<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 1997
REGISTRATION NO. 333-40087
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HBO & COMPANY
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7373 37-0986839
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
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:
<TABLE>
<S> <C>
LISA A. STATER, ESQ. THOMAS C. CHASE, ESQ.
Jones, Day, Reavis & Pogue Hill & Barlow, a Professional Corporation
3500 SunTrust Plaza One International Place
303 Peachtree Street, N.E. Boston, Massachusetts 02110-2607
Atlanta, Georgia 30308-3242 (617) 428-3000
(404) 521-3939
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. / / ______________
------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
HPR INC.
245 First Street
Cambridge, Massachusetts 02142
November 21, 1997
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders (the
"Meeting") of HPR Inc. ("HPR") to be held at the offices of Hill & Barlow, a
Professional Corporation, 20th Floor, One International Place, Boston,
Massachusetts 02110 at 9:00 a.m., local time, on December 23, 1997.
At the Meeting, you will be asked to consider and take action upon a
proposal to approve an Agreement of Merger dated September 27, 1997 (the "Merger
Agreement") among HPR, HBO & Company, a Delaware corporation ("HBOC"), and HBO &
Company of Georgia, a Delaware corporation, which is a wholly-owned subsidiary
of HBOC ("HBOC-GA"), pursuant to which, among other things, (a) HPR will merge
with and into HBOC-GA (the "Merger") and (b) each outstanding share of common
stock, $.01 par value per share, of HPR (the "HPR Common Stock") and each
outstanding right to acquire a share of HPR Common Stock will be converted into
the right to receive six-tenths (.6) of a share of common stock, $.05 par value
per share, of HBOC (the "Exchange Ratio"), less the amount of any fractional
share, which will be paid in cash.
Details of the foregoing matter are set forth in the accompanying Proxy
Statement/Prospectus which you are urged to review carefully. A copy of the
Merger Agreement is also attached to the Proxy Statement/Prospectus as Appendix
A.
Your Board of Directors has carefully considered and approved the Merger
proposal by unanimous vote of all directors present and has determined that the
Merger is fair to, and in the best interests of, HPR and its stockholders.
Accordingly, the Board of Directors unanimously recommends that stockholders
vote FOR approval of the Merger Agreement. The Board of Directors has received
the written opinion of BT Alex. Brown Incorporated to the effect that, as of the
date of such opinion and based upon and subject to certain matters stated
therein, the Exchange Ratio was fair, from a financial point of view, to the
holders of HPR Common Stock. A copy of such opinion is attached to the Proxy
Statement/Prospectus as Appendix B and should be read carefully in its entirety.
It is important that you vote your shares whether or not you plan to attend
the Meeting. To be sure your vote is counted, we urge you to carefully review
the Proxy Statement/Prospectus and to vote your shares as you choose. PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE AS
SOON AS POSSIBLE. You may revoke and change your proxy vote at any time prior to
the Meeting, and any such signed, dated and submitted proxy will supersede any
earlier proxy submitted by you. If you attend the Meeting and wish to vote in
person, the ballot that you submit at the Meeting will supersede your proxy.
Thank you for your cooperation.
Very truly yours,
[LOGO]
MARCIA J. RADOSEVICH, PH.D.
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
<PAGE>
HPR INC.
245 First Street
Cambridge, Massachusetts 02142
-------------------
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
-------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Meeting") of HPR Inc., a Delaware corporation ("HPR"), will be held on Tuesday,
December 23, 1997, at 9:00 a.m., local time, at the offices of Hill & Barlow, a
Professional Corporation, 20th Floor, One International Place, Boston,
Massachusetts 02110 for the following purpose:
To consider and vote upon a proposal to approve an Agreement of
Merger dated September 27, 1997 (the "Merger Agreement") among
HPR, HBO & Company, a Delaware corporation ("HBOC"), and HBO &
Company of Georgia, a Delaware corporation, which is a
wholly-owned subsidiary of HBOC ("HBOC-GA"), pursuant to which,
among other things, (a) HPR will merge with and into HBOC-GA (the
"Merger") and (b) each outstanding share of common stock, $.01 par
value per share (the "HPR Common Stock"), of HPR and each
outstanding right to acquire a share of HPR Common Stock will be
converted into the right to receive six-tenths (.6) of a share of
common stock, $.05 par value per share, of HBOC, less the amount
of any fractional share, which will be paid in cash.
The Board of Directors of HPR (the "HPR Board") has approved the Merger
proposal by unanimous vote of all directors present and has determined that the
Merger is fair to, and in the best interests of, HPR and its stockholders.
Accordingly, the HPR Board unanimously recommends that you vote FOR approval of
the Merger Agreement.
The HPR Board has fixed the close of business on November 19, 1997 as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Meeting. Accordingly, only stockholders of record of HPR Common
Stock at the close of business on that date will be entitled to notice of, and
to vote at, the Meeting or any adjournment or postponement thereof.
Details of the proposed Merger and other important information concerning
HPR and HBOC are more fully described in the accompanying Proxy
Statement/Prospectus. Whether or not you plan to attend the Meeting, you are
urged to study the Proxy Statement/Prospectus carefully and then to complete,
sign and date the enclosed proxy. To avoid unnecessary expense, please mail your
proxy promptly in the enclosed return envelope, which requires no postage if
mailed in the United States.
By order of the Board of Directors,
[SIGNATURE]
THOMAS C. CHASE
SECRETARY
Cambridge, Massachusetts
November 21, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN AND
MAIL PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF HPR. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
<PAGE>
SUBJECT TO COMPLETION DATED NOVEMBER 21, 1997
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>
PROXY STATEMENT
OF
HPR INC.
FOR SPECIAL MEETING OF STOCKHOLDERS
---------------------
PROSPECTUS
OF
HBO & COMPANY
----------------
This Proxy Statement/Prospectus is being furnished to holders of common
stock, $.01 par value per share (the "HPR Common Stock"), of HPR Inc., a
Delaware corporation ("HPR"), as a proxy statement in connection with the
solicitation of proxies by the Board of Directors of HPR (the "HPR Board") for
use at the Special Meeting of Stockholders (the "Meeting") of HPR to be held on
December 23, 1997, at the offices of Hill & Barlow, a Professional Corporation,
20th Floor, One International Place, Boston, Massachusetts 02110 commencing at
9:00 a.m., local time, and at any adjournment or postponement thereof, for the
purpose set forth herein and in the accompanying Notice of Special Meeting of
Stockholders of HPR.
This Proxy Statement/Prospectus also constitutes the prospectus of HBO &
Company, a Delaware corporation ("HBOC"), with respect to up to 10,586,554
shares (net of the aggregate amount of fractional shares, which will be paid in
cash) of common stock, $.05 par value per share, of HBOC (the "HBOC Common
Stock") to be issued in connection with the merger (the "Merger") of HPR with
and into HBO & Company of Georgia, a Delaware corporation, which is a
wholly-owned subsidiary of HBOC ("HBOC-GA"), in exchange for all of the
outstanding shares and rights to acquire shares of HPR Common Stock. In the
Merger, subject to the terms of the Agreement of Merger dated September 27, 1997
among HPR, HBOC and HBOC-GA (the "Merger Agreement"), each outstanding share of
HPR Common Stock and right to acquire a share of HPR Common Stock will be
converted into the right to receive six-tenths (.6) of a share of HBOC Common
Stock (the "Exchange Ratio"), less the amount of any fractional shares, which
will be paid in cash. The HPR Board may (but is not obligated to) terminate the
Merger Agreement if the average closing price per share (or if there is no sale
on such date then the average between the closing bid and ask prices on any such
day) as reported by the Nasdaq Stock Market National Market ("Nasdaq NM") for
shares of HBOC Common Stock during the 15 consecutive trading days ending on the
third trading day prior to the date of the Meeting (the "Market Value") is less
than $35.00.
Outstanding options to purchase shares of HPR Common Stock will be assumed
by HBOC upon consummation of the Merger such that the holders will have the
right to purchase that number of shares of HBOC Common Stock into which the
shares of HPR Common Stock subject to such options would have been converted in
the Merger.
As a result of the Merger, holders of shares of HPR Common Stock or rights
to acquire shares of HPR Common Stock will receive an aggregate of up to
10,586,554 shares of HBOC Common Stock (less the aggregate amount of any
fractional shares, which will be paid in cash). Shares of HBOC Common Stock and
HPR Common Stock are currently approved for quotation on the Nasdaq NM under the
symbols "HBOC" and "HPRI," respectively. On November 20, 1997, the reported
closing sale prices of a share of HBOC Common Stock and HPR Common Stock on the
Nasdaq NM were $43.875 and $26.00, respectively.
This Proxy Statement/Prospectus and the related Notice of Special Meeting
and proxy card are first being mailed on or about November 21, 1997, to
stockholders of record at the close of business on November 19, 1997 (the
"Record Date"). There were 15,385,515 shares of HPR Common Stock outstanding at
the close of business on the Record Date. Only holders of HPR Common Stock of
record on the Record Date will be entitled to notice of, and to vote at, the
Meeting or any adjournment or postponement thereof. Each holder of record may
revoke and change his proxy vote at any time prior to the Meeting and each such
signed, dated and submitted proxy will supersede any earlier proxy submitted. If
a holder of record of HPR Common Stock attends the Meeting and wishes to vote in
person, any ballot submitted by such holder at the Meeting will supersede any
earlier submitted proxy.
The above matters are discussed in detail in this Proxy
Statement/Prospectus. Stockholders of HPR are strongly urged to read and
consider this Proxy Statement/Prospectus in its entirety.
SEE "RISK FACTORS," ON PAGE 21 OF THIS PROXY STATEMENT/PROSPECTUS, FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY HPR STOCKHOLDERS IN
DETERMINING HOW TO VOTE ON THE MERGER AGREEMENT.
---------------------
<PAGE>
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 PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
The date of this Proxy Statement/Prospectus is November 21, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AVAILABLE INFORMATION AND SOURCES OF INFORMATION........................................................... 4
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................................................... 5
SUMMARY.................................................................................................... 6
The Parties.............................................................................................. 6
The Meeting.............................................................................................. 7
The Merger Proposal...................................................................................... 7
Summary Financial Data................................................................................... 11
Pro Forma Financial Information.......................................................................... 13
Comparative Per Share Data............................................................................... 19
RISK FACTORS............................................................................................... 21
CERTAIN MARKET INFORMATION................................................................................. 21
HBOC..................................................................................................... 21
HPR...................................................................................................... 22
THE MEETING................................................................................................ 22
THE MERGER PROPOSAL........................................................................................ 23
Background of the Merger................................................................................. 23
Reasons of HPR for Engaging in the Merger; Recommendation of the HPR Board............................... 26
Opinion of Financial Advisor to HPR...................................................................... 27
Reasons of HBOC for Engaging in the Merger............................................................... 32
Terms of the Merger...................................................................................... 32
Effective Time......................................................................................... 32
General Effects of the Merger.......................................................................... 32
Conversion of Shares................................................................................... 32
Fractional Shares...................................................................................... 32
Stock Plans............................................................................................ 32
Exchange of Certificates............................................................................... 33
Payment of Dividends................................................................................... 33
Limitations on Transferability of HBOC Common Stock.................................................... 33
Conditions; Waiver..................................................................................... 34
Hart-Scott-Rodino...................................................................................... 35
No Solicitation........................................................................................ 35
Termination............................................................................................ 35
Accounting Treatment..................................................................................... 35
Certain Federal Income Tax Consequences.................................................................. 36
No Appraisal Rights...................................................................................... 37
INTERESTS OF CERTAIN PERSONS IN EACH OF HBOC AND HPR....................................................... 38
Security Ownership of Certain Beneficial Owners and Management of HBOC................................... 38
Security Ownership of Certain Beneficial Owners and Management of HPR.................................... 39
Interests of Certain HPR Persons in Matters to be Acted Upon............................................. 41
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF HBOC COMMON STOCK AND HPR COMMON STOCK................ 42
Introduction............................................................................................. 42
Authorized Capital Stock................................................................................. 43
Board or Stockholder Approved Preferred Stock............................................................ 43
Voting Rights............................................................................................ 43
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Number of Directors...................................................................................... 43
Election of Board of Directors........................................................................... 44
Vote on Merger, Consolidation or Sale of Substantially All Assets........................................ 44
Special Meetings of Stockholders......................................................................... 44
Stockholder Action by Written Consent.................................................................... 44
Amendment of Certificate of Incorporation................................................................ 44
Amendment of Bylaws...................................................................................... 45
Liability and Indemnification of Officers and Directors.................................................. 45
Payment of Dividends..................................................................................... 46
Anti-Takeover Protection................................................................................. 46
Appraisal Rights......................................................................................... 46
BUSINESS OF HBOC........................................................................................... 47
General.................................................................................................. 47
Recent Developments...................................................................................... 47
BUSINESS OF HPR............................................................................................ 47
STOCKHOLDER PROPOSALS...................................................................................... 47
OTHER MATTERS.............................................................................................. 47
CERTAIN LEGAL MATTERS...................................................................................... 48
EXPERTS.................................................................................................... 48
APPENDIX A--Agreement of Merger dated September 27, 1997................................................... A-1
APPENDIX B--Opinion of BT Alex. Brown Incorporated......................................................... B-1
</TABLE>
3
<PAGE>
AVAILABLE INFORMATION AND SOURCES OF INFORMATION
Each of HBOC and HPR is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by each of HBOC and HPR with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at 7 World Trade Center,
13th Floor, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material also may be
obtained by mail from the Public Reference Section of the Commission, Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Additionally, the Commission maintains a Web site on the Internet that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission and that is located at
http://www.sec.gov.
HBOC has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), which includes the
proxy statement of HPR with respect to the Merger and the prospectus of HBOC
with respect to the shares of HBOC Common Stock issuable in the Merger. This
Proxy Statement/Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which are omitted in accordance with
the rules and regulations of the Commission and to which reference is hereby
made. Statements contained in this Proxy Statement/Prospectus as to the contents
of any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission, reference is made to the exhibit or other filing for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. Copies of the Registration
Statement together with exhibits may be inspected at the office of the
Commission in Washington, D.C., as indicated above, without charge and copies
thereof may be obtained therefrom upon payment of a prescribed fee.
All information contained in this Proxy Statement/Prospectus regarding HPR
has been supplied by HPR, information regarding the Merger proposal has been
supplied by HPR and/or HBOC and all other information has been supplied by HBOC.
References to HPR and HBOC in this Proxy Statement/ Prospectus mean the
respective corporations and their respective consolidated subsidiaries except as
the context may otherwise indicate.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS,
IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SHARES OF HBOC
COMMON STOCK MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HBOC, HPR OR
ANY OTHER PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OR THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROXY STATEMENT/ PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HBOC OR HPR SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
4
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The information in the following documents filed by HBOC with the Commission
(File No. 0-9900) pursuant to the Exchange Act is incorporated by reference in
this Proxy Statement/Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1996, filed with the Commission on March 6, 1997;
2. Quarterly Reports on Form 10-Q for the quarters ended: (i) March 31,
1997, dated and filed with the Commission on May 15, 1997, as amended by
Form 10-Q/A dated and filed with the Commission on May 15, 1997; (ii) June
30, 1997, dated and filed with the Commission on August 6, 1997; and (iii)
September 30, 1997, dated and filed with the Commission on November 12,
1997;
3. Current Reports on Form 8-K: (i) dated and filed with the Commission
on February 11, 1997; (ii) dated and filed with the Commission on March 19,
1997; and (iii) dated and filed with the Commission on October 3, 1997;
4. Proxy Statement dated as of April 4, 1997 and filed in definitive
form on April 4, 1997 with the Commission with respect to the information
required to be included herein by Items 401 (management), 402 (executive
compensation) and 404 (certain relationships and related transactions) of
Regulation S-K promulgated under the Securities Act and the Exchange Act;
and
5. The description of Common Stock and Preferred Share Purchase Rights
contained in HBOC's Registration Statements on Form 8-A, filed with the
Commission on August 19, 1981, as amended, and February 19, 1991, as
amended, respectively.
The information in the following documents filed by HPR with the Commission
(File No. 0-26348) pursuant to the Exchange Act is incorporated by reference in
this Proxy Statement/Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended June 30, 1997,
filed with the Commission on August 26, 1997, as amended by Form 10-K/A,
filed with the Commission on September 8, 1997; and
2. Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, dated and filed with the Commission on November 12, 1997.
All documents filed by HBOC and HPR pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and
prior to the date of the Meeting, shall be deemed to be incorporated by
reference in this Proxy Statement/Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
previously filed document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or was deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement/ Prospectus.
The information relating to HBOC and HPR contained in this Proxy
Statement/Prospectus should be read together with the information in the
documents incorporated by reference.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED, IN THE
CASE OF HBOC DOCUMENTS, TO HBO & COMPANY, 301 PERIMETER CENTER NORTH, ATLANTA,
GEORGIA 30346, ATTENTION: MONIKA BROWN, TELEPHONE: (800) 426-2411, AND, IN THE
CASE OF HPR DOCUMENTS, TO HPR INC., 245 FIRST STREET, CAMBRIDGE, MASSACHUSETTS
02142, ATTENTION: ANN MARIE PINAULT, TELEPHONE: (617) 679-8996. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE MEETING, ANY SUCH REQUESTS
SHOULD BE MADE BY DECEMBER 16, 1997.
5
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED
IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING NOTES THERETO, INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS. ALL SHARE AND PER SHARE DATA REGARDING HBOC COMMON STOCK
IN THIS PROXY STATEMENT/PROSPECTUS HAVE BEEN ADJUSTED TO GIVE EFFECT TO A
TWO-FOR-ONE STOCK SPLIT OF THE HBOC COMMON STOCK EFFECTED IN THE FORM OF A STOCK
DIVIDEND PAID SEPTEMBER 9, 1997 TO STOCKHOLDERS OF RECORD ON AUGUST 25, 1997.
THE PARTIES
HBO & COMPANY
GENERAL. HBOC develops integrated patient care, clinical, financial,
managed care and strategic management software solutions for the healthcare
industry. These open systems applications facilitate the integration of
clinical, financial and administrative data from a wide range of customer
systems and software. HBOC's broad product portfolio can be implemented in a
variety of combinations from stand-alone to enterprisewide, enabling customers
to add incremental capabilities to existing information systems without making
prior capital investments obsolete. HBOC also provides a full complement of
network communications technologies, including wireless capabilities, as well as
outsourcing services that are offered 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. In addition, HBOC offers a wide range of electronic commerce
services, including electronic medical claims and remittance advice services as
well as statement processing.
HBOC markets its products and services to integrated health delivery
networks, hospitals, physicians' offices, home health providers, pharmacies,
reference laboratories, managed care providers and payers. HBOC also sells its
products and services internationally through subsidiaries and/or distribution
agreements in the United Kingdom, Canada, Ireland, Saudi Arabia, Kuwait,
Australia, Puerto Rico and New Zealand.
The address and telephone number of the principal executive offices of HBOC
are 301 Perimeter Center North, Atlanta, Georgia 30346, (770) 393-6000.
RECENT DEVELOPMENTS. HBOC has entered into an Agreement of Merger dated
October 2, 1997 among HBOC, HBOC-GA and National Health Enhancement Systems,
Inc. ("National"). Such agreement is subject, among other things, to approval by
the stockholders of National. National develops and distributes products and
services used in the delivery of telephonic medical assistance and care
management.
HPR INC.
HPR develops and markets software and proprietary database products
incorporating clinical knowledge that enable payers and providers of healthcare
services to better manage the financial risk associated with the delivery of
healthcare and the quality of care. HPR products are used to manage healthcare
costs and quality of care by clinically evaluating providers' claims for
payment; measuring efficiency, quality and medical outcomes; determining
appropriate utilization of medical services; influencing physician referral
patterns and profiling practice patterns; assisting in
HEDIS-Registered Trademark- reporting; and managing and supporting the physician
credentialing and accreditation processes. HPR markets its products through a
combination of a national direct sales force and third-party marketing
agreements.
The address and telephone number of the principal executive offices of HPR
are 245 First Street, Cambridge, Massachusetts 02142, (617) 679-8000.
6
<PAGE>
THE MEETING
The Meeting will be held on December 23, 1997 at 9:00 a.m., local time, at
the offices of Hill & Barlow, a Professional Corporation, 20th Floor, One
International Place, Boston, Massachusetts 02110. The purpose of the Meeting is
to consider and take action upon a proposal to approve the Merger Agreement. The
HPR Board has fixed the close of business on November 19, 1997, as the Record
Date for the determination of stockholders entitled to vote at the Meeting. The
presence at the Meeting, in person or by proxy, of the holders of at least a
majority of the shares of HPR Common Stock issued and outstanding and entitled
to vote on such date is necessary to constitute a quorum at the Meeting. The
proposed Merger Agreement requires the affirmative vote of the holders of a
majority of the issued and outstanding shares of HPR Common Stock in order to be
approved. See "The Meeting."
THE MERGER PROPOSAL
RECOMMENDATION OF THE HPR BOARD; OPINION OF FINANCIAL ADVISOR TO HPR
The HPR Board has approved the Merger Agreement by unanimous vote of all
directors present and has determined that the Merger is fair to, and in the best
interests of, HPR and its stockholders. Accordingly, the HPR Board unanimously
recommends that HPR's stockholders vote FOR approval of the Merger Agreement. In
approving the Merger Agreement, the HPR Board considered various factors more
fully described under the caption "The Merger Proposal--Reasons of HPR for
Engaging in the Merger; Recommendation of the HPR Board." In addition, the HPR
Board has received an opinion of BT Alex. Brown Incorporated ("BT Alex. Brown")
regarding the fairness, from a financial point of view, of the Exchange Ratio to
the holders of HPR Common Stock. The full text of the opinion of BT Alex. Brown,
which is attached hereto as Appendix B and should be read carefully in its
entirety, is directed to the HPR Board, addresses only the fairness of the
Exchange Ratio from a financial point of view and does not constitute a
recommendation to any stockholder as to how such stockholder should vote at the
Meeting. See "The Merger Proposal--Opinion of Financial Advisor to HPR."
TERMS OF THE MERGER
The following is a summary of certain of the terms and conditions of the
Merger Agreement, a copy of which is attached hereto as Appendix A.
EFFECTIVE TIME. The Merger will become effective when both (i) the Merger
Agreement is adopted and approved by the stockholders of HPR in accordance with
the applicable provisions of the Delaware General Corporation Law (the "DGCL")
and (ii) a certificate of merger (the "Certificate of Merger") is filed with the
Secretary of State of Delaware (the time the Merger becomes effective being
referred to as the "Effective Time" and the date on which the Effective Time
occurs being referred to as the "Closing Date").
CONVERSION OF SHARES. Each share of HPR Common Stock issued and outstanding
immediately prior to the Effective Time will, at the Effective Time, be
converted into the right to receive six-tenths (.6) of a share of HBOC Common
Stock (the "Exchange Ratio"), less the amount of any fractional share, which
will be paid in cash; provided however, that if the Market Value of the HBOC
Common Stock is less than $35.00, the HPR Board shall have the right (but shall
not be obligated) to terminate the Merger Agreement. The shares of HBOC Common
Stock and any cash in lieu of fractions thereof receivable by holders of HPR
Common Stock are hereinafter referred to as the "Merger Consideration."
FRACTIONAL SHARES. No certificates or scrip representing fractional shares
of HBOC Common Stock shall be issued pursuant to the Merger, but in lieu
thereof, any holder of HPR Common Stock shall be entitled to receive a cash
payment therefor, without interest, at a pro rata amount based on the Market
Value.
7
<PAGE>
STOCK PLANS. Options to purchase shares of HPR Common Stock outstanding at
the Effective Time of the Merger will be assumed by HBOC, and the optionee will
have the right to purchase that number of shares (rounded down to the nearest
whole share) of HBOC Common Stock into which the number of shares of HPR Common
Stock the optionee was entitled to purchase under the existing option would have
been converted pursuant to the terms of the Merger. See "The Merger
Proposal--Terms of the Merger-- Stock Plans."
EXCHANGE OF CERTIFICATES. Promptly after the Effective Time, SunTrust Bank,
Atlanta (the "Exchange Agent") will mail to each record holder (as of the
Effective Time) of an outstanding certificate or certificates that immediately
prior to the Effective Time represented outstanding shares of HPR Common Stock
(the "Certificates") a letter of transmittal and instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration payable in respect of the shares of HPR Common Stock represented
thereby. Until surrendered, each Certificate shall represent for all purposes
only the right to receive the Merger Consideration, without any interest on the
value thereof. See "The Merger Proposal--Terms of the Merger--Exchange of
Certificates."
LIMITATIONS ON TRANSFERABILITY OF HBOC COMMON STOCK. Shares of HBOC Common
Stock received by certain persons deemed to be "affiliates" of HPR for purposes
of Rule 145 under the Securities Act will be subject to the restrictions imposed
by such rule. In accordance with Rule 145, an affiliate of HPR receiving HBOC
Common Stock issued in the Merger may not sell such shares except pursuant to
the volume and manner of sale limitations and other requirements specified
therein or pursuant to an effective registration statement under the Securities
Act. In addition, HPR affiliates are subject to certain restrictions on transfer
of both HPR Common Stock and HBOC Common Stock prior to and following the
Effective Time of the Merger to support pooling of interests accounting
treatment of the transaction. See "The Merger Proposal--Terms of the
Merger--Limitations on Transferability of HBOC Common Stock."
CONDITIONS; WAIVER. The obligations of HBOC and HBOC-GA, on the one hand,
and of HPR, on the other hand, to consummate the Merger are contingent upon and
subject to the satisfaction or waiver of certain conditions, including the
approval of the Merger Agreement by holders of the requisite number of shares of
HPR Common Stock. See "The Merger Proposal--Terms of the Merger--Conditions;
Waiver."
HART-SCOTT-RODINO. The Merger is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), which provides that certain transactions (including the Merger) may not
be consummated until certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the Federal
Trade Commission (the "FTC") and certain waiting period requirements have been
satisfied. HBOC and HPR filed the required information with the Antitrust
Division and the FTC on October 7, 1997 and the waiting period expired on
November 6, 1997. See "The Merger Proposal--Terms of the
Merger--Hart-Scott-Rodino."
NO SOLICITATION. HPR has agreed, subject to certain exceptions, that prior
to the Effective Time of the Merger or earlier termination of the Merger
Agreement, HPR shall not, and shall not permit any of its subsidiaries or their
respective representatives to solicit, initiate, encourage, endorse or enter
into any agreement with respect to, or take any other action to facilitate, any
inquiries or the making of any proposal or offer for any tender or exchange
offer, proposal for a merger, share exchange or other business combination or
similar transactions involving HPR or any of its subsidiaries. See "The Merger
Proposal-- Terms of the Merger--No Solicitation."
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time of the Merger by, among other things: (i) mutual written
consent of the Board of Directors of HBOC (the "HBOC Board") and the HPR Board,
notwithstanding the prior approval of the HPR stockholders; (ii) the HBOC Board,
in the event of material condemnation, destruction, loss or damage to the
business or assets of HPR and its subsidiaries, taken as a whole; (iii) the
Board of Directors of HBOC-GA (the "HBOC-GA Board") or the HPR Board, after
January 31, 1998, if any of the conditions to such party's
8
<PAGE>
obligation to consummate the Merger has not been fulfilled or waived, subject to
extension in certain circumstances, unless fulfillment has been frustrated or
made impossible by the party seeking termination; (iv) the HPR Board, if, in the
good faith exercise of its fiduciary duties to the stockholders of HPR in the
context of a proposal to acquire HPR by another party, the HPR Board decides
that such termination is required; and (v) the HPR Board, if the Market Value of
HBOC Common Stock is less than $35.00.
If the Merger Agreement is terminated by HPR in accordance with (iv) above,
HPR will be obligated to pay to HBOC-GA a fee in the amount of $10,000,000, plus
all reasonable costs and expenses of HBOC and HBOC-GA incurred in connection
with the negotiation and performance of the Merger Agreement.
ACCOUNTING TREATMENT
It is a condition to the consummation of the Merger that HBOC shall have
received letters, dated as of the date hereof and as of the Closing Date, from
Coopers & Lybrand L.L.P., in their capacity as independent public accountants
for HPR, setting forth their concurrence with the conclusion of HPR's management
that no conditions exist with respect to HPR that would preclude accounting for
the Merger as a pooling of interests, and from Arthur Anderson LLP, in their
capacity as independent public accountants for HBOC, to the effect that HBOC
satisfies the tests applicable to it such that the Merger can be accounted for
as a pooling of interests, in each case under Accounting Principles Board
Opinion No. 16 assuming that the Merger is closed and consummated in accordance
with the Merger Agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
HPR has received an opinion of its counsel, subject to the assumptions
contained therein, to the effect that the Merger will qualify as a
reorganization pursuant to Section 368(a) of the Internal Revenue Code (the
"Code"). Accordingly, no gain or loss will be recognized by an HPR stockholder
upon the exchange of the shares of HPR Common Stock for shares of HBOC Common
Stock pursuant to the Merger, except on the receipt of cash in lieu of a
fractional share interest in HBOC Common Stock. See "The Merger
Proposal--Certain Federal Income Tax Consequences."
NO APPRAISAL RIGHTS
Because HPR Common Stock is a Nasdaq NM security, the holders of shares of
HPR Common Stock will not be entitled to appraisal rights pursuant to Section
262 of the DGCL in connection with the Merger. See "The Merger Proposal--No
Appraisal Rights."
INTERESTS OF CERTAIN PERSONS
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF HPR AND HBOC. As
of the Record Date, directors and executive officers of HPR and their affiliates
were beneficial owners of 1,763,570 outstanding shares of HPR Common Stock,
representing approximately 11.5% of the total issued and outstanding HPR Common
Stock. Directors and executive officers of HBOC and their affiliates
beneficially owned approximately 5,707,003, or 2.8%, of the outstanding shares
(giving effect to the exercise of their presently exercisable stock options) of
HBOC Common Stock as of September 30, 1997. See "Interests of Certain Persons in
Each of HBOC and HPR."
INTERESTS OF CERTAIN HPR PERSONS IN MATTERS TO BE ACTED UPON. Certain
officers and the directors of HPR have interests in the Merger that differ from
those of HPR stockholders generally. Such interests include severance payments,
vesting of unvested and unexercisable stock options and continuing
indemnification against certain liabilities. As a result, such officers and
directors could be more likely to favor consummation of the Merger than
stockholders generally. See "Interests of Certain Persons in Each of HBOC and
HPR--Interests of Certain HPR Persons in Matters to be Acted Upon."
9
<PAGE>
COMPARISON OF STOCKHOLDER RIGHTS
HBOC and HPR are each incorporated under Delaware law. For a summary of
material differences between the rights of holders of shares of each of HPR
Common Stock and HBOC Common Stock, see "Comparison of Rights of Holders of
Shares of Each of HBOC Common Stock and HPR Common Stock."
CERTAIN MARKET INFORMATION
HBOC Common Stock and HPR Common Stock are traded on the Nasdaq NM under the
symbols "HBOC" and "HPRI," respectively. The closing sale prices per share of
HBOC Common Stock and HPR Common Stock on September 26, 1997, the last trading
day preceding the announcement of the proposed Merger, were $39.44 and $19.25,
respectively. See "Certain Market Information."
RISK FACTORS
The stockholders of HPR should carefully review the matters set forth under
"Risk Factors."
10
<PAGE>
SUMMARY FINANCIAL DATA
The following summary historical financial data for each of HBOC and HPR
should be read in conjunction with the financial statements and notes thereto of
HBOC and HPR, incorporated by reference in this Proxy Statement/Prospectus.
HBO & COMPANY(1)
(FROM CONTINUING OPERATIONS)
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994(2) 1995(3) 1996(4) 1996(4) 1997(5)
--------- --------- --------- --------- --------- --------- ---------
INCOME STATEMENT DATA:
Revenue......................................... $ 341,373 $ 385,124 $ 493,078 $ 672,276 $ 895,333 $ 639,394 $ 806,122
Operating Income (Loss)......................... $ 31,204 $ 31,281 $ 51,676 $ (28,817) $ 121,734 $ 97,284 $ 176,159
Income (Loss) Before Income Taxes............... $ 31,312 $ 35,386 $ 52,353 $ (28,759) $ 127,909 $ 101,456 $ 186,738
Net Income (Loss)............................... $ 20,991 $ 18,335 $ 32,927 $ (15,674) $ 77,288 $ 61,415 $ 112,001
Primary Earnings (Loss) Per Share............... $ .13 $ .11 $ .19 $ (.09) $ .39 $ .31 $ .55
Fully Diluted Earnings (Loss) Per Share......... $ .13 $ .11 $ .19 $ (.09) $ .39 $ .31 $ .55
Weighted Average Shares Outstanding
(Fully Diluted)............................... 161,268 166,354 173,188 177,312 199,586 199,476 202,786
Cash Dividends Per Share........................ $ .04 $ .04 $ .04 $ .04 $ .04 $ .03 $ .04
BALANCE SHEET DATA:
Working Capital................................. $ 47,145 $ 86,239 $ 49,939 $ 138,837 $ 269,408 $ 217,127 $ 458,939
Total Assets.................................... $ 228,832 $ 279,236 $ 404,416 $ 734,076 $ 959,347 $ 833,126 $1,112,563
Long-Term Debt.................................. $ 8,257 $ 6,424 $ 14,815 $ 3,642 $ 192 $ 213 $ 139
Stockholders' Equity............................ $ 128,651 $ 169,768 $ 208,619 $ 478,095 $ 615,711 $ 570,821 $ 811,584
</TABLE>
- ------------------------------
(1) All prior period amounts have been restated to reflect the 1997 acquisitions
of AMISYS Managed Care Systems, Inc. and Enterprise Systems, Inc. in pooling
transactions. All share and per share amounts have been restated to reflect
the 1997 two-for-one stock split effected in the form of a stock dividend.
(2) 1994 Income Statement related items include nonrecurring charges of $6,516.
Net income was $36,836 and fully diluted earnings per share was $.21
excluding nonrecurring charges.
(3) 1995 Income Statement related items include nonrecurring charges of $136,481
and exclude the dilutive effect of stock options. Net income was $66,215 and
fully diluted earnings per share was $.36 excluding nonrecurring charges and
including the dilutive effect of stock options.
(4) Year ended December 31, 1996 Income Statement related items include
nonrecurring charges of $69,867. Net income was $119,211 and fully diluted
earnings per share was $.60 excluding nonrecurring charges. Nine months
ended September 1996 Income Statement related items include nonrecurring
charges of $34,667. Net income was $82,216 and fully diluted earnings per
share was $.41 excluding nonrecurring charges.
(5) Nine months ended September 1997 Income Statement related items include
nonrecurring charges of $35,420. Net income was $133,253 and fully diluted
earnings per share was $.66 excluding nonrecurring charges.
11
<PAGE>
HPR INC.
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
AT AND
FOR THE
THREE
MONTHS
ENDED
AT AND FOR THE YEAR ENDED SEPTEMBER
JUNE 30, 30,
--------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
1993 1994 1995(1) 1996(2) 1997 1996
--------- --------- ----------- ----------- --------- ---------
INCOME STATEMENT DATA:
Revenue................................................ $ 10,770 $ 14,065 $ 18,264 $ 28,310 $ 39,101 $ 7,071
Net Income............................................. $ 1,501 $ 1,631 $ 6,067 $ 4,522 $ 7,011 $ 935
Net Income Per Share................................... $ .11 $ .12 $ .43 $ .29 $ .44 $ .06
Weighted Average Shares Outstanding.................... 13,522 13,966 14,175 15,840 16,103 16,098
Cash Dividends Per Share............................... $ -- $ -- $ -- $ -- $ -- $ --
BALANCE SHEET DATA:
Working Capital........................................ $ 2,192 $ 3,555 $ 11,130 $ 20,465 $ 31,881 $ 24,902
Total Assets........................................... $ 7,915 $ 10,805 $ 17,988 $ 34,603 $ 47,531 $ 35,583
Long-Term Liabilities.................................. $ 367 $ 601 $ 1,931 $ 882 $ 559 $ 882
Stockholders' Equity................................... $ 3,377 $ 5,055 $ 11,282 $ 27,915 $ 38,269 $ 29,930
<CAPTION>
<S> <C>
1997(3)
-----------
INCOME STATEMENT DATA:
Revenue................................................ $ 9,300
Net Income............................................. $ 999
Net Income Per Share................................... $ .06
Weighted Average Shares Outstanding.................... 16,324
Cash Dividends Per Share............................... $ --
BALANCE SHEET DATA:
Working Capital........................................ $ 29,890
Total Assets........................................... $ 47,209
Long-Term Liabilities.................................. $ 559
Stockholders' Equity................................... $ 39,305
</TABLE>
- ------------------------
(1) 1995 Income Statement items include a $5.8 million gain on settlement of
litigation, net of certain legal and other costs. Net income was $2,608 and
earnings per share was $.18 excluding the nonrecurring gain.
