-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NYRGKeA0ncSdrGFHq7KEN23r+wxhqbTWgTjc+t6FeCnrQ8MkHD903iagQlX3qGT1 pzu8hcL+PbwRHd1EfDlvmw== 0000950144-97-002360.txt : 19970317 0000950144-97-002360.hdr.sgml : 19970317 ACCESSION NUMBER: 0000950144-97-002360 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970313 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABR INFORMATION SERVICES INC CENTRAL INDEX KEY: 0000920985 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 593228107 STATE OF INCORPORATION: FL FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24132 FILM NUMBER: 97556277 BUSINESS ADDRESS: STREET 1: 34125 US HGHWY 19 N CITY: PALM HARBOR STATE: FL ZIP: 34684 BUSINESS PHONE: 8137852819 MAIL ADDRESS: STREET 1: 34125 US HGHWY 19 N CITY: PALM HARBOR STATE: FL ZIP: 34684 10-Q 1 ABR INFORMATION SYSTEMS, INC. - FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from ___________ to ____________ Commission File Number: 0-24132 ABR INFORMATION SERVICES, INC. (Exact Name of Registrant as Specified in its Charter) Florida 59-3228107 ------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 34125 U.S. Highway 19 North, Palm Harbor, Florida 34684-2116 - ------------------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including area code: (813) 785-2819 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: Class: Voting Common Stock, $.01 Par Value Outstanding at March 10, 1997: 27,374,454 Class: Nonvoting Common Stock, $.01 Par Value Outstanding at March 10, 1997: None
1 2 ABR INFORMATION SERVICES, INC. INDEX TO FORM 10-Q
Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Income for the three and six months ended January 31, 1996 and 1997 3 Consolidated Balance Sheets as of July 31, 1996 and January 31, 1997 4 Consolidated Statements of Cash Flows for the six months ended January 31, 1996 and 1997 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15
2 3 PART I. FINANCIAL INFORMATION Item 1. ABR INFORMATION SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended Six months ended January 31, January 31, ------------------------------ ------------------------------ 1996 1997 1996 1997 ----------- ----------- ----------- ----------- Revenue $ 6,851,136 $11,714,389 $12,465,439 $22,103,582 Operating expenses: Cost of services 3,780,042 6,469,631 6,824,505 12,384,210 Selling, general and administrative 1,420,482 2,368,084 2,801,474 4,515,024 Other operating 53,308 79,967 103,177 140,633 ----------- ----------- ----------- ----------- Total operating expenses 5,253,832 8,917,682 9,729,156 17,039,867 ----------- ----------- ----------- ----------- Operating income 1,597,304 2,796,707 2,736,283 5,063,715 Interest income 106,054 1,909,046 266,093 3,869,108 ----------- ----------- ----------- ----------- Income before income taxes 1,703,358 4,705,753 3,002,376 8,932,823 Income taxes 655,726 1,769,288 1,171,308 3,384,995 ----------- ----------- ----------- ----------- Net income $ 1,047,632 $ 2,936,465 $ 1,831,068 $ 5,547,828 =========== =========== =========== =========== Net income per common share $ .05 $ .11 $ .09 $ .20 =========== =========== =========== =========== Weighted average shares outstanding 20,516,742 27,938,898 20,418,111 27,399,889
The accompanying notes are an integral part of these statements. 3 4 ABR INFORMATION SERVICES, INC. CONSOLIDATED BALANCE SHEETS ASSETS
July 31, 1996 January 31, 1997 (Unaudited) ------------- ---------------- CURRENT ASSETS Cash and cash equivalents $ 14,088,396 $ 29,451,276 Investments 147,111,102 131,112,933 Accounts receivable, net 3,870,539 5,146,748 Prepaid expenses and other 1,282,952 2,109,712 -------------- ------------- Total current assets 166,352,989 167,820,669 PROPERTY AND EQUIPMENT, net 14,539,898 18,742,841 SOFTWARE DEVELOPMENT COSTS, net 6,181,973 8,177,056 GOODWILL, INTANGIBLES AND OTHER ASSETS, net 15,498,745 15,934,276 -------------- ------------- TOTAL ASSETS $ 202,573,605 $ 210,674,842 ============== ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 615,663 $ 573,112 Accrued expenses 762,442 1,062,501 Customer account deposits 18,019,405 18,901,678 Unearned revenue 647,093 599,102 Income taxes payable 483,663 406,455 -------------- -------------- Total current liabilities 20,528,266 21,542,848 ------------- ------------- DEFERRED INCOME TAXES 895,555 1,772,795 -------------- ------------- SHAREHOLDERS' EQUITY Preferred Stock - authorized 2,000,000 shares of $.01 par value; no shares issued - - Common Stock - authorized, 100,250,000 shares of $.01 par value; issued and outstanding, 13,588,194 and 27,370,706 shares, respectively 135,882 273,708 Additional paid in capital 169,879,717 170,403,478 Retained earnings 11,134,185 16,682,013 -------------- ------------- TOTAL SHAREHOLDERS' EQUITY 181,149,784 187,359,199 -------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 202,573,605 $ 210,674,842 ============== =============
The accompanying notes are an integral part of these statements. 4 5 ABR INFORMATION SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six months ended January 31, ----------- 1996 1997 ---- ---- Cash flows from operating activities: Net income $ 1,831,068 $ 5,547,828 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and other amortization 468,030 1,259,182 Amortization of software 33,809 231,042 Deferred income taxes 403,705 877,240 Increase in allowance for doubtful accounts 8,000 10,808 Tax benefit related to exercise of certain stock options -- 56,606 Change in operating assets and liabilities: Accounts receivable 181,955 (1,287,018) Prepaid expenses and other (367,077) (826,760) Other assets 1,190 3,737 Accounts payable (362,819) (42,551) Accrued expenses (120,856) 300,059 Unearned revenue 26,888 (47,991) Customer account deposits 1,236,586 882,274 Income taxes payable 118,522 (77,208) ------------ ------------- Net cash provided by operating activities 3,459,001 6,887,248 ------------ ------------- Cash flows from investing activities: Additions to investments (24,550,752) (265,579,923) Maturity of investments 29,524,787 281,578,092 Additions to property and equipment (4,604,362) (5,040,946) Additions to software development costs (1,010,037) (2,226,125) Cash paid for acquisition, net (12,476,476) (863,053) Disposal of fixed assets -- 2,607 ------------ ------------- Net cash provided by (used in) investing activities (13,116,840) 7,870,652 ------------ ------------- Cash flows from financing activities: Proceeds from long-term bank borrowings 6,104,641 -- Payments on bank borrowings (365,997) -- Exercise of common stock options 289,266 604,980 ------------ ------------- Net cash provided by financing activities 6,027,910 604,980 ------------ ------------- Net increase (decrease) in cash and cash equivalents (3,629,929) 15,362,880 Cash and cash equivalents at beginning of year 19,403,090 14,088,396 ------------ ------------- Cash and cash equivalents at end of period $ 15,773,161 $ 29,451,276 ============ =============
The accompanying notes are an integral part of these statements. 5 6 ABR INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 1997 NOTE A - DESCRIPTION OF ORGANIZATION AND BUSINESS ABR Information Services, Inc. (the "Company") is a leading provider of comprehensive benefits administration, compliance and information services to employers seeking to outsource their benefits administration functions. The Company believes it is the largest provider of COBRA (the "Consolidated Omnibus Reconciliation Act") compliance services. COBRA is a federally mandated law related to the portability of employee group health insurance. The Company also provides benefits administration services with respect to benefits provided to retirees and inactive employees, including retiree healthcare, disability, surviving dependent, family leave and severance benefits. Additionally, the Company provides benefits administration services with respect to benefits provided to active employees, including enrollment, eligibility verification, qualified domestic relations order ("QDRO") administration, HMO consolidation, 401(k) administration services, Flexible Spending Account ("FSA") administration and pension services. These services are offered on either an "a la carte" or a total outsourcing basis, allowing customers to outsource certain benefits administration tasks which they find too costly or burdensome to perform in-house, or to outsource the entire benefits