<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Under 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 2000 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 15, 2000
To The Stockholders:
The 2000 Annual Meeting of Stockholders of IDX Systems Corporation will be
held at the Clarion Hotel and Conference Center at 1117 Williston Road, South
Burlington, Vermont 05403, on Monday, May 15, 2000 at 10:00 a.m., local time,
to consider and act upon the following matters:
1. To elect three Class II Directors to serve for the ensuing three years.
2. 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 April 5, 2000 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 21, 2000
Whether or not you expect to attend the Annual 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 Annual
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 2000 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 15, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of IDX Systems Corporation for use at the
2000 Annual Meeting of Stockholders to be held at the Clarion Hotel and
Conference Center at 1117 Williston Road, South Burlington, Vermont 05403, on
Monday, May 15, 2000 at 10:00 a.m., local time, and at any adjournment or
adjournments of that 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, 1999 is being
mailed to stockholders with the mailing of this Notice and Proxy Statement on
or about April 21, 2000.
A copy of the company's Annual Report on Form 10-K for the year ended
December 31, 1999, as filed with the Securities and Exchange 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 SEC's home page on the Internet at
http://www.sec.gov.
Voting Securities and Votes Required
On April 5, 2000, the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting, there were
outstanding and entitled to vote an aggregate of 28,013,339 shares of common
stock of the company, $.01 par value per share. 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 Annual Meeting.
Shares of common stock present in person or represented by proxy (including
such shares that 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 Annual
Meeting at which a quorum is present. If a quorum exists, action on any other
matter properly coming before the Annual 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 that 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 31, 2000,
with respect to the beneficial ownership of the company's common stock by:
. each person known by the company to own beneficially more than 5% of the
outstanding shares of the company's common stock;
. each current Director and nominee for Director;
. each executive officer named in the Summary Compensation Table under the
heading "Executive Compensation" below (with the exception of Henry M.
Tufo, M.D., each, a "Named Executive Officer");
. and all current Directors and executive officers of the company as a
group.
The following table also sets forth certain information, as of January 31,
2000, with respect to the beneficial ownership of shares of common stock and
Series A convertible preferred stock of Channelhealth Incorporated, a
privately-held majority-owned subsidiary of the company ("CHI"), by each
current Director and nominee for Director, each Named Executive Officer and
all current Directors and executive officers of the company as a group. The
directors and officers of the company disclaim beneficial ownership of the
shares of common stock of CHI which are owned by the company.
The number of shares of common stock beneficially owned by each Director or
executive officer is determined under the rules of the SEC, 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,
as well as any shares that the individual has the right to acquire within 60
days after January 31, 2000, 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.
2
<PAGE>
<TABLE>
<CAPTION>
Shares of
CHI Series A
Shares of Shares of Convertible
IDX Common CHI Common Preferred
Stock Percentage of Stock Stock
Beneficially IDX Common Stock Beneficially Beneficially
Name and Address of Beneficial Owner Owned Outstanding(/1/) Owned(/2/) Owned(/3/)
- ------------------------------------ ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C>
5% Stockholders
Robert H. Hoehl(/4/)..... 6,047,797 21.7% 0 105,000
c/o IDX Systems Corpora-
tion
1400 Shelburne Road
South Burlington, VT
05403
Richard E. Tarrant(/5/).. 6,117,950 21.9% 105,000 0
c/o IDX Systems Corpora-
tion
1400 Shelburne Road
South Burlington, VT
05403
Amy E. Tarrant(/6/)...... 2,824,785 10.1% N/A N/A
Fairholt
570 South Prospect
Street
Burlington, VT 05401
Pequot Capital Manage-
ment, Inc.(/7/)......... 2,545,400 9.1% N/A 2,542,243
500 Nyala Farm Road
Westport, CT 06880
Wellington Management
Company, LLP(/8/)....... 2,337,900 8.4% N/A N/A
75 State Street
Boston, MA 02109
Other Directors
Henry M. Tufo,
M.D.(/9/)............... 59,758 * 0 15,000
Frank T. Sample(/10/).... 18,259 * 0 1,000
Stuart H. Altman,
Ph.D(/11/).............. 10,268 * 0 10,000
Steven M.
Lash(/12/)(/13/)........ 5,901 * 0 5,000
Allen Martin,
Esq.(/14/).............. 12,102 * 0 21,186
Mark F. Wheeler,
MD(/15/)(/16/).......... 43,980 * 15,000 20,000
Peter W. Van Etten....... 0 * 0 0
Other Named Executive Of-
ficers
James H. Crook,
Jr.(/16/)(/17/)......... 235,784 * 105,000 0
Robert F.
Galin(/16/)(/18/)....... 47,569 * 90,000 0
Jeffrey M.
Blanchard(/16/)(/19/)... 46,536 * 80,000 0
John A.
Kane(/16/)(/20/)........ 40,527 * 80,000 0
All current directors and
executive officers as a
group
(18 persons)(/21/)...... 12,782,464 45.4% 671,000 177,186
</TABLE>
- --------
* Represents holdings of less than one percent.
(1) Number of shares deemed outstanding includes 27,932,479 shares as of
January 31, 2000, plus any shares subject to options held by the person
or entity in question that are exercisable on or within 60 days after
January 31, 2000.
