<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:
[_] CONFIDENTIAL, FOR USE OF THE
[_] Preliminary Proxy Statement 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
IDX SYSTEMS CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1998
To The Stockholders:
The 1998 Annual Meeting of Stockholders of IDX Systems Corporation (the
"Company") will be held at the Ramada Inn and Conference Center at 1117
Williston Road, South Burlington, Vermont 05403, on Monday, May 18, 1998 at
10:00 a.m., local time, to consider and act upon the following matters:
1. To elect three Class III Directors to serve for the ensuing three years.
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the current fiscal year.
3. 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 16, 1998 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 13, 1998
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 1998 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 18, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of IDX Systems Corporation
(the "Company") for use at the 1998 Annual Meeting of Stockholders to be held
on May 18, 1998 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, 1997 is being
mailed to stockholders with the mailing of this Notice and Proxy Statement on
or about April 17, 1998.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, 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 16, 1998, 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 26,263,353 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
also will 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, 1998,
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 (a "Named Executive Officer")
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, 1998, 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
Robert H. Hoehl(2).......................... 6,445,700 24.7%
c/o IDX Systems Corporation
1400 Shelburne Road
South Burlington, VT 05403
Richard E. Tarrant(3)....................... 6,436,500 24.7
c/o IDX Systems Corporation
1400 Shelburne Road
South Burlington, VT 05403
OTHER DIRECTORS
Paul L. Egerman............................. 763,900 2.9
Malcolm A. Gleser, M.D., Ph.D(4)............ 273,247 1.1
Henry M. Tufo, M.D. ........................ 134,684 *
Frank T. Sample............................. 37,268 *
Stuart H. Altman, Ph.D(5)................... 6,300 *
Steven M. Lash(5)........................... 4,300 *
OTHER NAMED EXECUTIVE OFFICERS
James H. Crook, Jr.(6)...................... 205,734 *
Robert F. Galin(7).......................... 20,149 *
Jeffrey M. Blanchard(8)..................... 17,572 *
All Directors and executive officers as a
group
(15 persons)(2)(3)(4)(6)(9) ............... 14,471,383 55.2
</TABLE>
- --------
*Represents holdings of less than one percent.
(1) Number of shares deemed outstanding includes 26,092,053 shares as of
January 15, 1998, plus any shares subject to options held by the person or
entity in question that are exercisable on or within 60 days after January
15, 1998.
2
<PAGE>
(2) 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 shares Mr. Hoehl disclaims beneficial ownership. Also includes
135,008 shares held by Mr. Hoehl's wife, Cynthia K. Hoehl as the trustee
of six trusts (22,563 shares held in each of five trusts and 22,193 held
in one trust), the beneficiaries of which are the Hoehls' children, as to
which shares Mr. and Mrs. Hoehl each disclaim beneficial ownership. Also
includes 47,839 shares held by the Hoehl Family Foundation, a Vermont non-
profit corporation, the officers and trustees of which are Mr. and Mrs.
Hoehl and certain of their children, and as to which shares Mr. and Mrs.
Hoehl each disclaim beneficial ownership. Also includes 4,810,692 shares
which may become subject to a voting trust upon the death or incompetence
of Mr. Hoehl.
(3) 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 Mr. Tarrant's
wife, Amy E. Tarrant as the trustee of five trusts (14,184 shares each),
the beneficiaries of which are the Tarrants' children, as to which shares
Mr. and Mrs. Tarrant each disclaim beneficial ownership. Also includes
73,500 shares held by the Tarrant Family Foundation, a Vermont non-profit
corporation, the officers and trustees of which are Mr. and Mrs. Tarrant
and certain of their children, and as to which shares Mr. and Mrs. Tarrant
each disclaim beneficial ownership. Also includes 30,000 shares held by
Mrs. Tarrant, as to which shares Mr. Tarrant disclaims beneficial
ownership. Also includes 5,615,580 shares which may become subject to a
voting trust upon the death or incompetence of Mr. Tarrant. Also includes
5,512,080 shares held in a margin account with BT Alex. Brown, which
shares may be pledged by Mr. Tarrant in order to secure short-term loans
which may be obtained by Mr. Tarrant from BT Alex. Brown from time to
time.
