<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 [ ]
</TABLE>
HPR INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Filing fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)- and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
HPR INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 31, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of HPR Inc.,
a Delaware corporation ("HPR" or the "Company"), will be held at the Royal
Sonesta Hotel, 5 Cambridge Parkway, Cambridge, Massachusetts, on Friday, October
31, 1997 at 12:15 p.m., Eastern Standard Time, for the purpose of considering
and voting upon the following matters:
1. To fix the number of directors and elect a Board of Directors to
serve until the next Annual Meeting of Stockholders and until
their successors are elected and qualified;
2. To approve an amendment to the HPR 1995 Stock Plan to increase by
1,000,000 the number of shares authorized for issuance pursuant to
awards made thereunder;
3. To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the Company for the fiscal year ending June 30,
1998; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on September 8, 1997
as the record date for the determination of stockholders entitled to notice of
and to vote at this meeting. Accordingly, only stockholders of record at the
close of business on that date are entitled to vote at the meeting or at any
adjournment thereof.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended June 30, 1997, which contains financial statements and other information
of interest to stockholders, accompanies this Notice and the accompanying Proxy
Statement.
The business matters enumerated above are discussed more fully in the
accompanying Proxy Statement. Whether or not you plan to attend the meeting, you
are urged to study the Proxy Statement carefully and then to fill out, sign and
date the enclosed Proxy. To avoid unnecessary expense, please mail your Proxy
promptly in the enclosed return envelope, which requires no postage if mailed in
the United States.
By order of the Board of Directors,
THOMAS C. CHASE
Secretary
September 26, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN AND
MAIL PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
<PAGE> 3
HPR INC.
245 FIRST STREET
CAMBRIDGE, MASSACHUSETTS 02142
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 31, 1997
The Proxy accompanying this Proxy Statement is solicited by the Board of
Directors of HPR Inc. ("HPR" or the "Company") to be voted at the Annual Meeting
of Stockholders to be held at the Royal Sonesta Hotel, 5 Cambridge Parkway,
Cambridge, Massachusetts at 12:15 p.m., Eastern Standard Time, on Friday,
October 31, 1997 and at any adjournment thereof (the "Meeting").
It is expected that copies of the Notice of Meeting, this Proxy Statement
and the enclosed form of Proxy will be mailed on or about September 26, 1997 to
each stockholder entitled to vote at the Meeting. The Company's Annual Report to
Stockholders for the fiscal year ended June 30, 1997 accompanies this Proxy
Statement.
VOTING SECURITIES
Only the record holders of shares of common stock ($0.01 par value) of the
Company ("Common Stock") at the close of business on September 8, 1997 may vote
at the Meeting. Each share of Common Stock is entitled to one vote on each of
the matters to be voted upon at the Meeting.
On August 29, 1997, there were 15,338,345 shares of Common Stock issued and
outstanding. The following table sets forth certain information, as of August
29, 1997, with respect to the beneficial ownership of HPR's Common Stock (i) by
each person who is known by HPR to own beneficially more than five percent of
its Common Stock, (ii) by each of HPR's directors and nominees, (iii) by HPR's
Chief Executive Officer and each of its other four named executive officers (as
designated in accordance with the rules of the Securities and Exchange
Commission) (together, the "Named Executive Officers"), and (iv) by such
directors and all executive officers as a group. Unless otherwise noted, the
persons named in the table have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by each of them, subject
to community property laws, where applicable. Under the heading "Number of
Shares Issuable" are listed (and under the heading "Total" are included) shares
issuable within 60 days of August 29, 1997 upon exercise of stock options owned
by the party indicated. The percentage owned is calculated with respect to each
party by treating its issuable shares as outstanding in accordance with rules of
the Securities and Exchange Commission.
<PAGE> 4
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER
(AND ADDRESS OF OWNER NUMBER OF OF SHARES
OF MORE THAN FIVE PERCENT) ISSUED SHARES ISSUABLE TOTAL PERCENT
- ----------------------------------------------- ------------- --------- --------- ------
<S> <C> <C> <C> <C>
Essex Investment Management Company(1)......... 1,703,259 0 1,703,259 11.10%
125 High Street
Boston, MA 02110
A I M Management Group Inc.(2)................. 1,294,600 0 1,294,600 8.44%
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Goldman Sachs Group, L.P.(3)................... 1,095,821 0 1,095,821 7.14%
85 Broad Street
New York, NY 10004
Waddell & Reed Inc.(4)......................... 928,800 0 928,800 6.06%
6300 Lamar Ave
Overland, KS 66202
Marcia J. Radosevich, Ph.D..................... 591,230 252,699 843,929 5.41%
c/o HPR Inc.
245 First Street
Cambridge MA 02142
Richard H. Egdahl, M.D.(5)..................... 572,148 1,600 573,748 3.74%
Brian D. Cahill................................ 194,600 54,124 248,724 1.62%
Howard E. Cox, Jr.(6).......................... 231,382 1,600 232,982 1.52%
Steven J. Rosenberg............................ 0 123,562 123,562 *
James B. Stowe................................. 0 108,750 108,750 *
William G. Nelson, Ph.D........................ 100,000 1,600 101,600 *
Harris A. Berman(7)............................ 60,800 1,600 62,400 *
Joseph K. Jaeger............................... 13,410 17,414 30,824 *
All directors and executive officers as a group
(14 persons)................................. 1,763,570 579,549 2,343,119 14.72%
</TABLE>
- ---------------
* Less than one percent
(1) Based solely upon information reported on Schedule 13G as filed with the
Securities and Exchange Commission ("SEC"). Essex Investment Management
Company filed an Amendment No. 3 to its Schedule 13G on March 10, 1997,
reporting that it is an investment adviser with sole voting power as to
1,175,045 shares of the Company's Common Stock and sole dispositive power
with respect to 1,703,259 shares of the Company's Common Stock.
(2) Based solely upon information reported on Schedule 13G as filed with the SEC
on February 12, 1997 by A I M Management Group Inc. ("A I M Management") on
behalf of itself and its wholly-owned subsidiaries, A I M Advisors, Inc. and
A I M Capital Management, Inc. A I M Management reports that it is a parent
holding company and its two subsidiaries are investment advisers with shared
voting and dispositive power with respect to 1,294,600 shares of the
Company's Common Stock.
(3) Based solely upon information reported on Schedule 13G as filed with the SEC
on February 14, 1997 by The Goldman Sachs Group, L.P. and Goldman, Sachs &
Co., jointly. Goldman Sachs reports that the
2
<PAGE> 5
partnership is a parent holding company and Goldman, Sachs & Co. is a
broker-dealer and investment advisor, both of whom have shared voting and
dispositive power as to 1,095,821 shares of the Company's Common Stock.
