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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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OACIS HEALTHCARE HOLDINGS CORP.
(NAME OF SUBJECT COMPANY)
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OACIS HEALTHCARE HOLDINGS CORP.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
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00175167107510
(CUSIP NUMBER OF CLASS OF SECURITIES)
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JIM MCCORD
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
OACIS HEALTHCARE HOLDINGS CORP.
1101 FIFTH AVENUE, SUITE 200
SAN RAFAEL, CA 94901
(415) 482-4400
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF
OF THE PERSON FILING STATEMENT)
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COPIES TO:
KENNETH L. GUERNSEY
KARYN R. SMITH
COOLEY GODWARD LLP
ONE MARITIME PLAZA
20TH FLOOR
SAN FRANCISCO, CA 94111-3580
(415) 693-2000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Oacis Healthcare Holdings Corp., a
Delaware corporation (the "Company"), and the principal executive offices of the
Company are located at 1101 Fifth Avenue, Suite 200, San Rafael, CA 94901. The
title of the class of equity securities to which this Statement relates is the
common stock, par value $0.01 per share of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to a tender offer by Oscar Acquisition Corporation,
a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Science
Applications International Corporation, a Delaware corporation ("Parent"),
disclosed in a Tender Offer Statement on Schedule 14D-1, dated February 26, 1999
(the "Schedule 14D-1"), to purchase all outstanding Shares at a price of $4.45
per Share, net to the seller in cash, without any interest (such amount, or any
greater amount per Share paid pursuant to the Offer, the "Per Share Amount"),
upon the terms and subject to the conditions set forth in Purchaser's Offer to
Purchase, dated February 26, 1999 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with any amendments and supplements
thereto, collectively constitute the "Offer") included in the Schedule 14D-1.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of February 21, 1999 (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides that, among other things, as soon as
practicable after consummation of the Offer and the satisfaction of the other
conditions set forth in the Merger Agreement and in accordance with the relevant
provisions of the General Corporation Law of the State of Delaware ("Delaware
Law"), Purchaser will be merged with and into the Company (the "Merger"), with
the Company continuing as the surviving corporation (the "Surviving
Corporation").
At the Effective Time (as defined below), each outstanding Share (other
than Shares held in the treasury of the Company or owned by Parent or any
subsidiary of Parent (collectively, "Ineligible Shares") and other than Shares
held by stockholders properly exercising appraisal rights, if any, under
Delaware Law ("Dissenting Shares")) will be converted automatically into the
right to receive the Per Share Amount. "Effective Time" means the time at which
the Company and Purchaser file a Certificate of Merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware or such later time
as is specified in the Certificate of Merger. The Merger Agreement is more fully
described in Item 3.
The obligation of the Purchaser to accept for payment or pay for Shares
tendered pursuant to the Offer is subject to the condition that at least a
majority of the Shares outstanding on a fully diluted basis shall be validly
tendered, and not withdrawn, prior to the expiration date of the Offer. As of
February 21, 1999 certain stockholders of the Company (the "Stockholders")
entered into Stockholder Agreements with the Company (the "Stockholder
Agreements") pursuant to which each of the Stockholders has, among other things,
(i) agreed to validly tender (and not withdraw) pursuant to the Offer, all
Shares owned by it, (ii) agreed to vote such Shares in favor of the Merger and
the Merger Agreement and against any acquisition proposal other than the Merger,
and (iii) granted to Purchaser an irrevocable proxy to vote such shares in favor
of the transactions contemplated by the Merger Agreement. The Shares owned by
the Stockholders and subject to the Stockholder Agreements equal 6,267,216
Shares and represented approximately 47% of the Shares outstanding (on a fully
diluted basis) as of February 19, 1999.
According to the Schedule 14D-1, the principal executive offices of Parent
and Purchaser are located at 10260 Campus Point Drive, M/S F3, San Diego, CA
92121.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b) Except as described or referred to in the attached Annex A or set forth
below, to the knowledge of the Company, there are no material contracts,
agreements, arrangements or understandings and no actual or
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potential conflicts of interest between the Company or its affiliates and (i)
the Company, its executive officers, directors or affiliates or (ii) Parent or
Purchaser or any of their respective executive officers, directors or
affiliates.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is
filed as an Exhibit to the Schedule 14D-1. Such summary is qualified in its
entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer. The
obligation of the Purchaser to accept for payment or pay for Shares tendered
pursuant to the Offer is subject to the satisfaction of the Minimum Condition
(as defined below) and certain other conditions that are described below in
"-- Conditions to the Offer". The Purchaser has agreed that no change in the
Offer may be made which changes the form of consideration to be paid or
decreases the price per Share or the number of Shares sought in the Offer or
which imposes conditions to the Offer in addition to the Minimum Condition and
those conditions described below in "-- Conditions to the Offer". Purchaser may,
without the consent of the Company, (i) extend the Offer, if at any scheduled or
extended expiration date of the Offer any of the conditions set forth in
"-- Conditions to the Offer" or the Minimum Condition is not satisfied or
waived, (ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission (the "SEC")
or the staff thereof applicable to the Offer or any period required by
applicable law and (iii) extend the Offer on one or more occasions, if on such
expiration date there has not been validly tendered in accordance with the term
of the Offer and not withdrawn at least a majority of the outstanding Shares.
For a description of Purchaser's right to extend the period of time during which
the Offer is open and to amend, delay or terminate the Offer, see Sections 15
and 16 of the Schedule 14D-1. The "Minimum Condition" means that at least a
majority of the total number of Shares outstanding on a fully diluted basis have
been tendered and not withdrawn prior to the expiration date of the Offer.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, at the Effective Time, Purchaser shall be merged with
and into the Company in accordance with Delaware Law. As a result of the Merger,
the separate corporate existence of the Purchaser will cease and the Company
will be the Surviving Corporation.
Pursuant to the Merger Agreement, (i) each Ineligible Share shall be
canceled, and no payment shall be made with respect thereto; (ii) each share of
common stock of Purchaser then outstanding shall be converted into and become
one share of common stock of the Surviving Corporation with the same rights,
powers and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation; and (iii) each
Share, except Ineligible Shares and Dissenting Shares, outstanding immediately
prior to the Effective Time shall be converted into the right to receive $4.45
per Share in cash, without interest.
At the Effective Time, the Certificate of Incorporation of Purchaser in
effect at the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation until amended in accordance with applicable law, except
that the name of the Surviving Corporation shall be "Oacis Healthcare Holdings
Corp." The bylaws of Purchaser in effect at the Effective Time shall be the
bylaws of the Surviving Corporation until amended in accordance with applicable
law. From and after the Effective Time, until successors are duly elected or
appointed and qualified in accordance with applicable law, (a) the directors of
Purchaser at the Effective Time shall be the directors of the Surviving
Corporation and (b) the officers of the Company at the Effective Time shall be
the officers of the Surviving Corporation.
Conditions to the Offer. Notwithstanding any other provisions of the Offer,
subject to the terms of the Merger Agreement, Purchaser is not required to
accept for payment or pay for any Shares tendered pursuant to the Offer, and may
terminate the Offer, if (i) the Minimum Condition shall not have been satisfied
by June 30, 1999, (ii) the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall not have expired or
been terminated by June 30, 1999 or (iii) at any time on or
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after the date of the Merger Agreement and prior to the acceptance for payment
of Shares, any of the following conditions shall exist:
(a) there shall be threatened, instituted or pending any action, suit,
investigation or proceeding (collectively, a "Proceeding") (1) by any
Person (as defined below), foreign or domestic (except a government or
governmental authority or agency, domestic or foreign (each a "Governmental
Authority")), if there is a reasonable possibility that such Proceeding
will be decided in such Person's favor or (2) by any Governmental
Authority, in any case, before any court or governmental authority or
agency, domestic or foreign, (i) challenging or seeking to make illegal to
delay materially or otherwise directly or indirectly to restrain or
prohibit the making of the Offer, the acceptance for payment of or payment
for some or all of the Shares pursuant to the Offer or the consummation of
the Merger, seeking to obtain material damages or otherwise directly or
indirectly relating to the transactions contemplated by the Offer or the
Merger, (ii) seeking to restrain or prohibit Parent's ownership or
operation (or that of its subsidiaries or Affiliates (as defined below)) of
all or any material portion of the business or assets of the Company and
the Subsidiaries (as defined below), taken as a whole, or of Parent and its
subsidiaries, taken as a whole, or to compel Parent or any of its
subsidiaries or Affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Company and the
Subsidiaries, taken as a whole, or of Parent and its subsidiaries, taken as
a whole, (iii) seeking to impose or confirm material limitations on the
ability of Parent or any of its subsidiaries or Affiliates effectively to
exercise full rights of ownership of the Shares, including, without
limitation, the right to vote any Shares acquired or owned by Parent or any
of its subsidiaries or Affiliates on all matters properly presented to the
Company's stockholders, (iv) seeking to require divestiture by Parent or
any of its subsidiaries or Affiliates of any Shares, or (v) that otherwise
would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect (as defined below) on the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole; or
(b) there shall be any action taken, or any statute, rule, regulation,
injunction, order or decree proposed, enacted, enforced, promulgated,
issued or deemed applicable to the Offer or the Merger, by any court,
government or governmental authority or agency, domestic or foreign other
than the application of the waiting period provisions of the HSR Act to the
Offer or the Merger that is reasonably likely, directly or indirectly, to
result in any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above; or
(c) the Company shall have breached or failed to perform in any
material respect any of its covenants or agreements under the Merger
Agreement, or any of the representations and warranties of the Company set
forth in the Merger Agreement shall not be true when made or at any time
prior to consummation of the Offer as if made at and as of such time;
provided, however, that in the event that the Company's representations
regarding year 2000 compliance are not true, then Parent shall be required
to accept for payment and pay for all Shares validly tendered and not
withdrawn, so long as the Company has (i) cured such inaccuracy prior to
the consummation of the Offer or (ii) demonstrated to Parent that such
inaccuracy can be cured without having a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole; or
(d) the Company shall have entered into, or shall have publicly
announced its intention to enter into, an agreement or an agreement in
principle with respect to any Acquisition Proposal (as defined below) or
the Company Board shall have withdrawn or modified in a manner adverse to
Parent such Board approval or recommendation of the Offer or the Merger; or
(e) any Person or group (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other
than Parent, Purchaser or any Affiliate thereof) shall have acquired
beneficial ownership (as defined in Rule 13d-3 promulgated under the
Exchange Act) of a majority of the outstanding Shares through the
acquisition of stock, the formation of a group or otherwise, or shall have
been granted any option, right or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 50% of the Shares; or
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(f) the Merger Agreement shall have been terminated in accordance with
its terms,
which, in the reasonable judgment of Purchaser in any such case, and regardless
of the circumstances (including any action or omission by Parent) giving rise to
any such condition, makes it inadvisable to proceed with such acceptance for
payment of or payment. For purposes of the Merger Agreement: (i) "Person" means
an individual, a corporation, a limited liability company, a partnership, an
association, or trust or any other entity or organization, including a
government or political subdivision or any agency or instrumentality thereof;
(ii) "Affiliate" of any Person means any other Person controlling, controlled by
or under common control with such Person, where "control" means the possession,
directly or indirectly, of the power to direct the management and policies of a
Person whether through the ownership of voting securities, by contract or
otherwise; (iii) "Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are directly or indirectly owned by the Company; (iv) "Material Adverse Effect"
means any change or effect that, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), business, assets, results of operations or prospects
of the Company and the Subsidiaries taken as a whole or Parent and its
subsidiaries taken as a whole, as the case may be; and (v) "Acquisition
Proposal" means any offer or proposal for a merger or other business combination
involving the Company or any Subsidiary, the acquisition of any equity interest
in, or a substantial portion of the assets of, the Company or any Subsidiary,
other than the Merger; provided, however, that it shall not include sales of
products or services made in the ordinary course of business consistent with
past practices.
