0000912057-95-007218.txt : 19950905
0000912057-95-007218.hdr.sgml : 19950905
ACCESSION NUMBER: 0000912057-95-007218
CONFORMED SUBMISSION TYPE: S-4/A
PUBLIC DOCUMENT COUNT: 8
FILED AS OF DATE: 19950901
SROS: NASD
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HBO & CO
CENTRAL INDEX KEY: 0000310377
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373]
IRS NUMBER: 370986839
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4/A
SEC ACT: 1933 Act
SEC FILE NUMBER: 033-61905
FILM NUMBER: 95569754
BUSINESS ADDRESS:
STREET 1: 301 PERIMETER CTR N
CITY: ATLANTA
STATE: GA
ZIP: 30346
BUSINESS PHONE: 4043936000
MAIL ADDRESS:
STREET 1: 301 PERIMETER CTR N
CITY: ATLANTA
STATE: GA
ZIP: 30346
S-4/A
1
S-4/A
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 1, 1995
REGISTRATION NO. 33-61905
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--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HBO & COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 7373 37-0986839
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
301 PERIMETER CENTER NORTH
ATLANTA, GEORGIA 30346
(770) 393-6000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------
CHARLES W. MCCALL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HBO & COMPANY
301 PERIMETER CENTER NORTH
ATLANTA, GEORGIA 30346
(770) 393-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
LISA A. STATER, Esq. LESTER R. WOODWARD, Esq.
Jones, Day, Reavis & Pogue Davis, Graham & Stubbs, L.L.C.
3500 One Peachtree Center Suite 4700
303 Peachtree Street, N.E. 370 Seventeenth Street
Atlanta, Georgia 30308-3242 Denver, Colorado 80201
(404) 521-3939 (303) 892-7392
------------------------
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If any of 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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--------------------------------------------------------------------------------
HBO & COMPANY
CROSS-REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
FORM S-4 ITEM NUMBER AND HEADING CAPTION IN PROXY STATEMENT/PROSPECTUS
------------------------------------------------------------- --------------------------------------------------------
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of 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; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information............................ Incorporation of Certain Information by Reference;
Summary; Risk Factors
4. Terms of the Transaction.......................... Summary; Risk Factors; The Merger Proposal; Comparison
of Rights of Holders of Shares of Each of HBOC Common
Stock and CliniCom Common Stock; Appendix A
5. Pro Forma Financial Information................... Pro Forma Financial Information
6. Material Contacts with the Company Being
Acquired......................................... The Merger Proposal -- Background of the Merger;
Business of CliniCom -- HBOC Agreement
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters.... Inapplicable
8. Interests of Named Experts and Counsel............ The Merger Proposal -- Opinion of Financial Advisor for
CliniCom; Certain Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Inapplicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants....... Incorporation of Certain Information by Reference; HBO &
Company Selected Historical Financial Information;
Business of HBOC
11. Incorporation of Certain Information by
Reference........................................ Incorporation of Certain Information by Reference
12. Information with Respect to S-2 or S-3
Registrants...................................... Inapplicable
13. Incorporation of Certain Information by
Reference........................................ Inapplicable
14. Information With Respect to Registrants Other Than
S-3 or S-2 Registrants........................... Inapplicable
i
FORM S-4 ITEM NUMBER AND HEADING CAPTION IN PROXY STATEMENT/PROSPECTUS
------------------------------------------------------------- --------------------------------------------------------
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies......... Incorporation of Certain Information by Reference;
CliniCom Incorporated Selected Historical Financial
Information; Business of CliniCom
16. Information with Respect to S-2 or S-3
Companies........................................ Inapplicable
17. Information with Respect to Companies Other Than
S-3 or S-2 Companies............................. Inapplicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations
are to be Solicited.............................. Incorporation of Certain Information by Reference;
Summary; The Meeting; The Merger Proposal -- No
Appraisal Rights; Interests of Certain Persons in Each
of HBOC and CliniCom; Management of HBOC; Stockholder
Proposals
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange
Offer............................................ Inapplicable
ii
CLINICOM INCORPORATED
4720 Walnut Street
Boulder, Colorado 80301
(303) 443-9660
To the Stockholders: September 1, 1995
You are cordially invited to attend a special meeting of stockholders (the
"Meeting") of CliniCom Incorporated ("CliniCom") to be held at The Courtyard by
Marriott, 4710 Pearl East Circle, Boulder, Colorado 80301 at 10:00 a.m.
(Mountain Time), on Saturday, September 30, 1995.
At the Meeting, you will be asked to consider and take action upon a
proposal to approve an Agreement of Merger, dated as of July 14, 1995 (the
"Merger Agreement") among CliniCom, HBO & Company, a Delaware corporation
("HBOC"), and HBO & Company of Georgia, a Delaware corporation which is a wholly
owned subsidiary of HBOC ("HBOC-GA"), pursuant to which, among other things (a)
CliniCom will merge with and into HBOC-GA (the "Merger") and (b) each
outstanding share of Common Stock, par value $.001 per share ("CliniCom Common
Stock") and each right to acquire a share of CliniCom Common Stock will be
converted into the right to receive .4 of a share of Common Stock, $.05 par
value per share of HBOC ("HBOC Common Stock"), less the amount of any fractional
share which will be paid in cash.
Details of the proposed Merger and Merger Agreement are set forth in the
accompanying Proxy Statement/Prospectus which you are urged to review carefully.
A copy of the Merger Agreement is also attached to the Proxy
Statement/Prospectus as Appendix A.
Your Board of Directors has carefully considered the Merger proposal and
recommends that stockholders vote FOR the Merger.
It is important that your shares be represented at the Meeting. Whether or
not you expect to attend in person, please sign, date and return the enclosed
proxy card in the enclosed envelope promptly.
Sincerely,
/s/ William H. Brehm
William H. Brehm
Chief Executive Officer and
Chairman of the Board
CLINICOM INCORPORATED
4720 Walnut Street
Boulder, Colorado 80301
(303) 443-9660
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on Saturday, September 30, 1995
To the Stockholders of CliniCom Incorporated:
A special meeting of stockholders of CliniCom Incorporated, a Delaware
corporation ("CliniCom"), will be held at The Courtyard by Marriott, 4710 Pearl
East Circle, Boulder, Colorado 80301 at 10:00 a.m. (Mountain Time), on Saturday,
September 30, 1995, for the following purpose:
To consider and vote upon a proposal to approve an Agreement of Merger,
dated as of July 14, 1995 (the "Merger Agreement") among CliniCom, HBO &
Company, a Delaware corporation ("HBOC"), and HBO & Company of Georgia, a
Delaware corporation which is a wholly owned subsidiary of HBOC
("HBOC-GA"), pursuant to which, among other things (a) CliniCom will
merge with and into HBOC-GA (the "Merger") and (b) each outstanding share
of Common Stock, par value $.001 per share ("CliniCom Common Stock") and
each right to acquire a share of CliniCom Common Stock will be converted
into the right to receive .4 of a share of Common Stock, $.05 par value
per share of HBOC, less the amount of any fractional share which will be
paid in cash.
The Board of Directors of CliniCom has fixed the close of business on August
30, 1995 as the record date for the determination of stockholders entitled to
notice of, and to vote at, this meeting. A list of stockholders entitled to vote
at the meeting will be available for examination at the meeting by any
stockholder registered on CliniCom's stock ledger as of the record date for any
purpose germane to the meeting.
By Order of the Board of Directors:
/s/ William H. Brehm
William H. Brehm
Chief Executive Officer and
Chairman of the Board
September 1, 1995
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY TO ENSURE THAT YOUR SHARES ARE VOTED.
A POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. IF YOU ATTEND THE
MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
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 THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 1, 1995
PROXY STATEMENT
OF
CLINICOM INCORPORATED
FOR SPECIAL MEETING OF STOCKHOLDERS
---------------------
PROSPECTUS
OF
HBO & COMPANY
UP TO 3,981,407 SHARES OF
COMMON STOCK
This Proxy Statement/Prospectus is being furnished to holders of shares of
Common Stock, $.001 par value per share ("CliniCom Common Stock"), of CliniCom
Incorporated, a Delaware corporation ("CliniCom"), as a proxy statement in
connection with the solicitation of proxies by the Board of Directors of
CliniCom (the "CliniCom Board") for use at the special meeting of stockholders
of CliniCom to be held on Saturday, September 30, 1995, at The Courtyard by
Marriott, 4710 Pearl East Circle, Boulder, Colorado 80301 at 10:00 a.m.
(Mountain Time), and at any adjournment or postponement thereof (the "Meeting").
This Proxy Statement/Prospectus also constitutes the prospectus of HBO &
Company, a Delaware corporation ("HBOC"), with respect to up to 3,981,407 shares
(less the aggregate amount of fractional shares which are paid in cash) of
Common Stock, $.05 par value per share of HBOC ("HBOC Common Stock") to be
issued in connection with the merger (the "Merger") of CliniCom with and into
HBO & Company of Georgia, a Delaware corporation which is a wholly owned
subsidiary of HBOC ("HBOC-GA"), in exchange for all of the outstanding shares of
CliniCom Common Stock. In the Merger, subject to the terms of the Agreement of
Merger, dated as of July 14, 1995, among CliniCom, HBOC and HBOC-GA (the "Merger
Agreement"), each outstanding share of CliniCom Common Stock and each right to
acquire a share of CliniCom Common Stock, will be converted into the right to
receive .4 of a share of HBOC Common Stock (the "Exchange Ratio"). As more fully
discussed herein, CliniCom will have the right but not the obligation to
terminate the Merger Agreement in the event the average of the closing prices on
the Nasdaq Stock Market National Market ("NASDAQ-NM") of the HBOC Common Stock
is less than $50.00 for any period of twenty consecutive trading days ending on
any date prior to the second trading day prior to the Closing Date (as
hereinafter defined). In addition, it is a condition to the obligation of
CliniCom to close the transactions contemplated by the Merger Agreement that the
average of the closing prices on the NASDAQ-NM of the HBOC Common Stock for the
ten consecutive trading days ending on the second trading day prior to the
Closing Date not be less than $50.00. The CliniCom Board may waive this
condition.
Outstanding and unexercised options to purchase shares of CliniCom Common
Stock will be assumed by HBOC upon the completion of the Merger such that the
holder will have the right to purchase the number of shares of HBOC Common Stock
into which the shares of CliniCom Common Stock subject to such options would
have been converted in the Merger.
As a result of the Merger, holders of shares of CliniCom Common Stock or
rights to acquire shares of CliniCom Common Stock will receive shares of HBOC
Common Stock, which in the aggregate will represent up to 3,981,407 shares (less
the aggregate amount of any fractional shares which are paid in cash) of HBOC
Common Stock. Shares of HBOC Common Stock are currently approved for quotation
on the NASDAQ-NM. On August 31, 1995, the reported closing sale price of a share
of HBOC Common Stock on the NASDAQ-NM was $55.00, and the reported closing sale
price of a share of CliniCom Common Stock on the NASDAQ-NM was $21.50. This
Proxy Statement/Prospectus and the related Notice of Special Meeting and form of
proxy are first being mailed to stockholders of CliniCom on or about September
1, 1995.
SEE "RISK FACTORS" ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY CLINICOM STOCKHOLDERS IN DETERMINING HOW TO VOTE ON THE
MERGER AGREEMENT.
---------------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Proxy Statement/Prospectus is September 1, 1995.
AVAILABLE INFORMATION AND SOURCES OF INFORMATION
Each of HBOC and CliniCom is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by each of HBOC and CliniCom with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at 7 World Trade Center,
13th Floor, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also may be obtained by mail
from the Public Reference Section of the Commission, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
HBOC has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), which includes the
Proxy Statement of CliniCom with respect to the Merger and the Prospectus of
HBOC with respect to the shares of HBOC Common Stock issuable in the Merger.
This Proxy Statement/Prospectus does not contain all the information set forth
in the Registration Statement, certain portions of which are omitted in
accordance with the rules and regulations of the Commission. Statements made in
this Proxy Statement/Prospectus as to the contents of any contract, agreement or
other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. Copies of the Registration
Statement together with exhibits may be inspected at the office of the
Commission in Washington, D.C. without charge and copies thereof may be obtained
therefrom upon payment of a prescribed fee.
All information contained in this Proxy Statement/Prospectus concerning
CliniCom has been supplied by CliniCom, information regarding the Merger
proposal has been supplied by CliniCom and/ or HBOC and all other information
has been supplied by HBOC. References to CliniCom and HBOC in this Proxy
Statement/Prospectus mean the respective corporations and in the case of HBOC,
its consolidated subsidiaries, except as the context may otherwise indicate.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SHARES OF HBOC
COMMON STOCK MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HBOC,
CLINICOM OR ANY OTHER PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/ PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HBOC OR CLINICOM
SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The information in the following documents filed by HBOC with the Commission
(File No. 0-9900) pursuant to the Exchange Act is incorporated by reference in
this Proxy Statement/ Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1994 filed
with the Commission on March 17, 1995, as amended by Form 10-K(A) filed with
the Commission on March 31, 1995;
2
2. Quarterly Reports on Form 10-Q for the quarter ended March 31, 1995 filed
with the Commission on May 9, 1995 and for the quarter ended June 30, 1995
filed with the Commission on July 31, 1995, as amended by Form 10-Q(A) dated
August 11, 1995 and filed with the Commission on August 14, 1995;
3. Current Reports on Form 8-K, dated February 24, 1995 and filed with the
Commission on February 24, 1995, dated May 17, 1995, and filed with the
Commission on May 17, 1995, dated June 23, 1995 and filed with the
Commission on June 26, 1995 as amended by Form 8-K(A), dated July 31, 1995
and filed with the Commission on July 31, 1995, and as further amended by
Form 8-K(A)2, dated August 8, 1995 and filed with the Commission on August
8, 1995, dated July 10, 1995 and filed with the Commission on July 11, 1995,
dated July 18, 1995 and filed with the Commission on July 18, 1995, and
dated August 16, 1995 and filed with the Commission on August 16, 1995;
4. Proxy Statement, dated as of April 3, 1995, filed in final form on April 5,
1995 with the Commission with respect to the information required to be
included herein by Items 402 (executive compensation) and 404 (certain
relationships and related transactions) of Regulation S-K promulgated under
the Securities Act and the Exchange Act; and
5. The description of Common Stock and Preferred Share Purchase Rights
contained in HBOC's Registration Statements on Form 8-A, filed with the
Commission on August 19, 1981, as amended and February 19, 1991, as amended,
respectively.
The information in the following documents filed by CliniCom with the
Commission (File No. 0-11110) pursuant to the Exchange Act is incorporated by
reference in this Proxy Statement/ Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1994 filed
with the Commission on March 30, 1995;
2. Quarterly Reports on Form 10-Q for the quarter ended March 31, 1995 filed
with the Commission on May 15, 1995 and for the quarter ended June 30, 1995
filed with the Commission on August 3, 1995; and
3. Current Report on Form 8-K, dated July 20, 1995 and filed with the
Commission on July 21, 1995.
All documents filed by HBOC and CliniCom pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date of the Meeting, shall be deemed to be
incorporated by reference into this Proxy Statement/Prospectus and to be part
hereof from the date of filing of such documents. Any statement contained herein
or in a previously filed document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or was deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
The information relating to HBOC and CliniCom contained in this Proxy
Statement/Prospectus should be read together with the information in the
documents incorporated by reference.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR
ORAL REQUEST. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED, IN THE CASE OF
HBOC DOCUMENTS, TO HBO & COMPANY, 301 PERIMETER CENTER NORTH, ATLANTA, GEORGIA
30346, ATTENTION: MONIKA BROWN, TELEPHONE: (770) 668-5926, AND, IN THE CASE OF
CLINICOM DOCUMENTS, TO CLINICOM INCORPORATED, 4720 WALNUT STREET, BOULDER,
COLORADO 80301, ATTENTION: CATHERINE K. MILBURN, TELEPHONE (303) 443-9660. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE MEETING, ANY SUCH
REQUESTS SHOULD BE MADE BY SEPTEMBER 25, 1995.
3
TABLE OF CONTENTS
PAGE
--------------
AVAILABLE INFORMATION AND SOURCES OF INFORMATION.................................................. 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE................................................. 2
SUMMARY........................................................................................... 6
The Parties..................................................................................... 6
The Meeting..................................................................................... 7
The Merger Proposal............................................................................. 7
Other........................................................................................... 9
Comparative Per Share Data...................................................................... 10
RISK FACTORS...................................................................................... 12
Exchange Ratio.................................................................................. 12
Acquisitions and Integration.................................................................... 12
Healthcare Industry and Market Changes.......................................................... 12
Competition..................................................................................... 13
Technological Change; Proprietary Technology.................................................... 13
Product Liability............................................................................... 13
Possible Volatility of Stock Price.............................................................. 13
Shares Eligible for Future Sale................................................................. 13
CERTAIN MARKET INFORMATION........................................................................ 14
HBOC............................................................................................ 14
CliniCom........................................................................................ 15
SELECTED HISTORICAL FINANCIAL INFORMATION OF HBOC................................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION OF CLINICOM............................................. 17
PRO FORMA FINANCIAL INFORMATION................................................................... 17
THE MEETING....................................................................................... 24
THE MERGER PROPOSAL............................................................................... 25
Background of the Merger........................................................................ 25
Opinion of Financial Advisor for CliniCom....................................................... 27
Reasons of CliniCom for Engaging in the Merger.................................................. 32
Reasons of HBOC for Engaging in the Merger...................................................... 34
Terms of the Merger............................................................................. 34
Effective Time of the Merger.................................................................. 34
Exchange Ratio................................................................................ 35
Fractional Shares............................................................................. 35
Options....................................................................................... 35
Employee Stock Purchase Plan.................................................................. 35
Exchange of Certificates...................................................................... 35
Payment of Dividends.......................................................................... 36
Limitations on Transferability of HBOC Common Stock........................................... 36
Conditions; Waiver............................................................................ 36
Hart-Scott-Rodino............................................................................. 37
No Solicitation............................................................................... 37
Termination................................................................................... 37
Accounting Treatment............................................................................ 38
Certain Federal Income Tax Consequences......................................................... 38
No Appraisal Rights............................................................................. 39
INTERESTS OF CERTAIN PERSONS IN EACH OF HBOC AND CLINICOM......................................... 40
Security Ownership of Certain Beneficial Owners and Management of HBOC.......................... 40
Security Ownership of Certain Beneficial Owners and Management of CliniCom...................... 42
Interests of Certain Persons in Matters to be Acted Upon........................................ 43
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF HBOC COMMON STOCK AND CLINICOM COMMON
STOCK............................................................................................ 45
Introduction.................................................................................... 45
Authorized Capital Stock........................................................................ 45
Board or Stockholder Approved Preferred Stock................................................... 45
4
PAGE
--------------
Voting Rights................................................................................... 45
Number of Directors............................................................................. 46
Election of Board of Directors.................................................................. 46
Vote on Merger, Consolidation or Sale of Substantially All Assets............................... 46
Special Meeting of Stockholders................................................................. 46
Stockholder Action by Written Consent........................................................... 46
Amendment of Certificate of Incorporation....................................................... 47
Amendment of Bylaws............................................................................. 47
Liability and Indemnification of Officers and Directors......................................... 47
Payment of Dividends............................................................................ 48
Anti-Takeover Protection........................................................................ 48
Appraisal Rights................................................................................ 48
BUSINESS OF HBOC.................................................................................. 49
General......................................................................................... 49
Overview...................................................................................... 49
Industry...................................................................................... 49
Strategy........................................................................................ 50
Leverage Existing Customer Base............................................................... 50
Provide Enterprisewide Solutions to the Evolving Healthcare Industry.......................... 50
Provide Superior Integration of Products and Data............................................. 50
Expand into New Markets....................................................................... 51
Continue Product Development.................................................................. 51
Recent Acquisitions............................................................................. 51
Product Summary................................................................................. 52
Services........................................................................................ 54
Connect Technology............................................................................ 54
Outsourcing Services Group.................................................................... 54
Research and Development and Technology......................................................... 54
Sales and Marketing............................................................................. 55
BUSINESS OF CLINICOM.............................................................................. 56
General......................................................................................... 56
Industry Background............................................................................. 56
Strategy........................................................................................ 56
Ten Years of Solution-Oriented Product Development............................................ 57
Enabling Software Technology for Cost-Effective and Quality Care.............................. 57
Commitment to Open Systems Architecture and Integration....................................... 57
Portable and Wireless Products................................................................ 57
High Quality Client Service and Support....................................................... 57
Target Market................................................................................... 57
Products........................................................................................ 58
Applications for Managing Patient Care.......................................................... 60
Patient Care Database........................................................................... 61
Installation and Support Services............................................................... 61
New Product Development......................................................................... 62
Sales and Marketing............................................................................. 62
HBOC Agreement.................................................................................. 63
CONCURRENT OFFERING............................................................................... 63
MANAGEMENT OF HBOC................................................................................ 64
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......................................................... 65
STOCKHOLDER PROPOSALS............................................................................. 66
OTHER MATTERS..................................................................................... 66
CERTAIN LEGAL MATTERS............................................................................. 66
EXPERTS........................................................................................... 66
MERGER AGREEMENT.................................................................................. Appendix A
FAIRNESS OPINION OF DEAN WITTER REYNOLDS INC...................................................... Appendix B
5
SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED
IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS,
INCLUDING NOTES THERETO, AND PRO FORMA FINANCIAL INFORMATION INCLUDED OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS.
THE PARTIES
HBO & COMPANY
HBOC is a leading healthcare information systems company that develops
integrated patient care, clinical, financial and strategic management software
solutions for healthcare providers, payers and integrated healthcare delivery
systems. HBOC designs open systems solutions which facilitate the integration of
clinical, financial and administrative data from a wide range of customer
systems and software. HBOC's broad product portfolio can be implemented on a
stand-alone, combined or enterprisewide basis. HBOC's newer products offer open
systems solutions that enable customers to add incremental capabilities to
existing information systems, without making prior capital investments obsolete.
HBOC also provides networking technologies and outsourcing services under
contract management agreements whereby its staff manages and operates data
centers, information systems, organizations and business offices of healthcare
institutions of various sizes and structures.
HBOC markets its products and services to hospitals, integrated healthcare
delivery systems, physicians' offices, managed care providers, home health
providers, pharmacies and reference laboratories, and currently has one or more
applications installed in approximately 2,600 of the 5,900 hospitals in the
United States. HBOC also sells its products and services internationally through
its subsidiaries in the United Kingdom and Canada and distribution agreements in
Saudi Arabia, Australia, Puerto Rico and New Zealand.
The address and telephone number of the principal executive offices of HBOC
are 301 Perimeter Center North, Atlanta, Georgia 30346, (770) 393-6000.
CLINICOM INCORPORATED
CliniCom develops and markets a multi-disciplinary clinical information
system that enables healthcare providers to plan, implement, coordinate and
manage all aspects of the patient care process. CliniCom's products have evolved
from a bedside nursing system to an integrated information system that provides
a comprehensive set of applications allowing providers to manage and measure the
cost-effectiveness and quality of healthcare in a variety of care settings. The
CliniCom system is an integrated software/hardware solution which provides
access to detailed clinical information through an open-systems architecture, a
relational database and a wireless network. The system is designed to enhance
the efficiency of an entire healthcare provider network by unifying clinical
information from all areas with a consistent user interface and providing
on-line access to patient care information. CliniCom's modular software allows
healthcare organizations to purchase a base system and add software modules as
requirements change and new products are released. CliniCom continually expands
the scope and functionality of its products to address the changing needs of the
evolving healthcare market. Currently, CliniCom's primary market consists of
approximately 5,300 hospitals in the United States (excluding psychiatric
hospitals), 2,000 of which represent hospitals with 200 or more beds. CliniCom's
growth strategy has included expanding its target market to reach a broader
provider base, including the evolving regional healthcare delivery networks,
managed care organizations, ambulatory facilities, physician clinics and
long-term care facilities. As of June 30, 1995, CliniCom had sold its products
and services to 113 customers.
The address and telephone number of the principal executive offices of
CliniCom are 4720 Walnut Street, Boulder, Colorado 80301, (303) 443-9660.
6
THE MEETING
The Meeting will be held on Saturday, September 30, 1995 at 10:00 a.m.
(Mountain Time) at The Courtyard by Marriott, 4710 Pearl East Circle, Boulder,
Colorado 80301. The purpose of the Meeting is to consider and take action upon a
proposal to approve the Merger Agreement.
The CliniCom Board has fixed the close of business on August 30, 1995, as
the record date for the determination of holders of CliniCom Common Stock
entitled to vote at the Meeting (the "Record Date"). At the Record Date,
8,663,359 shares of CliniCom Common Stock were outstanding and entitled to vote.
The presence at the Meeting, in person or by proxy, of the holders of a majority
of the issued and outstanding shares of CliniCom Common Stock constitutes a
quorum for the transaction of business. The Merger Agreement must be approved by
holders of a majority of the issued and outstanding CliniCom Common Stock. See
"The Meeting."
THE MERGER PROPOSAL
TERMS OF THE MERGER
Assuming approval of the Merger Agreement by the required vote of holders of
CliniCom Common Stock and the satisfaction or waiver of all other conditions to
consummation of the Merger, at the Effective Time of the Merger (as defined
below), CliniCom will merge with and into HBOC-GA which will be the surviving
corporation (the "Surviving Corporation") in the Merger. See "The Merger
Proposal -- Terms of the Merger."
EFFECTIVE TIME OF THE MERGER. As soon as practicable after all of the
conditions to the Merger, including approval of the Merger Agreement by the
required vote of holders of CliniCom Common Stock at the Meeting, have been
satisfied or waived, HBOC and CliniCom will cause a Certificate of Merger to be
filed on behalf of HBOC-GA and CliniCom with the Secretary of State of Delaware
to make the Merger effective (the time the Merger becomes effective being
referred to herein as the "Effective Time of the Merger").
EXCHANGE RATIO. Each share of CliniCom Common Stock that is issued and
outstanding at the Effective Time of the Merger will be converted into the right
to receive .4 of a share of HBOC Common Stock (the "Exchange Ratio"). See "The
Merger Proposal -- Terms of the Merger -- Exchange Ratio."
FRACTIONAL SHARES. No fractional shares of HBOC Common Stock will be issued
in the Merger but in lieu thereof, a cash payment will be made therefor. See
"The Merger Proposal -- Terms of the Merger -- Fractional Shares."
OPTIONS. Options to purchase shares of CliniCom Common Stock outstanding at
the Effective Time of the Merger will be converted into options to purchase the
number of shares of HBOC Common Stock into which the number of shares of
CliniCom Common Stock each optionee was entitled to purchase under the existing
options would have been converted pursuant to the Exchange Ratio. See "The
Merger Proposal -- Terms of the Merger -- Options."
EMPLOYEE STOCK PURCHASE PLAN. Each participant in the CliniCom Incorporated
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") will receive
the number of shares of HBOC Common Stock into which the shares of CliniCom
Common Stock issuable to such participant in accordance with the Employee Stock
Purchase Plan would have been converted. See "The Merger Proposal -- Terms of
the Merger -- Employee Stock Purchase Plan."
EXCHANGE OF CERTIFICATES. Promptly after the Effective Time of the Merger,
Trust Company Bank (the "Exchange Agent") will mail to each record holder (as of
the Effective Time of the Merger) of an outstanding certificate or certificates
that immediately prior to the Effective Time of the Merger represented
outstanding shares of CliniCom Common Stock (the "Certificates") a letter of
transmittal and instructions for use in effecting the surrender of the
Certificates for exchange and/or payment
7
therefor. Until surrendered, each Certificate will represent for all purposes
only the right to receive shares of HBOC Common Stock and cash in lieu of any
fractional share interest, without any interest on the value thereof. See "The
Merger Proposal -- Terms of the Merger -- Exchange of Certificates."
LIMITATIONS ON TRANSFERABILITY OF HBOC COMMON STOCK. Shares of HBOC Common
Stock received by certain persons deemed to be "affiliates" of CliniCom for
purposes of Rule 145 under the Securities Act will be subject to the
restrictions imposed by such rule. In accordance with Rule 145, an affiliate of
CliniCom receiving HBOC Common Stock issued in the Merger may not sell such
shares except pursuant to the volume and manner of sale limitations and other
requirements specified therein or pursuant to an effective registration
statement under the Securities Act. See "The Merger Proposal -- Terms of the
Merger -- Limitations on Transferability of HBOC Common Stock." In addition,
certain CliniCom affiliates are subject to certain restrictions on transfer of
both CliniCom Common Stock prior to, and HBOC Common Stock following, the
Effective Date of the Merger to ensure pooling treatment of the transaction.
CONDITIONS; WAIVER. The obligations of HBOC and HBOC-GA on the one hand,
and of CliniCom, on the other hand, to consummate the Merger are contingent upon
the satisfaction or waiver of certain conditions, including approval of the
Merger by holders of the requisite number of shares of CliniCom Common Stock. It
is a condition of the obligation of CliniCom to consummate the Merger that,
unless waived, the average of the closing prices of the HBOC Common Stock on the
NASDAQ-NM for the ten consecutive trading days ending on the second trading day
prior to the Closing Date be not less than $50.00. See "The Merger Proposal --
Terms of the Merger -- Conditions; Waiver."
HART-SCOTT-RODINO. The Merger is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-R
Act"), which provides that certain transactions (including the Merger) may not
be consummated until certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the Federal
Trade Commission (the "FTC") and certain waiting period requirements have been
satisfied. HBOC and CliniCom filed the required information and material with
the Antitrust Division and the FTC on July 21, 1995 and were notified that they
had been granted early termination of the waiting period on August 4, 1995. See
"The Merger Proposal -- Terms of the Merger -- Hart-Scott-Rodino."
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time of the Merger by: (i) mutual consent of the Boards of
Directors of HBOC and CliniCom; (ii) HBOC-GA, in the event of material
condemnation, destruction, loss or damage of CliniCom; (iii) HBOC-GA or
CliniCom, after the earlier to occur of November 15, 1995, and the date that is
twenty-four (24) business days following the date the Registration Statement on
Form S-4 is declared effective by the Commission, if the other party fails to
fulfill any of its conditions, unless fulfillment has been made impossible by
the party seeking termination; (iv) CliniCom, if, in the good faith exercise of
its fiduciary duties to the stockholders of CliniCom in the context of a
proposal to acquire CliniCom by another party, the CliniCom Board decides that
such termination is required; or (v) CliniCom, if the average of the closing
prices of the HBOC Common Stock on the NASDAQ-NM for any period of twenty
consecutive trading days ending on any date prior to the second trading day
prior to the Closing Date is less than $50.00. See "The Merger Proposal -- Terms
of the Merger -- Termination."
ACCOUNTING TREATMENT
It is a condition of the closing of the Merger that the parties shall have
received letters from their independent accountants advising them that the
Merger may be accounted for under the "pooling of interests" method of
accounting in accordance with generally accepted accounting principles. See "The
Merger Proposal -- Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a "tax-free reorganization" for federal
income tax purposes. Davis, Graham & Stubbs, L.L.C., counsel to CliniCom, has
advised CliniCom, subject to the receipt of certain customary representations
and assumptions, that no gain or loss would be recognized by
8
CliniCom or by holders of CliniCom Common Stock on the exchange of CliniCom
Common Stock for HBOC Common Stock (except with respect to cash received in lieu
of fractional shares). See "The Merger Proposal -- Certain Federal Income Tax
Consequences." EACH HOLDER OF CLINICOM COMMON STOCK IS URGED TO CONSULT HIS OR
HER TAX ADVISOR TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH
HOLDER.
NO APPRAISAL RIGHTS
The holders of shares of CliniCom Common Stock will not be entitled to
appraisal rights pursuant to Section 262 of the Delaware General Corporation Law
(the "DGCL") in connection with the Merger. See "The Merger Proposal -- No
Appraisal Rights."
OTHER
INTERESTS OF CERTAIN PERSONS
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS. As of the Record
Date, directors and executive officers of CliniCom and their affiliates were
beneficial owners of 3,421,070 outstanding shares of CliniCom Common Stock
representing approximately 39% of the total issued and outstanding CliniCom
Common Stock. Holders of all of such shares have advised CliniCom that they
presently intend to vote or direct the vote of all shares of CliniCom Common
Stock over which they have voting control in favor of the Merger Agreement.
Directors and executive officers of HBOC and their affiliates beneficially owned
approximately 4.4% of the outstanding shares of HBOC Common Stock at August 1,
1995. See "Interests of Certain Persons in Each of HBOC and CliniCom."
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON. In considering
the Merger, stockholders of CliniCom should be aware that certain members of
management and the CliniCom Board have interests in the Merger that are in
addition to, or different from, the interests of stockholders of CliniCom
generally. See "Interests of Certain Persons in Each of HBOC and CliniCom --
Interests of Certain Persons in Matters to be Acted Upon."
COMPARISON OF STOCKHOLDER RIGHTS
HBOC and CliniCom are each incorporated under Delaware law. For a summary of
material differences between the rights of holders of shares of each of CliniCom
Common Stock and HBOC Common Stock, see "Comparison of Rights of Holders of
Shares of Each of HBOC Common Stock and CliniCom Common Stock."
CERTAIN MARKET INFORMATION
HBOC Common Stock is traded on the NASDAQ-NM under the symbol "HBOC."
CliniCom Common Stock is traded on the NASDAQ-NM under the symbol "CLIN." The
closing sales prices per share of HBOC Common Stock and CliniCom Common Stock on
July 14, 1995, the last trading day preceding the announcement of the proposed
Merger, were $58.50 and $17.00, respectively. See "Certain Market Information."
CONCURRENT OFFERING
HBOC has filed a registration statement in connection with a proposed
underwritten public offering of up to 4,000,000 shares of HBOC Common Stock by
First Data Corporation ("FDC"). Such shares were acquired by FDC in June 1995 in
consideration of the sale of the Health Systems Group ("HSG") by FDC to HBOC.
9
COMPARATIVE PER SHARE DATA
The following table sets forth certain per share information for HBOC and
CliniCom on both historical and pro forma combined bases (giving effect to the
Merger using the pooling of interests method of accounting) and certain
information on an equivalent pro forma combined basis.
HBO & COMPANY -- HISTORICAL
AT AND FOR THE
SIX MONTHS
AT AND FOR THE YEAR ENDED
ENDED DECEMBER 31, JUNE 30,
------------------------------- -----------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ------------
PER SHARE DATA
Book Value......................................... $ 2.91 $ 1.86 $ 2.88 $ 2.26 $ 6.68
Cash Dividends Declared............................ $ .15 $ .15 $ .16 $ .08 $ .08
Fully Diluted Earnings............................. $ .43 $ .58 $ .85 $ .36 $ .61(1)
CLINICOM INCORPORATED -- HISTORICAL
AT AND FOR THE
SIX MONTHS
AT AND FOR THE YEAR ENDED
ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
PER SHARE DATA
Book Value............................................ $ 1.08 $ 2.76 $ 3.48 $ 3.03 $ 3.83
Cash Dividends Declared............................... -- -- -- -- --
Fully Diluted Earnings................................ $ .17 $ .41 $ .62 $ .24 $ .33
PRO FORMA COMBINED HBO & COMPANY AND CLINICOM INCORPORATED (2)
AT AND FOR THE
SIX MONTHS
AT AND FOR THE YEAR ENDED
ENDED DECEMBER 31, JUNE 30,
--------------------------------- -----------------------
1992 1993 1994 (3) 1994 1995 (3)
--------- --------- ----------- --------- ------------
PER SHARE DATA
Book Value........................................ $ 2.88 $ 2.23 $ 3.34 $ 2.67 $ 6.84
Cash Dividends Declared........................... $ .13 $ .14 $ .14 $ .07 $ .07
Fully Diluted Earnings............................ $ .43 $ .62 $ .92 $ .38 $ .66(4)
------------------------
(1) The stated Fully Diluted Earnings Per Share of $.61 excludes the effect of
the $126 million nonrecurring charge which primarily relates to research
and development purchased from FDC which had not reached the stage of
technological feasibility and includes the effect of dilutive stock
options. Reported Fully Diluted Loss Per Share for the period was $(1.69).
(2) The unaudited Pro Forma Combined Per Share Data provided above is not
necessarily indicative of the results of operations or the financial
position which would have been attained had the Merger been consummated or
which may be attained in the future. This Pro Forma Combined Per Share
Data should be read in conjunction with the historical financial
statements of HBOC and CliniCom, which are incorporated or included
elsewhere in this document. See "Pro Forma Financial Information."
10
(3) The Pro Forma Combined Per Share Data for HBOC, CliniCom and HSG (see
"Business of HBOC -- Recent Acquisitions"), excluding the effect of the
$126 million nonrecurring charge referred to above and including the
effect of dilutive stock options, are as follows:
AT AND FOR
AT AND FOR THE
THE SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1994 1995
------------- -------------
PER SHARE DATA
Book Value............................ $ 6.18 $ 6.84
Cash Dividends Declared............... $ .13 $ .07
Fully Diluted Earnings................ $ .71 $ .45
(4) The stated Pro Forma Combined Fully Diluted Earnings Per Share of $.66
excludes the effect of the $126 million nonrecurring charge referred to
above and includes the effect of dilutive stock options. Without these
adjustments, reported Pro Forma Combined Fully Diluted Loss Per Share for
the period was $(1.44).
11
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT/ PROSPECTUS, HOLDERS OF CLINICOM COMMON STOCK SHOULD
CONSIDER CAREFULLY THE FOLLOWING FACTORS IN DETERMINING HOW TO VOTE WITH RESPECT
TO THE MERGER.
EXCHANGE RATIO
Stockholders should consider that, because the Exchange Ratio is fixed at .4
of a share of HBOC Common Stock for each share of CliniCom Common Stock, holders
of CliniCom Common Stock will not receive additional consideration in the event
that the value of a share of CliniCom Common Stock exceeds 40% of that of HBOC
Common Stock. In addition, although the Merger Agreement provides that the
CliniCom Board may terminate the Merger Agreement or elect not to close the
transactions contemplated thereby in the event the average closing price of the
HBOC Common Stock is less than $50.00 over certain specified periods, the
CliniCom Board may waive such provisions. See "The Merger Proposal -- Terms of
the Merger."
ACQUISITIONS AND INTEGRATION
An important element of HBOC's business strategy has been to expand through
acquisitions. See "Business of HBOC -- Strategy." HBOC's future success is
partially dependent upon its ability to effectively integrate acquired
businesses with HBOC's operations. Although HBOC believes that its recent
acquisitions will be successful and that it will be able to effect such
integration, there can be no assurance that past or future acquisitions will be
successfully integrated or that any such acquisition will otherwise be
successful. In addition, the financial performance of HBOC is now and will
continue to be subject to various risks associated with the acquisition of
businesses, including the financial effects associated with the integration of
such businesses. During the fiscal quarter ended June 30, 1995, HBOC recorded a
$126 million pre-tax charge in connection with its acquisition of HSG from FDC.
HEALTHCARE INDUSTRY AND MARKET CHANGES
The healthcare industry is subject to changing political, economic and
regulatory influences that may affect the procurement practices and other
operational aspects of the healthcare industry. During the past several years,
the healthcare industry has been subject to an increase in governmental
regulation of, among other things, reimbursement rates and certain capital
expenditures. A number of lawmakers have announced that they intend to propose
programs to reform the U.S. healthcare system. These programs may contain
proposals to increase governmental involvement in healthcare, lower
reimbursement rates and otherwise change the operating environment for HBOC's
customers. Cost containment measures instituted by healthcare providers could
result in greater selectivity in the allocation of capital funds, which could
have an adverse effect on HBOC's ability to sell its products and services. HBOC
cannot predict with any certainty what effect, if any, such proposals or
healthcare reforms might have on its business, financial condition or results of
operations.
In addition, the healthcare industry is currently undergoing significant
consolidation of healthcare providers resulting in a smaller number of larger
healthcare delivery enterprises. The changing industry profile produced by this
consolidation could have an adverse impact on HBOC's margins and profitability
due to increased competition.
Certain clinical applications of HBOC's computer-assisted services may be
subject to regulation by the federal Food and Drug Administration (the "FDA") as
medical devices. Such regulation would require the registration of the
applicable manufacturing facility and software/hardware products, application of
detailed recordkeeping and manufacturing standards, and pre-market notification
to the FDA of HBOC's intent to market the applications in question. The
pre-market notification procedure could create delays in marketing, and the FDA
could require supplemental filings or object to certain of these applications.
12
COMPETITION
The industry in which HBOC operates is highly competitive and subject to
continual change in the manner in which products and services are marketed and
vendors are selected by customers. The primary competitive factors are scope and
quality of products and service and support capabilities. Certain current and
potential competitors have greater resources than HBOC.
TECHNOLOGICAL CHANGE; PROPRIETARY TECHNOLOGY
Future advances in the healthcare information systems industry could lead to
new technologies, products or services that are competitive with the products
and services offered by HBOC. HBOC's continued success will depend, in part, on
its ability to be responsive to technological developments and challenges. Such
technological advances could also lower the cost of such products and services
or otherwise result in competitive pricing pressures, which could have an
adverse effect on HBOC. To remain competitive in the evolving healthcare
information systems marketplace, HBOC must develop new products on a timely
basis. The failure to develop competitive products or to introduce new products
on a timely basis could have an adverse effect on HBOC's future financial
performance.
HBOC relies on a combination of trade secret, copyright and trademark laws,
nondisclosure and other contractual provisions and technical measures to protect
its proprietary rights in its products. There can be no assurance that these
protections will be adequate or that HBOC's competitors will not independently
develop technologies that are substantially equivalent or superior to HBOC's
technology. Although HBOC believes that its products and other proprietary
rights do not infringe upon the proprietary rights of third parties, there can
be no assurance that third parties will not assert infringement claims against
HBOC in the future.