(2) 1996 Income Statement items include nonrecurring merger-related charges of
$.3 million. Net income was $4,719 and earnings per share was $.30 excluding
the nonrecurring charges.
(3) Three months ended September 30, 1997 Income Statement items include
nonrecurring merger-related charges of $.7 million. Net income was $1,391
and earnings per share was $.09 excluding the nonrecurring charges.
12
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following pro forma combined condensed financial statements give effect
to the acquisition of HPR by HBOC in the Merger, accounted for as a pooling of
interests. The pro forma combined condensed financial statements are presented
for information purposes only and are not necessarily indicative of the
financial position or results of operations which would have occurred had the
transaction been consummated on the dates indicated, nor are they necessarily
indicative of future results or financial position of HBOC. The pro forma
combined condensed financial statements should be read in conjunction with the
historical consolidated financial statements of HBOC and HPR incorporated by
reference in this Proxy Statement/Prospectus.
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AT SEPTEMBER 30, 1997
(000 OMITTED)
<TABLE>
<CAPTION>
HBOC/HPR
PRO FORMA PRO FORMA
HBOC HPR(1) ADJUSTMENTS COMBINED
------------ --------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents.................................. $ 344,259 $ 7,410 $ $ 351,669
Short-Term Investments..................................... 11,966 14,096 26,062
Receivables, Net........................................... 347,673 13,572 361,245
Current Deferred Income Taxes.............................. 22,128 698 22,826
Inventories................................................ 5,838 -- 5,838
Prepaids and Other Current Assets.......................... 19,527 1,459 20,986
------------ --------- ----- ------------
Total Current Assets................................... 751,391 37,235 -- 788,626
------------ --------- ----- ------------
Capitalized Software, Net.................................... 71,547 1,612 73,159
Property and Equipment, Net.................................. 75,323 2,603 77,926
Intangibles, Net............................................. 166,653 -- 166,653
Deferred Income Taxes........................................ 40,491 -- (559)(2) 39,932
Other Noncurrent Assets, Net................................. 7,158 5,759 12,917
------------ --------- ----- ------------
Total Assets........................................... $ 1,112,563 $ 47,209 $ (559) $ 1,159,213
------------ --------- ----- ------------
------------ --------- ----- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities.......................................... $ 292,452 $ 7,345 $ $ 299,797
Long-Term Debt............................................... 139 -- 139
Other Long-Term Liabilities.................................. 8,388 559 (559)(2) 8,388
Stockholders' Equity......................................... 811,584 39,305 850,889
------------ --------- ----- ------------
Total Liabilities and Stockholders' Equity............. $ 1,112,563 $ 47,209 $ (559) $ 1,159,213
------------ --------- ----- ------------
------------ --------- ----- ------------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
13
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/HPR
PRO FORMA PRO FORMA
HBOC HPR(1) ADJUSTMENTS COMBINED
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue........................................................ $ 806,122 $ 31,127 $ $ 837,249
Operating Expense:
Cost of Operations........................................... 351,250 6,487 357,737
Marketing.................................................... 112,254 7,369 119,623
Research and Development..................................... 59,705 5,459 65,164
General and Administrative................................... 71,334 3,919 75,253
Nonrecurring Charge.......................................... 35,420 671 36,091
---------- --------- ----------- -----------
Total Operating Expense.................................. 629,963 23,905 -- 653,868
---------- --------- ----------- -----------
Operating Income............................................... 176,159 7,222 -- 183,381
Other Income, Net.............................................. 10,579 1,028 11,607
---------- --------- ----------- -----------
Income Before Income Taxes..................................... 186,738 8,250 -- 194,988
Income Taxes................................................... 74,737 3,424 78,161
---------- --------- ----------- -----------
Net Income..................................................... $ 112,001 $ 4,826 $ -- $ 116,827
---------- --------- ----------- -----------
---------- --------- ----------- -----------
Earnings Per Share............................................. $ .55 $ .30 $ .55
---------- --------- -----------
---------- --------- -----------
Weighted Average Shares Outstanding............................ 202,786 16,180 (6,472)(3) 212,494
---------- --------- ----------- -----------
---------- --------- ----------- -----------
Excluding Nonrecurring Charge(4):
Net Income................................................... $ 133,253 $ 5,219 $ 138,472
---------- --------- -----------
---------- --------- -----------
Earnings Per Share........................................... $ .66 $ .32 $ .65
---------- --------- -----------
---------- --------- -----------
Weighted Average Shares Outstanding.......................... 202,786 16,180 (6,472)(3) 212,494
---------- --------- ----------- -----------
---------- --------- ----------- -----------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
14
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/ HBOC/HPR
HBOC AMISYS/ESI PRO FORMA PRO FORMA
AS REPORTED AMISYS(5) ESI(6) COMBINED HPR(1) ADJUSTMENTS COMBINED
----------- ----------- --------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................... $ 796,578 $ 46,438 $ 52,317 $ 895,333 $ 32,641 $ $ 927,974
Operating Expense:
Cost of Operations...... 351,139 24,504 18,405 394,048 7,810 401,858
Marketing............... 115,660 3,898 11,634 131,192 7,148 138,340
Research and
Development........... 64,096 7,390 7,053 78,539 5,159 83,698
General and
Administrative........ 86,019 5,166 8,768 99,953 3,897 103,850
Nonrecurring Charge..... 61,414 -- 8,453 69,867 336 70,203
----------- ----------- --------- ------------ ----------- ------------- -----------
Total Operating
Expense........... 678,328 40,958 54,313 773,599 24,350 -- 797,949
----------- ----------- --------- ------------ ----------- ------------- -----------
Operating Income (Loss)... 118,250 5,480 (1,996) 121,734 8,291 -- 130,025
Other Income, Net......... 4,102 1,324 749 6,175 1,128 7,303
----------- ----------- --------- ------------ ----------- ------------- -----------
Income (Loss) Before
Income Taxes............ 122,352 6,804 (1,247) 127,909 9,419 -- 137,328
Income Taxes.............. 48,398 2,721 (498) 50,621 3,851 54,472
----------- ----------- --------- ------------ ----------- ------------- -----------
Net Income (Loss)......... $ 73,954 $ 4,083 $ (749) $ 77,288 $ 5,568 $ -- $ 82,856
----------- ----------- --------- ------------ ----------- ------------- -----------
----------- ----------- --------- ------------ ----------- ------------- -----------
Earnings Per Share........ $ .40 $ .39 $ .35 $ .40
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Weighted Average Shares
Outstanding............. 186,324 199,586 16,125 (6,450)(3) 209,261
----------- ------------ ----------- ------------- -----------
----------- ------------ ----------- ------------- -----------
Excluding Nonrecurring
Charge(4):
Net Income.............. $ 119,211 $ 5,766 $ 124,977
------------ ----------- -----------
------------ ----------- -----------
Earnings Per Share...... $ .60 $ .36 $ .60
------------ ----------- -----------
------------ ----------- -----------
Weighted Average Shares
Outstanding........... 199,586 16,125 (6,450)(3) 209,261
------------ ----------- ------------- -----------
------------ ----------- ------------- -----------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
15
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/ HBOC/HPR
HBOC AMISYS/ESI PRO FORMA PRO FORMA
AS REPORTED AMISYS(5) ESI(6) COMBINED HPR(1) ADJUSTMENTS COMBINED
----------- ----------- --------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue.................... $ 607,242 $ 31,786 $ 33,248 $ 672,276 $ 23,486 $ $ 695,762
Operating Expense:
Cost of Operations....... 285,756 17,877 12,833 316,466 6,040 322,506
Marketing................ 90,852 3,038 7,710 101,600 5,528 107,128
Research and
Development............ 53,847 5,061 4,881 63,789 3,679 67,468
General and
Administrative......... 72,763 3,636 6,358 82,757 2,824 85,581
Nonrecurring Charge...... 136,481 -- -- 136,481 (6,211) 130,270
----------- ----------- --------- ------------ ----------- ------------- -----------
Total Operating
Expense............ 639,699 29,612 31,782 701,093 11,860 -- 712,953
----------- ----------- --------- ------------ ----------- ------------- -----------
Operating Income (Loss).... (32,457) 2,174 1,466 (28,817) 11,626 -- (17,191)
Other Income (Expense),
Net...................... 540 (499) 17 58 547 605
----------- ----------- --------- ------------ ----------- ------------- -----------
Income (Loss) Before Income
Taxes.................... (31,917) 1,675 1,483 (28,759) 12,173 -- (16,586)
Income Taxes............... (14,348) 670 593 (13,085) 4,975 (8,110)
----------- ----------- --------- ------------ ----------- ------------- -----------
Net Income (Loss).......... $ (17,569) $ 1,005 $ 890 $ (15,674) $ 7,198 $ -- $ (8,476)
----------- ----------- --------- ------------ ----------- ------------- -----------
----------- ----------- --------- ------------ ----------- ------------- -----------
Earnings (Loss) Per
Share.................... $ (.10) $ (.09) $ .49 $ (.05)
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Weighted Average Shares
Outstanding.............. 168,448 177,312 14,835 (8,419)(3) 183,728
----------- ------------ ----------- ------------- -----------
----------- ------------ ----------- ------------- -----------
Excluding Nonrecurring
Charge(4):
Net Income................. $ 66,215 $ 3,525 $ 69,740
------------ ----------- -----------
------------ ----------- -----------
Earnings Per Share......... $ .36 $ .24 $ .36
------------ ----------- -----------
------------ ----------- -----------
Weighted Average Shares
Outstanding.............. 185,884 14,835 (5,934)(3) 194,785
------------ ----------- ------------- -----------
------------ ----------- ------------- -----------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
16
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/ HBOC/HPR
HBOC AMISYS/ESI PRO FORMA PRO FORMA
AS REPORTED AMISYS(5) ESI(6) COMBINED HPR(1) ADJUSTMENTS COMBINED
----------- ----------- --------- ------------ --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue.............................. $ 453,979 $ 14,387 $ 24,712 $ 493,078 $ 15,951 $ $ 509,029
Operating Expense:
Cost of Operations................. 225,546 7,714 9,311 242,571 3,340 245,911
Marketing.......................... 64,127 738 5,984 70,849 4,153 75,002
Research and Development........... 42,919 3,270 6,377 52,566 2,247 54,813
General and Administrative......... 64,284 1,738 2,878 68,900 2,254 71,154
Nonrecurring Charge................ -- 6,516 -- 6,516 411 6,927
----------- ----------- --------- ------------ --------- ------------- -----------
Total Operating Expense........ 396,876 19,976 24,550 441,402 12,405 -- 453,807
----------- ----------- --------- ------------ --------- ------------- -----------
Operating Income (Loss).............. 57,103 (5,589) 162 51,676 3,546 -- 55,222
Other Income (Expense), Net.......... 1,154 (363) (114) 677 110 787
----------- ----------- --------- ------------ --------- ------------- -----------
Income (Loss) Before Income Taxes.... 58,257 (5,952) 48 52,353 3,656 -- 56,009
Income Taxes......................... 21,788 (2,381) 19 19,426 1,513 20,939
----------- ----------- --------- ------------ --------- ------------- -----------
Net Income (Loss).................... $ 36,469 $ (3,571) $ 29 $ 32,927 $ 2,143 $ -- $ 35,070
----------- ----------- --------- ------------ --------- ------------- -----------
----------- ----------- --------- ------------ --------- ------------- -----------
Earnings Per Share................... $ .22 $ .19 $ .15 $ .19
----------- ------------ --------- -----------
----------- ------------ --------- -----------
Weighted Average Shares
Outstanding........................ 164,128 173,188 14,108 (5,643)(3) 181,653
----------- ------------ --------- ------------- -----------
----------- ------------ --------- ------------- -----------
Excluding Nonrecurring Charge(4):
Net Income........................... $ 36,836 $ 2,384 $ 39,220
------------ --------- -----------
------------ --------- -----------
Earnings Per Share................... $ .21 $ .17 $ .22
------------ --------- -----------
------------ --------- -----------
Weighted Average Shares
Outstanding........................ 173,188 14,108 (5,643)(3) 181,653
------------ --------- ------------- -----------
------------ --------- ------------- -----------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
17
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(1) The fiscal year of HPR ends on June 30. HBOC pro forma income statements for
the years ended December 31, 1994, 1995 and 1996 and the nine months ended
September 30, 1997, have been completed using HPR income statements prepared
on a calendar year basis.
(2) Reclassification of HPR deferred tax liability to offset HBOC/HPR combined
deferred tax asset.
(3) Shares of HPR Common Stock were converted using an assumed Exchange Ratio of
.6. For the 1995 Pro Forma Combined Income Statement including the
nonrecurring charge, HPR weighted average shares are adjusted to exclude the
dilutive effect of stock options due to a loss for HBOC/HPR Pro Forma
Combined.
(4) Presentation is also made of Net Income, Earnings Per Share and Weighted
Average Shares Outstanding excluding the effect of nonrecurring
acquisition-related charges because HBOC management believes that this is a
better indication of operating results.
(5) On June 13, 1997, HBOC completed the acquisition of AMISYS Managed Care
Systems, Inc. ("AMISYS"), a leading provider of information systems for
managed care entities and other parties that assume financial risk for
healthcare populations. The acquisition was accounted for as a pooling of
interests; therefore, all prior period amounts have been restated. AMISYS
stockholders received 0.175 of a share of HBOC Common Stock for each share
of AMISYS common stock, or approximately 5.4 million shares of HBOC Common
Stock.
(6) On June 26, 1997, HBOC completed the acquisition of Enterprise Systems, Inc.
("ESi"), a leading developer of resource management solutions, including
materials management, operating room logistics, scheduling and financial
management. The acquisition was accounted for as a pooling of interests;
therefore, all prior period amounts have been restated. ESi stockholders
received 0.22895 of a share of HBOC Common Stock for each share of ESi
common stock, or approximately 7.6 million shares of HBOC Common Stock.
18
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables set forth certain per share data for HBOC and HPR on a
historical basis, certain historical equivalent per share data for HPR and
certain pro forma per share data for HBOC and HPR on a combined basis, giving
effect to the Merger using the pooling of interests method of accounting. All
share and per share amounts have been restated to reflect the HBOC 1997
two-for-one stock split effected in the form of a stock dividend. The unaudited
pro forma combined per share data provided below is not necessarily indicative
of the results of operations or the financial position which would have occurred
had the Merger been consummated on the indicated dates or which may be attained
in the future. The pro forma combined per share data should be read in
conjunction with the historical consolidated financial statements of HBOC and
HPR incorporated by reference in this Proxy Statement/Prospectus.
HISTORICAL
HBO & COMPANY(1)
<TABLE>
<CAPTION>
AT AND FOR THE
NINE MONTHS
AT AND FOR THE YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------- ----------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
Per Share Data:
Book Value........................................... $1.14 $2.52 $3.17 $2.96 $4.07
Cash Dividends Declared.............................. $ .04 $ .04 $ .04 $ .03 $ .04
Fully Diluted Earnings (Loss)........................ $ .19(2) $(.09)(3) $ .39(4) $ .31(5) $ .55(6)
</TABLE>
- ------------------------------
(1) Gives effect to the 1997 acquisitions of AMISYS Managed Care Systems, Inc.
and Enterprise Systems, Inc. in pooling transactions.
(2) Including the effect of the $7 million nonrecurring charge related to 1994
acquisitions.
(3) Including the effect of the $136 million nonrecurring charge related to 1995
acquisitions and excluding the dilutive effect of stock options.
(4) Including the effect of the $70 million nonrecurring charge related to 1996
acquisitions.
(5) Including the effect of the $35 million nonrecurring charge related to 1996
acquisitions.
(6) Including the effect of the $35 million nonrecurring charge related to 1997
acquisitions.
HPR INC.
<TABLE>
<CAPTION>
AT AND FOR THE
THREE MONTHS
AT AND FOR THE YEAR ENDED ENDED
JUNE 30, SEPTEMBER 30,
--------------------------- ----------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1996 1997
----- ----- ----- ----- -----
Per Share Data:
Book Value........................................... $1.52 $1.86 $2.50 $1.98 $2.56
Cash Dividends Declared.............................. $-- $-- $-- $-- $--
Net Income........................................... $ .43(1) $ .29(2) $ .44 $ .06 $ .06(3)
</TABLE>
- ------------------------------
(1) Including the effect of the $5.8 million one-time gain, net of certain legal
and other costs, on fiscal year 1995 settlement of litigation.
(2) Including the $.3 million nonrecurring charge related to fiscal year 1996
acquisition.
(3) Including the $.7 million nonrecurring charge related to fiscal year 1998
acquisition.
19
<PAGE>
HPR INC.
HISTORICAL EQUIVALENT DATA
USING THE EXCHANGE RATIO OF .6
<TABLE>
<CAPTION>
AT AND FOR THE
THREE MONTHS
AT AND FOR THE YEAR ENDED
ENDED JUNE 30, SEPTEMBER 30,
--------------------------- ----------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1996 1997
----- ----- ----- ----- -----
Per Share Data:
Book Value........................................... $2.53 $3.10 $4.17 $3.30 $4.27
Cash Dividends Declared.............................. $-- $-- $-- $-- $--
Net Income........................................... $ .72(1) $ .48(2) $ .73 $ .10 $ .10(3)
</TABLE>
- ------------------------------
(1) Including the effect of the $5.8 million one-time gain, net of certain legal
and other costs, on fiscal year 1995 settlement of litigation.
(2) Including the $.3 million nonrecurring charge related to fiscal year 1996
acquisition.
(3) Including the $.7 million nonrecurring charge related to fiscal year 1998
acquisition.
PRO FORMA COMBINED HBO & COMPANY AND HPR INC.
USING THE EXCHANGE RATIO OF .6
<TABLE>
<CAPTION>
AT AND FOR THE
NINE MONTHS
AT AND FOR THE YEAR ENDED
ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ----------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
Per Share Data:
Book Value........................................... $1.14 $2.52 $3.19 $2.98 $4.08
Cash Dividends....................................... $ .04 $ .04 $ .04 $ .03 $ .04
Net Income (Loss).................................... $ .19(1) $(.05)(2) $ .40(3) $ .31(4) $ .55(5)
</TABLE>
- ------------------------------
(1) Including the effect of the $7 million nonrecurring charge related to 1994
acquisitions.
(2) Including the effect of the $136 million nonrecurring charge related to 1995
acquisitions and excluding the dilutive effect of stock options.
(3) Including the effect of the $70 million nonrecurring charge related to 1996
acquisitions.
(4) Including the effect of the $35 million nonrecurring charge related to 1996
acquisitions.
(5) Including the effect of the $35 million nonrecurring charge related to 1997
acquisitions.
20
<PAGE>
RISK FACTORS
EXCHANGE RATIO
Stockholders of HPR should consider that they will receive six-tenths (.6)
of a share of HBOC Common Stock for each share of HPR Common Stock, regardless
of the Market Value of the HBOC Common Stock. Although the HPR Board has the
right to terminate the Merger Agreement if the Market Value is less than $35.00,
it is not obligated to do so. Accordingly, if the Market Value of HBOC Common
Stock is less than $35.00, the Merger proposal is approved by HPR stockholders
and the HPR Board determines not to exercise its right to terminate the Merger
Agreement, HPR stockholders could receive Merger Consideration that is less than
the then current market value of their shares of HPR Common Stock. There can be
no assurance that the Market Value will be equal to or greater than $35.00 or
that the value of the fractional share of HBOC Common Stock to be issued in
respect of a share of HPR Common Stock will equal or exceed the then current
market value of the HPR Common Stock. See "Certain Market Information" below for
historical stock price information concerning HBOC Common Stock and HPR Common
Stock, and see "The Merger Proposal--Terms of the Merger."
INTERESTS OF CERTAIN HPR OFFICERS AND DIRECTORS IN THE MERGER
Certain officers and the directors of HPR have interests in the Merger that
differ from those of HPR stockholders generally. Such interests include
severance payments, vesting of unvested and unexercisable stock options and
continuing indemnification against certain liabilities. As a result, such
officers and directors could be more likely to favor consummation of the Merger
than stockholders generally. See "Interests of Certain Persons in Each of HBOC
and HPR--Interests of Certain HPR Persons in Matters to be Acted Upon."
CERTAIN MARKET INFORMATION
HBOC
HBOC Common Stock is traded on the Nasdaq NM under the symbol "HBOC." The
table below presents the quarterly high and low closing sales prices and
dividend information for HBOC Common Stock as furnished by Nasdaq for the
periods indicated after restating for the 1997 two-for-one stock split effected
in the form of stock dividend.
<TABLE>
<CAPTION>
DIVIDENDS
DECLARED
YEAR ENDED DECEMBER 31: HIGH LOW PER SHARE
- --------------------------------------------------------------- --------- --------- -------------
<S> <C> <C> <C>
1995
First Quarter................................................ $ 11.19 $ 8.22 $ .01
Second Quarter............................................... $ 13.88 $ 9.88 $ .01
Third Quarter................................................ $ 16.13 $ 12.91 $ .01
Fourth Quarter............................................... $ 21.63 $ 15.44 $ .01
1996
First Quarter................................................ $ 25.48 $ 16.38 $ .01
Second Quarter............................................... $ 35.38 $ 23.88 $ .01
Third Quarter................................................ $ 35.00 $ 25.25 $ .01
Fourth Quarter............................................... $ 36.25 $ 25.00 $ .01
1997
First Quarter................................................ $ 36.13 $ 23.75 $ .01
Second Quarter............................................... $ 36.06 $ 21.25 $ .01
Third Quarter................................................ $ 42.25 $ 34.25 $ .02
Fourth Quarter (through November 20, 1997)................... $ 48.00 $ 36.75 $ .02
</TABLE>
As of October 31, 1997, there were approximately 2,935 holders of record of
shares of HBOC Common Stock.
21
<PAGE>
HPR
HPR Common Stock has traded on the Nasdaq NM since August 10, 1995, the date
of HPR's initial public offering, under the symbol "HPRI." The following table
sets forth the quarterly high and low sales prices for HPR Common Stock as
furnished by Nasdaq for the periods indicated. HPR has never declared a cash
dividend on the HPR Common Stock.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30: HIGH LOW
- --------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
1996
First Quarter ended September 30, 1995................................... $ 13.25 $ 9.06
Second Quarter ended December 31, 1995................................... $ 18.13 $ 11.25
Third Quarter ended March 31, 1996....................................... $ 21.75 $ 15.50
Fourth Quarter ended June 30, 1996....................................... $ 25.63 $ 18.25
1997
First Quarter ended September 30, 1996................................... $ 22.00 $ 13.50
Second Quarter ended December 31, 1996................................... $ 16.25 $ 11.50
Third Quarter ended March 31, 1997....................................... $ 18.38 $ 10.13
Fourth Quarter ended June 30, 1997....................................... $ 18.75 $ 10.75
1998
First Quarter ended September 30, 1997................................... $ 23.00 $ 14.88
Second Quarter (through November 20, 1997)............................... $ 27.50 $ 21.63
</TABLE>
As of November 19, 1997, there were approximately 71 holders of record of
shares of HPR Common Stock.
The following table sets forth the closing sales price for a share of each
of the indicated stocks on September 26, 1997, the last trading day preceding
the announcement of the proposed Merger, and the HPR equivalent share value.
<TABLE>
<CAPTION>
CLOSING SALES
PRICE ON
SEPTEMBER 26, 1997
-------------------
<S> <C>
HBOC.................................................. $ 39.44
HPR--Historical....................................... $ 19.25
HPR--Equivalent....................................... $ 23.66
</TABLE>
THE MEETING
This Proxy Statement/Prospectus and the accompanying Notice of Special
Meeting and proxy card are being furnished to the stockholders of HPR in
connection with the solicitation of proxies by the HPR Board for the Meeting to
be held on December 23, 1997 at the time and place and for the purpose set forth
in the accompanying Notice of Special Meeting.
Any HPR stockholder who has previously delivered a properly executed proxy
may revoke such proxy at any time before its exercise. A proxy may be revoked
either by (i) delivering to the Secretary of HPR prior to the Meeting either a
written revocation of such proxy or a duly executed proxy bearing a later date
or (ii) attending the Meeting and voting in person, regardless of whether a
proxy has previously been given. All valid, unrevoked proxies will be voted as
directed. In the absence of any contrary directions, proxies will be voted in
favor of the proposal set forth in the Notice of Special Meeting and, with
respect to such other matters as may properly come before the Meeting, in the
discretion of the appointed proxy holders.
Only holders of record of HPR Common Stock as of the close of business on
November 19, 1997, the Record Date, will be entitled to vote at the Meeting. At
that date, there were 15,385,515 shares of HPR Common Stock outstanding and
entitled to vote, 1,763,570 of which, or 11.5%, were beneficially owned by
directors and executive officers of HPR and their affiliates. Stockholders of
record on the Record Date are entitled to one vote for each share of HPR Common
Stock held on all matters to be voted upon at the Meeting. The presence at the
Meeting, in person or by proxy, of the holders of at least a majority of the
22
<PAGE>
shares of HPR Common Stock issued and outstanding and entitled to vote on the
Record Date is necessary to constitute a quorum at the Meeting. The proposed
Merger Agreement requires the affirmative vote of the holders of a majority of
the issued and outstanding shares of HPR Common Stock in order to be approved.
Abstentions will be counted in determining whether a quorum is present, will be
considered present and entitled to vote and will thus have the effect of a
negative vote. If a proxy is returned by a broker or other stockholder who does
not have authority to vote, does not give authority to a proxy to vote, or
withholds authority to vote as to any shares, such shares will be considered
present at the Meeting for purposes of determining a quorum, but will not be
considered for purposes of calculating the vote with respect to such matters.
The cost of soliciting proxies in the form enclosed herewith will be borne
entirely by HPR. In addition to the solicitation of proxies by mail, proxies may
be solicited by directors, officers and employees of HPR, without additional
remuneration, by personal interviews, telephone, facsimile or otherwise. HPR
will request persons, firms and corporations holding shares in their name or in
the names of their nominees, which are beneficially owned by others, to send
proxy materials to and obtain proxies from the beneficial owners and will
reimburse the holders for their reasonable expenses in doing so.
THE MERGER PROPOSAL
BACKGROUND OF THE MERGER
In early spring 1997, HPR's management began exploring the possibility of
finding a strategic business partner for the purposes of accelerating HPR's
growth, enhancing HPR's access to the provider market, broadening HPR's product
offerings and obtaining access to greater capital resources. On April 4, 1997,
HPR engaged BT Alex. Brown Incorporated ("BT Alex. Brown") to provide financial
advisory services, to explore strategic alternatives, including a potential
business combination, and to assist HPR in identifying and evaluating candidates
for potential business combinations. On April 14, 1997, HPR also engaged The
G.W. Carmany Co., Inc. ("Carmany") to consult with HPR management regarding the
process involved in a major corporate transaction such as HPR was exploring. On
May 26, 1997, HPR engaged Hambrecht & Quist LLC ("H&Q"), which had acted as lead
underwriter in HPR's public offerings in 1995 and 1996, to act as a secondary
financial advisor in connection with any potential business combination due to
their knowledge of HPR's business and, in particular, to advise HPR, if so
requested, about the adequacy of any consideration offered in connection with
such business combination and to evaluate the fairness of any such proposal.
From April through July 1997, BT Alex. Brown contacted fourteen potential
business combination partners to assess their level of interest in a transaction
with HPR. Of the fourteen parties contacted, five parties executed
confidentiality agreements and requested and received confidential information
about HPR. Of those parties who executed confidentiality agreements, two public
companies, one in the health-care industry ("Company No. 1") and one which was a
diversified company with a healthcare business ("Company No. 2"), indicated an
interest in pursuing discussions with HPR regarding a potential combination.
HBOC was not contacted during this time because HPR's management believed that
HBOC would be in a position to respond with an offer more quickly than other
parties, potentially precluding HPR from fully exploring the range of parties
interested in a transaction.
On June 6, 1997, Marcia J. Radosevich, HPR's Chairman, President and Chief
Executive Officer, and Brian D. Cahill, HPR's Chief Operating Officer and Chief
Financial Officer, met in Boston, Massachusetts with two members of the senior
management of Company No. 1 to discuss their respective businesses with a view
to a potential business combination.
On June 23, 1997, Dr. Radosevich, Mr. Cahill and representatives of BT Alex.
Brown met in Boston, Massachusetts with several members of senior management of
Company No. 2 to discuss the potential strategic fit of HPR with Company No. 2.
Following that meeting, there were several conference calls between the senior
management of HPR and representatives of Company No. 2 to perform business and
financial due diligence on HPR.
23
<PAGE>
On June 26, 1997, Dr. Radosevich, Mr. Cahill and a representative of BT
Alex. Brown met with several members of the senior management, legal counsel and
other representatives of Company No. 1, including Company No. 1's financial
advisor, in Boston, Massachusetts, to conduct a due diligence review of HPR. The
principal purpose of the meeting was for HPR's management to present information
regarding HPR's products and financial condition. Concurrently, legal
representatives of Company No. 1 conducted legal due diligence on HPR.
On July 2, 1997, representatives of BT Alex. Brown met with representatives
of Company No. 2 to discuss the financial implications of, and the rationale
for, a potential transaction. On July 8, 1997, members of senior management and
software professionals representing Company No. 2 met with representatives of
HPR, including Dr. Radosevich, to perform further due diligence on HPR's
products. On July 16, 1997, Dr. Radosevich and Mr. Cahill met with members of
Company No. 2's senior management, including members of Company No. 2's
acquisition team, to explore further the potential strategic fit and possible
synergies resulting from a business combination. The parties agreed to engage in
further discussions.
On July 17, 1997, a special meeting of the HPR Board was held, which was
also attended by a representative of Hill & Barlow, a Professional Corporation
("Hill & Barlow"), HPR's legal counsel, a representative of Carmany and
representatives of BT Alex. Brown. During that meeting, representatives of BT
Alex. Brown updated the HPR Board on the solicitation process, indicating which
parties had or had not executed confidentiality agreements and that, of those
parties contacted, only Company No. 1 and Company No. 2 had expressed interest
in a transaction with HPR. Dr. Radosevich and Mr. Cahill described for the HPR
Board their meetings with Company No. 1 and Company No. 2, and gave the HPR
Board an assessment of the benefits and disadvantages of a business combination
with each of the two companies. The HPR Board determined that since discussions
with Company No. 1 and Company No. 2 had progressed sufficiently, it was
appropriate to contact HBOC. The HPR Board directed BT Alex. Brown to contact
HBOC to inquire as to HBOC's interest in a potential business combination with
HPR and also directed HPR's management to pursue further discussions with each
of Company No. 1 and Company No. 2. Additionally, on the basis of the
presentation about Company No. 1, the HPR Board instructed Dr. Radosevich to
arrange a meeting as soon as possible to conduct due diligence on Company No.
1's suitability as a business combination partner. Also at such meeting, a
representative of Hill & Barlow reviewed the HPR Board's fiduciary duties in the
context of its discussions with the various parties.
On July 29, 1997, Dr. Radosevich, Mr. Cahill, Howard Cox, Jr., a member of
the HPR Board, and representatives of BT Alex. Brown met with representatives of
Company No. 1 to conduct a due diligence review of Company No. 1.
On July 31, 1997, representatives of BT Alex. Brown contacted Charles W.
McCall, President and Chief Executive Officer of HBOC, to inquire as to HBOC's
interest in a possible business combination with HPR. Mr. McCall indicated that
HBOC had a strong interest and requested information about HPR. Shortly
thereafter, HBOC executed a confidentiality agreement.
On August 18, 1997, Dr. Radosevich, Mr. Cahill and representatives of BT
Alex. Brown met in Boston with Mr. McCall, Glenn N. Rosenkoetter, Senior Vice
President--Strategic Business Units, John Nunnelly, Vice President, and Russell
D. Overton, Senior Vice President--Business Development, representing HBOC, to
discuss the strategic fit between HPR and HBOC and the joint prospects of the
two companies in the event of a potential business combination.
On August 20, 1997, at the instruction of HPR's management, a representative
of BT Alex. Brown sent a letter to Mr. McCall setting forth HPR's financial
analysis of a possible business combination between HBOC and HPR, which analysis
incorporated a price per share of HPR Common Stock of $25.00, or an implied
exchange ratio of .66 of a share of HBOC Common Stock for each share of HPR
Common Stock, at then current market prices.
On August 26, 1997, a representative of BT Alex. Brown, at the request of
HPR's management, telephoned Mr. McCall to discuss the letter of August 20,
1997. Mr. McCall stated that HBOC would be
24
<PAGE>
interested in a possible transaction at an exchange ratio of approximately .6 of
a share of HBOC Common Stock for each share of HPR Common Stock.
In late August, Company No. 2 informed representatives of BT Alex. Brown
that it was unable to submit a proposal for a potential business combination
with HPR.
On September 3, 1997, representatives of Company No. 1 met with Mr. Cahill
of HPR and representatives of BT Alex. Brown to conduct an in-depth review of
HPR's business plan, including HPR's projections by product. Shortly thereafter,
Company No. 1's financial advisor contacted a representative of BT Alex. Brown
and indicated that, while Company No. 1 remained interested in pursuing a
business combination with HPR, for internal reasons Company No. 1 would be
unable to make an offer for HPR at that time.
On September 5, 1997, Dr. Radosevich, Mr. Cox and representatives of BT
Alex. Brown traveled to Atlanta to meet with Mr. McCall and Jay P. Gilbertson,
Chief Financial Officer and Executive Vice President--Finance of HBOC, to
discuss the business and financial condition of HBOC. At such meeting, a
representative of BT Alex. Brown, at the instruction of HPR's management, spoke
with Mr. Gilbertson and requested that HBOC increase HBOC's proposed exchange
ratio of .6 of a share of HBOC Common Stock for each share of HPR Common Stock.
Mr. Gilbertson informed the BT Alex. Brown representative that HBOC believed
that the proposed exchange ratio of .6 was a fair offer.
During the week of September 8, 1997, representatives of BT Alex. Brown, at
the request of HPR's management, had several conversations with Mr. Gilbertson
of HBOC regarding valuation, structure and timing of a potential transaction. In
particular, the parties discussed the size of the break-up fee, the minimum
market value of HBOC Common Stock at which HPR would be required to go forward
with the transaction, and the nature of certain conditions precedent to closing,
particularly with respect to any material adverse change in HPR's business after
execution of the merger agreement. At the conclusion of the week, Dr. Radosevich
and Mr. McCall agreed that the parties would proceed with a transaction on the
basis of a preliminary understanding of an exchange ratio of .6 of a share of
HBOC Common Stock per share of HPR Common Stock, subject to further due
diligence and negotiation of a satisfactory agreement. On September 12, 1997,
the parties commenced negotiation of the terms of the merger agreement.
On September 15, employees of HBOC, and a representative from Jones, Day,
Reavis & Pogue ("Jones Day"), legal counsel to HBOC, visited the offices of Hill
& Barlow in Boston, Massachusetts, to conduct a due diligence review of HPR,
which review continued until the close of business on September 17, 1997. In
addition, on September 17, 1997, Jones Day circulated a draft of the merger
agreement for consideration by HPR's management and legal and financial
advisors.
On the afternoon of September 17, 1997, a special meeting of the HPR Board
was held, which also was attended by representatives of Hill & Barlow and BT
Alex. Brown. Representatives of BT Alex. Brown reviewed with the HPR Board the
financial terms of the HBOC offer. A representative of Hill & Barlow presented
the HPR Board with a report on potential issues raised by the draft of the
merger agreement received earlier in the day and furnished to the members of the
HPR Board at the beginning of the meeting, which issues included certain closing
conditions, reasons for termination of the agreement, circumstances under which
the break-up fee should be paid by HPR, treatment of employees' benefits under
existing plans and disclosure of highly sensitive HPR information, such as
information concerning customer contracts, prior to the closing of the proposed
merger. While the meeting was taking place, Mr. Cahill and Mr. Gilbertson were
discussing these issues at the offices of Hill & Barlow. Toward the end of the
HPR Board meeting, Mr. Cahill arrived and gave a report on the progress of those
negotiations. A discussion among the HPR Board members then ensued regarding
these matters. The HPR Board instructed HPR's management to proceed with
negotiation of the merger agreement.