The Merger Agreement provides that the foregoing conditions are for the
sole benefit of Purchaser and Parent and may, subject to the provisions of the
Merger Agreement set forth under "-- The Offer" above, be waived by Purchaser or
Parent in whole or in part at any time and from time to time in their
discretion. The Merger Agreement provides that failure by Parent or Purchaser at
any time to exercise any of the foregoing rights will not be deemed a waiver of
any such right, the waiver of any such right with respect to particular facts
and other circumstances shall not be deemed a waiver with respect to any other
facts and circumstances, and each such right shall be deemed an ongoing right
that may be asserted at any time and from time to time prior to the Effective
Time.
Stockholder Meeting; Proxy Material. The Merger Agreement provides that the
Company shall cause a meeting of its stockholders to be duly called and held as
soon as reasonably practicable following the consummation of the Offer for the
purpose of voting on the approval and adoption of the Merger Agreement, unless a
vote is not required under Delaware Law. Subject to fiduciary obligations under
applicable law as advised in writing by Company Counsel, the Company's Board of
Directors (the "Company Board") shall recommend such approval and adoption of
the Merger Agreement. In connection with such meeting, the Company will (a)
promptly prepare and file with the SEC, will use its best efforts to have
cleared by the SEC and will thereafter mail to its stockholders as promptly as
practicable the Company proxy statement and all other proxy materials for such
meeting, (b) use its best efforts to obtain the necessary approvals by its
stockholders of the Merger Agreement and the Merger and (c) otherwise comply
with all legal requirements applicable to such meeting. For purposes of the
Merger Agreement, "Company Counsel" means Cooley Godward LLP.
Conditions to the Merger. The Merger Agreement provides that the respective
obligations of each party to consummate the Merger are subject to the
satisfaction of the following conditions:
(a) if required by Delaware Law, the Merger Agreement shall have been
adopted by the stockholders of the Company in accordance with such law;
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit consummation of the Merger; and
(d) Parent shall have purchased Shares pursuant to the Offer.
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Termination of the Merger Agreement. The Merger Agreement provides that it
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time, notwithstanding approval of the Merger Agreement by the
stockholders of the Company:
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if the Offer has not been
consummated by June 30, 1999;
(c) by either the Company or Parent, if there shall be any law or
regulation that makes consummation of the Offer or the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining Parent or the Company from consummating the Offer or the Merger
is entered and such judgment, injunction, order or decree shall become
final and nonappealable;
(d) by Parent, if the Merger Agreement shall not have been approved
and adopted by a majority of the Shares entitled to vote as required under
Delaware Law by reason of the failure to obtain the required vote at a duly
held meeting of stockholders or any adjournment thereof;
(e) by Parent, in the event of any breach by any stockholder of any of
such stockholder's obligations under any of the Stockholder Agreements;
(f) by Parent, if (i) the Company shall have entered into, or shall
have publicly announced its intention to enter into, an agreement with
respect to any Acquisition Proposal, or (ii) the Company Board shall have
withdrawn or modified in a manner adverse to Parent the Company Board's
approval or recommendation of the Offer or the Merger;
(g) by Parent, if the Company shall have breached or failed to observe
or perform certain representations or obligations under the Merger
Agreement; or
(h) by the Company, upon payment to Parent of the amounts referred to
in "-- Fees and Expenses" below, if prior to a duly called meeting of the
stockholders of the Company for the purpose of voting on the approval and
adoption of the Merger Agreement, the Company Board shall have withdrawn or
modified in a manner adverse to Parent its approval or recommendation of
the Offer or the Merger in order to permit the Company to execute an
agreement in connection with an Acquisition Proposal with respect to the
Company which the Company Board determines in good faith (based on the
presentation of an investment banking firm of national reputation) to be
more favorable to the Company's stockholders than the Merger.
In the event of the termination of the Merger Agreement, the Merger
Agreement provides that it will become void and of no effect with no liability
thereunder on the part of any party thereto except that (a) the provisions of
the Merger Agreement related to fees and expenses described in "-- Fees and
Expenses" below and certain other provisions of the Merger Agreement shall
survive termination and (b) no such termination shall relieve any party of any
liability or damages resulting from any breach by that party of the Merger
Agreement.
Fees and Expenses. The Merger Agreement provides that all costs and
expenses incurred in connection with the Merger Agreement shall be paid by the
party incurring such costs and expenses. Notwithstanding the above, the Merger
Agreement provides that the Company shall pay Parent a fee in immediately
available funds equal to $2.5 million promptly, but in no event later than two
business days if:
(i) the Merger Agreement is terminated pursuant to paragraphs (e)
through (h) of "-- Termination of the Merger Agreement" above; or
(ii) (A) prior to the termination of the Merger Agreement, an
Acquisition Proposal is commenced, publicly proposed or publicly disclosed
and (B) the Merger Agreement is terminated pursuant to paragraph (b) or (d)
of "-- Termination of the Merger Agreement" above.
Other Offers. The Company has agreed in the Merger Agreement that, from the
date of the Merger Agreement until the termination thereof, the Company and the
Subsidiaries and the officers, directors, employees or other agents of the
Company and the Subsidiaries will not, directly or indirectly, (i) take any
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action to solicit, initiate or encourage any Acquisition Proposal or (ii) except
as may be required, in response to an unsolicited bona fide written Acquisition
Proposal, in order to comply with the fiduciary duties of the Company Board
under applicable law as advised in writing by Company Counsel, engage in
negotiations with, or disclose any nonpublic information relating to the Company
or any Subsidiary or afford access to the properties, books or records of the
Company or any Subsidiary to, any Person. The Company has agreed that it will
promptly (and in no event later than 24 hours after receipt of the relevant
Acquisition Proposal) notify (which notice shall be provided orally and in
writing and shall identify the Person making the relevant Acquisition Proposal
and set forth the material terms thereof) Parent after (i) the Company has
received any Acquisition Proposal, (ii) the Company has been advised that any
Person is considering making an Acquisition Proposal, or (iii) the Company has
received any request for nonpublic information relating to the Company or any
Subsidiary, or for access to the properties, books or records of the Company or
any Subsidiary, by any Person. The Company has agreed to keep Parent fully
informed of the status and details of any such Acquisition Proposal or request.
In addition, the Company has agreed that it shall not engage in negotiations
with, or disclose any nonpublic information to, any such Person unless it
received from such Person an executed confidentiality agreement with terms no
less favorable to the Company than the Mutual Non-Disclosure Agreement effective
as of November 4, 1998 between Parent and the Company (the "Mutual
Non-Disclosure Agreement"). The Company has further agreed that it shall, and
shall cause its Subsidiaries and the Company's directors, officers, employees,
financial advisors and other agents or representatives to, cease immediately and
cause to be terminated all activities, discussions or negotiations, if any, with
any Persons conducted prior to the date of the Merger Agreement with respect to
any Acquisition Proposal.
Conduct of the Business by the Company. The Merger Agreement provides that
during the period from the date of the Merger Agreement and until the Effective
Time, the Company and the Subsidiaries shall conduct their business in the
ordinary course consistent with past practice and shall use their best efforts
to preserve intact their business organizations and relationships with third
parties and to keep available the services of their present officers and
employees. In addition, from the date of the Merger Agreement until the
Effective Time:
(a) the Company will not adopt or propose any change in its
certificate of incorporation or bylaws;
(b) the Company will not, and will not permit any Subsidiary to, merge
or consolidate with any other Person or acquire a material amount of assets
of any other Person;
(c) the Company will not, and will not permit any Subsidiary to, sell,
lease, license or otherwise dispose of any material assets or property
except (i) pursuant to existing contracts or commitments and (ii) in the
ordinary course consistent with past practice;
(d) the Company will not, and will not permit any Subsidiary to,
settle or compromise any suit or claims or threatened suit or claim
relating to the transactions contemplated by the Merger Agreement;
(e) the Company will not, and will not permit any Subsidiary to (i)
take, agree or commit to take any action that would make any representation
and warranty of the Company contained in the Merger Agreement inaccurate in
any respect at, or as of any time prior to, the Effective Time or (ii) omit
or agree or commit to omit to take any action necessary to prevent any such
representation or warranty (including, without limitation, the Company's
representations and warranties regarding conduct of the business in the
ordinary course and absence of certain changes) from being inaccurate in
any respect at any time; and
(f) the Company will not, and will not permit any Subsidiary to, agree
or commit to do any of the foregoing.
Board of Directors. The Merger Agreement provides that, effective upon the
acceptance for payment by Purchaser pursuant to the Offer of a number of shares
that satisfies the Minimum Condition, Parent shall be entitled, subject to
compliance with Section 14(f) of the Exchange Act, to designate the number of
directors, rounded up to the next whole number, on the Company Board that equals
the product of (i) the total number of directors on the Company Board (giving
effect to the election of any additional directors pursuant to this paragraph)
multiplied by (ii) the percentage that the number of Shares beneficially owned
by Parent
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(including Shares accepted for payment) bears to the total number of Shares
outstanding. The Company has agreed in the Merger Agreement to take all actions
necessary to cause Parent's designees to be elected as directors of the Company,
including increasing the size of the Company Board or securing the resignations
of incumbent directors. The Company will also use its best efforts to cause
individuals designated by Parent to constitute the same percentage as such
individuals represent on the Company Board of (a) each committee of the Company
Board and (b) each board of directors (and committee thereof) of each
Subsidiary. Notwithstanding the foregoing, the Company shall use its best
efforts to cause at least two members of the Company Board as of the date of the
Merger Agreement who are not employees of the Company to remain members of the
Company Board until the Effective Time.
Stock Options. The Merger Agreement provides that at the Effective Time,
each option to purchase shares of Common Stock outstanding under any employee
stock option or compensation plan or arrangement of the Company (other than the
Company's 1996 Employee Stock Purchase Plan (the "Stock Purchase Plan")
described below), whether or not such option is then yet vested or exercisable,
shall be canceled, and Parent shall pay the option holder in cash at the
Effective Time for each such option an amount determined by multiplying (i) the
excess, if any, of the Per Share Amount over the applicable exercise price per
share of such option by (ii) the number of shares to which such option relates.