PRODUCT LIABILITY
Certain of HBOC's products provide applications that relate to patient
medical histories and treatment plans. Although HBOC has not experienced any
material claims to date, any failure of HBOC's products to provide accurate and
timely information could result in claims against HBOC. HBOC maintains insurance
to protect against claims associated with the use of its products, but there can
be no assurance that its insurance coverage would adequately cover any claim
asserted against HBOC.
POSSIBLE VOLATILITY OF STOCK PRICE
The stock market has from time to time experienced extreme price and volume
fluctuations, particularly in the high technology sector, which have often been
unrelated to the operating performance of particular companies. Such
fluctuations and factors such as announcements of technological innovations or
new products by HBOC or its competitors or third parties, as well as market
conditions in the computer software or hardware industries and healthcare reform
measures, may have a significant effect on the market price of HBOC's Common
Stock. Also, since HBOC recognizes revenues for certain products upon the
completion of certain milestone conditions, delays in meeting such conditions
could result in the shift of revenue recognition from one quarter to another.
Any such shift could adversely impact the results of operations for a particular
quarter, which in turn could cause fluctuations in HBOC's stock price.
SHARES ELIGIBLE FOR FUTURE SALE
HBOC has filed a registration statement in connection with a proposed
underwritten public offering of up to 4,000,000 shares of HBOC Common Stock by
FDC. Sales, or the availability for sale, of a substantial number of shares of
HBOC Common Stock in such offering or otherwise could have a significant adverse
effect on the market price for the HBOC Common Stock.
13
CERTAIN MARKET INFORMATION
HBOC
HBOC Common Stock is traded on the NASDAQ-NM under the symbol "HBOC." The
table below presents the quarterly high and low closing sales prices and
dividend information for HBOC Common Stock as furnished by NASDAQ for the
periods indicated after restating for the two-for-one stock split effected in
the form of a stock dividend effective March 28, 1994.
DIVIDENDS
DECLARED
YEAR ENDED DECEMBER 31: HIGH LOW PER SHARE
--------------------------- --------- --------- -----------
1993
First Quarter................................................................... $ 13.31 $ 10.31 $ .0375
Second Quarter.................................................................. $ 13.50 $ 8.44 $ .0375
Third Quarter................................................................... $ 19.13 $ 13.19 $ .0375
Fourth Quarter.................................................................. $ 23.00 $ 16.38 $ .0375
1994
First Quarter................................................................... $ 26.38 $ 20.88 $ .04
Second Quarter.................................................................. $ 31.13 $ 20.75 $ .04
Third Quarter................................................................... $ 34.50 $ 24.50 $ .04
Fourth Quarter.................................................................. $ 36.13 $ 29.00 $ .04
1995
First Quarter................................................................... $ 43.75 $ 33.50 $ .04
Second Quarter.................................................................. $ 54.50 $ 40.50 $ .04
Third Quarter (through August 31)............................................... $ 58.63 $ 53.25 $ .04
The closing sales price for a share of HBOC Common Stock on July 14, 1995,
the last trading day preceding the announcement of the proposed Merger, was
$58.50. As of June 30, 1995, there were approximately 1,675 holders of record of
shares of HBOC Common Stock.
14
CLINICOM
CliniCom Common Stock has been traded on the NASDAQ-NM under the symbol
"CLIN" since May 21, 1993. Prior thereto CliniCom Common Stock was quoted on the
NASDAQ SmallCap Market. The following table sets forth the quarterly high and
low closing sales prices since May 21, 1993, and the range of high and low bid
prices prior thereto for CliniCom Common Stock in such markets for the periods
indicated. Transactions in the NASDAQ SmallCap Market reflect inter-dealer
prices, without retail mark-up, mark-downs or commission and may not represent
actual transactions.
YEAR ENDED DECEMBER 31: HIGH LOW
--------------------------- --------- ---------
1993
First Quarter............................................................................. $ 9.75 $ 5.00
Second Quarter............................................................................ $ 10.625 $ 7.50
Third Quarter............................................................................. $ 16.50 $ 11.75
Fourth Quarter............................................................................ $ 23.25 $ 14.25
1994
First Quarter............................................................................. $ 27.50 $ 20.00
Second Quarter............................................................................ $ 22.625 $ 13.25
Third Quarter............................................................................. $ 20.75 $ 12.00
Fourth Quarter............................................................................ $ 17.50 $ 8.875
1995
First Quarter............................................................................. $ 19.25 $ 12.00
Second Quarter............................................................................ $ 21.00 $ 14.75
Third Quarter (through August 31)......................................................... $ 22.50 $ 16.00
The closing sales price for a share of CliniCom Common Stock on July 14,
1995, the last trading day preceding the announcement of the proposed Merger,
was $17.00. As of August 30, 1995, there were approximately 201 holders of
record of shares of CliniCom Common Stock.
CliniCom has not paid dividends on CliniCom Common Stock during the past
three years and has no present intention to do so.
15
HBO & COMPANY
SELECTED HISTORICAL FINANCIAL INFORMATION
(FROM CONTINUING OPERATIONS)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
The following selected historical financial information for each of the five
years in the period ended December 31, 1994, set forth below have been derived
from the consolidated financial statements of HBOC. The report of Arthur
Andersen LLP, independent public accountants, with respect to such consolidated
financial statements as of December 31, 1993, and 1994 and for the three years
in the period ended December 31, 1994, has been incorporated herein by
reference. The historical financial information for the six months ended June
30, 1994, and 1995 is derived from the unaudited financial statements of HBOC,
which in the opinion of management include all adjustments necessary for a fair
presentation of the financial condition and results of operations of HBOC for
such periods.
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------------------------- ----------------------
INCOME STATEMENT DATA: 1990 1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- --------- --------- -----------
Revenue.................................. $ 179,704 $ 177,775 $ 214,954 $ 250,791 $ 327,201 $ 145,850 $ 190,245
Operating Expense:
Cost of Operations..................... 99,036 99,314 118,106 132,801 172,894 78,870 91,279
Marketing.............................. 20,530 22,741 26,144 34,631 42,769 19,649 26,411
Research and Development............... 19,166 19,571 20,096 23,428 28,928 13,085 16,453
General and Administrative............. 28,103 27,762 29,035 27,765 34,590 14,712 20,490
Nonrecurring Charge.................... 731 10,883 -- -- -- -- 125,520(1)
--------- --------- --------- --------- --------- --------- -----------
Total Operating Expense.............. 167,566 180,271 193,381 218,625 279,181 126,316 280,153
--------- --------- --------- --------- --------- --------- -----------
Operating Income (Loss).................. 12,138 (2,496) 21,573 32,166 48,020 19,534 (89,908)
Other Income (Expense), Net.............. (133) (1,263) (553) (669) (1,031) 73 (1,026)
--------- --------- --------- --------- --------- --------- -----------
Net Income (Loss) Before Provision
(Credit) for Income Taxes............... 12,005 (3,759) 21,020 31,497 46,989 19,607 (90,934)
Provision (Credit) for Income Taxes...... 3,811 (1,312) 7,262 12,678 18,830 7,844 (36,373)
--------- --------- --------- --------- --------- --------- -----------
Net Income (Loss)........................ $ 8,194 $ (2,447) $ 13,758 $ 18,819 $ 28,159 $ 11,763 $ (54,561)
--------- --------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- --------- -----------
Fully Diluted Earnings (Loss) Per
Share................................... $ .27 $ (.08) $ .43 $ .58 $ .85 $ .36 $ (1.69)
Fully Diluted Weighted Average Shares
Outstanding............................. 29,720 28,654 32,296 32,718 33,106 32,834 32,333
AT DECEMBER 31,
----------------------------------------------------- AT JUNE 30,
BALANCE SHEET DATA: 1990 1991 1992 1993 1994 1995
--------- --------- --------- --------- --------- -----------
Working Capital (Deficiency).................. $ 19,254 $ 18,038 $ 18,304 $ 18,037 $ (8,719) $ (12,370)
Total Assets.................................. $ 127,758 $ 108,285 $ 113,842 $ 131,157 $ 233,877 $ 441,455
Long-Term Debt................................ $ 37,450 $ 20,003 $ -- $ -- $ 252 $ 879
Stockholders' Equity.......................... $ 28,339 $ 24,692 $ 47,727 $ 57,575 $ 91,475 $ 241,769
------------------------------
(1) Primarily relates to research and development purchased from FDC which had
not reached the stage of technological feasibility.
16
CLINICOM INCORPORATED
SELECTED HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
The following selected historical financial information for each of the five
years in the period ended December 31, 1994, set forth below have been derived
from the financial statements of CliniCom. The report of Arthur Andersen LLP,
independent public accountants, with respect to such financial statements of
CliniCom as of December 31, 1993, and 1994 and for the three years in the period
ended December 31, 1994, has been incorporated herein by reference. The
historical financial information for the six months ended June 30, 1994, and
1995 is derived from the unaudited financial statements of CliniCom, which, in
the opinion of management, include all adjustments necessary for a fair
presentation of the financial condition and results of operations of CliniCom
for such periods.
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- ----------------------
INCOME STATEMENT DATA: 1990 1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- --------- ----------- ---------
Total sales................................... $ 4,959 $ 7,084 $ 14,034 $ 20,146 $ 35,416 $ 13,608 $ 21,770
Costs and expenses:
Cost of sales and support services.......... 3,753 5,366 7,903 9,898 18,186 6,657 11,429
Research and development.................... 1,383 1,331 1,980 2,401 3,303 1,513 2,347
Selling and marketing....................... 1,228 1,363 1,948 2,773 5,046 2,316 2,758
General and administrative.................. 842 851 1,176 1,742 3,719 1,175 2,381
--------- --------- --------- --------- --------- ----------- ---------
Total costs and expenses...................... 7,206 8,911 13,007 16,814 30,254 11,661 18,915
--------- --------- --------- --------- --------- ----------- ---------
Income (loss) from operations................. (2,247) (1,827) 1,027 3,332 5,162 1,947 2,855
Other income (expense)........................ (337) (168) 118 281 771 428 258
--------- --------- --------- --------- --------- ----------- ---------
Net income (loss) before provision for
income taxes................................. (2,584) (1,995) 1,145 3,613 5,933 2,375 3,113
Provision for income taxes.................... -- -- 20 270 445 200 158
--------- --------- --------- --------- --------- ----------- ---------
Net income (loss)............................. $ (2,584) $ (1,995) $ 1,125 $ 3,343 $ 5,488 $ 2,175 $ 2,955
--------- --------- --------- --------- --------- ----------- ---------
--------- --------- --------- --------- --------- ----------- ---------
Net income (loss) per common share
(Fully diluted).............................. $ (.50) $ (.38) $ .17 $ .41 $ .62 $ .24 $ .33
Weighted average common shares outstanding
(Fully diluted).............................. 5,142 5,201 6,640 8,230 8,902 8,907 9,007
AT DECEMBER 31,
----------------------------------------------------- AT JUNE 30,
BALANCE SHEET DATA: 1990 1991 1992 1993 1994 1995
--------- --------- --------- --------- --------- -----------
Working capital (deficiency).................. $ (734) $ 331 $ 5,665 $ 19,301 $ 23,869 $ 26,890
Total assets.................................. $ 3,157 $ 6,205 $ 11,847 $ 28,815 $ 39,668 $ 41,978
Long-term debt................................ $ 2,712 $ 742 -- -- -- --
Stockholders' equity (deficit)................ $ (2,594) $ 1,013 $ 7,245 $ 22,236 $ 29,815 $ 33,162
PRO FORMA FINANCIAL INFORMATION
The following unaudited Pro Forma Combined Income Statements for the six
months ended June 30, 1995, and the year ended December 31, 1994, have been
prepared to reflect adjustments to HBOC's historical results of operations to
give effect to the acquisition of HSG and the proposed Merger as if each had
occurred on January 1 of each period presented. The attached Pro Forma Combined
Balance Sheets as of June 30, 1995, give effect to the Merger as if it had
occurred on that date.
These pro forma statements have been prepared by HBOC based on the audited
financial statements of HSG and CliniCom for the year ended December 31, 1994,
and the unaudited financial statements of HSG for the period from January 1
through June 17, 1995, and of CliniCom for the six months ended June 30, 1995,
which statements are incorporated by reference herein.
These pro forma statements are not necessarily indicative of the results of
operations which would have been attained had each of the acquisitions been
consummated on the dates indicated or which may be attained in the future. These
pro forma statements should be read in conjunction with the historical financial
statements and notes thereto of HBOC, HSG and CliniCom, incorporated herein by
reference.
17
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED INCOME STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
HBOC HSG ADJUSTMENTS COMBINED CLINICOM ADJUSTMENTS COMBINED
-------- ------- -------------- --------- -------- ------------- ---------
Revenue.................. $190,245 $53,429 $ 17,048(2) $258,440 $21,770 $(2,813)(8) $277,397
(2,282)(3)
Operating Expense:
Cost of Operations..... 91,279 -- 44,263(2) 137,194 11,429 (4,231)(8) 145,510
(296)(3) 1,418(8)
130(3) (300)(9)
3,334(3)
(456)(3)
(1,060)(3)
Marketing.............. 26,411 -- 6,048(2) 29,810 2,758 (390)(9) 32,178
(2,649)(3)
Research and
Development........... 16,453 -- 4,509(2) 16,724 2,347 (600)(9) 18,471
(4,238)(3)
General and
Administrative........ 20,490 -- 12,597(2) 29,309 2,381 (760)(9) 30,930
(1,896)(3)
767(3)
(2,649)(3)
Nonrecurring Charge.... 125,520 -- (125,520)(5) 0 -- -- 0
HSG Operating
Expense............... -- 50,369 (50,369)(2) 0 -- -- 0
-------- ------- -------------- --------- -------- ------------- ---------
Total Operating
Expense............. 280,153 50,369 (117,485) 213,037 18,915 (4,863) 227,089
-------- ------- -------------- --------- -------- ------------- ---------
Operating Income
(Loss).................. (89,908) 3,060 132,251 45,403 2,855 2,050 50,308
Other Income (Expense),
Net..................... (1,026) (3,233) -- (4,259) 258 -- (4,001)
-------- ------- -------------- --------- -------- ------------- ---------
Income (Credit) Before
Provision for Income
Taxes................... (90,934) (173) 132,251 41,144 3,113 2,050 46,307
Provision (Credit) for
Income Taxes............ (36,373) 1,433 51,398(6) 16,458 158 1,907(10) 18,523
-------- ------- -------------- --------- -------- ------------- ---------
Net Income (Loss)........ $(54,561) $(1,606) $ 80,853 $ 24,686 $ 2,955 $ 143 $ 27,784
-------- ------- -------------- --------- -------- ------------- ---------
-------- ------- -------------- --------- -------- ------------- ---------
Earnings (Loss) Per
Share:
Primary................ $ (1.69) -- -- $ .66 $ .33 -- $ .68
Fully Diluted.......... $ (1.69) -- -- $ .66 $ .33 -- $ .67
Weighted Average Shares
Outstanding:
Primary................ 32,333 -- 5,149(7) 37,482 9,007 (5,404)(11) 41,085
Fully Diluted.......... 32,333 -- 5,323(7) 37,656 9,007 (5,404)(11) 41,259
See "Notes to Pro Forma Combined Financial Statements."
18
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED INCOME STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
HBOC HSG ADJUSTMENTS COMBINED CLINICOM ADJUSTMENTS COMBINED
--------- --------- --------------- ------------- ----------- --------------- -------------
Revenue.......................... $ 327,201 $ 121,241 $ 36,732(2) $ 480,546 $ 35,416 $ (5,440)(8) $ 510,522
(4,628)(3)
Operating Expense:
Cost of Operations............. 172,894 -- 93,480(2) 273,131 18,186 (5,005)(8) 285,277
(746)(3) (435)(8)
260(3) (600)(9)
6,668(3)
(925)(3)
1,500(4)
Marketing...................... 42,769 -- 14,625(2) 52,825 5,046 (780)(9) 57,091
(4,569)(3)
Research and Development....... 28,928 -- 9,153(2) 37,125 3,303 (1,200)(9) 39,228
(956)(3)
General and Administrative..... 34,590 -- 20,393(2) 50,476 3,719 (1,520)(9) 52,675
(3,879)(3)
1,534(3)
(2,162)(3)
HSG Operating Expense.......... -- 100,919 (100,919)(2) 0 -- -- 0
--------- --------- --------------- ------------- ----------- --------------- -------------
Total Operating Expense...... 279,181 100,919 33,457 413,557 30,254 (9,540) 434,271
--------- --------- --------------- ------------- ----------- --------------- -------------
Operating Income (Loss).......... 48,020 20,322 (1,353) 66,989 5,162 4,100 76,251
Other Income (Expense), Net...... (1,031) (6,703) -- (7,734) 771 -- (6,963)
--------- --------- --------------- ------------- ----------- --------------- -------------
Income (Credit) Before Provision
for Income Taxes................ 46,989 13,619 (1,353) 59,255 5,933 4,100 69,288
Provision (Credit) for Income
Taxes........................... 18,830 7,877 (3,005)(6) 23,702 445 3,568(10) 27,715
--------- --------- --------------- ------------- ----------- --------------- -------------
Net Income....................... $ 28,159 $ 5,742 $ 1,652 $ 35,553 $ 5,488 $ 532 $ 41,573
--------- --------- --------------- ------------- ----------- --------------- -------------
--------- --------- --------------- ------------- ----------- --------------- -------------
Earnings Per Share:
Primary........................ $ .85 -- -- $ .96 $ .62 -- $ 1.03
Fully Diluted.................. $ .85 -- -- $ .96 $ .62 -- $ 1.02
Weighted Average Shares
Outstanding:
Primary........................ 32,973 -- 4,000(7) 36,973 8,901 (5,341)(11) 40,533
Fully Diluted.................. 33,106 -- 4,000(7) 37,106 8,902 (5,341)(11) 40,667
See "Notes to Pro Forma Combined Financial Statements."
19
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEETS
JUNE 30, 1995
(IN THOUSANDS)
PRO FORMA PRO FORMA
HBOC CLINICOM ADJUSTMENTS COMBINED
--------- ----------- --------------- -------------
Assets
Current Assets:
Cash and Cash Equivalents............................ $ 8,232 $ 7,526 -- $ 15,758
Receivables, Net..................................... 131,709 23,884 (13,486)(8) 142,107
Current Deferred Income Taxes........................ 9,130 -- -- 9,130
Inventories.......................................... 1,868 3,401 -- 5,269
Prepaids and Other Current Assets.................... 12,061 895 (1,879)(8) 11,077
--------- ----------- --------------- -------------
Total Current Assets............................... 163,000 35,706 (15,365) 183,341
--------- ----------- --------------- -------------
Intangibles, Net..................................... 181,293 -- -- 181,293
Deferred Income Taxes................................ 33,096 -- -- 33,096
Property and Equipment, Net.......................... 31,983 2,646 -- 34,629
Capitalized Software, Net............................ 25,626 3,491 (400)(8) 28,717
Other Noncurrent Assets, Net......................... 6,457 135 -- 6,592
--------- ----------- --------------- -------------
Total Assets............................................. $ 441,455 $ 41,978 $ (15,765) $ 467,668
--------- ----------- --------------- -------------
--------- ----------- --------------- -------------
Liabilities and Stockholders' Equity
Current Liabilities.................................... $ 175,370 $ 8,816 $ (12,209)(8) $ 171,977
Long-Term Debt......................................... 879 -- -- 879
Other Long-Term Liabilities............................ 23,437 -- -- 23,437
Stockholders' Equity................................... 241,769 33,162 (3,556)(8) 271,375
--------- ----------- --------------- -------------
Total Liabilities and Stockholders' Equity............... $ 441,455 $ 41,978 $ (15,765) $ 467,668
--------- ----------- --------------- -------------
--------- ----------- --------------- -------------
See "Notes to Pro Forma Combined Financial Statements."
20
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(In Thousands)
GENERAL
1. The foregoing Pro Forma Combined Income Statements for the six months
ended June 30, 1995, and the year ended December 31, 1994, give effect to the
acquisition of HSG which was completed on June 17, 1995, and the Merger. The
foregoing Pro Forma Combined Balance Sheets as of June 30, 1995, give effect to
the Merger as if it had occurred on that date. No pro forma adjustments are
necessary for the HSG acquisition on the June 30, 1995, Pro Forma Combined
Balance Sheets since that transaction was completed on June 17, 1995.
HBOC accounted for the acquisition of HSG as a purchase. The Merger, which
is subject to certain conditions including CliniCom stockholder approval, is
expected to close early in the fourth quarter of 1995. The transaction will be
accounted for as a pooling of interests.
Adjustments to the Pro Forma Combined Income Statements include such
adjustments as are necessary to allocate the HSG purchase price based on the
estimated fair market value of the assets acquired and the liabilities assumed
and to give effect to events that are directly attributable to the HSG
transaction and the Merger, which are expected to have a continuing impact on
HBOC and are factually supportable. The adjustments related to the Pro Forma
Combined Income Statements assume the transactions were consummated on January 1
of each period presented.
Adjustments to the Pro Forma Combined Balance Sheets include such
adjustments as are necessary to give effect to events that are directly
attributable to the Merger and factually supportable. The adjustments related to
the Pro Forma Combined Balance Sheets assume the Merger was consummated on June
30, 1995.
HSG ACQUISITION
2. HSG revenue and expense classifications were historically broken out
using different policies than those applied by HBOC. The adjustments necessary
to reclassify HSG revenue and expenses in accordance with HBOC policies are:
6/30/95 12/31/94
----------- ------------
Revenue........................................................... $ 17,048 $ 36,732
Cost of Operations................................................ $ 44,263 $ 93,480
Marketing......................................................... $ 6,048 $ 14,625
Research and Development.......................................... $ 4,509 $ 9,153
General and Administrative........................................ $ 12,597 $ 20,393
HSG Operating Expense............................................. $ (50,369) $ (100,919)
Historically, HSG netted certain costs against revenue for presentation,
while HBOC has historically reported revenue as a gross number.
21
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(In Thousands)
3. The following adjustments are necessary to adjust the June 30, 1995, and
December 31, 1994, income statement impact of the asset and liability fair
market value adjustments, assuming the purchase of HSG had been consummated on
January 1 of each period presented:
6/30/95 12/31/94
----------- ------------
HSG Capitalized Software.......................................... $ (296) $ (746)
HSG Goodwill...................................................... $ (1,896) $ (3,879)
HBOC Capitalized Software......................................... $ 130 $ 260
HBOC Customer Lists-to amortize over 15 years..................... $ 3,334 $ 6,668
HBOC Goodwill-to amortize over seven years........................ $ 767 $ 1,534
Deferred Revenue:
Revenue......................................................... $ (2,282) $ (4,628)
Cost of Operations.............................................. $ (456) $ (925)
Terminated Employees:
Cost of Operations.............................................. $ (1,060) $ --
Marketing....................................................... $ (2,649) $ (4,569)
Research and Development........................................ $ (4,238) $ (956)
General and Administrative...................................... $ (2,649) $ (2,162)
HBOC recorded the HSG deferred revenue acquired at its cost (the cost to
service remaining commitment). The net profit which had been deferred has been
eliminated.
The reduction of expense related to terminated employees results from the
termination of certain HSG employees in order to eliminate certain redundant
positions and increase the efficiency of the combined operations.
4. HSG was charged an allocated amount for the use of FDC's Data Center. In
1994, the amount charged was less than that deemed reasonable by management by
$1,500. The adjusted charge reflects that which will be charged to HBOC in the
future. The 1995 charge has been deemed reasonable by management.
5. In the second quarter of 1995, HBOC recorded a $125,520 charge primarily
related to purchased research and development of HSG. This nonrecurring charge
has been eliminated from the June 30, 1995, Pro Forma Combined Income
Statements.
6. The provision for income tax was derived by using the HBOC effective tax
rate of 40%.
7. The weighted average shares outstanding have been adjusted for the HSG
acquisition to give effect to the additional 4 million shares of HBOC Common
Stock outstanding, assuming the transaction had been consummated on January 1 of
each period presented and to give effect to the dilutive effect of stock options
outstanding at June 30, 1995, assuming that HBOC had net income.
THE MERGER
8. Beginning in 1988, HBOC and CliniCom were parties to various informal
cooperative marketing arrangements. Accordingly, certain intercompany
transactions and balances are included in the historical financial statements of
HBOC and CliniCom. The adjustments necessary to eliminate intercompany
transactions assuming the pooling of interests had been consummated on January 1
of each period presented are:
6/30/95 12/31/94
----------- ------------
Revenue........................................................... $ (2,813) $ (5,440)
Cost of Operations................................................ $ (4,231) $ (5,005)
22
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(In Thousands)
The following adjustments are necessary to correctly match revenue and expenses
according to HBOC policies, assuming the pooling of interests had been
consummated on January 1 of each period presented:
6/30/95 12/31/94
----------- -------------
Cost of Operations................................................ $ 1,418 $ (435)
The adjustments necessary to eliminate intercompany balances assuming the
pooling of interests had been consummated on June 30, 1995, are:
6/30/95
-----------
Receivables....................................................... $ (13,486)
Prepaids and Other Current Assets................................. $ (1,879)
Capitalized Software.............................................. $ (400)
Current Liabilities............................................... $ (12,209)
Retained Earnings................................................. $ (3,556)
9. The following adjustments are necessary to adjust the June 30, 1995, and
December 31, 1994, income statements to give effect to employee terminations.
The reduction of expense related to terminated employees results from the
termination of certain CliniCom employees in order to eliminate certain
redundant positions and increase the efficiency of the combined operations. The
adjustments, assuming the pooling of interests had been consummated on January 1
of each period presented, are:
6/30/95 12/31/94
------------- ------------
Cost of Operations................................................ $ (300) $ (600)
Marketing......................................................... $ (390) $ (780)
Research and Development.......................................... $ (600) $ (1,200)
General and Administrative........................................ $ (760) $ (1,520)
10. The provision for income tax was derived by using the HBOC effective tax
rate of 40%.
11. The Merger Agreement provides for the exchange of .4 of a share of HBOC
Common Stock for each share of currently outstanding CliniCom Common Stock.
23
THE MEETING
The enclosed proxy is solicited by the CliniCom Board for use at the Meeting
to be held at The Courtyard by Marriott, 4710 Pearl East Circle, Boulder,
Colorado 80301 on Saturday, September 30, 1995 at 10:00 a.m. (Mountain Time).
Holders of record of CliniCom Common Stock on the Record Date will be entitled
to vote at the Meeting and any adjournment thereof. On the Record Date,
8,663,359 shares of CliniCom Common Stock were outstanding and entitled to vote.
Each of such shares is entitled to one vote on each matter presented at the
Meeting.
The presence at the Meeting, in person or by proxy, of the holders of a
majority of the issued and outstanding shares of CliniCom Common Stock
constitutes a quorum for the transaction of business. If a proxy is returned by
a broker or other stockholder who does not have authority to vote, does not give
authority to a proxy to vote, or withholds authority to vote as to any shares,
such shares will be considered present at the Meeting for purposes of
determining a quorum. If a quorum is not present or represented at the Meeting,
the stockholders entitled to vote, present in person or represented by proxy,
have the power to adjourn the Meeting from time to time, without notice other
than an announcement at the Meeting, until a quorum is present or represented.
CliniCom will issue a press release if the Meeting is adjourned, informing the
stockholders of the time and place where the Meeting will be reconvened. At any
such reconvened Meeting at which a quorum is present or represented, any
business may be transacted that might have been transacted at the Meeting as
originally described in the notice of the Meeting.
In order to be approved, the Merger proposal must receive the affirmative
vote of holders of a majority of the issued and outstanding shares of CliniCom
Common Stock. Shares of CliniCom Common Stock not represented at the Meeting or
abstaining on the proposal to approve the Merger Agreement will thus have the
effect of a negative vote.
Any stockholder giving a proxy has the power to revoke it at any time before
it is voted by filing with the Secretary of CliniCom a written notice of
revocation or duly executed proxy bearing a later date, or by attending the
Meeting and voting in person. Each properly executed unrevoked proxy will be
voted as indicated. Where specific instructions are not indicated, the proxy
will be voted FOR the Merger.
The cost of soliciting proxies will be borne by CliniCom. Arrangements may
be made with brokerage houses, custodians, nominees and other fiduciaries to
send proxy materials to the beneficial owners of CliniCom Common Stock. CliniCom
will reimburse them for their reasonable out-of-pocket expenses. In addition to
solicitation by mail, directors, officers and employees of CliniCom, who will
receive no compensation for their services other than regular salaries, may
solicit proxies by mail, telephone and electronic transmission and personally.
24
THE MERGER PROPOSAL
BACKGROUND OF THE MERGER
Beginning in 1988, CliniCom and HBOC were parties to various informal
cooperative marketing arrangements. In December 1993, HBOC and CliniCom entered
into a three-year Software License and Distribution Agreement (together with the
related agreements dated as of such date, the "HBOC Agreement") pursuant to
which HBOC was granted a non-exclusive, non-transferable license to use CliniCom
software as described below under "Business of CliniCom -- HBOC Agreement." As a
result of that long standing relationship, CliniCom and HBOC were generally
familiar with each other's business and operations.
In June 1994, HBOC reviewed its product plans for the next 24-month period
and determined that its internal development of a point-of-care nursing solution
with functionality similar to that of the CliniCom product would not be complete
prior to December 31, 1996, the date of expiration of the HBOC Agreement.
Development of such a product was projected to require significant HBOC
resources and expenditures. In addition, HBOC believed it could be disadvantaged
in the marketplace because of potential confusion over HBOC's clinical product
direction in the event it introduced an internally developed product to replace
the product it was offering jointly with CliniCom. As a result of HBOC's review,
HBOC determined that the acquisition of CliniCom would be a solution that should
be pursued.
CliniCom's management and Board of Directors has regularly considered
CliniCom's position in the healthcare information systems industry. Over time,
the CliniCom Board concluded that CliniCom's long-term strategy must be either
to become an integrated system provider or to form strategic alliances with one
or more such providers for which the CliniCom system would become a part of a
larger integrated system. See "-- Reasons of CliniCom for Engaging in the
Merger." In considering the long-term strategy of CliniCom, the CliniCom Board
evaluated the financial requirements necessary for CliniCom to become an
integrated system provider and compared the risks and opportunities of such a
strategy with a strategy of forming an alliance with an integrated system
provider.
On November 9, 1994, Charles W. McCall, President and Chief Executive
Officer of HBOC, and Jay P. Gilbertson, Vice President -- Finance and Chief
Financial Officer of HBOC, met in New Orleans with William H. Brehm, Chairman of
the Board and Chief Executive Officer of CliniCom, Catherine K. Milburn, Vice
President of Finance and Administration and Chief Financial Officer of CliniCom,
and a representative of Punk, Ziegel and Knoell ("Punk, Ziegel"), an investment
banking firm on retainer with HBOC, to discuss a possible merger of the two
companies.
On November 10, 1994, HBOC forwarded to CliniCom a draft letter of intent
which contemplated the merger of CliniCom with HBOC in which the stockholders of
CliniCom would receive shares of HBOC with an implied value per share of
CliniCom Common Stock of approximately $15.00, subject to certain limited
adjustments tied to fluctuations in the market price of HBOC Common Stock. On
November 10, 1994, the closing price of the CliniCom Common Stock was $11.75 per
share. The draft letter of intent included a requirement of a "no shop"
agreement from CliniCom.
The draft letter of intent was provided to the CliniCom Board, which met on
November 18, 1994 to consider the proposed transaction. The CliniCom Board
concluded that the price proposed in the draft letter of intent was inadequate,
particularly in view of the fact that the market price of the CliniCom Common
Stock had been as high as $20.75 per share within the preceding two months. The
CliniCom Board believed that the decline in the market price of CliniCom Common
Stock to the level prevailing in November 1994, which occurred following
CliniCom's announcement of results of its operations for the third fiscal
quarter, was unwarranted given CliniCom's long-term outlook. Accordingly, the
CliniCom Board authorized a counterproposal to HBOC and on November 22, 1994
CliniCom forwarded a proposed redraft of a letter of intent which contemplated a
merger with an
25
implied value of approximately $18.50 for each share of CliniCom Common Stock,
again with certain limited adjustments. CliniCom offered to allow HBOC an
opportunity to conduct due diligence which CliniCom believed would support its
pricing response.
On November 28, 1994, HBOC responded to CliniCom's counterproposal
reoffering the terms of HBOC's original proposal as to pricing, as well as a
number of other issues, and advising CliniCom that HBOC's offer would terminate
on the following day. On November 29, 1994, the offer expired and the parties
ceased negotiations.
In December 1994, pursuant to authorization by the CliniCom Board granted at
a meeting on December 1, 1994, CliniCom engaged Volpe, Welty & Company ("Volpe,
Welty"), an investment banking firm, as its financial advisor to advise the
CliniCom Board concerning financial alternatives for CliniCom and to identify
and conduct negotiations with possible candidates to acquire or merge with
CliniCom. On January 4, 1995, a representative of Volpe, Welty met with Messrs.
McCall and Gilbertson to discuss the possibility of proceeding with the
contemplated merger at an implied value of $18.50 per share of CliniCom Common
Stock. The HBOC representatives reiterated that HBOC was unwilling to proceed at
an implied value of $18.50 per share. However, due to increases in the price of
HBOC Common Stock and anticipated cost savings from the combination of the two
entities, the HBOC representatives stated that they would be willing to consider
a transaction with an implied value of up to $17 per share of CliniCom Common
Stock. Later in January 1995 CliniCom advised HBOC that it had no interest in
proceeding on this basis. CliniCom's engagement of Volpe, Welty was terminated
in February 1995.
Shortly thereafter, the CliniCom Board determined that it should be prepared
to pursue a strategy of remaining an independent company, and that additional
capital would be required to implement that strategy. In furtherance of that
strategy, CliniCom filed a registration statement on May 5, 1995 with the
Commission which contemplated the sale by CliniCom of 1,000,000 shares of
CliniCom Common Stock as well as the sale of 1,000,000 shares by certain
existing stockholders. On May 4, 1995, the closing sale price of the CliniCom
Common Stock was $18.75 per share.
In late May, Mr. Gilbertson had discussions with Arthur DelVesco, a director
of CliniCom, and representatives of Punk, Ziegel, which was then acting as one
of the managing underwriters in CliniCom's proposed public offering, concerning
CliniCom's business and the possibility of reviving the discussions relating to
a merger of CliniCom with HBOC. Mr. DelVesco informed the other members of the
CliniCom Board of these discussions and conferred with directors William H.
Brehm and Marshall D. Miller about formulating a response.
On June 1, 1995, the parties agreed to resume negotiation of a merger at an
exchange ratio of .47961 of a share of HBOC Common Stock for each share of
CliniCom Common Stock. On June 1, 1995, the closing price of the HBOC Common
Stock was $48.375, implying a value per share of CliniCom Common Stock of
$23.20.
Thereafter, HBOC conducted due diligence with respect to CliniCom. Following
informal discussions among CliniCom's directors and management, the CliniCom
Board met on June 14, 1995. At that meeting, Mr. DelVesco advised the CliniCom
Board that Mr. Gilbertson had informed him that, as a result of its due
diligence investigation, HBOC had determined that an adjustment to the proposed
exchange ratio was appropriate. The CliniCom Board determined that the price
adjustment proposed by Mr. Gilbertson, to an implied value of $18.00 per share
for the CliniCom Common Stock, was unacceptable. However, the CliniCom Board
directed CliniCom's management to gather additional information relating to
CliniCom, and negotiations were suspended pending an opportunity to discuss that
response with HBOC. At the same meeting, the CliniCom Board authorized the
engagement of Dean Witter Reynolds Inc. ("Dean Witter"), which was then acting
as one of the managing underwriters in CliniCom's proposed public offering, to
represent CliniCom in connection with the negotiation of a proposed transaction,
including the rendering of a fairness opinion to the CliniCom Board.
26
During the week of June 26, a number of conversations took place among the
principals and representatives of HBOC and CliniCom, including a meeting at HBOC
on June 28, 1995, attended by representatives of CliniCom, HBOC, Punk, Ziegel
and Dean Witter. As a result of these conversations, on June 30, 1995 Mr.
Gilbertson, Mr. DelVesco and representatives of Punk, Ziegel and Dean Witter met
by telephone and agreed to explore a merger on the basis of a fixed exchange
ratio of .4 of a share of HBOC Common Stock for each share of CliniCom Common
Stock, but with a right of CliniCom to terminate if the price of the HBOC Common
Stock declined below $50.00 per share for certain periods. The parties then
directed their respective representatives to negotiate a definitive merger
agreement. On June 30, 1995 the closing price of the HBOC Common Stock was
$54.50 making the implied value per share of the CliniCom Common Stock $21.80.
On July 10, 1995, the CliniCom Board of Directors met to consider the draft
Merger Agreement that had been negotiated and to consider the transactions
contemplated thereby. At that meeting representatives of Dean Witter reviewed
the proposed financial terms of the Merger, discussed their analysis of the
proposed transaction and discussed their opinion as to the fairness of the
proposed exchange ratio to the CliniCom stockholders. Negotiations with HBOC
continued, and the CliniCom Board convened additional meetings on July 13 and
July 14. At the July 14 meeting Dean Witter presented its written opinion that,
as of that date, the Exchange Ratio was fair, from a financial point of view, to
the CliniCom stockholders. See "-- Opinion of Financial Advisor for CliniCom."
After deliberating about the proposed Merger Agreement, considering, among other
things, the matters discussed below and the opinion of Dean Witter referred to
above, the CliniCom Board unanimously authorized the execution of the Merger
Agreement and adopted resolutions recommending the Merger as being in the best
interests of CliniCom and its stockholders.
On July 14, 1995, the HBOC Board also approved the terms of the transaction
and authorized the execution of the Merger Agreement. The Merger Agreement was
signed by the parties on that date.
OPINION OF FINANCIAL ADVISOR FOR CLINICOM
In considering the proposed Merger and whether or not to recommend the
Merger to CliniCom's stockholders for approval, the CliniCom Board engaged Dean
Witter to provide financial advisory services, which included evaluating the
fairness to the holders of CliniCom Common Stock, from a financial point of
view, of the Exchange Ratio. On July 10, 1995, in connection with the evaluation
of the Merger Agreement by the CliniCom Board, Dean Witter made a presentation
to the CliniCom Board with respect to the Merger. In connection with this
presentation, the CliniCom Board was given written materials based on the
proposed merger as it stood on July 10, 1995. At its meeting on July 14, 1995,
the CliniCom Board received the oral opinion of Dean Witter to the effect that,
as of such date and based upon and subject to certain matters stated in its
opinion, the Exchange Ratio was fair, from a financial point of view, to the
holders of CliniCom Common Stock. Dean Witter's opinion as to the fairness of
the Exchange Ratio takes into account the provision of the Merger Agreement that
provides that CliniCom is not required to consummate the Merger if the average
of the per share closing prices on the NASDAQ-NM as reported in THE WALL STREET
JOURNAL of HBOC Common Stock for the ten (10) consecutive trading days ending on
the second trading day prior to the Closing Date is less than $50.00. The oral
opinion of Dean Witter was subsequently confirmed in writing as of July 14, 1995
and was substantially identical to their opinion dated the date of this Proxy
Statement/Prospectus, the full text of which is attached to this Proxy
Statement/Prospectus as Appendix B and is incorporated by reference herein.
Holders of shares of CliniCom Common Stock are urged to read the opinion in its
entirety for a description of the factors considered and assumptions made by
Dean Witter in rendering its opinion.
Dean Witter was not requested to, and did not, make any recommendations to
the CliniCom Board as to the form or amount of the consideration to be received
by the holders of shares of CliniCom Common Stock in the Merger, which was
determined through arm's length negotiations among the parties. In arriving at
its opinion, Dean Witter did not ascribe a specific range of fair value to
CliniCom, but made its determinations as to the fairness of the Exchange Ratio
on the basis of the financial and comparative analysis described below.
27
Dean Witter's opinion is directed to the CliniCom Board only and does not
constitute a recommendation to any holders of CliniCom Common Stock as to how
such holders should vote on the Merger at the Meeting. In addition, Dean Witter
was not requested to opine as to, and its opinion does not address, the
underlying business decision of the CliniCom Board to proceed with or effect the
Merger.