During the period from September 18, 1997 to September 27, 1997, HBOC
continued its due diligence review of materials provided by HPR and
representatives of HBOC and HPR continued to negotiate key business points and
the terms of the merger agreement, including HBOC's obligation to proceed with
the transaction if HPR's business were impacted as a result of announcement of
the merger,
25
<PAGE>
the ability of either party to terminate the agreement if the merger was not
consummated early in the first quarter of calendar year 1998, the circumstances
under which the break-up fee would be paid and the amount of the break-up fee,
representations with respect to highly sensitive HPR customer information and
inclusion of HPR employees in the HBOC 401(k) Plan.
On September 27, 1997, a special meeting of the HPR Board was held which
also was attended by representatives of Hill & Barlow, representatives from BT
Alex. Brown, a representative from Shearman & Sterling, special counsel to HPR,
and Mr. Cahill. All members of the HPR Board except Dr. Egdahl were present at
the meeting. A representative of Hill & Barlow reviewed the HPR Board's
fiduciary duties in the context of the proposed transaction and presented the
HPR Board with a report on the resolution of outstanding issues, including the
circumstances under which the parties could terminate the agreement. (The HPR
Board previously had been furnished with a full copy of the most current draft
of the merger agreement, together with a summary of significant terms of the
merger agreement.) The Shearman & Sterling representative presented the HPR
Board with a report on certain regulatory issues affecting the proposed merger.
BT Alex. Brown reviewed with the HPR Board the financial analyses performed by
BT Alex. Brown in connection with the proposed merger and rendered to the HPR
Board its oral opinion (which opinion was confirmed by delivery of a written
opinion dated September 27, 1997) to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the
Exchange Ratio was fair, from a financial point of view, to the holders of HPR
Common Stock. A discussion among the HPR Board members present at the meeting
then ensued regarding these matters. After further deliberation, the HPR Board
members present unanimously approved the Merger Agreement with HBOC and
authorized HPR's management to execute the Merger Agreement. Later on September
27, 1997, each company executed and delivered the Merger Agreement. The
execution of the Merger Agreement was announced on the morning of Monday,
September 29, 1997 by issuance of a press release.
Over the course of the negotiations with Company No. 1, Company No. 2 and
HBOC, representatives of HPR consulted with representatives of Carmany with
respect to the discussions with such parties and, in the case of HBOC, the terms
and conditions of the Merger Agreement. HPR did not seek the advice of H&Q in
connection with its discussions with any of Company No. 1, Company No. 2 or
HBOC.
REASONS OF HPR FOR ENGAGING IN THE MERGER; RECOMMENDATION OF THE HPR BOARD
The HPR Board has approved the proposed Merger by unanimous vote of the
directors present at the meeting and believes the Merger is in the best
interests of HPR and its stockholders. In reaching their decision, the HPR Board
considered, with the assistance of management and its legal and financial
advisors, the following factors:
i. The Merger offers HPR stockholders an opportunity to receive shares
in a significantly larger company with strong historical performance,
capital resources significantly greater than HPR's and demonstrated ability
to successfully implement a growth strategy that has resulted in historical
profitability and growth while affording HPR stockholders the opportunity to
continue to participate in the long-term growth and appreciation of HPR's
business through an ownership interest in HBOC;
ii. The Merger provides HPR stockholders with HBOC Common Stock in a
tax-free exchange at a substantial premium over the market price of their
shares of HPR Common Stock prior to the announcement of the Merger
Agreement. In addition, the Merger Agreement provides potential protection
to the HPR stockholders by providing the HPR Board the right to terminate
the transaction if the Market Value of HBOC Common Stock falls below $35.00.
The Merger Agreement also permits the HPR Board to terminate the Merger
Agreement (subject to the payment of a termination fee of $10,000,000 plus
expenses) if the HPR Board determines that termination of the Merger
Agreement would be in the best interests of HPR's stockholders and is
required in the exercise of its fiduciary duties to the stockholders of HPR
in the context of a competing offer;
iii. Potential operating synergies and cost savings of the combined
enterprise, including possible synergies and cost savings with respect to
(a) the consolidation of administrative and support
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functions, (b) the combination of sales forces and research and development
capabilities and (c) the elimination of public reporting obligations and
attendant costs of HPR;
iv. The capital structure, customer profile, product portfolio and
integration strategy of HBOC, as well as other information on the
management, business operations and prospects of HBOC and HPR and the
relative likelihood of achieving those prospects on both a combined and
separate basis;
v. The financial presentation and opinion dated September 27, 1997 of BT
Alex. Brown (which opinion has been confirmed by delivery of a written
opinion dated the date of this Proxy Statement/ Prospectus) to the effect
that, as of the date of such opinion and based upon and subject to certain
matters stated therein, the Exchange Ratio was fair, from a financial point
of view, to the holders of HPR Common Stock;
vi. That the Merger is expected to be accounted for as a "pooling of
interests" and is not subject to approval by HBOC stockholders; and
vii. Publicly available information concerning the financial
performance, condition, prospects and operations of each of HPR and HBOC.
The HPR Board also considered the following potentially negative factors in
its deliberations concerning the Merger:
i. The possibility that certain of the operating synergies and cost
savings sought to be achieved as a result of the Merger might not be
achieved;
ii. The high price to earnings ratio of HBOC Common Stock and the
possibility of a decrease in the market value of the HBOC Common Stock after
the Merger; and
iii. The risk that the Merger could be delayed due to regulatory
requirements.
The foregoing discussion of information and factors considered by the HPR
Board is not intended to be exhaustive but is intended to include the material
factors considered. In light of the wide variety of factors considered, the HPR
Board did not find it practical to, and did not, quantify or otherwise assign
relative weight to the specific factors considered, and individual directors may
have given differing weights to different factors.
After taking into consideration all of the factors set forth above, the HPR
Board approved the Merger by unanimous vote of the directors present at the
meeting and determined that the Merger is fair to, and in the best interests of,
HPR and its stockholders and has unanimously determined that HPR should proceed
with the Merger at this time. ACCORDINGLY, THE HPR BOARD UNANIMOUSLY RECOMMENDS
THAT HPR STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR TO HPR
HPR engaged BT Alex. Brown to act as its financial advisor in connection
with the Merger. On September 27, 1997, at a meeting of the HPR Board held to
evaluate the proposed Merger, BT Alex. Brown rendered to the HPR Board an oral
opinion (which opinion was subsequently confirmed by delivery of a written
opinion dated September 27, 1997) to the effect that, as of such date and based
upon and subject to certain matters stated in such opinion, the Exchange Ratio
was fair, from a financial point of view, to the holders of HPR Common Stock. BT
Alex. Brown has confirmed such opinion by delivery of a written opinion dated
the date of this Proxy Statement/Prospectus. In connection with its opinion
dated the date of this Proxy Statement/Prospectus, BT Alex. Brown updated
certain of the analyses performed in connection with its earlier opinion and
reviewed the assumptions on which such analyses were based and the factors
considered in connection therewith. No limitations were imposed by the HPR Board
upon BT Alex. Brown with respect to the investigations made or the procedures
followed by it in rendering its opinion.
The full text of the written opinion of BT Alex. Brown dated the date of
this Proxy Statement/ Prospectus, which sets forth the assumptions made, matters
considered and limitations of the review undertaken, is attached as Appendix B
to this Proxy Statement/Prospectus and is incorporated herein by
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reference. BT ALEX. BROWN'S OPINION IS DIRECTED TO THE HPR BOARD, ADDRESSES ONLY
THE FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL POINT OF VIEW, AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD
VOTE AT THE MEETING. The summary of the opinion of BT Alex. Brown in this Proxy
Statement/ Prospectus is qualified in its entirety by reference to the full text
of such opinion.
In connection with its opinion, BT Alex. Brown reviewed certain publicly
available financial information and other information concerning HPR and HBOC
and certain internal analyses and other information furnished to BT Alex. Brown
by HPR and HBOC. BT Alex. Brown also held discussions with members of the senior
managements of HPR and HBOC regarding the businesses and prospects of their
respective companies and the joint prospects of a combined company. In addition,
BT Alex. Brown (i) reviewed the reported prices and trading activity for HPR
Common Stock and HBOC Common Stock, (ii) compared certain financial and stock
market information for HPR and HBOC with similar information for certain
publicly traded companies, (iii) reviewed the financial terms of certain recent
business combinations which BT Alex. Brown deemed comparable in whole or in
part, (iv) reviewed the terms of the Merger Agreement, and (v) performed such
other studies and analyses and considered such other factors as BT Alex. Brown
deemed appropriate.
As described in its opinion, BT Alex. Brown assumed and relied upon, without
independent verification, the accuracy, completeness and fairness of the
information furnished to or otherwise reviewed by or discussed with BT Alex.
Brown for purposes of its opinion. With respect to the information relating to
the prospects of HPR and HBOC, BT Alex. Brown assumed that such information
reflected the best currently available judgments and estimates of the
managements of HPR and HBOC as to the likely future financial performances of
their respective companies and of the combined company. BT Alex. Brown also
assumed that the Merger would qualify for pooling-of-interests accounting
treatment and as a tax-free transaction for the holders of HPR Common Stock. BT
Alex. Brown did not make nor was it provided with an independent evaluation or
appraisal of the assets or liabilities of HPR or HBOC. BT Alex. Brown's opinion
was based on market, economic and other conditions as they existed and could be
evaluated as of the date of its opinion. Although BT Alex. Brown evaluated the
Exchange Ratio from a financial point of view, the type and amount of
consideration payable in the Merger was determined through negotiation between
HPR and HBOC. BT Alex. Brown's opinion does not constitute an opinion as to the
price at which the HBOC Common Stock will actually trade at any time.
The following is a summary of the material analyses and factors considered
by BT Alex. Brown in connection with its opinion to the HPR Board of Directors
dated September 27, 1997:
ANALYSIS OF SELECTED PUBLIC COMPANIES. BT Alex. Brown compared certain
financial and stock market information for HPR and HBOC with similar information
for the following selected publicly held companies in the healthcare industry:
(i) in the case of HPR: Access Health, Inc.; HBOC; HCIA, Inc.; IDX Systems
Corporation; Shared Medical Systems Corporation; SunQuest Information Systems,
Inc.; and Transition Systems, Inc. (the "HPR Selected Companies") and (ii) in
the case of HBOC: the HPR Selected Companies (other than HBOC) and HPR (the
"HBOC Selected Companies" and, together with the HPR Selected Companies, the
"Selected Companies"). BT Alex. Brown calculated market values relative to each
company's net income for the latest twelve months and calendar years 1997 and
1998, and adjusted market values (equity market value, plus debt, less cash and
equivalents) relative to each company's latest twelve months revenues, earnings
before interest, taxes, depreciation and amortization ("EBITDA"), and earnings
before interest and taxes ("EBIT"). All multiples were based on closing stock
prices on September 26, 1997. Net income estimates for HPR, HBOC and the
Selected Companies were based on analysts' estimates as reported by I/B/E/S, a
market research database. This analysis indicated multiples for the HPR Selected
Companies of latest twelve months net income and estimated calendar 1997 and
1998 net income of 26.2x to 53.6x (with a mean of 40.8x), 22.7x to 44.8x (with a
mean of 33.2x) and 17.8x to 33.1x (with a mean of 25.4x), respectively, and
latest twelve months revenues, EBITDA and EBIT of 1.7x to 8.1x (with a mean of
4.6x), 6.5x to 26.1x (with a mean of 17.0x) and 15.9x to 32.4x (with a mean of
23.7x), respectively. This analysis indicated multiples for the HBOC Selected
Companies of latest twelve months net income and estimated calendar 1997 and
1998 net income of 26.2x to 50.8x (with a mean
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of 39.6x), 22.7x to 38.1x (with a mean of 32.1x) and 17.8x to 29.3x (with a mean
of 24.7x), respectively, and latest twelve months revenues, EBITDA and EBIT of
1.7x to 8.1x (with a mean of 4.6x), 6.5x to 25.3x (with a mean of 16.7x) and
15.9x to 32.4x (with a mean of 23.0x), respectively. These multiples compare
with multiples of latest twelve months and estimated calendar 1997 and 1998 net
income and latest twelve months revenues, EBITDA and EBIT for HPR of 45.0x,
38.1x, 29.3x, 7.4x, 23.8x and 27.0x, respectively, and multiples of latest
twelve months and estimated calendar 1997 and 1998 net income and latest twelve
months revenues, EBITDA and EBIT for HBOC of 53.6x, 44.8x, 33.1x, 7.8x, 26.1x
and 32.2x, respectively. Based on the closing stock price of HBOC Common Stock
on September 26, 1997, the Exchange Ratio equated to implied multiples for HPR
of latest twelve months net income and estimated calendar 1997 and 1998 net
income of 56.0x (based on latest twelve months net income), 46.9x (based on
calendar year 1997 net income estimates as reported by I/B/E/S), 47.3x (based on
calendar year 1997 net income estimates of HPR management), 41.1x (based on
fiscal year 1998 net income estimates of HPR management), 36.0x (based on
calendar year 1998 net income estimates as reported by I/B/E/S) and 35.9x (based
on calendar year 1998 net income estimates of HPR management), respectively, and
latest twelve months revenues, EBITDA and EBIT of 9.4x, 30.1x and 34.3x,
respectively.
ANALYSIS OF SELECTED MERGER AND ACQUISITION TRANSACTIONS. BT Alex. Brown
reviewed the purchase price and implied transaction multiples paid in the
following selected merger and acquisition transactions in the healthcare
information technology industry, consisting of (acquiror/target): Misys
Corp./Medic Computer Systems, Inc.; IDX Systems Corporation/PHAMIS, Inc.;
HBOC/Enterprise Systems, Inc.; HBOC/AMISYS Managed Care Systems, Inc.;
HBOC/GMIS, Inc.; Medaphis Corporation/Health Data Sciences Corp.; HBOC/CyCare
Systems, Inc.; Warburg, Pincus Ventures, L.P./Transition Systems, Inc.; Medaphis
Corporation/Healthcare Recoveries, Inc.; HBOC/CliniCom Incorporated; HBOC/Health
Systems Group (FDC); Medaphis Corporation/Atwork Corporation; Health Management
Systems, Inc./ Health Care Microsystems, Inc.; Medaphis Corporation/AdvaCare,
Inc.; HBOC/Serving Software, Inc.; and HBOC/IBAX Healthcare Systems
(collectively, the "Selected Merger and Acquisition Transactions"). All
multiples were based on publicly available information at the time of
announcement of such transaction. This analysis indicated multiples for the
Selected Merger and Acquisition Transactions of latest twelve months and
one-year forward net income and latest twelve months revenues, EBITDA and EBIT
of 21.9x to 92.9x (with a mean of 46.8x), 28.4x to 46.2x (with a mean of 34.6x),
0.8x to 11.4x (with a mean of 4.3x), 6.3x to 40.8x (with a mean of 19.8x), and
9.1x to 60.3x (with a mean of 27.6x), respectively. Based on the closing stock
price of HBOC Common Stock on September 26, 1997, the Exchange Ratio equated to
implied multiples for HPR of latest twelve months net income and one-year
forward net income of 56.0x (based on latest twelve months net income), 41.1x
(based on fiscal year 1998 net income estimates of HPR management), 36.0x (based
on calendar year 1998 net income estimates as reported by I/B/E/S) and 35.9x
(based on calendar year 1998 net income estimates of HPR management),
respectively, and latest twelve months revenues, EBITDA and EBIT of 9.4x, 30.1x
and 34.3x, respectively. BT Alex. Brown also compared the premiums paid in the
Selected Merger and Acquisition Transactions with the premiums payable in the
Merger. The premiums paid in the Selected Merger and Acquisition Transactions,
based on the target company's closing stock price 30-days prior, and one-day
prior, to public announcement of such transactions were 2.2% to 110.0% (with a
mean of 45.0% and a median of 35.6%) and 3.7% to 56.5% (with a mean of 24.3% and
a median of 15.8%), respectively, as compared to the premiums payable in the
Merger based on the closing stock price of HPR Common Stock 30-days prior, and
one-day prior, to public announcement of the Merger of 30.1% and 22.9%,
respectively.
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DISCOUNTED CASH FLOW ANALYSIS. BT Alex. Brown performed a discounted cash
flow analysis of HPR and HBOC to estimate the present value of the stand-alone,
unlevered, after-tax free cash flows that HPR and HBOC could generate over the
years 1998 through 2002 based, in the case of HPR, on internal estimates of the
management of HPR and, in the case of HBOC, on discussions with the management
of HBOC. The stand-alone discounted cash flow analysis of HPR and HBOC was
determined by (i) adding (x) the present value at June 30, 1997 of projected
free cash flows over the five-year period 1998 through 2002 and (y) the present
value at June 30, 1997 of the estimated terminal values of HPR and HBOC in year
2002 and (ii) subtracting the current net debt of HPR and HBOC at June 30, 1997.
The range of estimated terminal values for HPR and HBOC at the end of the
five-year period was calculated by applying terminal value multiples ranging
from 14.0x to 18.0x to the projected 2002 EBITDA of HPR and HBOC, representing
the estimated values of HPR and HBOC beyond the year 2002. The cash flows and
terminal values of HPR and HBOC were discounted to present value using discount
rates ranging from 16% to 20% in the case of HPR and 14% to 18% in the case
HBOC. This analysis yielded equity reference ranges for HPR Common Stock and
HBOC Common Stock of approximately $18.53 to $26.00 per share and approximately
$34.15 to $60.28 per share, respectively.
PREMIUMS PAID ANALYSIS. BT Alex. Brown reviewed the range of premiums paid
in 68 change of control transactions with transaction values of $300 million to
$500 million involving non-finance companies. These transactions indicated a
range of premiums, based on the target company's stock price 30-days prior, and
one-day prior, to public announcement of the transactions of (14.9)% to 176.4%
(with a mean of 44.6% and a median of 45.1%) and (16.1%) to 176.4% (with a mean
of 34.8% and a median of 31.0%), respectively. BT Alex. Brown also reviewed the
range of premiums paid in 16 change of control transactions with transaction
values of $300 million to $500 million involving healthcare companies. These
transactions indicated a range of premiums, based on the target company's stock
price 30-days prior, and one-day prior, to public announcement of the
transaction of (1.1%) to 176.4% (with a mean of 43.6% and a median of 26.3%) and
(16.1%) to 176.4% (with a mean of 31.0% and a median of 15.1%), respectively.
The premiums payable in the Merger based on the closing stock price of HPR
Common Stock 30-days prior, and one-day prior, to public announcement of the
Merger were 30.1% and 22.9%, respectively.
HISTORICAL EXCHANGE RATIO ANALYSIS. BT Alex. Brown reviewed the historical
trading volumes and market prices for HPR Common Stock and HBOC Common Stock and
the implied historical exchange ratio of HPR Common Stock and HBOC Common Stock
(the closing price of HPR Common Stock divided by the closing price of HBOC
Common Stock) based on such market prices as of the 90 trading days, 30 trading
days and 15 trading days prior to, and as of, September 26, 1997. This analysis
indicated average exchange ratios for HPR Common Stock and HBOC Common Stock as
of the 90 trading days, 30 trading days and 15 trading days prior to, and as of,
September 26, 1997 of approximately 0.48, 0.47, 0.46 and 0.49, respectively, as
compared to the Exchange Ratio of 0.60.
CONTRIBUTION ANALYSIS. BT Alex. Brown analyzed the relative contributions
of HPR and HBOC to the estimated revenues, EBITDA, EBIT and net income of the
pro forma combined company for the latest twelve months ended June 30, 1997 and
to the estimated net income of the pro forma combined company for calendar years
1997 and 1998 based, in the case of HPR, on internal estimates of the management
of HPR and, in the case of HBOC, on analysts' estimates as reported by I/B/E/S,
and compared such contributions to the pro forma ownership of the holders of HPR
Common Stock in the pro forma combined company. This analysis indicated that (i)
for the latest twelve months ended June 30, 1997, HPR would have contributed
approximately 3.7% of the revenues, 3.9% of EBITDA, 4.3% of EBIT and 4.4% of the
net income of the pro forma combined company, (ii) in calendar year 1997, HPR
would contribute approximately 4.2% of the net income of the pro forma combined
company and (iii) in calendar year 1998, HPR would contribute approximately 4.2%
(based on net income estimates of HPR management), 3.8% (based on net income
estimates of HPR management with respect to HPR and I/B/E/S estimates, with a
positive 10% variance with respect to HBOC) and 3.7% (based on net income
estimates of HPR management with respect to HPR and I/B/E/S, estimates with a
positive 15% variance with respect to
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HBOC) of the net income of the pro forma combined company. Based on the Exchange
Ratio, current holders of HPR Common Stock would own approximately 4.6% of the
pro forma combined company upon consummation of the Merger.
ACCRETION/DILUTION ANALYSIS. BT Alex. Brown analyzed the pro forma effect
of the Merger on the earnings per share ("EPS") of HBOC in calendar year 1998
based, in the case of HPR, on EPS estimates of the management of HPR and, in the
case of HBOC, on EPS estimates as reported by I/B/E/S, both before and after
giving effect to certain cost savings and other potential synergies anticipated
by the managements of HPR and HBOC to result from the Merger (excluding
non-recurring costs resulting from the Merger). This analysis indicated that the
Merger could be dilutive to HBOC's EPS by approximately 0.4% in calendar year
1998 without giving effect to certain costs savings and other potential
synergies anticipated by the managements of HPR and HBOC to result from the
Merger and accretive to HBOC's EPS by approximately 0.1% to 3.6% in calendar
year 1998 assuming certain levels of cost savings and other potential synergies
were achieved (excluding non-recurring costs resulting from the Merger). The
actual operating or financial results achieved by the pro forma combined company
may vary from projected results and variations may be material as a result of
business and market risks, the timing and amount of synergies, the costs
associated with achieving such synergies and other factors.
HISTORICAL AND PRO FORMA COMPARISON. In connection with its opinion, BT
Alex. Brown also reviewed and considered, among other things: (i) historical and
pro forma financial information for HPR and HBOC; (ii) historical trading
volumes and market prices for HPR Common Stock and HBOC Common Stock, and
movements in HPR Common Stock and HBOC Common Stock relative to the S&P 500
Index and the common stock of the Selected Companies; (iii) analysts' reports,
including growth rate estimates, with respect to HPR and HBOC; and (iv) the
ownership profiles of HPR and HBOC.
The summary set forth above does not purport to be a complete description of
the opinion of BT Alex. Brown to the HPR Board or the financial analyses
performed and factors considered by BT Alex. Brown in connection with its
opinion. The preparation of a fairness opinion is a complex analytical process
involving various determinations as to the most appropriate and relevant methods
of financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. BT Alex. Brown believes that its analyses and the summary
set forth above must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, or selecting portions of the above
summary, without considering all factors and analyses, could create a misleading
or incomplete view of the processes underlying such analyses and opinion. In
performing its analyses, BT Alex. Brown made numerous assumptions with respect
to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of HPR and
HBOC. No company, transaction or business used in such analyses as a comparison
is identical to HPR, HBOC, or the proposed Merger, nor is an evaluation of the
results of such analyses entirely mathematical; rather, such analyses involve
complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies, businesses or transactions being
analyzed. The estimates contained in such analyses and the ranges of valuations
resulting from any particular analysis are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
those suggested by such analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to reflect the
prices at which businesses or securities actually may be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty. BT
Alex. Brown's opinion and financial analyses were only one of many factors
considered by the HPR Board in its evaluation of the proposed Merger and should
not be viewed as determinative of the views of the HPR Board or HPR's management
with respect to the Exchange Ratio or the Merger.
BT Alex. Brown is a nationally recognized investment banking firm and, as a
customary part of its investment banking business, is engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, private placements and valuations for estate,
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corporate and other purposes. HPR selected BT Alex. Brown to serve as its
financial advisor based on BT Alex. Brown's reputation, expertise and
familiarity with HPR, HBOC and their respective businesses. In the past, BT
Alex. Brown has provided various financing services for HBOC and various
financing and financial advisory services for HPR, for which services BT Alex.
Brown has received customary fees. BT Alex. Brown maintains a market in HPR
Common Stock and HBOC Common Stock and regularly publishes research reports
regarding the healthcare industry and the businesses and securities of publicly
owned companies in that industry, including HPR and HBOC. In the ordinary course
of business, BT Alex. Brown may actively trade the securities of both HPR and
HBOC for its own account and the accounts of its customers and, accordingly, may
at any time hold a long or short position in securities of HPR and HBOC.
Pursuant to the terms of BT Alex. Brown's engagement, HPR has agreed to pay
BT Alex. Brown upon consummation of the Merger an aggregate financial advisory
fee equal to 0.875% (less up to $500,000 payable to H&Q as secondary financial
advisor to HPR) of the aggregate consideration payable in the Merger. In
addition, HPR has agreed to reimburse BT Alex. Brown for its reasonable
out-of-pocket expenses, including reasonable fees and disbursements of counsel,
and to indemnify BT Alex. Brown and certain related parties against certain
liabilities, including certain liabilities under the federal securities laws,
relating to, or arising out of, its engagement.
REASONS OF HBOC FOR ENGAGING IN THE MERGER
The HBOC Board believes that the acquisition of HPR will expand HBOC's
enterprisewide suite of information systems by adding HPR's additional decision
support capabilities, primarily for the payer market, as well as for provider
customers who have assumed risk for their patient populations.
TERMS OF THE MERGER
The following summary of the terms and conditions of the Merger Agreement is
qualified in its entirety by reference to the full terms of the Merger
Agreement, which is attached hereto as Appendix A and is hereby incorporated by
reference herein.
EFFECTIVE TIME. The Merger will become effective when both (i) the Merger
Agreement is adopted and approved by the stockholders of HPR in accordance with
the applicable provisions of the DGCL and (ii) the Certificate of Merger is
filed with the Secretary of State of Delaware.
GENERAL EFFECTS OF THE MERGER. At the Effective Time, HPR will be merged
with and into HBOC-GA, which will be the surviving corporation.
CONVERSION OF SHARES. Each share of HPR Common Stock issued and outstanding
immediately prior to the Effective Time, will, at the Effective Time, be
converted into the right to receive six-tenths (.6) of a share of HBOC Common
Stock (the "Exchange Ratio"), less the amount of any fractional share, which
will be paid in cash; provided however, if the Market Value of the HBOC Common
Stock is less than $35.00, the HPR Board shall have the right (but shall not be
obligated) to terminate the Merger Agreement. The shares of HBOC Common Stock
and any cash in lieu of fractions thereof receivable by each HPR stockholder in
the Merger are referred to herein as the "Merger Consideration."
FRACTIONAL SHARES. No certificates or scrip representing fractional shares
of HBOC Common Stock shall be issued pursuant to the Merger, but in lieu
thereof, any holder of HPR Common Stock shall be entitled to receive a cash
payment therefor, without interest, at a pro rata amount based on the Market
Value.
STOCK PLANS. Options to purchase shares of HPR Common Stock outstanding at
the Effective Time of the Merger will be assumed by HBOC and, as a result of
such assumption of options to purchase HPR Common Stock, the optionee will have
the right to purchase the number of shares (rounded down to the
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nearest whole share) of HBOC Common Stock into which the number of shares of HPR
Common Stock the optionee was entitled to purchase under the existing option
would have been converted pursuant to the terms of the Merger. The aggregate
price for the total number of shares of HBOC Common Stock issuable pursuant to
an option will be the aggregate price at which the option was exercisable for
the total number of shares of HPR Common Stock issuable thereunder, reduced (as
necessary for rounding down) to that price that will buy the number of whole
shares of HBOC Common Stock issuable thereunder and the purchase price per share
of HBOC Common Stock shall be such aggregate price divided by the total number
of shares of HBOC Common Stock issuable thereunder. No other terms of the
options assumed by HBOC will be modified pursuant to the terms of the Merger
Agreement. However, in accordance with severance plans adopted by HPR, certain
unvested options will become vested. See "Interests of Certain Persons in Each
of HBOC and HPR--Interests of Certain HPR Persons in Matters to be Acted Upon."
EXCHANGE OF CERTIFICATES. HBOC has designated SunTrust Bank, Atlanta as
Exchange Agent in connection with the Merger. At the Effective Time, HBOC shall
provide the Exchange Agent with a sufficient number of shares of HBOC Common
Stock and cash to deliver the Merger Consideration to each holder of shares of
HPR Common Stock converted by reason of the Merger. Promptly after the Effective
Time, the Exchange Agent will mail to each record holder (as of the Effective
Time) of an outstanding certificate or certificates that immediately prior to
the Effective Time represented outstanding shares of HPR Common Stock (the
"Certificates"), a letter of transmittal and instructions for use in effecting
the surrender of the Certificates in exchange for the Merger Consideration
payable in respect of the shares of HPR Common Stock represented thereby.
Upon surrender to the Exchange Agent of a Certificate, together with such
letter of transmittal properly completed and duly executed and any other
required documents, the holder of such Certificate shall be entitled to receive
the Merger Consideration, and such Certificate shall forthwith be cancelled. If
payment is to be made to a person other than the person in whose name the
Certificate surrendered is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the Certificate surrendered or establish to the
satisfaction of HBOC-GA that such tax has been paid or is not applicable. Until
surrendered, each Certificate shall represent for all purposes only the right to
receive the Merger Consideration, without any interest on the value thereof.
Notwithstanding the foregoing, neither HBOC nor HBOC-GA shall be liable to
any holder of Certificates formerly representing shares of HPR Common Stock for
any property properly delivered or amount paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
PAYMENT OF DIVIDENDS. No cash or stock dividend payable, no certificate
representing split shares deliverable and no other distribution payable or
deliverable to holders of record of HBOC Common Stock at any time subsequent to
the Effective Time shall be paid or delivered to the holder of any Certificate
unless and until such Certificate is surrendered to the Exchange Agent. However,
subject to any applicable escheat laws, upon such surrender, there shall be paid
or delivered to the holder of record of the certificate or certificates for HBOC
Common Stock issued and exchanged therefor, the certificates for shares and/or
other property resulting from any such dividends, splits, or other
distributions, as the case may be, that shall have theretofore become payable or
deliverable with respect to HBOC Common Stock subsequent to the Effective Time,
without interest thereon.
LIMITATIONS ON TRANSFERABILITY OF HBOC COMMON STOCK. Shares of HBOC Common
Stock received by certain persons deemed to be "affiliates" of HPR for purposes
of Rule 145 under the Securities Act will be subject to the restrictions imposed
by such rule. In accordance with Rule 145, an affiliate of HPR receiving HBOC
Common Stock issued in the Merger may not sell such shares except pursuant to
the volume and manner of sale limitations and other requirements specified
therein or pursuant to an effective registration statement under the Securities
Act. It is a condition to the obligation of HBOC to consummate the Merger
33
<PAGE>
that HBOC shall have received from each affiliate of HPR a letter agreement
confirming that such person will not sell or otherwise dispose of the shares of
HBOC Common Stock received by such person as a result of the Merger other than
in compliance with Rule 145 or pursuant to an effective registration statement
or pursuant to any other available exemption from the registration requirements
of the Securities Act. In general, directors, officers and substantial
beneficial owners of a corporation's securities may be deemed to be "affiliates"
of a corporation. In addition, HPR affiliates are subject to certain
restrictions on transfer of both HPR Common Stock and HBOC Common Stock during
certain periods prior to and following the Effective Time of the Merger to
support pooling of interests accounting treatment of the transaction.
CONDITIONS; WAIVER. The obligations of HBOC and HBOC-GA, on the one hand,
and of HPR, on the other hand, to consummate the Merger are contingent upon and
subject to the satisfaction or waiver of the following conditions: (i) the
absence of certain legal or regulatory proceedings with respect to the Merger;
(ii) the expiration or termination of the waiting period under the HSR Act;
(iii) the approval of the Merger and the Merger Agreement and any related
matters by holders of the requisite number of shares of HPR Common Stock; (iv)
the Registration Statement shall have been declared effective by the Commission
and no stop order shall have been issued with respect thereto and shares of HBOC
Common Stock being issued in the Merger shall have been registered or shall be
exempt from registration under all applicable blue sky laws; (v) the HBOC Common
Stock issuable in the Merger shall have been listed or approved for listing upon
notice of issuance by the Nasdaq NM; and (vi) the receipt by the HPR Board of a
fairness opinion of BT Alex. Brown dated as of the date of this Proxy
Statement/Prospectus.
The obligations of HBOC and HBOC-GA to consummate the Merger are contingent
upon and subject to the satisfaction or waiver of the following additional
conditions: (i) the representations and warranties of HPR shall remain true and
correct at and as of the Closing Date, other than breaches of such
representations which do not individually or in the aggregate constitute a
material adverse effect on the businesses, assets, financial condition or
results of operations (a "Material Adverse Effect") of HPR taken as a whole;
(ii) the performance of all covenants, agreements and conditions by HPR as
provided in the Merger Agreement; (iii) there shall have been no change in the
business, properties, rights or operations of HPR or its subsidiaries, which
individually or in the aggregate constitute a Material Adverse Effect on HPR;
(iv) receipt of a certificate of the Chief Executive Officer of HPR regarding
satisfaction of certain conditions, including those listed in (i) through (iii)
above; (v) receipt of certain legal opinions, including an opinion of Jones Day,
counsel to HBOC, to the effect that the Merger will qualify as a reorganization
pursuant to Section 368(a) of the Code; (vi) receipt of letters from affiliates
of HPR regarding compliance with Rule 145 and certain pooling of interests
requirements; (vii) delivery of certain additional certificates and documents by
HPR, including consents of certain third parties; (viii) receipt of letters from
Coopers & Lybrand L.L.P. and Arthur Andersen LLP, in their capacities as
independent public accountants for HPR and HBOC, respectively, regarding the
appropriateness of accounting for the Merger as a pooling of interests; (ix)
receipt of letters from Coopers & Lybrand L.L.P., HPR's independent public
accountants, regarding certain information about HPR included in the
Registration Statement; (x) receipt of a non-competition agreement from Dr.
Radosevich; and (xi) the absence of any fees or expenses payable to any
investment banking firm or similar entity that will be incurred by HPR in
connection with the Merger, except fees and expenses of BT Alex. Brown, H&Q and
Carmany, not to exceed the limitations set forth in the Merger Agreement.
The obligation of HPR to consummate the Merger is contingent upon, and
subject to the satisfaction or waiver of, the following additional conditions:
(i) the representations and warranties of HBOC and HBOC-GA shall remain true and
correct at and as of the Closing Date other than breaches of such
representations which do not individually or in the aggregate constitute a
Material Adverse Effect on HBOC and HBOC-GA, taken as a whole; (ii) the
performance of all covenants, agreements and conditions by HBOC and HBOC-GA as
provided in the Merger Agreement; (iii) receipt of a certificate of the
President of each of HBOC and HBOC-GA regarding the matters in (i) and (ii)
above; and (iv) receipt of
34
<PAGE>
certain legal opinions, including an opinion from Hill & Barlow, counsel to HPR,
to the effect that the Merger will qualify as a reorganization pursuant to
Section 368(a) of the Code.
HART-SCOTT-RODINO. The Merger is subject to the requirements of the HSR
Act, which provides that certain transactions (including the Merger) may not be
consummated until certain information has been furnished to the Antitrust
Division and the FTC and certain waiting period requirements have been
satisfied. HBOC and HPR filed the required information with the Antitrust
Division and the FTC on October 7, 1997 and the waiting period expired on
November 6, 1997. Satisfaction of the waiting period requirement does not
preclude the Antitrust Division, the FTC or any other party from challenging or
seeking to delay or enjoin the Merger on antitrust or other grounds.
