<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
HEALTH SYSTEMS DESIGN 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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
HEALTH SYSTEMS DESIGN CORPORATION
1330 BROADWAY
OAKLAND, CALIFORNIA 94612
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MARCH 23, 1999, 10:00 A.M.
------------------------
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of Health
Systems Design Corporation will be held at the Oakland Marriott, 1001 Broadway,
Oakland, California, on Tuesday, March 23, 1999, at 10:00 A.M. for the following
purposes:
(1) To elect six directors.
(2) To approve the amendment of the 1996 Omnibus Equity Incentive Plan to
increase the number of shares authorized for issuance thereunder by
150,000.
(3) To transact such other business as may properly come before the meeting.
Only stockholders of record on the books of the Company as of 5:00 P.M.,
February 8, 1999, will be entitled to vote at the meeting and any adjournment
thereof. A complete list of stockholders of record as of the close of business
on February 8, 1999 will be available for inspection during normal business
hours ten days before the Annual Meeting at the Company's principal executive
offices at 1330 Broadway, Suite 1200, Oakland, California.
Dated: February 23, 1999
By Order of the Board of Directors
Catherine C. Roth,
SECRETARY
STOCKHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE.
<PAGE>
HEALTH SYSTEMS DESIGN CORPORATION
1330 BROADWAY
OAKLAND, CALIFORNIA 94612
------------------------
PROXY STATEMENT
---------------------
The enclosed proxy is solicited by the Board of Directors (the "Board") of
Health Systems Design Corporation (the "Company") to be used at the Annual
Meeting of Stockholders on March 23, 1999 and at any adjournment or postponement
thereof (the "Annual Meeting"), for the purposes set forth in the foregoing
notice. Only stockholders of record on the books of the Company as of 5:00 P.M.,
February 8, 1999, will be entitled to vote at the Annual Meeting. As of the
close of business on February 8, 1999, there were outstanding 6,714,040 shares
of Common Stock of the Company, entitled to one vote per share. This proxy
statement and the enclosed form of proxy were first sent to stockholders on or
about February 23, 1999.
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election of
the six directors proposed by the Board unless the authority to vote for the
election of directors (or for any one or more nominees) is withheld and, if no
contrary instructions are given, the proxy will be voted FOR the approval of the
amendment of the 1996 Omnibus Equity Incentive Plan. Any stockholder signing a
proxy in the form accompanying this Proxy Statement has the power to revoke it
prior to or at the Annual Meeting. A proxy may be revoked by a writing delivered
to the Secretary of the Company stating that the proxy is revoked, by a
subsequent proxy signed by the person who signed the earlier proxy, or by
attendance at the Annual Meeting and voting in person.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether or
not a quorum is present. The holders of a majority of the outstanding shares of
the Common Stock of the Company, present in person or by proxy, will constitute
a quorum for the transaction of business at the Annual Meeting or any
adjournment thereof. The election inspectors will treat abstentions and broker
non-votes as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. With regard to the election of directors,
votes may be cast "For" or "Withhold Authority" for each nominee; votes that are
withheld will be excluded entirely from the vote and will have no effect. Item 2
(the proposal to amend the 1996 Omnibus Equity Incentive Plan) requires the
affirmative vote of a majority of shares present in person or by proxy and
entitled to vote. Accordingly, abstentions on Item 2 will have the effect of a
negative vote on this item. If a broker indicates on the proxy that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote with
respect to that matter. Therefore, a broker non-vote will have no effect on
Items 1 and 2 of this Proxy Statement.
1
<PAGE>
ITEM 1--ELECTION OF DIRECTORS
The persons named below are nominees for director to serve until the next
Annual Meeting of Stockholders and until their successors shall have been
elected. The nominees constitute the present Board of Directors.
In the absence of instructions to the contrary, shares represented by the
proxy will be voted and the proxies will vote for the election of all such
nominees to the Board of Directors. If any of such persons is unable or
unwilling to be a candidate for the office of director at the date of the Annual
Meeting, or any adjournment thereof, the proxies will vote for such substitute
nominee as shall be designated by the proxies. The management of the Company has
no reason to believe that any of such nominees will be unable or unwilling to
serve if elected a director.
The following table sets forth certain information concerning the nominees,
which is based on data furnished by them.
<TABLE>
<CAPTION>
SERVED AS
BUSINESS EXPERIENCE DURING PAST FIVE YEARS DIRECTOR
NOMINEES FOR DIRECTOR AGE AND OTHER INFORMATION SINCE
- ----------------------------------- ---- ----------------------------------------------------------------- ---------
<S> <C> <C> <C>
Russell J. Harrison................ 53 President and Chief Executive Officer of the Company since August 1997
1997. Mr. Harrison was Vice President and Chief Information
Officer at Paris-- based SITA Globetel Company S.C., a
telecommunications company, from March 1996 to August 1997. Mr.
Harrison served as Chairman of 3Net Systems, a provider of
client/server solutions to the healthcare industry, from August
1993 to November 1995 and as President of 3Net Systems from
August 1993 to September 1995. From September 1991 to August
1993, Mr. Harrison served as Chief Information Officer of
McKesson Corporation, a manufacturer of pharmaceutical
products.
Richard C. Auger................... 55 Chairman of the Board of the Company since 1988. Mr. Auger is a 1988
co-founder of the Company and served as Executive Director of
Product Research of the Company from August 1997 to July 1998,
Chief Executive Officer of the Company from August 1988 to
August 1997 and President of the Company from August 1988 to
January 1996.
Catherine C. Roth.................. 48 Ms. Roth is a co-founder of the Company and served as Executive 1988
Director of Business Development of the Company from August
1997 to July 1998, President of the Company from January 1996
to August 1997 and Chief Operating Officer of the Company from
April 1994 to August 1997. From 1988 to January 1996, Ms. Roth
was the Company's Executive Vice President.
Christopher J. Herron.............. 49 President of Electran Corporation, a software development 1997
company, since January 1998. Mr. Herron served as Chief
Executive Officer of Nexgen Asia Pacific, a provider of Year
2000 correction software, from May 1997 to December 1997. From
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SERVED AS
BUSINESS EXPERIENCE DURING PAST FIVE YEARS DIRECTOR
NOMINEES FOR DIRECTOR AGE AND OTHER INFORMATION SINCE
- ----------------------------------- ---- ----------------------------------------------------------------- ---------
<S> <C> <C> <C>
1995 to 1997, Mr. Herron was President and Chief Executive
Officer of Convoy Corporation, a provider of data migration
software and services. From 1987 to 1994, Mr. Herron was with
Synon Corporation, a provider of software development tools and
services, where he held several positions, including President
and Chief Executive Officer.