In arriving at its opinion, Dean Witter, among other things, (i) reviewed
the Merger Agreement; (ii) reviewed the Annual Reports on Form 10-K and related
publicly available financial information of CliniCom for the three most recent
fiscal years ended December 31, 1994, the final prospectus, dated April 20,
1992, for CliniCom's initial public offering of CliniCom Common Stock, the
Quarterly Report on Form 10-Q for the period ended June 30, 1995, and CliniCom's
definitive proxy statement on Schedule 14A, dated May 3, 1995; (iii) reviewed
the Annual Reports on Form 10-K and related publicly available financial
information of HBOC for the three most recent fiscal years ended December 31,
1994, the Quarterly Report on Form 10-Q for the period ended June 30, 1995, and
HBOC's definitive proxy statement on Schedule 14A, dated April 3, 1995; (iv)
reviewed certain other information, including publicly available information,
relating to the business, earnings, cash flow, assets and prospects of CliniCom
and HBOC, respectively; (v) reviewed an income statement forecast of CliniCom
for the remaining portion of the 1995 fiscal year and for the fiscal year 1996
as furnished to Dean Witter by CliniCom; reviewed balance sheet and cash flow
forecasts of CliniCom for the remaining portion of the 1995 fiscal year and for
the fiscal year 1996 as prepared on the basis of information furnished to Dean
Witter by CliniCom; (vi) reviewed income statement forecasts of HBOC for the
remaining portion of the 1995 fiscal year and for the fiscal year 1996 as
furnished to Dean Witter by HBOC; (vii) conducted discussions with members of
senior management of CliniCom and HBOC, respectively, concerning the past and
current business, operations, assets, present financial condition and future
prospects of CliniCom and HBOC, respectively; (viii) reviewed the historical
reported market prices and trading activity for the CliniCom Common Stock and
the HBOC Common Stock; (ix) compared certain financial information, operating
statistics and market trading information relating to CliniCom with published
financial information, operating statistics and market trading information
relating to selected public companies that Dean Witter deemed to be reasonably
similar to CliniCom; compared certain financial information, operating
statistics and market trading information relating to HBOC with published
financial information, operating statistics and market trading information
relating to selected public companies that Dean Witter deemed to be reasonably
similar to HBOC; (x) compared the proposed financial terms of the Merger with
the financial terms, to the extent publicly available, of selected other recent
acquisitions that Dean Witter deemed to be relevant; and (xi) reviewed such
other financial studies and analyses and performed such other investigations and
took into account such other matters as Dean Witter deemed necessary.
In preparing its opinion, Dean Witter assumed and relied upon the accuracy
and completeness of all financial and other information supplied to it by
CliniCom and HBOC or that was publicly available, respectively, and did not
independently verify such information. Dean Witter also assumed that the HBOC
Agreement has not been materially modified or amended since the dates thereof.
Dean Witter has also relied upon the managements of CliniCom and HBOC,
respectively, as to the reasonableness and achieveability of the financial
forecasts of CliniCom and HBOC (and the assumptions and bases thereof) provided
to it or prepared on the basis of information and assumptions furnished to it,
and, with the CliniCom Board's consent, has assumed that such forecasts have
been reasonably prepared on the basis reflecting the best currently available
estimates and judgments of such respective managements as to the future
operating performance of CliniCom and HBOC, respectively. Furthermore, Dean
Witter assumed that the Merger would qualify (i) for pooling of interest
accounting treatment and (ii) as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). Dean
Witter was not requested to make, and Dean Witter has not made, an independent
appraisal or evaluation of assets, properties, facilities or liabilities of
CliniCom or HBOC and it was not furnished with any such appraisal or evaluation.
28
Dean Witter's opinion was necessarily based upon prevailing market
conditions (including market prices for CliniCom Common Stock and HBOC Common
Stock) and other circumstances and conditions as they existed and could be
evaluated as of the date of the opinion, and did not represent Dean Witter's
opinion as to what the actual value of CliniCom Common Stock or HBOC Common
Stock would be after the date thereof.
In connection with advising the CliniCom Board of its opinion on July 14,
1995 and in preparing its written and oral presentations to the CliniCom Board,
Dean Witter performed a variety of financial and comparative analyses including
those described below. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Furthermore, in arriving at its fairness opinion, Dean Witter did
not attribute any particular weight to any particular analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Dean Witter believes
that its analysis must be considered as a whole and that considering any portion
of such analysis and the factors considered, without considering all analyses
and factors, could create a misleading or incomplete view of the process
underlying the opinion.
In its analysis, Dean Witter made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of CliniCom and HBOC. Any
estimates contained in this analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses relating
to the value of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold.
Unless otherwise indicated, all references to the value of a share of
CliniCom Common Stock in the following description of the analyses conducted by
Dean Witter assume the exercise of all options for shares of CliniCom Common
Stock.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES. Using publicly available
information, Dean Witter compared selected quantitative data (including
revenues, earnings before interest, taxes, depreciation and amortization
("EBITDA"), earnings before interest and taxes ("EBIT"), and earnings per share
("EPS")), and qualitative information (including competitive position, customer
base, management, stage of technological development, stage of capital funding
and intercompany relationships) regarding CliniCom with similar data of selected
publicly traded health care information systems ("HCIS") companies competing in
the hospital applications business segment ("Hospital Applications Companies")
and other HCIS companies engaged in businesses considered by Dean Witter to be
comparable to those of CliniCom (including the Hospital Application Companies,
the "HCIS Universe"). Specifically, for CliniCom, Dean Witter included in its
review of Hospital Applications Companies, Cerner Corporation and Pyxis
Corporation, and in the HCIS Universe, a group of 13 additional HCIS companies,
consisting of C.I.S. Technologies, Inc., CyCare Systems, Inc., GMIS, Inc., HBOC,
HCIA, Inc., Health Management Systems, Inc., Medaphis Corporation, Medic
Computer Systems, Inc., Medicus Systems Corporation, Phamis, Inc., Physician
Computer Network, Inc., Quality Systems, Inc. and Shared Medical Systems
Corporation.
Of these companies, the analysis relied primarily on trading multiples and
qualitative factors associated with the Hospital Applications Companies, as they
were deemed by Dean Witter to be the most comparable companies to CliniCom due
to their similar business focus. Such data and ratios included a comparison of
CliniCom with the Hospital Applications Companies assuming a valuation of
CliniCom Common Stock of $23.40 per share (the price per share of CliniCom
Common Stock on July 14, 1995 after giving effect to the Exchange Ratio), in
relation to latest 12 months ("LTM") revenues, LTM EBITDA, LTM EBIT, LTM EPS,
projected 1995 calendar year EPS and projected 1996 calendar year EPS (such
projected EPS figures for the HCIS Universe, other than CliniCom and HBOC, being
based upon the means of publicly available estimates made by research analysts
and provided by Dean Witter research analysts or as reported by First Call
Corporation, an earnings
29
estimate reporting service provided by Thompson Financial Services Company). The
valuation multiples for CliniCom based on a price of $23.40 per share compares
with the range (and mean) of the Hospital Applications Companies of: for LTM
revenues, 5.6 times for CliniCom versus 6.1 to 5.6 times for the Hospital
Applications Companies (5.9 times mean); for LTM EBITDA, 29.6 times for CliniCom
versus 19.7 to 15.6 times for the Hospital Applications Companies (17.7 times
mean); for LTM EBIT, 37.3 times for CliniCom versus 25.3 to 16.3 times for the
Hospital Applications Companies (20.8 times mean); for LTM EPS, 52.5 times for
CliniCom versus 45.7 to 27.1 times for the Hospital Applications Companies (36.4
times mean); for calendar year 1995 projected EPS, 39.8 times for CliniCom
versus 38.6 to 23.2 times for the Hospital Applications Companies (30.9 times
mean); and for calendar year 1996 projected EPS, 29.1 times for CliniCom versus
31.5 to 18.2 for the Hospital Applications Companies (24.9 times mean).
Although Dean Witter relied primarily on trading multiples and qualitative
factors associated with Hospital Applications Companies, Dean Witter also relied
on trading multiples and qualitative factors associated with all companies in
the HCIS Universe. Such data and ratios included a comparison of CliniCom with
all the companies in the HCIS Universe in relation to the same trading multiples
as set forth above, assuming a valuation of CliniCom Common Stock of $23.40 per
share. The valuation multiples for CliniCom based on a price of $23.40 per share
compares with the range (and mean) of the HCIS Universe of: for LTM revenues,
5.6 times for CliniCom versus 9.4 to 1.5 times for the HCIS Universe (4.5 times
mean); for LTM EBITDA, 29.6 times for CliniCom versus 33.0 to 8.4 times for the
HCIS Universe (19.9 times mean); for LTM EBIT, 37.3 times for CliniCom versus
40.7 to 10.0 times for the HCIS Universe (26.9 times mean); for LTM EPS, 52.5
times for CliniCom versus 61.6 to 14.3 times for the HCIS Universe (38.4 times
mean); for calendar year 1995 projected EPS, 39.8 times for CliniCom versus 54.8
to 11.1 times for the HCIS Universe (33.2 times mean); and for calendar year
1996 projected EPS, 29.1 times for CliniCom versus 36.8 to 8.7 for the HCIS
Universe (24.4 times mean).
Because of the inherent differences between the products, operations and
other characteristics of CliniCom and selected public companies comprising the
HCIS Universe, Dean Witter believes that an appropriate use of a comparable
company analysis also involves qualitative judgments concerning differences
between the financial and operating characteristics of CliniCom and the selected
public companies, which affects the public trading values of CliniCom and the
selected companies, which judgments are reflected in Dean Witter's opinion.
COMPARABLE TRANSACTION ANALYSIS. Dean Witter reviewed with the CliniCom
Board the prices and multiples paid for other HCIS companies in recent
acquisitions or mergers that Dean Witter deemed comparable to the Merger. Dean
Witter specifically reviewed the following public transactions (the date of
announcement of the transaction is set forth next to each such transaction): The
Thompson Corporation/The MEDSTAT, Group Inc. (November 11, 1994), Medaphis
Corporation/AdvaCare, Inc. (July 21, 1994) and HBOC/Serving Software, Inc. (May
13, 1994). In addition, Dean Witter examined 25 private market transactions in
the HCIS industry during the time period beginning in 1991 through July 1995.
Such analysis indicates the average of the purchase prices in the public
transactions on a basis of a multiple of revenue, EBITDA, EBIT, net income and
tangible book value was 3.5 times, 17.4 times, 30.9 times, 50.0 times and 9.2
times, respectively, with respect to the public market transactions, (as
compared to CliniCom multiples of 5.6 times, 29.6 times, 37.3 times, 52.5 times
and 7.7 times, respectively, and assuming a valuation of the CliniCom Common
Stock of $23.40 per share) and on a basis of a multiple of revenue and EBIT for
the private market transactions, 2.8 times, and 15.2 times, respectively (as
compared to CliniCom multiples of 5.6 times and 37.3 times, respectively,
assuming a valuation of the CliniCom Common Stock of $23.40 per share).
No company or transaction used as a comparison in the above analysis is
identical to CliniCom or the Merger. Accordingly, analysis of the results of the
foregoing is not mathematical; rather it involves complex considerations and
judgments concerning the differences in financial and operating characteristics
and terms and structure of CliniCom and the Merger, respectively, and other
factors that could affect the public trading values of the companies to which
CliniCom is being compared.
30
INTERCOMPANY RELATIONSHIPS. In its presentation to the CliniCom Board, Dean
Witter noted the extent to which, particularly during recent fiscal periods, a
substantial and increasing percentage of CliniCom's revenues were derived
pursuant to the HBOC Agreement. Dean Witter noted that the percentage of
CliniCom revenues attributable to HBOC pursuant to the HBOC Agreement increased
from 29.2% of total revenues during the 1994 fiscal year to over 56.0% of total
revenues during the quarter ended March 31, 1995.
STOCK TRADING HISTORY. Dean Witter examined the history of the trading
prices and volume of CliniCom Common Stock, the relationship between movements
in the prices of CliniCom Common Stock and movements in certain stock indices,
and a relationship between movements in the prices of CliniCom Common Stock and
press announcements and other public disclosures. From January 2, 1995 through
July 14, 1995 (the last trading date prior to CliniCom's announcement that it
had entered into the Merger Agreement), the highest closing price for CliniCom
Common Stock was $21.00, on April 11 and 12, 1995. During the same period, the
lowest closing price for CliniCom Common Stock was $11 1/2, on January 2, 1995.
In the month prior to the announcement of the execution of the Merger Agreement,
CliniCom Common Stock traded in the $15 3/4 to $18 5/8 range. Following the
announcement of the execution of the Merger Agreement on July 17, 1995, CliniCom
Common Stock traded as high as $22.00 during such trading day.
Dean Witter reviewed and analyzed performance of the per share market prices
and trading volume of CliniCom Common Stock and HBOC Common Stock over the
period from July 7, 1994 through July 6, 1995 (the "Comparison Period") both
separately and in relation to each other and/or certain performance indices (Dow
Jones Industrial Average and Nasdaq Composite Index (the "Indices")). Dean
Witter noted that during the term of the Comparison Period, CliniCom Common
Stock had not performed consistently as well as the Indices. Dean Witter noted
that this performance could be attributable in part to the relative volatility
of CliniCom's earnings stream and increasing percentage of revenues attributable
to CliniCom's relationship with HBOC. Conversely, for a substantial portion of
the Comparison Period, HBOC Common Stock performance was well in excess of the
Indices.
Dean Witter also noted that the trading volume of HBOC Common Stock was
substantially greater than that of CliniCom Common Stock and, therefore,
ownership of HBOC Common Stock would provide greater liquidity for the holders
of CliniCom Common Stock. Dean Witter noted that the recent performance of
CliniCom Common Stock when compared with the Indices and recent and long-term
performance of HBOC Common Stock at levels at or above the Indices described
above, were all factors to be considered by the CliniCom Board in evaluating the
Merger.
CONTRIBUTION ANALYSIS. Dean Witter calculated the contribution of each of
CliniCom and HBOC to the pro forma combined entity with respect to revenues,
EBIT and net income. The foregoing contributions were examined for the one year
period ended December 31, 1994, and for the projected fiscal years ending
December 31, 1995 and December 31, 1996. The analysis was based on CliniCom's
projections for the foregoing periods and produced a relative contribution of
CliniCom to the pro forma combined entity (unadjusted for intercompany sales)
for the foregoing periods, respectively, of (i) 9.8%, 9.1% and 9.7% of revenues,
(ii) 9.7%, 8.8% and 8.5% of EBIT and (iii) 11.6%, 9.7% and 9.2% of net income.
Based on the closing prices of CliniCom Common Stock and HBOC Common Stock, the
holders of CliniCom Common Stock would have approximately 9.6% pro forma fully
diluted equity ownership of the pro forma combined entity.
Dean Witter concluded that CliniCom's pro forma equity ownership generally
equaled or exceeded such contribution to the pro forma combined entity and
therefore concluded that the results of such analysis support its opinions. Dean
Witter did not compute implied exchange ratios from the contribution analysis
but prepared such analysis only for informational purposes for the CliniCom
Board.
DISCOUNTED CASH FLOW ANALYSIS. Using a discounted cash flow analysis, Dean
Witter estimated the present value of the future cash flow that CliniCom is
projected to produce over a one and three
31
quarter year period from April 1995 through December 1996, under various
assumptions, if CliniCom were to perform in accordance with CliniCom
management's forecasts. Dean Witter estimated the terminal values of CliniCom
Common Stock at the end of the one and three quarter year period and discounted
such terminal values back to present values at different discount rates based
upon a consideration of a number of factors, including cost of capital, required
rates of return to investors and risks attributable to uncertainty of the
projected cash flow. The foregoing analysis resulted in a range of present
values per share for CliniCom Common Stock of $17.28 to $24.34. As indicated
below, this analysis is not necessarily indicative of actual values or of actual
future results and does not purport to reflect the prices at which any
securities may trade at the present time or at any time in the future.
In addition, Dean Witter applied the discounted cash flow analysis, based on
available information, to the HBOC cash flow to arrive at an estimated range of
present values per share for HBOC Common Stock. After giving effect to the
Exchange Ratio, Dean Witter compared the relative values of the resulting
analysis. Dean Witter noted that during the period for which management
projections were available, the relative value of the HBOC Common Stock was
higher than that of the CliniCom Common Stock.
Dean Witter is an internationally recognized investment banking firm with
substantial experience in transactions similar to the Merger and is familiar
with CliniCom and HBOC and their respective businesses. As part of its
investment banking business, Dean Witter is regularly engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, private placements, secondary distributions of listed
and unlisted securities, and valuations for corporate and other purposes. The
CliniCom Board selected Dean Witter because of its expertise, reputation and
familiarity with the HCIS industry.
As compensation for its financial advisory services in connection with the
Merger, Dean Witter will receive a fee of $690,000 from CliniCom upon
consummation of the Merger. Whether or not the Merger is consummated, CliniCom
has agreed to reimburse Dean Witter for reasonable expenses incurred by Dean
Witter, including fees and disbursements of counsel, up to $25,000. CliniCom has
also agreed to indemnify Dean Witter and certain related persons against certain
liabilities to which Dean Witter may become subject as a result of its
engagement, including liabilities under the federal securities laws.
Dean Witter had recently been selected by CliniCom to lead manage an
offering of CliniCom Common Stock, in respect of which a Registration Statement
on Form S-3 had been previously filed with the SEC, but which was not completed.
Dean Witter has received no fees in respect of such proposed offering or any
other services for CliniCom prior to the Merger. Dean Witter regularly publishes
research reports regarding the HCIS industry and the business and securities of
publicly owned companies in that industry and has previously published research
reports regarding CliniCom and HBOC. In the ordinary course of its business,
Dean Witter trades CliniCom Common Stock and HBOC Common Stock for its own
account and for the account of its customers and may at any time hold a long or
short position in such securities.
Dean Witter does not intend to undertake any review or analysis with respect
to the Merger after the date of this Proxy Statement/Prospectus.
REASONS OF CLINICOM FOR ENGAGING IN THE MERGER
The CliniCom Board has unanimously approved the proposed Merger pursuant to
the Merger Agreement as being in the best interests of CliniCom and its
stockholders. In reaching their decision the directors considered the following
factors and recommend that these factors also be considered by the stockholders
in voting on the Merger Agreement:
1. The healthcare information systems industry has been characterized by
rapid change and development over the last several years. One characteristic of
this change has been the movement toward integrated information systems that are
available from a single provider to meet the needs of regional healthcare
networks. After evaluation of CliniCom's position in the industry, the CliniCom
32
Board had concluded that its long-term strategy must be either to become an
integrated system provider or to form strategic alliances with one or more such
providers for which the CliniCom system would become a part of a larger
integrated system.
To become an integrated system provider would require that CliniCom both
substantially expand its development of the CliniCom systems and seek, through
acquisitions or strategic alliances with other companies, to obtain access to
those portions of the integrated system that would be unfeasible for CliniCom to
develop independently. The CliniCom Board authorized CliniCom management to
explore and evaluate acquisition candidates and strategic alliances which might
facilitate CliniCom's expansion to become an integrated system provider. Several
possible candidates for pursuing that strategy were explored by CliniCom's
management, and one acquisition, of KSH Systems, Inc., was completed in the
summer of 1994. It was recognized, however, that substantial funds would be
required to successfully pursue such a strategy, and in anticipation of such a
need, in May 1995, CliniCom filed a registration statement with the Commission
in preparation for a public offering of CliniCom Common Stock to raise such
funds.
While authorizing the pursuit of a growth strategy, the CliniCom Board also
remained open to the possibility that it would be better for CliniCom to
accomplish a strategic partnership through a merger with another company. The
proposal from HBOC appeared to the CliniCom Board to offer an opportunity to
realize value for the stockholders with less risk than the course of expanding
CliniCom into an integrated system provider.
2. The existing relationship between HBOC and CliniCom provides a firm
foundation for combining CliniCom's products and business into HBOC. After
entering into the HBOC Agreement in December 1993, 29% of CliniCom's total
revenues in 1994 were received through HBOC, and revenues from HBOC have
represented more than 50% of CliniCom's revenues in 1995. The importance of the
CliniCom clinical information system as a part of HBOC's information system
offerings, as well as the importance of the HBOC relationship to the successful
marketing of CliniCom's systems, has therefore been established. Moreover, HBOC
has substantially greater resources to support the continued development of the
CliniCom system, and its larger customer base and marketing organization offers
opportunities for wider distribution of the CliniCom system. The inclusion of
the CliniCom system in the HBOC system will permit CliniCom stockholders to
realize economic benefits from CliniCom's product development efforts to date
through continued participation as stockholders of HBOC. For these reasons the
CliniCom Board believes that the Merger with HBOC is strategically appropriate.
3. The CliniCom Board considered that the prospects of HBOC are likely to
be enhanced as a result of the Merger because of the contribution that the
CliniCom systems offer to the HBOC integrated information systems, thus
enhancing HBOC's position as a leader in offering integrated systems with an
additional key component owned internally by HBOC. The cost savings of operating
the CliniCom business as a part of HBOC as distinguished from a stand-alone
business was believed to enhance HBOC's prospects for benefitting from
integration of the CliniCom products into the HBOC systems.
4. The opinion of Dean Witter that the transaction is fair to the CliniCom
stockholders from a financial point of view, and the analysis of Dean Witter
which led to that conclusion, were considered by the directors.
5. The CliniCom Board recognized that the implied value of the HBOC Common
Stock, which will be received by the CliniCom stockholders in the Merger,
represents a premium over the market prices of the CliniCom Common Stock at most
times in recent months. The Merger also offers CliniCom stockholders an
opportunity to acquire, in a tax-free transaction, shares in a significantly
larger company whose shares have increased significantly in price in recent
years and have generally had less price volatility than the CliniCom Common
Stock.
6. The CliniCom Board considered financial and other terms of the Merger,
including (a) that the Merger would generally be tax-free to the CliniCom
stockholders who will receive HBOC Common
33
Stock in the Merger (see "-- Certain Federal Income Tax Consequences") and (b)
that the Merger will be subject to approval by the CliniCom stockholders and,
while the Merger Agreement contains a "no shop" clause and a termination fee
provision (see "-- Terms of the Merger -- No Solicitation" and
"-- Termination"), the Merger Agreement permits CliniCom to provide information
to or enter into discussions or negotiations with other persons if the CliniCom
Board determines that this is appropriate in the exercise of the Directors'
fiduciary duties. The Merger Agreement also provides that CliniCom may decline
to consummate the Merger or may terminate the Merger Agreement if the average
price of the HBOC Common Stock falls below $50.00 per share for certain periods
prior to completion of the Merger, thus permitting the Directors to reconsider
whether the transaction is still in the best interests of the CliniCom
stockholders if a substantial and sustained decline in the market price of
HBOC's Common Stock occurs prior to consummation of the Merger.
7. The CliniCom Board analyzed the financial condition, results of
operations and prospects of HBOC in evaluating the consideration that would be
received by CliniCom stockholders in the Merger. HBOC's history of growth in
revenue and earnings over several years, together with increasing market prices
for the HBOC Common Stock which appears to reflect that growth, were considered
potentially beneficial to the CliniCom stockholders who would receive the HBOC
Common Stock in the Merger.
8. In considering the possible exchange of shares of CliniCom Common Stock
for shares of HBOC Common Stock, the CliniCom Board considered the greater
diversity of products offered by HBOC than by CliniCom and that HBOC may
therefore be less vulnerable to adverse business developments than CliniCom on a
stand-alone basis. As a result, HBOC offers a prospect of greater stability in
its future operations.
The foregoing discussion of the information and factors considered by the
CliniCom Board is not intended to be exhaustive but is believed to include the
material factors considered by the CliniCom Board. In reaching its determination
to approve and recommend the Merger, the CliniCom Board did not assign any
relative or specific weights to the foregoing factors and individual Directors
may have given differing weights to different factors. The CliniCom Board is,
however, unanimous in its recommendation to CliniCom stockholders that the
Merger Agreement be adopted.
REASONS OF HBOC FOR ENGAGING IN THE MERGER
The HBOC Board believes that the addition of CliniCom's multi-disciplinary
clinical solution (as to which HBOC currently has a license from CliniCom to
offer through 1996) to its product line will further its business objective of
providing healthcare information systems and technology to meet virtually every
need of healthcare enterprises.
The HBOC Board considered that the alternative to the acquisition of
CliniCom was internal development of a competitive product which would require
significant resources and expenditures. In addition, the HBOC Board recognized
that it could be disadvantageous to market a new HBOC developed product in
competition with the jointly offered product of HBOC and CliniCom.
The HBOC Board believes that the jointly offered CliniCom product
complements HBOC's clinical information systems portfolio and satisfies the
needs of its existing customer base.
TERMS OF THE MERGER
HBOC, HBOC-GA and CliniCom entered into the Merger Agreement dated as of
July 14, 1995. The following summary of the terms and conditions of the Merger
Agreement is qualified in its entirety by reference to the full terms of the
Merger Agreement which is attached hereto as Appendix A and is hereby
incorporated by reference herein.
EFFECTIVE TIME OF THE MERGER. As soon as practicable after all of the
conditions to the Merger have been satisfied or waived, HBOC and CliniCom will
cause a Certificate of Merger to be filed on behalf of HBOC-GA and CliniCom with
the Secretary of State of Delaware to make the Merger effective (the time the
Merger becomes effective being referred to herein as the "Effective Time of the
Merger").
34
EXCHANGE RATIO. Each share of CliniCom Common Stock that is issued and
outstanding at the Effective Time of the Merger will be converted into the right
to receive .4 of a share of HBOC Common Stock (the "Exchange Ratio").
FRACTIONAL SHARES. No certificates or scrip representing fractional shares
of HBOC Common Stock will be issued in the Merger but in lieu thereof, a cash
payment will be made therefor, without interest, at a pro rata amount based on a
per share amount equal to the average of the closing prices of the HBOC Common
Stock on the NASDAQ-NM for the ten (10) consecutive trading days ending on the
second trading day prior to the date on which the closing of the transactions
contemplated by the Merger Agreement occurs (the "Closing Date").
OPTIONS. Options to purchase shares of CliniCom Common Stock outstanding at
the Effective Time of the Merger shall be assumed by HBOC, by which assumption
the optionee shall have the right to purchase the number of shares (rounded down
to the nearest whole share) of HBOC Common Stock into which the number of shares
of CliniCom Common Stock the optionee was entitled to purchase under the
existing options would have been converted pursuant to the Exchange Ratio. The
aggregate price for the total number of shares of HBOC Common Stock purchasable
pursuant to an option shall be the aggregate price at which the option was
exercisable for the total number of shares of CliniCom Common Stock purchasable
thereunder reduced (as necessary for rounding down) to that price that will buy
the number of whole shares of HBOC Common Stock purchasable thereunder and the
purchase price per share of HBOC Common Stock shall be such aggregate price
divided by the total number of shares of HBOC Common Stock purchasable
thereunder. No other terms of the options will be modified.
EMPLOYEE STOCK PURCHASE PLAN. Each participant in the CliniCom Incorporated
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") will receive
the number of shares of HBOC Common Stock into which the shares of CliniCom
Common Stock issuable to such participant in accordance with the Employee Stock
Purchase Plan would have been converted and cash in lieu of any fractional share
of HBOC Common Stock, together with a cash refund of any excess of the amount
collected during the purchase period over the amount of the purchase price of
the CliniCom Common Stock that would otherwise be issuable to the participant.
EXCHANGE OF CERTIFICATES. HBOC has designated Trust Company Bank (the
"Exchange Agent") to act as exchange agent in connection with the Merger. At the
Effective Time of the Merger, HBOC shall deliver (or cause to be delivered) to
the Exchange Agent a sufficient number of shares of HBOC Common Stock and cash
to make payment for shares of CliniCom Common Stock converted by reason of the
Merger. Promptly after the Effective Time of the Merger, the Exchange Agent will
mail to each record holder (as of the Effective Time of the Merger) of an
outstanding certificate or certificates that immediately prior to the Effective
Time of the Merger represented outstanding shares of CliniCom Common Stock (the
"Certificates") a letter of transmittal and instructions for use in effecting
the surrender of the Certificates for exchange and/or payment therefor.
Upon surrender to the Exchange Agent of a Certificate, together with such
letter of transmittal properly completed and duly executed, together with any
other required documents, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of shares of
HBOC Common Stock equal to the product of the number of shares of CliniCom
Common Stock represented by the Certificate multiplied by the Exchange Ratio and
cash in lieu of any fractional share interest (the "Merger Consideration"), and
such Certificate shall then be cancelled. If payment of the Merger Consideration
is to be made to a person other than the person in whose name the Certificate
surrendered is registered, the Certificate must be properly endorsed or
otherwise in proper form for transfer and the person requesting such payment
must pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid
35
or is not applicable. Until surrendered, each Certificate shall represent for
all purposes only the right to receive shares of HBOC Common Stock and cash in
lieu of any fractional share interest, without any interest on the value
thereof.
Notwithstanding the foregoing, neither HBOC nor the Surviving Corporation
shall be liable to any holder of Certificates formerly representing shares of
CliniCom Common Stock for any property delivered or amount paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
PAYMENT OF DIVIDENDS. No cash or stock dividend payable to holders of
record of HBOC Common Stock at any time subsequent to the Effective Time of the
Merger will be paid or delivered to any holder of a Certificate unless and until
such Certificate has been surrendered to the Exchange Agent in the manner
described above. However, upon such surrender, there shall be paid or delivered
to the holder of record of the certificates of HBOC Common Stock issued in
exchange therefor, the cash and other property resulting from such dividends,
without interest thereon.
LIMITATIONS ON TRANSFERABILITY OF HBOC COMMON STOCK. Shares of HBOC Common
Stock received by certain persons deemed to be "affiliates" of CliniCom for
purposes of Rule 145 under the Securities Act will be subject to the
restrictions imposed by such rule. In accordance with Rule 145, an affiliate of
CliniCom receiving HBOC Common Stock issued in the Merger may not sell such
shares except pursuant to the volume and manner of sale limitations and other
requirements specified therein or pursuant to an effective registration
statement under the Securities Act. It is a condition to the obligation of HBOC
to consummate the Merger that HBOC shall have received from each affiliate of
CliniCom a letter agreement confirming that such person will not sell or
otherwise dispose of the shares of HBOC Common Stock received by such person as
a result of the Merger other than in compliance with Rule 145 or pursuant to a
registration statement or pursuant to any other available exemptions from the
registration requirements of the Securities Act. In general, directors, officers
and substantial beneficial owners of a corporation's securities may be deemed to
be "affiliates" of a corporation. In addition, certain CliniCom affiliates are
subject to certain restrictions on transfer of both CliniCom Common Stock prior
to, and HBOC Common Stock following, the Effective Date of the Merger to ensure
pooling treatment of the transaction.
CONDITIONS; WAIVER. The obligations of HBOC and HBOC-GA on the one hand,
and of CliniCom, on the other hand, to consummate the Merger are contingent upon
the satisfaction or waiver of the following conditions: (i) the absence of
certain legal or regulatory proceedings with respect to the Merger; (ii) the
expiration of the waiting period under the H-S-R Act; (iii) approval of the
Merger by holders of the requisite number of shares of CliniCom Common Stock;
(iv) the Registration Statement on Form S-4 shall have been declared effective
and no stop order shall have been issued with respect thereto and shares of HBOC
Common Stock shall have been registered or shall be exempt from registration
under all applicable blue sky laws; and (v) the HBOC Common Stock issuable in
the Merger shall have been listed or approved for listing upon notice of
issuance by the NASDAQ-NM.
The obligation of HBOC and HBOC-GA to consummate the Merger is subject to
the satisfaction or waiver of the following additional conditions: (i) the
representations and warranties of CliniCom shall remain true and correct in all
material respects at and as of the Closing Date; (ii) the performance of
covenants, agreements and conditions by CliniCom as provided in the Merger
Agreement; (iii) there shall not have been any material adverse change in the
business, assets or operations of CliniCom; (iv) receipt of a certificate of the
President of CliniCom regarding the matters in (i) through (iii) above and
certain specific covenants and representations in the Merger Agreement; (v)
receipt of certain legal opinions, including an opinion of Jones, Day, Reavis &
Pogue to the effect that the Merger will qualify as a reorganization pursuant to
Section 368(a) of the Code; (vi) receipt of letters from affiliates of CliniCom
regarding compliance with Rule 145 and certain pooling of interests
requirements; (vii) delivery of certain additional certificates and documents by
CliniCom, including certain consents of third parties; (viii) receipt of letters
from Arthur Andersen LLP advising HBOC that the Merger may be accounted for as a
pooling of interests; (ix) receipt of letters from Arthur Andersen
36
LLP regarding information about CliniCom; (x) receipt of non-competition
agreements from certain key employees of CliniCom; (xi) the only fees and
expenses owed by CliniCom to any investment banking firm incurred in connection
with the Merger be for a fairness opinion and financial advisory services and do
not exceed a specified amount; (xii) certain voting and registration rights
agreements shall have been terminated; and (xiii) CliniCom shall have obtained a
complete release from liability in connection with certain financial advisory or
other services or certain stockholders of CliniCom shall have agreed to
indemnify CliniCom, HBOC and HBOC-GA against liability related thereto.
The obligation of CliniCom to consummate the Merger is subject to the
satisfaction or waiver of the following additional conditions: (i) the
representations and warranties of HBOC and HBOC-GA shall remain true and correct
in all material respects at and as of the Closing Date; (ii) the performance of
covenants, agreements and conditions by HBOC and HBOC-GA; (iii) there shall not
have been any material adverse change in the business, assets or operations of
HBOC; (iv) receipt of a certificate of the President of each of HBOC and HBOC-GA
regarding the matters in (i) through (iii); (v) receipt of certain legal
opinions, including an opinion from Davis, Graham & Stubbs, L.L.C. to the effect
that the Merger will qualify as a reorganization pursuant to Section 368(a) of
the Code; (vi) receipt of a fairness opinion of Dean Witter; (vii) the average
of the closing prices of the HBOC Common Stock on the NASDAQ-NM for the ten
consecutive trading days ending on the second trading day prior to the Closing
Date being not less than $50.00; (viii) receipt of letters from Arthur Andersen
LLP advising CliniCom that the Merger may be accounted for as a pooling of
interests.
HART-SCOTT-RODINO. The Merger is subject to the requirements of the H-S-R
Act, which provides that certain transactions (including the Merger) may not be
consummated until certain information has been furnished to the Antitrust
Division and the FTC and certain waiting period requirements have been
satisfied. HBOC and CliniCom filed the required information and material with
the Antitrust Division and the FTC on July 21, 1995, and were notified on August
4, 1995, that they had been granted early termination of the waiting period.
Satisfaction of the waiting period requirement does not preclude the Antitrust
Division, the FTC or any other party from challenging or seeking to delay or
enjoin the Merger on antitrust or other grounds.
NO SOLICITATION. CliniCom has agreed that prior to the Effective Time of
the Merger or earlier termination of the Merger Agreement, CliniCom shall not,
directly or indirectly, initiate, solicit, encourage, endorse or enter into any
agreement with respect to or take any action to facilitate, any inquiries or the
making of any proposal or offer for any tender or exchange offer, proposal for a
merger, share exchange or other business combination involving CliniCom or any
proposal or offer to acquire in any manner a substantial equity interest in
CliniCom or a substantial portion of the assets of CliniCom with any person or
entity; provided, however, that the Board of Directors of CliniCom may furnish
information to or enter into discussions or negotiations with any unsolicited
person or entity if the Board of Directors of CliniCom determines in good faith,
after receiving written advice from its outside counsel, that such action would
be required under applicable law in the exercise of its fiduciary duties.
CliniCom has agreed to notify HBOC-GA if any such proposals are received, any
such information is requested or any such negotiations or discussions are sought
to be initiated or continued.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time of the Merger by: (i) mutual consent of the Boards of
Directors of HBOC and CliniCom; (ii) HBOC-GA, in the event of material
condemnation, destruction, loss or damage to the business or assets of CliniCom;
(iii) HBOC-GA or CliniCom, after the earlier to occur of November 15, 1995 and
the date that is twenty-four (24) business days following the date the
Registration Statement on Form S-4 is declared effective by the Commission (the
earlier being the "Outside Closing Date"), if the other party fails to fulfill
any of its conditions, unless fulfillment has been made impossible by the party
seeking termination; (iv) CliniCom, if, in the good faith exercise of its
fiduciary duties to the stockholders of CliniCom in the context of a proposal to
acquire CliniCom by another party, the CliniCom Board decides that such
termination is required; or (v) CliniCom if the average of the closing prices of
the HBOC Common Stock on the NASDAQ-NM for any period of 20 consecutive trading
days ending on any date prior to the second trading day prior to the Closing
Date is less than $50.00.
37
In the event the Merger Agreement is terminated in accordance with (iv)
above, CliniCom will be obligated to pay HBOC and HBOC-GA their reasonable costs
and expenses incurred in connection with the negotiation and performance of the
Merger Agreement not to exceed $500,000 and a fee in the amount of $1,500,000.
ACCOUNTING TREATMENT
It is a condition of the closing of the Merger that the parties shall have
received letters from Arthur Andersen LLP, independent public accountants to
CliniCom and HBOC, that the Merger may be accounted for under the "pooling of
interests" method of accounting, in accordance with generally accepted
accounting principles.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is a condition to the obligation of CliniCom to consummate the Merger
that CliniCom receive an opinion from its counsel, Davis, Graham & Stubbs,
L.L.C., as to certain tax matters affecting CliniCom or holders of CliniCom
Common Stock, and it is a condition to the obligation of HBOC and HBOC-GA to
consummate the Merger that HBOC and HBOC-GA receive an opinion from their
counsel, Jones, Day, Reavis & Pogue, as to certain tax matters affecting HBOC or
HBOC-GA.
CliniCom has been advised by Davis, Graham & Stubbs, L.L.C. that the
principal federal income tax consequences of the Merger to CliniCom and its
stockholders are expected to be substantially as follows:
(i) The Merger will qualify as a reorganization pursuant to Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
(ii) No gain or loss will be recognized by CliniCom as the result of the
consummation of the Merger;
(iii) No gain or loss will be recognized by a CliniCom stockholder upon
the exchange of the shares of CliniCom Common Stock for shares of HBOC
Common Stock pursuant to the Merger, except on the receipt of cash in lieu
of a fractional share interest in HBOC Common Stock;
(iv) The aggregate adjusted tax basis of shares of HBOC Common Stock
received (including fractional share interests deemed received) by a
CliniCom stockholder as the result of the Merger will be the same as the
aggregate adjusted tax basis of the shares of CliniCom Common Stock
surrendered in exchange therefor;
(v) The holding period of the shares of HBOC Common Stock received
(including fractional share interests deemed received) by a CliniCom
stockholder as a result of the Merger will include the holding period of the
shares of CliniCom Common Stock surrendered in exchange therefor, provided
that such CliniCom Common Stock is held as a capital asset by the CliniCom
stockholder at the consummation of the Merger; and
(vi) A CliniCom stockholder who receives cash in lieu of a fractional
interest in shares of HBOC Common Stock will be treated as if the fractional
share were distributed as part of the exchange and then as having received a
cash distribution in redemption of such fractional share, which would be
taxed as provided in Section 302 of the Code.
HBOC and HBOC-GA have been advised by Jones, Day, Reavis & Pogue that the
principal federal income tax consequences of the Merger to HBOC and HBOC-GA are
expected to be substantially as follows:
(i) The Merger will qualify as a reorganization pursuant to Section
368(a) of the Code; and
(ii) No gain or loss will be recognized by either HBOC, HBOC-GA or
CliniCom as the result of the consummation of the Merger.
The advice referred to above and the tax opinions of Davis, Graham & Stubbs,
L.L.C. and Jones, Day, Reavis & Pogue are, and will be, premised upon the
receipt of certain customary representations
38
and assumptions referred to in the opinion letters. The necessary
representations have not yet been received, but are expected to be received
prior to the Effective Time of the Merger. In particular, the advice is premised
on, and the opinions will be issued in reliance on, certain representations from
CliniCom and/or certain holders of CliniCom Common Stock with respect to the
satisfaction of the "continuity of interest" requirement of the regulations
interpreting Section 368 of the Code. In general, the "continuity of interest"
requirement is considered to be satisfied if 50% or more of the capital stock
issued in a merger is held by the recipient stockholders of the acquired entity
following the merger other than under a plan or intent to dispose of such
shares. To satisfy this requirement, the Merger Agreement provides that, prior
to the Effective Time of the Merger, CliniCom will deliver to HBOC and HBOC-GA
letters to the reasonable satisfaction of HBOC and HBOC-GA from CliniCom and
certain of its stockholders that provide assurance that there is no plan or
intention on the part of the holders of CliniCom Common Stock (or knowledge of
such plan or intent with respect to holders of less than 5% of CliniCom Common
Stock) to sell, exchange or otherwise dispose of a number of shares of HBOC
Common Stock received in the Merger that would reduce CliniCom's stockholders'
ownership of HBOC Common Stock received in the Merger to a number of shares
having a value, as of the Effective Time of the Merger, of less than 50% of the
value of all of the outstanding CliniCom Common Stock immediately prior to the
Effective Time of the Merger. No ruling has been requested from the Internal
Revenue Service in connection with the Merger, and the opinions referred to
above would neither be binding upon the Internal Revenue Service nor preclude it
from adopting a contrary position.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A DECISION WHETHER
TO VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. THE
DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO A
PARTICULAR HOLDER OF SHARES OF CLINICOM COMMON STOCK THAT IS SUBJECT TO SPECIAL
TREATMENT UNDER CERTAIN FEDERAL INCOME TAX LAWS, SUCH AS DEALERS IN SECURITIES,
BANKS, INSURANCE COMPANIES, TAX EXEMPT ORGANIZATIONS, NON-UNITED STATES PERSONS
AND HOLDERS OF SHARES OF CLINICOM COMMON STOCK WHO ACQUIRED THEIR SHARES
PURSUANT TO THE EXERCISE OF OPTIONS TO PURCHASE SHARES OF CLINICOM COMMON STOCK
("CLINICOM OPTIONS") OR OTHERWISE AS COMPENSATION, NOR ANY CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION. MOREOVER, THE TAX
CONSEQUENCES TO HOLDERS OF CLINICOM OPTIONS ARE NOT DISCUSSED. THE DISCUSSION IS
BASED UPON THE CODE, TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS
AND COURT DECISIONS AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO
CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS
DISCUSSION. HOLDERS OF SHARES OF CLINICOM COMMON STOCK ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE MERGER TO THEM.
NO APPRAISAL RIGHTS
The holders of shares of CliniCom Common Stock will not be entitled to
appraisal rights pursuant to Section 262 of the DGCL in connection with the
Merger.