NO SOLICITATION. HPR has agreed that prior to the Effective Time of the
Merger or earlier termination of the Merger Agreement, HPR shall not, and shall
not permit any of its subsidiaries to, and HPR and its subsidiaries shall not
authorize or permit any officer, director, employee or representative of HPR or
its subsidiaries to, solicit, initiate, encourage (including by way of
furnishing information), endorse or enter into any agreement with respect to, or
take any other action to facilitate, any inquiries or the making of any proposal
or offer for any tender or exchange offer, proposal for a merger, share exchange
or other business combination involving HPR or any of its subsidiaries or any
proposal or offer to acquire in any manner a substantial equity interest in HPR
or any of its subsidiaries or a substantial portion of the assets of HPR or any
of its subsidiaries with any person or entity; provided, however, that the HPR
Board may furnish information to or enter into discussions or negotiations with
any unsolicited person or entity if, and only to the extent that, the HPR Board
determines in good faith, after receiving written advice of its outside counsel,
that such action would be required under applicable law in the exercise of its
fiduciary duties. HPR has agreed to notify HBOC-GA immediately of its receipt of
any such proposals or any such inquiries or discussions with respect thereto.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time of the Merger by: (i) mutual written consent of the HBOC
Board and the HPR Board, notwithstanding the prior approval of the HPR
stockholders; (ii) the HBOC Board, in the event of material condemnation,
destruction, loss or damage to the business of HPR and its subsidiaries, taken
as a whole; (iii) the HBOC-GA Board or the HPR Board, after January 31, 1998, if
any of the conditions to such party's obligation to consummate the Merger have
not been fulfilled or waived, subject to extension in certain circumstances,
unless fulfillment has been frustrated or made impossible by the party seeking
termination; (iv) the HPR Board, if, in the good faith exercise of its fiduciary
duties to the stockholders of HPR in the context of a proposal to acquire HPR by
another party, the HPR Board decides that such termination is required; (v) the
HPR Board (at its option), if the Market Value of HBOC Common Stock is less than
$35.00; and (vi) by the HBOC Board or the HPR Board if either reasonably
estimates that the aggregate external cost to HBOC or HPR, respectively, of
regulatory compliance after the initial filing under the HSR Act will exceed
specified limitations.
If the Merger Agreement is terminated by HPR in accordance with (iv) above,
HPR will be obligated to pay to HBOC-GA a fee in the amount of $10,000,000, plus
all reasonable costs and expenses of HBOC and HBOC-GA incurred in connection
with the negotiation and performance of the Merger Agreement.
ACCOUNTING TREATMENT
It is a condition to the consummation of the Merger that HBOC shall have
received letters, dated as of the date hereof and as of the Closing Date, from
Coopers & Lybrand L.L.P setting forth their concurrence with the conclusion of
HPR's management that no conditions exist with respect to HPR that would
preclude accounting for the Merger as a pooling of interests, and from Arthur
Andersen LLP to the effect that HBOC satisfies the tests applicable to it such
that the Merger can be accounted for as a pooling of interests, in each case
under Accounting Principles Board Opinion No. 16 assuming that the Merger is
closed and consummated in accordance with the Merger Agreement.
35
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary, based upon current law, is a general discussion of
the principal federal income tax consequences of the Merger, assuming the Merger
is consummated as contemplated herein. This summary is based upon the Code,
applicable regulations promulgated under the Code by the Treasury Department and
administrative rulings and judicial authority as of the date hereof, all of
which are subject to change, possibly with retroactive effect. Any such change
could affect the continuing validity of this summary. This summary applies to
holders of HPR Common Stock who hold their shares of HPR Common Stock as capital
assets. This summary does not discuss all aspects of income taxation that may be
relevant to a particular holder of HPR Common Stock in light of such holder's
specific circumstances or to certain types of holders subject to special
treatment under the federal income tax laws (for example, foreign persons,
dealers in securities, banks and other financial institutions, insurance
companies, tax-exempt organizations, and holders who acquired HPR Common Stock
pursuant to the exercise of options or otherwise as compensation), and it does
not discuss any aspect of state, local, foreign or other tax laws. Consequently,
each holder of HPR Common Stock should consult its own tax advisor as to the
specific tax consequences of the Merger to that stockholder.
As of the date of this Proxy Statement/Prospectus, Hill & Barlow has advised
HPR that in its opinion (i) the Merger will qualify as a reorganization pursuant
to Section 368(a) of the Code, (ii) no gain or loss will be recognized by HPR as
a result of the consummation of the Merger and (iii) no gain or loss will be
recognized by an HPR stockholder upon the exchange of the shares of HPR Common
Stock for shares of HBOC Common Stock pursuant to the Merger, except on the
receipt of cash in lieu of a fractional share interest in HBOC Common Stock.
As of the date of this Proxy Statement/Prospectus, Jones Day has advised
HBOC and HBOC-GA that in its opinion (i) the Merger will qualify as a
reorganization pursuant to Section 368(a) of the Code and (ii) no gain or loss
will be recognized by either HBOC, HBOC-GA or HPR as the result of the
consummation of the Merger.
The opinions of Hill & Barlow and Jones Day referred to herein are based
upon certain representations and warranties of HBOC, HBOC-GA, HPR and certain
stockholders of HPR. In addition, consummation of the Merger is subject to the
condition that as of the Closing Date the opinions described above shall not
have been withdrawn or materially modified. No ruling, however, has been
requested from the Internal Revenue Service in connection with the Merger, and
the opinions referred to above would neither be binding upon the Internal
Revenue Service nor preclude it from adopting a contrary position.
Provided that the Merger constitutes a tax-free reorganization, the
aggregate adjusted tax basis of the HBOC Common Stock received (including any
fractional share interests deemed received) by a stockholder of HPR as a result
of the Merger will be the same as the aggregate adjusted tax basis of the shares
of HPR Common Stock surrendered in exchange therefor. The holding period of the
HBOC Common Stock received (including any fractional share interests deemed
received) by a stockholder of HPR as a result of the Merger will include the
holding period of the shares of HPR Common Stock surrendered in exchange
therefor. Any cash that a stockholder of HPR receives in lieu of a fractional
interest in a share of HBOC Common Stock will be treated as if the fractional
share were distributed in the Merger and were then redeemed for the cash
payment, resulting in gain or loss upon receipt of such cash taxed as provided
in Section 302 of the Code.
To prevent "backup withholding" of federal income tax on any payments of
cash to an HPR stockholder in the Merger, an HPR stockholder must, unless an
exception applies under the applicable law and regulations, provide the payor of
such cash with such holder's correct taxpayer identification number ("TIN") on a
substitute Form W-9 and certify under penalties of perjury that such number is
correct and that such holder is not subject to backup withholding. The
exceptions provide that certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient,
36
<PAGE>
however, he or she must submit a signed statement (i.e., Certificate of Foreign
Status on Form W-8) attesting to his or her exempt status. A Substitute Form W-9
will be provided to each HPR stockholder in the letter of transmittal to be
mailed to each holder after the Effective Time. If the correct TIN and
certifications are not provided, a $50 penalty may be imposed on an HPR
stockholder by the Internal Revenue Service, and any cash received by such
stockholder may be subject to backup withholding at a rate of 31%.
THE DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS FOR
GENERAL INFORMATION ONLY AND IS BASED ON EXISTING LAW AS OF THE DATE OF THIS
PROXY STATEMENT/PROSPECTUS. STOCKHOLDERS OF HPR ARE URGED TO CONSULT THEIR TAX
ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER
(INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS).
NO APPRAISAL RIGHTS
Because HPR Common Stock is a Nasdaq NM security, the holders of shares of
HPR Common Stock will not be entitled to appraisal rights pursuant to Section
262 of the DGCL in connection with the Merger.
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<PAGE>
INTERESTS OF CERTAIN PERSONS IN EACH OF HBOC AND HPR
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF HBOC
The following table sets forth, as of September 30, 1997, unless otherwise
indicated, certain information with respect to all stockholders known to HBOC to
beneficially own more than five percent of the HBOC Common Stock and information
with respect to HBOC Common Stock beneficially owned by each director of HBOC,
the Chief Executive Officer of HBOC and HBOC's other executive officers who were
the most highly compensated for the year ended December 31, 1996, and all
directors and executive officers of HBOC as a group. Except as otherwise
indicated, the stockholders listed in the table have sole voting and investment
powers with respect to the HBOC Common Stock owned by them and beneficial
ownership is determined in accordance with the rules of the Commission.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS
- ------------------------------------------------- ------------------------ -----------------
<S> <C> <C>
Putnam Investments, Inc.
One Post Office Square
Boston, Massachusetts 02109.................... 12,638,106(2) 6.3%
Alfred C. Eckert III............................. 85,000(3) *
Holcombe T. Green, Jr............................ 2,271,720(4) 1.1%
Philip A. Incarnati.............................. 40,000(5) *
Alton F. Irby III................................ 86,000(6) *
Gerald E. Mayo................................... 164,000(5) *
Charles W. McCall................................ 2,536,813(7) 1.3%
James V. Napier.................................. 150,976(8) *
Donald C. Wegmiller.............................. 40,000(5) *
Jay P. Gilbertson................................ 141,744(9) *
Albert J. Bergonzi............................... 135,612(10) *
Jay M. Lapine.................................... 24,382(11) *
Russell G. Overton............................... 30,756(12) *
All Directors and Executive Officers as a Group
(12 persons)................................... 5,707,003(13) 2.8%
</TABLE>
- ------------------------
* Less than 1%.
(1) In accordance with the rules of the Commission, a person is deemed to be the
beneficial owner of any securities such person has the right to acquire
within 60 days of the date on which beneficial ownership is determined.
Accordingly, options exercisable within such period are reported as
presently exercisable.
(2) According to the joint Schedule 13G as of December 31, 1996, of Putnam
Investments, Inc. ("PI"), its parent, Marsh & McLennan Companies, Inc. and
PI's subsidiaries, Putnam Investment Management, Inc. ("PIM") and The Putnam
Advisory Company, Inc. ("PAC"), PAC has shared voting and shared dispositive
power with respect to 1,552,600 and 2,426,130 of such shares, PIM has shared
dispositive power with respect to 10,211,976 of such shares and PI has
shared voting and shared dispositive power with respect to 1,552,600 and
12,638,106 of such shares.
(3) Includes 80,000 shares that may be acquired through the exercise of
presently exercisable stock options and 5,000 held in an IRA for the benefit
of Mr. Eckert.
(4) Includes 900,000 shares that Mr. Green may acquire through the exercise of
presently exercisable stock options; 22,920 shares held in an IRA for the
benefit of Mr. Green; 1,100,600 shares held by a limited partnership of
which Mr. Green's wife is a general partner and with respect to which
beneficial
38
<PAGE>
ownership is disclaimed, except to the extent of his pecuniary interest
therein; and 248,200 shares held by HTG Corp., which is wholly-owned by Mr.
Green.
(5) Represents shares that may be acquired through the exercise of presently
exercisable stock options.
(6) Includes 80,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(7) Includes 440,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(8) Includes 1,400 shares owned by Mr. Napier's daughter and 100,000 shares that
may be acquired through the exercise of presently exercisable stock options.
(9) Includes 124,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(10) Includes 132,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(11) Includes 24,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(12) Includes 4,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(13) Includes 2,128,000 shares that may be acquired through the exercise of
presently exercisable stock options.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF HPR
As of November 19, 1997, there were 15,385,515 shares of HPR Common Stock
issued and outstanding. The following table sets forth, as of November 19, 1997,
unless otherwise indicated, certain information with respect to all stockholders
known to HPR to beneficially own more than five percent of the HPR Common Stock,
and information with respect to HPR Common Stock beneficially owned by each
director of HPR, the Chief Executive Officer of HPR and HPR's four other most
highly compensated executive officers for the year ended June 30, 1997, and all
directors and executive officers of HPR as a group. Except as otherwise
indicated, the stockholders listed in the table have sole voting and investment
powers with respect to HPR Common Stock owned by them and beneficial ownership
is determined in accordance with the rules of the Commission. Under the heading
"Number of Shares Issuable" are listed (and under the heading "Total" are
included) shares issuable within 60 days of November 19, 1997 upon exercise of
stock options held by the person indicated. The percentage owned is calculated
with respect to each person by treating its issuable shares as outstanding in
accordance with the rules of the Commission.
<TABLE>
<CAPTION>
NUMBER OF
NAME OF BENEFICIAL OWNER NUMBER OF SHARES
(AND ADDRESS OF OWNER OF MORE THAN FIVE PERCENT) ISSUED SHARES ISSUABLE TOTAL PERCENT
- ------------------------------------------------------------------ ------------- -------------- ---------- -----------
<S> <C> <C> <C> <C>
Essex Investment Management Company(1)............................ 1,703,259 0 1,703,259 11.07%
125 High Street
Boston, MA 02110
A I M Management Group Inc.(2).................................... 1,294,600 0 1,294,600 8.41%
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Goldman Sachs Group, L.P.(3)...................................... 1,095,821 0 1,095,821 7.12%
85 Broad Street
New York, NY 10004
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
NAME OF BENEFICIAL OWNER NUMBER OF SHARES
(AND ADDRESS OF OWNER OF MORE THAN FIVE PERCENT) ISSUED SHARES ISSUABLE TOTAL PERCENT
- ------------------------------------------------------------------ ------------- -------------- ---------- -----------
<S> <C> <C> <C> <C>
Waddell & Reed Inc.(4)............................................ 928,800 0 928,800 6.04%
6300 Lamar Ave.
Overland, KS 66202
Marcia J. Radosevich, Ph.D........................................ 591,230 264,450 855,680 5.47%
c/o HPR Inc.
245 First Street
Cambridge, MA 02142
Richard H. Egdahl, M.D.(5)........................................ 572,148 3,300 575,448 3.74%
Brian D. Cahill................................................... 194,600 57,500 252,100 1.63%
Howard E. Cox, Jr.(6)............................................. 231,382 3,300 234,682 1.52%
Steven J. Rosenberg............................................... 0 141,025 141,025 *
James B. Stowe.................................................... 0 118,750 118,750 *
William G. Nelson, Ph.D........................................... 100,000 3,300 103,300 *
Harris A. Berman(7)............................................... 60,800 3,300 64,100 *
Joseph K. Jaeger.................................................. 13,410 15,269 28,679 *
All Directors and Executive Officers as a Group (14 persons)...... 1,763,570 651,444 2,415,014 15.06
</TABLE>
- ------------------------
* Less than one percent.
(1) Based solely upon information reported on Schedule 13G as filed with the
Commission. Essex Investment Management Company filed an Amendment No. 3 to
its Schedule 13G on March 10, 1997, reporting that it is an investment
adviser with sole voting power as to 1,175,045 shares of HPR Common Stock
and sole dispositive power with respect to 1,703,259 shares of HPR Common
Stock.
(2) Based solely upon information reported on Schedule 13G as filed with the
Commission on February 12, 1997 by A I M Management Group Inc. ("A I M
Management") on behalf of itself and its wholly-owned subsidiaries, A I M
Advisors, Inc. and A I M Capital Management, Inc. A I M Management reports
that it is a parent holding company and its two subsidiaries are investment
advisors with shared voting and dispositive power with respect to 1,294,600
shares of HPR Common Stock.
(3) Based solely upon information reported on Schedule 13G as filed with the
Commission on February 14, 1997 by The Goldman Sachs Group, L.P. and
Goldman, Sachs & Co., jointly. The Schedule 13G reports that The Goldman
Sachs Group, L.P. is a parent holding company and Goldman, Sachs & Co. is a
broker-dealer and investment advisor, both of whom have shared voting and
dispositive power as to 1,095,821 shares of HPR Common Stock.
(4) Based solely upon information reported on Schedule 13G as filed jointly with
the Commission on January 31, 1997 by Waddell & Reed Inc. ("W&R"), Waddell &
Reed Investment Management Company ("WRIMC"), Liberty National Life
Insurance Company ("Liberty"), Waddell & Reed Financial Services, Inc.
("WRFSI"), Torchmark Corporation ("Torchmark") and United Investors
Management Company ("UIMC"). As reported in that Schedule 13G, W&R is a
broker-dealer with sole voting and dispositive power as to 928,800 shares of
HPR Common Stock; WRIMC is an investment advisor with sole voting and
dispositive power as to 868,800 shares of HPR Common Stock; Liberty is an
insurance company with sole voting and dispositive power as to 928,800
shares of
40
<PAGE>
HPR Common Stock; WRFSI is a parent holding company with sole voting and
dispositive power as to 928,800 shares of HPR Common Stock; Torchmark is a
parent holding company with sole voting and dispositive power as to 928,800
shares of HPR Common Stock; and UIMC is a parent holding company with sole
voting and dispositive power as to 928,800 shares of HPR Common Stock.
(5) Includes 82,812 shares of HPR Common Stock held by Dr. Egdahl's spouse,
Cynthia T. Egdahl.
(6) Includes 25,000 shares of HPR Common Stock held by Bridgeport Associates,
Inc., a corporation controlled by Mr. Cox.
(7) Includes 12,500 shares of HPR Common Stock held by The Harris A. Berman and
Ruth E. Nemzoff Family Foundation, as to which shares Dr. Berman disclaims
beneficial ownership.
INTERESTS OF CERTAIN HPR PERSONS IN MATTERS TO BE ACTED UPON
In considering the Merger, holders of HPR Common Stock should be aware that
the directors and executive officers of HPR have interests in the Merger in
addition to their interests as stockholders of HPR generally, as described
below.
Pursuant to the HPR Executive Separation Benefits Plan ("Severance Plan"),
executive officers of HPR are entitled to receive severance payments (a) if
their employment is terminated without cause, other than for disability, or if
they resign their employment due to a reduction in base pay or eligibility for
benefits, a reduction in responsibilities, a requirement that they relocate to a
post more than 50 miles from their existing post, or, if set forth in a separate
agreement between such executive officer and HPR, the executive is not offered
continued employment with a successor following a change in control of HPR, such
as the Merger, on substantially the same terms and conditions as were in effect
on the date of such change in control ("Eligible Termination") and (b) such
executive signs at the time of termination and then complies with a separation
letter which may include a comprehensive release and acknowledgment of existing
confidentiality and noncompetition agreements. The severance benefits to which
each executive officer (other than Dr. Radosevich) will be entitled includes
twelve months' base pay, payable on such executive's regular pay days for the
twelve-month period (or, if the Eligible Termination is pursuant to a change in
control, payable in a lump sum at the time of termination), outplacement
services for the twelve-month period following termination, continued
eligibility for twelve months for all benefits programs offered by HPR prior to
the termination of employment and accelerated vesting of 50% of any HPR stock
options which are not exercisable on the date of termination. Additionally, all
exercisable options held by the executive will remain exercisable for twelve
months after the Eligible Termination or the sooner to occur of (a) the date of
expiration of any such option if the executive had remained employed by HPR or
(b) the date set in any notice given that the options will be terminated in
connection with a change in control but any substitute options in the securities
of another company shall not be affected. The Severance Plan further provides
that if Dr. Radosevich is subject to an Eligible Termination after the date on
which a change in control takes place and prior to the second anniversary of
such date (which is assured pursuant to the agreement to be entered into with
HBOC described below), she will be entitled to receive a lump sum payment in the
amount of two times her base pay and benefits, to accelerated vesting of 100% of
unexercisable HPR stock options held by her, and all options held by her shall
remain exercisable until the end of their original term. If not already fully
paid or terminated for any other reason, an executive officer's benefits under
the Severance Plan shall cease if such executive officer breaches the terms of
any separation letter or non-compete agreement or materially fails to satisfy
any obligations under the Severance Plan. Pursuant to the Merger Agreement, Dr.
Radosevich will enter into a non-competition agreement with HBOC, which
agreement will provide, among other things, that her employment will terminate
90 days after the Effective Date, and such termination will be an Eligible
Termination. Currently, the base salary of each of the executive officers of HPR
is as follows: Dr. Radosevich: $250,000; Mr. Cahill: $200,000; Dr. Garling:
$225,000; Mr. Saltonstall: $140,000; Mr. Jaeger: $150,000; Mr. Stowe: $156,500;
Mr. Ricketson: $160,000; Mr. Brient: $150,000; Mr. Rosenberg: $170,000; and Mr.
Abatjoglou: $80,000. The
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number of shares of HPR Common Stock subject to currently unexercisable options
held by each of the executive officers of HPR is as follows: Dr. Radosevich:
164,876; Mr. Cahill: 230,876; Dr. Garling: 150,000; Mr. Saltonstall: 60,000; Mr.
Jaeger: 118,912; Mr. Stowe: 110,000; Mr. Ricketson: 41,000; Mr. Brient: 108,400;
Mr. Rosenberg: 101,776; and Mr. Abatjoglou: 38,000.
Dr. Radosevich also is a party to a separate severance payment agreement
with HPR, providing that HPR will pay Dr. Radosevich her base salary and
continue to provide insurance benefits for a 12-month period if HPR terminates
her employment, other than for cause or due to death or disability. For purposes
of such agreement, termination shall be deemed to have occurred if there is a
material reduction in compensation (other than a reduction not exceding 10%
imposed on all executive employees). The agreement also provides that in the
event of such a termination or a change of control of HPR, any right of HPR to
repurchase any shares of HPR Common Stock held by Dr. Radosevich shall
immediately terminate and all her outstanding stock options will become
immediately exercisable and not subject to repurchase.
Each of the executive officers of HPR is a party to a non-competition
agreement with HPR. These agreements provide that upon termination of such
officer's employment by HPR, at HPR's option such officer will refrain for a
period (to be determined by HPR) of up to 24 months, from certain competitive
activities with respect to HPR. If HPR exercises its option to restrain any such
officer from competitive activity, it will pay such officer 33% of his or her
monthly salary for each month for which the executive officer must refrain from
competing with HPR.
Pursuant to the HPR Inc. Director Termination Benefits Plan, all options
held by non-employee directors which are not currently exercisable will become
immediately exercisable upon the termination of such director's board membership
in connection with a change in control of HPR, such as the Merger. Such options
shall remain outstanding for the longer of twelve months after such termination
or until such options would have expired in accordance with their terms. Each of
the non-employee directors, Dr. Berman, Mr. Cox, Dr. Egdahl and Dr. Nelson,
holds currently unexercisable options to purchase 9,750 shares of HPR Common
Stock.
HBOC-GA has agreed that subsequent to the Closing Date, it will provide to
the directors and officers of HPR indemnification in accordance with the current
provisions of the Restated Certificate of Incorporation and the Amended and
Restated By-Laws of HPR and the Indemnification Agreements between HPR and each
of the directors and officers of HPR, with respect to matters occurring prior to
the Effective Time, including, without limitation, the Merger Agreement and the
transactions contemplated thereby, for a period of six years from the Effective
Time or until any known matters are resolved. Additionally, HBOC has agreed to
maintain in effect for twelve months following the Closing Date the policies of
directors' and officers' liability insurance currently maintained by HPR, or an
equivalent substitute, provided that the premiums are no more than 100% of the
annual premiums for such coverage as of the date of the Merger Agreement. If the
premiums exceed such 100% limit, HBOC has the option to provide substitute
insurance or to reduce the maximum amount of coverage to that available for such
amount.
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF
HBOC COMMON STOCK AND HPR COMMON STOCK
INTRODUCTION
HBOC and HPR are each incorporated under the laws of the State of Delaware.
The holders of shares of HPR Common Stock, whose rights as stockholders are
currently governed by Delaware law, the Restated Certificate of Incorporation of
HPR (the "HPR Charter") and the Amended and Restated By-laws of HPR (the "HPR
Bylaws"), will, upon the exchange of their shares pursuant to the Merger, become
holders of shares of HBOC Common Stock, and their rights as such will be
governed by Delaware law, the HBOC Certificate of Incorporation, as amended (the
"HBOC Charter"), and the Amended and Restated
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Bylaws of HBOC (the "HBOC Bylaws"). The material differences between the rights
of holders of shares of HPR Common Stock and the rights of holders of shares of
HBOC Common Stock result from differences in their governing corporate documents
and are summarized below.
The following summary does not purport to be a complete statement of the
rights of holders of shares of HBOC Common Stock under applicable Delaware law,
the HBOC Charter and HBOC Bylaws or a comprehensive comparison with the rights
of the holders of shares of HPR Common Stock under applicable Delaware law, the
HPR Charter and HPR Bylaws or a complete description of the specific provisions
referred to herein. The identification of specific differences is not meant to
indicate that other equally or more significant differences do not exist. This
summary is qualified in its entirety by reference to the DGCL and the governing
corporate documents of HBOC and HPR, to which holders of shares of HPR Common
Stock are referred. See "Incorporation of Certain Information by Reference."
AUTHORIZED CAPITAL STOCK
The DGCL requires that a corporation's certificate of incorporation set
forth the total number of shares of all classes of stock which the corporation
has authority to issue and a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof. The HBOC Charter provides that HBOC has authority to issue (i)
250,000,000 shares of HBOC Common Stock and (ii) 1,000,000 shares of preferred
stock, no par value. The HPR Charter provides that HPR has the authority to
issue (i) 35,000,000 shares of HPR Common Stock and (ii) 3,000,000 shares of
preferred stock, par value $.10 per share.
BOARD OR STOCKHOLDER APPROVED PREFERRED STOCK
The DGCL permits a corporation's certificate of incorporation to allow its
board of directors to issue, without stockholder approval, one or more series of
preferred or preference stock and to designate their rights, preferences,
privileges and restrictions. The HBOC Charter grants such power to the HBOC
Board. The HBOC Board has designated one series of preferred stock, the Series A
Junior Participating Preferred Stock. See "Incorporation of Certain Information
by Reference." The HPR Charter also grants such power to the HPR Board; however,
the HPR Board has not designated a series of preferred stock.
VOTING RIGHTS
The DGCL states that, unless a corporation's certificate of incorporation
or, with respect to clauses (ii) and (iii), the bylaws, specify otherwise, (i)
each share of its capital stock is entitled to one vote, (ii) a majority of
voting power of the shares entitled to vote, present in person or represented by
proxy, shall constitute a quorum at a stockholders' meeting and (iii) in all
matters other than the election of directors, the affirmative vote of a majority
of the voting power of shares, present in person or represented by proxy at the
meeting and entitled to vote on the subject matter, shall be the action of the
stockholders. The holders of shares of HBOC Common Stock are entitled to one
vote per share on all matters to be voted on by the stockholders of HBOC. The
holders of shares of HPR Common Stock are entitled to one vote per share on all
matters to be submitted to a vote of the stockholders of HPR.
NUMBER OF DIRECTORS
Under the DGCL, unless a corporation's certificate of incorporation
specifies the number of directors, such number shall be fixed by, or in the
manner provided in, its bylaws. If a corporation's certificate of incorporation
expressly authorizes its board of directors to amend its bylaws, its board of
directors may change the authorized number of directors by an amendment to the
corporation's bylaws, if fixed therein, or in such manner as is provided
therein. If such certificate of incorporation specifies the number of directors,
the number of directors can only be changed by amending the certificate of
incorporation. The HBOC Bylaws provide that the number of members of the HBOC
Board shall be not less than three nor
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more than fifteen, such number to be established by the HBOC Board or
stockholders. The number of directors on the HBOC Board is currently eight. The
HPR Charter specifies that the number of directors shall be not less than three
nor more than twelve with the exact number of directors to be fixed from time to
time by resolution of the HPR Board. The number of directors constituting the
HPR Board is currently five.
ELECTION OF BOARD OF DIRECTORS
The DGCL provides that a corporation's directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors. Under the
DGCL, a corporation's certificate of incorporation may provide that stockholders
of a corporation can elect directors by cumulative voting. Neither the HBOC
Charter nor the HPR Charter provides for cumulative voting.
VOTE ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS
The DGCL generally requires approval of any merger, consolidation or sale of
substantially all the assets of a corporation at a meeting of stockholders by
vote of the holders of a majority of all outstanding shares of the corporation
entitled to vote thereon. The certificate of incorporation of a Delaware
corporation may provide for a greater vote. The HBOC Charter generally requires
the affirmative vote of four-fifths of the outstanding HBOC Common Stock to
approve certain business combinations, except under certain circumstances. The
HPR Charter does not contain any provision requiring a greater vote with respect
to business combinations. See "--Anti-Takeover Protection."
SPECIAL MEETINGS OF STOCKHOLDERS
Under the DGCL, special stockholder meetings of a corporation may be called
by its board of directors and by any person or persons authorized to do so by
its certificate of incorporation or bylaws. Under the HBOC Charter and HBOC
Bylaws, special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the Chairman of the
Board or the President or by holders of four-fifths of the outstanding shares of
HBOC Common Stock and shall be called by the Chairman of the Board or President
at the request in writing of three-fourths of the directors of HBOC. Such
requests shall state the purpose or purposes of the proposed meeting. The HPR
Bylaws provide that special meetings of stockholders may be called by the
Chairman and Chief Executive Officer or, if none, the President and Chief
Operating Officer or by the HPR Board. The written notice of a special meeting
shall state the time, place and object for which the meeting is called.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Under the DGCL, any action by a corporation's stockholders must be taken at
a meeting of such stockholders, unless a consent in writing setting forth the
action so taken is signed by the stockholders having not less than the minimum
number of votes necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Actions by written
consent, however, may not be taken if otherwise provided for in the certificate
of incorporation. Both the HBOC Charter and the HPR Charter expressly prohibit
written consents by stockholders.
AMENDMENT OF CERTIFICATE OF INCORPORATION
The DGCL allows amendment of a corporation's certificate of incorporation if
its board of directors adopts a resolution setting forth the amendment proposed
and declaring its advisability and the stockholders thereafter approve such
proposed amendment, either at a special meeting called by the board for the
purpose of approval of such amendment by the stockholders or, if so directed by
the board, at the next annual stockholders' meeting. At any such meeting, the
proposed amendment generally must be approved
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by a majority of the outstanding shares entitled to vote. The holders of the
outstanding shares of a class are entitled to vote as a separate class upon a
proposed amendment, whether or not entitled to vote thereon by the certificate
of incorporation, if the amendment would increase or decrease the aggregate
number of authorized shares of such class, increase or decrease the par value of
the shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
not affect the entire class, then only the shares of the series so affected by
the amendment will be considered a separate class for the purposes of a vote on
the amendment. Under the DGCL, a corporation's certificate of incorporation also
may require, for action by the board or by the holders of any class or series of
voting securities, the vote of a greater number or proportion than is required
by the DGCL and the provision of the certificate of incorporation requiring such
greater vote may also provide that such provision cannot be altered, amended or
repealed except by such greater vote.
The HBOC Charter contains no provisions requiring a vote greater than that
specified in the DGCL to amend the HBOC Charter, except for those provisions
relating to business combinations. The HPR Charter contains no provisions
requiring a vote greater than that specified in the DGCL to amend the HPR
Charter, except for those provisions relating to stockholder action by written
consent and directors.
AMENDMENT OF BYLAWS
Under the DGCL, the power to adopt, amend or repeal a corporation's bylaws
resides with the stockholders entitled to vote thereon, and with the directors
of such corporation if such power is conferred upon the board of directors by
the certificate of incorporation. The HBOC Charter authorizes the HBOC Board to
make, alter or repeal the HBOC Bylaws. The HPR Charter provides that the HPR
Board may adopt, amend or repeal the HPR Bylaws subject only to any limitations
of applicable law or the HPR Bylaws. The HPR Bylaws provide that the HPR Board
or the stockholders of HPR may alter, amend or repeal the HPR Bylaws.
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The DGCL provides that a corporation may limit or eliminate a director's
personal liability for monetary damages to the corporation or its stockholders
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to such corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for paying or
approving a stock repurchase in violation of Section 174 of the DGCL or (iv) for
any transaction from which the director derived an improper personal benefit.
Both the HBOC Charter and the HPR Charter provide for elimination of personal
liability subject to the statutory exceptions.
Under the DGCL, directors and officers as well as other employees and
individuals may be indemnified against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation as a
derivative action) if they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interest of the corporation, and,
with respect to any criminal action or proceeding, if they had no reasonable
cause to believe their conduct was unlawful. The HBOC Bylaws and the HPR Charter
provide to directors and officers of HBOC and HPR, respectively, indemnification
to the fullest extent provided by law. Additionally, the HBOC Bylaws and the HPR
Bylaws provide that expenses incurred by a person in defending a civil or
criminal action, suit or proceeding by reason of the fact that he or she is a
director, officer, employee or agent may be paid in advance of the final
disposition of such action, suit or proceeding, upon receipt of an undertaking
by or on behalf of such director, officer, employee or agent to repay such
amount, unless it shall ultimately be determined that he or she is entitled to
be indemnified by HBOC or HPR, as the case may be, as authorized by relevant
Delaware law.
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PAYMENT OF DIVIDENDS
The DGCL permits the payment of dividends and the redemption of shares out
of a corporation's surplus. Under the DGCL, if a dividend is paid out of capital
surplus, stockholders need not be notified, and the dividends may, in certain
cases, also be paid out of net profits for the fiscal year in which declared or
out of net profits for the preceding fiscal year. Neither the HBOC Charter nor
the HPR Charter has provisions limiting the payment of dividends. Additionally,
the HPR Bylaws provide that before payment of any dividend, the HPR Board may
set aside out of any funds available for dividends such amount as the HPR Board,
in its absolute discretion, thinks proper as a reserve for any purpose as the
HPR Board shall think conducive to the interest of HPR.
ANTI-TAKEOVER PROTECTION
Under the DGCL, a merger or consolidation generally must be approved by the
affirmative vote of the holders of a majority of all of the outstanding shares
of stock entitled to vote thereon. However, no stockholder approval is required
if the acquiring corporation owns 90% or more of the outstanding shares of the
acquired corporation.
In addition to the DGCL's general requirements, Section 203 of the DGCL,
"Business Combinations with Interested Stockholders," prohibits a corporation
that does not opt out of its provisions from entering into certain business
combination transactions with "interested stockholders" (generally defined to
include persons beneficially owning 15% or more of the corporation's outstanding
capital stock) unless certain super-majority votes are obtained. HBOC has opted
out of Section 203 in its Bylaws. However, the HBOC Charter places certain
restrictions on "Business Combinations" (such as a merger) with "Controlling
Persons" (generally a person holding more than 10% of the HBOC Common Stock)
unless, generally speaking, the Business Combination has been approved by the
affirmative vote of the holders of four-fifths of the outstanding HBOC Common
Stock not held by the Controlling Person or its related entities or by a
majority of directors who were directors prior to the time the Controlling
Person became a Controlling Person and who are not affiliated with the
Controlling Person. Such provisions do not apply to the Merger. HPR has not
opted out of Section 203 in the HPR Charter or HPR Bylaws.
APPRAISAL RIGHTS
Generally, no appraisal rights are available under the DGCL for shares of
any class of stock which are (i) listed on a national securities exchange or
designated as a national market system security on an inter-dealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 holders. Further, under the DGCL, stockholders of
corporations being acquired pursuant to a merger have the right to serve upon
the corporation a written demand for appraisal of their shares when the
stockholders receive any form of consideration for their shares other than (a)
shares of the surviving corporation, (b) shares of any other corporation (i)
listed on a national securities exchange, (ii) designated as a national market
system security on an inter-dealer quotation system by the National Association
of Securities Dealers, Inc. or (iii) held of record by more than 2,000
stockholders or (c) cash in lieu of fractional shares or (d) any combination
thereof. Stockholders entitled to appraisal rights subsequently receive cash
from the corporation equal to the value of their shares as established by
judicial appraisal. Corporations may enlarge these statutory rights by including
in their certificate of incorporation a provision allowing appraisal rights in
any merger in which the corporation is a constituent corporation. Neither the
HBOC Charter nor the HPR Charter contains such a provision on appraisal rights.
The holders of shares of HPR Common Stock are not entitled to appraisal
rights in connection with the Merger pursuant to Section 262 of the DGCL because
the HPR Common Stock is designated as a national market system security on the
Nasdaq NM.
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BUSINESS OF HBOC
GENERAL
HBOC develops integrated patient care, clinical, financial, managed care and
strategic management software solutions for the healthcare industry. These open
systems applications facilitate the integration of clinical, financial and
administrative data from a wide range of customer systems and software. HBOC's
broad product portfolio can be implemented in a variety of combinations from
stand-alone to enterprisewide, enabling customers to add incremental
capabilities to existing information systems without making prior capital
investments obsolete. HBOC also provides a full complement of network
communications technologies, including wireless capabilities, as well as
outsourcing services that are offered 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. In addition, HBOC offers a wide range of electronic commerce
services, including electronic medical claims and remittance advice services as
well as statement processing.