Dissenting Shares. Notwithstanding any provision of the Merger Agreement to
the contrary, Dissenting Shares shall not be converted into the right to receive
the consideration otherwise payable in the Merger, unless such stockholder fails
to perfect or withdraws or otherwise loses his right to appraisal. If after the
Effective Time such stockholder fails to perfect or withdraws or loses his right
to appraisal, such Shares shall be treated as if they had been converted as of
the Effective Time into a right to receive the consideration otherwise payable
in the Merger. The Company shall give Parent prompt notice of any demands
received by the Company for the appraisal of Shares, and Parent shall have the
right to participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to, or settle or offer to settle, any such
demands.
Employee Stock Purchase Plan. The Merger Agreement provides that as of the
Effective Time, the Stock Purchase Plan shall be terminated. Parent shall pay
each participant under such Stock Purchase Plan in cash at the Effective Time,
an amount determined by multiplying (i) the Per Share Amount by (ii) the number
of shares such participant could have purchased under the Stock Purchase Plan
based on his or her account balance under the Stock Purchase Plan immediately
prior to the Effective Time. After the Effective Time, employees of the Company
will be eligible to participate in Parent's 1998 Employee Stock Purchase Plan.
Amendments; No Waivers. The Merger Agreement provides that any provision of
the Merger Agreement may be amended or waived prior to the Effective Time if,
and only if, such amendment or waiver is in writing and signed, in the case of
an amendment, by the Company, Parent and Purchaser or in the case of a waiver,
by the party against whom the waiver is to be effective; provided that after the
adoption of the Merger Agreement by the stockholders of the Company, no such
amendment or waiver shall, without the further approval of such stockholders,
alter or change (i) the amount or kind of consideration to be received in
exchange for any shares of capital stock of the Company, (ii) any term of the
certificate of incorporation of the Surviving Corporation or (iii) any of the
terms or conditions of the Merger Agreement if such alteration or change would
adversely affect the holders of any shares of capital stock of the Company.
The Merger Agreement also provides that failure or delay by any party in
exercising any right, power or privilege under the Merger Agreement shall not
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided in the Merger
Agreement shall be cumulative and not exclusive of any rights or remedies
provided by law.
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Representations and Warranties. The Merger Agreement contains customary
representations and warranties of the parties thereto, including representations
by the Company as to its corporate existence and power, corporate authorization,
governmental authorization, non-contravention, capitalization, subsidiaries, SEC
filings, financial statements, disclosure documents, absence of certain changes,
certain material contracts, absence of undisclosed material liabilities,
litigation, taxes, employee matters, compliance with laws, finders' fees,
patents and other proprietary rights, real property, environmental matters and
year 2000 compliance.
THE STOCKHOLDER AGREEMENTS
The following is a summary of the Stockholder Agreements entered into
between Purchaser and the following stockholders of the Company: Information
Partners Capital Fund, L.P., BCIP Associates, BCIP Trust Associates, L.P.,
Sutter Hill Ventures, InterWest Partners V, L.P., IMS Health Incorporated,
Sequoia Capital Growth Fund, Sequoia Technology Partners III, WPG Enterprise
Fund II, L.L.C., and Weiss, Peck & Greer Venture Associates III, L.L.C. (each a
"Stockholder"), copies of which are filed as Exhibits to the Schedule 14D-1. The
following summary is qualified in its entirety by reference to the Stockholder
Agreements.
Agreement to Tender. Pursuant to the Stockholder Agreements, each
Stockholder irrevocably and unconditionally agrees to validly tender (and not
withdraw), pursuant to and in accordance with the terms of the Offer, all of the
shares of capital stock of the Company that such Stockholder beneficially owns
as of the date of the Stockholder Agreement as well as any additional shares of
capital stock of the Company that such Stockholder may beneficially own, whether
acquired by purchase, exercise of options or otherwise, at any time after the
date of the Stockholder Agreement and prior to the expiration of the Offer, as
the expiration of the Offer may be extended from time to time (the "Stockholder
Shares"). Within five business days after the commencement of the Offer, such
Stockholder shall deliver to ChaseMellon Shareholder Services, L.L.C., the
Depositary (i) a letter of transmittal with respect to the Stockholder Shares
complying with the terms of the Offer, (ii) certificates representing all of the
Stockholder Shares and (iii) all other documents or instruments required to be
delivered pursuant to the terms of the Offer.
Voting Agreements. Pursuant to the Stockholder Agreements, each Stockholder
irrevocably and unconditionally agrees to vote or cause to be voted all shares
that such Stockholder is entitled to vote at the time any vote of the
stockholders of the Company is taken on such matters in favor of the approval
and adoption of the Merger Agreement and in favor of the transactions
contemplated thereby and (ii) against any (A) Acquisition Proposal (other than
the Merger), (B) reorganization, recapitalization, liquidation or winding up of
the Company or any other extraordinary transaction involving the Company, (C)
corporate action the consummation of which would frustrate the purposes, or
prevent or delay the consummation, of the transactions contemplated by the
Merger Agreement or (D) other matter relating to, or in connection with, any of
the matters referred to in clause (A), (B) or (C) above.
Grant of Proxy. Pursuant to the Stockholder Agreements, each Stockholder
irrevocably and unconditionally grants a proxy appointing Purchaser as such
Stockholder's attorney-in-fact and proxy, with full power of substitution, for
and in such Stockholder's name, to vote, express, consent or dissent, or
otherwise to utilize such voting power in the manner contemplated by the section
on "-- Voting Agreement" above as Purchaser or its proxy or substitute shall, in
Purchaser's sole discretion, deem proper with respect to the Shares.
Other Offers. According to the Stockholder Agreements, from the date
thereof until the termination thereof, each Stockholder and the officers,
directors, employees or other agents of such Stockholder will not, directly or
indirectly, (i) take any action to solicit, initiate or encourage any
Acquisition Proposal or (ii) engage in negotiations with, or disclose any
nonpublic information relating to the Company or any Subsidiary or afford access
to the properties, books or records of the Company or any Subsidiary to any
Person. Stockholder will promptly (and in no event later than 24 hours after
receipt of the relevant Acquisition Proposal) notify (which notice shall be
provided orally and in writing and shall identify the Person making the relevant
Acquisition Proposal and set forth the material terms thereof) Purchaser after
(i) such Stockholder has received any Acquisition Proposal, (ii) such
Stockholder has been advised that any Person is considering
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making an Acquisition Proposal, or (iii) such Stockholder has received any
request for nonpublic information relating to the Company or any Subsidiary, or
for access to the properties, books or records of the Company or any Subsidiary,
by any Person. Stockholder will keep Purchaser fully informed of the status and
details of any such Acquisition Proposal or request. Stockholder shall, and
shall cause its directors, officers, employees, financial advisors and other
agents or representatives to, cease immediately and cause to be terminated all
activities, discussions or negotiations, if any, with any Persons conducted
heretofore with respect to any Acquisition Proposal.
Representations and Warranties. The Stockholder Agreements contain
customary representations and warranties of the parties thereto.
No Proxies for or Encumbrances on Stockholder Shares. Except pursuant to
the terms of the Stockholder Agreements, each Stockholder agrees that, without
the prior written consent of Purchaser, such Stockholder will not, directly or
indirectly, (i) grant any proxies or enter into any voting trust or other
agreement or arrangement with respect to the voting of any Shares or (ii) sell,
assign, transfer, encumber, mortgage or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to the
direct or indirect sale, assignment, transfer, encumbrance, mortgage or other
disposition of, any Stockholder Shares during the term of the Stockholder
Agreements.
Appraisal Rights. Each Stockholder agrees not to exercise any rights
(including, without limitation, under Section 262 of the General Corporation Law
of the State of Delaware) to demand appraisal of any Stockholder Shares which
may arise with respect to the Merger.
Amendments; Termination. Any provision of the Stockholder Agreements may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party or in the case of a waiver,
by the party against whom the waiver is to be effective. Each Stockholder
Agreement will terminate on the earlier to occur of the consummation of the
Merger or 18 months after the date of the Stockholder Agreement.
EMPLOYMENT MATTERS
On February 19, 1999, Parent concluded retention letter agreements (the
"Retention Letter Agreements") with several employees of the Company, namely
with Louis Bunz, John Churin, Louis Delzompo, Stephen Ghiglieri, Jim Kennick,
Richard Larsen, Jim McCord, and Lee Ann Slinkard. The agreements provide for,
among other things, the employee's 1999 salary, guaranteed bonus and employee
benefits as well as a special retention package. On February 19, 1999 and
February 20, 1999 Parent also concluded non-solicitation agreements (the
"Non-Solicitation Agreements") with the employees named above, which provide,
among other things, that, if the employee ceases to be employed by the Company
or by Parent, the employee shall not solicit any person employed by the Company
or by Parent to terminate such person's employment. On February 20, 1999, the
Company, Oacis Healthcare Systems, Inc. and John Kingery entered into an
amendment to executive severance benefits agreement (the "Amendment to Executive
Severance Benefits Agreement") providing for, among other things, termination of
Mr. Kingery's employment with the Company and payment to him of severance in the
gross amount of $325,000. Copies of the Retention Letter Agreements, the
Non-Solicitation Agreements and the Amendment to Executive Severance Benefits
Agreement are filed as Exhibits to the Schedule 14D-1 and the foregoing summary
is qualified in its entirety by reference to the agreements.
MUTUAL NON-DISCLOSURE AGREEMENT
Pursuant to the Mutual Non-Disclosure Agreement, each of Parent and Company
has agreed that at all times until termination or expiration of the Mutual
Non-Disclosure Agreement, it will hold in strict confidence and not disclose to
any third party confidential information of the other party, except as approved
in writing by such other party, and will use confidential information for no
purpose other than evaluating or pursuing a business relationship with the other
party. A copy of such agreement is filed as an Exhibit to the Schedule 14D-1 and
the foregoing summary is qualified in its entirety by reference to such
agreement.
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EXCLUSIVITY AGREEMENT
In the Exclusivity Agreement concluded on January 15, 1999 between Parent
and the Company (the "Exclusivity Agreement"), the Company, subject to certain
exceptions, agreed to negotiate exclusively with Parent with respect to a
possible acquisition of the Company until February 15, 1999. The Exclusivity
Agreement also provided that the Company would reimburse Parent for expenses
incurred by Parent in the event the Company failed to engage in good faith
negotiations or if, in accordance with the fiduciary duties of the Company's
Board of Directors, the Company engaged in discussions with another potential
bidder. On February 13, 1999, the Company extended the exclusivity period from
February 15, 1999 to February 19, 1999. A copy of such agreement and the
amendment letter are filed as Exhibits to the Schedule 14D-1 and the foregoing
summary is qualified in its entirety by reference to such agreement and
amendment.
EMPI LICENSE AGREEMENT
On January 26, 1996, Parent and Oacis Healthcare Systems, Inc. entered into
an agreement (the "License Agreement") pursuant to which Parent licensed certain
technology which is currently marketed under the name "Enterprise Member Patient
Index" or "EMPI", and which was at the time being developed by Parent. In
consideration of the grant of the license and in accordance with the License
Agreement, the Company made one payment in the amount of $400,000 in 1997 and
one payment in the amount of $300,000 in 1998 to Parent.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
BACKGROUND
Since the Company's initial public offering in May 1996, the Company has
been active in seeking out and reviewing opportunities to maintain and
strengthen its technical leadership, while providing additional scale, marketing
resources and distribution to further its position as a leading provider of
clinical information systems. The Company Board and senior management believed
that increased consolidation among both its customers and competition was
likely, thus providing larger companies with greater scale, distribution and
marketing advantages.