administration function. The Company is headquartered in Palm Harbor, Florida and provides information and support services to more than 21,000 employers, including Fortune 500 companies, insurance companies and other employers. The Company's operations are in a single business segment, the information services business. The accompanying financial statements have been restated to reflect a two-for-one stock split completed February 1997 and an acquisition by a pooling of interest completed June 1996. Additionally, certain amounts in previous periods' financial statements have been adjusted or reclassified, for comparability purposes. NOTE B - BASIS OF PRESENTATION The accompanying financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnote disclosure required by generally accepted accounting principles for complete financial statements. The financial statements as of January 31, 1997 and for the three and six months ended January 31, 1996 and January 31, 1997 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The results of operations for the three and six months ended January 31, 1997 are not necessarily indicative of results that may be expected for the year ending July 31, 1997. These financial statements should be read in conjunction with the audited financial statements of the Company as of July 31, 1995 and 1996, and for each of the three years in the period ended July 31, 1996, included in the Company's 1996 Annual Report to Shareholders. Effective August 1, 1996 management elected to continue using the method under Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued for Employees" to account for stock option awards granted to employees. As a result, the pro forma disclosures required by Statement of Financial Accounting Standards No. 123 (SFAS No. 123) "Accounting for Stock-Based Compensations" will be in the Company's 1997 annual financial statements. The adoption of SFAS No. 123's accounting and reporting provisions had an immaterial effect on the Company's financial statements. NOTE C - NET INCOME PER COMMON SHARE Net income per common share has been computed using the weighted average of the outstanding Common Stock plus the dilutive Common Stock equivalents (stock options), using the treasury or the modified treasury stock method. Primary and fully dilutive calculations result in the same net income per common share. 6 7 ABR INFORMATION SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE D - COMMITMENTS Management estimates that as of January 31, 1997, approximately $4.4 million will be required in order for the Company to complete the currently defined software projects. Additionally, management estimates that as of January 31, 1997, approximately $3.8 million will be required to complete the cost of improvements to be made to a 110,000 square foot facility purchased in 1996. NOTE E - BUSINESS ACQUISITIONS On December 15, 1995, the Company, in an acquisition accounted for as a purchase, acquired all of the outstanding capital stock of Bullock Associates, Inc., which was subsequently renamed ABR Benefits Services, Inc. ("BSI"), for $12.5 million, with an additional $2.0 million payable upon the attainment of certain revenue requirements during 1996 and 1997. As of January 31, 1997, $863,053 of this additional amount was paid for the attainment of these revenue requirements leaving a balance of $1,136,947 that could be paid in 1997 upon the attainment of certain revenue requirements. BSI is located in Princeton, New Jersey, and provides COBRA administration, retiree insurance administration, insurance continuation billing and collection, pension benefits administration, QDRO administration and educational benefit administration services as well as administration for other employee benefits programs such as employee discount plans, adoption programs, program rebates and emergency loans. The following unaudited pro forma information have been derived from the historical financial statements of the Company and BSI and adjusts such information to give effect to the acquisition of BSI. The balances for the three and six months ended January 31, 1996 assume that the acquisition of BSI occurred on August 1, 1995. The unaudited pro forma financial information is not necessarily indicative of the results which would actually have occurred had the transaction been in effect on the dates and for the periods indicated or which may result in the future.
Pro Forma Financials Three months ended Six months ended (in thousands, except per share data) January 31, January 31, 1996 1996 ------ ----- Revenue $8,030 $16,044 Operating income $1,826 $ 3,621 Net income $1,120 $ 2,172 Net income per share $.05 $.11 ==== ====
NOTE F - LITIGATION The Company is involved in various litigation arising from the normal course of its operations. The outcome of the pending litigation is not expected to be material to the Company's financial condition but no assurances can be given in this regard. 7 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Financial Statements and notes thereto appearing elsewhere in this Form 10-Q. OVERVIEW The Company's revenues currently are generated from three sources: COBRA compliance services, administration services with respect to benefits provided to retirees and inactive employees, and administration services with respect to benefits provided to active employees. The first source of revenue for the Company, COBRA compliance services, is generated primarily from its qualifying event agreements with employers and through capitation agreements with insurance companies. Through qualifying event agreements, the Company receives a fixed, per occurrence fee from its customers for each qualifying event. A qualifying event occurs when an employee or his or her dependents experience a loss of coverage under a group healthcare plan. The amount of the fixed fee varies depending on the method of the qualifying event notification mailing, which is selected by the customer. Through capitation agreements, insurance companies designate the Company as the administrator of COBRA compliance for their group insurance clients that are subject to COBRA. The Company is paid a monthly fee for each employee covered by the group plan. The revenue generated under a capitation agreement is not dependent on the triggering of a qualifying event, but is determined based on the number of employees covered by the group plan at the beginning of each month. The Company also receives an administrative fee typically equal to 2% of the monthly health insurance premium that is paid by or on behalf of each continuant. In addition, the Company generates revenues from customers for additional COBRA compliance and healthcare administration services, both on a one-time and continuous basis. These additional revenues include new account fees paid to the Company when it is retained by a new customer. During the first six months of fiscal 1996 and 1997, 76.2% and 62.2%, respectively, of the Company's revenues were attributable to the Company's COBRA compliance services. The second source of the Company's revenue is providing administration services with respect to benefits provided to retirees and inactive employees, including retiree healthcare, disability, surviving dependent, family leave and severance benefits. During the first six months of fiscal 1996 and 1997, 10.1% and 16.0%, respectively, of the Company's revenues were attributable to the Company's administration services for retirees and inactive employees. The third source of the Company's revenues is providing administration services with respect to benefits provided to active employees. Through this service, the Company provides benefits administration services for active employees, such as enrollment, eligibility verification, QDRO administration, Flexible Spending Account administration, 401(k) plan administration and pension services. During the first six months of fiscal 1996 and the first six months of fiscal 1997, 13.7% and 21.8%, respectively, of the Company's revenues were attributable to benefits administration services for active employees. 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) RESULTS OF OPERATIONS The following table sets forth the percentage of revenue represented by certain items reflected in the Company's statements of income, as restated to reflect the acquisition by a pooling of interest in 1996.