HBOC markets its products and services to integrated health delivery
networks, hospitals, physicians' offices, home health providers, pharmacies,
reference laboratories, managed care providers and payers. HBOC also sells its
products and services internationally through subsidiaries and/or distribution
agreements in the United Kingdom, Canada, Ireland, Saudi Arabia, Kuwait,
Australia, Puerto Rico and New Zealand.
As of December 31, 1996, HBOC had 4,404 employees worldwide.
RECENT DEVELOPMENTS
HBOC has entered into an Agreement of Merger dated October 2, 1997 among
HBOC, HBOC-GA and National. Such agreement is subject, among other things, to
approval by the stockholders of National. National develops and distributes
products and services used in the delivery of telephonic medical assistance and
care management.
BUSINESS OF HPR
HPR develops and markets software and proprietary database products
incorporating clinical knowledge that enable payers and providers of healthcare
services to better manage the financial risk associated with the delivery of
healthcare and the quality of care. HPR products are used to manage healthcare
costs and quality of care by clinically evaluating providers' claims for
payment; measuring efficiency, quality and medical outcomes; determining
appropriate utilization of medical services; influencing physician referral
patterns and profiling practice patterns; assisting in
HEDIS-Registered Trademark- reporting; and managing and supporting the physician
credentialing and accreditation processes. HPR markets its products through a
combination of a national direct sales force and third-party marketing
agreements.
As of September 30, 1997, HPR employed 194 individuals.
STOCKHOLDER PROPOSALS
If the Merger is not consummated, proposals of stockholders intended to be
presented at HPR's 1998 annual meeting of stockholders must be received by HPR
by May 22, 1998 for inclusion in HPR's proxy materials relating to such meeting.
In the event the Merger is consummated, there will not be a 1998 annual meeting
of stockholders of HPR.
OTHER MATTERS
The management of HPR knows of no other matters that may come before the
Meeting. However, if matters other than those referred to above should properly
come before the Meeting, it is the intention of
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the persons named on the enclosed form of proxy to vote such proxy in accordance
with their best judgment.
CERTAIN LEGAL MATTERS
The validity of the shares of HBOC Common Stock offered hereby have been
passed upon for HBOC by Jones, Day, Reavis & Pogue, Atlanta, Georgia. Certain
tax matters in connection with the Merger have been passed upon for HPR by Hill
& Barlow, a Professional Corporation, Boston, Massachusetts.
EXPERTS
The audited financial statements and schedule of HBOC incorporated by
reference in this Proxy Statement/Prospectus and elsewhere in the Registration
Statement of which this Proxy Statement/Prospectus is a part, to the extent and
for the periods indicated in their reports, 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
nine months ended September 30, 1996 and 1997, which are 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 report thereon states that they did not audit and they
do not express an opinion on that interim financial information. Accordingly,
the degree of reliance on their report on that information should be restricted
in light of the limited nature of the review procedure 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 HPR Inc. consolidated balance sheets as of June 30, 1997 and 1996, and
the consolidated statements of income, retained earnings, and cash flows for
each of the three years in the period ended June 30, 1997, incorporated by
reference in this Prospectus, have been included herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
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APPENDIX A
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, made this 27th day of September, 1997, by and
among HBO & Company, a Delaware corporation ("Parent"); HBO & Company of
Georgia, a Delaware corporation (hereinafter referred to as "Purchaser"); and
HPR Inc., a Delaware corporation (hereinafter referred to as the "Acquired
Company");
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Acquired Company, Parent and
Purchaser deem it advisable and in the best interests of their respective
stockholders that Purchaser acquire the Acquired Company, and, on or prior to
the date hereof, such Boards of Directors have approved the acquisition of the
Acquired Company upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
receipt, sufficiency and adequacy of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as follows:
I. DEFINITIONS.
As used herein, the following terms shall have the following meanings unless
the context otherwise requires:
1.1 "Acquired Company" shall mean HPR Inc., a Delaware corporation.
1.2 "Acquired Company Information" shall have the meaning set forth in
Section 2.3.1.
1.3 "Acquired Company Reports" shall have the meaning set forth in
Section 3.21.
1.4 "Acquired Company Software" shall have the meaning set forth in
Section 3.14.2(iii).
1.5 "Acquired Company Stock" shall mean the common stock, $.01 par value
per share, of the Acquired Company.
1.6 "Agreement" shall mean this Agreement of Merger.
1.7 "Assumed Option" shall have the meaning set forth in Section 2.1.7.
1.8 "Benefit Plans" shall have the meaning set forth in Section 3.16.1.
1.9 "Certificate of Merger" shall have the meaning set forth in Section
2.1.2.
1.10 "Certificates" shall have the meaning set forth in Section 2.2.2
hereof.
1.11 "Closing" shall have the meaning set forth in Section 2.1.9 hereof.
1.12 "Closing Date" shall mean the date on which the Closing occurs
pursuant to Section 8.1 hereof.
1.13 "Confidentiality and Standstill Agreement" shall mean that certain
letter agreement dated July 31, 1997 entered into by and between Parent, BT
Alex. Brown Incorporated and the Acquired Company.
1.14 "Covenant Not to Compete" shall mean the non-competition agreement
referred to in Section 6.11.
1.15 "Customer Contracts" shall have the meaning set forth in Section
3.12.1.
1.16 "Delaware Code" shall mean the Delaware General Corporation Law.
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1.17 "DOL" shall mean the United States Department of Labor.
1.18 "Effective Time" shall mean the time the Merger becomes effective,
as set forth in Section 2.1.2.
1.19 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.20 "ERISA Affiliate" shall mean, with respect to a Person, any other
Person that is required to be aggregated with such Person under Tax Code
Section 414(b), (c), (m) and/or (o) at any time prior to the Closing Date.
1.21 "ERISA Plan" shall have the meaning set forth in Section 3.16.
1.22 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.23 "Exchange Agent" shall mean the person designated by Purchaser as
the Exchange Agent pursuant to Section 2.2.1 hereof.
1.24 "Exchange Ratio" shall mean the ratio of exchange pursuant to the
Merger in respect of each share of Acquired Company Stock constituting a
fraction of a share of Parent Stock as determined pursuant to the provisions
of Section 2.1.6.
1.25 "Existing Option" shall have the meaning set forth in Section
2.1.7.
1.26 "401(k) Plan" shall mean the HPR Inc. 401(k) Plan.
1.27 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust and
Improvements Act of 1976, as amended.
1.28 "Hazardous Substance" shall have the meaning set forth in Section
3.18.
1.29 "Immigration Laws" shall have the meaning set forth in Section
3.15.
1.30 "Indemnification Agreements" shall mean the indemnification
agreements entered into between the Acquired Company and its directors and
officers on or before the date of this Agreement.
1.31 "IRS" shall mean the United States Internal Revenue Service.
1.32 "Licensed Software" shall have the meaning set forth in Section
3.14.2(ii).
1.33 "Market Value" shall have the meaning set forth in Section
2.1.6(a).
1.34 "Material Adverse Effect" shall mean a material adverse effect on
the businesses, assets, financial condition or results of operations of the
corporation in question, taken as a whole.
1.35 "Material Contract" shall have the meaning set forth in Section
3.12.
1.36 "Merger" shall mean the merger of the Acquired Company with and
into Purchaser, as set forth in Section 2.1.1.
1.37 "Merger Consideration" shall have the meaning set forth in Section
2.1.6(c).
1.38 "Nasdaq" shall mean the Nasdaq National Market of the Nasdaq Stock
Market, Inc.
1.39 "1995, 1996 and 1997 Financial Statements" shall have the meaning
set forth in Section 3.5.1.
1.40 "1933 Act" shall mean the Securities Act of 1933, as amended.
1.41 "100% Amount" shall have the meaning set forth in Section 2.14.
1.42 "Owned Software" shall have the meaning set forth in the first
paragraph of Section 3.13.
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1.43 "Parent" shall mean HBO & Company, a Delaware corporation, which is
the sole stockholder of Purchaser.
1.44 "Parent Reports" shall have the meaning set forth in Section 4.5.
1.45 "Parent Stock" shall mean the common stock, $0.05 par value per
share, of Parent.
1.46 "PBGC" shall mean the Pension Benefit Guaranty Corporation
established under Title IV of ERISA.
1.47 "Person" shall include, but is not limited to, an individual, a
trust, an estate, a partnership, an association, a company, a corporation, a
sole proprietorship, a professional corporation or a professional
association.
1.48 "Pooling Letter" shall have the meaning set forth in Section
2.4(b).
1.49 "Purchaser" shall mean HBO & Company of Georgia, a Delaware
corporation.
1.50 "Real Property" shall have the meaning set forth in Section 3.18.
1.51 "Registration Statement" shall have the meaning set forth in
Section 2.3.1.
1.52 "Rule 145 Letters" shall have the meaning set forth in Section
2.4(a).
1.53 "SEC" shall mean the Securities and Exchange Commission.
1.54 "Stock Plans" shall mean the HPR Inc. 1991 Stock Plan, the HPR Inc.
1995 Stock Plan, and the HPR Inc. 1995 Eligible Directors Stock Plan.
1.55 "Subsidiaries" shall mean the subsidiaries of the Acquired Company,
which are listed on Exhibit 3.1 hereto.
1.56 "Surviving Corporation" shall have the meaning set forth in Section
2.1.1 hereof.
1.57 "Takeover Proposal" shall have the meaning set forth in Section
2.11 hereof.
1.58 "Tax Code" shall mean the Internal Revenue Code of 1986, as
amended.
II. COVENANTS AND UNDERTAKINGS.
2.1 TERMS AND APPROVAL OF MERGER.
2.1.1. TERMS OF THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
Code, the Acquired Company shall be merged with and into Purchaser (the
"Merger"), as soon as practicable following the satisfaction or waiver of
the conditions set forth in Articles V, VI and VII hereof. Following the
Merger, Purchaser shall continue as the surviving corporation (the
"Surviving Corporation") and the separate corporate existence of the
Acquired Company shall cease.
2.1.2. EFFECTIVE TIME; EFFECTS OF THE MERGER. The Merger shall become
effective when both (i) this Agreement shall be adopted and approved by the
stockholders of the Acquired Company in accordance with the applicable
provisions of the Delaware Code and (ii) a Certificate of Merger (the
"Certificate of Merger"), executed in accordance with the relevant
provisions of the Delaware Code is filed with the Secretary of State of
Delaware (the time the Merger becomes effective being referred to as the
"Effective Time"). The Merger shall have the effects set forth in the
Delaware Code.
2.1.3. CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of Purchaser as in effect immediately preceding the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation.
The Bylaws of Purchaser as in effect immediately preceding the Effective
Time shall be the Bylaws of the Surviving Corporation.
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2.1.4. DIRECTORS. The directors of Purchaser immediately prior to the
Effective Time shall be the directors of the Surviving Corporation and shall
hold office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law.
2.1.5. OFFICERS. The officers of Purchaser immediately prior to the
Effective Time shall be the officers of the Surviving Corporation and shall
hold office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law.
2.1.6. CONVERSION OF SHARES.
(a) Subject to Section 2.1.6(g) below, each outstanding share of
Acquired Company Stock issued and outstanding immediately prior to the
Effective Time shall, at the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into
the right to receive six tenths (.6) of a share of Parent Stock,
deliverable to the holder thereof without interest on the value thereof;
provided, however, if the average closing price per share (or if there is
no sale on such date then the average between the closing bid and ask
prices on any such day) for shares of Parent Stock during the fifteen
(15) consecutive trading days ending on the third trading day prior to
the date of the Special Meeting of stockholders of the Acquired Company
held to approve the Merger as reported by Nasdaq (the "Market Value"), is
less than $35.00 per share, then the Acquired Company shall have the
right to terminate this Agreement prior to Closing pursuant to Section
10.1.6.
(b) Each share of Acquired Company Stock held in the treasury of the
Acquired Company shall, at the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof, be canceled and
retired and cease to exist.
(c) Subject to any applicable escheat laws, until surrendered and
exchanged pursuant hereto, each certificate that immediately prior to the
Effective Time represented outstanding shares of Acquired Company Stock
shall be deemed for all corporate purposes of Parent, subject, however,
to the other provisions of this Section 2.1.6, to evidence the ownership
of the number of whole shares of Parent Stock into which the shares of
Acquired Company Stock represented thereby shall have been converted,
together with the right to receive the amount of cash in lieu of
fractional shares, if any, pursuant to subsections (a) and (d) of this
Section 2.1.6. (The shares of Parent Stock, and any cash in lieu of
fractions thereof, receivable by each Acquired Company stockholder as
described in Section 2.1.6(a) above and 2.1.6(d) below, are referred to
hereinafter as the "Merger Consideration.") No cash or stock dividend
payable, no certificate representing split shares deliverable, and no
other distribution payable or deliverable to holders of record of Parent
Stock at any time subsequent to the Effective Time shall be paid or
delivered to the holder of any certificate that at the Effective Time
represented Acquired Company Stock unless and until such certificate is
surrendered to the Exchange Agent. However, subject to any applicable
escheat laws, upon such surrender, there shall be paid or delivered to
the holder of record of the certificate or certificates for Parent Stock
issued and exchanged therefor, the certificates for shares and/or other
property resulting from any such dividends, splits, or other
distributions, as the case may be, that shall have theretofore become
payable or deliverable with respect to Parent Stock subsequent to the
Effective Time. No interest shall be payable with respect to such payment
or delivery of any dividends or other distributions upon the surrender of
certificates that represented Acquired Company Stock at the Effective
Time.
(d) No certificates or scrip representing fractional shares of Parent
Stock shall be issued upon surrender of certificates representing
Acquired Company Stock converted pursuant hereto, and no dividend, stock
split, or other distribution of Parent shall relate to any such
fractional share interest, and no such fractional share interest shall
entitle the owner thereof to vote or to
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any other rights of a stockholder of Parent. In lieu of any such
fractional share, any holder of Acquired Company Stock shall be entitled,
upon surrender in accordance herewith of such holder's certificate or
certificates representing Acquired Company Stock, to receive a cash
payment therefor, without interest, at a pro rata amount based on the
Market Value. No interest shall accrue with respect to any cash held for
the benefit of holders of unsurrendered certificates theretofore
representing shares of Acquired Company Stock at the Effective Time.
(e) All shares of Parent Stock into which shares of the Acquired
Company Stock have been converted pursuant to this Section 2.1.6 shall be
deemed to have been issued in full satisfaction of all rights pertaining
to such converted shares and shall, when issued pursuant to the
provisions hereof, be fully paid and nonassessable.
(f) The stock transfer books of Acquired Company Stock shall be
closed at the Effective Time, and thereafter no transfer of any such
shares of Acquired Company Stock shall be recorded thereon. In the event
a transfer of ownership of shares of Acquired Company Stock is not
recorded on the stock transfer books of the Acquired Company, a
certificate or certificates representing the number of whole shares of
Parent Stock into which such shares of Acquired Company Stock shall have
been converted in connection with the Merger may be issued to the
transferee of such shares of Acquired Company Stock if the certificate or
certificates representing such shares of Acquired Company Stock is or are
surrendered to the Exchange Agent accompanied by all documents deemed
necessary by the Exchange Agent to evidence and effect such transfer of
ownership of shares of Acquired Company Stock and by the payment of any
applicable stock transfer tax with respect to such transfer, subject to
compliance with any restrictions or conditions contained herein with
respect to the transfer of shares of Acquired Company Stock.
(g) In the event that Parent at any time or from time to time after
the date of this Agreement but prior to the Effective Time effects a
subdivision or combination of the outstanding Parent Stock into a greater
or lesser number of shares, then and in each such event the Exchange
Ratio and the Market Value shall be increased or decreased
proportionately and the other provisions of this Section 2.1.6 shall be
construed to give effect thereto.
2.1.7. STOCK PLANS. At the Effective Time, Parent shall assume the
Acquired Company's rights and obligations under each of the outstanding
options previously granted under the Stock Plans (each such option existing
immediately prior to the Effective Time being called an "Existing Option,"
and each such option so assumed by Parent being called an "Assumed Option"),
by which assumption the optionee shall have the right to purchase that
number of shares of Parent Stock (rounded down to the nearest whole) into
which the number of shares of Acquired Company Stock the optionee was
entitled to purchase under the Existing Option would have been converted
pursuant to the terms of the Merger as described in Section 2.1.6 hereof.
Each Assumed Option shall constitute a continuation of the Existing Option,
substituting Parent for Acquired Company as issuer and employment by Parent,
Purchaser or one of their respective subsidiaries for employment by the
Acquired Company. The aggregate price for the total number of shares of
Parent Stock at which the Assumed Option may be exercised shall be the
aggregate price at which the Existing Option was exercisable for the total
number of shares of Acquired Company Stock, reduced (as necessary for
purposes of rounding down) to the price that will buy the number of whole
shares for which the Assumed Option will be exercisable in accordance with
this Section 2.1.7, and the purchase price per share of Parent Stock
thereunder shall be such aggregate price divided by the total number of
shares of Parent Stock covered thereby. The assumption of the Assumed
Options by Parent as provided in this Section 2.1.7 shall not, except as
provided herein, provide the holders thereof additional benefits which they
did not have immediately prior to the Effective Time or relieve the holders
thereof of any obligations or restrictions applicable to the Assumed Options
or the shares of Parent Stock obtainable upon exercise of the Assumed
Options.
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2.1.8. STOCKHOLDERS' MEETING. The Acquired Company, acting through its
Board of Directors, shall:
(a) promptly furnish a copy of the proxy statement/prospectus
included in the Registration Statement to each of its stockholders after
the Registration Statement has become effective with the SEC;
(b) duly call, give notice of, convene and hold a special meeting of
its stockholders and submit this Agreement and the Merger and any related
matters, as appropriate, to a vote of the Acquired Company's stockholders
as soon as practicable for the purpose of considering and taking action
upon this Agreement and any such related matters; and
(c) use its reasonable best efforts, subject to the provisions of
Section 2.11, to obtain the necessary approval of the Merger by its
stockholders.
2.1.9. CLOSING; FILING OF CERTIFICATE OF MERGER. Upon the terms and
subject to the conditions hereof, as soon as practicable following the
satisfaction or waiver of the conditions set forth in Articles V, VI and VII
hereof, the Acquired Company and Purchaser shall execute and file the
Certificate of Merger referred to in Section 2.1.2 in the manner required by
the Delaware Code, and the parties hereto shall take all such other and
further actions as may be required by law to make the Merger effective.
Prior to the filing referred to in this Section 2.1.9, a closing (the
"Closing") will be held as set forth in Section 8.1 hereof, for the purpose
of confirming all of the foregoing.
2.1.10. 401(K) PLAN. Prior to the Closing Date, the Acquired Company
shall adopt appropriate resolutions and take any and all further actions
necessary to terminate the 401(k) Plan effective as of the date immediately
preceding the Closing Date. In addition, participants in the 401(k) Plan
shall make no further deferrals with respect to compensation for services
performed after such termination date and the Acquired Company shall make no
further employer contributions to the 401(k) Plan after such date, other
than (i) employee compensation deferrals and (ii) matching contributions
with respect to employee deferrals of compensation for services through the
termination date. Parent and Purchaser shall take such action that will
permit current participants in the 401(k) Plan who are employed by Purchaser
to participate in, effective as soon as reasonably practicable after the
Closing Date, the HBO & Company Profit Sharing and Savings Plan (the
"Purchaser Plan") and to effect a direct rollover of distributions from the
401(k) Plan to the Purchaser Plan, a copy of which has been furnished by
Parent to the Acquired Company. Parent and Purchaser shall also take or
cause to be taken such action as necessary to credit each 401(k) Plan
participant who becomes employed by Purchaser on the Closing Date with such
participant's service and years of service under the 401(k) Plan for
purposes of calculating eligibility for participation and vesting in
contributions under the Purchaser Plan.
2.2 DELIVERY OF MERGER CONSIDERATION.
2.2.1. EXCHANGE AGENT. Prior to the Effective Time, Purchaser shall
designate a bank or trust company to act as exchange agent in connection
with the Merger (the "Exchange Agent"). At the Effective Time, Purchaser or
Parent shall take all steps necessary to enable and cause Parent or the
Surviving Corporation to provide the Exchange Agent with the shares of
Parent Stock and cash in respect of fractional shares necessary to deliver
the Merger Consideration to each holder of Acquired Company Stock as
contemplated by Section 2.1.6 hereof prior to the time that such deliveries
are required to be made by the Exchange Agent as provided in this Section
2.2.
2.2.2. SURRENDER OF CERTIFICATES AND DELIVERY OF MERGER
CONSIDERATION. Promptly after the Effective Time, the Exchange Agent shall
mail to each record holder (as of the Effective Time) of an outstanding
certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of Acquired Company Stock (the
"Certificates"), a letter of transmittal in customary form (which specifies
that delivery shall be effected, and risk of loss and title to the
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Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) and instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration payable in respect
of the shares of Acquired Company Stock formerly represented by such
Certificate. Upon surrender to the Exchange Agent of a Certificate, together
with such letter of transmittal properly completed and duly executed,
together with any other required documents, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration
payable in respect of the shares of Acquired Company Stock formerly
represented by such Certificate, and such Certificate shall forthwith be
canceled. If payment is to be made to a Person other than the Person in
whose name the Certificate surrendered is registered, it shall be a
condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the Person
requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a Person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of Parent or the
Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this Section 2.2.2,
each Certificate shall represent for all purposes only the right to receive
the Merger Consideration, without any interest on the value thereof.
2.2.3. ESCHEAT LAWS. Notwithstanding any provision of this Article II
to the contrary, neither Parent nor the Surviving Corporation shall be
liable to any holder of Certificates formerly representing shares of
Acquired Company Stock for any property properly delivered or amount paid to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
2.3 SEC REGISTRATION.
2.3.1. The Acquired Company shall furnish to Parent such information,
including information about the Acquired Company and the Subsidiaries
(including the respective affiliates of any of them), as may be necessary to
enable Parent to prepare and file with the SEC a Registration Statement on
Form S-4 under the 1933 Act, and the rules and regulations promulgated
thereunder, in respect of the Parent Stock to be issued by reason of the
Merger (such registration statement, including the proxy
statement/prospectus included therein which is to be furnished to the
holders of the Acquired Company Stock, in each case together with any
amendments or supplements thereto, being referred to in this Agreement as
the "Registration Statement"). The Acquired Company covenants that the
Acquired Company Information (as defined below) included in the Registration
Statement shall not, at the time the Registration Statement is declared
effective, at the time the proxy statement/ prospectus contained therein is
first mailed to the Acquired Company's stockholders, or at the time of the
meeting of the Acquired Company's stockholders held to approve the Merger
Agreement, contain any statement which, at the time and in light of the
circumstances under which it is made, is false or misleading with respect to
any material fact, or omit to state a material fact necessary in order to
make the statements therein not false or misleading. If at any time prior to
the Effective Time any event or circumstance should come to the attention of
the Acquired Company with respect to the Acquired Company Information that
is required to be set forth in an amendment or supplement to the
Registration Statement, the Acquired Company shall immediately notify Parent
and shall assist Parent in appropriately amending or supplementing the
Registration Statement in the manner contemplated in Section 2.3.4 below. An
amendment or supplement may be accomplished, to the extent permitted by law,
rule or regulation, by including such information in a filing under the
Exchange Act that is incorporated by reference into the Registration
Statement. The Acquired Company covenants that the Registration Statement
insofar as it relates to information concerning the Acquired Company, the
Subsidiaries or any of their respective businesses, assets, directors,
officers, or stockholders or any other affiliates or other matters
pertaining to the Acquired Company or any of the Subsidiaries that is
supplied by the Acquired Company for inclusion in the Registration
Statement, including by incorporation by reference to SEC filings (the
"Acquired Company Information") shall comply as to form and substance in all
material respects with the applicable requirements of the 1933 Act and the
rules and
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regulations thereunder and the Exchange Act and the rules and regulations
thereunder; except that the Acquired Company shall have no liability or
obligation for any information other than the Acquired Company Information.
The Acquired Company represents that it is eligible for registration of its
securities on Form S-3.
2.3.2. The Acquired Company shall instruct its accountants, Coopers &
Lybrand L.L.P., to deliver and shall use its reasonable best efforts to
cause such accountants to deliver to Parent letters dated at the time the
Registration Statement becomes effective and as of the Closing Date,
addressed to Parent, each containing both (i) its concurrence with the
conclusion of the Acquired Company's management that no conditions exist
with respect to the Acquired Company that would preclude accounting for the
Merger as a "pooling of interests", which letters shall be substantially in
the form of the opinion letter attached as EXHIBIT 2.3.2(A) hereto; and (ii)
such matters as are customarily contained in auditors' letters regarding
information about the Acquired Company included in the Registration
Statement, which auditors' letters shall be in form and substance reasonably
satisfactory to Parent. Parent shall use its reasonable best efforts to
cause its accountants, Arthur Andersen LLP, to deliver to the Acquired
Company letters at such times to the effect that the Parent satisfies the
tests applicable to it such that the Merger can be accounted for as a
"pooling of interests", which letters shall be substantially in the form of
the letter attached as EXHIBIT 2.3.2(B) hereto.
2.3.3. Parent shall file the Registration Statement and use its
reasonable best efforts to have it declared effective by the SEC as promptly
as practicable, and shall use its reasonable best efforts to take any action
required to be taken to comply in all material respects with any applicable
federal or state securities laws in connection with the issuance of Parent
Stock in the Merger; except that such covenant of Parent is made, as to
those portions of the Registration Statement containing or required to
contain Acquired Company Information, assuming and relying solely on timely
and full compliance with Sections 2.3.1 and 2.3.2. Parent will, in a timely
manner, provide the Acquired Company with copies of any written
communications to or from the SEC and notify the Acquired Company of any
material oral communications to or from the SEC with respect to the
Registration Statement or the transactions contemplated thereby.
2.3.4. Parent covenants that the information included in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, at the time the proxy statement/prospectus contained
therein is first mailed to the Acquired Company's stockholders, or at the
time of the meeting of the Acquired Company's stockholders held to approve
the Merger, contain any statement which, at the time and in light of the
circumstances under which it is made, is false or misleading with respect to
any material fact, or omit to state a material fact necessary in order to
make the statements therein not false or misleading; except that Parent
makes no covenant as to those portions of the Registration Statement
containing or required to contain Acquired Company Information. If at any
time prior to the Effective Time any event or circumstance should come to
the attention of Parent that is required to be set forth in an amendment or
supplement to the Registration Statement, Parent shall use its reasonable
efforts to amend or supplement appropriately the Registration Statement. An
amendment or supplement may be accomplished, to the extent permitted by law,
rule or regulation, by including such information in a filing under the
Exchange Act that is incorporated by reference into the Registration
Statement.
2.3.5. The Registration Statement and all other documents required to be
filed by Parent with the SEC in connection with the transactions
contemplated herein shall comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder; except that Parent shall have no liability or
obligation for any failure to comply with such requirements arising out of
the Acquired Company Information.
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2.3.6. Parent shall use all reasonable efforts to take such action as
may be necessary to ensure that the requirements of Rule 144(c) under the
Securities Act are satisfied so as to enable any "affiliates" of the
Acquired Company (as that term is used in Rule 145 under the Securities Act)
to offer or sell the Parent Stock received by them in the Merger pursuant to
paragraph (d) of Rule 145 (subject to compliance with the provisions of
paragraphs (e), (f) and (g) of Rule 144).
2.3.7. Parent shall use all reasonable efforts to obtain prior to the
effective date of the Registration Statement all necessary "Blue Sky"
permits and approvals, if any, required to consummate the Merger.
2.3.8. As soon as reasonably practicable, but not later than thirty (30)
days following the Closing Date, Parent shall use all reasonable efforts to
file a registration statement on Form S-8 covering shares of Parent Stock
issuable pursuant to the Stock Plans; provided that such obligation is
subject to and conditional on the Acquired Company providing Parent with all
information requested by Parent in connection therewith prior to the Closing
Date.
2.3.9. Each party will provide to the other parties, or their counsel,
drafts of the information related to or customarily provided by such party
to be included in the Registration Statement on Form S-4 and will generally
cooperate with each other in the preparation thereof.
2.4 AFFILIATES.
(a) The Acquired Company shall use its reasonable best efforts to cause
each person that is an "affiliate" of the Acquired Company under the 1933
Act on the date preceding the date of the filing of the Registration
Statement to deliver to Parent on such date a written agreement
substantially in the form attached hereto as EXHIBIT 2.4(A) ("Rule 145
Letters"), and in the event that any other person becomes an affiliate of
the Acquired Company thereafter to cause such person to provide a Rule 145
Letter to Parent at the Closing.
(b) The Acquired Company shall use its reasonable best efforts to cause
each person that is an "affiliate" of the Acquired Company under the 1933
Act on the date preceding the date of the filing of the Registration
Statement to deliver to Parent on such date a written agreement
substantially in the form attached hereto as EXHIBIT 2.4(B) ("Pooling
Letters"), and in the event any other person (to the knowledge of the
Acquired Company) becomes an affiliate of the Acquired Company on or before
the Closing Date to cause such person to provide a Pooling Letter to Parent
at the Closing.
2.5 TRADING PROHIBITIONS. Each of Parent, Purchaser and the Acquired
Company hereby acknowledges that as a result of disclosures by Parent, Purchaser
and the Acquired Company contemplated under this Agreement, Parent, Purchaser,
the Acquired Company, the Subsidiaries and their respective affiliates may, from
time to time, have material, non-public information concerning each other. Each
of Parent, Purchaser, and the Acquired Company confirms that it and its
respective affiliates are aware, and that it has advised its representatives
that, (i) the United States securities laws may prohibit a person who has
material, non-public information from purchasing or selling securities of any
company to which such information relates, and (ii) material non-public
information shall not be communicated to any other person except as permitted
herein.
2.6 CONDUCT OF THE BUSINESS OF THE ACQUIRED COMPANY AND ITS SUBSIDIARIES
PRIOR TO CLOSING.
2.6.1. Except (i) with the prior written consent of Purchaser, (ii) as
may be required to effect the transactions contemplated by this Agreement,
or (iii) as provided otherwise in this Agreement, the Acquired Company
covenants that, between the date of this Agreement and the Effective Time,
the Acquired Company and the Subsidiaries will conduct their respective
business in the ordinary course, and that they will:
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(a) preserve the organization of the Acquired Company and the
Subsidiaries intact and use its reasonable best efforts to preserve the
goodwill of customers and others having business relations with the
Acquired Company or the Subsidiaries;
(b) maintain the properties of the Acquired Company and the
Subsidiaries in substantially the same working order and condition as
such properties are in as of the date of this Agreement, reasonable wear
and tear excepted;
(c) not effect any sale, assignment or transfer of any of their
respective assets except in the ordinary course of business;
(d) keep in force at no less than their present limits all existing
policies of insurance or comparable replacements thereof insuring the
Acquired Company, the Subsidiaries and their respective properties;
(e) except as set forth on EXHIBIT 2.6.1.(E), not enter into any
contract, commitment, arrangement or transaction of the type described in
Section 3.12 hereof or suffer, permit or incur any of the transactions or
events described in Section 3.9 hereof to the extent such events or
transactions are within the control of the Acquired Company or any of the
Subsidiaries (except that the Acquired Company and the Subsidiaries may
enter into new license agreements and support and maintenance agreements
and other agreements with customers in the ordinary course of business on
terms and prices consistent with historical practices);
(f) not make or permit any change in the Acquired Company's or any of
the Subsidiaries' Articles or Certificates of Incorporation or Bylaws, or
in their authorized, issued or outstanding securities (except for the
issuance of Acquired Company Stock pursuant to exercise of stock options
pursuant to the Stock Plans);
(g) except as set forth on EXHIBIT 2.6.1(G), not grant any stock
option or right to purchase any security of the Acquired Company or any
of the Subsidiaries, issue any security convertible into such securities,
purchase, redeem, retire or otherwise acquire any of such securities, or
agree to do any of the foregoing or declare, set aside or pay any
dividend, make any other distribution or declare any split in respect of
such securities;
(h) except as set forth on EXHIBIT 2.6.1(H), not adopt any new
Benefit Plan or amend, supplement, or accelerate the timing of payments
or vesting under any existing Benefit Plan, and not make any contribution
to or distribution from any employee benefit plan, pension plan, stock
bonus plan, 401(k) plan or profit sharing plan (except for the payment of
any health, disability and life insurance premiums that may become due
and except for contributions, vesting or distributions required (and not
discretionary) pursuant to the terms of any Benefit Plans);
(i) not change the amortization or capitalization policies for Owned
Software or otherwise make any changes in the accounting policies of the
Acquired Company and the Subsidiaries;
(j) not issue any notes, bonds or other debt security, or create,
incur, assume or guarantee any indebtedness for borrowed money;
(k) not issue any shares of Acquired Company Stock or of any
Subsidiary other than shares of Acquired Company Stock issuable upon
exercise of presently exercisable options;
(l) not take any action with respect to any awards under the Stock
Plans and not alter in any manner the terms, conditions or dates of
vesting or exercise of any of the options to purchase or other rights
with respect to Acquired Company Stock;
(m) not effect any acquisition, by purchase of stock, assets or
otherwise, of any business or portion thereof or of any Person; and
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(n) promptly advise Purchaser in writing of any matters arising or of
which the Acquired Company becomes aware after the date of this Agreement
that, if existing or known at the date hereof, would be required to be
set forth or described in this Agreement or the Exhibits hereto.
2.6.2. Except after prior notification to, and with the prior written
consent of, Purchaser, which consent shall not be unreasonably withheld, the
Acquired Company shall not make or permit any Subsidiary to make, between
the date of this Agreement and the Effective Time, any change in its banking
or safe deposit arrangements or grant any powers of attorney.
2.7 FILING OF TAX RETURNS. The Acquired Company shall cause all of the
Acquired Company's and the Subsidiaries' federal, state and local tax returns
required to be timely filed before the Effective Time to be timely and
accurately filed with the appropriate taxing authorities. For purposes of this
Section 2.7, such returns shall be deemed timely filed if the Acquired Company
or the applicable Subsidiary has obtained an extension from the appropriate
taxing authority as to the time in which it may file such tax returns. The
Acquired Company shall submit all such tax returns to Purchaser at least ten
(10) days prior to the date they must be filed, and Purchaser shall have the
opportunity to comment on and approve such returns, which approval shall not
unreasonably be withheld.
2.8 EXAMINATION OF PROPERTY AND RECORDS; CONFIDENTIALITY OF INFORMATION.
2.8.1. Except as set forth on EXHIBIT 2.8.1, between the date of this
Agreement and the Effective Time, the Acquired Company shall allow
Purchaser, its counsel and other representatives full access to all the
books, records, files, documents, assets, properties, contracts and
agreements of the Acquired Company and the Subsidiaries that may be
reasonably requested, and the Acquired Company shall furnish Purchaser, its
officers and representatives during such period with all information
concerning the affairs of the Acquired Company and the Subsidiaries that may
be reasonably requested. Between the date of this Agreement and the
Effective Time Parent shall allow any executive officer of the Acquired
Company access to the Chief Financial Officer of Parent to make inquiries
and request and receive information in respect of Parent or Purchaser deemed
by such Chief Financial Officer in the exercise of his judgment as
reasonably requested by the Acquired Company in the context of the
transactions provided for herein. Each party shall conduct any investigation
in a manner that will not unreasonably interfere with the businesses of the
other party.
2.8.2. All non-public information acquired by any party hereto pursuant
to this Section 2.8 or otherwise under this Agreement, whether or not in
writing, concerning the business, operations and affairs of any other party
to this Agreement, will be kept confidential and will not be disclosed to
any Person other than the parties hereto or their authorized representatives
(who shall be subject to the same obligations) and will not be used for any
purpose other than the consummation of the Merger and the related
transactions described herein, subject to any legal disclosure obligation of
any party upon advice from counsel and prior notice to the other party.
Promptly upon termination of this Agreement, and at the request of any party
hereto, all written materials thus obtained by any other party or any of its
representatives and all copies and extracts of such materials will be
delivered to the disclosing party, or destroyed, if requested by the
disclosing party.