(4) Includes (a) 219,655 shares held by Dr. Gleser and his wife, Dorothy B.
Gleser, as community property, (b) 40,000 shares held by Dr. Gleser as the
trustee of the Malcolm A. Gleser and Dorothy B. Gleser Charitable
Remainder Unitrust, the beneficiary of which is the American Civil
Liberties Union of Washington State, as to which shares each of Dr. Gleser
and Mrs. Gleser disclaims beneficial ownership and (c) 10,220 shares
subject to outstanding stock options which are exercisable on or within 60
days after January 15, 1998.
(5) Includes 4,000 shares subject to outstanding stock options which are
exercisable on or within 60 days after January 15, 1998.
(6) Includes 57,986 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 3,022 shares jointly held by Mr. Crook
and Mr. Crook's wife, Andrea Crook.
(7) Includes 18,626 shares subject to outstanding stock options which are
exercisable on or within 60 days after January 15, 1998.
(8) Includes 15,572 shares subject to outstanding stock options which are
exercisable on or within 60 days after January 15, 1998.
(9) Includes a total of 122,360 shares subject to outstanding stock options
which are exercisable on or within 60 days after January 15, 1998. Also
includes (a) 18,893 shares held by John A. Kane, Vice President, Finance
and Administration, Chief Financial Officer and Treasurer of the Company,
as trustee of the John A. Kane Grantor Retained Annuity Trust, as to which
shares Mr. Kane disclaims beneficial ownership, (b) 2,000 shares held by
Pamela J. Pure, Vice President, Marketing of the Company, jointly with her
husband David T. Pure and (c) 12,964 shares subject to outstanding stock
options held by Robert W. Baker, Jr., Vice President, General Counsel and
Secretary of the Company, which are exercisable on or within 60 days after
January 15, 1998.
3
<PAGE>
ELECTION OF DIRECTORS
The Board 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
terms expire at the 1999 Annual Meeting of Stockholders, two Class II
Directors, whose terms expire at the 2000 Annual Meeting of Stockholders, and
three Class III Directors, whose terms expire at this Meeting. 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 III Directors, Robert H. Hoehl, Stuart H. Altman,
Ph.D. and Malcolm A. Gleser, M.D., Ph.D. are presently serving as Class III
Directors of the Company. Mr. Hoehl and Dr. Altman have been Directors since
1995. Dr. Gleser has been a Director since July 1997. The persons named in the
enclosed proxy will vote for the election of each of the nominees for Class
III Directors unless the proxy is marked otherwise or unless one or more
nominees are unable or unwilling to serve. If elected, Mr. Hoehl, Dr. Altman
and Dr. Gleser will serve until the 2001 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 or the Board may reduce the number of Directors.
Pursuant to the terms of an Agreement and Plan of Merger (the "Merger
Agreement") dated as of March 25, 1997 by and among the Company, a subsidiary
of the Company and PHAMIS, Inc. ("PHAMIS"), a subsidiary of the Company was
merged into PHAMIS (the "Merger"), with PHAMIS being the surviving corporation
in the Merger and becoming a wholly-owned subsidiary of the Company. The
Merger was consummated in July 1997. In September 1997, PHAMIS was merged with
and into the Company. Pursuant to the Merger Agreement, the Board has fixed
the number of Directors of the Company at nine. As of the date hereof, the
Board was comprised of eight members. The Company may elect one additional
Director in 1998. Proxies cannot be voted at this Meeting for a greater number
of persons than the three nominees for Class III Directors named herein.
