Filed Pursuant to Rule 424(b)(3)
Registration No. 333-169948

 

 

PROPOSED MERGER — YOUR VOTE IS VERY IMPORTANT

 

To the shareholders of A.D.A.M., Inc.:

 

The board of A.D.A.M., Inc. (“ADAM”) has approved a strategic merger combining ADAM with Ebix, Inc. (“Ebix”). We believe that the proposed merger will allow Ebix and ADAM to be better positioned to compete as a provider of software and e-commerce solutions for both the insurance industry and employers, benefits brokers, healthcare organizations and online media companies. Ebix and ADAM have entered into an Agreement and Plan of Merger under which a newly formed, direct wholly owned subsidiary of Ebix will merge with and into ADAM, with ADAM becoming a wholly owned subsidiary of Ebix.

 

In the proposed merger, ADAM shareholders will receive 0.3122 shares (the “Exchange Ratio”) of Ebix common stock for each share of ADAM common stock, subject to certain adjustments specified in the merger agreement. Based on the closing sale price for Ebix common stock on August 27, 2010, the last trading day before public announcement of the merger, the 0.3122 exchange ratio represented approximately $6.11 in value for each share of ADAM common stock. Based on the closing sale price for Ebix common stock on December 21, 2010, the latest practicable date before the printing of this Proxy Statement/Prospectus, which we refer to as this “Proxy Statement/Prospectus,” the 0.3122 exchange ratio represented approximately $7.35 in value for each share of ADAM common stock.

 

The Exchange Ratio will be adjusted downward if ADAM fails to pay at or prior to closing (i) the amount of any ADAM debt owed out of ADAM’s cash on hand, (ii) the amount of expenses of ADAM’s financial advisor in excess of $650,000 out of ADAM’s cash on hand, or (iii) the amount of expenses of ADAM’s legal counsel on this Proxy Statement/Prospectus out of ADAM’s cash on hand. If there is an adjustment event, then ADAM’s common shareholders will receive a number of shares of Ebix common stock equal to the aggregate merger consideration of $65,350,000 minus (a) $5,071,000 for ADAM options and minus (b) $947,000 for ADAM’s outstanding warrant (proportionately reduced for any option or warrant exercises, forfeitures or cancellations), minus the amounts under clauses (i), (ii) and (iii) to the extent not paid by ADAM at or prior to the closing, divided by $19.06, which was the agreed upon value of Ebix common stock for purposes of the merger agreement. As of the date of this Proxy Statement/Prospectus, based on ADAM’s current cash on hand and expected earnings before closing, ADAM does not expect that an adjustment event will occur.

 

Ebix common stock is listed on the NASDAQ Stock Market under the symbol “EBIX.” ADAM common stock is listed on the NASDAQ Stock Market under the symbol “ADAM.” We urge you to obtain current market quotations for the shares of Ebix and ADAM.

 

Your vote is very important.  The merger cannot be completed unless ADAM shareholders adopt and approve the merger agreement. ADAM is holding a special meeting of its shareholders to vote on the proposals necessary to complete the merger. The enclosed Proxy Statement/Prospectus provides you with detailed information about the special meeting, the merger, the documents related to the merger, and the other business to be considered by shareholders. A copy of the merger agreement is attached as Annex A to this Proxy Statement/Prospectus. We urge you to read this document and the Proxy Statement/Prospectus carefully, including “Risk Factors” beginning on page 15 for a discussion of the risks relating to the merger .

 

Whether or not you plan to attend ADAM’s special meeting of shareholders, please submit your proxy as soon as possible to make sure that your shares are represented at that meeting.

 

The ADAM board of directors has unanimously approved the merger agreement and recommends that you vote FOR the proposal to adopt and approve the merger agreement and FOR the approval of the proposal to adjourn or postpone the special meeting, if necessary, to solicit additional proxies.

 

 

Mark B. Adams
President and Chief Executive Officer
A.D.A.M., Inc.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the merger or determined if this Proxy Statement/Prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

This Proxy Statement/Prospectus is dated December 22, 2010, and is first being mailed to ADAM shareholders on or about December 29, 2010.

 

 

10 10th Street NE, Suite 525
Atlanta, Georgia 30309

 

NOTICE OF SPECIAL MEETING OF A.D.A.M. SHAREHOLDERS TO BE HELD ON FEBRUARY 4, 2011 AT 10:00 A.M., LOCAL TIME

 

To the shareholders of A.D.A.M., Inc.:

 

A special meeting of shareholders of A.D.A.M., Inc. will be held at the offices of DLA Piper LLP (US) at One Atlantic Center, 1201 West Peachtree Street, Suite 2800, Atlanta, Georgia 30309-3450, on February 4, 2011, at 10:00 a.m., local time, for the following purposes:

 

1. To adopt and approve the Agreement and Plan of Merger, dated as of August 29, 2010, by and among Ebix, Inc., A.D.A.M., Inc. and Eden Acquisition Sub, Inc., as the same may be amended from time to time, and approve the merger and the other transactions described therein (the “Merger Proposal”).

 

2. To approve any motion to adjourn or postpone the special meeting to another time or place if necessary to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal listed above.

 

3. To transact such other business as may properly come before the special meeting or any adjournment or postponement thereof.

 

The accompanying Proxy Statement/Prospectus further describes the matters to be considered at the special meeting. A copy of the merger agreement has been included as Annex A to this Proxy Statement/Prospectus.

 

The ADAM board of directors has set November 26, 2010 as the record date for the special meeting. Only holders of record of shares of ADAM common stock at the close of business on November 26, 2010 will be entitled to notice of and to vote at the special meeting and any adjournments or postponements thereof. The special meeting will begin promptly at 10:00 a.m., local time. Check-in will begin at 9:30 a.m., local time, and you should allow ample time for check-in procedures. To ensure your representation at the special meeting, please complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Please submit your proxy promptly whether or not you expect to attend the special meeting. Submitting a proxy now will not prevent you from being able to vote at the special meeting by attending in person and casting a vote.

 

The ADAM board of directors recommends that you vote FOR the Merger Proposal and FOR the proposal to approve any motion to adjourn or postpone the special meeting to another time or place if necessary to solicit additional proxies.

 

By Order of the Board of Directors,

 

 

Mark B. Adams
President, Chief Executive Officer and Secretary
Atlanta, Georgia

 

December 22, 2010

 

PLEASE SUBMIT A PROXY FOR YOUR SHARES PROMPTLY. YOU CAN FIND INSTRUCTIONS FOR SUBMITTING A PROXY ON THE ENCLOSED PROXY CARD. IF YOU HAVE QUESTIONS ABOUT THE PROPOSALS OR ABOUT SUBMITTING A PROXY FOR YOUR SHARES, PLEASE CALL ADAM’S INVESTOR RELATIONS DEPARTMENT AT 800-755-ADAM (TOLL FREE) OR 404-604-2757 OR VIA EMAIL AT PR@ADAMCORP.COM.

 

REFERENCES TO ADDITIONAL INFORMATION

 

This document, referred to herein as the Proxy Statement/Prospectus, is the proxy statement of ADAM for its special meeting of shareholders and the prospectus of Ebix for the shares of Ebix common stock to be issued as consideration for the merger. This Proxy Statement/Prospectus incorporates by reference important business and financial information about Ebix from other documents that are not included in or delivered with this Proxy Statement/Prospectus. You can obtain documents incorporated by reference in this Proxy Statement/Prospectus, other than certain exhibits to these documents, by requesting them in writing or by telephone at the address below:

 

Ebix, Inc.
5 Concourse Parkway, Suite 3200
Atlanta, Georgia 30328
Attn: Investor Relations
(678) 281-2020

 

You also may obtain the documents incorporated by reference into this document through the Securities and Exchange Commission website at http://www.sec.gov or by making a request through Ebix’s investor relations department by sending an email to rkerris@ebix.com.

 

To receive timely delivery of the documents in advance of the meeting, you should make your request no later than January 28, 2011.

 

You should rely only on the information contained or incorporated by reference into this Proxy Statement/Prospectus. No one has been authorized to provide you with any information that is different from that contained in, or incorporated by reference into, this Proxy Statement/Prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it.

 

This Proxy Statement/Prospectus is dated December 22, 2010, and you should assume that the information contained herein is accurate only as of such date. You also should assume that the information incorporated by reference into this Proxy Statement/Prospectus is accurate as of the date of such document. Neither the mailing of this Proxy Statement/Prospectus to the stockholders of ADAM, nor the issuance by Ebix of shares of Ebix common stock in connection with the merger will create any implication that there has been no change in the affairs of Ebix or ADAM since the date of this Proxy Statement/Prospectus or that the information in this Proxy Statement/Prospectus or in the documents incorporated herein by reference is correct as of any time subsequent to the date hereof or the dates thereof.

 

This Proxy Statement/Prospectus does not constitute an offer to exchange or sell, or a solicitation of an offer to exchange or purchase, any securities, or a solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Information contained in this Proxy Statement/Prospectus regarding ADAM has been provided by ADAM and information contained in this Proxy Statement/Prospectus regarding Ebix has been provided by Ebix.

 

This Proxy Statement/Prospectus does not cover any resales of the Ebix common stock offered hereby to stockholders of ADAM who are deemed to be “affiliates” of Ebix upon the consummation of the merger. No person is authorized to make use of this Proxy Statement/Prospectus in connection with any such resales.

 

For a listing of the documents incorporated by reference into this Proxy Statement/Prospectus, see “Where You Can Find More Information.” on page 72.

 

SUBMITTING A PROXY BY INTERNET OR BY TELEPHONE

 

ADAM shareholders of record on the close of business on November 26, 2010, the record date for the ADAM special meeting, may submit their proxies by telephone or Internet by following the instructions on their proxy card or voting form. If you have any questions regarding whether you are eligible to submit your proxy by telephone or by Internet, please contact ADAM’S investor relations department by telephone at 800-755-ADAM (toll free) or 404-604-2757 or via email at pr@adamcorp.com.

 

TABLE OF CONTENTS

 

 

ANNEXES

 

 

The following questions and answers briefly address some commonly asked questions about the merger. The following questions and answers may not include all the information that is important to shareholders of ADAM. We urge shareholders to read carefully this entire Proxy Statement/Prospectus, including the annexes and the other documents referred to or incorporated by reference herein.

 

 

 

		Amount by which Expenses				Adjusted Exchange
		Exceed Cash on Hand				Ratio
		$	0				0.3122
		$	500,000				0.3096
		$	1,000,000				0.3069
		$	1,500,000				0.3043
		$	2,000,000				0.3017
		$	2,500,000				0.2990

 

 

 

 

SUMMARY

	•	the receipt of approval from the holders of ADAM common stock;
	•	the expiration or termination of the waiting period under HSR;

	•	the effectiveness of the registration statement of which this Proxy Statement/Prospectus forms a part, and the registration statement not being subject to any stop order or threatened stop order;
	•	the absence of any injunctions or legal prohibitions preventing the consummation of the merger;
	•	the absence of any governmental restraints with respect to the merger;
	•	the receipt of all governmental consents required by the merger agreement;
	•	the receipt of authorization from the NASDAQ Stock Market for listing of Ebix common stock to be issued in connection with the merger.
	•	the accuracy of the other party’s representations and warranties in the merger agreement, including the other party’s representation that no material adverse effect has occurred; and
	•	the other party’s compliance in all material respects with its obligations under the merger agreement.

	•	by mutual written consent of ADAM; Ebix and Eden Acquisition Sub, Inc.
	•	by either ADAM or Ebix, if:

	•	the merger is not consummated on or before March 31, 2011 (except that this right is not available to any party whose breach of any representation, warranty, covenant or agreement found in the merger agreement has been the cause of, or resulted in, such failure to consummate the merger);
	•	a governmental entity issues, promulgates, enforces or enters a final and nonappealable law, regulation, order, writ, assessment, decision, injunction, decree, ruling or judgment or takes any other nonappealable final action in each case making illegal, permanently enjoining or otherwise permanently prohibiting the completion of the merger (except that the right is not available to any party whose breach of any representation, warranty, covenant or agreement found in the merger agreement has been the cause of, or resulted in, the issuance, promulgation, enforcement or entry of such prohibiting circumstance);
	•	the required ADAM shareholder vote has not been obtained at the ADAM shareholder meeting or any adjournment or postponement thereof permitted under the merger agreement; or
	•	the other party breaches any of its representations, warranties, covenants or agreements in the merger agreement in such a way as would cause one or more of the conditions to closing not to be satisfied, and such breach is either incurable or is not cured prior to March 31, 2011, provided that the non-breaching party must provide thirty (30) days notice of its intent to terminate pursuant to this right;

	•	by Ebix, if:

	•	ADAM’s board of directors, or any committee thereof, makes, withdraws, amends, modifies or materially qualifies in a manner adverse to Ebix any public statement inconsistent with its recommendation that ADAM’s shareholders vote in favor of the merger;
	•	ADAM enters into or publicly announces its intention to enter into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other contract relating to any “takeover proposal” (as defined on page 55);

	•	ADAM breaches or fails to perform in any material respect its covenants and agreements related to transactions with a buyer other than Ebix as more specifically described on pages 54 and 55;
	•	ADAM’s board of directors fails to reaffirm its recommendation of the merger as provided for in the merger agreement;
	•	ADAM’s board of directors, upon a tender offer or exchange offer from a third party, fails to send to the shareholders within ten (10) business days after such tender offer or exchange offer is received a statement reaffirming the board of directors recommendation of the merger and a recommendation that the shareholders reject such tender or exchange offer; or
	•	ADAM or its board of directors publically announces its intentions to take any of the actions permitting Ebix to terminate the merger agreement.

	•	by ADAM, if prior to shareholder approval of the merger, ADAM enters into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other contract relating to any “takeover proposal” (as defined on page 55) with respect to a “superior proposal” (as defined on page 55), provided that ADAM pays the termination fee referred to below and concurrently enters into such agreement.

	•	ADAM’s board of directors, or any committee thereof, makes, withdraws, amends, modifies or materially qualifies in a manner adverse to Ebix any public statement inconsistent with its recommendation that ADAM’s shareholders vote in favor of the merger; or
	•	prior to ADAM shareholder approval of the merger, ADAM enters into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other contract relating to any “takeover proposal” (as defined on page 55) with respect to a “superior proposal” (as defined on page 55), provided that ADAM pays the ADAM termination fee referred and concurrently enters into such agreement; or
	•	ADAM’s board of directors, or any committee thereof, recommends, or ADAM enters into or announces its intention to enter into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other contract relating to any “takeover proposal” (as defined on page 55); or
	•	ADAM breaches or fails to perform in any material respect its covenants and agreements related to transactions with a buyer other than Ebix as more specifically described on page 54; or
	•	prior to shareholder approval of the merger, ADAM breaches any of its representations, warranties, covenants or agreements in the merger agreement in such a way as would cause one or more of the conditions to closing not to be satisfied, and such breach is either incurable or is not cured prior to March 31, 2011, provided that Ebix must provide thirty (30) days notice of its intent to terminate the merger agreement pursuant to this right or the merger is not consummated on or before March 31, 2011 (except that this right is not available to any party whose breach of any representation, warranty, covenant or agreement found in the merger agreement has been the cause of, or resulted in, such failure to consummate the merger) or the required ADAM shareholder vote has not been obtained at the ADAM shareholder meeting or any adjournment or postponement thereof permitted under the merger agreement and, prior to such termination, a takeover proposal shall be been publicly disclosed and not withdrawn and, within twelve months after such termination, ADAM enters into a definitive agreement with respect to a takeover proposal or a takeover proposal has been consummated (provided that, for purposes of the foregoing, the references to “15%” in the definition of takeover proposal on page 55 shall be changed to “50%”).

	•	by Ebix for a reason other than those expressly provided for in the merger agreement; or
	•	by ADAM because of a breach by Ebix or Eden Acquisition Sub, Inc. of any of their representations, warranties, covenants or agreements in the merger agreement in such a way as would cause one or more of the conditions to closing not to be satisfied, and such breach is either incurable or is not cured prior to March 31, 2011, provided that ADAM has provided thirty (30) days notice of its intent to terminate the merger agreement pursuant to this right or the merger is not consummated on or before March 31, 2011 (except that this right is not available to any party whose breach of any representation, warranty, covenant, or agreement found in the merger agreement has been the cause of, or resulted in, such failure to consummate the merger).

