<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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 (S)240.14a-11(c) or (S)240.14a-12
IDX SYSTEMS CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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>
IDX SYSTEMS CORPORATION
1400 SHELBURNE ROAD
P.O. BOX 1070
SOUTH BURLINGTON, VERMONT 05403
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1997
To The Stockholders:
The 1997 Annual Meeting of Stockholders of IDX Systems Corporation (the
"Company") will be held at the Emerald Room of the Sheraton Burlington Hotel
and Conference Center, 870 Williston Road, Burlington, Vermont 05403, on
Monday, May 19, 1997 at 11:00 a.m., local time, to consider and act upon the
following matters:
1. To elect two Class II Directors to serve for the ensuing three years.
2. To approve amendments to the Company's 1995 Director Stock Option Plan.
3. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the current fiscal year.
4. To consider and act upon such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Stockholders of record at the close of business on March 24, 1997 are
entitled to notice of, and to vote at, the meeting. The stock transfer books
of the Company will remain open for the purchase and sale of the Company's
Common Stock.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
ROBERT W. BAKER, JR., Secretary
South Burlington, Vermont
April 29, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED
BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE>
IDX SYSTEMS CORPORATION
1400 SHELBURNE ROAD
P.O. BOX 1070
SOUTH BURLINGTON, VERMONT 05403
PROXY STATEMENT FOR THE 1997 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 19, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of IDX Systems Corporation (the "Company")
for use at the 1997 Annual Meeting of Stockholders to be held on May 19, 1997
and at any adjournment or adjournments of that meeting (the "Meeting"). All
proxies will be voted in accordance with the instructions contained therein,
and if no choice is specified, the proxies will be voted in favor of the
matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before it is exercised by delivery of
written revocation to the Secretary of the Company.
The Company's Annual Report for the year ended December 31, 1996 is being
mailed to stockholders with the mailing of this Notice and Proxy Statement on
or about April 29, 1997.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as filed with the Securities and Exchange Commission (the
"Commission"), except for exhibits, will be furnished without charge to any
stockholder upon written request of Investor Relations, IDX Systems
Corporation, 1400 Shelburne Road, P.O. Box 1070, South Burlington, Vermont
05403. Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.
VOTING SECURITIES AND VOTES REQUIRED
On March 24, 1997, the record date for the determination of stockholders
entitled to notice of and to vote at the Meeting, there were outstanding and
entitled to vote an aggregate of 21,017,420 shares of Common Stock of the
Company, $.01 par value per share ("Common Stock"). Each share is entitled to
one vote.
Under the Vermont Business Corporation Act, the holders of a majority of the
shares of Common Stock issued, outstanding and entitled to vote on any matter
shall constitute a quorum with respect to that matter at the Meeting. Shares
of Common Stock present in person or represented by proxy (including such
shares which abstain or do not vote with respect to one or more of the matters
presented for stockholder approval) will be counted for purposes of
determining whether a quorum is present.
For the election of Directors, it is required under the Vermont Business
Corporation Act that there be an affirmative vote of the holders of a
plurality of votes cast by the stockholders entitled to vote at the Meeting at
which a quorum is present. If a quorum exists, action on any other matter
properly coming before the Meeting is approved if the votes cast by the
holders of the shares of Common Stock voting on such matter exceed the votes
cast opposing such matter.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees, who indicate on their proxies that
they do not have discretionary authority to vote such shares as to a
particular matter, will not be counted as votes in favor of such matter, and
will also not be counted as votes cast or shares voting on such matter.
Accordingly, abstentions and "broker non-votes" will have no effect on the
voting on a matter that requires the affirmative vote of a certain percentage
of the votes cast or shares voting on a matter.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of January 15, 1997,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock; (ii) each Director and nominee for
Director; (iii) each executive officer named in the Summary Compensation Table
under the heading "Executive Compensation" below and (iv) all Directors and
executive officers of the Company as a group.
The number of shares of Common Stock beneficially owned by each Director or
executive officer is determined under the rules of the Commission, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares as
to which the individual has sole or shared voting power or investment power
and also any shares which the individual has the right to acquire within 60
days after January 15, 1997 through the exercise of any stock option or other
right. Unless otherwise indicated, each person has sole investment and voting
power (or shares such power with his spouse) with respect to the shares set
forth in the following table. The inclusion herein of any shares deemed
beneficially owned does not constitute an admission of beneficial ownership of
those shares.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF
NAME AND ADDRESS COMMON STOCK COMMON STOCK
OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING(1)
------------------- ------------------ --------------
<S> <C> <C>
5% STOCKHOLDERS
Richard E. Tarrant(2)........................ 6,750,500 32.2%
c/o IDX Systems Corporation
1400 Shelburne Road
South Burlington, VT 05403
Robert H. Hoehl(3)........................... 6,750,521 32.2
c/o IDX Systems Corporation
1400 Shelburne Road
South Burlington, VT 05403
OTHER DIRECTORS
Paul L. Egerman(4)........................... 980,000 4.7
Henry M. Tufo, M.D.(5)....................... 194,000 *
Stuart H. Altman, Ph.D....................... 4,000 *
Larry D. Grandia............................. 2,000 *
Steven M. Lash............................... 2,000 *
OTHER SENIOR EXECUTIVES
James H. Crook, Jr.(6)....................... 355,181 1.7
Robert F. Galin.............................. 50,200 *
All Directors and executive officers as a
group
(15 persons)(2)(3)(4)(5)(6)(7).............. 15,260,848 72.2
</TABLE>
- --------
* Represents holdings of less than one percent.
(1) Number of shares deemed outstanding includes 20,995,260 as of January 15,
1997, plus any shares subject to options held by the person or entity in
question that are currently exercisable or exercisable within 60 days
after January 15, 1997.
(2) Includes 750,000 shares held by Mr. Tarrant as trustee of the Richard E.
Tarrant Grantor Retained Annuity Trust, as to which shares Mr. Tarrant
disclaims beneficial ownership and 70,920 shares held by
2
<PAGE>
Mr. Tarrant's wife, Amy E. Tarrant as the trustee of five trusts (14,184
shares each), the beneficiaries of which are the Tarrant's children, as to
which shares Mr. and Mrs. Tarrant each disclaim beneficial ownership.
Includes 30,000 shares held by Amy E. Tarrant, spouse of Mr. Tarrant of
which Mr. Tarrant disclaims beneficial ownership. Also includes 6,750,500
shares which may become subject to a voting trust upon the death or
incompetence of Mr. Tarrant. Includes 25,000 shares which are pledged as
security for guarantee to State Street Bank and Trust Company.
(3) Includes 750,000 shares held by Mr. Hoehl as trustee of the Robert H.
Hoehl Grantor Retained Annuity Trust and 750,000 shares held by Mr. Hoehl
as trustee of the Cynthia K. Hoehl Grantor Retained Annuity Trust, as to
which such shares Mr. Hoehl disclaims beneficial ownership. Also includes
131,676 shares held by Mr. Hoehl's wife, Cynthia K. Hoehl as the trustee
of six trusts (21,946 shares each), the beneficiaries of which are the
Hoehl's children, as to which shares Mr. and Mrs. Hoehl each disclaim
beneficial ownership. Also includes 6,750,521 shares which may become
subject to a voting trust upon the death or incompetence of Mr. Hoehl.
Includes 25,000 shares which are pledged as security for guarantee to
State Street Bank and Trust Company.
(4) Includes 25,000 shares which are pledged as security for guarantee to
State Street Bank and Trust Company.
(5) Includes 20,000 shares held by Carleen Ann Tufo, spouse of Dr. Tufo of
which Dr. Tufo disclaims beneficial ownership.
(6) Includes 59,493 shares held by Mr. Crook as trustee of the James H. Crook,
Jr. Grantor Retained Annuity Trust, as to which shares Mr. Crook disclaims
beneficial ownership. Also includes 1,515 shares jointly held by Mr. Crook
and by Mr. Crook's wife, Andrea Crook.
