuum Common Stock
received by a Hogan stockholder in the Merger will include the holding
period of the shares of Hogan Common Stock surrendered in exchange
therefor, provided that such shares of Hogan Common Stock are held as
capital assets at the Effective Time; and
(v) a stockholder of Hogan who receives cash in lieu of a fractional
share will recognize gain or loss equal to the difference, if any, between
such stockholder's basis in the fractional share (as described in paragraph
(iii) above) and the amount of cash received, and such gain or loss will be
a capital gain or loss if the Hogan Common Stock is held by such
stockholder as a capital asset at the Effective Time.
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ACCOUNTING TREATMENT
The Merger is expected to be accounted for using the "pooling of interests"
method of accounting pursuant to Opinion No. 16 of the Accounting Principles
Board. The pooling of interests method of accounting assumes that the combining
companies have been merged from inception, and the historical consolidated
financial statements for periods prior to consummation of the Merger are
restated as though the companies had been combined from inception. See the
Unaudited Pro Forma Combined Condensed Financial Information and notes thereto
included elsewhere in this Joint Proxy Statement/Prospectus.
Continuum has been preliminarily advised by its independent auditor, Ernst
& Young LLP, that the Merger should be treated as a pooling of interests in
accordance with generally accepted accounting principles. Hogan has been
preliminarily advised by its independent accountants, Price Waterhouse LLP, that
no matters have come to their attention that caused them to believe that
relative to Hogan there have been common stock transactions, changes in equity
ownership or ownership affiliations with other entities which would preclude
Continuum from accounting for the Merger as a pooling of interests. Consummation
of the Merger is conditioned upon the written confirmation of such advice. Also,
such advice contemplates that each person who may be deemed an affiliate of
Hogan or Continuum will enter into an agreement with Continuum not to sell or
otherwise transfer any shares of Hogan Common Stock or Continuum Common Stock,
as the case may be, within 30 days prior to the Effective Time or any Continuum
Common Stock thereafter prior to the publication of financial results that
include at least 30 days of post-Merger combined operations of Continuum and
Hogan.
GOVERNMENTAL AND REGULATORY APPROVALS
Transactions such as the Merger are reviewed by the Department of Justice
and the FTC to determine whether they comply with applicable antitrust laws.
Under the provisions of the HSR Act, the Merger may not be consummated until
such time as the specified waiting period requirements of the HSR Act have been
satisfied. Continuum and Hogan filed notification reports, together with
requests for early termination of the waiting period, with the Department of
Justice and the FTC under the HSR Act on December , 1995. Unless earlier
terminated or a request for additional information is made, the applicable
waiting period will expire on January , 1996.
At any time before or after the Effective Time, the Department of Justice,
the FTC or a private person or entity could seek under the antitrust laws, among
other things, to enjoin the Merger or to cause Continuum to divest itself, in
whole or in part, of Hogan or of other businesses conducted by Continuum. There
can be no assurance that a challenge to the Merger will not be made or that, if
such a challenge is made, Continuum and Hogan will prevail.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of Continuum Common Stock to be received by Hogan stockholders
in connection with the Merger have been registered under the Securities Act
pursuant to the Registration Statement and, except as set forth in this
paragraph, may be traded without restriction. The shares of Continuum Common
Stock to be issued in connection with the Merger and received by persons who are
deemed to be "affiliates" (as that term is defined in Rule 144 under the
Securities Act) of Hogan prior to the Merger may be resold by them only in
transactions permitted by the resale provisions of Rule 145 under the Securities
Act (or, in the case of such persons who become affiliates of Continuum, Rule
144 under the Securities Act) or as otherwise permitted under the Securities
Act. Under guidelines published by the Commission, the sale or other disposition
of Continuum Common Stock or Hogan Common Stock by an affiliate of either
Continuum or Hogan, as the case may be, within 30 days prior to the Effective
Time or the sale or other disposition of Continuum Common Stock thereafter prior
to the publication of financial results that include at least 30 days of
post-Merger combined operations of Continuum and Hogan (the "Pooling Period")
could preclude pooling of interests accounting treatment of the Merger.
Accordingly, the Merger Agreement provides that each of Hogan and Continuum will
use all reasonable efforts to cause its affiliates to execute a written
agreement to the effect that such persons will not sell, transfer or otherwise
dispose of any shares of Hogan Common Stock or Continuum
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Common Stock, as the case may be, during the Pooling Period and, with respect to
affiliates of Hogan, that such persons will not sell, transfer or otherwise
dispose of Continuum Common Stock at any time in violation of the Securities Act
or the rules and regulations promulgated thereunder, including Rule 145.
RIGHTS OF DISSENTING STOCKHOLDERS
Under Delaware law, neither Continuum's nor Hogan's stockholders will be
entitled to any appraisal or dissenters' rights in connection with the Merger.
Neither Continuum nor Hogan intends to make available such rights to its
stockholders.
CERTAIN TERMS OF THE MERGER AGREEMENT
The following description does not purport to be complete and is qualified
in its entirety by reference to the Merger Agreement, a copy of which is
attached as Appendix I to this Joint Proxy Statement/Prospectus and is
incorporated herein by reference.
EFFECTIVE TIME OF THE MERGER
The Merger Agreement provides that, as soon as practicable after the
satisfaction or waiver of the conditions to closing the Merger, the parties
shall cause the Merger to be consummated by filing a Certificate of Merger with
the Secretary of State of the State of Delaware, in such form as required by,
and executed in accordance with the relevant provisions of, Delaware law. It is
anticipated that, if the Continuum Issuance of Common Stock is approved at the
Continuum Special Meeting and the Merger Agreement is approved and adopted at
the Hogan Special Meeting and all other conditions to the Merger have been
satisfied or waived, the Effective Time will occur on the date of the Special
Meetings or as soon thereafter as practicable.
MANNER AND BASIS OF CONVERTING SHARES
At the Effective Time, each outstanding share of Hogan Common Stock, other
than shares of Hogan Common Stock held in the treasury of Hogan or owned by
Continuum or any direct or indirect wholly-owned subsidiary of either Continuum
or Hogan, which shares will be canceled at the Effective Time, will be converted
into the right to receive 0.355555 of a share of Continuum Common Stock. The
Exchange Ratio of 0.355555 is subject to upward adjustment in the event that
Continuum issues any securities prior to the Effective Time (except upon
exercise of employee or director stock options) or makes a public announcement
thereof. In such event, the Exchange Ratio would be increased to the extent
necessary, if any, so that the product of (i) the Exchange Ratio and (ii) the
Average Daily Price of Continuum Common Stock is not less than $13.00. For this
purpose, the "Average Daily Price of Continuum Common Stock" is defined by the
Merger Agreement to mean the average of the closing prices per share of
Continuum Common Stock as reported on the NYSE Composite tape during the 15
consecutive trading days ending on (but excluding) the trading day on which the
Effective Time occurs; provided, however, if during such 15-day period Continuum
issues any securities (except upon exercise of employee or director stock
options) or makes any public announcement thereof, then such period will begin
on the trading date on which such issuance or public announcement thereof
occurs. Continuum has no present plans to issue any Continuum Common Stock that
would result in an adjustment to the Exchange Ratio and accordingly regards the
possibility that the Exchange Ratio might be adjusted as remote.
As soon as practicable following the Effective Time, American Stock
Transfer & Trust Company (or another bank or trust company selected by Continuum
and reasonably acceptable to Hogan), acting as Exchange Agent, will mail to each
holder of Hogan Common Stock who was a record holder immediately prior to the
Effective Time, a letter of transmittal and other information advising such
holder of the consummation of the Merger and for use in exchanging Hogan Common
Stock certificates for Continuum Common Stock certificates and cash in lieu of
fractional shares. After the Effective Time, there will be no further
registration of transfers on the stock transfer books of Hogan of shares of
Hogan Common Stock that were outstanding immediately prior to the Effective
Time. Share certificates should not be surrendered for exchange by stockholders
of Hogan prior to the Effective Time and the receipt of a letter of transmittal.
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No fractional shares of Continuum Common Stock will be issued in the
Merger. Each holder of record of Hogan Common Stock entitled to a fractional
share will receive an amount in cash equal to the value of such fractional share
based upon the closing price of Continuum Common Stock on the NYSE Composite
Tape on the date of the Effective Time. No interest will be paid on such amount,
and all shares of Hogan Common Stock held by a record holder will be aggregated
for purposes of computing the amount of such payment.
Until so surrendered and exchanged, each certificate previously evidencing
shares of Hogan Common Stock will be deemed to evidence ownership of the number
of full shares of Continuum Common Stock into which such shares of Hogan Common
Stock have been converted in the Merger. Unless and until any such certificates
are so surrendered and exchanged, no dividends or other distributions declared
or made after the Effective Time and payable to the holders of record of
Continuum Common Stock as of any time after the Effective Time will be paid to
the holders of such certificates previously evidencing Hogan Common Stock;
provided, however, that, upon any such surrender and exchange of such
certificates, there will be paid to the record holders of the certificates
issued and exchanged therefor (i) the amount, without interest thereon, of
dividends or other distributions, if any, with a record date after the Effective
Time theretofore paid with respect to such whole shares of Continuum Common
Stock and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to surrender
of such certificates and a payment date occurring after such surrender, payable
with respect to such whole shares of Continuum Common Stock.
HOGAN OPTIONS
The Merger Agreement provides that Continuum and Hogan will take such
action as may be necessary to permit Continuum to assume, at the Effective Time,
each Hogan Option that remains unexercised in whole or in part and to substitute
shares of Continuum Common Stock for shares of Hogan Common Stock purchasable
under such assumed Hogan Option, subject to certain terms and conditions. The
assumed Hogan Option will not give the optionee additional benefits which such
optionee did not have under the Hogan Option, and will be assumed on the same
terms and conditions as the Hogan Option being assumed, subject to the matters
described in the following paragraph.
The number of shares of Continuum Common Stock purchasable under any Hogan
Option assumed by Continuum will be equal to the number of shares of Continuum
Common Stock that the holder of the Hogan Option would have received (without
regard to any vesting schedule) upon consummation of the Merger had such Hogan
Option been exercised in full immediately prior to the Effective Time, and the
per share exercise price will be equal to the per share exercise price of the
Hogan Option divided by the Exchange Ratio.
CONDITIONS TO THE MERGER
The respective obligations of Continuum and Hogan to consummate the Merger
are subject to the satisfaction of the following conditions, any or all of which
may be waived in writing by the parties to the Merger Agreement, in whole or in
part, to the extent permitted by applicable law: (i) the Merger Agreement shall
have been approved and adopted by the requisite vote of the stockholders of
Hogan, and the issuance of the Continuum Common Stock in the Merger shall have
been approved by the requisite vote of the stockholders of Continuum; (ii) the
NYSE shall have approved for listing (upon official notice of issuance) the
Continuum Common Stock to be issued in the Merger; (iii) the applicable waiting
period under the HSR Act with respect to the transactions contemplated by the
Merger Agreement shall have expired or been terminated; (iv) no governmental
authority or court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute or rule, regulation, injunction or
other order (whether temporary, preliminary or permanent) which remains in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger, or which questions the legality of the
Merger and could reasonably be expected to materially and adversely affect the
value of Hogan's business; (v) the Registration Statement shall have been
declared effective by the Commission under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the Commission, and Continuum shall have received all "Blue Sky"
permits and other authorizations necessary to consummate the transactions
contemplated by the Merger Agreement; and (vi) Continuum and Hogan shall have
received a
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confirmation in writing by Ernst & Young LLP and Price Waterhouse LLP,
respectively, on the Closing Date, which advice cumulatively is that the Merger
should be treated for financial accounting purposes as a pooling of interests in
accordance with generally accepted accounting principles and the published rules
and regulations of the Commission if the Merger is closed and consummated in
accordance with the Merger Agreement. The Closing Date is expected to occur on
the same day as the Effective Time.
The obligation of Continuum to effect the Merger is also subject to the
satisfaction at or prior to the Closing Date of the following conditions, any or
all of which may be waived in writing by Continuum, in whole or in part, to the
extent permitted by applicable law: (i) each of the representations and
warranties of Hogan contained in the Merger Agreement shall be true and correct
(subject to a materiality condition) as of the Closing Date as though made on
and as of the Closing Date (except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall be true and correct as of such earlier
date); (ii) Hogan shall have performed or complied in all material respects with
all agreements and covenants required by the Merger Agreement to be performed or
complied with by it on or prior to the Closing Date; and (iii) Vinson & Elkins
L.L.P. shall have delivered to Continuum its written opinion as of the date that
this Joint Proxy Statement/Prospectus is first mailed to Continuum stockholders
substantially to the effect that (x) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, (y) Continuum, Merger Sub and
Hogan will each be a party to that reorganization within the meaning of Section
368(b) of the Code, and (z) Continuum, Merger Sub and Hogan will not recognize
any gain or loss for U.S. federal income tax purposes as a result of the Merger,
and such opinion shall not have been withdrawn or modified in any material
respect.
The obligation of Hogan to effect the Merger is also subject to the
satisfaction at or prior to the Closing Date of the following conditions, any or
all of which may be waived in writing by Hogan, in whole or in part, to the
extent permitted by applicable law: (i) each of the representations and
warranties of Continuum and Merger Sub contained in the Merger Agreement shall
be true and correct (subject to a materiality condition) as of the Closing Date
as though made on and as of the Closing Date (except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall be true and correct as of such
earlier date); (ii) Continuum and Merger Sub shall have performed or complied in
all material respects with all agreements and covenants required by the Merger
Agreement to be performed or complied with by them on or prior to the Closing
Date; (iii) the shares of Continuum Common Stock to be issued in the Merger
shall have been approved for listing (subject to official notice of issuance) on
the NYSE; and (iv) Morgan, Lewis & Bockius LLP shall have delivered to Hogan its
written opinion as of the date that this Joint Proxy Statement/Prospectus is
first mailed to Hogan stockholders substantially to the effect that (x) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code, (y) Continuum, Merger Sub and Hogan will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, and (z) no gain
or loss for U.S. federal income tax purposes will be recognized by the holders
of Hogan Common Stock upon receipt of shares of Continuum Common Stock in the
Merger, except with respect to any cash received in lieu of a fractional share
interest in Continuum Common Stock, and such opinion shall not have been
withdrawn or modified in any material respect.
There can be no assurance that all of the conditions to the Merger will be
satisfied.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Hogan, Merger Sub and Continuum relating to, among other things, (i) each of
their organization and similar corporate matters, (ii) authorization, execution,
delivery, performance and enforceability of the Merger Agreement and related
matters, (iii) the absence of conflicts, violations and defaults under their
respective charters and bylaws and certain agreements, (iv) certain governmental
filings and approvals, (v) brokers, (vi) each of their capitalization, (vii) the
documents and reports filed by Continuum or Hogan with the Commission under the
Exchange Act since March 31, 1993 and the accuracy of the information contained
therein, including recent financial statements, (viii) the absence of certain
changes, events and undisclosed liabilities, (ix) compliance with law, (x) taxes
and matters relating to a tax-free reorganization and certain matters relating
to pooling of
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interests accounting, (xi) litigation, (xii) title to property, (xiii)
intellectual property and software, (xiv) employee benefit and labor matters,
(xv) environmental matters, (xvi) insurance, (xvii) vote required, (xviii) each
of their affiliates, (xix) certain business practices, and (xx) absence of
insider interests. All representations and warranties will expire at the
Effective Time.
CERTAIN COVENANTS; CONDUCT OF BUSINESS PRIOR TO THE MERGER
Each of Hogan and Continuum has agreed that, prior to the Effective Time,
unless otherwise contemplated by the Merger Agreement or consented to in writing
by the other, it will and will cause its subsidiaries to (i) operate its
business in all material respects in the usual and ordinary course consistent
with past practices and (ii) use all reasonable efforts to preserve
substantially intact its business organization, maintain its material rights and
franchises, retain the services of its respective officers and key employees,
and maintain its relationships with its material customers and suppliers.
Hogan has agreed that, prior to the Effective Time, except as contemplated
by the Merger Agreement or otherwise consented to in writing by Continuum, it
will not do, and will not permit any of its subsidiaries to do, any of the
following: (i) adopt certain amendments to its charter or bylaws; (ii) pay any
dividend or other distribution in respect of its capital stock, except for
intercompany dividends, or redeem or otherwise acquire any of its securities;
(iii) issue or sell any stock or other securities, subject to certain exceptions
including issuance of Hogan Common Stock upon exercise of Hogan Options
outstanding on the date of the Merger Agreement; (iv) (A) incur any material
long-term debt, (B) guarantee or otherwise become liable for any material
obligations of any third person or (C) make any material loans to, or
investments in, any third person; (v) acquire, sell, lease or dispose of any
material assets other than sales in the ordinary course of business consistent
with past practice; (vi) mortgage or otherwise encumber any material properties
or assets; (vii) (A) increase the compensation of any director or officer,
except in the ordinary course of business and consistent with past practice, (B)
grant any severance or termination pay (other than pursuant to agreements in
effect on the date of the Merger Agreement) to, or enter into or amend any
employment or severance agreement with, any director, officer or employee;
(viii) (A) effect any reorganization or recapitalization or (B) split or
reclassify any of its capital stock; (ix) extend, renew or otherwise amend
Hogan's lease of its executive offices in Dallas; (x) change any of its methods
of accounting in effect at September 30, 1995, except as may be required by law
or generally accepted accounting principles; (xi) take (and will use reasonable
efforts to prevent any affiliate of Hogan from taking) any action that, in the
judgment of Ernst & Young LLP, would cause the Merger not to be treated as a
"pooling of interests" for financial accounting purposes; or (xii) take, or
agree in writing or otherwise to take, any of the foregoing actions or any
actions that would (A) make any representation or warranty of Hogan contained in
the Merger Agreement untrue or incorrect, (B) result in any of the conditions of
the Merger Agreement not being satisfied or (C) be inconsistent with the terms
of the Merger Agreement.
Continuum has agreed that, prior to the Effective Time, except as
contemplated by the Merger Agreement or otherwise consented to in writing by
Hogan, it will not do, and will not permit any of its subsidiaries to do, any of
the following: (i) knowingly take any action which would result in a failure to
maintain the trading of the Continuum Common Stock on the NYSE; (ii) pay any
dividend or other distribution in respect of its capital stock, except for
intercompany dividends; (iii) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or the assets of, or by
any other manner, any business or any corporation, partnership or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets of any other person (other than the purchase of assets from suppliers or
vendors in the ordinary course of business and consistent with past practice),
which, in each case, would materially delay or prevent the consummation of the
Merger; (iv) adopt any amendments to its charter or bylaws, which would have an
adverse impact on the consummation of the Merger; (v) take (and will use
reasonable efforts to prevent any affiliate of Continuum from taking) any action
that, in the judgment of Price Waterhouse LLP, would cause the Merger not to be
treated as a "pooling of interests" for financial accounting purposes; (vi)
issue or sell any stock or other securities, subject to certain exceptions
including issuance of Continuum securities (A) upon exercise of employee or
director stock options or (B) having an aggregate market value of up to
$100,000,000, provided that the Exchange Ratio is adjusted as described above
under
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"Manner and Basis of Converting Shares"; (vii) acquire, sell, lease or dispose
of any material assets, (A) other than sales in the ordinary course of business
consistent with past practice, (B) except as disclosed pursuant to the Merger
Agreement or (C) are among Continuum and its subsidiaries; (viii) (A) effect any
reorganization or recapitalization or (B) split or reclassify any of its capital
stock; or (ix) take, or agree in writing or otherwise to take, any of the
foregoing actions or any action that would (A) make any representation or
warranty of Continuum or Merger Sub contained in the Merger Agreement untrue or
incorrect, (B) result in any of the conditions of the Merger Agreement not being
satisfied or (C) be inconsistent with the terms of the Merger Agreement.
NO SOLICITATION
Additionally, Hogan has agreed not to, directly or indirectly, knowingly
encourage, solicit, initiate or participate in discussions or negotiations with,
or knowingly provide any information to, any person or group (other than
Continuum or its affiliates or associates) concerning any merger of Hogan, sale
of substantially all of its assets, sale of shares of its capital stock or
similar transactions involving Hogan; provided, however, that the Board of
Directors of Hogan may (i) take and disclose to Hogan's stockholders a position
with respect to a tender offer for Hogan Common Stock by a third party pursuant
to Rules 14d-9 and 14e-2 under the Exchange Act, (ii) make such disclosure to
Hogan's stockholders as, in the judgment of such Board of Directors, may be
required under applicable law or (iii) participate in discussions or
negotiations with, or provide information to, any person in connection with an
unsolicited written proposal by such person to acquire Hogan pursuant to a
merger, purchase of shares of capital stock of Hogan or other similar
transaction or to acquire substantially all the assets of Hogan, if, and only to
the extent that (A) the Board of Directors of Hogan, after consultation with and
based upon the advice of independent legal counsel (who may be Morgan, Lewis &
Bockius LLP), determines in good faith that such action is necessary for such
Board of Directors to comply with its fiduciary duties to stockholders under
applicable law and (B) prior to entering into discussions or negotiations with,
or providing such information to, such person Hogan (x) provides written notice
to Continuum to the effect that it is participating in discussions or
negotiations with, or providing information to, such person and (y) enters into
with such person a confidentiality agreement in reasonably customary form on
terms not more favorable to such person than the terms contained in the
Confidentiality Agreement dated as of June 13, 1995, between Hogan and
Continuum.
CERTAIN POST-MERGER MATTERS
Once the Merger is consummated, Merger Sub will cease to exist as a
corporation, and Hogan as the Surviving Corporation will succeed to all of the
rights, assets, liabilities and obligations of Merger Sub in accordance with the
Delaware General Corporation Law.
Pursuant to the Merger Agreement, the Hogan Charter and the Hogan bylaws,
as in effect immediately prior to the Effective Time, will become the
certificate of incorporation and bylaws of the Surviving Corporation, except
that the Hogan Charter will be amended to reduce its authorized capital stock to
1,000 shares of common stock, par value $1.00 per share.