	•	solicit, initiate, or knowingly take any action to facilitate or encourage the submission of any takeover proposal or the making of any proposal that could reasonably be expected to lead to a takeover proposal, including, without limitation, amending or granting any waiver or release under any standstill or similar agreement with respect to any ADAM common stock; or
	•	conduct or engage in any discussions or negotiations regarding, disclose any non-public information relating to ADAM, knowingly assist, participate in, facilitate or encourage any effort by any third party that is seeking to make a takeover proposal; or
	•	amend or grant any waiver or release under any standstill or similar agreement with respect to any equity securities of ADAM or approve any transaction under the provisions of the Georgia Business Corporation Code regarding business combinations with interested shareholders; or
	•	enter into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other contract relating to any takeover proposal.

	•	to adopt and approve the merger agreement and approve the merger, and
	•	to approve any motion to adjourn or postpone the ADAM special meeting to another time or place if necessary to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal listed above.

 

SELECTED HISTORICAL FINANCIAL DATA OF EBIX

																						Nine Months Ended
		Year Ended December 31,																				September 30,
		2005				2006				2007				2008				2009(1)				2009				2010
		(In thousands, except per share data)
Consolidated Results of Operations Data:
Revenue		$	24,100			$	29,253			$	42,841			$	74,752			$	97,685			$	66,381			$	97,091
Operating income			4,650				6,712				12,801				29,264				39,256				27,400				38,849
Net income			4,322				5,965				12,666				27,314				38,822				26,725				43,075
Net income per share:
Basic(1)		$	0.17			$	0.24			$	0.45			$	0.93			$	1.24			$	0.88			$	1.24
Diluted(1)		$	0.15			$	0.21			$	0.40			$	0.76			$	1.03			$	0.72			$	1.10
Shares used in computing per share data:
Basic(1)			25,101				24,912				27,917				29,514				31,398				30,531				34,765
Diluted(1)			28,089				28,233				31,604				36,780				38,014				37,470				39,218
Consolidated Balance Sheet Data:
Total assets		$	27,981			$	47,352			$	108,510			$	141,167			$	262,167			$	201,819			$	293,117
Debt obligations			2,813				11,952				36,647				52,192				52,487				64,310				43,145
Redeemable common stock			1,461				—				—				—				—				—				—
Shareholders’ equity			17,501				26,166				60,678				70,142				170,743				120,874				211,878

(1)		Ebix’s earnings per share and outstanding share information adjusted to reflect the effect of the 3-for-1 stock split dated January 4, 2010.

 

SELECTED HISTORICAL FINANCIAL DATA OF ADAM

																						Nine Months Ended
		Year Ended December 31,																				September 30,
		2005				2006				2007				2008				2009(1)				2009				2010
		(In thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Revenues, net		$	10,054			$	16,505			$	27,878			$	28,857			$	28,161			$	20,732			$	20,348
Gross profit			7,991				13,064				21,309				22,957				21,846				16,086				16,468
Operating income (loss)			1,289				3,132				4,759				1,802				(11,521	)			(11,853	)			3,863
Income tax benefit (expense)			5,500				—				1,510				—				(1,336	)			—				(148	)
Net income (loss)			7,062				2,548				3,939				38				(13,335	)			(12,213	)			3,457
Basic net income (loss) per share		$	0.87			$	0.30			$	0.42			$	0.00			$	(1.35	)		$	(1.24	)		$	0.35
Weighted average number of common shares outstanding, basic			8,108				8,630				9,461				9,813				9,886				9,884				9,963
Diluted net income per share		$	0.75			$	0.25			$	0.38			$	0.00			$	(1.35	)		$	(1.24	)		$	0.33
Weighted average number of common shares outstanding, diluted			9,468				10,074				10,442				10,642				9,886				9,884				10,457

		Year Ended December 31,																				September 30,
		2005				2006				2007				2008				2009(1)				2010
		(In thousands)
BALANCE SHEET DATA:
Total assets		$	21,880			$	60,138			$	59,970			$	53,146			$	39,456				39,262
Long-term debt			—				24,000				16,750				8,000				6,000				1,500
Total liabilities			4,736				36,669				30,423				21,324				20,188				14,722
Total shareholders’ equity			17,144				23,469				29,547				31,822				19,268				24,540
Working capital (deficit)			8,576				3,084				1,228				(5,321	)			(3,835	)			(3,378	)

1.		ADAM recognized a pre-tax, non-cash impairment charge of $13,940 for the quarter ended March 31, 2009. For more information see Note 6 of the notes to ADAM’s consolidated financial statements contained in ADAM’s annual report on Form 10-K for the year ended December 31, 2009, a copy of which is included as Annex C to this Proxy Statement/Prospectus.
2.		Restructuring costs were $1,408 for the year ended December 31, 2009 and $2,193 for the year ended December 31, 2008. Restructuring costs are related to ADAM’s 2008 Facility Consolidation Program. For more information see Note 14 of the notes to ADAM’s consolidated financial statements contained in ADAM’s annual report on Form 10-K for the year ended December 31, 2009, a copy of which is included as Annex C to this Proxy Statement/Prospectus.

 

COMPARATIVE PRO FORMA FINANCIAL INFORMATION

		Year Ended December 31, 2009												Nine Months Ended September 30, 2010
		Ebix				ADAM				Pro Forma				Ebix				ADAM				Pro Forma
		As Reported				As Reported				Combined				As Reported				As Reported				Combined
		In thousands, except per share data
Revenue		$	97,685			$	28,161			$	125,846			$	97,091			$	20,348			$	117,439
Operating income (loss)(1)		$	39,256			$	(11,521	)		$	27,236			$	38,849			$	3,863			$	42,160
Net income (loss)(1)		$	38,822			$	(13,335	)		$	24,810			$	43,075			$	3,457			$	45,884
Basic earnings (loss) per share(2)		$	1.24			$	(1.35	)		$	0.71			$	1.24			$	0.35			$	1.20
Diluted earnings (loss) per share(2)		$	1.03			$	(1.35	)		$	0.60			$	1.10			$	0.33			$	1.08
Basic weighted average shares outstanding(2)(3)			31,398				9,886				34,771				34,765				9,963				38,138
Diluted weighted average shares outstanding(2)(3)			38,014				9,886				41,387				39,218				10,457				42,591

(1)		ADAM’s 2009 results include a $13.9 goodwill impairment charge, which was not deductible for tax purposes
(2)		Ebix earnings per share and outstanding share information adjusted to reflect the effect of the 3-for-1 stock split dated January 4, 2010
(3)		The pro forma basic and diluted weighted average shares outstanding is calculated by multiplying the number of ADAM’s outstanding common shares as of November 5, 2010 by the merger consideration exchange ratio of 0.3122 and adding the result to Ebix’s basic and diluted weighted average shares outstanding

		As of September 30, 2010
		Ebix				ADAM				Pro Forma
		As Reported				As Reported				Combined
		In thousands, except per share data
Cash and cash equivalents		$	11,263			$	5,688			$	8,706
Goodwill and intangible assets (net)		$	231,739			$	22,686			$	283,869
Total assets		$	293,117			$	39,262			$	375,874
Debt obligations(1)		$	43,145			$	3,596			$	43,241
Total liabilities		$	81,239			$	14,722			$	97,754
Retained earnings (deficit)		$	51,698			$	(35,545	)		$	48,704
Total stockholders equity		$	211,878			$	24,540			$	278,120
Book value per share(2)(3)		$	6.13			$	2.36			$	7.33
Common stock shares outstanding(2)(4)			34,588				10,388				37,960

(1)		Includes capital leases
(2)		Ebix common stock shares outstanding and book value per share adjusted to reflect the effect of the 3-for-1 stock split dated January 4, 2010
(3)		The book value per common share is computed by dividing stockholders’ equity at the end of the period by the number of shares of common stock outstanding at the end of the period
(4)		The pro forma shares of common stock outstanding is calculated by multiplying the number of ADAM’s outstanding shares of common stock as of November 5, 2010 by the merger consideration exchange ratio of 0.3122 and adding the result to Ebix’s shares of common stock outstanding

 

MARKET PRICES AND DISTRIBUTIONS

	•	the last reported sale price of a share of Ebix common stock and the last reported sale price of share of ADAM common stock, as reported by the NASDAQ Stock Market, and
	•	the market value of ADAM common stock on an equivalent per share basis, as determined by reference to the value of the merger consideration to be received in respect of each share of ADAM common stock in the merger, based on the exchange ratio of 0.3122 per share, which is subject to adjustment as described in the merger agreement.

										Equivalent
										Price per
										Share of
		EBIX				ADAM				ADAM
		Common				Common				Common
Date		Stock				Stock				Stock
August 27, 2010		$	19.56			$	3.17			$	6.11
December 21, 2010		$	23.54			$	7.11			$	7.35

 

This Proxy Statement/Prospectus contains or incorporates by reference a number of forward-looking statements by Ebix and ADAM, including statements relating to outlooks or expectations for earnings, revenues, expenses, asset quality, or other future financial or business performance, strategies, or expectations, or the impact of legal, regulatory, or supervisory matters on business, results of operations or financial condition. Specifically, forward looking statements may include:

 

 

These statements reflect management judgments based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

 

Future performance cannot be ensured. Actual results may differ materially from those in the forward-looking statements. Some factors that could cause actual results to differ materially from such forward-looking statements include those set forth under “Risk Factors” beginning on page 15, as well as, among others, the following:

 

 

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Proxy Statement/Prospectus, or in the case of a document incorporated by reference, as of the date of that document. Except as required by law, neither Ebix nor ADAM undertakes any obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports filed with the SEC by Ebix and ADAM. See “Where You Can Find More Information” beginning on page 72 for a list of the documents incorporated by reference.

 

In addition to the other information contained or incorporated by reference into this Proxy Statement/Prospectus, you should carefully consider the following risk factors described below in deciding how to vote on the merger. In addition, you should read and consider the risks associated with each of the businesses of Ebix and ADAM because these risks will also relate to Ebix following completion of the merger. Certain of these risks can be found in the documents incorporated by reference into this Proxy Statement/Prospectus.

 

Because the market price of Ebix common stock will fluctuate, ADAM shareholders cannot be sure of the market value of the Ebix common stock that they will receive.

 

When we complete the merger, each share of ADAM common stock will be converted into the right to receive 0.3122 shares of Ebix common stock, unless an adjustment event occurs. The exchange ratio will not be adjusted for changes in the market price of either Ebix common stock or ADAM common stock. Accordingly, the market value of the shares of Ebix common stock that ADAM shareholders will be entitled to receive when the parties complete the merger will depend on the market value of shares of Ebix common stock at the time that the parties complete the merger and could vary significantly from the market value on the date of this Proxy Statement/Prospectus or the date of the ADAM special meeting. The market value of Ebix common stock may continue to fluctuate after the completion of the merger. For example, during 2010, the sales price of Ebix common stock ranged from a low of $13.91 to a high of $26.28, all as reported on the NASDAQ Stock Market. See “Market Prices and Distributions” on page 13.

 

These variations could result from changes in the business, operations, or prospects of Ebix or ADAM prior to or following the merger, market assessments as to whether and when the merger will be consummated, regulatory considerations, general market and economic conditions, and other factors both within and beyond the control of Ebix or ADAM.

 

The exchange ratio is subject to change, and the exact exchange ratio is not determinable at this time.

 

The exchange ratio is subject to adjustment if ADAM fails to pay in full at or prior to the closing out of its cash on hand any of the following items:

 

 

If there is an adjustment to the exchange ratio, then the shares of Ebix common stock to be received upon the exchange of one share of ADAM common stock shall equal a ratio the numerator of which is $65,350,000 minus (a) $5,071,000 for ADAM options, minus (b) $947,000 for ADAM’s outstanding warrant (proportionately reduced for any option or warrant exercises, forfeitures or cancellations), minus (c) the amounts in the bullet list above to the extent not paid by ADAM at or prior to the closing, divided by $19.06, which was the agreed upon value of Ebix common stock for purposes of the merger agreement, and the denominator of which is the number of issued and outstanding shares of ADAM common stock to be converted.

 

As a result, the exact number of shares to be delivered in the merger is not determinable at this time, since the exchange ratio used to calculate the number of shares of Ebix common stock that will be issued may vary based on the items listed above. The exchange ratio will be determined immediately prior to the closing, which may or may not occur on the same day as the special meeting.

 

The opinion obtained by ADAM from its financial advisor does not and will not reflect subsequent changes.

 

Needham & Company, the financial advisor to ADAM, has delivered a “fairness opinion” to the board of directors of ADAM. The opinion of Needham & Company is directed to the board of directors of ADAM and is not a recommendation to any shareholder on how to vote on the merger agreement or any other matter. The opinion, which was originally issued on August 29, 2010, states that, as of August 29, 2010 and based upon and subject to the assumptions and other matters set forth in the opinion, the consideration to be received by

the holders of ADAM common stock pursuant to the merger agreement was fair to those holders from a financial point of view. The opinion does not reflect changes that may occur or may have occurred after the date of the opinion, including changes to the operations and prospects of Ebix or ADAM, changes in general market and economic conditions, changes in the market price of Ebix common stock, any adjustment to the merger consideration under the merger agreement, or regulatory or other factors. Any such changes, or changes in other factors on which the opinion was based, may alter the relative value of Ebix and ADAM.

 

The merger may fail to qualify as a reorganization for federal income tax purposes, resulting in your recognition of taxable gain or loss in respect of all of your ADAM common stock.

 

Ebix and ADAM intend for the merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986 (the “Code”). The Internal Revenue Service (the “IRS”) will not provide a ruling on the matter. If the merger fails to qualify as a reorganization, you generally would recognize gain or loss on each share of ADAM common stock surrendered in an amount equal to the difference between your adjusted tax basis in that share and the fair market value of the Ebix common stock received in exchange for that share upon completion of the merger.

 

Uncertainty about the merger and diversion of management could harm Ebix and ADAM, whether or not the merger is completed.

 

In response to the announcement of the merger, existing or prospective customers of Ebix or ADAM may delay or defer their purchasing or other decisions concerning Ebix or ADAM, or they may seek to change their existing business relationship. In addition, as a result of the announcement of the merger, current and prospective employees could experience uncertainty about their future with Ebix or ADAM, and either organization could lose key employees as a result. In addition to retention, these uncertainties may also impair each company’s ability to recruit or motivate key personnel. Completion of the merger will also require a significant amount of time and attention from management. The diversion of management attention away from ongoing operations could adversely affect ongoing operations and business relationships.

 

Failure to complete the merger could adversely affect Ebix’s and ADAM’s stock prices and their future business and financial results.

 

Completion of the merger is conditioned upon, among other things, the receipt of HSR approval, from the SEC as to the effectiveness of the related S-4 Registration Statement and approval of ADAM’s shareholders. There is no assurance that the parties will receive the necessary approvals or satisfy the other conditions to the completion of the merger. Failure to complete the proposed merger would prevent Ebix and ADAM from realizing the anticipated benefits of the merger. Each company will also remain liable for significant transaction costs, including legal, accounting, and financial advisory fees. In addition, the market price of each company’s common stock may reflect various market assumptions as to whether the merger will occur. Consequently, the completion of, or failure to complete, the merger could result in a significant change in the market price of Ebix’s and ADAM’s common stock.

 

Any delay in completion of the merger may significantly reduce the benefits expected to be obtained from the merger.

 

In addition to the required regulatory clearances and approvals, the merger is subject to a number of other conditions beyond the control of Ebix and ADAM that may prevent, delay, or otherwise materially adversely affect completion of the merger. See “The Merger — Regulatory Matters” beginning on page 43 and “The Merger Agreement — Conditions to Completion of the Merger” beginning on page 53. Ebix and ADAM cannot predict with certainty whether and when these other conditions will be satisfied. Further, the requirements for obtaining the required clearances and approvals could delay the completion of the merger for a significant period of time or prevent it from occurring. Any delay in completing the merger may significantly reduce the synergies and other benefits that Ebix and ADAM expect to achieve if they successfully complete the merger within the expected timeframe and integrate their respective businesses. In addition, either party can terminate the merger agreement if the merger has not been effected by March 31, 2011.