(4) Based solely upon information reported on Schedule 13G as filed jointly with
the SEC on January 31, 1997 by Waddell & Reed Inc. ("W&R"), Waddell & Reed
Investment Management Company ("WRIMC"), Liberty National Life Insurance
Company ("Liberty"), Waddell & Reed Financial Services, Inc. ("WRFSI"),
Torchmark Corporation ("Torchmark") and United Investors Management Company
("UIMC"). As reported in that Schedule 13G, W&R is a broker-dealer with sole
voting and dispositive power as to 928,800 shares of the Company's Common
Stock; WRIMC is an investment advisor with sole voting and dispositive power
as to 868,800 shares of the Company's Common Stock; Liberty is an insurance
company with sole voting and dispositive power as to 928,800 shares of the
Company's Common Stock; WRFSI is a parent holding company with sole voting
and dispositive power as to 928,800 shares of the Company's Common Stock;
Torchmark is a parent holding company with sole voting and dispositive power
as to 928,800 shares of the Company's Common Stock; and UIMC is a parent
holding company with sole voting and dispositive power as to 928,800 shares
of the Company's Common Stock.
(5) Includes 82,812 shares of Common Stock held by Dr. Egdahl's spouse, Cynthia
T. Egdahl.
(6) Includes 25,000 shares of Common Stock held by Bridgeport Associates, Inc.,
a corporation controlled by Mr. Cox.
(7) Includes 12,500 shares of Common Stock held by The Harris A. Berman and Ruth
E. Nemzoff Family Foundation, as to which shares Dr. Berman disclaims
beneficial ownership.
3
<PAGE> 6
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of
Directors of not fewer than three nor more than twelve directors. The persons
named as proxies in the accompanying form of Proxy intend (unless authority to
vote therefor is specifically withheld) to vote to fix the number of directors
for the ensuing year at five and to vote for the election of the five persons
named below, being the nominees of the present Board, as directors to hold
office until the next Annual Meeting and until their respective successors are
elected and qualified. If any of the nominees becomes unavailable to serve as a
director, the persons named as proxies have discretionary authority to vote for
a substitute. The Board of Directors has no reason to believe that any of the
nominees will be unavailable to serve if elected.
NOMINEES FOR ELECTION AS DIRECTORS
Information regarding each nominee is presented below.
Marcia J. Radosevich, Ph.D., age 44, has served as Chief Executive Officer
and a director of the Company since 1988 and was elected Chairman of the Board
of Directors in June 1995. From 1988 until 1992, and since May 31, 1996 she also
has held the position of President of the Company. She served as Vice Chairman
of the Board from 1992 to June 1995. Dr. Radosevich is a director of Oxford
Health Plans, a health maintenance organization.
Harris A. Berman, M.D., age 59, has been a director of the Company since
1994. Since 1986, Dr. Berman has been President and Chief Executive Officer of
Tufts Associated Health Plans, Inc., which manages a large health maintenance
organization and other managed care organizations.
Howard E. Cox, Jr., age 53, has been a director of the Company since 1991.
He is a general partner of Greylock Limited Partnership, a national venture
capital firm headquartered in Boston, Massachusetts, and has been associated
with certain affiliated partnerships for the past 26 years. Mr. Cox is a
director of Stryker Corporation, a medical equipment manufacturer, Arbor Health
Care Company, a medical services company, and The Vincam Group, Inc., a
professional employment organization.
Richard H. Egdahl, M.D., age 70, has been a director of the Company since
1988 and was elected to the position of Vice Chairman of the Board and chairman
of the Company's Medical Advisory Board in June 1995. He served as Chairman of
the Board from 1988 until June 1995. From 1973 until 1996, Dr. Egdahl was
Director of the Boston University Medical Center, and since then he has been the
Alexander Graham Bell Professor of Health Care Entrepreneurship. Dr. Egdahl is
also a trustee of each of the 31 registered investment companies in the Pioneer
Family of Mutual Funds, and a director of CORE, INC., a software company, and
Essex Investment Management Company, a private investment advisor.
William G. Nelson, Ph.D., age 63, has been a director of the Company since
1992. Dr. Nelson has served as Chairman and Chief Executive Officer of
Harrisdata Service of Wisconsin, Inc., a software company, since 1990 and of
GEAC Computer Corporation Limited (GEAC), a computer hardware and software
company, since 1996. From 1991 to 1994, he was President and Chief Executive
Officer of Pilot Software, Inc., a software company. Dr. Nelson is also a
director of GEAC, Manugistics, Inc., a software company, and Project Software
and Development, Inc., a software company.
4
<PAGE> 7
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has standing audit and compensation committees of the Board of
Directors. The Audit Committee consists of Drs. Nelson (Chairman), Berman and
Egdahl. The Audit Committee met five times during the last fiscal year and has
recommended to the Board of Directors the selection of Coopers & Lybrand L.L.P.
to serve as the Company's accountants for the fiscal year ending June 30, 1998.
The Compensation Committee consists of Mr. Cox (Chairman) and Drs. Berman and
Egdahl. The Compensation Committee met twice in fiscal 1997 to consider
directors' and officers' compensation and to review the annual evaluation of the
Company's officers.
The Board of Directors met or acted by written consent nine times during
fiscal 1997. All of the directors attended at least 75% of the meetings of the
Board of Directors and committees of the Board on which they served.
COMPENSATION OF DIRECTORS
Directors of the Company generally receive as compensation for all services
as directors $3,000 per year plus $1,000 for membership on a committee of the
Board and for each Board meeting attended. Directors of the Company are granted
options, subject to approval by the full Board, pursuant to the Company's 1995
Eligible Directors Stock Plan (the "Directors Plan"), which provides that each
director who is not an officer or employee of the Company or any subsidiary of
the Company (an "outside director") will be granted, upon first being elected to
the Board of Directors, an option to purchase 10,000 shares of Common Stock at
an exercise price equal to the fair market value on the date of grant. In
addition, on the thirtieth day after re-election at each annual meeting of
stockholders and subject to Board approval, each outside director will be
granted an option to purchase 4,000 shares of Common Stock at an exercise price
equal to the fair market value on the date of grant. A total of 150,000 shares
of Common Stock are available for awards under the Directors Plan. The options
granted under the Directors Plan vest in five equal annual installments
commencing one year after the date of grant. Under the HPR Inc. Director
Termination Benefits Plan (the "Directors Termination Plan"), effective January
1, 1997, options granted to non-employee directors will become 100% vested upon
the termination, under certain circumstances, of the director's board membership
in connection with a change in control of the Company (as defined in the
Directors Termination Plan).