TERMINATION OR AMENDMENT OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the Merger Agreement by the
stockholders of Hogan: (i) by mutual written consent authorized by the Boards of
Directors of Continuum and Hogan; (ii) by Continuum, upon a breach of any
representation, warranty, covenant or agreement on the part of Hogan set forth
in the Merger Agreement, or if any representation or warranty of Hogan shall
have become untrue, in either case such that Continuum's conditions to closing
would be incapable of being satisfied by April 30, 1996; (iii) by Hogan, upon a
breach of any representation, warranty, covenant or agreement on the part of
Continuum or Merger Sub set forth in the Merger Agreement, or if any
representation or warranty of Continuum or Merger Sub shall have become untrue,
in either case such that Hogan's conditions to closing would be incapable of
being satisfied by April 30, 1996; (iv) by either Continuum or Hogan, if the
Merger shall not have been consummated on or before April 30, 1996; (v) by
either Continuum or Hogan, if the Merger Agreement shall fail to receive the
requisite
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vote for approval and adoption by the stockholders of Hogan at the Hogan Special
Meeting or if the issuance of the Continuum Common Stock in connection with the
Merger shall fail to receive the requisite vote for approval by the stockholders
of Continuum at the Continuum Special Meeting; (vi) by Continuum, if (A) the
Board of Directors of Hogan withdraws, modifies or changes its recommendation of
the Merger Agreement or the Merger in a manner adverse to Continuum or shall
have resolved to do so, (B) the Morgan Stanley Opinion is withdrawn or (C) a
tender offer or exchange offer for 30% or more of the outstanding shares of
Hogan Common Stock is commenced, and the Board of Directors of Hogan has not
timely filed a Schedule 14D-9 recommending that stockholders not tender their
shares into such tender or exchange offer; or (vii) by Hogan, if the Board of
Directors of Hogan, after consultation with and based upon the advice of
independent legal counsel (who may be Morgan, Lewis & Bockius LLP), determines
in good faith that such action is necessary for such Board of Directors to
comply with its fiduciary duties to stockholders under applicable law.
Subject to limited exceptions, including the survival of Hogan's agreement
to pay a termination fee to Continuum under certain circumstances as discussed
below, in the event of the termination of the Merger Agreement, the Merger
Agreement will become void, without any liability on the part of Continuum,
Merger Sub or Hogan to the other, except that no party will be relieved of
liability for any breach of the Merger Agreement.
The Merger Agreement may be amended by the parties by action taken by or on
behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval of the Merger Agreement
by the stockholders of Hogan, (i) no amendment, which under applicable law may
not be made without the approval of the stockholders of Hogan, may be made
without such approval, and (ii) no amendment, which under the applicable rules
of the NYSE, may not be made without the approval of the stockholders of
Continuum, may be made without such approval. At any time prior to the Effective
Time, either Continuum or Hogan may (i) extend the time for the performance of
any of the obligations of the other under the Merger Agreement, (ii) waive any
inaccuracies in the representations and warranties of the other contained
therein or in any document delivered pursuant thereto, and (iii) waive
compliance by the other with any of the agreements or conditions contained
therein.
EXPENSES AND TERMINATION FEE
Except as provided in the following paragraph, all expenses incurred by
Continuum and Hogan will be borne by the party incurring such expenses;
provided, however, that the allocable share of Continuum and Hogan for all
expenses related to printing, filing and mailing this Joint Proxy
Statement/Prospectus and all regulatory filing fees (other than the filing fee
for registering Continuum Common Stock pursuant to the Registration Statement
and HSR filing fees, which shall be paid by Continuum) incurred in connection
with this Joint Proxy Statement/Prospectus will be one-half each.
The Merger Agreement also provides that Hogan will pay to Continuum
$5,000,000, which amount will be inclusive of all of Continuum's expenses, if
the Merger Agreement is terminated in accordance with its terms: (i) by either
Continuum or Hogan, if the Merger Agreement fails to receive the requisite vote
for approval by the stockholders of Hogan at the Hogan Special Meeting, and at
the time of such meeting there exists a Competing Transaction; (ii) (A) by
Continuum, if the Board of Directors of Hogan withdraws, modifies or changes its
recommendation of the Merger Agreement or the Merger in a manner adverse to
Continuum (or resolves to do so) or the Morgan Stanley Opinion is withdrawn, and
(B) at such time, there exists a Competing Transaction; (iii) by Continuum, if
the Board of Directors of Hogan shall recommend any Competing Transaction to
Hogan's stockholders (or resolves to do so); (iv) by Continuum, if a tender
offer or exchange offer for 30% or more of the outstanding Hogan Common Stock is
commenced, and Hogan's Board of Directors does not timely file a Schedule 14D-9
recommending that its stockholders not tender their shares into such tender
offer or exchange offer; or (v) by Hogan, if the Board of Directors of Hogan,
after consultation with and based on the advice of independent legal counsel,
determines in good faith that such action is necessary for such Board to comply
with its fiduciary duties to stockholders under applicable law.
38
<PAGE> 46
For purposes of the Merger Agreement, the term "Competing Transaction"
means any of the following (other than transactions contemplated by the Merger
Agreement) involving Hogan or any of its subsidiaries: (i) any merger,
consolidation, share exchange, business combination or similar transaction; (ii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition of
20% or more of the assets of Hogan and its subsidiaries, taken as a whole; (iii)
any tender offer or exchange offer for 30% or more of the outstanding shares of
Hogan Common Stock or the filing of a registration statement under the
Securities Act in connection therewith; or (iv) any public announcement or a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
CERTAIN BENEFIT PLANS AND SEVERANCE
The Merger Agreement provides that Continuum will honor, without
modification (except in connection with Continuum's assumption of the Hogan
Options), all contracts, agreements and commitments of Hogan authorized prior to
the date of the Merger Agreement that apply to any current or former employee or
director of Hogan, including the severance agreements between Hogan and certain
of its senior officers. See "The Merger -- Interests of Certain Persons in the
Merger." Further, the Merger Agreement obligates Continuum to provide to
officers and employees of Hogan who become or remain regular (full-time)
employees of Continuum, employee benefits, other than stock options, no less
favorable than the most favorable of (i) benefits which are substantially
comparable to those provided by Hogan to its officers or employees as of
September 30, 1995, or (ii) those provided by Continuum to its similarly
situated officers and employees; provided, however, that if (i) above is more
favorable, Continuum will only be obligated to provide such benefits through
September 30, 1996, after which time Continuum will only be obligated to provide
benefits in accordance with (ii) above. Any Hogan employee who becomes a
participant in an employee benefit plan of Continuum after the Effective Time
will be given credit under such plan for all service with Hogan, and, if
applicable, with Continuum, prior to becoming such a participant for purposes of
eligibility and vesting.
The Merger Agreement also provides that, promptly after March 31, 1996, the
Surviving Corporation will determine and pay bonuses under Hogan's executive
(including management) bonus program for the fiscal year ending March 31, 1996.
The current Presidents of Hogan and Continuum will make such determination
jointly and consistently with prior determinations under comparable Hogan bonus
plans and based upon generally accepted accounting principles as consistently
applied by Hogan. No bonuses will be payable under Hogan's executive (including
management) bonus program to the President or any of the five Senior Vice
Presidents of Hogan. See "The Merger -- Interests of Certain Persons in the
Merger" respecting Hogan's severance agreements with these six persons.
INDEMNIFICATION
The Merger Agreement provides that, after the Effective Time, the Surviving
Corporation will indemnify and hold harmless (and shall also advance expenses as
incurred to the fullest extent permitted under applicable law to) each current
or former officer or director of Hogan (the "Indemnified Persons") against all
losses, claims, damages, costs, expenses, settlement payments or liabilities
arising out of or connected with (i) their position with Hogan or (ii) the
Merger Agreement or the Merger, in each case to the fullest extent required or
permitted under applicable law or the Surviving Corporation's certificate of
incorporation or bylaws. The Merger Agreement further provides that the
Surviving Corporation (i) will not amend its certificate of incorporation or
bylaws in a manner that adversely affects the rights of any Indemnified Person
thereunder or under the Merger Agreement, unless otherwise required by
applicable law and (ii) will maintain, for not less than five years after the
Effective Time, director's and officer's liability insurance covering each
Indemnified Person on terms not materially less favorable than the insurance
maintained by Hogan on the date of the Merger Agreement in terms of coverage,
amounts and deductibles; provided, however, that in no event will the Surviving
Corporation be required to expend annually more than 200% of the current annual
premiums paid by Hogan for such insurance. Continuum has guaranteed the
foregoing indemnification obligations of the Surviving Corporation.
39
<PAGE> 47
MARKET PRICES OF COMMON STOCK AND DIVIDEND INFORMATION
Continuum Common Stock is traded on the NYSE under the symbol "CNU," and
Hogan Common Stock is traded on the Nasdaq National Market under the symbol
"HOGN." The following table sets forth, for the fiscal periods indicated, the
range of high and low per share sale prices for Continuum Common Stock and Hogan
Common Stock, as reported on the NYSE Composite Tape and the Nasdaq National
Market, respectively, and the cash dividends paid on each share of Hogan Common
Stock.
<TABLE>
<CAPTION>
CONTINUUM HOGAN
-------------- ---------------------------
HIGH LOW HIGH LOW DIVIDEND
---- ---- ---- --- --------
<S> <C> <C> <C> <C> <C>
Fiscal 1994*
First Quarter...................................... $21 3/8 $17 5/8 $ 8 1/8 $ 6 1/4 $.17
Second Quarter..................................... 18 1/8 14 1/2 11 3/4 8 --
Third Quarter...................................... 21 1/4 16 1/4 11 3/4 7 3/4 --
Fourth Quarter..................................... 25 18 5/8 10 3/4 7 7/8 --
Fiscal 1995*
First Quarter...................................... $25 5/8 $19 3/4 $10 3/4 $ 6 3/8 $.17
Second Quarter..................................... 23 3/4 18 8 1/8 5 7/8 --
Third Quarter...................................... 30 1/2 20 3/4 7 5 1/8 --
Fourth Quarter..................................... 32 1/4 27 7 4 5/8 --
Fiscal 1996*
First Quarter...................................... $34 $29 3/4 $11 3/4 $ 5 7/8 --
Second Quarter..................................... 39 1/2 32 1/2 12 9 --
Third Quarter (through December 21)................ 41 3/4 33 5/8 13 7/8 8 1/4 --
</TABLE>
- ---------------
* Fiscal quarters. The fiscal years of Continuum and Hogan end on March 31.
On December 8, 1995, the last trading day prior to the announcement by
Continuum and Hogan that they had executed the Merger Agreement, the closing per
share sale prices of Continuum Common Stock and Hogan Common Stock, as reported
on the NYSE Composite Tape and the Nasdaq National Market, respectively, were
$40 5/8 and $11 5/8, respectively. See the cover page of this Joint Proxy
Statement/Prospectus for a recent closing price of Continuum Common Stock and
Hogan Common Stock.
Following the Merger, Continuum Common Stock will continue to be traded on
the NYSE. Following the Merger, Hogan Common Stock will cease to be traded on
the Nasdaq National Market, and there will be no further market for such stock.
Continuum has not paid cash dividends on Continuum Common Stock since the
first quarter of its fiscal year ended March 31, 1987. Continuum's Board of
Directors currently intends not to pay cash dividends on Continuum Common Stock.
Future dividend policy will depend upon Continuum's earnings, capital
requirements, financial condition and other relevant factors.
Hogan has paid a special cash dividend of $.17 per share on the Hogan
Common Stock once during each of its past two fiscal years. Hogan determined not
to declare a dividend in connection with the fiscal year ended March 31, 1995
and, therefore, no dividend will be paid to Hogan stockholders in fiscal year
1996. Future dividend payments will necessarily depend on Hogan's earnings and
financial condition, capital requirements and other relevant factors.
40
<PAGE> 48
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements
are based on the historical consolidated balance sheets and statements of
operations of Continuum and Hogan, adjusted to give effect to the Merger, using
the pooling of interests method of accounting for a business combination.
The pro forma combined condensed balance sheet as of September 30, 1995
assumes that the Merger occurred as of that date and reflects the combination of
the historical balance sheet of Continuum as of September 30, 1995 with the
historical balance sheet of Hogan as of September 30, 1995.
The unaudited pro forma combined condensed statements of operations for the
six months ended September 30, 1995 and September 30, 1994 and for the years
ended March 31, 1995, 1994 and 1993 combine the historical results of operations
of Continuum for those periods with the historical results of operations of
Hogan for the same periods and assumes that the Merger occurred at the beginning
of the periods presented.
The following unaudited pro forma combined condensed financial information
has been prepared from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto of Continuum and Hogan,
incorporated by reference in this Joint Proxy Statement/Prospectus. This pro
forma information is presented for illustrative purposes only and is not
indicative of the results of operations or financial position that would have
occurred had the Merger been consummated on the dates indicated in the preceding
paragraphs, nor is it necessarily indicative of future operating results or
financial position of the combined companies.
41
<PAGE> 49
CONTINUUM AND HOGAN
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
-------------------
CONTINUUM HOGAN COMBINED DR CR PRO FORMA
--------- ------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Service revenues.................. $180,159 $43,096 $223,255 $ -- $ -- $ 223,255
Software system licensing......... 13,829 8,030 21,859 -- -- 21,859
Interest income................... 543 125 668 -- -- 668
--------- ------- -------- -------- -------- ---------
194,531 51,251 245,782 -- -- 245,782
--------- ------- -------- -------- -------- ---------
EXPENSES:
Service expenses.................. 137,744 31,437 169,181 -- -- 169,181
Marketing and administration...... 32,055 12,986 45,041 -- -- 45,041
Interest expense.................. 1,259 149 1,408 -- -- 1,408
--------- ------- -------- -------- -------- ---------
171,058 44,572 215,630 -- -- 215,630
--------- ------- -------- -------- -------- ---------
Income before income taxes.......... 23,473 6,679 30,152 -- -- 30,152
Income tax provision................ 7,043 2,569 9,612 -- -- 9,612
--------- ------- -------- -------- -------- ---------
Income from continuing operations... $ 16,430 $ 4,110 $ 20,540 $ -- $ -- $ 20,540
======== ======= ======== ======== ======== ========
Earnings per common share from
continuing operations............. $ 0.83 $ .81
======== ========
Average common shares outstanding... 19,900 25,411
======== ========
</TABLE>
See accompanying Notes to Pro Forma Combined Condensed Financial Statements.
42
<PAGE> 50
CONTINUUM AND HOGAN
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1994
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
--------------------
CONTINUUM HOGAN COMBINED DR CR PRO FORMA
--------- ------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Service revenues............ $140,832 $37,052 $177,884 $ -- $ -- $ 177,884
Software system licensing... 9,246 6,142 15,388 -- -- 15,388
Interest income............. 130 277 407 -- -- 407
-------- ------- -------- -------- -------- ---------
150,208 43,471 193,679 -- -- 193,679
-------- ------- -------- -------- -------- ---------
EXPENSES:
Service expenses............ 105,604 29,518 135,122 -- -- 135,122
Marketing and
administration........... 25,988 11,213 37,201 -- -- 37,201
Interest expense............ 921 167 1,088 -- -- 1,088
-------- ------- -------- -------- -------- ---------
132,513 40,898 173,411 -- -- 173,411
-------- ------- -------- -------- -------- ---------
Income before income taxes.... 17,695 2,573 20,268 -- -- 20,268
Income tax provision.......... 5,817 1,150 6,967 -- -- 6,967
-------- ------- -------- -------- -------- ---------
Income from continuing
operations.................. $ 11,878 $ 1,423 $ 13,301 $ -- $ -- $ 13,301
======== ======= ======== ======== ======== =========
Earnings per common share from
continuing operations....... $ 0.63 $ 0.55
======== =========
Average common shares
outstanding................. 18,997 24,295
======== =========
</TABLE>
See accompanying Notes to Pro Forma Combined Condensed Financial Statements.
43
<PAGE> 51
CONTINUUM AND HOGAN
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1995
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
------------------
CONTINUUM HOGAN COMBINED DR CR PRO FORMA
--------- ------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Service revenues............... $301,783 $78,615 $380,398 $ -- $ -- $ 380,398
Software system licensing...... 21,135 13,991 35,126 -- -- 35,126
Interest income................ 618 301 919 -- -- 919
-------- ------- -------- ------- ------- --------
323,536 92,907 416,443 -- -- 416,443
-------- ------- -------- ------- ------- --------
EXPENSES:
Service expenses............... 228,725 59,521 288,246 -- -- 288,246
Marketing and administration... 54,494 24,023 78,517 -- -- 78,517
Interest expense............... 2,209 369 2,578 -- -- 2,578
-------- ------- -------- ------- ------- --------
285,428 83,913 369,341 -- -- 369,341
-------- ------- -------- ------- ------- --------
Income before income taxes....... 38,108 8,994 47,102 -- -- 47,102
Income tax provision............. 11,904 2,700 14,604 -- -- 14,604
-------- ------- -------- ------- ------- --------
Income from continuing
operations..................... $ 26,204 $ 6,294 $ 32,498 $ -- $ -- $ 32,498
======== ======= ======== ======= ======= ========
Earnings per common share from
continuing operations.......... $ 1.38 $ 1.34
======== ========
Average common shares
outstanding.................... 19,038 24,300
======== ========
</TABLE>
See accompanying Notes to Pro Forma Combined Condensed Financial Statements.
44
<PAGE> 52
CONTINUUM AND HOGAN
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1994
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
--------------------
CONTINUUM HOGAN COMBINED DR CR PRO FORMA
--------- ------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Service revenues............. $227,391 $54,441 $281,832 $ -- $ -- $ 281,832
Software system licensing.... 14,689 17,199 31,888 -- -- 31,888
Interest income.............. 869 845 1,714 -- -- 1,714
--------- ------- -------- -------- -------- ---------
242,949 72,485 315,434 -- -- 315,434
--------- ------- -------- -------- -------- ---------
EXPENSES:
Service expenses............. 174,615 39,904 214,519 -- -- 214,519
Marketing and
administration............ 50,630 22,019 72,649 -- -- 72,649
Interest expense............. 3,766 70 3,836 -- -- 3,836
Restructuring and other
costs..................... 32,629 -- 32,629 -- -- 32,629
Charge for purchased research
and development........... 15,963 -- 15,963 -- -- 15,963
--------- ------- -------- -------- -------- ---------
277,603 61,993 339,596 -- -- 339,596
--------- ------- -------- -------- -------- ---------
Income (loss) before income
taxes........................ (34,654) 10,492 (24,162) -- -- (24,162)
Income tax provision
(benefit).................... (4,904) 4,600 (304) -- -- (304)
--------- ------- -------- -------- -------- ---------
Income (loss) from continuing
operations................... $(29,750) $ 5,892 $(23,858) $ -- $ -- $ (23,858)
======== ======= ======== ======== ======== ========
Earnings (loss) per common
share
from continuing operations... $ (1.79) $ (1.08)
======== ========
Average common shares
outstanding.................. 16,593 22,008
======== ========
</TABLE>
See accompanying Notes to Pro Forma Combined Condensed Financial Statements.
45
<PAGE> 53
CONTINUUM AND HOGAN
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1993
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
-------------------
CONTINUUM HOGAN COMBINED DR CR PRO FORMA
--------- ------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Service revenues.................. $211,366 $56,241 $267,607 $ -- $ -- $ 267,607
Software system licensing......... 25,097 8,277 33,374 -- -- 33,374
Interest income................... 2,471 1,383 3,854 -- -- 3,854
-------- ------- -------- -------- -------- ---------
238,934 65,901 304,835 -- -- 304,835
-------- ------- -------- -------- -------- ---------
EXPENSES:
Service expenses.................. 176,306 39,323 215,629 -- -- 215,629
Marketing and administration...... 60,571 16,857 77,428 -- -- 77,428
Interest expense.................. 3,201 71 3,272 -- -- 3,272
-------- ------- -------- -------- -------- ---------
240,078 56,251 296,329 -- -- 296,329
-------- ------- -------- -------- -------- ---------
Income (loss) before income taxes... (1,144) 9,650 8,506 -- -- 8,506
Income tax provision................ 4,217 4,170 8,387 -- -- 8,387
-------- ------- -------- -------- -------- ---------
Income (loss) from continuing
operations........................ $ (5,361) $ 5,480 $ 119 $ -- $ -- $ 119
======== ======= ======== ======== ======== =========
Earnings (loss) per common share
from continuing operations........ $ (0.37) $ 0.01
======== =========
Average common shares outstanding... 14,679 19,921
======== =========
</TABLE>
See accompanying Notes to Pro Forma Combined Condensed Financial Statements.
46
<PAGE> 54
CONTINUUM AND HOGAN
PRO FORMA COMBINED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
ADJUSTMENTS
------------------
CONTINUUM HOGAN COMBINED DR CR PRO FORMA
--------- ------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents...... $ 25,016 $ 4,745 $ 29,761 $ -- $ -- $ 29,761
Receivables, net of allowance
for doubtful accounts....... 98,384 44,103 142,487 -- -- 142,487
Other current assets........... 16,663 2,350 19,013 -- -- 19,013
-------- ------- -------- ------- ------- --------
140,063 51,198 191,261 -- -- 191,261
Property and equipment, net of
depreciation................... 29,883 6,577 36,460 -- -- 36,460
Goodwill, net of amortization.... 22,636 -- 22,636 -- -- 22,636
Software systems, net of
amortization................... 13,012 31,896 44,908 -- 20,000 24,908
Other assets..................... 9,976 8,687 18,663 -- -- 18,663
-------- ------- -------- ------- ------- --------
TOTAL ASSETS..................... $215,570 $98,358 $313,928 $ -- $20,000 $ 293,928
======== ======= ======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............... $ 19,165 $ 4,491 $ 23,656 $ -- $ -- $ 23,656
Deferred revenue............... 12,179 10,292 22,471 -- 5,000 27,471
Accrued liabilities and
other....................... 44,943 11,310 56,253 2,280 -- 53,973
Current portion of long-term
debt........................ 863 3,050 3,913 -- -- 3,913
-------- ------- -------- ------- ------- --------
77,150 29,143 106,293 2,280 5,000 109,013
-------- ------- -------- ------- ------- --------
Long-term debt................... 18,051 -- 18,051 -- -- 18,051
Other obligations................ 20,689 8,003 28,692 -- -- 28,692
-------- ------- -------- ------- ------- --------
38,740 8,003 46,743 -- -- 46,743
-------- ------- -------- ------- ------- --------
Stockholders' equity:
Common Stock, $.10 par value... 1,926 152 2,078 152 516 2,442
Capital in excess of par
value....................... 123,640 45,314 168,954 6,213 -- 162,741
Retained earnings (deficit).... (24,133 ) 21,595 (2,538) 22,720 -- (25,258)
Other.......................... (1,753 ) (5,849) (7,602) -- 5,849 (1,753)
-------- ------- -------- ------- ------- --------
99,680 61,212 160,892 29,085 6,365 138,172
-------- ------- -------- ------- ------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY........... $215,570 $98,358 $313,928 $31,365 $11,365 $ 293,928
======== ======= ======== ======= ======= ========
</TABLE>
See accompanying Notes to Pro Forma Combined Condensed Financial Statements.