The anticipated benefits of the merger, including anticipated costs savings, may not be realized fully or at all or may take longer to realize than expected.

 

The success of the merger will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining the businesses of Ebix and ADAM. However, to realize these anticipated benefits and cost savings, we must successfully combine the businesses of Ebix and ADAM. If we are not able to achieve these objectives, the anticipated benefits and cost savings of the merger may not be realized fully or at all or may take longer to realize than expected. The merger involves the integration of two companies that have previously operated independently with principal offices in two distinct locations. Due to legal restrictions, Ebix and ADAM are able to conduct only limited planning regarding the integration of the two companies prior to completion of the merger. Ebix will be required to devote significant management attention and resources to integrating the two companies. Delays in this process could adversely affect Ebix’s business, financial results, financial condition, and stock price following the merger. Even if Ebix were able to integrate ADAM’s business operations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, cost savings, innovation, and operational efficiencies that may be possible from this integration or that these benefits will be achieved within a reasonable period of time.

 

Additionally, as a condition to their approval of the merger, regulatory agencies may impose requirements, limitations, or costs or require divestitures or place restrictions on the conduct of the combined company’s business. If Ebix and ADAM were to agree to these requirements, limitations, costs, divestitures, or restrictions, the ability to realize the anticipated benefits of the merger may be impaired.

 

The combined company will incur significant transaction and merger-related costs in connection with the merger.

 

Ebix and ADAM expect to incur significant costs associated with completing the merger and combining the operations of the two companies. The exact magnitude of these costs is not yet known. In addition, there may be unanticipated costs associated with the integration. Although Ebix and ADAM expect that the elimination of duplicative costs and other efficiencies may offset incremental transaction and merger-related costs over time, these benefits may not be achieved in the near term, or at all.

 

Because ADAM’s directors and executive officers have interests in seeing the merger completed that are different than those of ADAM’s other shareholders, these persons may have conflicts of interest in recommending that ADAM shareholders vote to adopt and approve the merger agreement.

 

ADAM’s directors and executive officers have interests in the merger that are different from, or are in addition to, the interests of ADAM shareholders generally. This difference of interests stems from the equity-linked securities held by such persons; the change of control severance arrangements covering ADAM’s executive officers under which such officers are entitled to severance payments and other benefits if their employment is terminated following the merger; Ebix’s obligation under the merger agreement to indemnify ADAM’s directors and officers following the merger. These and other material interests of the directors and executive officers of ADAM in the merger that are different than those of the other ADAM shareholders are described under “The Merger — Interests of ADAM’s Directors and Executive Officers in the Merger” beginning on page 39.

 

ADAM shareholders percentage of ownership of Ebix will be much smaller than their percentage ownership of ADAM.

 

ADAM shareholders currently have the right to vote in the election of the board of directors of ADAM and on other matters affecting ADAM. If the merger occurs and you become a shareholder of Ebix, you will have the right to vote in the election of the board of directors of Ebix and on other matters affecting Ebix. However, your percentage ownership of Ebix will be much smaller than your percentage ownership of ADAM.

The merger agreement contains provisions that could discourage a potential alternative acquirer that might be willing to pay more to acquire ADAM.

 

The merger agreement contains “no shop” provisions that restrict ADAM’s ability to solicit or facilitate proposals regarding a merger or similar transaction with another party. Further, there are only limited exceptions to ADAM’s agreement that its board of directors will not withdraw or adversely qualify its recommendation regarding the merger agreement and the merger. Although ADAM’s board of directors is permitted to terminate the merger agreement in response to an unsolicited third party proposal to acquire ADAM, which ADAM’s board of directors determines to be more favorable than the merger with Ebix, if ADAM’s board of directors determines that a failure to do so could reasonably be expected to result in a breach of its fiduciary duties, its doing so would entitle Ebix to collect a $3.5 million termination fee from ADAM. In addition, Ebix is entitled to be paid the termination fee by ADAM if either Ebix or ADAM terminates the merger agreement because ADAM does not obtain its required shareholder vote and, in each case, prior to such termination a takeover proposal shall have been publicly disclosed and not withdrawn and, within twelve months after such termination, ADAM enters into a definitive agreement with respect to a takeover proposal and the termination or a takeover proposal has been consummated. We describe these provisions under “The Merger Agreement — Termination” beginning on page 56 and “The Merger Agreement — Termination Fees and Expenses” beginning on page 57.

 

These provisions could discourage a potential third party acquirer from considering or proposing an alternative acquisition, even if it were prepared to pay consideration with a higher value than that proposed to be paid in the merger, or might result in a potential third party acquirer proposing to pay a lower per share price than it might otherwise have proposed to pay because of the added expense of the termination fee.

 

Resales of shares of Ebix common stock following the merger, additional obligations to issue shares of Ebix common stock, and repurchases of common stock by Ebix may cause the market price of Ebix common stock to fluctuate.

 

As of December 16, 2010, Ebix had approximately 36.3 million shares of common stock outstanding and approximately 2.9 million shares of common stock subject to outstanding options and other rights to purchase or acquire its shares. Ebix currently expects that it will issue approximately up to 3.7 million shares of Ebix common stock in connection with the merger. The issuance of these new shares of Ebix common stock and the sale of additional shares of Ebix common stock that may become eligible for sale in the public market from time to time upon exercise of options and other equity-linked securities could have the effect of depressing the market price for shares of Ebix common stock.

 

Ebix previously announced that it has increased the number of shares of Ebix common stock authorized for repurchase under its share repurchase program from 5.0 million shares to 15.0 million shares. Any repurchases by Ebix could have the effect of raising or maintaining the market price of Ebix’s common stock above levels that would have otherwise prevailed or preventing or slowing a decline in the market price of Ebix’s common stock.

 

The trading price of shares of Ebix common stock after the merger may be affected by factors different from those affecting the price of shares of Ebix common stock or shares of ADAM common stock before the merger.

 

When the merger is completed, holders of ADAM common stock will become holders of Ebix common stock. The results of operations of Ebix, as well as the trading price of Ebix common stock, after the merger may be affected by factors different from those currently affecting Ebix’s or ADAM’s results of operations and the trading price of ADAM common stock. For a discussion of the businesses of Ebix and ADAM and of certain factors to consider in connection with those businesses, see the documents incorporated by reference into this Proxy Statement/Prospectus and referred to under “Where You Can Find More Information” beginning on page 72.

The shares of Ebix common stock to be received by ADAM stockholders as a result of the merger will have different rights from the shares of ADAM common stock.

 

Upon completion of the merger, ADAM stockholders will become Ebix stockholders and their rights as stockholders will be governed by the certificate of incorporation and bylaws of Ebix. The rights associated with ADAM common stock are different from the rights associated with Ebix common stock. Please see “Comparison of Rights of EBIX Shareholders and ADAM Shareholders” beginning on page 65 for a discussion of the different rights associated with Ebix common stock.

 

The ADAM board of directors is using this Proxy Statement to solicit proxies from the shareholders of ADAM at the special meeting. This Proxy Statement contains important information regarding the special meeting, the proposal on which you are being asked to vote, information you may find useful in determining how to vote, and voting procedures.

 

Date, Time and Place

 

The special meeting will be held on February 4, 2011, at 10:00 a.m., local time, at the offices of DLA Piper LLP (US) at One Atlantic Center, 1201 West Peachtree Street, Suite 2800, Atlanta, Georgia 30309-3450.

 

Purpose of the ADAM Special Meeting

 

ADAM shareholders will be asked to vote on the following proposals:

 

 

ADAM Record Date; Stock Entitled to Vote

 

The ADAM board of directors has fixed the close of business on November 26, 2010 as the record date for determining which ADAM shareholders of common stock are entitled to notice of, and to vote at, the special meeting. On the record date, there were 11,111,212 shares of ADAM common stock outstanding, held by approximately 144 holders of record.

 

A complete list of shareholders entitled to vote at the ADAM special meeting will be available for examination by any ADAM shareholder at ADAM’s offices located at, 10 10th Street NE, Atlanta, Georgia, 30309 for purposes pertaining to the ADAM special meeting, during normal business hours for a period of ten days before the ADAM special meeting, and at the time and place of the ADAM special meeting.

 

Quorum and Votes Required

 

A majority of the shares of ADAM common stock outstanding on the record date must be represented, either in person or by proxy, to constitute a quorum at the special meeting. Proxies marked as abstentions and broker non-votes will be used in determining the number of shares present at the special meeting. At the special meeting, each share of ADAM common stock is entitled to one vote on all matters properly submitted to ADAM shareholders.

 

The affirmative vote of the holders of at least a majority of the outstanding shares of ADAM common stock outstanding on the record date is required to approve the Merger Proposal.

 

ADAM’s board of directors recommends that ADAM shareholders vote FOR the Merger Proposal.

 

Voting by ADAM Directors and Executive Officers

 

Certain directors and executive officers of ADAM beneficially owned and were entitled to vote, or shared the right to vote, 295,248 shares of ADAM common stock, or approximately 2.7% of the total outstanding shares of ADAM common stock on the record date, and each of them has indicated his, her or its intention to vote FOR the Merger Proposal.

Voting Procedures

 

ADAM shareholders may vote by returning the enclosed proxy card by mail or in person at the special meeting. All shares of ADAM common stock represented by properly executed proxy cards received before or at the special meeting will be voted in accordance with the instructions indicated on those proxy cards.

 

If no instructions are indicated on a properly executed proxy, the shares will be voted FOR the Merger Proposal. You are urged to sign and return the proxy card even if you plan to attend the special meeting. In this way, your shares will be voted even if you are unable to attend the special meeting.

 

If a properly executed proxy card is returned and the shareholder has abstained from voting on the Merger Proposal, the ADAM common stock represented by the proxy will be considered present at the special meeting for purposes of determining a quorum and entitled to vote on the Merger Proposal.

 

If you received more than one proxy card, your shares are held in more than one account. Please sign and return all proxy cards to be sure that all your shares are voted for you by the individuals named on the proxy card.

 

If your shares are held in an account at a brokerage firm or bank, you must instruct them on how to vote your shares. If an executed proxy card is returned by a broker or bank holding shares that indicates that the broker or bank does not have discretionary authority to vote on the Merger Proposal, the shares will be considered present at the special meeting for purposes of determining the presence of a quorum, but will not be considered to be entitled to vote on the Merger Proposal. Your broker or bank will vote your shares only if you provide instructions on how to vote by following the information provided to you by your broker.

 

Because approval of the merger agreement requires the affirmative vote of the holders of a majority of ADAM’s outstanding shares, any failure to vote or broker non-votes for the Merger Proposal will have the same effect as a vote against the Merger Proposal at the special meeting. Abstentions will also have the effect of a vote against the Merger Proposal.

 

Every ADAM shareholder’s vote is important. Accordingly, each ADAM shareholder should sign, date, and return the enclosed proxy card, or vote via the Internet or by telephone, whether or not it plans to attend the ADAM special meeting in person.

 

Revocability of Proxies and Changes to a ADAM Shareholder’s Vote

 

You may change your vote or revoke your proxy at any time before the special meeting. In order to do this, you must: (1) sign and return another proxy at a later date, OR (2) give written permission to the Secretary of ADAM at or before the special meeting at 10 10th Street NE, Atlanta, Georgia, 30309 OR (3) attend the special meeting and vote in person. Any one of these actions will revoke an earlier proxy from you. Merely attending the special meeting will not constitute revocation of your proxy. If your shares are held in street name by your broker, you will need to contact your broker to revoke your proxy.

 

However, if an ADAM shareholder has shares held through a brokerage firm, bank, or other custodian, it may revoke its instructions only by informing the custodian in accordance with any procedures it has established.

 

Adjournment or Postponement

 

ADAM may adjourn or postpone the special meeting as set forth in ADAM’s articles of incorporation or bylaws or as otherwise permitted by law.

 

Other Business

 

ADAM is not aware of any business to be acted on at the special meeting except as described in this Proxy Statement. If any other matters are properly presented at the special meeting, or any adjournment or postponement of the special meeting, the persons appointed as proxies or their substitutes will have discretion

to vote or act on the matter according to their best judgment and applicable law unless the proxy indicates otherwise.

 

Solicitation of Proxies

 

Proxies may be solicited by directors, officers, and employees of ADAM by mail, by telephone, in person, or otherwise. They will receive no additional compensation for any solicitation efforts. In addition, ADAM will request banks, brokers, and other custodians, nominees, and fiduciaries to forward proxy materials to the beneficial owners of ADAM common stock and obtain voting instructions from the beneficial owners. ADAM will reimburse those firms for their reasonable expenses in forwarding proxy materials and obtaining voting instructions.

 

ADAM shareholders should not send in any stock certificates with their proxy card. If you are a ADAM shareholder, a transmittal letter with instructions for the surrender of your ADAM stock certificates will be mailed to you as soon as practicable after consummation of the merger.

 

 

(Item 1 on proxy card)

 

As discussed elsewhere in this Proxy Statement, ADAM is asking its shareholders to approve the Merger Proposal. Holders of ADAM common stock should read carefully this Proxy Statement in its entirety, including the annexes, for more detailed information concerning the merger agreement and the merger. In particular, holders of ADAM common stock are directed to the merger agreement, a copy of which is included as Annex A to this Proxy Statement.

 

The ADAM board of directors recommends a vote FOR the Merger Proposal (Item 1).

 

 

(Item 2 on proxy card)

 

If, at the special meeting, the number of shares of ADAM common stock present or represented and voting in favor of the approval of the Merger Proposal is insufficient to adopt that proposal under applicable law, ADAM intends to move to adjourn the special meeting in order to enable its board of directors to solicit additional proxies in respect of the approval of the Merger Proposal. In that event, ADAM will ask its shareholders to vote only upon the adjournment proposal, and not the Merger Proposal. If the proposal to adjourn the ADAM special meeting for the purpose of soliciting additional proxies is submitted to ADAM shareholders for approval, such approval requires the affirmative vote of a majority of the votes cast on the matter.

 

In this proposal, ADAM is asking its shareholders to authorize the holder of any proxy solicited by the ADAM board of directors to vote in favor of granting discretionary authority to the proxy holders, and each of them individually, to adjourn the special meeting to another time and place for the purpose of soliciting additional proxies. If the shareholders approve the adjournment proposal, ADAM could adjourn the special meeting and any adjourned session of the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from shareholders that have previously voted.

 

The ADAM board of directors recommends a vote FOR this item (Item 2).

 

The following is a discussion of the merger and the material terms of the merger agreement between Ebix and ADAM. You are urged to read carefully the merger agreement in its entirety, a copy of which is attached as Annex A to this Proxy Statement and is incorporated by reference herein.

 

Background of the Merger

 

ADAM has periodically reviewed and assessed trends and conditions impacting ADAM and its industry generally. From time to time, ADAM’s board of directors has reviewed the strategic alternatives potentially available to enhance shareholder value. As leading companies in their respective lines of business, ADAM and Ebix are generally familiar with each other’s business. The merger agreement is the culmination of a process that began in January 2009 when ADAM commenced a review of its strategic alternatives.

 

On January 23, 2009, ADAM’s board of directors held a meeting during which Kevin Noland, ADAM’s then President and Chief Executive Officer, presented an assessment of strategic alternatives for maintaining and improving ADAM shareholder value. Representatives from DLA Piper LLP (US) (“DLA Piper”), counsel to ADAM, advised the board with respect to its fiduciary duties with respect to these strategic alternatives. During this meeting representatives of ADAM’s then financial advisor, Lane, Berry and Co. International, LLC (“Lane Berry”), presented a summary of strategic and financial alternatives and an assessment of the current environment. Following discussions, ADAM’s board established a temporary executive committee consisting of Robert Cramer, Chairman of ADAM’s board of directors and an independent director, and Clay Scarborough, another independent member of the board of directors, to work with ADAM’s management to facilitate the company’s consideration of strategic alternatives. ADAM terminated Lane Berry as its advisor on February 4, 2009.