(2) Shares of common stock of CHI beneficially owned by the Directors, Named
Executive Officers and all directors and executive officers as a group
include shares issuable to such officer or Director on or within 60
3
<PAGE>
days after January 31, 2000 upon exercise of outstanding stock options. As
of January 31, 2000, no Directors or officers owned more than 1% of the CHI
common stock outstanding, and all Directors and executive officers as a
group beneficially owned 2.6% of the total CHI common stock outstanding as
of such date.
(3) As of January 31, 2000, no executive officers and only one Director,
Robert H. Hoehl (who owns 3.9%), owned more than 1% of the Series A
convertible preferred stock of CHI outstanding; and all directors and
executive officers as a group beneficially owned 6.5% of the Series A
convertible preferred stock of CHI outstanding.
(4) Includes 697,500 shares held by Mr. Hoehl as trustee of the Robert H.
Hoehl Grantor Retained Annuity Trust and 697,500 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
92,052 shares held by Mr. Hoehl's wife, Cynthia K. Hoehl as the trustee
of four trusts (23,013 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 80,000 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 43,590 shares held by Mrs. Hoehl, as to which
shares Mr. Hoehl disclaims beneficial ownership. Also includes 4,437,155
shares that may become subject to a voting trust upon the death or
incompetence of Mr. Hoehl.
(5) Includes 698,000 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. Also includes 2,575,365 shares held by
Amy E. Tarrant in her sole name and 70,920 shares held by Amy E. Tarrant,
Mr. Tarrant's former wife, as the trustee of five trusts (14,184 shares
each), the beneficiaries of which are the Tarrants' children, which
shares are subject to an informal voting arrangement between Amy E.
Tarrant and Mr. Tarrant with Mr. Tarrant having full voting power, and as
to which shares Mr. Tarrant and Amy E. Tarrant each disclaim beneficial
ownership. Also includes 148,500 shares held by the Tarrant Family
Foundation, a Vermont non-profit corporation, the officers and trustees
of which are Mr. Tarrant, Amy Tarrant and certain of their children, and
as to which shares Mr. Tarrant and Amy Tarrant each disclaim beneficial
ownership. Also includes 2,617,665 shares that may become subject to a
voting trust upon the death or incompetence of Mr. Tarrant. Of the shares
held by Mr. Tarrant in his sole name, 2,571,965 shares are held in a
margin account with BT Alex. Brown, which shares may from time to time
pledged by Mr. Tarrant in order to secure short-term loans which may be
obtained by Mr. Tarrant from BT Alex. Brown. Also includes 7,500 shares
subject to outstanding stock options held by Mr. Tarrant that are
exercisable on or within 60 days after January 31, 2000.
(6) This information is derived from a Schedule 13G filed with the SEC on
March 24, 2000. Includes 2,575,365 shares held by Amy E. Tarrant in her
sole name and 70,920 shares held by Amy E. Tarrant, as trustee which are
subject to an informal voting arrangement between Amy E. Tarrant and
Richard E. Tarrant with Richard E. Tarrant having full voting power, and
148,500 shares held by the Tarrant Family Foundation, a Vermont non-
profit corporation, the officers and trustees of which are Amy E. Tarrant
and Richard E. Tarrant and certain of their children, and as to which
shares Amy E. Tarrant and Richard E. Tarrant each disclaim beneficial
ownership.
(7) Represents shares held by Pequot Capital Management, Inc. as reported in
a Schedule 13G filed with the SEC on February 10, 2000. Also represents
shares of Series A convertible preferred stock of CHI owned by Pequot
Private Equity Fund II, L.P., an affiliate of Pequot Capital Management,
Inc.
(8) Represents 2,337,900 shares of the company's common stock which are held
of record by clients of Wellington Management Company, LLP, and which
shares may be deemed to be beneficially owned by Wellington Management in
its capacity as investment adviser, as reported in a Schedule 13G/A filed
with the SEC on February 11, 2000.
4
<PAGE>
(9) Includes 11,524 shares subject to outstanding stock options held by Dr.
Tufo that are exercisable on or within 60 days after January 31, 2000.
(10) Includes 1,448 shares subject to outstanding stock options held by Mr.
Sample that are exercisable on or within 60 days after January 31, 2000.
(11) Includes 7,246 shares subject to outstanding stock options held by Dr.
Altman that are exercisable on or within 60 days after January 31,
2000.
(12) Includes 5,246 shares subject to outstanding stock options held by Mr.
Lash that are exercisable on or within 60 days after January 31, 2000.
(13) Consists of 5,000 shares of Series A convertible preferred stock of CHI
held by Mr. Lash and Cia Colobella Lash as trustees of the Lash Family
Trust U/A dated 12/15/99 as to which shares Mr. and Mrs. Lash each
disclaim beneficial ownership.
(14) Includes 592 shares subject to outstanding stock options held by Mr.
Martin that are exercisable on or within 60 days after January 31, 2000.
(15) Includes 3,125 shares held in the company's 401(k) plan and 13,920
shares subject to outstanding stock options held by Dr. Wheeler that are
exercisable on or within 60 days after January 31, 2000.