Three months ended Six months ended January 31, January 31, 1996 1997 1996 1997 ---- ---- ---- ---- Revenue 100.0% 100.0% 100.0% 100.0% Cost of services 55.2 55.2 54.7 56.0 Selling, general and administrative expenses 20.7 20.2 22.5 20.4 Other operating expenses .8 .7 .8 .7 ---- --- ----- ---- Operating income 23.3 23.9 22.0 22.9 Interest income 1.6 16.3 2.1 17.5 Income taxes 9.6 15.1 9.4 15.3 ----- ----- ----- ----- Net income 15.3% 25.1% 14.7% 25.1% ===== ====== ===== =====
THREE MONTHS ENDED JANUARY 31, 1997 COMPARED TO THREE MONTHS ENDED JANUARY 31, 1996 Revenues increased $4.9 million, or 71%, to $11.7 million during the three months ended January 31, 1997 from $6.8 million in the three months ended January 31, 1996. Of the $4.9 million increase in revenues, $2.3 million was attributable to increased revenues from COBRA compliance services, $.8 million was attributable to increased revenues from retiree/inactive employee benefits administration and $1.8 million was due to increased revenues from active employee benefits administration. The increase in COBRA compliance revenues increased primarily as a result of the addition of new customers, the addition of a new product to service clients having to comply with newly passed state mandated continuation coverage health portability laws and as a result of the acquisitions. The increase in revenues from retiree/inactive employee benefits administration was primarily attributable to the addition of new customers, obtained by the Company and through acquisitions, who were not customers of the Company during the three months ended January 31, 1996. The increase in revenues from active employee benefits administration was primarily attributable to the addition of new customers obtained by the Company, the addition of new service product offerings and as a result of the acquisitions. Cost of services increased $2.7 million, or 71.2%, to $6.5 million during the three months ended January 31, 1997 from $3.8 million during the three months ended Janaury 31, 1996. The increase in cost of services was attributable to the addition of data processing, information systems and customer service personnel to support growth, the result of the acquisitions and the amortization of software placed in service as completed. As a percentage of revenues, cost of services remained the same at 55.2% for both periods. 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) Selling, general and administrative expenses increased $948,000, or 66.7%, to $2.4 million during the three months ended January 31, 1997 from $1.4 million in the three months ended January 31, 1996. The increase in selling, general and administrative expenses was primarily attributable to the addition of marketing, management and administrative personnel to support the Company's growth and additional marketing costs. As a percentage of revenues, selling, general and administrative expenses decreased to 20.2% from 20.7% for the same periods. The decrease as a percentage of revenues resulted primarily from the acquisitions which had lower selling, general and administrative expenses as a percent of revenue, and from operating efficiencies from allocating expenses over a larger revenue base. Other operating expenses increased 50% to $80,000 during the three months ended January 31, 1997 from $53,000 in the three months ended January 31, 1996. Interest income increased $1.8 million to $1.9 million during the three months ended January 31, 1997 from $106,000 in the three months ended January 31, 1996. This increase is a result of the investment of the proceeds from the Company's secondary stock offering completed in March 1996. Income taxes increased 169.8% to $1.8 million during the three months ended January 31, 1997 from $656,000 during the three months ended January 31, 1996. The Company's effective tax rate decreased to 37.6% from 38.5% for the same period in the previous year. As a result of the foregoing, the Company's net income increased $1.9 million, or 180.3%, to $2.9 million during the three months ended January 31, 1997 from $1.0 million in the three months ended January 31, 1996. Net income per share was $.11 for the quarter ended January 31, 1997 compared to $.05 for the corresponding prior year period, after adjustment for the February 1997 stock split. SIX MONTHS ENDED JANUARY 31, 1997 COMPARED TO SIX MONTHS ENDED JANUARY 31, 1996 Revenues increased $9.6 million, or 77.3%, to $22.1 million in the six months ended January 31, 1997 from $12.5 million in the same period of 1996. Of the $9.6 million increase in revenues, $4.2 million was attributable to increased revenues from COBRA compliance services, $2.3 million was attributable to increased revenues from retiree/inactive employee benefits administration and $3.1 million was due to increased revenues from active employee benefits administration. COBRA compliance revenues increased as a result of new customers, a new product to service clients mandated by the new state insurance portability laws and an increase in the number of COBRA compliance events over the prior period. The increase in retiree/inactive employee benefits administration revenues was primarily attributable to the addition of new customers during the first six months of fiscal 1997 who were not customers of the Company during the same period of 1996. The increase in revenues from active employee benefits administration was primarily attributable to the addition of new customers and new product offerings in total benefits outsourcing administration. Cost of services increased $5.6 million or 81.5% to $12.4 million in the six months ended January 31, 1997 from $6.8 million in the six months ended January 31, 1996. As a percentage of revenues, however, cost of services increased to 56.0% from 54.7% for the same period of 1996. The increase in the amount and percentage of cost of services was attributable to the addition of data processing, information systems and customer service personnel to support revenue growth and an increase in operating expenses to service the additional revenues. 10 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) Selling, general and administrative expenses increased $1.7 million, or 61.2% to $4.5 million in the six months ended January 31, 1997 from $2.8 million in the six months ended January 31, 1996. As a percentage of revenues, selling, general and administrative expense decreased to 20.4% in the six months ended January 31, 1997 from 22.5% in the six months ended January 31, 1996. The decrease as a percent of revenues results primarily from the acquisitions which had lower selling, general and administration expenses as a percent of revenue and from allocating expenses over a larger revenue base. Other operating expenses increased 36.3% to $141,000 in the six months ended January 31, 1997 from $103,000 in the six months ended January 31, 1996. Interest income increased $3.6 million to $3.9 million during the six months ended January 31, 1997 from $266,000 in the six months ended January 31, 1996. This increase is a result of the investment of the proceeds from the Company's secondary stock offering completed in March 1996. Income taxes increased 189% to $3.4 million in the six months ended January 31, 1997 from $1.2 million in the six months ended January 31, 1996. The Company's effective tax rate decreased to 37.9% from 39.0% for the same period. As a result of the foregoing, the Company's net income increased $3.7 million or 203% to $5.5 million in the six months ended January 31, 1997 from $1.8 million in the six months ended January 31, 1996. Net income per share was $.20 for the six months ended January 31, 1997 compared to $.09 for the corresponding prior year period after adjustment for the February 1997 stock split. LIQUIDITY AND CAPITAL RESOURCES In March 1996, the Company completed a secondary stock offering which provided, net cash after offering expenses, $151 million to its operations. Net cash provided by operating activities was $6.9 million for the six months ended January 31, 1997 compared to $3.5 million for the same period of 1996. As of January 31, 1997 and July 31, 1996, the Company's working capital and current ratio were $146.3 million and 7.8-to-1 and $145.8 million and 8.1-to-1, respectively. The Company invests excess cash balances in short-term investment grade securities, such as money market investments, obligations of the U.S. government and its agencies, and obligations of state and local government agencies. During the six months ended January 31, 1997, the Company's capital expenditures were $7.3 million. In December 1995, the Company purchased a 110,000 square foot facility situated on 12.7 acres of land in Palm Harbor, Florida. As of January 31, 1997, the cost of improvements to be made by the Company to such facility has been estimated to be $3.8 million. Management estimates that this operating facility will be ready for occupancy by May of 1997. Management