 

On April 8, 2009, the executive committee, together with Mr. Noland and Mark Adams, ADAM’s then Chief Financial Officer and ADAM’s current President and Chief Executive Officer, met with representatives from Needham & Company to discuss ADAM’s strategic alternatives. ADAM had asked Needham & Company to discuss strategic alternatives to drive future growth of the business and enhance shareholder value. Strategic alternatives discussed during the April 8, 2009 meeting included maintaining the status quo, acquiring or merging with another entity, raising equity capital, going private by partnering with a private equity firm, selling to a strategic buyer or acquiring a larger private company via a reverse merger.

 

On April 13, 2009, ADAM’s board of directors held a meeting during which the board of directors discussed a broad range of strategic alternatives for ADAM to increase shareholder value, including the matters discussed with Needham & Company on April 8, 2009. At this time, ADAM’s board determined to continue to focus on improving ADAM’s fundamentals, seeking growth and preserving profitability.

 

On May 19, 2009, ADAM’s board of directors held a meeting during which they further discussed various strategic alternatives for ADAM to increase value for its shareholders, including potential strategic business combinations and acquisitions. At this meeting, ADAM’s board determined to engage Needham & Company as financial advisor to assist ADAM in evaluating strategic alternatives available to ADAM. On June 2, 2009, ADAM and Needham & Company executed an engagement letter and Needham & Company promptly commenced a preparatory review of ADAM’s business and operations and ADAM’s potential strategic alternatives.

 

On May 20, 2009, Mr. Noland met with Robin Raina, Chairman, President and Chief Executive Officer of Ebix. Mr. Noland and Mr. Raina discussed the possible synergies that could be derived from a business combination between Ebix and ADAM. These discussions did not include any pricing terms and ADAM did not further pursue discussions with Ebix regarding a potential transaction at that time.

 

Beginning in June 2009 and continuing through September 2009, Needham & Company contacted a targeted list of twenty potential strategic buyers and thirty-seven potential financial buyers, including parties that had previously approached ADAM regarding a potential transaction, to explore whether they had an interest in pursuing a potential transaction with ADAM. Needham & Company and ADAM identified potential strategic buyers based on the potential strategic buyers’ business focus, acquisition interests and ability to

consummate a transaction. Needham & Company and ADAM identified potential financial buyers based on the potential financial buyers’ investment criteria, including their sector investment focus and target investment size. Five potential strategic buyers executed non-disclosure agreements (including Ebix and two third parties we refer to as Company A and Company B). Fifteen non-disclosure agreements were sent to potential financial buyers, eleven of which were executed.

 

On June 26, 2009, ADAM’s board of directors held a meeting during which they approved a shareholder rights plan out of concern that ADAM’s stock price might not properly reflect ADAM’s intrinsic or fair value. The board of directors also continued to analyze, with assistance from Needham & Company, various strategic alternatives for ADAM to increase shareholder value, including various potential strategic business combinations or acquisitions. During this meeting, representatives from DLA Piper advised the board with respect to its fiduciary duties, the shareholder rights plan, and consideration of strategic alternatives. ADAM’s board instructed management to work with Needham & Company to pursue these various alternatives and determine which of them, if any, would be attractive for ADAM’s consideration. Mr. Cramer and Needham & Company also agreed to have regularly scheduled conference calls to discuss Needham & Company’s progress and current assessments of alternatives and reactions from third parties.

 

Beginning in July 2009 and continuing through August 2009, ADAM held discussions with Company A, Company B, and Ebix regarding potential strategic alternatives and commenced preliminary due diligence.

 

ADAM and Company A had entered into a confidentiality agreement on October 7, 2007 and extended the term of this confidentiality agreement on July 8, 2009. In July 2009, ADAM and Company A held discussions regarding a transaction involving ADAM’s online content business. As part of these discussions, ADAM and Needham met with Company A on July 28, 2009.

 

On April 1, 2009, ADAM entered into a confidentiality agreement with Company B. ADAM and Company B held discussions regarding a potential strategic transaction whereby Company B would acquire ADAM. In addition, Needham & Company held discussions with Company B’s Chairman and members of Company B’s finance team. In August 2009, Mr. Noland met with representatives from Company B. Following this meeting and further discussions, on August 17, 2009, Company B terminated discussions regarding a potential strategic transaction with ADAM.

 

On July 2, 2009, ADAM and Ebix entered into a confidentiality agreement (the “Confidentiality Agreement”), which included a standstill provision expiring on July 2, 2010 and provided that Ebix would not take certain actions with respect to ADAM. ADAM and Ebix held discussions regarding a potential strategic transaction whereby Ebix would acquire ADAM.

 

On August 6, 2009, ADAM’s board of directors held a meeting during which they reviewed the status of Needham & Company’s contacts with various strategic partners and potential financial buyers.

 

On August 10, 2009, ADAM received an offer from Ebix to acquire all of ADAM’s outstanding shares of common stock on a debt-free basis for $46.0 million, or approximately $3.86 per share, payable in either cash or Ebix common stock valued at a fifteen-day average preceding the closing of the transaction, with a floor collar value of $14.13 per Ebix share. The offer also required that ADAM grant Ebix exclusivity until September 30, 2009.

 

On August 13, 2009, ADAM’s board held a meeting during which it discussed the status of the discussions with Ebix regarding its offer. Representatives from Needham & Company provided the ADAM board with an overview of Ebix’s offer of August 10, 2009. At the end of the meeting, ADAM’s board instructed Needham & Company to inquire if Ebix would be interested in acquiring a portion of ADAM’s business as a result of the board’s consideration of a potential sale of ADAM’s healthcare content assets to Company A. Needham & Company and Ebix then discussed orally whether Ebix would still be interested in acquiring ADAM if the healthcare content assets were sold to a third party.

 

On August 18, 2009, ADAM received a final revised offer from Ebix to acquire all of ADAM’s outstanding shares of common stock on a debt-free basis for $53.0 million, a $7.0 million increase from the August 10, 2009 offer, payable in cash or Ebix common stock valued at a fifteen-day average preceding the

closing of the transaction, with a floor collar value of $14.13 per Ebix share. The offer also required that ADAM grant Ebix exclusivity until September 30, 2009.

 

Between August 20, 2009 and September 3, 2009, Needham & Company held preliminary discussions with financial buyers that had expressed interest and responded to requests for information. Some potential financial buyers expressed oral interest in pursuing a transaction with ADAM while many more were uninterested in pursuing a transaction with ADAM.

 

On August 24, 2009, ADAM’s board of directors held a meeting during which they considered strategic alternatives for the company. Representatives from Needham & Company provided the ADAM board with an overview of Ebix’s revised offer from August 18, 2009. DLA Piper advised the board with respect to its fiduciary duties with respect to the potential Ebix transaction. Following consideration of Ebix’s offer by ADAM’s board, ADAM’s board determined to continue with the exploratory process previously started by Needham & Company. ADAM’s board of directors also directed Needham & Company and DLA Piper to respond to Ebix’s offer with an offer of approximately $63.0 million on a debt-free basis.

 

On August 25, 2009, Needham & Company delivered ADAM’s counteroffer to Ebix pursuant to which Ebix would acquire all of ADAM’s outstanding shares of common stock on a debt-free basis for $63.0 million payable in cash or Ebix common stock valued at a fifteen-day average preceding the closing of the transaction, with a floor collar value of $14.13 per Ebix share.

 

On August 25, 2009, Ebix’s board discussed the merits of ADAM’s counteroffer.

 

On August 26, 2009, Ebix responded to ADAM’s counteroffer by confirming that Ebix’s August 18, 2009 offer was its final offer. Ebix extended the time period in which ADAM was required to respond to the offer to September 15, 2009 but did not improve the price terms of the offer. On September 15, 2009, Needham & Company communicated to Ebix that ADAM had declined the offer from Ebix.

 

On August 27, 2009, ADAM received an offer from Company A to acquire the assets of ADAM’s healthcare content business for $35.0 million in cash. On August 31, 2009, ADAM delivered to Company A a counteroffer of $40.0 million in cash with respect to the sale of its healthcare content business. On September 1, 2009, Company A responded to ADAM’s counteroffer with a revised proposal to acquire ADAM’s healthcare content business for approximately $40.0 million in cash. Company A’s offer excluded the assets of ADAM’s broker/employer business and the education business. The offer also required that ADAM grant Company A exclusivity until October 9, 2009.

 

On September 1, 2009, ADAM’s board of directors held a meeting during which the board of directors considered Company A’s offer. Representatives from Needham & Company provided the ADAM board with an overview of Company A’s offer. Representatives from DLA Piper advised the board with respect to its fiduciary duties as to Company A’s offer. The ADAM board noted that none of the strategic buyers contacted by Needham & Company (other than Company A and Ebix) were interested in pursuing a transaction with ADAM and eighteen of the financial buyers contacted by Needham & Company stated that they were not interested in a transaction with ADAM and four of the financial buyers contacted by Needham & Company were unresponsive. While some financial buyers expressed oral interest in August 2009, the ADAM board of directors did not believe that those financial buyers could make a more attractive offer, especially given market conditions prevalent at the time and the risks associated with such financial buyers obtaining any required financing. As a result, the ADAM board instructed ADAM’s management to negotiate and enter into a non-binding letter of intent with Company A with respect to the sale of ADAM’s healthcare content business. As a condition to entering into a letter of intent with Company A, Company A demanded that ADAM enter into an exclusivity agreement. On September 2, 2009, ADAM entered into an exclusivity agreement with Company A that by its terms was to expire on the earlier of the date of the execution of a definitive agreement or October 19, 2009.

 

On September 3 and September 4, 2009, Needham & Company, on ADAM’s behalf, notified Ebix and the potential financial buyers who had executed non-disclosure agreements that ADAM’s evaluation of strategic alternatives had been suspended.

Between September 4, 2009 and October 15, 2009, Company A conducted due diligence on ADAM and counsel for Company A and DLA Piper negotiated and exchanged drafts of an asset purchase agreement with respect to ADAM’s healthcare content business. On September 12, 2009, DLA Piper sent an initial draft of an asset purchase agreement to counsel for Company A. On September 17 and 18, 2009, ADAM and Company A conducted in person due diligence meetings. On September 24, 2009, ADAM received a revised draft of an asset purchase agreement from counsel for Company A. On September 30, 2009, DLA Piper sent a revised draft of an asset purchase agreement to Company A’s counsel. On October 1, 2009, ADAM and Company A also held detailed discussions regarding consents of ADAM customers that would be required as a condition of closing any asset sale, together with possible tax and accounting issues in connection with the transaction. The parties also discussed a license to the continued use by ADAM of the assets in its broker/employer business and its education business.

 

On October 15, 2009, ADAM’s board of directors held a meeting during which the members of the board discussed the status of the potential transaction with Company A. The ADAM board also directed ADAM’s management to work with Needham & Company to develop a financial model to reflect ADAM’s then-current business strategies for the broker/employer business and the education business and the potential uses of the proceeds from the potential transaction with Company A.

 

On November 6, 2009, ADAM entered into a second exclusivity agreement with Company A that by its terms was to expire on the earlier of the date of the execution of an asset purchase agreement or January 5, 2010. This exclusivity agreement also provided that ADAM could terminate the exclusivity agreement on December 7, 2009 by providing written notice to Company A.

 

On November 23, 2009, ADAM’s board of directors held a meeting during which representatives from Needham & Company reviewed with the ADAM board of directors a summary of ADAM management’s financial model following the consummation of the sale of ADAM’s healthcare content business to Company A, including various scenarios and assumptions as to the use of any proceeds. Following discussion, ADAM’s board determined that: (i) following such sale, ADAM would not have sufficient scale to be a viable, stand-alone public company, (ii) a dividend of the net proceeds from such a sale would result in adverse tax consequences to ADAM’s shareholders, (iii) the use of proceeds for an acquisition strategy involved too many risks and uncertainties, (iv) ADAM should focus on building out its operational returns and profitability of its current business, and (v) significant issues with Company A remained to be resolved with respect to a license for ADAM to continue to use the assets in its broker/employer business and its education business. As a result, the ADAM board decided not to pursue the potential sale of ADAM’s healthcare content business to Company A. Needham & Company informed Company A that ADAM had declined to pursue the potential sale of ADAM’s healthcare content business to Company A. On December 7, 2009, ADAM terminated the exclusivity agreement with Company A.

 

On January 5, 2010, ADAM announced that Mr. Noland had resigned as President and Chief Executive Officer of ADAM and that Mr. Adams had been promoted to the position of President and Chief Executive Officer.

 

In January 2010, Mr. Cramer and Mr. Raina discussed a potential strategic transaction whereby Ebix would acquire all of ADAM’s outstanding shares of common stock. These discussions terminated due to disagreement over valuation between ADAM and Ebix.

 

On March 26, 2010, ADAM’s board held a meeting to consider a strategic transaction proposed by Ebix pursuant to which Ebix would acquire all of ADAM’s outstanding shares of common stock on a debt-free basis for $66.0 million, with two-thirds of the consideration payable in Ebix common stock valued at a fifteen-day average preceding the closing of the transaction and the remainder payable in cash. Ebix would have the option of paying the entire consideration in cash if its stock price at closing was less than $16.00 per share. The offer also required that ADAM grant Ebix exclusivity until April 30, 2010. Representatives from Needham & Company provided the ADAM board with an overview of Ebix’s offer. Representatives from DLA Piper advised the board with respect to its fiduciary duties as to the offer. At the conclusion of the meeting, the ADAM board decided to pursue a transaction with Ebix and authorized management to negotiate a non-binding letter of intent.

Between March 26, 2010 and April 1, 2010, ADAM and Ebix discussed and negotiated various aspects of the non-binding letter of intent.

 

On March 30, 2010, Ebix’s board held a meeting to discuss the ADAM transaction, and after discussion, the board provided authorization for Ebix’s senior management to proceed with the proposed transaction.

 

On April 1, 2010, ADAM and Ebix signed a non-binding letter of intent pursuant to which Ebix would acquire all of ADAM’s outstanding shares of common stock on a debt-free basis for $66.0 million, with two-thirds of the purchase price payable in Ebix common stock valued at a fifteen-day average preceding the closing of the transaction and the remainder payable in cash. Subject to the overall limits, ADAM shareholders would be entitled to elect whether to receive Ebix common stock, cash or a combination of cash and common stock. ADAM and Ebix also amended the Confidentiality Agreement to extend the term of certain provisions, including the standstill provision, by a period of one year. The offer required that ADAM grant Ebix exclusivity until April 30, 2010. Promptly following execution of the non-binding letter of intent, Ebix commenced due diligence on ADAM, and ADAM commenced due diligence on Ebix.

 

On April 27, 2010, Carlton Fields, P.A. (“Carlton Fields”), counsel for Ebix, delivered a draft merger agreement to DLA Piper. On May 5, 2010, DLA Piper sent a revised draft of the merger agreement to Carlton Fields. During this time, ADAM and Ebix also discussed certain structural issues, including the treatment of outstanding options to purchase shares of ADAM common stock and adjustments to the merger consideration based on various cash items. DLA Piper, Carlton Fields, ADAM and Ebix continued to discuss and negotiate issues with respect to the merger agreement. On May 16, 2010, Carlton Fields delivered a revised draft of the merger agreement to DLA Piper. Following repeated discussions, the parties were unable to reach agreement on the open issues and on May 20, 2010, ADAM and Ebix terminated discussions regarding the transaction.

 

On August 17, 2010, Mr. Cramer and Mr. Raina discussed renewing discussions with respect to a potential strategic transaction between ADAM and Ebix. Mr. Raina indicated that Ebix was willing to consider a transaction at the same value as indicated in April 2010, even though ADAM’s stock price had declined since that time. On August 18, 2010, ADAM received from Ebix a draft of a non-binding letter of intent with respect to a proposed transaction pursuant to which Ebix would acquire all of ADAM’s outstanding shares on a debt-free basis for $66.0 million of Ebix common stock, subject to certain adjustments. The offer required that ADAM grant Ebix exclusivity until August 25, 2010.

 

On August 20, 2010, ADAM’s board held a meeting during which it discussed the negotiations with Ebix and the status of the non-binding letter of intent. Representatives from Needham & Company provided the ADAM board with an overview of Ebix’s offer, including the relevant financial metrics. Representatives from DLA Piper advised the ADAM board with respect to its fiduciary duties with respect to a potential strategic transaction with Ebix. ADAM’s board also discussed various strategic alternatives available to ADAM. At the conclusion of the meeting, ADAM’s board directed Mr. Cramer and Mr. Adams to complete negotiation of and enter into the non-binding letter of intent. Over the following days, ADAM, with the assistance of DLA Piper, negotiated the terms of the non-binding letter of intent with Ebix, ultimately settling on merger consideration of approximately $65.4 million, subject to certain adjustments.