(16) Includes for the following persons, the following shares of CHI common
stock which are subject to stock options exercisable on or within 60
days after January 31, 2000: Robert W. Baker, Jr., 80,000 shares; Gene
H. Barduson, 20,000 shares; Mr. Blanchard, 80,000 shares; Vicki
Blanchard, 32,000 shares; Mr. Crook, 105,000 shares; Mr. Galin, 90,000
shares; Stephen C. Gorman, 32,000 shares; Mr. Kane, 80,000 shares; Walt
N. Marti, 32,000 shares; and Mr. Wheeler, 15,000 shares.
(17) Includes 52,487 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 8,521 shares jointly held
by Mr. Crook and Mr. Crook's wife, Andrea Crook, and 31,802 shares
subject to stock options held by Mr. Crook that are exercisable on or
within 60 days after January 31, 2000.
(18) Includes 45,819 shares subject to outstanding stock options held by Mr.
Galin that are exercisable on or within 60 days after January 31, 2000.
(19) Consists of 46,536 shares subject to outstanding stock options held by
Mr. Blanchard that are exercisable on or within 60 days after January
31, 2000.
(20) Includes 15,553 shares held by Mr. Kane as trustee of the John A. Kane
Grantor Retained Annuity Trust, as to which shares Mr. Kane disclaims
beneficial ownership. Also includes 16,647 shares subject to outstanding
stock options held by Mr. Kane that are exercisable on or within 60 days
after January 31, 2000.
(21) Includes an aggregate of 188,280 shares subject to outstanding stock
options held by the Directors and the Named Executive Officers that are
exercisable on or within 60 days after January 31, 2000. Also includes
(a) 13,858 shares subject to outstanding stock options held by Robert W.
Baker, Jr., Vice President, General Counsel and Secretary, that are
exercisable on or within 60 days after January 31, 2000, (b) 12,500
shares subject to outstanding stock options held by Walt N. Marti, Vice
President, Radiology and Imaging Solutions Division, that are
exercisable on or within 60 days after January 31, 2000, (c) 13,750
shares subject to outstanding stock options held by Vicki Blanchard,
Vice President, Integrated Solutions Division, that are exercisable on
or within 60 days after January 31, 2000 and (d) 7,475 shares subject to
outstanding stock options held by Stephen C. Gorman, Vice President,
Systems Division, that are exercisable on or within 60 days after
January 31, 2000.
5
<PAGE>
ELECTION OF DIRECTORS
The 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 terms expire at the 2002 Annual Meeting of Stockholders,
three Class II Directors, whose terms expire at this Meeting, and three Class
III Directors, whose terms expire at the 2001 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. There are no family relationships between or among any
Directors of the company.
The nominees for Class II Director, Henry M. Tufo, M.D., Steven M. Lash and
Peter W. Van Etten are presently serving as Class II Directors of the company.
Dr. Tufo has been a Director since 1995; Mr. Lash, since 1995; and Mr. Van
Etten, since September 1999. The persons named in the enclosed proxy will vote
for the election of each of the nominees for Class II Director unless the
proxy is marked otherwise or unless one or more nominees is unable or
unwilling to serve. If elected, Dr. Tufo and Messrs. Lash and Van Etten will
serve until the 2003 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.
Set forth below are the names of, and certain information with respect to,
the members of the Board (including the nominees for Class II Director).
Information with respect to the number of shares of common stock beneficially
owned by each Director, directly or indirectly, as of January 31, 2000,
appears under the heading "Security Ownership of Certain Beneficial Owners and
Management."
CLASS I DIRECTORS
Richard E. Tarrant, age 57, co-founded the company in 1969 and has served as
a Director and as the Chief Executive Officer of the company since that time;
he was also President of the company from 1969 to February 1999. 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 Board of Trustees of the University Health Center (Vermont)
from 1992 to 1994.
Frank T. Sample, age 54, has served as a Director of the company since July
1997 and was Executive Vice President of the company from July 1997 to
November 1997. Mr. Sample has served as President, Chief Executive Officer and
Director of VitalCom Inc., an enterprise-wide patient monitoring and
communications company, since November 1997, and as Chairman of its Board
since February 1998. Mr. Sample was President, Chief Executive Officer and a
Director of PHAMIS Incorporated from December 1990 to July 1997.
Allen Martin, Esq., age 62, has served as a Director of the company since
February 1999. Mr. Martin is an attorney and has been a Director of the law
firm of Downs Rachlin & Martin PLLC since 1970. He is the head of that firm's
Health Care Practice Group; he also concentrates in corporate and utility
finance law. Mr. Martin is a Director and the Chairman of the Board of WICOR
Americas, Inc. Mr. Martin is also a Director and Chairman of the Finance
Committee of Union Mutual Insurance, a property and casualty mutual insurance
company.
6
<PAGE>
NOMINEES FOR CLASS II DIRECTORS
Henry M. Tufo, M.D., age 60, has served as a Director of the company since
November 1995 and as a consultant since September 1999. Dr. Tufo served as
Executive Vice President from September 1995 to September 1999. He served as
Chief Operating Officer of the company from September 1996 to February 1999;
as Vice President and Chief Medical Officer from August 1995 to September
1995; and as a consultant from February 1995 to August 1995. Dr. Tufo was the
Chairman of Vermont Managed Care, a managed care organization which is wholly
owned by Fletcher Allen Healthcare, an integrated delivery network, from July
1990 to October 1997. Dr. Tufo was the President and Chief Executive Officer
of University Health Center (Vermont) from July 1989 to December 1994. Dr.
Tufo is Professor of Medicine at University of Vermont College of Medicine.