2.9 CONSENTS AND APPROVALS. The Acquired Company shall use its, and shall
cause the Subsidiaries to use their, reasonable best efforts (without requiring
the payment of money) to obtain the waiver, consent and approval of all persons,
except to the extent set forth on EXHIBIT 2.9, whose waiver, consent or approval
(i) is required in order to consummate the transactions contemplated by this
Agreement, including without limitation, the Merger and the merger or
dissolution of the Subsidiaries pursuant to Section 2.15, or (ii) is required by
any agreement, lease, instrument, arrangement, judgment, decree, order or
license to which the Acquired Company or any Subsidiary is a party or subject on
the Effective Time and (a) that would prohibit or require the waiver, consent or
approval of any person to such transactions or (b) under which, without such
waiver, consent or approval, such transactions would constitute an occurrence of
default under, or otherwise conflict with or be in contravention of, the
provisions thereof,
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result in the acceleration of any obligation thereunder or give rise to a right
of any party thereto to terminate its obligations thereunder. All obtained
written waivers, consents and approvals shall be produced at Closing in form and
content reasonably satisfactory to Purchaser.
2.10 SUPPLYING OF FINANCIAL STATEMENTS. The Acquired Company shall deliver
to Purchaser all regularly prepared audited and unaudited consolidated and
consolidating financial statements of the Acquired Company and the Subsidiaries
prepared after the date of this Agreement, in format historically published or
utilized internally (as applicable), and any financial statements prepared for
filing with the SEC, as soon as each is available.
2.11 NO SOLICITATION. The Acquired Company shall not, and shall not permit
any of the Subsidiaries to, and the Acquired Company and the Subsidiaries shall
not authorize or permit any officer, director or employee of, or any financial
advisor, attorney, accountant or other advisor or representative retained by,
the Acquired Company or any of the Subsidiaries to, solicit, initiate, encourage
(including by way of furnishing information), endorse or enter into any
agreement with respect to, or take any other action to facilitate, any inquiries
or the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Takeover Proposal (as hereafter defined). The Acquired Company
shall immediately advise Purchaser orally and in writing of any Takeover
Proposal or any inquiries or discussions with respect thereto. Neither the Board
of Directors of the Acquired Company nor any committee thereof shall (a)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Purchaser the approval or recommendation by the Board of Directors of the
Acquired Company of the Merger or this Agreement or (b) approve or recommend, or
propose to approve or recommend, any Takeover Proposal or any other acquisition
of outstanding shares of Acquired Company Stock other than pursuant to the
Merger or this Agreement. Notwithstanding the foregoing, nothing contained in
this Agreement shall prevent the Board of Directors of the Acquired Company from
furnishing information to or entering into discussions or negotiations with any
unsolicited person or entity if and only to the extent that the Board of
Directors of the Acquired Company shall have determined in good faith, after
receiving written advice of its outside counsel, that such action would be
required under applicable law in the exercise of its fiduciary duties. The
Acquired Company will immediately notify the Purchaser if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with the
Acquired Company and shall promptly, but in any event within three (3) business
days of receipt, furnish to Parent a copy of any such written proposal or a
written summary of any such oral proposal. As used in this Agreement, "Takeover
Proposal" shall mean any tender or exchange offer, or proposal, other than a
proposal by Purchaser or any of its affiliates, for a merger, share exchange or
other business combination involving the Acquired Company or any of the
Subsidiaries or any proposal or offer to acquire in any manner a substantial
equity interest in the Acquired Company or any of the Subsidiaries or a
substantial portion of the assets of the Acquired Company or any of the
Subsidiaries.
2.12 HSR ACT FILINGS. Parent and the Acquired Company shall each, in
cooperation with the other, make the required filings in connection with the
transactions contemplated by this Agreement under the HSR Act with the Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice, and shall request early termination of the waiting period with respect
to such filings. As promptly as practicable from time to time after the date of
this Agreement, each party shall make all such further filings and submissions,
and take such further action, as may be required in connection therewith, and
shall furnish the other all information in its possession necessary therefor.
Parent and the Acquired Company shall each notify the other immediately upon
receiving any request for additional information with respect to such filings
from either the Antitrust Division of the Department of Justice or the Federal
Trade Commission. Subject to the provisions of Section 10.1 hereof, the party
receiving the request shall use its reasonable best efforts to comply with such
request, and to take such reasonable action in respect of such request to enable
the Closing to occur, as soon as possible, and neither such party shall withdraw
any such filing or submission without the written consent of the other. Each
party shall keep the other party promptly informed of all developments regarding
the filings, requests and responses referred to in this
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Section 2.12, and shall provide the other party the opportunity to participate
in all meetings with the Antitrust Division of the Department of Justice or
Federal Trade Commission in respect thereof.
2.13 TAX REPORTING. For federal and state tax purposes, Purchaser and
Parent shall report the transactions contemplated by this Agreement as a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Tax Code and similar state laws. Prior to the Effective Time, the Acquired
Company will deliver to Purchaser and Parent letters to the reasonable
satisfaction of Purchaser and Parent from the Acquired Company and/or certain of
its stockholders that when read together provide assurance that there is no plan
or intention on the part of the stockholders of the Acquired Company (or
knowledge of such plan or intent to the extent the Acquired Company provides a
representation with respect to holders of less than five percent (5%) of the
Acquired Company Stock) to sell, exchange or otherwise dispose of a number of
shares of Parent Stock received in the Merger that would reduce the Acquired
Company's stockholders' ownership of Parent Stock received in the Merger to a
number of shares having a value, as of the Effective Time, of less than fifty
percent (50%) of the value of all of the outstanding stock of Acquired Company
immediately prior to the Effective Time.
2.14 INDEMNIFICATION OF ACQUIRED COMPANY OFFICERS AND DIRECTORS. The
Purchaser agrees that subsequent to the Closing it will provide to the directors
and officers of the Acquired Company indemnification in accordance with the
current provisions of the Certificate of Incorporation and By-Laws of the
Acquired Company and the Indemnification Agreements with respect to matters
occurring prior to the Effective Time, for a period of six years from the
Effective Time (or, in the case of matters occurring prior to the Effective Time
which have not been resolved prior to the sixth anniversary of the Effective
Time, until such matters are finally resolved). The Parent shall cause to be
maintained in effect for twelve (12) months following the Closing Date the
current policies of directors' and officers' liability insurance currently
maintained by the Acquired Company, which policies are described on EXHIBIT
3.19, at no greater than one hundred percent (100%) of the annual premiums for
such coverage as of the date hereof (as reflected on such EXHIBIT 3.19),
provided that the Parent may substitute therefor policies of at least the same
coverage containing terms and conditions that are no less advantageous
(including, without limitation, coverage under Parent's existing policies of
directors' and officers' liability insurance). In the event that the premiums
for the continued coverage exceed 100% of the premiums for the coverage as of
the date hereof (the "100% Amount"), Purchaser shall either substitute coverage
meeting the requirements of the proviso in the preceding sentence or continue
the existing insurance but reduce the maximum amount of coverage to that
available for premiums equal to the 100% Amount.
2.15 SUBSIDIARIES. The parties hereto agree that on the Closing Date,
Purchaser and Acquired Company will cause the Subsidiaries to be liquidated,
which may be effected, at the option of Purchaser, by corporate merger of the
Subsidiaries with and into Purchaser or any subsidiary or subsidiaries of
Purchaser or by corporate dissolution of the Subsidiaries.
2.16 CERTAIN REPORTS. If the Merger is effective in the month of December,
1997, Parent will use its reasonable best efforts to make publicly available
through a filing with the SEC the combined results of operations of Parent,
Purchaser and the Acquired Company for the calendar month following the Closing
on or before the twentieth (20th) day of the second calendar month following the
Closing. If the Merger is effective in the month of January, 1998, Parent will
use its reasonable best efforts to include the combined results of operations of
Parent, Purchaser and the Acquired Company for the first full calendar month
following the effective date of the Merger in Parent's Annual Report on Form
10-K for the year ending December 31, 1997. If the Merger is effective later
than January, 1998, Parent will use its reasonable best efforts to make publicly
available through a filing with the SEC the combined results of operations of
Parent, Purchaser and the Acquired Company for the calendar month following the
Closing on or before the twentieth (20th) day of the second calendar month
following Closing.
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III. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANY.
The Acquired Company represents and warrants to Purchaser and Parent as
follows:
3.1 ORGANIZATION, STANDING AND FOREIGN QUALIFICATION.
3.1.1. Each of the Acquired Company and the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the respective jurisdiction of its incorporation as set forth in
EXHIBIT 3.1 and has the requisite corporate power and authority to carry on
its business in the places and as it is now being conducted and to own and
lease the properties and assets that it now owns or leases.
3.1.2. Each of the Acquired Company and the Subsidiaries is duly
qualified and/or licensed to transact business and in good standing as a
foreign corporation in the jurisdictions listed in EXHIBIT 3.1 hereto, and
the character of the property owned or leased by the Acquired Company and
the Subsidiaries and the nature of the business conducted by them do not
require such qualification and/ or licensing in any other jurisdiction where
the failure to so qualify would have a Material Adverse Effect upon the
Acquired Company.
3.2 AUTHORITY AND STATUS.
3.2.1. The Board of Directors of the Acquired Company, by unanimous
vote of all directors present at a meeting duly called and held, has (i)
determined that the Merger is fair to and in the best interests of the
stockholders of the Acquired Company and (ii) resolved to submit the Merger
to and recommend approval of the Merger by the stockholders of the Acquired
Company.
3.2.2. The Acquired Company has the capacity and authority to execute
and deliver this Agreement, to perform hereunder and, upon approval of the
transactions provided for herein by the stockholders of the Acquired
Company, to consummate the transactions contemplated hereby without any
other corporate or stockholder approval. The execution, delivery and
performance by the Acquired Company of this Agreement and each and every
other agreement, document and instrument provided for herein have been duly
authorized and approved by the Board of Directors of the Acquired Company.
Assuming this Agreement and each and every agreement, document or instrument
to be executed, delivered and performed by the Acquired Company in
connection herewith are valid and legally binding obligations of Purchaser
and Parent, this Agreement and each and every agreement, document and
instrument to be executed, delivered and performed by the Acquired Company
in connection herewith constitute or will, when executed and delivered,
constitute the valid and legally binding obligation of the Acquired Company
enforceable against it in accordance with their respective terms, except as
enforceability may be limited by applicable equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws from
time to time in effect affecting the enforcement of creditors' rights
generally. Attached hereto as EXHIBIT 3.2 are true, correct and complete
copies of the current Articles or Certificates of Incorporation and Bylaws
of the Acquired Company and the Subsidiaries.
3.2.3. The Board of Directors of the Acquired Company received an
opinion from BT Alex. Brown Incorporated, its financial advisor,
concurrently with the approval described in Section 3.2.1 above to the
effect that the Exchange Ratio is fair, from a financial point of view, to
the Acquired Company's stockholders.
3.3 CAPITALIZATION. The entire authorized capital stock of the Acquired
Company consists of thirty-eight million (38,000,000) shares of stock, of which
thirty-five million (35,000,000) shares are designated Common Stock, par value
$.01 per share, and three million (3,000,000) shares are designated Preferred
Stock, par value $.10 per share. Of the total authorized Acquired Company Stock,
as of September 27, 1997, Fifteen Million Three Hundred Forty Thousand Three
Hundred Eighty-Five (15,340,385) shares were issued and outstanding and no
shares were held in the Acquired Company's treasury. Of the total
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authorized Preferred Stock, no shares have been issued. As of September 27,
1997, there were options outstanding under the Stock Plans entitling the
optionees thereunder upon valid exercise to acquire in the aggregate Two Million
Two Hundred Forty Thousand Five Hundred Seventy-One (2,240,571) shares of
Acquired Company Stock. With the exception of the right to acquire shares of
Acquired Company Stock pursuant to options under the Stock Plans, there are no
outstanding rights to acquire capital stock of the Acquired Company. All the
issued and outstanding shares of each of the Subsidiaries are owned by the
Acquired Company and are held free and clear of all liens, claims, charges and
encumbrances of any nature whatsoever. All of the outstanding shares of Acquired
Company Stock (and any shares issued pursuant to presently outstanding options,
if exercised and purchased at the applicable exercise price) were duly
authorized (or will be when issued and the option price paid), validly issued,
fully paid and nonassessable. None of the capital stock of the Acquired Company
is entitled to or subject to preemptive rights. Other than the requisite
stockholder vote to consummate the Merger, the authorization or consent of no
other person or entity is required in order to consummate the transactions
contemplated herein by virtue of any such person or entity having an equitable
or beneficial interest in the Acquired Company or any Subsidiary or the capital
stock of the Acquired Company or any Subsidiary. EXHIBIT 3.3 sets forth all
outstanding stock options, stock appreciation rights, phantom stock awards,
performance share unit awards, equity participation rights, or similar awards
outstanding under the Stock Plans or any other Benefit Plan as of the date
hereof, and lists in respect each option, award or right, the holder, the date
of grant and any vesting or other terms governing exercise or receipt, and any
warrants, calls, commitments or plans by the Acquired Company or any Subsidiary
to issue any additional shares of their capital stock, to pay any dividends on
such shares or to purchase, redeem, or retire any outstanding shares of their
capital stock, nor are there outstanding any securities or obligations that are
convertible into or exchangeable for any shares of capital stock of the Acquired
Company. Following the Merger, the Acquired Company will have no obligation to
issue, transfer or sell any shares of capital stock of any of the Subsidiaries.
There are not now, and at the Effective Time there will not be, any voting
trusts or other agreements or understandings to which the Acquired Company or
any of the Subsidiaries is a party or is bound with respect to the voting of the
capital stock of the Acquired Company or any of the Subsidiaries.
3.4 ABSENCE OF EQUITY INVESTMENTS. Except for the Subsidiaries and as
described in EXHIBIT 3.4 hereto, the Acquired Company does not, either directly
or indirectly, own of record or beneficially any shares or other equity
interests in any corporation, partnership, limited partnership, joint venture,
trust or other business entity.
3.5 LIABILITIES AND OBLIGATIONS OF THE ACQUIRED COMPANY AND THE
SUBSIDIARIES.
3.5.1. Attached hereto as EXHIBIT 3.5.1 are true, correct and complete
copies of the Acquired Company's audited consolidated balance sheets as of
June 30, 1995, June 30, 1996 and June 30, 1997, and the related consolidated
statements of income, stockholders' equity and cash flows for the years then
ended, together with the reports of Coopers & Lybrand L.L.P. thereon
(respectively, the "1995, 1996 and 1997 Financial Statements"). The 1995,
1996, and 1997 Financial Statements are complete, have been prepared in
accordance with generally accepted accounting principles, consistently
applied, fairly present in all material respects the financial condition of
the Acquired Company and the Subsidiaries as of the respective dates
thereof, and disclose all liabilities of the Acquired Company and the
Subsidiaries, whether absolute, contingent, accrued or otherwise, existing
as of the date thereof that are of a nature required to be reflected in
financial statements prepared in accordance with generally accepted
accounting principles.
3.5.2. Neither the Acquired Company nor any Subsidiary has any
liability or obligation (whether accrued, absolute, contingent or otherwise)
including, without limitation, any liability that might result from an audit
of their tax returns by any appropriate authority, except for (a) the
liabilities and obligations of the Acquired Company and the Subsidiaries
that are disclosed or reserved against in the 1997 Financial Statements or
EXHIBIT 3.5.2 hereto, to the extent and in the amounts so disclosed or
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reserved against, and (b) liabilities incurred or accrued in the ordinary
course of business since June 30, 1997 and liabilities incurred in
connection with the transactions referred to herein.
3.5.3. Except as disclosed in the 1997 Financial Statements or EXHIBIT
3.5.2, neither the Acquired Company nor any Subsidiary is in default with
respect to any liabilities or obligations, and all such liabilities or
obligations shown or reflected in the 1997 Financial Statements or EXHIBIT
3.5.2 and such liabilities incurred or accrued subsequent to June 30, 1997
have been, or are being, paid and discharged as they become due, and all
such liabilities and obligations were incurred in the ordinary course of
business except as indicated in EXHIBIT 3.5.2.
3.6 TAX RETURNS.
3.6.1. The Acquired Company and the Subsidiaries have, as of the date
hereof, and will prior to the Effective Time have, timely and accurately
filed all federal, state, foreign and local income, franchise, sales, real
and personal property and other tax returns and reports required to be filed
by them prior to such dates and have timely paid, or will prior to the
Effective Time timely pay, all taxes shown on such returns as owed for the
periods of such returns, including all withholding or other payroll related
taxes shown on such returns, except where the failure to so file any such
return or report would not individually or in the aggregate have a Material
Adverse Effect upon the Acquired Company. The tax basis of all assets of the
Acquired Company and the Subsidiaries as reflected on their books and
records is correct and accurate in all material aspects. Except as described
on EXHIBIT 3.6.1, neither the Acquired Company nor any Subsidiary is, nor
will any of them become, subject to any additional taxes, interest,
penalties or other similar charges with respect to the tax returns and
reports referred to in the first sentence of this Section 3.6. No
assessments or notices of deficiency or other communications have been
received by the Acquired Company, nor have any been threatened, with respect
to any such tax return that has not been paid, discharged or fully reserved
in the 1997 Financial Statements or EXHIBIT 3.6.1 hereto, and no amendments
or applications for refund have been filed or are planned with respect to
any such return. Except as set forth on EXHIBIT 3.6.1, there are no
agreements between the Acquired Company or any Subsidiary and any taxing
authority, including, without limitation, the IRS, waiving or extending any
statute of limitations with respect to any tax return, and neither the
Acquired Company nor any Subsidiary has filed any consent or election under
the Tax Code, including, without limitation, any election under Section
341(f) of the Tax Code.
3.6.2. Except as set forth on EXHIBIT 3.6.2, neither the Acquired
Company nor any Subsidiary has made any parachute payments as such term is
defined in Section 280G of the Tax Code, neither is obligated to make any
parachute payments, and neither is a party to any agreement that under
certain circumstances could obligate it, or any successor in interest, to
make any parachute payments that will not be deductible under Section 280G
of the Tax Code. The Acquired Company is not obligated to make
reimbursements or gross up payments to any person in respect to excess
parachute payments.
3.6.3. The Acquired Company and the Subsidiaries (a) have withheld
proper and accurate amounts in compliance with the tax withholding
provisions of all applicable laws for all compensation paid to the officers
and employees of the Acquired Company and the Subsidiaries, (b) have
correctly and properly prepared and duly and timely filed all returns and
reports relating to those amounts withheld from their officers and employees
and to their employer liability for employment taxes under the Tax Code and
applicable state and local laws and (c) have duly and timely paid and
remitted to the appropriate taxing authorities the amounts withheld from
their officers and employees and any additional amounts that represent their
employer liability under applicable law for employment taxes.
3.6.4. The income tax returns of the Acquired Company have been audited
by the IRS for all tax years through the year ended June 30, 1995, and all
taxes, deficiencies, penalties and interest relating to such tax years have
been fully paid and satisfied by the Acquired Company.
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3.6.5. No issue has been raised by the IRS, any state or local taxing
authority, or any other investigation or audit, that will have, or can be
expected to have, a Material Adverse Effect on the Acquired Company.
3.6.6. The 1995, 1996 and 1997 Financial Statements include, and the
accounts of the Acquired Company and the Subsidiaries will include, for all
periods up to and including the Closing Date, adequate provision for all
unpaid applicable taxes, assessments, fees and charges relating to the
Acquired Company and the Subsidiaries.
3.6.7. Neither the Acquired Company nor any Subsidiary is a "United
States real property holding corporation" as defined in Section 897(c)(2) of
the Tax Code.
3.7 OWNERSHIP OF ASSETS. The Acquired Company and the Subsidiaries have
title to all of their respective properties and assets, other than leased or
licensed property, in each case free and clear of any liens, security interests,
claims, charges, options, rights of tenants or other encumbrances, except (i)
for those encumbrances or defects in title not material to the continued use or
ownership of any such properties and assets in the ordinary course, (ii) as
disclosed or reserved against in EXHIBIT 3.7 or reserved against in the 1997
Financial Statements (to the extent and in the amounts so disclosed or reserved
against) and (iii) for liens arising from current taxes not yet due and payable.
Neither the Acquired Company, nor any Subsidiary, has received any payment from
a lessor or licensor in connection with or as inducement for entering into a
lease or license in which the Acquired Company or a Subsidiary is a lessee or
licensee, except licenses, fees and similar payment in historical amounts and in
the ordinary course of business. All buildings and material items of machinery
and equipment owned or leased by the Acquired Company or any Subsidiary are in
good operating condition and reasonable state of repair, subject only to
ordinary wear and tear. Except as reserved against in the 1997 Financial
Statements, the inventories of the Acquired Company and the Subsidiaries consist
only of items of supplies and equipment of a quality and quantity usable in the
normal course of their businesses. Neither the Acquired Company nor any
Subsidiary has received any notice of violation of any applicable zoning
regulation, ordinance or other law, regulation or requirement relating to their
operations and properties, whether owned or leased. All of the accounts
receivable of the Acquired Company and the Subsidiaries as of the Effective Time
will reflect actual transactions and will have arisen in the ordinary course of
business.
3.8 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. Except as set forth on
EXHIBIT 3.8 hereto, the execution and delivery of this Agreement by the Acquired
Company does not, and the consummation of all of the transactions contemplated
hereby will not, violate any provision of the Articles of Incorporation or
Certificate of Incorporation, as amended, or Bylaws, as amended, of the Acquired
Company or any Subsidiary or violate or constitute an occurrence of default
under any provision of, or conflict with, or result in acceleration of any
obligation under, or give rise to a right by any party to terminate its
obligations under, any Material Contract, or any order, judgment or decree to
which the Acquired Company or any Subsidiary is a party or is bound or by which
the Acquired Company's or any Subsidiaries' assets are affected. Except for the
applicable requirements of the HSR Act, the 1933 Act, the Exchange Act and
applicable Blue Sky laws, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity is required to
be obtained or made by or with respect to the Acquired Company, any Subsidiary
or any assets, properties or operations of the Acquired Company or any
Subsidiary in connection with the execution and delivery by the Acquired Company
of this Agreement or the consummation of the transactions contemplated hereby.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed on EXHIBIT
3.9, since June 30, 1997, the Acquired Company and each of the Subsidiaries has
operated in the ordinary course of business and there has not been (i) any
material damage, destruction or other casualty loss with respect to property
owned or leased by the Acquired Company or any of the Subsidiaries, whether or
not covered by insurance, or any strike, work stoppage or slowdown or other
labor trouble involving the Acquired Company or any of the Subsidiaries; (ii)
any increase in dividends or employee compensation or benefits
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payable by the Acquired Company, except for increases in compensation
consistent, in amounts and timing, with policies of the Acquired Company
approved on or prior to August 15, 1997 by its Board of Directors or the
Compensation Committee thereof; (iii) any change in accounting methods; or (iv)
any transaction, commitment, dispute or other event or condition that has
individually or in the aggregate resulted in any Material Adverse Effect in
respect of the Acquired Company.
3.10 LITIGATION. Except as otherwise set forth in EXHIBIT 3.10 hereto,
there is no suit, action, arbitration, proceeding, claim or investigation
pending or, to the knowledge of the Acquired Company, threatened against or
affecting the Acquired Company or any Subsidiary that would individually or in
the aggregate have a Material Adverse Effect on the Acquired Company, and, to
the knowledge of the Acquired Company, there exists no reasonable basis or
grounds for any such suit, action, arbitration, proceeding, claim or
investigation.
3.11 LICENSES AND PERMITS; COMPLIANCE WITH LAW. The Acquired Company and
the Subsidiaries hold all licenses, certificates, permits, franchises and rights
from all appropriate federal, state or other public authorities necessary for
the conduct of their respective businesses and the use of their respective
assets, except for such licenses, certificates, permits, franchises and rights
the absence of which would not individually or in the aggregate have a Material
Adverse Effect on the Acquired Company. Except as noted in EXHIBIT 3.11, and
except for any matters which will not individually or in the aggregate have a
Material Adverse Effect in respect of the Acquired Company, the Acquired Company
and the Subsidiaries presently are conducting their respective businesses so as
to comply with all applicable statutes, ordinances, rules, regulations and
orders of any governmental authority. Further, except as described on EXHIBIT
3.11, the Acquired Company and the Subsidiaries are not presently charged with,
or under governmental investigation with respect to, any actual or alleged
violation of any statute, ordinance, rule or regulation, or presently the
subject of any pending or, to the knowledge of the Acquired Company, threatened
adverse proceeding by any regulatory authority having jurisdiction over their
respective businesses, properties or operations. Except as disclosed on EXHIBIT
3.11, or as would not individually or in the aggregate have a Material Adverse
Effect on the Acquired Company, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
result in the termination of any license, certificate, permit, franchise or
right held by the Acquired Company or any Subsidiary, and all such licenses,
certificates, permits, franchises and rights will inure to the benefit of the
Surviving Corporation after the consummation of the transactions contemplated by
this Agreement.
3.12 CONTRACTS, AGREEMENTS AND INSTRUMENTS GENERALLY. EXHIBIT 3.12 hereto
consists of a true and complete list of all contracts, agreements, commitments
and other instruments (identified by title, date and parties)(whether oral or
written) to which the Acquired Company or any Subsidiary is a party that involve
a receipt or an expenditure by the Acquired Company or any Subsidiary or require
the performance of services or delivery of goods to, by, through, on behalf of
or for the benefit of the Acquired Company or any Subsidiary, which in each case
relates to a contract, agreement, commitment or instrument that requires
payments or provides for receipts in excess of $60,000 per year (except for
Customer Contracts which shall be subject to the threshold set forth in Section
3.12.1. below). EXHIBIT 3.12 also identifies (identified by title, date and
parties)(whether oral or written) all:
3.12.1. contracts, agreements, commitments or other instruments in
effect with any customer of the Acquired Company or any Subsidiary,
including without limitation all management agreements, data processing
agreements, consulting services agreements, software license agreements or
other licenses, software development agreements, purchase commitments or
installation agreements and maintenance or service agreements, which require
payments or provide for receipts (measured by total contract payments or
receipts divided by the years of the term of the contract) in excess of
$60,000 per year (hereinafter referred to as the "Customer Contracts" and
identified as such on EXHIBIT 3.12);
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3.12.2. leases, rental agreements or other contracts or commitments
affecting the ownership or leasing of, title to or use of any interest in
real or personal property with payments equal to or greater than $5,000 per
month and all maintenance or service agreements relating to any real or
personal property with payments equal to or greater than $5,000 per month;
3.12.3. contracts or commitments providing for payments based in any
manner upon the sales, purchases, receipts, income or profits of the
Acquired Company or any Subsidiary;
3.12.4. franchise agreements, marketing agreements or royalty
agreements (and with respect to each such agreement, EXHIBIT 3.12 sets forth
the aggregate royalties or similar payment paid or payable thereunder by the
Acquired Company or any Subsidiary as of the date hereof);
3.12.5. employment contracts or arrangements regarding employees or
independent contractors (including without limitation any standard form
contracts such as employee nondisclosure agreements), or for any continuing
payment of any type or nature, including, without limitation, any severance,
termination, parachute, or other payments (whether due to a change in
control, termination or otherwise) and bonuses and vested commissions.
EXHIBIT 3.12 also includes a listing of all such agreements, if any, for
which the standard form was materially or substantially modified or
materially or substantially altered, and any contracts that are not in the
standard form. Other than the standard form agreements listed on EXHIBIT
3.12, those listed variations from the standard form agreements and those
listed agreements that are not in the standard form, there are no other
agreements of the type referred to in this Section 3.12.5;
3.12.6. contracts, agreements, understandings or arrangements
restricting the Acquired Company or any Subsidiary from carrying on its
business anywhere in the world;
3.12.7. instruments or arrangements evidencing or related to
indebtedness for money borrowed or to be borrowed, whether directly or
indirectly, by way of purchase-money obligation, guaranty, subordination,
conditional sale, lease-purchase or otherwise providing for payments in
excess of $5,000 per month;
3.12.8. joint product development agreement with any party other than
the Purchaser, other than Customer Contracts; and
3.12.9. contracts or agreements with vendors of material equipment
purchased by the Acquired Company or appointing the Acquired Company as a
reseller of equipment, other than purchase orders in the ordinary course of
business.
The contracts, agreements, commitments and other instruments listed or
required to be listed on EXHIBIT 3.12 or listed on an Exhibit referred to in
Section 3.14 hereof are herein referred to as the "Material Contracts."
All the Material Contracts are valid and binding upon the Acquired Company
or the applicable Subsidiary and the other parties thereto and are in full force
and effect and enforceable in accordance with their terms, except as
enforceability may be affected by bankruptcy, insolvency, moratorium or similar
laws affecting creditors rights generally and general principles of equity
relating to the availability of equitable remedies. None of the Acquired
Company, the applicable Subsidiary and, to the knowledge of the Acquired
Company, any other party to any such contract, commitment or arrangement has
breached any provision of, or is in default under, the terms thereof; and there
are no existing facts or circumstances that would prevent the work in process of
the Acquired Company or any Subsidiary or their contracts and agreements from
maturing upon performance by the Acquired Company or the applicable Subsidiary
into collectible accounts receivable in the aggregate in amounts consistent with
historical experience. Except as set forth on EXHIBIT 3.12, there are no
contracts or commitments that require the performance of services or provision
of goods by the Acquired Company at a direct cost or with a value for each such
contract or commitment in excess of the revenue to be derived pursuant to the
terms of such contract or commitment.
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Except for terms specifically described in EXHIBIT 3.12, neither the Acquired
Company nor any Subsidiary has received any payment from any contracting party
in connection with or as an inducement for entering into any contract,
agreement, policy or instrument except for payment for actual services rendered
or to be rendered by such Acquired Company or Subsidiary consistent with amount
historically charged for such services.
3.13 CUSTOMER CONTRACTS. Except as set forth on EXHIBIT 3.13(A), each
Customer Contract executed within the five (5) year period ending on the date
hereof conforms substantially to one of the forms attached hereto as EXHIBIT
3.13(B) (the "Customer Contract Forms"). EXHIBIT 3.13(B) also includes copies of
standard forms employed by the Acquired Company and the Subsidiaries within the
five (5) year period ending on the date hereof in respect of current customers
the contracts for which do not constitute "Customer Contracts" by reason of the
dollar threshold provided for in the definition therefor in Section 3.12.1. With
respect to each Customer Contract, (i) each customer to which computer software
represented as owned by or proprietary to the Acquired Company or a Subsidiary
(the "Owned Software") has been licensed pursuant to such Customer Contract and
tendered or certified as operational by the Acquired Company or any Subsidiary
(whichever is the case being referred to in this Section 3.13 as the "Vendor")
has accepted such software to the extent and on the terms and conditions
provided for in such Customer Contract; (ii) in each case in which the Customer
Contract pursuant to which Owned Software is licensed incorporates response(s)
by Vendor to a Request for Proposal by the customer, such software has met all
material requirements set forth in such response(s); and (iii) all performance
warranties with respect to Owned Software made by the Vendor in any Customer
Contract, including warranties with respect to capacity, availability, downtime,
response time, and Year 2000 compliance have been satisfied in all material
respects upon the terms and conditions and to the extent provided for in such
Customer Contract. In addition, except as set forth on EXHIBIT 3.13(C), none of
the Customer Contracts contains any of the following deviations from the
Customer Contract Forms:
3.13.1. any term for acceptance of any Owned Software that fails to
specify a period of time or date for acceptance or standards applicable
thereto;
3.13.2. any provision granting the customer a right to a whole or
partial refund of fees previously paid upon the non-acceptance or failure of
any Owned Software to perform as warranted;
3.13.3. any provision obligating the Vendor to indemnify a customer
against consequential damages;
3.13.4. any commitment by the Vendor to provide a hardware upgrade in
response to or as a remedy for a breach of any software-related
response-time warranty unless the customer party to the Customer Contract in
which the commitment is made is required to pay the cost of such upgrade and
such costs are specified or described in such contract;
3.13.5. any material deviation from the provisions regarding
confidentiality of the Owned Software;
3.13.6. any provision granting an ownership interest (other than a
license) in any Owned Software to a customer;
3.13.7. any license for use by more than a single entity of any Owned
Software unless the customer that is a party to such Customer Contract has
agreed to pay a fee or fees with respect to each entity's use thereof;
3.13.8. any provision naming a customer as an insured on any policy of
insurance owned by the Vendor;
3.13.9. any joint product development agreement with any other party;
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3.13.10. any commitment or warranty made or given by the Vendor to
design or modify any Owned Software so as to comply with any governmental
regulations;
3.13.11. any restrictions in any Customer Contract on the ability of
the Vendor to increase the fees for maintenance of any Owned Software
applicable to any period beyond the period specified in such contract during
which the customer that is a party to such contract is obligated to pay
maintenance fees;
3.13.12. any commitment by the Vendor to sell or maintain computer
hardware;
3.13.13. any commitment by the Vendor to provide emergency back-up for
either software or hardware; or
3.13.14. any commitment by the Vendor to provide existing customers
products developed in the future as a credit to existing payment obligations
or for less than normal prices.
3.14 INTELLECTUAL PROPERTY; COMPUTER SOFTWARE.
3.14.1. EXHIBIT 3.14.1 hereto sets forth a complete and correct list of
(i) all trademarks, trade names, service marks, service names, and brand
names (whether or not any of the same are registered), and all patent and
registered copyrights and all applications for the foregoing, if any,
(setting forth the registration, issue or serial number of the patents and
registered copyrights and a description of the same) applicable to or used
in the businesses of the Acquired Company or any Subsidiary; (ii) the owner
of such intellectual property and any registration thereof or application
therefor; and (iii) a complete list of all licenses granted by or to the
Acquired Company or any Subsidiary with respect to any of the above
(identified by title, date and parties) (not inclusive of Customer Contracts
or contracts which do not constitute Customer Contracts by reason of the
dollar threshold provided for in the definition thereof in Section 3.12.1).
All such trademarks, trade names, service marks, service names, brand names,
copyrights and patents are owned by the Acquired Company or a Subsidiary
free and clear of all liens, claims, security interests and encumbrances.
Except as set forth on EXHIBIT 3.14.1, neither the Acquired Company nor any
Subsidiary is currently in receipt of any notice of any violation of, and
neither the Acquired Company nor any Subsidiary is violating, the rights of
others in any trademark, trade name, service mark, copyright, patent, trade
secret, know-how or other intangible asset.
3.14.2. (i) EXHIBIT 3.14.2(I) contains a complete and accurate list of
all Owned Software, which list specifies which of the Acquired Company and
the Subsidiaries is the owner thereof. Except as set forth on EXHIBIT
3.14.2(I), the Acquired Company or one of the Subsidiaries has title to the
Owned Software, free and clear of all claims, including claims or rights of
employees, agents, consultants, inventors, customers, licensees or other
parties involved in the development, creation, marketing, maintenance,
enhancement or licensing of such computer software. Except as set forth on
EXHIBIT 3.14.2(I) and except for commercially available, over-the-counter
"shrink-wrap" software, the Owned Software is not dependent on any Licensed
Software (as defined in subsection (ii) below) in order to operate fully in
the manner in which it is intended. No Owned Software has been published or
disclosed to any other parties, except as set forth on EXHIBIT 3.14.2(I),
and except pursuant to contracts requiring such other parties to keep the
Owned Software confidential. To the knowledge of the Acquired Company, no
such other party has breached any such obligation of confidentiality.
3.14.2 (ii) EXHIBIT 3.14.2(II) contains a complete and accurate list of
all software (other than commercially available over-the-counter
"shrink-wrap" software) under which the Acquired Company or any Subsidiary
is a licensee, lessee or otherwise has obtained the right to use (the
"Licensed Software"), and identifies by title, date and party, the license
or other agreement by which such right to use has been obtained, and the
duration or term thereof. The Acquired Company and any Subsidiary utilizing
such Licensed Software has the right and license to use, sublicense, modify
and copy Licensed Software as set forth in the respective license, lease or
similar agreement pursuant to
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which the Licensed Software is licensed to the Acquired Company or any
Subsidiary, free of any other limitations or encumbrances, and the Acquired
Company and each of the Subsidiaries are in full compliance with all
applicable provisions of such agreements. Except as disclosed on EXHIBIT
3.14.2(II), none of the Licensed Software has been incorporated into or made
a part of any Owned Software or any other Licensed Software. Neither the
Acquired Company nor any Subsidiary has published or disclosed any Licensed
Software to any other party except, in the case of Licensed Software that
the Acquired Company or a Subsidiary leases or markets to others, in
accordance with and as permitted by any license, lease or similar agreement
relating to the Licensed Software and except pursuant to contracts requiring
such other parties to keep the Licensed Software confidential. No party to
whom the Acquired Company or a Subsidiary has disclosed Licensed Software
has, to the knowledge of the Acquired Company, breached such obligation of
confidentiality.
