<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 18, 1995
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HBO & COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 37-0986839
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 PERIMETER CENTER NORTH ATLANTA, GEORGIA 30346
(770) 393-6000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
CHARLES W. MCCALL,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HBO & COMPANY
301 PERIMETER CENTER
NORTH ATLANTA, GEORGIA 30346
(770) 393-6000
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------------
COPIES TO:
LISA A. STATER, Esq. GREGORY A. FERNICOLA, Esq.
Jones, Day, Reavis & Pogue Skadden, Arps, Slate, Meagher & Flom
3500 One Peachtree Center 919 Third Avenue
303 Peachtree Street, N.E. New York, New York 10022
Atlanta, Georgia 30308 (212) 735-5000
(404) 521-3939
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS POSSIBLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (2) OFFERING PRICE (2) FEE (3)
<S> <C> <C> <C> <C>
Common Stock, $.05 par value and
Preferred Share Purchase Rights (4) 4,000,000 shares $52.9375 $211,750,000.00 $73,018.00
<FN>
(1) Includes 400,000 shares that may be purchased pursuant to the
over-allotment option granted to the Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended (the
"Securities Act"), based upon the average of the reported high and low
sales prices of the Common Stock of the registrant on The Nasdaq Stock
Market National Market (the "Nasdaq NM") on August 14, 1995.
(3) The registration fee for the securities offered hereby, $73,018.00, is
calculated pursuant to Rule 457(c) under the Securities Act as follows: one
twenty-ninth of one percent of the product of $52.9375, the average of the
reported high and low sales prices of the Common Stock on the Nasdaq NM on
August 14, 1995, multiplied by 4,000,000, the number of shares to be
registered.
(4) The Preferred Share Purchase Rights, which are attached to the Shares of
Common Stock being registered, will be sold for no additional
consideration; no additional registration fee is required.
</TABLE>
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 18, 1995
P R O S P E C T U S
[LOGO] 3,600,000 SHARES
HBO & COMPANY
COMMON STOCK
--------
This Prospectus relates to the sale of 3,600,000 shares (the "Shares") of
Common Stock, par value $.05 per share (the "Common Stock"), of HBO & Company, a
Delaware corporation ("HBOC" or the "Company"), by First Data Corporation, a
Delaware corporation ("FDC" or the "Selling Stockholder"). The Company will not
receive any of the proceeds from the sale of the Common Stock offered hereby.
The Company's Common Stock is traded on The Nasdaq Stock Market National Market
(the "Nasdaq NM") under the symbol "HBOC." The last reported sale price of the
Company's Common Stock on the Nasdaq NM on August 17, 1995 was $56.9375 per
share.
--------------
SEE "RISK FACTORS" AT PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDER(2)
<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
<FN>
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company, estimated
at $450,000.
(3) The Selling Stockholder has granted the Underwriters a 30-day option to
purchase up to 400,000 additional shares of Common Stock on the same terms
as set forth above solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Selling Stockholder will be $ , $ and
$ , respectively. See "Underwriting."
</TABLE>
--------------
The Shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the Shares
of Common Stock offered hereby will be available for delivery on or about
, 1995 at the offices of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013.
--------------
SMITH BARNEY INC.
ALEX. BROWN & SONS
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SCHRODER WERTHEIM & CO.
, 1995
<PAGE>
AVAILABLE INFORMATION
HBOC is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at the Public Reference Room of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; and at the
Commission's regional offices at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material may be obtained from the Public
Reference Section of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") of which this Prospectus forms a part, with
respect to the Shares being offered hereby pursuant to the Securities Act of
1933, as amended (the "Securities Act"). As permitted by the rules and
regulations of the Commission, this Prospectus omits certain information,
exhibits and undertakings contained in the Registration Statement. Such
additional information can be inspected at the principal office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of the
Registration Statement can be obtained from the Commission at prescribed rates
by writing to the Commission at such address.
Certain financial information relating to CliniCom Incorporated, a Delaware
corporation ("CliniCom"), which has been obtained from certain periodic reports
filed by CliniCom with the Commission pursuant to the applicable requirements of
the Exchange Act, is included herein to comply with certain accounting rules and
financial information requirements promulgated by the Commission. Although HBOC
has entered into a definitive agreement with CliniCom pursuant to which CliniCom
will be merged with a subsidiary of HBOC and HBOC, upon such merger, will be
deemed to be the successor to CliniCom. HBOC does not presently control such
company. Accordingly, HBOC does not have the ability to verify the accuracy,
completeness or correctness of such financial information relating to CliniCom
and HBOC can offer no assurances concerning such information other than that it
has been accurately reproduced from the relevant reports filed with the
Commission under the Exchange Act by CliniCom.
DOCUMENTS INCORPORATED BY REFERENCE
The information in the following documents filed by the Company with the
Commission (File No. 0-9900) pursuant to the Exchange Act is incorporated by
reference in this Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1994 filed
with the Commission on March 17, 1995, as amended by Form 10-K(A) filed with
the Commission on March 31, 1995;
2. Quarterly Reports on Form 10-Q for the quarter ended March 31, 1995 filed
with the Commission on May 9, 1995, and for the quarter ended June 30, 1995
filed with the Commission on July 31, 1995, as amended by Form 10-Q(A) dated
August 11, 1995 and filed with the Commission on August 14, 1995;
3. Current Reports on Form 8-K, dated February 24, 1995 and filed with the
Commission on February 24, 1995, dated May 17, 1995 and filed with the
Commission on May 17, 1995, dated June 23, 1995 and filed with the
Commission on June 26, 1995, as amended by Form 8-K(A), dated July 31, 1995
and filed with the Commission on July 31, 1995 and as further amended by
Form 8-K(A)2, dated August 8, 1995 and filed with the Commission on August
8, 1995, dated July 10, 1995, filed with the Commission on July 11, 1995,
dated July 18, 1995 and filed with the Commission on July 18, 1995 and dated
August 16, 1995 and filed with the Commission on August 16, 1995;
2
<PAGE>
4. Proxy Statement, dated as of April 3, 1995, filed in final form on April 5,
1995, with the Commission with respect to the information required to be
included herein by Items 402 (executive compensation), 403 (security
ownership of certain beneficial owners) and 404 (certain relationships and
related transactions) of Regulation S-K promulgated under the Securities Act
and the Exchange Act; and
5. The description of Common Stock and Preferred Share Purchase Rights
contained in HBOC's Registration Statements on Form 8-A, filed with the
Commission on August 19, 1981, as amended and February 19, 1991, as amended,
respectively.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of the Shares hereunder shall be deemed to be incorporated herein by reference
and shall be a part hereof from the date of the filing of such documents. Any
statements contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document, which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, upon written or oral
request of such person, a copy of the documents incorporated by reference
herein, other than exhibits to such documents not specifically incorporated by
reference. Such requests should be directed to: HBO & Company, 301 Perimeter
Center North, Atlanta, Georgia 30346, Attention: Monika Brown (telephone number
(770) 668-5926).
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NM OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NM IN ACCORDANCE
WITH RULE 10B-6A UNDER THE EXCHANGE ACT. SEE "UNDERWRITING."
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND THE NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE. EXCEPT AS OTHERWISE
NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE OVER-
ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS.
THE COMPANY
HBOC is a leading healthcare information systems company that develops
integrated patient care, clinical, financial and strategic management software
solutions for healthcare providers, payers and integrated healthcare delivery
systems. HBOC designs open systems solutions which facilitate the integration of
clinical, financial and administrative data from a wide range of customer
systems and software. The Company's broad product portfolio can be implemented
on a stand-alone, combined or enterprisewide basis. HBOC's newer products offer
open systems solutions that enable customers to add incremental capabilities to
existing information systems, without making prior capital investments obsolete.
HBOC also provides networking technologies and outsourcing services under
contract management agreements whereby its staff manages and operates data
centers, information systems, organizations and business offices of healthcare
institutions of various sizes and structures.
The Company markets its products and services to hospitals, integrated
healthcare delivery systems, physicians' offices, managed care providers, home
health providers, pharmacies and reference laboratories, and currently has one
or more applications installed in approximately 2,600 of the 5,900 hospitals in
the United States. The Company also sells its products and services
internationally through its subsidiaries in the United Kingdom and Canada and
distribution agreements in Saudi Arabia, Australia, Puerto Rico and New Zealand.
The Company's strategy is to provide a comprehensive range of computer-based
information systems and services designed to meet the evolving needs of
healthcare enterprises. The key elements of this strategy are to: (i) leverage
its existing customer base to sell additional applications and new products;
(ii) provide enterprisewide solutions to the evolving integrated healthcare
delivery systems market; (iii) provide open systems solutions designed to
integrate with other data and software; (iv) establish premier product
brand-name recognition in new markets; and (v) continue its significant research
and development efforts to ensure its product offerings will continue to meet
the evolving needs of its existing and potential customer base.
HBO & Company was incorporated in Delaware in 1974. The Company's executive
offices are located at 301 Perimeter Center North, Atlanta, Georgia 30346. The
Company's telephone number is (770) 393-6000.
RECENT ACQUISITIONS
The Company has grown its business through the development of new products,
the expansion of its service capabilities and the addition of new customers. In
addition, a substantial portion of its recent growth has come from acquisitions
which expanded the HBOC product lines and enhanced its installed customer base.
In February 1995 the Company acquired Advanced Laboratory Systems, Inc.
("ALS"), a Eugene, Oregon based developer of laboratory software for the
healthcare and commercial marketplace for $7 million, net of cash acquired. In
June 1995 HBOC acquired the Health Systems Group ("HSG") from First Data
Corporation, the Selling Stockholder in this Offering, for approximately $201
million, consisting of 4 million shares of HBOC Common Stock and $600,000 in
cash. Now known as HBOC's Charlotte Product Group, this business unit has an
installed base of more than 500 customers and provides information systems and
services to hospitals, medical group practices and medical facilities throughout
the United States, the United Kingdom, Australia and Puerto Rico. In July 1995
the
4
<PAGE>
Company acquired Pegasus Medical LTD, the developer of a computer-based patient
record designed to support clinical processes in physicians' offices and across
the continuum of care, for $8 million in cash and an additional cash payment of
up to $7 million, contingent upon product development.
Also in July 1995 HBOC entered into a definitive agreement to acquire
CliniCom Incorporated ("CliniCom") pursuant to which each of the approximately
8,660,000 outstanding shares of CliniCom common stock would be exchanged for .4
of a share of HBOC Common Stock (the "CliniCom Acquisition"). CliniCom is a
developer of point-of-care clinical information systems. For the six months
ended June 30, 1995, CliniCom reported that 54% of CliniCom's $21.8 million in
net sales were attributable to a cooperative marketing arrangement with HBOC.
The acquisition is subject to certain conditions, including CliniCom stockholder
approval.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by Selling Stockholder........... 3,600,000 Shares(1)
Total Outstanding Common Stock........................ 36,197,554 shares(2)
Use of Proceeds....................................... The Company will not receive any
proceeds from the sale of the Shares
offered hereby.
Nasdaq National Market Symbol......................... HBOC
<FN>
------------------------
(1) Excludes up to 400,000 shares of Common Stock that may be sold by the
Selling Stockholder upon exercise of the over-allotment option granted to
the Underwriters. See "Underwriting."
(2) Excludes approximately 3,500,000 shares of Common Stock issuable upon
consummation of the CliniCom Acquisition. See "Pro Forma Financial
Information." Also excludes up to 2,381,413 shares of Common Stock reserved
for issuance upon exercise of director and employee stock options of HBOC
at a weighted average exercise price of $16.856 per share and up to 516,563
shares of Common Stock issuable upon exercise of director and employee
stock options of CliniCom.
</TABLE>
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE AND CUSTOMER DATA)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA FOR FOR SIX
YEAR ENDED SIX MONTHS ENDED MONTHS ENDED
YEARS ENDED DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
---------------------------- ---------------- -------------------------- ------------
1992 1993 1994 1994 (1) 1994 1995 1995 (1)
-------- -------- -------- ---------------- -------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................................. $214,954 $250,791 $327,201 $510,522 $145,850 $ 190,245 $277,397
Operating Expense:
Cost of Operations.................... 118,106 132,801 172,894 285,277 78,870 91,279 145,510
Marketing............................. 26,144 34,631 42,769 57,091 19,649 26,411 32,178
Research and Development.............. 20,096 23,428 28,928 39,228 13,085 16,453 18,471
General and Administrative............ 29,035 27,765 34,590 52,675 14,712 20,490 30,930
Nonrecurring Charge................... -- -- -- -- -- 125,520(2) --
-------- -------- -------- ---------------- -------- ---------------- ------------
Operating Expense Before Nonrecurring
Charge................................. 193,381 218,625 279,181 434,271 126,316 154,633 227,089
-------- -------- -------- ---------------- -------- ---------------- ------------
Operating Expense After Nonrecurring
Charge................................. 193,381 218,625 279,181 434,271 126,316 280,153 227,089
-------- -------- -------- ---------------- -------- ---------------- ------------
Operating Income Before Nonrecurring
Charge................................. 21,573 32,166 48,020 76,251 19,534 35,612 50,308
-------- -------- -------- ---------------- -------- ---------------- ------------
Operating Income (Loss) After
Nonrecurring Charge.................... 21,573 32,166 48,020 76,251 19,534 (89,908) 50,308
-------- -------- -------- ---------------- -------- ---------------- ------------
Net Income (Loss)....................... $ 13,758 $ 18,819 $ 28,159 $ 41,573 $ 11,763 $ (54,561) $ 27,784
-------- -------- -------- ---------------- -------- ---------------- ------------
-------- -------- -------- ---------------- -------- ---------------- ------------
Fully Diluted Earnings (Loss) Per
Share.................................. $ .43 $ .58 $ .85 $ 1.02 $ .36 $ (1.69)/.61(3) $ .67
Fully Diluted Weighted Average Shares
Outstanding............................ 32,296 32,718 33,106 40,667 32,834 32,333 41,259
OPERATING DATA:
Recurring Revenue....................... $ 83,809 $ 88,035 $119,678 $ 50,818 $ 77,687
One-Time Sales Revenue.................. $131,145 $162,756 $207,523 $ 95,032 $ 112,558
Approximate Number of Customers......... 1,300 1,400 2,100 1,600 2,600
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1995
------------------------
ACTUAL PRO FORMA (1)
--------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficiency)............................................................ $ (12,370) $ 11,364
Total Assets............................................................................ $ 441,455 $ 467,668
Long-Term Debt.......................................................................... $ 879 $ 879
Stockholders' Equity.................................................................... $ 241,769 $ 271,375
<FN>
------------------------------
(1) Gives effect to the acquisition of HSG and the proposed acquisition of
CliniCom as if each had occurred on January 1 of each period presented. For
a detailed description, see "Pro Forma Financial Information."
(2) Primarily relates to research and development purchased from FDC which had
not reached the stage of technological feasibility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(3) $.61 excludes the nonrecurring charge and includes the effect of dilutive
stock options.
</TABLE>
6
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE
FOLLOWING FACTORS IN EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED
HEREBY.
ACQUISITIONS AND INTEGRATION
An important element of the Company's business strategy has been to expand
through acquisitions. The Company's future success is partially dependent upon
its ability to effectively integrate acquired businesses with the Company's
operations. Although the Company believes that its recent acquisitions will be
successful and that it will be able to effect such integration, there can be no
assurance that past or future acquisitions will be successfully integrated or
that any such acquisition will otherwise be successful. In addition, the
financial performance of the Company is now and will continue to be subject to
various risks associated with the acquisition of businesses, including the
financial effects associated with the integration of such businesses. During the
fiscal quarter ended June 30, 1995, the Company recorded a $126 million pre-tax
charge in connection with its acquisition of HSG from the Selling Stockholder.
The Company has entered into a definitive agreement to acquire CliniCom which
the Company presently expects to close early in the fourth quarter of 1995,
although there can be no assurance that such transaction will be consummated.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" and "Business -- Strategy."
HEALTHCARE INDUSTRY AND MARKET CHANGES
The healthcare industry is subject to changing political, economic and
regulatory influences that may affect the procurement practices and other
operational aspects of the healthcare industry. During the past several years,
the healthcare industry has been subject to an increase in governmental
regulation of, among other things, reimbursement rates and certain capital
expenditures. A number of lawmakers have announced that they intend to propose
programs to reform the U.S. healthcare system. These programs may contain
proposals to increase governmental involvement in healthcare, lower
reimbursement rates and otherwise change the operating environment for the
Company's customers. Cost containment measures instituted by healthcare
providers could result in greater selectivity in the allocation of capital
funds, which could have an adverse effect on the Company's ability to sell its
products and services. The Company cannot predict with any certainty what
effect, if any, such proposals or healthcare reforms might have on its business,
financial condition or results of operations.
In addition, the healthcare industry is currently undergoing significant
consolidation of healthcare providers resulting in a smaller number of larger
healthcare delivery enterprises. The changing industry profile produced by this
consolidation could have an adverse impact on the Company's margins and
profitability due to increased competition.
Certain clinical applications of the Company's computer-assisted services
may be subject to regulation by the federal Food and Drug Administration (the
"FDA") as medical devices. Such regulation would require the registration of the
applicable manufacturing facility and software/ hardware products, application
of detailed recordkeeping and manufacturing standards, and pre-market
notification to the FDA of the Company's intent to market the applications in
question. The pre-market notification procedure could create delays in
marketing, and the FDA could require supplemental filings or object to certain
of these applications.
COMPETITION
The industry in which the Company operates is highly competitive and subject
to continual change in the manner in which products and services are marketed
and vendors are selected by customers. The primary competitive factors are scope
and quality of products and service and support capabilities. Certain current
and potential competitors have greater resources than the Company.
7
<PAGE>
TECHNOLOGICAL CHANGE; PROPRIETARY TECHNOLOGY
Future advances in the healthcare information systems industry could lead to
new technologies, products or services that are competitive with the products
and services offered by the Company. The Company's continued success will
depend, in part, on its ability to be responsive to technological developments
and challenges. Such technological advances could also lower the cost of such
products and services or otherwise result in competitive pricing pressures,
which could have an adverse effect on the Company. To remain competitive in the
evolving healthcare information systems marketplace, the Company must develop
new products on a timely basis. The failure to develop competitive products or
to introduce new products on a timely basis could have an adverse effect on the
Company's future financial performance.
The Company relies on a combination of trade secret, copyright and trademark
laws, nondisclosure and other contractual provisions and technical measures to
protect its proprietary rights in its products. There can be no assurance that
these protections will be adequate or that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technology. Although the Company believes that its products and
other proprietary rights do not infringe upon the proprietary rights of third
parties, there can be no assurance that third parties will not assert
infringement claims against the Company in the future.
PRODUCT LIABILITY
Certain of the Company's products provide applications that relate to
patient medical histories and treatment plans. Although the Company has not
experienced any material claims to date, any failure of the Company's products
to provide accurate and timely information could result in claims against the
Company. The Company maintains insurance to protect against claims associated
with the use of its products, but there can be no assurance that its insurance
coverage would adequately cover any claim asserted against the Company.