47
<PAGE> 55
CONTINUUM AND HOGAN
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
On December 10, 1995, Continuum, Merger Sub, a wholly-owned subsidiary of
Continuum, and Hogan entered into an Agreement and Plan of Merger that provides
for the merger of Merger Sub with and into Hogan. Under the terms of the Merger
Agreement, each outstanding share of Hogan Common Stock will be converted into
the right to receive 0.355555 of a share of Continuum Common Stock. The business
combination is to be accounted for using the pooling of interests method of
accounting for business combinations.
2. PRO FORMA ADJUSTMENTS
(a) To give effect to the issuance of 5.2 million shares of Continuum
Common Stock in exchange for all of the shares of Hogan Common Stock outstanding
as of September 30, 1995, and to the retirement of the Hogan Common Stock, based
upon an Exchange Ratio of 0.355555. The actual number of shares of Continuum
Common Stock will be determined at the Effective Time.
(b) There were no material transactions between Continuum and Hogan during
the periods presented.
3. PRO FORMA EARNINGS (LOSS) PER SHARE
The pro forma average common shares outstanding have been computed by
adjusting the historical average common shares of Continuum for the shares
assumed to be issued in exchange for the outstanding Hogan Common Stock and for
the dilutive effect of common stock equivalents arising from the assumption of
the Hogan Options.
4. NON-RECURRING ITEMS ATTRIBUTABLE TO THE TRANSACTION
Continuum expects that certain adjustments will be recorded subsequent to
the Merger to accrue for specific and identifiable costs related to the Merger.
These adjustments consist of establishing such additional accruals and reserves
as may be necessary to record transaction expenses, to reflect the elimination
of redundant functions, and to conform Hogan's license revenue recognition
policy to that of Continuum's. Additionally, adjustments related to the
application of Continuum's capitalized software methods and procedures may be
made to give effect to Continuum's plans with respect to the conduct of Hogan's
business following the Merger. These adjustments are presently anticipated to
aggregate $33 million and consist of $5 million for investment banking and other
merger expenses, $3 million related to the elimination of duplicate data
processing facilities and employee severance costs, $5 million related to
license revenue recognition, and $20 million related to capitalized software.
These amounts are preliminary estimates and are subject to revisions as more
information becomes available.
These adjustments have been included, net of the estimated tax benefits, in
the accompanying unaudited pro forma combined condensed balance sheet.
These adjustments have not been included in the accompanying unaudited pro
forma combined condensed statement of operations as they are non-recurring and
not expected to be replicated in future periods. In addition, Continuum expects
to achieve cost savings primarily through the consolidation of the companies
including consolidation of certain data processing, marking and administrative
functions. The cost savings are expected to be achieved in varying amounts over
varying periods of time. No adjustments have been reflected in the unaudited pro
forma combined condensed statement of operations for these anticipated cost
savings.
48
<PAGE> 56
PRINCIPAL STOCKHOLDERS OF CONTINUUM AND HOGAN
CONTINUUM
The following table sets forth information with respect to stockholders of
Continuum who were known to Continuum to own beneficially more than 5% of the
Continuum Common Stock outstanding as of the Record Date. Unless otherwise
noted, each of the stockholders has sole voting and investment power with
respect to the shares beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
CONTINUUM CONTINUUM COMMON STOCK
NAME AND ADDRESS OF SHARES ---------------------------------
BENEFICIAL OWNER OWNED BEFORE MERGER AFTER MERGER(1)
-------------------------------------------- --------- ------------- ---------------
<S> <C> <C> <C>
DST Systems, Inc. 5,544,553(2) % %
1055 Broadway
Kansas City, Missouri 64105
FMR Corp. and Edward C. Johnson 3d 1,959,700(3) % %
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- ---------------
(1) Upon consummation of the Merger, assuming that (i) no change occurs in
shares of Continuum Common Stock owned as of the indicated date and (ii)
shares of Continuum Common Stock and shares of Hogan
Common Stock are outstanding at the Effective Time.
(2) Owned as of the Record Date.
(3) This information has been derived from a Schedule 13G filed with the
Commission and dated December 31, 1994, and is not within the direct
knowledge of Continuum. Based upon information contained in such Schedule
13G, Fidelity Management & Research Company, an investment advisory and
subsidiary of FMR Corp., is the beneficial owner of 1,939,300 shares of
Continuum Common Stock (the Fidelity Magellan Fund's interest amounted to
1,747,900 shares of such Continuum Common Stock), of which FMR Corp. and its
Chairman, Edward C. Johnson 3d, share dispositive power but have no voting
power. Another investment advisory and subsidiary of FMR Corp., Fidelity
Management Trust Company, is the beneficial owner of 20,400 shares of
Continuum Common Stock, of which FMR Corp. and Edward C. Johnson 3d have
dispositive power but have no voting power. Mr. Johnson and his family form
a controlling group with respect to FMR Corp.
Information as to the beneficial ownership of Continuum Common Stock by the
directors and executive officers of Continuum is set forth under "Principal
Stockholders" in the proxy statement of Continuum dated June 15, 1995 respecting
its 1995 Annual Meeting of Stockholders, which information is incorporated by
reference in Continuum's Annual Report on Form 10-K for the fiscal year ended
March 31, 1995, incorporated herein by reference. See "Incorporation of Certain
Documents by Reference." Upon consummation of the Merger, no such person will
own beneficially as much as 1% of the outstanding shares of Continuum Common
Stock.
49
<PAGE> 57
HOGAN
The following table sets forth information with respect to stockholders of
Hogan who were known to Hogan to own beneficially more than 5% of the Hogan
Common Stock outstanding as of the Record Date. The information set forth below
is based solely upon information contained in Schedule 13G filings made by such
stockholders with the Commission as of the dates indicated below. Unless
otherwise noted, each of the stockholders has sole voting and investment power
with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
PERCENT PERCENT
NUMBER OF OF
OF HOGAN HOGAN CONTINUUM
NAME AND SHARES COMMON COMMON
ADDRESS OF BENEFICIAL OWNER OWNED STOCK STOCK(1)
---------------------------------------------------- -------- ------ ---------
<S> <C> <C> <C>
Gregor G. Peterson 1,303,804(2) % %
904 Lakeshore Drive
P.O. Box 4450
Incline Village, Nevada 89450
Charles J. Brooks 1,016,356(3) % %
2016 Forest Avenue, Suite 2
San Jose, California 95128
ICM Asset Management, Inc. 1,183,050(4) % %
601 W. Main Avenue, Suite 917
Spokane, Washington 99201
</TABLE>
- ---------------
(1) Upon consummation of the Merger, assuming that (i) no change occurs in
shares of Hogan Common Stock owned on the indicated date and (ii)
shares of Continuum Common Stock and shares of Hogan
Common Stock are outstanding at the Effective Time.
(2) Per a Schedule 13G as of December 31, 1994, reporting: (i) 2,920 shares held
directly by Mr. Peterson, (ii) 1,000,268 shares held by a trust for the
benefit of Mr. Peterson and his wife, (iii) 240,616 shares owned by trusts
of which Mr. Peterson's wife is trustee or co-trustee with respect to which
Mr. Peterson disclaims beneficial ownership, and (iv) 60,000 shares issuable
upon exercise of outstanding options granted by Hogan which are presently
exercisable.
(3) Per a Schedule 13G as of December 31, 1994.
(4) Per a Schedule 13G as of December 31, 1994, reporting: (i) 39,300 shares
with respect to which ICM Asset Management, Inc. has sole voting power, (ii)
364,700 shares with respect to which it has shared voting power, and (iii)
1,183,500 shares with respect to which it has shared dispositive power.
Information as to the beneficial ownership of Hogan Common Stock by the
directors and executive officers of Hogan is set forth under "Item 12. Security
Ownership of Certain Beneficial Owners and Management" in Hogan's Annual Report
on Form 10-K for the fiscal year ended March 31, 1995, as amended by its Form
10-K/A dated July 28, 1995, incorporated herein by reference. See "Incorporation
of Certain Documents by Reference." Upon consummation of the Merger, no such
person will own beneficially as much as 1% of the outstanding shares of
Continuum Common Stock.
Certain information relating to the management, executive compensation,
certain relationships, and related transactions pertaining to Continuum and
Hogan is set forth or incorporated by reference in their respective Annual
Reports on Form 10-K for the fiscal year ended March 31, 1995, as amended. Such
Annual Reports are incorporated by reference in this Joint Proxy
Statement/Prospectus. See "Incorporation of Certain Documents by Reference."
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DESCRIPTION OF CONTINUUM CAPITAL STOCK
Continuum's authorized capital stock consists of 5,000,000 shares of
Preferred Stock, $.01 par value per share ("Preferred Stock"), and 40,000,000
shares of Common Stock, $.10 par value per share.
PREFERRED STOCK
The Board of Directors is authorized to create rights, preferences, and
other provisions of one or more series of Preferred Stock if and when such
shares are issued. There are no shares of Preferred Stock issued and
outstanding, and Continuum has no current plans to issue any shares of Preferred
Stock. Shares of Preferred Stock could have rights that are superior to
Continuum Common Stock with respect to voting, dividends, or upon liquidation,
or that otherwise adversely affect the holders of Continuum Common Stock. The
authorized but unissued shares of Continuum Common Stock or Preferred Stock
could be used by the incumbent Board of Directors to discourage or make more
difficult an attempt to effect a change in control of Continuum. There are no
other provisions of the Continuum Charter or bylaws that would have the effect
of delaying or preventing a change in control of Continuum.
COMMON STOCK
As of September 30, 1995, there were 19,190,271 shares of Continuum Common
Stock issued and outstanding, and an additional 63,970 shares issued and held in
treasury.
Holders of shares of Continuum Common Stock are entitled to one vote per
share on all matters to be voted on by stockholders. No stockholder of Continuum
is entitled to cumulate his votes for the election of directors, and
stockholders do not have preemptive rights. The directors are all of one class
and are elected by the stockholders of Continuum at each annual meeting of the
stockholders. An amendment to the Continuum Charter, any plan of merger or
consolidation to which Continuum is a party, or a sale, lease, exchange, or
other disposition of all, or substantially all, of the property and assets of
Continuum other than in the regular and ordinary course of business must be
approved by the affirmative vote of the holders of at least two-thirds of the
outstanding shares of the capital stock of Continuum entitled to vote thereon.
Holders of Continuum Common Stock are entitled to receive such dividends,
if any, as may be declared by the Board of Directors from funds legally
available therefor. In the event of the liquidation of Continuum, holders of
Continuum Common Stock would be entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
outstanding Preferred Stock.
There are no conversion rights or redemption provisions with respect to
shares of Continuum Common Stock. All of the outstanding shares of Common Stock
are, and the additional shares issuable pursuant to the Merger Agreement, will
be when so issued, fully paid and nonassessable.
American Stock Transfer & Trust Company, 40 Wall Street, New York, New York
10005, acts as the transfer agent and registrar of the Continuum Common Stock.
COMPARATIVE RIGHTS OF CONTINUUM AND HOGAN STOCKHOLDERS
If the Merger is consummated, the stockholders of Hogan will become
stockholders of Continuum. The rights of stockholders of both Continuum and
Hogan are governed by and subject to the provisions of the Delaware General
Corporation Law ("DGCL"). The rights of current Hogan stockholders following the
Merger will be governed by the Continuum Charter and Continuum's bylaws rather
than the provisions of the Hogan Charter and Hogan's bylaws. The following is a
brief summary of certain differences between the rights of Continuum
stockholders and the rights of Hogan stockholders, and is qualified in its
entirety by reference to the relevant provisions of the DGCL, the Continuum
Charter, Continuum's bylaws, the Hogan Charter and Hogan's bylaws.
CUMULATIVE VOTING
Each share of Hogan Common Stock is entitled to one vote per share, except
that, under the Hogan Charter, holders of Hogan Common Stock have cumulative
voting rights with respect to the election of
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directors. Cumulative voting permits a stockholder to multiply the number of
shares which the stockholder is entitled to vote at a meeting for election of
directors by the number of directors to be elected at the meeting and, at such
stockholder's option, to cast the number of votes so determined for one director
nominee or to distribute them to any two or more director nominees. The
provisions of the Hogan Charter establishing cumulative voting rights cannot be
amended or repealed without the affirmative vote of the holders of at least
two-thirds of the voting power of the outstanding shares of Voting Stock (as
defined in the Hogan Charter), voting together as a single class (a
"Supermajority Stockholder Vote"). No stockholder of Continuum is entitled to
cumulate such holder's votes for the election of directors.
NUMBER OF DIRECTORS
The Hogan Charter provides that the number of directors shall be fixed from
time to time by the Board of Directors of Hogan, but may not be less than three
nor more than nine. Amendment or repeal of this charter provision would also
require a Supermajority Stockholder Vote. Currently, the number of Hogan
directors is five.
Continuum's bylaws effectively permit the Board of Directors to fix the
number of directors from time to time, but the number may never be less than
three. Currently, the number of Continuum directors is eight.
POWER TO CALL SPECIAL MEETINGS
Hogan's bylaws provide that a special meeting of stockholders may be called
by a majority of its directors, the Chairman of the Board or the holders of a
majority of the shares entitled to vote at the meeting. Amendment or repeal of
this bylaw would require a Supermajority Stockholder Vote.
Continuum's bylaws authorize only its Board of Directors to call special
meetings of stockholders.
ACTION BY WRITTEN CONSENT
The Hogan Charter and Continuum's bylaws permit action to be taken by
stockholders without a meeting by written consent of holders of outstanding
stock having the minimum number of votes that would be necessary to authorize
such action at a meeting, except that the Hogan Charter further provides that
election of directors by written consent would require stockholder unanimity.
Amendment or repeal of this provision of the Hogan Charter would require a
Supermajority Stockholder Vote.
STOCKHOLDER PROPOSALS
Hogan's bylaws establish an advance notice procedure with regard to the
nomination (other than by or at the direction of Hogan's Board of Directors) of
candidates for election to the Board of Directors and with regard to certain
matters to be brought before an annual meeting of stockholders. In general,
written notice must be received by Hogan within a specified period prior to the
meeting and must contain certain specified information concerning the person to
be nominated or the matters to be brought before the meeting as well as the
stockholder submitting the proposal. Amendment or repeal of these bylaws would
require a Supermajority Stockholder Vote.
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
The Continuum Charter contains certain provisions requiring that holders of
a higher percentage of shares approve charter amendments and certain mergers,
consolidations and asset dispositions than would otherwise be required under the
DGCL. See "Description of Continuum Capital Stock."
The Hogan Charter requires that certain "Business Combination"
transactions, including mergers, consolidations and sales of assets or
securities having an aggregate fair market value of at least $5,000,000, between
Hogan and any "Interested Stockholder" (e.g., any person who is the beneficial
owner of 10% or more of the voting power of the then outstanding Voting Stock)
be approved by a Supermajority Stockholder Vote, unless (i) the transaction is
approved by a majority of the total number of the "Disinterested Directors" of
Hogan (generally, directors who are unaffiliated with the Interested Stockholder
and who were directors
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before the Interested Stockholder became an Interested Stockholder and certain
successors of such directors) or (ii) the transaction satisfies certain
conditions as to minimum price (based on the highest price paid by the
Interested Stockholder in specified circumstances), form of consideration and
procedure. Amendment or repeal of this provision of the Hogan Charter would
require a Supermajority Stockholder Vote.
AUDITORS
It is expected that representatives of Ernst & Young LLP will be present at
the Continuum Special Meeting, and that representatives of Price Waterhouse LLP
will be present at the Hogan Special Meeting, to respond to appropriate
questions of stockholders and to make a statement if they so desire.
LEGAL MATTERS
The validity of the Continuum Common Stock offered hereby has been passed
upon for Continuum by its Vice President and General Counsel, Jack Dennison. As
of the Record Date, Mr. Dennison beneficially owned no shares of Continuum
Common Stock and held options to purchase a total of 35,333 such shares. Certain
tax consequences of the Merger have been passed upon for Continuum by Vinson &
Elkins L.L.P., Houston, Texas, and for Hogan by Morgan, Lewis & Bockius LLP,
Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements and schedule of The Continuum
Company, Inc. at March 31, 1995 and 1994 and for each of the three years in the
period ended March 31, 1995, included in The Continuum Company, Inc. Annual
Report on Form 10-K for the year ended March 31, 1995 incorporated by reference
in this Joint Proxy Statement/Prospectus of The Continuum Company, Inc., which
is made a part of the Registration Statement, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference which, as to the fiscal year ended March
31, 1993, is based in part on the report of KPMG Peat Marwick LLP, independent
auditors. The consolidated financial statements and schedule are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of The Continuum Company, Inc. for
the year ended March 31, 1993, included in The Continuum Company, Inc. Annual
Report on Form 10-K for the year ended March 31, 1995, incorporated by reference
in this Joint Proxy Statement/Prospectus of The Continuum Company, Inc., which
is made a part of the Registration Statement, with respect to the consolidated
statements of operations, stockholders' equity and cash flows of Paxus
Corporation Limited (a company incorporated in New South Wales, Australia) have
been audited by KPMG Peat Marwick LLP, independent auditors, as set forth in
their report thereon included therein and is incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements and financial statements schedule
included in Hogan's Annual Report on Form 10-K for the year ended March 31, 1995
have been incorporated by reference herein and in the Registration Statement in
reliance on the reports of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting. The report
of Price Waterhouse LLP covering Hogan's consolidated financial statements
refers to a change in its method of accounting for income taxes in the year
ended March 31, 1994.
STOCKHOLDERS' PROPOSALS
Any proposals of holders of Continuum Common Stock intended to be presented
at the Annual Meeting of Stockholders of Continuum to be held in 1996 must be
received by Continuum, addressed to the Secretary at 9500 Arboretum Boulevard,
Austin, Texas 78759, no later than March 28, 1996, to be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.
If the Merger is not consummated, any proposals of stockholders of Hogan
intended to be presented at the Annual Meeting of Stockholders of Hogan to be
held in 1996 must be received by Hogan, addressed to the Secretary at 5080
Spectrum Drive, Suite 400E, Dallas, Texas 75248, no later than March 13, 1996,
to be considered for inclusion in the proxy statement and form of proxy relating
to that meeting.
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APPENDIX I
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HOGAN SYSTEMS, INC.,
THE CONTINUUM COMPANY, INC.
AND CONTINUUM ACQUISITION CORPORATION
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of December
10, 1995, is made by and among Hogan Systems, Inc., a Delaware corporation (the
"Company"), The Continuum Company, Inc., a Delaware corporation ("Parent"), and
Continuum Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of Parent ("Merger Sub").
WITNESSETH:
WHEREAS, Merger Sub will merge into the Company (the "Merger") pursuant to
the General Corporation Law of the State of Delaware (the "DGCL") and upon the
terms and subject to the conditions hereinafter set forth, and pursuant thereto
each outstanding share of Common Stock, par value $.01 per share ("Company
Common Stock"), of the Company not owned directly or indirectly by the Company
or Parent or their respective subsidiaries will be converted into the right to
receive a number of shares of Parent Common Stock, par value $0.10 per share
(the "Parent Common Stock"), to be determined in the manner set forth herein;
WHEREAS, the Board of Directors of the Company has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and is fair to, and in the best interests of, the Company and its
stockholders and has approved and adopted this Agreement and the transactions
contemplated hereby, and recommended adoption of this Agreement by the
stockholders of the Company;
WHEREAS, the Board of Directors of Parent has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and is fair to, and in the best interests of, Parent and its stockholders and
has approved and adopted this Agreement and the transactions contemplated hereby
and recommended approval by the stockholders of Parent of the issuance of Parent
Common Stock in connection with this Agreement;
WHEREAS, the Board of Directors of Merger Sub has approved and adopted this
Agreement and Parent, as the sole stockholder of Merger Sub, will adopt this
Agreement promptly after the execution hereof by the parties hereto;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the United
States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Merger is intended to be treated as a "pooling of interests"
for financial accounting purposes;
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions set forth below, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Subject to the terms and conditions hereof and in
accordance with the DGCL, at the Effective Time (as defined in Section 1.2): (i)
Merger Sub shall be merged with and into the Company and the separate existence
of Merger Sub shall cease; (ii) the Company, as the surviving corporation in the
Merger (the "Surviving Corporation"), (A) shall be a wholly-owned subsidiary of
Parent, (B) shall continue its corporate existence under the laws of the State
of Delaware, (C) shall retain its present name and (D) shall succeed to all
rights, assets, liabilities and obligations of Merger Sub and the Company in
accordance with the DGCL; (iii) except as provided in the proviso to this
Section 1.1, the Restated Certificate of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall continue as the
certificate of incorporation of the Surviving Corporation; (iv) the By-Laws of
the Company, as in effect immediately prior to the Effective Time, shall
continue as the bylaws of the Surviving Corporation; (v) the
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directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, each to hold office in accordance with
the certificate of incorporation and bylaws of the Surviving Corporation, and
(vi) the officers of Merger Sub immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, each to hold office in accordance
with the bylaws of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified; provided,
however, that Article IV of the Restated Certificate of Incorporation of the
Company shall be amended in its entirety to read as follows:
"The aggregate number of shares which the Corporation shall have authority
to issue is one thousand (1,000), of the par value of one dollar ($1.00)
each, to be designated 'Common Stock'."
From and after the Effective Time, the Merger will have all the effects provided
by applicable law.
SECTION 1.2. Effective Time of the Merger. As soon as practicable after the
Closing Date (as defined in Section 5.1 hereof) the parties hereto shall cause
the Merger to be consummated by filing a certificate of merger (the "Certificate
of Merger") with the Secretary of State of the State of Delaware, in such form
as required by, and executed in accordance with the relevant provisions of, the
DGCL (the date and time of such filing, or such later date or time agreed upon
by Parent and the Company and set forth therein, being called the "Effective
Time").
SECTION 1.3. Conversion and Cancellation of Securities.
(a) At the Effective Time, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock described in Section 1.3(b) hereof) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive 0.355555 of a fully paid and nonassessable share of
Parent Common Stock (such fraction being called the "Conversion Number");
provided, however, that no fractional shares of Parent Common Stock shall be
issued and, in lieu thereof, a cash payment shall be made pursuant to Section
1.4(i) hereof; and provided, further, that the Conversion Number shall be
subject to adjustment in accordance with the provisions of Section 4.2(d)(vi).
(b) At the Effective Time, each share of Company Common Stock held in the
treasury of the Company and each share of Company Common Stock owned by Parent
or any direct or indirect wholly owned subsidiary of the Company or Parent
immediately prior to the Effective Time, shall by virtue of the Merger and
without any action on the part of the holder thereof, be automatically canceled
and retired and cease to exist, and no cash, securities or other property shall
be payable in respect thereof.