In July 1998, the Company engaged Covington Associates LLC ("Covington") to
explore alternatives for the Company, including either the sale of the Company
or the establishment of one or more strategic partnership(s). Company management
and Covington identified potential partners and/or acquirors that would provide
the Company with, among other things, improved distribution channels, an
interest in exploiting the technology with differing business models and
recognition of the value of clinical data amassed in a data repository as a way
of further leveraging the value of the data. During the second and third quarter
of 1998, Company management and Covington met with nine parties to provide
management presentations in connection with the potential sale of the Company.
On August 7, 1998, Tracy Trent, Group Senior Vice President of Parent, met
with Jim McCord, the Company's Chief Executive Officer, to discuss various
aspects of the commercial relationships between Parent and the Company.
From late September through December 1998, the Company conducted meetings
with the nine parties who received management presentations from Covington. Of
these nine parties, two companies (in addition to Parent) expressed interest in
having further discussions regarding an acquisition of the Company, and the
Company engaged in discussions with those parties throughout the fourth quarter
of 1998. The first party, Company A, ultimately decided not to pursue a
transaction with the Company because Company A was unable to obtain financing it
had been seeking. The second party, Company B, continued to engage in
discussions with the Company through December 1998, but did not make an offer
for the Company, despite the significant efforts of Covington and the Company's
management team.
In mid-October 1998, Covington informed Parent that the Company was
exploring strategic alternatives and inquired as to Parent's potential interest
in acquiring the Company. On November 4, 1998, Parent and the
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Company entered into the Mutual Non-Disclosure Agreement, and Parent began to
conduct due diligence thereafter. On November 24, 1998, the Company's management
team made a presentation to a group of executives of Parent.
Throughout the remainder of November and December, representatives of
Parent, the Company and Covington held discussions regarding a range of
financial and operational aspects of a potential acquisition transaction. In
addition, Parent indicated to the Company that it would proceed with an
acquisition of the Company only if certain principal stockholders of the Company
executed agreements pursuant to which such stockholders would agree, among other
things, to support any acquisition of the Company by Parent.
Between January 5, 1999 and January 8, 1999, representatives of Parent and
the Company had further discussions concerning the proposed structure of a
possible acquisition. On January 8, 1999, the Company Board held a telephonic
meeting to discuss the status of the Company's discussions and negotiations with
prospective partners and authorized the Company to enter into exclusive
negotiations with Parent. At this time, the Company had not received any other
offers to purchase the Company, and prospects for offers from other parties
seemed remote. In addition, before proceeding further with negotiations, Parent
required that the Company enter into the Exclusivity Agreement.
On January 15, 1999, Parent and the Company entered into the Exclusivity
Agreement requiring the Company to cease all discussions and negotiations with
other parties and (subject to certain exclusions) to negotiate exclusively with
Parent until no later than February 15, 1999. The Exclusivity Agreement also
provided that the Company would reimburse Parent for expenses incurred by Parent
in the event the Company failed to engage in good faith negotiations or if, in
accordance with the fiduciary duties of the Company Board, the Company engaged
in discussions with another potential bidder. During this period, Parent and the
Company continued negotiations, and Parent continued its due diligence
investigation. On February 13, 1999, the expiration date of the Exclusivity
Agreement was extended to February 19, 1999.
Between January 15, 1999 and February 21, 1999, Parent conducted additional
due diligence and the Company, Covington, Company Counsel, Parent and Davis Polk
& Wardwell, Parent's counsel, had numerous discussions and continued
negotiations with respect to the purchase price, the draft of the definitive
agreement, employment-related issues and other material terms and conditions of
the transaction.
On February 20, 1999, the Company Board held a telephonic meeting with the
Company's senior management and representatives of Company Counsel and Covington
to review and discuss the proposed transaction and its material terms. At this
meeting, Covington presented materials underlying its oral opinion and provided
a written opinion that the consideration to be offered by Parent to the
stockholders of the Company in the transaction was fair, from a financial point
of view, to such stockholders. After extensive discussion, the Company Board
unanimously approved the transaction.
On February 21, 1999, the Merger Agreement and the Stockholder Agreements
were executed. The transaction was publicly announced on February 22, 1999.
RECOMMENDATION
THE COMPANY BOARD HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER
DESCRIBED HEREIN, UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR
TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S STOCKHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
A copy of a letter to the Company's stockholders communicating the Company
Board's recommendation is filed herewith as Exhibit 5 and is incorporated herein
by reference.
REASONS FOR THE RECOMMENDATION
At its meeting held on February 20, 1999, as discussed above, the Company
Board unanimously approved the Offer and the Merger, unanimously determined that
the terms of the Offer and the Merger were fair to,
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and in the best interest of, the Company's stockholders, and unanimously
recommended that the stockholders of the Company accept the Offer and tender
their Shares to Purchaser pursuant to the Offer. In making its recommendations
to the stockholders of the Company with respect to the Offer and the Merger, the
Company Board considered a number of factors, the material ones being the
following:
Competitive Environment. The Company Board reviewed the competitive
environment in which the Company operates and the increasing difficulty the
Company faces in its ability to achieve sales of its products and services. The
Company Board noted that the Company's customers and prospects increasingly
focus on the Company's size, lack of historical profitability and general
financial strength in making decisions as to whether to acquire the Company's
products and services. The Company Board considered various alternatives to
address the issues of scale and financial strength including: (a) raising
additional private or public equity, (b) restructuring the Company around a
subset of the Company's current product and service offerings, and (c) creating
strategic partnership relationships. The Company Board concluded that the Merger
and the Offer presented the most attractive opportunity for the Company to
achieve the required scale and financial strength required for it to
successfully compete in its market.
The Company Board also considered the industry's continuing demand for
increased software application functionality, which requires increased
investment by the Company to be competitive in the marketplace. This factor,
combined with the focus on financial strength, profitability and the need for
scale, contributed to the Company Board's conclusion to support the Merger and
the Offer.
Historical Stock Price Performance. The Company Board reviewed the
historical stock price performance of the Company relative to comparable
companies and to the broader stock market as a whole. The Company Board noted
that the Company historically underperformed with respect to both comparable
companies and the broader stock market as a whole. This underperformance
primarily was due to (a) the Company's history of operating losses and (b) a
perception by the financial community that the Company's revenue and,
accordingly, its prospects for profitability, were unpredictable and volatile
(primarily due to (i) industry factors such as a continuing trend by the
Company's customers to consolidate through merger and acquisition activity, (ii)
the diversion of resources by the Company's customers to address year 2000
issues and (iii) the fact that the Company relies on a relatively few number of
sales to generate the majority of its revenue), with the timing of such revenue
having potentially material adverse effects on the Company's results of
operations. Additionally, the Company Board noted that the Company's stock price
would likely continue to remain undervalued relative to the industry and broader
market as a result of the Company's limited public float (shares of the Company
held by the public) and low trading volume. The Company thus was faced with the
decision of how to achieve the best return for its stockholders while continuing
to strive to achieve its business and operating goals. The Company Board noted
that the price being offered by Parent in the Offer and Merger represented a
very attractive blended multiple for the Company relative to comparable
companies and the Company's historical stock price performance.
The Company Board noted that the consideration to be received by the
Company's stockholders pursuant to the Offer and the Merger, taken together,
would represent a premium of approximately 37% and 40% over the closing price of
the Shares on the Nasdaq National Market on February 19, 1999 (the last full
trading day prior to announcement of the execution of the Merger Agreement) and
the average closing price of the Shares during the preceding week, respectively,
and a substantial premium over the average trading price of these Shares for the
previous three to five months. THE COMPANY BOARD DID NOTE, HOWEVER, THAT THE
SHARES HAD TRADED IN EXCESS OF THE PRICE BEING OFFERED IN THE OFFER AND THE
MERGER WITHIN THE PRIOR 12 MONTH PERIOD.
Complementary Business Fit. The Company Board noted the strong business fit
between the product lines and services of the Company and Parent. The Company's
long-term strategy for several years has been based on the concept of open
software architectures facilitating interoperability between products and
systems from multiple suppliers. Parent shares a similar business strategy but
has focused on information services rather than software products. The Company
Board believes that combining the Company's software products with Parent's
strength in services and systems integration will provide the Company with a
much stronger and more complete offering to integrated health care delivery
networks, which are becoming the dominant market for the Company's products.
These organizations often prefer to purchase complete packages of products and
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services from a single supplier. Parent has existing contractual arrangements
with several large delivery organizations that represent attractive market
opportunities for the Company's products and also offer the Company a means of
entering additional markets such as government hospitals.
Operational Benefits for Combined Companies. The Company Board noted that
there were significant opportunities for synergies between the Company and
Parent, particularly in the areas of general corporate infrastructure and the
enhanced service component of the combined companies.
Other Potential Transactions. The Company Board considered whether any
other person would be interested in an acquisition of the Company at this time
on more attractive terms. The Company Board discussed the other significant
companies in the Company's industry and concluded that Parent's proposed
acquisition was the only viable proposal generated by Covington's solicitation
of potential offers to acquire the Company. In this connection, the Company
Board reviewed information regarding the preliminary discussions between the
Company and Parent (see " -- Background" above).
Financial Condition, Results of Operations, Business and Prospects of the
Company. The Company Board considered the Company's financial condition, results
of operations, business and prospects, including its prospects if it were to
remain independent. The Company Board discussed the Company's current strategic
plan, including its expansion plans and the risks for the Company involved in
its implementation. The Company Board also discussed the competitive environment
in which the Company operates, including the prospects for a general economic
slow down and the additional economies of scale and product depth that would
become available if the Merger were to occur.
Competing Offers; Breakup Fee. The Company Board considered that under the
Merger Agreement, the Company shall not solicit, initiate or encourage any
inquiries or proposals that may reasonably be expected to lead to any
Acquisition Proposal, or engage in any discussions or negotiations regarding any
Acquisition Proposal (see "The Merger -- Other Offers" in Item 3 above) and
noted that if the Company receives an offer superior in its terms to the Offer
and Merger, provides information to, or negotiates with, such competing bidder
and approves or recommends a tender offer competing with the Offer, the Company
may be required to pay Parent a termination fee of $2.5 million (see "The Merger
Agreement -- Fees and Expenses" in Item 3 above). However, the existence of the
Stockholder Agreements makes it significantly less likely that any third party
would make a proposal to acquire the Company, as the Stockholders own an
aggregate of approximately 47% of the outstanding Shares of the Company (on a
fully diluted basis) and have agreed to tender their Shares to the Offer and
otherwise support the Offer and Merger.