Dr. Radosevich receives no compensation for her service as a director.
COMPENSATION COMMITTEE INTERLOCKS, INSIDER PARTICIPATION AND CERTAIN
TRANSACTIONS
The members of the Compensation Committee are Mr. Cox, Dr. Berman and Dr.
Egdahl. Except for Dr. Radosevich, the Company's Chairman of the Board,
President and Chief Executive Officer, no officer or employee of the Company
participated in deliberations of the Board of Directors concerning executive
officer compensation during fiscal 1997.
Tufts Associated Health Plans, Inc., of which Dr. Berman is President and
Chief Executive Officer, is a licensee of certain of the Company's products and
one of three co-developers working with the Company on its Clinical Care
Management System product line. Managed Health Services Insurance Corp., of
which Mr. Cox is a director, and Oxford Health Plans, of which Dr. Radosevich is
a director, are licensees of certain of the Company's products.
The spouse of Dr. Egdahl, Cynthia T. Egdahl, was employed by the Company
until June 30, 1997, when she resigned such employment. Her compensation in
fiscal 1997 was $94,217. Ms. Egdahl also was paid a bonus of $8,250 in fiscal
1997 for work performed in fiscal 1996.
5
<PAGE> 8
Pursuant to a Stock Purchase Agreement dated December 20, 1991, as
subsequently amended, the Company agreed to pay consulting fees to Greylock
Limited Partnership, a Delaware limited partnership ("Greylock") of which Mr.
Cox is a general partner, or its designee, so long as any person affiliated with
Greylock serves on the Company's Board of Directors, in an amount of no less
than $20,000 per year (reduced, dollar for dollar, by any fees otherwise paid on
account of such affiliate's service on the Board; provided that if a higher fee
is paid to any other member of the Board, the Company will pay to such
affiliated director the higher amount). For fiscal 1997, Greylock was owed
$10,000 pursuant to this arrangement, which has been or will be paid subsequent
to fiscal year-end but prior to the Annual Meeting.
Pursuant to a consulting agreement dated January 1, 1992, and amended on
June 26, 1995, the Company compensates Dr. Egdahl for consulting services at the
rate of $10,000 per year. Such agreement will terminate if Dr. Egdahl ceases to
serve as Chairman of the Medical Advisory Board.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
and the rules promulgated thereunder require the Company's executive officers,
directors and persons who own more than ten percent of a registered class of the
Company's equity securities (collectively, "Reporting Persons") to file reports
of ownership and changes in ownership on Forms 3, 4 and 5 (the "Forms") with the
Securities and Exchange Commission (the "SEC") and the Nasdaq National Market
("Nasdaq"). Reporting Persons are required by SEC regulation to furnish the
Company with copies of all Forms filed with the SEC and Nasdaq.
Based on the Company's review of the copies of the Forms it has received
and written representations from Reporting Persons, the Company believes that
the following forms were filed late or otherwise required amendment: Forms 3 for
Mr. Paul Brient and Dr. David Rullo were filed after their respective due dates;
Form 5 for Dr. Nelson, reflecting stock option grants under the Company's 1995
Eligible Directors Stock Plan, was filed one day late; an amended Form 3 was
filed by Mr. Jaeger because, due to a clerical error, his original filing
reflected ownership of an incorrect number of shares of Common Stock; and past
Forms for Dr. Egdahl had not included options held by Dr. Egdahl's spouse. Ms.
Egdahl's exercise of those options during fiscal 1997 was timely reported on
Form 4 by Dr. Egdahl. The Company believes that all other Reporting Persons
complied with all filing requirements applicable to them with respect to
transactions during fiscal 1997.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a plurality of the shares present or represented at
the Meeting and entitled to vote thereon is required for election of directors.
Votes may be cast in favor of or withheld from each nominee. Unless authority to
vote for any director is withheld in the Proxy, votes will be cast in favor of
election of the nominees listed herein. Votes withheld from election of
directors will be excluded entirely from the vote and will have no effect. The
Board of Directors unanimously recommends a vote FOR fixing the number of
persons constituting the full Board at five and FOR each of the nominees listed
above.
6
<PAGE> 9
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth all compensation paid by the Company through
September 8, 1997 to the Chief Executive Officer and to each of the other four
most highly compensated executive officers of the Company (together, the "Named
Executive Officers") in all capacities for services rendered during the fiscal
years ended June 30, 1995, 1996 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
-------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS(1) COMPENSATION($)
- ------------------------------- ---- -------- -------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Marcia J. Radosevich, Ph.D..... 1997 $227,817 $102,000 25,000(2) $ 0
Chairman of the Board, 1996 188,280 60,626 0 0
President, and Chief 1995 181,913 60,487 250,000 0
Executive Officer
Joseph K. Jaeger(3)............ 1997 122,717 126,859 120,200 83,770(4)
Vice President, Sales 1996 -- -- -- --
1995 -- -- -- --
Brian D. Cahill................ 1997 171,000 75,000 245,000(2) 0
Chief Operating Officer and 1996 147,630 28,909 0 0
Chief Financial Officer 1995 142,500 24,225 40,000 0
Steven J. Rosenberg............ 1997 163,453 59,850 53,000(2) 0
Senior Vice President, 1996 145,600 22,714 0 0
Software Development 1995 125,000 26,000 65,000 0
James B. Stowe(5).............. 1997 152,000 25,840 25,000(2) 0
Vice President, Marketing and 1996 147,500 20,600 0 0
Business Development 1995 11,625 0 200,000 0
</TABLE>
- ---------------
(1) All option numbers have been adjusted to reflect stock splits of and stock
dividends on the Company's Common Stock since the date of grant.
(2) Includes an option for 25,000 shares granted after the end of the fiscal
year for services rendered in fiscal 1997.
(3) Mr. Jaeger first became an executive officer of the Company in fiscal 1997.
His bonus amount for fiscal 1997 includes approximately $100,000 in sales
commissions earned by Mr. Jaeger in his former position as National Director
of Sales.
(4) Represents amounts reimbursed in connection with Mr. Jaeger's relocation to
commence employment as Vice President, Sales.
(5) Mr. Stowe commenced employment with the Company on May 15, 1995.