39
INTERESTS OF CERTAIN PERSONS
IN EACH OF HBOC AND CLINICOM
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF HBOC
The following table sets forth, as of August 1, 1995, certain information
with respect to all stockholders known to HBOC to beneficially own more than
five percent of the HBOC Common Stock, and information with respect to HBOC
Common Stock beneficially owned by each Director of HBOC, the Chief Executive
Officer of HBOC and HBOC's four other most highly compensated executive officers
for the year ended December 31, 1994, and all Directors and executive officers
of HBOC as a group. Except as otherwise indicated, the stockholders listed in
the table have sole voting and investment powers with respect to HBOC Common
Stock owned by them.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
----------------------------------------- ---------------------- ---------
First Data Corporation 4,000,000(1) 11.05%
11718 Nicholas Street
Omaha, Nebraska 68154
American Express Financial 2,282,072(2) 6.3%
Advisors, Inc.
IDS Tower 10
Minneapolis, Minnesota 55440
The Prudential Insurance 2,230,725(3) 6.16%
Company of America
751 Broad Street
Newark, New Jersey 07102
John P. Crecine 15,000(4) *
Alfred C. Eckert III 5,000(5) *
Holcombe T. Green, Jr. 674,430(6) 1.86%
Alton F. Irby III 5,000(5) *
Gerald E. Mayo 31,000(7) *
Charles W. McCall 701,157(8) 1.94%
James V. Napier 31,044(9) *
Charles E. Thoele 35,000(5) *
Donald C. Wegmiller 0 *
James A. Gilbert 38,998(10) *
Glenn N. Rosenkoetter 3,888(11) *
Michael L. Kappel 13,512(12) *
All Directors and Executive 1,575,033 4.35%
Officers as a Group
(16 persons)
------------------------
* Less than 1%
(1) According to the Schedule 13D as of June 17, 1995, of First Data
Corporation ("FDC"), FDC has sole voting power and sole dispositive power
with respect to all such shares and neither shared voting power nor shared
dispositive power with respect to any such shares. FDC has requested that
HBOC file a registration statement for the sale of such shares as described
under "Concurrent Offering."
(2) According to the joint Schedule 13G as of December 31, 1994, of American
Express Company ("AEC") and American Express Financial Advisors, Inc.,
formerly IDS Financial Corporation ("AEF"), each of AEC and AEF has shared
voting power with respect to 544,300 shares and has
40
shared dispositive power with respect to 2,282,072 shares. Neither has sole
voting nor sole dispositive power with respect to such shares. AEC, the
parent holding company of AEF, disclaims beneficial ownership of all such
shares.
(3) According to the Schedule 13G as of April 4, 1995, of The Prudential
Insurance Company of America ("Prudential"), Prudential has sole voting
power and sole dispositive power with respect to 292,200 shares and shared
voting power and shared dispositive power with respect to 1,938,525 shares.
(4) Includes 5,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(5) Represents shares that may be acquired through the exercise of presently
exercisable stock options.
(6) Includes 235,000 shares that Mr. Green may acquire through the exercise of
presently exercisable stock options; 5,730 shares held in an IRA for the
benefit of Mr. Green; 371,650 shares held by a limited partnership of which
Mr. Green's wife is a general partner and with respect to which beneficial
ownership is disclaimed, except to the extent of his pecuniary interest
therein; and 62,050 shares held by HTG Corp. which is wholly owned by Mr.
Green.
(7) Includes 31,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(8) Includes 20,000 shares owned by Mr. McCall's son and 597,333 shares that
Mr. McCall may acquire through the exercise of presently exercisable stock
options.
(9) Includes 200 shares owned by Mr. Napier's daughter and 10,000 shares that
Mr. Napier may acquire through the exercise of presently exercisable stock
options.
(10) Includes 560 shares owned by Mr. Gilbert's son and 2,000 shares that Mr.
Gilbert may acquire through the exercise of presently exercisable stock
options.
(11) Includes 2,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(12) Includes 12,000 shares that may be acquired through the exercise of
presently exercisable stock options.
41
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF CLINICOM
The following table sets forth as of August 1, 1995, certain information
with respect to all stockholders known to CliniCom to beneficially own more than
five percent of the CliniCom Common Stock, and information with respect to
CliniCom Common Stock beneficially owned by each Director of CliniCom, the Chief
Executive Officer of CliniCom and CliniCom's four other most highly compensated
executive officers for the year ended December 31, 1994 and all Directors and
executive officers of CliniCom as a group. Except as otherwise indicated, the
stockholders listed in the table have sole voting and investment power with
respect to the CliniCom Common Stock owned by them.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS(1)
----------------------------------------- ---------------------- -------------
Marshall D. Miller 1,882,120(2) 21.7%
2950 Dean Parkway
Apartment 2501
Minneapolis, MN 55416
Wind Point Partners II, L.P. 1,412,130(3) 16.3%
676 N. Michigan Ave., Suite 3000
Chicago, IL 60611
Arthur DelVesco 1,412,130(4) 16.3%
676 N. Michigan Ave., Suite 3000
Chicago, IL 60611
INVESCO PLC 522,800(5) 6.0%
11 Devonshire Square
London, ECZM 4YR England
Scudder, Stevens & Clark, Inc. 464,200(6) 5.4%
345 Park Avenue
New York, New York 10154
Esmond T. Goei 3,500(7) *
Michael T. Kornett 14,750(8) *
David J. Miller 146,072(9) 1.7%
William H. Brehm 290,784(10) 3.2%
Catherine K. Milburn 81,635(11) *
Brian E. Higgins 129,791(12) 1.5%
Michael E. Myers 83,057(13) *
Linda J. McConnon 11,043(14) *
All Directors and Executive 3,956,242(15) 42.6%
Officers as a Group (12 persons)
------------------------
* Less than 1%
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934, as amended. Under Rule 13d-3(d), shares not outstanding that are
subject to options, warrants, rights, or conversion privileges exercisable
within sixty days are deemed outstanding for the purpose of calculating the
number and percentage owned by such person, but not deemed outstanding for
the purpose of calculating the percentage owned by any other person.
(2) Includes an aggregate of 408,966 shares held by David J. Miller, Susan D.
Lyons and Steven L. Miller, Mr. Miller's children. Mr. Miller has the power
to vote, but not dispose of, the shares held by such persons. Also includes
608,600 shares held by Dorado Investment Company, in which Mr. Miller holds
a 99% interest, and 40,000 shares held by Phileona Foundation, a
tax-exempt, non-profit organization of which Mr. Miller is a trustee with
the power to vote and dispose of such shares. Also includes 9,750 shares
subject to options exercisable within sixty days and excludes 4,250 shares
subject to options and vesting requirements not exercisable within sixty
days.
42
(3) Includes 9,750 shares subject to options exercisable within sixty days and
excludes 4,250 shares subject to options and vesting requirements not
exercisable within sixty days. Mr. DelVesco has agreed to transfer the
14,000 shares purchased upon exercise of his options to Wind Point Partners
II, L.P. ("Wind Point Partners") at the time of exercise.
(4) All of the shares shown are owned by Wind Point Partners. Includes 9,750
shares subject to options exercisable within sixty days and excludes 4,250
shares subject to options and vesting requirements not exercisable within
sixty days. Mr. DelVesco, a general partner of Wind Point Partners, may be
deemed to share voting and investment power as to such shares.
(5) According to the Schedule 13G as of December 31, 1994, certain INVESCO
investment managers (together with their parent corporation, INVESCO, PLC)
are considered "beneficial owners" in the aggregate of the 522,800 shares,
which shares were acquired for investment purposes by such investment
managers for certain of their advisory clients.
(6) According to the Schedule 13G as of December 31, 1994, certain Scudder,
Stevens & Clark investment managers (together with their parent
corporation, Scudder, Stevens & Clark, Inc.) are considered "beneficial
owners" in the aggregate of the 464,200 shares, which shares were acquired
for investment purposes by such investment managers for certain of their
advisory clients.
(7) Includes 2,250 shares subject to options exercisable within sixty days and
excludes 4,250 shares subject to options and vesting requirements not
exercisable within sixty days.
(8) Includes 9,750 shares subject to options exercisable within sixty days and
excludes 4,250 shares subject to options and vesting requirements not
exercisable within sixty days.
(9) Includes 9,750 shares subject to options exercisable within sixty days and
excludes 4,250 shares subject to options and vesting requirements not
exercisable within sixty days. Excludes any shares related to David
Miller's 1% ownership interest in Dorado Investment Company which owns
608,600 shares. Mr. Miller disclaims beneficial ownership of such shares
except to the extent of his 1% interest.
(10) Includes 289,584 shares subject to options exercisable within sixty days
and excludes 78,750 shares subject to options and vesting requirements not
exercisable within sixty days.
(11) Includes 31,375 shares subject to options exercisable within sixty days and
excludes 26,625 shares subject to options and vesting requirements not
exercisable within sixty days.
(12) Includes 41,672 shares subject to options exercisable within sixty days and
excludes 31,875 shares subject to options and vesting requirements not
exercisable within sixty days.
(13) Includes 83,057 shares subject to options exercisable within sixty days and
excludes 31,785 shares subject to options and vesting requirements not
exercisable within sixty days.
(14) Includes 11,043 shares subject to options exercisable within sixty days and
excludes 27,624 shares subject to options and vesting requirements not
exercisable within sixty days.
(15) Includes 535,172 shares subject to options exercisable within sixty days
and excludes 294,810 shares subject to options and vesting requirements not
exercisable within sixty days.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
In considering the Merger, stockholders of CliniCom should be aware that
certain members of management and the Board of Directors of CliniCom have
interests in the Merger that are in addition to, or different from, the
interests of stockholders of CliniCom generally.
EXECUTIVE RETENTION PLAN. Pursuant to the CliniCom Incorporated Executive
Retention Plan (the "Retention Plan"), participants therein may become entitled
to certain cash payments following the Merger. Generally, the Retention Plan
provides for certain cash payments to be made to participants in the event of a
"Qualified Termination" described below, following a "Change of Control." A
Change of Control for purposes of the Retention Plan is deemed to have occurred
if the stockholders of CliniCom approve a merger other than a merger which
results in the voting securities of CliniCom representing at least 80% of the
combined voting power of the surviving corporation. Accordingly, the Merger will
constitute a Change of Control for purposes of the Retention Plan.
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In the event of a Qualified Termination following the Merger, a participant
in the Retention Plan will be entitled to receive in cash (i) the participant's
annual base salary (as in effect immediately prior to the Merger); (ii) the
amount of the participant's bonus (net of sales commission) for the preceding
year (the "Bonus"); and (iii) one-twelfth of the Bonus received in the prior
year times the number of months worked in the year in which the Qualified
Termination occurs. A participant may also receive an additional amount of up to
one-half of such participant's annual base pay upon recommendation of the
committee appointed to administer the Retention Plan. Finally, each participant
is entitled to continue to participate in CliniCom's welfare benefit plans for
one year following the date of a Qualified Termination. Notwithstanding the
foregoing, to the extent the payments described above, either alone or in
conjunction with other compensation payable to participants, would constitute an
"excess parachute payment" for purposes of Section 280G(b)(2) of the Code, the
amount of such payments shall be reduced so as not to constitute such an "excess
parachute payment." Pursuant to the Retention Plan, CliniCom will be funding a
trust in the amount of approximately $2,000,000 to make payments prescribed
thereunder.
For purposes of the Retention Plan, a "Qualified Termination" means a
termination of a participant's employment within one year after the Merger: (i)
by HBOC for any reason other than "Cause" or (ii) by the participant for "Good
Reason." Generally, "Cause" means serious, willful misconduct in the
participant's obligations to his or her employer or gross violations of the
employer's established policies and procedures. "Good Reason" means generally:
(i) a change in the participant's duties which causes the participant's position
to become one of less responsibility, importance or scope; (ii) reduction in a
participant's base salary; (iii) elimination of benefit plans; and (iv) certain
relocations.
The following persons are participants in the Retention Plan: William H.
Brehm, Chief Executive Officer and Chairman of the Board; Catherine K. Milburn,
Vice President of Finance and Administration and Chief Financial Officer,
Secretary and Treasurer; Linda J. McConnon, Vice President and General Counsel;
Brian E. Higgins, Vice President of Business Development; Michael E. Myers, Vice
President of Marketing and Product Development; Dennis J. Gardner, Vice
President of Operations; Mark W. Fidler, Vice President of Client Services;
Craig J. Lund, Vice President of Direct Channel Sales; and Marjorie M. Rodell,
Director of Critical Care.
REGISTRATION RIGHTS. Pursuant to the Merger Agreement, HBOC has agreed to
provide certain registration rights in certain limited circumstances to Wind
Point Partners (or its partners), Marshall D. Miller, his children, David J.
Miller, Susan D. Lyons and Steven L. Miller, Phileona Foundation, which is a
tax-exempt, non-profit organization of which Marshall Miller is a trustee, and
Dorado Investment Company, in which Marshall Miller holds a 99% interest (the
"Selling Stockholders"). In the event that the average weekly reported volume of
trading of the HBOC Common Stock, as reported through the NASDAQ-NM, during any
four (4) calendar week period ending on any date within six months following the
Closing Date constitutes less than two percent of the number of shares of HBOC
Common Stock outstanding as of such date, HBOC will be obligated to file one
registration statement covering the shares owned by the Selling Stockholders.
INDEMNIFICATION AGREEMENTS. HBOC-GA has agreed to provide indemnification
to the directors and officers of CliniCom, in accordance with the current
provisions of the Certificate of Incorporation and Bylaws of CliniCom, for a
period of five years from the Effective Time of the Merger with respect to
matters arising prior thereto including, without limitation, the Merger
Agreement and the transactions contemplated thereby.
44
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF
HBOC COMMON STOCK AND CLINICOM COMMON STOCK
INTRODUCTION
HBOC and CliniCom are each incorporated under the laws of the State of
Delaware. The holders of shares of CliniCom Common Stock, whose rights as
stockholders are currently governed by Delaware law, the CliniCom Certificate of
Incorporation (the "CliniCom Charter"), and the Amended and Restated By-laws of
CliniCom (the "CliniCom Bylaws"), will, upon the exchange of their shares
pursuant to the Merger, become holders of shares of HBOC Common Stock, and their
rights as such will be governed by Delaware law, the HBOC Certificate of
Incorporation (the "HBOC Charter") and the Amended and Restated Bylaws of HBOC
(the "HBOC Bylaws"). The material differences between the rights of holders of
shares of CliniCom Common Stock and of the rights of holders of shares of HBOC
Common Stock result from differences in their governing corporate documents and
are summarized below.
The following summary does not purport to be a complete statement of the
rights of holders of shares of HBOC Common Stock under applicable Delaware law,
the HBOC Charter and HBOC Bylaws or a comprehensive comparison with the rights
of the holders of shares of CliniCom Common Stock under applicable Delaware law,
the CliniCom Charter and CliniCom Bylaws, or a complete description of the
specific provisions referred to herein. The identification of specific
differences is not meant to indicate that other equally or more significant
differences do not exist. This summary is qualified in its entirety by reference
to the Delaware General Corporation Law ("DGCL") and the governing corporate
documents of HBOC and CliniCom, to which holders of shares of CliniCom Common
Stock are referred.
AUTHORIZED CAPITAL STOCK
The DGCL requires that a corporation's certificate of incorporation set
forth the total number of shares of all classes of stock which the corporation
has authority to issue and a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof. The HBOC Charter provides that HBOC has authority to issue (i)
60,000,000 shares of HBOC Common Stock and (ii) 1,000,000 shares of preferred
stock, no par value. The CliniCom Charter provides that CliniCom has the
authority to issue (i) 30,000,000 shares of CliniCom Common Stock and (ii)
5,000,000 shares of preferred stock, par value $.001 per share (the "CliniCom
Preferred Stock").
BOARD OR STOCKHOLDER APPROVED PREFERRED STOCK
The DGCL permits a corporation's certificate of incorporation to allow its
board of directors to issue, without stockholder approval, series of preferred
or preference stock and to designate their rights, preferences, privileges and
restrictions. The HBOC Charter grants such power to the HBOC Board of Directors
(the "HBOC Board"). The HBOC Board has designated one series of preferred stock,
the Series A Junior Participating Preferred Stock. See "Incorporation of Certain
Information by Reference." The CliniCom Charter also grants such power to the
CliniCom Board. There are no shares of CliniCom Preferred Stock outstanding.
VOTING RIGHTS
The DGCL states that, unless a corporation's certificate of incorporation
or, with respect to clauses (ii) and (iii), the bylaws, specify otherwise, (i)
each share of its capital stock is entitled to one vote, (ii) a majority of
voting power of the shares entitled to vote, present in person or represented by
proxy, shall constitute a quorum at a stockholders' meeting, and (iii) in all
matters other than the election of directors, the affirmative vote of the
majority of the voting power of shares, present in person or represented by
proxy at the meeting and entitled to vote on the subject matter, shall be the
action of the stockholders. The holders of shares of HBOC Common Stock are
entitled to one vote per share on all matters to be voted on by the stockholders
of HBOC. The holders of shares of CliniCom Common Stock are entitled to one vote
per share on all matters to be voted on by the stockholders of CliniCom.
45
NUMBER OF DIRECTORS
Under the DGCL, unless a corporation's certificate of incorporation
specifies the number of directors, such number shall be fixed by, or in the
manner provided in, its bylaws. If a corporation's certificate of incorporation
expressly authorizes its board of directors to amend its bylaws, its board of
directors may change the authorized number of directors by an amendment to the
corporation's bylaws, if fixed therein, or in such manner as is provided
therein. If such certificate of incorporation specifies the number of directors,
the number of directors can only be changed by amending the certificate of
incorporation. The HBOC Bylaws provide that the number of members of the board
of directors shall be not less than three nor more than fifteen, such number to
be established by the board of directors or stockholders. The number of
directors on the HBOC Board is currently nine (9). The CliniCom Bylaws provide
that the number of directors shall be seven (7), which number may be changed
from time to time by resolution of the CliniCom Board. The number of directors
constituting the CliniCom Board is currently six.
ELECTION OF BOARD OF DIRECTORS
The DGCL provides that a corporation's directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors. Under the
DGCL, a corporation's certificate of incorporation may provide that stockholders
of a corporation can elect directors by cumulative voting. Neither the HBOC
Charter nor the CliniCom Charter provide for cumulative voting.
VOTE ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS
The DGCL generally requires approval of any merger, consolidation or sale of
substantially all the assets of a corporation at a meeting of stockholders by
vote of the holders of a majority of all outstanding shares of the corporation
entitled to vote thereon. The certificate of incorporation of a Delaware
corporation may provide for a greater vote. The HBOC Charter generally requires
the affirmative vote of four-fifths of the outstanding HBOC Common Stock to
approve certain business combinations, except under certain circumstances. See
"-- Anti-Takeover Protection." The CliniCom Charter does not provide for a vote
greater than a majority of all outstanding shares of CliniCom Common Stock for
approval of any merger, consolidation or sale of substantially all the assets of
CliniCom.
SPECIAL MEETINGS OF STOCKHOLDERS
Under the DGCL, special stockholder meetings of a corporation may be called
by its board of directors and by any person or persons authorized to do so by
its certificate of incorporation or bylaws. Under the HBOC Charter and Bylaws,
special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the Chairman of the Board or
the President or by holders of four-fifths of the outstanding shares of HBOC
Common Stock and shall be called by the Chairman of the Board or President at
the request in writing of three-fourths of the directors of HBOC. Such requests
shall state the purpose or purposes of the proposed meeting. The CliniCom Bylaws
provide that special meetings of stockholders may be called for any purpose by
the President, by the Secretary if directed by the CliniCom Board, by the
holders of at least 20% of any issued and outstanding CliniCom Preferred Stock
or by the holders of all issued and outstanding stock of CliniCom representing a
majority of the voting power of CliniCom.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Under the DGCL, any action by a corporation's stockholders must be taken at
a meeting of such stockholders, unless a consent in writing setting forth the
action so taken is signed by the stockholders having not less than the minimum
number of votes necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Actions by written
consent, however, may not be taken if otherwise provided for in the certificate
of incorporation. The HBOC Charter expressly prohibits written consents by
stockholders; the CliniCom Charter does not.
46
AMENDMENT OF CERTIFICATE OF INCORPORATION
The DGCL allows amendment of a corporation's certificate of incorporation if
its board of directors adopts a resolution setting forth the amendment proposed,
declaring its advisability, and the stockholders thereafter approve such
proposed amendment, either at a special meeting called by the board for the
purpose of approval of such amendment by the stockholders or, if so directed by
the board, at the next annual stockholders' meeting. At any such meeting, the
proposed amendment generally must be approved by a majority of the outstanding
shares entitled to vote. The holders of the outstanding shares of a class are
entitled to vote as a separate class upon a proposed amendment, whether or not
entitled to vote thereon by the certificate of incorporation, if the amendment
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class, or alter
or change the powers, preferences, or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences, or special rights of one or more series of any class so
as to affect them adversely, but not affect the entire class, then only the
shares of the series so affected by the amendment will be considered a separate
class for the purposes of a vote on the amendment. Under the DGCL, a
corporation's certificate of incorporation also may require, for action by the
board or by the holders of any class or series of voting securities, the vote of
a greater number or proportion than is required by the DGCL and the provision of
the certificate of incorporation requiring such greater vote cannot be altered,
amended or repealed except by such greater vote. The HBOC Charter does not
contain provisions requiring a vote greater than that specified in the DGCL to
amend the HBOC Charter, except for those provisions relating to business
combinations. See " -- Anti-Takeover Protection." The CliniCom Charter does not
contain a provision requiring a vote greater than that specified in the DGCL.
AMENDMENT OF BYLAWS
Under the DGCL, the power to adopt, amend or repeal a corporation's bylaws
resides with the stockholders entitled to vote thereon, and with the directors
of such corporation if such power is conferred upon the board of directors by
the certificate of incorporation. The HBOC Charter authorizes the HBOC Board to
make, alter or repeal the HBOC Bylaws. The CliniCom Charter also authorizes the
CliniCom Board to make, repeal, alter, amend and rescind the CliniCom Bylaws.
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The DGCL provides that a corporation may limit or eliminate a director's
personal liability for monetary damages to the corporation or its stockholders
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to such corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for paying or
approving a stock repurchase in violation of Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit. The HBOC Charter provides for elimination of personal liability subject
to the statutory exceptions. The CliniCom Charter provides that, to the fullest
extent permitted by the DGCL, a director shall not be liable to CliniCom or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Under the DGCL, directors and officers as well as other employees and
individuals may be indemnified against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation as a
derivative action) if they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interest of the corporation, and,
with respect to any criminal action or proceeding, if they had no reasonable
cause to believe their conduct was unlawful. The HBOC Bylaws provide to
directors and officers of HBOC indemnification to the fullest extent provided by
law. Article IX of the HBOC Bylaws also provides that expenses incurred by a
person in defending a civil or criminal action, suit or proceeding by reason of
the fact that he or she is a director, officer, employee or agent may be paid in
advance of the final disposition of such action, suit or proceeding, upon
receipt of an undertaking by or
47
on behalf of such director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he or she is entitled to be
indemnified by HBOC as authorized by relevant Delaware law. Article V of the
CliniCom Bylaws provides for indemnification of directors and officers to the
fullest extent authorized by the DGCL, including the right to be paid for
expenses in advance of the final disposition of any civil, criminal,
administrative or investigative action provided that such director, officer or
legal representative undertakes, to the extent required by the DGCL, to repay
such amounts if it is ultimately determined that such director, officer or legal
representative was not entitled to such indemnification.
PAYMENT OF DIVIDENDS
The DGCL permits the payment of dividends and the redemption of shares out
of a corporation's surplus. Under the DGCL, if a dividend is paid out of capital
surplus, stockholders need not be so notified, and the dividends may in certain
cases also be paid out of net profits for the fiscal year in which declared or
out of net profits for the preceding fiscal year. Neither the HBOC Charter nor
the HBOC Bylaws have any provisions limiting the payment of dividends. The
CliniCom Charter does not limit the payment of dividends, but the CliniCom
Bylaws allow the Board of Directors, before payment of dividends, to set aside
out of any funds available for dividends a reserve or reserves for any purpose
the directors think in their sole discretion is in the best interest of
CliniCom.
ANTI-TAKEOVER PROTECTION
Under the DGCL, a merger or consolidation generally must be approved by the
affirmative vote of the holders of a majority of all of the outstanding shares
of stock entitled to vote thereon. However, no stockholder approval is required
if the acquiring corporation owns 90% or more of the outstanding shares of the
acquired corporation.
In addition to the DGCL's general requirements, Section 203 of the DGCL,
"Business Combinations with Interested Stockholders," prohibits a corporation
that does not opt out of its provisions from entering into certain business
combination transactions with "interested stockholders" (generally defined to
include persons beneficially owning 15% or more of the corporation's outstanding
capital stock) unless certain super-majority votes are obtained. HBOC has opted
out of Section 203 in its Bylaws. However, the HBOC Charter places certain
restrictions on "Business Combinations" (such as a merger) with "Controlling
Persons" (generally, a person holding more than 10% of the HBOC Common Stock)
unless, generally speaking, the Business Combination has been approved by the
affirmative vote of the holders of four-fifths of the outstanding HBOC Common
Stock not held by the Controlling Person or its related entities or by a
majority of directors who were directors prior to the time the Controlling
Person became a Controlling Person and who are not affiliated with the
Controlling Person. Such provisions do not apply to the Merger. CliniCom has
opted out of Section 203 in the CliniCom Charter.
APPRAISAL RIGHTS
Under the DGCL, stockholders of corporations being acquired pursuant to a
merger have the right to serve upon the corporation a written demand for
appraisal of their shares when the stockholders receive any form of
consideration for their shares other than (a) shares of the surviving
corporation, (b) shares of any other corporation (i) listed on a national
securities exchange, (ii) designated as a national market system security on an
inter-dealer quotation system by the National Association of Securities Dealers,
Inc. or (iii) held of record by more than 2,000 shareholders or (c) cash in lieu
of fractional shares or any combination thereof. Stockholders entitled to
appraisal rights subsequently receive cash from the corporation equal to the
value of their shares as established by judicial appraisal. Corporations may
enlarge these statutory rights by including in their certificate of
incorporation a provision allowing appraisal rights in any merger in which the
corporation is a constituent corporation. Neither the HBOC Charter nor the
CliniCom Charter contains such a provision.
48
BUSINESS OF HBOC
GENERAL
OVERVIEW. HBOC is a leading healthcare information systems company that
develops integrated patient care, clinical, financial and strategic management
software solutions for healthcare providers, payers and integrated healthcare
delivery systems. HBOC designs open systems solutions which facilitate the
integration of clinical, financial and administrative data from a wide range of
customer systems and software. HBOC's broad product portfolio can be implemented
on a stand-alone, combined or enterprisewide basis. HBOC's newer products offer
open systems solutions that enable customers to add incremental capabilities to
existing information systems, without making prior capital investments obsolete.
HBOC also provides networking technologies and outsourcing services under
contract management agreements whereby its staff manages and operates data
centers, information systems, organizations and business offices of healthcare
institutions of various sizes and structures.
HBOC markets its products and services to hospitals, integrated healthcare
delivery systems, physicians' offices, managed care providers, home health
providers, pharmacies and reference laboratories, and currently has one or more
applications installed in approximately 2,600 of the 5,900 hospitals in the
United States. HBOC also sells its products and services internationally through
its subsidiaries in the United Kingdom and Canada and distribution agreements in
Saudi Arabia, Australia, Puerto Rico and New Zealand.
INDUSTRY. The healthcare industry is undergoing significant and rapid
change. Healthcare delivery costs have increased dramatically in recent years as
compared to the overall rate of inflation. The growing influence of managed care
has resulted in increasing pressure on participants in the healthcare system to
contain costs. Accordingly, the healthcare system has migrated towards more
managed care reimbursement, including discounted fee for service and capitation.
Under capitation, providers are paid a pre-determined fee per individual to
provide all healthcare services, thereby assuming the potential financial risks
of escalating healthcare costs. In order to deliver care in a cost effective
manner, providers are forming integrated healthcare delivery systems ("IHDS") to
provide care across the continuum.
IHDS are vertical networks of care providers that may include acute care
hospitals, physicians, out-patient care facilities and home healthcare. The goal
of IHDS is to deliver comprehensive healthcare in a cost effective manner and,
accordingly, their success is dependent on effectively managing and delivering
information to the caregivers. As IHDS are evolving, the demand for information
services is increasing as both financial and clinical information is required
across the multiple points-of-care.
Traditionally, the hospital information systems market has been the largest
segment of healthcare information services. According to Sheldon Dorenfest, a
healthcare consulting company, in 1994 the healthcare industry spent
approximately $8.5 billion for products and services to support automated
information systems, and the growth rate is expected to continue to increase
over the next several years as healthcare information expenditures are expected
to rise to $13 billion by 1997. In addition to this expanding market
opportunity, the demand for healthcare information systems is also increasing
because hospitals and other providers are under pressure to quantify and control
their costs. As a result, they are spending more of their operating budgets on
systems which enable them to access such information. According to the 1995
Annual HIMSS/HP Leadership Survey, an industry survey conducted by Hewlett
Packard at the Healthcare Information and Management Systems Society conference,
75% of the respondents stated that their information system investments will
increase at a rate of 20% or more over the next two years.
Healthcare information systems are evolving to meet the needs of a changing
marketplace. Initially, healthcare information systems were financially
oriented, focusing on the ability to capture charges and generate patient bills.
As cost containment efforts have forced providers and payors to
49
focus on their costs, manage risk and provide outcomes and quality analysis,
system needs have evolved from the traditional billing information to a wider
range of needs including enterprisewide systems capable of capturing and
analyzing data at all points-of-care as well as data repositories to store the
data. Historically, cost containment efforts have been hampered by a lack of
integrated clinical and financial information. As reimbursement is shifting more
toward risk sharing and capitation, providers and payers need to better manage
risk by controlling costs, demonstrating quality, measuring outcomes and
influencing utilization. Each of these goals requires the collection, analysis
and interpretation of clinical and financial information related to the delivery
of healthcare.
The availability of a complete, timely and cost-effective patient-focused
information system is essential to controlling healthcare costs while providing
high quality patient care. In many cases, information necessary to provide
effective patient care is located at several different sites and is not
immediately available to the care giver. To implement a computerized
patient-focused information system that accesses patient information in a
cost-effective manner, current and historical paper records must be made
available by computer to all points-of-care. In order to effectively manage
information in the current healthcare environment, providers, payers and IHDS
need information systems that can interface fully with existing and future
systems, capture data at the point-of-care, communicate data across the
continuum of care and process and store large volumes of data necessary for the
development of the computer-based patient record.
STRATEGY
HBOC's strategy is to provide a comprehensive range of computer-based
information systems and services designed to meet the evolving needs of
healthcare enterprises. The key elements of this strategy are to:
LEVERAGE EXISTING CUSTOMER BASE. HBOC is a leader in the hospital
information systems marketplace with one or more applications installed in
approximately 2,600 of the 5,900 hospitals in the U.S. HBOC expands its core
customer base through its sales and marketing efforts and strategic acquisitions
such as IBAX Healthcare Systems and HSG, which added 475 and 500 hospital
customers, respectively. This expanded customer base offers HBOC significant
opportunities to sell both additional applications of its established core
product line and its new Pathways patient-centered enterprisewide solutions. In
addition, HBOC believes its customer relationships and familiarity with
customers' existing systems should give HBOC an advantage over many of its
competitors in marketing applications to meet the evolving needs of these
customers. HBOC also seeks to further leverage its relationships with existing
customers to access additional healthcare organizations throughout newly-formed
IHDS.
PROVIDE ENTERPRISEWIDE SOLUTIONS TO THE EVOLVING HEALTHCARE INDUSTRY. HBOC
offers one of the broadest product lines in the healthcare information systems
industry serving patient care, clinical, financial and strategic applications.
Through its Pathways 2000 family of patient-focused enterprisewide information
systems, HBOC facilitates the more efficient integration of IHDS. HBOC's
Pathways 2000 client server applications are designed to provide a common
information infrastructure, enabling IHDS to collect, manage and disseminate
clinically oriented information organized on the basis of a patient's entire
history of care. The Pathways product line provides the capability to create
longitudinal computerized patient records as well as connectivity along the
entire continuum of care, enabling users to access patient data from any point
within an integrated delivery system.
PROVIDE SUPERIOR INTEGRATION OF PRODUCTS AND DATA. HBOC's products offer
customers open systems solutions with flexibility in adding incremental
capabilities, which protects the customers' capital investments. In addition,
HBOC's client-server architecture facilitates integration of clinical with
financial and administrative data from both HBOC and non-HBOC applications for
efficient resource allocation thereby allowing its customers to benefit from
price/performance advances. HBOC believes that these features will be of key
significance to healthcare organizations as they face industry consolidation and
evolve as part of integrated delivery systems.
50
EXPAND INTO NEW MARKETS. HBOC strives to establish premier product
brand-name recognition in new markets that provide business critical
applications in every essential care setting and the payer marketplace. HBOC
believes that as the healthcare industry decentralizes, management information
requirements at the point-of-care will increase. HBOC is developing or has
acquired client server applications to meet these needs in the physician's
office, home health market, reference lab and the payer market, all of which are
scheduled to be available in 1995 or early 1996.
CONTINUE PRODUCT DEVELOPMENT. HBOC believes that a key to implementing each
of its growth strategies is an ongoing focus on research and development to
ensure its product offerings will continue to meet the evolving needs of its
existing and potential customer base. HBOC's research efforts focus on
enhancements of existing product offerings as well as new product development.
In developing its products, HBOC's strategy is to ensure its information systems
are highly flexible, quickly adaptable and can serve the information access
needs of the increasingly broad range of users. HBOC's product developers use
state-of-the-art application development tools such as program generators,
artificial intelligence and expert systems which decrease development time and
lower the cost of new products. While HBOC's efforts focus primarily on internal
research and development of new products, HBOC has made and continues to explore
strategic acquisitions of developers of niche product software to complement and
diversify its product portfolio.
RECENT ACQUISITIONS
A substantial portion of HBOC's recent growth has resulted from acquisitions
of companies which expanded the HBOC product lines and enhanced its installed
customer base.
The following table outlines these acquisitions:
AGGREGATE PURCHASE
DATE ACQUIRED COMPANY PRICE PRIMARY SIGNIFICANCE
-------------------- --------------------------- -------------------- ----------------------------------------
June 1993 Biven Software, Inc. $2 million Managed care applications
December 1993 Data-Med Computer Services $5.2 million(1) Installed base of 100 hospitals in U.K.
Limited
May 1994 IBAX Healthcare Systems $44 million Series 4000 product line with presence
in the IBM AS/400 market; installed
base of 475 hospitals
September 1994 Serving Software, Inc. $48 million(2) Healthcare enterprise patient and
resource scheduling software
December 1994 Care 2000, Inc. $1.5 million Specialty in case management
methodologies
February 1995 Advanced Laboratory $7 million, net of Laboratory software for the healthcare
Systems, Inc. cash acquired and commercial marketplace
June 1995 Health Systems Group of $200.6 million(3) Installed base of 500 hospitals
First Data Corporation
July 1995 Pegasus Medical, LTD $8 million and up to Electronic patient record for the
$7 million physician's office designed to support
contingent payment the clinical process across the
continuum of care
Fourth Quarter 1995 CliniCom Incorporated To be determined(4) Bedside acute care clinical information
(Estimated) systems
------------------------
(1) Represents $5 million cash and shares of HBOC Common Stock, valued at
closing at $200,000.
(2) Accounted for as a pooling of interests. Represents value at closing of
1,479,029 shares of HBOC Common Stock.
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(3) Represents $600,000 cash and 4 million shares of HBOC Common Stock valued
at $200 million based on the ten day average of the closing prices of HBOC
Common Stock immediately prior to closing.
(4) To be accounted for as a pooling of interests. To be determined based on
value of .4 of a share of HBOC Common Stock to be issued for each of the
approximately 8,660,000 shares of outstanding CliniCom Common Stock.
PRODUCT SUMMARY
HBOC's offering of products and services is based on a strategic mix of
applications and technologies that support the restructuring of the healthcare
delivery system, backed by implementation, support and outsourcing services.
This portfolio of products is organized into four areas: core applications,
infrastructure applications, enterprisewide clinical practice management
applications and enterprise management applications.
CORE APPLICATIONS automate the operation of individual departments and their
respective functions within the healthcare enterprise.
INFRASTRUCTURE APPLICATIONS are not limited to a single department or
function; rather, they form the foundation of the emerging information
structures of healthcare enterprises. Specific components include:
- Interface managers that coordinate the flow of information
throughout the greater system and allow disparate incompatible
source systems to communicate with one another as well as
enterprise applications;
- Indexing applications that organize the vast information
collected about a person throughout the enterprise into a
patient-centered index; allowing the patient to be tracked
throughout the IHDS; and
- Data repository applications that collect all of the
information generated by source systems and organized by
interface managers and patient indexes into central relational
databases, thus forming the basis for the electronic medical
record.
ENTERPRISEWIDE CLINICAL PRACTICE MANAGEMENT APPLICATIONS facilitate and
improve the actual practice of medicine throughout the enterprise. Examples
include:
- Point-of-care workstations that give professionals immediate
access to the critical information necessary to provide better
quality care;
- Applications that make use of patient information to create
protocols and care pathways; and
- Applications that instantly register and schedule patients
anywhere in the enterprise from any other point within an
enterprise.
ENTERPRISE MANAGEMENT APPLICATIONS facilitate and improve the management and
operation of healthcare enterprises. These applications focus on providing
caregivers with the clinical, financial, and other information necessary to
improve the operation of the enterprise. Examples include utilization review and
accounts receivable management, as well as managed care contracting and member
management applications.
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The following table outlines the principal products in each area:
PRODUCT SUMMARY
GENERAL INSTALLED
PRODUCT FAMILY RELEASE DATE PRICE RANGE BASE DESCRIPTION
------------------------- --------- ------------ ------------ --------- --------------------------------------------------
(IN THOUSANDS)
CORE APPLICATIONS
STAR STAR Available $150-250(1) 300 Hospital and clinical information
system-UNIX/RISC-based (includes patient care,
laboratory, radiology, pharmacy and financial)
HealthQuest HealthQuest Available $200-300 230 Hospital and clinical information system-IBM
mainframe-based
Series Series Available $150-250 500 Hospital and clinical information system (includes
patient care, radiology, pharmacy and financial)
TRENDSTAR TRENDSTAR Available $50(2) 650(3) Decision support system targeted at acute care
hospitals
Saint, The Precision CPG Available $150-1,000 400 Hospital and clinical information system -
Alternative, Host Based UNIX/RISC-based and Host Based
INFRASTRUCTURE APPLICATIONS
Health Network Server Pathways Available $350-500 17 Relational database; data repository for patient
transactions
Interface Manager Pathways Available $60-150 58 Interface engine; manages network traffic;
performs protocol conversion and translation
Health Network Management Pathways Available $300-500 11 Enterprisewide management system; patient-centered
data collection, organization, and dissemination
ENTERPRISEWIDE CLINICAL PRACTICE MANAGEMENT APPLICATIONS
Care Manager Pathways Available $150-1,000 34 Acute care point-of-care clinical information
system
Clinical Workstation - Pathways Available $500-2,000 11 Assimilates and presents on-line, real-time
Phases I and II clinical information to physicians and other care
givers
Clinical Workstation - Pathways Q4 95/Q1 96 $500-2,000 0 Will incorporate advanced nursing functions,
Phases III and IV clinical imaging, and multimedia capabilities
Enterprise Scheduling Pathways Available $200-500 14 On-line enterprisewide scheduling system
Enterprise Registration Pathways Q4 95 $200-500 0 On-line enterprisewide registration system
Physician Chart Systems Pegasus Q1 96 $150-300 2 Physician's office computer-based patient record
Home Health Home Q2 96 $150-500 0 Clinical point-of-care applications for the home
Health health market
ENTERPRISE MANAGEMENT APPLICATIONS
Enterprise TRENDSTAR Available $200-750 650(3) Collects and presents data from transaction and
Strategic-Management decision support systems in a high-level, summary
form
Contract Management Pathways Available $200-1,000 47 Monitors and manages multiple varied contracts for
providers with managed care focus
Managed Care Pathways Q4 95 $200-1,000 1 Helps entities manage contractual arrangements
with providers, payers, and patients
TRENDSTAR Enterprise TRENDSTAR Q1 96/Q3 96 $100-750 0 Enterprisewide decision support system; new
Information System version will be client/ server based and will run
on Sybase
Receivables Workstation Pathways TBD $100-250 0 Facilitates A/R, billing, and other money
management functions
------------------------------
(1) $150-250 per module. On average, customers purchase 4-5 modules. Excludes
hardware (which is typically 50% of the software license fee),
implementation fees (which are typically $300-400), and software maintenance
fees (which approximate 15% of software license fees).
(2) $50 per module. On average, customers purchase 3 modules.
(3) 650 represents total TRENDSTAR installed base (including Enterprise
Strategic Management and TRENDSTAR).
53
SERVICES
Installation and implementation services are provided for purchasers of all
HBOC software products to assist with the smooth introduction of or transition
to those products. HBOC also provides software maintenance and enhancement
services, as well as custom programming and system modifications to meet special
client requirements. Equipment maintenance services are provided through HBOC's
various hardware partners.