Larry D. Grandia, a former Class I Director of the Company, resigned as a
Director effective as of May 19, 1997, the date of the 1997 Annual Meeting of
Stockholders. The Board filled the vacancy created by Mr. Grandia's
resignation in July 1997 by electing Mr. Sample as a Class I Director. Each of
Dr. Gleser and Mr. Sample has been elected as a Director of the Company
pursuant to the Merger Agreement. Prior to the Merger, Dr. Gleser served as a
director of PHAMIS and Mr. Sample served as President and Chief Executive
Officer and a director of PHAMIS.
There are no family relationships between or among any Directors of the
Company.
Set forth below are the name of, and certain information with respect to
each member of the Board (including the nominees for Class III Directors).
Information with respect to the number of shares of Common Stock beneficially
owned by each Director, directly or indirectly, as of January 15, 1998,
appears under the heading "Security Ownership of Certain Beneficial Owners and
Management."
NOMINEES FOR CLASS III DIRECTORS
ROBERT H. HOEHL, age 56, has served as Chairman of the Board of the Company
since founding the Company in 1969. Since October 1996, Mr. Hoehl has assisted
Mr. Tarrant with new business initiatives and acquisitions. Mr. Hoehl served
as Executive Vice President of the Company until his resignation in
October 1996.
4
<PAGE>
STUART H. ALTMAN, PH.D., age 60, 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. In
November 1997, Dr. Altman was appointed by President Clinton to the Bipartisan
Commission on the Future of Medicine. He was a four-term chairman of the U.S.
Congressional Prospective Payment Assessment Commission from 1983 to April
1996 and served as a senior member of the Clinton-Gore Health Policy
Transition Group from 1992 to January 1993. Dr. Altman served in the
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 1971 to
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.
MALCOLM A. GLESER, M.D., PH.D., age 55, has served as a Director and Chief
Clinical Design Architect of the Company since July 1997. Dr. Gleser was a co-
founder of PHAMIS and served as a director of PHAMIS from 1981 to July 1997.
Dr. Gleser served as PHAMIS's Chairman of the Board from 1982 to July 1997 and
as its Senior Vice President of Corporate Research Organization from May 1995
to July 1997. He served as Senior Vice President of Business Development of
PHAMIS from 1991 to May 1995.
CLASS I DIRECTORS
RICHARD E. TARRANT, age 55, 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 1988
to December 1994 and as Chairman of the University Health Center (Vermont)
from 1992 to 1994.
PAUL L. EGERMAN, age 49, has served as a Director of the Company since 1984.
From 1984 and until the expiration of his employment agreement with the
Company in June 1996, Mr. Egerman served the Company in various capacities,
including Senior Vice President from 1987 to June 1996 and Chief Operating
Officer from 1991 to June 1994. Mr. Egerman was a founder of Interpretive Data
Systems, Inc. which was merged into the Company in 1984. Since July 1996, Mr.
Egerman has acted as a consultant to the software industry.
FRANK T. SAMPLE, age 52, has served as a Director of the Company since July
1997. Mr. Sample served as Executive Vice President of the Company from July
1997 to November 1997. Mr. Sample was President, Chief Executive Officer and a
director of PHAMIS from 1990 to July 1997.
CLASS II DIRECTORS
HENRY M. TUFO, M.D., age 58, has served as a Director of the Company since
November 1995. Dr. Tufo has been Executive Vice President of the Company since
September 1995. Dr. Tufo has served as Chief Operating Officer of the Company
since September 1996. Dr. Tufo served as Vice President and Chief Medical
Officer of the Company from August 1995 to September 1995 and as a consultant
to the Company from February 1995 to August 1995. Dr. Tufo served as the
Chairman of Vermont Managed Care, a managed care organization which is wholly
owned by Fletcher Allen Healthcare, an integrated delivery network, from 1990
to October 1997. Dr. Tufo was the President and Chief Executive Officer of the
University Health Center (Vermont) from 1989 to December 1994. Dr. Tufo is
Professor of Medicine at the University of Vermont College of Medicine.