7
<PAGE> 10
OPTION/SAR GRANTS
The following table sets forth all options granted by the Company to the
Named Executive Officers during fiscal 1997, including the exercise price,
expiration date, and value as of the date of grant (without deduction for the
cost of exercise) of each such option. There were no SARs granted during fiscal
1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SHARES OPTIONS GRANTED EXERCISE GRANT DATE
UNDERLYING TO EMPLOYEES IN OR BASE PRICE EXPIRATION PRESENT
NAME OPTIONS GRANTED FISCAL 1997 PER SHARE(1) DATE VALUE(2)
- ----------------------------- --------------- ----------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Marcia J. Radosevich,
Ph.D....................... 0 0% -- -- --
Joseph K. Jaeger............. 45,200 4% $ 15.61 9/6/06 $1,070,788
75,000 7% 13.75 2/27/07 1,557,000
Brian D. Cahill.............. 20,000 2% 15.61 9/6/06 473,800
200,000 19% 13.75 2/27/07 4,152,000
Steven J. Rosenberg.......... 28,000 3% 15.61 9/6/06 663,320
James B. Stowe............... 0 0% -- -- --
</TABLE>
- ---------------
(1) The per-share option exercise price in the table is the fair market value of
the Common Stock on the date of the grant. All options become exercisable to
the extent of 20% of the underlying shares for each year elapsed since the
date of grant. The Company's Stock Plans are administered by the
Compensation Committee of the Board of Directors, which has authority to
determine the key employees and executive officers of the Company to whom,
and the terms and conditions on which, options will be granted under the
Stock Plans, subject to approval by the full Board.
(2) The Company has used the Black-Scholes model for option pricing to calculate
present value as of the date of the grant. This model relies on the
following assumptions, which may prove to be inaccurate in the future: stock
price volatility of 0.50; average risk-free rate of return of 6.36%; and
expected option life of five years. The model also assumes a liquid market
for options, although the options awarded under the Company's plans
generally may not be transferred. Further, exchange-traded options may be
exercised immediately; however, the Company's options are subject to certain
vesting rules. For these reasons, the Company believes that the model may
overstate the value of the options it awards. Their actual value, if any,
will depend on the market price of the Company's Common Stock on the date of
exercise. The value shown does not take into account the amount the
individual must pay to exercise the options.
8
<PAGE> 11
OPTION EXERCISES AND YEAR-END VALUES
Stock options exercised by the Named Executive Officers during fiscal 1997
are set forth in the following table, which also sets forth certain information
regarding non-exercised options held by each of the Named Executive Officers as
of June 30, 1997. There were no SARs outstanding during fiscal 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE(#) REALIZED($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marcia J. Radosevich,
Ph.D..................... 132,425 $2,291,125 239,075 103,500 $ 3,901,053 $ 1,335,150
Joseph K. Jaeger........... 0 0 8,126 123,200 128,741 525,578
Brian D. Cahill............ 0 0 26,500 233,500 416,100 1,181,950
Steven J. Rosenberg........ 38,500 701,425 120,025 62,000 1,988,996 519,520
James B. Stowe............. 6,250 73,675 73,750 120,000 951,375 1,548,000
</TABLE>
- ---------------
(1) Based on the market price for the Common Stock at June 30, 1997 of $18.50
per share, less the option exercise price.
(2) "Value Realized" represents the market price of the underlying securities on
the exercise date minus the exercise price of such options.
SEVERANCE AND CHANGE OF CONTROL AGREEMENTS
On December 6, 1989, the Company entered into a severance payment agreement
with Dr. Radosevich, the Company's President and Chief Executive Officer and a
director, providing that the Company will pay Dr. Radosevich her base salary for
a 12-month period if the Company terminates her employment, other than for cause
(as defined in the agreement) or due to death or disability. The agreement also
provides that in the event of such a termination or a change of control of the
Company, any right of the Company to repurchase any shares of Common Stock held
by Dr. Radosevich shall immediately terminate and all her outstanding stock
options shall become immediately exercisable and not subject to repurchase.
On November 2, 1992, the company entered into a severance pay agreement
with Thomas McNamara, then the Company's Vice President, Sales, providing that
the Company would pay Mr. McNamara his base salary for a six-month period if the
Company terminated his employment, other than for cause or due to death or
disability. Mr. McNamara resigned his employment with the Company effective
April 15, 1997 and such agreement was terminated without any payment being made
thereunder.
Effective January 1, 1997, the Company adopted its Executive Separation
Benefits Plan (the "Executive Plan"), which provides for severance payments to
be made to members of the Company's senior management in the event of
termination, under certain circumstances, of the eligible employee's employment.
The Executive Plan provides for payment to the Named Executive Officers and
other executive officers of the Company for 12 months of annual base salary upon
termination by the Company for reasons other than disability or "good cause," or
by the employee for "good reason," as defined in the Executive Plan. In
addition, upon a change in control of the Company, the Named Executive Officers,
other than Dr. Radosevich, and other executive officers are entitled upon
termination, subject to certain conditions, to a lump sum payment
9
<PAGE> 12
equal to 12 months' annual base salary, as well as acceleration of the vesting
of 50% of any unvested stock options then held by such employees. Dr. Radosevich
is entitled, if terminated upon or after a change in control of the Company, to
receive a lump sum payment equal to 24 months' annual base salary, as well as
acceleration of the vesting of 100% of any unvested stock options she then
holds.
The Company has entered into non-competition agreements with all of its
executive officers. These agreements provide that upon termination of such
officer's employment by the Company, at the Company's option such officer will
refrain, for a period to be determined by the Company of up to 24 months, from
certain competitive activities with respect to the Company. If the Company
exercises its option to restrain any such officer from competitive activity, it
will pay such officer 33% of his or her monthly salary for each month for which
the executive officer must refrain from competing with the Company. The Company
did not exercise this option with respect to Mr. McNamara, former Senior Vice
President, Sales, who resigned his employment with the Company effective April
15, 1997.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee") currently
consisting of Howard E. Cox, Jr. (Chairman), Harris A. Berman, and Richard H.
Egdahl, none of whom are employees of the Company.
The Committee has primary responsibility for analyzing the compensation of
executive officers of the Company, making recommendations to the full Board with
respect to such compensation, establishing performance goals for executive
officers, and administering the Company's stock option plans.
In recommending salaries for the Company's executive officers for the year,
the Committee considered the overall performance of the Company, particularly in
terms of revenue growth, earnings growth, satisfaction of product delivery
milestones, and earnings per share; the responsibilities of each officer and the
increase in those responsibilities during the year as a result of the Company's
continued growth; the importance of individual executive officers to the future
growth and profitability of the Company; cash compensation levels of competitors
in the industry (these competitors are included in the peer group index
appearing in the performance graph on page 10 hereof); and the success of the
management team in achieving the Company's short-term and longer-term goals.
Although all of such factors were considered by the Committee in exercising its
judgment as to compensation levels for the Chief Executive Officer and the other
executive officers, no precise formula has been used to weight the relative
importance of such factors. Based on publicly available information the
committee believes that cash compensation of the Chief Executive Officer and the
other executive officers for fiscal 1997 was at or near the median of the range
of cash compensation paid by the Company's competitors in the industry. In
allocating compensation among salary, bonuses and stock options, the committee
seeks to provide appropriate balance between current fixed and
performance-related compensation, and long-term incentives.