(7) Includes a total of 130,743 shares of Common Stock subject to outstanding
stock options which are currently exercisable or are exercisable within 60
days after January 15, 1997. Also includes 19,419 shares held by John A.
Kane as trustee of the John A. Kane Grantor Retired Annuity Trust, as to
which shares Mr. Kane disclaims beneficial ownership and 2,000 shares held
by Pamela J. Pure, Vice President, Marketing, jointly with her husband
David T. Pure.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes (designated
Class I directors, Class II directors and Class III directors), with members
of each class serving for staggered three-year terms. There are currently
three Class I Directors, whose term expires at the 1998 Annual Meeting of
Stockholders, two Class II Directors, whose term expires at the 1997 Annual
Meeting of Stockholders, and two Class III Directors, whose term expires at
the 1999 Annual Meeting of Stockholders. In each case, members of each class
hold office until their successors have been duly elected and qualified and
subject to their earlier death, resignation or removal.
The nominees for Class II Directors, Mr. Steven M. Lash and Henry M. Tufo,
M.D. are presently serving as Class II Directors of the Company. Mr. Lash and
Dr. Tufo have been Directors since 1995. The persons named in the enclosed
proxy will vote for the election of each of the nominees for Class II
Directors unless the proxy is marked otherwise or unless one or more nominees
are unable or unwilling to serve. If elected Mr. Lash and Dr. Tufo will serve
until the 2000 Annual Meeting of Stockholders (subject to the election and
qualification of their successors and to their earlier death, resignation or
removal). Each of the nominees has indicated his willingness to serve, if
elected; however, if any nominee should be unable or unwilling to serve, the
proxies may be voted for a substitute nominee designated by the Board of
Directors or the Board of Directors may reduce the number of Directors.
3
<PAGE>
Larry D. Grandia, a Class I director of the Company, has tendered his
resignation as a Director, effective as of the 1997 Annual Meeting of
Stockholders. The Board of Directors expects to fill the vacancy created by
Mr. Grandia's resignation after the Meeting.
There are no family relationships between or among any Directors of the
Company.
The following table sets forth the name, and certain information with
respect to each member of the Board of Directors (including the nominees for
Class II Directors). Information with respect to the number of shares of
Common Stock beneficially owned by each Director, directly or indirectly, as
of January 15, 1997, appears under the heading "Security Ownership of Certain
Beneficial Owners and Management."
NOMINEES FOR CLASS II DIRECTORS
HENRY M. TUFO, M.D., age 57, has served as a Director of the Company since
November 1995. Dr. Tufo has been Executive Vice President and Chief Medical
Officer of the Company since September 1995. Dr. Tufo served as Vice President
and Chief Medical Officer of the Company from August 1995 to September 1995.
Dr. Tufo has served as Chief Operating Officer of the Company since September
1996. Dr. Tufo served as a consultant to the Company from February 1995 to
August 1995. Dr. Tufo was the President and Chief Executive Officer of the
University Health Center (Vermont) from July 1989 to December 1994. Dr. Tufo
is the Chairman of Vermont Managed Care, a managed care organization which is
wholly owned by Fletcher Allen Healthcare, an integrated delivery network. Dr.
Tufo is Professor of Medicine at the University of Vermont College of
Medicine.
STEVEN M. LASH, age 43, has served as a Director of the Company since
November 1995. Mr. Lash has served as Executive Vice President and Chief
Financial Officer of FPA Medical Management, a physician management
organization, since September 1994. Prior to this time, Mr. Lash was the
Executive Vice President of Sharp Healthcare, a hospital and clinic system,
from January 1980 to September 1994.
CLASS I DIRECTORS
RICHARD E. TARRANT, age 54, co-founded the Company in 1969 and has served as
a Director and as the President and Chief Executive Officer of the Company
since that time. Mr. Tarrant served as a member of the Board of Trustees for
the University Health Center (Vermont), an academic medical center, from July
1988 to December 1994 and as Chairman of the University Health Center
(Vermont) from 1992 to 1994.
PAUL L. EGERMAN, age 47, has served as a Director of the Company since
September 1984. Mr. Egerman has served as Senior Vice President of the Company
from 1987 to 1996. Since July, 1996, Mr. Egerman has acted as a consultant to
the software industry. Mr. Egerman was a founder of Interpretive Data Systems,
Inc. which was merged into the Company in 1984. From 1984 and until the
expiration of his employment agreement with the Company on June, 30, 1996, Mr.
Egerman served the Company in various capacities, including as Chief Operating
Officer from January 1991 to June 1994.
LARRY D. GRANDIA, age 50, has served as a Director of the Company since
November 1995. Mr. Grandia has served as Vice President and Chief Information
Officer of Intermountain Health Care, an integrated delivery network, since
May 1986.
4
<PAGE>
CLASS III DIRECTORS
ROBERT H. HOEHL, age 55, co-founded the Company in June 1969 and served as
Executive Vice President of the Company until his resignation in October 1996.
Since October 1996, Mr. Hoehl has assisted Mr. Tarrant with new business
initiatives and acquisitions. Mr. Hoehl has served as Chairman of the Board of
Directors of the Company since founding the Company in 1969.
STUART H. ALTMAN, PH.D., age 59, has served as a Director of the Company
since November 1995. Mr. Altman has served as a Professor of National Health
Policy at The Heller School, Brandeis University since 1977. He served as Dean
of The Heller School at Brandeis University from September 1977 to June 1993
and as Professor of Economics at Brown University from 1966 to 1970. Dr.
Altman served in capacities of Deputy Assistant Secretary for Planning and
Evaluation/Health and Deputy Administrator for the Office of Health Cost of
Living Council for the United States Department of Health Education and
Welfare from July 1971 to August 1976, as well as economic consultant and
manpower economist for the Office of Assistant Secretary of Defense and Labor
Market Economics for the Federal Reserve Board. He is currently a senior
member of President Clinton's Health Policy Transition Team and a fourth term
chairman of the Prospective Payment Assessment Commission, mandated by
Congress.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
provides the opportunity for direct contact between the Company's independent
auditors and the Board of Directors. The Audit Committee has responsibility
for recommending the appointment of the Company's independent auditors,
reviewing the scope and results of audits and reviewing the Company's internal
accounting control policies and procedures. The Audit Committee held six (6)
meetings in 1996. The members of the Audit Committee are Messrs. Altman, Lash
and Dr. Tufo.
The Company also has a standing Compensation Committee of the Board of
Directors, which provides recommendations to the Board of Directors regarding
salaries and incentive compensation for employees and consultants of the
Company. The Compensation Committee establishes and modifies the compensation
of certain corporate officers of the Company, administers all of the Company's
stock option and other employee benefit plans, grants stock options under the
Company's stock option plans, including, through a subcommittee composed
solely of non-employee directors (the "Subcommittee"), to certain executive
officers of the Company, and engages, determines the terms of any employment
agreements and arrangements with, and is responsible for the termination of,
certain corporate officers of the Company. The Compensation Committee held
three (3) meetings during 1996. The Subcommittee held no meetings in 1996, but
acted by written consent action. The members of the Compensation Committee are
Messrs. Altman, Grandia and Tarrant. The members of the Subcommittee are
Messrs. Altman and Grandia. Mr. Tarrant did not and will not participate in
decisions concerning his own compensation. See "Report of the Compensation
Committee" below.
The Company also has a standing Committee on Interested Director
Transactions, which functions to consider transactions in which directors have
an interest. The Committee held two (2) meetings during 1996. The members of
the Committee are Messrs. Altman, Grandia and Lash.
The Company does not have a nominating committee or a committee serving a
similar function. Nominations are made by and through the full Board of
Directors. The Board of Directors will consider nominees recommended by
stockholders. Stockholders who wish to recommend nominees for director should
send such
5
<PAGE>
recommendations to the Secretary of the Company at the principal office of the
Company, who will forward them to the Board of Directors for considerations.
The Board of Directors held five (5) meetings during 1996. All Directors
attended 100% of the total number of meetings of the Board of Directors and
all committees of the Board of Directors on which they served.