5
<PAGE>
STEVEN M. LASH, age 44, 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 1980 to September 1994.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board, which provides the
opportunity for direct contact between the Company's independent auditors and
the Board. 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 two (2) meetings in 1997.
The members of the Audit Committee are Dr. Altman, Mr. Lash (Chairman) and
Dr. Tufo.
The Company also has a standing Compensation Committee of the Board, which
provides recommendations to the Board 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 one (1)
meeting during 1997, but acted by unanimous written consent on two (2)
occasions. The Subcommittee held no meetings in 1997, but acted by unanimous
written consent on four (4) occasions. The members of the Compensation
Committee are Dr. Altman (Chairman), Mr. Egerman, Mr. Lash and Mr. Tarrant.
The members of the Subcommittee are Dr. Altman and Mr. Lash. 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 considers transactions in which Directors have an
interest. The Committee held one (1) meeting during 1997, but acted by
unanimous written consent on one (1) occasion. The members of the Committee
are Dr. Altman (Chairman) and Mr. 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. The
Board will consider nominees recommended by stockholders. Stockholders who
wish to recommend nominees for Director should send such recommendations to
the Secretary of the Company at the principal office of the Company, who will
forward them to the Board for consideration.
The Board held nine (9) meetings during 1997. All Directors attended 100% of
the total number of meetings of the Board and all committees of the Board on
which they served.
BOARD OF DIRECTORS COMPENSATION
All of the Directors are reimbursed for expenses incurred in connection with
their attendance at Board and Committee meetings. Each non-employee Director
earns (i) a $5,000 annual fee, (ii) $1,500 for attendance at each regular
meeting of the Board, (iii) $500 for attendance at each special meeting of the
Board and (iv) $500
6
<PAGE>
for each regular and special meeting of the Board, if such Director does not
attend such meeting in person. Each non-employee Director who serves as the
chairman of a committee of the Board also earns an annual fee of $1,000. In
addition, on the date of each annual meeting of stockholders of the Company
(the "Annual Issuance Date"), each non-employee Director who has attended at
least 80% of the meetings of the Board over the year prior to the Annual
Issuance Date, receives a number of shares of Common Stock equal to $10,000
divided by the average of the high and low prices of the Common Stock as
listed on the Nasdaq National Market on the Annual Issuance Date. Employee
Directors do not receive any compensation in their capacities as Directors.
For the fiscal year ended December 31, 1997, Dr. Altman earned $19,000, Mr.
Egerman earned $18,000, Mr. Grandia earned $5,500, Mr. Lash earned $18,000 and
Mr. Sample earned $1,500 in Directors' fees. In addition, for the fiscal year
ended December 31, 1997, each of Dr. Altman, Mr. Egerman and Mr. Lash received
300 shares of Common Stock in connection with his services as a non-employee
Director of the Company. Mr. Grandia resigned as a Director of the Company
effective as of May 19, 1997, the date of the 1997 Annual Meeting of
Stockholders. Mr. Sample was elected to the Board in July 1997.
1995 Director Stock Option Plan. The 1995 Director Stock Option Plan was
adopted by the Board and approved by the stockholders of the Company in
September 1995. Amendments to the 1995 Director Stock Option Plan were adopted
by the Board in February, March and April of 1997 and approved by the
stockholders of the Company in April and July of 1997 (the 1995 Director Stock
Option Plan, as amended, is referred to herein as the "Director Plan").
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
80,000 shares of Common Stock may be issued upon exercise of options granted
under the Director Plan.
Pursuant to the terms of the Director Plan, the selection of a non-employee
Director as a recipient of an option, the timing of the grant of any such
option, the exercise price of any such option and the number of shares of
Common Stock subject to any such option are determined by (i) the Board or
(ii) a committee or subcommittee composed solely of two or more non-employee
Directors (within the meaning of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended) having full authority to act in the matter.