J. Matthew Mackowski............... 44 Partner of Mackowski & Shepler, a private investment partnership 1992
located in San Francisco, since 1992.
Arthur M. Southam, M.D............. 42 Dr. Southam served as Chief Executive Officer of Health Net, a 1996
health maintenance organization, from July 1996 to November
1998. From 1993 to July 1996, Dr. Southam was President and
Chief Executive Officer of CareAmerica Health Plans and from
1986 to 1993 was employed at CareAmerica Health Plans in a
number of capacities, including Executive Vice President and
Chief Operating Officer.
</TABLE>
3
<PAGE>
FURTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
In March 1996, after consummation of its initial public offering, the
Company established an Audit Committee and a Compensation Committee. The Company
does not have a Nominating Committee.
The members of the Audit Committee are Christopher J. Herron, J. Matthew
Mackowski and Arthur M. Southam. Among the functions performed by this committee
are to make recommendations to the Board with respect to the engagement or
discharge of independent auditors, to review with the independent auditors the
plan and results of the auditing engagement, to review the Company's internal
auditing procedures and system of internal accounting controls and to make
inquiries into matters within the scope of its functions. The Audit Committee
held three meetings during fiscal 1998.
The members of the Compensation Committee are Christopher J. Herron, Arthur
M. Southam, M.D. and J. Matthew Mackowski. Among the functions performed by this
committee are to review and make recommendations to the Board of Directors
concerning the compensation of the key management employees of the Company and
to administer the Company's equity incentive plan. The Compensation Committee
held two meetings during fiscal 1998.
ATTENDANCE AT MEETINGS
During fiscal 1998, there were no members of the Board of Directors who
attended fewer than seventy-five percent of the meetings of the Board of
Directors and all committees of the Board on which they served.
COMPENSATION OF DIRECTORS
Directors other than Mr. Mackowski who are not employees of the Company are
paid directors fees consisting of $5,000 per year and $1,000 for each Board
meeting attended. Directors who attend meetings of the Audit Committee or
Compensation Committee receive an additional $1,000 for each meeting not held on
the same day as a Board meeting. In addition, under the Nonemployee Director
Stock Option Plan, each nonemployee director other than Mr. Mackowski will be
granted at the Annual Meeting and at each subsequent annual meeting of
stockholders at which such nonemployee director is elected to the Board, an
option to purchase 5,000 shares of Common Stock at an exercise price equal to
the fair market value on the date of grant. Mr. Auger, who was Executive
Director of Product Research of the Company until July 1998, serves as Chairman
of the Board, and received a salary of $100,000 during fiscal 1998. Subsequent
to July 1998, Mr. Auger remained an employee of the Company and provided
consulting services to the Company and received $15,987 during fiscal 1998 for
such services. Ms. Roth, who was Executive Director of Business Development of
the Company until July 1998, received a salary of $126,229 during fiscal 1998.
Subsequent to July 1998, Ms. Roth provided consulting services to the Company
and received $30,424 during fiscal 1998 for such services. Mr. Auger and Ms.
Roth receive a fee of $125 per hour as employees of the Company and it is
expected that they will continue to provide services to the Company in fiscal
1999.
4
<PAGE>
ITEM 2--APPROVAL OF THE AMENDMENT OF THE 1996
OMNIBUS EQUITY INCENTIVE PLAN
In January 1996, the stockholders of the Company adopted the 1996 Omnibus
Equity Incentive Plan (the "Plan") pursuant to which an aggregate of 500,000
shares of the Company's Common Stock were originally reserved for issuance to
employees and consultants of the Company and its subsidiaries. In March 1997,
the stockholders approved an amendment to the Plan increasing the number of
shares of common stock authorized for issuance thereunder by 400,000 shares. In
March 1998, the stockholders approved an amendment to the Plan increasing the
number of shares of common stock authorized for issuance thereunder by an
additional 500,000 shares. In January 1999, the Board of Directors of the
Company amended the Plan, subject to stockholder approval at the Annual Meeting,
to increase the number of shares authorized for issuance under the Plan by an
additional 150,000 shares.
The reason for this increase is to ensure that a sufficient number of shares
of the company's Common Stock is available under the Plan for awards to attract,
retain and motivate selected employees with outstanding experience and ability.
As of December 31, 1998, there were 135,050 shares remaining for awards, which
would increase to 285,050 if the proposal is approved. Set forth below is a
summary of the principal features of the Plan.
GENERAL
The Plan provides for the granting of stock options, stock appreciation
rights ("SARs"), restricted stock awards, performance unit awards and
performances share awards (collectively, "Awards") to key employees and
consultants of the Company and its subsidiaries.
PURPOSE
The purpose of the Plan is to promote the success, and enhance the value, of
the Company's stockholders and by providing such employees and consultants with
an incentive for outstanding performance. The Plan is further intended to
provide flexibility to the Company in its ability to motivate, attract and
retain the services of participating employees and consultants upon whose
judgement, interest and special efforts the Company is largely dependent for the
successful conduct of its operations.
ELIGIBILITY TO RECEIVE AWARDS
Employees of the Company and its subsidiaries, and persons who provide
significant services to the Company or its subsidiaries, but who are neither
employees of the Company or its subsidiaries nor directors of the Company
("consultants") are eligible to be granted Awards under the Plan. However,
incentive stock options (see below) may be granted only to employees.
ADMINISTRATION
The Plan is administered by the Compensation Committee of the Board of
Directors of the Company (the "Committee"). Subject to the terms of the Plan,
the Committee has the sole discretion to determine the employees and consultants
who shall be granted Awards, the size and the types of such Awards, and the
terms and conditions of such Awards. The Committee may delegate its authority to
grant and administer Awards to a separate committee appointed by the Committee,
but only the Committee may make Awards to participants who are executive
officers of the Company.
OPTIONS
The price of the shares of the Company's Common Stock subject to each option
(the "option price") is set by the Committee but may not be less than 50% of the
fair market value on the date of grant in the
5
<PAGE>
case of an option that is not an incentive stock option (a "nonqualified stock
option"), and not less than 100% of the fair market value on the date of grant
in the case of an incentive stock option.