BOARD OF DIRECTORS COMPENSATION
All of the Directors are reimbursed for expenses incurred in connection with
their attendance at Board of Directors and Committee meetings. Each non-
employee Director earns $2,000 for attendance at each meeting of the Board or
Directors, and is granted options to purchase 2,000 shares of Common Stock
annually, in lieu of an annual cash retainer. In addition, each non-employee
Director earns $500 for attendance at each meeting of a committee of the Board
of Directors (other than telephonic meetings), if such Committee meeting is
not held on the same day as a Board of Directors meeting. Employee Directors
do not receive any compensation in their capacities as Directors. For the
fiscal year ended December 31, 1996, Mr. Altman earned $11,000, Mr. Grandia
earned $10,500, Mr. Lash earned $10,500 and Mr. Egerman earned $6,000 in
Directors' fees.
1995 Director Stock Option Plan. The 1995 Director Stock Option Plan (the
"Director Plan") was adopted by the Board of Directors and approved by the
stockholders of the Company in September 1995. Under the terms of the Director
Plan, Directors of the Company who are not employees of the Company or any
subsidiary of the Company are eligible to receive non-statutory options to
purchase shares of Common Stock. A total of 30,000 shares of Common Stock may
be issued upon exercise of options granted under the Director Plan. Options to
purchase 2,000 shares of Common Stock were granted to each of the three
eligible Directors (Messrs. Altman, Grandia and Lash) on May 6, 1996 at an
exercise price of $36.75 per share. Options will also be granted to future
eligible Directors upon each such director's initial election to the Board of
Directors.
Annual options to purchase 2,000 shares of Common Stock are currently
automatically granted to each eligible Director on the date of each annual
meeting of stockholders of the Company commencing with the Meeting. All
options will vest on the first anniversary of the date of grant (or, in the
case of annual options, the day prior to the first annual meeting of
stockholders of the Company following the date of grant, if earlier). With the
exception of options granted in 1995, the exercise price of options granted
under the Director Plan will equal the lesser of (i) the closing price of the
Common Stock on the date of grant or (ii) the average of the closing prices of
the Common Stock on the Nasdaq National Market (or such other nationally
recognized exchange or trading system if the Common Stock is no longer traded
on the Nasdaq National Market) for a period of ten consecutive trading days
prior to such date.
Options granted under the Director Plan are not transferable by the optionee
except by will or by the laws of descent and distribution. In the event an
optionee ceases to serve as a Director, each option may be exercised by the
optionee for the portion then exercisable at any time within three months
after the optionee ceases to serve as a Director; provided, however, that in
the event that the optionee ceases to serve as a Director due to his death or
disability, then the optionee, or his or her administrator, executor or heirs
may exercise the exercisable portion of the option for up to 180 days
following the date the optionee ceased to serve as a Director. No option is
exercisable after the expiration of ten years from the date of grant.
The Board of Directors have approved amendments to the Director Plan,
subject to stockholder approval. See "Amendments to 1995 Director Option
Plan."
During fiscal 1996, Messrs. Altman, Grandia and Lash were each granted an
option grant under the Plan to purchase 2,000 shares of Common Stock at an
exercise price of $36.75 per share. On the date of the Meeting, Messrs.
Egerman, Altman and Lash will receive an option grant under the Plan to
purchase 2,000 shares of Common Stock.
6
<PAGE>
SUMMARY COMPENSATION TABLE
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table. The following table sets forth certain
information with respect to the annual and long-term compensation for the last
fiscal year of the Company's President and Chief Executive Officer and the
Company's four other most highly compensated executive officers during fiscal
1996 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------- ------------ ---------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPEN- STOCK OPTIONS/ COMPEN-
NAME AND SALARY BONUS SATION AWARDS SARS SATION
PRINCIPAL POSITION(1) YEAR ($) ($) ($)(2) (#) (#) ($)(3)
--------------------- ---- -------- -------- ------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard E. Tarrant...... 1996 $373,000 -- -- -- -- $ 9,005
President and Chief 1995 373,000 $ 1,133 -- -- -- 8,727
Executive Officer 1994 394,564 -- -- -- -- 22,122
Robert H. Hoehl......... 1996 304,750 -- -- -- -- 9,005
Chairman of the Board 1995 373,000 1,133 -- -- -- 8,727
1994 394,564 -- -- -- -- 22,122
Henry M. Tufo, M.D...... 1996 250,000(4) 88,500 -- -- -- --
Executive Vice Presi-
dent, 1995 225,445 50,269 -- -- 200,000 --
COO and CMO 1994 20,000 -- -- -- -- --
James H. Crook, Jr...... 1996 264,600 60,000 -- -- -- 9,005
Vice President 1995 264,600 51,133 -- -- -- 8,727
1994 258,300 225,839 -- -- 70,796 22,122
Robert F. Galin......... 1996 138,500 182,586 -- -- 69,671 9,005
Vice President, Sales 1995 137,500 137,833 -- -- 16,000 8,727
1994 138,500 73,300 -- -- 20,000 19,858
</TABLE>
- --------
(1) In accordance with the rules of the Commission, this table and the option
grant table and the year-end option table which follows present
information concerning the Company's Chief Executive Officer and its four
other most highly compensated executive officers (determined by reference
to total annual salary and bonus earned by such officers) for fiscal 1996.
(2) Other Compensation in the form of perquisites and other personal benefits
has been omitted in those instances where such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10
percent of the total salary and bonus for each Named Executive Officer for
such year.
(3) Represents the Company's profit sharing plan contribution.
(4) Includes $21,156 paid to Dr. Tufo pursuant to an agreement between
Fletcher Allen Health Care, a customer of the Company, entered into
purusant to Dr. Tufo's employment agreement with the Company in connection
with his medical services provided to Fletcher Allen Health Care. See "--
Employment Agreements."
7
<PAGE>
Option Grant Table. The following table sets forth certain information
regarding options granted during the year ended December 31, 1996 by the
Company to the Named Executive Officers.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS/SARS EMPLOYEES EXERCISE OR FOR OPTION TERM(1)
GRANTED IN FISCAL BASE PRICE EXPIRATION --------------------------
NAME # YEAR ($/SH)(2) DATE 0% ($) 5%($) 10%($)
---- ------------ ------------- ----------- ---------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard E. Tarrant...... -- -- -- -- -- -- --
Robert H. Hoehl......... -- -- -- -- -- -- --
Henry M. Tufo, M.D. .... -- -- -- -- -- -- --
James H. Crook, Jr. .... -- -- -- -- -- -- --
Robert F. Galin......... 20,000 2.8% $ 30.00 01/05/06 -- $377,400 $ 956,200
49,671 7.0% 30.6250 09/06/06 -- 956,911 2,424,193
</TABLE>
- --------
(1) Amounts represent hypothetical gains that could be achieved for options if
exercised at the end of the option term. These gains are based on assumed
rates of stock price appreciation of 0%, 5% and 10% compounded annually
from the date options are granted assuming a 10 year realizable period.
Actual gains, if any, on stock option exercises will depend on the future
performance of the Common Stock on the date on which options were
exercised.
(2) All options vest according to various schedules over periods of time
ranging from less than one year to eight years from date of grant. Vesting
of certain options may accelerate upon the Company's achievement of
certain financial goals.
8
<PAGE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
YEAR-END OPTION/SAR VALUES
Year-End Option Table. The following table sets forth certain information
regarding stock options exercised during the year ended December 31, 1996 and
stock options held as of December 31, 1996 by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT FISCAL FISCAL YEAR-
YEAR-END (#) END($)(2)
SHARES
ACQUIRED ON VALUE
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- ---------------
<S> <C> <C> <C> <C>
Richard E. Tarrant........... -- -- -- --
Robert H. Hoehl.............. -- -- -- --
Henry M. Tufo, M.D........... -- -- -- --
James H. Crook, Jr........... -- -- -- --
Robert F. Galin.............. 25,786 802,264 19,014/81,671 $372,280/$658
</TABLE>
- --------
(1) Value is calculated based on the option exercise price and the closing
market price of the Common Stock on the date of exercise multiplied by the
number of shares as to which the exercise relates.