(c) At the Effective Time, each share of Merger Sub common stock, par value
$1.00 per share ("Merger Sub Common Stock"), validly issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action by the holder thereof, be converted into one validly issued,
fully paid and nonassessable share of Common Stock, par value $1.00 per share,
of the Surviving Corporation ("Surviving Corporation Common Stock").
SECTION 1.4. Exchange of Certificates.
(a) American Stock Transfer & Trust Company (or another bank or trust
company selected by Parent and reasonably acceptable to the Company) shall act
as exchange agent (the "Exchange Agent") in connection with the surrender of
certificates evidencing shares of Company Common Stock converted into shares of
Parent Common Stock pursuant to the Merger. On or prior to the Closing Date,
Parent shall deposit with the Exchange Agent one or more certificates
representing the shares of Parent Common Stock to be issued in the Merger (the
"Merger Stock"), which shares of Merger Stock shall be deemed to be issued at
the Effective Time. At and following the Effective Time, Parent shall deliver to
the Exchange Agent such cash as may be required from time to time to make
payments of cash in lieu of fractional shares in accordance with Section 1.4(i)
hereof.
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(b) As soon as practicable after the Effective Time, Parent shall cause the
Exchange Agent to mail to each person who was, at the Effective Time, a holder
of record of a certificate or certificates that immediately prior to the
Effective Time evidenced outstanding shares of Company Common Stock (the
"Certificates") (i) a letter of transmittal specifying that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, which shall be in a form and
contain any other provisions as Parent and the Surviving Corporation may
reasonably agree and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing the Merger Stock. Upon
the proper surrender of Certificates to the Exchange Agent, together with a
properly completed and duly executed letter of transmittal and such other
documents as may be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor certificates
representing the shares of Merger Stock that such holder has the right to
receive pursuant to the terms hereof (together with any dividend or distribution
with respect thereto made after the Effective Time and any cash paid in lieu of
fractional shares pursuant to Section 1.4(i) hereof), and the Certificate so
surrendered shall be canceled. In the event of a transfer of ownership of
Company Common Stock that is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Merger Stock
may be issued to a transferee if the Certificate representing such Company
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence reasonably
satisfactory to the Surviving Corporation and Parent that any applicable stock
transfer tax has been paid.
(c) After the Effective Time, each outstanding Certificate which
theretofore represented shares of Company Common Stock shall, until surrendered
for exchange in accordance with this Section 1.4, be deemed for all purposes to
evidence ownership of the number of full shares of Parent Common Stock into
which the shares of Company Common Stock (which, prior to the Effective Time,
were represented thereby) shall have been so converted.
(d) Except as otherwise expressly provided herein, Parent shall pay all
charges and expenses, including those of the Exchange Agent, in connection with
the exchange of Certificates for shares of Merger Stock. Any Merger Stock
deposited with the Exchange Agent pursuant to Section 1.4(a) hereof, and not
exchanged pursuant to Section 1.4(b) hereof for Company Common Stock within six
months after the Effective Time, shall be returned by the Exchange Agent to
Parent, which shall thereafter act as exchange agent subject to the rights of
holders of Company Common Stock hereunder.
(e) At the Effective Time, the stock transfer books of the Company shall be
closed and no transfer of shares of Company Common Stock shall thereafter be
made.
(f) None of Parent, Merger Sub, the Company, the Surviving Corporation or
the Exchange Agent will be liable to any holder of shares of Company Common
Stock for any shares of Merger Stock, dividends or distributions with respect
thereto or cash payable in lieu of fractional shares pursuant to Section 1.4(i)
hereof delivered to a state abandoned property administrator or other public
official pursuant to any applicable abandoned property, escheat or similar law.
(g) If any Certificates shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificates to
be lost, stolen or destroyed, and delivery of such bond or other indemnity as
the Exchange Agent may reasonably request, the Exchange Agent will deliver in
exchange for such lost, stolen or destroyed Certificates one or more
certificates representing the Merger Stock deliverable in respect thereof, as
determined in accordance with the terms hereof.
(h) No dividend or other distribution declared or made after the Effective
Time with respect to the Merger Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Merger Stock issuable upon surrender thereof until the holder
of such Certificate shall surrender such Certificate in accordance with Section
1.4(b). Subject to the effect of applicable law, following surrender of any such
Certificate there shall be paid, without interest, to the record holder of
certificates representing whole shares of Merger Stock issued in exchange
therefor: (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Merger Stock; and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to
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surrender of such Certificate and a payment date subsequent to such surrender
payable with respect to such whole shares of Merger Stock.
(i) No certificates or scrip evidencing fractional shares of Merger Stock
shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests shall not entitle the owner thereof to any rights of
a stockholder of Parent. In lieu of any such fractional shares, each holder of a
Certificate previously evidencing Company Common Stock, upon surrender of such
Certificate for exchange pursuant to this Article I, shall be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(a) the per share closing price as reported on the New York Stock Exchange
Composite Tape of Parent Common Stock on the date of the Effective Time (or, if
shares of Parent Common Stock do not trade on the New York Stock Exchange (the
"NYSE") on such date, the first date of trading of Parent Common Stock on the
NYSE after the Effective Time) by (b) the fractional interest to which such
holder would otherwise be entitled (after taking into account all shares of
Company Common Stock held of record by such holder at the Effective Time).
SECTION 1.5. No Dissenters' Rights. The holders of shares of Parent Common
Stock and the holders of shares of Company Common Stock shall not be entitled to
appraisal rights.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Company's Disclosure Schedule hereto, the
Company represents and warrants to Parent as follows:
SECTION 2.1. Organization and Authority; Subsidiaries.
(a) Each of the Company and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as it is
now being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing would not
have a Company Material Adverse Effect. (The term "Company Material Adverse
Effect" as used in this Agreement shall mean any change or effect that,
individually or when taken together with all other such changes or effects,
would be materially adverse to the financial condition, results of operations or
current or future business of the Company and its subsidiaries, taken as a
whole.) The Company has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. All necessary action, corporate or otherwise, required to have been
taken by or on behalf of it by applicable law, its charter document or otherwise
to authorize (i) the approval, execution and delivery on its behalf of this
Agreement and (ii) its performance of its obligations under this Agreement and
the consummation of the transactions contemplated hereby has been taken, except
that the transactions must be approved by the stockholders of the Company. This
Agreement constitutes the Company's valid and binding agreement, enforceable
against it in accordance with its terms, except (A) as the same may be limited
by applicable bankruptcy, insolvency, moratorium or similar laws of general
application relating to or affecting creditors' rights, including without
limitation, the effect of statutory or other laws regarding fraudulent
conveyances and preferential transfers, and (B) for the limitations imposed by
general principles of equity.
(b) The Company's Disclosure Schedule identifies each subsidiary of the
Company as of the date hereof and shows the jurisdiction of incorporation of
each such subsidiary. All the outstanding shares of capital stock of the
subsidiaries of the Company (other than directors' qualifying shares in the case
of foreign subsidiaries) are validly issued, fully paid and nonassessable and
owned by the Company (or by a subsidiary of the Company) free and clear of all
liens, claims or encumbrances. There are no existing options, calls or
commitments of any character relating to, or securities or rights convertible
into or exchangeable for shares of, the issued or unissued capital stock of any
subsidiary of the Company. Except as disclosed in filings made by
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the Company pursuant to the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "Exchange Act"), the Company does not
directly or indirectly own any interest in any other corporation, partnership,
joint venture or other business association or entity which is material to the
Company and its subsidiaries taken as a whole.
SECTION 2.2. No Breach. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not, (i)
violate or conflict with the Company's charter or bylaws or (ii) constitute a
breach or default (or an event that with notice or lapse of time or both would
become a breach or default) or give rise to any lien, third party right of
termination, cancellation, material modification or acceleration under any
agreement, understanding or undertaking to which the Company or any subsidiary
is a party or by which it is bound, except where such breach, default, lien,
third party right, cancellation, modification or acceleration would not have a
Company Material Adverse Effect, or (iii) constitute a violation of any law,
rule or regulation to which the Company or any subsidiary is subject.
SECTION 2.3. Consents and Approvals. Neither the execution and delivery by
the Company of this Agreement nor the consummation by the Company of the
transactions contemplated hereby will require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (i) for filings required under the Exchange Act,
(ii) for notification pursuant to, and expiration or termination of the waiting
period under, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (iii) for
filing and recording of the Certificate of Merger pursuant to the DGCL and (iv)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not prevent the Company from
performing its obligations under this Agreement without having a Company
Material Adverse Effect.
SECTION 2.4. Joint Proxy Statement/Prospectus and Other Information. None
of the information related to Company or any of its subsidiaries which is
supplied by Company for inclusion in the Joint Proxy Statement/Prospectus
described in Section 4.4(a) hereof will, at the time the Joint Proxy
Statement/Prospectus is mailed or at the time of the meeting of stockholders to
which the Joint Proxy Statement/Prospectus relates, contain any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation or warranty is otherwise made by
the Company with respect to the Joint Proxy Statement/Prospectus.
SECTION 2.5. Brokers and Finders. Neither the Company nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated herein, except that the Company has employed
Morgan Stanley & Co. Incorporated ("Morgan Stanley") as its financial advisor.
Prior to the date of this Agreement the Company has delivered to Parent a copy
of all agreements pursuant to which Morgan Stanley will be entitled to any
payment relating to the transactions contemplated by this Agreement.
SECTION 2.6. Capitalization. The Company's authorized capital stock
consists of (i) 50,000,000 shares of Company Common Stock, of which 14,507,415
were issued and outstanding as of November 13, 1995 (excluding 688,099 shares
held in treasury), and (ii) 1,000,000 shares of preferred stock, no par value
per share, of which no shares are issued and outstanding. Since November 13,
1995, no shares of Company Common Stock have been issued except upon exercise of
employee stock options. As of November 13, 1995 there were outstanding options
to purchase 2,383,002 shares of Company Common Stock and no options have been
granted after November 13, 1995. Except for such stock options, there are no
existing options, warrants, calls, subscriptions, or other rights or other
agreements or commitments obligating the Company to issue, transfer or sell any
shares of capital stock of the Company. There are no voting trusts or other
agreements or understandings to which the Company is a party with respect to the
voting of capital stock of the Company.
SECTION 2.7. SEC Reports. The Company has filed all required forms, reports
and documents with the Securities and Exchange Commission (the "SEC") pursuant
to the Exchange Act since March 31, 1993 (collectively, the "Company's SEC
Reports"). The Company's SEC Reports have complied in all material respects with
all applicable requirements of the Exchange Act. As of their respective dates,
none of the Company's SEC Reports, including, without limitation, any financial
statements or schedules included or
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incorporated by reference therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company has heretofore delivered to Parent, in the form filed with the SEC, all
of the Company's SEC Reports.
SECTION 2.8. Financial Statements. The audited consolidated financial
statements of the Company contained in the Company's Annual Report on Form 10-K
for the year ended March 31, 1995, as amended by Form 10-K/A (the "1995 10-K"),
which consist of (i) consolidated balance sheets as of March 31, 1995 and 1994,
(ii) consolidated statements of income, changes in shareholders' equity and cash
flows and (iii) the notes thereto for each of the three fiscal years in the
period ended March 31, 1995, certified by Price Waterhouse LLP, whose reports
thereon and on the related financial statement schedule are included therewith,
were prepared in accordance with generally accepted accounting principles
("GAAP") and present fairly the Company's consolidated financial condition and
the consolidated results of its operations as of the relevant dates thereof and
for the periods covered thereby. The unaudited consolidated financial statements
of the Company contained in the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1995 (the "Company 10-Q"), which consist of
(i) consolidated balance sheets as of September 30, 1995 and March 31, 1995,
(ii) consolidated statements of income and cash flows for the three months and
six months ended September 30, 1995 and 1994 and (iii) the notes thereto, were
prepared in accordance with GAAP, subject to the absence of notes and schedules,
and present fairly the Company's consolidated financial condition and the
consolidated results of its operations as of the relevant dates thereof and for
the periods covered thereby, subject to normal and recurring year-end
adjustments.
SECTION 2.9. Absence of Certain Changes. Except as otherwise disclosed in
the Company's SEC Reports (without further amendment), since March 31, 1995
there has not been any (i) material adverse change in the financial condition,
results of operations or current or future business of the Company and its
subsidiaries, taken as a whole, except for material adverse changes due to
general economic or industry-wide conditions, or (ii) other events or conditions
of any character that, individually or in the aggregate, have or would
reasonably be expected to have a Company Material Adverse Effect.
SECTION 2.10. Absence of Undisclosed Liabilities. Neither the Company nor
any subsidiary has any material indebtedness, liability or obligation of the
type required by GAAP to be reflected on a balance sheet that is not reflected
or reserved against in the balance sheet dated as of September 30, 1995 included
in the Company 10-Q or otherwise disclosed in the Company SEC Reports, except
for such indebtedness, liabilities or obligations which have arisen after such
date in the ordinary course of business.
SECTION 2.11. Compliance With Law. Each of the Company and its subsidiaries
holds all licenses, franchises, certificates, consents, permits and
authorizations from all governmental authorities necessary for the lawful
conduct of its business, except where the failure to hold any of the foregoing
would not have a Company Material Adverse Effect. Neither the Company nor any
subsidiary has violated, nor is it in violation of, any such licenses,
franchises, certificates, consents, permits or authorizations or, to the
Company's knowledge, any applicable statutes, laws, ordinances, rules and
regulations (including, without limitation, any of the foregoing related to
occupational safety, storage, disposal, discharge into the environment of
hazardous wastes, environmental protection, conservation, unfair competition,
labor practices or corrupt practices) of any governmental authorities, except
where such violations do not, and insofar as reasonably can be foreseen will
not, have a Company Material Adverse Effect, and neither the Company nor any
subsidiary has received any notice from a governmental or regulatory authority
within three years of the date hereof of any such violation.
SECTION 2.12. Taxes.
(a) All Tax Returns required to be filed by the Company and any of its
subsidiaries, on any of their income, properties or operations, before the date
hereof are in all material respects true, complete and correct and have been
duly filed in a timely manner, and all taxes required to have been paid in
connection with such Tax Returns have been paid, except where the failure to so
file or pay would not have a Company Material Adverse Effect. For purposes of
this Agreement, "Tax Return" means any return, report, statement,
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information statement and the like required to be filed with any authority with
respect to any tax imposed by any governmental authority.
(b) To the Company's knowledge, (i) there are no claims, investigations or
assessments pending or threatened against the Company or its subsidiaries, for
any alleged deficiency in taxes, (ii) there is no audit or investigation
currently being conducted that could cause the Company or its subsidiaries to be
liable for any taxes, and (iii) the Company and its subsidiaries have not agreed
to extend any applicable statute of limitations relating to the assessment of
federal, state or local taxes relating to the Company or its subsidiaries, which
in any case would have a Company Material Adverse Effect.
(c) The Company and its subsidiaries have complied in all material respects
with all tax withholding provisions of applicable federal, state and local laws
and have paid over to the proper governmental authorities all amounts required
to be so withheld or paid over before the date hereof, except where the failure
to so withhold would not have a Company Material Adverse Effect.
SECTION 2.13. Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, or any properties or
rights of the Company or any of its subsidiaries, before any court, arbitrator
or administrative, governmental or regulatory authority or body, domestic or
foreign, that, in the event of an adverse decision or outcome, could reasonably
be expected to have a Company Material Adverse Effect.
SECTION 2.14. Title to Property. Except for the office building in Woking,
England, disclosed in the 1995 10-K, neither the Company nor any subsidiary owns
any real property. The Company and each of its subsidiaries have good and
defensible title to all of their properties and assets, free and clear of all
liens, charges and encumbrances except liens for taxes not yet due and payable
and such liens or other imperfections of title, if any, as do not materially
detract from the value of or interfere with the present use of the property
affected thereby or which, individually or in the aggregate, would not have a
Company Material Adverse Effect; and, to the Company's knowledge, all leases
pursuant to which the Company or any of its subsidiaries lease from others real
or personal property are in good standing, valid and effective in accordance
with their respective terms, and there is not, to the knowledge of the Company,
under any of such leases, any existing material default or event of default (or
event which with notice or lapse of time, or both, would constitute a material
default and in respect of which the Company or such subsidiary has not taken
adequate steps to prevent such a default from occurring) except where the lack
of such good standing, validity and effectiveness, or the existence of such
default or event of default would not have a Company Material Adverse Effect.
SECTION 2.15. Intellectual Property; Software.
(a) Each of the Company and its subsidiaries owns, or possesses adequate
licenses or other valid rights to use, all existing United States and foreign
patents, trademarks, trade names, service marks, copyrights, trade secrets, and
applications therefor that are material to its business as currently conducted
(the "Company Intellectual Property Rights").
(b) The validity of the Company Intellectual Property Rights and the title
thereto of the Company or any subsidiary, as the case may be, is not being
questioned in any litigation to which the Company or any subsidiary is a party.
(c) The conduct of the business of the Company and its subsidiaries as now
conducted does not, to the Company's knowledge, infringe any valid patents,
trademarks, trade names, service marks or copyrights of others. The consummation
of the transactions contemplated hereby will not result in the loss or
impairment of any Company Intellectual Property Rights.
(d) Prior to the execution and delivery of this Agreement, the Company has
provided Parent with a list of all computer software which the Company or any
subsidiary owns or has the right to market or use to provide services to third
parties.
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(e) Neither the Company nor any subsidiary has licensed (or otherwise
entered into any agreement permitting) any person to use or market any of its
computer software (whether or not copyrighted) other than licenses to end-users
to use (but not market, distribute, sell or transfer) the computer software.
(f) Each of the Company and its subsidiaries considers its computer
software as trade secrets, and each has taken steps it believes appropriate to
protect and maintain the same as such.
SECTION 2.16. Employee Benefit Plans; Employment Agreements.
(a) The Company's Disclosure Schedule lists all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements, and any current or
former employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee of the Company, any
trade or business (whether or not incorporated) which is a member of a
controlled group including the Company or which is under common control with the
Company (an "ERISA Affiliate") within the meaning of Section 414 of the Code, or
any subsidiary of the Company, as well as each plan with respect to which the
Company or an ERISA Affiliate could incur liability under Section 4069 (if such
plan has been or were terminated) or Section 4212(c) of ERISA (together, the
"Employee Plans"), excluding former agreements under which the Company has no
remaining obligations and any of the foregoing that are required to be
maintained by the Company under the laws of any foreign jurisdiction. The
Company has made available to Parent a copy of (i) the most recent annual report
on Form 5500 filed with the Internal Revenue Service (the "IRS") and (ii) each
such written Employee Plan (other than those referred to in Section 4(b)(4) of
ERISA).
(b) (i) None of the Employee Plans promises or provides retiree medical or
other retiree welfare benefits to any person and none of the Employee Plans is a
"multi-employer plan" as such term is defined in Section 3(37) of ERISA; (ii)
there has been no "prohibited transaction", as such term is defined in Section
406 of ERISA and Section 4975 of the Code, with respect to any Employee Plan,
which could result in any Company Material Adverse Effect; (iii) all Employee
Plans are in compliance in all material respects with the requirements
prescribed by any and all statutes (including ERISA and the Code), orders, or
governmental rules and regulations currently in effect with respect thereto
(including all applicable requirements for notification to participants or the
Department of Labor, IRS or Secretary of the Treasury), and the Company and each
of its subsidiaries have performed all material obligations required to be
performed by them under, are not in any material respect in default under or
violation of, and have no knowledge of any default or violation by any other
party to, any of the Employee Plans; (iv) each Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code is the subject of a favorable determination letter
from the IRS, and nothing has occurred which may reasonably be expected to
impair such determination; (v) all contributions required to be made to any
Employee Plan pursuant to Section 412 of the Code, or the terms of the Employee
Plan or any collective bargaining agreement, have been made on or before their
due dates and a reasonable amount has been accrued for contributions to each
Employee Plan for the current plan years; (vi) with respect to each Employee
Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred; and (vii) neither
the Company nor any ERISA Affiliate has incurred, nor reasonably expects to
incur, any liability under Title IV of ERISA (other than liability for premium
payments to the Pension Benefit Guaranty Corporation arising in the ordinary
course).
(c) The Company's Disclosure Schedule sets forth a true and complete list,
as of the date of this Agreement, of each current or former employee, officer or
director of the Company or any of its subsidiaries who holds any option to
purchase Company Common Stock as of the date hereof (collectively, the "Stock
Options"), together with the number of shares of Company Common Stock which are
subject to such option, the date of grant of such option, the extent to which
such option is vested (or will become vested within six months from the date
hereof, or as a result of, the Merger), the option price of such option (to the
extent
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determined as of the date hereof), whether such option is intended to qualify as
an incentive stock option within the meaning of Section 422(b) of the Code (an
"ISO"), and the expiration date of such option. The Company's Disclosure
Schedule also sets forth the total number of such ISOs and such nonqualified
options. The Company has furnished Parent with complete copies of the plans
(collectively, the "Option Plans") pursuant to which the Stock Options were
issued.
(d) The Company has made available to Parent (i) copies of all employment
agreements with officers of the Company; (ii) copies of all agreements with
consultants who are individuals obligating the Company to make annual cash
payments in an amount exceeding $250,000; (iii) a schedule listing all officers
of the Company who have executed a non-competition agreement with the Company;
(iv) copies (or descriptions) of all severance agreements, programs and policies
of the Company with or relating to its employees, except programs and policies
required to be maintained by law; and (v) copies of all plans, programs,
agreements and other arrangements of the Company with or relating to its
employees which contain change in control provisions.
SECTION 2.17. Labor Matters.
(a) There are no controversies pending or, to the knowledge of the Company,
threatened, between the Company or any of its subsidiaries and any of their
respective employees, which controversies have or may reasonably be expected to
have a Company Material Adverse Effect.
(b) Neither the Company nor any of its subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or its subsidiaries nor does the Company know of
any activities or proceedings of any labor union to organize any such employees.
(c) The Company has no knowledge of any strikes, slowdowns, work stoppages,
lockouts or threats thereof, by or with respect to any employees of the Company
or any of its subsidiaries.
SECTION 2.18. Environmental Matters. Except in all cases as, in the
aggregate, have not had and could not reasonably be expected to have a Company
Material Adverse Effect, the Company and each of its subsidiaries, to the
Company's knowledge, (i) have obtained all applicable permits, licenses and
other authorizations which are required under foreign, federal, state or local
laws relating to pollution or protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by the Company or its subsidiaries (or their respective
agents); (ii) are in compliance with all terms and conditions of such required
permits, licenses and authorizations, and also are in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in such laws or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder; (iii) as of the date hereof, are
not aware of nor have received notice of any event, condition, circumstance,
activity, practice, incident, action or plan which is reasonably likely to
interfere with or prevent continued compliance with or which would give rise to
any common law or statutory liability, or otherwise form the basis of any claim,
action, suit or proceeding, based on or resulting from the Company's or any of
its subsidiaries (or any of their respective agents ) manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling or the
emission, discharge or release into the environment, of any pollutant,
contaminant, or hazardous or toxic material or waste; and (iv) have taken all
actions necessary under applicable requirements of foreign, federal, state or
local laws, rules or regulations to register any products or materials required
to be registered by the Company or its subsidiaries (or any of their respective
agents) thereunder.