Steven M. Lash, age 46, has served as a Director of the company since
November 1995. Since July 1999, Mr. Lash has served as President and Chief
Executive Officer of DermTech International, a provider of dermatology focused
consulting and preclinical and clinical testing services for the health and
beauty aid, chemical, cosmetic and pharmaceutical industries. Mr. Lash engaged
in business as an independent consultant from June 1998 to July 1999. Mr. Lash
served as Chief Financial Officer of FPA Medical Management, a physician
management organization, from September 1994 to March 1998, and as Executive
Vice President of FPA Medical Management from September 1994 to June 1998. FPA
Medical Management filed for protection under Chapter 11 of the United States
Bankruptcy Code in the United States District Court for the District of
Delaware in July 1998. Mr. Lash was the Executive Vice President of Sharp
Healthcare, a hospital and clinic system, from January 1980 to September 1994.
Peter W. Van Etten, age 53, has served as a Director of the company since
September 1999. Mr. Van Etten has been the President and Chief Executive
Officer of the Juvenile Diabetes Foundation since January 2000. He served as
President and Chief Executive Officer of UCSF, Stanford Health Care from
February 1997 to November 1999 and as President and Chief Executive Officer of
Stanford Health Services from 1994 to 1997. He also served as Chief Financial
Officer of Stanford University from 1991 to 1994.
CLASS III DIRECTORS
Robert H. Hoehl, age 58, co-founded the company in 1969 and has served as
Chairman of the Board since that time. 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.
Stuart H. Altman, Ph.D., age 62, has served as a Director of the company
since November 1995. Dr. Altman has been a Professor of National Health Policy
at The Heller School at Brandeis University since 1977. He served as Dean of
The Heller School 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 Medicare. 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 November 1992
to January 1993. Mr. Altman is a member of the Board of Directors of
OrthoLogic Corp., a developer, manufacturer and marketer of orthopedic devices
designed to promote the healing of musculoskeletal tissue.
7
<PAGE>
Mark F. Wheeler, M.D., M.P.H., age 50, has served as a Director of the
company since February 1999 and as its Chief Technical Architect since July
1997. He co-founded PHAMIS in 1981 and served as its Director of Research and
Development from its founding until its acquisition by IDX.
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, and reviewing the scope and
results of audits and reviewing the company's internal accounting control
policies and procedures. The Audit Committee held five meetings in 1999. The
members of the Audit Committee are Mr. Lash (Chairman), Dr. Altman 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 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,
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 officers of the company. The Compensation
Committee held one meeting and acted eight times by unanimous written consent
in 1999. The subcommittee held no meetings and acted twice by unanimous
written consent in 1999. The members of the Compensation Committee are Dr.
Altman (Chairman), 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 two meetings and acted once by unanimous written
consent during 1999. The members of the committee are Dr. Altman (Chairman),
Mr. Lash and Mr. Sample.
The company also has a standing Benefits Committee, which carries out all of
the duties and obligations of the company as plan administrator under its
employee health and welfare benefit plans. The committee held no meetings and
acted once by unanimous written consent during 1999. The members of the
committee are Dr. Tufo (Chairman) and Dr. Altman.
The company also has an Internet Committee, which considers matters and
transactions related to the company's Internet strategy. The committee held
three meetings and did not act by unanimous written consent during 1999. The
members of the committee are Mr. Hoehl (Chairman), Mr. Lash, Martin, Mr.
Tarrant and Mr. Wheeler.
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 five meetings during 1999. All Directors attended at least
75% of the meetings of the Board and all committees of the Board on which they
served.
8
<PAGE>
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:
. a $5,000 annual fee;
. $1,500 for attendance at each regular and special meeting of the Board;
and
. a $500 fee 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, each nonemployee Director who
has attended at least 80% of the meetings of the Board over the prior year
receives a number of shares of common stock equal to $60,000 divided by the
average of the high and low prices of the common stock as listed on the Nasdaq
National Market on that date. Employee Directors do not receive any
compensation in their capacities as Directors.
For the fiscal year ended December 31, 1999, Dr. Altman earned $13,000, Mr.
Lash earned $16,000, Mr. Sample earned $12,000, Mr. Martin earned $13,000 and
Mr. Van Etten earned $4,000 in Directors' fees. In addition, in connection
with services rendered as a non-employee Director of the company for the
fiscal year ended December 31, 1999, Dr. Altman, Mr. Lash and Mr. Sample each
received 481 shares of common stock and Mr. Martin received 160 shares of
common stock. On November 15, 1999, Mr. Wheeler was granted an option to
purchase 15,000 shares of common stock of CHI at an exercise price of $10.00
per share, which option is fully vested and exercisable.
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 this Director Plan were adopted by the Board in
February, March and April 1997 and approved by the stockholders in April and
July 1997.
Under the current 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 current 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 shares of
common stock subject to any such option are determined by (1) the Board or (2)
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 (1) the date 10 years after the date of grant or (2) 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); provide that, in the
event 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
9
<PAGE>
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 year 1999, Dr. Altman, Mr. Lash, Mr. Martin and Mr. Sample
were each granted an option under the Director Plan to purchase 2,887 shares
of common stock at an exercise price of $20.7813 per share. In addition, on
the date of this Annual Meeting, Dr. Altman, Mr. Lash, Mr. Sample, Mr. Martin
and Mr. Van Etten will each receive an option under the Director Plan to
purchase the number of shares of common stock equal to $60,000 divided by the
average of the high and low prices of the common stock on the Nasdaq National
Market on that date (the "Market Price") at an exercise price per share equal
to the Market Price.