estimates that as of January 31, 1997, approximately $9 million will be required in order for the Company to complete its currently defined software projects and to purchase equipment, furniture and hardware. The Company has a five-year, $15.0 million unsecured credit facility. The Company has agreed to maintain all of its assets free and clear of all liens, encumbrances and pledges, except purchase money security interests in specific equipment in an aggregate amount of less than $500,000 as long as the credit facility remains outstanding or any indebtedness thereunder remains unpaid. Interest on the principal balance outstanding under this line of credit accrues at a floating interest rate equal to the prime rate or, at the Company's option, to the 30-day London Interbank Offering Rate (LIBOR), plus an applicable interest rate margin between 1% and 2% based on certain financial ratios. The credit facility contains certain financial covenants requiring the maintenance of cash and cash equivalents and investments equal to or greater than customer account deposits, a funded debt to EBITDA ratio of a maximum of 2.25-to-1, a debt service coverage ratio of not less than 1.35-to-1, as well as the maintenance of certain funded debt to tangible net worth ratio. As of January 31, 1997, the Company was in compliance with all such covenants and there were no amounts outstanding under the credit facility. The Company believes that its cash, investments, its cash flow from operations and the funds available from its credit facility will be adequate to meet the Company's expected capital requirements for the foreseeable future. 11 12 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders At the Company's annual meeting of shareholders held on December 6, 1996, three matters were submitted to a vote of shareholders. James E. MacDougald and Thomas F. Costello were elected as directors of the Company for terms expiring in 1999. The following table sets forth certain information with respect to the election of directors at the annual meeting: Shares Withholding Name of Nominee Shares Voted For Authority --------------- ---------------- --------- James E. MacDougald 9,498,934 137,765 Thomas Costello 9,578,572 58,427 The following table sets forth the other directors of the Company whose terms of office continued after the 1996 annual meeting of the shareholders: Name of Director Term Expires ---------------- ------------ Suzanne M. MacDougald 1997 Mark M. Goldman 1998 Second, the Company's shareholders approved a proposal to amend the Company's Articles of Incorporation to increase the number of authorized shares of voting common stock from 20,000,000 to 100,000,000. The following table sets forth certain information with respect to the vote on such matter: Shares Voted Shares Voted For Against Abstentions --- ------- ----------- 6,076,639 3,501,750 40,035 Third, the Company's shareholders approved a proposal to adopt the 1996 Non-Employee Director Stock Option Plan. The following table sets forth certain information with respect to the vote on such matter: Shares Voted Shares Voted For Against Abstentions --- ------- ----------- 9,421,308 151,594 45,522 12 13 OTHER INFORMATION (continued) Item 5. Other Information Effective November 12, 1996, Vincent Addonisio was removed as Executive Vice President, Chief Financial Officer and Treasurer of the Company due to differences with the Board of Directors. On November 20, 1996, Mr. Addonisio resigned as a Director of the Company and withdrew as a nominee for election as a Director at the 1996 Annual Meeting of Shareholders. The Board did not propose for election at the Annual Meeting a successor director or nominee to Mr. Addonisio and has reduced the size of the Board to four directors. Mr. Addonisio has filed a lawsuit against the Company alleging breach of his employment contract and against the Company and James E. MacDougald, Chairman of the Board, President and Chief Executive Officer of the Company, alleging defamation. The Company does not believe that such litigation, or any settlement relating thereto, will have a material adverse effect on the Company's financial position but no assurances can be given in this regard. On January 30, 1997, James P. O'Drobinak joined the Company as Senior Vice President and Chief Financial Officer. From 1995 until joining the Company, Mr. O'Drobinak served as Chief Financial Officer - North America for Danka Industries, Inc., a publicly-held company that is the largest independent retail distributor of office equipment in North America. From 1983 to 1995, Mr. O'Drobinak held various positions with Deloitte & Touche LLP, an international accounting and consulting firm, most recently as a Senior Manager in the Tampa, Florida office. The Company also created two new wholly-owned subsidiaries to expand its benefits outsourcing offerings to include retirement plan administration services to employers and compliance services to insurance carriers. ABR Qualified Plan Services, Inc. ("QPSI"), a Florida corporation, provides employers with a complete menu of retirement plan administrative services, including administration of 401(k), profit sharing and other types of retirement plans. QPSI currently services more than 250 clients through several strategic alliances with financial institutions. These strategic alliances provide QPSI with a source of ongoing new business. The Company's other new subsidiary, ABR Coverage Continuation Services, Inc. ("CCSI"), also a Florida corporation, currently provides services to insurance carriers who are required to comply with the Florida Health Insurance Coverage Continuation Act. The compliance services required by the new Florida law are similar in many respects to those required by federal COBRA law, which are administered by the Company's CobraServ subsidiary. However, while CobraServ assists employers in satisfying the requirements of federal COBRA law, CCSI will focus on providing services to insurance carriers in fulfilling their compliance requirements under state insurance portability laws, such as the Florida Health Insurance Coverage Continuation Act. 13 14 OTHER INFORMATION (continued) Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.1 Amendment to the Company's Articles of Incorporation of ABR Information Services, Inc. 3.2 Articles of Incorporation of ABR Information Services, Inc., as amended to date. 10.1 1996 Non-Employee Director Stock Option Plan 27.1 Financial Data Schedule (Edgar Version Only) (b) Reports on Form 8-K The Company filed a Form 8-K dated January 30, 1997 on March 5, 1997. 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: March 13, 1997 ABR INFORMATION SERVICES, INC. (Registrant) /s/ James P. O'Drobinak --------------------------------- James P. O'Drobinak Senior Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) 15 EX-3.1 2 AMENDMENT TO THE COMPANY'S ARTICLES 1 EXHIBIT 3.1 AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION OF ABR INFORMATION SERVICES, INC. 2 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF ABR INFORMATION SERVICES, INC. Pursuant to the provisions of Section 607.1006 of the Florida Statutes, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation for the purpose of increasing the number of authorized shares of voting Common Stock pursuant to Section 607.0602 of the Florida Statutes: 1. Name of Corporation. The name of the corporation is ABR Information Services, Inc. 2. Amendments. The Articles of Incorporation of the corporation are amended by deleting the first two sentences of Section 3.1 of Article III in their entirety and inserting in lieu thereof the following: ARTICLE III Section 3.1 "The total number of shares of all classes of capital stock that the Corporation shall have the authority to issue shall be 102,250,000 shares, of which 100,250,000 shares shall be Common Stock having a par value of $0.01 per share ("Common Stock") and 2,000,000 shares shall be Preferred Stock having a par value of $0.01 per share ("Preferred Stock"). Of the Common Stock, 100,000,000 shares shall be voting shares ("Voting Common Stock") and 250,000 shares shall be nonvoting shares ("Nonvoting Common Stock"). . . ." 