Options granted under the Director Plan are not transferable by the optionee
except by will or by the laws of descent and distribution. Each option granted
under the Director Plan shall terminate and may no longer be exercised on the
earlier of (i) the date 10 years after the date of grant or (ii) the date one
year after the optionee ceases to serve as a Director of the Company (but in
no event later than 10 years after the date of grant); provided that, in the
event that an optionee ceases to serve as a Director due to his or her death
or disability (within the meaning of Section 22(e)(3) of the Internal Revenue
Code of 1986, as amended), then the exercisable portion of the option may be
exercised, within the period of one year following the date the optionee
ceases to serve as a Director (but in no event later than 10 years after the
date of grant), by the optionee or by the person to whom the option is
transferred by will, by the laws of descent and distribution, or by written
notice.
During fiscal 1997, Dr. Altman, Mr. Egerman and Mr. Lash were each granted
an option under the Director Plan to purchase 1,798 shares of Common Stock at
an exercise price of $33.3750 per share. In addition, on the date of this
Meeting, Dr. Altman, Mr. Egerman, Dr. Gleser, Mr. Lash and Mr. Sample will
each receive an option under the Director Plan to purchase that number of
shares of Common Stock equal to $60,000 divided by the average of the high and
low prices of the Common Stock on the Nasdaq National Market on the date of
the Meeting (the "Market Price") at an exercise price per share equal to the
Market Price.
7
<PAGE>
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
three fiscal years of the Company's President and Chief Executive Officer and
the Company's four other most highly compensated executive officers on
December 31, 1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
-------------------- ------------
SECURITIES ALL OTHER
NAME AND UNDERLYING COMPEN-
PRINCIPAL POSITION(1) YEAR SALARY BONUS OPTIONS SATION(2)
--------------------- ---- -------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Richard E. Tarrant........... 1997 $372,992 -- -- $18,107
President and Chief 1996 373,000 -- -- 9,005
Executive Officer 1995 373,000 $ 1,133 -- 8,727
Henry M. Tufo, M.D. ......... 1997 250,000(3) 99,000 26,663 6,987
Executive Vice President 1996 250,000(3) 88,500 -- --
and Chief Operating Officer 1995 225,445 50,269 200,000 --
James H. Crook, Jr........... 1997 264,600 70,000 23,437 18,107
Vice President 1996 264,600 60,000 -- 9,005
1995 264,600 51,133 -- 8,727
Robert F. Galin.............. 1997 159,250 165,750 9,545 18,107
Vice President, Sales 1996 138,500 182,586 69,671 9,005
1995 137,500 137,833 16,000 8,727
Jeffrey M. Blanchard......... 1997 142,500 106,400 8,500 17,858
Vice President, Client Serv-
ices 1996 125,000 60,000 25,857 9,005
1995 120,500 80,243 8,000 8,523
</TABLE>
- --------
(1) In accordance with the rules of the Commission, this table, the option
grant table and the year-end option table which follow present information
concerning the Company's Chief Executive Officer and its four other most
highly compensated executive officers on December 31, 1997 (determined by
reference to total annual salary and bonus earned by such officers).
(2) Represents the Company's profit sharing plan contribution.
(3) Includes $21,156 paid to Dr. Tufo pursuant to an agreement between
Fletcher Allen Health Care, a customer of the Company, entered into
pursuant to Dr. Tufo's employment agreement with the Company in connection
with his medical services provided to Fletcher Allen Health Care. See
"Employment Agreements."
8
<PAGE>
Option Grant Table. The following table sets forth certain information
regarding options granted during the year ended December 31, 1997 by the
Company to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL
-------------------------------------------- RATES OF STOCK
NUMBER OF PERCENT OF PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(1)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------
NAME GRANTED FISCAL YEAR PRICE(2) DATE 5% 10%
---- ---------- ------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Tarrant...... -- -- -- -- -- --
Henry M. Tufo, M.D. .... 14,463 2.06% $ 30.25 5/1/07 $275,145 $697,271
12,200 1.74 31.2188 11/24/07 239,527 607,008
James H. Crook, Jr. .... 9,337 1.33 30.25 5/1/07 177,628 450,143
14,100 2.01 31.2188 11/24/07 276,830 701,542
Robert F. Galin......... 7,400 1.05 31.2188 5/1/07 145,287 368,185
2,145 .31 31.6250 12/22/07 42,661 108,113
Jeffrey M. Blanchard.... 8,500 1.21 31.2188 11/24/07 166,883 422,915
</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 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 and the date on which options are
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.
