<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
HBO & COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE>
PRELIMINARY COPY
HBO & COMPANY
301 PERIMETER CENTER NORTH
ATLANTA, GEORGIA 30346
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1998
To the Stockholders of HBO & Company:
Notice is hereby given that the Annual Meeting of Stockholders of HBO &
Company will be held on Tuesday, May 12, 1998, at 9:00 A.M., local time, at the
offices of the Company at 301 Perimeter Center North, Atlanta, Georgia 30346,
for the following purposes:
1. To elect a Board of Directors consisting of seven members to hold
office until the next Annual Meeting of Stockholders or until their
successors are elected and qualified.
2. To approve the Amendment of the Certificate of Incorporation of the
Company to increase the number of authorized shares of Common Stock from
250,000,000 shares to 1,000,000,000.
3. To approve the HBO & Company 1998 Employee Discount Stock Purchase
Plan.
4. To ratify the appointment of Arthur Andersen LLP as independent
public accountants to audit the accounts of the Company and its subsidiaries
for the year ending December 31, 1998.
5. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
Only stockholders of record at the close of business on March 31, 1998,
shall be entitled to notice of, and to vote at, the meeting or any adjournment
thereof.
A proxy statement and a proxy solicited by the Board of Directors are
enclosed herewith. Whether or not you plan to attend the meeting in person,
please sign, date and mail your proxy card promptly in the enclosed postage-paid
envelope. If you attend the meeting, you may, if you wish, withdraw your proxy
and vote in person.
By order of the Board of Directors,
Jay P. Gilbertson
SECRETARY
April 3, 1998
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE
COMPLETED AND RETURNED PROMPTLY
<PAGE>
HBO & COMPANY
301 PERIMETER CENTER NORTH
ATLANTA, GEORGIA 30346
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of HBO & Company (the "Company") of proxies to be used at the
Annual Meeting of Stockholders to be held on May 12, 1998. This proxy statement
and the accompanying proxy card are being mailed to stockholders on or about
April 3, 1998.
Any stockholder who executes and delivers a proxy may revoke it at any time
prior to its use by executing a later dated proxy. All shares represented by
effective proxies will be voted as specified therein, or, if no direction is
indicated, they will be voted in favor of each of the proposals set forth in the
notice attached hereto, all of which are more fully described herein.
Directors are 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. When a quorum is present at the meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide the action proposed on each matter listed in
the accompanying Notice of Annual Meeting of Stockholders except the proposed
amendment of the Certificate of Incorporation, which must be approved by holders
of a majority of the outstanding shares of Common Stock, and the election of
Directors. Abstentions and broker "nonvotes" will be counted as present in
determining whether the quorum requirement is satisfied. A broker "nonvote"
occurs when a broker holding shares for a beneficial owner votes on one proposal
pursuant to discretionary authority or instructions from the beneficial owner,
but does not vote on another proposal because the broker has not received
instructions from the beneficial owner and does not have discretionary power.
The aggregate number of votes entitled to be cast by all stockholders present in
person or represented by proxy at the meeting, whether those stockholders vote
"For", "Against" or abstain from voting, will be counted for purposes of
determining the minimum number of affirmative votes required for approval of
such proposals, and the total number of votes cast "For" each of these proposals
will be counted for purposes of determining whether sufficient affirmative votes
have been cast. An abstention from voting by a stockholder on a proposal has the
same effect as a vote "Against" such proposal except with respect to the
election of Directors, in which case abstentions will have no effect. Broker
"nonvotes" are not counted for purposes of determining whether a proposal has
been approved.
The cost of soliciting proxies will be borne by the Company. In addition to
the use of the mails, Directors, officers and employees of the Company may
solicit proxies by telephone, telegraph or personal interview, but will not be
compensated for such solicitation. The Company has retained D.F. King & Co.,
Inc. to assist in the solicitation of proxies for a fee of $9,000 plus expenses.
Brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward soliciting material to their principals, and the Company
will, upon request, reimburse them for the reasonable expense of doing so. Only
stockholders of record as of March 31, 1998, are entitled to vote at the
meeting. The number of shares of Common Stock outstanding and entitled to vote
as of March 31, 1998, was [ ]. Each share is entitled to one vote. All
share and per share amounts have been restated to reflect the 1997 stock split
effected in the form of a stock dividend.
ELECTION OF DIRECTORS
The Bylaws of the Company currently provide that the Board of Directors
shall consist of not less than three nor more than fifteen Directors, subject to
increase or decrease in such number within legal limits by action of the Board
of Directors or the stockholders. There are presently seven Directors. Directors
shall
<PAGE>
be elected to serve until the next Annual Meeting of Stockholders or until their
successors are elected and qualified.
In the event that any nominee withdraws, or for any reason is unable to
serve as a Director, the proxies will be voted for such other person as may be
designated by the Board of Directors as a substitute nominee, but in no event
will proxies be voted for more than seven nominees. Management of the Company
has no reason to believe that any nominee will not continue to be a candidate or
will not serve if elected. Each nominee is currently a Director of the Company.
The following sets forth as of March 1, 1998, certain biographical
information and business experience for the past five years for each of the
nominees:
<TABLE>
<S> <C>
ALFRED C. ECKERT III Mr. Eckert, age 50, has been President of Greenwich Street
Capital Partners, Inc., a private investment firm, since
January 1994 and has been a Principal of Greycliff Partners,
a private investment firm, since December 1991. Mr. Eckert
is a Director of Day International, Inc., Georgia Gulf
Corporation and Telex Corporation. He has been a Director of
the Company since 1990.
PHILIP A. INCARNATI Mr. Incarnati, age 43, has been President and Chief
Executive Officer of McLaren Health Care Corporation, a
fully-integrated healthcare delivery system, since June
1989. He has been a Director of the Company since 1995.
ALTON F. IRBY III Mr. Irby, age 58, has been Deputy Chairman of NatWest
Markets Global Corporate Advisory Limited, since October
1996, when it acquired J.O. Hambro Magan Irby & Co. and has
served as Chief Executive since August 1997. Mr. Irby had
been a Founding Partner in J.O. Hambro Magan Irby & Co.
since its formation in 1988 and had served as Deputy
Chairman since March 1994. He has been a Director of the
Company since 1990.
GERALD E. MAYO Mr. Mayo, age 65, has served as Chairman and, until January
1996, as President of Midland Financial Services, Inc., the
holding company for The Midland Life Insurance Company which
is the successor to The Midland Mutual Life Insurance
Company, a life insurance and annuities company, since
December 1994. Mr. Mayo served the predecessor company in
similar capacities for over five years. Mr. Mayo is a
Director of The Columbia Gas System, Inc. and Borror
Corporation. He has been a Director of the Company since
1991.
CHARLES W. MCCALL Mr. McCall, age 54, has been President, Chief Executive
Officer and a Director of the Company since January 1991 and
has served as Chairman of the Board of Directors since
February 1998. Mr. McCall is also a Director of AMERIGROUP
Corporation, EIS International, Inc., and WestPoint Stevens
Inc.
JAMES V. NAPIER Mr. Napier, age 61, has served as the Chairman of the Board
of Directors of Scientific-Atlanta, Inc., a communications
equipment manufacturer, since November 1992 and served as
Acting Chief Executive Officer from December 1992 to July
1993. Mr. Napier has
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
been a private investor for more than five years. Mr. Napier
is a Director of Engelhard Corporation, Intelligent Systems
Corporation, Vulcan Materials Corporation, Personnel Group
of America, Inc. and Westinghouse Air Brake Company. He has
been a Director of the Company since 1981.
DONALD C. WEGMILLER Mr. Wegmiller, age 59, has been President and Chief
Executive Officer of Management Compensation
Group/HealthCare Compensation, an executive and physician
compensation consulting firm, since April 1993. He was Vice
Chairman and President of HealthSpan Health Systems
Corporation from November 1992 to April 1993. Mr. Wegmiller
is a Director of Medical Graphics Corporation, Possis
Medical Corporation, Minnesota Power & Light Company,
SelectCare, Inc. and Lec Tec Corporation. He has been a
Director of the Company since 1988.