The means by which the Committee established the Chief Executive Officer's
compensation for fiscal 1997 differed in no material way from that employed with
respect to the other executive officers of the Company, again using no precise
formula to weight the relative importance of the factors considered.
Bonus payments to executive officers for fiscal 1997 were based on a
combination of the Company's performance and the individual officer's
achievement of pre-established performance goals. The Company's Executive
Officer Bonus Plan provides for payment of bonuses only if the Company achieves
pre-established targets for revenues and profits. The Company achieved such
targets for fiscal 1997. Upon achievement of those targets, the Committee
evaluated each executive officer's achievement of pre-established individual
performance goals to determine the amount of such officer's annual bonus. The
amount of annual bonuses to executive officers for fiscal 1997 ranged from
approximately 15% to 50% of base compensation.
10
<PAGE> 13
Pursuant to the terms of the Company's executive compensation program, if
the Company's earnings per share reach a predetermined amount for the fiscal
year, the Company will grant an option to purchase 25,000 shares of Company
Common Stock to certain executive officers who have been employed by the Company
for the entire fiscal year. The Committee granted such options to each of Dr.
Radosevich and Messrs. Cahill, Rosenberg and Stowe in fiscal 1998 based on the
Company's earnings per share in fiscal 1997. These options were fully
exercisable on the grant date.
None of the compensation paid to any executive officer in fiscal 1997 is
subject to the limitations of Section 162(m) of the Internal Revenue Code of
1986, as amended, which precludes a public corporation from taking a deduction
for compensation of any of the Named Executive Officers in excess of $1 million.
COMPENSATION COMMITTEE
Harris A. Berman, M.D.
Howard E. Cox, Jr. (Chairman)
Richard H. Egdahl, M.D.
11
<PAGE> 14
PERFORMANCE GRAPH(1)
The following chart and corresponding table compare the value of $100
invested in HPR Inc. Common Stock from August 10, 1995 (the date of the
Company's initial public offering) through June 30, 1997 with a similar
investment in the Nasdaq Market Index and with a peer group consisting of six
publicly held companies which are in the same industry as the Company. The
comparison assumes that all dividends are reinvested.
[HPR Graph]
<TABLE>
<CAPTION>
Measurement Period NASDAQ Market
(Fiscal Year Covered) HPR Inc. Peer Group* Index
<S> <C> <C> <C>
8/11/95 100.00 100.00 100.00
6/30/96 234.48 256.30 115.45
6/30/97 204.14 231.70 139.08
*Peer Group:
Access Health Inc. HBO & Company HCIA Inc.
Health Systems Design Corporation Summit Medical Systems Transition Systems, Inc.
</TABLE>
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(1) The Company's selected peer group has changed since last year's proxy
statement because two companies in the former group, AMISYS Managed Care
Systems and GMIS Inc., have been acquired by HBO & Company. HBO & Company
and Transition Systems, Inc., public companies with similar operations and
markets to the Company, have been substituted for AMISYS and GMIS in the
accompanying graph. The Company conducted its initial public offering on
August 10, 1995. Therefore, only two years of comparative results are
provided in the accompanying graph.
12
<PAGE> 15
PROPOSAL TWO
APPROVAL OF AMENDMENT TO HPR 1995 STOCK PLAN
The HPR 1995 Stock Plan (the "1995 Plan") was adopted by the Board of
Directors on June 26, 1995 and approved by the stockholders on July 20, 1995,
and was amended and restated pursuant to a resolution by the Board of Directors
dated July 22, 1996 and approval by the stockholders on November 1, 1996. The
Board has adopted and recommends that the stockholders approve a further
amendment to the 1995 Plan to increase the number of shares which may be subject
to Awards made under the 1995 Plan from 2,035,000 to 3,035,000. The Company
believes that additional shares should be made available under the 1995 Plan to
give the Company maximum flexibility in providing appropriate incentives to key
personnel.
The 1995 Plan was adopted to ensure that an adequate number of option
shares are available to provide appropriate incentives to key employees and
other persons who provide significant services to the Company and its
subsidiaries (the "Company Group") by providing these individuals with an
opportunity to purchase or receive as bonuses stock of the Company and thereby
permitting them to share in the Company's success. The Company's future success
is highly dependent on the retention and continuing motivation of the persons
who perform key services for and make key contributions to the Company. The
Company believes that an active program of awarding stock options to those key
employees and other individuals has been, and will continue to be, an important
component of their compensation arrangements in a way that directly associates
their interests with those of the Company's stockholders.
The 1995 Plan provides for the granting of incentive stock options
("ISOs"), non-incentive stock options ("NSOs") (both ISOs and NSOs are
collectively referred to as "Options"), stock purchase authorizations ("Purchase
Authorizations"), stock bonus awards ("Bonuses"), and Stock Appreciation Rights
("SARs"). (The foregoing items are referred to herein collectively as "Awards".)
There currently are 2,035,000 shares authorized for Awards under the 1995 Plan.
On August 29, 1997, there remained available 135,122 shares for future Awards
under the 1995 Plan. The closing price of the Company's Common Stock as reported
by the Nasdaq National Market System on September 5, 1997 was $18.0625.
The 1995 Plan is administered by the Board of Directors, but the Board may
delegate such administration to the Compensation Committee of the Board (the
"Committee"), including the power to make recommendations to the Board of
Directors regarding which employees will be granted Awards under the 1995 Plan
and the terms and conditions of such Awards. However, all grants of Awards must
be approved by a majority vote of the Board of Directors. Under the 1995 Plan,
the Board, or the Committee as its delegate (all subsequent references herein to
the "Committee" shall refer to the Board or the Committee as its delegate),
determines which employees will be granted Awards under the 1995 Plan, the
number of shares covered by, and the duration of, each Award under the 1995
Plan, and other terms and conditions applicable to each Award granted under the
1995 Plan. These determinations are made at the time the Award is granted.
Under the 1995 Plan, the Committee selects the key employees, consultants
and other individual contributors of or to the Company Group ("Participants") to
receive Awards under the 1995 Plan, except that only employees of the Company
Group may be granted ISOs. Because Dr. Radosevich is an employee of the Company,
she, as well as the other Named Executive Officers and executive officers and
other key employees and service providers, is eligible to participate in the
1995 Plan and may be granted Awards thereunder. The Committee also has authority
to interpret the 1995 Plan and Awards; to prescribe, amend and rescind rules and
regulations relating to the 1995 Plan; and to make all other determinations
necessary or desirable for the administration of the 1995 Plan. The Committee
may establish guidelines for the grant of Awards to key employees of the Company
Group who are not executive officers of the Company, and the Committee may
delegate to the Company's Chief Executive Officer the authority to grant Awards,
within those guidelines, to eligible non-executive key employees. The Board
approves each Award granted under the 1995 Plan.