3. Adoption of Amendment. The amendment was adopted at a duly called meeting of the shareholders on December 6, 1996 at which a quorum appeared. Of the shares represented at the shareholders meeting, 6,076,639 shares were voted in favor of adoption of the amendment, 3,501,750 shares were voted against adoption of the amendment, and 40,035 shares abstained from voting on the proposal. There are no voting groups authorized to vote separately on the amendment, and the number of votes cast for adoption of the amendment was sufficient for approval pursuant to Section 607.1004 of the Florida Statutes. EX-3.2 3 ARTICLES OF INCORPORATION OF ABR 1 EXHIBIT 3.2 ARTICLES OF INCORPORATION OF ABR INFORMATION SERVICES, INC., AS AMENDED TO DATE 2 ARTICLES OF INCORPORATION OF ABR INFORMATION SERVICES, INC. THE UNDERSIGNED, acting as sole incorporator of ABR INFORMATION SERVICES, INC (hereinafter, the "Corporation") under the Florida Business Corporation Act, Chapter 607 of the Florida Statutes, as hereafter amended and modified (the "FBCA"), hereby adopts the following Articles of Incorporation for the Corporation, effective as of February 21, 1994 pursuant to Section 607.0203(1) of the Florida Statutes: ARTICLE I NAME The name of the Corporation is: ABR INFORMATION SERVICES, INC. ARTICLE II BUSINESS AND ACTIVITIES The Corporation may, and is authorized to, engage in any activity or business now or hereafter permitted under the laws of the United States and of the State of Florida. ARTICLE III CAPITAL STOCK 3.1 Authorized Shares. The total number of shares of all classes of capital stock that the Corporation shall have the authority to issue shall be 22,250,000 shares, of which 20,250,000 shares shall be Common Stock having a par value of $0.01 per share ("Common Stock") and 2,000,000 shares shall be Preferred Stock, par value of $0.01 per share ("Preferred Stock"). Of the Common Stock, 20,000,000 shares shall be voting shares ("Voting Common Stock") and 250,000 shares shall be nonvoting shares ("Nonvoting Common Stock"). Following the issuance by the Corporation of any shares of Nonvoting Common Stock, and the transfer or other disposition of any such Nonvoting Common Stock by the initial holder thereof, each share of Nonvoting Common Stock that is so transferred or disposed of, automatically and without further action on the part of the Corporation, shall be converted into the right to receive one share of Voting Common Stock. Except as otherwise provided in these Articles of Incorporation, each share of Nonvoting 3 Common Stock shall have the same rights as and be identical in all respects to each share of Voting Common Stock. The Board of Directors is expressly authorized, pursuant to Section 607.0602 of the FBCA, to provide for the classification and reclassification of any unissued shares of Common Stock or Preferred Stock and the issuance thereof in one or more classes or series without the approval of the shareholders of the Corporation, all within the limitations set forth in Section 607.0601 of the FBCA. 3.2 Common Stock. (a) Relative Rights. The Common Stock shall be subject to all of the rights, privileges, preferences and priorities of the Preferred Stock as set forth in the Articles of Amendment to these Articles of Incorporation that may hereafter be filed pursuant to Section 607.0602 of the FBCA to establish the respective series of the Preferred Stock. Except as otherwise provided in these Articles of Incorporation, each share of Common Stock shall have the same rights as and be identical in all respects to all the other shares of Common Stock. (b) Voting Rights. Except as otherwise provided by the FBCA and except as may be determined by the Board of Directors with respect to the Preferred Stock, only the holders of Voting Common Stock shall be entitled to vote for the election of directors of the Corporation and for all other corporate purposes. Upon any such vote, each holder of Voting Common Stock shall, except as otherwise provided by the FBCA, be entitled to one vote for each share of Voting Common Stock held by such holder. Except as otherwise provided by the FBCA, each holder of Nonvoting Common Stock shall not be entitled to vote for the election of directors of the Corporation or for any other corporate purpose. (c) Dividends. Whenever there shall have been paid, or declared and set aside for payment, to the holders of the shares of any class of stock having preference over the Common Stock as to the payment of dividends, the full amount of dividends and of sinking fund or retirement payments, if any, to which such holders are respectively entitled in preference to the Common Stock, then the holders of record of the Common Stock and any class or series of stock entitled to participate therewith as to dividends, shall be entitled to receive dividends, when, as, and if declared by the Board of Directors, out of any assets legally available for the payment of dividends thereon. (d) Dissolution, Liquidation, Winding Up. In the event of any dissolution, liquidation, or winding up of the Corporation, whether voluntary or involuntary, the holders of record of the Common Stock then outstanding, and all holders of any class or series of stock entitled to participate therewith in whole or in part, as to the distribution of assets, shall become entitled to participate in the distribution of assets of the Corporation remaining after the Corporation shall have -2- 4 paid , or set aside for payment, to the holders of any class of stock having preference over the Common Stock in the event of dissolution, liquidation, or winding up, the full preferential amounts (if any) to which they are entitled, and shall have paid or provided for payment of all debts and liabilities of the Corporation. 3.3 Preferred Stock. (a) Issuance, Designations, Powers, Etc. The Board of Directors is expressly authorized, subject to the limitations prescribed by the FBCA and the provisions of these Articles of Incorporation, to provide, by resolution and by filing Articles of Amendment to these Articles of Incorporation, which, pursuant to Section 607.0602(4) of the FBCA shall be effective without shareholder action, for the issuance from time to time of the shares of the Preferred Stock in one or more series, to establish from time to time the number of shares to be included in each such series, and to fix the designations, powers, preferences and other rights of the shares of each such series and to fix the qualifications, limitations and restrictions thereon, including, but without limiting the generality of the foregoing, the following: 1. the number of shares constituting that series and the distinctive designation of that series; 2. the dividend rate on the shares of that series, whether dividends shall be cumulative, noncumulative or partially cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payments of dividends on shares of that series; 3. whether that series shall have voting rights, in addition to the voting rights provided by the FBCA, and, if so, the terms of such voting rights; 4. whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; 5. whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount -3- 5 may vary under different conditions and at different redemption dates; 6. whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; 7. the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and 8. any other relative powers, preferences, and rights of that series, and qualifications, limitations or restrictions on that series. (b) Dissolution, Liquidation, Winding Up. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of Preferred Stock of each series shall be entitled to receive only such amount or amounts as shall have been fixed by the Articles of Amendment to these Articles of Incorporation or by the resolution or resolutions of the Board of Directors providing for the issuance of such series. 3.4. No Preemptive Rights. Except as the Board of Directors may otherwise determine, no shareholder of the Corporation shall have any preferential or preemptive right to subscribe for or purchase from the Corporation any new or additional shares of capital stock, or securities convertible into shares of capital stock, of the Corporation, whether now or hereafter authorized. ARTICLE IV BOARD OF DIRECTORS 4.1 Classification. Except as otherwise provided in these Articles of Incorporation or Articles of Amendment filed pursuant to Section 3.3 hereof relating to the rights of the holders of any class or series of Preferred Stock, voting separately by class or series, to elect additional directors under specified circumstances, the number of directors of the Corporation shall be as fixed from time to time by or pursuant to these Articles of Incorporation or by bylaws of the Corporation (the "Bylaws"). The directors, other than those who may be elected by the holders of any class or series of Preferred Stock voting separately by class or series, shall be classified, with respect to the time for which they severally hold office, into three classes, Class I, Class II and Class III, each of which shall be as nearly equal in number -4- 6 as possible, and shall be adjusted from time to time in the manner specified in the Bylaws to maintain such proportionality. Each initial director in Class I shall hold office for a term expiring at the 1996 annual meeting of the shareholders; each initial director in Class II shall hold office for a term expiring at the 1995 annual meeting of the shareholders; and each initial director in Class III shall hold office for a term expiring at the 1994 annual meeting of the shareholders. Notwithstanding the foregoing provisions of this Section 4.1, each director shall serve until such director's successor is duly elected and qualified or until such director's earlier death, resignation or removal. At each annual meeting of the shareholders, the successors to the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of the shareholders held in the third year following the year of their election and until their successors shall have been duly elected and qualified or until such director's earlier death, resignation or removal. 