SECTION 2.19. Insurance. The Company and its subsidiaries maintain general
liability and other business insurance that the Company believes to be
reasonably prudent for it business.
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SECTION 2.20. Vote Required. The affirmative vote of the holders of a
majority of the outstanding Company Common Stock is the only vote of the holders
of any class or series of the Company's capital stock necessary to approve and
adopt this Agreement.
SECTION 2.21. Tax Matters; Pooling.
(a) Neither the Company nor, to the knowledge of the Company, any of its
affiliates has taken or agreed to take any action that would prevent the Merger
from (a) constituting a reorganization qualifying under the provisions of
Section 368(a) of the Code or (b) being treated for financial accounting
purposes as a pooling of interests in accordance with GAAP and the rules,
regulations and interpretations of the SEC (a "Pooling Transaction"). The
Company has been advised in writing as of the date of this Agreement by Price
Waterhouse LLP that in accordance with GAAP and applicable rules and regulations
of the SEC, the Company is eligible to be a party to a merger accounted for as a
pooling of interests and that Price Waterhouse LLP is not aware of any matters
that prohibit the use of pooling of interests accounting in connection with the
Merger, and the factual information provided by the Company to Price Waterhouse
LLP in connection with such advice was correct in all material respects.
(b) The Company is not an investment company as defined in Section
368(a)(2)(f)(iii) and (iv) of the Code.
(c) The Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
SECTION 2.22. Affiliates. The Company's Disclosure Schedule identifies all
persons who, to the knowledge of the Company, may be deemed to be affiliates of
the Company under Rule 145 of the Securities Act, as well as all directors and
executive officers of the Company. Concurrently with the execution and delivery
of this Agreement, the Company has delivered to Parent an executed letter
agreement, substantially in the form of Exhibit A hereto, from certain of such
persons identified in the Company's Disclosure Schedule and will use its
reasonable best efforts to deliver to Parent within ten days after the date of
this Agreement an executed letter agreement, substantially in the form of
Exhibit A hereto, from each of the other persons so identified.
SECTION 2.23. Certain Business Practices. None of the Company, any of its
subsidiaries or any directors, officers, agents or employees of the Company or
any of its subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended (the
"FCPA"), or (iii) made any other unlawful payment.
SECTION 2.24. Insider Interests. No officer or director of the Company has
any interest in any material property, real or personal, tangible or intangible,
including without limitation, any computer software or Company Intellectual
Property Rights, used in or pertaining to the business of the Company or any
subsidiary, except for the ordinary rights of a stockholder or employee stock
optionholder.
SECTION 2.25. Opinion of Financial Advisor. The Company has received the
opinion of Morgan Stanley to the effect that, as of the date of delivery of such
opinion, the consideration to be received by the holders of Company Common Stock
in the Merger is fair, from a financial point of view, to such holders. The
Company will promptly deliver to Parent a copy of such opinion.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB
Except as set forth on Parent's Disclosure Schedule hereto, Parent and
Merger Sub each represents and warrants to the Company as follows:
SECTION 3.1. Organization and Authority.
(a) Each of the Parent and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as it is
now being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing would not
have a Parent Material Adverse Effect. (The term "Parent Material Adverse
Effect" as used in this Agreement shall mean any change or effect that,
individually or when taken together with all such other changes or effects,
would be materially adverse to the financial condition, results of operations or
current or future business of Parent and its subsidiaries, taken as a whole.) It
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. All necessary
action, corporate or otherwise, required to have been taken by or on behalf of
it by applicable law, its charter document or otherwise to authorize (i) the
approval, execution and delivery on its behalf of this Agreement and (ii) its
performance of its obligations under this Agreement and the consummation of the
transactions contemplated hereby has been taken, except that the transactions
must be approved by its stockholders. This Agreement constitutes its valid and
binding agreement, enforceable against it in accordance with its terms, except
(A) as the same may be limited by applicable bankruptcy, insolvency, moratorium
or similar laws of general application relating to or affecting creditors'
rights, including without limitation, the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers, and (B) for the
limitations imposed by general principles of equity.
(b) The Parent's Disclosure Schedule identifies each subsidiary of the
Parent as of the date hereof and shows the jurisdiction of incorporation of each
such subsidiary. All the outstanding shares of capital stock of the subsidiaries
of the Parent (other than directors qualifying shares in the case of foreign
subsidiaries) are validly issued, fully paid and nonassessable and owned by the
Parent (or by a subsidiary of the Parent) free and clear of all liens, claims or
encumbrances. There are no existing options, calls or commitments of any
character relating to, or securities or rights convertible into or exchangeable
for shares of, the issued or unissued capital stock of any subsidiary of the
Parent. Except as disclosed on the Parent's Disclosure Schedule or in filings
made by the Parent pursuant to the Exchange Act, the Parent does not directly or
indirectly own any interest in any other corporation, partnership, joint venture
or other business association or entity which is material to the Parent and its
subsidiaries taken as a whole.
SECTION 3.2. No Breach. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not, (i)
violate or conflict with its charter or bylaws or (ii) constitute a breach or
default (or an event that with notice or lapse of time or both would become a
breach or default) or give rise to any lien, third party right of termination,
cancellation, material modification or acceleration under any agreement,
understanding or undertaking to which it is a party or by which Parent or any of
its subsidiaries is bound, except where such breach, default, lien, third party
right, cancellation, modification or acceleration would not have a Parent
Material Adverse Effect, or (iii) constitute a violation of any law, rule or
regulation to which Parent or any of its subsidiaries is subject.
SECTION 3.3. Consents and Approvals. Neither the execution and delivery of
this Agreement by it nor its consummation of the transactions contemplated
hereby will require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, except (i)
for filings required under the Securities Exchange Act, (ii) for notification
pursuant to, and expiration or termination of the waiting period under, the HSR
Act, (iii) for filing and recording of the Certificate of Merger pursuant to the
DGCL, (iv) for registration of Parent Company Stock and related filings under
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act") and applicable state securities or
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blue sky laws ("Blue Sky Laws") and (v) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent it from performing its obligations under this
Agreement without having a Parent Material Adverse Effect.
SECTION 3.4. Joint Proxy Statement/Prospectus and Other Information. None
of the information related to Parent or any of its subsidiaries which is
supplied by Parent for inclusion in the Joint Proxy Statement/Prospectus
described in Section 4.4(a) hereof will, at the time the Joint Proxy
Statement/Prospectus is mailed or at the time of the meeting of stockholders to
which the Joint Proxy Statement/Prospectus relates, contain any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation or warranty is otherwise made by
Parent or Merger Sub with respect to the Joint Proxy Statement/Prospectus.
SECTION 3.5. Brokers. Neither it nor any of its officers, directors or
employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated herein.
SECTION 3.6. Capitalization. The Parent's authorized capital stock consists
of (i) 40,000,000 shares of Parent Common Stock, of which 19,201,000 were issued
and outstanding as of October 24, 1995, and (ii) 5,000,000 shares of preferred
stock, par value $.01 per share, of which no shares are issued and outstanding.
Since October 24, 1995, no shares of Parent Common Stock have been issued except
upon exercise of employee and director stock options or pursuant to employee
benefits plans. As of November 13, 1995 there were outstanding options to
purchase 2,262,559 shares of Parent Common Stock and no options have been
granted after November 13, 1995, except for options granted to employees and
directors under existing stock option plans in the ordinary course of business
and for options granted to new Parent employees in connection with any
acquisition disclosed in Parent's Disclosure Schedule. Except for such stock
options, there are no existing options, warrants, calls, subscriptions, or other
rights or other agreements or commitments obligating the Parent to issue,
transfer or sell any shares of capital stock of the Parent. There are no voting
trusts or other agreements or understandings to which the Parent is a party with
respect to the voting of capital stock of the Parent.
SECTION 3.7. SEC Reports. The Parent has filed all required forms, reports
and documents with the SEC pursuant to the Exchange Act since March 31,1993
(collectively, the "Parent's SEC Reports"). The Parent's SEC Reports have
complied in all material respects with all applicable requirements of the
Exchange Act. As of their respective dates, none of the Parent's SEC Reports,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Parent has heretofore delivered to Parent, in the form filed with the SEC, all
of the Parent's SEC Reports.
SECTION 3.8. Financial Statements. The audited consolidated financial
statements of the Parent contained in the Parent's Annual Report on Form 10-K
for the year ended March 31,1995 (the "Parent 1995 10-K"), which consist of (i)
consolidated balance sheets as of March 31,1995 and 1994, (ii) consolidated
statements of operations, changes of stockholders' equity and cash flows for
each of the three fiscal years in the period ended March 31,1995 and (iii) the
notes thereto, audited by Ernst & Young LLP, whose report thereon and on the
related schedule is included therewith, were prepared in accordance with GAAP
and present fairly the Company's consolidated financial condition and the
consolidated results of its operations as of the relevant dates thereof and for
the periods covered thereby. The unaudited consolidated financial statements of
Parent contained in its Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1995 (the "Parent 10-Q"), which consist of condensed
consolidated balance sheets as of September 30, 1995 and March 31, 1995,
condensed consolidated statements of operations and cash flows for the three
months and six months ended September 30, 1995 and 1994, and notes thereto, were
prepared in accordance with GAAP, subject to the absence of notes and schedules,
and present fairly Parent's
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consolidated financial condition and the consolidated results of its operations
as of the relevant dates thereof and for the periods covered thereby, subject to
normal and recurring year-end adjustments.
SECTION 3.9. Absence of Certain Changes. Except as otherwise disclosed in
the Company's SEC Reports (without further amendment), since March 31,1995 there
has not been any (i) material adverse change in the financial condition, results
of operations or current or future business of the Company and its subsidiaries,
taken as a whole, except for material adverse changes due to general economic or
industry-wide conditions, or (ii) other events or conditions of any character
that, individually or in the aggregate, have or would reasonably be expected to
have a Parent Material Adverse Effect.
SECTION 3.10. Absence of Undisclosed Liabilities. Neither Parent nor any
subsidiary has any material indebtedness, liability or obligation of the type
required by GAAP to be reflected on a balance sheet that is not reflected or
reserved against in the balance sheet dated as of September 30, 1995 included in
the Parent 10-Q or otherwise disclosed in the Parent's SEC Reports, except for
such indebtedness, liabilities or obligations which have arisen after such date
in the ordinary course of business.
SECTION 3.11. Compliance With Law. Each of Parent and its subsidiaries
holds all licenses, franchises, certificates, consents, permits and
authorizations from all governmental authorities necessary for the lawful
conduct of its business, except where the failure to hold any of the foregoing
would not have a Parent Material Adverse Effect. Neither Parent nor any
subsidiary has violated, nor is it in violation of, any such licenses,
franchises, certificates, consents, permits or authorizations or, to Parent's
knowledge, any applicable statutes, laws, ordinances, rules and regulations
(including, without limitation, any of the foregoing related to occupational
safety, storage, disposal, discharge into the environment of hazardous wastes,
environmental protection, conservation, unfair competition, labor practices or
corrupt practices) of any governmental authorities, except where such violations
do not, and insofar as reasonably can be foreseen will not, have a Parent
Material Adverse Effect, and neither Parent nor any subsidiary has received any
notice from a governmental or regulatory authority within three years of the
date hereof of any such violation.
SECTION 3.12. Taxes.
(a) All Tax Returns required to be filed by Parent and any of its
subsidiaries, or any of their income, properties or operations, before the date
hereof are in all material respects true, complete and correct and have been
duly filed in a timely manner, and all taxes required to have been paid in
connection with such Tax Returns have been paid, except where the failure to so
file or pay would not have a Parent Material Adverse Effect.
(b) To Parent's knowledge, (i) there are no claims, investigations or
assessments pending or threatened against Parent or its subsidiaries, for any
alleged deficiency in taxes, and (ii) there is no audit or investigation
currently being conducted that could cause Parent or its subsidiaries to be
liable for any taxes, which in any case would have a Parent Material Adverse
Effect.
(c) Parent and its subsidiaries have complied in all material respects with
all tax withholding provisions of applicable federal, state and local laws and
have paid over to the proper governmental authorities all amounts required to be
so withheld or paid over before the date hereof, except where the failure to so
withhold would not have a Parent Material Adverse Effect.
SECTION 3.13. Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of Parent, threatened
against Parent or any of its subsidiaries, or any properties or rights of Parent
or any of its subsidiaries, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, that, in the
event of an adverse decision or outcome, could reasonably be expected to have a
Parent Material Adverse Effect.
SECTION 3.14. Title to Property. Parent and each of its subsidiaries have
good and defensible title to all of their properties and assets, free and clear
of all liens, charges and encumbrances except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which, individually or in the aggregate, would not
have a Parent Material Adverse Effect; and, to Parent's knowledge, all leases
pursuant to
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which Parent or any of its subsidiaries lease from others real or personal
property are in good standing, valid and effective in accordance with their
respective terms, and there is not, to the knowledge of Parent, under any of
such leases, any existing material default or event of default (or event which
with notice or lapse of time, or both, would constitute a material default or
event of default (or event which with notice or lapse of time, or both, would
constitute a material default and in respect of which the Parent or such
subsidiary has not taken adequate steps to prevent such a default from
occurring) except where the lack of such good standing, validity and
effectiveness, or the existence of such default or event of default would not
have a Parent Material Adverse Effect.
SECTION 3.15. Intellectual Property; Software.
(a) Each of the Parent and its subsidiaries owns, or possesses adequate
licenses or other valid rights to use, all existing United States and foreign
patents, trademarks, trade names, service marks, copyrights, trade secrets, and
applications therefor that are material to its business as currently conducted
(the "Parent Intellectual Property Rights").
(b) The validity of the Parent Intellectual Property Rights and the title
thereto of the Parent or any subsidiary, as the case may be, is not being
questioned in any litigation to which the Parent or any subsidiary is a party.
(c) The conduct of the business of the Parent and its subsidiaries as now
conducted does not, to the Parent's knowledge, infringe any valid patents,
trademarks, tradenames, service marks or copyrights of others. The consummation
of the transactions contemplated hereby will not result in the loss or
impairment of any Parent Intellectual Property Rights.
(d) Prior to the execution and delivery of this Agreement, the Parent has
provided the Company with a list of all computer software which the Parent or
any subsidiary owns or has the right to market or use to provide services to
third parties.
(e) Neither the Parent nor any subsidiary has licensed (or otherwise
entered into any agreement permitting) any person to use or market any of its
computer software (whether or not copyrighted) other than licenses to end-users
to use (but not market, distribute, sell or transfer) the computer software.
(f) Each of the Parent and its subsidiaries considers its computer software
as trade secrets, and each has taken steps it believes appropriate to protect
and maintain the same as such.
SECTION 3.16. Employee Benefit Plans; Labor Matters. With respect to each
employee benefit plan, program, arrangement and contract (including, without
limitation, any "employee benefit plan", as defined in Section 3(3) of ERISA),
maintained or contributed to by Parent or any of its subsidiaries, or with
respect to which Parent or any of its subsidiaries could incur liability under
Section 4069, 4212(c) or 4204 of ERISA (the "Parent Benefit Plans"), no event
has occurred and, to the knowledge of Parent, there currently exists no
condition or set of circumstances, in connection with which Parent or any of its
subsidiaries could be subject to any liability under the terms of the Parent
Benefit Plans, ERISA, the Code or any other applicable law which would have a
Parent Material Adverse Effect. There is no pending or threatened labor dispute,
strike or work stoppage against Parent or any of its subsidiaries which may
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 3.17. Environmental Matters. Except in all cases as, in the
aggregate, have not had and could not reasonably be expected to have a Parent
Material Adverse Effect, Parent and each of its subsidiaries, to Parent's
knowledge, (i) have obtained all applicable permits licenses and other
authorizations which are required under foreign, federal, state or local laws
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
by Parent or its subsidiaries (or their respective agents); (ii) are in
compliance with all terms and conditions of such required permits, licenses and
authorizations, and also are in compliance with all other limitations,
restrictions, conditions, standards,
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prohibitions, requirements, obligations, schedules and timetables contained in
such laws or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder;
(iii) as of the date hereof, are not aware of nor have received notice of any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere with or prevent continued compliance
with or which would give rise to any common law or statutory liability, or
otherwise form the basis of any claim, action, suit or proceeding, based on or
resulting from Parent's or any of its subsidiaries (or any of their respective
agents') manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling or the emission, discharge or release into the
environment, of any pollutant, contaminant, or hazardous or toxic material or
waste; and (iv) have taken all actions necessary under applicable requirements
of foreign, federal, state or local laws, rules or regulations to register any
products or materials required to be registered by the Parent or its
subsidiaries (or any of their respective agents) thereunder.
SECTION 3.18. Insurance. Parent and its subsidiaries maintain general
liability and other business insurance that Parent believes to be reasonably
prudent for it business.
SECTION 3.19. Vote Required. The only vote of the holders of any class or
series of Parent's capital stock necessary to approve the issuance of the Parent
Common Stock in the Merger is, pursuant to the Rule 312 of the NYSE, the
affirmative vote of the holders of a majority of the outstanding shares of
Parent Common Stock voted on the proposal to so issue the Parent Common Stock,
provided that the total vote cast on such proposal represents over 50% in
interest of the outstanding Parent Common Stock. Parent, as the sole stockholder
of Merger Sub, will promptly vote to approve the Merger and adopt this
Agreement.
SECTION 3.20. Tax Matters; Pooling.
(a) Neither Parent nor, to the knowledge of Parent, any of its affiliates
has taken or agreed to take any action that would prevent the Merger (a) from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code or (b) from being treated as a Pooling Transaction for financial
accounting purposes. The Parent has been advised in writing as of the date of
this Agreement by Ernst & Young LLP that in accordance with GAAP and applicable
published rules and regulations of the SEC, the Parent is eligible to be a party
to a merger accounted for as a "pooling of interests" and that Ernst & Young LLP
is not aware of any matters that prohibit the use of pooling of interests
accounting in connection with the Merger, and the factual information provided
by the Parent to Ernst & Young LLP in connection with such advice was correct in
all material respects.
(b) The Parent is not an investment company as defined in Section
368(a)(2)(f)(iii) and (iv) of the Code.
(c) The Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
SECTION 3.21. Affiliates. Except for the directors and executive officers
of Parent and DST Systems, Inc., there are no persons who, to the knowledge of
Parent, may be deemed to be affiliates of Parent under Rule 1-02 of Regulation
S-X of the SEC. Concurrently with the execution and delivery of this Agreement,
Parent has delivered to the Company an executed letter agreement, substantially
in the form of Exhibit B hereto, from certain such persons and will use its
reasonable best efforts to deliver to the Company within ten days after the date
of this Agreement an executed letter agreement, substantially in the form of
Exhibit B hereto, from each of the other such persons.
SECTION 3.22. Certain Business Practices. None of Parent, any of its
subsidiaries or any directors, officers, agents or employees of Parent or any of
its subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the FCPA, or (iii) made any other unlawful payment.
SECTION 3.23. Insider Interests. No officer or director of the Parent has
any interest in any material property, real or personal, tangible or intangible,
including without limitation, any computer software or Parent
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Intellectual Property Rights, used in or pertaining to the business of the
Parent or any subsidiary, except for the ordinary rights of a stockholder or
employee stock optionholder.
ARTICLE IV
OTHER AGREEMENTS
SECTION 4.1. No Solicitation. Neither the Company nor any of its
subsidiaries, officers, directors, representatives or agents shall, directly or
indirectly, knowingly encourage, solicit, initiate or participate in any way in
discussions or negotiations with, or knowingly provide any information to, any
person or group (other than Parent or any affiliate or associate of Parent and
their respective directors, officers, employees, representatives and agents)
concerning any merger of the Company, sale of substantially all of the assets of
the Company, sale of shares of capital stock of the Company or similar
transactions involving the Company; provided, however, that nothing contained in
this Section 4.1 shall prohibit the Board of Directors of the Company from (i)
taking and disclosing to the Company's stockholders a position with respect to a
tender offer for Company Common Stock by a third party pursuant to Rules 14d-9
and 14e-2 promulgated under the Exchange Act, (ii) making such disclosure to the
Company's stockholders as, in the judgment of the Board of Directors of the
Company, may be required under applicable law or (iii) participating in
discussions or negotiations with, or providing information to, any person in
connection with an unsolicited written proposal by such person to acquire the
Company pursuant to a merger, purchase of shares of capital stock of the Company
or other similar transaction or to acquire substantially all of the assets of
the Company, if, and only to the extent that (A) the Board of Directors of the
Company, after consultation with and based upon the advice of independent legal
counsel (who may be Morgan, Lewis & Bockius LLP), determines in good faith that
such action is necessary for such Board of Directors to comply with its
fiduciary duties to stockholders under applicable law and (B) prior to entering
into discussions or negotiations with, or providing such information to, such
person the Company (x) provides written notice to Parent to the effect that it
is participating in discussions or negotiations with, or providing information
to, such person and (y) enters into with such person a confidentiality agreement
in reasonably customary form on terms not more favorable to such person than the
terms contained in that certain Confidentiality Agreement (herein so called)
dated as of June 13, 1995, between the Company and Parent.
SECTION 4.2. Conduct of Business Pending Merger.
(a) The Company hereby covenants and agrees that, prior to the Effective
Time, unless otherwise contemplated by this Agreement or consented to in writing
by Parent, the Company shall and shall cause its subsidiaries to:
(i) operate its business in all material respects in the usual and
ordinary course consistent with past practice; and
(ii) use all reasonable efforts to preserve substantially intact its
business organization, maintain its material rights and franchises, retain
the services of its respective officers and key employees and maintain its
relationships with its material customers and suppliers.