POSSIBLE VOLATILITY OF STOCK PRICE
The stock market has from time to time experienced extreme price and volume
fluctuations, particularly in the high technology sector, which have often been
unrelated to the operating performance of particular companies. Such
fluctuations and factors such as announcements of technological innovations or
new products by the Company or its competitors or third parties, as well as
market conditions in the computer software or hardware industries and healthcare
reform measures, may have a significant effect on the market price of the
Company's Common Stock. Also, since the Company recognizes revenues for certain
products upon the completion of certain milestone conditions, delays in meeting
such conditions could result in the shift of revenue recognition from one
quarter to another. Any such shift could adversely impact the results of
operations for a particular quarter, which in turn could cause fluctuations in
the Company's stock price.
SHARES ELIGIBLE FOR FUTURE SALE
See "Shares Eligible for Future Sale" for a discussion of the potential
effect on the market price of the Company's Common Stock of sales of the
Company's outstanding shares and, particularly, the shares issuable upon the
closing of the recently announced CliniCom Acquisition. Sales, or the
availability for sale, of a substantial number of shares of Common Stock could
have a significant adverse effect on the market price for the Common Stock.
8
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited Pro Forma Combined Income Statements for the six
months ended June 30, 1995, and the year ended December 31, 1994, have been
prepared to reflect adjustments to the Company's historical results of
operations to give effect to the acquisition of HSG and the proposed acquisition
of CliniCom as if each had been acquired on January 1 of each period presented.
The attached Pro Forma Combined Balance Sheets as of June 30, 1995, give effect
to the proposed acquisition of CliniCom as if it had occurred on that date.
These pro forma statements have been prepared by the Company based on the
audited financial statements of HSG and CliniCom for the year ended December 31,
1994, and the unaudited financial statements of HSG for the period from January
1 through June 17, 1995, and of CliniCom for the six months ended June 30, 1995,
which statements are incorporated by reference herein.
These pro forma statements are not necessarily indicative of the results of
operations which would have been attained had each of the acquisitions been
consummated on the dates indicated or which may be attained in the future. These
pro forma statements should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
historical financial statements and notes thereto of HBOC, HSG and CliniCom,
incorporated herein by reference.
9
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED INCOME STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
HBOC HSG ADJUSTMENTS COMBINED CLINICOM ADJUSTMENTS COMBINED
--------- -------- ------------ ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue....................... $ 190,245 $ 53,429 $ 17,048(2) $ 258,440 $ 21,770 $ (2,813)(8) $ 277,397
(2,282)(3)
Operating Expense:
Cost of Operations.......... 91,279 -- 44,263(2) 137,194 11,429 (4,231)(8) 145,510
(296)(3) 1,418(8)
130(3) (300)(9)
3,334(3)
(456)(3)
(1,060)(3)
Marketing................... 26,411 -- 6,048(2) 29,810 2,758 (390)(9) 32,178
(2,649)(3)
Research and Development.... 16,453 -- 4,509(2) 16,724 2,347 (600)(9) 18,471
(4,238)(3)
General and
Administrative............. 20,490 -- 12,597(2) 29,309 2,381 (760)(9) 30,930
(1,896)(3)
767(3)
(2,649)(3)
Nonrecurring Charge......... 125,520 -- (125,520)(5) 0 -- -- 0
HSG Operating Expense....... -- 50,369 (50,369)(2) 0 -- -- 0
--------- -------- ------------ ---------- --------- ------------ ----------
Total Operating Expense... 280,153 50,369 (117,485) 213,037 18,915 (4,863) 227,089
--------- -------- ------------ ---------- --------- ------------ ----------
Operating Income (Loss)....... (89,908) 3,060 132,251 45,403 2,855 2,050 50,308
Other Income (Expense), Net... (1,026) (3,233) -- (4,259) 258 -- (4,001)
--------- -------- ------------ ---------- --------- ------------ ----------
Income (Credit) Before
Provision for Income Taxes... (90,934) (173) 132,251 41,144 3,113 2,050 46,307
Provision (Credit) for Income
Taxes........................ (36,373) 1,433 51,398(6) 16,458 158 1,907(10) 18,523
--------- -------- ------------ ---------- --------- ------------ ----------
Net Income (Loss)............. $ (54,561) $ (1,606) $ 80,853 $ 24,686 $ 2,955 $ 143 $ 27,784
--------- -------- ------------ ---------- --------- ------------ ----------
--------- -------- ------------ ---------- --------- ------------ ----------
Earnings (Loss) Per Share:
Primary..................... $ (1.69) -- -- $ .66 $ .33 -- $ .68
Fully Diluted............... $ (1.69) -- -- $ .66 $ .33 -- $ .67
Weighted Average Shares
Outstanding:
Primary..................... 32,333 -- 5,149(7) 37,482 9,007 (5,404)(11) 41,085
Fully Diluted............... 32,333 -- 5,323(7) 37,656 9,007 (5,404)(11) 41,259
</TABLE>
See "Notes to Pro Forma Combined Financial Statements."
10
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED INCOME STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA
HBOC HSG ADJUSTMENTS COMBINED CLINICOM ADJUSTMENTS
-------- -------- ---------------- --------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenue................................. $327,201 $121,241 $ 36,732(2) $480,546 $35,416 $ (5,440)(8)
(4,628)(3)
Operating Expense:
Cost of Operations.................... 172,894 -- 93,480(2) 273,131 18,186 (5,005)(8)
(746)(3) (435)(8)
260(3) (600)(9)
6,668(3)
(925)(3)
1,500(4)
Marketing............................. 42,769 -- 14,625(2) 52,825 5,046 (780)(9)
(4,569)(3)
Research and Development.............. 28,928 -- 9,153(2) 37,125 3,303 (1,200)(9)
(956)(3)
General and Administrative............ 34,590 -- 20,393(2) 50,476 3,719 (1,520)(9)
(3,879)(3)
1,534(3)
(2,162)(3)
HSG Operating Expense................. -- 100,919 (100,919)(2) 0 -- --
-------- -------- ---------------- --------- -------- -------
Total Operating Expense............. 279,181 100,919 33,457 413,557 30,254 (9,540)
-------- -------- ---------------- --------- -------- -------
Operating Income (Loss)................. 48,020 20,322 (1,353) 66,989 5,162 4,100
Other Income (Expense), Net............. (1,031) (6,703) -- (7,734) 771 --
-------- -------- ---------------- --------- -------- -------
Income (Credit) Before Provision for
Income Taxes........................... 46,989 13,619 (1,353) 59,255 5,933 4,100
Provision (Credit) for Income Taxes..... 18,830 7,877 (3,005)(6) 23,702 445 3,568(10)
-------- -------- ---------------- --------- -------- -------
Net Income.............................. $ 28,159 $ 5,742 $ 1,652 $ 35,553 $ 5,488 $ 532
-------- -------- ---------------- --------- -------- -------
-------- -------- ---------------- --------- -------- -------
Earnings Per Share:
Primary............................... $ .85 -- -- $ .96 $ .62 --
Fully Diluted......................... $ .85 -- -- $ .96 $ .62 --
Weighted Average Shares Outstanding:
Primary............................... 32,973 -- 4,000(7) 36,973 8,901 (5,341)(11)
Fully Diluted......................... 33,106 -- 4,000(7) 37,106 8,902 (5,341)(11)
<CAPTION>
PRO FORMA
COMBINED
---------
<S> <C>
Revenue................................. $510,522
Operating Expense:
Cost of Operations.................... 285,277
Marketing............................. 57,091
Research and Development.............. 39,228
General and Administrative............ 52,675
HSG Operating Expense................. 0
---------
Total Operating Expense............. 434,271
---------
Operating Income (Loss)................. 76,251
Other Income (Expense), Net............. (6,963)
---------
Income (Credit) Before Provision for
Income Taxes........................... 69,288
Provision (Credit) for Income Taxes..... 27,715
---------
Net Income.............................. $ 41,573
---------
---------
Earnings Per Share:
Primary............................... $ 1.03
Fully Diluted......................... $ 1.02
Weighted Average Shares Outstanding:
Primary............................... 40,533
Fully Diluted......................... 40,667
</TABLE>
See "Notes to Pro Forma Combined Financial Statements."
11
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEETS
JUNE 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HBOC CLINICOM ADJUSTMENTS COMBINED
-------- -------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents..................................................... $ 8,232 $ 7,526 $ -- $ 15,758
Receivables, Net.............................................................. 131,709 23,884 (13,486)(8) 142,107
Current Deferred Income Taxes................................................. 9,130 -- -- 9,130
Inventories................................................................... 1,868 3,401 -- 5,269
Prepaids and Other Current Assets............................................. 12,061 895 (1,879)(8) 11,077
-------- -------- ------------ ---------
Total Current Assets........................................................ 163,000 35,706 (15,365) 183,341
-------- -------- ------------ ---------
Intangibles, Net................................................................ 181,293 -- -- 181,293
Deferred Income Taxes........................................................... 33,096 -- -- 33,096
Property and Equipment, Net..................................................... 31,983 2,646 -- 34,629
Capitalized Software, Net....................................................... 25,626 3,491 (400)(8) 28,717
Other Noncurrent Assets, Net.................................................... 6,457 135 -- 6,592
-------- -------- ------------ ---------
Total Assets.............................................................. $441,455 $41,978 $ (15,765) $467,668
-------- -------- ------------ ---------
-------- -------- ------------ ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities............................................................. $175,370 $ 8,816 $ (12,209)(8) $171,977
Long-Term Debt.................................................................. 879 -- -- 879
Other Long-Term Liabilities..................................................... 23,437 -- -- 23,437
Stockholders' Equity............................................................ 241,769 33,162 (3,556)(8) 271,375
-------- -------- ------------ ---------
Total Liabilities and Stockholders' Equity................................ $441,455 $41,978 $ (15,765) $467,668
-------- -------- ------------ ---------
-------- -------- ------------ ---------
</TABLE>
See "Notes to Pro Forma Combined Financial Statements."
12
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
GENERAL
1. The attached Pro Forma Combined Income Statements for the six months
ended June 30, 1995, and the year ended December 31, 1994, give effect to the
acquisition of HSG which was completed on June 17, 1995, and the proposed
CliniCom Acquisition. The foregoing Pro Forma Combined Balance Sheets as of June
30, 1995, give effect to the proposed CliniCom Acquisition as if it had occurred
on that date. No pro forma adjustments are necessary for the HSG acquisition on
the June 30, 1995, Pro Forma Combined Balance Sheets since that transaction was
completed on June 17, 1995.
HBOC accounted for the acquisition of HSG as a purchase. The proposed
CliniCom Acquisition, which is subject to certain conditions including CliniCom
stockholder approval, is expected to close early in the fourth quarter of 1995.
The transaction will be accounted for as a pooling of interests.
Adjustments to the Pro Forma Combined Income Statements include such
adjustments as are necessary to allocate the HSG purchase price based on the
estimated fair market value of the assets acquired and the liabilities assumed
and to give effect to events that are directly attributable to the HSG and
CliniCom transactions, which are expected to have a continuing impact on HBOC
and are factually supportable. The adjustments related to the Pro Forma Combined
Income Statements assume the transactions were consummated on January 1 of each
period presented.
Adjustments to the Pro Forma Combined Balance Sheets include such
adjustments as are necessary to give effect to events that are directly
attributable to the transaction and factually supportable. The adjustments
related to the Pro Forma Combined Balance Sheets assume the transaction was
consummated on June 30, 1995.
HSG ACQUISITION
2. HSG revenue and expense classifications were historically broken out
using different policies than those applied by HBOC. The adjustments necessary
to reclassify HSG revenue and expenses in accordance with HBOC policies are:
<TABLE>
<CAPTION>
6/30/95 12/31/94
-------- ---------
<S> <C> <C>
Revenue........................................... $ 17,048 $ 36,732
Cost of Operations................................ $ 44,263 $ 93,480
Marketing......................................... $ 6,048 $ 14,625
Research and Development.......................... $ 4,509 $ 9,153
General and Administrative........................ $ 12,597 $ 20,393
HSG Operating Expense............................. $(50,369) $(100,919)
</TABLE>
Historically, HSG netted certain costs against revenue for presentation,
while HBOC has historically reported revenue as a gross number.
13
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
3. The following adjustments are necessary to adjust the June 30, 1995, and
December 31, 1994, income statement impact of the asset and liability fair
market value adjustments, assuming the purchase of HSG had been consummated on
January 1 of each period presented:
<TABLE>
<CAPTION>
6/30/95 12/31/94
------- --------
<S> <C> <C>
HSG Capitalized Software.......................... $ (296) $ (746)
HSG Goodwill...................................... $(1,896) $ (3,879)
HBOC Capitalized Software......................... $ 130 $ 260
HBOC Customer Lists --
to amortize over 15 years....................... $ 3,334 $ 6,668
HBOC Goodwill --
to amortize over seven years.................... $ 767 $ 1,534
Deferred Revenue:
Revenue......................................... $(2,282) $ (4,628)
Cost of Operations.............................. $ (456) $ (925)
Terminated Employees:
Cost of Operations.............................. $(1,060) $ --
Marketing....................................... $(2,649) $ (4,569)
Research and Development........................ $(4,238) $ (956)
General and Administrative...................... $(2,649) $ (2,162)
</TABLE>
HBOC recorded the HSG deferred revenue acquired at its cost (the cost to
service remaining commitment). The net profit which had been deferred has been
eliminated.
The reduction of expense related to terminated employees results from the
termination of certain HSG employees in order to eliminate certain redundant
positions and increase the efficiency of the combined operations.
4. HSG was charged an allocated amount for the use of FDC's Data Center. In
1994, the amount charged was less than that deemed reasonable by management by
$1,500. The adjusted charge reflects that which will be charged to HBOC in the
future. The 1995 charge has been deemed reasonable by management.
5. In the second quarter of 1995, HBOC recorded a $125,520 charge primarily
related to purchased research and development of HSG. This nonrecurring charge
has been eliminated from the June 30, 1995, Pro Forma Combined Income
Statements.
6. The provision for income tax was derived by using the HBOC effective tax
rate of 40%.
7. The weighted average shares outstanding have been adjusted for the HSG
acquisition to give effect to the additional 4 million shares of Common Stock of
HBOC outstanding, assuming the transaction had been consummated on January 1 of
each period presented and to give effect to the dilutive effect of stock options
outstanding at June 30, 1995, assuming that HBOC had net income.
CLINICOM ACQUISITION
8. Beginning in 1988, HBOC and CliniCom were parties to various informal
cooperative marketing arrangements. Accordingly, certain intercompany
transactions and balances are included in the historical financial statements of
HBOC and CliniCom. The adjustments necessary to eliminate intercompany
transactions assuming the pooling of interests had been consummated on January 1
of each period presented are:
<TABLE>
<CAPTION>
6/30/95 12/31/94
------- --------
<S> <C> <C>
Revenue........................................... $(2,813) $ (5,440)
Cost of Operations................................ $(4,231) $ (5,005)
</TABLE>
14
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
The following adjustments are necessary to correctly match revenue and
expenses according to HBOC policies, assuming the pooling of interests had been
consummated on January 1 of each period presented:
<TABLE>
<CAPTION>
6/30/95 12/31/94
------- --------
<S> <C> <C>
Cost of Operations................................ $ 1,418 $(435)
</TABLE>
The adjustments necessary to eliminate intercompany balances, assuming the
pooling of interests had been consummated on June 30, 1995, are:
<TABLE>
<CAPTION>
6/30/95
---------
<S> <C>
Receivables....................................... $ (13,486)
Prepaids and Other Current Assets................. $ (1,879)
Capitalized Software.............................. $ (400)
Current Liabilities............................... $ (12,209)
Retained Earnings................................. $ (3,556)
</TABLE>
9. The following adjustments are necessary to adjust the June 30, 1995, and
December 31, 1994, income statements to give effect to employee terminations.
The reduction of expense related to terminated employees results from the
termination of certain CliniCom employees in order to eliminate certain
redundant positions and increase the efficiency of the combined operations. The
adjustments, assuming the pooling of interests had been consummated on January 1
of each period presented, are:
<TABLE>
<CAPTION>
6/30/95 12/31/94
------- --------
<S> <C> <C>
Cost of Operations................................ $ (300) $ (600)
Marketing......................................... $ (390) $ (780)
Research and Development.......................... $ (600) $ (1,200)
General and Administrative........................ $ (760) $ (1,520)
</TABLE>
10. The provision for income tax was derived by using the HBOC effective
tax rate of 40%.
11. The definitive agreement to acquire CliniCom provides for the exchange
of .4 of a share of Common Stock of HBOC for each share of currently outstanding
CliniCom common stock.
15
<PAGE>
HBO & COMPANY
SELECTED HISTORICAL FINANCIAL INFORMATION
(FROM CONTINUING OPERATIONS)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
The following selected historical financial information for each of the five
years in the period ended December 31, 1994, set forth below have been derived
from the consolidated financial statements of the Company. The report of Arthur
Andersen LLP, independent public accountants, with respect to such consolidated
financial statements as of December 31, 1993, and 1994 and for the three years
in the period ended December 31, 1994, has been incorporated herein by
reference. The historical financial information for the six months ended June
30, 1994, and 1995 is derived from the unaudited financial statements of the
Company, which in the opinion of management include all adjustments necessary
for a fair presentation of the financial condition and results of operations of
the Company for such periods.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ ------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue.................................................. $179,704 $177,775 $214,954 $250,791 $327,201 $145,850 $190,245
Operating Expense:
Cost of Operations..................................... 99,036 99,314 118,106 132,801 172,894 78,870 91,279
Marketing.............................................. 20,530 22,741 26,144 34,631 42,769 19,649 26,411
Research and Development............................... 19,166 19,571 20,096 23,428 28,928 13,085 16,453
General and Administrative............................. 28,103 27,762 29,035 27,765 34,590 14,712 20,490
Nonrecurring Charge.................................... 731 10,883 -- -- -- -- 125,520(1)
-------- -------- -------- -------- -------- -------- --------
Total Operating Expense.............................. 167,566 180,271 193,381 218,625 279,181 126,316 280,153
-------- -------- -------- -------- -------- -------- --------
Operating Income (Loss).................................. 12,138 (2,496) 21,573 32,166 48,020 19,534 (89,908)
Other Income (Expense), Net.............................. (133) (1,263) (553) (669) (1,031) 73 (1,026)
-------- -------- -------- -------- -------- -------- --------
Net Income (Loss) Before Provision (Credit) for Income
Taxes................................................... 12,005 (3,759) 21,020 31,497 46,989 19,607 (90,934)
Provision (Credit) for Income Taxes...................... 3,811 (1,312) 7,262 12,678 18,830 7,844 (36,373)
-------- -------- -------- -------- -------- -------- --------
Net Income (Loss)........................................ $ 8,194 $ (2,447) $ 13,758 $ 18,819 $ 28,159 $ 11,763 $(54,561)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Fully Diluted Earnings (Loss) Per Share.................. $ .27 $ (.08) $ .43 $ .58 $ .85 $ .36 $ (1.69)
Fully Diluted Weighted Average Shares Outstanding........ 29,720 28,654 32,296 32,718 33,106 32,834 32,333
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------ AT JUNE 30,
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficiency)................................ $ 19,254 $ 18,038 $ 18,304 $ 18,037 $ (8,719) $(12,370)
Total Assets................................................ $127,758 $108,285 $113,842 $131,157 $233,877 $441,455
Long-Term Debt.............................................. $ 37,450 $ 20,003 $ -- $ -- $ 252 $ 879
Stockholders' Equity........................................ $ 28,339 $ 24,692 $ 47,727 $ 57,575 $ 91,475 $241,769
<FN>
------------------------------
(1) Primarily relates to research and development purchased from FDC which had
not reached the stage of technological feasibility.