13
<PAGE> 16
In accordance with Code Section 162(m), a publicly-held corporation may not
deduct certain executive compensation in excess of $1 million per individual
unless such compensation is performance-based. Awards are deemed
performance-based only to the extent that, among other things, the plan to which
they relate specifies the maximum number of options which may be granted to any
Participant during a specified period of time. Accordingly, the 1995 Plan
indicates that the maximum number of Awards which may be granted to any
individual during each successive twelve-month period commencing on the
effective date of the 1995 Plan is 400,000 shares.
At the time of granting an Award, the Committee will determine the purchase
price per share to be paid upon the exercise of each Option or upon the purchase
pursuant to each Purchase Authorization granted or made under the 1995 Plan,
each within certain parameters. The exercise price per share to be paid upon the
exercise of each ISO granted under the 1995 Plan must be at least one hundred
percent (100%) of the fair market value on the date of grant, or in the case of
an ISO granted to an employee owning more than ten percent (10%) of the Common
Stock of the Company or its subsidiaries, must be at least one hundred ten
percent (110%) of the fair market value. The purchase price per share payable on
exercise of each NSO or upon the purchase of shares pursuant to each Purchase
Authorization granted under the 1995 Plan must be at least eighty-five percent
(85%) of the fair market value of the Common Stock on the date of the grant.
Bonus shares will be issued in consideration of services previously rendered,
which will be valued for such purposes by the Committee. No Award under the 1995
Plan may be granted with a purchase price less than the par value of the Common
Stock. The aggregate fair market value, as determined on the grant date, of the
shares for which ISOs are exercisable for the first time by a Participant during
any calendar year under all the plans of the Company may not exceed $100,000;
any Options in excess of such limit are treated as NSOs. The Company receives no
consideration from a Participant for the grant of an Award under the 1995 Plan.
Each Option is exercisable for the full amount or for any part thereof. At
the discretion of the Committee, Options granted under the 1995 Plan may be made
exercisable in installments which become available to the Participant from time
to time during the term of the Option. However, no Option may be exercised later
than ten (10) years after the date of grant and no ISO granted to a person who
owns over 10% of the Common Stock at the time of the grant may be exercised more
than five years from the date of the grant.
Payment must be made in full at the time the Option is exercised, or at the
time the purchase pursuant to a Purchase Authorization is made. Payment must be
made in cash or by check, or, if approved in advance by the Committee and
subject to the provisions of applicable law, by delivery and assignment to the
Company of other shares of Company stock having a market price equal to the
exercise or purchase price, or by the Participant's recourse promissory note, or
by a combination of any of the above methods. In addition, the Participant must
satisfy all applicable federal, state and local income and employment tax
withholding obligations before the Company is required to deliver any shares
under the 1995 Plan.
A Participant may not transfer an Option, SAR or Purchase Authorization
except by will or the laws of descent or distribution, and only the Participant
may exercise an Option, SAR or Purchase Authorization during the Participant's
lifetime. However, the Board may permit a Participant to transfer an Award
granted under the 1995 Plan if such transfer is made pursuant to generally
applicable criteria established by the Board, or by the Committee as its
delegate, prior to such transfer.
The number of shares that may be issued under the 1995 Plan is subject to
adjustment for stock dividends, stock splits, stock combinations,
recapitalizations and other similar changes. Any shares subject to an Award
which expires or terminates unexercised as to such shares, any shares reacquired
by the Company pursuant to forfeiture or a repurchase right under the 1995 Plan,
and any shares subject to an SAR which are not issued upon exercise of the SAR
will again become available for future Awards under the 1995 Plan.
14
<PAGE> 17
If the Company's Common Stock changes as the result of a merger or similar
reorganization as to which the Company is the surviving corporation, the number
and kind of shares which thereafter may be purchased pursuant to an Award, the
number and kind of shares then subject to Awards, and the price per share shall
be appropriately adjusted as the Committee determines to prevent dilution or
enlargement of the rights available or granted under the 1995 Plan. Except as
otherwise determined by the Committee, a merger or a similar reorganization
which the Company does not survive, or a sale of all or substantially all of the
assets of the Company, will cause every Award under the 1995 Plan to terminate,
to the extent not then exercised, unless the surviving entity agrees to assume
the Company's obligations thereunder. Alternatively, the Committee may provide
that some or all of the unexercised portion of any outstanding Award and some or
all of the unvested shares acquired upon exercise of any such Award will be
immediately exercisable and vested or no longer subject to repurchase rights as
of a specified date prior to the merger, similar reorganization or sale of
assets.
Within certain limits, the Committee may amend the 1995 Plan or the terms
of any Awards or agreements thereunder at any time without the consent of the
Participants. The Committee may not, however, amend the 1995 Plan (1) to
adversely affect or impair any then outstanding Award or related agreement
without the consent of the Participant holding such Award or related agreement;
or (2) without obtaining or being conditioned upon stockholder approval, if such
approval is required to protect the intended tax treatment of the Awards.
The 1995 Plan will terminate on June 26, 2005. The expiration date of each
Award will be no later than ten years from the date of grant.
FEDERAL INCOME TAX CONSIDERATIONS
The rules governing the tax treatment of options and stock acquired from
the exercise of options are quite technical. Therefore, the description of tax
consequences set forth below is necessarily general in nature and does not
purport to be complete. Moreover, statutory provisions are subject to change, as
are their interpretations, and their application may vary in individual
circumstances. Finally, the tax consequences under applicable state and local
income tax laws may not be the same as under the federal income tax laws.
ISOs granted pursuant to the 1995 Plan are intended to qualify as
"Incentive Stock Options" within the meaning of Section 422 of the Code. If the
Participant makes no disposition of the shares acquired pursuant to the exercise
of an ISO within one year after the transfer of shares to such Participant and
within two years from the grant of the ISO, such Participant will recognize no
taxable income for "regular" income tax purposes as a result of the grant or
exercise of such ISO. Under these circumstances, the Company will not be
entitled to a deduction for federal income tax purposes with respect to either
the issuance of such ISOs or the transfer of shares upon their exercise. After
July 28, 1997, a Participant who sells stock acquired pursuant to the exercise
of an ISO will recognize long-term capital gain or loss if the Participant has
held the stock more than 18 months. Under current law, long-term capital gain is
taxed at a maximum rate of 20%.