Options granted under the Plan are exercisable at the times and on the terms
established by the Committee, provided that options granted to officers who are
subject to section 16(b) of the Securities and Exchange Act of 1934 (the
"Exchange Act") may not be exercised until six months following the date of
grant. Subject to the foregoing limitation, the Committee may accelerate the
exercisability of any option.
The option price must be paid in full in cash or its equivalent at the time
of exercise. The Committee also may permit payment of the option price by the
tender of previously acquired shares of the Company's stock of such other legal
consideration which the Committee determines to be consistent with the Plan's
purpose and applicable law.
STOCK APPRECIATION RIGHTS
The Plan permits the grant of three types of SARs: Affiliated SARs,
Freestanding SARs, Tandem SARs, or any combination thereof. An Affiliated SAR is
an SAR that is granted in connection with a related option and which will be
deemed to automatically be exercised simultaneous with the exercise of the
related option. A Freestanding SAR is an SAR that is granted independently of
any options. A Tandem SAR is an SAR that is granted in connection with a related
option (and when a share is purchased under the option, the SAR is similarly
cancelled).
The Committee has complete discretion to determine the number of SARs
granted to any optionee or recipient and the terms and conditions pertaining to
such SARs. However, the grant price must be at least equal to the fair market
value of a share of the Company's Common Stock on the date of grant in the case
of a Freestanding SAR and equal to the option price of the related option in the
case of an Affiliated or Tandem SAR. An SAR that is granted to an officer who is
subject 16(b) of the Exchange Act ("Section 16(b)") may not be exercised until
at lease six months following the date of grant.
RESTRICTED STOCK AWARDS
The Plan permits the grant of restricted stock awards, which are restricted
Common Stock bonuses that vest in accordance with terms established by the
Committee. Restricted stock awards granted to an officer subject to Section
16(b) may not vest prior to six months following the date of its grant. The
Committee may impose restrictions and conditions on the shares, including,
without limitation, restrictions based upon the achievement of specific
performance goals (Company-wide, divisional and/or individual), and/or
restrictions under applicable federal or state securities laws. The Committee
may accelerate the time at which any restrictions lapse, and/or remove any
restrictions.
PERFORMANCE UNIT/SHARE AWARDS
The Plan permits the grant of performance unit and performance share awards
which are bonuses credited to an account established for the recipient and
payable in cash, Common Stock, or a combination thereof. Each performance share
has an initial value equal to the fair market value of a share of the Company's
Common Stock on the date of its grant. The number and/or value of performance
unit/shares that will be paid out to recipients will depend upon the extent to
which performance goals established by the Committee are satisfied. The payment
date for performance unit/share awards granted to officers subject to Section
16(b) may not be less than six months from the date of grant.
After a performance unit/share award has vested, the recipient will be
entitled to receive a payout of the number of performance units/shares earned by
the recipient, to be determined as a function of the extent to which the
corresponding performance goals have been achieved. The Committee also may waive
the achievement of any performance goals for such performance unit/share.
6
<PAGE>
Subject to the applicable award agreement, performance units/shares awarded
to recipients will be forfeited to the Company upon the earlier of the
recipient's termination of employment on the date set forth in the award
agreement.
NONTRANSFERABILITY OF AWARDS
Awards granted under the Plan may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
applicable laws of descent and distribution. However, an optionee or recipient
may designate one or more beneficiaries to receive any exercisable or vested
Awards following his or her death.
NEW PLAN BENEFITS
Regulations adopted by the Securities and Exchange Commission require
disclosure of benefits to the executive officers of the Company named in the
summary compensation table and to certain other categories of award recipient,
if such benefits are determinable. In addition to the grants of stock options
set forth below, it is likely that substantial additional grants will be made to
all such persons and others during the life of the Plan, and it is impossible to
determine the amount or terms of such future grants.
The following table sets forth as of January 31, 1999 (a) the aggregate
number of shares of the Company's Common Stock subject to Awards granted to such
persons under the Plan and (b) the dollar value of such awards based on the
difference between $5.25 per share, the closing price for the shares of Common
Stock on January 31, 1999, and the weighted average exercise price at which such
Awards were granted.
<TABLE>
<CAPTION>
NUMBER OF
SHARES DOLLAR VALUE
NAME OF INDIVIDUAL OF GROUP GRANTED OF AWARDS(1)
- ------------------------------------------------------- --------- ------------
<S> <C> <C>
Richard C. Auger....................................... -0- $ -0-
Catherine C. Roth...................................... -0- -0-
J Matthew Mackowski.................................... -0- -0-
Christopher J. Herron.................................. -0- -0-
Arthur M. Southam, M.D................................. -0- -0-
Russell J. Harrison.................................... 350,000 -0-(2)
Steven Moore........................................... 60,000 -0-(2)
Robert D. Archibald.................................... 75,000 -0-(2)
Lauryn L. Jones........................................ 66,000 -0-(2)
All executive officers, as a group..................... 564,000 -0-(2)
All employees who are not executive officers, as a
group................................................ 737,620 615,094
All directors who are not executive officers, as a
group................................................ -0- -0-
</TABLE>
- ------------------------
(1) All options were granted with an exercise price equal to 100% of fair market
value on the date of grant. On January 31, 1999, the closing price for the
shares of the Company's Common Stock on the Nasdaq National Market was $5.25
per share.
(2) The weighted average exercise price of these options was greater than the
closing price for the shares of the Company's Common Stock on the Nasdaq
National Market on January 31, 1999. Accordingly, the optionees could not,
as of such date, receive any profit from the options.
TAX ASPECTS
THE FOLLOWING DISCUSSION IS INTENDED TO PROVIDE AN OVERVIEW OF THE U.S.
FEDERAL INCOME TAX LAWS WHICH ARE GENERALLY APPLICABLE TO AWARDS GRANTED UNDER
THE PLAN AS OF THE DATE OF THIS PROXY STATEMENT. PEOPLE OR ENTITIES
7
<PAGE>
IN DIFFERING CIRCUMSTANCES MAY HAVE DIFFERENT TAX CONSEQUENCES, AND THE TAX LAWS
MAY CHANGE IN THE FUTURE. THIS DISCUSSION IS NOT INTENDED TO BE CONSTRUED AS TAX
ADVICE.
A recipient of a stock option or SAR will not have taxable income on the
date of grant. Upon the exercise of nonqualified options and SARs, the
participant will recognize ordinary income equal to the difference between the
fair market value of the shares on the date of exercise and the exercise price.