CONNECT TECHNOLOGY. To support the connectivity needs of hospitals and
their affiliates, the Connect Technology Group ("CTG") provides total network
installation and support. In addition, CTG offers comprehensive value-added
network information services that extend local and metropolitan area networks
outside of the hospital to include payers, vendors, financial institutions and
the Internet. All together, HBOC's networking solutions provide customers with a
complete network solution for electronic access throughout a provider
enterprise.
OUTSOURCING SERVICES GROUP. HBOC has been in the outsourcing business in
the United States for more than 20 years and now offers outsourcing services in
the United Kingdom as well. With the change and uncertainty engendered by
healthcare reform and the resulting economic pressures, information systems
outsourcing is becoming increasingly popular in the United States. Outsourcing
services go beyond managing hospital data processing operations (traditionally
known as facilities management) to encompass strategic management services in
information systems planning, receivables management, business office
administration and major system conversions.
RESEARCH AND DEVELOPMENT AND TECHNOLOGY
HBOC's product development effort applies advanced computer technology and
installation methodologies to the specific information processing needs of its
customers. HBOC believes a substantial and sustained commitment to such research
and development is important to the long-term success of the business.
Many of HBOC's products are portable to a variety of hardware platforms to
protect a healthcare organization's hardware investments and enable it to
benefit from price/performance advances. For example, HBOC offers a full range
of its products on RISC (Reduced Instruction Set Computing) hardware using the
UNIX operating system, which has very attractive price/performance
characteristics. Additionally, workstation technology, via PCs, provides
enhanced productivity and appeal for system users by giving them access to
graphics, image processing, voice processing, multiple technologies and
sophisticated user interfaces.
HBOC also offers specialized processors, utilizing client/server technology,
which provide organizations with improved processing and storage for large
volumes of data and specific applications, including imaging and document
processing. HBOC utilizes local, metropolitan and wide area networks to provide
faster and more effective pathways to distribute the wider variety of data,
images and recorded voice needed by image processing and client/server
applications.
Investment in software development, including both research and development
expense as well as capitalized software, has increased as HBOC has addressed new
software applications and enhanced existing products for installed systems. In
each of the last three fiscal years, HBOC expensed 9% of revenue for research
and development, which was approximately $29 million in 1994. HBOC capitalized
25%, 24% and 23% of its research and development expenditures in 1994, 1993 and
1992, respectively. Such amounts exclude the costs associated with HBOC's
acquisitions.
The technical concepts and codes embodied in HBOC's computer programs and
program documentation are not protected by patents or copyrights but constitute
trade secrets that are proprietary to HBOC. HBOC and its subsidiaries are the
owners of various registered trademarks and service marks, but such registration
provides limited protection.
54
SALES AND MARKETING
HBOC's primary market for its products and services consists of
approximately 3,000 acute care hospitals (and affiliated organizations) in the
above-100 bed range of the total of approximately 5,900 hospitals in the United
States. Through hospital affiliates, HBOC is increasingly marketing new products
to the total healthcare enterprise including ambulatory care, physician offices,
pharmacies, reference laboratories and managed care providers. Through its
subsidiary HBO & Company Canada Ltd., HBOC provides products and services in
Canada, where there are approximately 500 hospitals having 100 or more beds.
Through its subsidiary HBO & Company (UK) Limited, HBOC services the United
Kingdom, where there are approximately 300 hospitals having 100 or more beds.
HBOC products are also sold in other parts of the world through agreements with
third parties. One or more of HBOC's applications are currently installed in
approximately 2,600 hospitals.
HBOC's products and services are offered through a companywide sales
organization and business units that have responsibility for research and
development and customer services. HBOC's direct sales force includes over 150
salespersons. Approximately two-thirds of the sales force is dedicated to the
Pathways, STAR and HealthQuest product lines. The balance includes dedicated
sales forces for each of the remaining products lines.
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BUSINESS OF CLINICOM
GENERAL
CliniCom develops and markets a multi-disciplinary clinical information
system that enables healthcare providers to plan, implement, coordinate and
manage all aspects of the patient care process. CliniCom's products have evolved
from a bedside nursing system to an integrated information system that provides
a comprehensive set of applications allowing providers to manage and measure the
cost-effectiveness and quality of healthcare in a variety of care settings. The
CliniCom system is an integrated software/hardware solution which provides
access to detailed clinical information through an open-systems architecture, a
relational database and wireless network. The system is designed to enhance the
efficiency of an entire healthcare provider network by unifying clinical
information from all areas with a consistent user interface and providing
on-line access to patient care information. CliniCom's modular software allows
healthcare organizations to purchase a base system and add software modules as
requirements change and new products are released. CliniCom continually expands
the scope and functionality of its products to address the changing needs of the
evolving healthcare market. Currently, CliniCom's primary market consists of
approximately 5,300 hospitals in the United States (excluding psychiatric
hospitals), 2,000 of which represent hospitals with 200 or more beds. CliniCom's
growth strategy includes expanding its target market to reach a broader provider
base, including the evolving regional healthcare delivery networks, managed care
organizations, ambulatory facilities, physician clinics and long-term care
facilities. As of June 30, 1995, CliniCom had sold its products and services to
113 customers.
INDUSTRY BACKGROUND
The healthcare industry is subject to rapidly changing political, regulatory
and market driven pressures to contain healthcare costs. Healthcare providers
must demonstrate not only that patients are being cared for in the most
cost-efficient setting, but also that each patient's treatment regimen utilizes
clinical resources efficiently to produce the desired clinical outcomes.
Moreover, in response to the growing influence of managed care, healthcare
providers are increasingly being required to share or assume the economic risk
of healthcare delivery. Healthcare providers must focus not only on treating
illness in a cost-effective manner but also on maintaining wellness through
preventive care. In response to these dynamics, many providers are consolidating
to take advantage of economics of scale and operating efficiencies in order to
become more cost-efficient and are forming vertically integrated healthcare
delivery networks to more effectively manage the continuum of patient care.
In response to market and economic pressures, healthcare providers are
requiring increasingly sophisticated information systems that can serve larger
and more diverse patient populations, provide better access to and integration
of clinical information, improve operating efficiencies, measure and report
patient outcomes and provide more complete information regarding the actual
costs of delivering and managing care. Traditional healthcare information
systems are limited in their ability to automate patient-care processes
throughout a healthcare delivery network and in their ability to adapt to a
variety of care delivery settings. These limitations stem from inflexible system
architectures and, more importantly, from a focus on administrative and
financial applications rather than on clinical and patient-care process
applications, which are necessary to address the changing clinical information
needs of healthcare providers today.
STRATEGY
CliniCom's strategy for operating as a stand-alone company addresses the
changing clinical information needs of healthcare organizations and responds to
the shift toward integrated delivery networks by providing system solutions to
manage the costs and quality of care. This strategy includes the ongoing
development of software applications which provide an infrastructure for patient
care management to support the entire continuum of care and enable providers to
develop an integrated computerized patient medical record.
56
CliniCom's strategy is based upon the following factors:
TEN YEARS OF SOLUTION-ORIENTED PRODUCT DEVELOPMENT. CliniCom has ten years
of experience in developing patient-focused clinical software applications. This
experience provides a strong foundation for development of new products and the
enhancement of current product offerings. CliniCom, in partnership with
healthcare providers, works directly with clinicians to develop products which
meet the clinical information needs of its clients. The software applications
and enhancements are designed to be flexible with representation formats that
are easily modified to meet client standards and user requirements.
ENABLING SOFTWARE TECHNOLOGY FOR COST-EFFECTIVE AND QUALITY
CARE. CliniCom's software products provide tools for evaluation, outcomes
measurement, orders assessment and variance analysis, all of which assist in the
effective management of patient care and healthcare costs. Applications are
designed so that information is available on a real-time basis and providers can
manage care efficiently at the time care is being delivered. Furthermore, use of
CliniCom's system reduces time spent recording patient information and
eliminates redundant documentation, which decreases overall costs for nurse
staffing, overtime and temporary hiring. CliniCom applications improve and
standardize care planning, provide more rapid and accurate treatment decisions,
improve compliance with physician orders and allow multiple user access to
patient information.
COMMITMENT TO OPEN SYSTEMS ARCHITECTURE AND INTEGRATION. CliniCom is
committed to an open systems architecture, allowing clinical information from
all areas of a healthcare network to be collected, accessed and analyzed from
all locations, thereby reducing redundant data entry and providing access to
current patient information. CliniCom products incorporate industry standard
technologies, including the UNIX operating system, the TCP/IP communication
protocol, a relational database management system, the OSF Motif Graphical User
Interface and Microsoft Windows. This enables CliniCom to incorporate third
party products into the CliniCom system, increases flexibility and permits the
storage of discreet data.
PORTABLE AND WIRELESS PRODUCTS. The portable CliniView PC and WIN enable
healthcare providers to access and update information on-line. The system's
portability allows healthcare organizations to respond efficiently to the
changing nature and location of patients within the organization. The WIN
technology provides cost savings and allows for easier installation compared to
hardwired systems and enables hundreds of portable terminals to operate
simultaneously within a facility.
HIGH QUALITY CLIENT SERVICE AND SUPPORT. CliniCom believes it has an
excellent reputation for providing high quality client service and support.
CliniCom provides a toll-free, 24-hour, seven-day-a-week hotline, offers ongoing
education programs and organizes user group meetings. CliniCom's ability to rely
on its installed customer base as reference sites establishes product
credibility and is an integral part of product sales.
CliniCom's long-term growth strategy has been to be the leading provider of
clinical information systems by offering a comprehensive, integrated system
solution for inpatient, home health, physician clinic, ambulatory and subacute
settings, as well as for the emerging healthcare delivery networks. CliniCom's
growth strategy is comprised of the following key elements: (i) continuing to
develop and offer products with increased functionality; (ii) broadening its
target markets beyond the hospital; (iii) leveraging its customer base through
increased direct and partner system sales; and (iv) pursuing additional
strategic partnerships and acquisitions.
TARGET MARKET
Currently, CliniCom's primary market consists of approximately 5,300
hospitals in the United States (excluding psychiatric hospitals), 2,000 of which
represent hospitals with 200 or more beds. The nature of the hospital market is
changing as the pressures of managed care, capitation and increasing competition
are forcing many healthcare providers to align and form integrated delivery
networks. Many of CliniCom's hospital customers are aggressively establishing
regional healthcare networks by merging with other hospitals, forming
primary-care networks and acquiring physician group practices
57
within local and regional markets. CliniCom believes that such consolidation
will increase the need for information systems that operate in a common systems
environment and integrate patient care processes throughout healthcare delivery
systems. CliniCom also continues to develop new product applications to reach a
broader client base including home health, managed care, physician clinics,
ambulatory and subacute settings.
PRODUCTS
The CliniCom system is an integrated software/hardware solution based on the
HealthBasys architecture, an information framework for managing patient care,
which includes the ability to develop standard clinical guidelines for improved
resource utilization and patient outcomes and to develop comprehensive
computerized medical records. The system provides access to detailed clinical
information through an open-systems architecture, a relational database and a
wireless network which allows on-line access to patient care information. The
system is designed to enhance the efficiency of an entire healthcare system by
unifying clinical information from all areas with a consistent user interface.
SOFTWARE
CliniCom's software applications assist healthcare providers in assessing,
documenting, planning and managing each patient's condition and care. CliniCom's
modular software allows healthcare organizations to purchase a base system and
to add software modules as their requirements change and as new products are
released. CliniCom's software products are functionally integrated to give
providers immediate, convenient access to relevant clinical and financial
information that influences their care decisions at the point of care. The
following chart describes CliniCom's current software applications:
58
APPLICATIONS FOR MANAGING PATIENT CARE
COORDINATED CARE CARE PLANNING
--------------- ------------
-Guidelines Manager -Patient Care Orders and Statusing
-Clinical Communications -Plan of Care
ASSESSMENT EVALUATION
--------- ---------
-Admission History -Discrete Lab Results Review
-Legend Charting -Electronic Flowsheet
-Narrative Charting -Flowboard
-Quick Admit -Flowsheet Reporting
-Physician Access
IMPLEMENTATION -Profile Reporting
-------------
-Chart Against Care Plan -Textual Results Review
-Data Acquisition System
-Intake and Out-take SPECIFIC CARE AREAS
-----------------
-IV Administration -Critical Care
-IV Medicated Drip Calculations -Med/Surg
-IV Site Management -Obstetrical
-Medication Administration -Pediatric
-Now Vitals -Respiratory
-Patient Supplies Management -Home health
-Vital Signs
DECISION SUPPORT
---------------
SYSTEM ADMINISTRATION -Clinical Query
--------------------
-Flowsheet Builder
-Screen Builder COMMUNICATIONS
--------------
-Carelink 7
PATIENT CARE DATABASE
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APPLICATIONS FOR MANAGING PATIENT CARE
COORDINATED CARE. CliniCom's coordinated care applications are an
integrated set of applications that allow for the coordination of treatment
planning and implementation, evaluation of patient care information and outcomes
management. The Guidelines Manager application is designed for both case and
critical pathway management and enables a healthcare provider to develop
clinical guidelines tailored to specific needs. The Clinical Communications
application is a multi-disciplinary treatment management and order
communications tool. Physician orders become part of the clinical guidelines and
order results are assessed along with the outcomes of the care plan. Coordinated
care provides an objective ability to automatically capture variances from the
established guidelines.
ASSESSMENT. These applications facilitate the ongoing assessment of a
patient's condition from admission history through discharge. Data can be
presented in a narrative or flowsheet format and displayed graphically or
textually either on-line or in reports. The user can define or modify the input
screens and reports on site.
CARE PLANNING. Care planning applications allow care providers to create,
revise and evaluate the plan of care for each patient. These applications allow
each hospital to devise a standard plan of care or create a unique care plan for
each patient. These applications also support a variety of charting methods. The
patient's plan of care can be accessed by any healthcare provider (with proper
security clearance), resulting in a comprehensive, multidisciplinary plan of
care.
IMPLEMENTATION. These applications enable care providers to document the
implementation of a plan of care and include (i) the charting of patient
treatments and the response to such treatments, (ii) a medication administration
system utilizing bar codes to identify the patient and providers and to confirm
the medication to be administered (providing reminders and alerts where
appropriate), (iii) an IV medicated drip module which calculates dosages and
rates automatically and (iv) the ability to acquire data from patient monitors.
EVALUATION. Evaluation applications allow care providers to compare the
plan of care with the actual care provided and to manage patient care. The
screen display can be configured for specialty groups such as cardiology,
urology and respiratory. Data can be displayed graphically or textually on-line
in review systems or reports. A flowsheet format is generally used to facilitate
viewing of trends and correlation of patient data.
SPECIFIC CARE AREAS. CliniCom also provides applications for specific care
areas including critical care, medical/surgical care, obstetrical care,
pediatric care and respiratory care. Each application is designed to meet the
unique requirements of all phases of care and each specific application may be
integrated with the others. CliniCom's home health product, Charisma, contains
applications which support infusion therapy, pharmacy, home medical equipment
and respiratory care. The Charisma system addresses patient management, managed
care pricing, document tracking, inventory, outcomes and utilization reporting
and electronic claims processing and reimbursement.
SYSTEM ADMINISTRATION. System administration and integration software
includes system administration functions and allows hospitals to control
security, report requests and formats. The screen system can be used by
hospitals to customize screen displays without changing the underlying
application. New screens can be quickly and easily created on-site by the
hospital as technology, procedures and documentation requirements change. The
system integration software allows the provider to combine information from
various sources into a single flowsheet presentation.
DECISION SUPPORT. CliniCom's decision support application, Clinical Query,
is an intuitive, user-friendly decision support tool that allows clinicians and
healthcare management personnel to extract and organize clinical data for
on-line review and analysis. Reports generated from Clinical Query display
information in user-defined formats, including detailed graphics and charts, and
provide a comprehensive, clear summary of information to enhance decision
making.
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COMMUNICATIONS. CliniCom's Carelink 7 is a comprehensive communications
application designed to complement and integrate disparate information systems,
information generated by medical devices and personal communication systems used
in healthcare organizations. It is comprised of various modules that translate
various communication protocols, support the automatic acquisition of data from
medical monitors and communicate information on network-based systems. The
applications are functionally integrated to support the clinical process
regardless of care delivery location.
PATIENT CARE DATABASE
CliniCom currently utilizes a relational database management system for the
collection and integration of clinical information into a central database. The
integration of patient information in a relational database allows users to
access patient information from a variety of sources.
WIRELESS INTERACTIVE NETWORK
CliniCom has developed and patented a wireless interactive network (WIN),
designed to enable portable terminals or PCs and other hardware devices to
communicate on-line with the host server system without physical wiring. The WIN
utilizes spread spectrum, frequency hopping and data encryption technologies to
ensure the integrity of data transmissions. The WIN technology provides costs
savings and easier installation over hardwired systems and enables hundreds of
portable terminals to operate simultaneously within a facility.
THIRD PARTY HARDWARE AND SOFTWARE
CliniCom purchases third party hardware and software which it incorporates
into the CliniCom system. The CliniCom system utilizes industry standard
components such as the ORACLE relational database, UNIX operating system,
Ethernet network communications medium, TCP/IP communication protocols and the
ANSI-C and Cognos' POWERHOUSE programming language. The CliniCom system also
operates on multiple computing platforms such as the IBM RS-6000,
Hewlett-Packard, Data General and Sequent Symmetry products. By utilizing "open"
hardware options that meet industry standards, CliniCom offers clients a choice
of terminals. CliniCom's CliniView PC product allows for a similar presentation
format on a variety of terminals, from portable terminals to desktop computers.
CliniCom is currently marketing and installing the following terminals:
CLINIVIEW PC: A portable, pen-based computer that communicates on-line
via the WIN technology and includes an optional barcode reader for
disposables, medication and provider identification. CliniCom has
designed a handle which incorporates a radio and wall mounted charger
for the computer. The CliniView PC terminal replaces CliniCom's
CliniView RF terminal.
OTHER TERMINALS: X Window terminals, manufactured by other vendors,
provide color and high resolution graphics and are offered along with
other third-party terminals and personal computers that are Microsoft
Windows compatible.
INSTALLATION AND SUPPORT SERVICES
CliniCom installs and supports its proprietary software and hardware
products, including wireless local area network software, database software and
software for interfacing with other installed healthcare information systems.
CliniCom provides initial training services to its clients and offers continuing
education classes and support services. Software maintenance services include
24-hour, seven-day-a-week telephone support, including assistance in problem
identification and resolution. CliniCom generally charges a monthly maintenance
fee for software support services based on a percentage of the list price for
each software application maintained. For third party hardware maintenance
services, CliniCom contracts with third party hardware manufacturers. CliniCom
charges each client for maintenance of proprietary hardware based on the number
of devices installed. Hardware and software maintenance services are purchased
on an annual basis. To date, all clients have continued to contract for such
services.
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NEW PRODUCT DEVELOPMENT
CliniCom has made a significant investment in research and development and
continues to expand the CliniCom system. CliniCom's product development efforts
are focused on the completion of CliniCom's HealthBasys architecture, the
infrastructure designed to assist healthcare providers in the management of
patient populations. CliniCom's long-term product development objective is to
enable healthcare organizations to maintain a computerized medical record for
all patient information recorded and used during each phase of patient care,
including inpatient, outpatient and long term/home healthcare. A strategic
element of this objective is the ongoing development of the LifeBase data
repository. CliniCom is currently developing the following software
applications:
LIFEBASE: A comprehensive database that integrates clinical, financial,
cost, administrative and demographic information into a central
database. This repository is the enabling technology for managing the
information requirements of a healthcare delivery network and will
contain all of the clinical information pertinent to a patient's case,
including standards of care, a record of patient care variances, an
account of all scheduled and actual resources, a long-term clinical
profile and the computer-based patient record.
COMMUNITY PATIENT INDEX AND REGISTRATION: A patient identification and
tracking tool which will provide a healthcare organization with
important information about each patient's health status and previous
healthcare system encounters, as well as demographic, employer, family
and insurance information.
CLINICAL PROFILE: An intelligent, clinician-defined summary of relevant
information from the patient care database that includes only the
specific data the clinician requires to make efficient and effective
decisions.
CLINICAL ENCOUNTER: Several modular applications designed to support
the physician, whether in an ambulatory or acute care setting, in
assessing and diagnosing a patient, developing a treatment plan and
documenting the patient's progress. This information will become a part
of the continuum-based clinical record in the LifeBase patient care
database.
HEALTHVIEW: A user-friendly graphical information tool that will enable
clinicians to review and act upon patient data from a single
application, eliminating the need to access multiple systems.
In addition, CliniCom intends to expand its Coordinated Care product to
include Order Management, which will communicate orders to ancillary systems and
departments by electronic messages and/or paper-based requisitions. CliniCom
also plans to extend Guidelines Manager, Clinical Communications and Order
Management to manage care delivered in an outpatient setting. In addition,
CliniCom may seek to acquire additional products or develop joint venture
relationships. There can be no assurance, however, that CliniCom will be
successful in developing or acquiring such application software.
In addition to the development of new software applications, CliniCom will
continue to enhance the WIN. CliniCom will also review new product introductions
by other manufacturers in the area of hardware technology and will evaluate the
adoption of such new technology into its product line where appropriate.
SALES AND MARKETING
CliniCom sells and markets its products through a twenty-five person sales
force. The sales effort is supported by a sales support group and a marketing
communications program designed to achieve frequent contact with the target
market. The program includes advertising, trade show participation, a program
for industry consultants, quarterly newsletters, public relations activities and
a direct marketing effort.
Under customary sales arrangements, CliniCom agrees to deliver to its
clients both the hardware and software necessary to operate the CliniCom system.
CliniCom licenses software to its clients in
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perpetuity on a non-exclusive and non-transferable basis. Because of the
relatively high price of a new system, healthcare organization procurement
cycles for these products have typically required multiple approvals and have
often spanned six to eighteen months. In many cases, healthcare organizations
employ consultants to assist them in assessing alternative systems and issuing
requests for proposals from vendors.
CliniCom is an industry remarketer for Oracle Systems Corporation, Cognos,
IBM, Hewlett-Packard Company, Toshiba, Data General and Sequent Computer
Systems, each of whose products may be used as part of the CliniCom system. In
addition, certain of these manufacturers provide additional sales and marketing
exposure for the CliniCom system through cooperative marketing programs, direct
sales assistance and seminars jointly sponsored with CliniCom.
HBOC AGREEMENT
In December of 1993, CliniCom entered into the HBOC Agreement for a
three-year term, expiring December 31, 1996, unless renewed. The HBOC Agreement
grants HBOC a non-exclusive, non-transferable license to use the CliniCom
software (i) to sublicense to new and existing customers, (ii) to develop and
enhance interfaces with HBOC's software and (iii) to provide training and
technical support. The HBOC Agreement grants HBOC the right to sublicense the
software modules only as an integrated component of HBOC's product lines. HBOC
is prohibited from marketing the software as a stand-alone system or as a system
interfacing with a non-HBOC system. HBOC is also prohibited from licensing any
application or system software from or to third parties that are competitive
with CliniCom's software, including software developed by HBOC. Similarly,
CliniCom is prohibited from entering into similar distribution arrangements with
vendors whose principal business is the development and sale of hospital
information systems. Under the HBOC Agreement, HBOC pays CliniCom approximately
50% of revenues generated from CliniCom software sales. HBOC and CliniCom have
also entered into agreements under which CliniCom provides hardware installation
and software support. For the years ended December 31, 1993 and 1994 and for the
six months ended June 30, 1995, CliniCom derived 19%, 29% and 54%, respectively,
of its total sales from its cooperative marketing arrangement with HBOC. The
HBOC Agreement may be terminated by HBOC only for a material breach.
The foregoing is a summary description of the business of CliniCom. For
further information, see "Incorporation of Certain Information By Reference."
CONCURRENT OFFERING
HBOC has filed a registration statement in connection with a proposed
underwritten public offering of up to 4,000,000 shares of HBOC Common Stock by
FDC. Such shares were acquired by FDC in June 1995 in consideration of the sale
of HSG by FDC to HBOC.
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MANAGEMENT OF HBOC
The following table sets forth certain information about the executive
officers and directors of HBOC:
NAME AGE POSITION WITH THE COMPANY
------------------------- --- --------------------------------------------------
Charles W. McCall 51 Director, President and Chief Executive Officer
James A. Gilbert 47 Vice President - General Counsel and Secretary
Jay P. Gilbertson 35 Vice President - Finance, Chief Financial Officer,
Treasurer and Assistant Secretary
Russell G. Overton 48 Senior Vice President - Business Development
Albert J. Bergonzi 45 Executive Vice President - Sales
John P. Crecine 55 Director
Alfred C. Eckert III 47 Director
Holcombe T. Green, Jr. 55 Chairman of the Board
Alton F. Irby III 55 Director
Gerald E. Mayo 63 Director
James V. Napier 58 Director
Charles E. Thoele 59 Director
Donald C. Wegmiller 56 Director
Charles W. McCall has served as a Director, President and Chief Executive
Officer of HBOC since 1991. Prior to joining HBOC, he served as President and
Chief Executive Officer of CompuServe, Inc., a wholly owned subsidiary of H&R
Block, from 1985 to 1991. Mr. McCall is also a Director of SYMIX Systems, Inc.,
EIS International, Inc., WestPoint Stevens Inc. and XcelleNet, Inc.
James A. Gilbert has served as Vice President and General Counsel since
joining HBOC in 1988. He has served as Secretary since 1992.
Jay P. Gilbertson has served as Vice President - Finance, Chief Financial
Officer, Treasurer and Assistant Secretary since 1993. In 1992, Mr. Gilbertson
served as Vice President - Controller and Chief Accounting Officer. From 1988
through 1991, he served in a financial management capacity at Medical Systems
Support, Inc., HBOC's hardware maintenance subsidiary sold in 1991.
Russell G. Overton has served as Senior Vice President - Business
Development since 1992. From 1989 through 1991, he served as Vice President -
Business Development for HealthQuest Ltd. (a wholly owned subsidiary of HBOC).
Albert J. Bergonzi has served as Executive Vice President - Sales of HBOC
since June 1995. Prior to that time, Mr. Bergonzi served as the Vice President
and General Manager of HBOC's Amherst Product Group.
John P. Crecine has served as Chief Executive Officer of Integrated Digital
Systems, Inc., a technological services company, since July 1994. He was the
President of Georgia Institute of Technology from 1987 to July 1994. Dr. Crecine
is a Director of Intermet Corporation. He has been a Director of HBOC since
1990.
64
Alfred C. Eckert III has been President of Greenwich Street Capital
Partners, Inc., a private investment firm, since January 1994 and has been a
Partner of Greycliff Partners, a private investment firm, since December 1991.
He was a Partner of Goldman, Sachs & Co., investment bankers, from December 1984
to November 1991. Mr. Eckert is a Director of Georgia Gulf Corporation. He has
been a Director of HBOC since 1990.
Holcombe T. Green, Jr. is the Chairman of the Board of Directors of HBOC and
has been a Director of HBOC since 1987. He served in the capacity of President
and Chief Executive Officer of HBOC from January 1990 to January 1991. Mr. Green
has served as the Chairman and Chief Executive Officer of WestPoint Stevens
Inc., a textile manufacturing company, since October 1992. Mr. Green has been
the Principal of Green Capital Investors, L.P., a private investment fund, since
October 1987. He is also a Director of Georgia Gulf Corporation, Rhodes, Inc.
and American Buildings Company.
Alton F. Irby III has been a principal of J O Hambro Magan & Company,
investment bankers, since March 1988 and has also served as Deputy Chairman
since March 1994. Mr. Irby has been a Director of HBOC since 1990.
Gerald E. Mayo has served as Chairman and President of Midland Financial
Services, Inc., the holding company for The Midland Life Insurance Company which
is the successor to The Midland Mutual Life Insurance Company, a life insurance
and annuities company, since December 1994. Mr. Mayo served the predecessor
company in similar capacities for over five years. Mr. Mayo is a Director of
Huntington BancShares Inc., The Columbia Gas System, Inc. and Borror
Corporation. He has been a Director of HBOC since 1991.
James V. Napier has served as the Chairman of the Board of Directors of
Scientific-Atlanta, Inc., a communications equipment manufacturer, since
November 1992 and served as Acting Chief Executive Officer from December 1992 to
July 1993. From June 1988 to October 1992, he was Chairman and President of
Commercial Telephone Group, a telecommunication products company. Mr. Napier has
been a private investor since August 1987. Mr. Napier is a Director of Engelhard
Corporation, Intelligent Systems Corporation, Vulcan Materials Corporation,
Summit Communications Group, Inc. and Rhodes, Inc. He has been a Director of
HBOC since 1981.
Charles E. Thoele has been a Consultant to and a Director of Sisters of
Mercy Health Systems, a not for profit healthcare system, since February 1991.
From July 1986 to January 1991, he served as the Chief Operating Officer of
Sisters of Mercy Health Systems. Mr. Thoele is also a Director of Transcend
Services, Inc. He has been a Director of HBOC since 1989.
Donald C. Wegmiller has been President and Chief Executive Officer of
Management Compensation Group/HealthCare, an executive and physician
compensation consulting firm, since April 1993. He was Vice Chairman and
President of HealthSpan Health Systems Corporation ("HealthSpan") from November
1992 to April 1993. From May 1987 to November 1992, he was President and Chief
Executive Officer of Health One Corporation, a healthcare services company that
merged with HealthSpan. Mr. Wegmiller is a Director of Medical Graphics
Corporation, Possis Corporation and Minnesota Power & Light Company. He has been
a Director of HBOC since 1988.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Representatives of Arthur Andersen LLP will attend the meeting, will have
the opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions. The CliniCom Board has selected
Arthur Andersen LLP as the independent certified public accountants to audit
CliniCom's financial statements for the fiscal year ending December 31, 1995.
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STOCKHOLDER PROPOSALS
If the Merger is not consummated, stockholders who intend to present
proposals at the 1996 annual meeting, which CliniCom currently expects to hold
in May 1996, must deliver them to CliniCom at its principal executive offices on
or before January 3, 1996, for inclusion in the proxy statement and form of
proxy relating to that meeting. All proposals must comply with the applicable
requirements of the federal securities laws and CliniCom's Bylaws. In the event
the Merger is consummated there will not be a 1996 annual meeting.
OTHER MATTERS
CliniCom knows of no business which will be presented for consideration at
the Meeting other than that described above. However, if any other business
should come before the Meeting, it is the intention of the persons named in the
enclosed form of proxy to vote the proxies in respect of any such business in
accordance with their best judgment.
CERTAIN LEGAL MATTERS
The validity of the shares of HBOC Common Stock offered hereby will be
passed upon for HBOC by Jones, Day, Reavis & Pogue, Atlanta, Georgia. Certain
tax matters in connection with the Merger have been passed upon for CliniCom by
Davis, Graham & Stubbs, L.L.C., Denver, Colorado.
EXPERTS
The audited financial statements of HBOC incorporated by reference in this
Proxy Statement/ Prospectus and elsewhere in the Registration Statement of which
this Proxy Statement/Prospectus is a part, to the extent and for the periods
indicated in their report, have been audited by Arthur Andersen LLP, independent
public accountants, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.
With respect to the unaudited interim financial information of HBOC for the
quarter ended March 31, 1994 and 1995, and the quarter and six months ended June
30, 1994 and 1995, which are also incorporated by reference herein, Arthur
Andersen LLP has applied limited procedures in accordance with professional
standards for a review of that information. However, their separate reports
thereon state that they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
reports on that information should be restricted in light of the limited nature
of the review procedures applied. In addition, the accountants are not subject
to the liability provisions of Section 11 of the Securities Act for their report
on the unaudited interim financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the Securities Act.
The audited financial statements and schedule of CliniCom incorporated by
reference in this Proxy Statement/Prospectus and elsewhere in the Registration
Statement of which this Proxy Statement/Prospectus is a part, to the extent and
for the periods indicated in their reports, have been audited by Arthur Andersen
LLP, independent public accountants, and are included in reliance upon the
authority of said firm as experts in giving said reports.
The financial statements of HSG at December 31, 1993 and 1994, and for each
of the three years in the period ended December 31, 1994 incorporated herein and
in the Registration Statement of which this Proxy Statement/Prospectus is a part
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon, and are incorporated herein in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
66
APPENDIX A
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, made this 14th day of July, 1995, by and among HBO
& COMPANY, a Delaware corporation ("Parent"); HBO & COMPANY OF GEORGIA, a
Delaware corporation ("Purchaser"); and CLINICOM INCORPORATED, a Delaware
corporation ("Acquired Company");
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Acquired Company, Parent and
Purchaser deem it advisable and in the best interests of their respective
stockholders that Purchaser acquire the Acquired Company, and, on or prior to
the date hereof, such Boards of Directors have approved the acquisition of the
Acquired Company upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
receipt, sufficiency and adequacy of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as follows:
I. DEFINITIONS.
As used herein, the following terms shall have the following meanings unless
the context otherwise requires:
1.1 "Acquired Company" shall mean Clinicom Incorporated, a Delaware
corporation.
1.2 "Acquired Company Information" shall have the meaning set forth in
Section 2.3.1.
1.3 "Acquired Company Reports" shall have the meaning set forth in Section
3.21.
1.4 "Acquired Company Software" shall have the meaning set forth in Section
3.14.2(iii).
1.5 "Acquired Company Stock" shall mean the common stock, $0.001 par value
per share, of the Acquired Company.
1.6 "Agreement" shall mean this Agreement of Merger.
1.7 "Certificate of Merger" shall have the meaning set forth in Section
2.1.2.
1.8 "Benefit Plans" shall have the meaning set forth in Section 3.16.
1.9 "Certificates" shall have the meaning set forth in Section 2.2.2 hereof.
1.10 "Closing" shall have the meaning set forth in Section 2.1.9 hereof.
1.11 "Closing Date" shall mean the date on which the Closing occurs pursuant
to Section 8.1 hereof.
1.12 "Covenants Not to Compete" shall mean the Covenants Not to Compete
referred to in Section 6.11.
1.13 "Current Plan" shall have the meaning set forth in Section 3.16.1.
1.14 "Customer Contracts" shall have the meaning set forth in Section 3.12.1.
1.15 "Director Stock Option Plan" shall mean the Clinicom Incorporated
Nonemployee Director Stock Option Plan.
1.16 "Delaware Code" shall mean the Delaware General Corporation Law.
1.17 "DOL" shall mean the United States Department of Labor.
1.18 "Effective Time" shall have the meaning set forth in Section 2.1.2.
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1.19 "Employee Stock Option Plan" shall mean the Clinicom Incorporated 1985
Employee Stock Option Plan.
1.20 "Employee Stock Purchase Plan" shall mean the Clinicom Incorporated
Employee Stock Purchase Plan.
1.21 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
1.22 "ERISA Affiliate" shall mean, with respect to a Person, any other Person
that is required to be aggregated with such Person under Tax Code Section
414(b), (c), (m) and/or (o) at any time prior to the Closing Date.
1.23 "ERISA Plan" shall have the meaning set forth in Section 3.16.1.
1.24 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.25 "Exchange Agent" shall have the meaning set forth in Section 2.2.1.
1.26 "Exchange Ratio" shall have the meaning set forth in Section 2.1.6(a).
1.27 "401(k) Plan" shall mean the Clinicom Incorporated 401(k) Savings Plan
and Trust.
1.28 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust and Improvements
Act of 1976, as amended.
1.29 "Hazardous Substance" shall have the meaning set forth in Section 3.18.
1.30 "IRS" shall mean the United States Internal Revenue Service.
1.31 "Licensed Software" shall have the meaning set forth in Section
3.14.2(ii).
1.32 "Material Adverse Effect" (whether or not capitalized) shall mean a
material adverse effect on the businesses, assets (including intellectual
property rights) or operations of the corporation in question and its
subsidiaries, taken as a whole, which results from or is the consequence of any
claim, loss, damage or occurrence when aggregated with any other claims, losses,
damages or occurrences arising from the same or any substantially similar act,
failure to act, event, cause or circumstances. For purposes of this definition,
all breaches of representations and warranties set forth in Section 3.16 shall
be deemed to arise from the same act, event, cause or circumstances.
1.33 "Material Contracts" shall have the meaning set forth in Section 3.12.
1.34 "Merger" shall mean the merger of the Acquired Company with and into
Purchaser, as set forth in Section 2.1.1.
1.35 "Merger Consideration" shall have the meaning set forth in Section
2.1.6(a).
1.36 "Nasdaq" shall mean the National Association of Securities Dealers
Automated Quotation System.
1.37 "1933 Act" shall mean the Securities Act of 1933, as amended.
1.38 "Outside Closing Date" shall have the meaning set forth in Section
10.1.3.
1.39 "Owned Software" shall have the meaning set forth in Section 3.13.
1.40 "Parent" shall mean HBO & Company, a Delaware corporation, which is the
sole stockholder of Purchaser.
1.41 "Parent Reports" shall have the meaning set forth in Section 4.6.
1.42 "Parent Stock" shall mean the common stock, $0.05 par value per share,
of Parent.
1.43 "PBGC" shall mean the Pension Benefit Guaranty Corporation established
under Title IV of ERISA.
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1.44 "Person" shall include, but is not limited to, an individual, a trust,
an estate, a partnership, an association, a company, a corporation, a sole
proprietorship, a professional corporation, a professional association or other
entity.
1.45 "Pre-Closing Parent Stock Price" shall have the meaning set forth in
Section 7.8.
1.46 "Purchaser" shall mean HBO & Company of Georgia, a Delaware corporation.
1.47 "Real Property" shall have the meaning set forth in Section 3.18.
1.48 "Registration Statement" shall have the meaning set forth in Section
2.3.1.
1.49 "SEC" shall mean the Securities and Exchange Commission.
1.50 "Stock Plans" shall mean the Director Stock Option Plan, Employee Stock
Option Plan and Employee Stock Purchase Plan.
1.51 "Surviving Corporation" shall have the meaning set forth in Section
2.1.1 hereof.
1.52 "Takeover Proposal" shall have the meaning set forth in Section 2.11
hereof.
1.53 "Tax Code" shall mean the Internal Revenue Code of 1986, as amended.
II. COVENANTS AND UNDERTAKINGS.
2.1 TERMS AND APPROVAL OF MERGER.
2.1.1. TERMS OF THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware Code, the
Acquired Company shall be merged with and into Purchaser (the "Merger"), as soon
as practicable following the satisfaction or waiver of the conditions set forth
in Articles V, VI and VII hereof. Following the Merger, Purchaser shall continue
as the surviving corporation (the "Surviving Corporation") and the separate
corporate existence of the Acquired Company shall cease.
2.1.2. EFFECTIVE TIME; EFFECTS OF THE MERGER. The Merger shall become
effective when both (i) this Agreement shall be adopted and approved by the
stockholders of the Acquired Company in accordance with the applicable
provisions of the Delaware Code and (ii) a Certificate of Merger (the
"Certificate of Merger"), executed in accordance with the relevant provisions of
the Delaware Code is filed with the Secretary of State of Delaware (the time the
Merger becomes effective being referred to as the "Effective Time"). The Merger
shall have the effects set forth in the Delaware Code.
2.1.3. CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of Purchaser as in effect immediately preceding the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation. The
Bylaws of Purchaser as in effect immediately preceding the Effective Time shall
be the Bylaws of the Surviving Corporation.
2.1.4. DIRECTORS. The directors of Purchaser immediately prior to the
Effective Time shall be the directors of the Surviving Corporation and shall
hold office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
2.1.5. OFFICERS. The officers of Purchaser immediately prior to the
Effective Time shall be the officers of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
2.1.6. CONVERSION OF SHARES. (a) Subject to Section 2.1.6(g) below, each
outstanding share of Acquired Company Common Stock issued and outstanding
immediately prior to the Effective Time, shall, at the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into the right to receive four-tenths (4/10ths) of a share of Parent
Stock (the "Exchange Ratio"), deliverable to the holder thereof, without
interest on the value thereof, upon the
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surrender of the certificate(s) formerly representing such outstanding share.
(The shares of Parent Stock, or cash in lieu of fractions thereof, receivable by
each Acquired Company stockholder as described above are referred to hereinafter
as the "Merger Consideration.")
(b) Each share of Acquired Company Stock held in the treasury of the
Acquired Company shall, at the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, be cancelled and retired
and cease to exist.
(c) Subject to any applicable escheat laws, until surrendered and exchanged
pursuant hereto, each certificate that immediately prior to the Effective Time
represented outstanding shares of Acquired Company Stock shall be deemed for all
corporate purposes of Parent, subject, however, to the other provisions of this
Section 2.1.6, to evidence the ownership of the number of whole shares of Parent
Stock into which the shares of Acquired Company Stock represented thereby shall
have been converted, and shall be deemed to represent the right to receive the
amount of cash in lieu of fractional shares, if any, into which the shares of
Acquired Company Stock represented thereby shall have been converted pursuant to
subsection (a) of this Section 2.1.6. No interest shall be payable with respect
to any cash payment in lieu of fractional shares. No cash or stock dividend
payable, no certificate representing split shares deliverable, and no other
distribution payable or deliverable to holders of record of Parent Stock at any
time subsequent to the Effective Time shall be paid or delivered to the holder
of any certificate that at the Effective Time represented Acquired Company Stock
unless and until such certificate is surrendered to the Exchange Agent. However,
subject to any applicable escheat laws, upon such surrender, there shall be paid
or delivered to the holder of record of the certificate or certificates for
shares of Parent Stock issued and exchanged therefor, the certificates for
shares and/or other property resulting from any such dividends, splits, or other
distributions, as the case may be, that shall have theretofore become payable or
deliverable with respect to such shares of Parent Stock subsequent to the
Effective Time. No interest shall be payable with respect to such payment or
delivery of any dividends or other distributions upon the surrender of
certificates that represented Acquired Company Stock at the Effective Time.