Financial Advisor Presentations. The Company Board took into account the
advice and presentations of Covington with respect to the financial and other
terms of the Offer and the Merger and the opinion of Covington (the "Covington
Opinion") that the consideration to be received, pursuant to the Merger
Agreement, by holders of Shares in the Offer and the Merger, is fair from a
financial point of view to such holders. A copy of the Covington Opinion is
filed as Exhibit 6 to this Statement and is incorporated herein by reference.
Holders of Shares should read the opinions in their entirety for a description
of procedures followed, assumptions and qualifications made, matters considered
and limitations on the review undertaken by Covington.
Terms and Conditions of the Offer and the Merger. The Company Board also
considered the terms and conditions of the Offer and the Merger as well as the
terms of the Stockholder Agreements. The Company Board noted that the
transaction was being structured as a cash tender offer for all of the
outstanding Shares and the consideration to be received in the Merger would be
available to holders of Shares on the same basis. The Company Board considered
that the Stockholders, as principal stockholders, were committing to the
transaction but were not being afforded any preferential treatment in connection
with the Offer or the Merger. The Company Board also considered the implications
of the Stockholder Agreements for the minority stockholders of the Company. The
Company Board noted the limited conditions to Parent's obligations to consummate
the Offer.
The foregoing discussion of the information and factors considered and
given weight by the Company Board is not intended to be exhaustive. In view of
the variety of factors considered in connection with its
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evaluation of the Offer and the Merger, the Company Board did not find it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered in reaching its determination. In addition,
individual members of the Company Board may have given different weights to
different factors.
THE FULL TEXT OF THE COVINGTON OPINION IS ATTACHED AS EXHIBIT 6 HERETO.
STOCKHOLDERS ARE URGED TO AND SHOULD READ SUCH OPINION IN ITS ENTIRETY. SUCH
OPINION WAS PRESENTED FOR THE INFORMATION OF THE COMPANY BOARD IN CONNECTION
WITH ITS CONSIDERATION OF THE MERGER AGREEMENT AND IS DIRECTED ONLY TO THE
FAIRNESS (FROM A FINANCIAL POINT OF VIEW) OF THE CONSIDERATION TO BE RECEIVED
PURSUANT TO THE MERGER AGREEMENT, BY HOLDERS OF SHARES IN THE OFFER AND THE
MERGER.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
THE COVINGTON ENGAGEMENT
The Company has retained Covington to act as financial advisor to the
Company with respect to the Offer, the Merger and matters arising in connection
therewith. Pursuant to a letter agreement dated July 24, 1998, between the
Company and Covington (the "Engagement Letter"), the Company has agreed to pay
Covington Associates (i) a non-refundable monthly retainer fee of $5,000 in cash
per month, commencing on July 1, 1998 (the "Monthly Retainer") and (ii) a
transaction fee (the "Transaction Fee") based on the percentage of the aggregate
Purchase Price (as defined below), set forth on the schedule below, paid in a
Merger Transaction (as defined below) consummated by the Company during the term
of Covington's engagement or at any time during the 12 months following the
termination by the Company of such engagement (provided that the other party to
the Merger Transaction was introduced to the Company during the term of
Covington's engagement):
FEE PERCENTAGE OF
TRANSACTION SIZE (PURCHASE PRICE) PURCHASE PRICE
--------------------------------- -----------------
Less than $50,000,000....................................... 1.40%
At least $50,000,000 but less than $60,000,000.............. 1.34
At least $60,000,000 but less than $70,000,000.............. 1.28
At least $70,000,000 but less than $80,000,000.............. 1.22
At least $80,000,000 but less than $90,000,000.............. 1.16
Greater than $90,000,000.................................... 1.10
The Monthly Retainer may be increased or decreased if, by mutual agreement
of the Company and Covington, the workload merits such increase or decrease. The
Company also agreed to reimburse Covington for its reasonable out-of-pocket
expenses, not to exceed $25,000 in the aggregate without the Company's prior
written consent. In addition, any Monthly Retainers paid by the Company shall be
offset against any Transaction Fee paid to Covington upon consummation of a
Merger Transaction.
In addition, the Company agreed to pay Covington a fee of $150,000 (the
"Fairness Opinion Fee") for rendering an opinion as to the fairness, from a
financial point of view, of the consideration to be received by the Company and
its stockholders in connection with a Merger Transaction, subject to the
following reduction based on the Purchase Price:
REDUCTION IN FAIRNESS
TRANSACTION SIZE (PURCHASE PRICE) OPINION FEE
--------------------------------- ---------------------
Less than $50,000,000....................................... $ 75,000
At least $50,000,000 but less than $60,000,000.............. 100,000
At least $60,000,000 but less than $70,000,000.............. 125,000
Greater than $70,000,000.................................... 150,000
For purposes of the Engagement Letter, "Purchase Price" means an amount
equal to the sum of the aggregate fair market present value of any securities
issued (including options to acquire common stock),
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earn-out and cash consideration paid to the Company or its security holders and
option holders plus the assumption of any interest bearing indebtedness of the
Company by a purchaser in connection with a Merger Transaction. The fair market
value of any such securities issued to the Company will be the value determined
by the Company and Covington on the date of the closing of a Merger Transaction.
The value of any shares received by the Company or its stockholders shall be
based on the average per share closing price over the ten trading days
immediately preceding the date prior to the closing of a Merger Transaction. For
purposes of calculating the value of any stock options delivered by a public
company as part of the consideration received by the Company or its
stockholders, the Company and Covington shall agree on the value of such stock
options based on the Black Scholes option pricing model. "Merger Transaction"
means (a) any merger, consolidation, reorganization or other business
combination pursuant to which more than 50% of the Company's business or
operations is sold to a non-affiliated third party or (b) the acquisition,
directly or indirectly, by a non-affiliated third party of more than 50% of the
capital stock or assets of the Company by the way of tender or exchange offer,
negotiated purchase or otherwise, whether effected, in either case, in one
transaction or a series of related transactions.
In connection with the Offer and the Merger, Covington will receive an
aggregate of approximately $865,000 for services provided to the Company.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
Other than as described in the next paragraph, there have been no
transactions in Shares of the Company that were effected during the past 60 days
by the Company or, to the best knowledge of the Company, any executive officer,
director, affiliate or subsidiary of the Company.
(a) AND (b). Pursuant to the Stockholder Agreements, the Stockholders, each
of which either is, or is affiliated with, a director or affiliate of the
Company, and all of which together own an aggregate of 6,267,216 Shares
(representing approximately 47% of the Shares outstanding on (on a fully diluted
basis) February 19, 1999) have (i) agreed to tender all Shares covered by the
Stockholder Agreements into the Offer, (ii) vote their Shares in favor of the
Merger, and if necessary, to vote their Shares against any competing merger or
business combination proposal or any other proposal that could impede the
Merger, and (iii) granted to Purchaser an irrevocable proxy to vote their Shares
in accordance with the foregoing. See "The Stockholder Agreements" under Item 3
above.
To the knowledge of the Company, each of the Company's directors and
executive officers currently intend to tender all Shares owned beneficially or
of record by him or her.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) AND (b). As described under Item 3 above, the Company has agreed in the
Merger Agreement not to engage in certain activities in connection with any
proposal to engage in a business combination with, or acquire an interest in or
assets of, the Company. See "The Merger Agreement -- Other Offers" in Item 3
above.
The Company does not presently intend to solicit, initiate or encourage
(including by way of furnishing information), 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 Acquisition Proposal or (ii) except as
may be required, in response to an unsolicited bona fide written Acquisition
Proposal, in order to comply with the fiduciary duties of the Company Board,
under applicable law as advised in writing by Company Counsel, in any
discussions or negotiations regarding any Acquisition Proposal. See "The Merger
Agreement -- Other Offers" in Item 3 above.
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Except as described herein, there are no transactions, board resolutions,
agreements in principle or signed contracts in response to the Offer that relate
to or would result in one or more of the events referred to in the preceding
paragraph.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
See the Information Statement pursuant to Section 14(f) of the Exchange Act
and Rule 14f-1 thereunder, a copy of which is attached as Annex A to this
Statement.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The following Exhibits are filed herewith:
Exhibit 1: Agreement and Plan of Merger, dated as of February 21, 1999,
among Science Applications International Corporation, Oscar
Acquisition Corporation and Oacis Healthcare Holdings Corp.
(incorporated by reference to Exhibit (c)(1) of the Schedule
14D-1 of Science Applications International Corporation and
Oscar Acquisition Corporation filed with the Securities and
Exchange Commission on February 26, 1999 (the "Schedule
14D-1"))
Exhibit 2: Stockholder Agreements, dated as of February 21, 1999, among
Parent and each of the Stockholders (incorporated by reference
to Exhibits (c)(2) through (c)(11) of the Schedule 14D-1).
Exhibit 3: Text of Press Release dated February 22, 1999, issued by
Science Applications International Corporation.
Exhibit 4: Text of Press Release dated February 22, 1999, issued by Oacis
Healthcare Holdings Corp.
Exhibit 5: Letter to Stockholders of the Company, dated February 26,
1999.*
Exhibit 6: Opinion, dated February 20, 1999, of Covington Associates.*
Exhibit 7: Offer to Purchase, dated February 26, 1999 (incorporated by
reference to Exhibit (a)(1) of the Schedule 14D-1).**
Exhibit 8: Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) of the Schedule 14D-1).**
Exhibit 9: Retention Letter Agreements, dated as of February 19, 1999
among Parent and several employees of the Company
(incorporated by reference to Exhibits (c)(12) through (c)(19)
of the Schedule 14D-1).
Exhibit 10: Non-Solicitation Agreements, dated as of February 19, 1999 and
February 20, 1999 among Parent and several employees of the
Company (incorporated by reference to Exhibits (c)(20) through
(c)(27) of the Schedule 14D-1).
Exhibit 11: Amendment to Executive Severance Benefits Agreement dated
February 20, 1999 among John Kingery, Oacis Healthcare
Systems, Inc. and Oacis Healthcare Holdings Corp.
(incorporated by reference to Exhibit (c)(28) of the Schedule
14D-1).
Exhibit 12: Conversion Notices dated February 19, 1999 to Oacis Healthcare
Holdings Corp. from each of Information Partners Capital Fund,
L.P., BCIP Associates, BCIP Trust Associates, L.P. and The
Bell Atlantic Systems Group, Inc. (incorporated by reference
to Exhibits (c)(29) through (c)(32) of the Schedule 14D-1).
Exhibit 13: Registration Letters dated February 20, 1999 from each of Fred
Goad, John Kingery, Jim McCord and Dennis G. Sisco
(incorporated by reference to Exhibits (c)(33) through (c)(36)
of the Schedule 14D-1).
16
18
Exhibit 14: Mutual Non-Disclosure Agreement dated November 4, 1998 between
Oacis Healthcare Holdings Corp. and Science Applications
International Corporation (incorporated by reference to
Exhibit (c)(37) of the Schedule 14D-1).
Exhibit 15: Agreement between Science Applications International
Corporation and Oacis Healthcare Holdings Corp. dated as of
January 15, 1999 regarding exclusivity and amendment letter
dated February 13, 1999 (incorporated by reference to Exhibit
(c)(38) of the Schedule 14D-1).
- ---------------
* Included in copies of Schedule 14D-9 mailed to stockholders.