Any gain or loss recognized upon any later disposition of the shares generally
will be capital gain or loss.
Purchase of shares upon exercise of an incentive stock option will not
result in any taxable income to the participant, except for purposes of the
alternative minimum tax. Gain or loss recognized by the participant on a later
sale or other disposition will either be long-term capital gain or loss or
ordinary income, depending upon how long the participant holds the shares. Any
ordinary income recognized will be in the amount, if any, by which the lesser of
(1) the fair market value of such shares on the date of exercise or (2) the
amount realized from the sale, exceeds the exercise price.
Upon receipt of restricted stock or a performance unit/share, the
participant will not have taxable income unless he or she elects to be taxed.
Absent such election, upon vesting the participant will recognize ordinary
income equal to the fair market value of the shares or units at such time.
The Company generally will be entitled to a tax deduction for an Award in an
amount equal to the ordinary income realized by the participant at the time the
participant recognizes such income. In addition, Internal Revenue Code Section
162(m) contains special rules regarding the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly compensated executive officers. The general rule is that
annual compensation paid to any of these specified executives will be deductible
only to the extent that it does not exceed $1 million.
AMENDMENT AND TERMINATION OF THE PLAN
The Board generally may amend or terminate the Plan at any time for any
reason, but as required under Section 162(m), certain material amendments must
be approved by stockholders.
REQUIRED VOTE
The affirmative vote of a majority of shares present in person or by proxy
at the Annual Meeting and entitled to vote is required to approve the proposed
amendment of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENT OF THE 1996 OMNIBUS EQUITY INCENTIVE PLAN.
8
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The compensation paid to the Company's Chief Executive Officer and each of
the Company's other executive officers who received compensation in excess of
$100,000 for services in all capacities to the Company and its subsidiaries
(collectively, the "Named Executive Officers"), for fiscal 1996, 1997 and 1998
is set forth below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL ---------------------------
COMPENSATION SECURITIES ALL OTHER
------------------ OTHER ANNUAL RESTRICTED UNDERLYING COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) STOCK AWARDS($) OPTIONS TION($)
- -------------------------------------- ---- -------- -------- --------------- --------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Russel J. Harrison ................... 1998 $250,000 $ 71,875 -- -- -- --
President and Chief Executive 1997 40,702 -- -- -- 350,000 --
Officer since August 1997
Steven L. Moore ...................... 1998 $ 73,176 $ 50,000 $ 36,770 (1) -- 60,000 --
Executive Vice President--Chief
Financial Officer since April 1998
Robert D. Archibald .................. 1998 $106,371 $ 50,000 $ 249,100 (2) -- 75,000 --
Executive Vice President--
Operations since April 1998.........
Lauryn L. Jones ...................... 1998 $132,378 $ 37,500 $ 4,433 -- 66,000 --
Executive Vice President--Sales and
Marketing since December 1997
</TABLE>
- ------------------------
(1) Represents amount paid to Mr. Moore in fiscal 1998 for consulting services
prior to his joining the Company in April 1998.
(2) Represents amount paid to Alta Associates in fiscal 1998 for consulting
services. See "Transactions with the Company" below.
The following table sets forth certain information regarding stock options
granted during fiscal 1998 to the Named Executive Officers. None of the Named
Executive Officers received awards of stock appreciation rights during fiscal
1998.
9
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(3)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
- -------------------------------------- ------------- ------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Russell J. Harrison................... -- -- -- -- -- --
Steven L. Moore....................... 60,000 9% $ 7.656 5/5/2008 $ 748,249 $ 1,191,462
Robert D. Archibald................... 75,000 12% $ 7.656 5/5/2008 $ 935,311 $ 1,489,327
Lauryn L. Jones....................... 66,000 10% $ 7.375 2/9/2008 $ 792,864 $ 1,262,504
</TABLE>
- ------------------------
(1) All options granted in fiscal 1998 are subject to a five-year vesting
schedule commencing August 1998. Under the terms of the Company's 1996
Omnibus Equity Incentive Plan, the Compensation Committee retains
discretion, subject to plan limits, to modify the terms of outstanding
options.
(2) All options were granted at fair market value at date of grant.
(3) Realizable values are reported net of the option exercise price. The dollar
amounts under these columns are the result of calculations at the 5% and 10%
rates (determined from the price at the date of grant, not the stock's
current market value) set by the Securities and Exchange Commission and
therefore are not intended to forecast possible future appreciation, if any,
of the Company's stock price. Actual gains, if any, on stock option
exercises are dependent on the future performance of the common stock as
well as the optionholder's continued employment through the vesting period.
The potential realizable value calculation assumes that the optionholder
waits until the end of the option term to exercise the option.
The following table sets forth certain information with respect to stock
option exercises during fiscal 1998 and stock options held by each of the
Company's Named Executive Officers as of September 30, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END(#) AT FY-END($)
SHARES --------------- ---------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- -------------------------------------------------------- ----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Russell J. Harrison..................................... -- -- 87,500/262,500 -0-/-0-
Steven L. Moore......................................... -- -- -0-/60,000 -0-/-0-
Robert D. Archibald..................................... -- -- -0-/75,000 -0-/-0-
Lauryn L. Jones......................................... -- -- -0-/66,000 -0-/-0-
</TABLE>
EMPLOYMENT AGREEMENT
In 1998, the Company entered into an employment contract with Russell J.
Harrison, pursuant to which Mr. Harrison serves as President and Chief Executive
Officer of the Company. The agreement expires on July 31, 2000. Pursuant to the
agreement, Mr. Harrison receives a base salary of $250,000 per year and is
eligible to receive an annual cash bonus based upon achieving certain
performance goals. The potential bonus level shall not be less than $150,000. In
addition, pursuant to the agreement, Mr. Harrison
10
<PAGE>
was granted options to purchase 350,000 shares of the Company's common stock. If
Mr. Harrison terminates the agreement and such termination is for good reason
(as defined in the agreement) the Company shall pay him, in a lump sum, the
equivalent of his base salary for 18 months and any pro-rated bonus. If the
Company terminates Mr. Harrison without cause it is required to pay him the same
amounts as if he had terminated the agreement for good reason. In addition,
under the agreement if there is a change in control of the Company (as defined
in the agreement) and Mr. Harrison's employment is terminated, the Company is
required to pay him the same amounts as if he had terminated the agreement for
good reason and, additionally, all unvested outstanding stock options shall vest
as of the date of termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mackowski & Shepler, a private investment partnership of which Mr. Mackowski
is a partner and 50% owner, provided financial and strategic advisory services
to the Company under an arrangement which commenced in November 1994. Under this
arrangement, Mackowski & Shepler received payments totaling $75,055 in fiscal
1998 and will continue to receive $7,500 per month until May 1999.