</TABLE>
During the year ended December 31, 1997, the Board of Directors held four
meetings and two telephonic meetings. The Company has an Audit Committee, a
Stock Option and Compensation Committee and an Executive Committee. The Audit
Committee, comprised of Messrs. Incarnati, Napier, and Wegmiller, is responsible
for recommending to the Board of Directors the independent public accountants to
be retained for the year. The Audit Committee met twice during 1997 with the
independent auditors and the Company's management to review internal accounting
controls, audit plans and results, and accounting principles and practices. The
Stock Option and Compensation Committee, comprised of Messrs. Eckert, Irby, and
Mayo, met twice during 1997. The Stock Option and Compensation Committee makes
recommendations to the Board of Directors concerning the compensation to be paid
to all executive officers and Directors and administers the Company's stock
option plans. During 1997, the Executive Committee, which acts in the absence of
the Board of Directors, held no meetings. The members are Messrs. McCall and
Napier and Mr. Holcombe T. Green also served as a member until his resignation
from the Board of Directors. The Company has designated a Nominating Committee
composed of Messrs. McCall and Napier. The Nominating Committee will have the
responsibility to make recommendations for Board membership, rotation and
retirement and will serve as the committee responsible for the Board policy and
corporate governance matters. Inasmuch as the Nominating Committee has not yet
met, no procedures regarding recommendations of nominees by stockholders to such
committee have been adopted. The Company has no other standing committees.
During 1997, with the exception of Mr. Irby who missed one meeting and a
telephonic meeting, no member of the Board of Directors attended fewer than 75%
of the total of the meetings of the Board of Directors and the committees of
which he was a member. Officers are appointed by and serve at the pleasure of
the Board of Directors. No Director or officer is related to any other Director
or officer of the Company. On February 10, 1998 Mr. Holcombe T. Green resigned
as Chairman of the Board and, effective February 28, 1998, resigned as a
Director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE NOMINEES.
3
<PAGE>
COMPENSATION OF DIRECTORS
During 1997, Directors who were not officers of the Company received a
retainer of $5,000 per quarter and $1,000 for each Board and/or committee
meeting attended, with the exception of the former Chairman, Mr. Green, who
received $11,000 per quarter plus $1,000 for each Board meeting attended. In
addition, nonemployee Directors received annual grants of options to purchase
20,000 shares of Common Stock upon re-election. During 1997, no fees were paid
to any Director who was employed by the Company.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 1, 1998, certain information
with respect to all stockholders known to the Company to beneficially own more
than five percent of its Common Stock, and information with respect to the
Company's Common Stock beneficially owned by each Director of the Company, the
executive officers of the Company included in the Summary Compensation Table set
forth under the caption "Executive Compensation" and all Directors and executive
officers of the Company as a group. Except as otherwise indicated, the
stockholders listed in the table have sole voting and investment powers with
respect to the Common Stock owned by them and beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- --------------------------------------------------------- ------------------ -----------
<S> <C> <C>
American Express Financial Corporation................... 10,726,428(1) 5.0%
200 Vesey Street
New York, New York 10285
FMR Corp................................................. 11,466,215(2) 5.4%
82 Devonshire Street
Boston, Massachusetts 02109
Putnam Investments, Inc.................................. 16,951,766(3) 7.9%
One Post Office Square
Boston, Massachusetts 02109
Alfred C. Eckert III..................................... 1,000(4) *
Philip A. Incarnati...................................... 40,000(5) *
Alton F. Irby III........................................ 86,000(6) *
Gerald E. Mayo........................................... 164,000(5) *
Charles W. McCall........................................ 2,081,105 1.0%
James V. Napier.......................................... 146,076(7) *
Donald C. Wegmiller...................................... 10,000(5) *
Jay P. Gilbertson........................................ 94,176(8) *
Albert J. Bergonzi....................................... 2,216 *
Russell G. Overton....................................... 47,715(9) *
Jay M. Lapine............................................ 17,901(10) *
All Directors and Officers as a Group (11 persons)....... 2,690,189(11) 1.3%
</TABLE>
- ------------------------
* Less than 1%
(1) According to the joint Schedule 13G as of December 31, 1997 of American
Express Company and American Express Financial Corporation, each have shared
voting power with respect to 4,380,528 shares and shared dispositive power
with respect to all of such shares, although American Express Company
disclaims beneficial ownership of all such shares.
4
<PAGE>
(2) According to the Schedule 13G as of December 31, 1997, of FMR Corp. ("FMR"),
FMR has sole dispositive power with respect to all of such shares and sole
voting power with respect to 655,951 shares.
(3) According to the joint Schedule 13G as of December 31, 1997, 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 2,009,400 and 2,883,580 of such shares, respectively,
PIM has shared dispositive power with respect to 14,068,186 of such shares
and PI has shared voting and shared dispositive power with respect to
2,009,400 and 16,951,766 of such shares, respectively.
(4) Represents shares held by Mr. Eckert's wife's IRA.
(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 100,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(8) Includes 75,456 shares that may be acquired through the exercise of
presently exercisable stock options.
(9) Includes 12,005 shares that may be acquired through the exercise of
presently exercisable stock options.
(10) Includes 17,200 shares that may be acquired through the exercise of
presently exercisable stock options.
(11) Includes 498,661 shares that may be acquired through the exercise of
presently exercisable stock options.
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes all stock transaction reports for 1997 required to be
filed with the Securities and Exchange Commission were timely filed by officers
and Directors of the Company, except as follows. One report relating to one
transaction by Russell G. Overton and one report relating to two transactions by
Mr. McCall were filed late in 1997. In addition, a report regarding a gift by
Mr. McCall in 1996 was not timely filed.
5
<PAGE>
EXECUTIVE COMPENSATION
CASH COMPENSATION. The following tables set forth certain information as to
the Chief Executive Officer and the four most highly compensated executive
officers of the Company at December 31, 1997 whose cash compensation exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
-------------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
NAME AND --------------------- STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($)(1) SARS(#) COMPENSATION($)
- --------------------------------- --------- --------- ---------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Charles W. McCall 1997 575,000 1,150,000 N/A 250,000 49,903(2)
President and 1996 525,000 1,050,000 N/A 200,000 95,573
Chief Executive Officer 1995 520,833 669,375 118,125 200,000 34,537
Jay P. Gilbertson 1997 310,000 316,200 55,800 500,000 13,066(3)
President, Co-Chief Operating 1996 245,417 176,800 31,171 150,000 12,732
Officer, 1995 175,110 85,680 15,120 180,000 4,500
Chief Financial Officer,
Treasurer,
Principal Accounting Officer
and Secretary
Albert J. Bergonzi 1997 310,000 110,670 19,530 500,000 25,571(4)
President and 1996 245,416 171,408 30,230 150,000 21,672
Co-Chief Operating Officer 1995 156,938 81,845 14,443 210,000 8,833
Russell G. Overton 1997 180,417 124,100 21,900 40,000 17,448(5)
Senior Vice President- 1996 168,333 115,600 20,349 25,000 16,160
Business Development 1995 158,333 65,280 11,520 20,000 7,302
Jay M. Lapine 1997 160,000 84,080 14,837 50,000 6,801(6)
Senior Vice President, 1996 104,829 44,393 7,822 65,000 3,951
General Counsel and 1995 N/A
Assistant Secretary
</TABLE>
6
<PAGE>
FOOTNOTES TO SUMMARY COMPENSATION TABLE
(1) The dollar value of restricted stock awards for 1997 is calculated by
multiplying $51.8750, the closing market price of the Company's Common Stock
on The Nasdaq Stock Market on February 10, 1998, the date of the grant, by
the number of shares awarded, including 1,054, 368, 413 and 280, shares of
restricted stock for Messrs. Gilbertson, Bergonzi, Overton and Lapine,
respectively. Such restricted stock will vest fully in two years. Dividends
will be paid in accordance with regular quarterly dividends to stockholders
of record. The aggregate number of shares of restricted stock held at
December 31, 1997, by Messrs. Gilbertson, Bergonzi, Overton and Lapine was
1,744, 1,680, 1,212, and 382, respectively, and the value of such shares on
the date of grant (based upon the closing market price of the Company's
Common Stock) was $83,712, $80,640, $58,176 and $18,336, respectively.