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenues represent both one-time sales revenue and recurring
revenues. Software implementation fees, hardware sales and software license fees
represent nonrecurring components of revenue. Software maintenance fees, monthly
service fees and outsourcing services fees represent recurring revenues.
Information systems are marketed under equipment purchase and software
license agreements, as well as service agreements. Hardware revenue is
recognized at the time of delivery, and software license fees are recognized
either when the software is installed or, for packaged software, upon shipment.
Implementation fees are recognized as the work is performed or on a
percentage-of-completion basis. Software maintenance and support agreements are
marketed under annual and multi-year renewable agreements. Maintenance and
support revenue is generally billed annually and recognized ratably over the
period. Fees for outsourcing services are either recognized monthly as the work
is performed or on a percentage-of-completion basis.
The Company capitalizes research and development costs incurred from the
point of technological feasibility to the point of general availability and
amortizes those costs using the straight-line method based on estimated useful
lives of three years.
The Company grows its business through the development of new products, the
expansion of its service capabilities and the addition of new customers. A
substantial portion of its recent growth has resulted from acquisitions of
companies which expanded the HBOC product lines and enhanced its installed
customer base.
The following table outlines these acquisitions:
<TABLE>
<CAPTION>
AGGREGATE PURCHASE
DATE ACQUIRED COMPANY PRICE PRIMARY SIGNIFICANCE
-------------------- --------------------------- -------------------- ----------------------------------------
<S> <C> <C> <C>
June 1993 Biven Software, Inc. $2 million Managed care applications
December 1993 Data-Med Computer Services $5.2 million(1)
Limited Installed base of 100 hospitals in U.K.
May 1994 IBAX Healthcare Systems $44 million Series 4000 product line with presence
in the IBM AS/400 market; installed
base of 475 hospitals
September 1994 Serving Software, Inc. $48 million(2) Healthcare enterprise patient and
resource scheduling software
December 1994 Care 2000, Inc. $1.5 million Specialty in case management
methodologies
February 1995 Advanced Laboratories $7 million, net of Laboratory software for the healthcare
Systems, Inc. cash acquired and commercial marketplace
June 1995 Health Systems Group of $200.6 million(3)
First Data Corporation Installed base of 500 hospitals
July 1995 Pegasus Medical, LTD $8 million and up to Electronic patient record for the
$7 million physician's office designed to support
contingent payment the clinical process across the
continuum of care
Fourth Quarter 1995 CliniCom Incorporated To be determined(4) Bedside acute care clinical information
(Estimated) systems
<FN>
------------------------
(1) Represents $5 million cash and shares of Common Stock, valued at closing at
$200,000.
(2) Accounted for as a pooling of interests. Represents value at closing of
1,479,029 shares of Common Stock.
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
(3) Represents $600,000 cash and 4 million shares of Common Stock valued at
$200 million based on the ten day average of the closing prices of the
Common Stock immediately prior to closing.
(4) To be accounted for as a pooling of interests. To be determined based on
value of .4 of a share of Common Stock to be issued for each of the
approximately 8,660,000 shares of outstanding common stock of CliniCom.
</TABLE>
RESULTS OF OPERATIONS
The following table presents, as a percent of revenue, certain categories
included in the Company's consolidated statements of income for the periods
indicated:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
------------------------ ---------------
1992 1993 1994 1994 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenue........................................... 100% 100% 100% 100% 100%
Operating Expense:
Cost of Operations.............................. 55% 53% 53% 55% 48%
Marketing....................................... 12% 14% 13% 13% 14%
Research and Development........................ 9% 9% 9% 9% 9%
General and Administrative...................... 14% 11% 10% 10% 11%
Nonrecurring Charge............................. -- -- -- -- 65%
------ ------ ------ ------ ------
Operating Income (Loss)........................... 10% 13% 15% 13% (47%)
------ ------ ------ ------ ------
Net Income (Loss)................................. 6% 8% 9% 8% (29%)
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1995 AND 1994
The Company's revenue grew to $190.2 million for the first six months of
1995 from $145.9 million for the comparable prior year period as a result of
increased sales of the Pathways 2000 product group and HBOC's core transaction
systems and the Company's merger and acquisition activity. The Company's
acquisitions have increased revenue by enhancing the Company's product offerings
as well as expanding the customer base in which to sell its products.
Support and maintenance revenue increased 91% for the six-month period
compared to the same period of 1994 and was the source of approximately 29% of
the Company's revenue compared to approximately 20% a year ago. The increase in
support and maintenance revenue is a result of having more installed customers.
Software license fee revenue grew 29% for the 1995 six-month period, largely
due to Pathways 2000. Also contributing to the growth in license fee revenue was
the Serving Software Group, which has introduced its Pathways Healthcare
Scheduling product to the market; however, HBOC continues to derive a large
portion of its software license fee revenue from the STAR and TRENDSTAR
products.
Implementation services revenue grew 29% for the six-month period compared
to the same period last year. The increase was a result of the addition of the
Series product line and continued increases in implementation services for all
current business units.
Cost of operations were $91.3 million in the first six months of 1995 as
compared to $78.9 million in the comparable prior year period, but dropped to
48% of revenue for the six-month period compared to 54% for the same period in
1994. Cost of operations expense increased at a rate significantly slower than
the rate of revenue growth primarily due to a shift in the Company's software,
services and hardware revenue mix, a low salary growth rate resulting from
streamlining within the implementation organization, and a decrease in the use
of consultants and third-party contractors.
Marketing expense increased to $26.4 million or 14% of revenue for the first
six months of 1995 as compared to $19.6 million or 13% of revenue for the first
six months of 1994. Salary, travel and commission expense have increased due to
a larger sales force and higher sales volume.
18
<PAGE>
Research and development ("R&D") expense increased to $16.5 million from
$13.1 million but remained constant at 9% of revenue for the six-month periods
of both 1995 and 1994. Salary expense increased, while consulting expense
decreased as HBOC brought almost all of its development expertise in-house. The
R&D capitalization rate was 25% for the 1995 six-month period compared to 26%
for the comparable 1994 period. HBOC continues to work to enhance existing
products and bring additional Pathways 2000 products to the point of general
availability.
General and administrative expense increased to $20.5 million or 11% of
revenue for the first six months of 1995 from $14.7 million or 10% of revenue
for the first six months of 1994. The increases were primarily due to increased
depreciation and amortization expense resulting from a larger fixed asset base
and increased intangible asset amortization related to the acquisitions and
higher expense for incentive programs such as the Company-wide gainsharing
program.
The $126 million nonrecurring charge primarily related to the acquisition of
HSG, now the Charlotte Product Group, and resulted in an operating loss of $90
million for the six-month period ended June 30, 1995. Before adjusting for the
impact of this nonrecurring charge, operating income increased 82% for the
six-month period compared to the same period in 1994. Operating income as a
percent of revenue before the purchased research and development charge
increased to 19% from 13% for the six-month period.
The effective tax rate remained constant at 40% for the periods presented.
Earnings per share for the six months ended June 30, 1995, excluding the
nonrecurring charge, was $.64 ($.61 fully diluted), a 78% increase over the same
period in the prior year. These increases are attributable to increases in
revenue of 30% for the six-month period compared to the same period in 1994 with
a related increase of only 22% in operating expense, excluding the nonrecurring
charge. Revenue growth was fueled primarily by increased revenue from support
and maintenance, software license fees, and implementation services related to
both internal growth and acquisitions.
With the nonrecurring charge, loss per share for the six months ended June
30, 1995 was $(1.69). The nonrecurring charge of $126 million is primarily
related to research and development of HSG, which at the date of acquisition had
not reached technological feasibility. Also, the reported loss per share is not
adjusted for the effect of stock options outstanding since the effect was
anti-dilutive. Fully diluted earnings per share information, excluding the
nonrecurring charge, is presented above to aid in the analysis of results.
COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND 1993
Revenue for 1994 of $327.2 million increased 30% over 1993 revenue of $250.8
million due to both internal growth and acquisitions. Strong software license
fee revenue, growth in recurring maintenance and support contracts, heavy
implementation activity and growth from new outsourcing business all contributed
to overall growth. Revenue from software license fees increased 58% due
primarily to increased sales of the Company's new Pathways 2000 and STAR
products. The Series product line as well as the TRENDSTAR line of decision
support products also contributed strongly to software revenue growth. Revenue
from software maintenance and support contracts increased 69% in 1994 over 1993
due to growth in HBOC's customer base by more than 1,000 customers and as a
result of the installation of additional products in the Company's existing
customer base. Revenue from implementation services grew 18% as the Company's
implementation teams, particularly in the Series and STAR groups, worked on the
backlog of sold business. Revenue from outsourcing services grew 30%, primarily
due to growth in the Company's outsourcing businesses in the United Kingdom.
HBOC entered 1995 with a backlog consisting of future contracted outsourcing
service fees which totalled $75.2 million, contracted software and hardware fees
not yet delivered and installed which totalled $28.4 million, and future
payments from systems sold under monthly service fee agreements totalling $11.6
million for future years. HBOC also derives a large portion of its revenue from
renewable software maintenance and support contracts and from implementation
services.
19
<PAGE>
Cost of operations increased to $172.9 million in 1994 from $132.8 million
in 1993, but as a percent of revenue remained stable at 53% for both years.
Personnel-related expense has grown as HBOC has added implementation and support
staff to service its growing customer base, although cost of operations salaries
as a percent of revenue have actually decreased. Software royalty expense
increased as a result of Pathways Care Manager, the Company's nursing solution;
Pathways Health Network Server, the Company's enterprisewide database
repository; and the addition of the Series product line. Amortization expense
increased as a result of higher amortization of capitalized software as new
products were released and amortization of the customer lists acquired from IBAX
Healthcare Systems ("IBAX"). Hardware and software maintenance expense increased
primarily for support of customers' third-party business partner products.
Marketing expense increased to $42.8 million in 1994 from $34.6 million in
1993, but as a percent of revenue decreased to 13% in 1994 from 14% in 1993.
Marketing expense increased in total primarily in the area of personnel-related
expense that included salaries, commissions and travel. The addition of the
Series sales force drove these expenses higher.
R&D expense as a percent of revenue remained constant at 9% in 1994 and
1993. R&D expense increased in total in 1994 primarily as a result of higher
personnel-related expenses that were partially offset by a higher R&D
capitalization rate. HBOC capitalized 25% of its R&D costs in 1994, up slightly
from 24% in 1993. The increase in the capitalization rate reflects the effort
spent bringing the Company's new suite of Pathways 2000 products to market.
RESEARCH AND DEVELOPMENT SUMMARY
<TABLE>
<CAPTION>
1993 1994
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Total R&D Expenditures................................................. $ 30,890 $ 38,608
Less Capitalized R&D................................................. (7,462) (9,680)
--------- ---------
Reported R&D Expense................................................... $ 23,428 $ 28,928
Capitalization Rate.................................................... 24% 25%
--------- ---------
--------- ---------
</TABLE>
General and administrative expenses increased to $34.6 million in 1994 from
$27.8 million in 1993 but as a percent of revenue decreased slightly in 1994.
Total general and administrative expense increased, although at less than the
rate of revenue growth. Assets added through the Company's acquisitions resulted
in higher depreciation and amortization expense. Facilities-related expenses
have increased in total due to the IBAX acquisition, but the Company is
continuing to take steps to maximize productive use of space and equipment.
Employee benefit expense has increased due to the growth in the number of
employees.
Total operating expense as a percent of revenue showed a downward trend,
which improved operating income as a percent of revenue to 15% in 1994 from 13%
in 1993.
The effective tax rate remained stable at 40% in both 1994 and 1993.
Weighted average shares outstanding increased between 1993 and 1994 due to
shares issued under employee stock option and purchase programs and the dilutive
effect of stock options outstanding.
COMPARISON OF YEARS ENDED DECEMBER 31, 1993 AND 1992
For 1993, revenue was $250.8 million, an increase of 17% over 1992 revenue
of $215.0 million as a result primarily of increased STAR system sales and
installations, the addition of outsourcing customers, continued growth in
networking technology sales and increased demand for decision support software
products. HealthQuest revenue decreased slightly as customers waited for new
releases of several products.
20
<PAGE>
At December 31, 1993, future contracted outsourcing service fees totalled
$78.6 million and contracted software license fees and hardware to be installed,
as well as related subcontracted labor, totalled $30.9 million. Future payments
from systems installed or to be installed under monthly service agreements
provided the Company with a $23.4 million revenue base for future years as of
December 31, 1993. HBOC also generated recurring revenue from software
maintenance and enhancement fees.
Cost of operations expense increased to $132.8 million in 1993 from $118.1
million in 1992 but decreased as a percent of revenue to 53% from 55% in 1992
due to the move of approximately 50 employees into marketing roles and improved
productivity of implementation personnel. Hardware, personnel and consulting
costs were higher in 1993 compared to 1992 due to a higher volume of
installations and new outsourcing contracts.
Marketing expense increased to $34.6 million in 1993 from $26.1 million in
1992 and increased as a percent of revenue to 14% in 1993 from 12% in 1992 as a
result of the move of approximately 50 employees into marketing roles and
increased commissions due to higher sales volume.
R&D expense as a percent of revenue remained constant in 1993 and 1992. R&D
expense increased in 1993 due to an increase in personnel and other expenses
related to development activities. HBOC capitalized 24% of its R&D costs in
1993, which was an increase from the 1992 rate of 23%, due to new product
offerings reaching the technological feasibility threshold required for
capitalization.
RESEARCH AND DEVELOPMENT SUMMARY
<TABLE>
<CAPTION>
1992 1993
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Total R&D Expenditures................................................. $ 26,230 $ 30,890
Less Capitalized R&D................................................. (6,134) (7,462)
--------- ---------
Reported R&D Expense................................................... $ 20,096 $ 23,428
Capitalization Rate.................................................... 23% 24%
--------- ---------
--------- ---------
</TABLE>
General and administrative expense decreased to $27.8 million for 1993 from
$29.0 million in 1992 and also decreased as a percent of revenue compared to
1992, primarily as a result of lower salary expense, rent and bonuses due to
compensation plan restructuring and expense controls.
Total operating expense as a percent of revenue showed a downward trend,
which improved operating income as a percent of revenue from 13% in 1993 to 10%
in 1992.
The effective tax rate increased to 40% in 1993 from 35% in 1992 due to
deferred tax adjustments in 1992 and tax law changes in 1993.
Weighted average shares outstanding increased between 1992 and 1993 due to
shares issued under employee stock option and purchase programs and the dilutive
effect of stock options outstanding.
INFLATION
HBOC is affected by inflation through increased salaries, benefits and other
operating and administrative expenses. To the extent permitted by the
marketplace, the Company attempts to pass on increased costs by periodically
increasing prices of products and services. Both service and software
maintenance and support agreements contain clauses allowing the Company to
increase fees annually to reflect changes in costs. Other products and services
are generally contracted for short periods and are therefore not exposed to
inflationary pressure.
21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the six-month period ended June 30, 1995, HBOC generated $17 million
of cash flow from operations. The Company used a net $11 million for investing
activities, including the purchase of ALS, and capital expenditures. In
addition, the Company used $3.6 million to reduce indebtedness and pay
dividends. As a result, the Company increased its cash balance by $2.4 million
to $8.2 million at June 30, 1995.
For the year ended December 31, 1994, HBOC generated $39.4 million of cash
from operating activities and $1.1 million from financing activities, and used
$60.4 million in investing activities (including $42.5 million for acquisitions,
net of cash acquired, $9.7 million for capitalized software development and $5.7
million for capital expenditures), resulting in a cash decrease of $20 million.
The Company's current ratio remained constant at .9:1 at both June 30, 1995,
and December 31, 1994. Current assets increased $40.3 million or 33% during the
first six months of 1995, primarily due to acquisitions. The bulk of this growth
came from increased receivables acquired in the acquisition of HSG. Receivables
management is a key performance factor for HBOC, and management continues to
focus on this area. Current liabilities increased $44 million or 33% primarily
due to liabilities assumed related to the acquisition of HSG and increased
accounts payable.
The Company has access to several financing sources, including $25 million
available under a revolving credit agreement and $5 million available on two
lines of credit totalling $10 million, as of June 30, 1995.
Management believes positive future cash flows from operations and access to
financing sources will enable HBOC to continue to make strategic investments to
enhance quality, increase efficiency and promote growth.
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly financial data of
the Company for its six most recent fiscal quarters. In the opinion of the
Company's management, this unaudited information has been prepared on the same
basis as the audited information and includes all adjustments necessary to
present fairly the information set forth therein. The operating results for any
quarter are not necessarily indicative of results for any future period.
QUARTERLY RESULTS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED,
------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1994 1994 1994 1994 1995 1995
----------- ----------- ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue............................... $ 67,507 $ 78,343 $ 85,938 $ 95,413 $ 90,709 $ 99,536
Operating Income (Loss)............... $ 8,861 $ 10,673 $ 13,324 $ 15,162 $ 15,365 $(105,273)(1)
Net Income (Loss)..................... $ 5,428 $ 6,335 $ 7,726 $ 8,670 $ 9,002 $ (63,563)
Fully Diluted Earnings (Loss) Per
Share................................ $ .17 $ .19 $ .23 $ .26 $ .27 $ (1.94)
Fully Diluted Weighted Average Shares
Outstanding.......................... 32,818 33,040 33,263 33,351 33,481 32,739
<FN>
------------------------------
(1) Includes nonrecurring charge, which primarily relates to research and
development purchased from FDC which had not reached the stage of
technological feasibility.
</TABLE>
22
<PAGE>
BUSINESS
GENERAL
OVERVIEW
HBOC is a leading healthcare information systems company that develops
integrated patient care, clinical, financial and strategic management software
solutions for healthcare providers, payers and integrated healthcare delivery
systems. HBOC designs open systems solutions which facilitate the integration of
clinical, financial and administrative data from a wide range of customer
systems and software. The Company's broad product portfolio can be implemented
on a stand-alone, combined or enterprisewide basis. HBOC's newer products offer
open systems solutions that enable customers to add incremental capabilities to
existing information systems, without making prior capital investments obsolete.
HBOC also provides networking technologies and outsourcing services under
contract management agreements whereby its staff manages and operates data
centers, information systems, organizations and business offices of healthcare
institutions of various sizes and structures.
The Company markets its products and services to hospitals, integrated
healthcare delivery systems, physicians' offices, managed care providers, home
health providers, pharmacies and reference laboratories, and currently has one
or more applications installed in approximately 2,600 of the 5,900 hospitals in
the United States. The Company also sells its products and services
internationally through its subsidiaries in the United Kingdom and Canada and
distribution agreements in Saudi Arabia, Australia, Puerto Rico and New Zealand.
INDUSTRY
The healthcare industry is undergoing significant and rapid change.
Healthcare delivery costs have increased dramatically in recent years as
compared to the overall rate of inflation. The growing influence of managed care
has resulted in increasing pressure on participants in the healthcare system to
contain costs. Accordingly, the healthcare system has migrated towards more
managed care reimbursement, including discounted fee for service and capitation.