9
<PAGE>
Year-End Option Table. The following table sets forth certain information
regarding stock options exercised during the year ended December 31, 1997 and
stock options held as of December 31, 1997 by the Named Executive Officers.
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-
UNEXERCISED THE-MONEY OPTIONS
OPTIONS AT FISCAL AT FISCAL YEAR-
SHARES YEAR-END END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED(1) UNEXERCISEABLE UNEXERCISEABLE(2)
---- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Richard E. Tarrant...... -- -- -- --
Henry M. Tufo, M.D. .... -- -- 0/26,663 $ 0/$108,164
James H. Crook, Jr. .... -- -- 0/23,437 0/ 91,806
Robert F. Galin......... 19,014 $488,741 21,418/69,798 141,974/ 391,753
Jeffrey M. Blanchard.... 31,000 881,133 10,465/31,892 96,012/ 184,038
</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 the Nasdaq
National Market on December 31, 1997 was $37.00. Value is calculated on
the basis of the difference between the option exercise price and $37.00
multiplied by the number 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 (the "Agreement") with 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
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 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 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 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 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
10
<PAGE>
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 12 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 are Dr. Altman, Mr. Egerman, Mr.
Lash and Mr. 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. Egerman served the Company in various
capacities from 1984 to June 1996, including Senior Vice President from 1987
to June 1996 and Chief Operating Officer from January 1991 to June 1994.
Mr. Grandia resigned as a Director of the Company and a member of the
Compensation Committee effective as of May 19, 1997.
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 on
January 1, 1995, October 1, 1996 and February 1, 1997, the Company leases
approximately 120,385 square feet of the premises located at 116 Huntington
Avenue from Huntington Avenue Limited Partnership, a Vermont limited
partnership (the "Huntington 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 Huntington Partnership, and Messrs. Tarrant,
Hoehl, Egerman, Blanchard, Galin, Kane, Baker and another employee of the
Company acquired the remaining 99% limited partnership interest. The remainder
of the premises, consisting of approximately 135,945 square feet, is leased to
unrelated parties. The Company paid rent to the Huntington Partnership
relating to the premises in the amount of $3,024,349 during the fiscal year
ended December 31, 1997.
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.
Pursuant to a lease dated as of April 7, 1992, as amended on April 21, 1997,
the Company leases approximately 21,770 square feet of office space located at
4901 LBJ Freeway from 4901 LBJ Limited
11
<PAGE>
Partnership, a Vermont limited partnership ("LBJ"). 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 LBJ, 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, composed solely of the non-employee Directors of
the Company, approved the lease by the Company of as much additional space as
may become available in the premises owned by LBJ as may be needed by the
Company, provided rental rates are at fair market value and other terms are
commercially reasonable. The remainder of approximately 21,790 square feet is
leased to unrelated parties. The Company paid rent to LBJ in the amount of
$243,718 during the fiscal year ended December 31, 1997.
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 an Amended and Restated Lease
Agreement effective November 1, 1997, the Company leases the entire premises
at 1400 Shelburne Road from BDP, consisting of approximately 120,000 square
feet, of which (i) 60,000 square feet has been leased by the Company since
March 1989 and (ii) 60,000 square feet represents an addition to the original
premises, the construction of which was completed in December 1997. The
Committee on Interested Director Transactions of the Board approved the
Amended and Restated Lease Agreement with BDP and the transactions
contemplated thereby in February 1997 and December 1997. The Company paid rent
relating to these premises and made certain other payments to BDP in the
aggregate amount of $798,467 for fiscal 1997. The Company was 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 BDP and
State Street Bank and Trust Company, and also guaranteed the payment of
certain trustee fees to The First National Bank of Boston (approximately $1.25
million as of September 1995) pursuant to a certain industrial development
bond financing. BDP constructed the building subject to the lease using the
$4.0 million proceeds received in connection with the bond financing. All of
the Company's guarantees relating to 1400 Shelburne Road were terminated in
February 1998.