 

On August 23, 2010, ADAM and Ebix executed a non-binding letter of intent for the proposed transaction, which granted Ebix exclusivity until August 26, 2010.

 

On August 24, 2010 and continuing through August 29, 2010, Ebix performed due diligence on ADAM and ADAM performed due diligence on Ebix. On August 24, 2010, Carlton Fields delivered a revised draft of the merger agreement to DLA Piper, which was based on the draft merger agreement discussed by the parties in May 2010. On August 25, 2010, DLA Piper sent a revised draft of the merger agreement to Carlton Fields.

 

On August 26, 2010, ADAM’s board of directors held a meeting to discuss the status of the potential transaction with Ebix, focusing on issues such as termination fees and the exclusivity of certain remedies and the fact that Ebix was requiring certain adjustments to the merger consideration. The ADAM board also discussed the treatment in the merger of outstanding options to purchase shares of ADAM’s common stock in the merger. Ebix had previously indicated that it was only willing to have ADAM’s outstanding options exchanged for Ebix common stock or exchanged for a fixed cash amount to be set on the date the merger

agreement was signed. Representatives from Needham & Company reviewed with ADAM’s board of directors the financial aspects of these alternatives. Representatives from DLA Piper advised ADAM’s board of directors on the legal aspects of these alternatives. Following the discussions with Needham & Company and DLA Piper, ADAM’s board determined to have the outstanding options to purchase shares of ADAM common stock exchanged for a fixed cash amount to be set on the date the merger agreement was signed.

 

Over the next two days, DLA Piper and Carlton Fields continued discussions with respect to the merger agreement. On August 27, 2010, Carlton Fields delivered a revised draft of the merger agreement to DLA Piper, and DLA Piper delivered an initial draft of ADAM’s disclosure schedules to Carlton Fields. On August 28, 2010, DLA Piper delivered a revised draft of the merger agreement and a revised draft of ADAM’s disclosure schedules to Carlton Fields.

 

Throughout the day on August 28 and August 29, 2010, DLA Piper and Carlton Fields continued to negotiate the terms of the merger agreement. In the early evening of August 28, 2010, Carlton Fields delivered a draft of Ebix’s disclosure schedules to the merger agreement.

 

On August 29, 2010, Ebix’s board of directors signed a unanimous consent approving the transaction with ADAM.

 

On August 29, 2010, the ADAM board of directors held a meeting during which they reviewed the proposed transaction. Representatives of DLA Piper and Needham & Company were present at this meeting. DLA Piper advised the ADAM board with respect to its fiduciary duties as to the potential transaction with Ebix and reviewed the terms of the proposed merger agreement. A representative of Needham & Company then presented its financial analysis of the proposed transaction with Ebix and delivered its oral opinion (which was subsequently confirmed in writing) to the effect that, as of August 29, 2010 and based upon and subject to the limitations, qualifications and assumptions to be set forth in its written opinion, the consideration to be received by the holders of ADAM common stock pursuant to the merger agreement was fair to those holders from a financial point of view. Representatives of DLA Piper and Needham & Company responded to various questions from the ADAM board of directors. After the presentations from DLA Piper and Needham & Company, discussion ensued regarding the transaction and other strategic alternatives available to ADAM. At the conclusion of the meeting, the ADAM board of directors unanimously approved the merger agreement and recommended that the shareholders of ADAM vote in favor of the adoption and approval of the merger agreement.

 

Following the ADAM board meeting, representatives of DLA Piper and Carlton Fields proceeded to finalize the merger agreement and disclosure schedules during the course of the night on August 29, 2010. The merger agreement was promptly thereafter executed and the parties announced the transaction in a jointly issued press release at 8:30 a.m. Eastern Daylight Time on August 30, 2010.

 

The ADAM Board of Directors’ Recommendations and Reasons for the Merger

 

The ADAM board of directors believes that the merger and the merger agreement are advisable and in the best interests of ADAM and its shareholders. Accordingly, the ADAM board of directors has unanimously approved the merger and the merger agreement and unanimously recommends that ADAM shareholders vote “FOR” adoption and approval of the Merger Proposal. When ADAM’s shareholders consider the ADAM board of directors’ recommendation, ADAM’s shareholders should be aware that ADAM’s directors may have interests in the merger that may be different from, or in addition to, their interests. These interests are described in “Interests of ADAM’s Directors and Executive Officers in the Merger” beginning on page 39.

 

In the course of determining that the merger and the merger agreement are advisable and in the best interests of ADAM and its shareholders, the ADAM board of directors consulted with management as well as its financial and legal advisors and considered a number of factors in making its determination, including the following:

 

 

 

 

 

 

The foregoing discussion of the information and factors considered by the ADAM board of directors is not intended to be exhaustive but includes the material factors considered by the ADAM board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the ADAM board of directors did not find it useful to and did not attempt to quantify, rank, or otherwise assign relative weights to these factors. In addition, the ADAM board of directors did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, but rather the ADAM board of directors conducted an overall analysis of the factors described above, including discussions with ADAM’s management and its financial and legal advisors. In considering the factors described above, individual members of the ADAM board of directors may have given different weights to different factors.

 

Opinion of Financial Advisor to ADAM

 

ADAM retained Needham & Company to act as financial advisor in connection with the merger and to render an opinion as to the fairness, from a financial point of view, to the holders of ADAM common stock of the consideration to be received by those holders pursuant to the merger agreement. Under the merger agreement, each issued and outstanding share of ADAM common stock, other than shares owned by ADAM or any subsidiary of ADAM, will be converted into the right to receive a number of shares of Ebix common stock equal to the exchange ratio (such number of shares so issuable, the “consideration”).

 

On August 29, 2010, Needham & Company delivered its oral opinion, which it subsequently confirmed in writing, to the ADAM board of directors that, as of that date and based upon and subject to the assumptions and other matters described in the written opinion, the consideration to be received by the holders of ADAM common stock pursuant to the merger agreement was fair to those holders from a financial point of view. Needham & Company provided its opinion for the information and assistance of the ADAM board of directors in connection with and for the purpose of the board’s evaluation of the transactions contemplated by the merger agreement. Needham & Company’s opinion relates only to the fairness, from a financial point of view, to the holders of ADAM common stock of the consideration, which was determined through arm’s length negotiations between ADAM and Ebix and not by Needham & Company. While Needham & Company provided independent financial advice to the ADAM board of directors during the course of negotiations between ADAM and Ebix, the decision to approve and recommend the merger was made independently by the ADAM board. Needham & Company’s opinion does not address any other aspect of the merger, or any related transaction, and does not constitute a recommendation to any shareholder of ADAM as to how that shareholder should vote or act on any matter relating to the merger.

 

The complete text of Needham & Company’s opinion, which sets forth the assumptions made, procedures followed, matters considered, and qualifications and limitations on and scope of the review undertaken by Needham & Company, is attached to this Proxy Statement/Prospectus as Annex B. The summary of Needham & Company’s opinion set forth below is qualified in its entirety by reference to the full text of the opinion. ADAM shareholders should read this opinion carefully and in its entirety.

In arriving at its opinion, Needham & Company, among other things:

 

 

In connection with its review and in arriving at its opinion, Needham & Company assumed and relied on the accuracy and completeness of all of the financial, accounting, legal, tax and other information discussed with or reviewed by it for purposes of its opinion and did not independently verify, nor did Needham & Company assume responsibility for independent verification of, any of that information. Needham & Company assumed the accuracy of the representations and warranties contained in the merger agreement and all agreements related thereto. In addition, Needham & Company assumed that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code and will be consummated on the terms and subject to the conditions set forth in the draft merger agreement furnished to Needham & Company without waiver, modification or amendment of any material term, condition or agreement thereof and that, in the course of obtaining the necessary regulatory or third party approvals, consents, and releases for the merger, no delay, limitation, restriction, or condition will be imposed that would have an adverse effect on Ebix, ADAM or the contemplated benefits of the merger. Needham & Company also assumed, with the ADAM board’s consent, that no adjustment will be made to the initial exchange ratio of 0.3122 pursuant to the terms of the merger agreement. This 0.3122 exchange ratio is referred to in this discussion as the assumed exchange ratio. In addition, Needham & Company assumed that the financial forecasts for Ebix and ADAM provided to Needham & Company by Ebix and ADAM management were reasonably prepared on bases reflecting the best currently available estimates and judgments of management, at the time of preparation, of the future operating and financial performance of Ebix and ADAM and the combined companies, and Needham & Company relied, without independent verification, upon the estimates of Ebix and ADAM management of the potential cost savings and other synergies, including the amount and timing thereof, that may be achieved as a result of the merger. Needham & Company expressed no opinion with respect to any of those forecasts, including those costs savings and other synergies, or the assumptions on which they were based.

 

Needham & Company did not assume any responsibility for or make or obtain any independent evaluation, appraisal or physical inspection of the assets or liabilities of Ebix or ADAM nor did Needham & Company evaluate the solvency or fair value of Ebix or ADAM under any state or federal laws relating to bankruptcy, insolvency, or similar matters. Needham & Company’s opinion states that it was based on economic, monetary and market conditions as they existed and could be evaluated as of its date, and Needham & Company assumed no responsibility to update or revise its opinion based upon circumstances and

events occurring after its date. Needham & Company’s opinion is limited to the fairness, from a financial point of view, to the holders of ADAM common stock of the consideration to be received by those holders pursuant to the merger agreement and Needham & Company expressed no opinion as to the fairness of the merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of ADAM, or as to ADAM’s underlying business decision to engage in the merger or the relative merits of the merger as compared to other business strategies that might be available to ADAM. In addition, Needham & Company expressed no opinion with respect to the amount or nature or any other aspect of any compensation payable to or to be received by any officers, directors, or employees of any party to the merger, or any class of those persons, relative to the consideration to be received by the holders of ADAM common stock pursuant to the merger agreement or with respect to the fairness of any such compensation. Needham & Company did not express any opinion as to what the value of Ebix common stock will be when issued pursuant to the merger or the prices at which Ebix common stock or ADAM common stock will actually trade at any time.

 

ADAM imposed no limitations on Needham & Company with respect to the investigations made or procedures followed by Needham & Company in rendering its opinion.

 

In preparing its opinion, Needham & Company performed a variety of financial and comparative analyses. The following paragraphs summarize the material financial analyses performed by Needham & Company in arriving at its opinion. The order of analyses described does not represent relative importance or weight given to those analyses by Needham & Company. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by Needham & Company, the tables must be read together with the full text of each summary. The following quantitative information, to the extent it is based on market data, is, except as otherwise indicated, based on market data as it existed on or prior to August 27, 2010 and is not necessarily indicative of current or future market conditions.

 

Historical Stock Trading and Exchange Ratio Analysis.  Needham & Company reviewed the historical trading prices of Ebix common stock and ADAM common stock as of and for various periods ending on August 27, 2010, the last full trading day prior to the date of Needham & Company’s opinion, in order to determine the various implied exchange ratio premiums or discounts that existed for those periods. The following table presents:

 

 

 

Contribution Analysis.  Needham & Company reviewed and analyzed the implied percentage contribution of each of Ebix and ADAM to pro forma combined operating results for the last reported 12 months ended June 30, 2010 and pro forma projected fiscal year 2010 and fiscal year 2011 combined operating results. In calculating the pro forma projected combined operating results, Needham & Company

used estimates provided by Ebix and ADAM management. Needham & Company reviewed, among other things, the implied percentage contributions to pro forma combined revenues, gross profit, earnings before interest, taxes, depreciation, amortization, and stock compensation expense, or adjusted EBITDA, earnings before interest and taxes, or EBIT, and net income. The following tables present the results of this analysis and the estimated percentage ownership of the combined company on a pro forma basis by the Ebix shareholders and the ADAM shareholders and estimated pro forma enterprise value contributions of Ebix and ADAM, based on the assumed exchange ratio of 0.3122. In calculating pro forma equity ownership and enterprise value contributions, Needham & Company assumed that outstanding options to purchase ADAM common stock would remain outstanding and would not be cashed out in the merger, used the treasury stock method to calculate the number of pro forma shares of Ebix common stock outstanding, and assumed conversion of all outstanding Ebix convertible debt.

 

 

 

The results of the contribution analysis are not necessarily indicative of the contributions that the respective businesses may have in the future.

 

Accretion/Dilution Analysis.  Needham & Company prepared pro forma analyses of the financial impact of the merger based on the assumed exchange ratio, estimated financial results of Ebix and ADAM for 2011, and estimated transaction fees, and assuming cost savings and other synergies resulting from the merger. The estimated financial results, transaction fees, cost savings, and other synergies were based upon Ebix and ADAM managements’ estimates. Based upon these estimates and assumptions, Needham & Company noted that the merger would result in accretion to the estimated earnings per share of Ebix for 2011. The actual

operating or financial results achieved by the combined entity may vary from estimated results, and these variations may be material.

 

Selected Companies Analysis.  Using publicly available information, Needham & Company compared selected historical and projected financial and market data ratios for ADAM to the corresponding data and ratios of publicly traded companies that Needham & Company deemed relevant because they have lines of businesses that may be considered similar to ADAM’s lines of business. These companies, referred to as the selected companies, consisted of the following:

 

Ebix, Inc.
eDiets.com, Inc.
eHealth, Inc.
HealthStream, Inc.
InsWeb Corporation
Kenexa Corporation
Taleo Corporation
Workstream Inc.

 

The following table sets forth information concerning the following multiples for the selected companies and for ADAM:

 

 

Needham & Company calculated multiples for the selected companies based on the closing stock prices of those companies on August 27, 2010 and for ADAM based on the Ebix closing stock price of $19.56 on August 27, 2010 and the assumed exchange ratio of 0.3122.

 

Selected Transactions Analysis.  Needham & Company analyzed publicly available financial information for the following selected merger and acquisition transactions, which represent transactions completed since January 1, 2008 that involved target companies that were involved in healthcare management and online content businesses with enterprise values of less than $750 million:

 

 

In reviewing the selected transactions, Needham & Company calculated, for the selected transactions and for ADAM implied by the merger,

 

 

Needham & Company calculated multiples for ADAM based on the Ebix closing stock price of $19.56 on August 27, 2010 and the assumed exchange ratio of 0.3122.

 

The following table sets forth information concerning the multiples described above for the selected transactions and the same multiples implied by the merger.

 

 

Premiums Paid Analysis.  Needham & Company analyzed publicly available financial information for 21 merger and acquisition transactions, which represent transactions announced and closed between January 1, 2007 and August 27, 2010 that involved all stock consideration, equity values between $10 million and $1 billion, and acquired companies that were publicly-traded technology and technology-enabled service companies. In reviewing these transactions, Needham & Company analyzed the premium of consideration offered to the acquired company’s stock price one trading day, five trading days, and 30 trading days prior to the announcement of the transaction.

 

Needham & Company calculated premiums for ADAM based on the Ebix closing stock price of $19.56 on August 27, 2010 and the assumed exchange ratio of 0.3122. The following table sets forth information

concerning the stock price premiums in the selected transactions and the stock price premiums implied by the merger.

 

 

Discounted Cash Flow Analysis.  Needham & Company performed an illustrative discounted cash flow analysis to determine indicators of illustrative implied equity values for ADAM and illustrative implied equity values per share of ADAM common stock based on ADAM management’s financial forecasts. Needham & Company calculated a range of indications of the present value of unlevered free cash flows for ADAM for projected 2011 and 2012 using discount rates ranging from 12.5% to 17.5%. Needham & Company then calculated a range of illustrative terminal enterprise values by applying assumed perpetual growth rates ranging from 0.0% to 4.0% to management’s estimate of ADAM’s 2012 unlevered free cash flow. These illustrative terminal enterprise values were then discounted to calculate ranges of implied indications of present values using discount rates ranging from 12.5% to 17.5%. Needham & Company then added the ranges of the implied present values of ADAM’s unlevered free cash flows for the projected years to the ranges of implied present values of ADAM’s terminal enterprise values to derive ranges of implied present enterprise values of ADAM. After adding net cash and subtracting assumed debt to derive ranges of implied present equity values, these amounts were divided by the number of fully diluted shares outstanding to derive a range of illustrative implied equity values per share of $3.65 to $7.14, with a midpoint of $4.81. Needham & Company noted that the per share value implied by the assumed exchange ratio of 0.3122 and the Ebix closing stock price on August 27, 2010 of $19.56 was $6.11.