Compensation of Executive Officers
SUMMARY COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation for the last three fiscal years of the
company's President and Chief Executive Officer and the company's four other
most highly compensated executive officers during fiscal 1999 (the "Named
Executive Officers"), in addition to Henry M. Tufo, M.D., the former Executive
Vice President and Chief Operating Officer.
<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation Awards
---------------------- -------------
Securities All Other
Name and Principal Salary Bonus Underlying Compensation(/2/)
Position Year ($) ($) Options(/1/) ($)
- ------------------ ---- -------- -------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Richard E.
Tarrant(/3/)........... 1999 $372,986 $ 74,250 30,000 $ --
Chief Executive Officer
and former President (CHI) 105,000 --
1998 372,984 97,083 -- 15,215
1997 372,992 -- -- 18,107
James H. Crook,
Jr.(/4/)............... 1999 316,374 45,570 85,000 4,800
Vice President (CHI) 105,000
1998 264,600 70,000 -- 15,215
1997 264,600 70,000 23,437 18,107
Robert F. Galin......... 1999 192,500 53,250 20,000 2,680
Vice President, Sales (CHI) 90,000
1998 180,000 130,500 -- 15,215
1997 159,250 165,750 9,545 18,107
Jeffrey M. Blanchard.... 1999 192,500 26,250 35,000 4,800
Vice President, Client
Services (CHI) 80,000
1998 160,000 96,415 -- 15,215
1997 142,500 106,400 8,500 17,858
John A. Kane............ 1999 188,000 22,500 25,000 4,800
Chief Financial Officer (CHI) 80,000
1998 167,000 90,500 -- 15,215
1997 161,000 87,870 8,900 18,107
Henry M. Tufo,
M.D.(/5/).............. 1999 372,430(/6/) 32,900 -- --
Former Executive Vice 1998 250,000(/7/) 95,150 -- 15,215
President and Chief
Operating Officer
1997 250,000(/7/) 99,000 26,663 6,987
</TABLE>
10
<PAGE>
- --------
(1) In addition to receiving options to purchase common stock of the company,
certain of the Named Executive Officers were granted options in 1999 to
purchase common stock of CHI (designated in the table as CHI). Each CHI
option of such Named Executive Officers has an exercise price of $10.00
and are fully vested and exercisable.
(2) Represents the company's profit sharing plan contribution.
(3) Mr. Tarrant resigned as President in February 1999; he continues to serve
as Chief Executive Officer.
(4) Mr. Crook was named President and Chief Operating Officer in February
1999.
(5) Dr. Tufo resigned as Chief Operating Officer in February 1999 and as
Executive Vice President in September 1999; he currently performs certain
consulting services for the company.
(6) Includes $133,333 paid to Dr. Tufo for consulting services from September
1 through December 31, 1999 and $10,400 paid to Dr. Tufo (pursuant to an
agreement with 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 "Certain Relationships and Related Transactions."
(7) Includes $21,156 paid to Dr. Tufo (pursuant to an agreement with Fletcher
Allen Health Care, a customer of the company, entered into pursuant to
Dr. Tufo's employment agreement with the company) in connection with his
medical services provided to Fletcher Allen Health Care. See "Certain
Relationships and Related Transactions."
Option Grants in 1999
The following table sets forth certain information concerning grants of
stock options during the year ended December 31, 1999 to each of the Named
Executive Officers in addition to Henry M. Tufo, M.D., the former Executive
Vice President and Chief Operating Officer. The company granted no stock
appreciation rights during fiscal 1999,.
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock
Price Appreciation
for Option Term
Individual Grants ($)(/3/)
--------------------------------------------------- -------------------
Percent of
Total Options Exercise
Number of Shares Granted To Price
Underlying Employees in Per
Options Fiscal Year Share Expiration
Granted(/1/)(/2/) (%) ($) Date 5% 10%
----------------- ------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Tarrant...... 30,000 2.73% $13.625 4/22/09 $257,061 $ 651,442
(CHI) 105,000 8.41 10.00 11/15/09 660,345 1,673,385
James H. Crook, Jr...... 85,000 7.74 13.625 4/22/09 728,339 1,845,753
(CHI) 105,000 8.41 10.00 11/15/09 660,345 1,673,385
Robert F. Galin......... 20,000 1.82 13.625 4/22/09 171,374 434,295
(CHI) 90,000 7.21 10.00 11/15/09 566,010 1,434,330
Jeffrey M. Blanchard.... 30,000 2.73 13.625 4/22/09 257,061 651,442
5,000 0.45 13.625 4/22/09 42,843 108,574
(CHI) 80,000 6.41 10.00 11/15/09 503,120 1,274,960
John A. Kane............ 20,000 1.82 13.625 4/22/09 171,374 434,295
5,000 0.46 13.625 4/22/09 42,843 108,574
(CHI) 80,000 6.41 10.00 11/15/09 503,120 1,274,960
Henry M. Tufo........... -- -- -- -- -- --
</TABLE>
11
<PAGE>
- --------
(1) Options have been granted during the fiscal year to the Named Executive
Officers to purchase common stock of the company as well as common stock
of CHI (designated in the table as CHI). Such options to purchase CHI
common stock are fully vested and exercisable.