(d) No certificates or scrip representing fractional shares of Parent Stock
shall be issued upon surrender of certificates representing Acquired Company
Stock converted pursuant hereto, and no dividend, stock split, or other
distribution of Parent shall relate to any such fractional share interest, and
no such fractional share interest shall entitle the owner thereof to vote or to
any other rights of a stockholder of Parent. In lieu of any such fractional
share, any holder of Acquired Company Stock shall be entitled, upon surrender in
accordance herewith of such holder's certificate or certificates representing
Acquired Company Stock, to receive a cash payment therefor, without interest, at
a PRO RATA amount based on a per share amount equal to the Pre-Closing Parent
Stock Price. No interest shall accrue with respect to any cash held for the
benefit of holders of unsurrendered certificates theretofore representing shares
of Acquired Company Stock at the Effective Time.
(e) All shares of Parent Stock into which shares of the Acquired Company
Stock have been converted pursuant to this Section 2.1.6 shall be deemed to have
been issued in full satisfaction of all rights pertaining to such converted
shares and shall, when issued pursuant to the provisions hereof, be fully paid
and nonassessable.
(f) The stock transfer books of the Acquired Company shall be closed at the
Effective Time, and thereafter no transfer of any shares of Acquired Company
Stock shall be recorded thereon. In the event a transfer of ownership of shares
of Acquired Company Stock is not recorded on the stock transfer books of the
Acquired Company, a certificate or certificates representing the number of whole
shares of the Parent Stock into which such shares of Acquired Company Stock
shall have been converted in connection with the Merger may be issued to the
transferee of such shares of Acquired Company Stock if the certificate or
certificates representing such shares of Acquired Company Stock is or are
surrendered to the Exchange Agent accompanied by all documents deemed necessary
by the Exchange Agent to evidence and effect such transfer of ownership of
shares of Acquired Company
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Stock and by the payment of any applicable stock transfer tax with respect to
such transfer, subject to compliance with any restrictions or conditions
contained herein with respect to the transfer of shares of Acquired Company
Stock.
(g) In the event that Parent at any time or from time to time after the date
of this Agreement, but prior to the Effective Time, effects a subdivision or
combination of the outstanding Parent Stock into a greater or lesser number of
shares, then and in each such event the Exchange Ratio described in Section
2.1.6(a) shall be increased or decreased proportionately. In the event that
Parent at any time or from time to time shall fix a record date, which record
date is after the date of this Agreement but prior to the Effective Time, for
the determination of holders of Parent Stock entitled to receive a dividend or
other distribution payable in additional shares of Parent Stock, cash (except
Parent's regular quarterly dividend), or any other property, then and in each
such event, regardless of whether such dividend is to be paid prior to or after
the Effective Time, the Merger Consideration payable hereunder per share of
Acquired Company Stock shall be increased to reflect such dividend or
distribution as though each stockholder of the Acquired Company were, as of such
issuance or record date, a holder of record of that number of shares of Parent
Stock comprising the Merger Consideration otherwise payable to such stockholder
pursuant to Section 2.1.6(a).
2.1.7. STOCK OPTIONS. Options granted under the Stock Option Plans,
regardless of whether such options are currently exercisable, shall be treated
as follows:
(a) At the Effective Time, Parent shall assume the Acquired Company's
rights and obligations under each of the outstanding options previously
granted under the Director Stock Option Plan and the Employee Stock Option
Plan (each such option existing immediately prior to the Effective Time
being called an "Existing Option," and each such option so assumed by Parent
being called an "Assumed Option"), by which assumption the optionee shall
have the right to purchase that number of shares of Parent Stock (rounded
down to the nearest whole) into which the number of shares of Acquired
Company Stock the optionee was entitled to purchase under the
Existing Option would have been converted pursuant to the terms of the
Merger as described in Section 2.1.6 hereof. Each Assumed Option shall
constitute a continuation of the Existing Option, substituting Parent for
Acquired Company as issuer and employment by Parent, Purchaser or one of
their respective subsidiaries for employment by the Acquired Company. The
aggregate price for the total number of shares of Parent Stock at which the
Assumed Option may be exercised shall be the aggregate price at which the
Existing Option was exercisable for the total number of shares of Acquired
Company Stock, reduced (as necessary for purposes of rounding down) to the
price that will buy the number of whole shares for which the Assumed Option
will be exercisable in accordance with this paragraph (a), and the purchase
price per share of Parent Stock thereunder shall be such aggregate price
divided by the total number of shares of Parent Stock covered thereby.
(b) Each participant in the Employee Stock Purchase Plan on the day
prior to the Effective Date shall receive (1) the number of shares of Parent
Stock into which the shares of Acquired Company Stock issuable to such
participant in accordance with the Employee Stock Purchase Plan would have
been converted and (2) cash in lieu of any fractional share of Parent Stock,
together with a cash refund of any excess of the amount collected during the
purchase period, over the amount of the purchase price of the Acquired
Company Stock that otherwise would be issuable to such participant.
2.1.8. STOCKHOLDERS' MEETING. The Acquired Company, acting through its
Board of Directors, shall:
(a) promptly furnish a copy of the proxy statement/prospectus included
in the Registration Statement (defined in Section 2.3.1 below) to each of
its stockholders after the Registration Statement has become effective with
the SEC;
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(b) duly call, give notice of, convene and hold a special meeting of its
stockholders and submit this Agreement and any related matters, as
appropriate, and the Merger to a vote of the Acquired Company's stockholders
as soon as practicable for the purpose of considering and taking action upon
this Agreement and any such related matters; and
(c) use its reasonable best efforts, subject to the provisions of
Section 2.11, to obtain the necessary approval of the Merger by its
stockholders.
2.1.9. CLOSING; FILING OF CERTIFICATE OF MERGER. Upon the terms and
subject to the conditions hereof, as soon as practicable following the
satisfaction or waiver of the conditions set forth in Articles V, VI and VII
hereof, the Acquired Company and Purchaser shall execute and file the
Certificate of Merger referred to in Section 2.1.2 in the manner required by the
Delaware Code, and the parties hereto shall take all such other and further
actions as may be required by law to make the Merger effective. Prior to the
filing referred to in this Section 2.1.9, a closing (the "Closing") will be held
as set forth in Section 8.1 hereof, for the purpose of confirming all of the
foregoing.
2.2 DELIVERY OF MERGER CONSIDERATION.
2.2.1. EXCHANGE AGENT. Prior to the Effective Time, Purchaser shall
designate a bank or trust company to act as Exchange Agent in connection with
the Merger (the "Exchange Agent"). At the Effective Time, Purchaser or Parent
shall take all steps necessary to enable and cause Parent or the Surviving
Corporation to provide the Exchange Agent with the shares of Parent Stock and
cash in respect of fractional shares necessary to deliver the Merger
Consideration to each holder of Acquired Company Stock as contemplated by
Section 2.1.6 hereof prior to the time that such deliveries are required to be
made by the Exchange Agent as provided in this Section 2.2.
2.2.2. SURRENDER OF CERTIFICATES AND DELIVERY OF MERGER
CONSIDERATION. Promptly after the Effective Time, the Exchange Agent shall mail
to each record holder (as of the Effective Time) of an outstanding certificate
or certificates that immediately prior to the Effective Time represented
outstanding shares of Acquired Company Stock (the "Certificates"), a letter of
transmittal in customary form (which specifies that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender to the Exchange Agent of a Certificate, together
with such letter of transmittal properly completed and duly executed, together
with any other required documents, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration, and such
Certificate shall forthwith be cancelled. If payment is to be made to a Person
other than the Person in whose name the Certificate surrendered is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the Person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a Person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered in accordance
with the provisions of this Section 2.2.2, each Certificate shall represent for
all purposes only the right to receive the Merger Consideration, without any
interest on the value thereof.
2.3.3. ESCHEAT LAWS. Notwithstanding any provision of this Article II to
the contrary, neither Parent nor the Surviving Corporation shall be liable to
any holder of Certificates formerly representing shares of Acquired Company
Stock for any property properly delivered or amount paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.3 SEC REGISTRATION.
2.3.1. The Acquired Company shall furnish to Parent such information about
the Acquired Company, including without limitation information about its
stockholders, as may be necessary to enable Parent to prepare and file with the
SEC a Registration Statement on Form S-4 under the 1933 Act, and the rules and
regulations promulgated thereunder, in respect of the Parent Stock to be issued
by reason of the Merger (such registration statement, the prospectus included
therein and the proxy
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statement to be furnished to the holders of the Acquired Company Stock, in each
case together with any amendments thereto, being referred to in this Agreement
as the "Registration Statement"). The Acquired Company Information (as defined
below) included in the Registration Statement shall not, at the time the
Registration Statement is declared effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. If at any
time prior to the Effective Time any event or circumstance should come to the
attention of the Acquired Company with respect to the Acquired Company
Information that is required to be set forth in an amendment or supplement to
the Registration Statement, the Acquired Company shall immediately notify Parent
and shall assist Parent in appropriately amending or supplementing the
Registration Statement in the manner contemplated in Section 2.3.4 below. The
Registration Statement insofar as it relates to information concerning the
Acquired Company, or its business, assets, directors, officers, or stockholders
or other matters pertaining to the Acquired Company that is supplied by the
Acquired Company for inclusion in the Registration Statement (the "Acquired
Company Information") shall comply as to form and substance in all material
respects with the applicable requirements of the 1933 Act and the rules and
regulations thereunder and the Exchange Act and the rules and regulations
thereunder; except that the Acquired Company shall have no liability or
obligation for any information other than the Acquired Company Information.
2.3.2. The Acquired Company shall use its reasonable best efforts to cause
its accountants, Arthur Andersen, LLP, to deliver to Parent letters dated at the
time the Registration Statement becomes effective and as of the Closing Date,
addressed to Parent, both (i) to the effect that the Acquired Company satisfies
the tests applicable to it such that the Merger can be accounted for as a
"pooling of interests"; and (ii) containing such matters as are customarily
contained in auditors' letters regarding information about the Acquired Company
furnished expressly for inclusion in the Registration Statement, and in a form
and substance reasonably satisfactory to Parent. The Parent shall use its
reasonable best efforts to cause its accountants, Arthur Andersen, LLP to
deliver to the Acquired Company letters at such times to the effect that the
Parent satisfies the applicable tests for accounting for the Merger as a
"pooling of interests."
2.3.3. Parent shall file and use its reasonable best efforts to have the
Registration Statement declared effective by the SEC as promptly as practicable,
and shall use its reasonable best efforts to take any action required to be
taken to comply with any applicable federal or state securities laws in
connection with the issuance of Parent Stock in the Merger; except that such
covenant of Parent is made, as to those portions of the Registration Statement
containing or required to contain Acquired Company Information, assuming and
relying on timely and full compliance with Sections 2.3.1 and 2.3.2.
2.3.4. Parent covenants that the Registration Statement shall not, at the
time it is declared effective, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; except that such covenant
of Parent is made, as to those portions of the Registration Statement containing
or required to contain Acquired Company Information, assuming and relying on
timely and full compliance with Sections 2.3.1 and 2.3.2. If at any time prior
to the Effective Time any event or circumstance should come to the attention of
Parent that is required to be set forth in an amendment or supplement to the
Registration Statement, Parent shall use its reasonable best efforts to amend or
supplement appropriately the Registration Statement. An amendment or supplement
may be accomplished, to the extent permitted by law, rule or regulation, by
including such information in a filing under the Exchange Act that is
incorporated by reference into the Registration Statement.
2.3.5. Parent covenants that the Registration Statement and all other
documents required to be filed by Parent with the SEC in connection with the
transactions contemplated herein shall comply as to form and substance in all
material respects with the applicable requirements of the 1933 Act and
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the rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder; except that Parent shall have no liability or obligation
for any failure to comply with such requirements arising out of the Acquired
Company Information.
2.3.6. Parent shall use all its reasonable best efforts to file all reports
required to be filed by it on a timely basis under the 1933 Act or the Exchange
Act and the rules and regulations adopted by the SEC thereunder. Parent and the
Acquired Company shall use their reasonable best efforts to take such further
action as may be necessary to ensure that the requirements of Rule 144(c) under
the 1933 Act are satisfied so as to enable any "affiliates" of the Acquired
Company (as that term is used in Rule 145 under the 1933 Act) to offer or sell
the Parent Stock received by them in the Merger pursuant to paragraph (d) of
Rule 145 (subject to compliance with the provisions of paragraphs (e), (f) and
(g) of Rule 144).
2.3.7. Parent shall use its reasonable best efforts to obtain prior to the
effective date of the Registration Statement all necessary "Blue Sky" permits
and approvals, if any, required to consummate the Merger.
2.4 AFFILIATES.
(a) The Acquired Company shall use its reasonable best efforts to cause each
person that is an "affiliate" of the Acquired Company under the Securities Act
on the date of the Acquired Company's stockholder meeting to deliver to the
Parent at the Closing a written agreement substantially in the form attached
hereto as EXHIBIT 2.4(A) ("Rule 145 Letters").
(b) The Acquired Company shall use its reasonable best efforts to cause each
person that is an "affiliate" of the Acquired Company under the Securities Act
31 days prior to the date of the Acquired Company's stockholder meeting to
deliver to the Parent on such date a written agreement substantially in the form
attached hereto as EXHIBIT 2.4(B) ("Pooling Letters").
2.5 TRADING PROHIBITIONS. The parties hereto hereby acknowledge that as a
result of disclosures by the Acquired Company, Parent and Purchaser contemplated
under this Agreement, each of the parties and their affiliates may, from time to
time, have material, non-public information concerning the Acquired Company,
Parent, Purchaser and their respective subsidiaries or affiliated companies. The
parties confirm that they and their affiliates are aware, and have advised their
directors, officers, employees and representatives that, (i) the United States
securities laws may prohibit a person who has material, non-public information
from purchasing or selling securities of any company to which such information
relates, and (ii) material non-public information shall not be communicated to
any other person except as permitted herein.
2.6 CONDUCT OF THE BUSINESS OF THE ACQUIRED COMPANY PRIOR TO CLOSING.
2.6.1. Except (i) with the prior consent in writing of Purchaser (which
consent may not be unreasonably withheld in respect of subparagraph (e) below),
(ii) as may be required to effect the transactions contemplated by this
Agreement, or (iii) as provided otherwise in this Agreement, the Acquired
Company covenants that, between the date of this Agreement and the Effective
Time, the Acquired Company will conduct its business in the ordinary course, and
that it will:
(a) preserve the corporate organization of the Acquired Company intact
and use its reasonable best efforts to preserve the goodwill of customers
and others having business relations with the Acquired Company;
(b) use its reasonable best efforts to maintain the properties of the
Acquired Company in substantially the same working order and condition as
such properties are in as of the date of this Agreement, reasonable wear and
tear excepted;
(c) not effect any sale, assignment or transfer of any of its assets
except in the ordinary course of business and except for the transfer of
funds described on EXHIBIT 2.6.1(C) a trust under the Acquired Company's
Executive Retention Plan;
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(d) use its reasonable best efforts to keep in force at no less than
their present limits all existing policies of insurance or comparable
replacements thereof insuring the Acquired Company and its properties;
(e) not enter into or renew any Material Contract, enter into any
material amendment to any Material Contract or suffer, permit or incur any
of the transactions or events described in Section 3.9 hereof to the extent
such events or transactions are within the control of the Acquired Company
(except that the Acquired Company may enter into Customer Contracts in the
ordinary course of business consistent with historical practices);
(f) not make or permit any change in the Acquired Company's Certificate
of Incorporation or Bylaws, or in its authorized securities;
(g) other than pursuant to the existing terms of the Employee Stock
Purchase Plan, not grant any stock option or right to purchase any security
of the Acquired Company, issue any security convertible into such
securities, purchase, redeem, retire or otherwise acquire any of such
securities, or agree to do any of the foregoing or declare, set aside or pay
any dividend, make any other distribution or declare any split in respect of
such securities;
(h) not adopt any new Benefit Plan or amend any existing Benefit Plan,
and not make any contribution to or distribution from any employee benefit
plan, pension plan, stock bonus plan, 401(k) plan or profit sharing plan
(except for the payment of any health, disability and life insurance
premiums that may become due and except for contributions or distributions
required to be made or as consistently made in the past pursuant to the
terms of any Benefit Plans);
(i) not change the amortization or capitalization policies for Owned
Software or otherwise make any material changes in the accounting policies
of the Acquired Company;
(j) not issue any note, bond or other debt security, or create, incur,
assume or guarantee any indebtedness for borrowed money;
(k) not issue any shares of Acquired Company Stock other than shares
issuable upon exercise of presently exercisable options granted under the
Employee Stock Option Plan and the Director Stock Option Plan and shares
purchased prior to the Closing under the Employee Stock Purchase Plan;
(l) not alter in any manner not permitted herein the terms, conditions
or dates of vesting or exercise of any of the options granted under the
Stock Option Plans; and
(m) promptly advise Purchaser in writing of any matters arising or of
which the Acquired Company becomes aware after the date of this Agreement
that, if existing or known at the date hereof, would be required to be set
forth or described in this Agreement or the Exhibits hereto.
2.6.2. Except after prior notification to, and with the prior written
consent of, Purchaser, which consent shall not be unreasonably withheld, the
Acquired Company shall not make, between the date of this Agreement and the
Effective Time, any change in its banking or safe deposit arrangements or grant
any powers of attorney.
2.7 FILING OF TAX RETURNS. The Acquired Company shall cause all of the
Acquired Company's material federal, state and local tax returns required to be
timely filed before the Effective Time to be timely and accurately filed with
the appropriate taxing authorities. For purposes of this Section 2.7, such
returns shall be deemed timely filed if the Acquired Company has obtained an
extension from the appropriate taxing authority as to the time in which it may
file such tax returns. The Acquired Company shall submit all such tax returns to
Purchaser at least fifteen (15) days prior to the date they must be filed, and
Purchaser shall have the opportunity to comment on such returns. The Acquired
Company shall give reasonable and due consideration to any comments on such
returns made by Purchaser in light of the circumstances in which they are made.
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2.8 EXAMINATION OF PROPERTY AND RECORDS; CONFIDENTIALITY OF INFORMATION.
2.8.1. Between the date of this Agreement and the Effective Time, the
Acquired Company shall allow Purchaser, its counsel and other representatives
full access to its books, records, files, documents, assets, properties,
contracts and agreements as may be reasonably requested, and the Acquired
Company shall furnish the Purchaser, its officers and representatives during
such period with all information concerning its affairs as may be reasonably
requested. Between the date of this Agreement and the Effective Time, Parent
shall provide to the Acquired Company such information about Parent as the
executive officers of the Acquired Company reasonably request in the context of
the transactions provided for herein. All such requests shall be directed to the
Chief Financial Officer of Parent. Each party shall conduct any investigation in
a manner that will not unreasonably interfere with the businesses of the other
party.
2.8.2. All non-public information acquired by a party pursuant to this
Section 2.8 or otherwise in connection with this Agreement, whether or not in
writing, concerning the business, operations and affairs of another party, will
be kept confidential and will not be disclosed to any Person other than the
parties hereto or their authorized representatives (who shall be subject to the
same obligations) and will not be used for any purpose other than the
consummation of the Merger and the related transactions described herein,
provided that any party may, upon advice of counsel, and upon prior notice to
the party whose information is sought to be disclosed, comply with any order of
any court or governmental body. Promptly upon termination of this Agreement, and
at the request of a disclosing party, all written materials thus obtained by
another party or any of its representatives and all copies and extracts of such
materials will be delivered to the disclosing party.
2.9 CONSENTS AND APPROVALS. As and to the extent requested by Purchaser,
the Acquired Company shall use its reasonable best efforts to obtain the waiver,
consent and approval of all persons (other than customers) whose waiver, consent
or approval (i) is required in order to consummate the transactions contemplated
by this Agreement or (ii) is required by any agreement, lease, instrument,
arrangement, judgment, decree, order or license to which the Acquired Company is
a party or subject on the Effective Time and (a) that would prohibit or require
the waiver, consent or approval of any party to such transactions or (b) under
which, without such waiver, consent or approval, such transactions would
constitute an occurrence of default under the provisions thereof, result in the
acceleration of any obligation thereunder or give rise to a right of any party
thereto to terminate its obligations thereunder. The failure of the Acquired
Party to obtain any such waiver, consent or approval (after using its reasonable
best efforts to do so) shall not constitute a breach of, or default under, this
Agreement.
2.10 SUPPLYING OF FINANCIAL STATEMENTS. Parent and the Acquired Company
shall each deliver to the other all of its regularly prepared audited and
unaudited consolidated and consolidating financial statements prepared after the
date of this Agreement, in format historically published or utilized internally
(as applicable), and any financial statements prepared for filing with the SEC,
as soon as each is available.
2.11 NO SOLICITATION. The Acquired Company shall not, and the Acquired
Company shall not authorize or permit any officer, director or employee of, or
any financial advisor, attorney, accountant or other advisor or representative
retained by, the Acquired Company to, solicit, initiate, encourage (including by
way of furnishing information), endorse or enter into any agreement with respect
to, or take any other action to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal (as hereafter defined). Neither the Board of Directors of the
Acquired Company nor any committee thereof shall (a) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Purchaser the approval or
recommendation by the Board of Directors of the Acquired Company of the Merger
or this Agreement or (b) approve or recommend, or propose to approve or
recommend, any Takeover Proposal or any other acquisition of outstanding shares
of Acquired Company Stock other than pursuant to the Merger or this Agreement.
Notwithstanding the foregoing, nothing contained in this Agreement shall prevent
the Board of
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Directors of the Acquired Company from furnishing information to or entering
into discussions or negotiations with any unsolicited Person, or taking any
action described in clauses (a) and (b) of the preceding sentence, if and only
to the extent that the Board of Directors of the Acquired Company shall have
determined in good faith, after receiving written advice of its outside counsel,
that such action would be required under applicable law in the exercise of its
fiduciary duties. The Acquired Company will immediately notify the Purchaser if
any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with the Acquired Company. As used in this Agreement,
"Takeover Proposal" shall mean any tender or exchange offer, proposal, other
than a proposal by Purchaser or any of its affiliates, for a merger, share
exchange or other business combination involving the Acquired Company or any
proposal or offer to acquire in any manner a substantial equity interest in the
Acquired Company or a substantial portion of the assets of the Acquired Company.
2.12 HSR ACT FILINGS. Parent and the Acquired Company shall each, in
cooperation with the other, make the required filings in connection with the
transactions contemplated by this Agreement under the HSR Act with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice, and shall request early termination of the waiting period with respect
to such filings. As promptly as practicable from time to time after the date of
this Agreement, each party shall make all such further filings and submissions,
and take such further action, as may be required in connection therewith, and
shall furnish the other all information in its possession necessary therefor.
Parent and the Acquired Company shall each notify the other immediately upon
receiving any request for additional information with respect to such filings
from either the Antitrust Division of the Department of Justice or the Federal
Trade Commission, and the party receiving the request shall use its best efforts
to comply with such request as soon as possible. Neither such party shall
withdraw any such filing or submission without the written consent of the other.
2.13 TAX REPORTING. For federal and state tax purposes, Purchaser and
Parent shall report the transactions contemplated by this Agreement as a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Tax Code and similar state laws. Prior to the Effective Time, the Acquired
Company will deliver to Purchaser and Parent letters to the reasonable
satisfaction of Purchaser and Parent from the Acquired Company and certain of
its stockholders that when read together provide assurance that there is no plan
or intention on the part of the stockholders of the Acquired Company (or
knowledge of such plan or intent to the extent the Acquired Company provides a
representation with respect to holders of less than five percent (5%) of the
Acquired Company Stock) to sell, exchange or otherwise dispose of a number of
shares of Parent Stock received in the Merger that would reduce the Acquired
Company's stockholders' ownership of Parent Stock received in the Merger to a
number of shares having a value, as of the Effective Time, of less than fifty
percent (50%) of the value of all of the outstanding stock of Acquired Company
immediately prior to the Effective Time. Purchaser, Parent and the Acquired
Company agree that satisfaction of the representations described above will
constitute satisfaction of the "continuity of interest" requirement for
reorganizations under Section 368(a) of the Tax Code. Each of Purchaser, Parent
and the Acquired Company shall use their reasonable best efforts to obtain the
tax opinions described in 6.6 and 7.6 hereof.
2.14 INDEMNIFICATION OF ACQUIRED COMPANY OFFICERS AND DIRECTORS. The
Purchaser agrees that it will provide to the directors and officers of the
Acquired Company indemnification in accordance with the current provisions of
the Certificate of Incorporation and By-Laws of the Acquired Company with
respect to matters occurring prior to the Effective Time, including, without
limitation, this Agreement and the transactions contemplated hereby, for a
period of five years from the Effective Time (or, in the case of matters
occurring prior to the Effective Time which have not been resolved prior to the
fifth anniversary of the Effective Time, until such matters are finally
resolved). To the fullest extent permitted by applicable law, the Purchaser
shall advance expenses in connection with the foregoing indemnification. The
Parent shall cause to be maintained in effect for twelve (12) months following
the Closing the current policies of directors' and officers' liability insurance
currently maintained by the Acquired Company, which policies are described on
EXHIBIT 3.19, at no
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greater than one hundred percent (100%) of the annual premiums for such coverage
as of the date hereof (as reflected on such EXHIBIT 3.19), provided that the
Parent may substitute therefor policies of at least the same coverage containing
terms and conditions that are no less advantageous. In the event that the
premiums for the continued coverage exceed 100% of the premiums for the coverage
as of the date hereof (the "100% Amount"), Purchaser shall either substitute
coverage meeting the requirements of the proviso in the preceding sentence or
continue the existing insurance but reduce the maximum amount of coverage to
that available for premiums equal to the 100% Amount.
2.15 PUBLICATION OF OPERATIONAL RESULTS. Purchaser agrees to use its
reasonable best efforts to make publicly available joint results of operations
of Parent and the Acquired Company in respect of the first full calendar month
subsequent to Closing no later than twenty (20) days following the end of such
calendar month.
2.16 CONTINGENT REGISTRATION RIGHTS. In the event that the average weekly
reported volume of trading of the Parent Stock, as reported through the
automated quotation system of the Nasdaq Stock Market National Market System,
during any four (4) calendar week period ending on any date within six months
following the Closing Date constitutes less than two percent (2%) of the number
of shares of Parent Stock outstanding as of such date, Parent shall use its best
efforts to file promptly and make effective with the SEC a Registration
Statement covering the Parent Stock owned by Wind Point Partners II, L.P. (or
its partners), Marshall D. Miller, his children, Phileona Foundation and Dorado
Investment Company (the "Selling Stockholders") on the basis set forth on the
attached EXHIBIT 2.16. Parent acknowledges and agrees that this covenant is made
for the express benefit of the Selling Stockholders.
III. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANY.
The Acquired Company represents and warrants to Purchaser and Parent as
follows:
3.1 ORGANIZATION, STANDING AND FOREIGN QUALIFICATION.
3.1.1. The Acquired Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to carry on its business in the
places and as it is now being conducted and to own and lease the properties and
assets that it now owns or leases.
3.1.2. The Acquired Company is duly qualified and/or licensed to transact
business and in good standing as a foreign corporation in the jurisdictions
listed in EXHIBIT 3.1 hereto, and the character of the property owned or leased
by the Acquired Company and the nature of the business conducted by it does not
require such qualification and/or licensing in any other jurisdiction where the
failure to so qualify would have a Material Adverse Effect upon the Acquired
Company.
3.2 AUTHORITY AND STATUS.
3.2.1. The Board of Directors of the Acquired Company, by unanimous vote of
all directors present at a meeting duly called and held, has (i) determined that
the Merger is fair to and in the best interests of the stockholders of the
Acquired Company and (ii) resolved to submit the Merger to and recommend
approval of the Merger by the stockholders of the Acquired Company.
3.2.2. The Acquired Company has the capacity and authority to execute and
deliver this Agreement, to perform hereunder, and, upon approval of the
transactions provided for herein by its stockholders, to consummate the
transactions contemplated hereby without any other corporate or stockholder
approval. The execution, delivery and performance by the Acquired Company of
this Agreement and each and every other agreement, document and instrument
provided for herein have been duly authorized and approved by the Board of
Directors of the Acquired Company. Assuming this Agreement and each and every
agreement, document or instrument to be executed, delivered and performed by the
Acquired Company in connection herewith are valid and legally binding
obligations of Purchaser and Parent, this Agreement and each and every
agreement, document and instrument to be executed, delivered and performed by
the Acquired Company in connection herewith constitute or
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will, when executed and delivered, constitute the valid and legally binding
obligation of the Acquired Company enforceable against it in accordance with
their respective terms, except as enforceability may be limited by applicable
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws from time to time in effect affecting the enforcement of
creditors' rights generally. Attached hereto as EXHIBIT 3.2 are true, correct
and complete copies of the Certificate of Incorporation and Bylaws of the
Acquired Company.
3.2.3. The Board of Directors of the Acquired Company received an opinion
from Dean Witter Reynolds Inc., its financial advisor, concurrently with the
approval described in Section 3.2.1 above to the effect that the consideration
to be received by the Acquired Company's stockholders in the Merger is fair to
such stockholders from a financial point of view.
3.3 CAPITALIZATION. The entire authorized capital stock of the Acquired
Company consists of thirty-five million (35,000,000) shares of stock, of which
thirty million (30,000,000) shares are designated Common Stock, par value $0.001
per share, and five million (5,000,000) shares are designated Preferred Stock,
par value $.001 per share. Of the total authorized Common Stock, as of June 30,
1995, eight million six hundred sixty thousand eight hundred one (8,660,801)
shares were issued and outstanding and no shares were held in the Acquired
Company's treasury. Of the total authorized Preferred Stock, no shares are
issued. As of June 30, 1995, there were options outstanding under the Director
Stock Option Plan and the Employee Stock Option Plan entitling the optionees
thereunder, upon valid exercise, to acquire in the aggregate one million two
hundred ninety-two thousand two hundred fifty-eight (1,292,258) shares of Common
Stock. All of the outstanding shares of Acquired Company Stock (and any shares
issuable pursuant to presently outstanding options, if exercised and purchased
at the applicable exercise price) were duly authorized and will be, when issued
and the option price paid, validly issued, fully paid and nonassessable. None of
the capital stock of the Acquired Company is entitled to or subject to
preemptive rights. Other than the requisite stockholder vote to consummate the
Merger, the authorization or consent of no other Person is required in order to
consummate the transactions contemplated herein by virtue of any such Person
having an equitable or beneficial interest in the capital stock of the Acquired
Company. Except as set forth on EXHIBIT 3.3, there are no outstanding options,
warrants, calls, commitments or plans by the Acquired Company or any Subsidiary
to issue any additional shares of its capital stock, to pay any dividends on
such shares or to purchase, redeem, or retire any outstanding shares of its
capital stock, nor are there outstanding any securities or obligations that are
convertible into or exchangeable for any shares of capital stock of the Acquired
Company. Other than as disclosed on EXHIBIT 3.3, there are not now, and at the
Effective Time there will not be, any voting trusts or other agreements or
understandings to which the Acquired Company is a party or is bound with respect
to the voting of the capital stock of the Acquired Company.
3.4 ABSENCE OF EQUITY INVESTMENTS. Except as described in EXHIBIT 3.4
hereto, the Acquired Company does not, either directly or indirectly, own of
record or beneficially any shares or other equity interests in any corporation,
partnership, limited partnership, joint venture, trust or other business entity.
3.5 LIABILITIES AND OBLIGATIONS OF THE ACQUIRED COMPANY.
3.5.1. Attached hereto as EXHIBIT 3.5.1 are true and complete copies of the
Acquired Company's audited balance sheets as of December 31, 1992, December 31,
1993 and December 31, 1994 and the related statements of operations,
stockholders' equity and cash flows for the years then ended, together with the
reports of Arthur Andersen, LLP thereon, and an unaudited balance sheet as of
March 31, 1995 and the related statements of operations, stockholders' equity
and cash flows for the three-month period then ended (respectively, the "1992,
1993, 1994 and Interim 1995 Acquired Company Financial Statements"). The 1992,
1993, 1994 and Interim 1995 Acquired Company Financial Statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, and fairly present in all material respects the financial
condition of the Acquired Company as of the respective dates thereof (subject,
in the case of the Interim 1995 Acquired
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Company Financial Statements, to the absence of footnotes and to normal year-end
adjustments). Except as set forth on EXHIBIT 3.5.1, the Acquired Company has no
liabilities, whether absolute, contingent, accrued or otherwise ("Liabilities"),
except for (i) any Liability to the extent accrued or reserved against in the
balance sheet included in the Interim 1995 Acquired Company Financial Statements
or disclosed in the notes to the 1994 Acquired Company Financial Statements;
(ii) any Liability which was incurred after March 31, 1995 in the ordinary
course of business, which Liabilities have not individually or in the aggregate
had and would not have a Material Adverse Effect; (iii) any Liabilities to the
extent disclosed in the Acquired Company Reports and (iv) any other Liabilities
which would not have a Material Adverse Effect. The Acquired Company has
delivered to Purchaser true and complete copies of interim management-prepared
financial statements for the two months ending May 31, 1995 with schedules in
respect of accrued expenses attached thereto.
3.6 TAX RETURNS.
3.6.1. The Acquired Company has, as of the date hereof, and will prior to
the Effective Time have, timely and accurately filed all federal, state, foreign
and local income, franchise, sales, real and personal property and other tax
returns and reports required to be filed by it prior to such dates and have
timely paid, or will prior to the Effective Time timely pay, all taxes shown on
such returns as owed for the periods of such returns, including all withholding
or other payroll related taxes shown on such returns, except where the failure
to so file any such return or report would not have a Material Adverse Effect
upon the Acquired Company. The tax basis of all assets of the Acquired Company
as reflected on its books and records is correct and accurate in all material
aspects. No material assessments or notices of deficiency or other
communications have been received by the Acquired Company, nor have any been
threatened, with respect to any such tax return that has not been paid,
discharged or fully reserved in the Interim 1995 Acquired Company Financial
Statements or EXHIBIT 3.6 hereto, and no amendments or applications for refund
have been filed or are planned with respect to any such return. Except as set
forth on EXHIBIT 3.6, there are no agreements between the Acquired Company and
any taxing authority, including, without limitation, the IRS, waiving or
extending any statute of limitations with respect to any tax return, and the
Acquired Company has not filed any consent or election under the Tax Code,
including, without limitation, any election under Section 341(f) of the Tax
Code.
3.6.2. The Acquired Company has not made any parachute payments as such
term is defined in Section 280G of the Tax Code, is not obligated to make any
parachute payments, and is not a party to any agreement that under certain
circumstances could obligate it, or any successor in interest, to make any
parachute payments that will not be deductible under Section 280G of the Tax
Code.
3.6.3 The Acquired Company (a) has withheld proper and accurate amounts in
compliance, in all material respects, with the tax withholding provisions of all
applicable laws for all compensation paid to the officers and employees of the
Acquired Company, (b) has correctly and properly prepared and duly and timely
filed all returns and reports relating to those amounts withheld from its
officers and employees and to its employer liability for employment taxes under
the Tax Code and applicable state and local laws and (c) has duly and timely
paid and remitted to the appropriate taxing authorities the amounts withheld
from its officers and employees and any additional material amounts that
represent its employer liability under applicable law for employment taxes.
3.6.4 The income tax returns of the Acquired Company have been audited by
the IRS or the statute of limitations for assessment has closed for all tax
years through the year ended December 31, 1990, and all taxes, deficiencies,
penalties and interest relating to such tax years have been fully paid and
satisfied by the Acquired Company.
3.6.5 No issue has been raised by the IRS, any state or local taxing
authority, or any other investigation or audit, that will have, or can be
expected to have, a Material Adverse Effect on the Acquired Company.
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3.6.6 The 1992, 1993, 1994 and Interim 1995 Acquired Company Financial
Statements include, and the accounts of the Acquired Company will include, for
all periods up to and including the Closing Date, adequate provision under
generally accepted accounting principles for all unpaid applicable taxes,
assessments, fees and charges relating to the Acquired Company.
3.6.7 The Acquired Company is not a "United States real property holding
corporation" as defined in Section 897(c)(2) of the Tax Code.
3.7 OWNERSHIP OF ASSETS AND LEASES. The Acquired Company has title to all
of its property and assets used or useful in its business, other than leased or
licensed property and immaterial items of personal property, free and clear of
any liens, security interests, claims, charges, options, rights of tenants or
other encumbrances, except as disclosed in EXHIBIT 3.7 or reserved against in
the Interim 1995 Acquired Company Financial Statements (to the extent and in the
amounts so disclosed or reserved against) and except for liens arising from
current taxes not yet due and payable and other immaterial liens. The Acquired
Company has not received any payment from a lessor or licensee in connection
with or as inducement for entering into a lease or license in which the Acquired
Company is a lessee or licensee, except licenses, fees and similar payment in
the ordinary course of business. All buildings and material items of machinery
and equipment owned or leased by the Acquired Company are in good operating
condition and reasonable state of repair, subject only to ordinary wear and
tear. Except as reserved against in the Interim 1995 Acquired Company Financial
Statements, or disclosed on EXHIBIT 3.7, the inventories of the Acquired Company
consist only of items of supplies and computer-related equipment of a quality
and quantity usable in the normal course of their businesses. The Acquired
Company has received no written notice of a material violation of any applicable
zoning regulation, ordinance or other law, regulation or requirement relating to
its operations and properties, whether owned or leased. All of the accounts
receivable of the Acquired Company as of the Effective Time will reflect actual
transactions and will have arisen in the ordinary course of business.
3.8 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. Except as set forth on
EXHIBIT 3.8 hereto, the execution and delivery of this Agreement by the Acquired
Company does not, and the consummation of the transactions contemplated hereby
will not, violate any provision of the Certificate of Incorporation, as amended,
or Bylaws, as amended, of the Acquired Company or violate, breach or constitute
an occurrence of default under any provision of, or result in acceleration of
any obligation under, or give rise to a right by any party to terminate its
obligations under any Material Contract, or any order, judgment or decree to
which the Acquired Company is a party or is bound or by which the Acquired
Company's assets are affected. Except for the applicable requirements of the HSR
Act, the 1933 Act, the Exchange Act and applicable Blue Sky laws, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any governmental entity is required to be obtained or made by or with
respect to the Acquired Company, or any assets, properties or operations of the
Acquired Company in connection with the execution and delivery by the Acquired
Company of this Agreement or the consummation of the transactions contemplated
hereby.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed on EXHIBIT
3.9, since March 31, 1995, the Acquired Company has operated in the ordinary
course of business and there has not been (i) any material damage, destruction
or other casualty loss with respect to property owned or leased by the Acquired
Company, whether or not covered by insurance; (ii) any increase in dividends or
employee compensation or benefits payable by the Acquired Company, except for
increases in compensation in the ordinary course of business consistent with
historical practices; (iii) any material change in accounting methods; or (iv)
any other event or condition that has resulted in any Material Adverse Effect.
3.10 LITIGATION. Except as otherwise set forth in EXHIBIT 3.10 hereto,
there is no suit, action, arbitration, proceeding, claim or investigation
pending or, to the knowledge of the Acquired Company, threatened against or
affecting the Acquired Company that would have a Material Adverse Effect,
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and, to the knowledge of the Acquired Company, there exists no reasonable basis
or grounds for any such suit, action, arbitration, proceeding, claim or
investigation that would have a Material Adverse Effect.
3.11 LICENSES AND PERMITS; COMPLIANCE WITH LAW. The Acquired Company holds
all licenses, certificates, permits, franchises and rights from all appropriate
federal, state or other public authorities necessary for the conduct of its
business and the use of its assets except for such licenses, certificates,
permits franchises and rights the absence of which would not have a Material
Adverse Effect in respect of the Acquired Company. Except as noted in EXHIBIT
3.11, and except for any matters which will not have a Material Adverse Effect
in respect of the Acquired Company, the Acquired Company presently is conducting
its business so as to comply with all applicable statutes, ordinances, rules,
regulations and orders of any governmental authority. Further, the Acquired
Company is not presently charged with, or under governmental investigation with
respect to, any actual or alleged violation of any statute, ordinance, rule or
regulation, or presently the subject of any pending or, to the knowledge of the
Acquired Company, threatened adverse proceeding by any regulatory authority
having jurisdiction over its business, properties or operations.