Under capitation, providers are paid a pre-determined fee per individual to
provide all healthcare services, thereby assuming the potential financial risks
of escalating healthcare costs. In order to deliver care in a cost effective
manner, providers are forming integrated healthcare delivery systems ("IHDS") to
provide care across the continuum.
IHDS are vertical networks of care providers that may include acute care
hospitals, physicians, out-patient care facilities and home healthcare. The goal
of IHDS is to deliver comprehensive healthcare in a cost effective manner and,
accordingly, their success is dependent on effectively managing and delivering
information to the caregivers. As IHDS are evolving, the demand for information
services is increasing as both financial and clinical information is required
across the multiple points-of-care.
Traditionally, the hospital information systems market has been the largest
segment of healthcare information services. According to Sheldon Dorenfest, a
healthcare consulting company, in 1994 the healthcare industry spent
approximately $8.5 billion for products and services to support automated
information systems, and the growth rate is expected to continue to increase
over the next several years as healthcare information expenditures are expected
to rise to $13 billion by 1997. In addition to this expanding market
opportunity, the demand for healthcare information systems is also increasing
because hospitals and other providers are under pressure to quantify and control
their costs. As a result, they are spending more of their operating budgets on
systems which enable them to access such information. According to the 1995
Annual HIMSS/HP Leadership Survey, an industry survey conducted by Hewlett
Packard at the Healthcare Information and Management Systems Society conference,
75% of the respondents stated that their information system investments will
increase at a rate of 20% or more over the next two years.
Healthcare information systems are evolving to meet the needs of a changing
marketplace. Initially, healthcare information systems were financially
oriented, focusing on the ability to capture
23
<PAGE>
charges and generate patient bills. As cost containment efforts have forced
providers and payors to focus on their costs, manage risk and provide outcomes
and quality analysis, system needs have evolved from the traditional billing
information to a wider range of needs including enterprisewide systems capable
of capturing and analyzing data at all points-of-care as well as data
repositories to store the data. Historically, cost containment efforts have been
hampered by a lack of integrated clinical and financial information. As
reimbursement is shifting more toward risk sharing and capitation, providers and
payers need to better manage risk by controlling costs, demonstrating quality,
measuring outcomes and influencing utilization. Each of these goals requires the
collection, analysis and interpretation of clinical and financial information
related to the delivery of healthcare.
The availability of a complete, timely and cost-effective patient-focused
information system is essential to controlling healthcare costs while providing
high quality patient care. In many cases, information necessary to provide
effective patient care is located at several different sites and is not
immediately available to the care giver. To implement a computerized
patient-focused information system that accesses patient information in a
cost-effective manner, current and historical paper records must be made
available by computer to all points-of-care. In order to effectively manage
information in the current healthcare environment, providers, payers and IHDS
need information systems that can interface fully with existing and future
systems, capture data at the point-of-care, communicate data across the
continuum of care and process and store large volumes of data necessary for the
development of the computer-based patient record.
STRATEGY
HBOC's strategy is to provide a comprehensive range of computer-based
information systems and services designed to meet the evolving needs of
healthcare enterprises. The key elements of this strategy are to:
LEVERAGE EXISTING CUSTOMER BASE. HBOC is a leader in the hospital
information systems marketplace with one or more applications installed in
approximately 2,600 of the 5,900 hospitals in the U.S. The Company expands its
core customer base through its sales and marketing efforts and strategic
acquisitions such as IBAX and HSG, which added 475 and 500 hospital customers,
respectively. This expanded customer base offers HBOC significant opportunities
to sell both additional applications of its established core product line and
its new Pathways patient-centered enterprisewide solutions. In addition, the
Company believes its customer relationships and familiarity with customers'
existing systems should give the Company an advantage over many of its
competitors in marketing applications to meet the evolving needs of these
customers. The Company also seeks to further leverage its relationships with
existing customers to access additional healthcare organizations throughout
newly-formed IHDS.
PROVIDE ENTERPRISEWIDE SOLUTIONS TO THE EVOLVING HEALTHCARE INDUSTRY. HBOC
offers one of the broadest product lines in the healthcare information systems
industry serving patient care, clinical, financial and strategic applications.
Through its Pathways 2000 family of patient-focused enterprisewide information
systems, the Company facilitates the more efficient integration of IHDS. HBOC's
Pathways 2000 client server applications are designed to provide a common
information infrastructure, enabling IHDS to collect, manage and disseminate
clinically oriented information organized on the basis of a patient's entire
history of care. The Pathways product line provides the capability to create
longitudinal computerized patient records as well as connectivity along the
entire continuum of care, enabling users to access patient data from any point
within an integrated delivery system.
PROVIDE SUPERIOR INTEGRATION OF PRODUCTS AND DATA. The Company's products
offer customers open systems solutions with flexibility in adding incremental
capabilities, which protects the customers' capital investments. In addition,
HBOC's client-server architecture facilitates integration of clinical with
financial and administrative data from both HBOC and non-HBOC applications for
24
<PAGE>
efficient resource allocation thereby allowing its customers to benefit from
price/performance advances. The Company believes that these features will be of
key significance to healthcare organizations as they face industry consolidation
and evolve as part of integrated delivery systems.
EXPAND INTO NEW MARKETS. The Company strives to establish premier product
brand-name recognition in new markets that provide business critical
applications in every essential care setting and the payer marketplace. The
Company believes that as the healthcare industry decentralizes, management
information requirements at the point-of-care will increase. HBOC is developing
or has acquired client server applications to meet these needs in the
physician's office, home health market, reference lab and the payer market, all
of which are scheduled to be available in 1995 or early 1996.
CONTINUE PRODUCT DEVELOPMENT. HBOC believes that a key to implementing each
of its growth strategies is an ongoing focus on research and development to
ensure its product offerings will continue to meet the evolving needs of its
existing and potential customer base. The Company's research efforts focus on
enhancements of existing product offerings as well as new product development.
In developing its products, HBOC's strategy is to ensure its information systems
are highly flexible, quickly adaptable and can serve the information access
needs of the increasingly broad range of users. HBOC's product developers use
state-of-the-art application development tools such as program generators,
artificial intelligence and expert systems which decrease development time and
lower the cost of new products. While the Company's efforts focus primarily on
internal research and development of new products, the Company has made and
continues to explore strategic acquisitions of developers of niche product
software to complement and diversify its product portfolio.
PRODUCT SUMMARY
The Company's offering of products and services is based on a strategic mix
of applications and technologies that support the restructuring of the
healthcare delivery system, backed by implementation, support and outsourcing
services. This portfolio of products is organized into four areas: core
applications, infrastructure applications, enterprisewide clinical practice
management applications and enterprise management applications.
CORE APPLICATIONS automate the operation of individual departments and their
respective functions within the healthcare enterprise.
INFRASTRUCTURE APPLICATIONS are not limited to a single department or
function; rather, they form the foundation of the emerging information
structures of healthcare enterprises. Specific components include:
- Interface managers that coordinate the flow of information throughout the
greater system and allow disparate incompatible source systems to
communicate with one another as well as enterprise applications;
- Indexing applications that organize the vast information collected about a
person throughout the enterprise into a patient-centered index; allowing
the patient to be tracked throughout the IHDS; and
- Data repository applications that collect all of the information generated
by source systems and organized by interface managers and patient indexes
into central relational databases, thus forming the basis for the
electronic medical record.
ENTERPRISEWIDE CLINICAL PRACTICE MANAGEMENT APPLICATIONS facilitate and
improve the actual practice of medicine throughout the enterprise. Examples
include:
- Point-of-care workstations that give professionals immediate access to the
critical information necessary to provide better quality care;
- Applications that make use of patient information to create protocols and
care pathways; and
- Applications that instantly register and schedule patients anywhere in the
enterprise from any other point within an enterprise.
25
<PAGE>
ENTERPRISE MANAGEMENT APPLICATIONS facilitate and improve the management and
operation of healthcare enterprises. These applications focus on providing
caregivers with the clinical, financial, and other information necessary to
improve the operation of the enterprise. Examples include utilization review and
accounts receivable management, as well as managed care contracting and member
management applications.
The following table outlines the principal products in each area:
PRODUCT SUMMARY
<TABLE>
<CAPTION>
GENERAL PRICE RANGE INSTALLED
PRODUCT FAMILY RELEASE DATE (IN THOUSANDS) BASE DESCRIPTION
---------------------- ------------- ------------ -------------- ------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
CORE APPLICATIONS
STAR STAR Available $150-250(1) 300 Hospital and clinical information
system -- UNIX/RISC-based (includes
patient care, laboratory,
radiology, pharmacy and financial)
HealthQuest HealthQuest Available $200-300 230 Hospital and clinical information
system -- IBM mainframe-based
Series Series Available $150-250 500 Hospital and clinical information
system (includes patient care,
radiology, pharmacy and financial)
TRENDSTAR TRENDSTAR Available $50(2) 650(3) Decision support system targeted at
acute care hospitals
Saint, The Precision CPG Available $150-1,000 400 Hospital and clinical information
Alternative, Host system -- UNIX/RISC-based and Host
Based Based
INFRASTRUCTURE
APPLICATIONS
Health Network Server Pathways Available $350-500 17 Relational database; data repository
for patient transactions
Interface Manager Pathways Available $60-150 58 Interface engine; manages network
traffic; performs protocol
conversion and translation
Health Network Pathways Available $300-500 11 Enterprisewide management system;
Management patient-centered data collection,
organization, and dissemination
ENTERPRISEWIDE
CLINICAL PRACTICE
MANAGEMENT
APPLICATIONS
Care Manager Pathways Available $150-1,000 34 Acute care point-of-care clinical
information system
Clinical Workstation Pathways Available $500-2,000 11 Assimilates and presents on-line,
-- Phases I and II real-time clinical information to
physicians and other care givers
Clinical Workstation Pathways Q4 95/Q1 96 $500-2,000 0 Will incorporate advanced nursing
-- Phases III and IV functions, clinical imaging, and
multimedia capabilities
Enterprise Scheduling Pathways Available $200-500 14 On-line enterprisewide scheduling
system
Enterprise Pathways Q4 95 $200-500 0 On-line enterprisewide registration
Registration system
Physician Chart Pegasus Q1 96 $150-300 2 Physician's office computer-based
Systems patient record
Home Health Home Health Q2 96 $150-500 0 Clinical point-of-care applications
for the home health market
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
GENERAL PRICE RANGE INSTALLED
PRODUCT FAMILY RELEASE DATE (IN THOUSANDS) BASE DESCRIPTION
---------------------- ------------- ------------ -------------- ------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE MANAGEMENT
APPLICATIONS
Enterprise Strategic- TRENDSTAR Available $200-750 650(3) Collects and presents data from
Management transaction and decision support
systems in a high-level, summary
form
Contract Management Pathways Available $200-1,000 47 Monitors and manages multiple varied
contracts for providers with
managed care focus
Managed Care Pathways Q4 95 $200-1,000 1 Helps entities manage contractual
arrangements with providers,
payers, and patients
TRENDSTAR Enterprise TRENDSTAR Q1 96/Q3 96 $100-750 0 Enterprisewide decision support
Information System system; new version will be client/
server based and will run on Sybase
Receivables Pathways TBD $100-250 0 Facilitates A/R, billing, and other
Workstation money management functions
<FN>
------------------------------
(1) $150-250 per module. On average, customers purchase 4-5 modules. Excludes
hardware (which is typically 50% of the software license fee),
implementation fees (which are typically $300-400), and software
maintenance fees (which approximate 15% of software license fees).
(2) $50 per module. On average, customers purchase 3 modules.
(3) 650 represents total TRENDSTAR installed base (including Enterprise
Strategic Management and TRENDSTAR).
</TABLE>
SERVICES
Installation and implementation services are provided for purchasers of all
HBOC software products to assist with the smooth introduction of or transition
to those products. HBOC also provides software maintenance and enhancement
services, as well as custom programming and system modifications to meet special
client requirements. Equipment maintenance services are provided through HBOC's
various hardware partners.
CONNECT TECHNOLOGY
To support the connectivity needs of hospitals and their affiliates, the
Connect Technology Group ("CTG") provides total network installation and
support. In addition, CTG offers comprehensive value-added network information
services that extend local and metropolitan area networks outside of the
hospital to include payers, vendors, financial institutions and the Internet.
All together, HBOC's networking solutions provide customers with a complete
network solution for electronic access throughout a provider enterprise.
OUTSOURCING SERVICES GROUP
HBOC has been in the outsourcing business in the United States for more than
20 years and now offers outsourcing services in the United Kingdom as well. With
the change and uncertainty engendered by healthcare reform and the resulting
economic pressures, information systems outsourcing is becoming increasingly
popular in the United States. Outsourcing services go beyond managing hospital
data processing operations (traditionally known as facilities management) to
encompass strategic management services in information systems planning,
receivables management, business office administration and major system
conversions.
RESEARCH AND DEVELOPMENT AND TECHNOLOGY
The Company's product development effort applies advanced computer
technology and installation methodologies to the specific information processing
needs of its customers. The Company believes a substantial and sustained
commitment to such research and development is important to the long-term
success of the business.
27
<PAGE>
Many of the Company's products are portable to a variety of hardware
platforms to protect a healthcare organization's hardware investments and enable
it to benefit from price/performance advances. For example, HBOC offers a full
range of its products on RISC (Reduced Instruction Set Computing) hardware using
the UNIX operating system, which has very attractive price/performance
characteristics. Additionally, workstation technology, via PCs, provides
enhanced productivity and appeal for system users by giving them access to
graphics, image processing, voice processing, multiple technologies and
sophisticated user interfaces.
The Company also offers specialized processors, utilizing client/server
technology, which provide organizations with improved processing and storage for
large volumes of data and specific applications, including imaging and document
processing. The Company utilizes local, metropolitan and wide area networks to
provide faster and more effective pathways to distribute the wider variety of
data, images and recorded voice needed by image processing and client/server
applications.
Investment in software development, including both research and development
expense as well as capitalized software, has increased as the Company has
addressed new software applications and enhanced existing products for installed
systems. In each of the last three fiscal years, the Company expensed 9% of
revenue for research and development, which was approximately $29 million in
1994. The Company capitalized 25%, 24% and 23% of its research and development
expenditures in 1994, 1993 and 1992, respectively. Such amounts exclude the
costs associated with the Company's acquisitions. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
The technical concepts and codes embodied in the Company's computer programs
and program documentation are not protected by patents or copyrights but
constitute trade secrets that are proprietary to the Company. The Company and
its subsidiaries are the owners of various registered trademarks and service
marks, but such registration provides limited protection.
SALES AND MARKETING
The Company's primary market for its products and services consists of
approximately 3,000 acute care hospitals (and affiliated organizations) in the
above-100 bed range of the total of approximately 5,900 hospitals in the United
States. Through hospital affiliates, HBOC is increasingly marketing new products
to the total healthcare enterprise including ambulatory care, physician offices,
pharmacies, reference laboratories and managed care providers. Through its
subsidiary HBO & Company Canada Ltd., HBOC provides products and services in
Canada, where there are approximately 500 hospitals having 100 or more beds.
Through its subsidiary HBO & Company (UK) Limited, the Company services the
United Kingdom, where there are approximately 300 hospitals having 100 or more
beds. HBOC products are also sold in other parts of the world through agreements
with third parties. One or more of the Company's applications are currently
installed in approximately 2,600 hospitals.
HBOC's products and services are offered through a companywide sales
organization and business units that have responsibility for research and
development and customer services. HBOC's direct sales force includes over 150
salespersons. Approximately two-thirds of the sales force is dedicated to the
Pathways, STAR and HealthQuest product lines. The balance includes dedicated
sales forces for each of the remaining products lines.
28
<PAGE>
MANAGEMENT
The following table sets forth certain information about the executive
officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
--------------------------- --- ---------------------------------------------------------------------
<S> <C> <C>
Charles W. McCall 51 Director, President and Chief Executive Officer
James A. Gilbert 46 Vice President -- General Counsel and Secretary
Jay P. Gilbertson 35 Vice President -- Finance, Chief Financial Officer, Treasurer and
Assistant Secretary
Russell G. Overton 48 Senior Vice President -- Business Development
Albert J. Bergonzi 45 Executive Vice President -- Sales
John P. Crecine 55 Director
Alfred C. Eckert III 47 Director
Holcombe T. Green, Jr. 55 Chairman of the Board
Alton F. Irby III 55 Director
Gerald E. Mayo 63 Director
James V. Napier 58 Director
Charles E. Thoele 59 Director
Donald C. Wegmiller 56 Director
</TABLE>
Charles W. McCall has served as a Director, President and Chief Executive
Officer of the Company since 1991. Prior to joining the Company, he served as
President and Chief Executive Officer of CompuServe, Inc., a wholly owned
subsidiary of H&R Block, from 1985 to 1991. Mr. McCall is also a Director of
SYMIX Systems, Inc., EIS International, Inc., WestPoint Stevens Inc. and
XcelleNet, Inc.
James A. Gilbert has served as Vice President and General Counsel since
joining the Company in 1988. He has served as Secretary since 1992.
Jay P. Gilbertson has served as Vice President -- Finance, Chief Financial
Officer, Treasurer and Assistant Secretary since 1993. In 1992, Mr. Gilbertson
served as Vice President -- Controller and Chief Accounting Officer. From 1988
through 1991, he served in a financial management capacity at Medical Systems
Support, Inc., HBOC's hardware maintenance subsidiary sold in 1991.
Russell G. Overton has served as Senior Vice President -- Business
Development since 1992. From 1989 through 1991, he served as Vice President --
Business Development for HealthQuest Ltd. (a wholly owned subsidiary of the
Company).
Albert J. Bergonzi has served as Executive Vice President -- Sales of the
Company since June 1995. Prior to that time, Mr. Bergonzi served as the Vice
President and General Manager of the Company's Amherst Product Group.
John P. Crecine has served as Chief Executive Officer of Integrated Digital
Systems, Inc., a technological services company, since July 1994. He was the
President of Georgia Institute of Technology from 1987 to July 1994. Dr. Crecine
is a Director of Intermet Corporation. He has been a Director of the Company
since 1990.
Alfred C. Eckert III has been President of Greenwich Street Capital
Partners, Inc., a private investment firm, since January 1994 and has been a
Partner of Greycliff Partners, a private investment firm, since December 1991.
He was a Partner of Goldman, Sachs & Co., investment bankers, from December 1984
to November 1991. Mr. Eckert is a Director of Georgia Gulf Corporation. He has
been a Director of the Company since 1990.
29
<PAGE>
Holcombe T. Green, Jr. is the Chairman of the Board of Directors of the
Company and has been a Director of the Company since 1987. He served in the
capacity of President and Chief Executive Officer of the Company from January
1990 to January 1991. Mr. Green has served as the Chairman and Chief Executive
Officer of WestPoint Stevens Inc., a textile manufacturing company, since
October 1992. Mr. Green has been the Principal of Green Capital Investors, L.P.,
a private investment fund, since October 1987. He is also a Director of Georgia
Gulf Corporation, Rhodes, Inc. and American Buildings Company.
Alton F. Irby III has been a principal of J O Hambro Magan & Company,
investment bankers, since March 1988 and has also served as Deputy Chairman
since March 1994. Mr. Irby has been a Director of the Company since 1990.