(2) All options to purchase shares of the common stock of the company 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.
(3) 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 company's common stock and the date on
which options are exercised.
Aggregated Options Exercises in 1999
and Year-End 1999 Option Values
The following table sets forth certain information regarding stock options
exercised during the year ended December 31, 1999 and stock options held as of
December 31, 1999 by the Named Executive Officers in addition to Henry M.
Tufo, M.D., the former Executive Vice President and Chief Operating Officer.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities In-the-Money Options at
Shares Underlying Unexercised Fiscal Year-
Acquired on Value Options at Fiscal Year-End End($)(/2/)(/3/)
Name Exercise(#) Realized($)(/1/) Exercisable/Unexerciseable(#) Exercisable/Unexercisable
- ---- ----------- ---------------- ----------------------------- -------------------------
<S> <C> <C> <C> <C>
Richard E. Tarrant...... -- $ -- 7,500/22,500 $131,719/$395,156
(CHI) -- -- 105,000/0 0/0
James H. Crook, Jr...... -- -- 31,802/76,635 376,486/1,125,080
(CHI) -- -- 105,000/0 0/0
Robert F. Galin......... -- -- 53,819/43,397 216,713/279,852
(CHI) -- -- 90,000/0 0/0
Jeffrey M. Blanchard.... -- -- 37,786/39,571 254,395/489,712
(CHI) -- -- 80,000/0 0/0
John A. Kane............ -- -- 16,647/28,713 195,112/353,648
(CHI) -- -- 80,000/0 0/0
Henry M. Tufo, M.D...... -- -- 11,524/15,139 5,085/8,474
</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, 1999 was $31.25. Value is
calculated on the basis of the difference between the option exercise
price and $31.25, multiplied by the number of shares of common stock
underlying the option.
(3) No public market exists for the shares of CHI common stock. Accordingly,
no value in excess of the exercise price has been attributed to these
options.
12
<PAGE>
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Dr. Altman, Mr. Lash and Mr.
Tarrant. Mr. Tarrant, the 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.
The following is a description of certain transactions involving the company
and/or certain members of its Board, its Compensation Committee or its
executive management.
Shelburne Road. Mr. Tarrant and Mr. Hoehl are the two general partners of
BDP Realty Associates, a Vermont general partnership ("BDP"). 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.
Until October 1999, the company leased from BDP the entire premises at 1500
Shelburne Road, Burlington, Vermont, consisting of approximately 20,000 square
feet. The company leases the entire premises at 1400 Shelburne Road,
Burlington, Vermont, consisting of approximately 120,000 square feet. The
Committee on Interested Director Transactions of the Board approved the lease
with BDP and the transactions contemplated thereby in February 1997 and
December 1997. The company paid rent to BDP in the aggregate amount of
$1,331,400 during 1999.
The company is currently negotiating to acquire the land and buildings at
Shelburne Road from BDP, consisting of approximately 112,000 square feet of
office space and has commenced construction of approximately 90,000 additional
square feet of office space at that location.
Huntington Avenue. Mr. Tarrant is the President and a director of Huntington
Real Estate, Inc., a Vermont corporation. Other executive officers or
Directors of the company who serve as executive officers or directors of
Huntington Real Estate are Mr. Hoehl (Vice President), Mr. Kane (Director,
Vice President and Treasurer) and Mr. Baker (Director, Vice President and
Secretary). Huntington Real Estate has no compensation committee or other
board committee performing similar functions. Executive officers or Directors
of the company who are stockholders of Huntington Real Estate are Messrs.
Tarrant and Hoehl. Huntington Real Estate holds a 1% general partnership
interest in the Huntington Avenue Limited Partnership, a Vermont limited
partnership (the "Huntington Partnership"), and Messrs. Tarrant, Hoehl,
Blanchard, Galin, Kane, Baker and another employee of the company hold 68% of
the limited partnership interest.
Until July 1999, when the office building owned by the Huntington
Partnership was sold to an unrelated party, the company leased approximately
120,400 square feet of the premises located at 116 Huntington Avenue, Boston,
Massachusetts, from the Huntington Partnership. The remainder of the premises,
consisting of approximately 141,500 square feet, is leased to unrelated
parties. The company paid rent to the Huntington Partnership relating to the
premises in the amount of $2,888,712 during 1999.
LBJ Freeway. Mr. Tarrant is the President and a director of LBJ Real Estate
Inc., a Vermont corporation. Other executive officers or Directors of the
company who serve as executive officers or directors of LBJ Real Estate are
Mr. Hoehl (Vice President), Mr. Kane (Director, Vice President and Treasurer),
and Mr. Baker (Director, Vice President and Secretary). LBJ Real Estate has no
compensation committee or other board committee performing similar functions.
Executive officers or Directors of the company who are stockholders of LBJ
Real Estate are Messrs. Tarrant and Hoehl. LBJ Real Estate holds a 1% general
partnership interest in 4901 LBJ Limited Partnership, a Vermont limited
partnership ("LBJ"), and Messrs. Hoehl, Tarrant, Galin, Kane and two other
employees of the company hold 73% of the limited partnership interest.