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 1997
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 ("IDS"). The trustee of IDS is Mr. Tarrant and the beneficiaries of IDS
are Messrs. Tarrant, Hoehl and Egerman. The Company paid rent to IDS relating
to the premises in the amount of $204,664 for fiscal 1997.
12
<PAGE>
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 $165,139 to the Hotel in fiscal 1997, or
approximately $60 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, as amended ("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 (the "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 Voting Trust Agreement or otherwise (other than in a registered
public offering), the transferee will take such shares of Common Stock subject
to the Voting Trust Agreement, and as a condition precedent to the transfer,
must agree in writing to be bound by the terms of the Voting Agreement.
The Company entered into a tax indemnification agreement (the "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.
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 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
Compensation Committee, 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
13
<PAGE>
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 three 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. 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 1997 was $372,992. This
is lower than comparable salary levels at other companies within the industry
and was based on an acknowledgment of
14
<PAGE>
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.
Paul L. Egerman
Richard E. Tarrant
Steven M. Lash
15
<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, 1997 with the cumulative total return
on (i) the Nasdaq Total U.S. Index (the "Market Index") and (ii) the Nasdaq
Computer & Data Processing Index (the "Peer Index") (assuming the investment
of $100 in the Company's Common Stock, the Market Index and the Peer 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 quarter
thereafter, through the year ended December 31, 1997. 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 COMPANY INDEX, MARKET INDEX AND PEER INDEX
<CAPTION>
Measurement period Company Market Peer
(Fiscal Year Covered) Index Index Index
- --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
11/17/95 $100.000 $100.000 $100.000
12/29/95 $145.550 $100.931 $100.341
03/29/96 $121.466 $105.639 $105.042
06/28/96 $163.351 $114.262 $116.753
09/30/96 $146.597 $118.327 $119.073
12/31/96 $119.895 $124.143 $123.818
03/31/97 $114.136 $117.415 $114.930
06/30/97 $144.503 $138.935 $147.374
09/30/97 $144.764 $162.440 $161.174
12/31/97 $154.974 $152.337 $152.098
</TABLE>
16
<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
Securities Exchange Act of 1934, as amended.
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; 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. The trustee of IDS is Mr. Tarrant and the beneficiaries of IDS
are Messrs. Tarrant, Hoehl, and Egerman. The Company paid rent to IDS relating
to the premises in the amount of $204,664 for fiscal 1997.
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. The partners
of BDP are Messrs. Tarrant and Hoehl. The Company paid rent to BDP relating to
the premises in the amount of $154,800 for fiscal 1997.
1400 Shelburne Road, South Burlington, Vermont. Pursuant to an Amended and
Restated Lease Agreement effective November 1, 1997, the Company leases the
entire premises at 1400 Shelburne Road from BDP, consisting of approximately
120,000 square feet, of which (i) 60,000 square feet has been leased by the
Company since March 1989 and (ii) 60,000 square feet represents an addition to
the original premises, the construction of which was completed in December
1997. The partners of BDP are Messrs. Tarrant and Hoehl. The Committee on
Interested Director Transactions of the Board approved the Amended and
Restated Lease Agreement with BDP and the transactions contemplated thereby in
February 1997 and December 1997. The Company paid rent to BDP relating to the
premises in the amount of $608,267 for fiscal 1997. The Company was 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 BDP
and State Street Bank and Trust Company, and also guaranteed the payment of
certain trustee fees to The First National Bank of Boston (approximately $1.25
million as of September 1995) pursuant to a certain industrial development
bond financing. BDP constructed the building subject to the lease using the
$4.0 million proceeds received in connection with the bond financing. All of
the Company's guarantees relating to 1400 Shelburne Road were terminated in
February 1998.