3.14.2 (iii) The Owned Software and Licensed Software and commercially
available over-the-counter "shrink-wrap" software constitute all software
used in the businesses of the Acquired Company and the Subsidiaries
(collectively, the "Acquired Company Software"). EXHIBIT 3.14.2(III) sets
forth a list of all contract programmers, independent contractors,
nonemployee agents and persons or other entities (other than employees) who
have performed, within the last three (3) years, computer programming
services for the Acquired Company or any Subsidiary and identifies all
contracts and agreements pursuant to which such services were performed. The
transactions contemplated herein will not cause a breach or default under
any licenses, leases or similar agreements relating to the Acquired Company
Software or impair Purchaser's, the Acquired Company's or any Subsidiary's
ability to use the Acquired Company Software in the same manner as such
computer software is currently used by the Acquired Company or the
Subsidiaries. Neither the Acquired Company nor any Subsidiary is infringing
any intellectual property rights of any other person or entity with respect
to the Acquired Company Software, except for infringements that are unknown
or, with reasonable diligence, could not be known, to the Acquired Company
which would not individually or in the aggregate have a Material Adverse
Effect on the Acquired Company and, to the knowledge of the Acquired
Company, no other person or entity is infringing any intellectual property
rights of the Acquired Company with respect to the Acquired Company
Software.
3.14.2 (iv) EXHIBIT 3.14.2(IV)(A) lists and separately identifies all
agreements pursuant to which the Acquired Company or any Subsidiary has been
granted rights to market software owned by third parties, and EXHIBIT
3.14.2(IV)(B) lists and separately identifies all agreements pursuant to
which the Acquired Company or any Subsidiary has granted marketing rights in
the Acquired Company Software to third parties.
3.14.2 (v) None of the Acquired Company and the Subsidiaries has taken
or failed to take any actions under the law of any applicable foreign
jurisdictions where the Acquired Company or a Subsidiary has marketed or
licensed Acquired Company Software that would restrict or limit the ability
of the Acquired Company or any Subsidiary to protect, or prevent it from
protecting, its ownership interests in, confidentiality rights of, and
rights to market, license, modify or enhance, the Acquired Company Software.
3.15 LABOR MATTERS. Except as set forth on EXHIBIT 3.15, within the last
three (3) years neither the Acquired Company nor any Subsidiary has been the
subject of any known union activity or labor dispute, nor has there been any
strike of any kind called or, to the knowledge of the Acquired Company,
threatened to be called against any of them. Neither the Acquired Company nor
any Subsidiary has violated in any material respect any applicable federal or
state law or regulation relating to labor or labor practices. EXHIBIT 3.15 sets
forth a true, correct and complete list of outstanding employer loans or
advances from the Acquired Company and each Subsidiary to their respective
employees. The Acquired Company and all Subsidiaries are in substantial
compliance with all applicable requirements of the Immigration and Nationality
Act of 1952, as amended by the Immigration Reform and Control Act of 1986 and
the regulations promulgated thereunder (hereinafter collectively referred to as
the "Immigration Laws").
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3.16 BENEFIT PLANS.
3.16.1. EXHIBIT 3.16 lists every pension, retirement, profit-sharing,
deferred compensation, stock option, stock award, employee stock ownership,
severance pay, vacation, bonus or similar plan; any medical, vision, dental
or other health plan; any life insurance plan or any other employee benefit
plan or fringe benefit plan; any payroll practice; commitments or methods of
contribution or compensation (whether arrived at through collective
bargaining or otherwise), whether funded or unfunded, and whether legally
binding or not; including, without limitation, any "employee benefit plan,"
as that term is defined in Section 3(3) of ERISA, that is currently
maintained, or was adopted since June 30, 1995, sponsored in whole or in
part, or contributed to by the Acquired Company or any ERISA Affiliate of
the Acquired Company, for the benefit of, providing any remuneration or
benefits to, or covering any current or former employee, retiree, dependent,
spouse or other family member or beneficiary of such employee or retiree,
director, independent contractor, stockholder, officer or consultant of the
Acquired Company or any ERISA Affiliate of the Acquired Company or under (or
in connection with) which the Acquired Company or an ERISA Affiliate of the
Acquired Company has any contingent or noncontingent liability of any kind,
whether or not probable of assertion (collectively, the "Benefit Plans").
Any of the Benefit Plans that is an "employee pension benefit plan," or an
"employee welfare benefit plan" as that term is defined in Section 3(1) of
ERISA, is referred to herein as an "ERISA Plan." No Benefit Plan is or has
been a multi-employer plan within the meaning of Section 3(37) of ERISA.
3.16.2. EXHIBIT 3.16 also lists, with respect to all Benefit Plans
listed in EXHIBIT 3.16: (a) all trust agreements or other funding
arrangements, including insurance contracts, all annuity contracts,
actuarial statements or valuations, fidelity bonds, fiduciary liability
policies, investment manager or advisory contracts, and all amendments (if
any) thereto, (b) where applicable, with respect to any such plans or plan
amendments, the most recent determination letters issued by the IRS, and (c)
the most recent summary plan descriptions, any material modifications
thereto, and all material employee communications with respect to such
Benefit Plans. Contemporaneous with the delivery of the Exhibits to this
Agreement, the Acquired Company has delivered a true and complete copy of
each such Benefit Plan, agreement, most recent IRS letter or ruling,
opinion, return, financial statement and summary plan description described
in Sections 3.16.1 or 3.16.2 hereof, certified as such by the Chief
Financial Officer of the Acquired Company, together with the annual report
(Form 5500 Series) for the two most recent plan years for any Benefit Plan
subject to such reporting requirements.
3.16.3. All the Benefit Plans and any related trusts subject to ERISA
comply with and have been administered in substantial compliance with the
provisions of ERISA, all applicable provisions of the Tax Code relating to
qualification and tax exemption under Tax Code Sections 401(a) and 501(a) or
otherwise necessary to secure intended tax consequences, all applicable
state or federal securities laws and all other applicable laws, rules and
regulations, and the Acquired Company has not received any notice from any
governmental agency or instrumentality questioning or challenging such
compliance. Any noncompliance or failure properly to maintain, operate or
administer a Benefit Plan or related trust has not rendered nor will render
(i) such Benefit Plan or related trust or the Parent, Purchaser or Acquired
Company subject to or liable for any material taxes, penalties, or
liabilities to any Person; (ii) the Benefit Plan subject to
disqualification; or (iii) the trust subject to loss of tax-exempt status.
3.16.4. None of the Acquired Company, any of the Subsidiaries, and, to
the knowledge of the Acquired Company, any administrator or fiduciary of any
such Benefit Plan (or agent or delegate of any of the foregoing) has engaged
in any transaction or acted or failed to act in any manner that could
subject the Acquired Company to any direct or indirect liability (by
indemnity or otherwise) for a breach of any fiduciary, co-fiduciary or other
duty under ERISA. No material oral or written representation or
communication with respect to any aspect of the Benefit Plans has been or
will be made to employees of the Acquired Company prior to the Closing Date
that is not in accordance with the written or otherwise preexisting terms
and provisions of such Benefit Plans in effect immediately
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prior to the Closing Date, except for any amendments or terminations
required by the terms of this Agreement. There are no unresolved claims or
disputes under the terms of, or in connection with, the Benefit Plans (other
than routine undisputed claims for benefits), and no action, legal or
otherwise, has been commenced with respect to any claim.
3.16.5. All annual reports or returns, audited or unaudited financial
statements, actuarial valuations, summary annual reports and summary plan
descriptions issued with respect to the Benefit Plans are correct and
accurate in all material respects as of the dates thereof; and there have
been no amendments filed to any of such reports, returns, statements,
valuations or descriptions or required to make the information therein true
and accurate. All annual reports (Form 5500 series) required to be filed
with respect to any Benefit Plan have been or will be timely filed.
3.16.6. No non-exempt "prohibited transaction" (within the meaning of
Section 4975(c) of the Tax Code) involving any Benefit Plan has occurred.
None of the assets of any ERISA Plan is an "employer security" (within the
meaning of Section 407(d)(1) of ERISA) or "employer real property" (within
the meaning of Section 407(d)(2) of ERISA).
3.16.7. Each Benefit Plan that is or has been an "employee pension
benefit plan" as defined in Section 3(2) of ERISA is a defined contribution
plan qualified under Section 401(a) of the Tax Code and its related trust is
exempt from tax under Section 501(a) of the Tax Code (a "Qualified Plan")
and no circumstances exist that could result in disqualification of any
Qualified Plan or loss of tax-exempt status for its related trust. No
Qualified Plan (nor any predecessor to a Qualified Plan) has ever been
subject to the provisions of Title IV of ERISA or to the minimum funding
standards of Section 412 of the Tax Code.
3.16.8. As of June 30, 1997, the Acquired Company had no current or
future liability with respect to any events or matters occurring, arising or
accruing on or prior to such date under any Benefit Plan that was not
reflected in the 1997 Financial Statements.
3.16.9. The Acquired Company does not maintain any Benefit Plan
providing deferred or stock based compensation that is not reflected in the
1997 Financial Statements.
3.16.10. Neither the Acquired Company nor any ERISA Affiliate of the
Acquired Company has maintained, and neither now maintains, a Benefit Plan
providing welfare benefits (as defined in ERISA Section 3(1)) to employees
after retirement or other separation of service except to the extent
required under Part 6 of Title I of ERISA and Tax Code Section 4980B.
3.16.11. Except as set forth on EXHIBIT 3.16.11, the consummation of
the transactions contemplated by this Agreement will not (i) entitle any
current or former employee (or any spouse, dependent or other family member
of such employee) of the Acquired Company or any of the Subsidiaries to
severance pay, unemployment compensation or any payment contingent upon a
change in control or ownership of the Acquired Company, or (ii) accelerate
the time of payment or vesting, or increase the amount, of any compensation
due to any such employee or former employee (or any spouse, dependent or
other family member of such employee).
3.16.12. The Acquired Company has provided to each of those persons
listed on EXHIBIT 6.11A the form of Covenant Not to Compete attached as
EXHIBIT 6.11B and obtained their agreement to enter into same in favor of
Purchaser as of the Closing Date.
3.17 CUSTOMERS. Except as disclosed on EXHIBIT 3.17, none of the Acquired
Company and the Subsidiaries has received any notice from, or has any knowledge
that, any customer of the Acquired Company or any Subsidiary as of December 31,
1996 or any date subsequent thereto has taken or will take any steps that could
disrupt the business relationship of the Acquired Company or the Subsidiaries
with such customer in any material respect, including without limitation any
cancellation of contract, diminution of business or failure to renew, or any
intention to do any of the foregoing. None of the Acquired
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Company, any Subsidiary, any director, officer, agent, employee, or other Person
associated with or acting on behalf of the Acquired Company or any Subsidiary
has, directly or indirectly (i) used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity; (ii) made any unlawful payment to domestic or foreign
government officials or employees, or to domestic or foreign political parties
or campaigns, from corporate funds; (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; (iv) established or maintained any
unlawful or unrecorded fund of corporate monies or other assets; (v) made any
false or fictitious entry on the books or records of Acquired Company or any
Subsidiary; (vi) made any bribe, rebate, payoff, influence payment, kickback, or
other unlawful payment; (vii) given any favor or gift which is not deductible
for federal income tax purposes; or (viii) made any bribe, kickback, or other
payment of a similar or comparable nature, whether lawful or not, to any person
or entity, private or public, regardless of form, whether in money, property, or
services, to obtain favorable treatment in securing business or to obtain
special concessions, or to pay for favorable treatment for business secured or
for special concessions already obtained. The Acquired Company and the
Subsidiaries have complied with all applicable statutes, ordinances, rules,
regulations and orders relating to seeking, bidding, obtaining, performing under
or otherwise complying with, contracts with governmental and quasi-governmental
authorities, agencies or other entities.
3.18 ENVIRONMENTAL MATTERS. Except as set forth in EXHIBIT 3.18, no real
property now or previously owned, leased or used by the Acquired Company or any
Subsidiary (the "Real Property") has been used by the Acquired Company or any
Subsidiary or, to the knowledge of the Acquired Company, any other party for the
handling, treatment, storage or disposal of any Hazardous Substance. Except as
set forth in EXHIBIT 3.18, no release, discharge, spillage or disposal into the
environment of any Hazardous Substance and no soil, water or air contamination
by any Hazardous Substance has occurred or is occurring in, from or on the Real
Property (a) by virtue of the actions or failure to act of any of the Acquired
Company or any Subsidiary or (b) to the knowledge of the Acquired Company, by
virtue of the actions or failure to act of any other party. Except as set forth
in EXHIBIT 3.18, the Acquired Company and all Subsidiaries have complied in all
material respects with all reporting requirements under any applicable federal,
state or local environmental laws and any permits with respect to the Real
Property, and there are no existing violations by the Acquired Company or any
Subsidiary of any such environmental laws or permits with respect to the Real
Property. Except as set forth in EXHIBIT 3.18, there are no claims, actions,
suits, proceedings or investigations related to the presence, release,
production, handling, discharge, spillage, transportation or disposal of any
Hazardous Substance or ambient air conditions or contamination of soil, water or
air by any Hazardous Substance pending or threatened (1) with respect to the
Real Property (a) by virtue of the actions or failure to act of the Acquired
Company or any Subsidiary or (b) to the knowledge of the Acquired Company, by
virtue of the actions or failure to act of any other party, or (2) otherwise
against the Acquired Company or any Subsidiary, in any court or before any
state, federal or other governmental agency or private arbitration tribunal and,
to the knowledge of the Acquired Company, there is no basis for any such claim,
action, suit, proceeding or investigation (i) with respect to the Real Property
(a) by virtue of the actions or failure to act of the Acquired Company or any
Subsidiary or (b) to the knowledge of the Acquired Company, by virtue of the
actions or failure to act of any other party, or (ii) otherwise against the
Acquired Company or any Subsidiary. Except as disclosed on EXHIBIT 3.18, to the
knowledge of the Acquired Company or any Subsidiary, there are no underground
storage tanks on the Real Property. To the knowledge of the Acquired Company, no
building or other improvement included in the Real Property contains any exposed
or friable asbestos or any asbestos-containing materials, and such buildings and
improvements are free from radon contamination. For the purposes of this
Agreement, "Hazardous Substance" shall mean any hazardous or toxic substance or
waste as those terms are defined by any applicable federal, state or local law,
ordinance, regulation, policy, judgment, decision, order or decree, including,
without limitation, the Comprehensive Environmental Recovery Compensation and
Liability Act, 42 U.S.C. 9601 ET SEQ., the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 ET. SEQ. and the Resource Conservation and Recovery
Act, 42 U.S.C. 6901 ET SEQ., and petroleum, petroleum products and oil.
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3.19 INSURANCE. Set forth in EXHIBIT 3.19 is a complete list of all
material insurance policies that the Acquired Company and the Subsidiaries
maintained with respect to its businesses, properties or employees within the
preceding thirty-six (36) months. Except as set forth in EXHIBIT 3.19, such
policies are in full force and effect and no event has occurred that would give
any insurance carrier a right to terminate any such policy. Such policies are
adequate to insure against risks to which the Acquired Company, and any
Subsidiaries and their respective properties and assets are exposed in the
operation of their respective businesses in such amounts and types of coverage
as are commercially reasonable and are consistent with practices in the industry
in which the Acquired Company and the Subsidiaries operate. Except as set forth
in EXHIBIT 3.19, since December 31, 1996, there has not been any change in the
Acquired Company's or any Subsidiary's relationship with their respective
insurers or in the premiums payable pursuant to such policies.
3.20 RELATED PARTIES.
(a) Except as set forth in EXHIBIT 3.20, no stockholder owning greater
than a five-percent (5%) interest in the Acquired Company, or officer or
director of the Acquired Company or any Subsidiary, and, to the knowledge of
the Acquired Company, no affiliate or member of the immediate family of any
such stockholder, officer or director possesses, directly or indirectly, any
beneficial interest in, or is a director, officer or employee of, or member
of the immediate family of a director, officer or employee of, any
corporation, partnership, firm, association or business organization that is
a client, supplier, customer, lessor, lessee, lender, creditor, borrower,
debtor or contracting party with or of the Acquired Company or any
Subsidiary (except as a stockholder holding less than a one-percent 1%
interest in a corporation whose shares are traded on a national or regional
securities exchange or in the over-the-counter market).
(b) The Acquired Company has provided to each of its "affiliates" as
identified on EXHIBIT 3.20(A) copies of the Rule 145 Letters and Pooling
Letters and, except as set forth on EXHIBIT 3.20(A), obtained their written
agreement to enter into same as of the dates indicated in Section 2.4. The
Acquired Company has provided to the stockholders described on EXHIBIT
3.20(B) the form of letter referenced in Section 2.13 hereof provided by the
Purchaser and, except to the extent set forth on EXHIBIT 3.20(B), obtained
their written agreement to enter into same as of the Closing Date.
3.21 INFORMATION. The Acquired Company has made accessible to Purchaser or
Parent each registration statement, schedule, report, proxy statement or
information statement it has filed with the SEC on or after June 30, 1995
(collectively, the "Acquired Company Reports"). As of the date of this
Agreement, the Acquired Company Reports, taken together with information
previously furnished by the Acquired Company to Parent or Purchaser, did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading. As used
in this Section 3.21, "material" means material to the financial condition,
business, properties, rights or operations of the Acquired Company together with
the Subsidiaries, taken as a whole.
3.22 POOLING OF INTERESTS. The Acquired Company is not aware of any facts
or circumstances in respect of it or its accounting procedures which would have
the effect of precluding accounting for the transactions contemplated hereby as
a "pooling of interests."
3.23 EXHIBITS. All Exhibits attached hereto are true, correct and complete
as of the date of this Agreement and will be true, correct and complete as of
the Closing Date, except to the extent that such Exhibits may be untrue,
incorrect or incomplete due to changes occurring due to the operation of the
Acquired Company and the Subsidiaries in the ordinary course, which shall not
individually or in the aggregate have a Material Adverse Effect. Matters
disclosed on each Exhibit shall be deemed disclosed only for purposes of the
matters to be disclosed on such Exhibit and shall not be deemed to be disclosed
for any other purpose unless expressly provided therein.
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3.24 DISCLOSURE AND ABSENCE OF UNDISCLOSED LIABILITIES. No statement
contained herein or in any certificate, schedule, list, exhibit or other
instrument furnished or required to be furnished to Purchaser pursuant to the
provisions hereof contains, or will at the time it is furnished contain, any
untrue statement of any material fact or omits or omit to state a material fact
necessary to make the statements herein or therein not false or misleading. As
used in this Section, "material" means material to the financial condition,
business, properties, rights or operations of the Acquired Company and its
Subsidiaries, taken as a whole.
3.25 NO SPECIAL STOCKHOLDER RIGHTS. Except as disclosed on EXHIBIT 3.25,
the Acquired Company has no agreement with any individual or entity that grants
such person any rights as a stockholder of Acquired Company Stock that are in
addition to such holder's rights under the Acquired Company's Certificate of
Incorporation or Bylaws (including, without limitation, registration rights,
preemptive rights, put rights, rights of co-sale or rights to Board
representation).
IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT.
Purchaser and Parent, jointly and severally, represent and warrant to the
Acquired Company as follows:
4.1 ORGANIZATION AND STANDING.
4.1.1. Each of the Purchaser and Parent is a corporation duly
organized, validly existing and is in good standing under the laws of the
respective jurisdiction of its incorporation and has the requisite corporate
power and authority to carry on its business in the places and as it is now
being conducted and to own and lease the properties and assets that it now
owns or leases.
4.1.2. Each of the Purchaser and the Parent is duly qualified and/or
licensed to transact business and is in good standing as a foreign
corporation in jurisdictions where the character of the property owned or
leased by the Purchaser and the Parent and the nature of the business
conducted by them requires such qualification and/or licensing, except where
the failure to so qualify would not individually or in the aggregate have a
Material Adverse Effect upon the Purchaser and the Parent, taken as a whole.
4.2 CORPORATE POWER AND AUTHORITY. Each of Purchaser and Parent has the
capacity and authority to execute and deliver this Agreement, to perform
hereunder and to consummate the transactions contemplated hereby without the
necessity of any act or consent of any other Person whomsoever. The execution,
delivery and performance by Purchaser and Parent of this Agreement and each and
every agreement, document and instrument provided for herein have been duly
authorized and approved by their respective Boards of Directors (or Executive
Committees thereof). No approval of the stockholders of either Parent or
Purchaser is required to consummate the Merger. Assuming this Agreement, and
each and every other agreement, document and instrument to be executed,
delivered and performed by Purchaser and Parent in connection herewith are valid
and legally binding on the Acquired Company, this Agreement, and each and every
other agreement, document and instrument to be executed, delivered and performed
by Purchaser and Parent in connection herewith, constitute or will, when
executed and delivered, constitute the valid and legally binding obligations of
Purchaser and Parent as applicable, enforceable against each of them in
accordance with their respective terms, except as enforceability may be limited
by applicable equitable principles, or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally. Purchaser is a
wholly-owned subsidiary of Parent.
4.3 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. The execution and
delivery of this Agreement by Purchaser and Parent do not, and the consummation
of the transactions contemplated hereby will not, violate any provisions of the
Certificate of Incorporation, as amended, or Bylaws, as amended, of Purchaser or
of Parent, and violate or constitute an occurrence of default under any
provision of, or
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conflict with, result in acceleration of any obligation under, or give rise to a
right by any party to terminate its obligations under, any mortgage, deed of
trust, conveyance to secure debt, note, loan, lien, lease, agreement,
instrument, or any order, judgment, decree or other arrangement to which
Purchaser or Parent is a party or is bound or by which any of their respective
assets are affected. Except for the applicable requirements of the HSR Act, the
1933 Act, the Exchange Act, applicable Blue Sky laws, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
governmental entity is required to be obtained or made by or with respect to
Purchaser or Parent or any assets, properties or operations of Purchaser or
Parent in connection with the execution and delivery by Purchaser and Parent of
this Agreement or the consummation of the transactions contemplated hereby.
4.4 RESERVATION OF SHARES. Purchaser will, prior to the Merger, in
accordance with the terms thereof, have available shares of Parent Stock
sufficient to complete the Merger. The shares of Parent Stock will, upon
issuance in the Merger, be validly issued, fully paid and non-assessable.
4.5 INFORMATION. Parent has made available to the Acquired Company each
registration statement, schedule, report, proxy statement or information
statement it has filed with the Securities and Exchange Commission since January
1, 1996 (collectively, the "Parent Reports"). As of the date of this Agreement,
the Parent Reports, taken together with information previously furnished by
Parent to the Acquired Company, did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading. As used in this Section, "material" means
material to the financial condition, business, properties, rights or operations
of Parent together with its subsidiaries (including Purchaser), taken as a
whole.
4.6 CAPITALIZATION. The entire authorized capital stock of the Parent
consists of 251,000,000 shares of stock, of which 250,000,000 shares are
designated Common Stock, par value $0.05 per share, and 1,000,000 shares are
designated Preferred Stock, without par value. Of the total authorized Common
Stock, as of August 31, 1997, One Hundred Ninety-Nine Million Eighty-Seven
Thousand Nine Hundred Twenty (199,087,920) shares were issued and outstanding
and Twenty-Nine Million One Hundred Seventy Thousand Six Hundred Sixty-One
(29,170,661) shares were held in the Parent's treasury. Of the total authorized
Preferred Stock, no shares have been issued. As of August 31, 1997, there were
options outstanding entitling the optionees thereunder, to acquire in the
aggregate approximately Twelve Million Two Hundred Fifty-Two Thousand Nine
Hundred Fifty (12,252,950) shares of the Parent Stock. All the issued and
outstanding shares of each of the Parent Subsidiaries are owned directly or
indirectly by the Parent free and clear of all liens, claims, charges and
encumbrances of any nature whatsoever. All of the outstanding shares of Parent
Stock (and any shares issued pursuant to presently outstanding options, if
exercised and purchased at the applicable exercise price) where duly authorized
(or will be when issued and the option price paid), validly issued, fully paid
and nonassessable. None of the capital stock of the Parent is entitled to or
subject to preemptive rights. The authorization or consent of no other person or
entity is required in order to consummate the transaction contemplated herein by
virtue of any such person or entity having an equitable or beneficial interest
in the Parent or any Subsidiary.
V. CONDITIONS PRECEDENT TO RESPECTIVE OBLIGATIONS OF THE PARTIES.
The obligations of Purchaser and Parent, on the one hand, and of the
Acquired Company, on the other hand, to consummate, or cause to be consummated,
the Merger shall be contingent upon and subject to the satisfaction, on or
before the Closing, of each and every one of the following conditions, any one
or more of which may be waived in writing by such parties.
5.1 ACTIONS OF GOVERNMENTAL AUTHORITIES. There shall not have been
instituted or be pending any action, proceeding, application, claim or
counterclaim by any government or governmental authority or agency, domestic or
foreign, and Purchaser, Parent or the Acquired Company shall not have been
notified by any such government, governmental authority or agency (or a
representative thereof) of its present
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intention to commence, or recommend the commencement of, such an action or
proceeding, that (i) challenges the acquisition by Purchaser or Parent of the
Acquired Company Stock, restrains or prohibits or seeks to restrain or prohibit
the making or consummation of the Merger or restrains or prohibits or seeks to
restrain or prohibit the performance of this Agreement; (ii) prohibits or limits
or seeks to prohibit or limit the ownership or operation by Purchaser or Parent
of all or any substantial portion of the business or assets of the Acquired
Company or any of the Subsidiaries or of Purchaser, Parent or any of their
respective subsidiaries or compels or seeks to compel Purchaser or Parent to
dispose of or to hold separate all or any substantial portion of the business or
assets of the Acquired Company or any of the Subsidiaries or of Purchaser,
Parent or any of their respective subsidiaries, or imposes or seeks to impose
any material limitation on the ability of Purchaser or Parent to conduct such
business or to own such assets; or (iii) imposes or seeks to impose limitations
on the ability of Purchaser or Parent (or any other affiliate of Purchaser) to
acquire or hold or to exercise full rights of ownership of the Surviving
Corporation, including, but not limited to, the right to vote such shares on all
matters properly presented to the stockholders of the Surviving Corporation.
5.2 OTHER LEGAL ACTIONS. There shall not have been any statute, rule,
regulation, order or injunction enacted, promulgated, entered, enforced, deemed
applicable to the Merger or this Agreement or proposed by any government,
governmental authority or agency or court, domestic or foreign, and no claim or
action shall have been instituted by any Person before a court, government or
governmental authority or agency, that could in the reasonable expectation of
Purchaser and Parent on the one hand, or the Acquired Company on the other hand,
result in any of the consequences specifically set forth in clauses (i) through
(iii) of Section 5.1 above.
5.3 LEGAL APPROVALS. The execution and the delivery of this Agreement and
the consummation of the transactions contemplated hereby shall have been
approved by all regulatory authorities whose approvals are required by law and
the waiting period under the HSR Act shall have expired or have been terminated.
5.4 STOCKHOLDER APPROVAL. This Agreement and the Merger and any related
matters shall have been adopted and approved by the affirmative vote of the
holders of the outstanding shares of Acquired Company Stock by the vote required
by, and in accordance with, the Delaware Code.
5.5 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective by the SEC, and no stop order suspending
effectiveness shall have been issued, and no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing. The shares of Parent Stock to be issued or sold
pursuant to the Registration Statement shall have been registered for issuance
under all applicable Blue Sky laws or shall be exempt from such registration,
and no stop order shall have been issued with respect to the issuance or sale of
such securities by any Blue Sky authority.
5.6 NASDAQ APPROVAL. The Parent Stock issuable in the Merger shall have
been listed or approved for listing upon notice of issuance by the Nasdaq Stock
Market, Inc.
5.7 FAIRNESS OPINION. The Board of Directors of the Acquired Company shall
have received an opinion from BT Alex. Brown Incorporated, its financial
advisor, dated as of the date of the mailing to the stockholders of the Acquired
Company of the proxy statement/prospectus included within the Registration
Statement confirming the opinion referred to in Section 3.2.3 hereof.
VI. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND PARENT.
In addition to the conditions set forth in Article V above, all the
obligations of Purchaser and Parent to consummate, or cause to be consummated,
the Merger shall be contingent upon and subject to the satisfaction, on or
before the Closing, of each and every one of the following conditions. The
following conditions are for the sole benefit of Purchaser and Parent and may be
asserted by Purchaser or Parent
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regardless of the circumstances giving rise to any such condition and may be
waived by Purchaser or Parent (which action shall be deemed a waiver by both
Purchaser and Parent), in whole or in part, at any time and from time to time,
in the sole discretion of Purchaser or Parent. The failure by either Purchaser
or Parent at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any other right, and each right shall be deemed an ongoing
right that may be asserted at any time and from time to time.
6.1 REPRESENTATIONS OF ACQUIRED COMPANY. All representations and
warranties of the Acquired Company contained in this Agreement (except as
affected by the transactions contemplated by this Agreement), in the statements
contained in the Exhibits hereto or in any certificate delivered by the Acquired
Company pursuant to this Agreement shall be true and correct when made, and
shall be true and correct at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date,
in each case as if none of such representations and warranties contained any
qualifications as to materiality or the absence of Material Adverse Effect,
provided, however, that notwithstanding the foregoing, this condition shall be
deemed to be satisfied if all breaches of such representations and warranties,
after giving effect to the foregoing, do not individually or in the aggregate
constitute a Material Adverse Effect on the Acquired Company.
6.2 COVENANTS OF ACQUIRED COMPANY. The Acquired Company shall have, or
caused to be, performed and observed all covenants, agreements and conditions
hereto to be performed or observed at or before the Closing Date.
6.3 NO CHANGE TO THE ACQUIRED COMPANY. Since the date of this Agreement
there shall not have been any change or changes in the business, properties,
rights or operations of the Acquired Company or its Subsidiaries, which
individually or in the aggregate constitute a Material Adverse Effect on the
Acquired Company.
6.4 CERTIFICATE. Purchaser shall have received a certificate of the Chief
Executive Officer of the Acquired Company, dated as of the Closing Date,
certifying as to the matters set forth in Sections 6.1 through 6.3 above. In
addition, Parent shall have received both a certificate dated as of the
effective date of the Registration Statement and a certificate dated as of the
Closing Date certifying that the covenants set forth in Sections 2.3.1 and 2.3.2
hereof have been performed and that the representations set forth in Sections
3.21 and 3.24 hereof are true and correct as of such dates.
6.5 OPINION OF ACQUIRED COMPANY'S COUNSEL. Purchaser and Parent shall have
received an opinion of counsel for the Acquired Company in customary form
reasonably acceptable to Purchaser.
6.6 TAX OPINION. Purchaser and Parent shall have received an opinion from
their counsel, dated as of the date the Registration Statement is declared
effective and not withdrawn or materially modified as of the Closing Date, to
the effect that the Merger will qualify as a reorganization pursuant to Section
368(a) of the Tax Code, which opinion shall be substantially in the form of
EXHIBIT 6.6 hereto.
6.7 AFFILIATES AND PRINCIPAL STOCKHOLDERS. Purchaser and Parent shall have
received the Rule 145 Letters and the Pooling Letters from the persons and at
the times specified in Section 2.4, and the letters referenced in Section 2.13.
6.8 ADDITIONAL INSTRUMENTS. The Acquired Company shall have delivered to
Purchaser or Parent certified copies of resolutions duly adopted by the Acquired
Company's Board of Directors and stockholders, approving the Merger and
authorizing the transactions contemplated hereby, and such other or additional
instruments, consents, waivers, approvals, endorsements and documents as Parent
and Purchaser reasonably deem to be necessary to enable the Merger to be
consummated as provided in this Agreement. All other proceedings in connection
with the Merger and the other transactions contemplated hereby, and all
instruments, consents, waivers, approvals, endorsements and documents referred
to hereunder or otherwise incident to such transactions, shall have been
obtained and be reasonably satisfactory in form and substance to Parent and
Purchaser and their counsel, including, without limitation, those consents,
waivers and approvals referred to in Section 2.9 hereof.
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6.9 ACCOUNTANTS' POOLING LETTERS. Parent shall have received letters from
Coopers & Lybrand L.L.P. and Arthur Andersen LLP, dated as of the effective date
of the Registration Statement and as of the Closing Date, in each case addressed
to Parent advising it, as set forth in Section 2.3.2 hereof, regarding the
appropriateness of accounting for the Merger as a pooling of interests, which
letters shall be substantially in the form of EXHIBITS 2.3.2(A) and 2.3.2(B),
respectively.
6.10 ACCOUNTANT'S COMFORT LETTERS. Purchaser and Parent shall have
received letters from Coopers & Lybrand L.L.P. dated as of the effective date of
the Registration Statement and as of the Closing Date, in each case addressed to
Purchaser and Parent, containing such matters as are customarily contained in
auditors' letters regarding the Acquired Company Information provided expressly
for inclusion in such Registration Statement, and in form and substance
reasonably satisfactory to Parent.
6.11 COVENANTS NOT TO COMPETE. Purchaser shall have received executed
non-competition agreements from each of those persons listed on EXHIBIT 6.11(A),
with each such agreement in the form of EXHIBIT 6.11(B) hereto (a "Covenant Not
to Compete").
6.12 FEE LIMITATION. The only fees and expenses to any investment banking
firm or similar entity that will be incurred by Acquired Company in connection
with the transaction with Parent and Purchaser will be the fees and expenses of
BT Alex. Brown Incorporated, Hambrecht & Quist LLC and The G.W. Carmany Co.,
Inc., which shall be consistent with the engagement letters entered into by BT
Alex. Brown Incorporated, Hambrecht & Quist LLC and The G.W. Carmany Co., Inc.,
dated April 4, 1997, May 26, 1997 and April 14, 1997, respectively, and shall
not exceed the sums set forth on EXHIBIT 6.12 hereto.
VII. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRED COMPANY.
All the obligations of the Acquired Company to consummate the Merger shall
be contingent upon and subject to the satisfaction, on or before the Closing, of
each and every one of the following conditions. The following conditions are for
the sole benefit of the Acquired Company and may be asserted by the Acquired
Company regardless of the circumstances giving rise to any such condition and
may be waived by the Acquired Company, in whole or in part, at any time and from
time to time, in the sole discretion of the Acquired Company for purposes of
consummating the transactions contemplated herein. The failure by the Acquired
Company at any time to exercise any of the foregoing rights shall not be deemed
a waiver of any other right, and each right shall be deemed an ongoing right
that may be asserted at any time and from time to time.
7.1 REPRESENTATIONS OF PURCHASER AND PARENT. All representations and
warranties made by Purchaser and Parent in this Agreement (except as affected by
the transactions contemplated by this Agreement), in the statements contained in
the exhibits hereto or in any certificate delivered by the Purchaser and Parent
pursuant to this Agreement shall be true and correct when made, at and as of the
Closing Date as though such representations and warranties were made or given on
and as of the Closing Date, in each case as if none of such representations and
warranties contained any qualifications as to materiality or the absence of
Material Adverse Effect, provided, however, that notwithstanding the foregoing,
this condition shall be deemed to be satisfied if all breaches of such
representations and warranties, after giving effect to the foregoing, do not
individually or in the aggregate constitute a Material Adverse Effect on the
Purchaser and Parent taken as a whole.
7.2 COVENANTS OF PURCHASER AND PARENT. Purchaser and Parent shall have, or
caused to be, performed and observed in all respects all covenants, agreements
and conditions hereof to be performed or observed by them at or before the
Closing Date.
7.3 CERTIFICATE. The Acquired Company shall have received a certificate of
the President of each of Parent and Purchaser, dated as of the Closing Date,
certifying as to the matters set forth in Sections 7.1 and 7.2 above.
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7.4 OPINION OF PARENT'S AND PURCHASER'S COUNSEL. The Acquired Company
shall have received an opinion of counsel to Parent and Purchaser, dated as of
the Closing Date, in customary form reasonably acceptable to Acquired Company.
7.5 TAX OPINION. The Acquired Company shall have received for the benefit
of its stockholders an opinion from its tax counsel, dated as of the date the
Registration Statement is declared effective and not withdrawn or materially
modified as of the Closing Date, to the effect that the Merger will qualify as a
reorganization pursuant to Section 368(a) of the Tax Code, which opinion shall
be substantially in the form of EXHIBIT 7.5 hereto.