(2) Represents $14,856 annual premium paid by the Company on $1,000,000 term
life insurance policy; $4,800 in contributions by the Company to the HBO &
Company Profit Sharing and Savings Plan, a defined contribution plan (the
"Profit Sharing Plan"); $26,250 in contributions by the Company to the HBO &
Company Key Employee Supplemental Retirement Plan, a defined contribution
nonqualified plan ("SERP"), as well as $3,997 in interest under the SERP.
(3) Represents $4,800 in contributions by the Company to the Profit Sharing Plan
and $8,266 (representing stock award of 250 shares).
(4) Represents $4,800 in contributions by the Company to the Profit Sharing
Plan, $12,039 in contributions by the Company to the SERP, as well as $1,194
in interest under the SERP and $7,538 (representing stock award of 228
shares).
(5) Represents $4,800 in contributions by the Company to the Profit Sharing
Plan, $4,244 in contributions by the Company to the SERP, as well as $667 in
interest under the SERP and $7,737 (representing stock award of 234 shares).
(6) Represents $4,800 in contributions by the Company to the Profit Sharing Plan
and $2,001 in contributions by the Company to the SERP.
7
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------
<S> <C> <C> <C> <C> <C>
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO EXERCISE GRANT
UNDERLYING EMPLOYEES OR BASE DATE
OPTIONS/SARS IN FISCAL PRICE EXPIRATION PRESENT
NAME GRANTED (#) YEAR ($/SH) DATE VALUE ($)(6)
- -------------------------------------------- ------------- --------------- --------- ------------ ------------
Charles W. McCall (1) 250,000 6.15% 42.00 11-11-2007 6,620,000
Jay P. Gilbertson (2) 500,000 12.31% 42.00 11-11-2007 13,240,000
Albert J. Bergonzi (3) 500,000 12.31% 42.00 11-11-2007 13,240,000
Russell G. Overton(4) 40,000 1.00% 29.4062 02-11-2007 747,200
Jay M. Lapine (5) 50,000 1.23% 42.00 11-11-2007 1,324,000
</TABLE>
- ------------------------
(1) Option for 250,000 shares becomes exercisable in increments of 50,000 shares
on November 11, 1998 through 2002.
(2) Option for 500,000 shares becomes exercisable in increments of 100,000
shares on November 11, 1998 through 2002.
(3) Option for 500,000 shares becomes exercisable in increments of 100,000
shares on November 11, 1998 through 2002.
(4) Option for 40,000 shares becomes exercisable in increments of 8,000 shares
on February 11, 1998 through 2002.
(5) Option for 50,000 shares becomes exercisable in increments of 10,000 shares
on November 11, 1998 through 2002.
(6) The present value was calculated using the Black-Scholes methodology. The
Company's future stock performance will not necessarily be consistent with
such valuation. The assumptions used to determine the value are as follows:
<TABLE>
<CAPTION>
CHARLES JAY P. ALBERT J. RUSSELL G. JAY M.
W. MCCALL GILBERTSON BERGONZI OVERTON LAPINE
------------- ----------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Fair Market Value On Grant Date $ 42.00 $ 42.00 $ 42.00 $ 29.4062 $ 42.00
Exercise Dates * * * * *
Risk-Free Rate (10-Year U.S. Treasury Strip as of Grant 6.02% 6.02% 6.02% 6.56% 6.02%
Date)
Volatility (5-Year Closing Price Volatility) 0.43 0.43 0.43 0.43 0.43
Annual Dividend Yield/Share 0.19% 0.19% 0.19% 0.27% 0.19%
Discount For Forfeitures 0% 0% 0% 0% 0%
Discount For Non-transferability 0% 0% 0% 0% 0%
</TABLE>
- ------------------------
* On expiration date.
8
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/ OPTIONS/SARS AT
SHARES SARS AT FY-END FY-END($)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ---------------------------------- -------------- ------------ --------------------- ------------------------
<S> <C> <C> <C> <C>
Charles W. McCall 2,080,000 49,683,728 -0-/810,000 -0-/14,224,171
Jay P. Gilbertson 152,000 4,334,561 60,000/1,020,000 1,114,846/17,201,764
Albert J. Bergonzi 247,200 5,234,111 -0-/1,004,800 -0-/16,092,170
Russell G. Overton 30,000 711,183 4,000/136,000 71,656/3,859,572
Jay M. Lapine 15,200 232,600 14,000/163,600 264,797/2,649,897
</TABLE>
CHANGE IN CONTROL ARRANGEMENTS. The Company has one compensatory
arrangement with its executive officers that will result from a change in
control of the Company. Under the stock option agreements ("Option Agreements")
with each of the Company's executive officers named in the table under "Summary
Compensation Table" ("Optionees"), in the event there is a Change of Control (as
defined below) of the Company and either (i) the Optionee's employment by the
Company is terminated involuntarily by the Company or (ii) the Optionee
terminates his employment with the Company for Good Reason (as such term is
defined below), then the Option Agreement shall not terminate but rather the
Optionee shall have the immediate right to exercise the option with respect to
all shares granted pursuant thereto at any time, whether or not then otherwise
exercisable. See "Aggregated Option/SAR Exercises In Last Fiscal Year and FY-End
Option/SAR Values." Further, should such Change of Control result in the
termination of the Option Agreement without the simultaneous conversion of the
option into options to purchase like stock of the Company or a corporation
acquiring or succeeding to the rights of the Company in such Change of Control,
upon terms substantially similar to those described therein, the option shall
vest immediately. Generally, "Change of Control" includes certain tender offers,
the sale of substantially all of the Company's assets, acquisition by any person
of 40% or more of the outstanding voting securities of the Company and certain
changes in the membership or composition of the Board of Directors of the
Company.
Generally, termination by an Optionee for "Good Reason" following a Change
of Control includes certain changes in the Optionee's duties, certain salary
reductions or cessation of bonus plans in which the Optionee participates,
certain relocations or failure of the Company to continue in effect certain
benefit and compensation plans.
REPORT OF STOCK OPTION AND COMPENSATION COMMITTEE
COMPENSATION PHILOSOPHY
The Stock Option and Compensation Committee (the "Committee") believes the
Company must pay competitively to attract and retain qualified executives. To
motivate executive personnel to perform at their full potential, the Committee
believes a significant portion of compensation should be incentive-based. In
9
<PAGE>
addition, the Committee believes it is important to reward not only individual
performance and achievement, but also to focus on overall corporate results.
This latter objective serves the dual purposes of encouraging teamwork among
executives and also supports the Company's objective of creating stockholder
value.
ELEMENTS OF THE PROGRAM
Total executive compensation consists of three key components: base
salaries, short-term incentive compensation ("Management Incentive Plan"), and
long-term incentives (Stock Options). Compensation objectives vary by component
of pay. Each of these elements, and the Company's competitive objective for that
element, is described in more detail below.
BASE SALARIES
For 1997, base salaries for all executive officers other than the CEO were
targeted at the size-adjusted market median (50th percentile). For this purpose,
the "market" consisted of a group of computer software and hardware companies
whose businesses are considered somewhat similar to the Company's and with whom
the Company competes for executive talent. These companies are different from
those included in the stock price performance graph elsewhere in this proxy
statement since the Company believes the market for executive talent extends to
a broader group of companies than those included in the stock price performance
graph.
Individual base salary increases for all executive officers other than the
CEO were based on a review of this market data, the actual salaries of the
executives and the CEO's recommendation. Factors considered by the CEO in making
recommendations for increases included, but were not limited to, levels of
responsibility, prior experience, and on-the-job performance. No specific weight
was assigned to these factors. As a group, salaries for the executive officers
(other than the CEO) were slightly below the size-adjusted market median of the
comparable companies.
SHORT-TERM INCENTIVES
The Management Incentive Plan (the "MIP"), which was adopted by the
Committee in 1993, was designed by a third party consulting firm. This plan
covers approximately 286 management personnel, including all executive officers
other than the CEO (whose incentive compensation is described below). The
Committee believes this plan promotes the Company's philosophy of having a
substantial portion of executive pay "at-risk."
Awards for 1997 performance under the MIP were based on achievement of
Corporate Earnings Per Share (EPS) results, as well as individual performance
measures. A bonus pool is funded based on whether annual EPS goals are achieved
at the "threshold," "target" or "stretch" levels. The Committee believes that
measuring EPS is the best way to take stockholder expectations into account in
motivating executives.