TRANSACTIONS WITH THE COMPANY
During fiscal 1998, the Company paid $249,100 to Alta Associates for
consulting services provided by Alta Associates. Robert D. Archibald, the
Company's Executive Vice President-Operations, is an officer and stockholder of
Alta Associates. The Company continues to use the services of Alta Associates
from time to time.
See "Compensation Committee Interlocks and Insider Participation" and
"Further Information Concerning the Board of Directors--Compensation of
Directors" for certain transactions between the Company and its officers and
directors.
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
To the Board of Directors:
The Compensation Committee (the "Committee") is comprised of three outside
directors of the Board of Directors, and is responsible for setting and
monitoring policies governing the compensation of executive officers. In fiscal
1998, the Committee was responsible for setting the performance and compensation
level for the Chief Executive Officer, and approved all stock option grants
under the Company's 1996 Omnibus Equity Incentive Plan. The compensation levels
for the Company's other executive officers were set by the Chief Executive
Officer and reviewed by the Committee.
The objective of Health Systems Design Corporation's executive compensation
program is to ensure that the Company is able to secure the necessary
high-caliber talent needed to contribute toward planned business goals, and
enhance stockholder value by linking the financial interests of the Company's
executives with those of the stockholders. The Company's compensation philosophy
is to offer a competitive total compensation opportunity that includes a peer
group competitive base pay element, a bonus element that varies directly with
the Company's business results against targeted goals, and an incentive stock
option element that provides financial rewards proportionate to growth in
long-term share values.
In setting compensation policies the Committee analyzed reported data of
both published industry sector compensation surveys and proxy statements of
identified peer group companies. Additionally, the Committee has periodically
reviewed data from outside compensation consultants in comparing the
compensation levels of Health Systems Design Corporation's executive officers
with similar positions in comparable organizations.
The Committee is of the opinion that the compensation levels for its
executive officers are in line with similar positions of responsibility and
scope in comparable organizations, and that an appropriate amount of total
remuneration potential exists based on the planned performance of the Company,
therefore providing sufficient incentive for executives to focus upon future
business results and share values.
CEO COMPENSATION
The salary of the Chief Executive Officer is reviewed by the Committee on an
annual basis and, in determining any salary adjustment, the Committee considers
the factors outlined above. In June 1997 the Company hired Russell J. Harrison
as a consultant with the agreement that he would assume the position of
President and Chief Executive Officer in August 1997. Mr. Harrison's
compensation package includes annual salary of $250,000, a bonus of up to
$150,000 based on achievement of specific financial performance indicators, and
stock options to purchase 350,000 shares of the Company's common stock with
vesting over five years, exercisable at the fair market value of the common
stock on the first day of his employment by the Company. Mr. Harrison's bonus
award of $71,875 for fiscal 1998 was based on the Company's achievement of
financial results against a specified target for the fiscal year. The Committee
believes that Mr. Harrison's compensation package provides adequate incentive to
achieve both short and long term Company performance.
12
<PAGE>
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Internal Revenue Code Section 162(m) contains special rules regarding the
federal income tax deductibility of compensation paid to the Company's Chief
Executive Officer and to each of the other four most highly compensated
executive officers. The general rule is that annual compensation paid to any of
these specified executives will be deductible only to the extent that it does
not exceed $1 million. Given that the annual cash compensation currently paid to
each of the Company's executive officers is substantially below $1 million, the
Company has not adopted an overall policy regarding Section 162(m).
Compensation Committee
Christopher J. Herron
Arthur M. Southam, M.D.
J. Matthew Mackowski
February 10, 1999
13
<PAGE>
PERFORMANCE GRAPH
The following graph compares the percentage change in the Company's
cumulative total stockholder return on its Common Stock for the period from the
Company's initial public offering on March 5, 1996 to September 30, 1998 with
the cumulative total return of the Nasdaq Composite (U.S.) Index and the Nasdaq
Computer and Data Processing Index, a peer group index consisting of all of the
more than 300 computer and data processing companies listed on the Nasdaq
National and Small Capitalization Markets.
The comparisons in the graph below are based on historical data and are not
indicative of, or intended to forecast, the possible future performance of the
Company's Common Stock.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF 31 MONTH CUMULATIVE TOTAL RETURN *
AMONG HEALTH DESIGN CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ COMPUTER & DATA PROCESSING INDEX
HEALTH SYSTEMS NASDAQ STOCK
DESIGN CORPORATION MARKET (U.S.)
<S> <C> <C>
3/05/96 100 100
3/96 106 101
6/96 113 109
9/96 88 113
12/96 68 118
3/97 45 112
6/97 51 132
9/97 74 155
12/97 79 145
3/98 63 170
6/98 54 175
9/98 37 158
* $100 INVESTED ON 3/05/96 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
<CAPTION>
COMPARISON OF 31 MONTH CUMULATIVE TOTAL RETURN *
AMONG HEALTH DESIGN CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ COMPUTER & DATA PROCESSING INDEX
NASDAQ COMPUTER &
DATA PROCESSING
<S> <C>
3/05/96 100
3/96 103
6/96 114
9/96 116
12/96 121
3/97 112
6/97 144
9/97 157
12/97 148
3/98 196
6/98 218
9/98 205
* $100 INVESTED ON 3/05/96 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
</TABLE>
14
<PAGE>
OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table indicates, as to (i) each person who is known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each Named Executive Officer and (iv) all
directors and executive officers as a group, the number of shares and percentage
of the Company's stock beneficially owned as of January 31, 1999.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
AS OF JANUARY 31, 1999
--------------------------
NUMBER OF
EXECUTIVE OFFICER OR DIRECTOR COMMON SHARES PERCENT
- ---------------------------------------------------------------------- -------------- --------
<S> <C> <C>
Richard C. Auger(1)................................................... 1,566,800 23.4%
Catherine C. Roth(1).................................................. 1,187,100(2) 17.7%
J. Matthew Mackowski(1)............................................... 1,439,586(3) 21.4%
The D3 Family Fund, L.P(4) ........................................... 388,000 5.8%
19605 N.E. 8th Street Camas,
Washington 98607
Russell J. Harrison................................................... 110,933(5) 1.6%
Christopher J. Herron................................................. 10,000(6) *
Arthur M. Southam, M.D................................................ 15,300(7) *
Steven L. Moore....................................................... 500 *
Robert D. Archibald................................................... -0- --
Lauryn L. Jones....................................................... 14,300(8) *
All directors and officers as a group (nine persons).................. 4,344,519(9) 63.3%
</TABLE>
- ------------------------
(*) Less than 1%.