4.2 Removal. (a) Removal For Cause. Except as otherwise provided pursuant to the provisions of these Articles of Incorporation or Articles of Amendment relating to the rights of the holders of any class or series of Preferred Stock, voting separately by class or series, to elect directors under specified circumstances, any director or directors may be removed from office at any time, but only for cause (as defined in Section 4.2(b) hereof) and only by the affirmative vote, at a special meeting of the shareholders called for such a purpose, of not less than sixty-six and two-thirds percent (66 2/3%) of the total number of votes of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, but only if notice of such proposed removal was contained in the notice of such meeting. At least thirty (30) days prior to such special meeting of shareholders, written notice shall be sent to the director or directors whose removal will be considered at such meeting. Any vacancy on the Board of Directors resulting from such removal or otherwise shall be filled only by vote of a majority of the directors then in office, although less than a quorum, and any director so chosen shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall have been elected and qualified or until any such director's earlier death, resignation or removal. (b) "Cause" Defined. For the purposes of this Section 4.2, "cause" shall mean (i) misconduct as a director of the Corporation or any subsidiary of the Corporation which involves dishonesty with respect to a substantial or material corporate activity or corporate assets, or (ii) conviction of an offense punishable by one (1) or more years of imprisonment (other than minor regulatory infractions and traffic violations which do not materially and adversely affect the Corporation). 4.3 Change of Number of Directors. In the event of any increase or decrease in the authorized number of directors, the newly created or eliminated -5- 7 directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to maintain such classes as nearly equal as possible. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 4.4 Directors Elected by Holders of Preferred Stock. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect one or more directors at an annual or special meeting of shareholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of these Articles of Incorporation, as amended by Articles of Amendment applicable to such classes or series of Preferred Stock, and such directors so elected shall not be divided into classes pursuant to this Article IV unless expressly provided by the Articles of Amendment applicable to such classes or series of Preferred Stock. 4.5 Exercise of Business Judgment. In discharging his or her duties as a director of the Corporation, a director may consider such factors as the director considers relevant, including the long-term prospects and interests of the Corporation and its shareholders, the social, economic, legal, or other effects of any corporate action or inaction upon the employees, suppliers, customers of the Corporation or its subsidiaries, the communities and society in which the Corporation or its subsidiaries operate, and the economy of the State of Florida and the United States. 4.6 Initial Directors. The number of directors constituting the initial Board of Directors of the Corporation is five (5). The number of directors may be increased or decreased from time to time as provided in the Bylaws, but in no event shall the number of directors be less than three (3). The names and addresses of the persons who are to serve as initial directors in each class until successor directors are duly elected and qualified are as follows: Class I James E. MacDougald 34125 U.S. Highway 19 North Palm Harbor, FL 34684-2116 Thomas F. Costello 34125 U.S. Highway 19 North Palm Harbor, FL 34684-2116 -6- 8 Class II Stephen R. Hood 34125 U.S. Highway 19 North Palm Harbor, FL 34684-2116 Mark M. Goldman 34125 U.S. Highway 19 North Palm Harbor, FL 34684-2116 Class III Suzanne M. MacDougald 34125 U.S. Highway 19 North Palm Harbor, FL 34684-2116 ARTICLE V ACTION BY SHAREHOLDERS 5.1 Call For Special Meeting. Special meetings of the shareholders of the Corporation may be called at any time, but only by (a) the Chairman of the Board of the Corporation, (b) a majority of the directors in office, although less than a quorum, and (c) the holders of not less than thirty-five percent (35%) of the total number of votes of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. 5.2 Shareholder Action By Unanimous Written Consent. Any action required or permitted to be taken by the shareholders of the Corporation must be effected at a duly called annual or special meeting of the shareholders, and may not be effected by any consent in writing by such shareholders, unless such written consent is unanimous. ARTICLE VI INDEMNIFICATION 6.1 Provision of Indemnification. The Corporation shall, to the fullest extent permitted or required by the FBCA, including any amendments thereto (but in the case of any such amendment, only to the extent such amendment permits or requires the Corporation to provide broader indemnification rights than prior to such amendment), indemnify its Directors and Executive Officers against any and all Liabilities, and advance any and all reasonable Expenses, incurred thereby in any Proceeding to which any such Director or Executive Officer is a Party or in which such Director or Executive Officer is deposed or called to testify as a witness because he -7- 9 or she is or was a Director or Executive Officer of the Corporation. The rights to indemnification granted hereunder shall not be deemed exclusive of any other rights to indemnification against Liabilities or the advancement of Expenses which a Director or Executive Officer may be entitled under any written agreement, Board of Directors' resolution, vote of shareholders, the Act, or otherwise. The Corporation may, but shall not be required to, supplement the foregoing rights to indemnification against Liabilities and advancement of Expenses by the purchase of insurance on behalf of any one or more of its Directors or Executive Officers whether or not the Corporation would be obligated to indemnify or advance Expenses to such Director or Executive Officer under this Article. For purposes of this Article, the term "Directors" includes former directors of the Corporation and any director who 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, including, without limitation, any employee benefit plan (other than in the capacity as an agent separately retained and compensated for the provision of goods or services to the enterprise, including, without limitation, attorneys-at-law, accountants, and financial consultants). The term "Executive Officers" includes those individuals who are or were at any time "executive officers" of the Corporation as defined in Securities and Exchange Commission Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as amended. All other capitalized terms used in this Article VI and not otherwise defined herein have the meaning set forth in Section 607.0850, Florida Statutes (1991). The provisions of this Article VI are intended solely for the benefit of the indemnified parties described herein, their heirs and personal representatives and shall not create any rights in favor of third parties. No amendment to or repeal of this Article VI shall diminish the rights of indemnification provided for herein prior to such amendment or repeal. ARTICLE VII AMENDMENTS 7.1 Articles of Incorporation. Notwithstanding any other provision of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding that a lesser percentage may be specified by law) the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the total number of votes of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required (unless separate voting by classes is required by the FBCA, in which event the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the number of shares of each class or series entitled to vote as a class shall be required), to amend or repeal, or to adopt any provision inconsistent with the purpose or intent of, Articles IV, V, VI or this Article VII of these Articles of Incorporation. Notice of any such proposed amendment, repeal or adoption shall be contained in the notice of the meeting at which it is to be considered. Subject to the provisions set forth herein, the Corporation reserves the -8- 10 right to amend, alter, repeal or rescind any provision contained in these Articles of