(b) Except as contemplated by this Agreement or otherwise consented to in
writing by Parent, from the date of this Agreement until the Effective Time, the
Company shall not do, and shall not permit any of its subsidiaries to do, any of
the following:
(i) adopt any amendments to its charter document, which would alter
the terms of the Company Common Stock or would have an adverse impact on
the consummation of the transactions contemplated by this Agreement;
(ii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, except for dividends by a subsidiary to the Company
or another subsidiary of the Company, or redeem or otherwise acquire any of
its securities;
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(iii) issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class or any other securities or amend any of the terms of any such
securities or agreements outstanding on the date hereof; provided, however,
the Company may issue shares of Company Common Stock upon the exercise of
employee stock options outstanding on the date hereof and any subsidiary
may issue securities to the Company or any other subsidiary;
(iv) (A) create, incur or assume any long-term debt (including
obligations in respect of capital leases but excluding any intercompany
indebtedness) that is material to the Company and its subsidiaries taken as
a whole, (B) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any person other than the Company or a subsidiary that is
material to the Company and its subsidiaries taken as a whole, or (C) make
any loans, advances or capital contributions to, or investments in, any
person other than the Company or a subsidiary, which loans, advances or
capital contributions are material to the Company and its subsidiaries
taken as a whole;
(v) acquire, sell, lease or dispose of any assets that are material to
the Company and its subsidiaries taken as a whole, other than sales that
are in the ordinary and usual course of business consistent with past
practice;
(vi) mortgage, pledge or subject to any lien, lease, security interest
or other charge or encumbrance any of its properties or assets, tangible or
intangible, material to the Company and its subsidiaries taken as a whole;
(vii) (A) increase the compensation payable to or to become payable to
any director or officer, except for increases in salary or wages payable or
to become payable in the ordinary course of business and consistent with
past practice; (B) grant any severance or termination pay (other than
pursuant to agreements in effect on the date of this Agreement) to, or
enter into or amend any employment or severance agreement with, any
director, officer or employee;
(viii) (A) effect any reorganization or recapitalization or (B) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for, shares of its capital stock;
(ix) extend, renew or otherwise amend the Company's lease of its
executive offices in Dallas, Texas;
(x) change any of its methods of accounting in effect at September 30,
1995, except as may be required by law or GAAP;
(xi) take (and will use reasonable efforts to prevent any affiliate of
the Company from taking) any action that, in the judgment of Ernst & Young
LLP, would cause the Merger not to be treated as a pooling of interests for
financial accounting purposes; or
(xii) take, or agree in writing or otherwise to take, any of the
foregoing actions or any actions that would (A) make any representation or
warranty of the Company contained in this Agreement untrue or incorrect as
of the date when made or as of the Closing Date, (B) result in any of the
conditions of this Agreement not being satisfied or (C) be inconsistent
with the terms of this Agreement or the transactions contemplated hereby.
(c) Parent hereby covenants and agrees that, prior to the Effective Time,
unless otherwise contemplated by this Agreement or consented to in writing by
the Company, Parent shall and shall cause its subsidiaries to:
(i) operate its business in all material respects in the usual and
ordinary course consistent with past practice; and
(ii) use all reasonable efforts to preserve substantially intact its
business organization, maintain its material rights and franchises, retain
the services of its respective officers and key employees and maintain its
relationships with its material customers and suppliers.
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(d) Except as contemplated by this Agreement or otherwise consented to in
writing by the Company, from the date of this Agreement until the Effective
Time, Parent shall not do, and shall not permit any of its subsidiaries to do,
any of the following:
(i) knowingly take any action which would result in a failure to
maintain the trading of the Parent Common Stock on the NYSE;
(ii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, except for dividends by a subsidiary of Parent to
Parent or another subsidiary of Parent;
(iii) acquire or agree to acquire, by merging or consolidating with,
by purchasing an equity interest in or the assets of, or by any other
manner, any business or any corporation, partnership or other business
organization or division thereof, or otherwise acquire or agree to acquire
any assets of any other entity (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and consistent with
past practice), which, in each case, would materially delay or prevent the
consummation of the transactions contemplated by this Agreement;
(iv) adopt or propose to adopt any amendments to its charter document,
which would have an adverse impact on the consummation of the transactions
contemplated by this Agreement;
(v) take (and will use reasonable efforts to prevent any affiliate of
Parent from taking) any action that, in the judgment of Price Waterhouse
LLP, would cause the Merger not to be treated as a "pooling of interests"
for financial accounting purposes;
(vi) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class or any other securities (except for bank loans) or amend any of
the terms of any such securities or agreements outstanding on the date
hereof or make any public announcement thereof; provided, however, any
subsidiary may issue securities to Parent or any other subsidiary and
Parent may issue securities or make a public announcement thereof (A) upon
the exercise of employee or director stock options or (B) having an
aggregate market value of up to $100,000,000, provided that, in such event,
the Conversion Number shall be increased to the extent necessary, if any,
so that the product of (x) the Conversion Number and (y) the Average Daily
Price of the Parent Common Stock is not less than $13.00;
(vii) acquire, sell, lease or dispose of any assets that are material
to Parent and its subsidiaries taken as a whole, (A) other than sales that
are in the ordinary and usual course of business consistent with past
practice, (B) except as disclosed in Parent's Disclosure Schedule, or (C)
that are only among Parent and any of its subsidiaries;
(viii) (A) effect any reorganization or recapitalization or (B) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for, shares of its capital stock; or
(ix) take, or agree in writing or otherwise to take, any of the
foregoing actions or any action that would (A) make any representation or
warranty of Parent or Merger Sub contained in this Agreement untrue or
incorrect as of the date when made or as of the Closing Date, (B) result in
any of the conditions of this Agreement not being satisfied or (C) be
inconsistent with the terms of this Agreement or the transactions
contemplated hereby.
SECTION 4.3. Access to Information.
(a) Between the date of this Agreement and the Effective Time, the Company
will (i) give Parent and its authorized representatives reasonable access,
during regular business hours upon reasonable notice, to all offices and other
facilitates and to all of its books and records, (ii) permit Parent to make such
reasonable inspections as it may require, and (iii) cause its officers and those
of its subsidiaries to furnish Parent with such financial and operating data and
other information with respect to the business and properties of the
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Company, as Parent may from time to time reasonably request and as the Company
may have on hand or be able to produce without hardship. All such access and
information obtained by Parent and its authorized representatives shall be
subject to the terms and conditions of the Confidentiality Agreement.
(b) Between the date of this Agreement and the Effective Time, Parent will
(i) give Company and its authorized representatives reasonable access, during
regular business hours upon reasonable notice, to all offices and other
facilitates and to all of its books and records, (ii) permit the Company to make
such reasonable inspections as it may require, and (iii) cause its officers and
those of its subsidiaries to furnish Company with such financial and operating
data and other information with respect to the business and properties of Parent
as the Company may from time to time reasonably request and as Parent may have
on hand or be able to produce without hardship. All such access and information
obtained by the Company and its authorized representatives shall be subject to
the terms and conditions of the Confidentiality Agreement.
(c) Notwithstanding the foregoing provisions of this Section 4.3, neither
party shall be required to grant access or furnish information to the other
party to the extent that such access or the furnishing of such information is
prohibited by law. No investigation by the parties hereto made heretofore or
hereafter shall affect the representations and warranties of the parties which
are herein contained and each such representation and warranty shall survive
such investigation.
SECTION 4.4. SEC Filings.
(a) As promptly as practicable after the date hereof, the Company and
Parent shall jointly prepare and file with the SEC a joint proxy
statement/registration statement combining preliminary proxy materials of the
Company and Parent under the Exchange Act with respect to the Merger and a
preliminary prospectus of Parent with respect to the Parent Common Stock to be
issued in the Merger and will thereafter use their respective best efforts to
respond to any comments of the SEC with respect thereto and to cause a
definitive joint proxy statement/registration statement (including all
supplements and amendments thereto, the "Joint Proxy Statement/Prospectus") and
proxy to be mailed to their respective stockholders as promptly as practicable.
The Joint Proxy Statement/Prospectus shall include the recommendation of the
Company's Board of Directors in favor of the Merger and adoption of this
Agreement, unless otherwise necessary due to the applicable fiduciary duties of
the directors of the Company, as determined by such directors in good faith
after consultation with and based upon the advice of independent legal counsel
(who may be Morgan, Lewis & Bockius LLP).
(b) As soon as practicable after the date hereof, the Company and Parent
shall prepare and file any other filings required to be filed by each under the
Exchange Act or any other federal or state laws relating to the Merger and the
transactions contemplated hereby (collectively "Other Filings") and will use
their best efforts to respond to any comments of the SEC or any other
appropriate government official with respect thereto.
(c) The Company and Parent shall cooperate with each other and provide to
each other all information necessary in order to prepare the Joint Proxy
Statement/Prospectus and the Other Filings (collectively, the "SEC Filings") and
shall provide promptly to each other party any information that such party may
obtain that could necessitate amending any such document.
(d) The Company and Parent will notify the other party promptly of the
receipt of any comments from the SEC or its staff or any other appropriate
government official and of any requests by the SEC or its staff or any other
appropriate government official for amendments or supplements to any of the SEC
Filings or for additional information and will supply the other party with
copies of all correspondence between the Company or any of its representatives
or Parent and any of its representatives, as the case may be, on the one hand,
and the SEC or its staff or any other appropriate government official, on the
other hand, with respect thereto. If at any time prior to the Effective Time,
any event shall occur that should be set forth in an amendment of, or a
supplement to, any of the SEC Filings, the Company and Parent agree promptly to
prepare and file such amendment or supplement and to distribute such amendment
or supplement as required by applicable law, including, in the case of an
amendment or supplement to the Joint Proxy Statement/Prospectus, mailing such
supplement or amendment to their respective stockholders.
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(e) The information provided and to be provided by the Company and Parent
for use in the SEC Filings shall at all times prior to the Effective Time be
true and correct in all material respects and shall not omit to state any
material fact required to be stated therein or necessary in order to make such
information not false or misleading, and the Company and Parent each agree to
promptly correct any such information provided by it for use in the SEC Filings
that shall have become false or misleading. The SEC Filings, when filed with the
SEC or any appropriate government official, shall comply as to form in all
material respects with all applicable requirements of law.
(f) Parent shall indemnify, defend and hold harmless the Company, each of
its officers and directors and each other person, if any, who controls any of
the foregoing within the meaning of the Exchange Act against any losses, claims,
damages or liabilities, joint or several, to which any of the foregoing may
become subject under the Securities Act or the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) an untrue statement or alleged
untrue statement of a material fact contained in any SEC Filing or (ii) the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that Parent
was responsible for such misstatement or omission, and Parent shall reimburse
the Company and each such officer, director and controlling person for any legal
or any other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action.
(g) The Company shall indemnify, defend and hold harmless Parent, each of
its officers and directors and each other person, if any, who controls any of
the foregoing within the meaning of the Exchange Act against any losses, claims,
damages or liabilities, joint or several, to which any of the foregoing may
become subject under the Securities Act or the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) an untrue statement or alleged
untrue statement of a material fact contained in any SEC Filing or (ii) the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that the
Company was responsible for such misstatement or omission, and the Company shall
reimburse Parent and each such officer, director and controlling person for any
legal or any other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action.
(h) For the purpose of this Section 4.4, the term "Indemnifying Party"
shall mean the party having an obligation hereunder to indemnify the other party
pursuant to this Section 4.4, and the term "Indemnified Party" shall mean the
party having the right to be indemnified pursuant to this Section 4.4. Whenever
any claim shall arise for indemnification under this Section 4.4, the
Indemnified Party shall promptly notify the Indemnifying Party in writing of
such claim and, when known, the facts constituting the basis for such claim (in
reasonable detail). Failure by the Indemnified Party to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
hereunder unless such failure materially prejudices the Indemnifying Party.
(i) After such notice, if the Indemnifying Party undertakes to defend any
such claim, then the Indemnifying Party shall be entitled, if it so elects, to
take control of the defense and investigation with respect to such claim and to
employ and engage attorneys of its own choice to handle and defend the same, at
the Indemnifying Party's cost, risk and expense, upon written notice to the
Indemnified Party of such election, which notice acknowledges the Indemnifying
Party's obligation to provide indemnification hereunder. The Indemnifying Party
shall not settle any third-party claim that is the subject of indemnification
without the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld; provided, however, that the Indemnifying Party may settle
a claim without the Indemnified Party's consent if such settlement (i) makes no
admission or acknowledgment of liability or culpability with respect to the
Indemnified Party, (ii) includes a complete release of the Indemnified Party and
(iii) does not require the Indemnified Party to make any payment or forego or
take any action. The Indemnified Party shall cooperate in all reasonable
respects with the Indemnifying Party and its attorneys in the investigation,
trial and defense of any lawsuit or action with respect to such claim and any
appeal arising therefrom (including the filing in the Indemnified Party's name
of appropriate cross claims and counterclaims). The Indemnified Party may, at
its
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own cost, participate in any investigation, trial and defense of such lawsuit or
action controlled by the Indemnifying Party and any appeal arising therefrom.
If, after receipt of a claim notice pursuant to Section 4.4(h), the Indemnifying
Party does not undertake to defend any such claim the Indemnified Party may, but
shall have no obligation to, contest any lawsuit or action with respect to such
claim and the Indemnifying Party shall be bound by the result obtained with
respect thereto by the Indemnified Party (including, without limitation, the
settlement thereof without the consent of the Indemnifying Party). If there are
one or more legal defenses available to the Indemnified Party that conflict with
those available to the Indemnifying Party, the Indemnified Party shall have the
right, at the expense of the Indemnifying Party, to assume the defense of the
lawsuit or action; provided, however, that the Indemnified Party may not settle
such lawsuit or action without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld. At any time after the commencement
of defense of any lawsuit or action, the Indemnifying Party may request the
Indemnified Party to agree in writing to the abandonment of such contest or to
the payment or compromise by the Indemnifying Party of such claim, whereupon
such action shall be taken unless the Indemnified Party determines that the
contest should be continued and so notifies the Indemnifying Party in writing
within 15 days of such request from the Indemnifying Party. If the Indemnified
Party determines that the contest should be continued, the Indemnifying Party
shall be liable hereunder only to the extent of the lesser of (i) the amount
which the other party(ies) to the contested claim had agreed to accept in
payment or compromise as of the time the Indemnifying Party made its request
therefor to the Indemnified Party or (ii) such amount for which the Indemnifying
Party may be liable with respect to such claim by reason of the provisions
hereof.
(j) If the indemnification provided for in this Section 4.4 shall for any
reason be unavailable to the Indemnified Party in respect of any loss, claim,
damage or liability, or action referred to herein, then the Indemnifying Party
shall, in lieu of indemnifying the Indemnified Party, contribute to the amount
paid or payable by the Indemnified Party as a result of such loss, claim, damage
or liability, or action in respect thereof, in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and the
Indemnified Party on the other with respect to the statements or omissions that
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative fault shall
be determined by reference to whether the untrue or alleged untrue statement or
omission of a material fact relates to information supplied by the Indemnifying
Party on the one hand or the Indemnified Party on the other, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by the
Indemnified Party as a result of the loss, claim, damage or liability, or action
in respect thereof, referred to above in this paragraph shall be deemed to
include, for purposes of this paragraph, any legal or other expenses reasonably
incurred by the Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 4.5. New York Stock Exchange Listing. Parent shall use all
reasonable best efforts to obtain, prior to the Effective Time, approval for
listing of the Parent Common Stock to be issued pursuant to the Merger on the
NYSE upon official notice of issuance.
SECTION 4.6. Reasonable Best Efforts. Subject to the fiduciary duties of
the Company's Board of Directors, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement in the most expeditious manner
practicable, including but not limited to the satisfaction of all conditions to
the Merger.
SECTION 4.7. Public Announcements; Confidentiality. Except as may be
required by applicable law, no party hereto shall make any public announcements
or otherwise communicate with any news media or any other party, with respect to
this Agreement or any of the transactions contemplated hereby without prior
consultation with the other parties as to the timing and contents of any such
announcement or communications as may be reasonable under the circumstances;
provided, however, that nothing contained herein shall
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prevent any party from (i) promptly making all filings with governmental
authorities as may, in its judgment, be required or advisable in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby or (ii) disclosing the terms of this Agreement
to such party's legal counsel, financial advisors or accountants in furtherance
of the transactions contemplated by this Agreement. The press release announcing
the execution and delivery of this Agreement shall be a joint press release of
the Company and Parent.
SECTION 4.8. Notification. Each party hereto shall, in the event of, or
promptly after obtaining knowledge of the occurrence or threatened occurrence
of, any fact or circumstance that would cause or constitute a material breach of
any of its representations and warranties set forth herein, give notice thereof
to the other parties and shall use its best efforts to prevent or promptly to
remedy such breach.
SECTION 4.9. Meetings of Stockholders. Each of Parent and the Company shall
take all action necessary, in accordance with the DGCL and its respective
certificate of incorporation and bylaws, to duly call, give notice of, convene
and hold a meeting of its stockholders as promptly as practicable, in the case
of the Company, to consider and vote upon the adoption and approval of this
Agreement and the transactions contemplated hereby, and, in the case of Parent,
to vote upon the issuance of Parent Common Stock pursuant to the Merger
(collectively, the "Transactions"). The stockholder votes required for the
adoption and approval of the Transactions shall be the vote required by the DGCL
and its charter and bylaws, in the case of the Company, and Rule 312 of the
NYSE, in the case of Parent. Subject to the fiduciary duties of the Boards of
Directors under applicable law as advised by outside counsel, the Company and
Parent shall use their best efforts to solicit from their respective
stockholders proxies in favor of adoption and approval of the Transactions and
to take all other action necessary to secure the votes of stockholders required
to effect the Transactions.
SECTION 4.10. Regulatory and Other Authorizations. Each party hereto agrees
to use its best efforts to obtain all authorizations, consents, orders and
approvals of federal, state, local and foreign regulatory bodies and officials
and non-governmental third parties that may be or become necessary for (i) its
respective execution and delivery of, and the performance of its respective
obligations pursuant to, this Agreement and (ii) the ownership of the Surviving
Corporation by Parent, and each party will cooperate fully with the other
parties in promptly seeking to obtain all such authorizations, consents, orders
and approvals. Without limitation, the Company and Parent shall each make an
appropriate filing of a Notification and Report Form pursuant to the HSR Act as
promptly as practicable. Each such filing shall request early termination of the
waiting period imposed by the HSR Act.
SECTION 4.11. Further Assurances. Each of the parties hereto shall execute
such documents and other instruments and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and
consummate the transactions contemplated hereby or, at and after the Effective
Time, to evidence the consummation of the transactions contemplated by this
Agreement. Upon the terms and subject to the conditions hereof, each of the
parties hereto shall take or cause to be taken all actions and to do or cause to
be done all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement and to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings.
SECTION 4.12. Indemnification; Director's and Officer's Insurance. After
the Effective Time, the Surviving Corporation shall indemnify and hold harmless
(and shall also advance expenses as incurred to the fullest extent permitted
under applicable law to) each person who is now, or has been prior to the date
hereof or who becomes prior to the Effective Time, an officer or director of the
Company or any of the Company's subsidiaries (the "Indemnified Persons") against
(i) all losses, claims, damages, costs, expenses (including without limitation
counsel fees and expenses), settlement payments or liabilities arising out of or
in connection with any claim, demand, action, suit, proceeding or investigation
based in whole or in part on, or arising in whole or in part out of, the fact
that such person is or was an officer or director of the Company or any of the
Company subsidiaries, whether or not pertaining to any matter existing or
occurring at or prior to the Effective Time and whether or not asserted or
claimed prior to or at or after the Effective Time ("Indemnified Liabilities")
and (ii) all Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out
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of, or pertaining to this Agreement, or the transactions contemplated hereby, in
each case to the fullest extent required or permitted under applicable law or
under the Surviving Corporation's certificate of incorporation or bylaws (which
in relevant part are and shall remain identical to the Company's Restated
Certificate of Incorporation and By-Laws). Any determination required to be made
with respect to whether an Indemnified Person's conduct complies with the
standards set forth under applicable law or the Surviving Corporation's
certificate of incorporation or bylaws shall be made by a person, mutually
acceptable to the Surviving Corporation and the Indemnified Person, who shall
have been a director or executive officer of a corporation whose shares of
common stock were listed during at least one year of such service on the NYSE or
the American Stock Exchange or quoted on the National Association of Securities
Dealers Automated Quotations System. The parties hereto intend, to the extent
not prohibited by applicable law, that the indemnification provided for in this
Section 4.12 shall apply without limitation to negligent acts or omissions by an
Indemnified Person. The Surviving Corporation's certificate of incorporation and
bylaws shall not be amended in a manner that adversely affects the rights of any
Indemnified Person thereunder or under this Section 4.12, unless otherwise
required by applicable law. The Surviving Corporation shall maintain, for not
less than five years after the Effective Time, director's and officer's
liability insurance covering each Indemnified Person on terms not materially
less favorable than the insurance maintained in effect by the Company on the
date hereof in terms of coverage (including without limitation types of claims,
time period of claims, exclusions and persons covered), amounts and deductibles;
provided, however, that in no event shall the Surviving Corporation be required
to expend more than 200% of the current annual premiums paid by the Company for
such insurance. Parent hereby guarantees the payment and performance of the
Surviving Corporation's obligations in this Section 4.12. Each Indemnified
Person is intended to be a third party beneficiary of this Section 4.12 and may
specifically enforce its terms. This Section 4.12 shall not limit or otherwise
adversely affect any rights any Indemnified Person may have under any agreement
with the Company or under the Company's Restated Certificate of Incorporation or
By-Laws.
SECTION 4.13. Employee Benefits.
(a) Parent hereby unconditionally agrees to, and agrees to cause its
subsidiaries to honor, without modification except as provided in this Section
4.13, all contracts, agreements and commitments of the Company or any of its
subsidiaries authorized by the Company or any of its subsidiaries prior to the
date hereof which apply to any current or former employee or current or former
director of the Company or any of its subsidiaries, including, without
limitation, the severance agreements between the Company and certain of its
senior officers (copies of which severance agreements have been furnished to
Parent).
(b) Parent hereby unconditionally agrees to, and to cause its subsidiaries
to, provide to officers and employees of the Company and its subsidiaries who
become or remain regular (full-time) employees of Parent or any of its
subsidiaries, employee benefits, other than stock options, no less favorable
than the most favorable of (i) benefits which are substantially comparable to
those provided by the Company or its subsidiaries to its officers or employees
as of September 30, 1995, or (ii) those provided by Parent and its subsidiaries
to their similarly situated officers and employees; provided, however, that if
(i) above is more favorable, Parent shall only be obligated to provide such
benefits through September 30, 1996, after which time Parent shall only be
obligated to provide the benefits in accordance with (ii) above. Any employee of
the Company or any of its subsidiaries who becomes a participant in any employee
benefit plan, program, policy, or arrangement of Parent or any of its
subsidiaries after the Effective Date shall be given credit under such plan,
program, policy, or arrangement for all service with the Company or any of its
subsidiaries, and, if applicable, with Parent or any of its subsidiaries, prior
to becoming such a participant for purposes of eligibility and vesting.