(2) The closing price for the Company's Common Stock as reported by Nasdaq
National Market on December 31, 1996 was $28.625. Value is calculated on
the basis of the difference between the option exercise price and $28.625
multiplied by the numbers of shares of Common Stock underlying the option.
EMPLOYMENT AGREEMENTS
Henry M. Tufo, M.D., is party to an Amended and Restated
Consulting/Employment Agreement among the Company, Mr. Tarrant and Mr. Hoehl
pursuant to which Dr. Tufo has agreed to serve as the Vice President and Chief
Medical Officer of the Company effective August 1, 1995. Prior to his
employment with the Company, Dr. Tufo served the Company as a consultant from
February 1, 1995 through July 31, 1995. Pursuant to the Consulting/Employment
Agreement, the Company has agreed to pay Dr. Tufo an initial salary of
$250,000 per year and certain benefits, including an annual bonus pursuant to
the Company's Executive Bonus Plan. Pursuant to the Agreement, and at the
Company's request, Dr. Tufo will practice medicine one day per week at
Fletcher Allen Health Care ("FAHC") for which he will receive compensation
directly from FAHC. The Consultant/Employment Agreement provides that in the
event that the Company terminates or materially reduces the benefits payable
under its Executive Bonus Plan, Dr. Tufo's initial salary amount shall be
revised each calendar year during the term of the Agreement based on his
performance during the previous calendar year, provided, however, that Dr.
Tufo's salary for any year may not be lower than the salary he received in the
immediately preceding calendar year.
The term of the Consulting/Employment Agreement runs from February 1, 1995
to June 30, 2000, provided, however, that the Agreement will thereafter be
considered automatically renewed for successive one year periods if not
terminated by either party upon 12 months advance written notice. The
Agreement may be terminated by Dr. Tufo with or without cause, upon delivery
of written notice not less than 180 days prior to the effective date of
termination. The Company may terminate the Agreement only if Dr. Tufo commits
fraud, engages in criminal
9
<PAGE>
conduct, continually and grossly fails to perform adequately his duties under
the Agreement, or becomes disabled. The Agreement also provides that for the
equivalent of one full business day per week during the term of the Agreement,
Dr. Tufo will have the right to continue to pursue his clinical practice of
medicine. At the request of the Company, Dr. Tufo has continued such clinical
practice and has agreed to reduce the amount of salary he is receiving from
the Company by the amount of salary he receives under the Agreement from his
clinical practice. Dr. Tufo has agreed (i) not to disclose any confidential
information of the Company following the term of the Agreement, (ii) to assign
all inventions and proprietary information to the Company, and (iii) not to
compete with the Company in the health care information systems business in
the United States and Canada for twelve months following the termination of
his employment. However, these provisions do not preclude Dr. Tufo from
engaging in the practice of medicine or working in the medical care delivery
field after termination of his employment with the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee, established on November 7, 1995,
are Messrs. Altman, Grandia and Tarrant. Mr. Tarrant, the President and Chief
Executive Officer of the Company, did not participate in decisions concerning
his own compensation or in decisions concerning stock options granted to
certain executive officers of the Company.
Mr. Tarrant is the President and a director of Huntington Real Estate, Inc.,
a Vermont corporation. The other executive officers of Huntington Real Estate
Inc. are Mr. Egerman (Vice President), Mr. Hoehl (Vice President), Mr. Kane
(Vice President) and Mr. Baker (Secretary), and the other directors of
Huntington Real Estate Inc. are Messrs. Egerman, Kane and Baker. Huntington
Real Estate Inc. has no compensation committee or other board committee
performing similar functions. The stockholders of Huntington Real Estate Inc.
are Messrs. Tarrant, Hoehl and Egerman.
Pursuant to an Agreement of Lease dated as of April 13, 1994, as amended by
a Second Addendum to the Office Lease Agreement dated January 1, 1995, the
Company leases approximately 105,300 square feet from Huntington Avenue
Limited Partnership, a Vermont limited partnership. Pursuant to an Amended and
Restated Certificate and Agreement of Limited Partnership dated March 25,
1994, as amended, Huntington Real Estate Inc. acquired a 1% general
partnership interest in the Partnership, and Messrs. Tarrant, Hoehl, Egerman,
Blanchard, Galin, Kane, Baker and another employee of the Company acquired the
remaining 99% limited partnership interest. On October 14, 1996, the Committee
on Interested Director Transactions of the Board of Directors of the Company,
composed solely of the non-employee Directors of the Company, approved a
transaction whereby the Company shall lease an approximately 15,000 additional
square feet from the Partnership. The remainder of the premises, consisting of
approximately 135,500 square feet, is leased to unrelated parties. The Company
paid rent to the Partnership relating to the premises in the amount of
$2,621,000 during the fiscal year ended December 31, 1996. Messrs. Tarrant,
Hoehl and Egerman have each guaranteed $750,000 of the Partnership's
obligations. In addition, each of Messrs. Tarrant, Hoehl and Egerman have
executed Pledge Agreements pursuant to which each has pledged 25,000 shares of
the Company's Common Stock as security for their guarantee of the
Partnership's obligations to State Street Bank and Trust Company.
Mr. Tarrant is the President and a director of LBJ Real Estate Inc., a
Vermont corporation. The other executive officers of LBJ Real Estate Inc. are
Mr. Egerman (Vice President), Mr. Hoehl (Vice President), Mr. Kane (Vice
President and Treasurer), Mr. Baker (Secretary), and the other directors of
LBJ Real Estate Inc. are Messrs. Egerman, Kane and Baker. LBJ Real Estate Inc.
has no compensation committee or other board committee performing similar
functions. The stockholders of LBJ Real Estate Inc. are Messrs. Tarrant, Hoehl
and Egerman.
10
<PAGE>
Pursuant to a lease dated as of April 7, 1992, the Company leases 18,600
square feet of office space from 4901 LBJ Limited Partnership, a Vermont
limited partnership. Pursuant to a Second Amended and Restated Certificate and
Agreement of Limited Partnership dated October 23, 1995, LBJ Real Estate Inc.
acquired a 1% general partnership interest in the Partnership, and Messrs.
Hoehl, Tarrant, Egerman, Galin, Kane and 2 other employees of the Company
acquired the remaining 99% limited partnership interest. On February 15, 1997,
the Committee on Interested Director Transactions of the Board of Directors of
the Company, composed solely of the non-employee Directors of the Company (the
"Committee"), approved the lease by the Company of as much additional space as
may become available in the premises owned by the Partnership as may be needed
by the Company, provided rental rates are at fair market value and other terms
are commercially reasonable, and the Committee approved a transaction whereby
the Company shall lease approximately 2,100 square feet from square feet from
the Partnership. The remainder of approximately 22,800 square feet is leased
to unrelated parties. The Company paid rent to the Partnership in the amount
of $230,127 during the fiscal year ended December 31, 1996.
Mr. Tarrant is one of two general partners of BDP Realty Associates, a
Vermont general partnership ("BDP"), which was formed pursuant to a
partnership agreement dated as of November 16, 1978. The other general partner
of BDP is Mr. Hoehl. No other executive officers or directors of the Company
have any interest in BDP. BDP has no compensation committee or other committee
performing similar functions.
Pursuant to an Agreement of Lease dated as of July 6, 1979, revived, renewed
and extended as of August 1, 1987 and as of September 19, 1995, the Company
leases from BDP the entire premises at 1500 Shelburne Road, consisting of
approximately 20,000 square feet. Pursuant to a Lease dated as of March 1,
1989, the Company leases the entire premises at 1400 Shelburne Road from BDP.