Gerald E. Mayo has served as Chairman and President of Midland Financial
Services, Inc., the holding company for The Midland Life Insurance Company which
is the successor to The Midland Mutual Life Insurance Company, a life insurance
and annuities company, since December 1994. Mr. Mayo served the predecessor
company in similar capacities for over five years. Mr. Mayo is a Director of
Huntington BancShares Inc., The Columbia Gas System, Inc. and Borror
Corporation. He has been a Director of the Company since 1991.
James V. Napier has served as the Chairman of the Board of Directors of
Scientific-Atlanta, Inc., a communications equipment manufacturer, since
November 1992 and served as Acting Chief Executive Officer from December 1992 to
July 1993. From June 1988 to October 1992, he was Chairman and President of
Commercial Telephone Group, a telecommunication products company. Mr. Napier has
been a private investor since August 1987. Mr. Napier is a Director of Engelhard
Corporation, Intelligent Systems Corporation, Vulcan Materials Corporation,
Summit Communications Group, Inc. and Rhodes, Inc. He has been a Director of the
Company since 1981.
Charles E. Thoele has been a Consultant to and a Director of Sisters of
Mercy Health Systems, a not for profit healthcare system, since February 1991.
From July 1986 to January 1991, he served as the Chief Operating Officer of
Sisters of Mercy Health Systems. Mr. Thoele is also a Director of Transcend
Services, Inc. He has been a Director of the Company since 1989.
Donald C. Wegmiller has been President and Chief Executive Officer of
Management Compensation Group/HealthCare, an executive and physician
compensation consulting firm, since April 1993. He was Vice Chairman and
President of HealthSpan Health Systems Corporation ("HealthSpan") from November
1992 to April 1993. From May 1987 to November 1992, he was President and Chief
Executive Officer of Health One Corporation, a healthcare services company that
merged with HealthSpan. Mr. Wegmiller is a Director of Medical Graphics
Corporation, Possis Corporation and Minnesota Power & Light Company. He has been
a Director of the Company since 1988.
30
<PAGE>
THE SELLING STOCKHOLDER
All of the 3,600,000 shares of Common Stock offered hereby (excluding up to
400,000 shares that may be sold by FDC, the Selling Stockholder, pursuant to the
Underwriters' over-allotment option) are being sold by FDC. Such shares were
issued to FDC in June 1995 in connection with the sale of HSG to the Company.
See "Prospectus Summary -- Recent Acquisitions." As of the date of this
Prospectus, the 4,000,000 shares of Common Stock owned by FDC represent
approximately 11.1% of the outstanding Common Stock. Upon completion of this
Offering, FDC will own 400,000 shares of Common Stock (representing
approximately 1.1% of the outstanding Common Stock without giving effect to the
CliniCom Acquisition) or no shares of Common Stock if the Underwriters'
over-allotment option is exercised in full.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the CliniCom Acquisition, HBOC will have approximately
39.7 million shares outstanding all of which will be freely tradeable except (i)
shares which are held by certain persons who may be deemed "affiliates" of HBOC
for purposes of Rule 144; (ii) approximately 1.3 million of the approximately
3.5 million shares issuable in the CliniCom Acquisition (which CliniCom has
advised HBOC will be issued to persons who may be deemed "affiliates" of
CliniCom for purposes of Rule 145); and (iii) all or any portion of the 400,000
shares held by the Selling Stockholder which are not sold to the underwriters
pursuant to their over-allotment option, which will continue to be "restricted
securities" for purposes of Rule 144.
The Company, the Selling Stockholder and certain of the Company's officers
and directors who beneficially own in the aggregate 1,003,937 shares of Common
Stock (approximately 2.5% of the outstanding Common Stock after giving pro forma
effect to the consummation of the CliniCom Acquisition), have agreed that, for a
period of 60 days after the date of this Prospectus, they will not, without the
prior written consent of Smith Barney Inc., offer for sale, sell, contract to
sell or otherwise dispose of any Common Stock (or any securities convertible
into or exercisable or exchangeable for Common Stock) or grant any options or
warrants to purchase Common Stock, except, in the case of the Company, pursuant
to a registration statement on Form S-4 or S-8 or in transactions exempt from
the registration requirements of the Securities Act so long as the transferee
thereof agrees to the foregoing restrictions on transfer for the remainder of
such 60 day period.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned restricted securities for at least a two-year period (as
computed under Rule 144), and any person who is an affiliate of the Company
whose shares are not restricted securities, is entitled to sell within any
three-month period a number of shares that does not exceed the greater of (i) 1%
of the then outstanding shares of Common Stock (approximately 400,000 shares
after giving effect to the CliniCom Acquisition), and (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks immediately
preceding the date on which the notice of sale is filed with the Commission.
Sales under Rule 144 are also subject to certain provisions relating to the
manner and notice of sale and the availability of current information about the
Company. A person (or persons whose shares are aggregated) who is not deemed an
affiliate of the Company at any time during the 90 days immediately preceding a
sale, and who has beneficially owned shares for at least a three-year period (as
computed under Rule 144), would be entitled to sell such shares under Rule
144(k) without regard to the volume limitations and other conditions described
above. Under Rule 145 as currently in effect, former affiliates of CliniCom are
free to publicly resell their shares in accordance with the provisions of Rule
144, other than the two-year holding period requirement.
The persons who may be deemed "affiliates" of CliniCom have been granted
certain registration rights with respect to their shares as has the Selling
Stockholder with respect to the balance, if any, of its shares which remain
unsold after completion of the Offering.
31
<PAGE>
Sales, or the availability for sale, of a substantial number of the shares
of Common Stock could have a significant adverse effect on the market price of
the Common Stock.
UNDERWRITING
Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof, each of the underwriters named below (the "Underwriters")
for whom Smith Barney Inc., Alex. Brown & Sons Incorporated, Donaldson, Lufkin &
Jenrette Securities Corporation and Schroder Wertheim & Co. Incorporated are
acting as the Representatives (the "Representatives") has severally agreed to
purchase, and the Selling Stockholder has agreed to sell to each Underwriter,
Shares of Common Stock which equal the number of Shares set forth opposite the
name of such underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
------------------------------------------------------------------------------------------- -----------
<S> <C>
Smith Barney Inc...........................................................................
Alex. Brown & Sons Incorporated............................................................
Donaldson, Lufkin & Jenrette Securities Corporation........................................
Schroder Wertheim & Co. Incorporated.......................................................
-----------
Total.................................................................................. 3,600,000
-----------
-----------
</TABLE>
The Underwriters initially propose to offer part of the Shares of Common
Stock directly to the public at the public offering price set forth on the cover
page of this Prospectus and part to certain dealers at a price which represents
a concession not in excess of $ per Share below the public offering price.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per Share to the other Underwriters or to certain other
dealers. After the initial public offering, the public offering price and such
concessions may be changed by the Underwriters.
The Selling Stockholder has granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
aggregate of 400,000 additional shares of Common Stock at the public offering
price set forth on the cover page of this Prospectus less underwriting discounts
and commissions. The Underwriters may exercise such option to purchase
additional shares solely for the purpose of covering over-allotments, if any,
incurred in connection with the sale of the Shares offered hereby. To the extent
such option is exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as the number of Shares set forth opposite such Underwriter's
name in the preceding table bears to the total number of Shares in such table.
The Company, the Selling Stockholder and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
The rules of the Commission generally prohibit the Underwriters from making
a market in the Common Stock during the two business days prior to commencement
of sales in this Offering (the "Cooling Off Period"). The Commission has,
however, adopted Rule 10b-6A ("Rule 10b-6A"), which provides an exemption from
such prohibition for certain passive market making transactions. Such passive
market making transactions must comply with applicable price and volume limits
and must be identified as passive market making transactions. In general,
pursuant to Rule 10b-6A, a passive market maker must display its bid for a
security at a price not in excess of the highest independent bid for the
security. If all independent bids are lowered below the passive market maker's
bid, however, such bid must then be lowered when certain purchase limits are
exceeded. Further, net purchases by a passive market maker on each day are
generally limited to a specified percentage of the passive
32
<PAGE>
market maker's average daily trading volume in a security during a specified
prior period and must be discontinued when such limit is reached. Pursuant to
the exemption provided by Rule 10b-6A, certain of the Underwriters and selling
group members may engage in passive market making in the Common Stock during the
Cooling Off Period. Passive market making may stabilize the market price of the
Common Stock at a level above that which might otherwise prevail, and if
commenced, may be discontinued at any time.
The Company, the Selling Stockholder and certain of the Company's officers
and directors who beneficially own in the aggregate 1,003,937 shares of Common
Stock (approximately 2.5% of the outstanding Common Stock after giving pro forma
effect to the consummation of the CliniCom Acquisition), have agreed that, for a
period of 60 days after the date of this Prospectus, they will not, without the
prior written consent of Smith Barney Inc., offer for sale, sell, contract to
sell or otherwise dispose of any Common Stock (or any securities convertible
into or exercisable or exchangeable for Common Stock) or grant any options or
warrants to purchase Common Stock, except, in the case of the Company, pursuant
to a registration statement on Form S-4 or S-8 or in transactions exempt from
the registration requirements of the Securities Act so long as the transferee
thereof agrees to the foregoing restrictions on transfer for the remainder of
such 60 day period.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Jones, Day, Reavis & Pogue, Atlanta, Georgia. Certain legal matters
will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher &
Flom, New York, New York.
EXPERTS
The audited financial statements of HBOC incorporated by reference in this
Registration Statement of which this Prospectus is a part, to the extent and for
the periods indicated in their report, have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
With respect to the unaudited interim financial information of HBOC for the
quarter ended March 31, 1994 and 1995 and the quarter and six months ended June
30, 1994 and 1995, which are also incorporated by reference herein, Arthur
Andersen LLP has applied limited procedures in accordance with professional
standards for a review of that information. However, their separate reports
thereon state that they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
reports on that information should be restricted in light of the limited nature
of the review procedures applied. In addition, the accountants are not subject
to the liability provisions of Section 11 of the Securities Act for their report
on the unaudited interim financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by the
accountants within the meaning of Sections 7 and 11 of the Securities Act.
The financial statements of the Health Systems Group of FDC at December 31,
1993 and 1994, and for each of the three years in the period ended December 31,
1994 incorporated herein and in the Registration Statement of which this
Prospectus is a part have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon, and are incorporated herein in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
The audited financial statements of CliniCom incorporated by reference in
this Prospectus and elsewhere in the Registration Statement of which this
Prospectus is a part, to the extent and for the periods indicated in their
report, have been audited by Arthur Andersen LLP, independent public
accountants, and are included in reliance upon the authority of said firm as
experts in giving said report.
33
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES TO WHICH
IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Documents Incorporated by Reference............ 2
Prospectus Summary............................. 4
Risk Factors................................... 7
Pro Forma Financial Information................ 9
Selected Historical Financial Information...... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 17
Business....................................... 23
Management..................................... 29
The Selling Stockholder........................ 31
Shares Eligible for Future Sale................ 31
Underwriting................................... 32
Legal Matters.................................. 33
Experts........................................ 33
</TABLE>
3,600,000 SHARES
[LOGO HBO & COMPANY]
COMMON STOCK
--------------
P R O S P E C T U S
, 1995
--------------
SMITH BARNEY INC.
ALEX. BROWN & SONS
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SCHRODER WERTHEIM & CO.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the offering are as follows:
<TABLE>
<CAPTION>
ITEM AMOUNT*
--------------------------------------------------------------------------------- -----------
<S> <C>
Registration fee................................................................. $ 73,018
NASD filing fee.................................................................. 21,675
Blue sky fees and expenses....................................................... 20,000
Printing and engraving expenses.................................................. 95,000
Legal fees and expenses.......................................................... 175,000
Accounting fees and expenses..................................................... 35,000
Miscellaneous expenses........................................................... 30,307
-----------
Total........................................................................ $ 450,000
-----------
-----------
</TABLE>
------------------------
* All amounts estimated except the Registration fee and the NASD filing fee.
All such expenses will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
HBO & Company's (the "Company") By-Laws (Article IX, Section 1), provide
that every person who was or is a party or is threatened to be made a party to
or is involved in any action, suit, or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a director or officer of the
Company or is or was serving at the request of the Company or for its benefit as
a director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless to the fullest extent legally permissible under and pursuant to
any procedure specified in the General Corporation Law of the State of Delaware,
as amended from time to time, against all expenses, liabilities and losses
(including attorneys' fees, judgments, fines and amounts paid or to be paid in
settlement) reasonably incurred or suffered by him in connection therewith. Such
right of indemnification shall be a contract right that may be enforced in any
manner by such person. Such right of indemnification shall not be exclusive of
any other right which such directors, officers or representatives may have or
thereafter acquire and, without limiting the generality of such statement, they
shall be entitled to their respective rights of indemnification under any bylaw,
agreement, vote of stockholders, provision of law or otherwise, as well as their
rights under such article.
Article IX, Section 2 of the Company's By-Laws provides that the Board of
Directors may cause the Company to purchase and maintain insurance on behalf of
any person who is or was a director or officer of the Company, or is or was
serving at the request of the Company as a director or officer of another
corporation, or as its representative in a partnership, joint venture, trust or
other enterprise against any liability asserted against such person and incurred
in any such capacity or arising out of such status, whether or not the
corporation would have the power to indemnify such person.
With respect to indemnification of officers and directors, Section 145 of
the Delaware General Corporation Law provides that a corporation shall have
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and,
II-1
<PAGE>
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Under this provision of the Delaware General
Corporation Law, the termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Furthermore, the Delaware General Corporation Law provides that a
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability, but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
In addition, the General Corporation Law of Delaware enables a Delaware
corporation to include in its certificate of incorporation a provision
eliminating or limiting a director's liability to the corporation or its
stockholders for monetary damages for breaches of a director's fiduciary duty as
a director. The statute provides, however, that liability for (a) breach of the
director's duty of loyalty, (b) acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, (c) the unlawful purchase
or redemption of stock or unlawful dividends or (d) transactions from which a
director derived an improper personal benefit cannot be eliminated or limited in
this manner. The Company's Certificate of Incorporation contains such
provisions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
Items marked with an asterisk, "*," relate to management contracts or
compensatory plans or arrangements. The following exhibits are filed as part of
this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------------
<C> <S> <C>
THE FOLLOWING EXHIBITS ARE INCLUDED IN THIS REGISTRATION STATEMENT:
2 -- Form of Underwriting Agreement.
5 -- Opinion of Jones, Day, Reavis & Pogue re validity.
11 -- Statement re Computation of Per Share Earnings.
23(a) -- Consent of Arthur Andersen LLP.
23(b) -- Consent of Arthur Andersen LLP.
23(c) -- Consent of Ernst & Young LLP.
23(d) -- Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
24 -- Power of Attorney (included in signature page).
99 -- Subsidiaries of Registrant.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ --------------------------------------------------------------------------------
<C> <S> <C>
The following exhibits filed with the Securities and Exchange Commission are incorporated
by reference as shown below.
ON MAY 13, 1981, AS PART OF ITS REGISTRATION STATEMENT ON FORM S-1 (REGISTRATION
NUMBER 2-72275):
4(a) -- Specimen forms of certificates for Common Stock of Registrant.
ON FEBRUARY 15, 1991, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 2-75987):
*4 -- HBO & Company 1981 Incentive Stock Option Plan, as amended.
ON FEBRUARY 22, 1991, AS PART OF ITS FORM 8-K:
*4 -- HBO & Company Rights Agreement.
ON MARCH 26, 1991, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 2-92030):
*4 -- HBO & Company Nonqualified Stock Option Plan, as amended.
ON MARCH 27, 1991, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-12051):
*4 -- HBO & Company 1986 Employee Nonqualified Stock Option Plan, as amended.
ON AUGUST 12, 1993, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-67300):
*4 -- HBO & Company 1993 Stock Option Plan for Nonemployee Directors.
ON AUGUST 17, 1994, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-82960):
*4 -- HBO & Company 1983 Employee Discount Stock Purchase Plan, as amended.
ON AUGUST 17, 1994, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-82962):
*4 -- HBO & Company 1990 Executive Incentive Plan, as amended.
ON SEPTEMBER 15, 1994, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-84034):
*4 -- 1986 Incentive Stock Option Plan of Serving Software, Inc.
ON MARCH 17, 1995, AS PART OF ITS FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1994:
*4 -- Chief Executive Officer Incentive Plan.
ON MAY 9, 1995, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-59173):
*4 -- HBO & Company 1986 Nonqualified Stock Option Agreement, HBO & Company 1991
Nonqualified Stock Option Agreement 1 and HBO & Company 1991 Nonqualified Stock
Option Agreement 2.
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the
II-3
<PAGE>
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Atlanta, State of Georgia, on the 17th day of August,
1995.
HBO & COMPANY
By: /s/ CHARLES W. MCCALL
-----------------------------------
Charles W. McCall
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Charles W. McCall and Jay P. Gilbertson, jointly
and severally, his true and lawful attorneys-in-fact and agents, each with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
registration statement, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each of said attorneys-in-fact and agents, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
-------------------------------- -------------------------------------- ---------------
<C> <S> <C>
/s/ CHARLES W. MCCALL Director, President and Chief
-------------------------------- Executive Officer (Principal August 17, 1995
(Charles W. McCall) Executive Officer)
Vice President -- Finance, Chief
/s/ JAY P. GILBERTSON Financial Officer, Treasurer and
-------------------------------- Assistant Secretary (Principal August 17, 1995
(Jay P. Gilbertson) Financial Officer)
/s/ TIMOTHY S. HEYERDAHL Vice President -- Controller and
-------------------------------- Chief Accounting Officer (Principal August 17, 1995
(Timothy S. Heyerdahl) Accounting Officer)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
-------------------------------- -------------------------------------- ---------------
<C> <S> <C>
/s/ HOLCOMBE T. GREEN, JR.
-------------------------------- Chairman of the Board of August 17, 1995
(Holcombe T. Green, Jr.) Directors
-------------------------------- Director August , 1995
(John P. Crecine)
/s/ ALFRED C. ECKERT III
-------------------------------- Director August 17, 1995
(Alfred C. Eckert III)
/s/ ALTON F. IRBY III
-------------------------------- Director August 17, 1995
(Alton F. Irby III)
/s/ GERALD E. MAYO
-------------------------------- Director August 17, 1995
(Gerald E. Mayo)
/s/ JAMES V. NAPIER
-------------------------------- Director August 17, 1995
(James V. Napier)
/s/ CHARLES E. THOELE
-------------------------------- Director August 17, 1995
(Charles E. Thoele)
/s/ DONALD C. WEGMILLER
-------------------------------- Director August 17, 1995
(Donald C. Wegmiller)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX TO EXHIBITS PAGE
------------ ------------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
2 Form of Underwriting Agreement.
5 Opinion of Jones, Day, Reavis & Pogue re validity.
11 Statement re computation of per share earnings.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of Arthur Andersen LLP.
23(c) Consent of Ernst & Young LLP.
23(d) Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
24 Power of Attorney (included in signature page).
99 Subsidiaries of Registrant.
</TABLE>
<PAGE>
3,600,000 Shares
HBO & COMPANY
Common Stock
UNDERWRITING AGREEMENT
August , 1995
SMITH BARNEY INC.