** Included in the Offer to Purchase Materials being mailed to Company
Stockholders.
17
19
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Oacis Healthcare Holdings Corp.
By: /s/ JIM MCCORD
------------------------------------
Name: Jim McCord
Title: Chairman of the Board and
Chief Executive Officer
Dated: February 26, 1999
18
20
ANNEX A
INFORMATION PROVIDED PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
GENERAL
This information is being mailed on or about February 26, 1999 to holders
of record of shares of Common Stock, par value $0.01 per share, of Oacis
Healthcare Holdings Corp. (the "Company") in connection with the possible
election of persons designated by Science Applications International Corporation
("Parent") to the Board of Directors of the Company (the "Company Board") other
than at a meeting of the stockholders of the Company. Such election would occur
pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated as
of February 21, 1999, among Parent, Oscar Acquisition Corporation ("Purchaser")
and the Company. The Merger Agreement is more fully described under Item 3 of
the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), of which this Annex A is a part. Capitalized terms used and
not defined in this Annex A have the meanings assigned to them in the Schedule
14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
February 26, 1999. The Offer currently is scheduled to expire at 12:00 midnight,
New York City time, on March 25, 1999, at which time, if the Offer is not
extended and all conditions to the Offer have been satisfied or waived, the
Purchaser is obligated to purchase all Shares validly tendered pursuant to the
Offer and not withdrawn.
If the Merger Agreement is terminated or if Purchaser does not accept the
Shares tendered for payment, then Purchaser will not have any right to designate
directors for election to the Company Board.
THE PARENT DESIGNEES
Pursuant to the Merger Agreement, promptly upon the acceptance for payment
by Purchaser for shares of common stock, par value $0.01 per share, of the
Company (the "Shares") purchased pursuant to the Offer, Parent shall be
entitled, subject to compliance with Section 14(f) of the Exchange Act, to
designate such number of directors, rounded up to the next whole number, on the
Company Board as will give Parent representation on the Company Board equal to
that number of directors that equals the product of (i) the total number of
directors on the Company Board (giving effect to the election of any additional
directors pursuant to this paragraph) multiplied by (ii) the percentage that the
number of Shares beneficially owned by Purchaser (including Shares accepted for
payment) bears to the number of Shares then outstanding. The Company has agreed
in the Merger Agreement that it shall take all action necessary to cause
Parent's designees to be elected as directors of the Company, including
increasing the size of the Company Board or securing the resignations of
incumbent directors. In addition, the Stockholder Agreements provide that each
stockholder party to such agreement shall cause all directors affiliated with
such stockholder to resign from the Company Board upon consummation of the
Offer. On February 20, 1999, John Kingery, Fred Goad, Dennis Sisco and Jim
McCord resigned from the Company Board effective upon the purchase of the shares
tendered in the Offer. Such resignations are sufficient for Parent to designate
up to eight out of nine directors of the Company following consummation of the
Offer. The Company has also agreed to use its best efforts to cause individuals
designated by Parent to constitute the same percentage as such individuals
represent on the Company Board of (a) each committee of the Company Board and
(b) each board of directors (and committee thereof) of each Subsidiary.
Notwithstanding the foregoing, the Company shall use its best efforts to cause
at least two members of the Company Board as of the date of the Merger Agreement
who are not employees of the Company to remain members of the Company Board
until the Effective Time.
It is expected that on the date that Purchaser accepts for payment and
purchases Shares under the Offer, which the Company expects to be on or after
March 25, 1999, the Company will promptly take such other action as will be
necessary to enable the Parent Designees (as defined below) to be elected to the
Company Board.
A-1
21
Set forth in the table below are the name, age, present principal
occupation or employment and business address for each of the persons who may be
designated by Parent as the Parent Designees. Unless otherwise indicated, the
business address for each individual listed below is 10260 Campus Point Drive,
M/S F3, San Diego, CA 92121. Each of the individuals listed below is a citizen
of the United States. "Parent Designees" shall mean all of the individuals set
forth below.
NAME OF PURCHASER DESIGNEE AGE PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- -------------------------- --- -----------------------------------------------
J.R. Beyster............ 74 Chairman of the Board, Chief Executive Officer and a
Director of Parent since the Company was founded and
President of the Parent since 1998.
D.A. Cox................ 51 Executive Vice President of Parent since January 1998.
Mr. Cox has held various positions with Parent since
1988, including serving as a Sector Vice President
from 1996 to 1998. He is also President and a member
of the Board of Directors of Purchaser.
J.E. Glancy............. 52 Corporate Executive Vice President since January 1994
and a Director of the Parent since July 1994. Dr.
Glancy has held various positions with Parent since
1976, including serving as a Sector Vice President
from 1991 to 1994. Dr. Glancy is also a director of
Network Solutions, Inc.
J.D. Heipt.............. 56 Senior Vice President for Administration and Secretary
of Parent since 1984. Mr. Heipt has held various
positions with Parent since 1979. Mr. Heipt is also a
director of Network Solutions, Inc.
P.N. Pavlics............ 38 Senior Vice President since January 1997 and
Controller of Parent since 1993. Mr. Pavlics has held
various positions with Parent since 1985, including
serving as a Corporate Vice President from 1993 to
January 1997.
W.A. Roper, Jr.......... 52 Senior Vice President and Chief Financial Officer of
Parent since 1990. Mr. Roper is also Chief Financial
Officer and a member of the Board of Directors of
Purchaser. Mr. Roper is also a director of Network
Solutions, Inc.
D.E. Scott.............. 41 Senior Vice President of Parent since January 1997 and
General Counsel of Parent since 1992. Mr. Scott has
held various positions with Parent since 1987,
including serving as a Corporate Vice President from
1992 to January 1997.
T. Trent................ 35 Vice President of Purchaser since the Company was
founded. Mr. Trent has held various positions with
Parent since 1993, including serving as Vice President
for Corporate Development from July 1993 to October
1995, Corporate Vice President for Corporate
Development from October 1995 to July 1997 and Senior
Vice President from July 1997 to January 1998. Since
January 1999, Mr. Trent is Group Senior Vice President
of Parent.
K.A. Werner............. 38 Secretary of Purchaser since the Company was founded.
Mr. Werner was a partner/shareholder at the law firm
of Seltzer Caplan Wilkins & McMahon from 1990 to 1995.
He was Corporate Counsel of Parent from 1995 to 1997.
Since May 1997, Mr. Werner has served as Associate
General Counsel of Parent.
Any other officer of Parent or Purchaser listed in Schedule I to the Offer
to Purchase dated February 26, 1999, filed as an exhibit to the Tender Offer
Statement on Schedule 14D-1 of Parent and Purchaser may also be designated by
Purchaser as a Parent Designee. The information with respect to the Parent
Designees has been supplied by Purchaser for inclusion herein.
A-2
22
CERTAIN INFORMATION CONCERNING THE COMPANY
The Shares are the only class of voting securities of the Company
outstanding. As of February 19, 1999, there were approximately 10,619,646 Shares
outstanding and approximately 13,261,619 Shares outstanding on a fully diluted
basis. Each Share that is outstanding as of the close of business on any
applicable record date for any matter to be acted upon by stockholders is
entitled to one vote on such matter. The Company Board currently consists of
seven members.
CURRENT MEMBERS OF THE COMPANY BOARD
To the extent that the Company Board will consist of persons who are not
among the Parent Designees, the Company Board is expected to consist of persons
who are currently directors of the Company who have not resigned.
The following table sets forth as to each director, his age, year first
elected a director and business experience. This information was provided to the
Company by the respective director.
AGE (AS OF YEAR FIRST
FEBRUARY 10, ELECTED
NAME 1999) DIRECTOR BUSINESS EXPERIENCE AND CURRENT DIRECTORSHIPS
---- ------------ ---------- ---------------------------------------------
Jim McCord................... 56 1994 Mr. McCord joined the Company in May 1994 as
Chief Executive Officer and has served as a
director since joining the Company. In March
1996, he was appointed Chairman of the Board
of Directors. From January 1986 to March
1994, Mr. McCord served as a Vice President
of Shared Medical Systems Corporation
("SMS"), where he started and managed the
Decision Support Systems Group, an
independent business unit that provides
analystic products and services to senior
healthcare managers and professionals in the
SMS client base. From 1974 through 1985, Mr.
McCord was founder and Chief Executive
Officer of SysteMetrics, Inc., a health
services research and information company
that is now part of Medical Economics, a
Thompson Communications Company.
Alan W. Crites............... 46 1995 Mr. Crites has served as a director of the
Company since May 1995. He has been a General
Partner of InterWest Partners, a venture
capital investment firm, since November 1989.
He also serves as a director of Gadzooks,
Inc., and several privately held companies.
David Dominik................ 43 1994 Mr. Dominik has served as a director of the
Company since May 1994. Mr. Dominik has been
a General Partner of Information Partners,
the General Partner of Information Partners
Capital Fund, L.P., a venture capital
investment firm, since January 1990, and
Managing Director of Information Partners,
Inc. since June 1993. In addition, he has
been a Managing Director of Bain Capital,
Inc., an investment firm, since June 1993 and
is a General Partner of BCIP Associates and
BCIP Trust Associates, L.P.
A-3
23
AGE (AS OF YEAR FIRST
FEBRUARY 10, ELECTED
NAME 1999) DIRECTOR BUSINESS EXPERIENCE AND CURRENT DIRECTORSHIPS
---- ------------ ---------- ---------------------------------------------
Fred Goad.................... 58 1996 Mr. Goad joined the Company as a director in
October 1996. Mr. Goad joined ENVOY
Corporation, a data transactions company, in
August 1984 as a director and President, and
was elected Chairman and Co-Chief Executive
Officer in 1995. Mr. Goad also serves as a
director of Performance Food Group, Inc. and
three privately held companies. Mr. Goad was
a founding member of the Nashville Healthcare
Council.
John Kingery................. 53 1997 Mr. Kingery served as a consultant to the
Company from February 1996 to March 1996, at
which time he joined the Company as President
and Chief Operating Officer. He was appointed
as a director in January 1997. From June 1992
to March 1996, Mr. Kingery provided interim
management and consulting services to high
growth companies. From January 1991 to May
1992, he was the founder and President of
Summit Credit Corporation, a company that
arranges financing for medical diagnostic
imaging equipment.
Dennis G. Sisco.............. 52 1994 Mr. Sisco has served as a director of the
Company since May 1994. Mr. Sisco has been a
partner of Behrman Capital, a private equity
investment firm, since January 1998. From
1988 to February 1997, he was employed by the
Dun & Bradstreet Corporation and Cognizant
Corporation, which was spun off from Dun &
Bradstreet in November 1996. At Dun &
Bradstreet and Cognizant, Mr. Sisco was an
Executive Vice President with responsibility
for several operating units as well as
business development. He also serves as a
director of Gartner Group, Inc., Aspect
Development, Inc., TSI Software International
and several privately held companies.
William H. Younger, Jr....... 49 1994 Mr. Younger has served as a director of the
Company since May 1994. Mr. Younger is a
managing director of the general partner of
Sutter Hill Ventures, a venture capital
investment firm, where he has been employed
since 1981. He also serves as a director of
Celeritek, FORTE Software, Information
Advantage and several privately held
companies.