Participants generally will recognize income for purposes of the federal
alternative minimum tax to the extent that the fair market value of the shares
purchased upon exercise of an ISO exceeds the option price for the shares (the
"spread amount"). Under current law, the maximum rate of alternative minimum tax
is 28%. For purposes of the alternative minimum tax only, the spread amount will
be added to the option price in calculating a purchaser's basis in the stock and
thus determining the purchaser's gain or loss on the sale of shares acquired
upon exercise of such ISOs. A credit for any net alternative minimum tax paid by
an ISO holder on exercise may be available to offset the Participant's regular
income tax in subsequent years, including any tax on the income resulting from a
sale of the shares acquired upon the exercise.
15
<PAGE> 18
If shares subject to ISOs are disposed of prior to the expiration of the
time periods described above, the Participant will recognize ordinary income in
the year in which the disqualifying disposition occurs, the amount of which will
generally be the lesser of (i) the excess of the market value of the shares on
the date of exercise over the exercise price, or (ii) the gain recognized on
such disposition. Such amount will ordinarily be deductible by the Company for
federal income tax purposes in the same year, provided that the Company
satisfies certain federal income tax reporting requirements. In addition, the
excess, if any, of the amount realized on a disqualifying disposition over the
market value of the shares on the date of exercise will be treated as capital
gain.
A Participant who acquires shares by exercise of a NSO generally recognizes
as taxable ordinary income, at the time of exercise, the difference between the
exercise price and the fair market value of the shares on the date of exercise.
The amount of the Participant's taxable income will ordinarily be deductible by
the Company in the same year in which the Participant recognizes the taxable
income, subject to the limitations of Section 162(m) of the Code.
SARs are grants entitling a Participant to receive, upon exercise of the
SAR, distribution of an amount in cash or shares or a combination thereof with a
value equal to or less than the difference between the market price per share of
the Company's Common Stock on the date of exercise and the market price on the
date of grant, multiplied by the number of shares for which the SAR is
exercised. A Participant will realize compensation income in the full amount of
such distribution. The Company will be allowed a corresponding deduction of the
amount of the distribution, generally in the Company's tax year in which the
exercise occurs. The Participant will obtain a basis in any shares distributed
in satisfaction of SARs equal to the fair market value of such shares at the
time of such exercise (which is the amount of compensation income realized), for
purposes of determining capital gain or loss on the later sale of such shares.
The Company must withhold federal and applicable state and local taxes with
respect to a SAR distribution. For SAR distributions made in shares of the
Company's stock, withholding will be applied against other compensation payable
from the Company.
Under Section 162(m) of the Code, the Company may be limited as to federal
income tax deductions to the extent that total individual compensation paid to
any of the Named Executive Officers exceeds $1,000,000 in any one year. The
Company can preserve the deductibility of certain compensation in excess of
$1,000,000, however, provided that it complies with conditions imposed by
Section 162(m), including the payment of performance-based compensation pursuant
to a plan approved by stockholders. The 1995 Plan is designed to provide the
Company flexibility and the opportunity to qualify certain aspects of
compensation as performance-based compensation under Section 162(m), should the
Company's compensation of any Named Executive Officer at some time in the future
be sufficiently high to trigger the limitations set forth in Section 162(m).
16
<PAGE> 19
BENEFITS UNDER 1995 PLAN
Due to the discretionary nature of the 1995 Plan, it is not possible to
determine who the future Participants in the 1995 Plan will be, or the number or
value of Awards to be received by any Participant or group under the 1995 Plan.
The following table sets forth information with respect to the aggregate grants
of Awards under the 1995 Plan to the Named Executive Officers, all current
executive officers as a group, all non-employee directors as a group, and all
other employees as a group during fiscal 1997.
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE($)(1) NUMBER OF UNITS(2)
------------------------------------------- ------------------- ------------------
<S> <C> <C>
Marcia J. Radosevich....................... 0 0
Chairman, President and Chief Executive
Officer
Joseph K. Jaeger........................... $ 434,291 120,200
Vice President, Sales
Brian D. Cahill............................ $ 911,548 220,000
Chief Operating Officer and Chief Financial
Officer
Steven J. Rosenberg........................ $ 68,670 28,000
Senior Vice President, Software Development
James B. Stowe............................. 0 0
Vice President, Marketing and Business
Development
All Current Executive Officers as a Group
(10 persons)............................. $ 2,964,205 726,200
All Current Non-Executive Directors as a
Group (4 persons)........................ 0 0
All Non-Executive Employees as a Group..... $ 843,790 292,190
</TABLE>
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(1) Value of in-the-money options at fiscal year-end. An "in-the-money" option
is an option for which the option price of the underlying stock is less than
the September 5, 1997 market price of $18.0625; the value shown reflects
stock market appreciation since the date of the granting of the option.
(2) Includes all options granted under the 1995 Plan in fiscal 1997, whether
vested or unvested, and whether exercised or unexercised as of fiscal 1997
year-end.
No directors or nominees received option grants under the 1995 Plan in
fiscal 1997. All directors and nominees, other than Marcia J. Radosevich, were
granted options under the HPR 1995 Eligible Directors Stock Plan. After fiscal
year-end, Dr. Radosevich received an option to purchase 25,000 shares under the
1995 Plan for services rendered in fiscal 1997.
AMENDMENT TO THE 1995 PLAN
The Board has adopted and recommends that the stockholders approve an
amendment to the 1995 Plan to increase by 1,000,000 shares to 3,035,000 the
maximum number of shares available for Awards under the 1995 Plan. The Board
believes that additional shares should be made available to give the Company
maximum flexibility in providing appropriate incentives to key personnel.
17
<PAGE> 20
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of all outstanding shares
present or represented at the Meeting and entitled to vote thereon is required
to approve the amendment to the 1995 Plan. Abstentions will count as shares
present or represented at the Meeting and will, therefore, be included in
determining whether the required vote has been received and effectively count as
a vote "against" approval. The Board of Directors unanimously recommends a vote
FOR approval of the proposed amendment to the 1995 Plan and your proxy will be
so voted unless you specify otherwise.
PROPOSAL THREE
SELECTION OF ACCOUNTANTS
Upon the recommendation of its Audit Committee, the Board of Directors
selected the firm of Coopers & Lybrand L.L.P. as accountants of the Company for
the fiscal year ending June 30, 1998, subject to the ratification by a vote of
the holders of a majority of the shares of Common Stock voting thereon at the
Annual Meeting. A representative of Coopers & Lybrand L.L.P., which served as
accountants for fiscal 1997, is expected to be present at the Meeting, with the
opportunity to make a statement if he or she desires to do so, and to be
available to respond to appropriate questions.