ALEX. BROWN & SONS INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SCHRODER WERTHEIM & CO. INCORPORATED
AS REPRESENTATIVES OF THE SEVERAL UNDERWRITERS
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
First Data Corporation, a Delaware corporation (the "Selling
Stockholder"), proposes to sell an aggregate of 3,600,000 shares of the common
stock, $0.05 par value per share, of HBO & Company, a Delaware corporation (the
"Company"), to the several Underwriters named in Schedule I hereto (the
"Underwriters"). The Company's common stock, $0.05 par value per share, is
hereinafter referred to as the "Common Stock" and the 3,600,000 shares of Common
Stock to be sold to the Underwriters by the Selling Stockholder are hereinafter
referred to as the "Firm Shares". The Selling Stockholder also proposes to sell
to the Underwriters, upon the terms and conditions set forth in Section 2
hereof, up to an additional 400,000 shares (the "Additional Shares") of Common
Stock. The Firm Shares and the Additional Shares are hereinafter collectively
referred to as the "Shares".
The Company and the Selling Stockholder wish to confirm as follows their
respective agreements with you (the "Representatives") and the other several
Underwriters on whose behalf you are acting, in connection with the several
purchases of the Shares by the Underwriters.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-3 under the Act (the "registration
statement"), including a prospectus subject to completion relating to the
Shares. The term "Registration Statement" as used in this Agreement means the
registration statement (including all financial schedules and exhibits), as
amended at the time it becomes effective, or, if the registration
<PAGE>
statement became effective prior to the execution of this Agreement, as
supplemented or amended prior to the execution of this Agreement. If it is
contemplated, at the time this Agreement is executed, that a post-effective
amendment to the registration statement will be filed and must be declared
effective before the offering of the Shares may commence, the term "Registration
Statement" as used in this Agreement means the registration statement as amended
by said post-effective amendment. The term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement, or, if the prospectus included in the Registration Statement omits
information in reliance on Rule 430A under the Act and such information is
included in a prospectus filed with the Commission pursuant to Rule 424(b) under
the Act, the term "Prospectus" as used in this Agreement means the prospectus in
the form included in the Registration Statement as supplemented by the addition
of the Rule 430A information contained in the prospectus filed with the
Commission pursuant to Rule 424(b). The term "Prepricing Prospectus" as used in
this Agreement means the prospectus subject to completion in the form included
in the registration statement at the time of the initial filing of the
registration statement with the Commission, and as such prospectus shall have
been amended from time to time prior to the date of the Prospectus. Any
reference in this Agreement to the registration statement, the Registration
Statement, any Prepricing Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to Item
12 of Form S-3 under the Act, as of the date of the registration statement, the
Registration Statement, such Prepricing Prospectus or the Prospectus, as the
case may be, and any reference to any amendment or supplement to the
registration statement, the Registration Statement, any Prepricing Prospectus or
the Prospectus shall be deemed to refer to and include any documents filed after
such date under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") which, upon filing, are incorporated by reference therein, as required by
paragraph (b) of Item 12 of Form S-3. As used herein, the term "Incorporated
Documents" means the documents which at the time are incorporated by reference
in the registration statement, the Registration Statement, any Prepricing
Prospectus, the Prospectus, or any amendment or supplement thereto.
2. AGREEMENTS TO SELL AND PURCHASE. The Selling Stockholder agrees,
subject to all the terms and conditions set forth herein, to sell to each
Underwriter and, upon the basis of the representations, warranties and
agreements of the Company and the Selling Stockholder herein contained and
subject to all the terms and conditions set forth herein, each Underwriter,
severally and not jointly, agrees to purchase from the Selling Stockholder, at a
purchase price of $_________ per Share (the "purchase price per share"), the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto (or such number of Firm Shares increased as set forth in
Section 12 hereof).
The Selling Stockholder also agrees, subject to all the terms and
conditions set forth herein, to sell to the Underwriters, and, upon the basis of
the representations, warranties and agreements of the Company and the Selling
Stockholder herein contained and subject to all the terms and conditions set
forth herein, the Underwriters shall have the right to purchase from the Selling
Stockholder, at the purchase price per share, pursuant to an option (the
"over-allotment option") which may be exercised at any time and from time to
time prior to 9:00 P.M., New York City time, on the 30th day after the date of
the Prospectus (or, if such 30th day shall be a Saturday or Sunday
-2-
<PAGE>
or a holiday, on the next business day thereafter when the New York Stock
Exchange is open for trading), up to an aggregate of 400,000 Additional Shares.
Additional Shares may be purchased only for the purpose of covering over-
allotments made in connection with the offering of the Firm Shares. Upon any
exercise of the over-allotment option, each Underwriter, severally and not
jointly, agrees to purchase from the Selling Stockholder the number of
Additional Shares (subject to such adjustments as you may determine in order to
avoid fractional shares) which bears the same proportion to the number of
Additional Shares to be sold by the Selling Stockholder as the number of Firm
Shares (or such number of Firm Shares increased as set forth in Section 12
hereof) bears to the number of Firm Shares to be sold by the Selling
Stockholder.
3. TERMS OF PUBLIC OFFERING. The Company and the Selling Stockholder
have been advised by you that the Underwriters propose to make a public offering
of their respective portions of the Shares as soon after the Registration
Statement and this Agreement have become effective as in your judgment is
advisable and initially to offer the Shares upon the terms set forth in the
Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New
York City time, on , 1995 (the "Closing Date"). The place of closing
for the Firm Shares and the Closing Date may be varied by agreement between
Smith Barney Inc. and the Selling Stockholder.
Delivery to the Underwriters of and payment for any Additional Shares to
be purchased by the Underwriters shall be made at the aforementioned office of
Smith Barney Inc. at such time on such date (the "Option Closing Date"), which
may be the same as the Closing Date but shall in no event be earlier than the
Closing Date nor earlier than two nor later than ten business days after the
giving of the notice hereinafter referred to, as shall be specified in a written
notice from you on behalf of the Underwriters to the Selling Stockholder (with a
copy to the Company) of the Underwriters' determination to purchase a number,
specified in such notice, of Additional Shares. The place of closing for any
Additional Shares and the Option Closing Date for such Shares may be varied by
agreement between Smith Barney Inc. and the Selling Stockholder.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 10:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
or the Option Closing Date, as the case may be, against payment of the purchase
price therefor by certified or official bank check or checks payable in New York
Clearing House (next day) funds to the order of the Selling Stockholder.
-3-
<PAGE>
5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it
is necessary for the Registration Statement or a post-effective amendment
thereto to be declared effective before the offering of the Shares may commence,
the Company will endeavor to cause the Registration Statement or such
post-effective amendment to become effective as soon as possible and will advise
you promptly and, if requested by you, will confirm such advice in writing, when
the Registration Statement or such post-effective amendment has become
effective.
(b) The Company will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in paragraph (f)
below, of any change in the Company's condition (financial or other), business,
properties, net worth or results of operations, or of the happening of any
event, which makes any statement of a material fact made in the Registration
Statement or the Prospectus (as then amended or supplemented) untrue or which
requires the making of any additions to or changes in the Registration Statement
or the Prospectus (as then amended or supplemented) in order to state a material
fact required by the Act to be stated therein or necessary in order to make the
statements therein not misleading, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented) to comply with the Act or any
other law. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible time.
(c) The Company will furnish to you, without charge (i) four
signed copies of the Registration Statement as originally filed with the
Commission and of each amendment thereto, including financial statements and all
exhibits to the Registration Statement, (ii) such number of conformed copies of
the Registration Statement as originally filed and of each amendment thereto,
but without exhibits, as you may reasonably request, (iii) such number of copies
of the Incorporated Documents, without exhibits, as you may request, and (iv)
four copies of the exhibits to the Incorporated Documents.
(d) The Company will not file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus or, prior to the
end of the period of time referred to in the first sentence in subsection (f)
below, file any document which, upon filing becomes an Incorporated Document, of
which you shall not previously have been advised or to which, after you shall
have received a copy of the document proposed to be filed, you shall reasonably
object.
-4-
<PAGE>
(e) The Company consents to the use, in accordance with the
provisions of the Act and with the securities or Blue Sky laws of the
jurisdictions in which the Shares are offered by the several Underwriters and by
dealers, prior to the date of the Prospectus, of each Prepricing Prospectus.
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as a prospectus is
required by the Act to be delivered in connection with sales by any Underwriter
or dealer, the Company will expeditiously deliver to each Underwriter and each
dealer, without charge, as many copies of the Prospectus (and of any amendment
or supplement thereto) as you may reasonably request. The Company consents to
the use of the Prospectus (and of any amendment or supplement thereto) in
accordance with the provisions of the Act and with the securities or Blue Sky
laws of the jurisdictions in which the Shares are offered by the several
Underwriters and by all dealers to whom Shares may be sold, both in connection
with the offering and sale of the Shares and for such period of time thereafter
as the Prospectus is required by the Act to be delivered in connection with
sales by any Underwriter or dealer. If during such period of time any event
shall occur that in the judgment of the Company or in the opinion of counsel for
the Underwriters is required to be set forth in the Prospectus (as then amended
or supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus (or to
file under the Exchange Act any document which, upon filing, becomes an
Incorporated Document) in order to comply with the Act or any other law, the
Company will forthwith prepare and, subject to the provisions of paragraph (d)
above, file with the Commission an appropriate supplement or amendment thereto
(or to such document), and will expeditiously furnish to the Underwriters and
dealers a reasonable number of copies thereof. In the event that the Company
and you, as Representatives of the several Underwriters, agree that the
Prospectus should be amended or supplemented, the Company, if requested by you,
will promptly issue a press release announcing or disclosing the matters to be
covered by the proposed amendment or supplement.
(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Shares
for offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as you may designate and will
file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided that
in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Shares, in any jurisdiction where it is not now so
subject.
(h) The Company will make generally available to its security
holders a consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which consolidated earnings statement shall
satisfy the provisions of Section ll(a) of the Act.
-5-
<PAGE>
(i) During the period of three years hereafter, the Company will
furnish to you (i) as soon as available, a copy of each report of the Company
mailed to stockholders or filed with the Commission, and (ii) from time to time
such other information concerning the Company as you may request.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 12 hereof or by notice given by you terminating this
Agreement pursuant to Section 12 or Section 13 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of the Company to comply with the terms or fulfill any of the conditions of
this Agreement, the Company agrees to reimburse the Representatives for all
out-of-pocket expenses (including fees and expenses of counsel for the
Underwriters) incurred by you in connection herewith.
(k) If Rule 430A of the Act is employed, the Company will timely
file the Prospectus pursuant to Rule 424(b) under the Act and will advise you of
the time and manner of such filing.
(l) Except as provided in this Agreement, the Company will not
offer for sale, sell, contract to sell or otherwise dispose of any Common Stock
or any securities convertible into or exercisable or exchangeable for Common
Stock, or grant any options or warrants to purchase Common Stock, for a period
of 60 days after the date of the Prospectus, without the prior written consent
of Smith Barney Inc. (other than pursuant to a registration statement on
Form S-4 or S-8 or any successor form), except in transactions exempt from the
registration requirements of the Act so long as the transferee thereof agrees to
the foregoing restriction on transfer for the remainder of such 60 day period.
(m) The Company has furnished or will furnish to you "lock-up"
letters, in form and substance satisfactory to you, signed by the Company's
Chief Executive Officer and Chairman of the Board.
(n) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
6. AGREEMENTS OF THE SELLING STOCKHOLDER. The Selling Stockholder
agrees with the several Underwriters as follows:
(a) The Selling Stockholder will cooperate to the extent necessary
to cause the registration statement or any post-effective amendment thereto to
become effective at the earliest possible time.
-6-
<PAGE>
(b) The Selling Stockholder will pay all Federal, state, local,
stock transfer and other taxes, if any, on the transfer or sale of the Shares
being sold by the Selling Stockholder to the Underwriters.
(c) The Selling Stockholder will do or perform all things required
to be done or performed by the Selling Stockholder prior to the Closing Date or
any Option Closing Date, as the case may be, to satisfy all conditions precedent
to the delivery of the Shares pursuant to this Agreement.
(d) The Selling Stockholder will not offer for sale, sell,
contract to sell or otherwise dispose of any Common Stock, except for the sale
of Shares to the Underwriters pursuant to this Agreement, prior to the
expiration of 60 days after the date of the Prospectus, without the prior
written consent of Smith Barney Inc., except that the Selling Stockholder may so
dispose of shares of Common Stock in transactions exempt from the registration
requirements of the Act so long as the transferee thereof agrees to the
foregoing restriction on transfer for the remainder of such 60 day period.
(e) Except as stated in this Agreement and in the Prepricing
Prospectus and the Prospectus, the Selling Stockholder will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(f) The Selling Stockholder will advise you promptly, and if
requested by you, will confirm such advice in writing, within the period of time
referred to in Section 5(f) hereof, of any change in information relating to the
Selling Stockholder or any new information relating to the Selling Stockholder
which comes to the attention of the Selling Stockholder that suggests (i) that
any statement relating to the Selling Stockholder made in the Registration
Statement or the Prospectus (as then amended or supplemented, if amended or
supplemented) is or may be untrue in any material respect, (ii) that the
Registration Statement or Prospectus (as then amended or supplemented, if
amended or supplemented) omits or may omit to state a material fact or a fact
necessary to be stated therein in order to make the statements relating to the
Selling Stockholder therein not misleading, or (iii) that an amendment of or
supplement to the Prospectus (as then amended or supplemented, if amended or
supplemented) is necessary in order to comply with the Act or any other law.
(g) If this Agreement shall be terminated by the Underwriters
because of any failure or refusal on the part of the Selling Stockholder to
comply with the terms or fulfill any of the conditions of this Agreement, the
Selling Stockholder agrees to reimburse the Representatives for all
out-of-pocket expenses (including fees and expenses of counsel for the
Underwriters) incurred by you in connection herewith.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
-7-
<PAGE>
(a) Each Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied when
so filed in all material respects with the provisions of the Act. The
Commission has not issued any order preventing or suspending the use of any
Prepricing Prospectus.
(b) The Company and the transactions contemplated by this
Agreement meet the requirements for using Form S-3 under the Act. The
registration statement in the form in which it became or becomes effective and
also in such form as it may be when any post-effective amendment thereto shall
become effective and the prospectus and any supplement or amendment thereto when
filed with the Commission under Rule 424(b) under the Act, complied or will
comply in all material respects with the provisions of the Act and will not at
any such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except that this representation and warranty does not
apply to statements in or omissions from the registration statement or the
prospectus made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by or on behalf of any
Underwriter through you expressly for use therein or relating to the Selling
Stockholder furnished to the Company in writing by or on behalf of the Selling
Stockholder expressly for use therein.
(c) The Incorporated Documents heretofore filed, when they were
filed (or, if any amendment with respect to any such document was filed, when
such amendment was filed), conformed in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder, any
further Incorporated Documents so filed will, when they are filed, conform in
all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder; no such document when it was filed (or, if an
amendment with respect to any such document was filed, when such amendment was
filed), contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and no such further document, when it is
filed, will contain an untrue statement of a material fact or will omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading.
(d) All the outstanding shares of capital stock of the Company
(including the Shares) have been duly authorized and validly issued, are fully
paid and nonassessable and are free of any preemptive or similar rights; and the
capital stock of the Company conforms to the description thereof incorporated by
reference in the Registration Statement and the Prospectus.
(e) The Company and each of the Subsidiaries (as hereinafter
defined) is a corporation duly organized and validly existing in good standing
under the laws of its jurisdiction of incorporation with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as presently conducted and as described in the Registration Statement
and the Prospectus, and is duly registered and qualified to conduct its business
and is in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does not have
a
-8-
<PAGE>
material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries taken as a whole.
(f) All the Company's subsidiaries (within the meaning of
Regulation S-X under the Act) as of the date hereof are listed in Exhibit 99 to
the Registration Statement (such subsidiaries are referred to herein as the
"Subsidiaries"). All the outstanding shares of capital stock of the Company and
each of the Subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable, and are owned by the Company directly, or indirectly
through one of the other Subsidiaries, free and clear of any lien, adverse
claim, security interest, equity or other encumbrance.
(g) There are no legal or governmental proceedings pending or, to
the knowledge of the Company, threatened, against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or to which
any of their respective properties is subject, that are required to be described
in the Registration Statement or the Prospectus but are not described as
required, and there are no agreements, contracts, indentures, leases or other
instruments that are required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement or any
Incorporated Document that are not described or filed as required by the Act or
the Exchange Act.
(h) Neither the Company nor any of the Subsidiaries is in
violation of or in default under (i) its certificate or articles of
incorporation or by-laws, or (ii) any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, or (iii) any
obligation, agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any agreement, indenture, lease or other
instrument to which the Company or any of the Subsidiaries is a party or by
which any of them or any of their respective properties may be bound, except,
with respect to the foregoing clauses (ii) and (iii), such violations or
defaults which do not or will not have a material adverse effect on the
condition (financial or other), business, properties, net worth or results of
operations of the Company and the Subsidiaries taken as a whole.
(i) Neither the execution, delivery or performance of this
Agreement by the Company nor the consummation by the Company of the transactions
contemplated hereby (i) requires any consent, approval, authorization or other
order of or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official (except
such as may be required for the registration of the Shares under the Act and the
Exchange Act and compliance with the securities or Blue Sky laws of various
jurisdictions, all of which have been or will be effected in accordance with
this Agreement) or conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate or articles of
incorporation or by-laws of the Company or any of the Subsidiaries or (ii)
conflicts or will conflict with or constitutes or will constitute a breach of,
or a default under, any agreement, indenture, lease or other instrument to which
the Company or any of the Subsidiaries is a party or by which any of them or any
of their respective properties may be bound, or violates or will violate any
statute, law, regulation or filing
-9-
<PAGE>
or judgment, injunction, order or decree applicable to the Company or any of the
Subsidiaries or any of their respective properties, or will result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of the Subsidiaries pursuant to the terms of any
agreement or instrument to which any of them is a party or by which any of them
may be bound or to which any of the property or assets of any of them is
subject.
(j) The accountants, Arthur Andersen LLP and Ernst & Young, who
have certified or shall certify the financial statements included or
incorporated by reference in the Registration Statement and the Prospectus (or
any amendment or supplement thereto) are independent public accountants as
required by the Act.
(k) The financial statements of the Company, together with related
schedules and notes, included or incorporated by reference in the Registration
Statement and the Prospectus (and any amendment or supplement thereto), present
fairly the consolidated financial position, results of operations, stockholders'
equity and cash flows of the Company and the Subsidiaries on the basis stated in
the Registration Statement at the respective dates or for the respective periods
to which they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other financial and statistical information and data of the
Company included or incorporated by reference in the Registration Statement and
the Prospectus (and any amendment or supplement thereto) are accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of the Company and the Subsidiaries.
(l) The pro forma combined financial statements of the Company and
its Subsidiaries included or incorporated by reference in the Registration
Statement present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to pro forma
financial statements, have been prepared on the basis of the assumptions
described in the Registration Statement and the Prospectus and such assumptions
used in the preparation thereof are reasonable, and the adjustments used therein
are appropriate to give effect to the transactions or circumstances referred to
therein.
(m) The execution and delivery of, and the performance by the
Company of its obligations under, this Agreement have been duly and validly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding agreement
of the Company, enforceable against the Company in accordance with its terms.
(n) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), neither
the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that would be required to be disclosed therein or
incorporated therein by reference, and there has not been any
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material adverse change in the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries taken as a whole.