Incorporation in the manner now or hereafter prescribed by law. 7.2 Bylaws. The shareholders of the Corporation may adopt or amend a bylaw which fixes a greater quorum or voting requirement for shareholders (or voting groups of shareholders) than is required by the FBCA. The adoption or amendment of a bylaw that adds, changes or deletes a greater quorum or voting requirement for shareholders must meet the same quorum or voting requirement and be adopted by the same vote and voting groups required to take action under the quorum or voting requirement then in effect or proposed to be adopted, whichever is greater. ARTICLE VIII INITIAL REGISTERED OFFICE AND AGENT The address of the initial Registered Office of the Corporation is 34125 U.S. Highway 19 North, Palm Harbor, FL 34684-2116, and the initial Registered Agent at such address is Vincent Addonisio. ARTICLE IX PRINCIPAL OFFICE AND MAILING ADDRESS The address of the Principal Office of the Corporation and its mailing address is 34125 US Highway 19 North, Suite 300, Palm Harbor, Florida 34684-2116. The location of the Principal Office and the mailing address shall be subject to change as may be provided in the Bylaws. ARTICLE X INCORPORATOR The name and address of the sole incorporator of the corporation is: Thomas E. Lange, Foley & Lardner, 100 North Tampa Street, Tampa, FL 33602. IN WITNESS WHEREOF, these Articles of Incorporation have been signed by the undersigned incorporator this 17th day of February, 1994. /s/ Thomas E. Lange _____________________________ Thomas E. Lange, Incorporator -9- 11 ACCEPTANCE OF APPOINTMENT BY INITIAL REGISTERED AGENT THE UNDERSIGNED, having been named in Article VIII of the foregoing Articles of Incorporation as initial Registered Agent at the office designated therein, hereby accepts such appointment and agrees to act in such capacity. The undersigned hereby states that he is familiar with, and hereby accepts, the obligations set forth in Section 607.0505, Florida Statutes, and the undersigned will further comply with any other provisions of law made applicable to him as Registered Agent of the Corporation. DATED, this 17th day of February, 1994. /s/ Vincent Addonisio ____________________________ Vincent Addonisio - 10 - EX-10.1 4 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN 1 EXHIBIT 10.1 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN 2 EXHIBIT A ABR INFORMATION SERVICES, INC. 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN 1. PURPOSE OF PLAN The purpose of this Plan is to enable ABR Information Services, Inc. (the "Company") and its Subsidiaries to compete successfully in attracting, motivating and retaining Non-Employee Directors with outstanding abilities by making it possible for them to purchase Shares on terms that will give them a direct and continuing interest in the future success of the businesses of the Company and its Subsidiaries and encourage them to remain as directors of the Company or one or more of its Subsidiaries. 2. DEFINITIONS For purposes of the Plan, except where the context clearly indicates otherwise, the following terms shall have the meanings set forth below: (a) "Board" means the Board of Directors of the Company. (b) "Code" means the United States Internal Revenue Code of 1986, as amended. (c) "Effective Date" means the date the Plan is adopted by the Board. (d) "Fair Market Value" means, with respect to a Share, if the Shares are then listed and traded on a registered national or regional securities exchange, or quoted on The National Association of Securities Dealers' Automated Quotation System (including The Nasdaq Stock Market's National Market), the average closing price of a Share on such exchange or quotation system for the five trading days immediately preceding the date of grant of an Option, or, if Fair Market Value is used herein in connection with any event other than the grant of an Option, then such average closing price for the ten trading days immediately preceding the date of such event. If the Shares are not traded on a registered securities exchange or quoted in such a quotation system, the Board shall determine the Fair Market Value of a Share. (e) "Non-Employee Director" shall mean any member of the Company's Board of Directors who is not an employee of the Company or any Subsidiary. (f) "Option" means an option granted under this Plan, which Option shall not be an incentive stock option within the meaning of Section 422 of the Code, or the corresponding provision of any subsequently enacted tax statute. (g) "Optionee" means any person who has been granted an Option which Option has not expired or been fully exercised or surrendered. (h) "Plan" means the Company's 1996 Non-Employee Director Stock Option Plan. A-1 3 (i) "Rule 16b-3" means Rule 16b-3 promulgated pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or any successor rule. (j) "Share" means one share of voting common stock, par value $.01 per share, of the Company, and such other stock or securities that may be substituted therefor pursuant to Section 5 hereof. (k) "Subsidiary" means any "subsidiary corporation" within the meaning of Section 424(f) of the Code. 3. LIMITS ON OPTIONS The total number of Shares with respect to which Options may be granted under the Plan shall not exceed in the aggregate 200,000 Shares, subject to adjustment as provided in Section 5 hereof. If any Option expires, terminates or is terminated for any reason prior to its exercise in full, the Shares that were subject to the unexercised portion of such Option shall be available for future grants under the Plan. 4. GRANTING AND TERMS OF OPTIONS (a) On the date on which a Non-Employee Director, other than a Non-Employee Director who is serving as such on the Effective Date, is first elected or appointed as a Non-Employee Director during the existence of the Plan, such Non-Employee Director shall automatically be granted an Option to purchase 5,000 Shares. Each Non-Employee Director as of the Effective Date shall, on the Effective Date, automatically be granted an Option to purchase 5,000 Shares. (b) Each Non-Employee Director (if he or she continues to serve in such capacity) shall, on the day following the annual meeting of shareholders in each year during the time the Plan is in effect, automatically be granted an Option to purchase 5,000 Shares; provided, however, that a Non-Employee Director who receives, in any year, an Option pursuant to Section 4.(a) hereof shall not be eligible to begin to receive grants pursuant to this Section 4.(b) until the following year. (c) Notwithstanding the provisions of Section 4.(a) and 4.(b) hereof, Options shall be automatically granted to Non-Employee Directors under the Plan only for so long as the Plan remains in effect and a sufficient number of Shares are available hereunder for the granting of such Options. (d) The exercise price of each Share subject to an Option shall be equal to 100% of the Fair Market Value of the Shares on the date of grant of such Option. (e) Options shall not be assignable or transferable by the Optionee other than by will or by the laws of descent and distribution. (f) Each Option shall expire and all rights thereunder shall end at the expiration of ten (10) years after the date on which it was granted, subject in all cases to earlier expiration as provided in subsections (g) and (h) of this Section 4. (g) During the life of an Optionee, an Option shall be exercisable only by such Optionee and only within one (1) month after the date on which the Optionee ceases to be a Non-Employee Director, A-2 4 other than by reason of the Optionee's death or resignation from the Board with the consent of the Company as provided in subsection (h) of this Section 4, but only if and to the extent the Option was exercisable immediately prior to such date, and subject to the provisions of the subsections (f) and (i) of this Section 4. If the Optionee is removed as a Director for cause (as defined in the Company's Articles of Incorporation, as amended from time to time), all Options of the Optionee shall terminate immediately on the date of removal. (h) If an Optionee: (i) dies while a Non-Employee Director or within the period when an Option could have otherwise been exercised by the Optionee; or (ii) ceases to be a Non-Employee Director as a result of such Optionee's resignation from the Board, provided that the Company has consented in writing to such Optionee's resignation, then, in each such case, such Optionee, or the duly authorized representatives of such Optionee, shall have the right, at any time within three (3) months after the death or after such resignation of the Optionee, as the case may be, and prior to the termination of the Option pursuant to subsections (f) and (i) of this Section 4, to exercise any Option to the extent such Option was exercisable by the Optionee immediately prior to such Optionee's death or resignation. (i) The Optionee may exercise the Option (subject to the limitations on exercise set forth in subsection (f) of this Section 4), in whole or in part, as follows: (i) the Option may not be exercised to any extent prior to one (1) year following the date of grant; and (ii) the Option may be exercised to the extent of 25% of the Shares subject to such Option after one year following the date of grant and may be exercised to the extent of an additional 25% of the Shares subject to such Option after each of the second, third and fourth years following the date of grant. (j) An Option may be exercised in whole at one time or in part from time to time, subject to subsection (i) of this Section 4. 