A-4
24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and footnotes thereto set forth information regarding
the beneficial ownership of common stock of the Company ("Common Stock") as of
February 19, 1999 by (a) each person known by the Company to be the beneficial
owner of more than 5% of the outstanding Shares, (b) each of the Company's
directors, (c) each Named Executive Officer (as defined in "Summary Compensation
Table") and (d) all directors and executive officers of the Company as a group.
Unless otherwise noted in the footnotes, the persons named in the table have
sole voting and investment power with respect to all Shares indicated as
beneficially owned by them.
COMMON STOCK BENEFICIALLY
OWNED(1)
-----------------------------
PERCENT
NAME NUMBER OF SHARES OWNERSHIP
---- ---------------- ---------
Entities affiliated with Information Partners(2)............ 1,880,151 17.5%
Two Copley Place
Boston, MA 02116
Sutter Hill Ventures(3)..................................... 1,238,672 11.6
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Entities affiliated with InterWest Partners(4).............. 1,129,944 10.6
3000 Sand Hill Road
Building 3, Suite 255 Menlo Park, CA 94025
IMS Health Incorporated(5).................................. 1,110,661 10.4
200 Nyala Farms Road
Westport, CT 06897
Entities affiliated with Sequoia Capital(6)................. 706,215 6.7
3000 Sand Hill Road
Building 3, Suite 255 Menlo Park, CA 94025
Entities affiliated with Weiss, Peck & Greer(7)............. 628,091 5.9
555 California Street, Suite 4760
San Francisco, CA 94104
Jim McCord(8)............................................... 578,818 5.2
John Kingery(9)............................................. 354,135 3.2
Alan W. Crites(10).......................................... 1,157,444 10.9
David Dominik(11)........................................... 1,895,151 17.6
Fred C. Goad, Jr.(12)....................................... 15,000 *
Dennis G. Sisco(13)......................................... 15,000 *
William H. Younger, Jr.(3).................................. 1,238,672 11.6
Louis Delzompo(14).......................................... 127,594 1.2
Louis Bunz(15).............................................. 105,000 1.0
Lee Ann Slinkard(16)........................................ 149,053 1.4
All directors and executive officers as a group (11
persons)(17).............................................. 5,818,330 48.0
- ---------------
* Represents holdings of less than one percent.
(1) At February 19, 1999, there were 10,619,646 Shares outstanding, excluding
2,348,762 Shares underlying outstanding stock options. Percentages for each
person or group listed have been calculated assuming the exercise of all
stock options owned by such person or group listed.
(2) Includes 1,603,525 shares held by Information Partners Capital Fund, L.P.,
90,332 shares held by BCIP Associates and 39,688 shares held by BCIP Trust
Associates, L.P. Also includes Shares issuable upon the exercise of
warrants held by Information Partners Capital Fund, L.P. to purchase
135,757 shares, warrants held by BCIP Associates to purchase 4,398 shares
and warrants held by BCIP Trust Associates, L.P. to purchase 6,451 shares.
A-5
25
(3) Includes 819,216 shares held by Sutter Hill Ventures, a California limited
partnership ("Sutter Hill"), over which Mr. Younger, a director of the
Company, shares voting and investment power with four other partners of the
general partner of Sutter Hill. Also includes 82,449 shares held by Mr.
Younger, 15,000 shares issuable upon the exercise of stock options held by
Mr. Younger and 322,007 shares held by the other four partners and their
related family entities. Mr. Younger disclaims beneficial ownership of
shares held by Sutter Hill and the other persons and entities except to the
extent of his proportionate partnership interest in Sutter Hill.
(4) Includes 1,122,882 shares held by InterWest Partners V, L.P. and 7,062
shares held by InterWest Investors V.
(5) Includes 10,000 shares issuable upon the exercise of stock options. These
options were granted to Mr. Sisco, a director of the Company, under the
1996 Director Option Plan and were assigned by Mr. Sisco to IMS Health
Incorporated.
(6) Includes 663,842 shares held by Sequoia Capital Growth Fund and 42,373
shares held by Sequoia Technology Partners III.
(7) Includes 342,982 shares held by WPG Enterprises Fund II, L.P. and 285,109
shares held by Weiss, Peck & Greer Venture Associates III, L.P.
(8) Includes 529,771 shares issuable upon the exercise of stock options.
(9) Includes 354,135 shares issuable upon the exercise of stock options.
(10) Includes 1,122,882 shares held by InterWest Partners V, L.P. and 7,062
shares held by InterWest Investors V. Mr. Crites disclaims beneficial
ownership of shares held by such entities, except as to the extent of his
proportionate partnership interest therein. Also includes 27,500 shares
issuable upon the exercise of stock options held by Mr. Crites.
(11) Includes 1,603,525 shares held by Information Partners Capital Fund, L.P.,
90,332 shares held by BCIP Associates and 39,688 shares held by BCIP Trust
Associates, L.P. Also includes Shares issuable upon the exercise of (i)
warrants held by Information Partners Capital Fund, L.P. to purchase
135,757 shares, warrants held by BCIP Associates to purchase 4,398 shares
and warrants held by BCIP Trust Associates, L.P. to purchase 6,451 shares
and (ii) options to purchase 15,000 shares held by Mr. Dominik. Mr. Dominik
is a general partner of Information Partners Capital Fund, L.P., BCIP
Associates and BCIP Trust Associates, L.P., and disclaims beneficial
ownership of the shares held by such entities except to the extent of his
proportionate partnership interest therein.
(12) Includes 15,000 shares issuable upon the exercise of stock options.
(13) Includes 15,000 shares issuable upon the exercise of stock options.
(14) Includes 124,655 shares issuable upon the exercise of stock options.
(15) Includes 105,000 shares issuable upon the exercise of stock options.
(16) Includes 143,096 shares issuable upon the exercise of stock options.
(17) Includes 1,513,176 shares issuable upon the exercise of stock options.
A-6
26
MANAGEMENT
Set forth below is certain information regarding the executive officers of
the Company.
AGE (AS OF
FEBRUARY 10,
NAME 1999) POSITION WITH THE COMPANY AND OTHER BUSINESS EXPERIENCE
---- ------------ -------------------------------------------------------
Jim McCord............ 56 See biography in "Current Members of the Company Board."
John Kingery.......... 53 See biography in "Current Members of the Company Board."
Stephen F. Mr. Ghiglieri joined the Company in July 1994 as Vice
Ghiglieri........... 37 President of Finance and Administration and Chief
Financial Officer. He was appointed Secretary in September
1994. From March 1992 to July 1994, he served as
Controller for Oclassen Pharmaceuticals, Inc., a developer
and marketer of prescription pharmaceuticals. From August
1984 to March 1992, he was employed by Price Waterhouse,
most recently as an audit manager, where he specialized in
high growth health and life sciences companies. Mr.
Ghiglieri is a certified public accountant.
Louis Bunz............ 50 Mr. Bunz joined the Company in August 1997 as Area Vice
President of Sales and in October 1997 was promoted to
Vice President of Sales. From April 1996 to July 1997 Mr.
Bunz served as Director of Customer Business Development
for Motorola Emtek Health Care Division and from July 1989
to April 1996 served as Vice President of Sales for
Transitions Systems, Inc.
Louis Delzompo........ 39 Mr. Delzompo joined the Company in July 1996 as Vice
President of Development. From April 1987 to July 1996, he
was employed by Sun Microsystems, Inc. in a variety of
product marketing management and software development
management positions, serving most recently as Director of
Network Access and Messaging Development. From July 1981
to March 1987, he was employed by Data General Corporation
as a systems engineer and product marketing manager.
Lee Ann Slinkard...... 43 Ms. Slinkard has worked for the Company since September
1986. She has served in a variety of roles, including
Director of Installation Services and Director of Client
Services. In May 1994, she was appointed Vice President of
Client Services and in October 1994 she was appointed Vice
President of Professional Services.
Each executive officer of the Company serves at the pleasure of the Company
Board.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent (10%) of the
Shares, to file with the Commission and the Nasdaq National Market, initial
reports of beneficial ownership and reports of changes in beneficial ownership
of Shares. Such persons are required by regulations of the Exchange Act to
furnish the Company with copies of all Section 16(a) forms they file. To the
Company's knowledge, based solely on a review of the reports and representations
furnished to the Company during the last fiscal year, the Company believes that
for the year ended December 31, 1998, each of the persons required to file
reports under Section 16(a) of the Exchange Act is in compliance with all
applicable filing requirements with the exception of Mr. Goad, a director, who
did not timely file a Form 4 for a reportable transaction during the year.
BOARD AND COMMITTEE MEETINGS
The Board of Director held four meetings during the fiscal year ended
December 31, 1998 ("1998 Fiscal Year"). The Board of Directors has an Audit
Committee and a Compensation Committee but does not have a nominating committee
or a committee performing the function of a nominating committee. From time to
time, the Board has created various ad hoc committees for special purposes. No
such committee is currently functioning.
A-7
27
The Audit Committee currently consists of directors Alan C. Crites and
William H. Younger, Jr. The Audit Committee held two meetings during the 1998
Fiscal Year. The Audit Committee reviews the internal accounting procedures of
the Company and consults with and reviews the services provided by the Company's
independent auditors.
The Compensation Committee currently consists of directors David Dominik,
Dennis G. Sisco and William H. Younger, Jr. The Compensation Committee held two
meetings during the 1998 Fiscal Year. The Compensation Committee reviews and
recommends to the Board the compensation and benefits of all executive officers
of the Company, administers the Company's 1996 Stock Plan and 1996 Employee
Stock Purchase Plan with respect to grants made thereunder to executive
officers, and reviews general policies relating to compensation and benefits of
employees of the Company.
During the 1998 Fiscal Year, each Board Member attended 75% or more of the
meetings of the Board of Directors and of the committees of the Board on which
the director served during the period for which he was a director or committee
member, respectively.
A-8
28
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning compensation
paid to or accrued for the Company's Chief Executive Officer and each of the
other four most highly compensated current executive officers of the Company,
determined as of December 31, 1998 (hereafter collectively referred to as the
"Named Executive Officers"), for the fiscal years ended December 31, 1996, 1997
and 1998:
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION NUMBER OF
------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS/SARS
--------------------------- ---- -------- ------- --------------- ------------
Jim McCord................................ 1998 $218,400 $ -- $ 2,657 22,715(2)
Chairman of the Board and 1997 218,053 -- 2,406 72,715
Chief Executive Officer 1996 201,667 45,375 4,713 --
John Kingery.............................. 1998 208,000 -- 2,657 304,135(2)
President and Chief 1997 207,667 -- 3,031 91,635
Operating Officer 1996 150,000 45,000 3,228 262,500
Louis Bunz................................ 1998 140,000 -- 82,564(3) 75,000(2)
Vice President of Sales 1997 69,333 -- 9,479 105,000
1996 -- -- -- --
Louis Delzompo............................ 1998 185,000 -- 5,962 104,655(2)
Vice President of 1997 164,942 -- 5,039 49,655
Development 1996 96,115 14,000 1,729 75,000
Lee Ann Slinkard.......................... 1998 151,250 -- 32,069(4) 26,850(2)
Vice President of 1997 150,417 -- 1,099 56,850
Professional Services 1996 131,250 29,520 45,598 --
- ---------------
(1) Includes relocation reimbursements and health and disability insurance
premiums.