 

No company, transaction, or business used in the “Selected Companies Analysis,” “Selected Transactions Analysis” or “Premiums Paid Analysis” as a comparison is identical to Ebix, ADAM, or the merger. Accordingly, an evaluation of the results of these analyses is not entirely mathematical; rather, it involves complex considerations and judgments concerning differences in the financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the selected companies or selected transactions or the business segment, company or transaction to which they are being compared.

 

The summary set forth above does not purport to be a complete description of the analyses performed by Needham & Company in connection with the rendering of its opinion. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant quantitative and qualitative methods of financial analyses and the application of those methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to summary description. Accordingly, Needham & Company believes that its analyses must be considered as a whole and that selecting portions of its analyses or the factors it considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying its analyses and opinion. Needham & Company did not attribute any specific weight to any factor or analysis considered by it. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given greater weight than any other analysis.

 

In performing its analyses, Needham & Company made numerous assumptions with respect to industry performance, general business, and economic conditions and other matters, many of which are beyond Ebix’s or ADAM’s control. Any estimates contained in or underlying these analyses, including estimates of future performance, are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those estimates. Additionally, analyses relating to the values of businesses or assets do not purport to be appraisals or necessarily reflect the prices at which businesses or assets may actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. Needham & Company’s opinion and its related analyses were only one of many factors considered by ADAM’s board of

directors in their evaluation of the merger and should not be viewed as determinative of the views of ADAM’s board of directors or management with respect to the consideration or the merger.

 

Under the terms of its engagement letter with Needham & Company, ADAM has paid Needham & Company a retainer fee of $60,000 and will pay a nonrefundable fee of $150,000 for rendering the Needham & Company opinion. If the merger is consummated, ADAM has agreed to pay Needham & Company an additional fee of 2.0% of the aggregate purchase price paid in the merger, against which the $60,000 retainer fee would be credited. If the merger were consummated on December 21, 2010, the total fees payable to Needham & Company, including the fee for rendering the Needham & Company opinion, would be approximately $1.9 million. Whether or not the merger is consummated, ADAM has agreed to reimburse Needham & Company for certain of its out-of-pocket expenses and to indemnify Needham & Company and related persons against various liabilities, including certain liabilities under the federal securities laws.

 

Needham & Company is a nationally recognized investment banking firm. As part of its investment banking services, Needham & Company is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of securities, private placements, and other purposes. Needham & Company was retained by the ADAM board of directors to act as its financial advisor based on Needham & Company’s experience as a financial advisor in mergers and acquisitions as well as Needham & Company’s familiarity with ADAM and its industry generally. Needham & Company has not had any other investment banking relationship with Ebix or ADAM during the past two years. Needham & Company may in the future provide investment banking and financial advisory services to Ebix, ADAM, or their respective affiliates unrelated to the merger, for which services Needham & Company would expect to receive compensation. In the normal course of its business, Needham & Company may actively trade the equity securities of Ebix and ADAM for its own account or for the account of its customers and, therefore, may at any time hold a long or short position in those securities.

 

The Ebix Board of Directors’ Reasons for the Merger

 

In the course of determining that the merger and the merger agreement are advisable and in the best interests of Ebix and its shareholders, Ebix’s management and board of directors considered a number of factors in making its determination, including the following:

 

 

Taking all the above factors into consideration, Ebix’s management and board of directors ultimately determined that its best option was to pursue a business combination with ADAM.

 

The Ebix board of directors also considered a variety of other factors and risks concerning the merger, including the following:

 

 

The foregoing discussion of the factors considered by Ebix’s board of directors is not intended to be exhaustive but summarizes the material factors and risks considered by Ebix’s board of directors in making its determination to approve the merger agreement and the merger. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Ebix board of directors did not find it useful to, and did not attempt to, quantify, rank, or otherwise assign relative weights to these factors. In considering the factors described above, individual members of the Ebix board of directors may have given different weight to different factors.

 

In addition, the Ebix board of directors did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, but rather conducted an overall analysis of the factors described above, including discussions with the Ebix management team and Ebix’s outside legal and financial advisors. Based on the totality of the information presented, Ebix’s board of directors determined that Ebix should proceed with the merger and the merger agreement.

 

Interests of ADAM’s Directors and Executive Officers in the Merger

 

In considering the recommendation of the ADAM board of directors in favor of the merger, you should be aware that there are provisions in the merger agreement and other existing agreements that will result in certain benefits to ADAM’s directors and executive officers that are not available to shareholders generally.

The ADAM board of directors was aware of, and considered the interests of, ADAM’s directors and executive officers and the potential conflicts arising from such interests in its deliberations of the merits of the merger and in approving the merger agreement and the merger. Other than the provisions of the merger agreement the employment agreement amendment described below, the arrangements described below were in existence before the discussions about the merger began. Shareholders should take these benefits into account in deciding whether to vote for approval of the merger agreement.

 

Stock Options and Restricted Stock Awards

 

Upon the completion of the merger, each ADAM outstanding stock option will vest in its entirety and will be cancelled and converted into a right to receive from Ebix an amount in cash, without interest, equal to the excess, if any, of $5.95 above the per share exercise price of such stock option multiplied by the number of shares subject to such stock option, subject to applicable tax withholding. All outstanding restricted stock awards will vest in their entirety on an accelerated basis contingent upon and immediately prior to the completion of the merger, subject to applicable tax withholding, and will be converted into the right to receive 0.3122 shares of Ebix common stock, subject to the adjustments described in the merger agreement.

 

Change of Control and Severance Benefits

 

In connection with the appointment of Mark Adams as President and Chief Executive Officer on January 4, 2010, ADAM entered into a second amended and restated employment agreement with Mr. Adams dated February 24, 2010. The employment agreement provided for severance following a change in control in the event Mr. Adams’s employment is terminated without cause or by him for good reason within twelve months following of a change in control. Pursuant to the amended and restated employment agreement, Mr. Adams is entitled to a lump sum cash payment in an amount equal to 200% of his annual base salary in effect on the date of termination, an amount equal to 12 months of COBRA premiums in an amount sufficient to continue the same medical coverage carried while an employee of ADAM and a prorated bonus for the year in which the termination occurs. On July 13, 2010, Mr. Adams’s employment agreement was amended to also provide for severance following a change of control if Mr. Adams resigns without good reason.

 

Under Mr. Adams’s employment agreement, “with cause” means the termination of employment resulting from: (i) any act or omission which constitutes a material breach by Mr. Adams of his obligations under the agreement; (ii) the commission by Mr. Adams of a felony or any crime involving moral turpitude, fraud, or dishonesty; (iii) the perpetration by Mr. Adams of any intentional, material act of dishonesty whether relating to ADAM, ADAM’s employees or otherwise; (iv) the use of illegal drugs by the Mr. Adams, or drunkenness or substance abuse by the Mr. Adams that interferes with the performance of his duties; (v) gross incompetence on the part of Mr. Adams in the performance of his duties; (vi) the issuance of a final consent decree, cease and desist, or similar order against Mr. Adams by a regulatory agency relating to violations or alleged violations of any federal or state law or regulation governing the conduct of the business of ADAM; or (vii) any other act or omission (other than an act or omission resulting from the exercise by Mr. Adams of good faith business judgment) that materially impairs the financial condition or business reputation of ADAM. “Without cause” means the termination of employment for any reason other than those justifying termination “with cause”.

 

Under Mr. Adams’s employment agreement, “with good reason” means Mr. Adams’s termination of his employment with ADAM as a result of: (i) the assignment to Mr. Adams of any duties materially and adversely inconsistent with Mr. Adams’s position as specified in the employment agreement (or such other position to which he may be promoted), including status, offices, responsibilities, or persons to whom Mr. Adams reports as contemplated in the employment agreement, or any other action by ADAM which results in a material adverse change in such position, status, offices, titles, or responsibilities; or (ii) any material breach of the employment agreement by ADAM, including the failure to pay Mr. Adams on a timely basis any material amounts to which he is entitled under the employment agreement. Mr. Adams must provide notice to ADAM of the existence of a condition constituting good reason within 90 days of the initial existence of the condition, and upon such notice, ADAM shall have a period of 30 days during which it may remedy the condition and not be required to pay the applicable severance.

On November 4, 2009, ADAM entered into an employment agreement with Christopher Joe as Director of Finance. Pursuant to this employment agreement, in the event Mr. Joe’s employment is terminated without cause or by him for good reason or without good reason within 12 months following of a change in control, Mr. Joe is entitled to a lump sum cash payment in an amount equal to 50% of his annual base salary in effect on the date of termination, an amount representing his target bonus amount as set forth in the employment agreement, an amount equal to 12 months of COBRA premiums in an amount sufficient to continue the same medical coverage carried while an employee of ADAM and a prorated bonus for the year in which the termination occurs.

 

Under Mr. Joe’s employment agreement, “with cause” means the termination of employment resulting from: (i) any act or omission which constitutes a material breach by Mr. Joe of his obligations under the agreement; (ii) the commission by Mr. Joe of a felony or any crime involving moral turpitude, fraud or dishonesty; (iii) the perpetration by Mr. Joe of any intentional, material act of dishonesty whether relating to ADAM, ADAM’s employees or otherwise; (iv) the use of illegal drugs by the Mr. Joe, or drunkenness or substance abuse by the Mr. Joe which interferes with the performance of his duties; (v) gross incompetence on the part of Mr. Joe in the performance of his duties; (vi) the issuance of a final consent decree, cease and desist or similar order against Mr. Joe by a regulatory agency relating to violations or alleged violations of any federal or state law or regulation governing the conduct of the business of ADAM; or (vii) any other act or omission (other than an act or omission resulting from the exercise by Mr. Joe of good faith business judgment) which materially impairs the financial condition or business reputation of ADAM. “Without cause” means the termination of employment for any reason other than those justifying termination “with cause”.

 

Under Mr. Joe’s employment agreement, “with good reason” means Mr. Joe’s termination of his employment with ADAM as a result of: (i) the assignment to Mr. Joe of any duties materially and adversely inconsistent with Mr. Joe’s position as specified in the employment agreement (or such other position to which he may be promoted), including status, offices, responsibilities or persons to whom Mr. Joe reports as contemplated in the employment agreement, or any other action by ADAM which results in a material adverse change in such position, status, offices, titles, or responsibilities; or (ii) any material breach of the employment agreement by ADAM, including the failure to pay Mr. Joe on a timely basis any material amounts to which he is entitled under the employment agreement. Mr. Joe must provide notice to ADAM of the existence of a condition constituting good reason within 90 days of the initial existence of the condition, and upon such notice, ADAM shall have a period of 30 days during which it may remedy the condition and not be required to pay the applicable severance.

 

The merger will constitute a change of control transaction as defined in the employment agreements described above and Ebix has agreed that the change in duties for Mr. Adams and Mr. Joe following the merger will constitute “good reason” under those employment agreements.

 

ADAM Common Stock, RSAs, and Stock Options Held by Directors and Executive Officers

 

The following table summarizes the ADAM common stock, restricted stock awards (RSAs), and options to purchase ADAM common stock held by each of ADAM’s directors and executive officers. All such shares of ADAM common stock are being treated identically in the merger to shares of ADAM common stock held by other ADAM shareholders, and all such RSAs and stock options are being treated identically to RSAs and stock options held by ADAM employees generally.

 

 

 

 

Indemnification and Insurance

 

The merger agreement provides that for six years after the effective time of the merger (i) Ebix and Merger Sub will honor all rights to indemnification for acts or omissions prior to the effective time of the merger existing in favor of ADAM directors or officers as provided in ADAM organizational documents and any indemnification agreements with such individuals and (ii) indemnify, defend and hold harmless present and former officers and directors of ADAM (and those individuals serving as a director or officer of another entity at the request of ADAM) against all losses (including reimbursement of legal expenses) arising out of their actions as an officer or director occurring at or prior to the effective time of the merger (including in connection with the negotiation of the merger). The merger agreement also provides that Ebix will cause the surviving corporation to purchase six-year officers’ and directors’ liability insurance policies on terms and conditions no less favorable than ADAM’s existing directors’ and officers’ liability insurance, subject to a premium cap of 200% of the annual premium paid by ADAM for its existing insurance. Ebix and the surviving corporation are obligated to maintain such policies in full force and effect and continue to honor their respective obligations thereunder for the full term thereof.

 

Ebix Stock Ownership

 

ADAM’s directors and executive officers do not own any shares of Ebix common stock.

 

Accounting Treatment

 

The merger will be accounted for as an acquisition of ADAM by Ebix under the purchase method of accounting of U.S. generally accepted accounting principles. Under the purchase method of accounting, the assets and liabilities of the acquired company are, as of completion of the merger, recorded at their respective fair values and added to those of the reporting public issuer, including an amount for goodwill representing the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets. Financial statements of Ebix issued after the merger will include only the operations of ADAM after the merger and will not be restated retroactively to reflect the historical financial position or results of operations of ADAM.

 

Restrictions on Sales of Shares of Ebix Common Stock Received in the Merger

 

Ebix shares of common stock issued in the merger will not be subject to any restrictions on transfer arising under the Securities Act of 1933, as amended (the “Securities Act”), except for Ebix shares issued to any ADAM shareholder who may be deemed to be an “affiliate” of Ebix after completion of the merger. Former ADAM shareholders who were affiliates of ADAM at the time of the ADAM special meeting and who are not affiliates of Ebix after the completion of the merger may sell their Ebix shares at any time. Former ADAM shareholders who are or become affiliates of Ebix after completion of the merger will remain or be subject to the volume and sale limitations of Rule 144 under the Securities Act until they are no longer affiliates of Ebix. This Proxy Statement does not cover resales of Ebix common stock received by any person upon completion of the merger, and no person is authorized to make any use of this Proxy Statement in connection with any resale.

No Appraisal Rights

 

Under Section 14-2-1302 of the General Business Corporation Code of the State of Georgia, the holders of ADAM common stock will not have appraisal rights in connection with the merger as Ebix is listed on the NASDAQ Stock Market and holders of ADAM common stock are not being required to receive any consideration from Ebix in the form of cash.

 

Regulatory Matters

 

Completion of the merger is conditioned upon, among other things, the receipt of antitrust approval under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (referred to herein as “HSR”). Ebix and ADAM have each agreed to use their reasonable best efforts to take all actions necessary, proper, or advisable and to satisfy all conditions to the merger in the most expeditious manner practicable, including obtaining approval under HSR. Ebix and ADAM filed their respective HSR Notifications on October 8, 2010. On October 21, 2010, the FTC granted early termination of the waiting period under the HSR applicable to the merger. However, the foregoing does not require Ebix to consent, offer, or agree any sale, license, assignment, transfer, divestiture, or disposal of any assets, business, or portion of the business of Ebix, or conduct, restrict, operate, invest, or otherwise change the assets, business, or portion of business of Ebix or impose any restriction, requirement, or limitation on the operation of the business, or portion of the business of Ebix. In addition, either party can terminate the merger agreement if the merger has not been effected by March 31, 2011, so long as such party’s breach did not cause the failure. In such case, no termination fee is due. Each of Ebix and ADAM has the right to terminate the merger agreement if a governmental entity issues an order, decree or ruling or takes any other nonappealable final action permanently restraining, enjoining, or otherwise prohibiting the merger. In this case, the terminating party would not be required to pay a termination fee.

 

Listing of Ebix Common Stock on the NASDAQ Stock Market; Delisting and Deregistration of ADAM Common Stock

 

Ebix has agreed that prior to the completion of the merger, it will cause the shares of Ebix common stock to be issued in the merger and reserved for issuance under any assumed equity awards to be approved for listing on the NASDAQ Stock Market. Such approval is a condition to the completion of the merger. If the merger is completed, ADAM common stock will cease to be listed on the NASDAQ Stock Market and its shares will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

The following discussion summarizes the material U.S. federal income tax consequences of the merger to holders of ADAM common stock.