(1) The address of Mr. Auger, Ms. Roth and Mr. Mackowski is 1330 Broadway, Suite
1200, Oakland, California 94612. Each of these persons may be deemed to be a
"control person" of the Company within the meaning of the rules and
regulations of the Securities and Exchange Commission by reason of his stock
ownership and positions with the Company.
(2) Includes 267,466 shares of Common Stock held by Ms. Roth's children.
(3) Includes 18,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days as of December 31, 1998. Also includes 686 shares
of Common Stock held by Mr. Mackowski's wife.
(4) Based on Schedule 13D filed with the Company reflecting beneficial ownership
as of June 23, 1997.
(5) Includes 110,933 shares issuable upon exercise of outstanding stock options
exercisable within 60 days as of January 31, 1999.
(6) Includes 10,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days as of January 31, 1999.
(7) Includes 15,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days as of January 31, 1999.
(8) Includes 14,300 shares issuable upon exercise of outstanding stock options
exercisable within 60 days as of January 31, 1999.
(9) Includes 168,233 shares issuable upon exercise of outstanding stock options
exercisable within 60 days as of January 31, 1999.
15
<PAGE>
SECTION 16(a) INFORMATION
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period from
October 1, 1997 to September 30, 1998 all filing requirements applicable to its
officers, directors, and greater than ten-percent beneficial owners were
complied with, except that each of Robert D. Archibald and Lauryn L. Jones
failed to file a Form 3 reflecting such person's initial beneficial ownership
and Catherine Roth failed to file a Form 5 to report certain gifts of shares to
her children.
AUDITORS
Arthur Andersen LLP, independent certified public accountants, serves as the
Company's principal accountants. Representatives of Arthur Andersen LLP will be
present at the Annual Meeting with the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
OTHER MATTERS
As of the date of this Proxy Statement, there are no other matters which
management intends to present or has reason to believe others will present to
the meeting. If other matters properly come before the meeting, those who act as
proxies will vote in accordance with their judgment.
STOCKHOLDER PROPOSALS
If any stockholder intends to present a proposal for action at the 2000
Annual Meeting of Stockholders of the Company and wishes to have such proposal
set forth in management's proxy statement, such stockholder must forward the
proposal to the Company so that it is received on or before October 26, 1999.
Proposals should be addressed to the Company at 1330 Broadway, Oakland,
California 94612, Attention: Corporate Secretary.
The attached proxy card grants the proxy holders discretionary authority to
vote on any matter raised at the Annual Meeting. If a stockholder intends to
submit a proposal at the 2000 Annual Meeting of Stockholders of the Company,
which proposal is not intended to be included in the Company's proxy statement
and form of proxy relating to such meeting, the stockholder should give
appropriate notice no later than January 9, 2000. If a stockholder fails to
submit the proposal by such date, the Company will not be required to provide
any information about the nature of the proposal in its proxy statement and the
proxy holders will be allowed to use their discretionary voting authority if the
proposal is raised at the 2000 Annual Meeting of Stockholders of the Company.
16
<PAGE>
COST OF SOLICITATION
All expenses in connection with the solicitation of this proxy, including
the charges of brokerage houses and other custodians, nominees or fiduciaries
for forwarding documents to stockholders, will be paid by the Company.
Dated: February 23, 1999.
By Order of the Board of Directors
Catherine C. Roth,
SECRETARY
17
<PAGE>
1468-PS-99
<PAGE>
APPENDIX A
HEALTH SYSTEMS DESIGN CORPORATION
1996 OMNIBUS EQUITY INCENTIVE PLAN
(AMENDED AND RESTATED AS OF JANUARY 28, 1999)
SECTION 1
ESTABLISHMENT, PURPOSE AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Health Systems Design Corporation, a Delaware
corporation (the "Company"), hereby establishes an incentive compensation plan
to be known as the "Health Systems Design Corporation 1996 Omnibus Equity
Incentive Plan" (the "Plan"). The Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units, and
Performance Shares. The Plan is effective immediately preceding the date that
the Company's Registration Statement on Form S-1 covering the sale of its Common
Stock is declared effective by the Securities and Exchange Commission.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the success,
and enhance the value, of the Company by linking the personal interests of
Participants to those of Company shareholders, and by providing Participants
with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants upon whose
judgment, interest, and special effort the successful conduct of its operation
largely is dependent.
1.3 DURATION OF THE PLAN. The Plan shall commence on the date specified in
Section 1.1, and shall remain in effect, subject to the right of the Board of
Directors to terminate the Plan at any time pursuant to Section 13 until all
Shares subject to the Plan have been purchased or acquired pursuant to the
provisions of the Plan. However, without further stockholder approval, no
Incentive Stock Option may be granted under the Plan on or after February 15,
2005.
SECTION 2
DEFINITIONS
The following terms shall have the meanings set forth below, unless plainly
required by the context:
2.1 "AFFILIATED SAR" means a SAR that is granted in connection with a
related Option, and which will be deemed to automatically be exercised
simultaneous with the exercise of the related Option.
2.2 "AWARD" means, individually or collectively, a grant under the Plan of
Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock,
Performance Units, or Performance Shares.
<PAGE>
2.3 "AWARD AGREEMENT" means an agreement entered into by each Participant
and the Company, setting forth the terms and provisions applicable to Awards
granted to Participants under this Plan.
2.4 "BOARD" or "Board of Directors" means the Board of Directors of the
Company.
2.5 "CODE" means the Internal Revenue Code of 1986, as amended. Reference to
a specific section of the Code shall include such section, any valid regulation
promulgated thereunder, and any comparable provision of any future legislation
amending, supplementing or superseding such section.
2.6 "COMMITTEE" means the committee, as specified in Section 3, appointed by
the Board to administer the Plan with respect to grants of Awards.
2.7 "COMPANY" means Health Systems Design Corporation, a Delaware
corporation, or any successor thereto.
2.8 "CONSULTANT" means any consultant, independent contractor, or other
person who provides significant services to the Company or its Subsidiaries, but
who is neither an employee of the Company or its Subsidiaries, nor a Director of
the Company.