(2) Options reflect repricing of options previously granted.
(3) Includes $79,811 in sales commissions.
(4) Includes $30,000 in sales commissions.
A-9
29
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to stock
options granted to each of the Named Executive Officers during the fiscal year
ended December 31, 1998. In accordance with the rules of the SEC, also shown
below is the potential realizable value over the term of the option (the period
from the grant date to the expiration date) based on assumed rates of stock
appreciation of 5% and 10%, compounded annually. These amounts are based on
certain assumed rates of appreciation and do not represent the Company's
estimate of future stock price. Actual gains, if any, on stock option exercises
will be dependent on the future performance of the Common Stock.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
--------------------------------------------------------- AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM(3)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR(1) PER SHARE(2) DATE 5% 10%
---- ------------ -------------- ------------ ---------- ----------- -------------
Jim McCord............. 22,715(4) 1.86% $3.50 05/22/2007 $ 43,830 $ 107,959
John Kingery........... 262,500(5) 21.45 3.50 03/21/2006 438,659 1,050,671
41,635(6) 3.40 3.50 01/16/2008 91,641 232,242
Louis Bunz............. 30,000(7) 2.45 3.50 08/11/2007 57,889 142,584
45,000(7) 3.68 3.50 12/18/2007 86,832 213,876
Louis Delzompo......... 75,000(7) 6.13 3.50 07/24/2006 125,331 300,191
29,655(4) 2.42 3.50 05/22/2007 57,222 140,943
Lee Ann Slinkard....... 18,000(7) 1.47 3.50 01/22/2007 34,732 85,5500
8,850(4) 0.72 3.50 05/22/2007 17,077 42,062
- ---------------
(1) Based on an aggregate of 1,223,897 options granted by the Company in the
year ended December 31, 1998 to employees of the Company, including the
Named Executive Officers, certain of such grants being subject to
stockholder approval. All options granted in 1998 were granted in
connection with the repricing of previously granted options.
(2) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant.
(3) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated assuming that the
fair market value of the Company's Common Stock on the date of grant
appreciates at the indicated annual rate compounded annually for the entire
term of the option and that the option is exercised and sold on the last
day of its term for the appreciated stock price.
(4) Options were granted under the 1996 Stock Option Plan (the "1996 Plan" and
vest in equal monthly installments over 72 months.
(5) Options were granted under the 1995 Key Person Plan and vest in equal
monthly installments over 48 months.
(6) 20,000 options were granted under the 1996 Plan and vest in equal monthly
installments over 48 months and 21,635 options were granted under the 1996
Plan and vest in equal monthly installments over 72 months.
(7) Options were granted under the 1996 Plan and vest in equal monthly
installments over 48 months.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION/SAR VALUES
The following table sets forth certain information with respect to the
Named Executive Officers concerning option exercises for the year ended December
31, 1998 and exercisable and unexercisable options held as of December 31, 1998:
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Jim McCord.................. -- $-- 444,871 84,900 $963,772 $34,894
John Kingery................ -- -- 128,498 225,637 -- --
Louis Bunz.................. -- -- 7,811 97,189 -- --
Louis Delzompo.............. -- -- 31,087 93,568 -- --
Lee Ann Slinkard............ -- -- 86,521 56,575 176,815 11,630
- ---------------
(1) Based on the date of exercise, minus the per share exercise price,
multiplied by the number of shares issued upon exercise of the option.
(2) Based on the difference between the fair market value of Common Stock on
December 31, 1998 of $2.625, and the option exercise price, multiplied by
the number of shares underlying the option.
EXECUTIVE SEVERANCE BENEFITS AGREEMENT
The Company has entered into Executive Severance Benefit Agreements dated
as of October 13, 1998 (each an "Executive Severance Agreement"), with each of
Messrs. Kingery, McCord, Ghiglieri, Delzompo, Bunz, Allen, Kennick and Larsen,
Ms. Slinkard and Ms. Ottesen (each, an "Executive") providing for certain
benefits (the "Severance Benefits") if the Executive's employment is terminated
beginning two months prior to and ending 18 months following a Change in Control
(as defined below) other than termination for "cause" (as defined below).
The Company also is obligated to pay Severance Benefits if the Executive's
employment terminates due to a Constructive Termination beginning two months
prior to and ending 18 months following a Change in Control. Constructive
Termination includes: (i) the assignment to Executive of any duties or
responsibilities which result in a diminution in Executive's position or
function as in effect immediately prior to the earlier of the date of
termination of employment or the date of the Change in Control; provided,
however, that a mere change in Executive's title or reporting relationships,
without a resulting change in duties or responsibilities as described above,
shall not constitute a Constructive Termination; (ii) a reduction by the Company
in Executive's base salary, as in effect on the date of the Change in Control or
as increased thereafter; (iii) any failure by the Company to continue in effect
any benefit plan or program, including incentive plans or plans with respect to
the receipt of securities of the Company, in which Executive was participating
immediately prior to a Change in Control (hereinafter referred to as "Benefit
Plans"); the taking of any action by the Company that would adversely affect
Executive's participation in or reduce Executive's benefits under the Benefit
Plans or deprive Executive of any fringe benefit that Executive enjoyed
immediately prior to a Change in Control; or the failure by the Company to
provide Executive with compensation and benefits at levels that are competitive
with levels in the employment market in terms of Executive's title, position and
responsibilities immediately prior to a Change in Control; provided, however,
that no Constructive Termination shall be deemed to have occurred following a
Change in Control if the Company provides for Executive's participation in
Benefit Plans and programs which, taken as a whole, are comparable to the
Benefit Plans and provides Executive with compensation and benefits at levels
that are competitive with levels in the employment market in terms of
Executive's title, position and responsibilities immediately prior to the Change
in Control, as Executive determines in good faith; (iv) a relocation of
Executive's business office to a location more than thirty (30) miles from the
location at which Executive performed duties as of the date of the Executive
Severance Agreement, except for required travel by Executive on the Company's
business to an extent
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substantially consistent with Executive's business travel obligations prior to
the Change in Control; (v) a material breach by the Company of any provision of
the Executive Severance Agreement or any other material agreement between
Executive and the Company concerning the terms and conditions of Executive's
employment; or (vi) any failure by the Company to obtain the assumption of the
Executive Severance Agreement or any other material agreement between Executive
and the Company concerning the terms and conditions of Executive's employment by
any successor or assign of the Company.
The Severance Benefits consist of a payment from the Company to the
Executive of the Executive's annual base salary and a multiple of the target
annual bonus in effect at the time of termination. The Executive Severance
Agreements also provide that if the Executive elects continued coverage under
federal COBRA law, the Company shall pay the premiums of Executive's group
health insurance coverage, including coverage for Executive's eligible
dependents for a period not to exceed eighteen months.
The Severance Benefits are conditioned upon the Executive's execution of a
release (a "Release"), a form of which is attached to the Executive Severance
Agreement that relates to all of Executive's rights and claims in existence at
the time of execution of such Release and which confirms Executive's obligations
under the Company's standard form of proprietary information and inventions
agreement.
Mr. Kingery's Executive Severance Agreement was amended as of February 20,
1999 and provides that, in the event of a sale of the Company to Purchaser,
instead of receiving the Severance Benefits described above, he shall receive a
lump sum payment in the amount of $325,000 and the Company shall pay the
premiums of his group health insurance coverage, including coverage of his
eligible dependents, for a period not to exceed 12 months. For the purposes of
the Executive Severance Agreements, "Change in Control" means (i) a sale of
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation; (iii) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; (iv) a reorganization of the business of the Company which
results in a material change in the business plan or business model or
operations of the Company; or (v) the individuals who, as of October 13, 1998,
are members of the Board (the "Incumbent Board") cease for any reason to
constitute at least fifty percent (50%) of the Board (provided, however,that if
the election, or nomination for election, by the Company's stockholders of any
new director was approved by a vote of at least fifty percent (50%) of the
Incumbent Board, such new director shall be considered as a member of the
Incumbent Board).
For purposes of the Executive Severance Agreements, "Cause" means that, in
the reasonable determination of the Company or, in the case of the Chief
Executive Officer, the Company Board, Executive (i) has committed an intentional
act to materially injure the Company; (ii) has intentionally refused or failed
to follow lawful and reasonable directions of the Company Board or the
appropriate individual to whom Executive reports; (iii) has willfully and
habitually neglected Executive's duties for the Company; or (iv) has been
convicted of a felony involving moral turpitude that is likely to inflict or has
inflicted material injury on the Company. Notwithstanding the foregoing, cause
shall not exist unless the conduct described in the preceding sentence has not
been cured within fifteen (15) days following Executive's receipt of written
notice from the Company or the Company Board, as the case may be, specifying the
particulars of the conduct constituting Cause.
Upon successful completion of the Offer, a Change in Control will have
occurred.
COMPENSATION OF DIRECTORS
Directors currently do not receive any cash compensation from the Company
for their service as members of the Company Board or any committee of the
Company Board, although they are reimbursed for certain reasonable expenses in
connection with attendance at Company Board and committee meetings. Under the
1996 Director Option Plan (the "Director Plan"), each director who is not an
employee of the Company receives an option to purchase 10,000 shares of Common
Stock upon joining the Company Board. In addition, on the first day following
each annual meeting of stockholders, each re-elected nonemployee director who
has served as a director for at least six months receives an option to purchase
2,500 shares of Common Stock. The
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exercise price of all options granted under the Director Plan equals the fair
market value of the Common Stock on the date of grant. Options granted under the
Director Plan vest monthly over 12 months from the date of grant. Options to
purchase an aggregate of 22,500 shares of Common Stock were granted under the
Director Plan at a weighted average exercise price of $4.22 in 1998. Employee
directors do not receive any compensation or stock option grants for serving as
directors or for attending Company Board or committee meetings. However, they
are reimbursed for certain reasonable expenses in connection with attendance at
Company Board and committee meetings.
Under the terms of indemnification agreements with each of the Company's
directors, the Company is obligated to indemnify each director against certain
claims and expenses for which the director might be held liable in connection
with past or future service on the Company Board. In addition, the Company's
certificate of incorporation provides that, to the greatest extent permitted by
the Delaware Law, its directors shall not be liable for monetary damages for
breach of fiduciary duty as a director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee currently consists of directors David
Dominik, Dennis G. Sisco and William H. Younger, Jr. No executive officer of the
Company served on the compensation committee of another entity or on any other
committee of the board of directors of another entity performing similar
functions during the last fiscal year.
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
99.4 Text of Press Release dated February 22, 1999, issued by
Oacis Healthcare Holdings Corp.
99.5 Letter to Stockholders of the Company, dated February 26,
1999.
99.6 Opinion, dated February 20, 1999, of Covington Associates
LLC.