 

This discussion addresses only those ADAM shareholders that hold their ADAM common stock as a capital asset and does not address all aspects of U.S. federal income taxation that may be relevant to a holder of ADAM common stock in light of that shareholder’s particular circumstances or to a shareholder subject to special rules, such as:

 

 

 

If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds ADAM common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partners and the activities of the partnership. A partner in a partnership holding ADAM common stock should consult its tax advisor.

 

The following discussion is not binding on the Internal Revenue Service, referred to as the “IRS.” It is based on the Internal Revenue Code of 1986, as amended, referred to as the “Code”, applicable Treasury regulations, administrative interpretations and court decisions, each as in effect as of the date of this document and all of which are subject to change, possibly with retroactive effect. The tax consequences under U.S. state and local and foreign laws and U.S. federal laws other than U.S. federal income tax laws are not addressed.

 

Holders of ADAM common stock are strongly urged to consult their tax advisors as to the specific tax consequences to them of the merger, including the applicability and effect of U.S. federal, state, and local and foreign income and other tax laws in light of their particular circumstances.

 

General

 

Ebix and ADAM have structured the merger to qualify as a “reorganization” for U.S. federal income tax purposes and have each agreed to use their reasonable best efforts to cause the merger to qualify as a “Reorganization” for U.S. federal income tax purposes. Ebix and ADAM will receive an opinion from Carlton Fields, P.A. to the effect that, for U.S. federal income tax purposes, the merger will constitute a reorganization within the meaning of Section 368 of the Code. This opinion relies on assumptions, including assumptions regarding the absences of changes in existing facts and law and the completion of the merger in the manner contemplated by the merger agreement, and representations and convenants made by Ebix and ADAM, including those contained in certificates of officers of Ebix and ADAM. The accuracy of those representations, covenants, or assumptions may affect the conclusions set forth in the opinion, in which case the tax consequences of the merger could differ from those discussed here. Opinions of counsel neither bind the IRS nor preclude the IRS from adopting a contrary position. No ruling has been or will be sought from the IRS on the tax consequences of the merger.

 

U.S. Federal Income Tax Consequences to ADAM Shareholders

 

The material U.S. federal income tax consequences of the merger will be as follows:

 

 

 

In the case of a holder of ADAM common stock that holds shares of ADAM common stock with differing tax bases and/or holding periods, the preceding rules must be applied to each identifiable block of ADAM common stock. For this purpose, a “block” consists of shares acquired at the same cost in a single transaction.

 

Information Reporting and Backup Withholding

 

A holder of ADAM common stock may be subject to information reporting and backup withholding in connection with any cash payments received instead of a fractional share of Ebix common stock, unless such holder provides proof of an applicable exemption or a correct taxpayer identification number, and otherwise complies with the applicable requirements of the backup withholding rules. The amounts withheld under the backup withholding rules are not an additional tax and may be refunded, or credited against the holder’s U.S. federal income tax liability, provided the required information is timely furnished to the Internal Revenue Service.

 

Reporting Requirements

 

A “significant holder” of ADAM stock will be required to retain records pertaining to the merger and will be required to file with such holder’s U.S. federal income tax return for the year in which the merger takes place a statement setting forth facts relating to the merger, including:

 

 

A “significant holder” is a ADAM shareholder that receives Ebix common stock in exchange for such holder’s ADAM common stock if, immediately prior to the exchange, such holder:

 

 

This discussion is intended to provide only a general summary of the material U.S. federal income tax consequences of the merger, and is not a complete analysis or description of all potential U.S. federal income tax consequences of the merger. This discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances. In addition, it does not address any non-income tax or any foreign, state or local tax consequences of the merger. Accordingly, ADAM strongly urges each holder of ADAM common stock to consult his or her tax advisor to determine the particular U.S. federal, state, or local or foreign income or other tax consequences to that shareholder of the merger.

 

The following discussion summarizes material provisions of the Agreement and Plan of Merger a copy of which is attached as Annex A to this Proxy Statement and is incorporated by reference herein. The rights and obligations of the parties are governed by the express terms and conditions of the merger agreement and not by this summary. This summary is not complete and is qualified in its entirety by reference to the complete text of the merger agreement. We urge you to read the merger agreement carefully in its entirety, as well as this Proxy Statement, before making any decisions regarding the merger.

 

The representations and warranties described below and included in the merger agreement were made by each of Ebix (and its wholly-owned subsidiary, Eden Acquisition Sub, Inc.) and ADAM to each other. The assertions embodied in those representations and warranties were made solely for purposes of the merger agreement and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating its terms. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to shareholders, or may have been used for the purpose of allocating risk between Ebix (and its wholly-owned subsidiary, Eden Acquisition Sub, Inc.). The merger agreement is described in this Proxy Statement and included as Annex A only to provide you with information regarding its terms and conditions. The representations and warranties in the merger agreement and the description of them in this Proxy Statement should be read in conjunction with the other information provided elsewhere in this Proxy Statement as well as in conjunction with the documents incorporated by reference into this Proxy Statement for information regarding such entities and their respective businesses. See “Where You Can Find More Information” beginning on page 72 of this Proxy Statement.

 

The Merger

 

Subject to the terms and conditions of the merger agreement and in accordance with Georgia law, Eden Acquisition Sub, Inc., a Georgia corporation and wholly-owned subsidiary of Ebix, will merge with and into ADAM, and ADAM will survive the merger as a wholly-owned subsidiary of Ebix.

 

Effective Time of the Merger

 

The merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Georgia or at such later time as may be specified in the certificate of merger, with the consent of Ebix and ADAM. The filing of the certificate of merger will occur no later than three business days after the conditions to completion of the merger have been satisfied or waived.

 

Consideration to be Received in the Merger

 

At the effective time of the merger, each issued and outstanding share of ADAM common stock will be converted into the right to receive 0.3122 shares of Ebix common stock, which we refer to as the exchange ratio. The exchange ratio is subject to adjustment if ADAM fails to pay in full at or prior to the closing out of its cash on hand any of the following items (each, an adjustment event):

 

 

As of the date of this Proxy Statement/Prospectus, based on ADAM’s current cash on hand and expected earnings before closing, ADAM does not expect that an adjustment event will occur. If there is an adjustment event, then the shares of Ebix common stock to be received upon the exchange of one share of ADAM common stock shall equal a ratio the numerator of which is $65,350,000 minus (a) $5,071,000 for ADAM options and minus (b) $947,000 for ADAM’s outstanding warrant (proportionately reduced for any option or warrant exercises, forfeitures or cancellations), minus (c) the amounts in the bullet list above to the extent not paid by ADAM at or prior to the closing, divided by $19.06, which was the agreed upon value of Ebix

common stock for purposes of the merger agreement, and the denominator of which is the number of issued and outstanding shares of ADAM common stock to be converted.

 

Holders of ADAM common stock will not receive any fractional shares of Ebix common stock in the merger. Instead, the total number of Ebix shares that each holder of ADAM common stock will receive in the merger will be rounded down to the nearest whole number and Ebix will pay cash for any resulting fractional share that a ADAM shareholder otherwise would be entitled to receive. The exchange agent will compile all of the fractional shares of Ebix common stock and sell them as whole shares at the then prevailing price on the NASDAQ Stock Market. Upon completion of the sale of all such shares, the exchange agent will distribute the proceeds pro rata to the individuals that were to receive fractional shares.

 

Example (assuming no adjustment to the exchange ratio): If you currently own 25 shares of ADAM common stock, absent the treatment of the fractional shares described above, you would be entitled to receive (25 x 0.3122) or 7.805 shares of Ebix common stock. Since fractional shares will not be issued, you will be entitled to 7 shares of Ebix common stock. The remaining 0.805 shares will be grouped with other fractional shares and sold on the NASDAQ Stock Market as whole shares. You will then receive a check equal to your pro rata portion of the total proceeds of such sale.

 

Treatment of ADAM Options

 

At the effective time of the merger, each option to purchase shares of ADAM common stock that is outstanding and vested or exercisable immediately prior to the date the merger becomes effective will vest in its entirety and will be simultaneously canceled and converted into the right to receive from Ebix and the surviving corporation an amount in cash, without interest, equal to the aggregate number of ADAM shares of common stock subject to the option multiplied by the excess, if any, of $5.95 above the per share exercise price under the option, subject to applicable tax withholding. Such payments will be made by the surviving corporation after the merger.

 

ADAM Restricted Stock Awards

 

At the effective time of the merger, all restricted stock awards outstanding under ADAM’s 1992 Stock Option Plan and 2002 Stock Incentive Plan shall vest in their entirety on an accelerated basis immediately prior to the consummation of the merger. All outstanding restricted stock awards will vest in their entirety on an accelerated basis contingent upon and immediately prior to the completion of the merger, subject to applicable tax withholding, and will be converted into the right to receive 0.3122 shares of Ebix common stock, subject to the adjustments described in the merger agreement.

 

Other Adjustments to the Exchange Ratio

 

In addition to the adjustments explained in “The Merger Agreement — Consideration to be Received in the Merger” above, the exchange ratio will be appropriately adjusted to reflect fully the effect of any reclassification, stock split (including a reverse stock split) or combination, exchange, merger consolidation or readjustment of shares, or any stock dividend or stock distribution, or any similar transaction or event with respect to Ebix common stock or ADAM common stock prior to the effective time of the merger.

 

Procedures for Exchange of Certificates

 

Ebix will appoint an exchange agent reasonably acceptable to ADAM for the purpose of exchanging certificates and book-entry shares representing shares of ADAM’s common stock. Ebix shall pay all costs, fees, and expenses incurred in connection with the retention and engagement of the exchange agent. As soon as reasonably practical following the effective time of the merger, the exchange agent will mail transmittal materials to each holder of record of shares of ADAM’s common stock, advising such holders of the procedure for surrendering their share certificates, or in the case of book-entry shares, the surrender of such shares, to the exchange agent.

Each holder of a share of ADAM’s common stock that has been converted into a right to receive the merger consideration will receive the merger consideration upon surrender to the exchange agent of such holder’s common stock certificate or book-entry share, together with a letter of transmittal covering such shares and such other documents as the exchange agent may reasonably require. All shares of Ebix common stock issued in exchange for shares of ADAM common stock will be issued in uncertificated book-entry form.

 

After the effective time of the merger, each certificate or book-entry share that previously represented shares of ADAM’s common stock will represent for all purposes only the right to receive the applicable merger consideration as described on page 46 above under “The Merger Agreement — Consideration to be Received in the Merger,” including cash for any fractional shares of Ebix’s common stock. In addition, ADAM will not register any transfers of shares of ADAM’s common stock after the effective time of the merger.

 

ADAM shareholders will not be paid any dividends or other distributions made by Ebix after the effective time of the merger, until such shareholders surrender their ADAM stock certificates or book-entry shares to the exchange agent.

 

Holders of ADAM’s common stock should not send in their ADAM stock certificates or documents evidencing their surrender of ADAM book-entry shares until they receive, complete and submit a signed letter of transmittal sent by the exchange agent with instructions for the surrender of ADAM common stock.

 

ADAM and Ebix are not liable to holders of shares of ADAM’s common stock for any amount delivered to a public official under applicable abandoned property, escheat, or similar laws.

 

Representations and Warranties

 

The merger agreement contains a number of representations and warranties made by ADAM and Ebix (including its wholly-owned subsidiary Eden Acquisition Sub, Inc.) to each other. The representations and warranties are subject in some cases to specified exceptions and qualifications. The parties’ reciprocal representations and warranties relate to, among other things:

 

 

In addition to the foregoing, the Agreement and Plan of Merger contains representations and warranties made by ADAM to Ebix (including its wholly-owned subsidiary Eden Acquisition Sub, Inc.) regarding:

 

 

 

In addition, the Agreement and Plan of Merger contains representations and warranties made by Ebix (including its wholly-owned subsidiary Eden Acquisition Sub, Inc.) to ADAM regarding:

 

 

Conduct of Business Pending the Merger

 

Under the merger agreement, ADAM is required to carry on its business in the ordinary course consistent with past practice, use its reasonable efforts to preserve substantially intact its business organization, to keep available the services of its current officers and employees, preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business relationships with ADAM.

 

In addition, ADAM may not, among other things and subject to certain exceptions, without Ebix’s consent:

 

 

 

 

Commercially Reasonable Best Efforts; Other Agreements

 

Other Actions.  ADAM and Ebix have each agreed to not, and to not permit any of their respective subsidiaries to, take, or agree or commit to take, any action that would reasonably be expected to, individually or in the aggregate, prevent, materially delay, or materially impede the consummation of the merger or the other transactions contemplated by the merger agreement.

 

Commercially Reasonable Efforts.  Ebix, Eden Acquisition Sub, Inc., and ADAM have each agreed to use (and agreed to cause their subsidiaries to use) commercially reasonable best efforts to take, or cause to be taken, all actions necessary, proper, or advisable under to complete the merger and the other transactions contemplated by the merger agreement in the most expeditious manner as practicable.

 

Interactions with Governmental Bodies and Antitrust Issues.  Further, each party is required to notify the other parties of any communications from any governmental entity related to the merger. Neither Ebix nor ADAM may, without the written consent of the other, agree with a governmental entity to toll or extend any applicable waiting period under HSR or any other antitrust laws. As promptly as reasonably practicable, the parties to the merger agreement are to provide the information and documents necessary or requested by the applicable governmental for the filings required by and inquiries related to HSR and any additional filings necessary under the applicable antitrust laws. The parties shall also use their reasonable best efforts to obtain prompt approval of the merger by any applicable governmental entity.

 

Challenges to the Merger.  If a governmental entity or any private party institutes or threatens to institute any administrative or judicial proceeding challenging the merger or any transaction contemplated by the merger agreement, ADAM shall cooperate in all respects with Ebix and Eden Acquisition Sub, Inc. and shall use its reasonable best efforts to contest and resist any such action. Ebix and Eden Acquisition Sub, Inc. have no such duty to defend, contest, or resist any such action.

 

Changes in Business.  None of Ebix, Eden Acquisition Sub, Inc. or any of their subsidiaries shall be required to, and ADAM may not, without the prior written consent of Ebix, become subject to, consent to, or offer or agree to, or otherwise take any action with respect to, any requirement, condition, limitation, understanding, agreement, or order to:

 

 

If requested by Ebix, however, ADAM will become subject to, consent to, or offer or agree to, or otherwise take any action with respect to, any such requirement, condition, limitation, understanding, agreement, or order

so long as such requirement, condition, limitation, understanding, agreement, or order is only binding on ADAM in the event the completion of the merger occurs.

 

Consents.  ADAM shall use its reasonable best efforts to obtain all reasonably required consents from third parties due under certain material contracts as well as other consents necessary for the operation of ADAM’s business after the merger.

 

Public Announcements.  No public release or announcement concerning merger shall be issued by any party without the prior written consent of ADAM and Ebix except as such release or announcement may be related to another offer to purchase ADAM as expressly permitted by the merger agreement or required by applicable law or the rules or regulations of the NASDAQ Stock Market or any governmental entity to which a party is subject, in which case the party required to make the release or announcement shall, prior to the public release or announcement, consult with the other party about such release or announcement.

 

Takeover Statutes.  If any “control share acquisition,” “fair price,” “moratorium,” or other anti-takeover law becomes or is deemed to be applicable to ADAM, Ebix, Eden Acquisition Sub, Inc., or the merger, each party and its respective board of directors shall grant such approvals and take such actions as are necessary so that the merger may be consummated as promptly as practicable on the terms provided for in the merger agreement.

 

Merger Sub.  Ebix is required to take all actions necessary to cause Eden Acquisition Sub, Inc. to perform its obligations under the merger agreement and to complete the merger.

 

Resignation of ADAM’s Board of Directors and Certain Officers.  On the day the merger is completed, ADAM will cause to be delivered to Ebix the resignations of each member of the ADAM board of directors, and, to the extent requested by Ebix, each officer of ADAM. ADAM and Ebix agreed that the resulting resignations of Mark Adams and Christopher Joe shall be deemed to constitute “With Good Reason,” as such term is defined in their employment agreements with ADAM.