On February 15, 1997, the Committee on Interested Director Transactions of the
Board of Directors of the Company, composed solely of the non-employee
Directors of the Company, approved a transaction whereby the Company shall
lease approximately 58,000 additional square feet at 1400 Shelburne Road from
BDP, upon the completion of construction, which is expected to occur in the
second half of 1997. The Company paid rent to the BDP relating to these
premises in the total amount of $671,400 during the fiscal year ended December
31, 1996. The Company is a guarantor of approximately $1.25 million of the
total amount of certain obligations totaling approximately $3.1 million and
relating to 1400 Shelburne Road under a Reimbursement Agreement dated as of
January 25, 1993 between the Partnership and State Street Bank and Trust
Company, and also guarantees the payment of certain trustee fees to The First
National Bank of Boston pursuant to a certain industrial development bond
financing. The Partnership constructed the building subject to the lease using
the $4.0 million proceeds received in connection with the bond financing. The
Company's guaranty was reduced to $1.25 million as of September 19, 1995.
Mr. Tarrant is the President and a director of IDX Investment Corporation, a
Vermont corporation. The Company is the sole shareholder of IDX Investment
Corporation. IDX Investment Corporation's sole purpose is to invest funds of
the Company. The other executive officers of IDX Investment Corporation are
Mr. Kane (Vice President and Treasurer) and Mr. Baker (Secretary), and the
other directors of IDX Investment Corporation are Mr. Kane and Mr. Baker. IDX
Investment Corporation has no compensation committee or other board committee
performing similar functions.
Pursuant to a lease dated as of December 1, 1981, renewed, revived and
extended as of June 29, 1995, the Company leased during fiscal 1996
approximately 11,000 square feet of office space located at 882 Commonwealth
Avenue, Brookline, Massachusetts from IDS Realty Trust, a Massachusetts
nominee trust formed pursuant to a Declaration of Trust dated as of October 1,
1981. The trustee of the Trust is Mr. Tarrant
11
<PAGE>
and the beneficiaries of the Trust are Messrs. Tarrant, Hoehl and Egerman. The
Company paid rent to the Trust relating to the premises in the amount of
$150,936 for fiscal 1996.
The Howard Johnson's and the Holiday Inn (collectively, the "Hotel") in
South Burlington, Vermont is owned by Larkin, Tarrant and Hoehl Partnership, a
Vermont general partnership in which Messrs. Tarrant and Hoehl each own a 25%
general partnership interest. Clients and employees of the Company visiting
South Burlington frequently stay at the Hotel. In addition, IDX holds certain
corporate meetings at the Hotel's conference facility. The Company paid an
aggregate of approximately $185,772 to the Hotel in fiscal 1996, or
approximately $64 per night.
Mr. Tarrant and Mr. Hoehl (together with the trustees of the trusts
referenced below, the "Stockholders") and the Company entered into a
Redemption Agreement ("Agreement") to provide for the orderly control and
management of the Company and to provide a source of funds for disabled
Stockholders and the estates of deceased Stockholders. The Agreement provides
that neither Stockholder may transfer his shares of Common Stock during the
period commencing on April 1, 1993 and ending on the date both Stockholders
are deceased or incompetent (the "Restriction Period"), without the consent of
the other Stockholder.
Each of Mr. Tarrant and Mr. Hoehl agreed that, in the event of his death or
incompetency while the other is living and competent, the guardian or executor
of such person shall enter into a voting trust agreement that gives the other
Stockholder the right to vote the shares of Common Stock of the deceased or
incompetent Stockholder.
In the event that any shares of Common Stock are transferred to any third
party, pursuant to the terms of the Agreement or otherwise (other than in a
registered public offering), the transferee will take such shares of Common
Stock subject to the Agreement, and as a condition precedent to the transfer,
must agree in writing to be bound by the terms of the Agreement.
The Company entered into a Tax Indemnification Agreement with certain of its
stockholders, including Mr. Tarrant, providing for, among other things, the
indemnification of the Company by such stockholders for any federal and state
income taxes (including interest) incurred by the Company if for any reason
the Company is deemed to be treated as a C corporation during any period for
which it reported its earnings to the taxing authorities as an S corporation.
The Tax Indemnification Agreement further provides for the cross-
indemnification of the Company and of each such stockholder for certain
additional taxes (including interest and, in the case of such stockholders,
penalties) resulting from the Company's operations during the period in which
it was an S corporation.
The Company terminated its status as an S corporation on November 1, 1995.
On October 13, 1995, the Company declared a distribution to stockholders of
record as of October 16, 1995 in an amount equal to the Company's
undistributed S corporation earnings from July 1, 1987 through October 31,
1995 ($36.7 million). This amount was paid in two parts: $35.1 million on
November 24, 1995 and $1.6 million on December 20, 1995. Approximately $13.3
million of the distribution was used by certain of these stockholders to repay
the related party loans and advances from the Company to certain real estate
partnerships and trusts which are controlled by certain Directors and officers
of the Company that own real estate, some of which is leased to the Company.
REPORT OF THE COMPENSATION COMMITTEE
Executive Compensation Philosophy. The Company's executive compensation
program is designed to align executive compensation with financial
performance, business strategies and Company values and
12
<PAGE>
objectives. This program seeks to enhance the profitability of the Company,
and thereby enhance stockholder value by linking the financial interests of
the Company's executives with those of the stockholders. Under the guidance of
the Company's Compensation Committee of the Board of Directors, the Company
has developed and implemented an executive compensation program to achieve
these objectives while providing executives with compensation opportunities
that are competitive with companies of comparable size in related industries.
The program is more heavily oriented to bonus than other comparable companies.
It is the Company's philosophy to pay less than market base salary and greater
than market incentives.
In applying this philosophy, the Compensation Committee has established a
program to (i) attract and retain executives of outstanding abilities who are
critical to the long-term success of the Company, and (ii) reward executives
for attainment of business objectives and enhancement of stockholder value by
providing equity ownership in the Company. Through these objectives, the
Company integrates its compensation programs with its annual and long-term
strategic initiatives.
Executive Compensation Program. The Compensation Committee, which is
comprised solely of two outside Directors and the CEO, approves the executive
compensation program on an annual basis, including specific levels of
compensation for all executive officers. The Company's executive compensation
program has been designed to implement the objectives described above and is
comprised of the following fundamental elements:
. base salary that is determined by individual contributions and sustained
performance within an established competitive salary range, and
. incentive program that rewards executives for meeting specific business
objectives.
Each of these elements of compensation is discussed below.
Salary. Salary levels for the Company's executive officers are determined
based primarily on industry comparative studies performed by a nationally
recognized executive compensation consulting firm. Salaries for executive
officers are reviewed by the Compensation Committee on an annual basis. The
Compensation Committee believes existing executive compensation, including
salary and incentive compensation, to be at industry standards.
Long-Term Incentive Compensation. The Company's long-term incentive
compensation program is primarily implemented through the grant of stock
options. This program is intended to align executive interests with long-term
interests of stockholders by linking executive compensation with stockholder
enhancement. In addition, the program motivates executives to improve long-
term stock market performance by allowing them to develop and maintain a long-
term equity ownership position in the Company's Common Stock. Stock options
are granted at prevailing market prices and will only have value if the
Company's stock price increases in the future. All options vest according to
various schedules over periods of time ranging from less than one year to
eight years from date of grant. Vesting of certain options may accelerate upon
the Company's achievement of certain financial goals. Further, executives
generally must be employed by the Company at the time of vesting in order to
exercise the options. The Compensation Committee, through a subcommittee
composed solely of non-employee directors, authorizes the number of shares to
be issued pursuant to option grants made to the Company's executive officers.
Stock options are awarded by the Compensation Committee based on individual
achievements and a formula related to the cash compensation of executives.
Chief Executive Officer Compensation. The Compensation Committee evaluates
the performance of the Chief Executive Officer on an annual basis and reports
its assessment to the outside members of the Board of
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<PAGE>
Directors. The Compensation Committee's assessment of the Chief Executive
Officer is based on a number of factors, including the following: achievement
of short- and long-term financial and strategic targets and objectives,
considering factors such as sales and earnings per share; Company position
within the industry in which it competes; overall economic climate; individual
contribution to the Company and such other factors as the Compensation
Committee may deem appropriate.