2.9 "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company.
2.10 "DISABILITY" means a permanent and total disability within the meaning
of Code Section 22(e)(3).
2.11 "EMPLOYEE" means any employee of the Company or of the Company's
Subsidiaries, whether such employee is so employed at the time the Plan is
adopted or becomes so employed subsequent to the adoption of the Plan. Directors
who are not otherwise employed by the Company shall not be considered Employees.
2.12 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor Act thereto. Reference to a specific section
or regulation of the Exchange Act shall include such section or regulation, any
valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such section or
regulation.
2.13 "FAIR MARKET VALUE" means the average of the highest and lowest quoted
selling prices for Shares on the relevant date, or if there were no sales on
such date, the weighted average of the means between the highest and lowest
quoted selling prices on the nearest day before and the nearest day after the
relevant date, as determined by the Committee.
2.14 "FREESTANDING SAR" means a SAR that is granted independently of any
Options.
<PAGE>
2.15 "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares,
which is designated as an Incentive Stock Option and is intended to meet the
requirements of Section 422 of the Code.
2.16 "INSIDER" shall mean an Employee who, on the relevant date, is a
Company director, Company officer (within the meaning of Rule 16a-1 promulgated
under the Exchange Act), or beneficial owner of 10% or more of the Shares.
2.17 "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase
Shares which is not intended to be an Incentive Stock Option.
2.18 "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option.
2.19 "OPTION PRICE" means the price at which a Share may be purchased by a
Participant pursuant to an Option, as determined by the Committee.
2.20 "PARTICIPANT" means an Employee of the Company who has outstanding an
Award granted under the Plan.
2.21 "PERFORMANCE UNIT" means an Award granted to an Employee pursuant to
Section 9.
2.22 "PERFORMANCE SHARE" means an Award granted to an Employee, pursuant to
Section 9 herein.
2.23 "PERIOD OF RESTRICTION" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of time,
the achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, in its discretion), and the Shares are subject to a
substantial risk of forfeiture, as provided in Section 8.
2.24 "RESTRICTED STOCK" means an Award granted to a Participant pursuant to
Section 8.
2.25 "RETIREMENT" shall have the meaning for each respective individual
Participant ascribed to it in the pension plan of the Company applicable to each
such respective Participant.
2.26 "SHARES" means the shares of common stock of the Company.
2.27 "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted alone or in
connection with a related Option, designated as a SAR, pursuant to the terms of
Section 7.
2.28 "SUBSIDIARY" means any corporation in which the Company owns directly,
or indirectly through subsidiaries, at least fifty percent (50%) of the total
combined voting power of all classes of stock, or any other entity (including,
but not limited to, partnerships and joint ventures) in which the Company owns
at least fifty percent (50%) of the combined equity thereof.
<PAGE>
2.29 "TANDEM SAR" means a SAR that is granted in connection with a related
Option, the exercise of which shall require forfeiture of the right to purchase
a Share under the related Option (and when a Share is purchased under the
Option, a SAR shall similarly be cancelled).
2.30 "WINDOW PERIOD" means the period beginning on the third business day
following the date of public release of the Company's quarterly sales and
earnings information, and ending on the twelfth business day following such
date.
SECTION 3
ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Committee. The
Committee shall consist of not less than two (2) Directors. The members of the
Committee shall be appointed from time to time by, and shall serve at the
pleasure of, the Board of Directors. The Committee shall be comprised solely of
Directors who are "disinterested persons" under Rule 16b-3 under the Exchange
Act. Notwithstanding any contrary provision of the Plan, during the period prior
to the time when the Shares first are registered under Section 12 of the
Exchange Act, the Board (a) shall have all of the authority granted under the
Plan to the Committee, and (b) may exercise all of the powers of the Committee.
3.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full power, except
as limited by law or by the Certificate of Incorporation or Bylaws of the
Company, and subject to the provisions herein, to determine the size and types
of Awards; to determine the terms and conditions of such Awards in a manner
consistent with the Plan; to construe and interpret the Plan and any Award
Agreement or instrument entered into under the Plan; to establish, amend, or
waive rules and regulations for the Plan's administration; and (subject to the
provisions of Section 13 herein) to amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are within the
discretion of the Committee as provided in the Plan. Further, the Committee
shall make all other determinations which may be necessary or advisable for the
administration of the Plan. As permitted by law, the Committee may delegate its
powers; provided, however, that only the Committee may administer the Plan with
respect to Insiders.
3.3 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board of Directors shall be final, conclusive, and binding on
all persons, including the Company, its shareholders, Employees, Participants,
and their estates and beneficiaries, and shall be given the maximum deference
permitted by law.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.3, the
total number of Shares available for grant under the Plan may not exceed
1,550,000. These 1,550,000 Shares may be either authorized but unissued or
reacquired Shares.
<PAGE>
The following rules will apply for purposes of the determination of the
number of Shares available for grant under the Plan:
(a) While an Award is outstanding, it shall be counted against the
authorized pool of Shares, regardless of its vested status.
(b) The grant of an Option or Restricted Stock shall reduce the Shares
available for grant under the Plan by the number of Shares subject to
such Award.
(c) The grant of a Tandem SAR shall reduce the number of Shares available
for grant by the number of Shares subject to the related Option
(i.e., there is no double counting of Options and their related
Tandem SARs); provided, however, that, upon the exercise of such
Tandem SAR, the authorized Share pool shall be credited with the
appropriate number of Shares representing the number of shares
reserved for such Tandem SAR less the number of Shares actually
delivered upon exercise thereof or the number of Shares having a Fair
Market Value equal to the cash payment made upon such exercise.
(d) The grant of an Affiliated SAR shall reduce the number of Shares
available for grant by the number of Shares subject to the SAR, in
addition to the number of Shares subject to the related Option;
provided, however, that, upon the exercise of such Affiliated SAR,
the authorized Share pool shall be credited with the appropriate
number of Shares representing the number of shares reserved for such
Affiliated SAR less the number of Shares actually delivered upon
exercise thereof or the number of Shares having a Fair Market Value
equal to the cash payment made upon such exercise.
(e) The grant of a Freestanding SAR shall reduce the number of Shares
available for grant by the number of Freestanding SARs granted;
provided, however, that, upon the exercise of such Freestanding SAR,
the authorized Share pool shall be credited with the appropriate
number of Shares representing the number of shares reserved for such
Freestanding SAR less the number of Shares actually delivered upon
exercise thereof or the number of Shares having a Fair Market Value
equal to the cash payment made upon such exercise.