The individual performance measures for each of the named executive officers
(other than the CEO) generally are financial items such as operating income,
business unit revenues, etc. and also goals based on specific job
responsibilities or measures related to market share. In all cases, the measures
are quantifiable and measurable. "Threshold," "target" and "stretch" performance
levels also are established for each individual measure. No payouts will be made
if the specific goals established for each executive officer are not achieved.
Weightings for each measure varied somewhat among the executives, but generally
ranged from 20% to 60% for operating income and/or EPS goals, from 20% to 60%
for revenue goals, and were
10
<PAGE>
20% for goals related to specific job responsibilities. Based on whether the
individual performance goals are achieved, and on the EPS results, actual awards
may vary above or below target levels. Maximum awards are 200% of target awards.
Payouts from the EPS bonus pool are made only to the extent that EPS results
are at or above the threshold performance level. If, based on performance, the
EPS pool is funded at or above a level sufficient to pay the full awards earned
by each participant, those amounts are paid. However, if the EPS pool is not
large enough to pay all awards otherwise earned, each participant's award is
decreased on a PRO RATA basis. Then, the actual payouts to participants depend
jointly on each person's success in achieving their individual goals, and on the
Company's EPS results.
Target awards for 1997 for each executive officer (other than the CEO) were
set at either 40% or 60% of base salary, which is essentially at the median of
the market. For 1997, EPS results were at the maximum level and thus the bonus
pool was funded at the maximum level. Although individual performance among the
named executive officers (other than the CEO) varied somewhat due to differences
in goals, all officers earned total bonuses above target and some earned total
bonuses at the maximum level.
For all participants except the CEO, awards earned are paid eighty-five
percent (85%) in cash and fifteen percent (15%) in restricted stock after
year-end. Each restricted stock award is subject to forfeiture if the
executive's employment is terminated other than by reason of death, disability
or retirement within two years of the date of grant. The restricted stock awards
were structured as an incentive to participants to maximize the long-term return
to stockholders. They also are intended to encourage retention among executives
considered key to the Company's success. Awards earned by the CEO are paid in
cash.
LONG-TERM INCENTIVES
In 1997, the Committee made stock option awards to all of the named
executives. In making these grants, the Committee considered competitive market
information on long-term incentive awards for comparable positions, existing
stock holdings, each executive's individual performance, and the competitiveness
of the executive's overall pay package. No specific weighting was assigned to
these factors by the Committee. Because the Committee has not established a
competitive objective for this component of pay, the number of shares granted to
each executive was discretionary.
SPECIFICS OF CEO COMPENSATION
The Committee considers essentially the same factors in determining the
CEO's base salary increase as are considered in determining increases in base
salary for other executive officers. The Committee believed that the CEO's
contribution to the Company's 1996 performance was significant based on its
review (without specific weighting) of such factors as revenue growth,
accomplishment of strategic business objectives and EPS results. Accordingly,
the Committee increased the CEO's salary from $525,000 for 1996 to $575,000 for
1997. His base compensation thus was set by the Committee at a level which the
Committee considered commensurate with his performance.
The CEO's bonus for 1997 was based solely on EPS results. The CEO's bonus
target was 100% of salary in 1997, which was established to be extremely
competitive with target bonuses for others in similar positions. Earnings per
share for 1997 was at the maximum level required (200% of salary, or
$1,150,000). This amount was paid in cash after year end.
11
<PAGE>
The CEO was granted an option to buy 250,000 shares of the Company's Common
Stock. The Committee determined the size of this grant based on a review of
competitive data and on its assessment of the CEO's performance during the year
as measured by revenue growth, accomplishment of strategic objectives and
earnings per share results. Because these factors were considered in general,
they were not subject to any specific weighting.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
In 1993, Section 162(m) was added to the Internal Revenue Code. This section
generally limits to $1 million the tax deduction for compensation paid to
executive officers of a publicly-held corporation who are named in the proxy
statement unless certain requirements are met. To preserve tax deductions
related to executive compensation, the Company obtained stockholder approval for
the HBO & Company Omnibus Stock Incentive Plan and for the terms of the Chief
Executive Officer Incentive Plan which relates to the CEO's performance-based
compensation through 1999.
ALFRED C. ECKERT III
ALTON F. IRBY III
GERALD E. MAYO
12
<PAGE>
COMPANY PERFORMANCE GRAPH
The following graph shows a five year comparison of cumulative total returns
for the Company's Common Stock, the Center for Research in Security Prices
("CRSP") Total Return Index for The Nasdaq Stock Market (U.S. companies) and the
CRSP Total Return Index for the Nasdaq Computer and Data Processing Services
Stocks. Upon request, the Company will furnish stockholders a list of the
component companies of such indexes.
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
HBO & COMPANY
PREPARED BY THE CENTER FOR RESEARCH IN SECURITY PRICES
Produced on 02/26/98 including data to 12/31/97
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HB0 &
Company
12/31/92 $100.0
1/29/93 $96.1
2/26/93 $83.0
3/31/93 $93.0
4/30/93 $79.4
5/28/93 $94.5
6/30/93 $105.5
7/30/93 $127.0
8/31/93 $139.7
9/30/93 $144.9
10/29/93 $153.2
11/30/93 $159.6
12/31/93 $180.4
1/31/94 $188.8
2/28/94 $183.4
3/31/94 $196.3
4/29/94 $206.1
5/31/94 $212.0
6/30/94 $198.5
7/29/94 $224.1
8/31/94 $257.5
9/30/94 $267.6
10/31/94 $255.8
11/30/94 $248.9
12/30/94 $270.9
1/31/95 $280.7
2/28/95 $303.4
3/31/95 $343.1
4/28/95 $360.9
5/31/95 $382.6
6/30/95 $430.2
7/31/95 $436.1
8/31/95 $434.2
9/29/95 $493.7
10/31/95 $558.9
11/30/95 $590.5
12/29/95 $605.6
1/31/96 $663.9
2/29/96 $782.4
3/29/96 $745.2
4/30/96 $938.9
5/31/96 $987.3
6/28/96 $1071.7
7/31/96 $968.9
8/30/96 $864.1
9/30/96 $1056.2
10/31/96 $951.4
11/29/96 $899.9
12/31/96 $939.8
1/31/97 $991.3
2/28/97 $912.1
3/31/97 $752.2
4/30/97 $847.2
5/30/97 $1015.4
6/30/97 $1090.9
7/31/97 $1225.6
8/29/97 $1134.5
9/30/97 $1196.5
10/31/97 $1378.7
11/28/97 $1422.3
12/31/97 $1522.0
Notes:
A. The lines represent monthly index levels derived from compounded daily returns that include all
dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceeding
trading day is used.
D. The index level for all series was set to $100.0 on 12/31/92.
<CAPTION>
<S> <C>
Nasdaq Stock Market
(US Companies)
12/31/92 $100.0
1/29/93 $102.8
2/26/93 $99.0
3/31/93 $101.9
4/30/93 $97.5
5/28/93 $103.4
6/30/93 $103.8
7/30/93 $104.0
8/31/93 $109.3
9/30/93 $112.6
10/29/93 $115.1
11/30/93 $111.7
12/31/93 $114.8
1/31/94 $118.3
2/28/94 $117.2
3/31/94 $110.0
4/29/94 $108.5
5/31/94 $108.8
6/30/94 $104.8
7/29/94 $107.0
8/31/94 $113.8
9/30/94 $113.5
10/31/94 $115.7
11/30/94 $111.9
12/30/94 $112.2
1/31/95 $112.8
2/28/95 $118.8
3/31/95 $122.3
4/28/95 $126.2
5/31/95 $129.4
6/30/95 $139.9
7/31/95 $150.2
8/31/95 $153.3
9/29/95 $156.8
10/31/95 $155.9
11/30/95 $159.5
12/29/95 $158.7
1/31/96 $159.5
2/29/96 $165.6
3/29/96 $166.1
4/30/96 $179.9
5/31/96 $188.1
6/28/96 $179.7
7/31/96 $163.7
8/30/96 $172.8
9/30/96 $186.1
10/31/96 $184.0
11/29/96 $195.4
12/31/96 $195.2
1/31/97 $209.1
2/28/97 $197.5
3/31/97 $184.6
4/30/97 $190.4
5/30/97 $212.0
6/30/97 $218.5
7/31/97 $241.5
8/29/97 $241.1
9/30/97 $255.4
10/31/97 $242.1
11/28/97 $243.3
12/31/97 $239.5
Notes:
A. The lines represent monthly index levels derived from compounded daily returns that include all
dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceeding
trading day is used.
D. The index level for all series was set to $100.0 on 12/31/92.
<CAPTION>
NASDAQ COMPUTER AND DATA
Processing Stocks
SIC 7370-7379 U.S. & Foreign
12/31/92 $100.0
1/29/93 $104.5
2/26/93 $99.4
3/31/93 $104.8
4/30/93 $97.6
5/28/93 $105.6
6/30/93 $104.9
7/30/93 $96.4
8/31/93 $99.3
9/30/93 $105.3
10/29/93 $107.1
11/30/93 $106.5
12/31/93 $105.8
1/31/94 $111.6
2/28/94 $112.5
3/31/94 $107.3
4/29/94 $107.2
5/31/94 $112.1
6/30/94 $105.0
7/29/94 $105.4
8/31/94 $116.5
9/30/94 $116.9
10/31/94 $129.0
11/30/94 $127.1
12/30/94 $128.5
1/31/95 $125.5
2/28/95 $135.3
3/31/95 $144.7
4/28/95 $151.9
5/31/95 $154.3
6/30/95 $171.5
7/31/95 $181.8
8/31/95 $181.5
9/29/95 $187.3
10/31/95 $196.8
11/30/95 $198.3
12/29/95 $195.7
1/31/96 $193.7
2/29/96 $205.8
3/29/96 $204.9
4/30/96 $228.8
5/31/96 $236.4
6/28/96 $227.8
7/31/96 $204.0
8/30/96 $209.4
9/30/96 $232.3
10/31/96 $228.2
11/29/96 $244.6
12/31/96 $241.5
1/31/97 $263.5
2/28/97 $242.1
3/31/97 $224.2
4/30/97 $253.5
5/30/97 $281.3
6/30/97 $287.5
7/31/97 $317.4
8/29/97 $308.9
9/30/97 $314.4
10/31/97 $307.9
11/28/97 $315.7
12/31/97 $296.7
Notes:
A. The lines represent monthly index levels derived from compounded daily returns that include all
dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceeding
trading day is used.
D. The index level for all series was set to $100.0 on 12/31/92.
</TABLE>
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and HTG Corp., a corporation owned by Holcombe T. Green, Jr.,
former Chairman of the Board of the Company, each owned a half interest in an
airplane, which they operated pursuant to a Co-Ownership Agreement dated as of
July 15, 1993 (the "Co-Ownership Agreement") until May 19, 1997 when HTG Corp.
purchased the Company's interest therein. Pursuant to the Co-Ownership
Agreement, each party paid its own direct operating costs for use of the
airplane and during 1997 each paid one-half of the cost of new equipment of
approximately $40,000. For the period January 1, 1997 until May 19, 1997, fixed
costs were allocated based on the percentage of actual use. Payments made by
either party on behalf of the other party were reimbursed based upon the
percentage of use. For such period, the percentages of use of HTG Corp. and the
Company were deemed to have been 50% and 50%, respectively. Also for such
period, total fixed and direct expenses of HTG Corp. and the Company were
$194,534 and $251,599, respectively. Pursuant to the Co-Ownership Agreement, the
Company caused HTG Corp. to purchase its interest in the airplane on May 19,
1997 for $3,004,000, representing the acquisition and readiness costs incurred
by the Company.
During 1997, McLaren HealthCare Corporation paid the Company $2,315,363 for
information systems and services. Mr. Incarnati, a Director of the Company, is
the President and Chief Executive Officer of McLaren HealthCare Corporation.
APPROVAL OF THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation (the "Certificate") currently
authorizes the issuance of 250,000,000 shares of Common Stock, par value $.05
per share. On February 10, 1998, the Board of Directors unanimously approved,
subject to stockholder approval, an amendment to the Certificate increasing the
number of authorized shares of Common Stock to 1,000,000,000 (the "Amendment").
A copy of the proposed Amendment as adopted by the Board of Directors appears as
Appendix A to this Proxy Statement.
The number of authorized shares of Common Stock was increased following
stockholder approval at a meeting held May 14, 1996 from 60,000,000 to
250,000,000. Since that time, the Board of Directors has declared two
two-for-one stock splits effected in the form of stock dividends and the Company
has engaged in numerous stock-based acquisitions. Of the 250,000,000 shares of
Common Stock currently authorized to be issued under the Certificate, as of
December 31, 1997, 211,380,000 shares were outstanding, and 8,416,787 shares
were reserved for stock based plans for a total outstanding and reserved of
219,796,787 shares.
In order to have an adequate number of authorized shares to be able to
consider future potential stock splits and the continued pursuit of stock-based
acquisitions, the Board of Directors is seeking stockholder approval of the
proposed Amendment. The Company has no present plans or commitments with respect
to the issuance of the proposed additional authorized shares of Common Stock.
Although the Company presently has no commitments to issue any shares for such
purposes, the Board of Directors periodically evaluates stock splits, and the
Company reviews potential acquisitions on an ongoing basis. As stated above, the
Board of Directors obtained approval of an increase of similar magnitude in 1996
and has substantially exhausted such shares. Holders of the Company's Common
Stock have no preemptive rights.
Assuming approval of the Amendment, the Board of Directors will have the
authority to issue the increased authorized shares of Common Stock from time to
time for proper corporate purposes without
14
<PAGE>
further stockholder approval except that transactions involving the issuance of
20% or more of the Company's Common Stock would require stockholder approval to
maintain compliance with the Nasdaq National Market criteria.
The proposed Amendment could impede or deter the removal of management or
make a change in control or hostile acquisition of the Company more difficult,
even if such removal of management, change in control or hostile acquisition
could potentially benefit the Company's stockholders. In addition, to the extent
the additional shares are issued in connection with stock-based acquisitions,
the proportionate interests of existing stockholders in the Company would be
reduced and, from an economic standpoint, such acquisitions could be accretive
or dilutive to the Company's stockholders.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is required for approval of the proposed Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION.
APPROVAL OF THE HBO & COMPANY
1998 EMPLOYEE DISCOUNT STOCK PURCHASE PLAN
The Board of Directors has adopted the HBO & Company 1998 Employee Discount
Stock Purchase Plan (the "Stock Purchase Plan"), subject to approval by the
stockholders of the Company at the Annual Meeting of Stockholders. The Stock
Purchase Plan replaces the HBO & Company 1983 Employee Discount Stock Purchase
Plan.
The Stock Purchase Plan is intended to encourage the employees of the
Company and certain of its subsidiaries to acquire a proprietary interest, or to
increase their existing proprietary interest, in the Company by purchasing
shares of the Company's Common Stock. The Board believes that employee ownership
of Common Stock will serve as an incentive, encouraging employees to continue
their employment and to perform diligently their duties as employees.
The Stock Purchase Plan will be administered by a committee (the
"Committee") designated by the Board. All questions of interpretation or
application of the Stock Purchase Plan will be determined by the Committee, and
its determinations will be final and binding upon all persons, unless otherwise
determined by the Board.
All employees of the Company or any subsidiary designated by the Board whose
customary employment is 20 hours or more per week or at least five (5) months in
any calendar year will be eligible to participate in the Stock Purchase Plan.
However, no employee will be eligible to participate to the extent that,
immediately after a right to purchase Common Stock is granted, such employee
would own shares of Common Stock or the stock of a subsidiary possessing 5% or
more of the total combined voting power or value of all classes of such stock.
As of March 1, 1998, approximately 6,000 employees are eligible to participate
in the Stock Purchase Plan.
The Stock Purchase Plan will be implemented by a continuous series of
offerings (each one a "Purchase Period") beginning on March 1st of each calendar
year (the "Offering Date") and terminating on the last day of the following
February (the "Termination Date"). Subject to obtaining stockholder approval,
the first Purchase Period began on March 1, 1998 and will terminate on February
28, 1999.
15
<PAGE>
Each eligible employee may become a participant in the Stock Purchase Plan
by making an election, prior to any Offering Date, in accordance with the
procedures established by the Committee, authorizing specified regular payroll
deductions over the next succeeding Purchase Period. Such deductions may not
exceed 10% of a participant's compensation for any payroll period. Payroll
deductions will be credited to an account (a "Cash Account") established for the
participant by the Company.
For each Purchase Period, each participant will have the right to purchase
that number of shares of Common Stock determined by dividing (i) $25,000 by (ii)
the fair market value (the closing price of the Common Stock on Nasdaq) of one
share of Common Stock on the Offering Date for that Purchase Period. However, no
right to purchase shares of Common Stock under the Stock Purchase Plan will be
granted to an employee if such right, when combined with all other rights and
options granted under all of the employee stock purchase plans of the Company
and its subsidiaries, would permit the employee to purchase shares of Common
Stock with a fair market value (determined at the time the right or option is
granted) in excess of $25,000 for each calendar year.
The purchase price of each share of Common Stock will be the lesser of (i)
85% of the fair market value of the Common Stock on the Offering Date, or (ii)
85% of the fair market value of the Common Stock on the Termination Date.
As of each Termination Date, the Committee will purchase from the Company
the number of whole and fractional shares of Common Stock that is the lesser of
(i) the maximum number of shares for which the participant has been granted a
right to purchase for the Purchase Period, or (ii) the number of whole shares of
Common Stock determined by dividing the amount in his Cash Account by the
Purchase Price.
If a participant terminates employment with the Company and its subsidiaries
during a Purchase Period for any reason other than death, disability or
retirement, the participant's participation in the Stock Purchase Plan will
immediately terminate and the balance of the participant's Cash Account will be
returned to the participant. If a participant terminates employment with the
Company and its subsidiaries during a Purchase Period due to death, then, at the
election of the participant's beneficiary, the balance of the participant's Cash
Account will be (i) delivered to the beneficiary, or (ii) held in the Cash
Account until the end of the Purchase Period and applied to purchase Common
Stock. If a participant terminates employment with the Company and its
subsidiaries due to retirement or disability no more than three (3) months
before the Termination Date for a Purchase Period, then, at the participant's
election, the balance of the participant's Cash Account will be (i) returned to
the participant, or (ii) held in the Cash Account until the end of the Purchase
Period and applied to purchase Common Stock. If a participant terminates
employment due to retirement or disability more than three (3) months before the
Termination Date for a Purchase Period, then the participant's participation in
the Plan will immediately terminate and the balance of the participant's Cash
Account will be returned to the participant.
A participant may discontinue making payroll deductions at any time during a
Purchase Period but may not otherwise increase or decrease the amount of payroll
deductions elected for a Purchase Period. Upon such discontinuance, at the
participant's election, the balance of the participant's Cash Account will be
(i) returned to the participant as soon as practicable, or (ii) held in the Cash
Account until the end of the Purchase Period and applied to purchase Common
Stock.
The Board may amend the Stock Purchase Plan in any respect; provided,
however, that any amendment increasing the number of shares of Common Stock
reserved under the Stock Purchase Plan or changing the designated class of
employees eligible to participate in the Stock Purchase Plan must be approved by
the stockholders of the Company.
16
<PAGE>
The Company will reserve 1,500,000 shares of Common Stock for purchase by
employees under the Stock Purchase Plan. In the event of a subdivision or
consolidation of outstanding shares of Common Stock, or the payment of a stock
dividend thereon, or certain corporate transactions, the number of shares
reserved under the Stock Purchase Plan and the number and price of such shares
subject to purchase pursuant to rights outstanding thereunder, will be adjusted
in such manner as may be deemed necessary or equitable by the Board to give
proper effect to such event.
The Stock Purchase Plan and all rights of employees hereunder will terminate
when the number of shares available for issuance under the Stock Purchase Plan
is substantially exhausted or at any time upon action of the Board.
Because levels of participation and the eventual purchase prices are not
presently known, the future benefits to be received by any person is not
determinable at this time.
The foregoing is only a summary of the Stock Purchase Plan and is qualified
in its entirety by reference to the full text of the Stock Purchase Plan, a copy
of which is attached hereto as Appendix B.
The following is a brief summary of certain of the federal income tax
consequences of transactions under the Stock Purchase Plan. This summary is not
intended to be exhaustive and does not describe state or local tax consequences.
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423(b) of the Internal Revenue Code
of 1986, as amended (the "Code"). If a participant does not sell or otherwise
dispose of shares of Common Stock purchased under the Stock Purchase Plan until
at least one year after the last day of the Purchase Period in which such shares
were purchased, he will not realize taxable income upon the granting of the
right to purchase shares or upon the actual purchase of the shares. Upon a
disposition after this one-year period, or upon the participant's death at any
time (even within the one-year period) while owning the shares, the gain or loss
on the shares will be treated as capital gain or loss, provided that the
participant will realize ordinary income equal to the lesser of (i) 15 percent
of the fair market value of the shares on the first day of the Purchase Period
in which the shares were purchased, or (ii) the excess of the fair market value
of the shares at the time the shares were sold (or at the time of the
participant's death) over the purchase price of the shares. The Company will not
be entitled to a deduction for federal income tax purposes with respect to the
purchase of the shares or the subsequent disposition of the shares.
If a participant sells or otherwise disposes of shares prior to the
expiration of the one-year period described above, the participant will realize
ordinary income in the year of the sale in an amount equal to the excess of the
fair market value at the time the shares were purchased over the purchase price.
This amount generally will be deductible by the Company in the year in which the
disposition occurs. The excess, if any, of the amount realized by the
participant upon the sale of the shares over the fair market value of the shares
on the date of purchase will be treated as a capital gain. If the amount
realized is less than the fair market value of the shares on the date of
purchase, the difference will be treated as a capital loss.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
HBO & COMPANY 1998 EMPLOYEE DISCOUNT STOCK PURCHASE PLAN.
17
<PAGE>
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed Arthur Andersen LLP as independent public accountants for the Company
for the year ending December 31, 1998. The Board of Directors recommends that
such appointment be ratified.
Representatives of Arthur Andersen LLP will be present at the meeting and
shall have the opportunity to make a statement, if they desire to do so, and
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT
OF
ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
Management of the Company knows of no matters other than those stated above
that are to be brought before the meeting. However, if any such other matters
should be presented for consideration and voting, it is the intention of the
persons named in the proxy to vote thereon in accordance with their judgment.
STOCKHOLDER PROPOSALS
Proposals by stockholders intended to be presented at the 1999 Annual
Meeting must be forwarded in writing and received at the principal executive
office of the Company no later than December 4, 1998, directed to the attention
of the Secretary, for consideration for inclusion in the Company's proxy
statement for the Annual Meeting of Stockholders to be held in 1999. Any such
proposals must comply in all respects with the rules and regulations of the
Securities and Exchange Commission.
Jay P. Gilbertson
SECRETARY
April 3, 1998
18
<PAGE>
APPENDIX A
PROPOSED AMENDMENT OF THE CERTIFICATE OF INCORPORATION INCREASING THE
NUMBER OF SHARES OF AUTHORIZED COMMON STOCK
Set forth below is the text of the proposed amendment of the first paragraph
of Article 4 of the Certificate of Incorporation:
"4. The total number of shares of stock which the Company shall have
authority to issue is one billion and one million (1,001,000,000), one
billion (1,000,000,000) of which shall be common stock with a par value of
five cent ($.05) per share, amounting in the aggregate to fifty million
dollars ($50,000,000), and one million (1,000,000) of which shall be
preferred stock without par value."
Set forth below is the text of the existing paragraph of Article 4 of the
Certificate of Incorporation, which would be stricken in its entirety and
replaced by the proposed amendment set forth above:
"4. The total number of shares of stock which the Company shall have
authority to issue is two hundred fifty one million (251,000,000), two
hundred fifty million (250,000,000) of which shall be common stock with a
par value of five cents ($.05) per share, amounting in the aggregate to
twelve million five hundred thousand dollars ($12,500,000), and one million
(1,000,000) of which shall be preferred stock without par value."
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APPENDIX B
HBO & COMPANY
1998 EMPLOYEE DISCOUNT STOCK PURCHASE PLAN
1. PURPOSE
The HBO & Company 1998 Employee Discount Stock Purchase Plan (the "Plan") is
intended to encourage the employees of HBO & Company (the "Company") and certain
of its subsidiaries to acquire a proprietary interest, or to increase their
existing proprietary interest, in the Company. The Board of Directors of the
Company (the "Board") believes that employee ownership of the Company's stock
will serve as an incentive, encouraging employees to continue their employment
and to perform diligently their duties as employees. The Plan is intended to
qualify as an "employee stock purchase plan" within the meaning of Section 423
of the Internal Revenue Code of 1986, as amended (the "Code").
2. STOCK RESERVED FOR THE PLAN
The Company will reserve 1,500,000 shares of the Company's common stock,
$.05 par value per share ("Stock"), for purchase by employees under the Plan.
The number of shares of Stock reserved for the Plan may be adjusted as provided
in Section 16. The shares of Stock reserved for the Plan may be shares now or
hereafter authorized but unissued, shares that have been reacquired by the
Company, or shares of treasury stock.
3. ADMINISTRATION
The Plan will be administered by a committee (the "Committee") that will
consist of those persons designated by the Board. The members of the Committee
may, but need not, be members of the Board. The Board from time to time may
remove members from, or add members to, the Committee. Vacancies on the
Committee will be filled by the Board. Subject to the express provisions of the
Plan, the Committee will have authority to interpret the Plan, to prescribe
rules and regulations for administering the Plan, and to make all other
determinations necessary or advisable in administering the Plan. The
determinations of the Committee will be final and binding upon all persons,
unless otherwise determined by the Board. A majority of the members of the
Committee will constitute a quorum, and the Committee may act by vote of a
majority of its members at a meeting at which a quorum is present, or without a
meeting by a written consent signed by all members of the Committee.
4. ELIGIBILITY
(a) ELIGIBLE EMPLOYEES. Except for those persons specifically excluded under
subsection (b) hereof, (i) all employees of the Company, and (ii) all employees
of any subsidiary corporations of the Company (as defined in Code Section 424(f)
and referred to herein as "Subsidiaries") that are designated by the Board as
participating Subsidiaries, will be eligible to participate in the Plan. Such
employees are referred to herein as "Employees."
(b) EXCLUDED EMPLOYEES. The following Employees will not be eligible to
participate in the Plan:
(i) any Employee whose customary employment is 20 hours or less per week
or for not more than 5 months in any calendar year; and
(ii) any Employee who, immediately after a right to purchase Stock is
granted hereunder, would own shares of Stock, or of the stock of a
Subsidiary, possessing 5 percent or more of the total
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combined voting power or value of all classes of such stock. In determining
whether an Employee owns 5 percent of such shares, (A) the attribution of
ownership rules of Code Section 424(d) will apply, and (B) an Employee will
be deemed to own the shares of stock underlying any outstanding option which
he has been granted (whether under the Plan or any other plan or
arrangement).
5. OFFERING DATES
The Plan will be implemented by a continuous series of offerings beginning
on March 1st of each calendar year (the "Offering Date") and terminating on the
last day of the following February (the "Termination Date"). The period for
which each such offering is effective is referred to herein as a "Purchase
Period." The first Purchase Period will commence on March 1, 1998 and will
terminate on February 28, 1999.
6. ELECTION TO PARTICIPATE
(a) INITIAL ELECTION. Each Employee who is eligible to participate in the
Plan may become a participant (a "Participant") by making an election, prior to
any Offering Date and in the accordance with procedures established by the
Committee, authorizing specified regular payroll deductions over the next
succeeding Purchase Period (an "Election Form"). Each election will be expressed
as a percentage of the Employee's Compensation (as defined below), which may not
exceed 10 percent of the Employee's Compensation for any payroll period or be
less than 1 percent of the Employee's Compensation for any payroll period (or
such other maximum and minimum percentages as the Committee may determine). A
Participant's "Compensation" is his total cash compensation from the Company and
its affiliates. Payroll deductions for a Participant will be made regularly and
in equal amounts during the Purchase Period by the Company, and will be credited
to a bookkeeping account established by the Company in the name of the
Participant (the "Cash Account"). No interest will be paid on or credited to
Cash Accounts.
(b) CHANGES IN RATE OF PAYROLL DEDUCTION. A participant may discontinue
making payroll deductions in accordance with Section 6(c), but may not otherwise
increase or decrease the amount of payroll deductions elected for a Purchase
Period.
(c) DISCONTINUANCE OF CONTRIBUTIONS. At any time during a Purchase Period, a
Participant may discontinue participation in the Plan for the current Purchase
Period by providing notice in accordance with procedures established by the
Committee. Upon such discontinuance, at the Participant's election, the balance
of his Cash Account will be (i) returned to the Participant as soon as
practicable, or (ii) held in the Cash Account until the end of the Purchase
Period and applied to purchase Stock in accordance with Section 10. A
Participant who discontinues payroll deductions may recommence his participation
in the Plan as of the Offering Date for any other succeeding Purchase Period,
provided he otherwise is eligible to participate and timely files a new Election
Form with the Committee.
7. RIGHTS TO PURCHASE STOCK
For each Purchase Period, each Participant will have the right to purchase
that number of shares of Stock determined by dividing (i) $25,000 by (ii) the
Fair Market Value of one share of Stock (as defined in Section 9(b)) on the
Offering Date for the Purchase Period; provided, however, that no Participant
will have the right to purchase Stock in excess of the annual limit in Section
8. If the number of shares of the Stock available for purchase under the Plan is
insufficient to grant to each Participant the right to purchase the full number
of shares to which he otherwise would be entitled, then each Participant will
have the right
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to purchase that number of available shares of Stock that is equal to the total
number of available shares of Stock multiplied by a fraction, the numerator of
which is the amount of Compensation credited to the Participant's Cash Account
for the Purchase Period, and the denominator of which is the total amount of
Compensation credited to the Cash Accounts of all Participants for the Purchase
Period.
8. ANNUAL LIMIT
No right to purchase shares of Stock under the Plan will be granted to an
Employee if such right, when combined with all other rights and options granted
under all of the Code Section 423 employee stock purchase plans of the Company,
its Subsidiaries or any parent corporation (within the meaning of Code Section
424(e)), would permit the Employee to purchase shares of Stock with a Fair
Market Value (determined at the time the right or option is granted) in excess
of $25,000 for each calendar year in which the right or option is outstanding at
any time, determined in accordance with Code Section 423(b)(8).
9. PURCHASE PRICE
(a) PRICE. The purchase price of each share of Stock will be the lesser of
(i) 85 percent of the Fair Market Value of the Stock on the Offering Date, or
(ii) 85 percent of the Fair Market Value of the Stock on the Termination Date.
(b) FAIR MARKET VALUE. The Fair Market Value of the Stock, as of any date,
will be equal to the closing price of the Common Stock on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") for such
date as reported in THE WALL STREET JOURNAL. If no transaction is reported for a
particular date, Fair Market Value will be the closing price on the closest
preceding date for which any transaction is reported. If the Stock is not traded
on NASDAQ, Fair Market Value will be determined using the method established by
the Committee.
10. PURCHASE OF STOCK
As of each Termination Date, the Committee will purchase from the Company,
for each Participant having funds in his Cash Account, the number of whole and
fractional shares of Stock that is the lesser of (i) the maximum number of
shares for which the Participant has been granted a right to purchase for the
Purchase Period; or (ii) the number of whole shares of Stock determined by
dividing the amount in his Cash Account by the purchase price determined under
Section 9(a).
11. STOCK ACCOUNTS
(a) ESTABLISHMENT OF ACCOUNTS. As soon as practicable after each Termination
Date, the Company will deliver to a custodian selected by the Committee (the
"Custodian") a certificate or certificates representing the total number of
shares purchased by all Participants in the Purchase Period. The Custodian will
maintain a separate "Stock Account" for each Participant, which will be credited
with the number of shares of Stock purchased by the Participant under the Plan.
(b) WITHDRAWALS FROM STOCK ACCOUNTS. A Participant may at any time withdraw
any shares of Stock credited to his Stock Account. As soon as practicable after
such request by a Participant, the Committee shall cause a certificate
representing such Shares to be delivered to the Participant.
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<PAGE>
(c) RIGHTS AS SHAREHOLDERS. A Participant will have all of the rights of a
shareholder of the Company with respect to all of the shares of Stock credited
to his Stock Account, including the right to vote and receive dividends on such
Shares.
12. TERMINATION OF EMPLOYMENT
(a) TERMINATION OTHER THAN DUE TO DEATH, DISABILITY, OR RETIREMENT. If a
Participant terminates employment with the Company and its Subsidiaries during a
Purchase Period for any reason other than death, disability, or retirement, then
the Participant's participation in the Plan will immediately terminate and the
balance of the Participant's Cash Account will be returned to the Participant.
For purposes of the Plan, a Participant who is on an approved leave of absence
shall not be considered to have terminated employment until the 91st day of such
leave of absence or such longer period as the Participant's right to
re-employment is guaranteed by law or contract.
(b) TERMINATION DUE TO DEATH. If a Participant terminates employment with
the Company and its Subsidiaries during a Purchase Period due to death, then, at
the election of the Participant's beneficiary, the balance of the Participant's
Cash Account shall be (i) delivered to the beneficiary or (ii) held in the Cash
Account until the end of the Purchase Period and applied to purchase Stock in
accordance with Section 10.
(c) TERMINATION DUE TO DISABILITY OR RETIREMENT. If a Participant terminates
employment with the Company and its Subsidiaries due to retirement or disability
no more than 3 months before the Termination Date for a Purchase Period, then,
at the Participant's election, the balance of the Participant's Cash Account
shall be (i) returned to the Participant, or (ii) held in the Cash Account until
the end of the Purchase Period and applied to purchase Stock in accordance with
Section 10. If a Participant terminates employment more than 3 months before the
Termination Date for a Purchase Period, then the Participant's participation in
the Plan will immediately terminate and the balance of the Participant's Cash
Account will be returned to the Participant.
13. DESIGNATION OF BENEFICIARY
In accordance with procedures established by the Committee, a Participant
may designate one or more beneficiaries to receive benefits in the event of the
Participant's death. If a Participant fails to properly designate a beneficiary,
the Participant's estate will be considered the Participant's beneficiary for
purposes of the Plan.
14. COMPLIANCE WITH SECURITIES LAWS
All shares of Stock issued under the Plan will be subject to such
restrictions as the Committee may deem advisable under any applicable federal or
state securities laws, and the Committee may cause a legend or legends making
reference to such restrictions to be placed on the certificates representing
such shares.
15. RIGHTS NOT TRANSFERABLE
Rights under the Plan are not transferable by a Participant other than by
will or the laws of descent and distribution and are exercisable during his
lifetime only by him.
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16. ADJUSTMENT IN CASE OF CHANGES AFFECTING THE COMPANY'S STOCK
In the event of a subdivision or consolidation of outstanding shares of
Stock, or the payment of a stock dividend thereon, or in the event of any
"corporate transaction" as defined in Treasury Regulations Section
1.425-1(a)(1)(ii)(now relating to Code Section 424), the number of shares
reserved or authorized to be reserved under the Plan and the number and price of
such shares subject to purchase pursuant to rights outstanding hereunder, and
the number of shares credited to Participants' Stock Accounts, will be adjusted
in such manner as may be deemed necessary or equitable by the Board to give
proper effect to such event, subject to the limitations of Code Section 424.
17. FOREIGN EMPLOYEES
The Committee may provide for such special terms for Participants who are
foreign nationals, or who are employed by the Company or a Subsidiary outside of
the United States of America, as the Committee may consider necessary or
appropriate to accommodate differences in local law, tax policy or custom.
Moreover, the Committee may approve such supplements to or amendments,
restatements, or alternative versions of, this Plan as it may consider necessary
or appropriate for such purposes without thereby affecting the terms of this
Plan as in effect for any other purpose; provided, however, that no such
supplements, amendments, restatements or alternative versions shall include any
provisions that are inconsistent with terms of this Plan, as then in effect,
unless this Plan could have been amended to eliminate such inconsistency without
further approval by the shareholders of the Company, or which would cause the
Plan to fail to meet the requirements of Section 423 of the Code.
18. AMENDMENT OF THE PLAN
The Board may amend the Plan in any respect; provided, however, that, any
amendment (i) increasing the number of shares of Stock reserved under the Plan
(other than as provided in Section 15), or (ii) changing the designated class of
employees eligible to participate in the Plan as provided in Section 4, must be
approved, within 12 months of the adoption of such an amendment, by the
stockholders of the Company.
19. TERMINATION OF THE PLAN
The Plan and all rights of Employees hereunder will terminate:
(i) as of the Termination Date on which Participants purchase a number of
shares of Stock that substantially exhausts the number of shares available for
issuance under the Plan, to such an extent that the Committee determines that no
subsequent offerings are practicable; or
(ii) at any time upon action of the Board; provided, however, that if the
Plan is terminated during any Purchase Period, any amounts in a Participant's
Cash Account will be returned to the Participant.
20. EFFECTIVE DATE OF PLAN
The Plan will become effective as of the date the Plan is adopted by the
Board; provided, however, that if the Plan is not approved by the holders of a
majority of the voting power of the outstanding shares of Stock within 12 months
from the date the Plan is adopted by the Board, the Plan will be terminated and
all amounts in Participants' Cash Accounts returned to them.
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<PAGE>
21. GOVERNMENT AND OTHER REGULATIONS
The Plan, and the grant and exercise of the rights to purchase shares of the
Stock hereunder, and the Company's obligation to sell and deliver shares of
Stock, will be subject to all applicable federal, state and foreign laws, rules
and regulations, and to such approvals by any regulatory or government agency as
may, in the opinion of counsel for the Company, be required.
22. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they have as
directors or as members of the Committee, the members of the Committee will be
indemnified by the Company against reasonable expenses (including, without
limitation, attorneys' fees) actually and necessarily incurred in connection
with the defense of any action, suit or proceeding, or in connection with any
appeal, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved to the extent required by and in the
manner provided by the Bylaws of the Company relating to indemnification of
directors) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it will be
adjudged in such action, suit or proceeding that such Committee member did not
act in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Company.
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<PAGE>
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF HBO & COMPANY FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD MAY 12, 1998
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL PROPOSALS.
1. To elect seven Directors.
FOR all nominees listed below (except WITHHOLD AUTHORITY to vote for all
as instructed nominees listed below / /
below) / /
Alfred C. Eckert III, Philip A. Incarnati, Alton F. Irby III, Gerald E. Mayo,
Charles W. McCall, James V. Napier,
Donald C. Wegmiller.
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name here:
- --------------------------------------------------------------------------------
2. To approve the Amendment of the Certificate of Incorporation to increase the
number of common shares to 1,000,000,000.
FOR / / AGAINST / / ABSTAIN / /
3. To approve the HBO & Company Employee Discount Stock Purchase Plan.
FOR / / AGAINST / / ABSTAIN / /
4. To ratify appointment of Arthur Andersen LLP as independent public
accountants.
FOR / / AGAINST / / ABSTAIN / /
The shares represented by this proxy card will be voted as directed above. IF NO
DIRECTION IS GIVEN AND THE PROXY CARD IS VALIDLY EXECUTED, THE SHARES WILL BE
VOTED FOR ALL LISTED PROPOSALS. In their discretion, the proxy holders are
authorized to vote upon such other business as may properly come before the
meeting.
<PAGE>
The undersigned hereby appoints Charles W. McCall and Jay P. Gilberston, or
either one of them, with full power of substitution as proxy holders to
represent and to vote as designated hereon, the Common Stock of the undersigned
at the Annual Meeting of Stockholders of the Company to be held on May 12, 1998,
or any postponement or adjournment thereof.
__________________________________
Signature of Stockholder
__________________________________
Signature of Stockholder
Dated ______________________, 1998
IMPORTANT: Sign exactly as your
name appears at left. Give full
title of executor, administrator,
trustee, guardian, etc. Joint
owners should each sign
personally.