The salary of the Chief Executive Officer is reviewed by the Compensation
Committee on an annual basis and, in determining any salary adjustment, the
Compensation Committee considers the above factors. Based upon a review of
such factors, the Chief Executive Officer's salary for 1996 was $382,005. This
is lower than comparable salary levels at other companies within the industry
and was based on an acknowledgment of the Chief Executive Officer's
substantial equity ownership in the Company and his request that he be paid
lower than industry averages. In recognition of such equity ownership, the
Company has not granted to the Chief Executive Officer any options to purchase
Common Stock of the Company.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code of 1986, as amended, enacted in 1993, generally
disallows tax deductions to publicly-traded corporations for compensation over
$1 million paid to the corporation's Chief Executive Officer or any of its
other four most highly compensated executive officers. Qualifying performance-
based compensation will not be subject to this disallowance if certain
requirements are met. The Company structures the compensation arrangements of
its executive officers to attempt to avoid disallowances under Section 162(m).
COMPENSATION COMMITTEE
Stuart H. Altman, Ph.D.
Larry D. Grandia
Richard E. Tarrant
14
<PAGE>
STOCK PERFORMANCE GRAPH
The comparative stock performance graph below compares the cumulative
stockholder return on the Common Stock of the Company for the period from
November 17, 1995 through December 31, 1996 with the cumulative total return
on (i) the Nasdaq Total U.S. Index and (ii) the Nasdaq Computer & Data
Processing Index (assuming the investment of $100 in the Company's Common
Stock, the Nasdaq Total U.S. Index and the Nasdaq Computer & Data Processing
Index on November 17, 1995 and reinvestment of all dividends). Measurement
points are on November 17, 1995 and the last trading day of each calendar
month thereafter, through the year ended December 31, 1996. Prior to November
17, 1995, the Company's Common Stock was not registered under the Securities
Exchange Act of 1934.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG IDX SYSTEMS, MARKET INDEX AND PEER INDEX
<CAPTION>
IDS SYSTEMS MARKET PEER
CORP. INDEX INDEX
-------- -------- --------
<S> <C> <C> <C>
Measurement PT -
11/17/95 $100.000 $100.000 $100.000
11/30/95 $115.183 $101.471 $101.645
12/29/95 $145.550 $100.931 $100.341
01/31/96 $137.173 $101.430 $ 99.310
02/29/96 $132.984 $105.296 $105.495
03/29/96 $121.466 $105.646 $105.053
04/30/96 $153.927 $114.412 $117.325
05/31/96 $174.346 $119.665 $121.203
06/28/96 $163.351 $114.270 $116.769
07/31/96 $120.942 $104.092 $104.572
08/30/96 $121.466 $109.924 $107.371
09/30/96 $146.597 $118.337 $119.096
10/31/96 $123.560 $117.028 $116.995
11/29/96 $103.665 $124.270 $125.419
12/31/96 $119.895 $124.141 $123.861
</TABLE>
15
<PAGE>
COMPLIANCE WITH SECTION 16 REPORTING REQUIREMENTS
Based solely on its review of copies of reports filed by reporting persons
pursuant to Section 16(a) of the Exchange Act, or written representations from
reporting persons that no Form 5 filing was required for such person, the
Company believes that all filings required to be made by reporting persons of
the Company were timely made in accordance with the requirements of the
Exchange Act, with the sole exception of James H. Crook, Jr., who filed one
form with respect to one sale transaction, twelve days after the due date for
such form.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Real Estate Transactions. The following is a description of certain real
estate transactions involving the Company and all or certain of Richard E.
Tarrant, President, Chief Executive Officer and Director; Robert H. Hoehl,
Chairman of the Board of Directors; Paul L. Egerman, a Director of the
Company; John A. Kane, Vice President, Finance and Administration, Chief
Financial Officer and Treasurer; Robert F. Galin, Vice President, Sales;
Robert W. Baker, Jr., Vice President, General Counsel and Secretary; and
Jeffrey M. Blanchard, Vice President, Client Services.
882 Commonwealth Avenue, Brookline, Massachusetts. Pursuant to a lease dated
as of December 1, 1981, renewed, revived and extended as of June 29, 1995, the
Company leased, during fiscal 1996, approximately 11,000 square feet of office
space from IDS Realty Trust, a Massachusetts nominee trust formed pursuant to
a Declaration of Trust dated as of October 1, 1981. The trustee of the Trust
is Mr. Tarrant and the beneficiaries of the Trust are Messrs. Tarrant, Hoehl,
and Egerman. The Company paid rent to the Trust relating to the premises in
the amount of $150,936 for fiscal 1996.
1500 Shelburne Road, South Burlington, Vermont. Pursuant to a lease dated as
of July 6, 1979, revived, renewed and extended as of August 1, 1987 and as of
September 19, 1995, the Company leases the entire premises at 1500 Shelburne
Road, consisting of approximately 20,000 square feet, from BDP Realty
Associates, a Vermont general partnership formed pursuant to a partnership
agreement dated November 16, 1978 ("BDP"). The partners of the Partnership are
Messrs. Tarrant and Hoehl. The Company paid rent to the Partnership relating
to the premises in the amount of $154,800 for fiscal 1996.
1400 Shelburne Road, South Burlington, Vermont. Pursuant to a lease dated
March 1, 1989, the Company leases the entire premises at 1400 Shelburne Road,
consisting of approximately 60,000 square feet, from BDP. The partners of the
Partnership are Messrs. Tarrant and Hoehl. On February 15, 1997, the Committee
on Interested Director Transactions of the Board of Directors of the Company
approved a transaction whereby the Company shall lease approximately 58,000
additional square feet at 1400 Shelburne Road from BDP, upon the completion of
construction, which is expected to occur in the second half of 1997. The
Company paid rent to the Partnership relating to the premises in the amount of
$516,600 for fiscal 1996. The Company is a guarantor of approximately $1.25
million of the total amount of certain obligations totaling approximately $3.1
million relating to 1400 Shelburne Road under a Reimbursement Agreement dated
as of January 25, 1993 between the Partnership and State Street Bank and Trust
Company, and also guarantees the payment of certain trustee fees to The First
National Bank of Boston pursuant to a certain industrial development bond
financing. The Partnership constructed the building subject to the lease using
the $4.0 million proceeds received in connection with the bond financing. The
Company's guaranty was reduced to $1.25 million as of September 19, 1995.
116 Huntington Avenue, Boston, Massachusetts. Pursuant to an Agreement of
Lease dated as of April 13, 1994, as amended by a Second Addendum to the
Office Lease Agreement dated January 1, 1995, the Company leases approximately
105,300 square feet from Huntington Avenue Limited Partnership, a Vermont
limited
16
<PAGE>
partnership. The executive officers of Huntington Real Estate Inc. are as
follows: Mr. Tarrant, President, Mr. Egerman, Vice President, Mr. Hoehl, Vice
President, Mr. Kane, Vice President, and Mr. Baker, Secretary. The directors
of Huntington Real Estate Inc. are Messrs. Tarrant, Egerman, Kane and Baker.
On October 14, 1996, the Committee on Interested Director Transactions of the
Board of Directors of the Company, composed solely of the non-employee
Directors of the Company, approved a transaction whereby the Company shall
lease an approximately 15,000 additional square feet from the Partnership. The
remainder of the premises, consisting of approximately 135,500 square feet, is
leased to unrelated parties. Pursuant to an Amended and Restated Certificate
and Agreement of Limited Partnership dated March 25, 1994, as amended,
Huntington Real Estate Inc. acquired a 1% general partnership in the
Partnership, and Messrs. Tarrant, Hoehl, Egerman, Blanchard, Galin, Kane,
Baker and another employee of the Company acquired the remaining 99% limited
partnership interest. The Company paid rent to the Partnership relating to the
premises in the amount of $2,621,000 during the fiscal year ended December 31,
1996. Messrs. Tarrant, Hoehl and Egerman have each guaranteed $750,000 of the
Partnership's obligations. In addition, each of Messrs. Tarrant, Hoehl and
Egerman have executed Pledge Agreements pursuant to which each has pledged
25,000 shares of the Company's Common Stock as security for their guarantee of
the Partnership's obligations to State Street Bank and Trust Company.