(o) Each of the Company and the Subsidiaries has good and
marketable title to all property (real and personal) described in the Prospectus
as being owned by it, free and clear of all liens, claims, security interests or
other encumbrances except such as are described in the Registration Statement
and the Prospectus or in a document filed as an exhibit to the Registration
Statement and all the property described in the Prospectus as being held under
lease by each of the Company and the Subsidiaries is held by it under valid,
subsisting and enforceable leases, subject in each case to such exceptions that
do not or will not, have a material adverse effect on the condition (financial
or other), business, properties, net worth or results of operations of the
Company and the Subsidiaries taken as a whole.
(p) The Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own its respective properties and to
conduct its business in the manner described in the Prospectus, subject to such
qualifications as may be set forth in the Prospectus and except where the
failure to have any such permit does not and will not have a material adverse
effect on the condition (financial or other), business, properties, net worth or
results of operations of the Company and the Subsidiaries taken as a whole; the
Company and each of the Subsidiaries has fulfilled and performed all its
material obligations with respect to such permits and no event has occurred
which allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the rights of
the holder of any such permit, subject in each case to such qualification as may
be set forth in the Prospectus; and, except as described in the Prospectus, none
of such permits contains any restriction that is materially burdensome to the
Company or any of the Subsidiaries.
(q) The Company maintains a system of internal accounting controls
meeting the requirements of Section 13(b)(2) of the Exchange Act.
(r) To the Company's knowledge, neither the Company nor any of its
Subsidiaries nor any employee or agent of the Company or any Subsidiary has made
any payment of funds of the Company or any Subsidiary or received or retained
any funds in violation of any law, rule or regulation, which payment, receipt or
retention of funds is of a character required to be disclosed in the Prospectus.
(s) The Company and each of the Subsidiaries have filed all tax
returns required to be filed, which returns are complete and correct in all
material respects, and neither the Company nor any Subsidiary is in default in
the payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto.
(t) No holder of any security of the Company has any right to
require registration of shares of Common Stock or any other security of the
Company because of the filing of the registration statement or consummation of
the transactions contemplated by this Agreement.
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(u) The Company and the Subsidiaries own or possess all patents,
trademarks, trademark registration, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
described in the Prospectus as being owned by them or any of them or necessary
for the conduct of their respective businesses, and the Company is not aware of
any claim to the contrary or any challenge by any other person to the rights of
the Company and the Subsidiaries with respect to the foregoing, except for such
claims that do not have a material adverse effect on the condition (financial or
other), business, properties, net worth or results of operations of the Company
and the Subsidiaries taken as a whole.
(v) The Company has complied with all provisions of Florida
Statutes, Section 517.075, relating to issuers doing business with Cuba.
(w) The Shares are, and as of the Closing Date and any Option
Closing Date will continue to be, listed on the Nasdaq Stock Market National
Market.
(x) No person has the right, contractual or otherwise,
to permit them to underwrite the sale of, the Shares or the right to
have any Common Stock or other securities of the Company included in
the registration statement or the right, as a result of the filing
of the registration statement, to require registration under the
Act of any shares of Common Stock or other securities of the Company.
8. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDER. The
Selling Stockholder represents and warrants to each Underwriter that:
(a) The Selling Stockholder now has, and on the Closing Date and
any Option Closing Date will have, valid and marketable title to the Shares to
be sold by the Selling Stockholder, free and clear of any lien, claim, security
interest or other encumbrance, including, without limitation, any restriction on
transfer applicable to the sale of the Shares hereunder.
(b) The Selling Stockholder now has, and on the Closing Date and
any Option Closing Date will have, full legal right, power and authorization,
and any approval required by law, to sell, assign transfer and deliver such
Shares in the manner provided in this Agreement, and upon delivery of and
payment for such Shares hereunder, the several Underwriters will acquire valid
and marketable title to such Shares free and clear of any lien, claim, security
interest, or other encumbrance.
(c) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Stockholder and is the valid and
binding agreement of the Selling Stockholder enforceable against the Selling
Stockholder in accordance with its terms, except as enforcement of rights to
indemnity and contribution hereunder may be limited by Federal or state
securities laws or principles of public policy and subject to the qualification
that the enforceability of the Selling Stockholder's obligations hereunder may
be limited by bankruptcy, insolvency, reorganization, moratorium, and other
similar laws relating to or affecting creditors' rights generally and by general
equitable principles.
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(d) Neither the execution and delivery of this Agreement by or on
behalf of the Selling Stockholder nor the consummation of the transactions
herein contemplated by or on behalf of the Selling Stockholder requires any
consent, approval, authorization or order of, or filing or registration with,
any court, regulatory body, administrative agency or other governmental body,
agency or official (except such as may be required under the Act or such as may
be required under state securities or Blue Sky laws governing the purchase and
distribution of the Shares) or conflicts or will conflict with or constitutes or
will constitute a breach of, or default under, or violates or will violate, any
agreement, indenture or other instrument to which the Selling Stockholder is a
party or by which the Selling Stockholder is or may be bound or to which any of
the Selling Stockholder's property or assets is subject, or any statute, law,
rule, regulation, ruling, judgment, injunction, order or decree applicable to
the Selling Stockholder or to any property or assets of the Selling Stockholder.
(e) The information relating to the Selling Stockholder furnished
to the Company in writing by or on behalf of the Selling Stockholder expressly
for use in the Registration Statement and the Prospectus does not and will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
(f) The Selling Stockholder has not taken, directly or indirectly,
any action designed to or that might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Shares, except for the lock-up arrangements described
in the Prospectus.
(g) The audited financial statements of HSG, together with related
notes, incorporated by reference in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations, stockholder's equity and
cash flows of HSG on the basis stated in the Registration Statement at the
respective dates or for the respective periods to which they apply; such
statements and related notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other historical financial
information set forth in the pro forma financial statements for the year ended
December 31, 1994 under the column "HSG" included or incorporated by reference
in the Registration Statement and the Prospectus (and any amendment or
supplement thereto) is accurately presented and prepared on a basis consistent
with such financial statements and the books and records of HSG.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each of you and each other Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prepricing Prospectus or in
the Registration Statement or the Prospectus or in any amendment or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
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the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which has been
made therein or omitted therefrom in reliance upon and in conformity with the
information relating to such Underwriter furnished in writing to the Company by
or on behalf of any Underwriter through you expressly for use in connection
therewith; provided, however, that the indemnification contained in this
paragraph (a) with respect to any Prepricing Prospectus shall not inure to the
benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) on account of any such loss, claim, damage, liability or expense
arising from the sale of the Shares by such Underwriter to any person if a copy
of the Prospectus shall not have been delivered or sent to such person within
the time required by the Act and the regulations thereunder, and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such Prepricing Prospectus was corrected in the
Prospectus, provided that the Company has delivered the Prospectus to the
several Underwriters in such quantities as they have requested on a timely basis
to reasonably permit such delivery or sending. The foregoing indemnity
agreement shall be in addition to any liability which the Company may otherwise
have.
(b) The Selling Stockholder agrees to indemnify and hold harmless each
of you and each other Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
each Underwriter, but only with respect to the information relating to the
Selling Stockholder furnished in writing by or on behalf of the Selling
Stockholder expressly for use in the Registration Statement, the Prospectus or
any Prepricing Prospectus, or any amendment or supplement thereto. If any
action, suit or proceeding shall be brought against any Underwriter or any such
controlling person of any Underwriter based on the Registration Statement, the
Prospectus or any Prepricing Prospectus or any amendment or supplement thereto,
and in respect of which indemnity may be sought against the Selling Stockholder
pursuant to this paragraph (b), the Selling Stockholder shall have the rights
and duties given to the Company by paragraph (c) below (except that if the
Company shall have assumed the defense thereof the Selling Stockholder shall not
be required to do so, but may employ separate counsel therein and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
Selling Stockholder's expense), and each Underwriter and each such controlling
person of any Underwriter shall have the rights and duties given to the
Underwriters by paragraph (c) below. The foregoing indemnity agreement shall be
in addition to any liability which the Selling Stockholder may otherwise have.
(c) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company or the Selling Stockholder, such
Underwriter or such controlling person shall promptly notify the parties against
whom indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. Such Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the indemnifying parties have agreed in
writing
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to pay such fees and expenses, (ii) the indemnifying parties have failed to
assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both such
Underwriter or such controlling person and the indemnifying parties and such
Underwriter or such controlling person shall have been advised by its counsel
that representation of such indemnified party and any indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying party shall not have the right to assume the defense of
such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the indemnifying parties
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such
Underwriters and controlling persons not having actual or potential differing
interests with you or among themselves, which firm shall be designated in
writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The indemnifying parties shall not be liable
for any settlement of any such action, suit or proceeding effected without their
written consent, but if settled with such written consent, or if there be a
final judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying parties agree to indemnify and hold harmless any Underwriter, to
the extent provided in the preceding paragraph, and any such controlling person
from and against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
(d) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, the Selling Stockholder, and any person who controls the
Company or the Selling Stockholder within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, to the same extent as the foregoing
indemnity from the Company and the Selling Stockholder to each Underwriter, but
only with respect to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of its directors, any such officer, the Selling
Stockholder, or any such controlling person based on the Registration Statement,
the Prospectus or any Prepricing Prospectus, or any amendment or supplement
thereto, and in respect of which indemnity may be sought against any Underwriter
pursuant to this paragraph (d), such Underwriter shall have the rights and
duties given to the Company by paragraph (c) above (except that if the Company
or the Selling Stockholder shall have assumed the defense thereof such
Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at such Underwriter's expense), and the Company, its
directors, any such officer, the Selling Stockholder, and any such controlling
person shall have the rights and duties given to the Underwriters by paragraph
(c) above. The foregoing indemnity agreement shall be in addition to any
liability which any Underwriter may otherwise have.
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(e) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under subsection (a) above or, where the
indemnified party is the Company or its officers, directors or controlling
persons, under subsection (d) above, in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then an indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the Underwriters on the other
hand in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. If the indemnification provided for in this Section 9
is unavailable to an indemnified party under subsection (b) above or, where the
indemnified party is the Selling Stockholder, under subsection (d) above in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Selling Stockholder on the one hand and the Underwriters on the other hand from
the offering of the Shares, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Selling Stockholder on the one hand and the
Underwriters on the other in connection with the statements or omissions that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Selling Stockholder on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Selling Stockholder bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus;
provided that, in the event that the Underwriters shall have purchased any
Additional Shares hereunder, any determination of the relative benefits received
by the Selling Stockholder or the Underwriters from the offering of the Shares
shall include the net proceeds (before deducting expenses) received by the
Selling Stockholder, and the underwriting discounts and commissions received by
the Underwriters from the sale of such Additional Shares, in each case computed
on the basis of the respective amounts set forth in the notes to the table on
the cover page of the Prospectus. The relative fault of the Company or the
Selling Stockholder, as the case may be, on the one hand and the Underwriters on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Stockholder, as the case may be, on the one hand or by
the Underwriters on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
(f) The Company, the Selling Stockholder and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
9 were determined by a pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (e) above. The amount paid or payable by an indemnified party as a
result of the losses,
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claims, damages, liabilities and expenses referred to in paragraph (e) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 9, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 9 are several
in proportion to the respective numbers of Firm Shares set forth opposite their
names in Schedule I hereto (or such numbers of Firm Shares increased as set
forth in Section 12 hereof) and not joint.
(g) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(h) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 9 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of the Company and the Selling Stockholder set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or the Selling Stockholder or any person controlling the Company or the Selling
Stockholder, (ii) acceptance of any Shares and payment therefor hereunder, and
(iii) any termination of this Agreement. A successor to any Underwriter or any
person controlling any Underwriter, or to the Company, its directors or
officers, the Selling Stockholder, or any person controlling the Company or the
Selling Stockholder, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 9.
10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered, it
is necessary for the registration statement or a post-effective amendment
thereto to be declared effective before the offering of the Shares may commence,
the registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall have been
timely made; no stop order suspending the
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effectiveness of the registration statement shall have been issued and no
proceeding for that purpose shall have been instituted or, to the knowledge of
the Company or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to your
reasonable satisfaction.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the Company or the
Subsidiaries taken as a whole not contemplated by the Prospectus, which in your
reasonable opinion, as Representatives of the several Underwriters, would
materially adversely affect the market for the Shares, or (ii) any event or
development relating to or involving the Company or any officer or director of
the Company or the Selling Stockholder which makes any statement made in the
Prospectus untrue or which, in the opinion of the Company and its counsel or the
Underwriters and their counsel, requires the making of any addition to or change
in the Prospectus in order to state a material fact required by the Act or any
other law to be stated therein or necessary in order to make the statements
therein not misleading, if amending or supplementing the Prospectus to reflect
such event or development would, in your reasonable opinion, as Representatives
of the several Underwriters, materially adversely affect the market for the
Shares.
(c) You shall have received on the Closing Date, an opinion of
Jones, Day, Reavis and Pogue, counsel for the Company, dated the Closing Date
and addressed to you, as Representatives of the several Underwriters, to the
effect that:
(i) The Company is a corporation duly incorporated and
validly existing in good standing under the laws of the State of Delaware with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto);
(ii) Each of the Subsidiaries is a corporation duly
organized and validly existing in good standing under the laws of the
jurisdiction of its organization, with full corporate power and authority to
own, lease, and operate its properties and to conduct its business as described
in the Registration Statement and the Prospectus (and any amendment or
supplement thereto);
(iii) The authorized capital stock of the Company conforms in
all material respects as to legal matters to the description thereof contained
in the Company's Registration Statements on Form 8-A, filed with the Commission
on August 19, 1981, as amended, and February 1991, as amended, each of which
have been incorporated by reference in the Registration Statement;
(iv) All the outstanding shares of capital stock of the
Company (including the Shares) have been duly authorized and validly issued, and
are fully paid and nonassessable;
(v) The form of certificates for the Shares conforms to the
requirements of the Delaware General Corporation Law;
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(vi) The Registration Statement and all post-effective
amendments, if any, have become effective under the Act and, to the best
knowledge of such counsel after reasonable inquiry, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose are pending before or contemplated by the Commission; and any
required filing of the Prospectus pursuant to Rule 424(b) has been made in
accordance with Rule 424(b);
(vii) The Company has corporate power and authority to enter
into this Agreement and this Agreement has been duly authorized, executed and
delivered by the Company and is a valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except as
enforcement of rights to indemnity and contribution hereunder may be limited by
Federal or state securities laws or principles of public policy and subject to
the qualification that the enforceability of the Company's obligations hereunder
may be limited by bankruptcy, insolvency, reorganization, moratorium, and other
similar laws relating to or affecting creditors' rights generally and by general
equitable principles;
(viii) Neither the Company nor any of the Subsidiaries is in
violation of its respective certificate or articles of incorporation or by-laws;
(ix) Neither the offer, sale or delivery of the Shares, the
execution, delivery or performance of this Agreement, compliance by the Company
with the provisions hereof nor consummation by the Company of the transactions
contemplated hereby conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate or articles of
incorporation or by-laws of the Company or any of the Subsidiaries or any
agreement, indenture, lease or other instrument to which the Company or any of
the Subsidiaries is a party or by which any of them or any of their respective
properties is bound that is an exhibit to the Registration Statement or to any
Incorporated Document; or will result in the creation or imposition of any lien,
charge or encumbrance under any such document that is an exhibit to the
Registration Statement or to any Incorporated Document upon any property or
assets of the Company or any of the Subsidiaries, nor will any such action
result in any violation of any existing United States, New York, Georgia or
Delaware corporate law, regulation or ruling (assuming compliance with all
applicable state securities and Blue Sky laws);
(x) No consent, approval, authorization or other order of,
or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency, or official is required on the part
of the Company (except as have been obtained under the Act and the Exchange Act
or such as may be required under state securities or Blue Sky laws governing the
purchase and distribution of the Shares) for the execution, delivery or
performance by the Company of this Agreement;
(xi) The Registration Statement and the Prospectus and any
supplements or amendments thereto (except for the financial statements and the
notes thereto and the schedules and other financial and statistical data
included therein, as to which such counsel need not express any opinion) comply
as to form in all material respects with the requirements of the Act; and each
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of the Incorporated Documents (except for the financial statements and the notes
thereto and the schedules and other financial and statistical data included
therein, as to which counsel need not express any opinion) at the time they were
filed, complied as to form in all material respects with the Exchange Act and
the rules and regulations of the Commission thereunder;
(xii) Although counsel has not undertaken, except as
otherwise indicated in their opinion, to determine independently, and does not
assume any responsibility for, the accuracy or completeness of the statements in
the Registration Statement (except as set forth in paragraph (iii) above), such
counsel has participated in the preparation of the Registration Statement and
the Prospectus, including review and discussion of the contents thereof
(including review and discussion of the contents of all Incorporated Documents),
and nothing has come to the attention of such counsel that has caused them to
believe that the Registration Statement (including the Incorporated Documents)
at the time the Registration Statement became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus, as of its date and as of the Closing Date or the Option
Closing Date, as the case may be, or any amendment or supplement to the
Prospectus, as of its respective date, and as of the Closing Date or the Option
Closing Date, as the case may be, contained any untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
opinion with respect to the financial statements and the notes thereto and the
schedules and other financial data included in the Registration Statement or the
Prospectus or any Incorporated Document).
In rendering their opinion as aforesaid, such counsel may rely upon an
opinion or opinions, each dated the Closing Date, of other counsel retained by
them or the Company as to laws of any jurisdiction other than the United States,
the State of Delaware or the State of New York, provided that (1) each such
local counsel is acceptable to the Representatives, (2) such reliance is
expressly authorized by each opinion so relied upon and a copy of each such
opinion is delivered to the Representatives and is, in form and substance
satisfactory to them and their counsel, and (3) counsel shall state in their
opinion that they believe that they and the Underwriters are justified in
relying thereon.
(d) You shall have received on the Closing Date, an opinion of James A.