5. EFFECT OF CHANGES IN CAPITALIZATION (a) If the number of outstanding Shares is increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, stock split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company, a proportionate and appropriate adjustment shall be made by the Board of Directors in (i) the number and type of Shares subject to the Plan and which thereafter may be made the subject of Options under the Plan, and (ii) the number and kind of shares for which Options are outstanding, so that the proportionate interest of the Optionee immediately following such event shall, to the extent practicable, be the same as immediately prior to such event. Any such adjustment in outstanding Options shall not change the aggregate option price payable with respect to Shares subject to the unexercised portion of the Options outstanding but shall include a corresponding proportionate adjustment in the option price per Share. (b) Subject to Section 5.(c) hereof, if the Company shall be the surviving corporation in any reorganization, merger, share exchange or consolidation of the Company with one or more other corporations or other entities, any Option theretofore granted shall pertain to and apply to the securities to which a holder of the number of Shares subject to such Option would have been entitled immediately following such reorganization, merger, share exchange or consolidation, with a corresponding proportionate adjustment of the option price per Share so that the aggregate option price thereafter shall A-3 5 be the same as the aggregate option price of the Shares remaining subject to the Option immediately prior to such reorganization, merger, share exchange or consolidation. (c) In the event of: (i) the adoption of a plan of reorganization, merger, share exchange or consolidation of the Company with one or more other corporations or other entities as a result of which the holders of the Shares as a group would receive less than fifty percent (50%) of the voting power of the capital stock or other interests of the surviving or resulting corporation or entity; (ii) the adoption of a plan of liquidation or the approval of the dissolution of the Company; (iii) the approval by the Board of an agreement providing for the sale or transfer of the assets of the Company; or (iv) the acquisition of more than fifty percent (50%) of the outstanding shares by any person within the meaning of Rule 13(d)(3) under the Securities Exchange Act of 1934 if such acquisition is not preceded by a prior expression of approval by the Board, then, in each such case, any Option granted hereunder shall become immediately exercisable in full, subject to any appropriate adjustments in the number of Shares subject to such Option and the option price, regardless of any provision contained in the Plan with respect thereto limiting the exercisability of the Option for any length of time. Notwithstanding the foregoing, if a successor corporation or other entity as contemplated in clause (i) or (iii) of the preceding sentence agrees to assume the outstanding Options or to substitute substantially equivalent options, then the outstanding Options issued hereunder shall not be immediately exercisable, but shall remain exercisable in accordance with the terms of the Plan and the applicable stock option agreements. (d) Adjustments under this Section 5 relating to Shares or securities of the Company shall be made by the Board, whose determination in that respect shall be final and conclusive. Options subject to grant or previously granted under the Plan at the time of any event described in this Section 5 shall be subject to only such adjustments as shall be necessary to maintain the proportionate interest of the Options and preserve, without exceeding, the value of such Options. No fractional Shares or units of other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding upward to the nearest whole Share or unit. (e) The grant of an Option pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve or liquidate, or to sell or transfer all or any part of its business or assets. 6. DELIVERY AND PAYMENT FOR SHARES (a) No Shares shall be delivered upon the exercise of an Option until the option price for the Shares acquired has been paid in full. No shares shall be issued or transferred under the Plan unless and until all legal requirements applicable to the issuance or transfer of such Shares have been complied with to the satisfaction of the Board. Any Shares issued by the Company to an Optionee upon exercise of an Option may be made only in strict compliance with and in accordance with applicable state and federal securities laws. (b) Payment of the option price for the Shares purchased pursuant to the exercise of an Option shall be made: (i) in cash or by check payable to the order of the Company; (ii) through the tender to the Company of Shares, which Shares shall be valued, for purposes of determining the extent to which the option price has been paid thereby, at their Fair Market Value on the date of exercise; or (iii) by a combination of the methods described in (i) and (ii) hereof. A-4 6 7. NO CONTINUATION AS A DIRECTOR AND DISCLAIMER OF RIGHTS No provision in the Plan or in any Option granted or option agreement entered into pursuant to the Plan shall be construed to confer upon any individual the right to remain a director of the Company or any Subsidiary. The Plan shall in no way be interpreted to require the Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any Optionee or beneficiary under the terms of the Plan. An Optionee shall have none of the rights of a shareholder of the Company until all or some of the Shares covered by an Option are fully paid and issued to such Optionee. 8. ADMINISTRATION The Plan is intended to meet the requirements of Rule 16b-3(c)(2)(ii) adopted under the Securities Exchange Act of 1934, as amended, and accordingly is intended to be self-governing. To this end, the Plan requires no discretionary action by any administrative body with regard to any transaction under the Plan. To the extent, if any, that any questions of interpretation arise, these shall be resolved by the Board. 9. NO RESERVATION OF SHARES The Company shall be under no obligation to reserve or to retain in its treasury any particular number of Shares in connection with its obligations hereunder. 10. AMENDMENT OF PLAN The Board, without further action by the shareholders, may amend this Plan from time to time as it deems desirable; provided, that (i) no such amendment shall be made without shareholder approval if such approval would be required to comply with Rule 16b-3 and (ii) the provisions of Sections 4.(a) and 4.(b) shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations promulgated thereunder. 11. TERMINATION OF PLAN This Plan shall terminate ten (10) years from the Effective Date. The Board may, in its discretion, suspend or terminate the Plan at any time prior to such date, but such termination or suspension shall not adversely affect any right or obligation with respect to any outstanding Option. 12. EFFECTIVE DATE The Plan shall become effective on the Effective Date and Options hereunder may be granted at any time on or after that date, subject to approval of the Plan by the Company's shareholders within one year after the Effective Date by a majority of the votes cast at a duly held meeting of the shareholders of the Company at which a quorum representing a majority of all outstanding stock is present, either in person or by proxy, and in a manner that satisfies the requirements of Rule 16b-3. Upon approval of the Plan by the shareholders of the Company as set forth above, all Options granted under the Plan on or after the Effective Date shall be fully effective as if the shareholders of the Company had approved the Plan on the Effective Date. A-5 EX-27.1 5 FINANCIAL DATA SCHEDULE (FOR EDGAR VERSION ONLY)
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ABR INFORMATION SERVICES, INC. FORM 10-Q 6-MOS JUL-31-1997 AUG-01-1996 JAN-31-1997 29,451,276 131,112,933 5,196,450 49,702 0 167,820,669 22,131,027 3,388,186 210,674,842 21,542,848 0 0 0 273,708 187,085,491 210,674,842 22,103,582 22,103,582 12,384,210 4,515,024 140,633 0 (3,869,108) 8,932,823 3,384,995 5,547,828 0 0 0 5,547,828 .20 .20
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