4901 LBJ Freeway, Dallas, Texas. Pursuant to a lease dated as of April 7,
1992, the Company leases 18,600 square feet of office space from 4901 LBJ
Limited Partnership, a Vermont limited partnership. The executive officers of
LBJ Real Estate Inc. are as follows: Mr. Tarrant, President, Mr. Egerman, Vice
President, Mr. Hoehl, Vice President, Mr. Kane, Vice President and Treasurer,
and Mr. Baker, Secretary. The directors of LBJ Real Estate Inc. are Messrs.
Tarrant, Egerman, Kane and Baker. On February 15, 1997, the Committee on
Interested Director Transactions of the Board of Directors of the Company,
composed solely of the non-employee Directors of the Company, approved a
transaction whereby the Company shall lease an additional 2100 square feet
from square feet from the Partnership. The remainder of approximately 22,800
square feet is leased to unrelated parties. The Company paid rent to the
Partnership in the amount of $230,127 during the fiscal year ended December
31, 1996.
Other Transactions. The following is a description of certain other
transactions involving the Company and all or certain of its Directors,
executive officers and stockholders:
For a description of certain employment and other arrangements between the
Company and its executive officers, see "Employment Agreements" above. In
addition, see "Compensation Committee Interlocks and Insider Participation"
above for information relating to certain transactions between the Company and
entities in which Mr. Tarrant and certain other executive officers and
Directors of the Company have an interest.
Pamela J. Pure and the Company entered into a Letter Agreement on March 7,
1995 relating to Ms. Pure's employment with the Company which provides that
Ms. Pure is entitled to a seat on the Company's Executive Committee. The
Agreement further provides that Ms. Pure is entitled to an annual base salary
of $115,000 until June 30, 1997 and a yearly bonus pursuant to the Company's
Executive Bonus Plan. She has been guaranteed at least 50% of the executive
bonus amount for the twelve month Plan periods ending June 30, 1996 and 1997.
In addition, the Company: (i) granted Ms. Pure an option to purchase 24,000
shares of the Company's Common Stock at a price of $4.32 per share, which
option is fully vested, and (ii) agreed to pay Ms. Pure's relocation costs.
During the year ended December 31, 1996, the Company paid an aggregate of
approximately $66,876 to Ms. Pure as reimbursement of her relocation costs.
Jeffrey V. Sutherland, Ph.D. and the Company entered into an Employment
Agreement dated August 16, 1996 pursuant to which Mr. Sutherland has agreed to
serve as Senior Vice President for Engineering and Product
17
<PAGE>
Development in the Corporate Division. The Agreement further provides that Mr.
Sutherland is entitled to receive an annual base salary of $160,000 and a
bonus of $20,000 payable upon continued employment through December 31, 1996.
Thereafter, Dr. Sutherland is entitled to a yearly bonus pursuant to the
Company's Executive Bonus Plan. In addition, the Company granted Dr.
Sutherland options to purchase 70,000 shares of the Company's Common Stock at
a price of $30.625, which options become exercisable in annual increments of
twenty-five percent (25%) of the total number of options granted, commencing
one year from the date of grant.
The Employment Agreement entered into by the Company and Paul L. Egerman,
pursuant to which Mr. Egerman served as Senior Vice President of the Company
for a period of two years, expired on June 24, 1996. The Employment Agreement
provides that Mr. Egerman will not for a period of 40 months after his
employment with the Company, compete with the Company in the health care
information systems industry. The Employment Agreement also provides that Mr.
Egerman may not disclose or use any proprietary, secret or confidential
information of the Company relating to, inter alia, its business, technology,
customer lists, products and services.
Conflict Policy. The Company adopted a policy, effective following the
consummation of its initial public offering on November 22, 1995, that all
material transactions between the Company and its officers, Directors and
other affiliates must (i) be approved by a majority of the members of the
Company's Board of Directors and by a majority of the disinterested members of
the Company's Board of Directors and (ii) be on terms no less favorable to the
Company than could be obtained from unaffiliated third parties. In addition,
this policy requires that any loans by the Company to its officers, Directors
or other affiliates be for bona fide business purposes only.
The Company believes that the transactions discussed under the heading
"Certain Relationships and Related Transactions" were on terms no less
favorable to the Company than could have been obtained with unrelated third
parties.
AMENDMENTS TO THE 1995 DIRECTOR STOCK OPTION PLAN
On February 15, 1997 and March 31, 1997, the Board of Directors adopted,
subject to stockholder approval, amendments (the "Amendments") to the
Company's 1995 Director Stock Option Plan (the "Plan") to (i) increase the
amount of time an optionee will have to exercise his or her options granted
pursuant to the Plan after the optionee ceases to be a director of the
Company, and (ii) modify the amendment provisions of the Plan to increase the
authority of the Board of Directors to amend the Plan without stockholder
approval. Under the Amendments, an optionee holding options granted pursuant
to the Plan may exercise these options for a period up to one year after the
optionee ceases to be a director of the Company for any reason. The Plan
currently provides that an optionee granted options pursuant to the Plan may
exercise these options for a period of three months after the optionee ceases
to be a director of the Company. The Plan also currently provides that the
Board of Directors, under certain circumstances, cannot amend the Plan or
grant discretionary options without stockholder approval. Under the
Amendments, the Board of Directors will have authority to amend the Plan
without stockholder approval. Currently under the terms of the Plan, options
to purchase 2,000 shares of Common Stock are automatically granted every year
to each non-employee director on the date of the annual meeting. Options to
purchase 2,000 shares of Common Stock are also automatically granted to each
new director upon his or her initial election to the Board of Directors.
The Amendments were adopted because the Company believes that the Amendments
will enhance the Company's ability to attract well-qualified non-employee
directors and will enable the Company to compensate its directors on a level
commensurate with other public companies. If the Amendments are approved, (i)
shares
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granted pursuant to the Plan may no longer be exercised on the earlier of (a)
the date ten years after the date of grant, or (b) the date one year after a
director ceases to be a director of the Company, and (ii) the granting of
options to non-employee directors shall be determined either by unanimous vote
of (a) the discretion of the full Board of Directors, or (b) by a committee
composed solely of two or more "non-employee directors" (as defined in Rule
16b-3 promulgated under the Exchange Act).
As option grants under the Plan, as amended by the Amendments will be
discretionary, the Company cannot now determine the number of options to be
received by the Company's directors and by non-employee directors as a group.
Employees of the Company may not receive options under the Plan. Accordingly,
no Named Executive or directors who are employees of the Company receive
options under the Plan. During 1996, each of the non-employee directors
received options under the Plan to purchase 2,000 shares of Common Stock, at a
price of $36.75 per share. For additional information regarding the ownership
of options by the Named Executive Officers, see "Compensation of Executive
Officers--Option/SAR Grants in Last Year."
The following is a summary of the material provisions of the Plan.
The Plan was adopted by the Board of Directors and approved by the
stockholders of the Company in September 1995. Under the terms of the Plan,
Directors of the Company who are not employees of the Company or any
subsidiary of the Company are eligible to receive non-statutory options to
purchase shares of Common Stock. A total of 30,000 shares of Common Stock may
be issued upon exercise of options granted under the Plan.
Currently, under the Plan, an option to purchase 2,000 shares of Common
Stock is automatically granted to each non-employee director on the date of
the annual meeting and an option to purchase 2,000 shares of Common Stock is
also granted to each new non-employee director upon his or her initial
election to the Board of Directors. (Each non-employee director on the Board
of Directors at the time of the effective date of the Company's initial public
offering was granted an option to purchase 2,000 shares of Common Stock). The
Amendment submitted to the stockholders for approval will allow the Board of
Directors discretion to grant options to non-employee directors, as determined
either by approval of (i) the full Board of Directors, or (ii) by a committee
or subcommittee composed solely of two or more "non-employee directors" (as
defined in Rule 16b-3). All options granted under the Plan will vest on the
first anniversary of the date of grant (or, in the case of annual option, the
day prior to the first annual meeting of the stockholders of the Company
following the date of grant, if earlier). The exercise price of the options
granted under the Plan will equal (i) the closing price of the Common Stock on
the date of grant or (ii) the Common Stock is not traded on the Nasdaq
National Market or a national securities exchange, the fair market value per
share on the date of grant as determined by the Board of Directors.