 

Certain Tax Matters.  The merger agreement is intended to constitute a “plan of reorganization” within the meaning of Code regulations Section 1.368-2(g), and Ebix and ADAM are to use their reasonable best efforts to cause the merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Ebix and ADAM agreed to cooperate in the preparation, execution, and filing of all tax returns and other documentation regarding any taxes of the parties which become payable in connection with the merger that are required or permitted to be filed on or before the effective time of the merger.

 

ADAM’s Rights Agreement.  Prior to the earlier of the termination of the merger agreement or the effective time of the Merger, ADAM and its board of directors may not amend or modify or take any other action with regard to ADAM’s rights agreement in any manner or take any other action so as to (i) render the rights agreement inapplicable to any transaction other than the merger, (ii) permit any person or group who would otherwise be an acquiring person under the rights agreement not to be an acquiring person, (iii) provide that a distribution date or triggering event does not occur under the rights agreement by reason of the execution of any contract other than the merger agreement, and (iv) except as specifically contemplated by the merger agreement, otherwise affect the rights of holders of rights under the rights agreement. ADAM and its board of directors must take all action to ensure that the rights agreement is and, through the effective time of the merger, will not apply to Ebix, Eden Acquisition Sub, Inc., the merger agreement, or the merger. The rights agreement shall be amended so that the rights will expire immediately prior to the effective time of the merger.

 

Parent Non-Competition.  Between the date of the merger agreement and the effective time of the merger, Ebix may not enter into any contract with a competitor of ADAM.

 

Listing on the NASDAQ Stock Market.  Ebix has agreed to use its reasonable best efforts to cause its shares to be issued pursuant to the merger agreement to be approved for listing (subject to official notice of issuance) on the NASDAQ Stock Market prior to the effective time of the merger.

 

Ebix Guarantee.  Ebix agreed to take all action necessary to cause Eden Acquisition Sub, Inc. to perform all of its and the surviving corporation to perform all of the surviving corporation’s, agreements, covenants,

and obligations under the merger agreement and to complete the merger on the terms and subject to the conditions set forth in the merger agreement. Ebix will be liable for any breach of any representation, warranty, covenant, or agreement of Eden Acquisition Sub, Inc. in the merger agreement and for any breach of this guarantee.

 

Other Agreements.  The merger agreement contains certain other agreements, including agreements relating to access to information and cooperation between Ebix and ADAM during the pre-closing period.

 

Proxy Statement; Shareholders’ Meeting.  Ebix and ADAM have agreed to cooperate in preparing and filing this Proxy Statement and the registration statement of which it forms a part. Each has agreed to respond to any SEC comments relating to this Proxy Statement and to use its commercially reasonable efforts to have the registration statement of which it forms a part declared effective, and ADAM has agreed to cause this Proxy Statement to be mailed to its shareholders as promptly as practicable after the registration statement of which this Proxy Statement forms a part is declared effective. ADAM has also agreed to hold a shareholders’ meeting as promptly as possible after the registration statement is declared effective.

 

Conditions to Completion of the Merger

 

Each party’s obligation to effect the merger is subject to the satisfaction or waiver of various conditions, which include the following:

 

 

The merger agreement provides that a “material adverse effect” shall not be deemed to include:

 

 

 

The merger agreement also provides that any event, change, and effect referred to in the first, third and fourth bullets immediately above shall be taken into account in determining whether a “material adverse effect” has occurred or would reasonably be expected to occur to the extent that such event, change, or effect has a disproportionate effect on the affected party and its subsidiaries, taken as a whole, compared to other participants in the industries in which the affected party and its subsidiaries conduct their businesses.

 

No Solicitation; Changes in Recommendations

 

In the merger agreement, ADAM has agreed that its board of directors will recommend that ADAM’s shareholders adopt and approve the merger agreement and that it will not directly or indirectly, authorize or permit its directors, officers, employees, advisors, or investment bankers to, directly or indirectly, solicit, initiate, or knowingly take any action to facilitate or encourage the submission of any “takeover proposal” (as defined below) or the making of any proposal that could lead to any takeover proposal, or subject to the permitted actions described in the paragraph below:

 

 

ADAM agreed to cease immediately and cause to be terminated, and not authorize or knowingly permit any of its representatives to continue, any and all existing activities, discussions or negotiations, if any, with any third party conducted prior to the date of the merger agreement with respect to any takeover proposal and to use its reasonable best efforts to cause any such third party (or its agents or advisors) in possession of non-public information in respect of ADAM that was furnished by or on behalf of ADAM to return or destroy (and confirm destruction of) all such information.

 

Notwithstanding the foregoing, at any time before the date that the vote required to be obtained from ADAM’s shareholders in connection with the merger has been obtained, and so long as the ADAM board of directors has delivered to Ebix written notice as required by the merger agreement related to the following, ADAM and its board of directors may, in each case referred to below, only if the ADAM board of directors

determines in good faith, after consultation with outside legal counsel and financial advisors, that the failure to take such action could reasonably be expected to cause the ADAM board of directors to be in breach of its fiduciary duties under applicable law:

 

 

Before the ADAM board of directors may make any change in its recommendation or ADAM may enter into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement, or other contract relating to any takeover proposal, ADAM must follow certain notice provisions and engage in good faith negotiations with Ebix to amend the merger agreement in such a way as to make the acquisition proposal no longer a superior proposal or obviate the need for a change of recommendation, as applicable.

 

The term “takeover proposal” means a proposal or offer from, or indication of interest in making a proposal or offer by, any person (other than Ebix and its subsidiaries, including Eden Acquisition Sub, Inc.) relating to any:

 

 

The term “superior proposal” means a bona fide written takeover proposal involving the direct or indirect acquisition pursuant to a tender offer, exchange offer, merger, consolidation, or other business combination, of all or substantially all of ADAM’s consolidated assets or a majority of ADAM’s common stock that the ADAM board of directors determines in good faith (after consultation with outside legal counsel and ADAM’s financial advisor) is more favorable from a financial point of view to ADAM’s shareholders than the merger, taking into account all financial considerations, the identity of the third party making such takeover proposal, the anticipated timing, required conditions (including any financing condition or the reliability of any debt or equity funding commitments) and prospects for completion of such takeover proposal, the other terms and conditions of such takeover proposal, and the implications thereof on ADAM, including relevant legal, regulatory, and other aspects of such takeover proposal deemed relevant by the board of directors, and any

revisions to the terms of merger agreement proposed by Ebix in response to the notices required by the merger agreement.

 

The merger agreement also provides that ADAM must promptly notify Ebix in writing (but in no event later than twenty-four (24) hours) after it obtains knowledge of the receipt by ADAM of any takeover proposal, any inquiry that would reasonably be expected to lead to a takeover proposal, any request for non-public information relating to ADAM or for access to the business, properties, assets, books, or records of ADAM by any third party. Thereafter, ADAM must keep Ebix fully informed, on a current basis, of the status and material terms of any such takeover proposal, indication or request, including any material amendments or proposed amendments as to price and other material terms thereof.

 

Termination

 

Generally, the merger agreement may be terminated and the merger may be abandoned at any time prior to the completion of the merger (including after shareholder approval, except where expressly noted):

 

 

 

 

 

 

 

Termination Fees and Expenses

 

ADAM is required to pay Ebix a $3.5 million termination fee if the merger agreement has been terminated because:

 

 

Ebix is required to pay ADAM a $3.5 million termination fee if the merger agreement has been terminated:

 

 

Whether or not the merger is completed, all costs and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement will be paid by the party incurring those costs or expenses except as expressly set forth in the merger agreement.

Effect of Termination

 

If the merger agreement is terminated as described in “The Merger Agreement — Termination” above, the merger agreement will be void, and there will be no liability or obligation on the part of any party except that:

 

 

Employee Matters

 

The merger agreement provides that:

 

 

Indemnification and Insurance

 

The merger agreement provides that for six years after the effective time of the merger:

 

 

 

Amendment; Extension and Waiver

 

Subject to applicable law:

 

 

Governing Law

 

The merger agreement is governed by and construed in accordance with the laws of the State of Georgia with respect to matters, issues, and questions relating to the merger or the duties of the boards of directors of ADAM and Eden Acquisition Sub, Inc. and the laws of the State of Delaware with respect to matters, issues, and questions relating to the duties of the board of directors of Ebix with respect to all other matters, issues and questions that would cause the application of the laws of any jurisdiction other than the State of Delaware.

 

EBIX

 

Ebix, Inc. was founded in 1976 as Delphi Systems, Inc., a California corporation. In December 2003, the company changed its name to Ebix, Inc. Ebix is listed on the The NASDAQ Stock Market.

 

Ebix, Inc. is a leading international supplier of software and e-commerce solutions to the insurance industry. Ebix provides a series of application software products for the insurance industry ranging from carrier systems, agency systems, and exchanges to custom software development for all entities involved in the insurance and financial industries.

 

Ebix’s goal is to be the leading powerhouse of backend insurance transactions in the world. Ebix’s technology vision is to focus on convergence of all insurance channels, processes, and entities in a manner such that data can seamlessly flow once a data entry has been made.

 

Ebix strives to work collaboratively with clients to develop innovative technology strategies and solutions that address specific business challenges. Ebix combines the newest technologies with its capabilities in consulting, systems design, and integration, IT and business process outsourcing, applications software, and Web and application hosting to meet the individual needs of organizations.

Ebix has recently made a number of strategic acquisitions.

 

Effective September 1, 2010, Ebix acquired all of the stock of Brazilian-based USIX Technology, S.A. for total net cash consideration of $7.6 million. USIX Technology provides broker systems and related services for insurance carriers across Brazil. The former shareholders of USIX Technology retain the right to earn up to an additional $5.8 million if certain revenue targets are achieved over the two-year period subsequent to the acquisition. Ebix funded this acquisition with internal resources using available cash reserves.

 

Effective July 1, 2010, Ebix acquired all of the stock of Singapore-based E-Trek Solutions PTE Ltd. for total net cash consideration of $1.0 million. E-Trek Solutions provides underwriting and claims processing services for the insurance industry in Singapore. The former shareholders of E-Trek Solutions retain the right to earn up to an additional $1.0 million if certain revenue targets are achieved over the two-year period subsequent to the acquisition. Ebix funded this acquisition with internal resources using available cash reserves.

 

Effective May 20, 2010, Ebix acquired Houston, Texas-based Connective Technologies, Inc. through an asset purchase for total net cash consideration of $1.3 million. Connective Technologies is a premier provider of on-demand software solutions for property and casualty insurance carriers in the United States. The former owners of Connective Technologies retain the right to earn up to an additional $4.0 million if certain revenue targets are achieved over the two-year period subsequent to the acquisition. Ebix funded this acquisition with internal resources using available cash reserves.

 

Effective April 1, 2010, Ebix acquired all of the stock of Australian-based Trades Monitor for total net cash consideration of $2.7 million. Trades Monitor provides specialized insurance related software to the Australian insurance industry. The former shareholders of Trades Monitor retain the right to earn an additional $458 thousand if certain incremental revenue targets are achieved by the two-year anniversary date of the business acquisition. Ebix funded this acquisition with internal resources using available cash reserves.

 

Effective January 15, 2010, Ebix acquired all of the stock of Brazilian-based MCN Technology & Consulting for total net cash consideration of $2.9 million. MCN provides software development and consulting services for insurance companies, insurance brokers, and financial institutions. The former shareholders of MCN retain the right to earn up to an additional $2.0 million if certain incremental revenue targets are achieved at the two-year anniversary date of the business acquisition. Ebix funded this acquisition with internal resources using available cash reserves.

 

Effective October 1, 2009, Ebix acquired E-Z Data, Inc. E-Z Data was a leading industry provider of on-demand customer relationship management solutions for insurance companies, brokers, agents, investment dealers, and financial advisors. Ebix acquired the business operations and intellectual property of E-Z Data for an aggregate purchase price of $50.53 million paid to E-Z Data’s shareholders consisting of cash consideration in the amount of $25.53 million paid at closing and $25.00 million in shares of Ebix common stock valued at the average market closing price for the three most recent days prior to September 30, 2009. Ebix funded the cash portion of the purchase price for this business acquisition using the proceeds from Ebix’s two convertible promissory notes issued in late August 2009.

 

Effective October 1, 2009, Ebix acquired Peak Performance Solutions, Inc. Ebix paid Peak’s shareholders $8.0 million in cash for all of Peak’s outstanding stock. Peak provides comprehensive, end-to-end insurance software and technology solutions to insurance companies and self-insured entities for workers’ compensation claims processing, risk management administration, and managed care tracking. Peak’s shareholders also retain the right to earn up to $1.5 million of future additional cash compensation if certain revenue targets are achieved during the 2010 calendar year. Ebix funded this acquisition with internal resources using available cash reserves.

 

Effective May 1, 2009, Ebix acquired Facts, Inc., a leading provider of fully-automated software solutions for healthcare payers specializing in claims processing, employee benefits, and managed care. Facts’ products are available in either an application service provider or self-hosted model. Ebix paid the Facts shareholders $7.0 million in cash for all of Facts’ stock. Ebix financed this acquisition with internal resources using available cash reserves.

Effective November 24, 2008, Ebix acquired ConfirmNet Corporation. Ebix paid ConfirmNet shareholders $7.4 million for all of ConfirmNet’s stock. The ConfirmNet shareholders earned an additional $3.1 million for meeting certain revenue objectives which was paid in the first quarter of 2009, and retain the right to earn up to an additional $3.2 million at the one year anniversary date of the acquisition if certain revenue targets of the ConfirmNet division of Ebix are met.

 

Effective August 1, 2008, Ebix acquired Acclamation Systems, Inc. Ebix paid Acclamation shareholders $22 million for all of Acclamation’s stock. Acclamation’s shareholders also retain the right to earn up to $3 million in additional cash consideration over the two-year period following the effective date of the acquisition if specific revenue targets of Ebix’s Health Benefits division are achieved. Ebix financed this acquisition using a combination of available cash reserves and the proceeds from the issuance of convertible debt.

 

Effective April 28, 2008, Ebix acquired Periculum Services Group, a provider of certificate of insurance tracking services. Ebix acquired all of the stock of Periculum for a payment of $1.1 million and Periculum’s shareholders earned, and Ebix paid, an additional $200,000 for meeting certain revenue objectives. Ebix financed this acquisition using available cash. The operating results of Periculum, which is a component of Ebix’s BPO channel, have been included in Ebix’s reported net income starting in the second quarter of 2008.

 

Effective January 2, 2008, Ebix completed the acquisition of Telstra eBusiness Services Pty Limited, a premier insurance exchange located in Melbourne, Australia. The purchase price was $43.8 million and was financed with a combination of available cash reserves, proceeds from the issuance of convertible debt, proceeds from the sales of unregistered shares of Ebix’s common stock, and funding from Ebix’s revolving line of credit.

 

Effective November 1, 2007, Ebix completed the acquisition of IDS Jenquest, Inc., a leader in the certificate of insurance tracking industry located in Hemet, California. The purchase price was $11.25 million and was primarily financed from internal sources using available cash reserves. IDS shareholders retained the right to earn up to $1.0 million in additional payments over one year if certain revenue or operating income targets of the IDS division of Ebix were met. The earn-out of $1.0 million was achieved in the fourth quarter of 2008 and payment was remitted in the first quarter of 2009.

 

Ebix has its headquarters in Atlanta, Georgia, and it also has domestic operations in Walnut Creek, San Diego, Hemet, and Pasadena, California; Pittsburgh, Pennsylvania; Portland, Michigan; New York, New York; St. Louis, Missouri; Park City, Utah; Herndon, Virginia; Columbus, Ohio; and Dallas and Houston, Texas. Ebix also has offices in Brazil, Australia, New Zealand, Singapore, Japan, China, and India. In these offices, Ebix employs insurance and technology professionals who provide products, services, support and consultancy to more than 3,000 customers on six continents. Ebix’s focus on quality has enabled its development unit in India to be awarded Level 5 status of the Carnegie Mellon Software Engineering Institute’s Capability Maturity Model Integrated. Ebix has also earned ISO 9001:2000 certifications for both its development and call center units in India.

 

Ebix’s revenues are derived from four product or service groups. Presented in tabular format below is the breakout of our revenue streams for each of those product or service groups for the year ended December 31, 2009 and 2008: