<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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. BARRY E. TAYLOR, ESQ.
JONES, DAY, REAVIS & POGUE DANIEL R. MITZ, ESQ.
3500 SUNTRUST PLAZA WILSON SONSINI GOODRICH & ROSATI
303 PEACHTREE STREET, N.E. 650 PAGE MILL ROAD
ATLANTA, GEORGIA 30308-3242 PALO ALTO, CALIFORNIA 94304-1050
(404) 521-3939 (650) 493-9300
</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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) SHARE(2) PRICE(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
Common Stock, par value $.05 per share, and
Preferred Share Purchase Rights (4)....... 38,932,001 shares $24.289655 $945,644,884 $262,889
</TABLE>
(1) Represents the maximum number of shares of common stock, par value $.05 per
share ("HBOC Common Stock"), of HBO & Company ("HBOC") anticipated to be
issued in connection with the Merger (as defined herein) in exchange for all
of the issued and outstanding shares of common stock, $.001 par value per
share ("Access Common Stock"), of Access Health, Inc. ("Access"), assuming
the issuance prior to the Effective Time (as defined herein) of the Merger
of all shares of Access Common Stock subject to rights to acquire shares of
Access Common Stock held by persons other than HBOC.
(2) Estimated pursuant to Rule 457(f) of the Securities Act of 1933, as amended
(the "Securities Act"), based upon the estimated market value of 26,849,656
shares of Access Common Stock, the maximum number of shares of Access Common
Stock to be canceled pursuant to the Merger Agreement (based upon the
average of the reported high and low sales prices of a share of Access
Common Stock on the Nasdaq Stock Market National Market ("Nasdaq NM") on
November 4, 1998 of $35.22 per share).
(3) The registration fee for the securities registered hereby, $262,889, is
calculated pursuant to Rule 457(f) under the Securities Act, as follows:
.000278 multiplied by the product of $35.22, the average of the reported
high and low sales prices for a share of Access Common Stock on the Nasdaq
NM on November 4, 1998, times 26,849,656 the maximum number of shares of
Access Common Stock to be canceled in connection with the Merger. The
registration fee paid with respect to this filing has been reduced by
$179,893, which was paid on October 27, 1998 in connection with the filing
of Confidential Proxy Materials by Access.
(4) The Preferred Share Purchase Rights, which are attached to the shares of
HBOC Common Stock being registered, will be issued for no additional
consideration; no additional registration fee is required.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ACCESS HEALTH, INC.
335 INTERLOCKEN PARKWAY
BROOMFIELD, COLORADO 80021
November 6, 1998
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of
Access Health, Inc. to be held on:
Thursday, December 10, 1998
at 9:00 a.m.
at the corporate offices of Access Health, Inc.
335 Interlocken Parkway
Broomfield, Colorado 80021
THIS IS A VERY IMPORTANT SPECIAL MEETING THAT AFFECTS YOUR INVESTMENT IN
ACCESS.
At this special meeting you will be asked to vote on a merger agreement
pursuant to which Access will be merged with a subsidiary of HBO & Company. In
the merger, HBOC will pay Access stockholders 1.45 shares of HBOC common stock
for each share of Access common stock. This payment is subject to adjustment if
the average closing price per share of HBOC common stock as reported by the
Nasdaq Stock Market during a specified period before the special meeting is
greater than $30.00. In that event, Access stockholders will receive for each
share of Access common stock shares of HBOC common stock determined by dividing
$43.50 by that average closing price. The exchange of Access common stock for
HBOC common stock (other than cash paid for fractional shares) will be tax-free
to Access stockholders for federal income tax purposes.
Your Board of Directors has approved the merger, has determined that the
merger agreement and the merger are in your best interests and recommends that
you vote to approve the merger agreement at the special meeting. The merger
agreement is attached to the accompanying proxy statement/prospectus as Appendix
A. We encourage you to read the merger agreement.
In reaching this determination, your Board of Directors received the written
opinion of Merrill Lynch, Pierce, Fenner & Smith, Incorporated to the effect
that as of its date the exchange ratio was fair, from a financial point of view,
to Access stockholders. A copy of this opinion is attached to the accompanying
proxy statement/prospectus as Appendix B.
You should be aware that HBOC has entered into an agreement to merge with
McKesson Corporation. Under the terms of that agreement, each share of HBOC
common stock will be converted into .37 of a share of McKesson common stock.
That merger is subject to a number of customary closing conditions, and is
expected to be completed after our merger with HBOC.
We have enclosed a notice of special meeting and a proxy
statement/prospectus discussing the proposed merger and the related merger
agreement. We encourage you to read these documents carefully. Also enclosed is
a proxy card so you can vote on the merger agreement without attending the
meeting. Please complete, sign and date the enclosed proxy card and return it to
us as soon as possible in the stamped envelope we have provided. If you decide
to come to the special meeting, you may vote your shares in person whether or
not you have mailed us a proxy.
Thank you for your cooperation.
Very truly yours,
/s/ JOSEPH P. TALLMAN
JOSEPH P. TALLMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
TO THE STOCKHOLDERS OF
ACCESS HEALTH, INC.
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
THURSDAY, DECEMBER 10, 1998
AT 9:00 A.M.
AT THE CORPORATE OFFICES OF ACCESS HEALTH, INC.,
335 INTERLOCKEN PARKWAY
BROOMFIELD, COLORADO 80021
------------------------
The Board of Directors of Access asks you to attend this important special
meeting to vote on the following:
1. A merger agreement, pursuant to which Access would be merged with a
subsidiary of HBOC. In the merger, HBOC will pay Access stockholders 1.45
shares of HBOC common stock for each share of Access common stock. This
payment is subject to adjustment if the average closing price per share
of HBOC common stock as reported by the Nasdaq Stock Market during a
specified period before the special meeting is greater than $30.00. In
that event, Access stockholders will receive for each share of Access
common stock shares of HBOC common stock determined by dividing $43.50 by
that average closing price; and
2. Any other business as may properly come before the special meeting or
any postponement or adjournment.
Your Board of Directors has determined that the merger agreement and the
merger are in your best interests and recommends that you vote to approve the
merger agreement at the special meeting.
Only stockholders who held their shares of Access common stock at the close
of business on October 19, 1998 will be entitled to notice of, and to vote at,
the special meeting or any adjournments or postponements. The merger cannot be
completed unless holders of a majority of the outstanding shares of Access
common stock on the record date affirmatively vote to approve the merger
agreement.
Accompanying this notice is a proxy statement/prospectus discussing the
proposed merger and the related merger agreement. We encourage you to read this
document carefully. Also enclosed is a proxy card so you can vote on the merger
agreement without attending the special meeting. Please complete, sign and date
the enclosed proxy card and return it to us as soon as possible in the stamped
envelope we have provided. If you decide to come to the special meeting, you may
vote your shares in person whether or not you have mailed us a proxy. You may
also revoke your proxy at any time before the special meeting in writing.
By Order of the Board of Directors,
/c/ JULIE A. BROOKS
JULIE A. BROOKS
SENIOR VICE PRESIDENT AND SECRETARY
Broomfield, Colorado
Date: November 6, 1998
<PAGE>
THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. HBO & COMPANY MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROXY STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THOSE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED NOVEMBER 6, 1998
<TABLE>
<S> <C>
PROXY STATEMENT PROSPECTUS
OF OF
ACCESS HEALTH, INC. HBO & COMPANY
UP TO 38,932,001 SHARES OF
FOR A SPECIAL MEETING OF STOCKHOLDERS COMMON STOCK,
TO BE HELD ON DECEMBER 10, 1998 PAR VALUE $.05
</TABLE>
The Board of Directors of Access Health, Inc. has approved a merger
agreement, as amended, pursuant to which Access would be merged with a
subsidiary of HBO & Company. In the merger, HBOC will pay Access stockholders
1.45 shares of HBOC common stock for each share of Access common stock. This
payment is subject to adjustment if the average closing price per share of HBOC
common stock as reported by the Nasdaq Stock Market during a specified period
before the special meeting is greater than $30.00. In that event, Access
stockholders will receive for each share of Access common stock shares of HBOC
common stock determined by dividing $43.50 by that average closing price. If the
average closing price per share of HBOC common stock during that specified
period is less than $21.00 per share, then the Access Board may terminate the
merger agreement. The exchange of Access common stock for HBOC common stock
(other than cash paid for fractional shares) will be tax-free to Access
stockholders for federal income tax purposes.
Your Board of Directors has determined that the merger agreement and the
merger are in your best interests and recommends that you vote to approve the
merger agreement at a special meeting of Access stockholders.
A special meeting for Access stockholders to vote on the merger agreement
has been scheduled on:
THURSDAY, DECEMBER 10, 1998
AT 9:00 A.M.
AT THE CORPORATE OFFICES OF ACCESS
335 INTERLOCKEN PARKWAY
BROOMFIELD, COLORADO 80021
Only stockholders who held their shares of Access common stock at the close
of business on October 19, 1998 will be entitled to notice of, and to vote at,
the special meeting and any adjournments or postponements. The merger cannot be
completed unless holders of a majority of the outstanding shares of Access
common stock on the record date affirmatively vote to approve the merger
agreement.
HBOC common stock is listed on the Nasdaq National Market under the symbol
"HBOC." Access common stock is listed on the Nasdaq National Market under the
symbol "ACCS."
You should be aware that HBOC has entered into an agreement to merge with
McKesson Corporation. Under the terms of that agreement, each share of HBOC
common stock will be converted into .37 of a share of McKesson common stock.
That merger is subject to a number of customary closing conditions, and is
expected to be completed after our merger with HBOC.
This document gives you detailed information about the proposed merger. We
encourage you to read this entire document carefully. Please see "Where You Can
Find More Information" on page 62 for additional information about HBOC and
Access on file with the Securities and Exchange Commission.
SEE "RISK FACTORS" ON PAGE 26 FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU
SHOULD CONSIDER IN DETERMINING HOW TO VOTE ON THE MERGER AGREEMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE HBOC COMMON STOCK TO BE ISSUED
IN THE MERGER OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE
OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Proxy Statement/Prospectus dated November 6, 1998, and first mailed to
stockholders on November 9, 1998.
<PAGE>
THIS DOCUMENT INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT EACH OF HBOC AND ACCESS THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS
DOCUMENT. YOU MAY OBTAIN DOCUMENTS THAT ARE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION AND INCORPORATED BY REFERENCE IN THIS DOCUMENT BY REQUESTING
THEM IN WRITING OR BY TELEPHONE FROM THE APPROPRIATE PARTY AT THE FOLLOWING
ADDRESS:
<TABLE>
<S> <C>
FOR HBOC DOCUMENTS: FOR ACCESS DOCUMENTS:
HBO & COMPANY ACCESS HEALTH, INC.
301 PERIMETER CENTER NORTH 335 INTERLOCKEN PARKWAY
ATLANTA, GEORGIA 30346 BROOMFIELD, COLORADO 80021
ATTENTION: MONIKA BROWN ATTENTION: MATT PLAVAN
TELEPHONE: 800-426-2411 TELEPHONE: 303-664-6386
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM EITHER COMPANY, PLEASE DO SO BY
DECEMBER 3, 1998 IN ORDER TO RECEIVE THEM BEFORE THE MEETING.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
SUMMARY.................................................................................................... 1
RISK FACTORS............................................................................................... 26
No Assurance That Value of Merger Consideration Will Exceed Access Market Value.......................... 26
Interests of Certain Access Officers and Directors in the Merger Differ from Other Stockholders.......... 26
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE............................................................ 26
CERTAIN MARKET INFORMATION................................................................................. 27
HBOC..................................................................................................... 27
Access................................................................................................... 27
THE SPECIAL MEETING........................................................................................ 29
THE MERGER PROPOSAL........................................................................................ 29
Background of the Merger................................................................................. 29
Reasons of Access for Engaging in the Merger; Recommendation of the Access Board......................... 32
Opinion of Financial Advisor to Access................................................................... 34
Reasons of HBOC for Engaging in the Merger............................................................... 43
Terms of the Merger...................................................................................... 43
Effective Time......................................................................................... 43
General Effect of the Merger........................................................................... 43
Conversion of Shares................................................................................... 43
Fractional Shares...................................................................................... 44
Stock Plans............................................................................................ 44
Employee Stock Purchase Plan........................................................................... 44
Exchange of Certificates............................................................................... 44
Payment of Dividends................................................................................... 45
Limitations on Transferability of HBOC Common Stock.................................................... 45
Conditions; Waiver..................................................................................... 45
Hart-Scott-Rodino...................................................................................... 47
No Solicitation........................................................................................ 47
Termination............................................................................................ 47
Accounting Treatment..................................................................................... 48
Certain Federal Income Tax Consequences.................................................................. 48
No Appraisal Rights...................................................................................... 49
INTERESTS OF CERTAIN PERSONS IN EACH OF HBOC AND ACCESS.................................................... 50
Security Ownership of Certain Beneficial Owners and Management of HBOC................................... 50
Security Ownership of Certain Beneficial Owners and Management of Access................................. 52
Interests of Certain Access Persons in Matters to be Acted Upon.......................................... 53
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF HBOC COMMON STOCK AND ACCESS COMMON STOCK............. 56
Introduction............................................................................................. 56
Authorized Capital Stock................................................................................. 56
Board or Stockholder Approved Preferred Stock............................................................ 56
Voting Rights............................................................................................ 56
Number of Directors...................................................................................... 57
Election of Board of Directors........................................................................... 57
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Vote on Merger, Consolidation or Sale of Substantially All Assets........................................ 57
Special Meetings of Stockholders......................................................................... 57
Stockholder Action by Written Consent.................................................................... 58
Amendment of Certificate of Incorporation................................................................ 58
Amendment of Bylaws...................................................................................... 58
Liability and Indemnification of Officers and Directors.................................................. 58
Payment of Dividends..................................................................................... 59
Anti-Takeover Protection................................................................................. 59
Appraisal Rights......................................................................................... 59
BUSINESS OF HBOC........................................................................................... 60
General.................................................................................................. 60
Recent Developments...................................................................................... 60
BUSINESS OF ACCESS......................................................................................... 61
STOCKHOLDER PROPOSALS...................................................................................... 61
OTHER MATTERS.............................................................................................. 61
CERTAIN LEGAL MATTERS...................................................................................... 61
EXPERTS.................................................................................................... 61
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 62
APPENDIX A--Agreement of Merger dated September 28, 1998, as amended....................................... A-1
APPENDIX B--Opinion of Merrill Lynch, Pierce, Fenner & Smith, Incorporated................................. B-1
</TABLE>
ii
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE
PROPOSED MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF
THE PROPOSED MERGER, YOU SHOULD CAREFULLY READ THE ENTIRE DOCUMENT AND THE
DOCUMENTS WE HAVE REFERRED YOU TO. SEE "WHERE YOU CAN FIND MORE INFORMATION"
(PAGE 62). THE MERGER AGREEMENT, AS AMENDED, IS ATTACHED AS APPENDIX A TO THIS
DOCUMENT. WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT. IT IS THE LEGAL
DOCUMENT THAT GOVERNS THE PROPOSED MERGER. WE HAVE ADJUSTED ALL SHARE AND PER
SHARE INFORMATION REGARDING HBOC COMMON STOCK IN THIS PROXY STATEMENT/PROSPECTUS
FOR THE TWO-FOR-ONE STOCK SPLIT EFFECTED IN THE FORM OF A STOCK DIVIDEND THAT
WAS PAID ON JUNE 9, 1998.
THE COMPANIES (PAGES 60 AND 61)
HBO & COMPANY
301 Perimeter Center North
Atlanta, Georgia 30346
(770) 393-6000
HBOC provides software solutions, technological innovation and comprehensive
services to the healthcare industry. HBOC's products and services address its
customers' need for integrated information, whether for patient care, financial,
clinical, homecare, managed care or strategic management. HBOC's products use an
open systems architecture. This allows HBOC's customers to add products without
making their existing systems obsolete. HBOC also provides networking
technologies and electronic commerce services, as well as outsourcing services
for managing business offices and information systems operations. HBOC serves
more than 9,000 customers worldwide, including integrated health delivery
networks, hospitals, physicians' offices, home health providers, pharmacies,
reference laboratories, managed care providers and payors.
On October 17, 1998, HBOC entered into an agreement providing for the
acquisition of HBOC by McKesson Corporation in a merger. The merger agreement
provides that each HBOC stockholder will receive .37 of a share of McKesson
common stock for each share of HBOC common stock. The merger is subject to
regulatory approval and approval by the stockholders of HBOC and McKesson, as
well as other customary conditions. McKesson common stock is listed on The New
York Stock Exchange and the Pacific Exchange, Inc. under the symbol "MCK."
Within the United States and Canada, McKesson is the largest wholesale
distributor of ethical and proprietary drugs, medical-surgical supplies and
health and beauty care products. McKesson is also engaged in the processing and
sale of bottled drinking water to homes and businesses and packaged water
through retail stores. The principal markets for the drug, medical-surgical
supplies and health and beauty care distribution businesses are chain and
independent drug stores, hospitals, alternate-site healthcare facilities, food
stores and mass merchandisers. See "Where You Can Find More Information" on page
62.
ACCESS HEALTH, INC.
335 Interlocken Parkway
Broomfield, Colorado 80021
(303) 466-9500
Access is a leading provider of care management products and services to the
healthcare industry. Access provides its services primarily through six
telephonic care centers, which are staffed by registered nurses and other
healthcare professionals. Access' primary clients include health maintenance
organizations, preferred provider organizations, indemnity insurers, integrated
delivery systems, government agencies, self-insured employers and physician
groups.
ACCESS' REASONS FOR THE MERGER;
RECOMMENDATION TO
ACCESS STOCKHOLDERS (PAGE 32)
The Access Board has determined that the terms of the merger and the merger
agreement are in the best interests of Access and its stockholders. In reaching
its decision, the Access Board considered the following factors, among other
things:
- The combined company would be able to respond more effectively to rapid
change in the healthcare industry.
- The merger provides an opportunity for expanded distribution of both
HBOC's and Access' products and services.
<PAGE>
- The HBOC common stock that Access stockholders would receive represents a
more liquid investment in a company with a strong track record.
The Access Board has also considered the proposed merger of HBOC with
McKesson. The Access Board recommends that you vote FOR approval of the merger
agreement.
OTHER INTERESTS OF ACCESS
OFFICERS AND DIRECTORS IN THE MERGER (PAGE 53)
In considering the Board's recommendation that you vote to approve the
merger agreement, you should note that the directors and certain officers of
Access have arrangements including employment agreements, severance payments,
vesting of unexercisable stock options and continuing indemnification against
certain liabilities that provide them with interests in the merger that are
different from, or in addition to, yours. As a result, these directors and
officers could be more likely to vote to approve the merger agreement than
Access stockholders generally.
Specifically, Access stock options granted to certain participants in
Access' incentive plans, including Access' officers and directors, will, under
the terms of those incentive plans, to the extent not vested or exercisable,
vest and become exercisable for shares of HBOC common stock immediately upon
consummation of the merger. In addition, certain executive officers have entered
into employment agreements with HBOC. Lastly, the merger agreement requires HBOC
to continue to provide indemnification and related insurance for Access
directors and officers.
THE SPECIAL MEETING (PAGE 29)
Access will hold a special meeting of stockholders on Thursday, December 10,
1998 at 9:00 a.m. at Access' corporate offices, 335 Interlocken Parkway,
Broomfield, Colorado 80021. At the special meeting, Access stockholders will be
asked to approve the merger agreement.
RECORD DATE FOR VOTING
ON THE MERGER AGREEMENT (PAGE 29)
You are entitled to vote at the special meeting if you owned shares of
Access common stock as of the close of business on October 19, 1998, the record
date. On the record date, there were 23,655,151 shares of Access common stock
outstanding. Access stockholders will have one vote at the special meeting for
each share of Access common stock they owned on the record date.
STOCKHOLDER VOTE REQUIRED TO APPROVE THE
MERGER AGREEMENT; VOTING
AGREEMENTS (PAGES 29 AND 50)
The affirmative vote of the holders of a majority of the outstanding shares
of Access common stock on the record date is required to approve the merger
agreement. Your failure to vote will have the effect of a vote against the
merger agreement. HBOC stockholders will not vote on the merger agreement.
On the record date, the directors and executive officers of Access and their
affiliates owned 1,507,733 shares of Access common stock, which represented
approximately 6.4% of the outstanding shares of Access common stock. Each of the
directors and executive officers of Access have entered into voting agreements
granting HBOC a proxy to vote all their shares of Access common stock for
approval of the merger agreement. On September 30, 1998, the directors and
executive officers of HBOC and their affiliates owned 6,524,976 shares of HBOC
common stock, which represented approximately 1.5% of the outstanding shares of
HBOC common stock (giving effect to the exercise of their presently exercisable
stock options).
THE MERGER
The merger agreement, as amended, is attached as Appendix A at the back of
this proxy statement/prospectus. We encourage you to read the merger agreement
as it is the legal document that governs the proposed merger.
2
<PAGE>
WHAT ACCESS STOCKHOLDERS WILL RECEIVE IN THE MERGER (PAGE 43)
As a result of the merger, HBOC will pay Access stockholders 1.45 shares of
HBOC common stock for each share of Access common stock that they own. This
payment is subject to adjustment if the average closing price per share of HBOC
common stock as reported by the Nasdaq Stock Market during the 20 consecutive
trading days ending on the second trading day prior to the special meeting is
greater than $30.00. In that event, Access stockholders will receive for each
share of Access common stock shares of HBOC common stock determined by dividing
$43.50 by that average closing price.
Access stockholders will not receive fractional shares. Instead, they will
receive a check in payment for any fractional share based on the market value of
HBOC common stock during the specified period prior to the meeting.
EXAMPLES:
- - IF THE AVERAGE CLOSING PRICE OF HBOC COMMON STOCK DURING THE 20 CONSECUTIVE
TRADING DAYS ENDING ON THE SECOND TRADING DAY BEFORE THE SPECIAL MEETING IS
LESS THAN OR EQUAL TO $30.00,
- AND YOU OWN 100 SHARES OF ACCESS COMMON STOCK, THEN AFTER THE MERGER YOU
WILL RECEIVE 145 SHARES OF HBOC COMMON STOCK.
- AND YOU OWN 1 SHARE OF ACCESS COMMON STOCK, THEN AFTER THE MERGER, YOU
WILL RECEIVE 1 SHARE OF HBOC COMMON STOCK AND A CHECK FOR THE MARKET
VALUE OF THE .45 FRACTIONAL SHARE OF HBOC COMMON STOCK.
- - IF THE AVERAGE CLOSING PRICE OF HBOC COMMON STOCK DURING THE 20 CONSECUTIVE
TRADING DAYS ENDING ON THE SECOND TRADING DAY BEFORE THE SPECIAL MEETING IS
$32.00, AND YOU OWN 100 SHARES OF ACCESS COMMON STOCK, THEN AFTER THE MERGER
YOU WILL RECEIVE 135 SHARES OF HBOC COMMON STOCK AND A CHECK FOR THE MARKET
VALUE OF THE .94 FRACTIONAL SHARE OF HBOC COMMON STOCK. THIS AMOUNT IS
CALCULATED BY DIVIDING $43.50 BY $32.00 (THE AVERAGE CLOSING PRICE) AND
MULTIPLYING THE QUOTIENT OF 1.3594 BY 100 SHARES OF ACCESS COMMON STOCK.
If the merger of HBOC with McKesson is completed, each share of HBOC common
stock will be converted into .37 of a share of McKesson common stock.
DO NOT SEND IN YOUR STOCK CERTIFICATES NOW. WHEN THE MERGER IS COMPLETED, WE
WILL SEND YOU WRITTEN INSTRUCTIONS FOR EXCHANGING YOUR STOCK CERTIFICATES.
WHAT WILL HAPPEN TO ACCESS
If the merger is completed, a newly formed subsidiary of HBOC will be merged
with Access. Access will become a subsidiary of HBOC. Stockholders of Access
before the merger will own stock in HBOC after the merger.
CONDITIONS TO THE MERGER (PAGE 45)
The merger will not be completed unless certain conditions are met,
including the approval of the merger agreement by Access stockholders. Certain
of the conditions may be waived by the company entitled to assert the condition.
NO SOLICITATION (PAGE 47)
Access has agreed, subject to certain exceptions, not to initiate or engage
in discussions with another party regarding a business combination with such
other party while the merger is pending.
TERMINATION OF THE MERGER AGREEMENT (PAGE 47)
Access and HBOC may together agree to terminate the merger agreement without
completing the merger, whether or not Access stockholders have approved the
merger agreement.
The merger agreement may also be terminated in certain other circumstances,
as follows:
(1) either company may terminate the merger agreement if the merger is
not completed on or before January 15, 1998. However, neither Access nor
HBOC may terminate the merger agreement if its breach of the merger
agreement is the reason the merger has not been completed by that date;
(2) the Access Board may terminate the merger agreement if:
3
<PAGE>
- it determines, under certain circumstances, that its fiduciary obligations
require it to do so; or
- the average market value of HBOC common stock during the 20 consecutive
trading days ending on the second trading day prior to the Access special
meeting is less than $21.00.
(3) the HBOC Board may terminate the merger agreement if the assets,
rights, financial condition or results of operations of Access are
condemned, destroyed, lost or damaged in such a way as to have a material
adverse effect on Access.
TERMINATION FEES AND EXPENSES (PAGE 47)
If the merger agreement is terminated by Access to pursue an acquisition
agreement with a third party, Access will be required to pay HBOC a fee of $25
million in cash, subject to certain conditions, and all reasonable out-of-pocket
expenses of HBOC incurred in connection with the merger agreement up to $1
million. Further, if the merger agreement is terminated by either party because
the Access stockholders do not approve the merger agreement and the average
closing price per share of HBOC common stock during the five trading days ending
the day before the special meeting is less than $21.00, then Access will not be
required to pay HBOC the $25 million fee. However, Access will be required to
pay HBOC's reasonable out-of-pocket expenses up to $1 million.
REGULATORY APPROVALS (PAGE 47)
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
prohibits us from completing the merger until after we have furnished certain
information and materials to the Antitrust Division of the Department of Justice
and the Federal Trade Commission and a required waiting period has ended. Both
Access and HBOC furnished the required information and requested early
termination of the waiting period.
ACCOUNTING TREATMENT (PAGE 48)
We intend that the merger will be accounted for as a pooling of interests.
This means that after the merger HBOC will treat the companies as if they had
always been combined for accounting and financial reporting purposes.
IMPORTANT FEDERAL INCOME TAX CONSEQUENCES (PAGE 48)
The exchange of Access common stock for HBOC common stock (other than cash
paid for fractional shares) will be tax-free to Access stockholders for federal
income tax purposes.
Tax matters are very complicated and the tax consequences of the merger to
you will depend on the facts of your own circumstances. You should consult your
tax advisors for a full understanding of all of the tax consequences of the
merger to you.
NO APPRAISAL RIGHTS (PAGE 49)
Under Delaware law, Access stockholders do not have any right to an
appraisal of the value of their Access common stock in connection with the
merger.
RISKS OF THE MERGER (PAGE 26)
In considering whether to approve the merger agreement, you should consider
certain risks of the merger, including the risk of fluctuations in the market
price of HBOC common stock and the fact that the directors and certain officers
of Access may have interests in the merger that are different from, or in
addition to, yours.
OPINION OF FINANCIAL ADVISOR (PAGE 34 AND APPENDIX B)
In deciding to approve the merger, Access' Board considered an opinion from
its financial advisor, Merrill Lynch, Pierce, Fenner & Smith, Incorporated, to
the effect that as of its date the exchange ratio was fair, from a financial
point of view, to Access stockholders. Merrill Lynch has confirmed its opinion
as of the date hereof. This opinion is attached as Appendix B to this document.
YOU ARE URGED TO READ THE ENTIRE MERRILL LYNCH OPINION CAREFULLY.
4
<PAGE>
COMPARATIVE PER SHARE MARKET
PRICE INFORMATION (PAGE 27)
Shares of HBOC common stock and Access common stock are both quoted on the
Nasdaq Stock Market's National Market. On September 25, 1998, the last trading
day before the announcement of the proposed merger, the Access common stock
closed at $31.25 per share and the HBOC common stock closed at $28.1875 per
share. On November 5, 1998, Access common stock closed at $35.625 per share, and
HBOC common stock closed at $25.1875 per share.
LISTING OF HBOC COMMON STOCK
The shares of HBOC common stock issued in connection with the merger will be
listed on the Nasdaq Stock Market's National Market.
FORWARD-LOOKING STATEMENTS MAY PROVE
INACCURATE (PAGE 26)
Each of Access and HBOC have made forward-looking statements in this
document (and in documents that are incorporated by reference) that are subject
to risks and uncertainties. Forward-looking statements include expectations
concerning matters that are not historical facts. Also, when we use words such
as "believes," "expects," "anticipates" or similar expressions, we are making
forward-looking statements. For more information regarding factors that could
cause actual results to differ from these expectations, you should refer to the
documents we have filed with the Securities and Exchange Commission. See "Where
You Can Find More Information" on page 62.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have questions about the merger you should contact:
Access Investor Relations
335 Interlocken Parkway
Broomfield, Colorado 80021
Telephone: 303-664-6386
Attention: Matt Plavan
5
<PAGE>
SUMMARY FINANCIAL DATA
We derived the HBOC information from the audited financial statements of
HBOC for its fiscal years 1993 through 1997 and the unaudited financial
statements as of and for the nine months ended September 30, 1997 and 1998. On
October 1, 1998, HBOC completed the acquisition of US Servis, Inc. and on
October 30, 1998, HBOC completed the acquisition of IMNET Systems, Inc. Each of
these acquisitions was accounted for as a pooling of interests. The following
financial statements have not been restated to give effect to the US Servis or
IMNET acquisitions because the impact of these acquisitions are not material to
HBOC.
On June 30, 1998 Access acquired InterQual, Inc. The acquisition was
accounted for as a pooling of interests. The Access financial statements for all
periods presented below reflect the results of Access and InterQual on a
combined basis. The Access information was derived from the audited financial
statements of Access for its fiscal years 1995 through 1997 and the unaudited
financial statements as of and for the nine months ended June 30, 1997 and 1998.
The 1993 and 1994 financial statements of Access are derived from the separate
audited financial statements of Access and InterQual and are combined to reflect
the June 30, 1998 pooling of interests.
This information is only a summary and should be read in conjunction with
each company's historical financial statements (and related notes) contained in
their reports filed with the Securities and Exchange Commission. See "Where You
Can Find More Information" on page 62.
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>
1993 1994(2) 1995(3) 1996(4) 1997(5) 1997(5) 1998(6)
---------- ---------- ---------- ------------ ------------ ------------ ------------
INCOME STATEMENT DATA:
Revenue...................... $ 409,354 $ 525,490 $ 715,902 $ 950,911 $ 1,203,204 $ 861,962 $ 1,119,170
Net Income (Loss)............ $ 19,893 $ 34,500 $ (7,895) $ 82,333 $ 143,537 $ 117,696 $ 224,161
Diluted Earnings (Loss) Per
Share...................... $ .06 $ .09 $ (.02) $ .20 $ .33 $ .28 $ .51
Weighted Average Shares
Outstanding (Diluted)...... 349,371 364,547 370,060 421,768 428,925 427,405 439,379
Cash Dividends Per Share..... $ .02 $ .02 $ .02 $ .02 $ .03 $ .02 $ .05
BALANCE SHEET DATA:
Working Capital.............. $ 89,723 $ 53,330 $ 156,488 $ 295,240 $ 519,140 $ 489,792 $ 789,785
Total Assets................. $ 296,781 $ 425,093 $ 771,550 $ 1,012,749 $ 1,312,586 $ 1,177,016 $ 1,534,730
Long-Term Debt............... $ 6,700 $ 15,067 $ 4,054 $ 769 $ 1,022 $ 368 $ 696
Stockholders' Equity......... $ 176,242 $ 215,848 $ 500,787 $ 650,646 $ 900,582 $ 857,039 $ 1,185,139
</TABLE>
- ------------------------
(1) All share and per share amounts have been restated to reflect the 1998
two-for-one stock split effected in the form of a stock dividend.
(2) 1994 Income Statement related items include a nonrecurring charge of $6,927.
Net income was $38,650 and diluted earnings per share was $.11 excluding the
nonrecurring charge.
6
<PAGE>
(3) 1995 Income Statement related items include a nonrecurring charge of
$130,270 and exclude the dilutive effect of stock options. Net income was
$70,321 and diluted earnings per share was $.18 excluding the nonrecurring
charge and including the dilutive effect of stock options.
(4) 1996 Income Statement related items include a nonrecurring charge of
$70,203. Net income was $124,456 and diluted earnings per share was $.30
excluding the nonrecurring charge.
(5) Year ended December 31, 1997 Income Statement related items include a
nonrecurring charge of $95,250. Net income was $200,664 and diluted earnings
per share was $.47 excluding the nonrecurring charge. Nine months ended
September 30, 1997 Income Statement related items include a nonrecurring
charge of $35,420. Net income was $139,017 and diluted earnings per share
was $.33 excluding the nonrecurring charge.
(6) Nine months ended September 30, 1998 Income Statement related items include
a nonrecurring credit of $3,000. Net income was $222,361 and diluted
earnings per share was $.51 excluding the nonrecurring credit.
7
<PAGE>
ACCESS HEALTH, INC.
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
AT AND FOR THE
NINE MONTHS
AT AND FOR THE YEAR ENDED ENDED
SEPTEMBER 30, JUNE 30,
------------------------------------------------------ ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997(1) 1997(2) 1998(3)
--------- --------- --------- --------- ---------- ---------- ----------
INCOME STATEMENT DATA:
Revenue.................................. $ 22,989 $ 24,145 $ 42,765 $ 82,836 $ 120,642 $ 87,517 $ 109,191
Operating Income (Loss).................. $ (580) $ (7,124) $ (2,538) $ 5,898 $ 11,105 $ 6,078 $ 17,993
Income (Loss) Before Income Taxes........ $ (281) $ (6,668) $ (1,815) $ 7,306 $ 2,930 $ 7,292 $ 20,564
Net Income (Loss)........................ $ (660) $ (4,983) $ (1,177) $ 1,196 $ 4,980 $ 5,377 $ 12,750
Diluted Earnings (Loss) Per Share........ $ (.05) $ (.35) $ (.08) $ .05 $ .21 $ .23 $ .52
Weighted Average Shares Outstanding
(Diluted).............................. 14,073 14,174 14,814 22,667 23,892 23,503 24,661
Cash Dividends Per Share................. $ -- $ -- $ -- $ -- $ -- $ -- $ --
BALANCE SHEET DATA:
Working Capital.......................... $ 11,285 $ 9,490 $ 12,721 $ 37,643 $ 58,778 $ 42,227 $ 75,807
Total Assets............................. $ 27,134 $ 30,091 $ 42,380 $ 92,145 $ 115,551 $ 106,939 $ 147,608
Long-Term Liabilities.................... $ 1,248 $ 921 $ 670 $ 1,506 $ 759 $ 943 $ 198
Stockholders' Equity..................... $ 16,479 $ 16,203 $ 16,088 $ 52,443 $ 80,494 $ 73,050 $ 102,031
</TABLE>
- ------------------------
(1) Year ended September 30, 1997 Income Statement related items include a
nonrecurring charge of $26,006. Net income was $17,319 and diluted earnings
per share was $.72 excluding the nonrecurring charge and benefits of net
operating loss carry-forwards.
(2) Nine months ended June 30, 1997 Income Statement related items include a
nonrecurring charge of $13,306. Net income was $12,359 and diluted earnings
per share was $.53 excluding the nonrecurring charge and benefits of net
operating loss carry-forwards.
(3) Nine months ended June 30, 1998 Income Statement related items include a
nonrecurring charge of $9,000. Net income was $18,330 and diluted earnings
per share was $.74 excluding the nonrecurring charge.
8
<PAGE>
HBOC/ACCESS
PRO FORMA FINANCIAL INFORMATION
We intend that the merger will be accounted for as a pooling of interests,
which means that after the merger HBOC will treat the companies as if they had
always been combined for accounting and financial reporting purposes.
We are presenting below unaudited pro forma financial information that
reflects the pooling of interests method of accounting to give you a better
picture of what our businesses might have looked like had they always been
combined. We prepared the pro forma income statements and balance sheet by
adding or combining the historical amounts of each company. We have adjusted all
share and per share amounts for the HBOC 1998 two-for-one stock split. The
companies may have performed differently if they had always been combined. You
should not rely on the pro forma information as being indicative of the
historical results that the companies would have had or the results that HBOC
will experience in the future.
On October 1, 1998, HBOC completed the acquisition of US Servis. The
acquisition was accounted for as a pooling of interests. US Servis historical
amounts are not included in the following pro forma combined condensed financial
statements as the impact of this acquisition is not material to HBOC. On October
30, 1998, HBOC completed the acquisition of IMNET Systems, Inc. The acquisition
was accounted for as a pooling of interests. IMNET historical amounts are not
included in the following pro forma combined condensed financial statements as
the impact of this acquisition is not material to HBOC.
The unaudited pro forma financial information should be read in conjunction
with each company's historical financial statements (and related notes)
contained in their annual reports on Form 10-K and other information filed with
the Securities and Exchange Commission. See "Where You Can Find More
Information" on page 62.
For pro forma financial information regarding the merger of HBOC with
McKesson, see page 18.
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AT SEPTEMBER 30, 1998
(000 OMITTED)
<TABLE>
<CAPTION>
HBOC/ACCESS
PRO FORMA PRO FORMA
HBOC ACCESS(1) ADJUSTMENTS COMBINED
------------ ---------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents.............................. $ 555,875 $ 46,704 $ $ 602,579
Short-Term Investments................................. 6,208 30,052 36,260
Receivables, Net....................................... 510,998 26,253 537,251
Current Deferred Income Taxes.......................... 20,573 9,671 30,244
Inventories............................................ 5,708 -- 5,708
Prepaids and Other Current Assets...................... 31,631 8,506 40,137
------------ ---------- ------------ -------------
Total Current Assets................................. 1,130,993 121,186 -- 1,252,179
Capitalized Software, Net................................ 83,277 -- 83,277
Property and Equipment, Net.............................. 119,427 19,354 138,781
Intangibles, Net......................................... 157,904 2,493 160,397
Deferred Income Taxes.................................... 28,135 1,042 29,177
Other Noncurrent Assets, Net............................. 14,994 3,533 18,527
------------ ---------- ------------ -------------
TOTAL ASSETS............................................... $ 1,534,730 $ 147,608 $ -- $ 1,682,338
------------ ---------- ------------ -------------
------------ ---------- ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities...................................... $ 341,208 $ 45,379 $ 386,587
Long-Term Debt........................................... 696 198 894
Other Long-Term Liabilities.............................. 7,687 -- 7,687
Stockholders' Equity..................................... 1,185,139 102,031 1,287,170
------------ ---------- ------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................. $ 1,534,730 $ 147,608 $ -- $ 1,682,338
------------ ---------- ------------ -------------
------------ ---------- ------------ -------------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
9
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/ACCESS
PRO FORMA PRO FORMA
HBOC ACCESS(1) ADJUSTMENTS COMBINED
------------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
Revenue.................................................... $ 1,119,170 $ 109,191 $ -- $ 1,228,361
Operating Expense:
Cost of Operations....................................... 464,167 52,342 516,509
Marketing................................................ 153,487 9,694 163,181
Research and Development................................. 71,318 8,652 79,970
General and Administrative............................... 75,024 11,510 86,534
Nonrecurring Charge (Credit)............................. (3,000) 9,000 6,000
------------ ---------- ----------- -------------
Total Operating Expense.............................. 760,996 91,198 -- 852,194
------------ ---------- ----------- -------------
Operating Income........................................... 358,174 17,993 -- 376,167
Other Income, Net.......................................... 15,428 2,571 17,999
------------ ---------- ----------- -------------
Income Before Income Taxes................................. 373,602 20,564 -- 394,166
Income Taxes............................................... 149,441 7,814 157,255
------------ ---------- ----------- -------------
Net Income................................................. $ 224,161 $ 12,750 $ -- $ 236,911
------------ ---------- ----------- -------------
------------ ---------- ----------- -------------
Earnings Per Share:
Basic.................................................... $ .52 $ .57 $ .51
------------ ---------- -------------
------------ ---------- -------------
Diluted.................................................. $ .51 $ .52 $ .50
------------ ---------- -------------
------------ ---------- -------------
Weighted Average Shares Outstanding:
Basic.................................................... 428,927 22,502 10,126(2) 461,555
------------ ---------- ----------- -------------
------------ ---------- ----------- -------------
Diluted.................................................. 439,379 24,661 11,098(2) 475,138
------------ ---------- ----------- -------------
------------ ---------- ----------- -------------
Excluding Nonrecurring Charge (Credit) (3):
Net Income............................................... $ 222,361 $ 18,330 $ 240,691
------------ ---------- -------------
------------ ---------- -------------
Diluted Earnings Per Share............................... $ .51 $ .74 $ .51
------------ ---------- -------------
------------ ---------- -------------
Weighted Average Shares Outstanding (Diluted)............ 439,379 24,661 11,098(2) 475,138
------------ ---------- ----------- -------------
------------ ---------- ----------- -------------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
10
<PAGE>
HBO & COMPANY AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(000 OMITTED, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HBOC/ACCESS
PRO FORMA PRO FORMA
HBOC ACCESS(1) ADJUSTMENTS COMBINED
------------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
Revenue................................................... $ 1,203,204 $ 120,642 $ -- $ 1,323,846
Operating Expense:
Cost of Operations...................................... 511,082 57,116 568,198
Marketing............................................... 176,194 11,684 187,878
Research and Development................................ 89,059 11,232 100,291
General and Administrative.............................. 108,811 13,499 122,310
Nonrecurring Charge..................................... 95,250 16,006 10,000(4) 121,256
------------ ---------- ----------- -------------
Total Operating Expense........................... 980,396 109,537 10,000 1,099,933
------------ ---------- ----------- -------------
Operating Income.......................................... 222,808 11,105 (10,000) 223,913
Other Income (Loss), Net.................................. 16,382 (8,175) 10,000(4) 18,207
------------ ---------- ----------- -------------
Income Before Income Taxes................................ 239,190 2,930 -- 242,120
Income Taxes (Benefit).................................... 95,653 (2,050) 93,603
------------ ---------- ----------- -------------
Net Income................................................ $ 143,537 $ 4,980 $ -- $ 148,517
------------ ---------- ----------- -------------
------------ ---------- ----------- -------------
Earnings Per Share:
Basic................................................... $ .34 $ .23 $ .33
------------ ---------- -------------
------------ ---------- -------------
Diluted................................................. $ .33 $ .21 $ .32
------------ ---------- -------------
------------ ---------- -------------
Weighted Average Shares Outstanding:
Basic................................................... 417,022 21,668 9,751(2) 448,441
------------ ---------- ----------- -------------
------------ ---------- ----------- -------------
Diluted................................................. 428,925 23,892 10,751(2) 463,568
------------ ---------- ----------- -------------
------------ ---------- ----------- -------------
Excluding Nonrecurring Charge (3):
Net Income.............................................. $ 200,664 $ 17,319 $ 217,983
------------ ---------- -------------
------------ ---------- -------------
Diluted Earnings Per Share.............................. $ .47 $ .72 $ .47
------------ ---------- -------------
------------ ---------- -------------
Weighted Average Shares Outstanding (Diluted)........... 428,925 23,892 10,751(2) 463,568
------------ ---------- ----------- -------------
------------ ---------- ----------- -------------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
11
<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/ACCESS
PRO FORMA PRO FORMA
HBOC ACCESS(1) ADJUSTMENTS COMBINED
---------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue...................................................... $ 950,911 $ 82,836 $ -- $ 1,033,747
Operating Expense:
Cost of Operations......................................... 413,471 43,283 456,754
Marketing.................................................. 146,207 11,408 157,615
Research and Development................................... 83,984 8,350 92,334
General and Administrative................................. 107,810 13,897 121,707
Nonrecurring Charge........................................ 70,203 -- 70,203
---------- ----------- ------ -------------
Total Operating Expense.............................. 821,675 76,938 -- 898,613
---------- ----------- ------ -------------
Operating Income............................................. 129,236 5,898 -- 135,134
Other Income, Net............................................ 7,222 1,408 8,630
---------- ----------- ------ -------------
Income Before Income Taxes................................... 136,458 7,306 -- 143,764
Income Taxes................................................. 54,125 6,110 60,235
---------- ----------- ------ -------------
Net Income................................................... $ 82,333 $ 1,196 $ -- $ 83,529
---------- ----------- ------ -------------
---------- ----------- ------ -------------
Earnings Per Share:
Basic...................................................... $ .20 $ .07 $ .19
---------- ----------- -------------
---------- ----------- -------------
Diluted.................................................... $ .20 $ .05 $ .18
---------- ----------- -------------
---------- ----------- -------------
Weighted Average Shares Outstanding:
Basic...................................................... 404,800 16,698 7,514(2) 429,012
---------- ----------- ------ -------------
---------- ----------- ------ -------------
Diluted.................................................... 421,768 22,667 10,200(2) 454,635
---------- ----------- ------ -------------
---------- ----------- ------ -------------
Excluding Nonrecurring Charge (3):
Net Income................................................. $ 124,456 $ 1,196 $ 125,652
---------- ----------- -------------
---------- ----------- -------------
Diluted Earnings Per Share................................. $ .30 $ .05 $ .28
---------- ----------- -------------
---------- ----------- -------------
Weighted Average Shares Outstanding (Diluted).............. 421,768 22,667 10,200(2) 454,635
---------- ----------- ------ -------------
---------- ----------- ------ -------------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
12
<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/ACCESS
PRO FORMA PRO FORMA
HBOC ACCESS(1) ADJUSTMENTS COMBINED
---------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue...................................................... $ 715,902 $ 42,765 $ -- $ 758,667
Operating Expense:
Cost of Operations......................................... 329,684 27,930 357,614
Marketing.................................................. 114,994 6,434 121,428
Research and Development................................... 68,293 3,972 72,265
General and Administrative................................. 89,213 6,967 96,180
Nonrecurring Charge........................................ 130,270 -- 130,270
---------- ----------- ------ -------------
Total Operating Expense.............................. 732,454 45,303 -- 777,757
---------- ----------- ------ -------------
Operating Loss............................................... (16,552) (2,538) -- (19,090)
Other Income, Net............................................ 605 723 1,328
---------- ----------- ------ -------------
Loss Before Income Taxes..................................... (15,947) (1,815) -- (17,762)
Income Tax Benefit........................................... (8,052) (638) (8,690)
---------- ----------- ------ -------------
Net Loss..................................................... $ (7,895) $ (1,177) $ -- $ (9,072)
---------- ----------- ------ -------------
---------- ----------- ------ -------------
Loss Per Share............................................... $ (.02) $ (.08) $ (.02)
---------- ----------- -------------
---------- ----------- -------------
Weighted Average Shares Outstanding.......................... 370,060 14,814 6,666(2) 391,540
---------- ----------- ------ -------------
---------- ----------- ------ -------------
Excluding Nonrecurring Charge (3):
Net Income (Loss).......................................... $ 70,321 $ (1,177) $ 69,144
---------- ----------- -------------
---------- ----------- -------------
Diluted Earnings (Loss) Per Share.......................... $ .18 $ (.08) $ .16
---------- ----------- -------------
---------- ----------- -------------
Weighted Average Shares Outstanding (Diluted).............. 391,121 14,814 13,527(2) 419,462
---------- ----------- ------ -------------
---------- ----------- ------ -------------
</TABLE>
The accompanying Notes to Pro Forma Combined Condensed Financial Statements
are an integral part of these financial statements.
13
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(1) The HBOC Pro Forma Combined Condensed Balance Sheet at September 30, 1998
has been completed using the Access balance sheet at June 30, 1998. The HBOC
Pro Forma Combined Condensed Income Statement for the nine months ended
September 30, 1998 has been completed using the Access income statement for
the nine months ended June 30, 1998. The HBOC Pro Forma Combined Condensed
Income Statements for the years ended December 31, 1995, 1996 and 1997 have
been completed using the Access income statements for the fiscal years ended
September 30, 1995, 1996 and 1997, respectively. HBOC believes that the
differences in such periods in all cases mentioned has an immaterial impact
on the pro forma statements.
(2) Shares of Access Common Stock were converted using an assumed Exchange Ratio
of 1.4500. Exchange Ratios of 1.2429 and 1.0875 have an immaterial effect on
diluted earnings per share. See "--Comparative Per Share Data" presented
elsewhere in this document. For the 1995 Pro Forma Combined Condensed Income
Statement (excluding nonrecurring charge), Access weighted average shares
are adjusted to include the dilutive effect of stock options and preferred
stock due to net income for HBOC/Access Pro Forma Combined.
(3) Presentation is also made of Net Income (Loss), Diluted Earnings (Loss) Per
Share and Weighted Average Shares Outstanding (Diluted) excluding the effect
of nonrecurring charges and credits because HBOC management believes that
this is a better indication of actual operating results.
(4) Reclassification from other income of Access' write-down of an investment to
conform to HBOC presentation.
14
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables set forth book values, dividends and earnings per share
on a historical basis and on a pro forma combined basis for HBOC and Access and
on an equivalent pro forma basis for Access. The pro forma information gives
effect to the merger accounted for as a "pooling of interests," which means that
after the merger HBOC will treat the companies as if they had always been
combined for accounting and financial reporting purposes. We have adjusted all
share and per share amounts for the HBOC 1998 two-for-one stock split. The
companies may have performed differently if they had always been combined. You
should not rely on the pro forma information as being indicative of the
historical results that the companies would have had or the results that HBOC
will experience in the future.
The pro forma combined comparative per share data should be read in
conjunction with each company's historical financial statements (and related
notes) contained in their reports filed with the Securities and Exchange
Commission. See "Where You Can Find More Information" on page 62.
HISTORICAL
HBO & COMPANY
<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>
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
Per Share Data:
Book Value............................ $ 1.28 $ 1.59 $ 2.13 $ 2.04 $ 2.75
Cash Dividends Declared............... $ .02 $ .02 $ .03 $ .02 $ .05
Diluted Earnings (Loss)............... $ (.02)(1) $ .20(2) $ .33(3) $ .28(4) $ .51(5)
</TABLE>
- ------------------------
(1) Including the effect of the $130 million nonrecurring charge related to 1995
acquisitions and excluding the dilutive effect of stock options.
(2) Including the effect of the $70 million nonrecurring charge related to 1996
acquisitions.
(3) Including the effect of the $95 million nonrecurring charge related to 1997
acquisitions.
(4) Including the effect of the $35 million nonrecurring charge related to 1997
acquisitions.
(5) Including the effect of the $3 million nonrecurring credit related to 1997
acquisitions.
ACCESS HEALTH, INC.
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
Per Share Data:
Book Value............................ $ 1.06 $ 3.00 $ 3.65 $ 3.35 $ 4.33
Cash Dividends Declared............... $ -- $ -- $ -- $ -- $ --
Diluted Earnings (Loss)............... $ (.08) $ .05 $ .21(1) $ .23(2) $ .52(3)
</TABLE>
- ------------------------
(1) Including the effect of the $26 million nonrecurring charge related to
fiscal year 1997 acquisitions and the write-down of investment in American
Health Network, L.P.
(2) Including the effect of the $13 million nonrecurring charge related to
fiscal year 1997 acquisitions.
(3) Including the effect of the $9 million nonrecurring charge related to 1998
acquisitions.
15
<PAGE>
PRO FORMA COMBINED HBO & COMPANY AND ACCESS HEALTH, INC.
USING AN ASSUMED VALUE OF HBOC COMMON STOCK OF $30.00 OR LESS
RESULTING IN AN ASSUMED EXCHANGE RATIO OF 1.4500
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED NINE MONTHS ENDED
DECEMBER 31,(6) SEPTEMBER 30,
---------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
Per Share Data:
Book Value.......................... $ 1.25 $ 1.62 $ 2.16 $ 2.06 $ 2.76
Cash Dividends Declared............. $ .02 $ .02 $ .03 $ .02 $ .05
Diluted Earnings (Loss)............. $ (.02)(1) $ .18(2) $ .32(3) $ .27(4) $ .50(5)
</TABLE>
USING AN ASSUMED VALUE OF HBOC COMMON STOCK OF $35.00
RESULTING IN AN ASSUMED EXCHANGE RATIO OF 1.2429
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED NINE MONTHS ENDED
DECEMBER 31,(6) SEPTEMBER 30,
---------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
Per Share Data:
Book Value.......................... $ 1.26 $ 1.63 $ 2.18 $ 2.08 $ 2.79
Cash Dividends Declared............. $ .02 $ .02 $ .03 $ .02 $ .05
Diluted Earnings (Loss)............. $ (.02)(1) $ .19(2) $ .32(3) $ .27(4) $ .50(5)
</TABLE>
USING AN ASSUMED VALUE OF HBOC COMMON STOCK OF $40.00
RESULTING IN AN ASSUMED EXCHANGE RATIO OF 1.0875
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED NINE MONTHS ENDED
DECEMBER 31,(6) SEPTEMBER 30,
---------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
Per Share Data:
Book Value.......................... $ 1.27 $ 1.64 $ 2.20 $ 2.09 $ 2.82
Cash Dividends Declared............. $ .02 $ .02 $ .03 $ .02 $ .05
Diluted Earnings (Loss)............. $ (.02)(1) $ .19(2) $ .33(3) $ .27(4) $ .51(5)
</TABLE>
- ------------------------
(1) Including the effect of the $130 million nonrecurring charge related to
HBOC's 1995 acquisitions.
(2) Including the effect of the $70 million nonrecurring charge related to
HBOC's 1996 acquisitions.
(3) Including the effect of the $95 million nonrecurring charge related to
HBOC's 1997 acquisitions and Access' $26 million nonrecurring charge related
to fiscal year 1997 acquisitions and the write-down of investment in
American Health Network, L.P.
(4) Including the effect of the $35 million nonrecurring charge related to
HBOC's 1997 acquisitions and Access' $13 million nonrecurring charge related
to fiscal year 1997 acquisitions.
(5) Including the effect of the $3 million nonrecurring credit related to HBOC's
1997 acquisitions and Access' $9 million nonrecurring charge related to
fiscal year 1998 acquisitions.
(6) The fiscal year of Access ends on September 30. Pro forma per share data at
and for the years ended December 31, 1995, 1996 and 1997 have been completed
using the Access income statements at and for the fiscal years ended
September 30, 1995, 1996 and 1997, respectively. Pro forma per share data at
and for the nine months ended September 30 have been completed using the
Access information at and for the nine months ended June 30 for all periods
presented. HBOC believes that the differences in such periods in all cases
mentioned has an immaterial impact on the pro forma per share data.
16
<PAGE>
EQUIVALENT PRO FORMA DATA FOR ACCESS HEALTH, INC.
USING AN ASSUMED VALUE OF HBOC COMMON STOCK OF $30.00 OR LESS
RESULTING IN AN ASSUMED EXCHANGE RATIO OF 1.4500
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED NINE MONTHS ENDED
DECEMBER 31,(6) SEPTEMBER 30,
---------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
Per Share Data:
Book Value........................... $ 1.82 $ 2.35 $ 3.13 $ 2.98 $ 4.01
Cash Dividends Declared.............. $ .03 $ .03 $ .04 $ .03 $ .07
Diluted Earnings (Loss).............. $ (.03)(1) $ .27(2) $ .46(3) $ .39(4) $ .72(5)
</TABLE>
USING AN ASSUMED VALUE OF HBOC COMMON STOCK OF $35.00
RESULTING IN AN ASSUMED EXCHANGE RATIO OF 1.2429
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED NINE MONTHS ENDED
DECEMBER 31,(6) SEPTEMBER 30,
---------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
Per Share Data:
Book Value........................... $ 1.57 $ 2.03 $ 2.71 $ 2.58 $ 3.47
Cash Dividends Declared.............. $ .02 $ .02 $ .04 $ .02 $ .06
Diluted Earnings (Loss).............. $ (.03)(1) $ .23(2) $ .40(3) $ .34(4) $ .63(5)
</TABLE>
USING AN ASSUMED VALUE OF HBOC COMMON STOCK OF $40.00
RESULTING IN AN ASSUMED EXCHANGE RATIO OF 1.0875
<TABLE>
<CAPTION>
AT AND FOR THE
AT AND FOR THE YEAR ENDED NINE MONTHS ENDED
DECEMBER 31,(6) SEPTEMBER 30,
---------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
Per Share Data:
Book Value........................... $ 1.38 $ 1.79 $ 2.39 $ 2.28 $ 3.06
Cash Dividends Declared.............. $ .02 $ .02 $ .03 $ .02 $ .05
Diluted Earnings (Loss).............. $ (.03)(1) $ .20(2) $ .36(3) $ .30(4) $ .55(5)
</TABLE>
- ------------------------
(1) Including the effect of the $130 million nonrecurring charge related to
HBOC's 1995 acquisitions.
(2) Including the effect of the $70 million nonrecurring charge related to
HBOC's 1996 acquisitions.
(3) Including the effect of the $95 million nonrecurring charge related to
HBOC's 1997 acquisitions and Access' $26 million nonrecurring charge related
to fiscal year 1997 acquisitions and the write-down of investment in
American Health Network, L.P.
(4) Including the effect of the $35 million nonrecurring charge related to
HBOC's 1997 acquisitions and Access' $13 million nonrecurring charge related
to fiscal year 1997 acquisitions.
(5) Including the effect of the $3 million nonrecurring credit related to HBOC's
1997 acquisitions and Access' $9 million nonrecurring charge related to
fiscal year 1998 acquisitions.
(6) The fiscal year of Access ends on September 30. Pro forma per share data at
and for the years ended December 31, 1995, 1996 and 1997 have been completed
using the Access income statements at and for the fiscal years ended
September 30, 1995, 1996 and 1997, respectively. Pro forma per share data at
and for the nine months ended September 30 have been completed using the
Access information at and for the nine months ended June 30 for all periods
presented. HBOC believes that the differences in such periods in all cases
mentioned has an immaterial impact on the pro forma per share data.
17
<PAGE>
SUPPLEMENTAL UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL DATA OF
MCKESSON AND HBOC
On October 17, 1998, McKesson signed an agreement to acquire HBOC. Terms of
the merger call for each HBOC stockholder to receive .37 of a share of McKesson
common stock for each share of HBOC common stock in a tax-free exchange. The
merger is subject to regulatory approval, McKesson and HBOC stockholder approval
and other customary conditions. HBOC and McKesson intend that the merger will be
accounted for as a pooling of interests and expect that it will close in the
first quarter of 1999.
The following financial data present the combined condensed balance sheet of
McKesson and the pro forma combined condensed balance sheet of HBOC and Access
and the combined condensed statements of income of McKesson and the pro forma
combined condensed statements of income of HBOC and Access. The pro forma
financial data do not reflect any cost savings or other synergies anticipated by
McKesson or HBOC management as a result of the merger. Also in connection with
the merger, the companies expect to incur charges for merger-related costs.
Management has not estimated the amount of such merger-related costs and the pro
forma financial data do not reflect any such costs. The companies may have
performed differently if they had always been combined. You should not rely on
the pro forma information as being indicative of the historical results the
combined companies would have had or the results that they will experience in
the future.
McKesson's fiscal year ends on March 31. HBOC's fiscal year ends on December
31. For purposes of combining HBOC's financial data with McKesson's historical
financial data, the financial information of HBOC has been reported on a
combined pro forma basis with Access using the twelve-month periods ended March
31, 1998, 1997 and 1996 and the six-month period ended September 30, 1998. In
addition, the financial information of HBOC has been reported assuming the
merger between HBOC and Access is consummated.
The supplemental unaudited pro forma combined condensed consolidated
financial data should be read in conjunction with the historical financial
statements of McKesson and HBOC contained in their reports filed with the
Securities and Exchange Commission. See "Where You Can Find More Information" on
page 62.
18
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AT SEPTEMBER 30, 1998
(IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
MCKESSON HBOC (1) COMBINED
------------ ----------- -----------
<S> <C> <C> <C>
Assets
Current Assets:
Cash and Cash Equivalents............................................. $ 103.5 $ 602.6 $ 706.1
Marketable Securities Available for Sale.............................. 28.1 36.3 64.4
Receivables........................................................... 1,948.7 537.3 2,486.0
Inventories........................................................... 3,207.2 5.7 3,212.9
Prepaid Expenses...................................................... 42.2 70.3 112.5
------------ ----------- -----------
Total Current Assets................................................ 5,329.7 1,252.2 6,581.9
Property, Plant and Equipment, net...................................... 479.8 138.8 618.6
Capitalized Software, net(2)............................................ 4.7(3) 83.2 87.9
Goodwill and Other Intangibles.......................................... 828.2 160.4 988.6
Other Assets............................................................ 374.5(3) 47.7 422.2
------------ ----------- -----------
Total Assets........................................................ $ 7,016.9 $ 1,682.3 $ 8,699.2
------------ ----------- -----------
------------ ----------- -----------
Liabilities and Stockholders' Equity
Current Liabilities:
Drafts and Accounts Payable........................................... $ 2,848.4 $ 108.4 $ 2,956.8
Short-term Loans and Current Portion of Long-Term Debt................ 484.9 1.2 486.1
Other Current Liabilities............................................. 475.4 277.0 752.4
------------ ----------- -----------
Total Current Liabilities........................................... 3,808.7 386.6 4,195.3
Postretirement Obligations and Other Noncurrent Liabilities............. 240.4 7.7 248.1
Long-Term Debt.......................................................... 1,141.5 0.9 1,142.4
McKesson-obligated mandatorily redeemable convertible preferred
securities of subsidiary grantor trust whose sole assets are junior
subordinated debentures of McKesson................................... 195.5 -- 195.5
Stockholders' Equity.................................................... 1,630.8 1,287.1 2,917.9
------------ ----------- -----------
Total Liabilities and Stockholders' Equity.......................... $ 7,016.9 $ 1,682.3 $ 8,699.2
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
- ------------------------
(1) HBOC amounts are reported on a pro forma combined basis with Access, and
have been reclassified from the historical HBOC presentation to conform to
the McKesson financial statement presentation.
(2) Capitalized software represents costs to develop software for sale to
customers.
(3) McKesson amounts have been reclassified from historical McKesson
presentation to conform to the HBOC financial statement presentation.
19
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
------------------------------
<S> <C> <C> <C> <C>
HISTORICAL
MCKESSON HBOC(1) ADJUSTMENTS COMBINED
-------------- ------------ -------------- --------------
Revenues............................................. $ 12,812.4 $ 863.6 $ $ 13,676.0
Cost and Expenses:
Cost of Sales and Operations......................... 11,981.4(2) 352.3 12,333.7
Selling, Marketing, Distribution and
Administration..................................... 684.1(2) 172.7 856.8
Research and Development............................. -- 55.4 55.4
Nonrecurring Charge.................................. -- 6.0(3) 6.0
Interest............................................. 57.4 -- 57.4
-------------- ------ -------------- --------------
Total Cost and Expenses........................ 12,722.9 586.4 -- 13,309.3
-------------- ------ -------------- --------------
Income before Income Taxes and Dividends on
Convertible Preferred Securities of Subsidiary
Trust.............................................. 89.5 277.2 366.7
Income Taxes......................................... (34.9) (110.6) (145.5)
Dividends on Convertible Preferred Securities of
Subsidiary Trust, net of tax benefit............... (3.1) -- (3.1)
-------------- ------ -------------- --------------
Net Income................................... $ 51.5 $ 166.6 $ -- $ 218.1
-------------- ------ -------------- --------------
-------------- ------ -------------- --------------
Earnings Per Common Share:
Diluted.............................................. $ 0.51 $ 0.35 $ 0.78
Basic................................................ $ 0.54 $ 0.36 $ 0.82
Shares on which Earnings Per Common Share were based:
Diluted.............................................. 106.2 477.7 (301.0)(4) 282.9
Basic................................................ 95.6 463.4 (292.0)(4) 267.0
</TABLE>
- ------------------------
(1) HBOC amounts are reported on a pro forma combined basis with Access, and
have been reclassified from the historical HBOC presentation to conform to
the McKesson financial statement presentation.
(2) Includes $80.1 million in charges ($0.7 million in Cost of Sales and
Operations and $79.4 million in Selling, Marketing, Distribution and
Administration) for transaction costs, employee benefit change of control
provisions and restructuring, integration and systems installation costs
associated primarily with acquisition-related activities, $52.3 million
after-tax.
(3) Includes acquisition charges related to HBOC's acquisition of HPR Inc. and
Access' acquisition of InterQual, Inc., $3.8 million after-tax.
(4) Reflects the effect of the exchange ratio of 0.37 of a share of McKesson
common stock for each share of HBOC common stock.
20
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
--------------------------
<S> <C> <C> <C> <C>
HISTORICAL
MCKESSON HBOC(1) ADJUSTMENTS COMBINED
-------------- ------------ -------------- ----------
Revenues.............................................. $ 20,857.3 $ 1,438.6 $ $ 22,295.9
Cost and Expenses:
Cost of Sales and Operations.......................... 19,336.0 610.2 19,946.2
Selling, Marketing, Distribution and Administration... 1,159.1(2) 314.9 1,474.0
Research and Development.............................. -- 100.6 100.6
Nonrecurring Charge................................... -- 107.9(4) 107.9
Interest.............................................. 102.5 -- 102.5
-------------- ------------ -------------- ----------
Total Cost and Expenses......................... 20,597.6 1,133.6 -- 21,731.2
-------------- ------------ -------------- ----------
Income before Income Taxes and Dividends on
Convertible Preferred Securities of Subsidiary
Trust............................................... 259.7 305.0 564.7
Income Taxes.......................................... (98.6)(3) (118.2) (216.8)
Dividends on Convertible Preferred Securities of
Subsidiary Trust, net of tax benefit................ (6.2) -- (6.2)
-------------- ------------ -------------- ----------
Net Income...................................... $ 154.9 $ 186.8 $ -- $ 341.7
-------------- ------------ -------------- ----------
-------------- ------------ -------------- ----------
Earnings Per Common Share:
Diluted............................................... $ 1.59 $ 0.40 $ 1.27
Basic................................................. $ 1.69 $ 0.41 $ 1.32
Shares on which Earnings Per Common Share were based:
Diluted............................................... 101.2 469.2 (295.6)(5) 274.8
Basic................................................. 91.5 452.5 (285.1)(5) 258.9
</TABLE>
- ------------------------
(1) HBOC amounts are reported on a pro forma combined basis with Access, and
have been reclassified from the historical HBOC presentation to conform to
the McKesson financial statement presentation.
(2) Includes $16.7 million in charges for the terminated merger with AmeriSource
Health Corporation and $13.9 million in costs associated primarily with the
integration and rationalization of recent acquisitions, $25.4 million
after-tax in the aggregate.
(3) Includes a nonrecurring $4.6 million favorable tax adjustment.
(4) Includes acquisition charges related to HBOC's acquisitions of AMISYS
Managed Care Systems, Inc., Enterprise Systems, Inc., HPR Inc. and National
Health Enhancement Systems, Inc. and the merger of Access and Informed
Access Systems Inc., $61.4 million after-tax.
(5) Reflects the effect of the exchange ratio of 0.37 of a share of McKesson
common stock for each share of HBOC common stock.
21
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1997
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
--------------------------
<S> <C> <C> <C> <C>
HISTORICAL
MCKESSON HBOC(1) ADJUSTMENTS COMBINED
-------------- ------------ -------------- ----------
Revenues.............................................. $ 15,710.8 $ 1,123.9 $ $ 16,834.7
Cost and Expenses:
Cost of Sales and Operations.......................... 14,673.5 487.3 15,160.8
Selling, Marketing, Distribution and Administration... 944.5(2) 290.9 1,235.4
Research and Development.............................. -- 97.5 97.5
Nonrecurring Charge................................... -- 83.5(3) 83.5
Interest.............................................. 55.7 -- 55.7
-------------- ------------ -------------- ----------
Total Cost and Expenses......................... 15,673.7 959.2 -- 16,632.9
-------------- ------------ -------------- ----------
Income before Income Taxes and Dividends on
Convertible Preferred Securities of Subsidiary
Trust............................................... 37.1 164.7 201.8
Income Taxes.......................................... (31.3) (67.5) (98.8)
Dividends on Convertible Preferred Securities of
Subsidiary Trust, net of tax benefit................ (0.7) -- (0.7)
-------------- ------------ -------------- ----------
Income after Taxes:
Continuing Operations................................. 5.1 97.2 -- 102.3
Discontinued Operations............................... 8.6 -- 8.6
Discontinued Operations--Gain on Sale of Armor All
Stock............................................... 120.2 -- 120.2
-------------- ------------ -------------- ----------
Net Income...................................... $ 133.9 $ 97.2 $ -- $ 231.1
-------------- ------------ -------------- ----------
-------------- ------------ -------------- ----------
Earnings Per Common Share:
Diluted:
Continuing Operations................................. $ 0.06 $ 0.21 $ 0.40
Discontinued Operations............................... 0.10 -- 0.03
Discontinued Operations--Gain on Sale of Armor All
Stock............................................... 1.35 -- 0.46
-------------- ------------ ----------
Total........................................... $ 1.51 $ 0.21 $ 0.89
-------------- ------------ ----------
-------------- ------------ ----------
Basic:
Continuing Operations................................. $ 0.06 $ 0.22 $ 0.42
Discontinued Operations............................... 0.10 -- 0.03
Discontinued Operations--Gain on Sale of Armor All
Stock............................................... 1.41 -- 0.49
-------------- ------------ ----------
Total........................................... $ 1.57 $ 0.22 $ 0.94
-------------- ------------ ----------
-------------- ------------ ----------
Shares on which Earnings Per Common Share were based:
Diluted............................................... 89.4 458.5 (288.9)(4) 259.0
Basic................................................. 85.5 434.7 (273.8)(4) 246.4
</TABLE>
22
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1997 (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
- ------------------------
(1) HBOC amounts are reported on a pro forma combined basis with Access, and
have been reclassified from the historical HBOC presentation to conform to
the McKesson financial statement presentation.
(2) Includes $98.8 million in charges for restructuring, asset impairment and
other operating items and $48.2 million for the write-off of in-process
technology related to the acquisition of McKesson Automated Healthcare Inc.,
$109.5 million after-tax in the aggregate.
(3) Includes acquisition charges related to HBOC's acquisitions of CyCare
Systems, Inc., Management Software, Inc. and GMIS Inc. and the merger of
Access and Informed Access System Inc., $50.2 million after-tax.
(4) Reflects the effect of the exchange ratio of 0.37 of a share of McKesson
common stock for each share of HBOC common stock.
23
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1996
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
-------------------------
<S> <C> <C> <C> <C>
HISTORICAL
MCKESSON HBOC(1) ADJUSTMENTS COMBINED
---------- ------------ ------------- ----------
Revenues...................................................... $ 12,964.8 $ 835.9 $ $ 13,800.7
Cost and Expenses:
Cost of Sales and Operations.................................. 12,049.3 384.5 12,433.8
Selling, Marketing, Distribution and Administration........... 674.2 239.5 913.7
Research and Development...................................... -- 78.1 78.1
Nonrecurring Charge........................................... -- 136.5(2) 136.5
Interest...................................................... 44.4 -- 44.4
---------- ------ ------ ----------
Total Cost and Expenses................................. 12,767.9 838.6 -- 13,606.5
---------- ------ ------ ----------
Income (Loss) Before Income Taxes............................. 196.9 (2.7) 194.2
Income Taxes.................................................. (76.2) 0.6 (75.6)
---------- ------ ------ ----------
Income (Loss) After Taxes:
Continuing Operations......................................... 120.7 (2.1) 118.6
Discontinued Operations....................................... 14.7 -- 14.7
---------- ------ ------ ----------
Net Income (Loss)....................................... $ 135.4 $ (2.1) $ -- $ 133.3
---------- ------ ------ ----------
---------- ------ ------ ----------
Earnings (Loss) Per Common Share:
Diluted:
Continuing Operations......................................... $ 1.29 $ (0.01) $ 0.48
Discontinued Operations....................................... 0.16 -- 0.06
---------- ------ ----------
Total................................................... $ 1.45 $ (0.01) $ 0.54
---------- ------ ----------
---------- ------ ----------
Basic:
Continuing Operations......................................... $ 1.36 $ (0.01) $ 0.51
Discontinued Operations....................................... 0.17 -- 0.06
---------- ------ ----------
Total................................................... $ 1.53 $ (0.01) $ 0.57
---------- ------ ----------
---------- ------ ----------
Shares on which Earnings (Loss) Per Common Share were based:
Diluted....................................................... 93.2 394.7 (238.7)(3) 249.2
Basic......................................................... 88.8 394.7 (248.7)(3) 234.8
</TABLE>
- ------------------------
(1) HBOC amounts are reported on a pro forma combined basis with Access, and
have been reclassified from the historical HBOC presentation to conform to
the McKesson financial statement presentation.
(2) Includes acquisition charges related to HBOC's acquisitions of First Data
Health Systems Corporation and CliniCom Incorporated, $81.9 million
after-tax.
(3) Reflects the effect of the exchange ratio of 0.37 of a share of McKesson
common stock for each share of HBOC common stock.
24
<PAGE>
MCKESSON AND HBOC
SUPPLEMENTAL COMPARATIVE PER SHARE DATA
The following tables set forth certain per share data for McKesson on a
historical basis, HBOC on a pro forma combined basis with Access, McKesson and
HBOC on a supplemental pro forma combined basis and on a per share equivalent
pro forma basis for HBOC. The information gives effect to the proposed merger
between McKesson and HBOC on a pooling of interests basis at the exchange ratio
of .37 of a share of McKesson common stock for each share of HBOC common stock.
The per share data and per share equivalent pro forma combined data for HBOC is
presented assuming the proposed merger between HBOC and Access is consummated.
The supplemental unaudited pro forma combined and equivalent financial data do
not reflect any cost savings or other synergies anticipated by McKesson or HBOC
management as a result of the merger. Also in connection with the merger, the
companies expect to incur charges for merger-related costs. Neither McKesson nor
HBOC has estimated the amount of such merger-related costs and the pro forma
financial data do not reflect any such costs. The companies may have performed
differently if they had always been combined. You should not rely on the pro
forma information as being indicative of the historical results the combined
companies would have had or the results that they will experience in the future.
The following information should be read in conjunction with the pro forma
HBOC/Access financial information on pages 9 to 14, the supplemental unaudited
pro forma financial data of McKesson and HBOC on pages 18 to 24, and the
historical financial statements of each of the companies filed with the
Securities and Exchange Commission. See "Where You Can Find More Information" on
page 62.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------- SIX MONTHS ENDED
1996 1997 1998 SEPTEMBER 30, 1998
--------- --------- --------- -------------------
<S> <C> <C> <C> <C>
MCKESSON - HISTORICAL
Earnings per common share
Continuing Operations
Diluted....................................................... $ 1.29 $ 0.06 $ 1.59 $ 0.51
Basic......................................................... 1.36 0.06 1.69 0.54
Net Income
Diluted....................................................... 1.45 1.51 1.59 0.51
Basic......................................................... 1.53 1.57 1.69 0.54
Cash dividends declared per common share.......................... 0.50 0.50 0.50 0.25
Book value per common share....................................... 15.09 16.43
HBOC - PRO FORMA COMBINED WITH ACCESS(1)
Earnings (loss) per common share
Net Income (Loss)
Diluted....................................................... (0.01) 0.21 0.40 0.35
Basic......................................................... (0.01) 0.22 0.41 0.36
Book value per common share....................................... 2.41 2.76
PRO FORMA COMBINED(1)
Earnings per common share
Continuing Operations
Diluted....................................................... 0.48 0.40 1.27 0.78
Basic......................................................... 0.51 0.42 1.32 0.82
Net Income
Diluted....................................................... 0.54 0.89 1.27 0.78
Basic......................................................... 0.57 0.94 1.32 0.82
Cash dividends declared per common share.......................... 0.50 0.50 0.50 0.25
Book value per common share....................................... 9.54 10.75
EQUIVALENT PRO FORMA COMBINED PER HBOC SHARE(1)
Earnings per common share
Continuing Operations
Diluted....................................................... 0.18 0.15 0.47 0.29
Basic......................................................... 0.19 0.16 0.49 0.30
Net Income
Diluted....................................................... 0.20 0.33 0.47 0.29
Basic......................................................... 0.21 0.35 0.49 0.30
Cash dividends declared per common share.......................... 0.18 0.18 0.18 0.09
Book value per common share....................................... 3.53 3.98
</TABLE>
(1) Assumes an exchange ratio of 1.45 HBOC shares for each share of Access and
0.37 of a McKesson share for each share of HBOC.
25
<PAGE>
RISK FACTORS
NO ASSURANCE THAT VALUE OF MERGER CONSIDERATION WILL EXCEED ACCESS MARKET VALUE
Stockholders of Access should consider that if the average closing price per
share of HBOC common stock during a specified period before the special meeting
is less than or equal to $30.00, they will receive 1.45 shares of HBOC common
stock for each share of Access common stock, regardless of the market price of
the Access common stock. In such event, there is no assurance that Access
stockholders will receive any minimum value of HBOC common stock for each share
of Access common stock. Alternatively, if the average closing price of HBOC
common stock is greater than $30.00, Access stockholders will receive for each
share of Access common stock shares of HBOC common stock with a value of $43.50,
even if the then current market value of Access common stock exceeds $43.50.
Regardless of the average closing price of HBOC common stock, there can be no
assurance that the value of the shares of HBOC common stock to be issued in
respect of a share of Access common stock will equal or exceed the then current
market value of Access common stock. See "Certain Market Information" below for
historical stock price information concerning HBOC common stock and Access
common stock and see "The Merger Proposal--Terms of the Merger" on page 43.
INTERESTS OF CERTAIN ACCESS OFFICERS AND DIRECTORS IN THE MERGER DIFFER FROM
OTHER STOCKHOLDERS
The directors and certain officers of Access have arrangements that provide
them with interests in the merger that are different from, or in addition to,
yours. Such interests include employment agreements, severance payments, vesting
of unexercisable stock options and continuing indemnification against certain
liabilities. As a result, these directors and officers could be more likely to
vote to approve the merger agreement than Access stockholders generally. See
"Interests of Certain Persons in Each of HBOC and Access--Interests of Certain
Access Persons in Matters to be Acted Upon" on page 53.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This document, the documents of HBO & Company ("HBOC") and Access Health,
Inc. ("Access") incorporated by reference herein and other communications to
stockholders of HBOC and Access, respectively, may contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements relate to expectations concerning matters that are not
historical facts. Although each of HBOC and Access believes that the
expectations reflected in such forward-looking statements are reasonable,
neither can give any assurance that such expectations will prove to have been
correct. Important factors that could cause actual results to differ materially
from such expectations ("Cautionary Statements") are disclosed herein and
therein, including, without limitation, in conjunction with the forward-looking
statements included under "Risk Factors." All forward-looking statements
attributable to HBOC are expressly qualified in their entirety by the Cautionary
Statements described herein and in HBOC's reports filed with the Securities and
Exchange Commission (the "Commission"), including the Annual Report on Form 10-K
for the year ended December 31, 1997 and the quarterly reports on Form 10-Q for
the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998. All
forward-looking statements attributable to Access are expressly qualified in
their entirety by the Cautionary Statements described herein and in Access'
reports filed with the Commission, including the Annual Report on Form 10-K for
the year ended September 30, 1997 and the quarterly reports on Form 10-Q for the
quarters ended December 31, 1997, March 31, 1998 and June 30, 1998.
26
<PAGE>
CERTAIN MARKET INFORMATION
HBOC
The common stock, par value $.05 per share (the "HBOC Common Stock"), of
HBOC is traded on the Nasdaq Stock Market, Inc. National Market (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 the Nasdaq Stock Market, Inc. ("Nasdaq") for the periods indicated
after restating for the 1998 two-for-one stock split effected in the form of a
stock dividend.
<TABLE>
<CAPTION>
DIVIDENDS
DECLARED
YEAR ENDED DECEMBER 31: HIGH LOW PER SHARE
- --------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
1996
First Quarter................................................ $ 12.74 $ 8.19 $ .005
Second Quarter............................................... $ 17.69 $ 11.94 $ .005
Third Quarter................................................ $ 17.50 $ 12.63 $ .005
Fourth Quarter............................................... $ 18.13 $ 12.50 $ .005
1997
First Quarter................................................ $ 18.07 $ 11.88 $ .005
Second Quarter............................................... $ 18.03 $ 10.63 $ .005
Third Quarter................................................ $ 21.13 $ 17.13 $ .010
Fourth Quarter............................................... $ 24.32 $ 18.50 $ .010
1998
First Quarter................................................ $ 30.47 $ 21.69 $ .010
Second Quarter............................................... $ 35.56 $ 28.00 $ .020
Third Quarter................................................ $ 37.50 $ 21.25 $ .020
Fourth Quarter (through November 5, 1998).................... $ 29.56 $ 23.19
</TABLE>
As of October 31, 1998, there were approximately 4,030 holders of record of
shares of HBOC Common Stock.
ACCESS
The common stock, par value $.001 per share (the "Access Common Stock"), of
Access is traded on the Nasdaq NM under the symbol "ACCS." The table below
presents the quarterly high and low sales prices for Access Common Stock as
furnished by Nasdaq for the periods indicated. Access has never declared a cash
dividend on the Access Common Stock.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30: HIGH LOW
- --------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
1997
First Quarter ended December 31, 1996.................................... $ 56.25 $ 30.50
Second Quarter ended March 31, 1996...................................... $ 42.25 $ 13.50
Third Quarter ended June 30, 1997........................................ $ 25.63 $ 11.50
Fourth Quarter ended September 30, 1997.................................. $ 35.13 $ 23.00
1998
First Quarter ended December 31, 1997.................................... $ 40.75 $ 26.69
Second Quarter ended March 31, 1998...................................... $ 39.94 $ 22.13
Third Quarter ended June 30, 1998........................................ $ 39.94 $ 20.63
Fourth Quarter ended September 30, 1998.................................. $ 39.00 $ 21.50
1999
First Quarter ending December 31, 1998 (through November 5, 1998)........ $ 37.00 $ 29.25
</TABLE>
27
<PAGE>
As of October 19, 1998, there were approximately 703 holders of record of
shares of Access Common Stock.
Each share of Access Common Stock issued and outstanding immediately prior
to the effective time of the merger of a new directly wholly owned subsidiary of
HBOC with and into Access (the "Merger") will, at such time, be converted into
the right to receive one and forty-five hundredths (1.45) shares of HBOC Common
Stock; provided, however, that 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 date) for shares of HBOC Common Stock during the 20
consecutive trading days ending on the second trading day prior to the date on
which the special meeting of Access stockholders is held as reported by Nasdaq
(the "Market Value"), is greater than $30.00, then Access stockholders will
receive for each share of Access Common Stock a fractional share of HBOC Common
Stock determined by dividing $43.50 by the Market Value (whichever basis is
applicable, being referred to as the "Exchange Ratio"). The following table sets
forth the closing sales price for a share of each of the indicated stocks on
September 25, 1998, the last trading day preceding the announcement of the
proposed Merger, and the Access equivalent share value.
<TABLE>
<CAPTION>
CLOSING SALES
PRICE ON
SEPTEMBER 25, 1998
------------------
<S> <C>
HBOC...................................................................... $ 28.1875
Access--Historical........................................................ $ 31.2500
Access--Equivalent at an assumed Exchange Ratio of 1.4500................. $ 40.8700
Access--Equivalent at an assumed Exchange Ratio of 1.2429................. $ 35.0300
Access--Equivalent at an assumed Exchange Ratio of 1.0875................. $ 30.6500
</TABLE>
28
<PAGE>
THE SPECIAL MEETING
This Proxy Statement/Prospectus and the accompanying Notice of Special
Meeting and proxy card are being furnished to the stockholders of Access in
connection with the solicitation of proxies by the Board of Directors of Access
(the "Access Board") for the special meeting to be held on December 10, 1998 at
the time and place and for the purposes set forth in the accompanying Notice of
Special Meeting (the "Special Meeting").
Any Access stockholder who has previously delivered a properly executed
proxy may revoke such proxy at any time before its exercise by delivering to the
Secretary of Access a written revocation or a duly executed proxy bearing a
later date or attending the Special Meeting and voting in person. All valid,
unrevoked proxies will be voted as directed. In the absence of any contrary
directions, proxies will be voted in favor of approval of the Agreement of
Merger dated September 28, 1998 (as amended October 26, 1998), by and among
HBOC, HBO & Company of Georgia, a wholly owned subsidiary of HBOC ("HBOC-GA"),
and Access (the "Merger Agreement") and, with respect to such other matters as
may properly come before the Special Meeting, including consideration of a
motion to adjourn or postpone the Special Meeting to another time and/or place,
in the discretion of the appointed proxy holders.
Only holders of record of Access Common Stock as of the close of business on
October 19, 1998 (the "Record Date"), will be entitled to vote at the Special
Meeting. At that date, there were 23,655,151 shares of Access Common Stock
outstanding and entitled to vote, 1,507,733 of which, or approximately 6.4%,
were beneficially owned by directors and executive officers of Access and their
affiliates (excluding shares subject to options). Pursuant to certain voting
agreements (the "Voting Agreements") entered into with the directors and
executive officers of Access at the same time as the Merger Agreement, HBOC
holds proxies to vote all such shares of Access Common Stock in favor of
approval of the Merger Agreement. Stockholders of record on the Record Date are
entitled to one vote for each share of Access Common Stock held on all matters
to be voted upon at the Special Meeting. The presence at the Special Meeting, in
person or by proxy, of the holders of at least a majority of the shares of
Access Common Stock issued and outstanding and entitled to vote on the Record
Date is necessary to constitute a quorum at the Special Meeting. The Merger
Agreement requires the affirmative vote of the holders of a majority of the
issued and outstanding shares of Access 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 Special Meeting for purposes of determining a quorum and will
also have the effect of a negative vote.
The cost of soliciting proxies in the form enclosed herewith will be borne
entirely by Access. In addition to the solicitation of proxies by mail, proxies
may be solicited by directors, officers and employees of Access, without
additional remuneration, by personal interviews, telephone, facsimile or
otherwise. Access 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. Access
has retained Corporate Investor Communications, Inc. to assist in the
solicitation of proxies at a cost of approximately $10,000, plus customary
expenses.
THE MERGER PROPOSAL
BACKGROUND OF THE MERGER
On August 27, 1997, representatives of HBOC met with representatives of
Access at the offices of Access in Broomfield, Colorado to provide an overview
of each company's business and to discuss potential strategic business
relationships between the companies. Participants from HBOC were Jay P.
Gilbertson, President, Co-Chief Operating Officer and Chief Financial Officer;
Russell G. Overton, Senior Vice President--Business Development; and Michael L.
Kappel, Senior Vice President--Corporate
29
<PAGE>
Planning. Participants from Access were Joseph P. Tallman, President and Chief
Executive Officer; Timothy H. Connor, Senior Vice President and Chief Financial
Officer; Michael E. Myers, Senior Vice President, Marketing and Technology; and
Elizabeth Snowden, Senior Vice President, Sales and Marketing. At the meeting,
the HBOC representatives advised the Access representatives that HBOC was
interested in discussing a possible acquisition of Access by HBOC. Access
management advised the HBOC representatives that Access was not prepared to
engage in such discussions in the absence of an attractive firm offer.
On May 11, 1998, Mr. Gilbertson, Mr. Overton and Albert J. Bergonzi,
President and Co-Chief Operating Officer of HBOC, met with Mr. Tallman, Mr.
Connor, Mr. Johnson and outside advisors to Access, in Baltimore, Maryland. At
the meeting, Mr. Gilbertson and Mr. Bergonzi presented an overview of HBOC's
business and organization, and Mr. Overton presented a summary of the strategic
benefits that could be gained through a combination of Access and HBOC. Mr.
Tallman advised the HBOC representatives that Access was not interested in
engaging in merger discussions in the absence of a formal proposal for
consideration by the Access Board. Mr. Tallman invited HBOC to visit Access'
executive offices to gain additional information regarding Access' business.
On May 28, 1998, at a regularly scheduled meeting of the Access Board, Mr.
Tallman apprised the Access Board of the recent discussions with HBOC and HBOC's
interest in entering into discussions regarding the potential acquisition of
Access. After discussing both the benefits and disadvantages of such an
acquisition, the Access Board advised Mr. Tallman that, while it had no present
intention of selling the company, he should continue having discussions with
HBOC's representatives.
On June 22 and June 23, 1998, Mr. Gilbertson, Mr. Bergonzi and Mr. Overton
met at Access headquarters in Broomfield, Colorado with Mr. Tallman, Mr. Connor,
Ms. Snowden and Mr. John R. Barr, Senior Vice President, Product Development and
Technology. At these meetings, Access management presented an overview of
Access' business, organization, strategy and products. The participants also
discussed the potential benefits that could be achieved by HBOC through a
combination of the two companies.
On July 2, 1998, Mr. Overton called Mr. Tallman to present an offer to
acquire Access. Thereafter, Mr. Tallman discussed the proposal with several
Access Board members, who agreed that they believed the proposal would not be
acceptable to the Access Board, but that it should consider the proposal at the
next Access Board meeting.
On July 16, 1998, Mr. Connor met with Mr. Overton at HBOC's headquarters in
Atlanta, Georgia to discuss HBOC's initial proposal and to discuss whether an
alternative valuation structure could be developed that would be acceptable to
the Access Board. At the end of the meeting, Mr. Overton indicated that he would
confer with HBOC management and, if they decided it was appropriate, contact
Access with an alternative proposal.
On July 22, 1998, Mr. Overton called Mr. Tallman and Mr. Connor to indicate
that HBOC was prepared to make a more attractive offer to acquire Access.
Following the discussion, Mr. Tallman reviewed with Mr. Johnson his discussions
with Mr. Overton who reviewed them with other members of the Access Board. Based
on his discussions with other Access Board members, Mr. Johnson then instructed
Access management to conduct a detailed evaluation of Access' business,
prospects, recent and future operating results and stock price levels and to be
prepared to discuss these matters at the next regularly scheduled Access Board
meeting.
On July 24, 1998, Mr. Tallman and Mr. Connor spoke with Mr. Overton to
communicate the directions to Access management by the Access Board. During the
discussion, Mr. Overton suggested that Mr. Tallman and Mr. Johnson should meet
with Charles W. McCall, Chairman, President and Chief Executive Officer of HBOC,
to address any questions they had about HBOC and gain his perspective on a
possible merger of the two companies.
30
<PAGE>
On July 31, 1998, Mr. Tallman and Mr. Johnson met with Mr. McCall in Vail,
Colorado. Mr. McCall discussed HBOC's business and strategy and reiterated
HBOC's interest in acquiring Access.
On August 21, 1998, Mr. Overton met with Mr. Tallman and Mr. Connor in
Boulder, Colorado to discuss the status of Access' evaluation of a possible
merger with HBOC. Mr. Tallman indicated that Access management needed to perform
further due diligence on HBOC to assess the proposed transaction.
Between August 21 and September 3, 1998, Mr. Overton spoke several times
with Mr. Tallman and Mr. Connor to schedule a follow-up due diligence visit in
Atlanta, to discuss the structure of a possible combined company following a
merger and to discuss strategies of integrating the two companies in the event a
merger was consummated.
On September 3, 1998, Mr. Connor, Robert Gentry, Vice President--Finance and
Accounting and Patrick Benner, Director--Corporate Development, of Access met at
HBOC headquarters in Atlanta, Georgia with Messrs. Gilbertson, Overton, Kappel,
Timothy Heyerdahl, Senior Vice President--Finance and Treasury, Monika Brown,
Director of Investor Relations, and Eric Lindsey, Manager--Corporate Business
Development, of HBOC to perform additional due diligence on HBOC's business and
to provide an update on Access' business. At the meeting, HBOC indicated that it
was prepared to exchange 1.45 shares of HBOC Common Stock for each share of
Access Common Stock, with a value per share of Access Common Stock not to exceed
$43.50. The representatives of Access advised the HBOC representatives that they
would present the proposal at the Access Board meeting scheduled for September
9, 1998.
On September 9, 1998, the Access Board met and reviewed with Access'
management, representatives of Merrill Lynch, Pierce, Fenner & Smith,
Incorporated, Access' financial advisor ("Merrill Lynch"), and representatives
of legal counsel to Access, the status of the discussions between Access and
HBOC, Access' business and prospects, the benefits and potential risks of a
potential merger with HBOC and the proposed terms of the merger. At this
meeting, Access' legal counsel advised the Access Board of its fiduciary duties
in considering a possible acquisition of the company. The Access Board
authorized management to continue discussions with HBOC regarding the possible
acquisition of Access by HBOC.
On September 15, 1998, Access formally retained Merrill Lynch to act as its
financial advisor in connection with a potential business combination with HBOC.
From September 10 through September 27, 1998, the two companies' executive
officers, legal counsel and other representatives held further discussions to
negotiate the terms of the proposed merger agreement and related documents,
including the terms of the proposed voting agreements to be entered into by
certain officers, directors and affiliates of Access, the termination rights
contained in the proposed merger agreement, the conditions upon which any
termination fees would be payable and the amount of such fees, Access' rights
under the proposed merger agreement to consider and negotiate other acquisition
proposals in certain circumstances and the representations, warranties and
covenants to be made by Access and HBOC. During this period, Access' financial
advisors had further discussions regarding valuation issues, as well as other
terms and conditions of a possible acquisition of Access by HBOC, and
representatives of HBOC and Access and their respective legal advisors conducted
further due diligence on the other's business, prospects, strategy and financial
condition. The Access Board met telephonically on September 23, 1998, at which
meeting Access' management and legal and financial advisors discussed with the
Access Board the status of the negotiations of the terms of the merger agreement
and related documents and the status of due diligence efforts.
On September 27, 1998, the Access Board met telephonically to consider and
vote upon the proposed merger and related transactions. At this specially
scheduled meeting, (1) management reviewed the principal terms of the draft
merger agreement, copies of which had previously been furnished to the Access
Board; (2) the Access Board considered reports from management, legal and
financial advisors as to the results of their due diligence investigation of
HBOC; (3) Access' legal advisors held discussions regarding the Access Board's
fiduciary duties in considering an acquisition of the company and reviewed terms
of the
31
<PAGE>
proposed definitive merger agreement and related documents, including the voting
agreements; (4) representatives of Merrill Lynch made a presentation to the
Access Board regarding the information with respect to the companies described
in "--Opinion of Financial Advisor to Access--The Original Opinion" below and
delivered its oral opinion to the effect that, as of such date and based upon
the assumptions made, matters considered and limits of review, as set forth in
its written opinion subsequently delivered on September 28, 1998, the Exchange
Ratio was fair, from a financial point of view, to the holders of Access Common
Stock, other than HBOC and its affiliates; (5) management, Access' legal
advisors and representatives of Merrill Lynch responded to questions regarding
the proposed merger; and (6) the Access Board approved the Merger, the Merger
Agreement and related agreements.
On September 28, 1998, Access and HBOC executed the Merger Agreement and
issued press releases announcing the Merger.
On October 23, 1998, the Access Board met telephonically and reviewed with
Access' management and legal counsel the status of the Merger in light of the
pending merger of HBOC with McKesson that was announced on October 18, 1998. At
this meeting, the Board discussed the terms of HBOC's merger with McKesson and
discussed the benefits and risks of Access' proposed merger with HBOC in light
of HBOC's pending merger with McKesson.
On October 26, 1998, the Access Board again met telephonically. At this
meeting, management and representatives of Merrill Lynch presented information
regarding Access and HBOC, as well as information regarding McKesson, in light
of the pending merger of HBOC and McKesson. After considering the information
presented by management and Merrill Lynch, and after reconsidering the potential
benefits and the negative factors of the Merger in light of HBOC's pending
merger with McKesson, the Access Board determined that as of that date the
Merger Agreement and the Merger continue to be fair to, and in the best
interests of, Access and its stockholders.
REASONS OF ACCESS FOR ENGAGING IN THE MERGER; RECOMMENDATION OF THE ACCESS BOARD
The Access Board has approved the Merger Agreement and the Merger, and has
determined that the terms of the Merger Agreement are fair to, and in the best
interests of, Access and its stockholders. During the course of its
deliberations, the Access Board identified a number of potential benefits of the
Merger which it believes could contribute to the success of the combined company
and thus inure to the benefit of Access stockholders, including the following:
- The experience, financial resources, size and breadth of product offerings
of the combined company will allow it to respond more quickly and
effectively to technological change, intensifying competition, increased
consolidation and evolving market demands in an industry experiencing
rapid innovation, consolidation and change.
- The Merger will provide an opportunity for expanded distribution of both
companies' products and services by providing opportunities for Access to
offer its services to HBOC's customers, which include a significant number
of healthcare providers, and for HBOC to offer its products and services
to Access' customers, which include health maintenance organizations,
preferred provider organizations, indemnity insurers, integrated delivery
systems and government agencies.
- The Merger offers Access stockholders greater liquidity and an opportunity
to receive shares in a significantly larger company with strong historical
performance, capital resources significantly greater than Access' and
demonstrated ability to successfully implement its growth strategy that
has resulted in historical increases in revenue and earnings, while
affording them the opportunity to continue to participate in the long-term
growth and appreciation in Access' business through an ownership interest
in HBOC.
In reaching its decision to approve the Merger and the Merger Agreement, the
Access Board considered, among other things, the following factors: (1)
historical information concerning Access' and HBOC's respective businesses,
prospects, financial performance and condition, operations, technology,
32
<PAGE>
management and competitive position, including public reports concerning results
of operations during the most recent fiscal year and fiscal quarter for each
company filed with the Commission; (2) the financial condition, results of
operations and businesses of Access and HBOC before and after giving effect to
the Merger; (3) current financial market conditions and historical market
prices, volatility and trading information with respect to the Access Common
Stock and the HBOC Common Stock, the consideration to be received by Access'
stockholders in the Merger and the implied value of the HBOC Common Stock to be
issued in exchange for each share of Access Common Stock and a comparison of
comparable merger transactions; (4) the belief that the terms of the Merger
Agreement, including the parties' representations, warranties and covenants, and
the conditions to their respective obligations, are reasonable; (5) the
prospects of Access as an independent company; (6) the potential for other third
parties to enter into strategic relationships with or to acquire Access; (7) the
information with respect to the companies presented by Merrill Lynch to the
Access Board, including Merrill Lynch's opinion described in "-- Opinion of
Financial Advisor to Access--The Original Opinion" below; (8) the impact of the
Merger on Access' customers and employees; and (9) reports from management,
legal and financial advisors as to the results of their due diligence
investigation of HBOC. The Access Board also considered the terms of the
proposed Merger Agreement regarding Access' rights to consider and negotiate
other acquisition proposals in certain circumstances, as well as the possible
effects of the provisions regarding termination fees. In addition, the Access
Board noted that the Merger is expected to be accounted for as a pooling of
interests and that no goodwill is expected to be created on the books of HBOC as
a result thereof.
The Access Board also considered a variety of potentially negative factors
in its deliberations concerning the Merger, including: (1) the risk that,
despite the intentions and efforts of the parties, the operational and
competitive benefits sought to be achieved in the Merger will not be achieved;
(2) the risk that the market value and liquidity of HBOC Common Stock might be
adversely affected; (3) the risk that existing or prospective customers may not
respond positively to the Merger announcement; (4) the risk that despite the
intentions and efforts of the parties, the key technical and management
personnel of Access required to facilitate a successful integration may not
remain with the combined company; and (5) the risk of the loss of key HBOC
customers or other negative impacts on HBOC's business. Despite these
potentially negative factors, the Access Board believes that the benefits that
will result from the Merger outweigh the potentially negative factors and risks
related to the consummation of the Merger.
The foregoing discussion of the information and factors considered by the
Access Board is not intended to be exhaustive but is believed to include all
material factors considered by the Access Board. In view of the variety of
factors considered in connection with its evaluation of the Merger, the Access
Board did not find it practicable to and did not quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the Access Board may have
given different weights to different factors.
After taking into consideration all of the factors set forth above, the
Access Board unanimously approved the Merger and the Merger Agreement and
determined that the Merger is fair to, and in the best interests of, Access and
its stockholders. The Access Board has also considered the pending merger of
HBOC and McKesson. In this regard, the Access Board has considered, among other
things, the terms of the Merger Agreement between HBOC and McKesson, historical
information concerning McKesson, the financial condition, results of operations
and businesses of Access, HBOC and McKesson after giving effect to the Merger
and HBOC's merger with McKesson, and the information with respect to the
companies, including McKesson, presented by Merrill Lynch to the Access Board.
After reconsidering the potential benefits and negative factors of the Merger in
light of the pending merger of HBOC and McKesson, the Access Board determined
that the Merger continues to be fair to, and in the best interests of, Access
and its stockholders. ACCORDINGLY, THE ACCESS BOARD RECOMMENDS THAT ACCESS
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
33
<PAGE>
OPINION OF FINANCIAL ADVISOR TO ACCESS
On September 15, 1998, Access retained Merrill Lynch to act as its exclusive
financial advisor in connection with evaluating a potential strategic alliance
with HBOC. At the meeting of the Access Board on September 27, 1998, Merrill
Lynch rendered its oral opinion to the Access Board, and subsequently on
September 28, 1998, Merrill Lynch delivered its written opinion (the "Original
Opinion"), to the effect that, as of such date and based upon the assumptions
made, matters considered and limits of review, as set forth in such opinion, the
Exchange Ratio was fair, from a financial point of view, to the holders of
Access Common Stock, other than HBOC and its affiliates. On October 26, 1998, as
a result of the proposed McKesson/HBOC merger, the Access Board requested and
Merrill Lynch delivered its restated oral opinion (the "Restated Opinion") to
the Access Board to the effect that as of such date and based upon the
assumptions made, matters considered and limits of review, as set forth in such
opinion, the Exchange Ratio was fair, from a financial point of view, to the
holders of Access Common Stock, other than HBOC and its affiliates, whether or
not the McKesson/HBOC merger is consummated. The Restated Opinion was confirmed
in writing as of the date of this Proxy Statement/Prospectus (the "Final
Opinion" and, together with the Original Opinion and the Restated Opinion, the
"Merrill Lynch Opinions"). No limitations were imposed by the Access Board upon
Merrill Lynch with respect to the investigations made or procedures followed by
it in rendering its opinion. The full text of the Final Opinion, which sets
forth assumptions made, matters considered and certain limitations on the scope
of review undertaken, is attached to this Proxy Statement/Prospectus as Appendix
B and is incorporated herein by reference. The description of the Original
Opinion and the Restated Opinion set forth herein is qualified in its entirety
by reference to the full text of the Final Opinion. Access stockholders are
urged to read the opinion in its entirety.
THE FINAL OPINION IS ADDRESSED TO THE ACCESS BOARD AND ADDRESSES ONLY THE
FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE EXCHANGE RATIO AND DOES NOT
ADDRESS THE MERITS OF THE UNDERLYING DECISION BY THE ACCESS BOARD TO ENGAGE IN
THE MERGER OR THE UNDERLYING DECISION BY THE BOARDS OF MCKESSON AND HBOC TO
ENGAGE IN THE MCKESSON/HBOC MERGER AND DOES NOT CONSTITUTE, NOR SHOULD IT BE
CONSTRUED AS, A RECOMMENDATION TO ANY ACCESS STOCKHOLDER AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING ON THE PROPOSED MERGER OR ANY
MEETING OF STOCKHOLDERS OF HBOC WITH RESPECT TO THE MCKESSON/HBOC MERGER IF
GIVEN THE OPPORTUNITY TO VOTE THEREON OR ANY MATTER RELATED THERETO. THE
EXCHANGE RATIO WAS DETERMINED ON THE BASIS OF NEGOTIATIONS AMONG ACCESS AND HBOC
AND WAS APPROVED BY THE ACCESS BOARD.
In connection with the preparation of the Merrill Lynch Opinions, Merrill
Lynch was not authorized by Access or the Access Board to solicit, and Merrill
Lynch did not solicit, third-party indications of interest for the acquisition
of all or any part of Access.
At the meetings of the Access Board held on September 27, 1998 and October
26, 1998, Merrill Lynch presented certain financial analyses accompanied by
written materials in connection with the delivery of the Original Opinion and
the Restated Opinion, respectively. The following is a summary of the material
financial and comparative analyses performed by Merrill Lynch in arriving at the
Original Opinion and the Restated Opinion. As used herein, "First Call" refers
to First Call Corp. First Call is an on-line data service that monitors and
publishes compilations of earnings and growth rate estimates produced by
selected research analysts on certain public companies. In addition, as used
herein, "FY" refers to fiscal year and "CY" refers to calendar year; the Access
fiscal year ends on September 30. "LTM" refers to the last twelve-month period.
THE ORIGINAL OPINION
In connection with the preparation of the Original Opinion, Merrill Lynch,
among other things: (1) reviewed certain publicly available business and
financial information relating to Access and HBOC
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that Merrill Lynch deemed relevant; (2) reviewed certain information, including
financial forecasts, relating to the business, earnings, cash flow, assets,
liabilities and prospects of Access and HBOC, as well as the amount and timing
of the cost savings and related expenses and synergies expected to result from
the Merger (the "Expected Synergies") furnished to Merrill Lynch by Access and
HBOC, respectively; (3) conducted discussions with members of senior management
and representatives of Access and HBOC concerning the matters described in
clauses (1) and (2) above, as well as their respective businesses and prospects
before and after giving effect to the Merger and the Expected Synergies; (4)
reviewed the market prices and valuation multiples for the shares of Access
Common Stock and HBOC Common Stock and compared them with those of certain
publicly traded companies that Merrill Lynch deemed to be relevant; (5) reviewed
the results of operations of Access and HBOC and compared them with those of
certain publicly-traded companies that Merrill Lynch deemed to be relevant; (6)
compared the proposed financial terms of the Merger with the financial terms of
certain other transactions that Merrill Lynch deemed to be relevant; (7)
participated in certain discussions and negotiations among representatives of
Access and HBOC and their legal advisors; (8) reviewed the potential pro forma
impact of the Merger; (9) reviewed the Merger Agreement; and (10) reviewed such
other financial studies and analysis and took into account such other matters as
Merrill Lynch deemed necessary, including its assessment of general economic,
market and monetary conditions.
In preparing the Original Opinion, Merrill Lynch assumed and relied on the
accuracy and completeness of all information supplied or otherwise made
available to Merrill Lynch, discussed with or reviewed by or for Merrill Lynch,
or publicly available, and Merrill Lynch did not assume any responsibility for
independently verifying such information or undertake an independent evaluation
or appraisal of any of the assets or liabilities (contingent or otherwise) of
Access or HBOC nor was Merrill Lynch furnished with any such evaluation or
appraisal. In addition, Merrill Lynch did not assume any obligation to conduct
any physical inspection of the properties or facilities of Access or HBOC. With
respect to the financial forecast information and the Expected Synergies
furnished to or discussed with Merrill Lynch by Access and HBOC, Merrill Lynch
assumed that such information had been reasonably prepared and reflected the
best currently available estimates and judgment of Access' or HBOC's management
as to the expected future financial performance of Access or HBOC, as the case
may be, and the Expected Synergies. Merrill Lynch further assumed that the
Merger will be accounted for as a pooling of interests under generally accepted
accounting principles and that it will qualify as a tax-free reorganization for
U.S. federal income tax purposes.
The Original Opinion was necessarily based upon market, economic and other
conditions as they existed and could be evaluated on, and on the information
made available to Merrill Lynch as of, the date of the Original Opinion. Merrill
Lynch assumed that in the course of obtaining the necessary regulatory or other
consents or approvals (contractual or otherwise) for the Merger, no
restrictions, including any divestiture requirements or amendments or
modifications, would be imposed that would have a material adverse effect on the
contemplated benefits of the Merger.
Merrill Lynch expressed no opinion as to the prices at which HBOC Common
Stock or Access Common Stock will trade following the announcement or
consummation of the Merger. The Merrill Lynch Opinion does not address the
relative merits of the Merger and alternative business combinations with third
parties.
HISTORICAL TRADING PERFORMANCE. Merrill Lynch reviewed the share price
history for Access for the period September 24, 1997 through September 25, 1998
and for HBOC for the period January 1, 1991 through September 25, 1998, and, in
the case of Access, noted certain events and public announcements made by Access
during such period. Merrill Lynch also reviewed the reaction of the HBOC stock
price one day, one week and one month following fourteen acquisitions made by
HBOC since April 29, 1994.
ANALYSIS OF SELECTED COMPARABLE PUBLICLY TRADED COMPANIES. Using publicly
available information and estimates of future financial results published by
First Call and taken from Merrill Lynch Equity Research, Merrill Lynch compared
certain financial and operating information and ratios for each of Access and
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HBOC with the corresponding financial and operating information for a group of
publicly-traded companies engaged primarily in businesses which Merrill Lynch
deemed to be reasonably comparable to Access and HBOC, respectively. For the
purpose of its analyses, the following companies were used as comparable
companies to Access: HBOC, IMS Health Incorporated, CSC Holdings, Inc., Shared
Medical Systems Corporation, IDX Systems Corporation, National Data Corp.,
Cerner Corporation, Medquist Inc., Medical Manager Corporation, Envoy
Corporation, Eclipsys Corporation, Medaphis Corporation, Transition Systems,
Inc. and HCIA Inc. (collectively, "Health Care IT Companies"), as well as Snyder
Communications Inc., West TeleServices Corp. and TeleTech Holdings Inc.
(collectively, "Tele-Services Companies," and together with the Health Care IT
Companies, the "Access Comparable Companies"); and the following companies were
used as comparable companies to HBOC: all of the Health Care IT Companies as
well as SAP A.G., Oracle Corporation, People Soft, Inc., BAAN Company N.V. and
J.D. Edwards & Company (collectively, "Software Companies," and the Software
Companies, together with the Health Care IT Companies, the "HBOC Comparable
Companies").
Merrill Lynch's calculations resulted in the following relevant ranges for
the Access Comparable Companies and for Access as of September 25, 1998: (1) a
range of total market value of $75.0 million to $12.1 billion (as compared to
Access at $771.1 million); (2) a range of prices of the Access Comparable
Companies as a multiple of estimated CY 1999 earnings per share ("EPS") as
estimated by First Call of 45.8x to 10.9x, with means of 23.3x, 24.3x and 19.4x
for all Access Comparable Companies, Health Care IT Companies and Tele-Services
Companies, respectively (as compared to 18.8x for Access), but excluding certain
Health Care IT Companies which Merrill Lynch deemed appropriate; (3) a range of
five-year estimated EPS compound annual growth rate ("CAGR") of 40% to 15%, with
means of 28%, 27% and 32% for all Access Comparable Companies, Health Care IT
Companies and Tele-Services Companies, respectively (as compared to 32% for
Access), but excluding certain Health Care IT Companies which Merrill Lynch
deemed appropriate; and (4) a range of the ratio of share price to estimated
EPS, expressed as a percentage of five-year EPS CAGR of 153% to 42% with means
of 82%, 88% and 59% for all Access Comparable Companies, Health Care IT
Companies and Tele-Services Companies, respectively (as compared to 59% for
Access) but excluding certain Health Care IT Companies which Merrill Lynch
deemed appropriate. Based upon these ranges Merrill Lynch determined the implied
per share equity reference range for Access to be $26.55 to $45.31.
Merrill Lynch's calculations resulted in the following relevant ranges for
the HBOC Comparable Companies and for HBOC as of September 25, 1998: (1) a range
of total market value of $75.0 million to $65.6 billion (as compared to HBOC at
$12.1 billion); (2) a range of prices of the HBOC Comparable Companies as a
multiple of CY 1999 EPS as estimated by First Call of 54.6x to 13.6x with means
of 31.9x, 26.4x and 39.5x for all HBOC Comparable Companies, Health Care IT
Companies and Software Companies, respectively (as compared to 31.7x for HBOC),
but excluding certain Health Care IT Companies which Merrill Lynch deemed
appropriate; (3) a range of five-year estimated EPS CAGR of 45% to 20% with
means of 29%, 25% and 35% for all HBOC Comparable Companies, Health Care IT
Companies and Software Companies, respectively (as compared to 35% for HBOC),
but excluding certain Health Care IT Companies which Merrill Lynch deemed
appropriate; and (4) a range of the ratio of share price to estimated EPS,
expressed as a percentage of five-year EPS CAGR of 172% to 68% with means of
111%, 107% and 116% for all HBOC Comparable Companies, Health Care IT Companies
and Software Companies, respectively (as compared to 90% for HBOC), but
excluding certain Health Care IT Companies which Merrill Lynch deemed
appropriate. Based upon these ranges Merrill Lynch determined the implied per
share equity reference range for HBOC to be $22.50 to $36.23.
None of the companies utilized in the above analysis for comparative
purposes is, of course, identical to Access or HBOC. Accordingly, a complete
analysis of the results of the foregoing calculation cannot be limited to a
quantitative review of such results and involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the Access Comparable Companies and the HBOC Comparable Companies and other
factors that could affect the public trading market of the Access Comparable
Companies and the HBOC Comparable Companies, as well as that of Access or
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HBOC. In addition, the ranges for the Access Comparable Companies and the HBOC
Comparable Companies, are based on projections prepared by research analysts
using only publicly-available information. Accordingly, such estimates may or
may not prove to be accurate.
SELECTED COMPARABLE ACQUISITIONS ANALYSIS. Merrill Lynch also reviewed the
financial terms of thirty-three acquisitions in the healthcare information
technology industry (the "Comparable Acquisitions"). Merrill Lynch analyzed
ratios comparing offer value per share and transaction value to various
financial performance data and determined that, with respect to transaction
value as a multiple of LTM Sales, LTM earnings before interest, tax,
depreciation and amortization ("EBITDA"), and LTM earnings before interest and
taxes ("EBIT") and with respect to offer value as a multiple of LTM Net Income,
the ranges indicated by the Comparable Acquisitions were 3.0x to 7.0x, 15.0x to
23.0x, 23.0x to 35.0x and 33.0x to 45.0x, respectively. Applying these ranges of
selected multiples for the Comparable Acquisitions to corresponding financial
data for Access, but excluding certain acquisitions that Merrill Lynch deemed
appropriate, resulted in an average equity range for Access of approximately
$28.91 to $45.15 per share.
PREMIUM ANALYSIS. Using publicly-available information regarding 305
announced, but not withdrawn, and completed domestic transactions between
January 1, 1994 and September 21, 1998 of greater than $500.0 million and less
than $1.5 billion in value as of the announcement dates, Merrill Lynch
calculated the average premiums as of the announcement dates in such
transactions over the stock prices one day, one week and one month,
respectively, prior to the announcement dates (or, in the case of transactions
involving healthcare information technology companies, one day, ten days and one
month, respectively). Merrill Lynch noted that (1) in all such transactions,
such premiums were 25.7%, 29.4% and 35.2%, respectively (or, in the case of the
34 transactions involving healthcare information technology companies during
such period, 34.1%, 29.7% and 48.9%, respectively), and (2) in the 172 of such
transactions announced, but not withdrawn, and completed between January 1, 1997
and September 21, 1998, such premiums were 23.8%, 27.7% and 31.7%, respectively
(or, in the case of the 21 transactions involving healthcare information
technology companies during such period, 23.2%, 29.8% and 39.2%, respectively).
Merrill Lynch further noted that applying the ranges of premiums paid in such
transactions to the respective historical stock prices of Access Common Stock
resulted in an implied equity range of $31.88 to $40.63.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed discounted cash flow
analyses (i.e., analyses of the present value of the projected unlevered cash
flows for the periods using the discount rates indicated) of Access based upon
both base case and downside case models provided by Access' management for the
calendar years 1998 through 2002, inclusive, using discount rates reflecting an
equity cost of capital ranging from 14% to 18% and terminal value multiples of
CY 2002 tax-effected EBITA (EBIT plus amortization and less taxes) ranging from
16.0x to 22.0x. The forecasts prepared by management of Access were estimates
only and inherently subject to known and unknown risks, uncertainties, and other
factors, many of which are outside of Access' and Merrill Lynch's control, which
may cause the actual results to differ significantly from those set forth in the
forecasts. The theoretical value of Access (1) based on the base case management
forecasts produced a range of value per share of Access Common Stock of $37.50
to $54.40 and (2) based on the downside case management forecasts produced a
range of value per share of Access Common Stock of $33.30 to $47.98.
Merrill Lynch also performed discounted cash flow analyses of HBOC for the
fiscal years 1998 through 2002, inclusive, based upon information provided by
HBOC's management with respect to fiscal years 1998 through 2001, inclusive,
using discount rates reflecting an equity cost of capital ranging from 13% to
17% and terminal value multiples of FY 2002 tax-effected EBITA ranging from
27.0x to 33.0x. The information provided by management of HBOC was estimated and
inherently subject to known and unknown risks, uncertainties, and other factors,
many of which are outside of HBOC's and Merrill Lynch's control, which may cause
the actual results to differ significantly from those set forth in the
information provided by HBOC management. The theoretical value of HBOC based on
the information provided by HBOC management produced a range of value per share
of HBOC Common Stock of $33.77 to $45.93.
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PRO FORMA COMBINATION ANALYSIS. Merrill Lynch analyzed the pro forma
effects resulting from the Merger, including the potential impact on Access' and
HBOC's projected stand-alone EPS and the anticipated accretion or dilution, as
applicable, to Access' and HBOC's EPS resulting from the Merger. Merrill Lynch
observed that, after giving effect to Access and HBOC management projections,
the Merger would be accretive to HBOC's projected EPS in each of the years 1999
through 2001, inclusive.
HISTORICAL EXCHANGE RATIO ANALYSIS. Merrill Lynch compared the Exchange
Ratio to the recent historical implied exchange ratios. This analysis indicated
that for the one-year period through September 25, 1998, the average of the
implied exchange ratios was 1.16x. Merrill Lynch also noted that such ratio was
0.97x for the six-month period through September 25, 1998, such ratio was 0.90x
for the three-month period through September 25, 1998, such ratio was 1.02x for
the one-month period through September 25, 1998, and such ratio was 1.11x based
on the closing prices on September 25, 1998. Merrill Lynch also noted that the
Exchange Ratio represented a premium over such ratios for such periods of 24.7%,
50.1%, 60.2%, 42.5% and 30.8%, respectively.
RELATIVE DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch compared the range of
theoretical values per share for shares of Access Common Stock produced by the
base case discounted cash flow analysis described above to those for shares of
HBOC Common Stock produced by the discounted cash flow analysis described above
and noted that the exchange ratios implied by such theoretical values ranged
from 1.098x to 1.194x, as compared to the Exchange Ratio of 1.450x.
THE RESTATED OPINION
In connection with the preparation of the Restated Opinion, Merrill Lynch,
among other things: (1) reviewed certain publicly available business and
financial information relating to Access, HBOC and McKesson that Merrill Lynch
deemed relevant; (2) reviewed certain information, including financial
forecasts, relating to the business, earnings, cash flow, assets, liabilities
and prospects of Access, HBOC and McKesson and of McKesson after giving effect
to the McKesson/HBOC merger furnished to Merrill Lynch by Access, HBOC and
McKesson, respectively, as well as the amount and timing of the cost savings and
related expenses and synergies expected to result from the Merger furnished to
Merrill Lynch by Access and from the McKesson/HBOC merger furnished to Merrill
Lynch by McKesson and HBOC, respectively (the "Aggregate Expected Synergies");
(3) conducted discussions with members of senior management and representatives
of Access, McKesson and HBOC concerning the matters described in clauses (1) and
(2) above, as well as their respective businesses and prospects before and after
giving effect to the Merger, the McKesson/HBOC merger and the Aggregate Expected
Synergies; (4) reviewed the market prices and valuation multiples for the shares
of Access Common Stock, HBOC Common Stock and the common stock of McKesson (the
"McKesson Common Stock") and compared them with those of certain publicly-traded
companies that Merrill Lynch deemed to be relevant; (5) reviewed the results of
operations of Access, HBOC and McKesson and compared them with those of certain
publicly-traded companies that Merrill Lynch deemed to be relevant; (6) compared
the proposed financial terms of the Merger and the McKesson/HBOC merger with the
financial terms of certain other transactions that Merrill Lynch deemed to be
relevant; (7) participated in certain discussions and negotiations among
representatives of Access and HBOC and their legal advisors with respect to the
Merger; (8) reviewed the potential pro forma impact of the Merger and the
McKesson/HBOC merger; (9) reviewed the Merger Agreement and the McKesson/HBOC
merger agreement; and (10) reviewed such other financial studies and analysis
and took into account such other matters as Merrill Lynch deemed necessary,
including its assessment of general economic, market and monetary conditions.
In preparing the Restated Opinion, Merrill Lynch assumed and relied on the
accuracy and completeness of all information supplied or otherwise made
available to Merrill Lynch, discussed with or reviewed by or for Merrill Lynch,
or publicly available, and Merrill Lynch did not assume any responsibility for
independently verifying such information or undertake an independent evaluation
or appraisal of any of the assets or liabilities (contingent or otherwise) of
Access, HBOC or McKesson nor was Merrill Lynch
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furnished with any such evaluation or appraisal. In addition, Merrill Lynch did
not assume any obligation to conduct any physical inspection of the properties
or facilities of Access, HBOC or McKesson. With respect to the financial
forecast information and the Aggregate Expected Synergies furnished to or
discussed with Merrill Lynch by Access, HBOC or McKesson, as the case may be,
Merrill Lynch assumed that such information had been reasonably prepared and
reflected the best currently available estimates and judgment of Access', HBOC's
or McKesson's management as to the expected future financial performance of
Access, HBOC or McKesson, as the case may be, and the Aggregate Expected
Synergies. Merrill Lynch further assumed that each of the Merger and the
McKesson/HBOC merger will be accounted for as a pooling of interests under
generally accepted accounting principles and each of the Merger and the
McKesson/HBOC merger will qualify as a tax-free reorganization for U.S. federal
income tax purposes.
The Restated Opinion was necessarily based upon market, economic and other
conditions as they existed and could be evaluated on, and on the information
made available to Merrill Lynch as of, the date of the Restated Opinion. Merrill
Lynch assumed that in the course of obtaining the necessary regulatory or other
consents or approvals (contractual or otherwise) for the Merger and the
McKesson/HBOC merger, no restrictions, including any divestiture requirements or
amendments or modifications, would be imposed that would have a material adverse
effect on the contemplated benefits of the Merger or the McKesson/ HBOC merger.
Merrill Lynch expressed no opinion as to (1) the prices at which HBOC Common
Stock, Access Common Stock or McKesson Common Stock will trade following the
announcement or consummation of the Merger, (2) the adequacy of the
consideration to be received by the former holders of Access Common Stock in
connection with the McKesson/HBOC merger or (3) the value of the consideration
to be received in the Merger as compared to the value of the consideration to be
received in the McKesson/HBOC merger. The Merrill Lynch Opinion does not address
the relative merits of the Merger or the McKesson/ HBOC merger and alternative
business combinations with third parties.
OVERVIEW OF MCKESSON. Merrill Lynch reviewed the business of McKesson,
including its acquisition history, industry trends and financial performance. In
addition, Merrill Lynch reviewed the share price history for McKesson for the
period October 22, 1997 through October 22, 1998 and noted certain events and
public announcements made by McKesson during such period.
ANALYSIS OF SELECTED COMPARABLE PUBLICLY-TRADED COMPANIES. Using publicly
available information and estimates of future financial results published by
First Call and taken from Merrill Lynch Equity Research, Merrill Lynch compared
certain financial and operating information and ratios for each of Access and
HBOC and for McKesson and HBOC after giving effect to the proposed McKesson/HBOC
merger but excluding Access ("McKesson/HBOC") with the corresponding financial
and operating information for a group of publicly-traded companies engaged
primarily in businesses which Merrill Lynch deemed to be reasonably comparable
to Access, HBOC and McKesson, respectively. For the purpose of its analyses, the
Access Comparable Companies were used as comparable companies to Access; the
HBOC Comparable Companies were used as comparable companies to HBOC; and the
following companies were used as comparable companies to McKesson/HBOC: all of
the HBOC Comparable Companies as well as Cardinal Health Inc., McKesson, Bergen
Brunswing Corp., Allegiance Corp., PSS World Medical Inc., Amerisource Health
Corp., Henry Schein Inc., Bindley Western Industries, Inc. and Owens & Minor
Inc. (collectively, the "Medical Distribution Companies" and, together with the
HBOC Comparable Companies, the "McKesson/HBOC Comparable Companies").
Merrill Lynch's calculations resulted in the following relevant ranges for
the Access Comparable Companies and for Access as of October 22, 1998: (1) a
range of total market value of the Access Comparable Companies of $43.0 million
to $10.3 billion (as compared to Access at $828.0 million); (2) a range of
prices of the Access Comparable Companies as a multiple of estimated CY 1999 EPS
as estimated by First Call of 42.9x to 13.2x, with means of 23.5x, 24.1x and
21.1x for all Access Comparable Companies, Health Care IT Companies and
Tele-Services Companies, respectively (as compared to 20.3x for Access),
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but excluding certain Health Care IT Companies which Merrill Lynch deemed
appropriate; (3) a range of five-year estimated EPS CAGR of 37% to 15%, with
means of 27%, 26% and 31% for all Access Comparable Companies, Health Care IT
Companies and Tele-Services Companies, respectively (as compared to 34% for
Access), but excluding certain Health Care IT Companies which Merrill Lynch
deemed appropriate; and (4) a range of the ratio of share price to estimated
EPS, expressed as a percentage of five-year EPS CAGR of 140% to 57% with means
of 85%, 89% and 68% for all Access Comparable Companies, Health Care IT
Companies and Tele-Services Companies, respectively (as compared to 60% for
Access) but excluding certain Health Care IT Companies which Merrill Lynch
deemed appropriate. Based upon these ranges Merrill Lynch determined the implied
per share equity reference range for Access to be $26.55 to $48.14.
Merrill Lynch's calculations resulted in the following relevant ranges for
the HBOC Comparable Companies and for HBOC as of October 22, 1998: (1) a range
of total market value of $43.0 million to $46.1 billion (as compared to HBOC at
$10.4 billion); (2) a range of prices of the HBOC Comparable Companies as a
multiple of CY 1999 EPS as estimated by First Call of 46.9x to 13.2x with means
of 25.8x, 22.1x and 31.3x for all HBOC Comparable Companies, Health Care IT
Companies and Software Companies, respectively (as compared to 26.3x for HBOC),
but excluding certain Health Care IT Companies which Merrill Lynch deemed
appropriate; (3) a range of five-year estimated EPS CAGR of 35% to 17% with
means of 26%, 22% and 31% for all HBOC Comparable Companies, Health Care IT
Companies and Software Companies, respectively (as compared to 33% for HBOC),
but excluding certain Health Care IT Companies which Merrill Lynch deemed
appropriate; and (4) a range of the ratio of share price to estimated EPS,
expressed as a percentage of five-year EPS CAGR of 153% to 66% with means of
101%, 102% and 100% for all HBOC Comparable Companies, Health Care IT Companies
and Software Companies, respectively (as compared to 80% for HBOC), but
excluding certain Health Care IT Companies which Merrill Lynch deemed
appropriate. Based upon these ranges Merrill Lynch determined the implied per
share equity reference range for HBOC to be $22.28 to $31.50.
Merrill Lynch's calculations resulted in the following relevant ranges for
the McKesson/HBOC Comparable Companies and for McKesson/HBOC as of October 22,
1998: (1) a range of total market value of the Medical Distribution Companies of
$472 million to $11.6 billion; (2) a range of prices of the Medical Distribution
Companies as a multiple of CY 1999 EPS as estimated by First Call of 26.8x to
17.0x with a mean of 20.7x for all Medical Distribution Companies; (3) a range
of five-year estimated EPS CAGR of 28% to 15% with a mean of 20% for all Medical
Distribution Companies; (4) a range of the ratio of share price to estimated
EPS, expressed as a percentage of five-year EPS CAGR of 158% to 73% with a mean
of 105% for all Medical Distribution Companies; and (5) ranges of total market
value, prices as a multiple of CY 1999 EPS, five-year estimated EPS CAGR and
ratio of share price to estimated EPS, expressed as a percentage of five-year
EPS CAGR for the HBOC Comparable Companies as described in the immediately
preceding paragraph. Based upon these ranges and assuming certain benefits from
the Aggregate Expected Synergies of the McKesson/HBOC merger, Merrill Lynch
determined the implied per share equity reference range for McKesson/HBOC to be
$68.23 to $86.86.
None of the companies utilized in the above analysis for comparative
purposes is, of course, identical to Access, HBOC or McKesson/HBOC. Accordingly,
a complete analysis of the results of the foregoing calculation cannot be
limited to a quantitative review of such results and involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the Access Comparable Companies, the HBOC Comparable
Companies and the McKesson/HBOC Comparable Companies and other factors that
could affect the public trading market of the Access Comparable Companies, the
HBOC Comparable Companies and the McKesson/HBOC Comparable Companies, as well as
that of Access, HBOC or McKesson. In addition, the ranges for the Access
Comparable Companies, the HBOC Comparable Companies and the McKesson/HBOC
Comparable Companies, are based on projections prepared by research analysts
using only publicly-available information. Accordingly, such estimates may or
may not prove to be accurate.
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SELECTED COMPARABLE ACQUISITIONS ANALYSIS. Merrill Lynch also reviewed the
financial terms of thirty-three acquisitions in the healthcare information
technology industry (the "Comparable Acquisitions"). Merrill Lynch analyzed
ratios comparing offer value per share and transaction value to various
financial performance data and determined that, with respect to transaction
value as a multiple of LTM Sales, LTM EBITDA, and LTM EBIT and with respect to
offer value as a multiple of LTM Net Income, the ranges indicated by the
Comparable Acquisitions were 3.0x to 7.0x, 15.0x to 23.0x, 23.0x to 35.0x and
33.0x to 45.0x, respectively. Applying these ranges of selected multiples for
the Comparable Acquisitions to corresponding financial data for Access, but
excluding certain acquisitions that Merrill Lynch deemed appropriate, resulted
in an average equity range for Access of approximately $28.91 to $45.15 per
share.
PREMIUM ANALYSIS. Using publicly-available information regarding 305
announced, but not withdrawn, and completed domestic transactions between
January 1, 1994 and September 21, 1998 of greater than $500.0 million and less
than $1.5 billion in value as of the announcement dates, Merrill Lynch
calculated the average premiums as of the announcement dates in such
transactions over the stock prices one day, one week and one month,
respectively, prior to the announcement dates (or, in the case of transactions
involving healthcare information technology companies, one day, ten days and one
month, respectively). Merrill Lynch noted that (1) in all such transactions,
such premiums were 25.7%, 29.4% and 35.2%, respectively (or, in the case of the
34 transactions involving healthcare information technology companies during
such period, 34.1%, 29.7% and 48.9%, respectively), and (2) in the 172 of such
transactions announced, but not withdrawn, and completed between January 1, 1997
and September 21, 1998, such premiums were 23.8%, 27.7% and 31.7%, respectively
(or, in the case of the 21 transactions involving healthcare information
technology companies during such period, 23.2%, 29.8% and 39.2%, respectively).
Merrill Lynch further noted that applying the ranges of premiums paid in such
transactions to the respective historical stock prices of Access Common Stock
resulted in an implied equity range of $31.88 to $40.63.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed discounted cash flow
analyses (i.e., analyses of the present value of the projected unlevered cash
flows for the period using the discount rates indicated) of Access based upon
both base case and downside case models provided by Access' management for the
calendar years 1998 through 2002, inclusive, using discount rates reflecting an
equity cost of capital ranging from 14% to 18% and terminal value multiples of
CY 2002 tax-effected EBITA (EBIT plus amortization and less taxes) ranging from
14.0x to 20.0x. The forecasts prepared by management of Access were estimates
only and inherently subject to known and unknown risks, uncertainties and other
factors, many of which are outside of Access' and Merrill Lynch's control, which
may cause the actual results to differ significantly from those set forth in the
forecasts. The theoretical value of Access (1) based on the base case management
forecasts produced a range of value per share of Access Common Stock of $33.97
to $50.35 and (2) based on the downside case management forecasts produced a
range of value per share of Access Common Stock of $30.24 to $44.47.
Merrill Lynch also performed discounted cash flow analyses of HBOC for the
fiscal years 1998 through 2002, inclusive, based upon information provided by
HBOC's management with respect to fiscal years 1998 through 2001, inclusive,
using discount rates reflecting an equity cost of capital ranging from 13% to
17% and terminal value multiples of FY 2002 tax-effected EBITA ranging from
25.0x to 30.0x. The information provided by management of HBOC was estimated and
inherently subject to known and unknown risks, uncertainties and other factors,
many of which are outside of HBOC's and Merrill Lynch's control, which may cause
the actual results to differ significantly from those set forth in the
information provided by HBOC management. The theoretical value of HBOC based on
the information provided by HBOC management produced a range of value per share
of HBOC Common Stock of $31.61 to $42.20.
Merrill Lynch also performed discounted cash flow analyses of McKesson/HBOC
for the calendar years 1998 through 2002, inclusive, based upon information
provided by McKesson's and HBOC's management with respect to calendar years 1998
through 2001, inclusive, using discount rates reflecting an equity cost of
capital ranging from 14% to 18% and terminal value multiples of CY 2002
tax-effected
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EBITA ranging from 24.0x to 28.0x. The information provided by management of
McKesson and HBOC was estimated and inherently subject to known and unknown
risks, uncertainties and other factors, many of which are outside of McKesson's,
HBOC's and Merrill Lynch's control, which may cause the actual results to differ
significantly from those set forth in the information provided by McKesson and
HBOC management. The theoretical value of McKesson/HBOC based on the information
provided by McKesson and HBOC management produced a range of value per share of
$78.11 to $103.76.
PRO FORMA COMBINATION ANALYSIS. Merrill Lynch analyzed the pro forma
effects resulting from the Merger, including the potential impact on Access' and
HBOC's projected stand-alone EPS and the anticipated accretion or dilution, as
applicable, to Access' and HBOC's EPS resulting from the Merger. Merrill Lynch
observed that, after giving effect to Access and HBOC management forecasts, the
Merger would be accretive to HBOC's projected EPS in each of the years 1999
through 2001, inclusive.
In addition, Merrill Lynch analyzed the pro forma effects of the
McKesson/HBOC merger and the Merger, including the potential impact on Access',
HBOC's and McKesson's projected stand-alone EPS and the anticipated accretion or
dilution, as applicable, to Access', HBOC's and McKesson's EPS resulting from
the Merger. Merrill Lynch observed that, after giving effect to Access, HBOC and
McKesson management forecasts, the mergers would be accretive to HBOC's and
McKesson's projected EPS in each of the years 1999 through 2001, inclusive,
assuming, in the case of McKesson's projected EPS, certain Expected Synergies in
connection with the mergers.
HISTORICAL EXCHANGE RATIO ANALYSIS. Merrill Lynch compared the Exchange
Ratio to the recent historical implied exchange ratios. This analysis indicated
that for the one-year period through October 22, 1998, the average of the
implied exchange ratios was 1.16x. Merrill Lynch also noted that such ratio was
0.97x for the six-month period through October 22, 1998, such ratio was 0.90x
for the three-month period through October 22, 1998, such ratio was 1.02x for
the one-month period through October 22, 1998, and such ratio was 1.11x based on
the closing prices on September 25, 1998. Merrill Lynch also noted that the
Exchange Ratio represented a premium over such ratios for such periods of 24.7%,
50.1%, 60.2%, 42.5% and 30.8%, respectively.
RELATIVE DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch compared the range of
theoretical values per share for shares of Access Common Stock produced by the
base case discounted cash flow analysis described above to those for shares of
HBOC Common Stock produced by the discounted cash flow analysis described above
and noted that the exchange ratios implied by such theoretical values ranged
from 1.062x to 1.203x, as compared to the Exchange Ratio of 1.450x.
In addition, Merrill Lynch compared the range of theoretical values per
share for shares of Access Common Stock produced by the base case discounted
cash flow analysis described above to those for McKesson/HBOC produced by the
discounted cash flow analysis described above and noted that the exchange ratios
for a combination of Access with McKesson/HBOC implied by such theoretical
values ranged from 0.426x to 0.493x, as compared to the exchange ratio of 0.54x
implied for such combination by the Exchange Ratio in the Merger of 1.45x and
the McKesson/HBOC Exchange Ratio of 0.37x based on the stock prices of Access,
HBOC and McKesson as of October 22, 1998.
PRO FORMA CONTRIBUTION ANALYSIS. Merrill Lynch analyzed the relative
contributions of Access, HBOC and McKesson to projected revenue, operating
income and net income for the years 1998, 1999 and 2000 on a pro forma basis
giving effect to the Mergers.
The summary set forth above does not purport to be a complete description of
the analyses performed by Merrill Lynch in arriving at the Merrill Lynch
Opinions. The preparation of a fairness opinion is a complex process and not
necessarily susceptible to partial or summary description. Merrill Lynch
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all factors and analyses, could create a misleading view of the
process underlying the Merrill Lynch Opinions. In its analyses, Merrill Lynch
made numerous assumptions with
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respect to industry performance, general business and economic conditions and
other matters, many of which are beyond Access', HBOC's, McKesson's and Merrill
Lynch's control. Any estimates contained in Merrill Lynch's analyses are not
necessarily indicative of actual values, which may be significantly more or less
favorable than as set forth therein. Estimated values do not purport to be
appraisals and do not necessarily reflect the prices at which businesses or
companies may be sold in the future, and such estimates are inherently subject
to uncertainty.
The Access Board selected Merrill Lynch to render the Merrill Lynch Opinions
because Merrill Lynch is an internationally recognized investment banking firm
with substantial experience in transactions similar to the Merger and the
McKesson/HBOC merger and because it is familiar with Access and its business. In
addition, Merrill Lynch acted as the lead managing underwriter in connection
with Access' public offering in December 1995 and, in connection therewith,
received customary fees. Merrill Lynch has from time to time rendered investment
banking, financial advisory and other services to Access and may continue to do
so and has received, and may receive, customary compensation for the rendering
of such services. Merrill Lynch is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, secondary distributions of listed
and unlisted securities and private placements.
Pursuant to a letter agreement dated September 15, 1998, Access has agreed
to pay Merrill Lynch a transaction fee equal to 0.42% of the aggregate purchase
price paid by HBOC upon consummation of the Merger, payable upon the completion
of the Merger. Access also agreed to reimburse Merrill Lynch for its reasonable
out-of-pocket expenses incurred in connection with its advisory work, including
the reasonable fees and disbursements of its legal counsel, subject to certain
limitations, and to indemnify Merrill Lynch and certain related persons against
certain liabilities arising out of or in conjunction with its rendering of
services under such letter agreement, including certain liabilities under the
federal securities laws.
In the ordinary course of its business, Merrill Lynch may actively trade in
the securities of Access, HBOC or McKesson for its own account and the account
of its customers and, accordingly, may at any time hold a long or short position
in such securities.
REASONS OF HBOC FOR ENGAGING IN THE MERGER
HBOC believes that the Merger will enhance its community health, access
management and clinical management strategies, thereby strengthening HBOC's
position in both the payor and provider markets.
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 (1) the Merger
Agreement is adopted and approved by the stockholders of Access in accordance
with the applicable provisions of the Delaware General Corporation Law (the
"DGCL") and (2) 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").
GENERAL EFFECT OF THE MERGER. At the Effective Time, a new directly
wholly-owned subsidiary of HBOC ("Merger Sub") will be merged with and into
Access, which will be the surviving corporation.
CONVERSION OF SHARES. Each share of Access Common Stock issued and
outstanding immediately prior to the Effective Time, will, at the Effective
Time, be converted into the right to receive one and forty-five hundredths
(1.45) shares of HBOC Common Stock; provided, however, that 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
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on any such date) for shares of HBOC Common Stock during the 20 consecutive
trading days ending on the second trading day prior to the date on which the
Special Meeting is held as reported by Nasdaq (the "Market Value"), is greater
than $30.00, then Access stockholders will receive for each share of Access
Common Stock a fractional share of HBOC Common Stock determined by dividing
$43.50 by the Market Value (whichever basis is applicable, being referred to as
the "Exchange Ratio"). The shares of HBOC Common Stock and any cash in lieu of
fractions thereof receivable by Access stockholders 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 Access 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 Access Common Stock outstanding
at the Effective Time of the Merger will be assumed by HBOC and, as a result of
such assumption, the optionee will have the right to purchase the number of
shares (rounded down to the nearest whole share) of HBOC Common Stock into which
the number of shares of Access 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 Access 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.
At the Effective Time, options held by executive officers of Access, as well as
certain other option holders, will, pursuant to their terms, become immediately
and fully exercisable. Except to the extent necessary for certain outstanding
options to continue to qualify as incentive stock options, no other terms of the
options assumed by HBOC will be modified pursuant to the terms of the Merger
Agreement. See "Interests of Certain Persons in Each of HBOC and
Access--Interests of Certain Access Persons in Matters to be Acted Upon."
EMPLOYEE STOCK PURCHASE PLAN. At the Effective Time, HBOC will assume
Access' rights and obligations under the Access Health, Inc. 1991 Employee Stock
Purchase Plan and each outstanding right to purchase Access Common Stock will be
adjusted in the same manner provided for in respect of outstanding options.
EXCHANGE OF CERTIFICATES. Prior to the Effective Time, HBOC-GA shall
designate SunTrust Bank, Atlanta or another bank or trust company reasonably
acceptable to Access as exchange agent (the "Exchange Agent") in connection with
the Merger. At the Effective Time, HBOC shall provide the Exchange Agent with
the shares of HBOC Common Stock and cash necessary to deliver the Merger
Consideration to each holder of shares of Access Common Stock converted by
reason of the Merger. As soon as reasonably practicable 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 Access 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 Access 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 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
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Certificate surrendered or establish to the reasonable satisfaction of HBOC or
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 Access 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 Access for
purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"), will be subject to the restrictions imposed by such rule. In
accordance with Rule 145, an affiliate of Access 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. HBOC has
received from each person who was an affiliate of Access on the date of the
Merger Agreement, and Access has agreed to use its reasonable best efforts to
cause any person who thereafter becomes an affiliate of Access to provide to
HBOC, 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, Access and HBOC affiliates are
subject to certain restrictions on transfer of Access 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 Access, on the other hand, to consummate the Merger are contingent upon
and subject to the satisfaction or waiver of the following conditions:
(1) the absence of certain legal or regulatory proceedings with respect
to the Merger;
(2) the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act");
(3) the approval of the Merger and the Merger Agreement and any related
matters by holders of the requisite number of shares of Access Common Stock;
(4) the registration statement on Form S-4 of which this Proxy
Statement/Prospectus is a part (the "Registration Statement") shall have
been declared effective by the Commission and no stop order shall have been
issued with respect thereto; and
(5) the receipt by the Access Board of a fairness opinion of Merrill
Lynch dated as of the date of this Proxy Statement/Prospectus.
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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:
(1) Access shall have performed and observed all covenants and
agreements required to be performed or observed at or before the Closing
Date and the representations and warranties of Access shall remain true and
correct at and as of the Closing Date, except for those representations and
warranties which address matters only as of a specific date which shall have
been true and correct as of such date, and, with certain exceptions, other
than breaches of such representations, warranties, covenants and agreements
which do not individually or in the aggregate constitute a material adverse
effect on the assets, rights, financial condition or results of operations
(a "Material Adverse Effect") of Access and its subsidiaries, taken as a
whole;
(2) there shall have been no change in the business, properties, rights
or operations of Access or its subsidiaries, which individually or in the
aggregate constitute a Material Adverse Effect on Access except any change
or effect related to a downturn in general economic conditions in the United
States;
(3) receipt of a certificate of the President of Access regarding
satisfaction of certain conditions, including those listed in (1) and (2)
above;
(4) receipt of certain legal opinions, including an opinion of Jones,
Day, Reavis & Pogue, counsel to HBOC ("Jones Day"), to the effect that the
Merger will qualify as a reorganization pursuant to Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
(5) receipt of letters from any person who has become an affiliate of
Access after the date of the Merger Agreement regarding compliance with
certain pooling of interests requirements;
(6) delivery of certain consents, waivers and approvals of certain third
parties;
(7) receipt of letters from Arthur Andersen LLP, in their capacity as
independent public accountants for Access and HBOC, respectively, regarding
the appropriateness of accounting for the Merger as a pooling of interests;
(8) receipt of letters from Arthur Andersen LLP, in their capacity as
independent public accountants for Access, regarding certain information
about Access included in the Registration Statement; and
(9) subject to certain exceptions, the absence of any fees or expenses
payable to any investment banking firm or similar entity that will be
incurred by Access in connection with the Merger, except fees and expenses
of Merrill Lynch, not to exceed the limitations set forth in the Merger
Agreement.
The obligation of Access to consummate the Merger is contingent upon, and
subject to the satisfaction or waiver of, the following additional conditions:
(1) HBOC and HBOC-GA shall have performed and observed all covenants and
agreements required to be performed or observed at or before the Closing
Date and the representations and warranties of HBOC and HBOC-GA shall remain
true and correct at and as of the Closing Date, except for those
representations and warranties which address matters only as of a specific
date which shall have been true and correct as of such date, and, with
certain exceptions, other than breaches of such representations, warranties,
covenants and agreements which do not individually or in the aggregate
constitute a Material Adverse Effect on HBOC-GA;
(2) receipt of a certificate of the President of each of HBOC and
HBOC-GA regarding the matters in (1) above; and
(3) 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.
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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 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 Access filed the required information with the Antitrust
Division and the FTC on October 13, 1998, and have requested early termination
of the waiting period. 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. Access has agreed that, prior to the Effective Time of the
Merger or earlier termination of the Merger Agreement, Access shall not, and
shall not permit any of its subsidiaries to, and Access and its subsidiaries
shall not authorize or permit any officer, director, employee or representative
of Access 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 Access or any of its
subsidiaries or any proposal or offer to acquire in any manner a substantial
equity interest in Access or any of its subsidiaries or a substantial portion of
the assets of Access or any of its subsidiaries with any person or entity;
provided, however, that the Access Board may furnish information to or enter
into discussions or negotiations with any person or entity if, and only to the
extent that, the Access Board determines in good faith, after consultation and
review with its outside counsel, that such action would be required under
applicable law in the exercise of its fiduciary duties. Access has agreed to
notify HBOC-GA promptly, but in no event later than one business day after
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:
(1) mutual consent of the Board of Directors of HBOC (the "HBOC Board")
and the Access Board, notwithstanding the prior approval by the Access
stockholders;
(2) the HBOC Board, in the event of condemnation, destruction, loss or
damage to the business of Access that causes a Material Adverse Effect on
Access;
(3) the Board of Directors of HBOC-GA or the Access Board, after January
15, 1999, if any of the conditions to such party's obligation to consummate
the Merger have not been fulfilled or waived, unless fulfillment has been
frustrated or made impossible by the party seeking termination, except if
such act is specifically contemplated and permitted by the Merger Agreement;
(4) the Access Board, if, in the exercise of its fiduciary duties to the
stockholders of Access, the Access Board decides that such termination is
required; and
(5) the Access Board, if the Market Value of HBOC Common Stock is less
than $21.00.
If the Merger Agreement is terminated by Access in accordance with (4) above
or by Access or HBOC-GA because the Access stockholders do not approve the
Merger Agreement, Access will be obligated to pay to HBOC-GA a fee in the amount
of $25,000,000 (the "Termination Fee"), plus all reasonable costs and expenses
of HBOC and HBOC-GA incurred in connection with the negotiation and performance
of the Merger Agreement, up to $1,000,000; provided, however, that if the Merger
Agreement is terminated by any party because the Access stockholders fail to
approve the Merger Agreement and the average closing price per share (or if
there is no sale on such date, the average between the closing bid and ask
prices on any such day) of HBOC Common Stock on the five consecutive trading
days ending on the trading day immediately preceding the date of the Special
Meeting is less than $21.00, then Access shall not be required to pay such
Termination Fee, but will be required to pay HBOC's reasonable out-of-pocket
expenses up to $1,000,000.
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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
Arthur Andersen LLP, Access' independent public accountants, setting forth their
concurrence with the conclusion of Access' management that no conditions exist
with respect to Access that would preclude accounting for the Merger as a
pooling of interests, and from Arthur Andersen LLP, HBOC's independent public
accountants, to the effect that the Merger can be accounted for as a pooling of
interests, in each case under Accounting Principles Board Opinion No. 16 and
assuming that the Merger is closed and consummated in accordance with the Merger
Agreement.
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 Access Common Stock who hold their shares of Access Common Stock as
capital assets. This summary does not discuss all aspects of income taxation
that may be relevant to a particular holder of Access 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, holders who acquired Access
Common Stock pursuant to the exercise of options or otherwise as compensation
and holders who hold their Access Common Stock as a hedge or as part of a
hedging, straddle, conversion or other risk reduction transaction), and it does
not discuss any aspect of state, local, foreign or other tax laws. Consequently,
each holder of Access Common Stock should consult its own tax advisor as to the
specific tax consequences of the Merger to that stockholder.
Pursuant to the Merger, Merger Sub will merge with and into Access, and
Access will be the survivor. Except with respect to payments of cash to Access'
stockholders in lieu of fractional shares of HBOC Common Stock, one hundred
percent (100%) of Access Common Stock outstanding immediately prior to the
Merger will be exchanged solely for HBOC Common Stock
As of the date of this Proxy Statement/Prospectus, Jones Day has advised
HBOC, Merger Sub and Access that in its opinion the Merger will qualify as a
reorganization pursuant to Section 368(a) of the Code. As such, the Merger will
have the federal income tax consequences set forth below:
(1) No gain or loss will be recognized by an Access stockholder upon the
exchange of the shares of Access 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.
(2) The aggregate adjusted tax basis of the HBOC Common Stock received
(including any fractional share interests deemed received) by a stockholder
of Access as a result of the Merger will be the same as the aggregate
adjusted tax basis of the shares of Access Common Stock surrendered in
exchange therefor.
(3) The holding period of the HBOC Common Stock received (including any
fractional share interests deemed received) by a stockholder of Access as a
result of the Merger will include the holding period of the shares of Access
Common Stock surrendered in exchange therefor.
(4) Any cash that a stockholder of Access 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.
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(5) No gain or loss will be recognized by HBOC, Merger Sub and Access as
a result of the consummation of the Merger.
The opinion of Jones Day referred to herein is subject to certain
assumptions and qualifications and based, among other factors, upon certain
representations and warranties of HBOC, Merger Sub and Access which counsel
assumed to be true, correct and complete. In addition, consummation of the
Merger is subject to the condition that as of the Closing Date the opinion
described above shall not have been withdrawn or materially modified. The
opinion referred to above would neither be binding upon the Internal Revenue
Service nor preclude it from adopting a contrary position.
To prevent "backup withholding" of federal income tax on any payments of
cash to an Access stockholder in the Merger, an Access 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, 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 Access
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 Access stockholder by the Internal Revenue Service,
and any cash received by such stockholder may be subject to backup withholding
at a rate of 31%.
Each Access stockholder will be required to retain records and file with
such holder's United States federal income tax return a statement setting forth
certain facts relating to the Merger.
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 ACCESS 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 Access Common Stock is a Nasdaq NM security, the holders of shares
of Access 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 ACCESS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF HBOC
The following table sets forth, as of September 30, 1998, 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, 1997, 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>
FMR Corp................................................................. 22,932,430(2) 5.3%
82 Devonshire Street
Boston, Massachusetts 02109
Putnam Investments, Inc.................................................. 33,903,532(3) 7.9%
One Post Office Square
Boston, Massachusetts 02109
Alfred C. Eckert III..................................................... 42,000(4) *
Philip A. Incarnati...................................................... 100,000(5) *
Alton F. Irby III........................................................ 192,000(6) *
M. Christine Jacobs...................................................... 20,000(5) *
Gerald E. Mayo........................................................... 268,000(5) *
Charles W. McCall........................................................ 4,582,241(7) 1.1%
James V. Napier.......................................................... 301,552(8) *
Donald C. Wegmiller...................................................... 40,000(5) *
Jay P. Gilbertson........................................................ 453,440(9) *
Albert J. Bergonzi....................................................... 350,184(10) *
Russell G. Overton....................................................... 71,684 *
Jay M. Lapine............................................................ 103,875(11) *
All Directors and Executive Officers as a Group (12 persons)............. 6,524,976(12) 1.5%
</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 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 1,311,902 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 4,018,800 and 5,767,160 of such shares, respectively,
PIM has shared dispositive power with respect to 28,136,372 of such shares
and PI has shared voting and shared dispositive power with respect to
4,018,800 and 33,903,532 of such shares, respectively.
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<PAGE>
(4) Includes 20,000 shares that may be acquired through the exercise of
presently exercisable stock options and 2,000 shares that are 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 180,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(7) Includes 420,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(8) Includes 220,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(9) Includes 384,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(10) Includes 344,000 shares that may be acquired through the exercise of
presently exercisable stock options.
(11) Includes 102,400 shares that may be acquired through the exercise of
presently exercisable stock options.
(12) Includes 2,098,400 shares that may be acquired through the exercise of
presently exercisable stock options.
51
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ACCESS
The following table sets forth, as of October 19, 1998, unless otherwise
indicated, certain information with respect to all stockholders known to Access
to beneficially own more than five percent of the Access Common Stock, and
information with respect to Access Common Stock beneficially owned by each
director of Access, the Chief Executive Officer of Access and Access' four other
most highly compensated executive officers for the year ended September 30,
1998, and all directors and executive officers of Access as a group. Except as
otherwise indicated, the stockholders listed in the table have sole voting and
investment powers with respect to Access 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 OWNERSHIP
NAME AND ADDRESS OF BENEFICIAL OWNER (1) PERCENT OF CLASS
- ------------------------------------------------------------------------ ---------------------- -------------------
<S> <C> <C>
The Kaufmann Fund, Inc.................................................. 4,046,900 17.1%
Edgemont Asset Management
140 E. 45th St., 43rd Floor
New York, New York 10017
Franklin Advisors, Inc.................................................. 1,257,100 5.3
770 Mariners Island Blvd.
San Mateo, California 94404
Pilgrim Baxter & Associates Ltd......................................... 1,252,700 5.3
825 Duportail Road
Wayne, Pennsylvania 19087
Joseph P. Tallman....................................................... 702,147(2) 2.9
Kinney L. Johnson....................................................... 739,190(3) 3.1
Richard C. Miller....................................................... 263,230(4) 1.1
John R. Durant, M.D..................................................... 17,000(5) *
Douglas L. Elden........................................................ 43,863 *
Frank G. Washington..................................................... 27,000(6) *
Elizabeth Snowden....................................................... 338,566(7) 1.4
Barry W. Wolcott........................................................ 118,653(8) *
Timothy H. Connor....................................................... 179,557(9) *
Julie A. Brooks......................................................... 98,686(10) *
All directors and executive officers as a group (12 persons)............ 2,662,892(11) 10.7%
</TABLE>
- ------------------------
* Less than one percent.
(1) Applicable percentage of ownership is based on 23,655,151 shares of Access
Common Stock outstanding as of October 19, 1998, together with applicable
options and warrants for such stockholder. Beneficial ownership is
determined in accordance with the rules of the Commission, and includes
voting and investment power with respect to shares. Shares of Access Common
Stock subject to options and warrants currently exercisable or exercisable
within 60 days of October 19, 1998, are deemed outstanding for computing the
percentage ownership of the person holding such options and warrants, but
are not deemed outstanding for computing the percentage of any other person.
(2) Includes 42,001 shares issuable upon exercise of options to purchase shares
of Access Common Stock which are exercisable within 60 days of October 19,
1998 and an additional 192,999 option shares of Access Common Stock which
accelerate upon a change of control. Does not include 206,066 shares of
Access Common Stock owned, 24,001 shares issuable upon exercise of options
to purchase shares of Access Common Stock which are exercisable within 60
days of October 19, 1998 and an additional 108,499 option shares which
accelerate upon a change of control and are held by Mr. Tallman's wife,
Elizabeth Snowden.
52
<PAGE>
(3) Includes 714,690 shares held by American Healthcare Fund II, L.P., 17,500
shares issuable upon exercise of options to purchase shares of Access Common
Stock which are exercisable within 60 days of October 19, 1998 and an
additional 2,500 option shares which accelerate upon a change of control.
(4) Includes 11,350 shares held by Mr. Miller as custodian for his son and
daughter, 165,929 shares issuable upon exercise of options to purchase
shares of Access Common Stock which are exercisable within 60 days of
October 19, 1998 and an additional 76,138 option shares which accelerate
upon a change of control.
(5) Includes 16,250 shares issuable upon exercise of options to purchase shares
of Access Common Stock which are exercisable within 60 days of October 19,
1998.
(6) Includes 22,500 shares issuable upon exercise of options to purchase shares
of Access Common Stock which are exercisable within 60 days of October 19,
1998 and an additional 2,500 option shares which accelerate upon a change of
control.
(7) Includes 24,001 shares issuable upon exercise of options to purchase shares
of Access Common Stock which are exercisable within 60 days of October 19,
1998 and an additional 108,499 option shares of Access Common Stock which
accelerate upon a change of control. Does not include 467,147 shares of
Access Common Stock owned, 42,001 shares issuable upon exercise of options
to purchase shares of Access Common Stock which are exercisable within 60
days of October 19, 1998 and an additional 192,999 option shares which
accelerate upon a change of control and are held by Ms. Snowden's husband,
Joseph Tallman.
(8) Includes 5,001 shares issuable upon exercise of options to purchase shares
of Access Common Stock which are exercisable within 60 days of October 19,
1998 and an additional 83,499 option shares which accelerate upon a change
of control.
(9) Includes 62,343 shares issuable upon exercise of options to purchase shares
of Access Common Stock which are exercisable within 60 days of October 19,
1998 and an additional 100,499 option shares which accelerate upon a change
of control.
(10) Includes 18,600 shares issuable upon exercise of options to purchase shares
of Access Common Stock which are exercisable within 60 days of October 19,
1998 and an additional 79,400 option shares which accelerate upon a change
of control.
(11) Includes 384,126 shares issuable upon exercise of options to purchase
shares of Access Common Stock which are exercisable within 60 days of
October 19, 1998 and an additional 771,033 option shares which accelerate
upon a change of control.
INTERESTS OF CERTAIN ACCESS PERSONS IN MATTERS TO BE ACTED UPON
In considering the Merger, holders of Access Common Stock should be aware
that the directors and executive officers of Access have interests in the Merger
in addition to their interests as stockholders of Access generally, as described
below.
HBOC EMPLOYMENT AGREEMENTS. HBOC has entered into two-year employment
agreements (the "HBOC Employment Agreements") with the five executive officers
of Access set forth in the table below. The HBOC Employment Agreements, although
effective and binding as of September 27, 1998, will become operative upon the
closing of the Merger. Pursuant to the HBOC Employment Agreements, each Access
executive officer will be employed by HBOC in the position indicated below and
will receive the annual base salary indicated below, will be entitled to
participate in HBOC's management incentive plan and will receive the one-time
retention bonus indicated below. The retention bonus is payable to the executive
18 months after the effective date of the Merger if the executive has remained
in the continuous employ of HBOC, subject to earlier payment in the event HBOC
effects an involuntary termination (as defined in the agreement) of the
executive.
53
<PAGE>
<TABLE>
<CAPTION>
ANNUAL RETENTION
NAME POSITION BASE SALARY BONUS
- --------------------------------- --------------------------------- ----------- ----------
<S> <C> <C> <C>
John Barr........................ Senior VP--Access Health Group $ 175,000 $ 175,000
Timothy Connor................... Senior VP--Access Health Group $ 175,000 $ 175,000
Elizabeth Snowden................ Senior VP--Access Health Group $ 175,000 $ 175,000
Joseph Tallman................... Senior VP--HBOC--GA and General $ 250,000 $ 250,000
Manager Access Health Group
Fiona Wood....................... Senior VP--Access Health Group $ 150,000 $ 150,000
</TABLE>
The HBOC Employment Agreements also provide that if HBOC effects an
involuntary termination of the executive during the term of the agreement, the
executive is entitled to continue to receive his or her annual base salary for
the remainder of the term of employment as well as continued health and welfare
benefits for one year from the date of termination or the duration of the term
of employment, whichever is less. The HBOC Employment Agreements also contain a
noncompetition agreement pursuant to which the Access executive agrees not to
compete with HBOC during the term of employment and for a period of one year
thereafter. The HBOC Employment Agreements, upon becoming operative upon the
closing of the Merger, supersede any prior employment agreements between the
Access executives named above and Access, including the Access Employment
Agreements described below.
ACCESS EMPLOYMENT AGREEMENTS. Joseph Tallman, John Barr, Julie Brooks,
Timothy Connor and Elizabeth Snowden, executive officers of Access, as well as
certain key employees of Access are parties to employment agreements (the
"Access Employment Agreements") with Access that provide for the receipt of
certain severance payments and other benefits as a result of the Merger.
Pursuant to the Access Employment Agreements, in the event of a constructive
termination of the employee or a termination without cause, the Access employee
is entitled to continue to receive his or her annual base salary for 12 months
after the termination, provided that if such a termination occurs after a change
of control (which includes the Merger), the severance period is 24 months after
termination and the severance payment is to be paid in one lump sum within three
days following termination. Each employee is also entitled to receive health and
welfare benefits for the duration of the severance period. In addition, pursuant
to the Access Employment Agreements, all unvested stock options held by the
Access employees become fully exercisable upon a change of control and,
therefore, upon the closing of the Merger. The payments and benefits under the
Access Employment Agreements are subject to reduction to the extent that such a
reduction would produce a greater after-tax benefit to the employee after taking
into account the excise tax on certain "excess parachute payments" under Section
280G of the Code. Fiona Wood also has an employment agreement with Access that
provides similar benefits as the Access Employment Agreements following a change
of control. The Access Employment Agreements of Messrs. Tallman, Barr, Connor
and Ms. Snowden and the employment agreement of Ms. Wood will be superseded by
their respective HBOC Employment Agreements upon the closing of the Merger. Ms.
Brooks' current base salary is $156,800 per year.
ACCELERATED VESTING OF STOCK OPTIONS. Pursuant to option agreements under
Access' 1989 Stock Option Plan, executive officers of Access hold options to
purchase an aggregate of 851,842 shares of Access Common Stock, of which options
to purchase an aggregate of 689,895 shares of Access Common Stock remained
unvested as of October 19, 1998. Such unvested options will accelerate and
become fully vested and exercisable upon the effectiveness of the Merger. See
"--Security Ownership of Certain Beneficial Owners and Management of Access."
54
<PAGE>
HBOC-GA has agreed that, subsequent to the Closing Date, it will provide to
the directors and officers of Access indemnification in accordance with current
provisions of the Amended and Restated Certificate of Incorporation and the
Bylaws of Access and certain indemnification agreements between Access and each
such director and officer, with respect to matters occurring prior to the
Effective Time, 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 Access provided that the
premiums are no more than 110% of the annual premiums for such coverage as of
the date of the Merger Agreement. If the premiums exceed such 110% amount, HBOC
has the option to provide substitute insurance.
55
<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF SHARES OF EACH OF
HBOC COMMON STOCK AND ACCESS COMMON STOCK
INTRODUCTION
HBOC and Access are each incorporated under the laws of the State of
Delaware. The holders of shares of Access Common Stock, whose rights as
stockholders are currently governed by Delaware law, the Amended and Restated
Certificate of Incorporation of Access (the "Access Charter") and the By-laws of
Access (the "Access 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 Bylaws of HBOC
(the "HBOC Bylaws"). The material differences between the rights of holders of
shares of Access 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 Access Common Stock under applicable Delaware law,
the Access Charter and Access 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 Access, to which holders of shares
of Access Common Stock are referred. See "Where You Can Find More Information."
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)
1,000,000,000 shares of HBOC Common Stock and (ii) 1,000,000 shares of preferred
stock, no par value. The Access Charter provides that Access has the authority
to issue (i) 75,000,000 shares of Access Common Stock and (ii) 5,000,000 shares
of preferred stock, par value $.001 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. The Access Charter also grants such power
to the Access Board. The Access Board has designated one series of preferred
stock, the Series A Participating Preferred Stock. See "Where You Can Find More
Information."
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 Access Common Stock are entitled to one vote per
56
<PAGE>
share on all matters to be voted on by the stockholders of Access, except with
regard to the election of directors. See "--Election of Board of Directors."
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 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 Access Bylaws specify that the number of
directors shall be not less than four nor more than ten. The number of directors
on the Access Board is currently six.
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. The HBOC Charter does
not provide for cumulative voting. The Access Charter and Bylaws provide for
cumulative voting so long as the name of the candidate for director shall have
been placed in nomination prior to the voting and the stockholder, or any other
holder of the same class or series of stock, has given notice at the meeting
prior to the voting of the intention to cumulate votes.
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
Access 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 special meeting.
The Access Bylaws provide that special meetings of stockholders may be called at
any time by the Access Board, the Chairman of the Board, the President or one or
more stockholders holding shares in the aggregate entitled to cast not less than
ten percent of the votes at that meeting. If a special meeting is called by one
or more stockholders, then the request must be in writing and must specify the
time of such meeting and the general nature of the business proposed to be
transacted. The written notice of a special meeting of Access stockholders shall
state the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called.
57
<PAGE>
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. The HBOC Charter expressly prohibits written consents by
stockholders. The Access Bylaws provide that stockholders may act by written
consent, provided that prompt notice of such action must be given to those
stockholders who did not sign such written consent.
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 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 Access Charter contains no
provisions requiring a vote greater than that specified in the DGCL to amend the
Access Charter.
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 Access Charter provides that the
Access Board is expressly authorized to make, alter, amend or repeal the Access
Bylaws. The Access Bylaws provide that the Access Bylaws may be adopted, amended
or repealed by the stockholders entitled to vote, provided that the Access
Charter may confer the power to adopt, amend or repeal bylaws upon the Access
Board.
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 Access Bylaws provide for elimination of personal
liability subject to the statutory exceptions.
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<PAGE>
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 interests 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
Access Bylaws provide to directors and officers of HBOC and Access,
respectively, indemnification to the fullest extent provided by law.
Additionally, the HBOC 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 or officer, 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 or officer to repay such amount, unless it
shall ultimately be determined that he or she is entitled to be indemnified by
HBOC as authorized by relevant Delaware law.
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. The HBOC Charter has no
provisions limiting the payment of dividends. The Access Bylaws provide that the
directors may, subject to any restrictions contained in the Access Charter,
declare and pay dividends pursuant to the DGCL. The Access Board may set apart
out of any of the funds available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve.
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. Access has not
opted out of Section 203 in the Access Charter or Access 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. (the "NASD") 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
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exchange, (ii) designated as a national market system security on an
inter-dealer quotation system by the NASD or (iii) held of record by more than
2,000 stockholders, (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 Access Charter contains such a provision on appraisal
rights.
The holders of shares of Access Common Stock are not entitled to appraisal
rights in connection with the Merger pursuant to Section 262 of the DGCL because
the Access Common Stock is designated as a national market system security on
the Nasdaq NM.
BUSINESS OF HBOC
GENERAL
HBOC provides 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 healthcare organizations to add
incremental capabilities to their 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,
medical call centers, 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 payors. 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, 1997, HBOC had 6,286 employees worldwide.
RECENT DEVELOPMENTS
HBOC has entered into an Agreement and Plan of Merger (the "McKesson Merger
Agreement") dated as of October 17, 1998 among HBOC, McKesson Corporation
("McKesson") and McKesson Merger Sub, Inc. The McKesson Merger Agreement
provides for the acquisition of HBOC by McKesson in a merger and for each share
of HBOC Common Stock to be converted into .37 of a share of common stock of
McKesson. Such agreement is subject, among other things, to regulatory approval
and approval by the stockholders of HBOC and McKesson. The common stock of
McKesson is listed on the New York Stock Exchange under the symbol "MCK."
Within the United States and Canada, McKesson is the largest wholesale
distributor of ethical and proprietary drugs, medical-surgical supplies and
health and beauty care products. McKesson is also engaged in the processing and
sale of bottled drinking water to homes and businesses and packaged water
through retail stores. The principal markets for the drug, medical-surgical
supplies and health and beauty care distribution businesses are chain and
independent drug stores, hospitals, alternate care sites, food stores and mass
merchandisers. See "Where You Can Find More Information."
On October 30, 1998, HBOC acquired all of the outstanding shares of common
stock of IMNET Systems, Inc. ("IMNET"), which provides electronic information
and document management solutions for the healthcare industry. HBOC issued or
reserved for issuance approximately 11.2 million shares of HBOC Common Stock to
IMNET stockholders and optionholders pursuant to such acquisition.
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BUSINESS OF ACCESS
Access is a leading provider of care management products and services to the
healthcare industry. Access provides its services primarily through six
telephonic care centers, which are staffed by registered nurses and other
healthcare professionals. Access' primary clients include health maintenance
organizations, preferred provider organizations, indemnity insurers, integrated
delivery systems, government agencies, self-insured employers and physician
groups. Access' objective is to measurably improve the delivery of healthcare
through dynamically integrated programs that help individuals effectively manage
their health needs. Its products and services are designed to help reform an
inefficient healthcare system in ways that benefit healthcare payors, providers
and individuals.
STOCKHOLDER PROPOSALS
If the Merger is not consummated, proposals of stockholders intended to be
presented at Access' 1998 annual meeting of stockholders must have been received
by Access by October 23, 1998 for inclusion in Access' proxy materials relating
to such meeting. All stockholder proposals that are not submitted for inclusion
in such proxy materials must be received by Access by December 6, 1998, in order
to be considered timely. In the event the Merger is consummated, there will not
be a 1998 annual meeting of stockholders of Access.
OTHER MATTERS
The management of Access knows of no other matters that may come before the
Special Meeting. However, if matters other than those referred to above should
properly come before the Special Meeting, it is the intention of 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 and certain
tax matters have been passed upon by Jones, Day, Reavis & Pogue, Atlanta,
Georgia.
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
three and nine months ended September 30, 1997 and 1998, 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 audited financial statements and schedule of Access 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
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Andersen LLP, independent public accountants, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
The consolidated financial statements of McKesson and the related financial
statement schedule incorporated in this Proxy Statement/Prospectus by reference
from McKesson's Annual Report on Form 10-K for the fiscal year ended March 31,
1998 and the consolidated financial statements of FoxMeyer Corporation
("FoxMeyer") for the year ended March 31, 1996 incorporated in this Proxy
Statement/ Prospectus by reference from McKesson's Current Report on Form 8-K/A
filed with the Commission on April 28, 1997 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports incorporated herein
by reference, (which report dated May 18, 1998 on McKesson's consolidated
financial statements expresses an unqualified opinion and which report on a
FoxMeyer's consolidated financial statements dated June 28, 1996, (March 18,
1997 as to paragraph seven of Note Q), expresses an unqualified opinion and
includes an explanatory paragraph relating to the sale of the principal assets
of FoxMeyer and its Chapter 7 bankruptcy filing). Such consolidated financial
statements and financial statement schedule have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
HBOC and Access file annual, quarterly and current reports, proxy statements
and other information with the Commission. You may read and copy any reports,
statements or other information filed by either company at the Commission's
public reference rooms in Washington, D.C., New York City and Chicago. Please
call the Commission at 1-800-SEC-0330 for further information on the public
reference rooms. The companies' filings are also available to the public from
commercial document retrieval services and at the Internet web site maintained
by the Commission at http://www.sec.gov.
HBOC filed a Registration Statement on Form S-4 to register with the
Commission the HBOC Common Stock to be issued to Access stockholders in the
Merger. This Proxy Statement/Prospectus is a part of that Registration Statement
and constitutes a prospectus of HBOC in addition to being a proxy statement of
Access for the Special Meeting. As allowed by the Commission's rules, this Proxy
Statement/ Prospectus does not contain all of the information you can find in
the Registration Statement or the exhibits to the Registration Statement. This
Proxy Statement/Prospectus summarizes some of the documents that are exhibits to
the Registration Statement, and you should refer to the exhibits for a more
complete description of the matters covered by those documents.
The Commission allows HBOC and Access to "incorporate by reference"
information into this Proxy Statement/Prospectus. This means that we may
disclose important information to you by referring you to another document filed
separately with the Commission. The information incorporated by reference is
considered to be part of this Proxy Statement/Prospectus, except for any
information modified or superseded by information in (or incorporated by
reference in) this Proxy Statement/Prospectus. This Proxy Statement/Prospectus
incorporates by reference the documents set forth below that have been
previously filed with the Commission. The documents contain important
information about our companies and their finances.
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<TABLE>
<CAPTION>
HBOC DOCUMENTS (FILE NO. 0-9900) PERIOD COVERED OR DATE FILED
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1997.
Quarterly Reports on Form 10-Q Quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998.
Current Reports on Form 8-K Filed February 10, 1998, February 12, 1998, May 19,
1998, July 27, 1998 October 5, 1998 and October 19,
1998.
Proxy Statement on Schedule 14A with regard to the Filed April 2, 1998.
description of Management, Executive Compensation and
Certain Relationships and Related Transactions
Registration Statement on Form 8-A, with regard to the Filed August 19, 1981, as amended, and February 19,
description of HBOC Common Stock and Preferred Share 1991, as amended.
Purchase Rights
<CAPTION>
ACCESS DOCUMENTS (FILE NO. 0-19758) PERIOD COVERED OR DATE FILED
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K, as amended Year ended September 30, 1997.
Quarterly Reports on Form 10-Q Quarters ended December 31, 1997, March 31, 1998 and
June 30, 1998.
Current Reports on Form 8-K Filed January 9, 1998, July 10, 1998 (as amended
September 14, 1998), August 31, 1998 and October 16,
1998.
</TABLE>
HBOC and Access are also incorporating by reference additional documents
that either company may file with the Commission between the date of this Proxy
Statement/Prospectus and the date of the Special Meeting.
HBOC has supplied all information contained or incorporated by reference in
this Proxy Statement/ Prospectus relating to HBOC, and Access has supplied all
such information relating to Access.
Certain financial and other information relating to McKesson, which has been
obtained from certain reports filed by McKesson with the Commission, is included
or incorporated in this Proxy Statement/ Prospectus to comply with certain rules
of the Commission. Although neither HBOC nor Access has the ability to verify
the information in McKesson's reports, it is accurately reproduced from them.
The reports filed by McKesson from which certain information has been
incorporated are:
<TABLE>
<CAPTION>
MCKESSON DOCUMENTS (FILE NO. 1-13252) PERIOD COVERED OR DATE FILED
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
The consolidated financial statements, and related notes Year ended March 31, 1998.
and report set forth on pages 23 through 54 of Exhibit
13 to the Annual Report on Form 10-K
The condensed consolidated financial statements and Quarter ended September 30, 1998.
related notes set forth on pages 3 through 9 of the
Quarterly Report in Form 10-Q
The consolidated financial statements and related notes Filed April 28, 1997.
and report set forth on pages numbered 1 through 21 of
Amendment No. 2 to the Current Report on Form 8-K/A
</TABLE>
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HBOC or Access will provide, without charge, a copy of any or all of their
documents incorporated by reference in this Proxy Statement/Prospectus (other
than exhibits to such documents, unless the exhibits are specifically
incorporated by reference in such documents). You may obtain documents
incorporated by reference in this Proxy Statement/Prospectus by requesting them
in writing or by telephone from the appropriate party at the following address:
<TABLE>
<S> <C>
FOR HBOC OR MCKESSON DOCUMENTS: FOR ACCESS DOCUMENTS:
HBO & Company Access Health, Inc.
301 Perimeter Center North 335 Interlocken Parkway
Atlanta, Georgia 30346 Broomfield, Colorado 80021
Attention: Monika Brown Attention: Matt Plavan
Telephone: 800-426-2411 Telephone: 303-664-6386
</TABLE>
If you would like to request documents from either company, please do so by
December 3, 1998 to receive them before the Special Meeting.
Neither HBOC nor Access has authorized anyone to give any information
regarding the solicitation of proxies or the offering of shares of HBOC Common
Stock that is different from what is contained in this Proxy
Statement/Prospectus. This Proxy Statement/Prospectus is not an offer to sell or
a solicitation of anyone to whom it would be unlawful to make an offer of
solicitation. You should not assume that the information contained in this Proxy
Statement/Prospectus is accurate as of any time after the date of this Proxy
Statement/Prospectus, and neither the mailing of this Proxy Statement/Prospectus
to Access stockholders nor the issuance of HBOC Common Stock in the Merger
should create any implication to the contrary.
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APPENDIX A
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, made this 28th day of September, 1998, by and
among HBO & COMPANY, a Delaware corporation ("Parent"); HBO & COMPANY OF
GEORGIA, a Delaware corporation (hereinafter referred to as "Purchaser"); and
ACCESS HEALTH, 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;
WHEREAS, the parties hereto intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended;
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 Access Health, 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, $.001 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 "Content" shall have the meaning set forth in Section 3.13 hereto.
1.14 "Covenants Not to Compete" shall mean the Covenants Not to Compete
referred to in Section 2.20.
1.15 "Customer Contracts" shall mean the contracts identified on Exhibit
1.15 hereto.
1.16 "Delaware Code" shall mean the Delaware General Corporation Law.
1.17 "DOL" shall mean the United States Department of Labor.
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1.18 "Effective Time" shall mean the time the Merger becomes effective, as
set forth in Section 2.1.2.
1.19 "Employee Agreements" shall mean the Employee Agreements referred to in
Section 6.12.
1.20 "Employment Agreements" shall mean the Employment Agreements referred
to in Section 2.22.
1.21 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
1.22 "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.
1.23 "ERISA Plan" shall have the meaning set forth in Section 3.16.
1.24 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.25 "Exchange Agent" shall mean the person designated by Purchaser as the
Exchange Agent pursuant to Section 2.2.1 hereof.
1.26 "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.
1.27 "Existing Option" shall have the meaning set forth in Section 2.1.7.
1.28 "401(k) Plan" shall mean the Access Health, Inc. Retirement Savings
Plan.
1.29 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust and Improvements
Act of 1976, as amended.
1.30 "Hazardous Substance" shall have the meaning set forth in Section 3.18.
1.31 "Immigration Laws" shall have the meaning set forth in Section 3.15.
1.32 "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.
1.33 "IRS" shall mean the United States Internal Revenue Service.
1.34 "Licensed Software" shall have the meaning set forth in Section
3.14.2(ii).
1.35 "Market Value" shall have the meaning set forth in Section 2.1.6(a).
1.36 "Material Adverse Effect" shall mean a material adverse effect on the
assets, rights, financial condition or results of operations of the corporation
in question and its subsidiaries, taken as a whole.
1.37 "Material Contract" shall have the meaning set forth in Section 3.12.
1.38 "Merger" shall mean the merger of the Acquired Company with and into
Purchaser, as set forth in Section 2.1.1.
1.39 "Merger Consideration" shall have the meaning set forth in Section
2.1.6(c).
1.40 "Nasdaq" shall mean the Nasdaq National Market of the Nasdaq Stock
Market, Inc.
1.41 "1998 Financial Statements" shall have the meaning set forth in Section
3.5.1.
1.42 "1995, 1996, 1997 and Interim Financial Statements" shall have the
meaning set forth in Section 3.5.1.
1.43 "1933 Act" shall mean the Securities Act of 1933, as amended.
1.44 "Owned Software" shall mean computer software programs and related
documentation used in electronic data processing in which the Acquired Company
or one of the Subsidiaries possesses sole legal
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right, title or interest except that elements that constitute Licensed Software
authorized for use by the Acquired Company or such Subsidiary therein or that
are known to the computer software industry generally shall not constitute Owned
Software.
1.45 "Parent" shall mean HBO & Company, a Delaware corporation, which is the
sole stockholder of Purchaser.
1.46 "Parent Reports" shall have the meaning set forth in Section 4.5.
1.47 "Parent Stock" shall mean the common stock, $0.05 par value per share,
of Parent.
1.48 "PBGC" shall mean the Pension Benefit Guaranty Corporation established
under Title IV of ERISA.
1.49 "Person" shall mean an individual, a trust, an estate, a partnership,
an association, a company, a corporation, a sole proprietorship, a professional
corporation or a professional association or other entity.
1.50 "Pooling Letter" shall have the meaning set forth in Section 2.4(b).
1.51 "Purchaser" shall mean HBO & Company of Georgia, a Delaware
corporation.
1.52 "Real Property" shall have the meaning set forth in Section 3.18.
1.53 "Registration Statement" shall have the meaning set forth in Section
2.3.1.
1.54 "Rule 145 Letters" shall have the meaning set forth in Section 2.4(a).
1.55 "SEC" shall mean the Securities and Exchange Commission.
1.56 "Special Meeting Date" shall mean the date on which a special meeting
of the stockholders of the Acquired Company is held at which a vote is taken to
approve the Merger.
1.57 "Stock Plans" shall mean collectively the Access Health, Inc. 1989
Incentive Stock Plan, the Access Health, Inc. 1995 Director Option Plan, the
Access Health, Inc. 1996 Supplemental Stock Plan, the Informed Access Systems,
Inc. Stock Option Plan, and the Access Health, Inc. 1998 Stock Plan (to the
extent sufficient options are not available under the Access Health, Inc. 1989
Incentive Stock Plan or 1996 Supplemental Stock Plan for the grants described on
Exhibit 2.6.1(g)).
1.58 "Subsidiaries" shall mean the subsidiaries of the Acquired Company,
which are listed on Exhibit 3.2.
1.59 "Surviving Corporation" shall have the meaning set forth in Section
2.1.1 hereof.
1.60 "Termination Fee" shall have the meaning set forth in Section 10.2.2
hereof.
1.61 "Takeover Proposal" shall have the meaning set forth in Section 2.11
hereof.
1.62 "Tax Code" shall mean the Internal Revenue Code of 1986, as amended.
1.63 "Voting Agreements" shall mean the Voting Agreements referred to in
Section 2.21.
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 the provisions set forth in
Exhibit 2.1.1 hereto, 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.
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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.
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
one and forty-five one hundredths (1.45) shares of Parent Stock, deliverable to
the holder thereof without interest on the value thereof; provided, however,
that 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 twenty (20) consecutive trading days ending on
the second trading day prior to the Special Meeting Date as reported by Nasdaq
(the "Market Value"), is greater than $30.00 per share, then the Exchange Ratio
shall be reduced to that fraction that will allow each share of Acquired Company
Stock to be converted into a fractional share of Parent Stock, which, when
multiplied by the Market Value, will equal $43.50.
(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
subsection (d) of this Section 2.1.6. (The shares of Parent Stock as described
in Section 2.1.6(a) above, and any cash in lieu of fractions thereof, receivable
by each Acquired Company stockholder as described in Section 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
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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 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.
(a) At the Effective Time, Parent shall assume the Acquired
Company's rights and obligations under each of the outstanding options 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
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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, obligations or restrictions which they
did not have immediately prior to the Effective Time or relieve the holders
thereof of any benefits, obligations or restrictions applicable to the Assumed
Options or the shares of Parent Stock obtainable upon exercise of the Assumed
Options. It is intended that Assumed Options assumed by Parent shall qualify
following the Effective Time as incentive stock options as defined in Section
422 of the Code to the extent Existing Options qualified as incentive stock
options immediately prior to the Effective Time (after giving effect to any
accelerated vesting caused by the Merger) and the provisions of this Section
2.1.7 shall be applied consistent with such intent. To the extent necessary, if
any, the terms and conditions of Assumed Options covered by the preceding
sentence shall be adjusted in order to comply with Section 424(a) of the Code.
Parent will reserve sufficient shares of Parent Common Stock for issuance under
this Section 2.1.7.
(b) At the Effective Time, Parent shall assume the Acquired
Company's rights and obligations under the Access Health, Inc. 1991 Employee
Stock Purchase Plan, and each outstanding right to purchase stock under such
plan shall be adjusted in the manner provided for the subsection (a) hereinabove
in respect of Assumed Options.
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 reasonably requested by Purchaser, 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 Board of Directors
of the Acquired Company shall adopt appropriate resolutions and shall cause
the Acquired Company to 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
Access Health, Inc. Profit Sharing and Savings Plan (the "Purchaser Plan")
and to effect a direct
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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 SunTrust Bank, Atlanta or another bank or trust company reasonably
acceptable to the Acquired 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. As soon as reasonably practicable 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
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 reasonable 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
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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 on the Special Meeting Date, 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 promptly
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 information contained in the Registration
Statement insofar as it constitutes or 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 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, Arthur
Andersen LLP 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, (i) addressed to the
Acquired Company containing its concurrence with the conclusion of the Acquired
Company's management that no conditions exist with respect to the Acquired
Company that would preclude the Acquired Company from being a party to a
business combination to be accounted for 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) addressed to the Acquired Company and Parent
containing 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 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(ii).
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 on the Special
Meeting Date, 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 Acquired Company Information or those portions of the Registration
Statement required to contain Acquired
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Company Information to the extent they do not contain such 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
promptly notify the Acquired Company and use its reasonable best efforts to
amend or supplement appropriately the Registration Statement and the proxy
statement/prospectus contained therein. 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. Each of the
Acquired Company and Parent will respond to any comments of the SEC and use its
respective reasonable best efforts to have the Registration Statement declared
effective under the 1933 Act as promptly as reasonably practicable after such
filing. Each of Parent and the Acquired Company will notify the other promptly
upon receipt of any comments from the SEC or its staff or of any request by the
SEC or its staff for amendments or supplements to the Registration Statement or
the proxy statement/prospectus included therein or for additional information
and will supply the other with copies of all correspondence between such party
or any of its representatives on the one hand, and the SEC, or its staff on the
other hand, with respect to the Registration Statement including the proxy
statement/prospectus included therein, or any other filing with the SEC required
pursuant to the transactions contemplated hereby.
2.3.6. Parent shall use all reasonable best efforts to take such
action, if any, as may be necessary to satisfy the requirements of Rule 144(c)
under the 1933 Act 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. As soon as reasonably practicable, but not later than five (5)
days following the Closing Date, Parent shall use all reasonable best 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
reasonably requested by Parent in connection therewith prior to the Closing
Date.
2.4 AFFILIATES.
(a) Contemporaneously herewith, the Acquired Company has delivered
to Purchaser originals of a written agreement in the form attached hereto as
Exhibit 2.4(A) ("Rule 145 Letters"), executed by each person that is an
"affiliate" of the Acquired Company as of the date hereof. In the event that any
other person becomes an "affiliate" of the Acquired Company under the 1933 Act
prior to the date of the filing of the Registration Statement, or after such
filing, the Acquired Company shall use its reasonable best efforts to cause such
person to provide a Rule 145 Letter to Parent prior to the filing of the
Registration statement or at the Closing, as applicable.
(b) Contemporaneously herewith, the Acquired Company has delivered
to Purchaser originals of a written agreement in the form attached hereto as
Exhibit 2.4(B) ("Pooling Letters"), executed by each person that is an
"affiliate" of the Acquired Company under the 1933 Act as of the date hereof. In
the event that any other person becomes an "affiliate" of the Acquired Company
prior to the date of the filing of the Registration Statement, or after such
filing, the Acquired Company shall use its reasonable best efforts to cause such
person to provide a Pooling Letter to Parent prior to the filing of the
Registration Statement or at the Closing, as applicable.
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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:
(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) use its reasonable best efforts consistent with practices
necessary to maintain an on-going business to 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) 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 care center agreements, license agreements and
support and maintenance agreements and other agreements with customers in the
ordinary course of business on terms and prices generally 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 disclosed on Exhibit 2.6.1(g) hereto, not grant any
stock option, award under the Stock Plans, 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, and not commence a new offering period under the Access Health, Inc.
1991 Employee Stock Purchase Plan after the date hereof;
(h) except as disclosed on Exhibit 2.6.1(h) hereto, (i) not adopt
any new Benefit Plan or amend, supplement, or accelerate the timing of payments
or vesting under any existing Benefit Plan, and (ii) not make any contribution
to or distribution from any employee benefit plan, pension plan, stock bonus
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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, except as required by GAAP and after
prior notice to Purchaser;
(j) not issue any notes, bonds or other debt security, or create,
incur, assume or guarantee any indebtedness for borrowed money;
(k) except as disclosed on Exhibit 2.6.1(k), not issue any shares of
Acquired Company Stock or of any Subsidiary other than shares of Acquired
Company Stock issuable upon exercise of outstanding options pursuant to the
Stock Plans and as required by the express terms of the Access Health, Inc. 1991
Employee Stock Purchase Plan;
(l) except to the extent set forth on Exhibit 2.6.1(g) hereto, not
alter in any manner the terms, conditions or dates of vesting or exercise of any
awards under the Stock Plans, including, without limitation, any options to
purchase or other rights with respect to Acquired Company Stock;
(m) not effect any acquisition of any business or portion thereof or
of any Person, by purchase of stock, assets or otherwise (which shall not be
deemed to include purchases of supplies, equipment and other personal property
in the ordinary course of business);
(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; and
(o) not amend, terminate or modify the Covenants Not to Compete,
Voting Agreements or Employment Agreements referred to in Sections 2.20, 2.21
and 2.22, respectively.
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
(other than immaterial tax returns) required to be timely filed before the
Effective Time to be timely and accurately filed (other than immaterial
inaccuracies) 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 fifteen
(15) days prior to the date they must be filed.
2.8 EXAMINATION OF PROPERTY AND RECORDS; CONFIDENTIALITY OF INFORMATION.
2.8.1. Between the date of this Agreement and the Effective Time, the
Acquired Company shall, upon reasonable prior notice, allow Purchaser, its
counsel and other representatives full access during normal business hours 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 reasonable 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
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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. In addition, the Parent and the
Acquired Company are parties to that certain Confidentiality Agreement dated
August 27, 1998 which the parties hereto acknowledge and affirm shall remain in
full force and effect until the Closing Date.
2.9 CONSENTS AND APPROVALS. Except to the extent set forth on Exhibit 2.9,
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 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, 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 monthly audited (if any) 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, promptly after each is available,
including, without limitation, the 1998 Financial Statements.
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 would reasonably be expected
to lead to, any Takeover Proposal (as hereafter defined). 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. 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 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
consultation and review with its outside counsel, that such action would be
required under applicable law in the exercise of its fiduciary duties. The
Acquired Company will promptly, but in no event later than one (1) business day
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after receipt thereof, 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 any negotiations or
discussions initiated prior to the date hereof or terminated after the date
hereof are sought to be continued with the Acquired Company and shall promptly,
but in any event within one (1) business day 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. Nothing contained in this Agreement shall
prohibit the Acquired Company from taking and disclosing to its stockholders a
position contemplated by rules 14d-9 and 14e-2(a) promulgated under the Exchange
Act.
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 promptly 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, and the party receiving the request shall use its reasonable
best efforts to comply with such request as soon as possible. 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
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. It is intended by the parties hereto that the Merger
shall constitute a reorganization within the meaning of Section 368 of the Tax
Code, and each of the parties hereto will use its best efforts to cause the
Merger to be treated as such a reorganization. The parties hereto adopt this
Agreement as a "plan of reorganization" within the meaning of Section 1.368-2(g)
and 1.368-3(a) of the United States Income Tax Regulations. 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) of the Tax Code and similar state laws.
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 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). Purchaser shall cause to be
maintained in effect for twelve (12) months following the Closing Date the
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 ten percent (110%) of the annual premiums for such
coverage as of the date hereof; 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).
2.15 SUBSIDIARIES. The parties hereto agree that, except to the extent set
forth on Exhibit 2.15 hereto, 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.
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2.16 CERTAIN REPORTS. Subject to Exhibit 2.16, 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 first full calendar month following Closing, as promptly as practicable
after the end of such month, taking into account the parties' intention to have
no unnecessary delay in such publication.
2.17 POOLING OF INTERESTS; TAX FREE REORGANIZATION. Each of the Acquired
Company, Purchaser and Parent agrees (a) not to take any action that would
adversely affect the ability of Parent to account for the Merger as a "pooling
of interests" and (b) not to take any action either prior to or after the
Effective Time that would cause the Merger to fail to qualify as a
"reorganization" under Section 368(a) of the Code. The Acquired Company,
Purchaser and Parent each agrees to provide Arthur Andersen LLP such letters as
may be reasonably requested by it with respect to the letters referred to in
Section 2.3.2, and to provide to each other's counsel representation letters in
the forms attached to Exhibits 7.4 and 6.5, respectively.
2.18 NASDAQ LISTING. Parent agrees to cause to be authorized for listing
on Nasdaq prior to the Effective Time the shares of Parent Common Stock
issuable, and those required to be reserved for issuance, in connection
herewith.
2.19 CERTAIN MATTERS. Purchaser shall promptly advise the Acquired Company
in writing of any matters arising or of which Purchaser 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 by Purchaser in this Agreement or the
Exhibits hereto.
2.20 COVENANTS NOT TO COMPETE. Contemporaneously herewith, the Acquired
Company shall deliver to Purchaser originals of the Covenants Not to Compete in
the form of Exhibit 2.20(A) hereto (the "Covenants Not to Compete"), executed by
each of the individuals listed on Exhibit 2.20(B) hereto.
2.21 VOTING AGREEMENTS. Contemporaneously herewith, the Acquired Company
shall deliver to Purchaser originals of the Voting Agreements in the form of
Exhibit 2.21(A) hereto (the "Voting Agreements"), executed by each of the
Persons listed on Exhibit 2.21(B) hereto.
2.22 EMPLOYMENT AGREEMENTS. Contemporaneously herewith, the Acquired
Company shall deliver to Purchaser originals of the Employment Agreements in the
form of Exhibit 2.22(A) hereto (the "Employment Agreements"), executed by each
of the individuals listed on Exhibit 2.22(B) hereto.
III. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANY.
The Acquired Company represents and warrants to Purchaser and Parent,
subject to the provisions of Section 3.26, 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.
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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, to the extent required, 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 Merrill Lynch & Co., its financial advisors, 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 eighty million (80,000,000) shares of stock, of which
seventy-five million (75,000,000) shares are designated common stock, $.001 par
value per share, and five million (5,000,000) shares are designated preferred
stock, $.001 par value per share. Of the total authorized capital stock of the
Acquired Company, as of September 22, 1998, twenty-three million six hundred
twenty-six thousand one hundred fifty-one (23,626,151) shares of common stock
were issued and outstanding, no shares of common stock were held in the Acquired
Company's treasury and no shares of preferred stock were issued and outstanding
or held in the Acquired Company's treasury. As of September 22, 1998, there were
options outstanding under the Stock Plans entitling the optionees thereunder
upon valid exercise to acquire in the aggregate 3,123,505 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 and the Access Health,
Inc. 1991 Employee Stock Purchase Plan, 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
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awards outstanding under the Stock Plans or any other Benefit Plan as of
September 22, 1998, and lists in respect of 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. Except as contemplated by Section 2.21 hereof, 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. Since September 22,
1998, the Acquired Company has not issued or authorized the issuance of any
stock options, stock appreciation rights, phantom stock awards, performance
share unit awards, equity participation rights, or similar awards, or any
warrants, calls or commitments to issue additional shares of capital stock,
except as contemplated by Exhibit 2.6.1(g).
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
September 30, 1995, September 30, 1996, September 30, 1997, and unaudited
consolidated balance sheet as of June 30, 1998, and the related consolidated
statements of income, stockholders' equity and cash flows for the years and nine
months then ended, together (except in the case of the financial statements
dated June 30, 1998) with the reports of the Acquired Company's auditors thereon
(respectively, the "1995, 1996, 1997 and Interim Financial Statements"). As soon
as they are available, the Acquired Company will attach as part of Exhibit 3.5.1
a true, correct and complete copies of the Acquired Company's audited
consolidated balance sheet as of September 30, 1998, and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended, together with the report of Arthur Andersen LLP thereon (the
"1998 Financial Statements"). The 1995, 1996, and 1997 Financial Statements are
and the 1998 Financial Statements will be, complete, have been, and in the case
of the 1998 Financial Statements will have been, prepared in accordance with
generally accepted accounting principles, consistently applied, fairly present,
and in the case of the 1998 Financial Statements will fairly present, in all
material respects the financial condition of the Acquired Company and the
Subsidiaries as of the respective dates thereof, and disclose, and in the case
of the 1998 Financial Statements will 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
its tax returns by any appropriate authority which would reasonably be expected
to have a Material Adverse Effect, except for (a) the liabilities and
obligations of the Acquired Company and the Subsidiaries that are disclosed or
reserved against in the Interim Financial Statements or Exhibit 3.5.2 hereto, to
the extent and in the amounts so disclosed or reserved against, and (b)
liabilities incurred or accrued in the ordinary course of business since June
30, 1998 and liabilities incurred in connection with the transactions referred
to herein.
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3.5.3. Except as disclosed in the Interim Financial Statements or
Exhibit 3.5.2, neither the Acquired Company nor any Subsidiary is in default
(other than immaterial defaults) with respect to any liabilities or obligations
(other than immaterial liabilities or obligations), and all such liabilities or
obligations shown or reflected in the Interim Financial Statements or Exhibit
3.5.2 and such liabilities incurred or accrued subsequent to June 30, 1998 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 in
all material respects 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, 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. 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 that individually or in the aggregate would have a Material Adverse Effect.
No assessments or notices of deficiency or other communications have been
received by the Acquired Company, nor to the knowledge of the Acquired Company
have any been threatened, with respect to any such tax return that has not been
paid, discharged or fully reserved in the Interim Financial Statements, and no
amendments or applications for refund have been filed or are planned with
respect to any such return. 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 other than an extension resulting from the filing of a tax return after
its original due date in the ordinary course of business, and neither the
Acquired Company nor any Subsidiary has filed any election under Section 341(f)
of the Tax Code. Neither the Acquired Company nor any Subsidiary has been a
member of an affiliated group of corporations filing a consolidated federal
income tax return (other than a group the common parent of which was the
Acquired Company).
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 reimbursement 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 all material respects 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 in all material respects 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 in all material respects 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 September 30, 1994,
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, 1997 and Interim Financial Statements include,
and the 1998 Financial Statements and 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 as
reserved against in the Interim Financial Statements (to the extent and in the
amounts so disclosed or reserved against) and except as reflected in the Company
Financials and except for liens for taxes not yet due and payable and such liens
or other imperfections of title and encumbrances, if any, which are immaterial
in character, amount or extent, and which do not materially detract from the
value, or materially interfere with the present use, of the property subject
thereto or affected thereby. 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. Neither the Acquired Company nor any Subsidiary has received any
notice of violation (other than immaterial violations) 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 will reflect actual
transactions and have arisen in all material respects in the ordinary course of
business.
3.8 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. Except as set forth on
Exhibit 3.8(A) 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, and except as set forth on Exhibit 3.8(B) hereto
the consummation of the transactions described in Exhibit 2.1.1 hereto will not
(i) 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 (ii) 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, applicable Blue Sky
laws and applicable merger statutes, no consent, approval, order or
authorization of, or registration, declaration or filing (other than immaterial
consents, approvals, orders, authorizations, registrations, declarations or
filings) 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, 1998 until the date hereof, 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 payable by the Acquired Company, except for normal increases in
compensation or benefits consistent in amounts and timing with historical
practices; (iii) any change in accounting methods not
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required by GAAP; 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, to the knowledge of
the Acquired Company, 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. None of the matters disclosed on Exhibit
3.10, singly or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Acquired Company.
3.11 LICENSES AND PERMITS; COMPLIANCE WITH LAW.
3.11.1. 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 immaterial
licenses, certificates, permits, franchises and rights. The Acquired Company and
the Subsidiaries hold all registrations, approvals, licenses, permits or other
authorizations from the Food and Drug Administration and any other applicable
federal, state or other public authority necessary to manufacture, license and
sell their products, except for immaterial registrations, approvals, licenses,
permits or authorizations. Except as noted in Exhibit 3.11, 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, except for immaterial noncompliance.
Further, except as set forth on Exhibit 3.11, the Acquired Company and the
Subsidiaries are not presently charged with, or, to the Acquired Company's
knowledge, 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. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the termination of any licenses,
certificates, permits, franchises or rights referred to in this Section 3.11.1
which are 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, other than immaterial licenses, certificates, permits,
franchises and rights.
3.11.2. Without limiting the generality of the foregoing, in
providing services on behalf of the Acquired Company or any Subsidiary, each
physician, nurse or other health care professional who is an employee of or
independent contractor to the Acquired Company or any Subsidiary has obtained
and maintained all licenses, registrations, certifications, permits and
approvals necessary to provide such services in compliance with, and has
provided such services in compliance with, all applicable federal, state and
local laws, including without limitation all professional practice acts and
similar laws relating to the practice of medicine or the provision of
professional health care services, other than immaterial noncompliance.
3.11.3. The Acquired Company and each of the Subsidiaries is in
compliance with, and has made all filings required pursuant to, all federal,
state and local laws, ordinances, regulations and orders, including, without
limitation, compliance with the federal Medicare and Medicaid statutes, 42
U.S.C. SectionSection 1320a-7, 1320a-7a and 1320a-7b and the regulations
promulgated thereunder, except for immaterial noncompliance or failure to make
immaterial filings. Neither the Acquired Company nor any of the Subsidiaries has
(A) solicited, offered, paid or received any remuneration or other inducements,
directly or
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indirectly, to or from any Person, including without limitation any health care
provider, health benefit plan, health maintenance organization, preferred
provider organization or managed care organization, in violation of federal or
state law relating to referrals for health care items or services, including,
without limitation, the federal Medicare and Medicaid statutes, 42 U.S.C.
SectionSection 1320a-7, 1320a-7a and 1320a-7b and the regulations promulgated
thereunder, other than immaterial violations; and (B) neither the Acquired
Company nor any of the Subsidiaries has any relationship with a physician or any
other person in violation of federal or state self-referral laws, including
without limitation 42 U.S.C. Section 1395nn and Section 1395q and the
regulations promulgated thereunder other than immaterial violations.
3.11.4. Neither the Acquired Company nor any Subsidiary, nor to the
Acquired Company's knowledge any employee of or independent contractor to the
Acquired Company or any Subsidiary, is presently charged in writing with, or, to
the Acquired Company's knowledge, under any governmental investigation with
respect to, and, to the knowledge of the Company, there is no reasonable basis
or grounds for, any charge, claim, investigation, suit, action, proceeding or
any actual or alleged violation of any law, statute, rule or regulation referred
to in Sections 3.11.1 through 3.11.3 above, including without limitation any
professional practice act.
3.12 CONTRACTS, AGREEMENTS AND INSTRUMENTS GENERALLY. Exhibit 3.12 hereto
consists of a true and complete list as of the date hereof 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: requires payments or provides for receipts in excess
of $[250,000] per year, except for Customer Contracts. Exhibit 3.12 also
identifies (identified by title, date and parties)(whether oral or written) as
of the date hereof all of the following to which the Acquired Company or any of
the Subsidiaries is a party:
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 constitute Customer Contracts;
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 $20,000 per month
and all maintenance or service agreements relating to any real or personal
property with payments equal to or greater than $20,000 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 involving payments in excess of $75,000 per year;
3.12.5. employment contracts (other than offer letters providing for
at-will employment), contracts with independent contractors, standard form
contracts such as employee nondisclosure agreements, and contracts providing for
severance, termination, parachute, or other payments (whether due to a change in
control, termination or otherwise). Substantially all employees of the Acquired
Company and the Subsidiaries have executed employee non-disclosure agreements in
the form attached hereto as part of Exhibit 3.12;
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,
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subordination, conditional sale, lease-purchase or otherwise providing for
payments in excess of $20,000 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 relating to 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, to the knowledge of the Acquired
Company, 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, other than immaterial breaches or defaults.
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 which would have a Material Adverse Effect.
3.13 CUSTOMER CONTRACTS. Each Customer Contract conforms substantially to
one of the forms attached hereto as Exhibit 3.13 (the "Customer Contract
Forms"). Exhibit 3.13 also includes copies of standard forms employed by the
Acquired Company and the Subsidiaries in respect of current customers the
contracts for which do not constitute "Customer Contracts" by reason of the
definition therefor in Section 1.14. Neither the Acquired Company nor, to the
knowledge of the Acquired Company, any Subsidiary has received any payment from
any contracting party in connection with or as an inducement for entering into
any Customer Contract within the last two (2) years, 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. With
respect to each Customer Contract, (i) each customer to which 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 and 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, none of the Customer Contracts which involves the licensing or
maintenance of Owned Software or content proprietary to the Acquired Company or
any Subsidiary ("Content") contains any of the following deviations from the
Customer Contract Forms:
3.13.1. any term for acceptance of any Owned Software or Content that
fails to specify a period of time or date for acceptance or standards applicable
thereto;
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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 or Content 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 or Content;
3.13.6. any provision granting an ownership interest (other than a
license) in any Owned Software or Content to a customer;
3.13.7. any license for use by more than a single entity of any Owned
Software or Content 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;
3.13.10. any commitment or warranty made or given by the Vendor to
design or modify any Owned Software or Content 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
as of the date hereof of all trademarks, trade names, service marks, service
names, and brand names, other than immaterial 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) owned by
the Acquired Company; and (ii) 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). 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, 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 written
notice of any violation of, and to the knowledge of the Acquired Company 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.
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3.14.2. (i) Exhibit 3.14.2(i) contains a complete and accurate list of
all Owned Software (other than immaterial 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 such 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
delivered to any other parties or otherwise disclosed in a manner that would
materially and adversely affect the Acquired Company's proprietary rights
therein, except as set forth on Exhibit 3.14.2(i), and except pursuant to
Customer Contracts and other contracts requiring such other parties to keep the
Owned Software confidential or license agreements providing appropriate
restrictions on use of the Owned Software. For purposes of the preceding
sentence, marketing materials that describe the Owned Software and its functions
in general shall not be deemed a disclosure of the Owned Software. 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
as of the date hereof of all software (other than commercially available
over-the-counter "shrink-wrap" software and immaterial 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. 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 which the Licensed Software is licensed to the Acquired Company or
any Subsidiary. The Acquired Company and each of the Subsidiaries are in
compliance with all applicable provisions of such agreements, except for
immaterial noncompliance. 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.
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 other than
immaterial software (collectively, the "Acquired Company Software"). Exhibit
3.14.2(iii) sets forth a list as of the date hereof 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. All such
Persons have executed an agreement providing that the Acquired Company or a
Subsidiary, as the case may be, has the exclusive ownership right to all
inventions, discoveries, improvements and other work product conceived,
developed or produced in connection with the programming services provided by
such Persons. To the Acquired Company's knowledge, 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, and, to the
knowledge of the Acquired Company, no other person or entity is infringing any
intellectual property rights of the Acquired Company or any Subsidiary with
respect to the Acquired Company Software.
3.14.2 (iv) Exhibit 3.14.2(iv)(a) lists and separately identifies all
material agreements as of the date hereof 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 material
agreements as of the date hereof 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
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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, other than immaterial
actions or failures.
3.14.2 (vi) The Owned Software and Licensed Software (a) includes Year
2000 date conversion and capabilities including, but not limited to: date data
century recognition; calculations which accommodate same century and
multi-century formulas and date values; correct sort ordering; and date data
interface values that reflect the century; (b) automatically compensates for and
manages and manipulates data involving dates, including single century formulas
and multi-century formulas, and will not cause an abnormal abend or abort within
the application or result in the generation of incorrect values or invalid
outputs involving such date; (c) provides that all date related user interface
functionalities and data fields include the indication of the correct century;
(d) provides that all date related system to system or application to
application data interface functionalities will include the indication of the
correct century; and (e) will continue to comply with clauses (a) through (d)
above. All date processing by Owned Software and Licensed Software will include
four digit year format and recognize and correctly process dates for leap years.
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 3.15sets
forth a true, correct and complete list as of the date hereof of outstanding
employer loans or advances from the Acquired Company and each Subsidiary to
their respective employees other than commission or expense advances consistent
with historical practices. 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").
3.16 BENEFIT PLANS.
3.16.1. Exhibit 3.16 lists as of the date hereof every pension,
retirement, profit-sharing, deferred compensation, stock option, stock award,
employee stock ownership, severance pay, vacation, bonus or other incentive
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
providing for payment upon or in connection with termination of employment;
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 or previously adopted, maintained,
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" as
defined in Section 3(2) of ERISA, 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
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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. Prior
to or contemporaneous with the delivery of the Exhibits to this Agreement, the
Acquired Company has delivered a true and complete copy of each material 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, together with the annual report (Form 5500 Series) for the two most
recent plan years for such 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, other
than immaterial liability. 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 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 as of the date hereof 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, except to the extent that
such disqualification could be avoided through the payment of monetary sanctions
and other corrective costs which (in the aggregate with respect to all Qualified
Plans) would be immaterial. 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.
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3.16.8. As of June 30, 1998, 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 Interim Financial Statements, other than immaterial liabilities.
3.16.9. The Acquired Company does not maintain any Benefit Plan
providing deferred or stock based compensation that is not reflected in the
Interim Financial Statements. All deferred compensation plans or arrangements
will terminate upon the effectiveness of the Merger.
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. 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).
3.17 CUSTOMERS. None of the Acquired Company and the Subsidiaries has
received any written notice from, or has any knowledge that, any customer of the
Acquired Company or any Subsidiary as of January 1, 1998 or any date subsequent
thereto that is party to a Customer Contract has taken or will take any steps
that could reasonably be expected to 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 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; or (vii) 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, except for immaterial noncompliance.
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, other than
the lawful handling, treatment, storage or disposal of immaterial amounts of
Hazardous Substances in the ordinary course of business. 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
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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, other than immaterial violations. Except as
set forth in Exhibit 3.18, there are no actions, suits, or to the knowledge of
the Acquired Company, any claims, 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.
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.
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. The Acquired Company
believes 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 January 1,
1997, 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. No officer or director of the Acquired Company or
any Subsidiary or, to the knowledge of the Acquired Company, any member of the
immediate family of such officer or director, any affiliate of the Acquired
Company or member of the immediate family of any such affiliate, or any
stockholder owning greater than a five-percent (5%) interest in the Acquired
Company, possesses, directly or indirectly, any beneficial interest in (except
for an immaterial interest), 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 in
an immaterial respect).
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 September 30, 1997,
including, without limitation, (a) the Acquired Company's Annual Report on Form
10-K for the year ended September 30, 1997, including all documents incorporated
therein, (b) the Acquired Company's Quarterly Reports on Form 10-Q for the
quarters ended December 31, 1997, March 31, 1998 and June 30, 1998, and (c) all
Reports of the Acquired Company on Form
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8-K since June 30, 1998 (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 DISCLOSURE. 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 (i) contains, or will
at the time it is furnished contain, any untrue statement of any material fact
or (ii) omits or omit to state any material fact necessary to make the
statements herein or therein not false or misleading which omission is known or
should be known by the Acquired Company. 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.
3.24 NO SPECIAL STOCKHOLDER RIGHTS. Except as set forth on Exhibit 3.24,
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).
3.25 RIGHTS AGREEMENT. The Acquired Company has taken all action
(including, if required, redeeming all of the outstanding preferred stock
purchase rights issued pursuant to the Acquired Company's Rights Agreement or
amending the Acquired Company's Rights Agreement) so that the entering into of
this Agreement and the consummation of Merger, and the other transactions
contemplated hereby, do not and will not result in the grant of any rights to
any Person under the Acquired Company's Rights Agreement or enable or require
the rights thereunder to be exercised, distributed or triggered.
3.26 EXHIBITS. The individual representations and warranties in this
Article III are further subject to the exceptions set forth in the Exhibits
hereto to the extent that exception specifically identifies the particular
representation and warranty to which the exception is related.
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. Each of the Purchaser and Parent is a
corporation duly organized, validly existing and is in good standing under the
laws of the State of Delaware.
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). 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,
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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.
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, except as set forth on Exhibit 4.3, violate or constitute an
occurrence of default under any provision of, or 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, and as set forth on Exhibit 4.3, 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
December 31, 1997, including, without limitation, (a) Parent's Annual Report on
Form 10-K for the year ended December 31, 1997, including all documents
incorporated therein, (b) Parent's Quarterly Report on Form 10-Q for the
quarters ended March 31, 1998 and June 30, 1998, and (c) any Reports of Parent
on Form 8-K since June 30, 1998 (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, results of
operations, business, assets or properties 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 1,001,000,000 shares of stock, of which 1,000,000,000 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 June 30, 1998, four hundred thirty-seven million seven hundred
seventy-six thousand one hundred twenty-five (437,776,125) shares were issued
and outstanding and no shares were held in the Parent's treasury. Of the total
authorized Preferred Stock, no shares have been issued. As of June 30, 1998,
there were options outstanding entitling the optionees thereunder, to acquire in
the aggregate approximately twenty-nine million one hundred ninety thousand four
hundred seventy-four (29,190,474) shares of the Parent Stock. None of the
capital stock of the Parent is entitled to or subject to preemptive rights.
4.7 POOLING OF INTERESTS. Parent and Purchaser are not aware of any facts
or circumstances in respect of either of them or their accounting procedures
which would have the effect of precluding accounting for the transactions
contemplated hereby as a "pooling of interests."
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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 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, (i) as to which a temporary restraining order,
preliminary injunction or other injunctive relief that result in any of the
consequences referred to in clauses (i) through (iii) of Section 5.1 above has
been issued or granted which remains then in effect, or (ii) that would
reasonably be expected to result in any of the consequences referred to in
clauses (i) through (iii) of Section 5.1 above and which would reasonably be
expected to have a Material Adverse Effect on the Acquired Company.
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.
5.6 FAIRNESS OPINION. The Acquired Company shall have received an opinion
from Merrill Lynch & Co., its financial advisor, dated as of the date of the
mailing of the proxy statement/prospectus included within the Registration
Statement confirming the opinion referred to in Section 3.2.3 hereof.
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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 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 PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS OF ACQUIRED
COMPANY. The Acquired Company shall have performed and observed all
covenants and agreements contained in this Agreement required to be
performed or observed at or before the Closing Date, and each of the
representations and warranties of the Acquired Company contained in this
Agreement (except as expressly contemplated by this Agreement), 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, except for those representations and
warranties which address matters only as of a specific date which shall have
been true and correct as of such date, in each case as if none of such
representations and warranties contained any qualifications as to
materiality, immateriality 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,
warranties, covenants and agreements, after giving effect to the foregoing,
do not individually or in the aggregate constitute a Material Adverse Effect
on the Acquired Company; PROVIDED FURTHER, HOWEVER, that the foregoing
proviso as it pertains to covenants or agreements of the Acquired Company
shall not apply with respect to (x) actions done with the actual prior
knowledge of the Board of Directors or any executive officer of the Acquired
Company (other than a breach of Section 2.6.1(n) or an action which results
in the breach of any other covenant or agreement of the Acquired Company in
an immaterial respect), or (y) performance of covenants set forth in
Sections 2.6.1(f), 2.6.1(g), 2.6.1(h)(ii), 2.6.1(k) and 2.6.1(l) hereof.
6.2 NO MATERIAL ADVERSE CHANGE. 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, except for the matters specifically disclosed on Exhibit
6.2.
6.3 CERTIFICATE. Purchaser shall have received a certificate of the
President of the Acquired Company, dated as of the Closing Date, certifying
as to the matters set forth in Sections 6.1 through 6.2 above.
6.4 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.
6.5 TAX OPINION. Purchaser, Parent and Acquired Company for its own
benefit and for the benefit of its shareholders shall have received an
opinion from counsel of Purchaser and Parent, 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 (or,
alternatively, the transaction or transactions occurring pursuant to Exhibit
2.1.1, but only, in the event the Second Merger is consummated, if the IRS
Ruling is obtained and the Second Merger occurs as described in and in
accordance with the terms and conditions of such IRS Ruling) will qualify as
a reorganization pursuant to Section 368(a) of the Tax Code, which opinion
shall be substantially in the form of Exhibit 6.5 hereto. This opinion will
be based on certain representations of Purchaser, Parent and
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Acquired Company. Purchaser, Parent and Acquired Company agree to provide to
counsel to Purchaser and Parent reasonable representations that are
requested by counsel.
6.6 AFFILIATES AND PRINCIPAL STOCKHOLDERS. Purchaser and Parent shall
have received the Pooling Letters from the persons and at the times
subsequent to the date hereof specified in Section 2.4.
6.7 ADDITIONAL INSTRUMENTS. All consents, waivers and approvals
described in Exhibit 6.7 shall have been obtained and be reasonably
satisfactory in form and substance to Parent and Purchaser and their
counsel.
6.8 ACCOUNTANTS' POOLING LETTERS. Parent shall have received letters
from 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.
6.9 ACCOUNTANT'S COMFORT LETTERS. Purchaser and Parent shall have
received letters from Arthur Andersen LLP 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.
6.10 FEE LIMITATION. Except as provided on Exhibit 6.10(A), 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 Merrill Lynch & Co.,
which shall be consistent with the engagement letter dated September 15,
1998, attached hereto as Exhibit 6.10(B).
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 PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS OF PURCHASER AND
PARENT. Purchaser and Parent shall have performed and observed all
covenants and agreements contained in this Agreement required to be
performed or observed at or before the Closing Date, and each of the
representations and warranties made by Purchaser and Parent in this
Agreement (except as expressly contemplated by this Agreement), 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, except for those representations and warranties which address
matters only as of a specific date which shall have been true and correct as
of such date, in each case as if none of such representations and warranties
contained any qualifications as to materiality, immateriality or the absence
of Material Adverse Effect; PROVIDED, HOWEVER, that notwithstanding the
foregoing, this conditions shall be deemed to be satisfied if all breaches
of such representations, warranties, covenants and agreement, after giving
effect to the foregoing, do not individually on in the aggregate constitute
a Material Adverse Effect on the Purchaser; provided further, however, that
the foregoing proviso as it pertains to covenants or
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agreements of Parent and Purchaser shall not apply with respect to actions
done with the actual knowledge of the Board of Directors or any executive
officer of Parent or Purchaser (other than an action which results in a
breach of a covenant or agreement of Parent or Purchaser in an immaterial
respect).
7.2 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 Section 7.1
above.
7.3 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.
7.4 TAX OPINION. Purchaser, Parent and Acquired Company for its own
benefit and for the benefit of its stockholders shall have received an
opinion from counsel of Acquired Company, 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 (or,
alternatively, the transaction or transactions occurring pursuant to Exhibit
2.1.1, but only, in the event the Second Merger is consummated, if the IRS
Ruling is obtained and the Second Merger occurs as described in and in
accordance with the terms and conditions of such IRS Ruling) will qualify as
a reorganization pursuant to Section 368(a) of the Tax Code, which opinion
shall be substantially in the form of Exhibit 7.4 hereto. This opinion will
be based on certain representations of Purchaser, Parent and Acquired
Company. Purchaser, Parent and Acquired Company agree to provide the counsel
to Acquired Company reasonable representations that are requested by
counsel.
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 certificate described in Section 6.3 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 and any other
jurisdiction that is set forth in Exhibit 3.1 hereto;
(e) certified copies of resolutions of the Board of Directors and
stockholders of the Acquired Company approving the transactions set
forth in this Agreement, 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.
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(f) certificates of incumbency for the officers of the Acquired
Company;
(g) resignations of each trustee of each Benefit Plan;
(h) Certificate of Merger 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
in Section 6.4;
(j) the Rule 145 Letters and Pooling Letters described in Section
2.4;
(k) the letters described in Section 2.3.2 hereof;
(l) the letters from Arthur Andersen LLP to be delivered by the
Closing Date as described in Section 6.8; and
(m) 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 7.2;
(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 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 7.3; 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.
8.2.3. The deliveries described in Sections 8.2.1 and 8.2.2 above
shall not be deemed to be a condition precedent to Purchaser's or the Acquired
Company's obligation to close, except to the extent otherwise encompassed in the
conditions set forth in Articles V, VI and VII hereof.
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, 2.3.7, 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
and Employment Agreements) 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
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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 15, 1999, 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, or if the condition set forth in Section 6.7 hereof has not
been fulfilled or waived by Purchaser and Parent unless such fulfillment has
been frustrated or made impossible by any act or failure to act of it or the
Subsidiaries (except if such act is specifically contemplated and permitted by
this Agreement);
10.1.4. By Purchaser after January 15, 1999, 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 waived, unless such fulfillment
has been frustrated or made impossible by any act or failure to act of Purchaser
or Parent (except if such act is specifically contemplated and permitted by this
Agreement);
10.1.5. By the Board of Directors of the Acquired Company if in the
exercise of its fiduciary duties to the Acquired Company's stockholders imposed
by law and in accordance with and not in contravention of the provisions of
Section 2.11, the Board of Directors of the Acquired Company decides that such
termination is required; and
10.1.6. By the Board of Directors of the Acquired Company, if the
Market Value of the Parent Stock is less than $21.00 per share.
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, subject to the
provisions of Section 10.2.2. 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, or by the Parent, Purchaser or
Acquired Company in accordance with Section 10.1.3 or 10.1.4 by reason of the
failure of the condition set forth in Section 5.4 hereof, 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 up to a maximum amount of $1 million, and (ii) to Purchaser a fee in the
amount of $25 million (the "Termination Fee") subject to the provisions of
Exhibit 10.2.2 hereof. Notwithstanding anything herein to the contrary, in the
case of any termination of this Agreement under this Section 10.2.2 and provided
the Acquired Company has not breached any of the covenants provided for in
Section 2.1.8 or 2.11 hereof, payment of the amount specified in the preceding
sentence 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 the amount specified in the
preceding sentence,
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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 the Parent or the Purchaser under or in connection with
this Agreement or any such 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 as set forth below. If any such condemnation,
destruction, loss, or damage causes a Material Adverse Effect on the Acquired
Company, then Purchaser shall have the right to terminate this Agreement.
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:
11.1.1. If to the Acquired Company:
Access Health, Inc.
335 Interlocken Parkway
Broomfield, Colorado 80021
Attn: Mr. Joe Tallman
and to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: Barry Taylor, Esq.
Daniel Mitz, 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
Atlanta, Georgia 30308-3242
Attn: John E. Zamer, Esq.
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.
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<PAGE>
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 Merrill Lynch & Co., 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 Merrill Lynch
& Co., or any 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, Merrill Lynch & Co., and any other
broker or finder shall be paid by the Acquired Company, subject to the
limitations set forth in Section 6.10.
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, subject to the express terms and conditions
hereof.
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. The initial press release in
respect of the transactions contemplated herein shall be jointly issued and
approved by Purchaser and the Acquired Company. In the event that either
party proposes to issue, make or distribute any other 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, 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.
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<PAGE>
11.10 GOVERNING LAW. Except to the extent the transactions
contemplated hereby are governed by the Delaware Code (including, without
limitation, related corporate governance issues), this Agreement shall be
governed by and construed in accordance with the laws of the State of
Georgia.
11.11 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.
11.12 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.
11.13 PRONOUNS. All pronouns used herein shall be deemed to refer to
the masculine, feminine or neuter gender as the context requires.
11.14 EXHIBITS INCORPORATED. All Exhibits attached hereto are an
integral part of this Agreement.
11.15 TIME OF ESSENCE. Time is of the essence in this Agreement.
11.16 THIRD PARTY BENEFICIARIES. This Agreement and the documents and
instruments and other agreements among the parties hereto as contemplated by
or referred to herein are not intended to confer upon any other person any
rights or remedies hereunder, except as specifically provided in Section
2.14 or elsewhere herein.
11.17 SEVERABILITY. In the event that any provision of this Agreement
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of such void or unenforceable
provision.
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<PAGE>
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.
"PURCHASER":
HBO & COMPANY OF GEORGIA
By: /s/ RUSSELL G. OVERTON
--------------------------------------
Title: Senior Vice President
--------------------------------------
"PARENT":
HBO & COMPANY
By: /s/ RUSSELL G. OVERTON
--------------------------------------
Title: Senior Vice President
--------------------------------------
"ACQUIRED COMPANY":
ACCESS HEALTH, INC.
By: /s/ JOSEPH P. TALLMAN
--------------------------------------
Title: President and Chief Executive
Officer
--------------------------------------
A-39
<PAGE>
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT (the "Agreement") is made this 26th day of October,
1998, by and among HBO & COMPANY, a Delaware corporation ("Parent"), HBO &
COMPANY OF GEORGIA, a Delaware corporation ("Purchaser"), and ACCESS HEALTH,
INC., a Delaware corporation (the "Acquired Company").
W I T N E S S E T H :
WHEREAS, Parent, Purchaser and the Acquired Company have entered into that
certain Agreement of Merger dated September 28, 1998 (the "Merger Agreement");
WHEREAS, parties hereto desire to amend the Merger Agreement as set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth herein, the receipt, sufficiency and adequacy
of which are hereby acknowledged, intending to be legally bound hereby, the
parties hereto agree as follows:
1. Section 1.38 of the Merger Agreement is hereby amended to read as
follows:
"1.38 "Merger" shall mean the merger of Merger Sub with and into the
Acquired Company, as set forth in Section 2.1.1."
2. Section 2.1.1 of the Merger Agreement is hereby amended to read as
follows:
"2.1.1 TERMS OF MERGER. Upon the terms and subject to the conditions set
forth in this Agreement and in accordance with the Delaware Code, Parent
shall cause to be incorporated under the laws of the State of Delaware a
new directly wholly-owned subsidiary ("Merger Sub") which shall be merged
with and into the Acquired Company (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, the Acquired Company
shall continue as the surviving corporation (the "Surviving Corporation")
and the separate corporate existence of the Merger Sub shall cease."
3. Section 2.1.3 of the Merger Agreement is hereby amended to read as
follows:
"2.1.3 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of Merger Sub as in effect immediately preceding the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation. The Bylaws of Merger Sub as in effect immediately preceding
the Effective Time shall be the Bylaws of the Surviving Corporation."
4. Section 2.1.4 of the Merger Agreement is hereby amended to read as
follows:
"2.1.4 DIRECTORS. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation and
shall hold office from 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."
5. Section 2.1.5 of the Merger Agreement is hereby amended to read as
follows:
"2.1.5 OFFICERS. The officers of Merger Sub 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."
6. Section 2.1.9 of the Merger Agreement is hereby amended to read as
follows:
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<PAGE>
"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 shall, and Parent shall cause Merger Sub
to, 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."
7. The first sentence of Section 3.8 of the Merger Agreement is hereby
amended to read as follows:
"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 (i) 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 (ii) 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."
8. The first sentence of Section 6.5 of the Merger Agreement is hereby
amended to read as follows:
"Parent, Merger Sub and Acquired Company for its own benefit and for the
benefit of its shareholders shall have received an opinion from counsel
of Purchaser and Parent, 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 6.5 hereto. This opinion
will be based on certain reasonable and customary representations of
Parent, Merger Sub and Acquired Company (subject to the reasonable
satisfaction of Acquired Company). Parent, Merger Sub and Acquired
Company agree to provide the counsel to Parent reasonable and customary
representations that are requested by counsel."
9. Section 7.4 of the Merger Agreement is hereby amended to read as
follows:
"Parent, Merger Sub and Acquired Company for its own benefit and for the
benefit of its stockholders shall have received an opinion from counsel
of Purchaser and Parent, 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 6.5 hereto. This opinion
will be based on certain reasonable and customary representations of
Parent, Merger Sub and Acquired Company (subject to the reasonable
satisfaction of Acquired Company). Parent, Merger Sub and Acquired
Company agree to provide the counsel to Parent reasonable and customary
representations that are requested by counsel."
10. Section 8.2.2(b) of the Merger Agreement is hereby amended to read as
follows:
"(b) certificates of incumbency of the officers of Merger Sub,
Purchaser and Parent who are executing this Agreement and the other
documents contemplated hereunder;"
11. Section 8.2.2(c) of the Merger Agreement is hereby amended to read as
follows:
"(c) certified copies of resolutions of the Board of Directors of
each of Merger Sub and Parent (or Executive Committees thereof) approving
the transactions set forth in this Agreement;"
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<PAGE>
12. Exhibits 2.1.1 and 7.4 to the Merger Agreement are hereby deleted in
their entirety.
13. Exhibits 2.9, 3.5.2, 3.8, 6.5 and 6.7 are hereby amended, and as so
amended are attached hereto.
14. Except as expressly provided in this Agreement, all of the terms and
conditions of the Merger Agreement shall remain in full force and effect
and not be altered or amended hereby.
15. Sections 11.7, 11.9, 11.10, 11.11, 11.12, 11.13, 11.15, 11.16 and 11.17
of the Merger Agreement are hereby incorporated herein by reference.
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.
"PURCHASER":
HBO & COMPANY OF GEORGIA
By: /s/ JAY M. LAPINE
------------------------------------------
Title: Assistant Secretary and Executive
Vice President
------------------------------------------
"PARENT":
HBO & COMPANY
By: /s/ JAY M. LAPINE
------------------------------------------
Title: Assistant Secretary and Executive
Vice President
------------------------------------------
"ACQUIRED COMPANY":
ACCESS HEALTH, INC.
By: /s/ JOSEPH TALLMAN
------------------------------------------
Title: Chief Executive Officer
------------------------------------------
A-42
<PAGE>
APPENDIX B
[LETTERHEAD OF MERRILL LYNCH]
November 6, 1998
Board of Directors
Access Health, Inc.
335 Interlocken Parkway
Broomfield, CO 80021
Members of the Board of Directors:
Access Health, Inc. (the "Company"), HBO & Company ("HBOC") and HBO &
Company of Georgia, a wholly owned subsidiary of HBOC, have entered into an
Agreement of Merger, as amended (the "Company/HBOC Agreement"), pursuant to
which a newly formed subsidiary of HBOC (the "Acquisition Sub") will be merged
with and into the Company in a transaction (the "Company/HBOC Merger") in which
each outstanding share of the Company's common stock, par value $.001 per share
(the "Company Shares"), will be converted into the right to receive 1.45 shares,
subject to certain adjustments (the "Company/HBOC Exchange Ratio") of the common
stock of HBOC, par value $.05 per share (the "HBOC Shares").
On October 17, 1998, subsequent to the execution of the Company/HBOC
Agreement, McKesson Corporation ("McKesson"), McKesson Merger Sub, Inc., a
wholly owned subsidiary of McKesson ("McKesson Merger Sub"), and HBOC entered
into an Agreement and Plan of Merger (the "McKesson/ HBOC Agreement") pursuant
to which McKesson Merger Sub will be merged with and into HBOC in a transaction
(the "McKesson/HBOC Merger" and, together with the Company/HBOC Merger, the
"Mergers") in which each of the outstanding HBOC Shares will be converted into
the right to receive 0.37 shares of the common stock of McKesson, par value
$0.01 per share (the "McKesson Shares"). You have advised us that HBOC currently
expects that the Company/HBOC Merger will be consummated prior to the
McKesson/HBOC Merger.
You have asked us whether in our opinion, the Company/HBOC Exchange Ratio is
fair from a financial point of view to the holders of the Company Shares, other
than HBOC and its affiliates, whether or not the McKesson/HBOC Merger is
consummated.
In arriving at the opinion set forth below, we have, among other things:
1. Reviewed certain publicly available business and financial
information relating to the Company, HBOC and McKesson that we deemed to be
relevant;
2. Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets, liabilities and
prospects of the Company, HBOC and McKesson and of McKesson after giving
effect to the McKesson/HBOC Merger and the Company/HBOC Merger furnished to
us by the Company, McKesson and HBOC, respectively, as well as the amount
and timing of the cost savings and related expenses and synergies expected
to result from the Company/HBOC Merger furnished to us by the Company and
the McKesson/HBOC Merger furnished to us by McKesson and HBOC, respectively
(the "Expected Synergies");
3. Conducted discussions with members of senior management and
representatives of the Company, McKesson and HBOC concerning the matters
described in clauses 1 and 2 above, as well as their respective businesses
and prospects before and after giving effect to the Company/HBOC Merger, the
McKesson/HBOC Merger and the Expected Synergies;
B-1
<PAGE>
4. Reviewed the market prices and valuation multiples for the Company
Shares, the HBOC Shares and the McKesson Shares and compared them with those
of certain publicly traded companies that we deemed to be relevant;
5. Reviewed the results of operations of the Company, HBOC and McKesson
and compared them with those of certain publicly traded companies that we
deemed to be relevant;
6. Compared the proposed financial terms of the Company/HBOC Merger and
the McKesson/ HBOC Merger with the financial terms of certain other
transactions that we deemed to be relevant;
7. Participated in certain discussions and negotiations among
representatives of the Company and HBOC and their legal advisors with
respect to the Company/HBOC Merger;
8. Reviewed the potential pro forma impact of the Company/HBOC Merger
and the McKesson/HBOC Merger;
9. Reviewed copies of the Company/HBOC Agreement and the McKesson/HBOC
Agreement; and
10. Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company, HBOC or McKesson or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company,
HBOC or McKesson. With respect to the financial forecast information and the
Expected Synergies furnished to or discussed with us by the Company, HBOC or
McKesson, as the case may be, we have assumed that they have been reasonably
prepared and reflect the best currently available estimates and judgment of the
Company's, HBOC's or McKesson's management as to the expected future financial
performance of the Company, HBOC or McKesson, as the case may be, and the
Expected Synergies. We express no view as to such forecasts or the assumptions
on which they are based. We have further assumed that each of the Mergers will
be accounted for as a pooling of interests under generally accepted accounting
principles and that each of the Mergers will qualify as a tax-free
reorganization for U.S. federal income tax purposes.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Mergers, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Company/ HBOC Merger or the
McKesson/HBOC Merger.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or any
part of the Company.
We are acting as financial advisor to the Company in connection with the
Company/HBOC Merger and will receive a fee from the Company for our services
which is contingent upon the consummation of the Company/HBOC Merger. In
addition, the Company has agreed to indemnify us for certain liabilities arising
out of our engagement. We have, in the past, provided financial advisory and
financing services to the Company including acting as lead underwriter for the
Company and may continue to do so and have received, and may receive, fees for
the rendering of such services. In addition, in the ordinary course of our
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<PAGE>
business, we may actively trade the Company Shares, as well as HBOC Shares and
McKesson Shares for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Company/HBOC Merger or the decisions by HBOC and
McKesson to enter into the McKesson/HBOC Merger and does not constitute a
recommendation to any shareholder as to how such shareholder should vote on
either of the proposed Mergers if given the opportunity to vote thereon, or any
matter related thereto.
We are not expressing any opinion herein as to (i) the prices at which the
Company Shares, the HBOC Shares or the McKesson Shares will trade following the
announcement or consummation of either of the Company/HBOC Merger or the
McKesson/HBOC Merger, (ii) the adequacy of the consideration to be received by
the former holders of Company Shares in connection with the McKesson/HBOC Merger
or (iii) the value of the consideration to be received in the Company/HBOC
Merger as compared to the consideration to be received in the McKesson/HBOC
Merger.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Company/HBOC Exchange Ratio is fair from a financial
point of view to the holders of the Company Shares, other than HBOC and its
affiliates whether or not the McKesson/HBOC Merger is consummated.
Very truly yours,
/s/ Merrill Lynch, Pierce, Fenner &
Smith
Incorporated
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
B-3
<PAGE>
PROXY
ACCESS HEALTH, INC.
335 Interlocken Parkway
Broomfield, Colorado 80021
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph Tallman and Timothy Connor, and each
of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent, and to vote as designated on the reverse
side, all of the shares of Common Stock of Access Health, Inc. ("Access"),
held of record by the undersigned on October 19, 1998, at a Special Meeting
of Stockholders to be held on December 10, 1998, or any adjournment or
postponement thereof upon the following matter, as set forth in the Notice of
said Meeting dated November 6, 1998, a copy of which has been received by the
undersigned.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
2566
x Please mark
your votes as
in this example.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE PROPOSAL. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
1. APPROVAL OF THE AGREEMENT OF MERGER dated September 28, 1998, as amended,
by and among Access, HBO & Company ("HBOC") and HBO & Company of Georgia
("HBOC-GA") pursuant to which Access will be merged with a subsidiary of
HBOC, with Access becoming a wholly owned subsidiary of HBOC.
For / / Against / / Abstain / /
2. In their discretion, the Proxies are authorized to vote upon such other
matters that may properly come before the meeting or any adjournments thereof.
Signatures: DATE
------------------------------- ----------------------
Please sign exactly as your name appears on this proxy. If the shares
represented by this proxy are held by joint tenants, both must sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If stockholder is a corporation, please sign in full
corporate name by President or other authorized officer. If stockholder is a
partnership, please sign in partnership name by authorized person.
<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
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<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. Pursuant to Item 601 of Regulation S-K, 17 C.F.R. Section
229.601(b)(4)(iii)(A), HBOC has excluded from Exhibit 2 the exhibits thereto.
HBOC agrees to furnish copies of such exhibits to the Commission upon request.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- --------------------------------------------------------------------------------------------------------
<S> <C>
2 Agreement of Merger dated September 28, 1998, as amended October 26, 1998, by and among HBO & Company,
HBO & Company of Georgia and Access Health, Inc., as amended (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 Jones, Day, Reavis & Pogue re tax matters.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of Arthur Andersen LLP.
23(c) Consent of Deloitte & Touche LLP.
23(d) Consent of Jones, Day, Reavis & Pogue (included in Exhibits 5 and 8).
23(e) Consent of Merrill Lynch, Pierce, Fenner & Smith, Incorporated.
24 Power of Attorney (included on signature page).
</TABLE>
II-2
<PAGE>
The following exhibits filed with the Securities and Exchange Commission are
incorporated by reference as shown below.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------------
DESCRIPTION
--
<S> <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.
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 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):
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C> <S>
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
ON DECEMBER 22, 1997, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-42871):
4 -- HBO & Company 1998 Employee Discount Stock Purchase Plan.
ON DECEMBER 29, 1997, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-43375):
4 -- HPR Inc. 1995 Eligible Directors Stock Plan.
ON DECEMBER 29, 1997, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-43377):
4 -- HPR Inc. Amended and Restated 1995 Stock Plan, HPR Inc. Amended and Restated 1991 Stock Plan.
ON JANUARY 2, 1998, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-43673):
4 -- National Health Enhancement Systems, Inc. Amended 1998 Stock Option Plan.
ON JANUARY 2, 1998, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-43679):
4 -- Expert Systems, Inc. 1993 Stock Option Plan.
ON MAY 19, 1998, AS PART OF ITS FORM 8-K, DATED AND FILED WITH THE COMMISSION ON MAY 19, 1998:
3 (i) -- HBO & Company Certificate of Incorporation, as amended.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C> <S>
ON JUNE 11, 1998, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-56579):
4 (a) -- Non-Qualified Stock Option Agreement, dated May 26, 1998, by and between HBO & Company and Duane
Tiseth.
4 (b) -- Non-Qualified Stock Option Agreement, dated May 26, 1998, by and between HBO & Company and David S.
Tiseth.
ON OCTOBER 2, 1998, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-65237):
4.1 -- Option Agreement dated October 12, 1994, by and between US Servis, Inc. and Graham O. King.
4.2 -- Amendment No. 1 to Option Agreement dated July 23, 1997 by and between US Servis, Inc. and Graham O.
King.
4.3 -- Section 9 of Employment Agreement dated June 14, 1991 by and between US Servis, Inc. and Stephen G.
Sullivan re: Options.
ON OCTOBER 2, 1998, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-65243):
4.1 -- US Servis, Inc. (f/k/a Micro Healthsystems, Inc.) Amended 1993 Stock Option Plan.
ON OCTOBER 21, 1998, AS EXHIBIT A TO ITS SCHEDULE 13D REGARDING THE COMMON STOCK OF MCKESSON
CORPORATION:
2 -- Agreement and Plan of Merger dated as of October 17, 1998 among HBO & Company, McKesson Corporation
and McKesson Merger Sub, Inc.
ON OCTOBER 29, 1998, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-66319):
4 -- IMNET Systems, Inc. 1996 Employee Discount Stock Purchase Plan.
ON OCTOBER 29, 1998, AS PART OF ITS FORM S-8 (REGISTRATION NUMBER 333-66321):
4 (a) -- IMNET Systems, Inc. 1993 Employee Stock Option and Rights Plan.
4 (b) -- Form of IMNET Systems, Inc. Key Employee Stock Option Agreement.
</TABLE>
(b) Financial Statement Schedules.
No financial statement schedules are required to be filed herewith.
(c) The opinion of Merrill Lynch, Pierce, Fenner & Smith, 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
II-5
<PAGE>
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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this 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 5th day of November, 1998.
HBO & COMPANY
By: /s/ CHARLES W. MCCALL
-----------------------------------------
Charles W. McCall
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Charles W. McCall and Jay P. Gilbertson, jointly
and severally, his or her true and lawful attorneys-in-fact and agents, each
with full power of substitution and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign any and all
amendments to this registration statement, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURES TITLE DATE
- ------------------------------ --------------------------- ------------------
Chairman, President and November 5, 1998
/s/ CHARLES W. MCCALL Chief Executive Officer
- ------------------------------ (Principal Executive
(Charles W. McCall) Officer)
President, Co-Chief November 5, 1998
Operating Officer, Chief
Financial Officer,
/s/ JAY P. GILBERTSON Principal Accounting
- ------------------------------ Officer, Treasurer and
(Jay P. Gilbertson) Secretary (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ ALFRED C. ECKERT III Director November 5, 1998
- ------------------------------
(Alfred C. Eckert III)
/s/ PHILIP A. INCARNATI Director November 5, 1998
- ------------------------------
(Philip A. Incarnati)
/s/ ALTON F. IRBY III Director November 5, 1998
- ------------------------------
(Alton F. Irby III)
II-7
<PAGE>
SIGNATURES TITLE DATE
- ------------------------------ --------------------------- ------------------
/s/ M. CHRISTINE JACOBS Director November 5, 1998
- ------------------------------
(M. Christine Jacobs)
/s/ GERALD E. MAYO Director November 5, 1998
- ------------------------------
(Gerald E. Mayo)
/s/ JAMES V. NAPIER Director November 5, 1998
- ------------------------------
(James V. Napier)
/s/ DONALD C. WEGMILLER Director November 5, 1998
- ------------------------------
(Donald C. Wegmiller)
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- -----------
<C> <S> <C>
2 Agreement of Merger dated September 28, 1998, as amended October 26, 1998, by and among HBO &
Company, HBO & Company of Georgia and Access Health, 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 Jones, Day, Reavis & Pogue re tax matters.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of Arthur Andersen LLP.
23(c) Consent of Deloitte & Touche LLP.
23(d) Consent of Jones, Day, Reavis & Pogue (included in Exhibits 5 and 8).
23(e) Consent of Merrill Lynch, Pierce, Fenner & Smith, Incorporated.
24 Power of Attorney (included on signature page).
</TABLE>
<PAGE>
EXHIBIT 5
JONES, DAY, REAVIS & POGUE
3500 One SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308
(404) 521-3939
November 5, 1998
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 38,932,001 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 to which this
opinion appears as Exhibit 5 (the "Registration Statement"), filed with the
Securities and Exchange Commission.
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
[Letterhead of Jones, Day, Reavis & Pogue]
November 6, 1998
HBO & Company
Merger Sub
301 Perimeter Center North
Atlanta, Georgia 30346
Access Health, Inc.
335 Interlocken Parkway
Broomfield, Colorado 80021
Re:Merger of a new directly wholly-owned subsidiary ("Merger Sub") of
HBO & Company ("Parent") into Access Health, Inc. ("Acquired
Company")
Ladies and Gentlemen:
This opinion is being delivered in connection with the Agreement of Merger
("Merger Agreement"), dated as of September 28, 1998, as amended as of October
26, 1998, by and among Parent, HBO & Company of Georgia, and Acquired Company.
Pursuant to the Merger Agreement, Merger Sub will merge with and into Acquired
Company (the "Merger"), and Acquired Company will be the survivor. Except with
respect to payments of cash to Acquired Company stockholders in lieu of
fractional shares of Parent stock, one hundred percent (100%) of Acquired
Company stock outstanding immediately prior to the Merger will be exchanged
solely for Parent voting stock.
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 6, 1998. 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 Parent in connection with the transaction
described above. As such, and for the purpose of rendering this opinion, we have
examined (or will examine) 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 (including all exhibits and schedules
attached thereto):
1. The Merger Agreement;
2. The Proxy Statement/Prospectus of Parent and Acquired Company, dated
November 6, 1998;
3. The representation letter from Parent and Merger Sub to us;
4. The representation letter from Acquired Company to us;
5. Such other documents, letters, 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) due execution and
delivery of all documents where due execution and delivery are prerequisites to
the effectiveness thereof.
<PAGE>
November 6, 1998
Page 2
We have assumed that all transactions 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, the Merger will qualify as
a reorganization pursuant to Section 368(a) of the Code.
In addition to your request for our opinion on the specific matter of
Federal income tax law described above, you have asked us to review the
discussion of Federal income tax issues contained in the Registration Statement
on Form S-4. We have reviewed the discussion entitled "Certain Federal Income
Tax Consequences" contained in the Registration Statement and believe that such
information fairly presents the current Federal income tax law applicable to the
Merger and certain material Federal tax consequences to Parent, Merger Sub,
Acquired Company, and Acquired Company's shareholders as a result of the Merger.
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 above. The opinion does not
address any other Federal, state, local or foreign tax consequences that may
result from any other transaction.
3. No opinion is expressed as to any transaction other than the Merger
as described in the Proxy Statement/Prospectus (taking into account the
merger contemplated by the Agreement and Plan of Merger dated as of October
17, 1998 between Parent and McKesson Corporation). 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 the 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 the representations, warranties, statements or assumptions upon
which we have relied is not correct and complete in all material respects,
this opinion would be adversely affected and should not be relied upon.
4. This opinion has been delivered to you for the purpose of satisfying
the conditions set forth in Sections 6.5 and 7.4 of the Merger Agreement and
is intended solely for the benefit of Parent, Merger Sub, Acquired Company
and the shareholders of Acquired Company. 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 filed with the Securities and Exchange
Commission by Parent to which this opinion appears as Exhibit 8 and the
references to this firm under the headings "Certain Federal Income Tax
Consequences" and "Certain Legal Matters" in such Registration Statement.
Very truly yours,
/s/ JONES, DAY, REAVIS & POGUE
<PAGE>
[ARTHUR ANDERSEN LLP]
EXHIBIT 23(A)
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, 1998 included or incorporated by reference in HBO & Company's Form
10-K for the year ended December 31, 1997 and to all references to our firm
included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
November 5, 1998
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
EXHIBIT 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated October 14, 1998, on the consolidated financial statements of Access
Health, Inc., included in Access Health, Inc.'s Form 8-K dated October 16, 1998,
which is incorporated by reference in this Registration Statement on Form S-4 of
HBO & Company and to all references to our Firm in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Denver, Colorado,
November 5, 1998
<PAGE>
EXHIBIT 23(C)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Proxy
Statement/Prospectus of HBO & Company included in the Registration Statement on
Form S-4 of our reports dated May 18, 1998 on McKesson's consolidated financial
statements and financial statement schedule, appearing in and incorporated by
reference in the Annual Report on Form 10-K of McKesson for the year ended March
31, 1998, and our report on FoxMeyer Corporation's consolidated financial
statements dated June 28, 1996 (March 18, 1997 as to paragraph seven of Note Q),
which report expresses an unqualified opinion and includes an explanatory
paragraph relating to the sale of the principal assets of FoxMeyer Corporation
and its Chapter 7 bankruptcy filing, appearing in the Current Report on Form
8-K/A of McKesson filed with the Securities and Exchange Commission on April 28,
1997.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
Deloitte & Touche LLP
San Francisco, California
Dallas, Texas
November 6, 1998
<PAGE>
EXHIBIT 23(E)
[Letterhead of Merrill Lynch]
We hereby consent to the inclusion of our opinion letter, dated November 6,
1998, to the Board of Directors of Access Health, Inc. as Appendix B to the
Proxy Statement/Prospectus which forms a part of the Registration Statement on
Form S-4 relating to the proposed merger of Access Health, Inc. with and into
HBO & Company of Georgia and to the references to such opinion in such Proxy
Statement/ Prospectus. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
/s/ Merrill Lynch, Pierce, Fenner & Smith Incorporated
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
November 6, 1998