13
<PAGE>
The company leases approximately 37,868 square feet of office space located
at 4901 LBJ Freeway, Dallas, Texas, from LBJ. The remainder of approximately
5,500 square feet is leased to unrelated parties. The company paid rent to LBJ
in the amount of $457,777 during 1999.
Commonwealth Avenue. The company leased during fiscal 1999 approximately
11,000 square feet of office space located at 882 Commonwealth Avenue,
Brookline, Massachusetts from IDS Realty Trust, a Massachusetts nominee trust
("IDS"). The trustee of IDS is Mr. Tarrant and the beneficiaries of IDS
include Messrs. Tarrant and Hoehl. The company paid rent to IDS relating to
the premises in the amount of $87,936 for fiscal 1999.
Stock Redemption Agreement. Mr. Tarrant and Mr. Hoehl (together with the
trustees of the trust referenced below, the "Founding Stockholders") and the
company entered into a Redemption Agreement provide for the orderly control
and management of the company and to provide a source of funds for disabled
Founding Stockholders and the estates of deceased Founding Stockholders. The
agreement provides that neither Founding Stockholder may transfer his shares
of common stock during the period commencing on April 1, 1993 and ending on
the date both Founding Stockholders are deceased or incompetent, without the
consent of the other Founding 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
Founding Stockholder the right to vote the shares of common stock of the
deceased or incompetent Founding 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 trust agreement.
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 its stockholders. Under the guidance of the company's
Compensation Committee of the Board, 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 plans than other comparable companies. It is the company's philosophy
to pay less-than-market base salaries and greater-than-market incentives.
In applying this philosophy, the Compensation Committee has established a
program to (1) attract and retain, executives of outstanding abilities who are
critical to the long-term success of the company, and (2) 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.
14
<PAGE>
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:
. a base salary that is determined by individual contributions and
sustained performance within an established competitive salary range,
and
. an 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 its current 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. 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 nonemployee 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; the company's 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 1999 was $372,986. 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
less than the industry average. Also in recognition of his equity ownership,
the company has not granted to the Chief Executive Officer any options to
purchase common stock of the company.
15
<PAGE>
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code of 1986, as amended, generally disallows tax deductions
to publicly-traded corporations for compensation over $1.0 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.
Richard E. Tarrant
Steven M. Lash
16
<PAGE>
Stock Performance Graph
The comparative stock performance graph below compares the cumulative
stockholder return on common stock of the company for the period from November
17, 1995 through December 31, 1999 with cumulative total return on
(1) the Nasdaq Total U.S. Index, and
(2) the Nasdaq Computer & Data Processing Index.
The graph assumes an investment of $100 in each of the company's common
stock, the Nasdaq Total U.S. Index and the Nasdaq Computer & Data Processing
Index, 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, 1999. Prior to November 17, 1995, the company's
common stock was not registered under the Securities Exchange Act of 1934.
IDX Systems Corporation Comparative Performance Graph
[GRAPH APPEARS HERE]
IDX Systems
Corporation Market Index Peer Index
----------- ------------ ----------
11/1995 100.0 100.0 100.0
12/1995 193.1 100.9 100.3
12/1996 159.0 124.2 123.8
12/1997 205.6 152.2 152.1
12/1998 244.4 214.6 271.5
12/1999 173.6 397.1 596.2
17
<PAGE>
Compliance with Section 16 Reporting Requirements
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the company's directors, executive officers and holders of more than 10% of
the company's common stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of common
stock and other equity securities of the company. Except as described below,
and based solely on its review of copies of Section 16(a) reports filed by the
reporting persons 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.
Steven M. Lash, a member of the Board of Directors of the company, reported
the exchange of his shares of common stock of EDiX Corporation for shares of
the company's common stock which occurred in April 1999 on a Form 4 filed on
June 10, 1999.
Allen Martin, a member of the Board of Directors of the company, reported
the purchase of shares of the company's common stock which occurred in
November 1999 on a Form 4 filed on January 4, 2000.
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, Chief Executive Officer
and Director; Robert H. Hoehl, Chairman of the Board; 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.
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 leased the entire premises at 1500 Shelburne
Road, consisting of approximately 20,000 square feet, from BDP Realty
Associates, until October 1999. 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 1999.
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. 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 $1,176,600
for fiscal 1999.
The company is currently negotiating to acquire the land and buildings at
Shelburne Road from BDP, consisting of approximately 112,000 square feet of
office space and has commenced construction of approximately 90,000 additional
square feet of office space at that location.
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 leased approximately 120,400 square
feet of the premises located at 116 Huntington Avenue from the Huntington
Partnership until July 1999, when the office building owned by the Huntington
Partnership was sold to an unrelated party. The remainder of the premises,
consisting of approximately 141,500 square feet, is leased to unrelated
parties. The company paid rent to the Huntington Partnership relating to the
premises in the amount of $2,888,712 during 1999.
18
<PAGE>
Huntington Real Estate, Inc. holds a 1% general partnership interest in the
Huntington Partnership, and Messrs. Tarrant, Hoehl, Blanchard, Galin, Kane,
Baker and another employee of the company hold 68% of the limited partnership
interest. The executive officers or Directors of the company who serve as
executive officers of Huntington Real Estate, Inc. are Mr. Tarrant (Director
and President), Mr. Hoehl (Vice President), Mr. Kane (Director, Vice President
and Treasurer), and Mr. Baker (Director, Vice President and Secretary).