116 Huntington Avenue, Boston, Massachusetts. Pursuant to an Agreement of
Lease dated as of April 13, 1994, as amended on January 1, 1995, October 1,
1996 and February 1, 1997, the Company leases approximately 120,385 square
feet of the premises located at 116 Huntington Avenue from the Huntington
Partnership. The
17
<PAGE>
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. The
remainder of the premises, consisting of approximately 135,945 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
Huntington 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 Huntington
Partnership relating to the premises in the amount of $3,024,349 during the
fiscal year ended December 31, 1997.
4901 LBJ Freeway, Dallas, Texas. Pursuant to a lease dated as of April 7,
1992, as amended on April 21, 1997, the Company leases approximately 21,770
square feet of office space located at 4901 LBJ Freeway from LBJ. 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, composed
solely of the non-employee Directors of the Company, approved the lease by the
Company of as much additional space as may become available in the premises
owned by LBJ as may be needed by the Company, provided the rental rates are at
fair market value and other terms are commercially reasonable. The remainder
of approximately 21,790 square feet is leased to unrelated parties. The
Company paid rent to LBJ in the amount of $243,718 during the fiscal year
ended December 31, 1997.
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 Agreement" 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 12 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, and (ii)
agreed to pay Ms. Pure's 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 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 25% of the total
number of options granted, commencing one year from the date of grant.
18
<PAGE>
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
Board and by a majority of the disinterested members of the Board 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.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board, 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, 1998. Although stockholder approval of
the Board's selection of Ernst & Young LLP is not required by law, the Board
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
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 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.
19
<PAGE>
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal
office in Burlington, Vermont not later than December 18, 1998 for inclusion
in the proxy statement for that meeting.
By Order of the Board of Directors,
ROBERT W. BAKER, JR., Secretary
April 13, 1998
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.
20
<PAGE>
[X] PLEASE MARK BOXES
AS IN THIS EXAMPLE
----------------------------------------
IDX SYSTEMS CORPORATION
----------------------------------------
PROXY APPOINTMENT FORM
Mark box at right if an address change or comment has been noted on
the reverse side of this card. [_]
RECORD DATE SHARES:
------------------
Please be sure to sign and date this Proxy Appointment Form Date
- --------------------------------------------------------------------------------
- ----------Stockholder sign here --------------------- Co-owner sign here -------
1. To elect the following Class III Directors
(except as marked below): FOR ALL WITH- FOR ALL
NOMINEES HOLD EXCEPT
Stuart H. Altman, Ph.D. [_] [_] [_]
Malcolm A. Gleser, M.D., Ph.D.
Robert H. Hoehl
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
the "For All Except" box and strike a line through the name(s) of the
nominee(s) in the list above.
FOR AGAINST ABSTAIN
2. To ratify the selection of Ernst & Young LLP
as the Company's independent auditors for the [_] [_] [_]
current year.
Please sign exactly as name(s) appear(s) hereon. When shares are held by
joint owners, both should sign. When signing as attorney, executor,
administator, trustee or guardian, please give full title as such. If a
corporation or partnership, please sign by authorizing person.
DETACH CARD DETACH CARD
IDX SYSTEMS CORPORATION
Dear Stockholder,
Please take note of the important information enclosed with this Proxy
Appointment Form. 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 the Proxy Appointment Form to indicate how your shares
will be voted, then sign the card, detach it and return it in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, May 18,
1998.
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 18, 1998
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 as if personally present at the Annual
Meeting of Stockholders of the Company to be held at the Ramada Inn and
Conference Center at 1117 Williston Road, South Burlington, Vermont 05403, on
May 18, 1998 at 10:00 a.m., local time, and at any adjournment thereof.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS MAY PROPERLY 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 AND PROPOSAL 2. 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 indicates his intent to vote in person.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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