The Board of Directors unanimously recommends a vote FOR ratification of
the selection of Coopers & Lybrand L.L.P. as accountants for the fiscal year
ending June 30, 1998, and your proxy will be so voted unless you specify
otherwise. A vote by the holders of the majority of all outstanding shares
present or represented at the Meeting and entitled to vote thereon is required
for ratification.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company, at its offices at 245
First Street, Cambridge, Massachusetts 02142, no later than May 22, 1998, in
order to be considered for inclusion in the Proxy Statement and form of proxy
relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than that shown above. However, if any other
proper business should come before the Meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the Proxies with respect to
any such business in accordance with their best judgment. Matters with respect
to which the enclosed form of Proxy confers such discretionary authority are as
follows: (i) matters which the Board of Directors does not know of a reasonable
time before the mailing of this Proxy Statement which are to be presented at the
Annual meeting; (ii) approval of the minutes of the prior meeting of
stockholders, such approval not constituting ratification of the action taken at
such meeting; (iii) election of any person as a director if any of the nominees
named herein are unable to serve or for good cause will not serve; and (iv)
matters incident to the conduct of the meeting.
The cost of preparing, assembling and mailing the proxy material will be
borne by the Company. In addition to the use of the mails, certain officers and
regular employees of the Company, without additional compensation, may use their
personal efforts, by telephone or otherwise, to obtain Proxies. The Company will
also request brokerage houses, custodians, nominees and fiduciaries to forward
copies of the proxy material to those persons for whom they hold shares and to
request instruction for voting the Proxies. The Company will reimburse such
brokerage houses and other persons for their reasonable expenses in connection
therewith.
18
<PAGE> 21
Any stockholder giving a Proxy in the accompanying form retains the power
to revoke it, by appropriate written notice to the Secretary of the Company or
by the giving of a later-dated Proxy, at any time prior to the exercise of the
powers conferred thereby. Attendance in person at the Meeting will not in itself
be deemed to revoke a Proxy unless the stockholder gives an affirmative notice
at the Meeting that the stockholder intends to revoke the Proxy and to vote in
person.
The shares represented by a Proxy will be voted as directed by the
stockholder giving the Proxy.
Broker Non-votes
Brokers holding shares for beneficial owners must vote those shares
according to the specific instructions they receive from the owners. Under NASD
rules governing brokers using the Nasdaq National Market ("Nasdaq"), on which
shares of the Company are traded, brokers who have not received instructions
from beneficial owners may, depending on the type of proposal involved, vote
shares held by them in street name in their discretion. The type of proposal on
which brokers may vote depends upon the rules of the exchange(s) of which the
broker is a member. For instance, a broker who is a member of the New York Stock
Exchange who does not receive instructions from a beneficial owner may (but is
not required to) vote on the election of directors, but not on the proposed
amendment to the HPR 1995 Stock Plan.
When a broker is not entitled to vote with respect to a certain proposal,
this gives rise to what is known as a "broker non-vote" on such proposal. In the
event of a broker non-vote with respect to any proposal coming before the
Meeting, the Proxy will be counted as present for purposes of determining the
existence of a quorum, and the broker non-vote will have the same effect as an
abstention as to that proposal. Accordingly, a broker non-vote will have no
effect on the outcome of the election of directors or selection of accountants
and will have the same effect as a vote against the proposed amendment to the
HPR 1995 Stock Plan.
IF NO CONTRARY INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED (1) TO FIX
THE NUMBER OF DIRECTORS AT FIVE AND TO ELECT THE PERSONS NAMED UNDER "ELECTION
OF DIRECTORS," (2) TO APPROVE THE AMENDMENT TO THE HPR 1995 STOCK PLAN TO
INCREASE BY 1,000,000 THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE THEREUNDER;
(3) TO RATIFY THE SELECTION OF COOPERS & LYBRAND L.L.P. AS ACCOUNTANTS FOR
FISCAL YEAR 1998, AND (4) IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
19
<PAGE> 22
HPR INC.
MEETING OF STOCKHOLDERS - OCTOBER 31, 1997
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HPR INC.
The undersigned stockholder in HPR Inc. (the "Company") hereby appoints Marcia
J. Radosevich, Ph.D. and Brian D. Cahill, and each of them, attorneys, agents
and proxies, with power of substitution to each, to vote all shares of Common
Stock that the undersigned is entitled to vote at the Annual meeting of
Stockholders of the Company to be held at the Royal Sonesta Hotel, 5 Cambridge
Parkway, Cambridge, Massachusetts on October 31, 1997 at 12:15 p.m., Eastern
Standard Time, and any adjournments thereof, on matters which may properly come
before the Annual Meeting, in accordance with and as more fully described in the
Notice of Meeting and Proxy Statement, receipt of which is hereby acknowledged.
The shares represented by this Proxy will be voted as directed by the
undersigned.
IF NO CONTRARY INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN FAVOR OF
FIXING THE NUMBER OF DIRECTORS AT FIVE, FOR THE NOMINEES FOR DIRECTORS LISTED
ON THE REVERSE SIDE AND IN FAVOR OF PROPOSALS 2 AND 3.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
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Please sign this Proxy exactly as your name(s) appear(s) on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, this signature
should be that of an authorized officer who should state his or her title.
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HAS YOUR ADDRESS CHANGED?
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DO YOU HAVE ANY COMMENTS?
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<PAGE> 23
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|
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
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HPR INC.
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Mark box at right if you plan to attend the Meeting. [ ]
Mark box at right if an address change or comment has been noted on
the reverse side of this card. [ ]
RECORD DATE SHARES:
1. To fix the number of persons constituting
the full Board of Directors at five and to FOR ALL WITH- FOR ALL
elect the following nominees as Directors. NOMINEES HOLD EXCEPT
MARCIA J. RADOSEVICH HARRIS A. BERMAN
HOWARD E. COX, JR. RICHARD H. EGDAHL [ ] [ ] [ ]
WILLIAM G. NELSON
To withhold authority to vote "For" a
particular nominee, mark the "For All
Except" box and strike a line through
that nominee's name. Your shares shall
be voted to set the number of directors
at five and "For" the other nominees.
2. To approve the amendment to the HPR 1995 FOR AGAINST ABSTAIN
Stock Plan. [ ] [ ] [ ]
3. To ratify the selection of Coopers &
Lybrand L.L.P. as accountants of the
Company for the fiscal year ending
June 30, 1998. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
-------------------------
Please be sure to sign and date this Proxy. Date
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Stockholder sign here Co-owner sign here
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DETACH CARD DETACH CARD
HPR INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, October
31, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Marcia J. Radosevich, Ph.D.
Chairman, Chief Executive Officer and President
HPR Inc.