3.12 CONTRACTS, AGREEMENTS AND INSTRUMENTS GENERALLY. EXHIBIT 3.12 hereto
consists of a true and complete list as of the date hereof (identifying by
title, date and parties) of all contracts, agreements, commitments and other
instruments (whether oral or written) to which the Acquired Company is a party
(excluding all contracts between the Acquired Company and Purchaser) as follows:
3.12.1. any contracts, agreements, commitments or other instruments in
effect with any customer of the Acquired Company (excluding any customer
that has purchased products or services of the Acquired Company through the
Purchaser), including without limitation any consulting services agreements,
software license agreements, software development agreements, other
licenses, purchase commitments or installation agreements and maintenance or
service agreements in excess of $75,000 per year (hereinafter referred to as
the "Customer Contracts," and identified as such on EXHIBIT 3.12), other
than purchase orders for software modules in the ordinary course of
business;
3.12.2. any lease, rental agreement or other contract or commitment
affecting the ownership or leasing of, title to or use of any interest in
real or personal property with payments equal to or greater than $5,000 per
month and any maintenance or service agreements relating to any real or
personal property with payments equal to or greater than $5,000 per month;
3.12.3. any contract or commitment providing for payments based in any
manner upon the sales, purchases, receipts, income or profits of the
Acquired Company, other than Customer Contracts;
3.12.4. any employment contract, any plan or arrangement providing for
continuing payment of any type or nature after termination of employment,
including, without limitation, any severance, termination, parachute, or
other payments (whether due to a change in control, termination or
otherwise) and bonuses and vested commissions;
3.12.5. any contract, agreement, understanding or arrangement
restricting the Acquired Company from carrying on its business anywhere in
the world;
3.12.6. any instrument or arrangement evidencing or related to
indebtedness for money borrowed or to be borrowed, whether directly or
indirectly, by way of purchase-money obligation, guaranty, subordination,
conditional sale, lease-purchase or otherwise providing for payments in
excess of $5,000 per month;
3.12.7. any joint product development agreement with any party other
than the Purchaser, other than Customer Contracts;
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3.12.8. any contract or agreement with vendors of material equipment
purchased by the Acquired Company or appointing the Acquired Company as a
reseller of equipment, other than purchase orders in the ordinary course of
business; and
3.12.9. any other contract, agreement, commitment or other instrument
that involves a receipt of or requires an expenditure by the Acquired
Company or requires the performance of services or delivery of goods to, by,
through, on behalf of or for the benefit of the Acquired Company, in excess
of $100,000.00 during the remainder of its term.
The contracts, agreements, commitments and other instruments listed or
required to be listed on EXHIBITS 3.12 AND 3.14(A)(II) are herein referred to as
the "Material Contracts."
All of the Material Contracts are valid and binding upon the Acquired
Company and the other parties thereto and are in full force and effect and
enforceable in accordance with their terms, except as enforceability may be
affected by bankruptcy, insolvency, moratorium or similar laws affecting
creditors rights generally and general principles of equity relating to the
availability of equitable remedies. Except as listed on EXHIBIT 3.12(A), the
Acquired Company has not, and, to the knowledge of the Acquired Company, no
other party to any Material Contract has breached in any material respect any
provision of, or is in default in any material respect under, the terms thereof.
Except as listed on EXHIBIT 3.12(A) and except with respect to Customer
Contracts to which Purchaser is a party, there are no existing facts or
circumstances that would prevent the Customer Contracts from maturing upon
performance thereunder by the Acquired Company into valid accounts receivable
which are payable to the Acquired Company consistent in all material respects
with historical experience. Except as listed on EXHIBIT 3.12(A) and except
accounts receivable from the Purchaser, the Acquired Company has performed all
work and other obligations in respect of receivables outstanding for more than
ninety (90) days to fully recognize and be entitled to collect same in all
material respects. Except for terms specifically described in EXHIBIT 3.12, the
Acquired Company has not received any payment from any contracting party in
connection with or as an inducement for entering into any contract, agreement,
policy or instrument except for payment for actual services rendered or to be
rendered by the Acquired Company consistent with amount historically charged for
such services.
3.13 CUSTOMER CONTRACTS. Except as set forth on EXHIBIT 3.13A,
substantially all of the Customer Contracts (other than development contracts)
conform in all material respects to one of the forms attached hereto as EXHIBIT
3.13B (the "Customer Contract Forms"), except where such deviations would not
have a Material Adverse Effect in respect of the following terms: acceptance,
limitation of remedies, warranty limitations, commitments relative to hardware
upgrades for breach of any response time warranty, confidentiality, and
modification to comply with governmental regulation. Except as set forth on
EXHIBIT 3.13A, the Acquired Company has no material commitments to provide
existing customers products developed in the future at a credit to existing
payment obligations or for less than normal prices. Except as set forth on
EXHIBIT 3.13A, with respect to each Customer Contract, (i) each customer to
which computer software owned by the Acquired Company (the "Owned Software") has
been licensed and delivered pursuant to such Customer Contract and certified as
operational by the Acquired Company has accepted such software to the extent and
on the terms and conditions provided for in such Customer Contract except for
immaterial items of Owned Software; (ii) in each case in which the Customer
Contract pursuant to which Owned Software is licensed incorporates response(s)
by the Acquired Company to a Request for Proposal by the customer, such software
has met all material requirements set forth in such response(s); and (iii) all
performance warranties with respect to Owned Software made by the Acquired
Company in any Customer Contract, including warranties with respect to capacity,
availability, downtime and response time, have been satisfied in all material
respects upon the terms and conditions and to the extent provided for in such
Customer Contract.
3.14 INTELLECTUAL PROPERTY; COMPUTER SOFTWARE.
3.14.1. Except as listed on EXHIBIT 3.14.1, the Acquired Company is the
owner, free and clear of all material liens, claims, security interests and
encumbrances, or has the right to use without
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material restriction pursuant to a valid license, all trademarks, trade names,
service marks, service names, and brand names (whether or not any of the same
are registered), and all copyrights and patents, together with all registrations
and applications for registrations of the foregoing, if any, applicable to or
used in the businesses of the Acquired Company. Except as listed on EXHIBIT
3.14.1, the Acquired Company is not currently in receipt of any notice of any
violation of, and the Acquired Company is not violating (other than immaterial
violations), the rights of others in any trademark, trade name, service mark,
copyright, patent, trade secret, know-how or other intangible asset.
3.14.2.(i) EXHIBIT 3.14.2(I) contains a complete and accurate list of all
Owned Software, other than immaterial Owned Software. The Acquired Company has
title to the Owned Software, free and clear of all claims, including claims or
rights of employees, agents, consultants, customers, licensees or other parties
involved in the development, creation, marketing, maintenance, enhancement or
licensing of such computer software. Except as indicated on EXHIBIT 3.14.2(I)
and for commercially available, over-the-counter "shrink-wrap" software, the
Owned Software is not dependent on any Licensed Software (as defined in
subsection (ii) below) in order to fully operate in the manner in which it is
intended. No Owned Software has been published or disclosed to any other
parties, except pursuant to contracts requiring such other parties to keep the
Owned Software confidential and where such disclosure would not have a Material
Adverse Effect. To the knowledge of the Acquired Company, no such other party
has breached any such obligation of confidentiality.
3.14.2(ii) EXHIBIT 3.14.2(II) contains a complete and accurate list of all
software (other than commercially available over-the-counter "shrink-wrap"
software) under which the Acquired Company is a licensee, lessee or otherwise
has obtained the right to use (the "Licensed Software"), other than immaterial
Licensed Software, and includes reference to any agreement to use, license,
lease or other instrument pursuant to which the Acquired Company has obtained
such right. The Acquired Company has the right and license to use, sublicense,
modify and copy such Licensed Software as set forth in the respective license,
lease or similar agreement pursuant to which the Licensed Software is licensed
to the Acquired Company, free of any other limitations or encumbrances.
3.14.2(iii) The Owned Software and Licensed Software and commercially
available over-the-counter "shrink-wrap" software constitute all software used
in the businesses of the Acquired Company (collectively, the "Acquired Company
Software"), other than immaterial Owned Software and immaterial Licensed
Software. The Acquired Company is not infringing (other than immaterial
infringements) any intellectual property rights of any other person or entity
with respect to the Acquired Company Software, and, to the knowledge of the
Acquired Company, no other person or entity is infringing any intellectual
property rights of the Acquired Company with respect to the Acquired Company
Software other than immaterial infringements.
3.14.2(iv) The Acquired Company has not granted marketing rights in the
Acquired Company Software to any third party other than Purchaser.
3.15 LABOR MATTERS. Within the last three (3) years the Acquired Company
has not been the subject of any union activity or labor dispute, nor has there
been any strike of any kind called or, to the knowledge of the Acquired Company,
threatened to be called against it. The Acquired Company has not violated in any
material respect any applicable federal or state law or regulation relating to
labor or labor practices. EXHIBIT 3.15(D) sets forth a true, correct and
complete list of employer loans or advances from the Acquired Company to its
employees. The Acquired Company is in compliance with all applicable
requirements of the Immigration and Nationality Act of 1952, as amended by the
Immigration Reform and Control Act of 1986 and the regulations promulgated
thereunder (hereinafter collectively referred to as the "Immigration Laws"),
except for any non-compliance that would not have a Material Adverse Effect.
3.16 BENEFIT PLANS.
3.16.1. EXHIBIT 3.16 lists every pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus or other incentive plan; any
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medical, vision, dental or other health plan; any life insurance plan or any
other employee benefit plan or fringe benefit plan; including, without
limitation, any "employee benefit plan," as that term is defined in Section 3(3)
of ERISA, that is currently maintained, sponsored in whole or in part, or
contributed to by the Acquired Company or any ERISA Affiliate of the Acquired
Company, for the benefit of, providing any remuneration or benefits to, or
covering any current or former employee, retiree, dependent, spouse or other
family member or beneficiary of such employee or retiree, director, independent
contractor, stockholder, officer or consultant of the Acquired Company (the
"Current Plans"). The Current Plans, together with any such plans or
arrangements previously adopted or sponsored, contributed to by the Acquired
Company or any ERISA Affiliate of the Acquired Company or under (or in
connection with) which the Acquired Company or an ERISA Affiliate of the
Acquired Company has any contingent or noncontingent liability of any kind
(whether or not probable of assertion) that would have a Material Adverse Effect
on the Company are collectively referred to herein as the "Benefit Plans". Any
of the Benefit Plans that is an "employee pension benefit plan," or an "employee
welfare benefit plan" as those terms are defined in Section 3(1) of ERISA, is
referred to herein as an "ERISA Plan." No Benefit Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA.
3.16.2. EXHIBIT 3.16 also lists, with respect to all Benefit Plans listed
in EXHIBIT 3.16: (a) all trust agreements fidelity bonds, fiduciary liability
policies, investment manager or advisory contracts, and all amendments (if any)
thereto, (b) where applicable, with respect to any such plans or plan
amendments, the most recent determination letters issued by the IRS, and (c) the
most recent summary plan descriptions and any material modifications thereto.
Except as set forth on EXHIBIT 3.16.2, the Acquired Company has delivered a true
and complete copy of each such Benefit Plan, agreement, most recent IRS letter
or ruling, opinion, return, financial statement and summary plan description
described in Sections 3.16.1 or 3.16.2 hereof, certified as such by a duly
authorized officer of the Acquired Company, together with the annual report
(Form 5500 Series) for the two most recent plan years for any Benefit Plan
subject to such reporting requirements.
3.16.3. Except where any failure to comply would not have a Material
Adverse Effect on the Acquired Company, all the Benefit Plans and any related
trusts subject to ERISA comply with and have been administered in substantial
compliance with the applicable provisions of ERISA, all applicable provisions of
the Tax Code relating to qualification and tax exemption under Tax Code Sections
401(a) and 501(a) or otherwise necessary to secure intended tax consequences,
all applicable state or federal securities laws and all other applicable laws,
rules and regulations, and the Acquired Company has not received any notice from
any governmental agency or instrumentality questioning or challenging such
compliance. Any noncompliance or failure properly to maintain, operate or
administer a Benefit Plan or related trust has not rendered nor will render such
Benefit Plan or related trust or the Parent, Purchaser or Acquired Company
subject to or liable for any material taxes, penalties, or liabilities to any
Person.
3.16.4. None of the Acquired Company, and, to the knowledge of the Acquired
Company, any administrator or fiduciary of any such Benefit Plan (or agent or
delegate of any of the foregoing) has engaged in any transaction or acted or
failed to act in any manner that could subject the Acquired Company to any
direct or indirect liability (by indemnity or otherwise) for a breach of any
fiduciary, co-fiduciary or other duty under ERISA that would have a Material
Adverse Effect on the Company. No material oral or written representation or
communication with respect to any aspect of the Benefit Plans has been or will
be made to employees of the Acquired Company prior to the Closing Date that is
not in accordance with the written or otherwise preexisting terms and provisions
of such Benefit Plans in effect immediately prior to the Closing Date, except
for any amendments or terminations required by the terms of this Agreement and
except for any such representation or communication as would not have a Material
Adverse Effect on the Acquired Company. To the knowledge of the Acquired Company
there are no pending unresolved claims or disputes under the terms of, or in
connection with, the Benefit Plans (other than routine undisputed claims for
benefits), and no action, legal or otherwise, has been commenced with respect to
any claim.
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3.16.5. To the knowledge of the Acquired Company, all annual reports or
returns, audited or unaudited financial statements, actuarial valuations,
summary annual reports and summary plan descriptions issued with respect to the
Benefit Plans are correct and accurate in all material respects as of the dates
thereof; and there have been no amendments filed to any of such reports,
returns, statements, valuations or descriptions or required to make the
information therein true and accurate. All annual reports (Form 5500 series)
required to be filed with respect to any Current Plan for the Plan year ending
in 1994 have been or will be timely filed prior to Closing.
3.16.6. No non-exempt "prohibited transaction" (within the meaning of
4975(c) of the Tax Code involving any Benefit Plan has occurred. None of the
assets of any ERISA Plan is an "employer security" (within the meaning of
Section 407(d)(1) of ERISA) or "employer real property" (within the meaning of
Section 407(d)(2) of ERISA).
3.16.7. The only Benefit Plan that is or has been an "employee pension
benefit plan" as defined in Section 3(2) of ERISA is the 401(k) Plan. The 401(k)
Plan is qualified under Section 401(a) of the Tax Code and its related trust is
exempt from tax under Section 501(a) of the Tax Code and no circumstances exist
that could result in a disqualification of the 401(k) Plan or loss of tax-exempt
status for its related trust that would have a Material Adverse Effect on the
Acquired Company. Neither the 401(k) Plan nor any predecessor plan has ever been
subject to the provisions of Title IV of ERISA or to the minimum funding
standards of Section 412 of the Tax Code.
3.16.8. As of March 31, 1995, the Acquired Company had no current or future
liability with respect to any events or matters occurring, arising or accruing
on or prior to such date under any Benefit Plan that was not reflected in the
Interim 1995 Acquired Company Financial Statements and that would have a
Material Adverse Effect on the Acquired Company.
3.16.9. Neither the Acquired Company nor any ERISA Affiliate of the
Acquired Company has maintained, and neither now maintains, a Benefit Plan
providing welfare benefits (as defined in ERISA Section 3(1)) to employees after
retirement or other separation of service except to the extent required under
Part 6 of Title I of ERISA and Tax Code Section 4980B.
3.16.10. Except as set forth on EXHIBIT 3.16.10, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee (or any spouse, dependent or other family member of such
employee) of the Acquired Company to severance pay, unemployment compensation or
any payment contingent upon a change in control or ownership of the Acquired
Company, or (ii) accelerate the time of payment or vesting, or increase the
amount, of any compensation due to any such employee or former employee (or any
spouse, dependent or other family member of such employee).
3.17 CUSTOMERS. Except as set forth in EXHIBIT 3.17, as of the date hereof
the Acquired Company has not received any notice from, and does not have any
knowledge that, any current customer of the Acquired Company has taken or will
take any steps that could disrupt the business relationship of the Acquired
Company with such customer in any material respect. The Acquired Company will
not suffer subsequent to the date hereof and prior to the Closing any damage to
the business relationship of the Acquired Company with any current customer or
customers of the Acquired Company that would have in the aggregate a Material
Adverse Effect.
3.18 ENVIRONMENTAL MATTERS. Except with respect to chemicals contained in
products used by the Acquired Company in the ordinary course of business and
except as set forth in EXHIBIT 3.18, no real property now or previously owned,
leased or used by the Acquired Company (the "Real Property") has been used by
the Acquired Company or, to the knowledge of the Acquired Company, any other
party for the handling, treatment, storage or disposal of any Hazardous
Substance. Except as set forth in EXHIBIT 3.18, no release, discharge, spillage
or disposal into the environment of any material quantity of a Hazardous
Substance and no material soil, water or air contamination by any Hazardous
Substance has occurred or is occurring in, from or on the Real Property (a) by
virtue of the actions or failure to act of any of the Acquired Company or (b) to
the knowledge of the Acquired Company, by
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virtue of the actions or failure to act of any other party. Except as set forth
in EXHIBIT 3.18, the Acquired Company has complied in all material respects with
all reporting requirements under any applicable federal, state or local
environmental laws and any permits with respect to the Real Property, and there
are no existing material violations by the Acquired Company of any such
environmental laws or permits with respect to the Real Property. Except as set
forth in EXHIBIT 3.18, there are no claims, actions, suits, proceedings or
investigations related to the presence, release, production, handling,
discharge, spillage, transportation or disposal of any Hazardous Substance or
ambient air conditions or contamination of soil, water or air by any Hazardous
Substance pending or threatened (1) with respect to the Real Property (a) by
virtue of the actions or failure to act of the Acquired Company or (b) to the
knowledge of the Acquired Company, by virtue of the actions or failure to act of
any other party, or (2) otherwise against the Acquired Company, in any court or
before any state, federal or other governmental agency or private arbitration
tribunal and, to the knowledge of the Acquired Company, there is no reasonable
basis for any such claim, action, suit, proceeding or investigation (i) with
respect to the Real Property (a) by virtue of the actions or failure to act of
the Acquired Company or (b) to the knowledge of the Acquired Company, by virtue
of the actions or failure to act of any other party, or (ii) otherwise against
the Acquired Company or any Subsidiary. Except as disclosed on EXHIBIT 3.18, to
the knowledge of the Acquired Company, there are no underground storage tanks on
the Real Property. To the knowledge of the Acquired Company, no building or
other improvement included in the Real Property contains any exposed or friable
asbestos currently required to be removed or otherwise treated under applicable
law. For the purposes of this Agreement, "Hazardous Substance" shall mean any
hazardous or toxic substance or waste as those terms are defined by any
applicable federal, state or local law, ordinance, regulation, decision, order
or decree, including, without limitation, the Comprehensive Environmental
Recovery Compensation and Liability Act, 42 U.S.C. 9601 ET SEQ., the Hazardous
Materials Transportation Act, 49 U.S.C. 1801 ET. SEQ. and the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 ET SEQ., and petroleum, petroleum
products and oil.
3.19 INSURANCE. Set forth in EXHIBIT 3.19 is a complete list of all
material insurance policies that the Acquired Company maintains with respect to
its businesses, properties or employees. Except as set forth in EXHIBIT 3.19,
such policies are in full force and effect and no event has occurred that would
give any insurance carrier a right to terminate any such policy. Such policies
are adequate to insure against risks to which the Acquired Company and its
properties and assets are exposed in the operation of its business in such
amounts and types of coverage as are commercially reasonable and are consistent
with practices in the industry in which the Acquired Company operates. Except as
set forth in EXHIBIT 3.19, since March 31, 1995, there has not been any change
in the Acquired Company's relationship with its insurers or in the premiums
payable pursuant to such policies.
3.20 RELATED PARTY RELATIONSHIPS. Except as set forth in EXHIBIT 3.20, to
the knowledge of the Acquired Company, no stockholder owning greater than a
five-percent (5%) interest in the Acquired Company, no affiliate or member of
the immediate family of any such stockholder, and no officer or director or
member of the immediate family of such officer or director of the Acquired
Company possesses, directly or indirectly, any beneficial interest in, or is a
director, officer or employee of, or member of the immediate family of a
director, officer or employee of, any corporation, partnership, firm,
association or business organization that is a client, supplier, customer,
lessor, lessee, lender, creditor, borrower, debtor or contracting party with or
of the Acquired Company (except as a stockholder holding less than a one-percent
1% interest in a corporation whose shares are traded on a national or regional
securities exchange or in the over-the-counter market).
3.21 INFORMATION. The Acquired Company has made accessible to Purchaser or
Parent each registration statement, schedule, report, proxy statement or
information statement it has filed with the SEC since January 1, 1993,
including, without limitation, (a) the Acquired Company's Annual Reports on Form
10-K for the years ended December 31, 1993, and December 31, 1994, including all
documents incorporated therein and (b) the Acquired Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995 and any Report on Form 8-K
filed since December 31, 1994
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(collectively, the "Acquired Company Reports"). As of the date of this
Agreement, the Acquired Company Reports, taken together with information
previously furnished by the Acquired Company to Parent or Purchaser, did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading. As used
in this Section 3.21, "material" means material to the financial condition,
business, properties, rights or operations of the Acquired Company.
3.22 POOLING OF INTERESTS. The Acquired Company is not aware of any facts
or circumstances in respect of it or its accounting procedures which would have
the effect of precluding accounting for the transactions contemplated hereby as
a "pooling of interests."
3.23 DISCLOSURE AND ABSENCE OF UNDISCLOSED LIABILITIES. No statement
contained herein or in any certificate, schedule, list, exhibit or other
instrument furnished or required to be furnished to Parent or Purchaser pursuant
to the provisions hereof contains, or will at the time it is furnished contain,
any untrue statement of any material fact or omits to state any fact necessary
to make the statements herein or therein in light of the circumstances in which
they were made or omitted not false or misleading. As used in this Section,
"material" means material to the financial condition, business, properties,
rights or operations of the Acquired Company.
3.24 NO SPECIAL STOCKHOLDER RIGHTS. Except for the Voting Trust Agreement
and the Registration Rights Agreement referenced in Section 6.13, the Acquired
Company has no agreement with any individual or entity that grants such person
any rights as a stockholder of Acquired Company Stock that are in addition to
such holder's rights under the Acquired Company's Certificate of Incorporation
or Bylaws (including, without limitation, registration rights, preemptive
rights, put rights, rights of co-sale or rights to Board representation).
IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT.
Purchaser and Parent, jointly and severally, represent and warrant to the
Acquired Company as follows:
4.1 ORGANIZATION AND STANDING. Each of Purchaser and Parent is a duly
organized and validly existing corporation in good standing under the laws of
the State of Delaware.
4.2 CORPORATE POWER AND AUTHORITY. Each of Purchaser and Parent has the
capacity and authority to execute and deliver this Agreement, to perform
hereunder and to consummate the transactions contemplated hereby without the
necessity of any act or consent of any other Person whomsoever. The execution,
delivery and performance by Purchaser and Parent of this Agreement and each and
every agreement, document and instrument provided for herein have been duly
authorized and approved by their respective Boards of Directors (or Executive
Committees thereof). Assuming this Agreement, and each and every other
agreement, document and instrument to be executed, delivered and performed by
Purchaser and Parent in connection herewith are valid and legally binding on the
Acquired Company, this Agreement, and each and every other agreement, document
and instrument to be executed, delivered and performed by Purchaser and Parent
in connection herewith, constitute or will, when executed and delivered,
constitute the valid and legally binding obligations of Purchaser and Parent as
applicable, enforceable against each of them in accordance with their respective
terms, except as enforceability may be limited by applicable equitable
principles, or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws from time to time in effect affecting the enforcement of creditors' rights
generally.
4.3 CAPITALIZATION. The entire authorized capital stock of the Parent
consists of sixty-one million (61,000,000) shares of stock, of which sixty
million (60,000,000) shares are designated Common Stock, par value $.05 per
share, and one million (1,000,000) shares are designated Preferred Stock, no par
value per share ("Parent Preferred Stock"). Of the total authorized Common Stock
as of June 30, 1995, approximately fifty-three million one hundred one thousand
(53,101,000) shares were issued, of which approximately thirty-six million one
hundred ninety-seven thousand (36,197,000)
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shares were outstanding and approximately sixteen million nine hundred four
thousand shares were held in the Parent's treasury. Of the total authorized
Preferred Stock, none were outstanding. On February 12, 1991, Parent declared a
dividend distribution of one Preferred Share Purchase Right for each share of
Parent Stock. As of June 30, 1995 none of such Rights had been exercised. As of
June 30, 1995, Parent had an aggregate of approximately one million three
hundred sixteen thousand ninety-seven (1,316,097) shares of Common Stock
reserved for issuance under previously approved employee stock option, purchase
or benefit plans. All of the outstanding shares of Parent Stock (including any
shares issued pursuant to existing Parent stock option, purchase or benefit
plans, if exercised and purchased at the applicable exercise price) and Parent
Preferred Stock were duly authorized (or will be when issued and the option or
purchase price is paid), validly issued, fully paid and nonassessable. None of
the capital stock of the Parent is entitled or subject to preemptive rights. All
of the outstanding capital stock of the Purchaser is owned by the Parent. The
authorization or consent of no other person or entity is required in order to
consummate the transactions as contemplated herein by virtue of any such person
or entity having an equitable or beneficial interest in the Parent or the
Purchaser or in the capital stock of the Parent or the Purchaser.
4.4 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. The execution and
delivery of this Agreement by Purchaser and Parent do not, and the consummation
of the transactions contemplated hereby will not, violate any provisions of the
Certificate of Incorporation, as amended, or Bylaws, as amended, of Purchaser or
of Parent, and, except as set forth on EXHIBIT 4.4, violate or constitute an
occurrence of default under any provision of, or conflict with, result in
acceleration of any obligation under, or give rise to a right by any party to
terminate its obligations under, any mortgage, deed of trust, conveyance to
secure debt, note, loan, lien, lease, agreement, instrument, or any order,
judgment, decree or other arrangement to which Purchaser or Parent is a party or
is bound or by which any of their respective assets are affected. Except for the
applicable requirements of the HSR Act, the 1933 Act, the Exchange Act and
applicable Blue Sky laws, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity is required to
be obtained or made by or with respect to Purchaser or Parent or any assets,
properties or operations of Purchaser or Parent in connection with the execution
and delivery by Purchaser and Parent of this Agreement or the consummation of
the transactions contemplated hereby.
4.5 RESERVATION OF SHARES. Purchaser will, prior to the Merger, in
accordance with the terms thereof, have available shares of Parent Stock
sufficient to complete the Merger. The Parent Stock, when issued hereunder to
the stockholders of the Acquired Company, shall be duly authorized, validly
issued, fully paid and non-assessable.
4.6 INFORMATION. Parent has delivered to the Acquired Company each
registration statement, schedule, report, proxy statement or information
statement it has filed with the Securities and Exchange Commission since January
1, 1993, including, without limitation, (a) Parent's Annual Report on Form 10-K
for the years ended December 31, 1993, and December 31, 1994, respectively,
including all documents incorporated therein, (b) Parent's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995 and (c) Parent's Reports on Form
8-K since December 31, 1994 dated July 10, 1995 (collectively, the "Parent
Reports"). As of the date of this Agreement, the Parent Reports, taken together
with information previously furnished by Parent to the Acquired Company, did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading. As used
in this Section, "material" means material to the financial condition, results
of operations, business, assets or properties of Parent together with its
subsidiaries (including Purchaser), taken as a whole.
4.7 LIABILITIES AND OBLIGATIONS OF PARENT AND THE PURCHASER. Attached
hereto as EXHIBIT 4.7 are true, correct and complete copies of the Parent's
audited consolidated balance sheets as of December 31, 1992, December 31, 1993,
and December 31, 1994 and the related consolidated statements of earnings and
retained earnings and cash flows for the years then ended, and an unaudited
consolidated balance sheet as of March 31, 1995 and the related consolidated
statement of earnings and
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retained earnings and cash flows for the three-month period then ended, together
with the reports of Arthur Andersen & Co. on the financial statements for the
years ended December 31, 1992, December 31, 1993 and December 31, 1994
(respectively, the "1992, 1993, 1994 and Interim 1995 Parent Financial
Statements"). The 1992, 1993, 1994 and Interim 1995 Parent Financial Statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, and fairly present in all material respects the
consolidated financial condition and statements of cash flow of the Parent and
its subsidiaries (including the Purchaser) as of the respective dates thereof
(subject, in the case of the Interim 1995 Parent Financial Statements, to the
absence of footnotes and to normal year-end adjustments).
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed on EXHIBIT
4.8, since March 31, 1995, the Parent has operated in the ordinary course of
business and there has not been any transaction, commitment, dispute or other
event or condition that would result in any Material Adverse Effect.
4.9 LITIGATION. Except as otherwise set forth in EXHIBIT 4.9 hereto, there
is no suit, action, arbitration, proceeding, claim or investigation pending or,
to the knowledge of the Parent or the Purchaser, threatened against or affecting
the Parent or the Purchaser that would have a Material Adverse Effect, and, to
the knowledge of the Parent or the Purchaser, there exists no reasonable basis
or grounds for such suit, action, arbitration, proceeding, claim or
investigation that would have a Material Adverse Effect.
4.10 POOLING OF INTERESTS. The Parent and the Purchaser are not aware of
any facts or circumstances respecting either thereof or their accounting
procedures which would have the effect of precluding accounting for transaction
contemplated hereby as a "pooling of interests."
V. CONDITIONS PRECEDENT TO RESPECTIVE OBLIGATIONS OF THE PARTIES.
The obligations of Purchaser and Parent, on the one hand, and of the
Acquired Company, on the other hand, to consummate, or cause to be consummated,
the Merger shall be contingent upon and subject to the satisfaction, on or
before the Closing, of each and every one of the following conditions, any one
or more of which may be waived in writing by such parties.
5.1 ACTIONS OF GOVERNMENTAL AUTHORITIES. There shall not have been
instituted or be pending any action, proceeding, application, claim or
counterclaim by any government or governmental authority or agency, domestic or
foreign, and Purchaser, Parent or the Acquired Company shall not have been
notified by any such government, governmental authority or agency (or a
representative thereof) of its present intention to commence, or recommend the
commencement of, such an action or proceeding, that (i) challenges the
acquisition by Purchaser or Parent of the Acquired Company, restrains or
prohibits or seeks to restrain or prohibit the making or consummation of the
Merger or restrains or prohibits or seeks to restrain or prohibit the
performance of this Agreement; (ii) prohibits or limits or seeks to prohibit or
limit the ownership or operation by Purchaser or Parent of all or any
substantial portion of the business or assets of the Acquired Company or of
Purchaser, Parent or any of their respective subsidiaries or compels or seeks to
compel Purchaser or Parent to dispose of or to hold separate all or any
substantial portion of the business or assets of the Acquired Company or of
Purchaser, Parent or any of their respective subsidiaries, or imposes or seeks
to impose any material limitation on the ability of Purchaser or Parent to
conduct such business or to own such assets; or (iii) imposes or seeks to impose
limitations on the ability of Purchaser or Parent (or any other affiliate of
Purchaser) to acquire or hold or to exercise full rights of ownership of the
Surviving Corporation, including, but not limited to, the right to vote such
shares on all matters properly presented to the stockholders of the Surviving
Corporation.
5.2 OTHER LEGAL ACTIONS. No action, suit or proceeding shall be pending or
threatened before any court of any federal, state, local or foreign jurisdiction
(other than an action, suit or proceeding in
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which no governmental authority is a party) of the type referred to in clauses
(i) through (iii) of Section 5.1 above, in which action, suit or proceeding
there is a reasonable possibility of an adverse outcome.
5.3 LEGAL APPROVALS. The execution and the delivery of this Agreement and
the consummation of the transactions contemplated hereby shall have been
approved by all regulatory authorities whose approvals are required by law and
the waiting period under the HSR Act shall have expired or have been terminated.
5.4 STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
adopted and approved by the affirmative vote or written consent of the holders
of the outstanding shares of Acquired Company Stock by the vote or written
consent required by, and in accordance with, the Delaware Code.
5.5 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective by the SEC, and no stop order with respect
thereto shall have been issued. The shares of Parent Stock to be issued or sold
pursuant to the Registration Statement shall have been registered for issuance
in the Merger under all applicable Blue Sky laws or shall be exempt from such
registration, and no stop order shall have been issued with respect to the
issuance or sale of such securities by any Blue Sky authority.
5.6 NASDAQ APPROVAL. The Parent Stock issuable in the Merger shall have
been listed or approved for listing upon notice of issuance by the Nasdaq Stock
Market National Market.
VI. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND PARENT.
In addition to the conditions set forth in Article V above, all the
obligations of Purchaser and Parent to consummate, or cause to be consummated,
the Merger shall be contingent upon and subject to the satisfaction, on or
before the Closing, of each and every one of the following conditions. The
following conditions are for the sole benefit of Purchaser and Parent and may be
waived by Purchaser or Parent (which action shall be deemed a waiver by both
Purchaser and Parent), in whole or in part, at any time and from time to time,
in the sole discretion of Purchaser or Parent. The failure by either Purchaser
or Parent at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any other right, and each right shall be deemed an ongoing
right that may be asserted at any time and from time to time.
6.1 REPRESENTATIONS OF ACQUIRED COMPANY. All representations and
warranties of the Acquired Company contained in this Agreement (except as
affected by the transactions contemplated by this Agreement), in the statements
contained in the Exhibits hereto or in any certificate delivered by the Acquired
Company pursuant to this Agreement shall be true and correct in all material
respects when made, and shall be true and correct in all material respects at
and as of the Closing Date as though such representations and warranties were
made or given on and as of the Closing Date.
6.2 COVENANTS OF ACQUIRED COMPANY. The Acquired Company shall have, or
caused to be, performed and observed in all material respects all covenants,
agreements and conditions hereto to be performed or observed at or before the
Closing Date.
6.3 NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the date of this
Agreement there shall not have been any Material Adverse Effect in respect of
the Acquired Company. A Material Adverse Effect shall not be deemed to have
occurred for purposes of this Section 6.3 by reason of the inability of Acquired
Company to enter into contracts with those prospective new customers which prior
to the execution of this Agreement have been separately identified in a writing
by Acquired Company to Purchaser substantially due to the reaction of such
prospective new customers to the announcement of the transactions contemplated
by this Agreement. In addition, a Material Adverse Effect shall not be deemed to
have occurred for purposes of this Section 6.3 as a result of reductions in the
volume of
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revenue received by Acquired Company from Purchaser where such reduction is the
result of Purchaser's deliberate action. The exceptions to the Material Adverse
Effect condition set forth in the immediately preceding two sentences are
conditioned on the Acquired Company using its reasonable best efforts to enter
into contracts with prospective new customers.
6.4 CERTIFICATE. Purchaser shall have received a certificate of the
President of the Acquired Company, dated as of the Closing Date, certifying as
to the matters set forth in Sections 6.1 through 6.3 above. In addition, Parent
shall have received both a certificate dated as of the effective date of the
Registration Statement and a certificate dated as of the Closing Date certifying
that in particular and without modifying the certificate indicated above, the
covenants set forth in Sections 2.3.1 and 2.3.2 above have been performed and
that the representations set forth in Sections 3.21 and 3.24 above are true and
correct as of such dates, but that the agreements referenced in Section 3.24
have been (or will be) terminated prior to Closing.
6.5 OPINION OF ACQUIRED COMPANY'S COUNSEL. Purchaser and Parent shall have
received an opinion of counsel for the Acquired Company, dated as of the Closing
Date, of customary form reasonably acceptable to Purchaser.
6.6 TAX OPINION. Purchaser and Parent shall each have received an opinion
from their counsel based upon appropriate representations of the parties and
certain stockholders of the Acquired Company dated as of the Closing Date to the
effect that the Merger will qualify as a reorganization pursuant to Section
368(a) of the Tax Code.
6.7 AFFILIATES AND PRINCIPAL STOCKHOLDERS. Parent and Purchaser shall have
received the Rule 145 Letters and the Pooling Letters from the persons and at
the times specified in Section 2.4 and the letters referenced in Section 2.13.
6.8 ADDITIONAL INSTRUMENTS; CERTAIN CONSENTS. The Acquired Company shall
have delivered to Purchaser or Parent certified copies of resolutions duly
adopted by the Acquired Company's Board of Directors and stockholders, approving
the Merger and authorizing the transactions contemplated hereby, and such other
or additional instruments, endorsements and documents as Parent and Purchaser
reasonably deem to be necessary to enable the Merger to be consummated as
provided in this Agreement. The Acquired Company shall have received the
waivers, consents and approvals to the transactions contemplated herein, which
are listed on EXHIBIT 6.8.
6.9 ACCOUNTANT'S POOLING LETTERS. Parent shall have received letters from
Arthur Andersen, LLP dated as of the effective date of the Registration
Statement and as of the Closing Date addressed to Parent advising it, as set
forth in Section 2.3.2 hereof, that the Merger may be accounted for as a pooling
of interests and otherwise in such form as is customary and reasonably
acceptable to Parent.
6.10 ACCOUNTANT'S COMFORT LETTERS. Purchaser and Parent shall have
received letters from Arthur Andersen, LLP dated as of the effective date of the
Registration Statement and as of the Closing Date, addressed to Purchaser and
Parent, containing such matters as are customarily contained in auditors'
letters regarding the Acquired Company Information provided expressly for
inclusion in such Registration Statement, and in form and substance reasonably
satisfactory to Parent and Purchaser.
6.11 COVENANTS NOT TO COMPETE. Purchaser shall have received executed
non-competition agreements from William H. Brehm, Brian E. Higgins and Michael
E. Myers in the form attached hereto as EXHIBIT 6.11, or in a substantially
similar form reasonably acceptable to Purchaser, further accompanied by letters
from the Purchaser regarding the applicability of the Acquired Company's
Executive Retention Plan which have been previously agreed to.
6.12 FEE LIMITATION. The only fees and expenses to any investment banking
firm or similar entity that will be incurred by Acquired Company in connection
with the transaction with Parent and Purchaser will be in connection with the
delivery of a fairness opinion as required by Section 7.7
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hereof and financial advisory services and such fees shall not exceed $690,000
in the aggregate and expenses not exceed $25,000, and Purchaser shall receive
evidence of compliance with this limitation reasonably satisfactory to it.
6.13 CONTRACT CANCELLATION. The Voting Trust Agreement and Registration
Rights Agreement of the Acquired Company, each referenced on EXHIBIT 3.3, shall
have been terminated, and of no further force or effect.
6.14 RESOLUTION OF CERTAIN MATTERS. The Acquired Company shall have
obtained a complete release from liability in connection with the matter
described on EXHIBIT 6.14 (the "Matter") at no cost to the Acquired Company and
in form reasonably satisfactory to Purchaser, or those certain stockholders of
the Acquired Company listed on EXHIBIT 6.14 shall have agreed to indemnify, on a
joint and several basis, the Acquired Company, Parent and Purchaser against all
liability and expense in connection with the Matter, such indemnification to be
on terms reasonably satisfactory to Purchaser and Parent. If such
indemnification is provided, the indemnifying stockholders shall be entitled to
control the defense of any litigation relating to the Matter.
VII. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRED COMPANY.
All the obligations of the Acquired Company to consummate the Merger shall
be contingent upon and subject to the satisfaction, on or before the Closing, of
each and every one of the following conditions. The following conditions are for
the sole benefit of the Acquired Company and may be asserted by the Acquired
Company regardless of the circumstances giving rise to any such condition and
may be waived by the Acquired Company, in whole or in part, at any time and from
time to time, in the sole discretion of the Acquired Company for purposes of
consummating the transactions contemplated herein. The failure by the Acquired
Company at any time to exercise any of the foregoing rights shall not be deemed
a waiver of any other right, and each right shall be deemed an ongoing right
that may be asserted at any time and from time to time.
7.1 REPRESENTATIONS OF PURCHASER AND PARENT. All representations and
warranties made by Purchaser and Parent in this Agreement (except as affected by
the transactions contemplated by this Agreement) shall be true and correct in
all material respects when made, and shall be true and correct in all material
respects at and as of the Closing Date, with the same force and effect as if
such representations and warranties had been made at and as of the Closing Date.
7.2 COVENANTS OF PURCHASER AND PARENT. Purchaser and Parent shall have, or
caused to be, performed and observed in all material respects all covenants,
agreements and conditions hereof to be performed or observed by them at or
before the Closing Date.
7.3 NO MATERIAL ADVERSE CHANGES IN BUSINESS. Since the date of this
Agreement there shall not have been any Material Adverse Effect in respect of
the Parent.
7.4 CERTIFICATE. The Acquired Company shall have received a certificate of
the President of each of Parent and Purchaser, dated as of the Closing Date,
certifying as to the matters set forth in Sections 7.1, 7.2 and 7.3 above.
7.5 OPINION OF PARENT'S AND PURCHASER'S COUNSEL. The Acquired Company
shall have received an opinion of Jones, Day, Reavis & Pogue, counsel to Parent
and Purchaser, dated as of the Closing Date, of customary form reasonably
acceptable to Acquired Company.
7.6 TAX OPINION. The Acquired Company shall have received for the benefit
of its stockholders an opinion from its tax counsel based upon appropriate
representations of the parties and certain stockholders of the Acquired Company,
dated as of the Closing Date, to the effect that the Merger will qualify as a
reorganization pursuant to Section 368(a) of the Tax Code.
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7.7 FAIRNESS OPINION. The Acquired Company shall have received an opinion
dated as of the date of the mailing of the Registration Statement to the
stockholders of the Acquired Company from Dean Witter Reynolds Inc., its
financial advisor, confirming the opinion referred to in Section 3.2.3 hereof.
7.8 PARENT STOCK PRICE. The average of the per share closing prices on the
Nasdaq Stock Market's National Market as reported in THE WALL STREET JOURNAL of
the Parent Stock for the ten (10) consecutive trading days ending on the second
trading day prior to the Closing Date (the "Pre-Closing Parent Stock Price")
shall be at least $50.00.
7.9 ACCOUNTANTS' POOLING LETTERS. The Acquired Company shall have received
letters from Arthur Andersen, LLP dated as of the effective date of the
Registration Statement and as of the Closing Date, addressed to the Acquired
Company, advising it, as set forth in Section 2.3.2, that the Merger may be
accounted for as a pooling of interests and otherwise in such form as is
customary and reasonably acceptable to the Acquired Company.
VIII. CLOSING.
8.1 TIME AND PLACE OF CLOSING. Unless another place or date is agreed to
in writing by the Acquired Company and Purchaser, the Closing shall be held at
the offices of Jones, Day, Reavis & Pogue, 3500 One Peachtree Center, 303
Peachtree Street N.E., Atlanta, Georgia 30308-3242, commencing at 10:00 a.m.