Gilbert, Esq., Vice President-General Counsel and Secretary of the Company,
dated the Closing Date and addressed to you, as Representatives of the several
Underwriters, to the effect that:
(i) The Company and each of the Subsidiaries have all necessary
governmental authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental regulatory officials and
bodies (except where the failure so to have any such authorizations, approvals,
orders, licenses, certificates, franchises or permits, individually or in the
aggregate, would not have a material adverse effect on the condition (financial
or other), business, properties, net worth or results of operations of the
Company and the Subsidiaries taken as a whole),
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<PAGE>
to own their respective properties and to conduct their respective businesses as
now being conducted and as described in the Prospectus;
(ii) Except as disclosed in the Prospectus, the Company owns of
record, directly or indirectly, all the outstanding shares of capital stock of
each of the Subsidiaries free and clear of any lien, adverse claim, security
interest, equity, or other encumbrance;
(iii) Other than as described or contemplated in the Prospectus
(or any supplement thereto), there are no legal or governmental proceedings
pending or threatened against the Company or any of the Subsidiaries, or to
which the Company or any of the Subsidiaries, or any of their property, is
subject, which are required to be described in the Registration Statement or
Prospectus (or any amendment or supplement thereto);
(iv) There are no agreements, contracts, indentures, leases or
other instruments, that are required to be described in the Registration
Statement or the Prospectus (or any amendment or supplement thereto) or to be
filed as an exhibit to the Registration Statement or any Incorporated Document
that are not described or filed as required, as the case may be;
(v) The Company and the Subsidiaries own all trademark
registrations and service mark registrations described in the Prospectus as
being owned by them or necessary for the conduct of their respective businesses,
and such counsel is not aware of any claim to the contrary or any challenge by
any other person to the rights of the Company and the Subsidiaries with respect
to the foregoing, except for such claims that do not have a material adverse
effect on the condition (financial or other), business, properties, net worth or
results of operations of the Company and the Subsidiaries taken as a whole;
(vi) Neither the Company nor any of the Subsidiaries is in
violation of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries or of any
judgement, injunction, order or decree of any court or governmental agency or
body having jurisdiction over the Company or any of the Subsidiaries, except for
such violations that do not and will not have a material adverse effect on the
condition (financial or other), business, properties, net worth or results of
operations of the Company and the Subsidiaries taken as a whole;
(vii) Except as described in the Prospectus or in any Incorporated
Documents, there are no outstanding options, warrants or other rights calling
for the issuance of, and such counsel does not know of any commitment, plan or
arrangement to issue, any shares of capital stock of the Company or any security
convertible into or exchangeable or exercisable for capital stock of the
Company;
(viii) Except as described in the Prospectus, there is no holder of
any security of the Company or any other person who has the right, contractual
or otherwise, to cause the Company to have any Common Stock or other securities
of the Company included in the registration
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<PAGE>
statement or the right, as a result of the filing of the registration statement,
to require registration under the Act of any shares of Common Stock or other
securities of the Company;
(ix) Nothing has come to the attention of such counsel that has
caused him to believe that the Registration Statement (including the
Incorporated Documents) at the time the Registration Statement became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus, as of its date and as of the Closing Date
or the Option Closing Date, as the case may be, or any amendment or supplement
to the Prospectus, as of its respective date, and as of the Closing Date or the
Option Closing Date, as the case may be, contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
opinion with respect to the financial statements and the notes thereto and the
schedules and other financial data included in the Registration Statement or the
Prospectus or any Incorporated Document);
(x) To the best knowledge of such counsel after reasonable
inquiry, neither the Company nor any of its Subsidiaries is in default in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or other evidence of indebtedness, except as may be disclosed in
the Prospectus and except such defaults that do not and will not have a material
adverse effect on the condition (financial or other), business, properties, net
worth or results of operations of the Company and the Subsidiaries taken as a
whole; and
(xi) Neither the offer, sale or delivery of the Shares by the
Selling Stockholder contemplated hereby, the execution, delivery or performance
of this Agreement and compliance by the Company with the provisions hereof nor
consummation by the Company of the transactions contemplated hereby will result
in the creation or imposition of any lien, charge or encumbrance under any
agreement, indenture, lease or other instrument to which the Company or any of
the Subsidiaries is a party, known to such counsel after reasonable inquiry,
upon any property or assets of the Company or any of the Subsidiaries, nor will
any such action result in any violation of any existing law, regulation, ruling
(assuming compliance with all applicable state securities and Blue Sky laws),
judgment, injunction, order or decree known to such counsel after reasonable
inquiry, applicable to the Company, the Subsidiaries or any of their respective
properties, except such violations that do not and will not have a material
adverse effect on the condition (financial or other), business, properties, net
worth or results of operations of the Company and the Subsidiaries taken as a
whole.
(e) You shall have received on the Closing Date, an opinion of Sidley &
Austin, counsel for the Selling Stockholder, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, to the effect
that:
(i) This Agreement has been duly authorized, executed and
delivered by the Selling Stockholder and is a valid and binding agreement of the
Selling Stockholder enforceable against the Selling Stockholder in accordance
with its terms, except as enforcement of rights to
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<PAGE>
indemnity and contribution hereunder may be limited by Federal or state
securities laws or principles of public policy and subject to the qualification
that the enforceability of the Selling Stockholder's obligations hereunder may
be limited by bankruptcy, insolvency, reorganization, moratorium, and other
similar laws relating to or affecting creditors' rights generally and by general
equitable principles;
(ii) The Selling Stockholder has full corporate power and
authority to sell, assign, transfer and deliver valid title to the Shares to the
Underwriters pursuant to this Agreement;
(iii) The execution, delivery and performance of this Agreement by
the Selling Stockholder, the compliance by the Selling Stockholder with the
provisions hereof, the sale and delivery by the Selling Stockholder of the
Shares hereunder and the consummation by the Selling Stockholder of the other
transactions contemplated hereby will not violate, result in a breach of or
constitute a default under the terms or provisions of the certificate of
incorporation, as amended, or by-laws of the Selling Stockholder, or any United
States, New York or Delaware corporate law, rule, or regulation that a
nationally recognized firm of lawyers exercising customary professional
diligence would reasonably recognize as being directly applicable to the Selling
Stockholder in connection with the transactions contemplated by this Agreement;
and
(iv) Upon delivery of the Shares pursuant to this Agreement and
payment therefor as contemplated herein, the Underwriters will acquire valid
title to the Shares free and clear of any lien, claim, security interest, or
other encumbrance, restriction on transfer or other defect in title (assuming
the Underwriters are purchasing the Shares in good faith and without knowledge
of such lien, claim, security interest, or other encumbrance, restriction on
transfer or other defect in title).
In rendering their opinion as aforesaid, such counsel may rely upon
an opinion or opinions, each dated the Closing Date, of other counsel retained
by them or the Selling Stockholder as to laws of any jurisdiction other than the
United States, the State of Delaware or the State of New York, provided that (1)
each such local counsel is acceptable to the Representatives, (2) such reliance
is expressly authorized by each opinion so relied upon and a copy of each such
opinion is delivered to the Representatives and is, in form and substance
satisfactory to them and their counsel, and (3) counsel shall state in their
opinion that they believe that they and the Underwriters are justified in
relying thereon.
(f) You shall have received on the Closing Date, an opinion of David P.
Bailis, Esq., General Counsel of the Selling Stockholder, dated the Closing Date
and addressed to you, as Representatives of the several Underwriters, to the
effect that:
(i) The execution, delivery and performance of this Agreement by
the Selling Stockholder, the compliance by the Selling Stockholder with the
provisions hereof, the sale and delivery of the Shares hereunder and the
consummation by the Selling Stockholder of the other transactions contemplated
hereby will not violate, result in a breach of or constitute a default under the
terms or provisions of any material agreement, indenture, mortgage or other
instrument known
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<PAGE>
to such counsel to which the Selling Stockholder is a party or by which it is or
any of its assets or property is bound, or any ruling, judgment, injunction,
order or decree applicable to the Selling Stockholder or to any of the property
or assets of the Selling Stockholder;
(ii) No consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body, agency, or official is required on the part of the
Selling Stockholder (except as have been obtained under the Act and the Exchange
Act or such as may be required under state securities or Blue Sky laws governing
the purchase and distribution of the Shares) for the execution, delivery or
performance by the Selling Stockholder of this Agreement, compliance by the
Selling Stockholder with the provisions hereof, the sale and delivery of the
Shares hereunder or the consummation by the Selling Stockholder of the other
transactions contemplated hereby.
(g) You shall have received on the Closing Date an opinion of Skadden,
Arps, Slate, Meagher and Flom, counsel for the Underwriters, dated the Closing
Date and addressed to you, as Representatives of the several Underwriters, with
respect to the matters referred to in clauses (vi), (vii), (xi) and (xii) of the
foregoing paragraph (c) and such other related matters as you may request.
(h) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Arthur Andersen LLP and Ernst & Young, independent certified
public accountants, substantially in the forms heretofore approved by you.
(i)(i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be contemplated by the
Commission at or prior to the Closing Date; (ii) there shall not have been,
since the respective dates as of which information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), except as
may otherwise be stated in the Registration Statement and Prospectus (or any
amendment or supplement thereto), any material adverse change in the condition
(financial or other), business, properties, net worth or results of operations
of the Company and the Subsidiaries taken as a whole; and (iii) all the
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief financial officer of the Company (or such other officers as are
acceptable to you), to the effect set forth in this Section 10(i) and in Section
10(j) hereof.
(j) The Company shall not have failed at or prior to the Closing Date
to have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.
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<PAGE>
(k) The Selling Stockholder shall not have failed at or prior to the
Closing Date to have performed or complied with any of its agreements herein
contained and required to be performed or complied with by it hereunder at or
prior to the Closing Date.
(l) All the representations and warranties of the Selling Stockholder
contained in this Agreement shall be true and correct on and as of the date
hereof and on and as of the Closing Date as if made on and as of the Closing
Date, and you shall have received a certificate, dated the Closing Date and
signed by an executive officer of the Selling Stockholder to the effect set
forth in this Section 10(l) and in Section 10(k) hereof.
(m) The Selling Stockholder and the Company shall have furnished or
caused to be furnished to you such further certificates and documents as you
shall have reasonably requested in connection with the closing hereunder.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and your counsel.
Any certificate or document signed by any officer of the Company or the
Selling Stockholder and delivered to you, as Representatives of the
Underwriters, or to counsel for the Underwriters, shall be deemed a
representation and warranty by the Company or the Selling Stockholder, as the
case may be, to each Underwriter as to the statements made therein.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of any Option Closing
Date of the conditions set forth in this Section 10, except that, if any Option
Closing Date is other than the Closing Date, the certificates, opinions and
letters referred to in paragraphs (c) through (i) shall be dated the Option
Closing Date in question and the opinions called for by paragraphs (c), (d) and
(e) shall be revised to reflect the sale of Additional Shares.
11. EXPENSES. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by them of
their obligations hereunder: (i) the preparation, printing or reproduction, and
filing with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectus, the Incorporated Documents, and all
amendments or supplements to any of them, as may be reasonably requested for use
in connection with the offering and sale of the Shares; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the Shares;
(iv) the printing (or reproduction) and delivery of this Agreement, the
preliminary and supplemental Blue Sky Memoranda and all other agreements or
documents printed (or reproduced) and delivered in connection with the offering
of the Shares; (v) the listing of the Shares on the Nasdaq Stock Market National
Market; (vi) the registration or qualification of the Shares for offer and sale
under the securities or Blue Sky
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<PAGE>
laws of the several states as provided in Section 5(g) hereof (including the
reasonable fees (not to exceed $15,000), expenses and disbursements of counsel
for the Underwriters relating to the preparation, printing or reproduction, and
delivery of the preliminary and supplemental Blue Sky Memoranda and such
registration and qualification); (vii) the filing fees in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc.; (viii) the transportation and other expenses incurred by or on behalf of
Company representatives in connection with presentations to prospective
purchasers of the Shares; and (ix) the fees and expenses of the Company's
accountants and the fees and expenses of counsel (including local and special
counsel) for the Company.
12. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the registration statement or a post-effective amendment thereto to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the registration statement or such
post-effective amendment has been released by the Commission. Until such time
as this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Company and the Selling Stockholder.
If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate number of Shares which the Underwriters are
obligated to purchase on the Closing Date, each non-defaulting Underwriter shall
be obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule I hereto bears to the aggregate number of
Firm Shares set forth opposite the names of all non-defaulting Underwriters or
in such other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares
which such defaulting Underwriter or Underwriters are obligated, but fail or
refuse, to purchase. If any one or more of the Underwriters shall fail or
refuse to purchase Shares which it or they are obligated to purchase on the
Closing Date and the aggregate number of Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Shares which
the Underwriters are obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Selling Stockholder for the purchase of such Shares
by one or more non-defaulting Underwriters or other party or parties approved by
you and the Selling Stockholder are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Selling Stockholder. In any such case which
does not result in termination of this Agreement, either you or the Selling
Stockholder shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party
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<PAGE>
not listed in Schedule I hereto who, with your approval and the approval of the
Selling Stockholder, purchases Shares which a defaulting Underwriter is
obligated, but fails or refuses, to purchase.
Any notice under this Section 12 may be given by telegram, facsimile or
telephone but shall be subsequently confirmed by letter.
13. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company and the Selling Stockholder, by notice to the Company
and the Selling Stockholder, if prior to the Closing Date or any Option Closing
Date (if different from the Closing Date and then only as to the Additional
Shares), as the case may be, (i) trading in securities generally on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market shall
have been suspended or materially limited, (ii) a general moratorium on
commercial banking activities in New York or Georgia shall have been declared by
either federal or state authorities, or (iii) there shall have occurred any
outbreak or escalation of hostilities or other international or domestic
calamity, crisis or change in political, financial or economic conditions, the
effect of which on the financial markets of the United States is such as to make
it, in your judgment, impracticable or inadvisable to commence or continue the
offering of the Shares at the offering price to the public set forth on the
cover page of the Prospectus or to enforce contracts for the resale of the
Shares by the Underwriters. Notice of such termination may be given to the
Company and the Selling Stockholder by telegram, facsimile or telephone and
shall be subsequently confirmed by letter.
14. INFORMATION FURNISHED BY THE UNDERWRITERS AND THE SELLING
STOCKHOLDER. (a) The statements set forth in the last paragraph on the cover
page, the stabilization and passive market making legend on the inside cover
page, and the names and participations of the Underwriters in the first
paragraph, and the selling concessions and passive market making in the third
paragraph under the caption "Underwriting" in any Prepricing Prospectus and in
the Prospectus, constitute the only information furnished by or on behalf of the
Underwriters through you as such information is referred to in Sections 7(b) and
9 hereof;
(b) The statements set forth on the cover page relating to the
Selling Stockholder, the information regarding the Common Stock offered by the
Selling Stockholder set forth in the Prospectus Summary, the information under
the caption "The Selling Stockholder" and the third and fourth paragraphs under
the caption "Underwriting" in the Registration Statement, any Prepricing
Prospectus and in the Prospectus constitute the only information furnished by or
on behalf of the Selling Stockholder as such information is referred to in
Sections 8(b) and 9 hereof.
15. MISCELLANEOUS. Except as otherwise provided in Sections 5, 12 and
13 hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 301 Perimeter Center North, Atlanta, Georgia 30346, Attention:
General Counsel; or (ii) if to the Selling Stockholder, at 11718 Nicholas
Street, Omaha, Nebraska 68154, Attention: Treasurer, or (iii) if to you, as
Representatives of the several Underwriters, care of Smith Barney Inc., 388
Greenwich Street, New York, New York 10013, Attention: Manager, Investment
Banking Division.
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<PAGE>
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 9 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the
term "successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any of the Shares in his
status as such purchaser.
16. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Stockholder and the several Underwriters.
Very truly yours,
HBO & Company
By ________________________________
[title]
First Data Corporation
By ________________________________
[title]
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
SMITH BARNEY INC.
ALEX. BROWN & SONS INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SCHRODER WERTHEIM & CO.
INCORPORATED
As Representatives of the Several Underwriters
By SMITH BARNEY INC.
By ______________________________________
Managing Director
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<PAGE>
SCHEDULE I
HBO & COMPANY
Number of
Underwriter Firm Shares
----------- -----------
Smith Barney Inc.
Alex. Brown & Sons Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Schroder Wertheim & Co. Incorporated
-----------
Total. 3,600,000
-----------
-----------
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<PAGE>
EXHIBIT 5
August 17, 1995
HBO & Company
301 Perimeter Center North
Atlanta, Georgia 30346
Gentlemen:
We have acted as counsel to HBO & Company, a Delaware corporation (the
"Company"), in connection with the registration of up to 4,000,000 shares of
Common Stock, $.05 par value per share, of the Company (the "Shares"), to be
sold by First Data Corporation (the "Selling Stockholder") pursuant to a
Registration Statement on Form S-3, filed with the Securities and Exchange
Commission to which this opinion appears as Exhibit 5 (the "Registration
Statement").
We have examined originals or certified or photostatic copies of such
records of the Company, certificates of officers of the Company, and public
officials and such other documents as we have deemed relevant or necessary as
the basis of the opinion set forth below in this letter. In such examination, we
have assumed the genuineness of all signatures, the conformity to original
documents submitted as certified or photostatic copies, and the authenticity of
originals of such latter documents. Based on the foregoing, we are of the
following opinion:
The Shares to be sold by the Selling Stockholder were, when issued by the
Company, duly authorized, validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and the reference to this Firm under the heading "Legal
Matters" in the Prospectus constituting part of the Registration Statement.
Sincerely,
/s/ JONES, DAY, REAVIS & POGUE
JONES, DAY, REAVIS & POGUE
<PAGE>
EXHIBIT 11
HBO & COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE OF COMMON STOCK
FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1994
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
<S> <C> <C> <C> <C>
1995 1994 1995 1994
---------- --------- ---------- ---------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 32,739 31,449 32,333 31,286
ADD -- Shares of common stock assumed issued upon exercise of
stock options using the "treasury stock" method as it applies
to the computation of primary earnings per share -- 1,591 -- 1,548
---------- --------- ---------- ---------
NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 32,739 33,040 32,333 32,834
ADD -- Additional shares of common stock assumed issued upon
exercise of stock options using the "treasury stock" method
as it applies to the computation of fully diluted earnings
per share -- -- -- --
---------- --------- ---------- ---------
NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING
ASSUMING FULL DILUTION 32,739 33,040 32,333 32,834
---------- --------- ---------- ---------
---------- --------- ---------- ---------
NET EARNINGS FOR PRIMARY AND FULLY DILUTED EARNINGS (LOSS) PER
SHARE: $ (63,563) $ 6,335 $ (54,561) $ 11,763
---------- --------- ---------- ---------
---------- --------- ---------- ---------
EARNINGS (LOSS) PER SHARE:
PRIMARY $ (1.94) $ .19 $ (1.69) $ .36
---------- --------- ---------- ---------
---------- --------- ---------- ---------
FULLY DILUTED $ (1.94) $ .19 $ (1.69) $ .36
---------- --------- ---------- ---------
---------- --------- ---------- ---------
</TABLE>
Note: No common stock was assumed issued upon exercise of stock options for the
computation of loss per share.
<PAGE>
EXHIBIT 23(A)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 8, 1995
incorporated by reference in HBO & Company's Form 10-K for the year ended
December 31, 1994 and to all references to our firm included in this
registration statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
August 15, 1995
<PAGE>
EXHIBIT 23(B)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 10, 1995
included in HBO & Company's Form 8-K dated August 16, 1995 and to all references
to our firm included in this registration statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
August 15, 1995
<PAGE>
EXHIBIT 23(C)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of HBO & Company for
the registration of 3,600,000 shares (4,000,000 shares assuming exercise of the
over-allotment option) of its common stock and to the incorporation by reference
therein of our reports dated January 26, 1995 (except for Note 12, as to which
the date is June 17, 1995) and March 31, 1995 (except for Note 11, as to which
the date is June 17, 1995), with respect to the financial statements of the
Health Services Business of First Data Health Systems Corporation included in
the Current Report on Form 8-K of HBO & Company dated July 31, 1995.
ERNST & YOUNG LLP
Denver, Colorado
August 15, 1995
<PAGE>
EXHIBIT 99
HBO & COMPANY SUBSIDIARIES
As of August 8, 1995
HBO & Company of Georgia
HBO & Company (UK) Limited
HBO & Company Canada Ltd.
HBO & Company (VI), Inc.
Data-Med Computer Services Limited
Pegasus Medical LTD
First Data Health Systems Corporation
First Data Health Systems (Australia), Pty. Ltd.
First Data Health Systems (U.K.), Ltd.
First Data Health Systems (Ireland), Ltd.
First Data Health Systems Training Services Ltd.