Options granted under the Plan are not transferrable by the optionee except
by will or by the laws of descent and distribution. Currently, under the Plan,
in the event an optionee ceases to serve as a director, each option may be
exercised by the optionee for the portion then exercisable at any time within
three months after the optionee ceases to serve as a director, provided,
however, that in the event that the optionee ceases to serve as a director due
to his death or disability, then the optionee, or his or her administrator,
executor or heirs may exercise the exercisable portion of the option for up to
180 days following the date the optionee ceased to serve as a director. The
Amendment submitted to the stockholders for approval will allow an optionee
who ceases to serve as a director to exercise any exercisable options under
the Plan for a period of up to one year after the optionee ceases to be a
director of the Company for any reason. Currently, under the Plan, no option
is exercisable after the expiration of ten years from the date of grant.
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The Plan is administered by the Board of Directors, Currently, the Board of
Directors may suspend or discontinue the Plan or revise or amend it in any
respect whatsoever, provided, however, that without approval of the
stockholder, no revision or amendment may (i) change the number of shares
subject to the Plan (except as otherwise provided in the Plan), (ii) change
the designations of the class of directors eligible to receive options, or
(iii) materially increase the benefits accruing to participants under the
Plan. Certain sections of the Plan may not be amended more than once in any
six-month period. The Amendment submitted to the stockholders for approval
will allow the Board of Directors to revise or amend the Plan even if the
amendment or revision changes the designation of the class of directors
eligible to receive options or materially increases the benefits accruing to
participate under the Plan.
Federal Income Tax Consequences
General. The following is a summary of the United States federal income tax
consequences that generally will arise with respect to the grant and exercise
of stock options under the Plan and with respect to the sale of Common Stock
acquired under the Plan. It does not address the tax consequences that may
arise with respect to any gift or disposition other than by sale of Common
Stock acquired under the Plan; nor does it address the tax consequences that
may be applicable to a participant who exercises a stock option within six
months after it is granted under the Plan. For precise advice as to any
specific transaction or set of circumstances, participants should consult with
their own tax advisors. Participants should also consult with their own tax
advisors regarding the application of any state, local, and foreign taxes and
any federal gift, estate, and inheritance taxes. The Plan is not a qualified
plan under Section 401(a) of the Code.
Tax Consequences to Participants. A participant will not recognize taxable
income upon the grant of an option under the Plan. However, a participant will
recognize ordinary compensation income upon the exercise of the option in an
amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option (the "Option Stock") on the
exercise date over the exercise price.
A participant will have a tax basis for any Option Stock equal to the
exercise price plus any income recognized with respect to the option. Upon
selling Option Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the Option Stock
over the participant's tax basis in the Option Stock. This capital gain or
loss will be a long-term capital gain or loss if the participant has held the
Option Stock for more than one year prior to the date of the sale and will be
a short-term capital gain or loss if the participant has held the Option Stock
for a shorter period.
The Plan permits a participant to exercise a stock option by delivering to
the Company Common Stock having a fair market value equal in amount to the
exercise price. The use of this method of exercise generally will not alter
the tax consequences described above, and it may enable a participant to
dispose of appreciated Common Stock without immediately recognizing capital
gain on the disposition. The participant's tax basis in any shares of Common
Stock delivered to the Company to exercise an option generally will be carried
over to an equal number of shares of Common Stock acquired upon exercising the
option. Nevertheless, participants should consider that the delivery to the
Company of stock acquired pursuant to the exercise of an incentive stock
option or pursuant to an employee stock purchase plan could have adverse tax
consequence, if certain holding period requirements are not satisfied with
respect to that stock.
Tax Consequences to the Company. The grant of a stock option under the Plan
will have no tax consequences to the Company except that the Company generally
will be entitled to a business-expense deduction with respect to any ordinary
compensation income recognized by a participant under the Plan.
20
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THE BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENTS TO THE 1995 DIRECTOR
STOCK OPTION PLAN ARE IN THE BEST INTEREST OF THE COMPANY AND ITS STOCKHOLDERS
AND RECOMMENDS A VOTE FOR THIS PROPOSAL.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of its Audit Committee, has
selected the firm of Ernst & Young LLP, independent auditors, as auditors of
the Company for the fiscal year ending December 31, 1997. Although stockholder
approval of the Board of Directors' selection of Ernst & Young LLP is not
required by law, the Board of Directors believes that it is advisable to give
stockholders an opportunity to ratify this selection. If this proposal is not
approved at the Meeting, the Board of Directors will reconsider its selection
of Ernst & Young LLP.
Representatives of Ernst & Young LLP are expected to be present at the
Meeting. They will have the opportunity to make a statement if they desire to
do so and will also be available to respond to appropriate questions from
stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Meeting. However, if any other matters are properly presented to
the Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's Directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the
owners of stock held in their names, and the Company will reimburse them for
their reasonable out-of-pocket expenses incurred in connection with the
distribution of proxy materials.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Burlington, Vermont not later than December 29, 1997 for inclusion
in the proxy statement for that meeting.
By Order of the Board of Directors,
ROBERT W. BAKER, JR., Secretary
April 29, 1997
THE BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THIS MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
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IDX SYSTEMS CORPORATION
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PROXY APPOINTMENT FORM
RECORD DATE SHARES:
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Please be sure to sign and date this Proxy. Date
----------------------------
- ----Stockholder sign here-------------------------Co-owner sign here------------
1. To elect the following Class II Directors (except as marked below):
With- For All
For hold Except
Steven M. Lash
Henry M. Tufo, M.D. [_] [_] [_]
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
the "For All Except" box and strike a line through the nominee's(s') name(s)
in the list above.
2. To approve amendments to the Company's 1995 Director Stock Option Plan.
For Against Abstain
[_] [_] [_]
3. To ratify the selection of Ernst & Young LLP as the Company's independent
auditors for the current year.
For Against Abstain
[_] [_] [_]
Please sign exactly as name(s) appear(s) hereon. When shares are held by
joint owners, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation or a partnership, please sign by authorizing person.
Mark box at right if an address change or comment has been noted on the [_]
reverse side of this card.
DETACH CARD DETACH CARD
IDX SYSTEMS CORPORATION
Dear Stockholder:
Please take note of the important information enclosed with this Proxy
Appointment Form and Ballot. There are a number of issues related to the
management and operation of IDX Systems Corporation 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 Appointment Form 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, May 19,
1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
IDX Systems Corporation
<PAGE>
IDX SYSTEMS CORPORATION
PROXY APPOINTMENT FORM
Annual Meeting of Stockholders - May 19, 1997
This Proxy is Solicited by the Board of Directors
The undersigned, revoking all prior proxies, hereby appoint(s) Richard E.
Tarrant, John A. Kane and Robert W. Baker Jr., and each of them, with full power
of substitution, as proxies, to represent and to vote, as designated herein, all
shares of Common Stock of IDX Systems Corporation (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held at the Emerald Room at the
Sheraton Burlington Hotel and Conference Center, 870 Williston Road, Burlington,
Vermont 05403, on May 19, 1997 at 11:00 a.m., local time, and at any adjournment
thereof.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS PROPERLY MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
This Proxy Appointment Form, when properly executed, will be voted in the manner
directed by the undersigned stockholder(s). IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1, PROPOSAL 2 AND PROPOSAL 3. Attendance of the
undersigned at the meeting, or any adjournment thereof, will not be deemed to
revoke this proxy unless the undersigned shall revoke this proxy in writing
before it is exercised or affirmatively indicate his intent to vote in person.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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