4901 LBJ Freeway, Dallas, Texas. Pursuant to a lease dated as of April 7,
1992, as amended as of December 31, 1994, May 1, 1995, April 21, 1997 and
February 1, 1998, the company leases approximately 37,868 square feet of
office space located at 4901 LBJ Freeway from 4901 LBJ Limited Partnership
("LBJ"). The remainder of approximately 5,500 square feet is leased to
unrelated parties. The company paid rent to LBJ in the amount of $457,777
during the fiscal year ended December 31, 1999.
LBJ Real Estate Inc. holds a 1% general partnership interest in LBJ, and
Messrs. Hoehl, Tarrant, Galin, Kane and two other employees of the company
hold 73% of the limited partnership interest. The executive officers or
Directors of the company who serve as executive officers of LBJ Real Estate
Inc. are Mr. Tarrant (President), Mr. Hoehl (Vice President), Mr. Kane
(Director, Vice President and Treasurer), and Mr. Baker (Director,
Vice President and Secretary). On February 15, 1998, 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.
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 leases approximately 11,000 square feet of office space from IDS. The
trustee of IDS is Mr. Tarrant and the beneficiaries of IDS include Messrs.
Tarrant and Hoehl. The company paid rent to IDS relating to the premises in
the amount of $87,936 for fiscal 1999.
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:
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.
Dr. Tufo and the company entered into an Amended and Restated
Consulting/Employment Agreement, dated as of March 7, 1995, as amended by an
Amendment, dated as of February 16, 1999, and as further amended by a Third
Amendment, dated as of August 1, 1999. Pursuant to this agreement, Dr. Tufo
will serve as a consultant to the company until June 30, 2000, at a base
salary of $400,000 per annum, payable semi-monthly. The agreement renews
automatically for successive one-year terms until either party gives at least
12 months advance written notice of its intent not to renew. If the company
terminates this agreement prior to June 30, 2000 without cause (as defined in
the agreement), the company will be required to pay to Dr. Tufo (1) the
compensation due to him as if his services had continued until such date plus
(2) an amount equal to the difference between the market price of IDX common
stock on the date of termination and the exercise price of all unexercised
options granted to Dr. Tufo that would have become exercisable on or before
June 30, 2000.
In September 1999 and December 1999, the company entered into
indemnification agreements with each of its Directors and executive officers,
pursuant to which the company shall indemnify such Director or executive
officer to the fullest extent possible under Vermont law.
19
<PAGE>
On January 10, 2000, CHI sold 2,542,243 shares of its Series A convertible
preferred stock at a price of $11.80 per share to Pequot Private Equity Fund
II, L.P., an affiliate of Pequot Capital Management, Inc., a beneficial owner
of more than 5% of the outstanding shares of the company's common stock.
On January 17, 2000, Messrs. Altman, Lash, Martin, Sample and Van Etten,
each a Director of the company, were each granted options to purchase 2,000
shares of common stock of CHI, each with an exercise price of $11.80 per
share, as part of their compensation. These options will become fully vested
and exercisable on January 17, 2001.
On January 31, 2000, CHI sold an aggregate of 177,186 shares of its Series A
convertible preferred stock, at a price of $11.80 per share, to the following
Directors and officers of the company: Mr. Hoehl, 105,000 shares; Mr. Martin,
21,186 shares; Mr. Wheeler, 20,000 shares; Dr. Tufo, 15,000 shares; Dr.
Altman, 10,000 shares; Mr. Lash, 5,000 shares; and Mr. Sample, 1,000 shares.
See notes to the table under "Security Ownership of Certain Beneficial Owners
and Management" for information relating to the beneficial ownership of such
shares.
Conflict Policy.
The company adopted a policy, effective following the consummation of its
initial public offering November 22, 1995, that all material transactions
between the company and its officers, Directors and other affiliates must (1)
be approved by a majority of the members of the Board and by a majority of the
disinterested members of the Board and (2) 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.
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, 2000.
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
Matters to be Considered at the Meeting
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.
20
<PAGE>
Solicitation of Proxies
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 2001 Annual Meeting
Proposals of stockholders intended to be included in the company's proxy
statement for the 2001 Annual Meeting of Stockholders must be received by the
company at its principal office in Burlington, Vermont not later than December
22, 2000.
Stockholders who wish to make a proposal at the 2001 Annual Meeting--other
than one that will be included in the company's proxy materials--must notify
the company no later than March 7, 2001. If a stockholder who wishes to
present a proposal fails to notify the company by this date, the proxies that
management solicits for the meeting will have discretionary authority to vote
on the stockholder's proposal if it is properly brought before the meeting.
By Order of the Board of Directors,
ROBERT W. BAKER, JR., Secretary
April 21, 2000
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.
21
<PAGE>
Appendix A
[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. [_]
CONTROL NUMBER:
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 II Directors
(except as marked below): FOR ALL WITH- FOR ALL
NOMINEES HOLD EXCEPT
(01) Henry M. Tufo, M.D. [_] [_] [_]
(02) Steven M. Lash
(03) Peter W. Van Etten
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. Your shares will be voted for the remaining
nominee(s).
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 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 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 15,
2000.
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 15, 2000
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 Clarion Hotel
and Conference Center at 1117 Williston Road, South Burlington, Vermont 05403,
on May 15, 2000 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. 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 or her 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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