VIII. CLOSING.
8.1 TIME AND PLACE OF CLOSING. Unless another place or date is agreed to
in writing by the Acquired Company and Purchaser, the Closing shall be held at
the offices of counsel to Parent and Purchaser, in Atlanta, Georgia, commencing
at 10:00 a.m. Eastern Time, within two (2) business days of the last to occur of
(i) the expiration or termination of the waiting period under the HSR Act, (ii)
the Merger having been approved by the stockholders of the Acquired Company
pursuant to the Delaware Code and (iii) the satisfaction or waiver of the other
conditions set forth in Articles V, VI and VII. (The actual date of the Closing
is referred in this Agreement as the "Closing Date.")
8.2 TRANSACTIONS AT CLOSING. At the Closing, each of the following
transactions shall occur:
8.2.1. THE ACQUIRED COMPANY'S PERFORMANCE. At the Closing, the
Acquired Company shall deliver to Purchaser and Parent, the following:
(a) copies of the consents and waivers described in Section 2.9;
(b) satisfactory evidences of the approvals described in Section
5.4;
(c) the certificates described in Section 6.4 to be delivered on the
Closing Date;
(d) certificates of compliance or certificates of good standing of
the Acquired Company and of the Subsidiaries, as of the most recent
practicable date, from the appropriate governmental authority of the
jurisdiction of their respective incorporation;
(e) certified copies of resolutions of the Board of Directors and
stockholders of the Acquired Company approving the transactions set forth
in this Agreement;
(f) certificates of incumbency for the officers of the Acquired
Company;
(g) resignations of each trustee of each Benefit Plan;
(h) Certificate of Merger and a Plan of Merger, each in form and
content that complies with the Delaware Code, executed by the Acquired
Company;
(i) the opinion of counsel for the Acquired Company, referenced
inSection 6.5;
(j) the tax opinion described in Section 6.6;
(k) the Rule 145 Letters and Pooling Letters described in Section
2.4;
(l) the letters described in Section 2.13 hereof;
(m) the letters described in Section 2.3.2 hereof;
(n) the letters from Coopers & Lybrand L.L.P. to be delivered by the
Closing Date as described in Section 6.9;
(o) the Covenant Not to Compete fully executed and delivered; and
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(p) such other evidence of the performance of all covenants and
satisfaction of all conditions required of the Acquired Company by this
Agreement, at or prior to the Closing, as Purchaser, Parent or their
counsel may reasonably require.
8.2.2. PERFORMANCE BY PURCHASER AND PARENT. At the Closing, Purchaser
or Parent, as appropriate, shall deliver to the Acquired Company the
following:
(a) the certificate described in Section 7.3;
(b) certificates of incumbency of the officers of Purchaser and of
Parent who are executing this Agreement and the other documents
contemplated hereunder;
(c) certified copies of resolutions of the Boards of Directors of
each of Purchaser and Parent (or Executive Committees thereof) approving
the transactions set forth in this Agreement;
(d) Certificate of Merger and a Plan of Merger, each in form and
content that complies with the Delaware Code, executed by Purchaser;
(e) the opinion of counsel for Purchaser and Parent referenced in
Section 7.4; and
(f) such other evidence of the performance of all the covenants and
satisfaction of all of the conditions required of Purchaser and of Parent
by this Agreement at or before the Closing as the Acquired Company or its
counsel may reasonably require.
IX. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
9.1 Except for the covenants contained in Sections 2.1.6, 2.1.7, 2.1.10,
2.2.2, 2.3.6, 2.3.8, 2.13, 2.14, 2.16 and 11.5, all representations, warranties
and agreements of the parties in this Agreement or in any instrument delivered
pursuant to this Agreement (other than the Covenants Not To Compete) shall not
survive the Closing, and thereafter no party hereto and no officer, director or
employee of any such party shall have any liability whatsoever with respect to
any such representation, warranty or agreement except for liabilities arising
from fraud, willful misconduct or criminal acts.
X. TERMINATION.
10.1 METHOD OF TERMINATION. This Agreement constitutes the binding and
irrevocable agreement of the parties to consummate the transactions contemplated
hereby, the consideration for which is (a) the covenants set forth in Article II
hereof, and (b) expenditures and obligations incurred and to be incurred by
Purchaser and Parent, on the one hand, and by the Acquired Company, on the other
hand, in respect of this Agreement, and this Agreement may be terminated or
abandoned only as follows:
10.1.1. By the mutual consent of the Boards of Directors of the
Acquired Company and Parent, notwithstanding prior approval by the
stockholders of any or all of such corporations;
10.1.2. By the Board of Directors of the Parent in accordance with its
rights under Section 10.3;
10.1.3. By the Board of Directors of the Acquired Company after January
31, 1998, if any of the conditions set forth in Articles V and VII hereof,
to which the Acquired Company's obligations are subject, have not been
fulfilled or waived, unless such fulfillment has been frustrated or made
impossible by any act or failure to act of it or the Subsidiaries; PROVIDED,
HOWEVER, that this Section 10.1.3 shall not be invoked by reason of a
failure to satisfy the condition set forth in Section 5.3 hereof until the
earlier to occur of (i) 45 days after the date on which the Acquired Company
has substantially complied with any request for additional information with
respect to its filing under the HSR Act or (ii) February 16, 1998;
10.1.4. By Purchaser after January 31, 1998, if any of the conditions
set forth in Articles V and VI hereof, to which the obligations of Purchaser
and Parent are subject, have not been fulfilled or
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waived, unless such fulfillment has been frustrated or made impossible by
any act or failure to act of Purchaser or Parent; PROVIDED, HOWEVER, that
this Section 10.1.4 shall not be invoked by reason of a failure to satisfy
the condition set forth in Section 5.3 hereof until the earlier to occur of
(i) 45 days after the date on which both Parent and Purchaser have
substantially complied with any request for additional information with
respect to the Parent's filing under the HSR Act or (ii) February 16, 1998;
10.1.5. By the Board of Directors of the Acquired Company if in the
exercise of its good faith determination, as set forth in Section 2.11, as
to its fiduciary duties to the Acquired Company's stockholders imposed by
law, the Board of Directors of the Acquired Company decides that such
termination is required;
10.1.6. By the Board of Directors of the Acquired Company, if the
Market Value of the Parent Stock is less than $35.00 per share;
10.1.7. By the Board of Directors of Parent if it reasonably estimates
that the aggregate external cost to Parent and Purchaser (e.g., attorneys,
consultants and out-of-pocket copies) of antitrust compliance after the
initial filing required under the HSR Act will exceed $500,000; or
10.1.8. By the Board of Directors of the Acquired Company if it
reasonably estimates that the aggregate external cost to the Acquired
Company (e.g., attorneys, consultants and out-of-pocket copies) of antitrust
compliance after the initial filing required under the HSR Act will exceed
$500,000.
10.2 EFFECT OF TERMINATION.
10.2.1. Except as provided in Section 10.2.2, and except as provided in
the immediately succeeding sentence, in the event of a termination of this
Agreement pursuant to Section 10.1 hereof, each party shall pay the costs
and expenses incurred by it in connection with this Agreement, and no party
(or any of its officers, directors, employees, agents, representatives or
stockholders) shall be liable to any other party for any costs, expenses,
damage or loss of anticipated profits hereunder. In the event of any
termination of this Agreement, the parties shall retain any and all rights
attendant to a breach of any covenant, representation or warranty made
hereunder. Section 2.8.2 of this Agreement shall survive termination hereof.
10.2.2. In the event this Agreement is terminated by the Acquired
Company in accordance with Section 10.1.5, then the Acquired Company shall
promptly pay (i) all reasonable costs and expenses of Purchaser and Parent
incurred in connection with the negotiation and performance of this
Agreement including without limitation fees and expenses of counsel, fees
and expenses of independent public accountants, printing expenses and
registration fees and (ii) to Purchaser a fee in the amount of $10,000,000.
In the case of the payment of the fee described in the preceding sentence,
and provided the Acquired Company has not breached any of the covenants
provided for in Section 2.1.8 or 2.11 hereof other than in an immaterial
respect, payment of such amount shall constitute liquidated damages and
shall be the sole and exclusive remedy of Parent and Purchaser for any and
all damages arising under or in connection with this Agreement, and, upon
payment of such amount, neither the Acquired Company nor any officers,
directors, employees, agents, representatives or stockholders of the
Acquired Company shall have any liability or further obligation to Parent or
Purchaser under or in connection with this Agreement or any termination
hereof.
10.3 RISK OF LOSS. The Acquired Company retains all risk of condemnation,
destruction, loss or damage due to fire or other casualty from the date of this
Agreement up to the Effective Time. If the condemnation, destruction, loss, or
damage is such that the business of the Acquired Company and the Subsidiaries,
taken as a whole, is materially interrupted or curtailed or the assets of the
Acquired Company and the Subsidiaries, taken as a whole, are materially
affected, then Purchaser shall have the right to terminate this Agreement.
A-34
<PAGE>
XI. GENERAL PROVISIONS.
11.1 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
certified mail, return receipt requested, first class postage prepaid, or sent
by Federal Express or similar overnight delivery service with receipt
acknowledged addressed as follows:
<TABLE>
<C> <S>
11.1.1. If to the Acquired Company:
HPR Inc.
245 First Street
Cambridge, MA 02142
Attn: Marcia J. Radosevich, Ph.D.
and to:
Hill & Barlow
One International Place
Boston, MA 02110-2607
Attn: Thomas C. Chase, Esq.
11.1.2. If to Purchaser or Parent:
HBO & Company
301 Perimeter Center North
Atlanta, Georgia 30346
Attn: Mr. Jay P. Gilbertson
and to:
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
Attn: John E. Zamer, Esq.
</TABLE>
11.1.3. If delivered personally, the date on which a notice, request,
instruction or document is delivered shall be the date on which such
delivery is made and, if delivered by mail or by overnight delivery service,
the date on which such notice, request, instruction or document is received
shall be the date of delivery. In the event any such notice, request,
instruction or document is mailed or shipped by overnight delivery service
to a party in accordance with this Section 11.1 and is returned to the
sender as nondeliverable, then such notice, request, instruction or document
shall be deemed to have been delivered or received on the fifth day
following the deposit of such notice, request, instruction or document in
the United States mails or the delivery to the overnight delivery service.
11.1.4. Any party hereto may change its address specified for notices
herein by designating a new address by notice in accordance with this
Section 11.1.
11.2 BROKERS. Purchaser and Parent, jointly and severally, represent and
warrant to the Acquired Company that no broker or finder has acted for them or
any entity controlling, controlled by or under common control with them in
connection with this Agreement. The Acquired Company represents and warrants to
Purchaser and Parent that, except for BT Alex. Brown Incorporated, Hambrecht &
Quist LLC and The G.W. Carmany Co., Inc., no broker or finder has acted for it
or any entity controlling, controlled by or under common control with it in
connection with this Agreement. The Acquired Company agrees to indemnify and
hold harmless Purchaser and Parent against any fee, loss, or expense arising out
of any claim by BT Alex. Brown Incorporated, Hambrecht & Quist LLC and The G.W.
Carmany Co., Inc., or any
A-35
<PAGE>
other broker or finder employed or alleged to have been employed by it or any of
the Subsidiaries or any of the Acquired Company's stockholders. The fees and
expenses of BT Alex. Brown Incorporated, Hambrecht & Quist LLC and The G.W.
Carmany Co., Inc., and any other broker or finder shall be paid by the Acquired
Company, subject to the limitations set forth in Section 6.12 in conjunction
with such other fees set forth in Section 11.5.
11.3 FURTHER ASSURANCES. Each party covenants that at any time, and from
time to time, after the Effective Time, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.
11.4 WAIVER. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived by any
other party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
11.5 EXPENSES. Except as provided in 10.2.2, all expenses incurred by the
parties hereto in connection with or related to the authorization, preparation
and execution of this Agreement and the closing of the transactions contemplated
hereby, including, without limitation of the generality of the foregoing, all
fees and expenses of agents, representatives, counsel and accountants employed
by any such party, shall be borne solely and entirely by the party that has
incurred the same.
11.6 PRESS RELEASES AND DISCLOSURE. In the event that either party
proposes to issue, make or distribute any press release, public announcement or
other written publicity or disclosure prior to the Closing Date that refers to
the transactions contemplated herein, the party proposing to make such
disclosure shall provide a copy of such disclosure to the other parties and
shall afford the other parties reasonable opportunity (subject to any legal
obligation of prompt disclosure) to comment on such disclosure or the portion
thereof which refers to the transactions contemplated herein prior to making
such disclosure.
11.7 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
executors, administrators, successors and assigns.
11.8 HEADINGS. The section and other headings in this Agreement are
inserted solely as a matter of convenience and for reference, and are not a part
of this Agreement.
11.9 ENTIRE AGREEMENT. This Agreement and all agreements referenced
specifically in this Agreement and executed as required by this Agreement
constitute the entire agreement among the parties hereto and supersede and
cancel any prior agreements, representations, warranties, or communications,
whether oral or written (except for the Confidentiality and Standstill Agreement
which shall remain in full force and effect according to the terms thereof),
among the parties hereto relating to the transactions contemplated hereby or the
subject matter herein. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an agreement in
writing signed by the party against whom or which the enforcement of such
change, waiver, discharge or termination is sought.
11.10 GOVERNING LAW. Except to the extent the transactions contemplated
hereby are governed by the Delaware Code, this Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia.
11.11 CONSENT TO ACQUISITION OF VOTING SECURITIES. Pursuant to Section 8
of the Confidentiality and Standstill Agreement, the Acquired Company hereby
consents to the acquisition of the voting securities of the Acquired Company
pursuant to the terms of this Agreement.
11.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
11.13 NO AGREEMENT UNTIL EXECUTED. This Agreement shall not constitute or
be deemed to evidence a contract or agreement among the parties hereto unless
and until executed by all parties hereto, irrespective, of negotiations among
the parties or the exchanging of drafts of this Agreement.
11.14 PRONOUNS. All pronouns used herein shall be deemed to refer to the
masculine, feminine or neuter gender as the context requires.
11.15 EXHIBITS INCORPORATED. All Exhibits attached hereto are an integral
part of this Agreement.
11.16 TIME OF ESSENCE. Time is of the essence in this Agreement.
IN WITNESS WHEREOF, each party hereto has executed or caused this Agreement
to be executed on its behalf, all on the day and year first above written.
<TABLE>
<S> <C> <C>
"PURCHASER":
HBO & COMPANY OF GEORGIA
By: /s/ JAY P. GILBERTSON
-----------------------------------------
Jay P. Gilbertson
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
"PARENT":
HBO & COMPANY
By: /s/ JAY P. GILBERTSON
-----------------------------------------
Jay P. Gilbertson
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
"ACQUIRED COMPANY":
HPR INC.
By: /s/ MARCIA J. RADOSEVICH
-----------------------------------------
Marcia J. Radosevich
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
</TABLE>
A-37
<PAGE>
APPENDIX B
[LETTERHEAD OF BT ALEX. BROWN INCORPORATED]
November 21, 1997
Board of Directors
HPR Inc.
245 First Street
Cambridge, MA 02142
Members of the Board:
HPR Inc. ("HPR"), HBO & Company ("HBOC"), and HBO & Company of Georgia, a
Delaware corporation and a wholly-owned subsidiary of HBOC (the "Merger Sub"),
have entered into an Agreement of Merger dated as of September 27, 1997 (the
"Agreement"). Pursuant to the Agreement, the implementation of which is
contingent on stockholder approval by HPR's stockholders, HPR shall be merged
with and into Merger Sub (the "Merger"), and each share of common stock, $0.01
par value, of HPR (the "HPR Common Stock"), issued and outstanding immediately
prior to the effective time of the Merger will be converted into six tenths
(0.6) of a share (the "Exchange Ratio") of the common stock, $0.05 par value, of
HBOC (the "HBOC Common Stock"). We have assumed, with your consent, that the
Merger will qualify for pooling-of-interests accounting treatment and as a
tax-free transaction for the stockholders of HPR. You have requested our opinion
as to whether the Exchange Ratio is fair, from a financial point of view, to
holders of HPR Common Stock.
BT Alex. Brown Incorporated ("BT Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We have acted as financial advisor to the Board of Directors of HPR in
connection with the Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of the Merger
and a portion of which is payable upon the delivery of this opinion. In the
past, we have provided various financing services for HBOC and various financing
and financial advisory services for HPR and received customary fees for
rendering such services. BT Alex. Brown maintains a market in the common stock
of HPR and HBOC and regularly publishes research reports regarding the health
care industry and the businesses and securities of publicly owned companies in
that industry, including HPR and HBOC. In the ordinary course of business, BT
Alex. Brown may actively trade the securities of both HPR and HBOC for our own
account and the account of our customers and, accordingly, may at any time hold
a long or short position in securities of HPR and HBOC.
B-1
<PAGE>
Board of Directors
HPR Inc.
November 21, 1997
Page 2
In connection with this opinion, we have reviewed certain publicly available
financial information and other information concerning HPR and HBOC and certain
internal analyses and other information furnished to us by HPR and HBOC. We have
also held discussions with members of the senior managements of HPR and HBOC
regarding the businesses and prospects of their respective companies and the
joint prospects of a combined company. In addition, we have (i) reviewed the
reported prices and trading activity for the common stock of both HPR and HBOC,
(ii) compared certain financial and stock market information for HPR and HBOC
with similar information for certain publicly traded companies, (iii) reviewed
the financial terms of certain business combinations which we deemed comparable
in whole or in part, (iv) reviewed the terms of the Agreement, and (v) performed
such other studies and analyses and considered such other factors as we deemed
appropriate.
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to the information relating to the prospects of HPR and
HBOC, we have assumed that such information reflects the best currently
available judgments and estimates of the managements of HPR and HBOC as to the
likely future financial performances of their respective companies and of the
combined entity. In addition, we have not made an independent evaluation or
appraisal of the assets or liabilities of HPR and HBOC, nor have we been
furnished with any such evaluations or appraisals. Our opinion is based on
market, economic and other conditions as they exist and can be evaluated as of
the date of this letter.
Our advisory services and the opinion expressed herein were prepared for the
use of the Board of Directors of HPR and do not constitute a recommendation to
HPR's stockholders as to how they should vote at the stockholders' meeting in
connection with the Merger. We hereby consent, however, to the inclusion of this
opinion as an exhibit to any proxy or registration statement distributed in
connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Exchange Ratio is fair, from a financial point of view,
to holders of HPR Common Stock.
Very truly yours,
/s/ BT Alex. Brown Incorporated
BT ALEX. BROWN INCORPORATED
B-2
<PAGE>
HPR INC.
MEETING OF STOCKHOLDERS - DECEMBER 23, 1997
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HPR INC.
The undersigned stockholder in HPR Inc. (the "Company") hereby appoints
Marcia J. Radosevich, Ph.D., Brian D. Cahill and Thomas C. Chase, and each of
them, attorneys, agents and proxies, with power of substitution to each, to vote
all shares of Common Stock that the undersigned is entitled to vote at a Special
Meeting of Stockholders of the Company to be held at the offices of Hill &
Barlow, a Professional Corporation, 20th Floor, One International Place, Boston,
Massachusetts on Tuesday, December 23, 1997 at 9:00 a.m., Eastern Standard Time,
and any postponements or adjournments thereof, on matters which may properly
come before the Special Meeting, in accordance with and as more fully described
in the Notice of Special Meeting of Stockholders and Proxy Statement/Prospectus,
receipt of which is hereby acknowledged.
The shares represented by this Proxy will be voted as directed by the
undersigned.
IF NO CONTRARY INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED FOR
APPROVAL OF THE MERGER AGREEMENT.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign this Proxy exactly as your name(s) appear(s) on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation, the signature should
be that of an authorized officer who should state his or her title.
<TABLE>
<S> <C>
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- --------------------------------------------------------- ---------------------------------------------------------
- --------------------------------------------------------- ---------------------------------------------------------
- --------------------------------------------------------- ---------------------------------------------------------
</TABLE>
<PAGE>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE.
---------------------------------------------------------------
HPR INC.
---------------------------------------------
<TABLE>
<S> <C> <C>
Mark box at right if you plan to attend the Meeting. / /
Mark box at right if an address change or comment has been
noted on the reverse side of this card. / /
</TABLE>
RECORD DATE SHARES:
To approve the Agreement of Merger dated September 27, 1997 among the
Company, HBO & Company and HBO & Company of Georgia.
/ / FOR / / AGAINST / / ABSTAIN
Please be sure to sign and date
this Proxy.
__________________________________
Date
__________________________________
Stockholder sign here
__________________________________
Co-owner sign here
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
HBO & Company's (the "Company") By-Laws (Article IX, Section 1) provide that
every person who was or is a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation or for its
benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
and pursuant to any procedure specified in the General Corporation Law of the
State of Delaware, as amended from time to time, against all expenses,
liabilities and losses (including attorneys' fees, judgments, fines and amounts
paid or to be paid in settlement) reasonably incurred or suffered by him in
connection therewith. Such right of indemnification shall be a contract right
that may be enforced in any manner by such person. Such right of indemnification
shall not be exclusive of any other right which such directors, officers or
representatives may have or thereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under such article.
Article IX, Section 2 of the Company's By-Laws provides that the Board of
Directors may cause the corporation to purchase and maintain insurance on behalf
of any person who is or was a director or officer of the corporation, or is or
was serving at the request of the corporation as a director or officer of
another corporation, or as its representative in a partnership, joint venture,
trust or other enterprise against any liability asserted against such person and
incurred in any such capacity or arising out of such status, whether or not the
corporation would have the power to indemnify such person.
With respect to indemnification of officers and directors, Section 145 of
the Delaware General Corporation Law provides that a corporation shall have the
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Under this provision of
the Delaware General Corporation Law, the termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
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 the 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
II-1
<PAGE>
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 Delaware General Corporation Law enables a Delaware
corporation to include in its certificate of incorporation a provision
eliminating or limiting a director's liability to the corporation or its
stockholders for monetary damages for breaches of a director's fiduciary duty as
a director. The statute provides, however, that liability for (a) breach of the
director's duty of loyalty, (b) acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, (c) the unlawful purchase
or redemption of stock or unlawful dividends or (d) transactions from which a
director derived an improper personal benefit cannot be eliminated or limited in
this manner. The Company's Certificate of Incorporation contains such
provisions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following exhibits are filed as part of this Registration
Statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2 Agreement of Merger dated September 27, 1997 by and among HBO & Company, HBO & Company of Georgia and
HPR Inc. (included as Appendix A to the Proxy Statement/ Prospectus contained in Part I of this
Registration Statement).
5 Opinion of Jones, Day, Reavis & Pogue re legality.
8 Opinion of Hill & Barlow re tax matters.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of Coopers & Lybrand L.L.P.
23(c) Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
23(d) Consent of Hill & Barlow (included in Exhibit 8).
24* Power of Attorney.
99(a) Consent of BT Alex. Brown Incorporated.
</TABLE>
- ------------------------
* Previously filed.
The following exhibits filed with the Securities and Exchange Commission are
incorporated by reference as shown below.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
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 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.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
ON JULY 20, 1994, AS PART OF THE FORM S-4 REGISTRATION STATEMENT DATED JULY 19, 1994, AS AMENDED BY
AMENDMENT NO. 1 TO FORM S-4 DATED AUGUST 10, 1994, AND FILED WITH THE COMMISSION ON AUGUST 11, 1994,
AND FURTHER AMENDED BY AMENDMENT NO. 2 TO FORM S-4 DATED AUGUST 10, 1994, AND FILED WITH THE
COMMISSION AUGUST 11, 1994:
3 --Amended HBO & Company Bylaws.
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 of HBO & Company.
ON MAY 9, 1995, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-59173):
4 --HBO & Company 1986 Nonqualified Stock Option Agreement, HBO & Company 1991 Nonqualified Stock Option
Agreement 1 and HBO & Company 1991 Nonqualified Stock Option Agreement 2.
ON OCTOBER 5, 1995, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 33-63213):
4 --1985 Employee Stock Option Plan of CliniCom Incorporated.
ON MAY 21, 1996, AS PART OF ITS FORM 8-K DATED MAY 21, 1996, AND FILED WITH THE COMMISSION ON MAY 21,
1996:
3(i) --HBO & Company Certificate of Incorporation, as amended.
ON AUGUST 22, 1996, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-10603):
4 --CyCare Systems, Inc. 1995 Long-term Incentive Plan (including the predecessor CyCare Systems, Inc.
Stock Option Plan).
ON DECEMBER 10, 1996, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-17583):
4(a) --GMIS Inc. Non-Qualified Stock Option Agreement Between GMIS Inc. and Josephine G. Kaple.
4(b) --GMIS Inc. Non-Qualified Stock Option Agreement Between GMIS Inc. and Lawrence Keonig.
ON DECEMBER 10, 1996, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-17551):
4 --GMIS Inc. 1991 Stock Option Plan.
ON DECEMBER 10, 1996, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-17579):
4 --Gabreili Medical Information Systems, Inc. 1984 Stock Option Plan.
ON DECEMBER 10, 1996, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-17555):
4 --GMIS Inc. 1995 Stock Option Plan.
ON DECEMBER 10, 1996, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-10479):
4 --Gabreili Medical Information Systems, Inc. 1985 Non-Qualified Common Stock Option Plan.
ON JUNE 17, 1997, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-29365:
4 --AMISYS Managed Care System, Inc. Directors' Stock Option Plan.
ON JUNE 17, 1997, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-29367:
4 --AMISYS Managed Care System, Inc. 1994 Equity Incentive Plan.
ON JUNE 30, 1997, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-30373):
4 --Enterprise Systems, Inc. Long Term Incentive Plan
</TABLE>
II-3
<PAGE>
(b) Financial Statement Schedules.
No financial statement schedules are required to be filed herewith.
(c) The opinion of BT Alex. Brown Incorporated is included as Appendix B to
the Proxy Statement/ Prospectus contained in Part I of this Registration
Statement.
ITEM 22. UNDERTAKINGS.
(a) (i) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(ii) (1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the meaning
of Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(iii) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, in
the State of Georgia, on the 20th day of November, 1997.
<TABLE>
<CAPTION>
HBO & COMPANY
<S> <C> <C>
By: /s/ CHARLES W. MCCALL
-----------------------------------------
Charles W. McCall
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- -------------------------------------------- -------------------------------------------- ----------------------
<S> <C> <C>
/s/ CHARLES W. MCCALL Director, President and Chief Executive
---------------------------------- Officer (Principal Executive Officer)
(Charles W. McCall) November 20, 1997
/s/ JAY P. GILBERTSON President, Co-Chief Operating Officer, Chief
---------------------------------- Financial Officer, Principal Accounting
(Jay P. Gilbertson) Officer, Treasurer and Secretary
(Principal Financial Officer and Principal
Accounting Officer) November 20, 1997
* Chairman of the Board of Directors
----------------------------------
(Holcombe T. Green, Jr.)
* Director
----------------------------------
(Alfred C. Eckert III)
* Director
----------------------------------
(Philip A. Incarnati)
* Director
----------------------------------
(Alton F. Irby III)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- -------------------------------------------- -------------------------------------------- ----------------------
<S> <C> <C>
* Director
----------------------------------
(Gerald E. Mayo)
* Director
----------------------------------
(James V. Napier)
* Director
----------------------------------
(Donald C. Wegmiller)
By: /s/ CHARLES W. MCCALL
----------------------------------
*Charles W. McCall
Attorney-in-Fact November 20, 1997
By: /s/ JAY P. GILBERTSON
----------------------------------
*Jay P. Gilbertson
Attorney-in-Fact November 20, 1997
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE
- --------- ---------
<S> <C> <C>
2 Agreement of Merger dated September 27, 1997 by and among HBO & Company, HBO & Company of Georgia
and HPR Inc. (included as Appendix A to the Proxy Statement/Prospectus contained in Part I of
this Registration Statement).
5 Opinion of Jones, Day, Reavis & Pogue re legality.
8 Opinion of Hill & Barlow re tax matters.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of Coopers & Lybrand L.L.P.
23(c) Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5).
23(d) Consent of Hill & Barlow (included in Exhibit 8).
24* Power of Attorney.
99(a) Consent of BT Alex. Brown Incorporated.
</TABLE>
- ------------------------
* Previously filed.
<PAGE>
EXHIBIT 5
JONES, DAY, REAVIS & POGUE
3500 SUNTRUST PLAZA
303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308
(404) 521-3939
NOVEMBER 20, 1997
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 10,586,554 shares of Common
Stock, $.05 par value per share, of the Company (the "Shares"), to be issued by
the Company pursuant to a Registration Statement on Form S-4 (File No.
333-40087) (the "Registration Statement"), filed with the Securities and
Exchange Commission to which this opinion appears as Exhibit 5.
We have examined originals or certified or photostatic copies of such
records of the Company, certificates of officers of the Company, and public
officials and such other documents as we have deemed relevant or necessary as
the basis of the opinion set forth below in this letter. In such examination, we
have assumed the genuineness of all signatures, the conformity to original
documents submitted as certified or photostatic copies, and the authenticity of
originals of such latter documents. Based on the foregoing, we are of the
following opinion:
The Shares have been duly authorized and, when issued by the Company in the
manner described in the Registration Statement, will be validly issued,
fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and the reference to this Firm under the heading "Certain
Legal Matters" in the Proxy Statement/Prospectus constituting part of the
Registration Statement.
Sincerely,
/s/ Jones, Day, Reavis & Pogue______________
JONES, DAY, REAVIS & POGUE
<PAGE>
EXHIBIT 8
[HILL & BARLOW LETTERHEAD]
NOVEMBER 21, 1997
HPR Inc.
245 First Street
Cambridge, Massachusetts 02142
Ladies and Gentlemen:
This opinion is being delivered in connection with the Agreement of Merger
("Merger Agreement"), dated as of September 27, 1997, by and among HBO & Company
("Parent"), HBO & Company of Georgia ("Purchaser"), and HPR Inc. ("Acquired
Company"). Pursuant to the Merger Agreement, Acquired Company will merge with
and into Purchaser (the "Merger"), and Purchaser will be the survivor. This
opinion is issued with respect to certain Federal income tax consequences of the
Merger. Reference to such opinion is made in the Proxy Statement/Prospectus of
Parent and Acquired Company, dated November 21, 1997 (the "Proxy
Statement/Prospectus").
All capitalized terms not otherwise defined herein have the meaning assigned
to them in the Merger Agreement. All section references, unless otherwise
indicated, are to the Internal Revenue Code of 1986, as amended (the "Code").
We have acted as legal counsel to Acquired Company in connection with the
Merger. As such, and for the purpose of rendering this opinion, we have examined
(or will examine on or prior to the Effective Time of the Merger) and are
relying (or will rely) upon (without any independent investigation or review
thereof) the truth and accuracy, at all relevant times, of the statements,
covenants, representations and warranties contained in the following documents:
1. The Merger Agreement;
2. The Proxy Statement/Prospectus;
3. Representations made to us by Parent and Purchaser;
4. Representations made to us by Acquired Company;
5. Representations made to us by certain holders of five percent (5%)
or more of the Acquired Company stock;
6. Such other documents, records and matters of law as in our judgment
were necessary or appropriate.
In connection with rendering this opinion, we have assumed (without any
independent investigation or review thereof) that original documents (including
signatures) are authentic, that documents submitted to us as copies conform to
the original documents, and that there has been (or will be by the Effective
Time of the Merger) due execution and delivery of all documents where due
execution and delivery are prerequisites to the effectiveness thereof. We have
assumed that the Merger will be consummated pursuant to applicable state law in
accordance with the Merger Agreement and as described in the Proxy
Statement/Prospectus.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, for Federal income tax purposes:
<PAGE>
1. The Merger will qualify as a reorganization pursuant to Section
368(a) of the Code;
2. No gain or loss will be recognized by Acquired Company as the result
of the consummation of the Merger;
3. No gain or loss will be recognized by an Acquired Company
stockholder upon the exchange of the shares of Acquired Company Common Stock
for shares of Parent Common Stock pursuant to the Merger, except on the
receipt of cash in lieu of a fractional share interest in Parent Common
Stock;
4. The aggregate adjusted tax basis of shares of Parent Common Stock
received (including fractional share interests deemed received) by an
Acquired Company stockholder as the result of the Merger will be the same as
the aggregate adjusted tax basis of the shares of Acquired Company Common
Stock surrendered in exchange therefor;
5. The holding period of the shares of Parent Common Stock received
(including fractional share interests deemed received) by an Acquired
Company stockholder as a result of the Merger will include the holding
period of the shares of Acquired Company Common Stock surrendered in
exchange therefor, provided that such Acquired Company Common Stock is held
as a capital asset by the Acquired Company stockholder at the consummation
of the Merger; and
6. An Acquired Company stockholder who receives cash in lieu of a
fractional interest in a share of Parent Common Stock will be treated as if
the fractional share were distributed as part of the exchange and then as
having received a cash distribution in redemption of such fractional share,
which would be taxed as provided in Section 302 of the Code.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment
regarding the application of Federal income tax laws arising under the Code,
existing judicial decisions, administrative regulations and published
rulings and procedures. Our opinion is not binding upon the Internal Revenue
Service or the courts, and we cannot provide assurance that the Internal
Revenue Service will not assert a contrary position. Furthermore, we cannot
provide assurance that future legislative, judicial or administrative
changes would not, on either a prospective or retroactive basis, adversely
affect the accuracy of the conclusions stated herein. Moreover, we undertake
no responsibility to advise you of any new developments in the application
or interpretation of the Federal income tax laws as they might relate to
this opinion.
2. This opinion addresses only whether the Merger will qualify as a
reorganization under Section 368(a) of the Code and the tax consequences
listed above. The opinion does not address any other Federal, state, local
or foreign tax consequences that may result from the Merger or any other
transaction.
3. No opinion is expressed as to any transaction other than the Merger
as described in the Merger Agreement. Moreover, we have assumed that all the
transactions described in the Merger Agreement have been or will be
consummated in accordance with the terms of such Merger Agreement and
without waiver or breach of any material provision thereof and that all of
the representations, warranties, statements and assumptions upon which we
have relied remain true and accurate at all relevant times. In the event
that any of these assumptions upon which we have relied is incorrect, this
opinion may be adversely affected and be unable to be relied upon.
4. This opinion has been delivered to you for the purpose of satisfying
the condition set forth in Section 7.5 of the Merger Agreement and is
intended solely for your benefit. It may not be relied upon for any other
purpose or by any other person or entity, and may not be made available to
any other person or entity, without our prior written consent.
5. We hereby consent to the filing of this opinion as Exhibit 8 to the
Registration Statement on Form S-4 (File No. 333-40087) filed with the
Securities and Exchange Commission by Parent and the
<PAGE>
reference to this firm under the headings "Certain Federal Income Tax
Consequences" and "Certain Legal Matters" in such Registration Statement.
Very truly yours,
Hill & Barlow, a Professional
Corporation
/s/ Miriam V. Sheehan___________________
Miriam V. Sheehan,
a Member of the Firm
<PAGE>
EXHIBIT 23(A)
[ARTHUR ANDERSEN LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our reports dated
February 6, 1997 included or incorporated by reference in HBO & Company's Form
10-K for the year ended December 31, 1996 and to all references to our firm
included in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Atlanta, Georgia
November 17, 1997
<PAGE>
EXHIBIT 23(B)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of HBO & Company on Form S-4 of our report dated August 1, 1997, on our audits
of the consolidated financial statements of HPR Inc. as of June 30, 1997 and
1996, and for the years ended June 30, 1997, 1996 and 1995, which report is
included in the Annual Report on Form 10-K of HPR Inc. for the year ended June
30, 1997. We also consent to the reference to our firm under the caption
"Experts".
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 20, 1997
<PAGE>
EXHIBIT 99(A)
[LETTERHEAD OF BT ALEX. BROWN INCORPORATED]
November 21, 1997
The Board of Directors
HPR Inc.
245 First Street
Cambridge, Massachusetts 02142
Members of the Board:
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of HPR Inc. ("HPR") as Appendix B to the Proxy Statement/Prospectus of
HPR and HBO & Company ("HBOC") relating to the proposed merger transaction
involving HPR and HBOC. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under, and we do not
admit that we are "experts" for purposes of, the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
By: /s/ BT ALEX. BROWN INCORPORATED
------------------------------------------
BT ALEX. BROWN INCORPORATED