(c) Parent and the Company shall take such actions consistent with the
Merger being accounted for financial accounting purposes as a Pooling
Transaction, including (with respect to the Company) the amendment of the Option
Plans and Stock Options, to permit Parent to assume, and Parent shall assume,
effective at the Effective Time, each Stock Option that remains unexercised in
whole or in part as of the Effective Time and substitute shares of Parent Common
Stock for the shares of Company Common Stock
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purchasable under each such assumed option ("Assumed Option"), which assumption
and substitution shall be effected as follows:
(i) the Assumed Option shall not give the optionee additional benefits
which such optionee did not have under the Stock Option before such
assumption and shall be assumed on the same terms and conditions as the
Stock Option being assumed, subject to Section 4.13(c)(ii) and (iii) below;
(ii) the number of shares of Parent Common Stock purchasable under the
Assumed Option shall be equal to the number of shares of Parent Common
Stock that the holder of the Stock Option being assumed would have received
(without regard to any vesting schedule) upon consummation of the Merger
had such Stock Option been exercised in full immediately prior to
consummation of the Merger; and
(iii) the per share exercise price of such Assumed Option shall be an
amount equal to the purchase exercise price of the Stock Option being
assumed divided by the Conversion Number.
(d) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of the Assumed Options, and, as soon as practicable after the Effective
Time, Parent shall file a registration statement on Form S-8 (or other
appropriate form) with respect to the shares of Parent Common Stock subject to
the Assumed Options, and shall use its best efforts to maintain the
effectiveness of such registration statement for so long as any of the Assumed
Options remain outstanding.
(e) Promptly after March 31, 1996, the Surviving Corporation shall
determine and declare bonuses payable under the Company's executive (including
management) bonus program for the fiscal year ending March 31, 1996, subject to
the terms of the severance agreements referred to in Section 4.13(a) hereof.
Such determination shall be made jointly in good faith by the current Presidents
of each of the Company and Parent and shall be made consistent with the
determinations made with respect to prior awards by the Company under comparable
bonus plans and based upon GAAP as consistently applied by the Company.
(f) After the Effective Time, Parent shall not permit the Surviving
Corporation to terminate the employment of the current President and five Senior
Vice Presidents of the Company prior to such time as financial statements that
include at least 30 days of combined operations of Parent and the Surviving
Corporation after the Merger have been publicly reported as contemplated by
Accounting Series Release 135 and related rules, and during such time the
compensation of such officers shall not be reduced below the levels thereof as
of September 30, 1995.
SECTION 4.14. Merger Sub. Prior to the Effective Time, Merger Sub shall not
conduct any business or make any investments other than as specifically
contemplated by this Agreement and will not have any assets (other than a de
minimis amount of cash paid to Merger Sub for the issuance of its stock to
Parent) or liabilities.
SECTION 4.15. Affiliates; Pooling; Tax Treatment.
(a) The Company shall use all reasonable efforts to obtain from any person
who may be deemed to have become an affiliate of the Company after the date of
this Agreement and on or prior to the Effective Time a written agreement
substantially in the form of Exhibit A hereto as soon as practicable after
attaining such status.
(b) Parent shall use all reasonable efforts to obtain from any person who
may be deemed to have become an affiliate of Parent after the date of this
Agreement and on or prior to the Effective Time a written agreement
substantially in the form of Exhibit B hereto as soon as practicable after
obtaining such status.
(c) Parent shall not be required to maintain the effectiveness of the Joint
Proxy Statement/Prospectus for the purpose of resale by stockholders of the
Company who may be affiliates of the Company or Parent pursuant to Rule 145
under the Securities Act.
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(d) Each party hereto shall use all reasonable best efforts to cause the
Merger to be treated for financial accounting purposes as a Pooling Transaction,
and shall not take, and shall use all reasonable best efforts to prevent any
affiliate of such party from taking, any actions which could prevent the Merger
from being treated for financial accounting purposes as a Pooling Transaction.
(e) Each party hereto shall use all reasonable best efforts to cause the
Merger to qualify, and shall not take, and shall use all reasonable efforts to
prevent any affiliate of such party from taking, any actions which could prevent
the Merger from qualifying, as a reorganization under the provisions of Section
368(a) of the Code.
SECTION 4.16. Comfort Letters.
(a) The Company shall use all reasonable best efforts to cause Price
Waterhouse LLP to deliver a letter dated as of the date of the Joint Proxy
Statement/Prospectus, and addressed to itself and Parent and their respective
Boards of Directors, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for agreed upon procedures letters delivered by
independent public accountants in connection with registration statements and
proxy statements similar to the Joint Proxy Statement/Prospectus.
(b) Parent shall use all reasonable efforts to cause Ernst & Young LLP to
deliver a letter dated as of the date of the Joint Proxy Statement/Prospectus,
and addressed to itself and the Company and their respective Boards of
Directors, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for agreed upon procedures letters delivered by
independent accountants in connection with registration statements and proxy
statements similar to the Joint Proxy Statement/Prospectus.
SECTION 4.17. Parent Directors. Parent shall appoint, effective as of the
Effective Time, any two of the current directors of the Company as Advisory
Directors of Parent, each of whom shall hold office until the next annual
meeting of the Board of Directors of Parent and in accordance with the bylaws of
Parent. Further, subject to the consummation of the Merger, Parent shall take
all action necessary under its bylaws or otherwise in order to elect one other
current director of the Company to the Board of Directors of Parent, effective
no later than the third regular meeting of such Board of Directors following the
Effective Time, who shall hold office until the next annual meeting of Parent's
stockholders and until his or her successor shall have been elected and
qualified.
SECTION 4.18. Stockholder's Agreement. Parent has delivered to the Company
an agreement from DST Systems, Inc. whereby DST Systems, Inc. agrees to vote all
of its shares of Parent Common Stock in favor of Parent's issuance of Parent
Common Stock pursuant to this Agreement.
ARTICLE V
CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING
SECTION 5.1. Closing and Closing Date. As soon as practicable after the
satisfaction or waiver of the conditions set forth herein and prior to the
filing of the Certificate of Merger, a closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Vinson & Elkins
L.L.P., First City Tower, Houston, Texas or at such other location as the
parties may agree in writing. The date on which the Closing occurs is referred
to as the "Closing Date."
SECTION 5.2. Conditions to the Obligations of the Company, Parent and
Merger Sub. The respective obligations of the Company, on the one hand, and
Parent and Merger Sub, on the other hand, to consummate the transactions
contemplated hereby are subject to the satisfaction at or prior to the Closing
Date of the following conditions, any or all of which may be waived in writing
by the parties hereto, in whole or in part, to the extent permitted by
applicable law:
(a) this Agreement shall have been approved and adopted by the
stockholders of the Company as contemplated hereby;
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(b) the issuance of Parent Common Stock pursuant to the Merger shall
have been approved by the stockholders of Parent as contemplated hereby;
(c) approval for listing by the NYSE upon official notice of issuance
of the Parent Common Stock to be issued in the Merger shall have been
received by Parent;
(d) any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or
been terminated, and any other governmental or regulatory notices or
approvals required with respect to the transactions contemplated hereby
shall have been either filed or received;
(e) no federal, state or foreign governmental authority or other
agency or commission or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute or rule, regulation,
injunction or other order (whether temporary or preliminary or permanent)
which remains in effect and which has the effect of making the transactions
contemplated hereby illegal or otherwise prohibiting the transactions
contemplated by this Agreement, or which questions the validity or the
legality of the transactions contemplated hereby and which could reasonably
be expected to materially and adversely affect the value of the business of
the Company;
(f) the Joint Proxy Statement/Prospectus shall have been declared
effective under the Securities Act and no stop orders with respect thereto
shall have been issued; and Parent shall have received all Blue Sky permits
and other authorizations necessary to consummate the Transactions; and
(g) Parent and the Company shall have received a confirmation in
writing by Ernst & Young LLP and Price Waterhouse LLP, respectively, on the
Closing Date that the Merger should be treated for financial accounting
purposes as a Pooling Transaction.
SECTION 5.3. Additional Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger and the other
transactions contemplated hereby are also subject to the satisfaction at or
prior to the Closing Date of the following conditions, any or all of which may
be waived in writing by Parent, in whole or in part, to the extent permitted by
applicable law:
(a) each of the representations and warranties of the Company
contained in this Agreement shall be true and correct except to the extent
that the breach thereof shall not constitute a Company Material Adverse
Effect as of the Closing Date as though made on and as of the Closing Date
(except to the extent such representations and warranties specifically
relate to an earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date), and Parent
and Merger Sub shall have received a certificate of the President or the
chief financial officer of the Company, dated the Closing Date, to such
effect;
(b) the Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date, and
Parent and Merger Sub shall have received a certificate of the President or
the chief financial officer of the Company, dated the Closing Date, to that
effect; and
(c) Vinson & Elkins L.L.P. shall have delivered to Parent its written
opinion as of the date that the Joint Proxy Statement/Prospectus is first
mailed to Parent's stockholders substantially to the effect that (x) the
Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, (y) Parent, Merger Sub and the Company will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code, and (z) Parent, Merger Sub and the Company will not recognize any
gain or loss for U.S. federal income tax purposes as a result of the
Merger, and such opinion shall not have been withdrawn or modified in any
material respect.
SECTION 5.4. Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Merger and the other transactions
contemplated hereby are also subject to the satisfaction at or
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prior to the Closing Date of the following conditions, any or all of which may
be waived in writing by the Company, in whole or in part, to the extent
permitted by applicable law:
(a) each of the representations and warranties of Parent and Merger
Sub contained in this Agreement shall be true and correct except to the
extent that the breach thereof shall not constitute a Parent Material
Adverse Effect as of the Closing Date as though made on and as of the
Closing Date (except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties shall be true and correct as of such earlier date), and the
Company shall have received a certificate of the President or the chief
financial officer of each of the Parent and Merger Sub, dated the Closing
Date, to such effect;
(b) Parent and Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the
Closing Date, and the Company shall have received a certificate of the
President or the chief financial officer of each of the Parent and Merger
Sub, dated the Closing Date, to that effect;
(c) the shares of Parent Common Stock to be issued in the Merger shall
have been approved for listing (subject to official notice of issuance) on
the NYSE; and
(d) Morgan, Lewis & Bockius LLP shall have delivered to the Company
its written opinion as of the date that the Joint Proxy
Statement/Prospectus is first mailed to the Company's stockholders
substantially to the effect that (x) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, (y)
Parent, Merger Sub and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, and (z) no
gain or loss for U.S. federal income tax purposes will be recognized by the
holders of Company Common Stock upon receipt of shares of Parent Common
Stock in the Merger, except with respect to any cash received in lieu of a
fractional share interest in Parent Common Stock, and such opinion shall
not have been withdrawn or modified in any material respect.
ARTICLE VI
TERMINATION
SECTION 6.1. Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, whether before or after approval and adoption of this Agreement
by the Company's stockholders:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company and Parent;
(b) by Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if
any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 5.3(a) or Section
5.3(b) of this Agreement, as the case may be, would be incapable of being
satisfied by April 30, 1996; provided, however, that in any case, a wilful
material breach shall be deemed to cause such conditions to be incapable of
being satisfied for purposes of this Section 6.1(b);
(c) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent or Merger Sub set forth in this
Agreement, or if any representation or warranty of Parent or Merger Sub
shall have become untrue, in either case such that the conditions set forth
in Section 5.4(a) or Section 5.4(b) of this Agreement, as the case may be,
would be incapable of being satisfied by April 30, 1996; provided, however,
that in any case, a wilful breach shall be deemed to cause such conditions
to be incapable of being satisfied for purposes of this Section 6.1(c);
(d) by either Parent or the Company, if the Merger shall not have been
consummated on or before April 30, 1996;
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(e) by either Parent or the Company, if this Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders of
the Company at the Company's stockholders meeting referred to in Section
4.9 hereof or if the issuance of the Parent Common Stock in connection with
the Merger shall fail to receive the requisite vote for approval by the
stockholders of Parent at the Parent's stockholders meeting referred to in
Section 4.9 hereof;
(f) by Parent, if (i) the Board of Directors of the Company shall
withdraw, modify or change its recommendation of this Agreement or the
Merger in a manner adverse to Parent or shall have resolved to do so; (ii)
the opinion of Morgan Stanley referred to in Section 2.25 shall be
withdrawn, or (iii) a tender offer or exchange offer for 30% or more of the
outstanding shares of Company Common Stock shall commence, and the Board of
Directors of the Company shall not have timely filed a Schedule 14D-9 which
recommends that stockholders not tender their shares into such tender or
exchange offer; or
(g) by the Company, if the Board of Directors of the Company, after
consultation with and based upon the advice of independent legal counsel
(who may be Morgan, Lewis & Bockius LLP), determines in good faith that
such action is necessary for such Board of Directors to comply with its
fiduciary duties to stockholders under applicable law.
The right of any party hereto to terminate this Agreement pursuant to this
Section 6.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto or any of their
respective officers, directors, representatives or agents, whether prior to or
after the execution of this Agreement.
SECTION 6.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 6.1 hereof, this Agreement, except as provided in
Sections 6.5 and 7.13, shall forthwith become null and void and have no effect,
without any liability on the part of any party or its directors, officers or
stockholders. Nothing in this Section 6.2 shall relieve any party to this
Agreement of liability for breach of this Agreement.
SECTION 6.3. Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after approval and
adoption of this Agreement by the stockholders of the Company, (i) no amendment,
which under applicable law may not be made without the approval of the
stockholders of the Company, may be made without such approval, and (ii) no
amendment, which under the applicable rules of the NYSE, may not be made without
the approval of the stockholders of Parent, may be made without such approval.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
SECTION 6.4. Waiver. At any time prior to the Effective Time, either party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby. For purposes of this Section 6.4,
Parent and Merger Sub shall be deemed to be one party.
SECTION 6.5. Fees, Expenses and Other Payments.
(a) Except as provided in Section 6.5(c) of this Agreement, all Expenses
(as defined in paragraph (b) of this Section 6.5) incurred by the parties hereto
shall be borne solely and entirely by the party which has incurred such
Expenses; provided, however, that the allocable share of the Parent and Merger
Sub as a group and the Company for all Expenses related to printing, filing and
mailing the Joint Proxy Statement/Prospectus and all SEC and other regulatory
filing fees incurred in connection with the Joint Proxy Statement/Prospectus
shall be one-half each; and provided further that Parent may, at its option, pay
any Expenses of the Company, and Parent shall pay all SEC and HSR filing fees.
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(b) "Expenses" as used in this Agreement shall include all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Joint Proxy Statement/Prospectus, the solicitation of stockholder approvals
and all other matters related to the consummation of the transactions
contemplated hereby.
(c) The Company agrees that if this Agreement is terminated pursuant to:
(i) Section 6.1(e) because this Agreement shall fail to receive the
requisite vote for approval and adoption by the stockholders of the Company
at their meeting referred to in Section 4.9 hereof and at the time of such
meeting there shall exist a Competing Transaction; or
(ii) Section 6.1(f)(i) or (ii) and at the time of the withdrawal,
modification or change, there shall exist a Competing Transaction; or
(iii) Section 6.1(f)(iii); or
(iv) Section 6.1(g);
then the Company shall pay to Parent an amount equal to $5,000,000, which amount
is inclusive of all Parent's Expenses.
(d) Any payment required to be made pursuant to Section 6.5(c) of this
Agreement shall be made as promptly as practicable but not later than three
business days after termination of this Agreement, and shall be made by wire
transfer of immediately available funds to an account designated by Parent.
(e) For purposes of this Section 6.5, the term "Competing Transaction"
means any of the following (other than the transactions contemplated by this
Agreement) involving the Company or any of its subsidiaries: (i) any merger,
consolidation, share exchange, business combination or similar transaction; (ii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition of
20% or more of the assets of the Company and its subsidiaries, taken as a whole;
(iii) any tender offer or exchange offer for 30% or more of the outstanding
shares of Company Common Stock or the filing of a registration statement under
the Securities Act in connection therewith; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Survival of Representations and Warranties. The
representations and warranties contained herein shall not survive beyond the
Effective Time. This Section 7.1 shall not limit any covenant or agreement of
the parties hereto which by its terms requires performance after the Effective
Time.
SECTION 7.2. Entire Agreement. This Agreement (together with the Exhibits,
the Company's Disclosure Statement and Parent's Disclosure Statement) and the
Confidentiality Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior written and oral
and all contemporaneous oral agreements and understandings with respect to the
subject matter hereof.
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SECTION 7.3. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when delivered in
person, by telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
if to Parent or Merger Sub:
The Continuum Company, Inc.
9500 Arboretum Boulevard
Austin, Texas 78759-6399
Telecopy: (512) 338-7730
Attention: Jack Dennison, Esq.
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Telecopy: (713) 758-2346
Attention: C. Michael Harrington, Esq.
if to the Company:
Hogan Systems, Inc.
5080 Spectrum Drive
Dallas, Texas 75248
Telecopy: (213) 386-3800
Attention: R. Edwin Pearce, Esq.
with a copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103
Telecopy: (215) 963-5299
Attention: William M. Doran, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy shall be deemed effective
on the first business day at the place of which such notice or communication is
received following the day on which such notice or communication was sent. Any
notice or communication sent by registered or certified mail shall be deemed
effective on the fifth business day at the place from which such notice or
communication was mailed following the day in which such notice or communication
was mailed.
SECTION 7.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of the
laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
SECTION 7.5. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 7.6. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement except
for Section 4.12 (which is intended to be for the benefit of the persons
provided for therein, and may be enforced by such persons).
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SECTION 7.7. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
SECTION 7.8. Certain Definitions. For the purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "Average Daily Price of the Parent Common Stock" means the average
of the closing prices, regular way, per share of Parent Common Stock as
reported on the NYSE Composite Tape during the 15 consecutive trading days
ending on (but excluding) the trading day on which the Effective Time
occurs; provided, however, if during such 15-day period Parent shall issue
any securities referred to in clause (B) of the proviso to Section
4.2(d)(vi) or make any public announcement thereof, then such period shall
begin on the trading date on which such issuance or public announcement
thereof shall occur;
(c) "business day" means any day other than a day on which banks in
the State of Texas are authorized or obligated to close;
(d) "knowledge" or "known" shall mean, with respect to any matter in
question, if an executive officer of the Company or Parent, as the case may
be, has actual knowledge of such matter;
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization or other entity; and
(f) "subsidiary" or "subsidiaries" of the Company, Parent, the
Surviving Corporation or any other person, means any corporation,
partnership, joint venture or other legal entity of which the Company,
Parent, the Surviving Corporation or any such other person, as the case may
be (either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests,
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity.
SECTION 7.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of the Company or Parent or any officer,
director, employee, agent, representative or investor of any party hereto.
SECTION 7.10. Binding Effect, Assignment. This Agreement shall inure to the
benefit of be binding upon the parties hereto and their respective legal
representatives and successors. This Agreement may not be assigned by any party
hereto.
SECTION 7.11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 7.12. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder.
SECTION 7.13. Legal Fees; Costs. If any party hereto institutes any action
or proceeding, whether before a court or arbitrator, prior to the Effective
Date, to enforce any provision of this Agreement, the
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prevailing party therein shall be entitled to received from the losing party
reasonable attorneys' fees and costs incurred in such action or proceeding,
whether or not such action or proceeding is prosecuted to judgment.
SECTION 7.14. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive to, and not exclusive
of, any rights or remedies otherwise available.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by one of its officers thereunto duly authorized,
effective as of the day and year first above written.
HOGAN SYSTEMS, INC.
By: /s/ MICHAEL H. ANDERSON
------------------------------------
Michael H. Anderson
President and Chief Executive
Officer
THE CONTINUUM COMPANY, INC.
By: /s/ W. MICHAEL LONG
------------------------------------
W. Michael Long
President and Chief Executive
Officer
CONTINUUM ACQUISITION CORPORATION
By: /s/ W. MICHAEL LONG
------------------------------------
W. Michael Long
President
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EXHIBIT A
COMPANY AFFILIATE'S AGREEMENT
The Continuum Company, Inc.
9500 Arboretum Boulevard
Austin, Texas 78759
Ladies and Gentlemen:
I have been advised that as of the date hereof, I may be deemed to be an
"affiliate" of Hogan Systems, Inc., a Delaware corporation ("HSI"), as that term
is defined for purposes of paragraphs (c) and (d) of Rule 145 of the Rules and
Regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act").
Pursuant to the terms and subject to the conditions of that certain
Agreement and Plan of Merger by and among The Continuum Company, Inc., a
Delaware corporation ("TCC"), Continuum Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of TCC ("Merger Sub"), and HSI (the
"Merger Agreement"), providing for, among other things, the merger of Merger Sub
with and into HSI (the "Merger"), I will be entitled to receive shares of common
stock, par value $0.10 per share, of TCC ("TCC Common Stock"), in exchange for
shares of common stock, par value $0.01 per share, of HSI ("HSI Common Stock")
owned by me at the Effective Time (as defined in the Merger Agreement) of the
Merger as determined pursuant to the Merger Agreement.
I further understand that the Merger will be treated for financial
accounting purposes as a "pooling of interests" in accordance with generally
accepted accounting principles and that the staff of the SEC has issued certain
guidelines that should be followed to ensure the pooling of the entities.
In consideration of the agreements contained herein, TCC's reliance on this
letter in connection with the consummation of the Merger and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledge, I hereby represent, warrant and agree that (i) I will not make any
sale, transfer or other disposition of HSI Common Stock owned by me during the
period commencing 30 days before the Effective Time and ending at the earlier of
the Effective Time and the termination of the Merger Agreement, (ii) I will not
make any sale, transfer or other disposition of TCC Common Stock owned by me
after the Effective Time until such time as financial statements that include at
least 30 days of combined operations of HSI and TCC after the Merger shall have
been publicly reported, unless I shall have delivered to TCC prior to any such
sale, transfer or other disposition, a written opinion from Ernst & Young LLP,
independent auditors of TCC, or a written no-action letter from the accounting
staff of the SEC, in either case in form and substance reasonably satisfactory
to TCC, to the effect that such sale, transfer or other disposition will not
cause the Merger not to be treated as a "pooling of interests" for financial
accounting purposes in accordance with generally accepted accounting principles
and the rules, regulations and interpretations of the SEC and (iii) I will not
make any sale, transfer or other disposition of any shares of TCC Common Stock
received by me pursuant to the Merger in violation of the Securities Act or the
Rules and Regulations. I have been advised that the issuance of the shares of
TCC Common Stock pursuant to the Merger will have been registered with the SEC
under the Securities Act on a Registration Statement on Form S-4. However, I
have also been advised, and I agree, that since I may be deemed to be an
affiliate of HSI at the time the Merger is submitted for a vote of the
stockholders of HSI, the TCC Common Stock received by me pursuant to the Merger
can be sold by me only (i) pursuant to an effective registration statement under
the Securities Act, (ii) in conformity with the volume and other limitations of
Rule 145 promulgated by the SEC under the Securities Act, or (iii) in reliance
upon an exemption from registration that is available under the Securities Act.