Eastern Time, within two (2) business days of the last to occur of (i) the
expiration or termination of the waiting period under the HSR Act, (ii) the
Merger having been approved by the stockholders of the Acquired Company pursuant
to the Delaware Code and (iii) the satisfaction or waiver of the other
conditions set forth in Articles V, VI and VII. (The actual date of the Closing
is referred in this Agreement as the "Closing Date.")
8.2 TRANSACTIONS AT CLOSING. At the Closing, each of the following
transactions shall occur:
8.2.1. THE ACQUIRED COMPANY'S PERFORMANCE. At the Closing, the
Acquired Company shall deliver to Purchaser and Parent, in addition to the
other deliveries required by the terms and conditions of this Agreement, the
following:
(a) copies of any consents listed on Exhibit 6.8;
(b) reasonably satisfactory evidence of the approvals described in
Sections 5.4 and 5.5;
(c) the certificates described in Section 6.4 to be delivered on the
Closing Date;
(d) certificates of compliance or certificates of good standing of
the Acquired Company as of the most recent practicable date, from the
Secretary of the State of Delaware;
(e) certified copies of resolutions of the Board of Directors and
stockholders of the Acquired Company approving the transactions set forth
in this Agreement;
(f) certificates of incumbency for the officers of the Acquired
Company;
(g) resignations of each trustee of each Benefit Plan;
(h) Certificate of Merger and a Plan of Merger, each in form and
content that complies with the Delaware Code, executed by the Acquired
Company;
(i) the opinion of counsel for the Acquired Company, referenced in
Section 6.5;
(j) the tax opinion described in Section 6.6;
(k) the Rule 145 Letters described in Section 2.4;
(l) the letters described in Section 2.13;
(m) the letters from Arthur Andersen, LLP to be delivered by the
Closing Date as described in Section 6.9;
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(n) the Covenants Not to Compete as executed by the employees of the
Acquired Company specified in Section 6.11; and
(o) such other evidence of the performance of all covenants and
satisfaction of all conditions required of the Acquired Company by this
Agreement, at or prior to the Closing, as Purchaser, Parent or their
counsel may reasonably require.
8.2.2. PERFORMANCE BY PURCHASER AND PARENT. At the Closing, Purchaser
or Parent, as appropriate, shall deliver to the Acquired Company, in
addition to the other deliveries required by the terms and conditions of
this Agreement, the following:
(a) the certificate described in Section 7.4;
(b) certificates of incumbency of the officers of Purchaser and of
Parent who are executing this Agreement and the other documents
contemplated hereunder;
(c) certified copies of resolutions of the Boards of Directors of
each of Purchaser and Parent (or Executive Committees thereof) approving
the transactions set forth in this Agreement;
(d) Certificate of Merger and a Plan of Merger, each in form and
content that complies with the Delaware Code, executed by Purchaser;
(e) the opinion of counsel for Purchaser and Parent referenced in
Section 7.5;
(f) the tax opinion described in Section 7.6;
(g) such other evidence of the performance of all the covenants and
satisfaction of all of the conditions required of Purchaser and of Parent
by this Agreement at or before the Closing as the Acquired Company or its
counsel may reasonably require.
IX. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
9.1 Except for the covenants contained in Sections 2.13, 2.14 and 11.5, all
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Closing,
and thereafter no party hereto and no officer, director or employee of any such
party shall have any liability whatsoever with respect to any such
representation, warranty or agreement except for liabilities arising from fraud,
willful misconduct or criminal acts.
X. TERMINATION.
10.1 METHOD OF TERMINATION. This Agreement constitutes the binding and
irrevocable agreement of the parties to consummate the transactions contemplated
hereby, the consideration for which is (a) the covenants set forth in Article II
hereof, and (b) the obligations incurred and to be incurred by Purchaser and
Parent, on the one hand, and by the Acquired Company, on the other hand, in
respect of this Agreement, and this Agreement may be terminated or abandoned
only as follows:
10.1.1. by the mutual consent of the Boards of Directors of the
Acquired Company and Parent, notwithstanding prior approval by the
stockholders of any or all of such corporations;
10.1.2. by the Board of Directors of Purchaser in accordance with its
rights under Section 10.3;
10.1.3. by the Board of Directors of the Acquired Company after the
earlier to occur of November 15, 1995, and the date that is twenty-four (24)
business days following the date on which the Registration Statement is
declared effective by the SEC (whichever is earlier being referred to herein
as the "Outside Closing Date"), if any of the conditions set forth in
Articles V and VII hereof, to which the Acquired Company's obligations are
subject, have not been fulfilled or waived, unless such fulfillment has been
frustrated or made impossible by any act or failure to act of it;
A-29
10.1.4. by Purchaser after the Outside Closing Date, if any of the
conditions set forth in Articles V and VI hereof, to which the obligations
of Purchaser and Parent are subject, have not been fulfilled or waived,
unless such fulfillment has been frustrated or made impossible by any act or
failure to act of Purchaser or Parent;
10.1.5. by the Board of Directors of the Acquired Company if in the
exercise of its good faith determination, as set forth in Section 2.11, as
to its fiduciary duties to the Acquired Company's stockholders imposed by
law, the Board of Directors of the Acquired Company decides that such
termination is required; or
10.1.6. by the Board of Directors of the Acquired Company if the
average of the per share closing prices of the Parent Stock on the Nasdaq
Stock Market's National Market as reported in THE WALL STREET JOURNAL for
any period of twenty (20) consecutive trading days ending on any date prior
to the second trading day prior to the Closing Date is less than $50.00.
10.2 EFFECT OF TERMINATION.
10.2.1. In the event of a termination of this Agreement pursuant to
Sections 10.1, each party shall pay the costs and expenses incurred by it in
connection with this Agreement, and except as provided in the next succeeding
sentence, no party (or any of its officers, directors, employees, agents,
representatives or stockholders) shall be liable to any other party for any
costs, expenses, damage or loss of anticipated profits hereunder. In the event
of a termination of this Agreement other than pursuant to Sections 10.1.1,
10.1.5, and 10.1.6, the parties shall retain any and all rights attendant to a
breach of any covenant, representation or warranty made hereunder. The parties
agree that the failure to be satisfied of any condition to Closing shall not,
absent a breach of any covenant, representation or warranty made herein,
constitute a breach of this Agreement; although a breach of any covenant,
representation or warranty that results in or constitutes the failure of any
condition to Closing shall nonetheless constitute a breach for purposes of the
immediately preceding sentence. The parties also agree that Sections 5, 6 and 7
do not in and of themselves constitute representations, warranties or covenants.
Each party further agrees not to take any actions with the intent of frustrating
the satisfaction of the conditions to its obligation to close. In the event of a
termination of this Agreement pursuant to Section 10.1.5 hereof, Section 10.2.2
shall govern.
10.2.2. In the event the Agreement is terminated by the Acquired Company in
accordance with Section 10.1.5, the Acquired Company shall promptly pay to
Purchaser (i) in an aggregate amount not to exceed $500,000, all reasonable
costs and expenses of Purchaser and Parent incurred in connection with the
negotiation and performance of this Agreement including without limitation fees
and expenses of counsel, fees and expenses of independent public accountants,
filing fees in respect of compliance with the HSR Act, printing expenses and
registration fees and (ii) a fee in the amount of $1,500,000. In the case of any
termination of this Agreement under Section 10.1.5, payment of the amounts
specified in the preceding sentence shall constitute liquidated damages and
shall be the sole and exclusive remedy of Parent and Purchaser for any and all
damages arising under or in connection with this Agreement, and, upon payment of
the amounts specified in the preceding sentence, the Acquired Company shall not
have any liability or further obligation to Parent or Purchaser under or in
connection with this Agreement or any such termination hereof.
10.2.3. Notwithstanding anything in this Agreement to the contrary, the
provisions of Section 2.8.2 shall survive any termination of this Agreement
prior to Closing.
10.3 RISK OF LOSS. The Acquired Company retains all risk of condemnation,
destruction, loss or damage due to fire or other casualty from the date of this
Agreement up to the Effective Time. If the condemnation, destruction, loss, or
damage is such that the business of the Acquired Company, is interrupted or
curtailed or the assets of the Acquired Company are adversely affected such that
a Material Adverse Effect Occurs, then Purchaser shall have the right to
terminate this Agreement.
A-30
XI. GENERAL PROVISIONS.
11.1 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
certified mail, return receipt requested, first class postage prepaid, or sent
by Federal Express or similar overnight delivery service with receipt
acknowledged addressed as follows:
11.1.1. If to the Acquired Company:
Clinicom Incorporated
4720 Walnut Street
Boulder, Colorado 80301-2557
Attn: Mr. William H. Brehm
and to:
Lester R. Woodward, Esq.
Davis Graham & Stubbs
370 Seventeenth Street
Suite 4700
Denver, Colorado 80201
11.1.2. If to Purchaser or Parent:
HBO & Company
301 Perimeter Center North
Atlanta, Georgia 30346
Attn: Mr. Jay P. Gilbertson
and to:
Jones, Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
Attn: John E. Zamer, Esq.
11.1.3. If delivered personally, the date on which a notice, request,
instruction or document is delivered shall be the date on which such
delivery is made and, if delivered by mail or by overnight delivery service,
the date on which such notice, request, instruction or document is received
shall be the date of delivery. In the event any such notice, request,
instruction or document is mailed or shipped by overnight delivery service
to a party in accordance with this Section 11.1 and is returned to the
sender as nondeliverable, then such notice, request, instruction or document
shall be deemed to have been delivered or received on the fifth day
following the deposit of such notice, request, instruction or document in
the United States mails or the delivery to the overnight delivery service.
11.1.4. Any party hereto may change its address specified for notices
herein by designating a new address by notice in accordance with this
Section 11.1.
11.2 BROKERS. Purchaser and Parent, jointly and severally, represent and
warrant to the Acquired Company that except for Punk, Ziegel & Knoell, no broker
or finder has acted for them or any entity controlling, controlled by or under
common control with them in connection with this Agreement. The Acquired Company
represents and warrants to Purchaser and the Parent that, except for Dean Witter
Reynolds Inc. and except as disclosed on EXHIBIT 11.2, no broker or finder has
acted for it or any entity controlling, controlled by or under common control
with it in connection with this Agreement. Purchaser agrees to indemnify and
hold harmless the Acquired Company against any fee, loss or expense arising out
of any claim by Punk, Ziegel & Knoell or any other broker or finder
A-31
employed by either of them, and the Acquired Company agrees to indemnify and
hold harmless Purchaser and Parent against any fee, loss, or expense arising out
of any claim by Dean Witter Reynolds Inc., or any other broker or finder
employed by it or any of the Acquired Company's stockholders. The fees and other
expenses of Punk, Ziegel & Knoell shall be paid by Parent and Purchaser and the
fees and expenses of Dean Witter Reynolds Inc. shall be paid by the Acquired
Company (subject to the limitations set forth in Section 6.12) all in
conjunction with such other fees as provided for in Section 11.5.
11.3 FURTHER ASSURANCES. Each party covenants that at any time, and from
time to time, after the Effective Time, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.
11.4 WAIVER. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived by any
other party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
11.5 EXPENSES. Except as provided in 10.2.2, all expenses incurred by the
parties hereto in connection with or related to the authorization, preparation
and execution of this Agreement and the Closing of the transactions contemplated
hereby, including, without limitation of the generality of the foregoing, all
fees and expenses of agents, representatives, counsel and accountants employed
by any such party, shall be borne solely and entirely by the party that has
incurred the same. The Acquired Company represents and warrants that the firm of
Davis Graham & Stubbs has served as its sole legal counsel, and Parent and
Purchaser represent and warrant that the firms of Jones, Day, Reavis & Pogue and
Mazursky & Hiner have served as Parent and Purchaser's sole legal counsel, in
connection with the negotiation, execution and delivery of this Agreement, and
each of such parties acknowledges and agrees that neither the Acquired Company
nor the Parent or Purchaser shall be required to pay the fees or expenses of any
other legal counsel in such connection.
11.6 PRESS RELEASES AND DISCLOSURE. In the event that either party
proposes to issue, make or distribute any press release, public announcement or
other written publicity or disclosure prior to the Closing Date that refers to
the transactions contemplated herein, the party proposing to make such
disclosure shall provide a copy of such disclosure to the other parties and
shall afford the other parties reasonable opportunity (subject to any legal
obligation of prompt disclosure) to comment on such disclosure or the portion
thereof which refers to the transactions contemplated herein prior to making
such disclosure.
11.7 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
executors, administrators, successors and assigns.
11.8 HEADINGS. The section and other headings in this Agreement are
inserted solely as a matter of convenience and for reference, and are not a part
of this Agreement.
11.9 ENTIRE AGREEMENT. This Agreement and all agreements referenced
specifically in this Agreement and executed as required by this Agreement
constitute the entire agreement among the parties hereto and supersede and
cancel any prior agreements, representations, warranties, or communications,
whether oral or written, among the parties hereto relating to the transactions
contemplated hereby or the subject matter herein. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by an agreement in writing signed by the party against whom or which the
enforcement of such change, waiver, discharge or termination is sought.
11.10 GOVERNING LAW. Except to the extent the transactions contemplated
hereby are governed by the Delaware Code, this Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware.
A-32
11.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.12 NO AGREEMENT UNTIL EXECUTED. This Agreement shall not constitute or
be deemed to evidence a contract or agreement among the parties hereto unless
and until executed by all parties hereto, irrespective of negotiations among the
parties or the exchanging of drafts of this Agreement.
11.13 PRONOUNS. All pronouns used herein shall be deemed to refer to the
masculine, feminine or neuter gender as the context requires.
11.14 EXHIBITS INCORPORATED. All Exhibits attached hereto are an integral
part of this Agreement.
11.15 TIME OF ESSENCE. Time is of the essence in this Agreement.
IN WITNESS WHEREOF, each party hereto has executed or caused this Agreement
to be executed on its behalf, all on the day and year first above written.
"PURCHASER":
HBO & COMPANY OF GEORGIA
By: /s/ JAY P. GILBERTSON
-----------------------------------
Jay P. Gilbertson,
VICE PRESIDENT -- FINANCE AND
CHIEF FINANCIAL OFFICER
"PARENT":
HBO & COMPANY
By: /s/ JAY P. GILBERTSON
-----------------------------------
Jay P. Gilbertson,
VICE PRESIDENT -- FINANCE AND
CHIEF FINANCIAL OFFICER
"ACQUIRED COMPANY":
CLINICOM INCORPORATED
By: /s/ WILLIAM H. BREHM
-----------------------------------
William H. Brehm,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
A-33
APPENDIX B
September 1, 1995
Board of Directors
CliniCom Incorporated
4720 Walnut Street
Boulder, CO 80301
Ladies and Gentlemen:
CliniCom Incorporated, a Delaware corporation (the "Company"), HBO &
Company, a Delaware corporation ("HBOC"), and HBO & Company of Georgia, a
Delaware corporation and a wholly owned subsidiary of HBOC (the "Purchaser"),
have entered into an Agreement of Merger, dated as of July 14, 1995 (the
"Agreement"), providing for the merger of the Company with and into the
Purchaser (the "Merger"). The Agreement provides that each outstanding share of
common stock, par value $.001 per share, of the Company (the "Company Common
Stock") issued and outstanding immediately prior to the Effective Time (as
defined in the Agreement), shall at the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into the
right to receive four-tenths (4/10ths) of a share (the "Exchange Ratio") of
common stock, par value $.05 per share, of HBOC (the "HBOC Common Stock"),
deliverable to the holder thereof, without interest on the value thereof. The
Company is not required to consummate the Merger if the average of the per share
closing prices on the Nasdaq's National Market as reported in THE WALL STREET
JOURNAL of the HBOC Common Stock for the ten (10) consecutive trading days
ending on the second trading day prior to the Closing Date (as defined in the
Agreement) is less than $50.00.
You have requested our opinion, as investment bankers, as to the fairness,
from a financial point of view, to the stockholders of the Company, of the
Exchange Ratio.
In arriving at the opinion set forth below, we have, among other things:
(1) reviewed the Agreement;
(2) reviewed the Annual Reports on Form 10-K and related publicly available
financial information of the Company for the three most recent fiscal years
ended December 31, 1994, the final prospectus, dated April 20, 1992, for the
Company's initial public offering of Common Stock, the Quarterly Report on
Form 10-Q for the period ended June 30, 1995, and the Company's definitive
Proxy Statement on Schedule 14A, dated May 3, 1995;
(3) reviewed the Annual Reports on Form 10-K and related publicly available
financial information of HBOC for the three most recent fiscal years ended
December 31, 1994, the Quarterly Report on Form 10-Q for the period ended
June 30, 1995, and HBOC's definitive Proxy Statement on Schedule 14A, dated
April 3, 1995;
(4) reviewed certain other information, including publicly available
information, relating to the business, earnings, cash flow, assets and
prospects of the Company and HBOC, respectively;
(5) reviewed an income statement forecast of the Company for the remaining
portion of the 1995 fiscal year and for the fiscal year 1996 as furnished to
us by the Company; reviewed balance sheet and cash flow forecasts of the
Company for the remaining portion of the 1995 fiscal year and for the fiscal
year 1996 as prepared on the basis of information and assumptions furnished
to us by the Company;
(6) reviewed income statement forecasts of HBOC for the remaining portion of the
1995 fiscal year and for the fiscal year 1996 as furnished to us by HBOC;
(7) conducted discussions with members of senior management of the Company and
HBOC, respectively, concerning the past and current business, operations,
assets, present financial condition and future prospects of the Company and
HBOC, respectively;
(8) reviewed the historical reported market prices and trading activity for the
Company Common Stock and HBOC Common Stock;
B-1
(9) compared certain financial information, operating statistics and market
trading information relating to the Company with published financial
information, operating statistics and market trading information relating to
selected public companies that we deemed to be reasonably similar to the
Company; compared certain financial information, operating statistics and
market trading information relating to HBOC with published financial
information, operating statistics and market trading information relating to
selected public companies that we deemed to be reasonably similar to HBOC;
(10) compared the proposed financial terms of the Merger with the financial
terms, to the extent publicly available, of selected other recent
acquisitions that we deemed to be relevant; and
(11) reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters as we deemed
necessary.
In preparing our opinion, we have assumed and relied upon the accuracy and
completeness of all financial and other information supplied to us by the
Company and HBOC or that is publicly available, respectively, and we have not
independently verified such information. We have also assumed that the Software
License and Distribution Agreement, Teaming Agreement, Software Support and
Enhancement Agreement, and Software Development Agreement, each dated December
24, 1993 and entered into between the Company and HBO & Company of Georgia, have
not been materially modified or amended since the dates thereof. We also have
relied upon the managements of the Company and HBOC, respectively, as to the
reasonableness and achievability of the financial forecasts of the Company and
HBOC (and the assumptions and bases thereof) provided to us or prepared on the
basis of information and assumptions furnished to us, and with your consent we
have assumed that such forecasts have been reasonably prepared on the basis
reflecting the best currently available estimates and judgments of such
respective managements as to the future operating performance of the Company and
HBOC, respectively. Furthermore, we assumed the Merger will qualify (i) for
pooling of interests accounting treatment and (ii) as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
We have not been requested to make, and we have not made, an independent
appraisal or evaluation of the assets, properties, facilities or liabilities of
the Company or HBOC and we have not been furnished with any such appraisal or
evaluation.
It should be noted that this opinion necessarily is based upon prevailing
market conditions (including current market prices for the Company Common Stock
and the HBOC Common Stock) and other circumstances and conditions as they exist
and can be evaluated at this time, and does not represent our opinion as to what
the actual value of the Company Common Stock or the HBOC Common Stock will be
after the date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services, a
portion of which is contingent upon the consummation of the Merger. In addition,
in the ordinary course of our business, we actively trade the securities of the
Company and HBOC for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
In addition, we have not acted as financial advisor to HBOC, nor have we acted
as manager of any HBOC security offering, and have not received any advisory or
offering fees from HBOC. We do, however, in the ordinary course of business,
provide our clients with research coverage of both the Company and HBOC.
On the basis of, and subject to the foregoing and other matters that we
consider pertinent, we are of the opinion that, AS OF THE DATE HEREOF, the
Exchange Ratio is fair, from a financial point of view, to the holders of the
outstanding Company Common Stock.
Very truly yours,
/s/ DEAN WITTER REYNOLDS INC.
DEAN WITTER REYNOLDS INC.
B-2
PROXY
CLINICOM INCORPORATED
4720 WALNUT STREET
BOULDER, COLORADO 80301
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William H. Brehm and Catherine K. Milburn,
and each of them, as Proxies, each with the power to appoint his or her
substitute, and hereby authorizes them to represent, and to vote as designated
on the reverse side, all the shares of Common Stock of CliniCom Incorporated
held of record by the undersigned on August 30, 1995, at a Special Meeting of
Stockholders to be held on Saturday, September 30, 1995 or any adjournment
thereof upon the following matter, as set forth in the Notice of said Meeting
dated September 1, 1995, a copy of which has been received by the undersigned.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
1. APPROVAL OF AGREEMENT OF MERGER dated July 14, 1995 by and among CliniCom Incorporated, HBO & Company and HBO &
Company of Georgia.
FOR AGAINST ABSTAIN
/ / / / / /
2. In their discretion, the Proxies are authorized to vote upon such other matters that may properly come before the
meeting or any adjournments thereof.
Please sign exactly as your name appears
on this proxy. If the shares represented
by this proxy are held by joint tenants,
both must sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as such.
If stockholder is a corporation, please
sign in full corporate name by President
or other authorized officer. If
stockholder is a partnership, please sign
in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PRE-PAID ENVELOPE.
Signature: _________________ Date _________
Signature: _________________ Date _________
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
HBO & Company's (the "Company") By-Laws (Article IX, Section 1) provide that
every person who was or is a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation or for its
benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
and pursuant to any procedure specified in the General Corporation Law of the
State of Delaware, as amended from time to time, against all expenses,
liabilities and losses (including attorneys' fees, judgments, fines and amounts
paid or to be paid in settlement) reasonably incurred or suffered by him in
connection therewith. Such right of indemnification shall be a contract right
that may be enforced in any manner by such person. Such right of indemnification
shall not be exclusive of any other right which such directors, officers or
representatives may have or thereafter acquire and, without limiting the
generality of such statement,, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under such article.
Article IX, Section 2 of the Company's By-Laws provides that the Board of
Directors may cause the corporation to purchase and maintain insurance on behalf
of any person who is or was a director or officer of the corporation, or is or
was serving at the request of the corporation as a director or officer of
another corporation, or as its representative in a partnership, joint venture,
trust or other enterprise against any liability asserted against such person and
incurred in any such capacity or arising out of such status, whether or not the
corporation would have the power to indemnify such person.
With respect to indemnification of officers and directors, Section 145 of
the Delaware General Corporation Law provides that a corporation shall have
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Under this provision of
the Delaware General Corporation Law, the termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contenders or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Furthermore, the Delaware General Corporation Law provides that a
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation except that no indemnification shall be made
II-1
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability, but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
In addition, the General Corporation Law of Delaware enables a Delaware
corporation to include in its certificate of incorporation a provision
eliminating or limiting a director's liability to the corporation or its
stockholders for monetary damages for breaches of a director's fiduciary duty as
a director. The statute provides, however, that liability for (a) breach of the
director's duty of loyalty, (b) acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, (c) the unlawful purchase
or redemption of stock or unlawful dividends or (d) transactions from which a
director derived an improper personal benefit cannot be eliminated or limited in
this manner. The Company's Certificate of Incorporation contains such
provisions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. Items marked with an asterisk, "*," relate to management
contracts or compensatory plans or arrangements. The following exhibits are
filed as part of this Registration Statement:
EXHIBIT
NUMBER DESCRIPTION
------------ ---------------------------------------------------------------------------------------------------
2 Agreement of Merger dated as of July 14, 1995 by and among HBO & Company, HBO & Company of Georgia
and CliniCom Incorporated (included as Appendix A to the Proxy Statement/Prospectus contained in
Part I of this Registration Statement).
5 Opinion of Jones, Day, Reavis & Pogue re legality.
8 Opinion of Davis, Graham & Stubbs, L.L.C. re tax matters.
+11 Statement re Computation of Per Share Earnings.
21 Subsidiaries of Registrant.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of Arthur Andersen LLP.
23(c) Consent of Ernst & Young LLP.
23(d) Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
23(e) Consent of Davis, Graham & Stubbs, L.L.C. (included in Exhibit 8).
23(f) Consent of Dean Witter Reynolds Inc.
+24 Power of Attorney (included in signature page).
------------------------
+ Previously filed.
II-2
EXHIBIT
NUMBER DESCRIPTION
------------- ----------------------------------------------------------------------
The following exhibits filed with the Securities and Exchange Commission are
incorporated by reference as shown below.
ON MAY 13, 1981, AS PART OF ITS REGISTRATION STATEMENT ON FORM S-1
(REGISTRATION NUMBER 2-72275):
4(a) -- Specimen forms of certificates for Common Stock of Registrant.
10(e) -- Standard Form of EPLA Agreement.
ON JANUARY 22, 1985, AS PART OF ITS FORM S-14 (REGISTRATION NUMBER
2-95208):
3(a) -- Certificate of Incorporation of Registrant.
ON MARCH 21, 1989, AS PART OF ITS FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1988:
10(a) -- Standard Form of Software License Agreement.
10(b) -- Standard Form of Hardware Purchase Agreement.
ON FEBRUARY 15, 1991, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER
2-75987):
*4 -- HBO & Company 1981 Incentive Stock Option Plan, as amended.
ON FEBRUARY 22, 1991, AS PART OF ITS FORM 8-K:
*4 -- HBO & Company Rights Agreement.
ON MARCH 26, 1991, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER
2-92030):
*4 -- HBO & Company Nonqualified Stock Option Plan, as amended.
ON MARCH 27, 1991, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER
33-12051):
*4 -- HBO & Company 1986 Employee Nonqualified Stock Option Plan, as
amended.
ON MARCH 27, 1991, AS A PART OF ITS FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1990:
3(a) -- Amendments to the Certificate of Incorporation of Registrant.
10(c) -- Standard Form of HealthQuest Ltd. Software License and Maintenance
Agreement.
ON MARCH 27, 1992, AS A PART OF ITS FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1991:
10(a) -- Standard Form of Credit Agreement with recourse between the Company
and Sanwa Business Credit Corporation.
10(b) -- Standard Form of Credit Agreement without recourse between the Company
and Sanwa Business Credit Corporation.
ON MARCH 26, 1993, AS PART OF ITS FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1992:
10(d) -- Standard Form of Credit Agreement without recourse between the Company
and The First National Bank of Boston.
ON AUGUST 12, 1993, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER
33-67300):
*4 -- HBO & Company 1993 Stock Option Plan for Nonemployee Directors.
ON AUGUST 13, 1993, AS PART OF ITS FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1993:
10(a) -- Acquisition Agreement, dated June 28, 1993, of Biven Software, Inc.
ON MARCH 23, 1994, AS PART OF ITS FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1993:
10(a) -- Grid Note between the Company and Continental Bank N.A., dated June
25, 1993.
10(b) -- Acquisition of Data-Med Computer Services Limited-Sale and Purchase
Agreement, dated December 16, 1993.
10(e) -- Co-ownership agreement between HTG Corp. and the Company of Falcon 20
airplane, dated July 15, 1993.
10(f) -- Promissory note from HTG Corp. and the Company to General Electric
Capital Corporation.
10(g) -- Letter agreement between HTG Corp. and the Company regarding the Loan
from General Electric Capital Corporation, dated December 16, 1993.
II-3
EXHIBIT
NUMBER DESCRIPTION
------------- ----------------------------------------------------------------------
ON MAY 6, 1994, AS PART OF ITS FORM 10-Q REPORT FOR THE QUARTER ENDED
MARCH 31, 1994:
10(a) -- Termination of the Amended and Restated Revolving Credit Agreement,
effective April 20, 1994.
10(b) -- Letter agreement from Bank of Boston regarding the Revolving and Term
Loan Facility, dated April 19, 1994.
ON JUNE 14, 1994, AS PART OF ITS FORM 8-K REPORT DATED JUNE 13, 1994,
AS AMENDED BY FORM 8-KA DATED JUNE 30, 1994 AND FILED WITH THE
COMMISSION ON JULY 1, 1994:
2 -- Asset Purchase Agreement among IBAX Healthcare Systems, Baxter
Healthcare Corporation, International Business Machines Corporation,
Baxter Systems, Inc., HCPG Corporation, HBO & Company and HBO &
Company of Georgia dated May 31, 1994.
ON JULY 20, 1994, AS PART OF THE FORM S-4 REGISTRATION STATEMENT DATED
JULY 19, 1994, AS AMENDED BY AMENDMENT NO. 1 TO FORM S-4 DATED AUGUST
10, 1994, AND FILED WITH THE COMMISSION ON AUGUST 11, 1994, AND
FURTHER AMENDED BY AMENDMENT NO. 2 TO FORM S-4 DATED AUGUST 10, 1994,
AND FILED WITH THE COMMISSION AUGUST 11, 1994:
2 -- Agreement of Merger dated June 30, 1994, by and among HBO & Company,
HBO & Company of Georgia and Serving Software, Inc.
3 -- Amended Bylaws of Registrant.
10(a) -- Receivable Purchase Agreement, dated as of June 24, 1994, among HBO &
Company of Georgia, as seller, and The First National Bank of Boston
and NationsBank of Georgia, N.A., as purchasers, and The First
National Bank of Boston, as agent.
10(b) -- Credit Agreement, dated June 13, 1994, between the Company and
Wachovia Bank of Georgia, N.A.
10(c) -- Note payable to Baxter Healthcare Corporation, dated May 31, 1994.
10(d) -- Note payable to International Business Machines Corporation, dated May
31, 1994.
10(e) -- Amended and Restated Revolving Credit and Term Loan Agreement, dated
as of May 27, 1994, among HBO & Company and HBO & Company of Georgia
and The First National Bank of Boston and NationsBank of Georgia,
N.A. and The First National Bank of Boston, as agent.
10(f) -- First Amendment to the May 27, 1994, Amended and Restated Revolving
Credit and Term Loan Agreement and First Amendment to Revolving
Credit Notes, dated as of June 30, 1994.
*10(g) -- Letter Agreement between John E. Haugo, Ph.D. and HBO & Company, dated
June 29, 1994, re: employment.
ON AUGUST 11, 1994, AS PART OF ITS FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1994:
10 -- Second Amendment to the May 27, 1994, Amended and Restated Revolving
Credit and Term Loan Agreement by and among HBO & Company, HBO &
Company of Georgia, The First National Bank of Boston, NationsBank of
Georgia, N.A. and other lending institutions, dated as of June 30,
1994.
ON AUGUST 17, 1994, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER
33-82960):
*4 -- HBO & Company 1983 Employee Discount Stock Purchase Plan, as amended.
ON AUGUST 17, 1994, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER
33-82962):
*4 -- HBO & Company 1990 Executive Incentive Plan, as amended.
ON SEPTEMBER 15, 1994, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER
33-84034):
*4 -- 1986 Incentive Stock Option Plan of Serving Software, Inc.
II-4
EXHIBIT
NUMBER DESCRIPTION
------------- ----------------------------------------------------------------------
ON NOVEMBER 10, 1994, AS PART OF ITS FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1994:
10(a) -- First Amendment to the Receivables Purchase Agreement by and among HBO
& Company of Georgia, The First National Bank of Boston, NationsBank
of Georgia, N.A. and other financial institutions, dated September
30, 1994.
10(b) -- Third Amendment to the May 27, 1994, Amended and Restated Revolving
Credit and Term Loan Agreement by and among HBO & Company, HBO &
Company of Georgia, The First National Bank of Boston, NationsBank of
Georgia, N.A. and other lending institutions, dated August 31, 1994.
ON MARCH 17, 1995, AS PART OF ITS FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1994:
*4 -- Chief Executive Officer Incentive Plan.
11 -- Computation of Earnings Per Share of Common Stock for the Years Ended
December 31, 1994, 1993 and 1992.
13 -- Annual Report to Stockholders for the year ended December 31, 1994.
ON MAY 9, 1995, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER
33-59173):
*4 -- HBO & Company 1986 Nonqualified Stock Option Agreement, HBO & Company
1991 Nonqualified Stock Option Agreement 1 and HBO & Company 1991
Nonqualified Stock Option Agreement 2.
ON MAY 9, 1995, AS PART OF ITS FORM 10-Q FOR THE QUARTER ENDED MARCH
31, 1995:
10 -- Second Amendment to Receivables Purchase Agreement dated March 31,
1995.
ON JUNE 23, 1995, AS PART OF ITS FORM 8-K DATED JUNE 23, 1995, AS
AMENDED BY FORM 8-KA DATED JULY 31, 1995, AND FILED WITH THE
COMMISSION ON JULY 31, 1995, AS FURTHER AMENDED BY FORM 8-KA2 DATED
AUGUST 8, 1995 AND FILED WITH THE COMMISSION ON AUGUST 8, 1995:
2 -- Stock Purchase Agreement, dated as of May 16, 1995, among First Data
Corporation, FDC Health, Inc., First Data Health Systems Corporation,
HBO & Company, and HBO & Company of Georgia, as amended by letter
agreement dated June 17, 1995.
ON JULY 31, 1995, AS PART OF ITS FORM 10-Q FOR THE QUARTER ENDED JUNE
30, 1995:
10 -- Interim Loan and Security Agreement between General Electric Capital
Corporation, HTG Corp. and HBO & Company of Georgia and letter
agreement between HTG Corp. and HBO & Company of Georgia, dated June
26, 1995.
(b) Financial Statement Schedules.
No financial statement schedules are required to be filed herewith.
(c) The opinion of Dean Witter Reynolds Inc. is included as Appendix B to
the Proxy Statement/ Prospectus contained in Part I of this Registration
Statement.
ITEM 22. UNDERTAKINGS.
(a) (i) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(ii) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of
II-5
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(iii) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, in
the State of Georgia, on the 31st day of August, 1995.
HBO & COMPANY
By: /s/ CHARLES W. MCCALL
-----------------------------------
Charles W. McCall
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
SIGNATURE TITLE DATE
----------------------------------- -------------------------- ---------------
/s/ CHARLES W. MCCALL Director, President and August 31, 1995
----------------------------------- Chief Executive Officer
(Charles W. McCall) (Principal Executive
Officer)
/s/ JAY P. GILBERTSON Vice President -- Finance, August 31, 1995
----------------------------------- Chief Financial Officer,
(Jay P. Gilbertson) Treasurer and Assistant
Secretary (Principal
Financial Officer)
/s/ TIMOTHY S. HEYERDAHL Vice President -- August 31, 1995
----------------------------------- Controller and Chief
(Timothy S. Heyerdahl) Accounting Officer
(Principal Accounting
Officer)
* Chairman of the Board of
----------------------------------- Directors
(Holcombe T. Green, Jr.)
II-7
SIGNATURE TITLE DATE
----------------------------------- -------------------------- ---------------
Director
-----------------------------------
(John P. Crecine)
* Director
-----------------------------------
(Alfred C. Eckert III)
* Director
-----------------------------------
(Alton F. Irby III)
* Director
-----------------------------------
(Gerald E. Mayo)
* Director
-----------------------------------
(James V. Napier)
* Director
-----------------------------------
(Charles E. Thoele)
* Director
-----------------------------------
(Donald C. Wegmiller)
By: /s/ CHARLES W. MCCALL August 31, 1995
-----------------------------------
*Charles W. McCall,
Attorney-in-Fact
By: /s/ JAY P. August 31, 1995
GILBERTSON
-----------------------------------
*Jay P. Gilbertson,
Attorney-in-Fact
II-8
INDEX TO EXHIBITS
EXHIBITS PAGE
--------- ---------
2 Agreement of Merger dated as of July 14, 1995 by and among HBO & Company, HBO & Company of
Georgia and CliniCom Incorporated (included as Appendix A to the Proxy Statement/Prospectus
contained in Part I of this Registration Statement)...........................................
5 Opinion of Jones, Day, Reavis & Pogue re legality..............................................
8 Opinion of Davis, Graham & Stubbs, L.L.C. re tax matters.......................................
+11 Statement re Computation of Per Share Earnings
21 Subsidiaries of Registrant.....................................................................
23(a) Consent of Arthur Andersen LLP.................................................................
23(b) Consent of Arthur Andersen LLP.................................................................
23(c) Consent of Ernst & Young LLP...................................................................
23(d) Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5)
23(e) Consent of Davis, Graham & Stubbs, L.L.C. (included in Exhibit 8)
23(f) Consent of Dean Witter Reynolds Inc............................................................
+24 Power of Attorney (included in signature page)
------------------------
+ Previously filed.
EX-5
2
EXHIBIT 5
EXHIBIT 5
August 30, 1995
HBO & COMPANY
301 PERIMETER CENTER NORTH
ATLANTA, GEORGIA 30346
Gentlemen:
We have acted as counsel to HBO & Company, a Delaware corporation (the
"Company"), in connection with the registration of 3,981,407 shares of Common
Stock, $.05 par value per share, of the Company (the "Shares"), to be issued by
the Company pursuant to a Registration Statement on Form S-4 (File No.
33-61905), filed with the Securities and Exchange Commission (the "Registration
Statement").
We have examined originals or certified or photostatic copies of such
records of the Company, certificates of officers of the Company, and public
officials and such other documents as we have deemed relevant or necessary as
the basis of the opinion set forth below in this letter. In such examination, we
have assumed the genuineness of all signatures, the conformity to original
documents submitted as certified or photostatic copies, and the authenticity of
originals of such latter documents. Based on the foregoing, we are of the
following opinion:
The Shares have been duly authorized and, when issued in the manner
contemplated by the Registration Statement, will be validly issued,
fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and the reference to this Firm under the heading "Certain
Legal Matters" in the Proxy Statement/Prospectus constituting part of the
Registration Statement.
Sincerely,
/s/
JONES, DAY, REAVIS & POGUE
EX-8
3
EXHIBIT 8
EXHIBIT 8
August 30, 1995
CLINICOM INCORPORATED
4720 WALNUT STREET
BOULDER, CO 80301
Re: Proxy Statement of CliniCom Incorporated
and Prospectus of HBO & Company
---------------------------------------------------
Dear Sirs:
We have acted as counsel to CliniCom Incorporated in connection with the
Registration Statement on Form S-4, to which this opinion appears as Exhibit 8
(the "Registration Statement"), which includes the Proxy Statement of CliniCom
Incorporated and the Prospectus of HBO & Company. Unless otherwise indicated,
any defined terms used herein shall have the same meanings that such terms have
in the Proxy Statement/Prospectus. We hereby confirm that, assuming the due
receipt of customary representations as referred to under the heading "Certain
Federal Income Tax Consequences" in the Proxy Statement/Prospectus, in our
opinion the statements attributed to us in the Proxy Statement/Prospectus under
the heading "Certain Federal Income Tax Consequences" are accurate in all
material respects.
We hereby consent to the filing with the Securities and Exchange Commission
of this opinion as an exhibit to the Registration Statement and to the
references to this Firm in the Proxy Statement/ Prospectus constituting part of
the Registration Statement.
Very truly yours,
/s/
DAVIS, GRAHAM & STUBBS, L.L.C.
EX-21
4
EXHIBIT 21
EXHIBIT 21
HBO & COMPANY SUBSIDIARIES
HBO & Company of Georgia
HBO & Company (UK) Limited
HBO & Company Canada Ltd.
HBO & Company (VI), Inc.
Data-Med Computer Services Limited
Pegasus Medical LTD
First Data Health Systems Corporation
First Data Health Systems (Australia), Pty. Ltd.
First Data Health Systems (U.K.), Ltd.
First Data Health Systems (Ireland), Ltd.
First Data Health Systems Training Services Ltd.
EX-23.A
5
EXHIBIT 23(A)
EXHIBIT 23(A)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 8, 1995
incorporated by reference in HBO & Company's Form 10-K for the year ended
December 31, 1994 and to all references to our firm included in this
registration statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
August 30, 1995
EX-23.B
6
EXHIBIT 23(B)
EXHIBIT 23(B)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 10, 1995
incorporated by reference or included in CliniCom Incorporated's Form 10-K for
the year ended December 31, 1994 and to all references to our firm included in
this registration statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
August 30, 1995
EX-23.C
7
EXHIBIT 23(C)
EXHIBIT 23(C)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in the Proxy Statement/Prospectus of CliniCom
Incorporated and HBO & Company, which is made a part of the Registration
Statement on Form S-4 (No. 33-61905) of HBO & Company, of our reports dated
January 26, 1995 (except for Note 12, as to which the date is June 17, 1995) and
March 31, 1995 (except for Note 11, as to which the date is June 17, 1995), with
respect to the financial statements of the Health Services Business of First
Data Health Systems Corporation included in the Current Report on Form 8-K of
HBO & Company dated July 31, 1995.
ERNST & YOUNG LLP
Denver, Colorado
August 30, 1995
EX-23.F
8
EXHIBIT 23(F)
EXHIBIT 23(F)
We hereby consent to the inclusion of our opinion dated September 1, 1995 to
the Board of Directors of CliniCom Incorporated as Appendix B to the Proxy
Statement/Prospectus which is part of the HBO & Company Registration Statement
on Form S-4 (File No. 33-61905) and to the references to our firm included in
such Registration Statement. In giving such consent, we do not admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended (the "Act"), or the rules and regulations
of the Securities and Exchange Commission thereunder (the "Rules"), nor do we
thereby 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 Act or the
Rules.
DEAN WITTER REYNOLDS INC.
New York, New York
September 1, 1995