I also understand and agree that stop transfer instructions will be given
to TCC's transfer agent with respect to the TCC Common Stock to be received by
me pursuant to the Merger and that there will be placed
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on the certificates representing such shares of TCC Common Stock, or any
substitutions therefor, a legend stating in substance as follows:
"These shares were issued in a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. These shares may only be
transferred in accordance with the terms of such Rule and an Affiliate's
Agreement between the original holder of such shares and The Continuum
Company, Inc., a copy of which agreement is on file at the principal
offices of The Continuum Company, Inc."
It is understood and agreed that the legend set forth above shall be
removed upon surrender of certificates bearing such legend by delivery of
substitute certificates without such legend if I shall have delivered to TCC an
opinion of counsel, in form and substance reasonably satisfactory to TCC, to the
effect that (i) the sale or disposition of the shares represented by the
surrendered certificates may be effected without registration of the offering,
sale and delivery of such shares under the Securities Act, and (ii) the shares
to be so transferred may be publicly offered, sold and delivered by the
transferee thereof without compliance with the registration provisions of the
Securities Act.
By its execution hereof, TCC agrees that it will, as long as I own any TCC
Common Stock to be received by me pursuant to the Merger which remains subject
to Rule 145 under the Securities Act, take all reasonable efforts to make timely
filings with the SEC of all reports required to be filed by it pursuant to the
Securities Exchange Act of 1934, as amended, and will promptly furnish upon
written request of the undersigned a written statement confirming that such
reports have been so timely filed.
If you are in agreement with the foregoing, please so indicate by signing
below and returning a copy of this letter to the undersigned, at which time this
letter shall become a binding agreement between us.
Very truly yours,
By:
----------------------------------
Name:
Title:
Date:
Address:
ACCEPTED this day
of , 199
The Continuum Company, Inc.
By:
------------------------------------
Name:
Title:
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EXHIBIT B
PARENT AFFILIATE'S AGREEMENT
The Continuum Company, Inc.
9500 Arboretum Boulevard
Austin, Texas 78759
Ladies and Gentlemen:
I have been advised that as of the date hereof, I may be deemed to be an
affiliate of The Continuum Company, Inc., a Delaware corporation ("TCC"), as
that term is defined in Rule 1-02 of Regulation S-X of the Rules and Regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"SEC").
I understand that, pursuant to the terms and subject to the conditions of
that certain Agreement and Plan of Merger (the "Merger Agreement") by and among
TCC, Continuum Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of TCC ("Merger Sub"), and Hogan Systems, Inc., a Delaware
corporation ("HSI"), Merger Sub will be merged with and into HSI (the "Merger")
at the Effective Time (as defined in the Merger Agreement).
I further understand that the Merger will be treated for financial
accounting purposes as a "pooling of interests" in accordance with generally
accepted accounting principles and that the staff of the SEC has issued certain
guidelines that should be followed to ensure the pooling of the entities.
In consideration of the agreements contained herein, TCC's reliance on this
letter in connection with the consummation of the Merger and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, I hereby represent, warrant and agree that (i) I will not make any
sale, transfer or other disposition of TCC Common Stock (as defined in the
Merger Agreement) owned by me during the period commencing 30 days before the
Effective Time and ending at the earlier of the Effective Time and the
termination of the Merger Agreement, and (ii) I will not make any sale, transfer
or other disposition of TCC Common Stock owned by me after the Effective Time
until such time as financial statements that include at least 30 days of
combined operations of HSI and TCC after the Merger shall have been publicly
reported, unless I shall have delivered to TCC prior to any such sale, transfer
or other disposition, a written opinion from Ernst & Young LLP, independent
auditors of TCC, or a written no-action letter from the accounting staff of the
SEC, in either case in form and substance reasonably satisfactory to TCC, to the
effect that such sale, transfer or other disposition will not cause the Merger
not to be treated as a "pooling of interests" for financial accounting purposes
in accordance with generally accepted accounting principles and the rules,
regulations and interpretations of the SEC.
Very truly yours,
By:
------------------------------
Name:
Title:
Date:
Address:
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APPENDIX II
[MORGAN STANLEY LETTERHEAD]
December 10, 1995
Board of Directors
Hogan Systems, Inc.
5080 Spectrum Drive
Suite 400E
Dallas, TX 75248
Members of the Board:
We understand that Hogan Systems, Inc. ("Hogan" or the "Company"), The
Continuum, Inc. ("Continuum") and Continuum Acquisition Corporation, a
wholly-owned subsidiary of Continuum ("Acquisition Sub") have entered into an
Agreement and Plan of Merger dated as of December 10, 1995 (the "Merger
Agreement"), which provides, among other things, for the merger (the "Merger")
of Acquisition Sub with and into Hogan. Pursuant to the Merger, Hogan will
become a wholly owned subsidiary of Continuum and each issued and outstanding
share of common stock, par value $0.01 per share, of Hogan (the "Hogan Common
Stock"), other than shares held in treasury or held by Continuum or any
affiliate of Continuum, will be converted into the right to receive .355555 (the
"Exchange Ratio") shares of common stock, par value $0.10 per share, of
Continuum (the "Continuum Common Stock"), subject to adjustment in certain
circumstances. The terms and conditions of the Merger are more fully set forth
in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to the holders of
Hogan Common Stock.
For purposes of the opinion set forth herein, we have:
<TABLE>
<S> <C>
(i) analyzed certain publicly available financial statements and other information of
Hogan;
(ii) analyzed certain internal financial statements and other financial and operating
data concerning Hogan prepared by the management of Hogan;
(iii) analyzed certain financial projections prepared by the management of Hogan;
(iv) discussed the past and current operations and financial condition and the
prospects of Hogan with senior executives of Hogan;
(v) analyzed certain publicly available financial statements and other information of
Continuum;
(vi) analyzed certain internal financial statements and other financial and operating
data concerning Continuum prepared by the management of Continuum;
(vii) analyzed certain financial projections prepared by the management of Continuum;
(viii) discussed the past and current operations and financial condition and the
prospects of Continuum with senior executives of Continuum, and analyzed the pro
forma impact of the Merger on Continuum's earnings per share, consolidated
capitalization and financial ratios;
(ix) reviewed the reported prices and trading activity for the Hogan Common Stock;
</TABLE>
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Hogan Systems, Inc.
December 10,1995
Page 2
<TABLE>
<S> <C>
(x) compared the financial performance of Hogan and the prices and trading activity
of the Hogan Common Stock with that of certain other comparable publicly traded
companies and their securities;
(xi) reviewed the reported prices and trading activity for the Continuum Common Stock;
(xii) compared the financial performance of Continuum and the prices and trading
activity of the Continuum Common Stock with that of certain other comparable
publicly traded companies and their securities;
(xiii) reviewed the financial terms, to the extent publicly available, of certain
comparable acquisition transactions;
(xiv) reviewed and discussed with the senior management of Continuum the strategic
rationale for the Merger;
(xv) participated in discussions and negotiations among representatives of Hogan and
Continuum and their legal advisors;
(xvi) reviewed the Merger Agreement and certain related documents; and
(xvii) performed such other analyses as we have deemed appropriate.
</TABLE>
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, including estimates by
the management of Hogan of the cost savings and other synergies expected to be
derived from the Merger, we have assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgements of the
future financial performance of Continuum and Hogan, respectively. We have not
made any independent valuation or appraisals of the assets or liabilities of
Hogan, nor have we been furnished with any such appraisals. Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of Hogan in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory services for Hogan and have received fees for the rendering
of these services.
It is understood that this letter is for the information of the Board of
Directors of Hogan and may not be used for any other purpose without our prior
written consent.
Based on and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to the holders of Hogan Common Stock.
Very truly yours,
MORGAN STANLEY & CO.
INCORPORATED
/s/ JAMES B. STYNES
-------------------------------
By: James B. Stynes
Managing Director
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<PAGE> 100
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") permits a
corporation to grant indemnification to directors, officers and other agents in
terms sufficiently broad to permit indemnification under certain circumstances
for liabilities, including expenses, arising in connection with the Securities
Act of 1933, as amended. Pursuant to the Certificate of Incorporation and the
Bylaws of Continuum, directors and officers of Continuum are indemnified to the
full extent permitted by law. In addition, Continuum has entered into
indemnification agreements with its officers and directors that indemnify such
officers and directors to the full extent permitted by law against all expenses
(including attorneys' fees), judgments, fines, or settlement amounts incurred or
paid by them in any action or proceeding, including any action by or on behalf
of Continuum, on account of their service as an officer or director of
Continuum.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
liability for unauthorized acquisitions or redemptions of, or dividends on,
capital stock), or (iv) for any transaction from which the director derived an
improper personal benefit. Article Eighth of Continuum's Certificate of
Incorporation contains such a provision.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<S> <C>
2.1 -- Agreement and Plan of Merger dated as of December 10, 1995 among The
Continuum Company, Inc., Continuum Acquisition Corporation, and Hogan
Systems, Inc. (included as Appendix I to the Joint Proxy
Statement/Prospectus)
3.1 -- Certificate of Incorporation of Continuum and Amendment thereto (filed
as an Exhibit to Continuum's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994 and incorporated herein by reference)
3.2 -- Bylaws of Continuum (filed as an Exhibit to Continuum's Annual Report
on Form 10-K for the fiscal year ended March 31, 1989 and incorporated
herein by reference) and amendment thereto adopted May 18, 1989 (filed
as an Exhibit to Continuum's Annual Report on Form 10-K for the fiscal
year ended March 31, 1989 and incorporated herein by reference)
5.1 -- Opinion of Jack Dennison, General Counsel of Continuum
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Jack Dennison, General Counsel of Continuum (set forth in
Exhibit 5.1)
23.3 -- Consent of KPMG Peat Marwick LLP
23.4 -- Consent of Price Waterhouse LLP
*23.5 -- Consent of Morgan Stanley & Co. Incorporated
24.1 -- Powers of Attorney from Officers and Directors of Continuum
99.1 -- Form of Continuum Proxy
99.2 -- Form of Hogan Proxy
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise,
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the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit, or
proceeding) is asserted against the registrant 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.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 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.
(2) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(3) That, every prospectus: (i) that is filed pursuant to paragraph
(2) immediately preceding, or (ii) that purports to meet the requirements
of Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of Form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
II-2
<PAGE> 102
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Austin, Texas on the 22nd day of
December, 1995.
THE CONTINUUM COMPANY, INC.
By: /s/ JOHN L. WESTERMANN III
---------------------------------
John L. Westermann III
Vice President, Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ---- ----
<S> <C> <C>
/s/ *RONALD C. CARROLL Chairman of the Board of
- ----------------------------------------------- Directors
Ronald C. Carroll
/s/ *LOWELL C. ANDERSON Director
- -----------------------------------------------
Lowell C. Anderson
/s/ *THOMAS G. BROWN Director
- -----------------------------------------------
Thomas G. Brown
/s/ *W. MICHAEL LONG President, Chief Executive
- ----------------------------------------------- Officer and Director
W. Michael Long
/s/ *THOMAS A. MCDONNELL Director
- -----------------------------------------------
Thomas A. McDonnell
/s/ *CARL S. QUINN Director
- ----------------------------------------------- December 22,1995
Carl S. Quinn
/s/ *EDWARD C. STANTON, III Director
- -----------------------------------------------
Edward C. Stanton, III
/s/ *E. LEE WALKER Director
- -----------------------------------------------
E. Lee Walker
/s/ JOHN L. WESTERMANN III Chief Financial Officer
- ----------------------------------------------- and Treasurer (Principal
John L. Westermann III Financial Officer)
/s/ LOU ANNE GILMORE Vice President and
- ----------------------------------------------- Controller (Principal
Lou Anne Gilmore Accounting Officer)
</TABLE>
- ------------------
* Signed on behalf of each of these persons by:
<TABLE>
<S> <C> <C>
By: /s/ JOHN L. WESTERMANN III
- -----------------------------------------------
John L. Westermann III,
Attorney-in-fact
</TABLE>
<PAGE> 103
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
- --------------- ------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger dated as of December 10, 1995
among The Continuum Company, Inc., Continuum Acquisition
Corporation, and Hogan Systems, Inc. (included as Appendix
I to the Joint Proxy Statement/Prospectus)
3.1 -- Certificate of Incorporation of Continuum and Amendment
thereto (filed as an Exhibit to Continuum's Annual Report
on Form 10-K for the fiscal year ended March 31, 1994 and
incorporated herein by reference)
3.2 -- Bylaws of Continuum (filed as an Exhibit to Continuum's
Annual Report on Form 10-K for the fiscal year ended March
31, 1989 and incorporated herein by reference) and
amendment thereto adopted May 18, 1989 (filed as an
Exhibit to Continuum's Annual Report on Form 10-K for the
fiscal year ended March 31, 1989 and incorporated herein
by reference)
5.1 -- Opinion of Jack Dennison, General Counsel of Continuum
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Jack Dennison, General Counsel of Continuum
(set forth in Exhibit 5.1)
23.3 -- Consent of KPMG Peat Marwick LLP
23.4 -- Consent of Price Waterhouse LLP
*23.5 -- Consent of Morgan Stanley & Co. Incorporated
24.1 -- Powers of Attorney from Officers and Directors of
Continuum
99.1 -- Form of Continuum Proxy
99.2 -- Form of Hogan Proxy
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 5.1
December 22, 1995
The Continuum Company
9500 Arboretum Boulevard
Austin, Texas 78759
Ladies and Gentlemen:
I am Vice President and General Counsel of The Continuum Company, Inc. (the
"Company"), and I have represented the Company in connection with the
registration of an aggregate of 6,004,583 shares of Common Stock, $.10 par
value, of the Company (the "Continuum Common Stock"), pursuant to a registration
statement on Form S-4 (the "Registration Statement") filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Act"), relating to the proposed merger (the "Merger") of Continuum Acquisition
Corporation, a wholly-owned subsidiary of the Company ("Merger Sub"), with and
into Hogan Systems, Inc., a Delaware corporation ("Hogan"), as set forth in that
certain Agreement and Plan of Merger, dated as of December 10, 1995, among the
Company, Merger Sub and Hogan (the "Merger Agreement"), included in the
Registration Statement. In the Merger, each outstanding share of Common Stock,
$.01 par value, of Hogan (other than shares held directly or indirectly by the
Company or Hogan) will be converted into the right to receive 0.355555 of a
share of Continuum Common Stock.
In connection herewith, I have examined the Certificate of Incorporation
and the Bylaws of the Company, each as amended to the date hereof, the records
of certain corporate proceedings which have occurred prior to the date hereof,
the Registration Statement, and such other documents, and have made such other
investigations as I considered necessary for the purposes of this opinion.
Based upon the foregoing, I am of the opinion that the shares of Continuum
Common Stock being registered pursuant to the Registration Statement, when
issued pursuant to the terms of the Merger Agreement as described in the
Registration Statement, will be validly issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement. In
giving this consent, I do not thereby admit that I am within the category of
persons whose consent is required under Section 7 of the Act and the rules and
regulations thereunder.
Very truly yours,
/s/ JACK DENNISON
Jack Dennison
Vice President and General Counsel
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference of our report dated April 26, 1995 with respect
to the consolidated financial statements and schedule of The Continuum Company,
Inc. included in its Annual Report (Form 10-K) for the year ended March 31, 1995
filed with the Securities and Exchange Commission, in the Joint Proxy
Statement/Prospectus of The Continuum Company, Inc. that is made a part of the
Registration Statement (Form S-4) of The Continuum Company, Inc. for the
registration of its common stock to be issued in connection with the Merger of
Hogan Systems, Inc.
/s/ ERNST & YOUNG LLP
Austin, Texas
December 20, 1995
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the use in this Registration
Statement on Form S-4 of The Continuum Company, Inc. of our report dated
September 24, 1993 with respect to the consolidated statements of operations,
stockholders' deficit and cash flows of Paxus Corporation Limited (a company
incorporated in New South Wales, Australia) and subsidiaries for the year ended
March 31, 1993, which financial statements are not presented separately in this
Registration Statement, and to all references to our Firm included in this
Registration Statement.
/s/ KPMG Peat Marwick LLP
Sydney, New South Wales, Australia
December 20, 1995
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of The Continuum
Company, Inc. of our report dated April 21, 1995 which appears on page 22 of
Hogan Systems, Inc. Annual Report on Form 10-K for the year ended March 31,
1995. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page 29 of such Annual Report on
Form 10-K. We also consent to the references to us under the heading "Experts"
in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Dallas, Texas
December 21, 1995
<PAGE> 1
EXHIBIT 23.5
CONSENT OF MORGAN STANLEY & CO. INCORPORATED
December , 1995
Hogan Systems, Inc.
5080 Spectrum Drive
Suite 400E
Dallas, TX 75248
Dear Sirs:
We hereby consent to the inclusion in the Registration Statement on Form
S-4, relating to the proposed merger of Hogan Systems, Inc. with Continuum
Acquisition Corporation, a wholly owned subsidiary of The Continuum Company,
Inc., of our opinion letter appearing as Appendix II to the Joint Proxy
Statement/Prospectus which is a part of the Registration Statement, and to the
references of our firm name therein. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations
adopted by the Securities Exchange Commission thereunder nor do we admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By:
------------------------------
<PAGE> 1
EXHIBIT 24.1
LIMITED POWER OF ATTORNEY
THE CONTINUUM COMPANY, INC.
KNOW ALL MEN BY THESE PRESENTS that, the undersigned director or officer of
The Continuum Company, Inc., a Delaware corporation, does hereby make,
constitute and appoint W. MICHAEL LONG, JOHN L. WESTERMANN III and JACK
DENNISON, and each of them acting individually, his true and lawful attorney
with power to act without the other and with full power of substitution, to
execute, deliver and file, for and on his behalf, and in his name and in his
capacity or capacities as aforesaid, a Registration Statement on Form S-4 for
filing with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and any other documents in support thereof or supplemental
thereto, with respect to any securities, including Common Stock, of The
Continuum Company, Inc., necessary or appropriate to be registered in connection
with the merger of Hogan Systems, Inc. with Continuum Acquisition Corporation
(or any other wholly-owned subsidiary of The Continuum Company, Inc.) and any
and all amendments thereto, hereby granting to said attorneys and each of them
full power and authority to do and perform each and every act and thing
whatsoever as said attorney or attorneys may deem necessary or advisable to
carry out fully the intent of the foregoing as the undersigned might or could do
personally or in the capacity or capacities as aforesaid, hereby ratifying and
confirming all acts and things which said attorney or attorneys may do or cause
to be done by virtue of these presents.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day
of December, 1995.
<TABLE>
<S> <C>
/s/ THOMAS A. MCDONNELL /s/ W. MICHAEL LONG
- ----------------------------------- -----------------------------------
/s/ CARL S. QUINN /s/ RONALD C. CARROLL
- ----------------------------------- -----------------------------------
/s/ EDWARD C. STANTON, III /s/ LOWELL C. ANDERSON
- ----------------------------------- -----------------------------------
/s/ E. LEE WALKER /s/ THOMAS G. BROWN
- ----------------------------------- -----------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 99.1
- --------------------------------------------------------------------------------
PROXY
THE CONTINUUM COMPANY, INC.
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS -- FEBRUARY 29, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby makes, constitutes and appoints Ronald C. Carroll, W.
Michael Long and John L. Westermann III, and each of them, to be his true and
lawful agent and attorney-in-fact, with full power of substitution, to vote all
of the shares of Common Stock registered in the undersigned name on the books of
The Continuum Company, Inc. (the "Company") at the special meeting of
stockholders of the Company to be held on the 29th day of February, 1996, at
10:00 a.m., Austin, Texas time, at the Company's headquarters, 9500 Arboretum
Boulevard, Austin, Texas, and at any and all adjournments thereof, with all the
powers the undersigned would possess if personally present and participating,
without limiting the foregoing, to vote as follows:
1. / / For / / Against / / Abstain approval of the issuance by the
Company of shares of its Common Stock pursuant to the Agreement and Plan of
Merger among The Continuum Company, Inc., Continuum Acquisition Corporation and
Hogan Systems, Inc.
2. If any other business is presented at the meeting or adjournments thereof,
the persons named above will vote in accordance with their judgement on such
matters.
- --------------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
NOTE: THIS PROXY WILL BE VOTED AS SPECIFIED OR IF NO SPECIFICATION IS MADE
IT WILL BE VOTED IN FAVOR OF PROPOSAL NO. 1 ABOVE.
Date Signed:
--------------------------------
(Please fill in date)
--------------------------------
Signature(s)
--------------------------------
Signature(s)
Note: When signing as attorney,
executor, administrator, trustee,
or guardian, please give full
title. If more than one trustee,
all should sign. It is important
that you date your proxy in the
space provided above.
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 99.2
PROXY
HOGAN SYSTEMS, INC.
SPECIAL MEETING OF SHAREHOLDERS - FEBRUARY 29, 1996
This proxy is solicited by the Board of Directors and will be voted
"For" the proposals unless otherwise directed.
The undersigned, revoking all prior proxies, hereby appoint(s) Michael
H. Anderson and WIlliam O. Hunt, and each of them, with full power of
substitution, as proxies to represent and vote as designated hereon, all shares
of Common Stock of Hogan Systems, Inc. which the undersigned would be entitled
to vote if personally present at the Special Meeting of Shareholders of Hogan
to be held at the Spectrum Conference Center located at Hogan's headquarters
at the Spectrum Center, 5080 Spectrum Drive, Dallas, Texas 75240, on Thursday,
February 29, 1996, at 10:00 a.m., local time, and at any adjournments thereof.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) THEREOF.
/See Reverse
Side/
<PAGE> 2
/X/ Please mark your
votes as in this
example. SHARES IN YOUR NAME
<TABLE>
<CAPTION>
<S> <C>
1. Approve and adopt the Agreement and Plan of Merger dated as of December 10,
1995 by and among Hogan Systems, Inc., The Continuum Company, Inc. and FOR AGAINST ABSTAIN
Continuum Acquisition Corporation. / / / / / /
</TABLE>
SIGNATURE(S) DATE
------------------------------------------- -----------------
SIGNATURE(S) DATE
------------------------------------------- -----------------
Please sign exactly as your name appears. If signing as attorney, executor,
trustee or in any other capacity, sign name and title.