(f) The Committee shall in each cash determine the appropriate number of
Shares to deduct from the authorized pool in connection with the
grant of Performance Units and/or Performance Shares.
(g) To the extent that an Award is settled in cash rather than in Shares,
the authorized Share pool shall be credited with the appropriate
number of Shares having a Fair Market Value equal to the cash
settlement of the Award.
<PAGE>
4.2 LAPSED AWARDS. If any Award granted under this Plan is cancelled,
terminates, expires, or lapses for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding Tandem SAR),
any Shares subject to such Award again shall be available for the grant of an
Award under the Plan. However, in the event that prior to the Award's
cancellation, termination, expiration, or lapse, the holder of the Award at any
time received one or more "benefits of ownership" pursuant to such Award (as
defined by the Securities and Exchange Commission, pursuant to any rule or
interpretation promulgated under Section 16 of the Exchange Act), the Shares
subject to such Award shall not be made available for regrant under the Plan.
4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation,
stock dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the Shares, such adjustment shall be made
in the number and class of Shares which may be delivered under the Plan, and
in the number and class of and/or price of Shares subject to outstanding
Options, SARs, and Restricted Stock granted under the Plan, as may be
determined to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or diminishment of Awards; and provided that
the number of Shares subject to any Award shall always be a whole number.
SECTION 5
ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all
Employees and Consultants of the Company and its Subsidiaries, as determined by
the Committee, including Employees who are members of the Board, but excluding
Directors who are not Employees.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee in its sole discretion, shall select from all eligible Employees and
Consultants, those to whom Awards shall be granted, and the Committee, in its
sole discretion, shall determine the nature and amount of each Award.
SECTION 6
STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Employees and Consultants at any time and from time to
time as shall be determined by the Committee. The Committee shall have
discretion in determining the number of Shares subject to Options granted to
each Participant. The Committee may grant ISOs, NQSOs, or a combination thereof.
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, the conditions of exercise of the
Options, and such other provisions
<PAGE>
as the Committee shall determine. The Award Agreement also shall specify
whether the Option is intended to be an ISO or a NQSO.
6.3 OPTION PRICE. The Option Price for each grant of an Option shall be
determined by the Committee in its sole discretion.
6.3.1 NONQUALIFIED STOCK OPTIONS. In the case of a Nonqualified Stock
Option, the Option Price shall be not less than fifty percent (50%) of the
Fair Market Value of a Share on the date that the Option is granted.
6.3.2 INCENTIVE STOCK OPTIONS. In the case of an Incentive Stock Option, the
Option Price shall be not less than one-hundred percent of the Fair Market Value
of a Share on the date that the Option is granted; provided, however, that if at
the time the Option is granted, the Employee (together with persons whose stock
ownership is attributed to the Employee pursuant to Section 424(d) of the Code)
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any of its Subsidiaries, the Option Price
shall be not less than one-hundred and ten percent (110%) of the Fair Market
Value of a Share on the date that the Option is granted.
6.4 DURATION OF OPTIONS. Each Option shall expire at such time as the
Committee, in its sole discretion, shall determine; provided, however, that no
Incentive Stock Option may be exercised after the expiration of 10 years from
the date the Option was granted; provided, further, no Incentive Stock Option
granted to an Employee who, together with persons whose stock ownership is
attributed to the Employee pursuant to Section 424(d) of the Code, owns stock
possessing more than 10% of the total combined voting power of all classes of
the stock of the Company or any of its Subsidiaries, may be exercised after the
expiration of 5 years from the date the Option was granted. After the Option is
granted, the Committee, in its sole discretion, may extend the maximum term of
such Option.
6.5 EXERCISE OF OPTIONS. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions
as the Committee, in its sole discretion, shall determine. After an Option is
granted, the Committee, in its sole discretion, may accelerate the
exercisability of the Option. However, in no event may any Option granted to
an Insider be exercisable until six (6) months following the date of its
grant.
6.6 PAYMENT. Options shall be exercised by the Participant's delivery of a
written notice of exercise to the Secretary of the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the Company
in full in cash or its equivalent. The Committee, in its sole discretion, also
may permit exercise (a) by tendering previously acquired Shares having an
aggregate Fair Market Value at the time of exercise equal to the total Option
Price (provided that the Shares which are tendered must have been held by the
Participant for at least six (6) months prior to their tender to satisfy the
Option Price), or (b) by any other means which the Committee, in its sole
discretion, determines to provide legal consideration for the Shares, and to be
consistent with the Plan's purpose and applicable law.
<PAGE>
As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option under
the Plan, as it may deem advisable, including, without limitation, restrictions
under applicable Federal securities laws, under the requirements of any national
securities exchange or system upon which such Shares are then listed and/or
traded, and under any blue sky or state securities laws applicable to such
Shares.
6.8 CERTAIN ADDITIONAL PROVISIONS FOR INCENTIVE STOCK OPTIONS.
6.8.1 EXERCISABILITY. The aggregate Fair Market Value (determined at the
time the Option is granted) of the Shares with respect to which Incentive
Stock Options are exercisable for the first time by any Employee during any
calendar year (under all plans of the Company and its Subsidiaries) shall not
exceed $100,000.
6.8.2 TERMINATION OF EMPLOYMENT. No Incentive Stock Option may be exercised
more than three months after the Participant's termination of employment for any
reason other than Disability or death, unless (a) the Participant dies during
such three-month period, and (b) the Award Agreement permits later exercise. No
Incentive Stock Option may be exercised more than one year after the
Participant's termination of employment on account of Disability, unless (a) the
Participant dies during such one-year period, and (b) the Award Agreement
permits later exercise.
6.8.3 EMPLOYEES ONLY. Incentive Stock Options may be granted only to persons
who are Employees at the time of grant. Consultants shall not be eligible to
receive Incentive Stock Options.
6.9 NONTRANSFERABILITY OF OPTIONS. No Option granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will, the laws of descent and distribution, or as allowed under
Section 10. All Options granted to a Participant under the Plan shall be
exercisable during his or her lifetime only by such Participant.
SECTION 7
STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, a SAR
may be granted to an Employee or Consultant at any time and from time to time as
shall be determined by the Committee, in its sole discretion. The Committee may
grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination
thereof.
The Committee shall have complete discretion to determine the number of SARs
granted to any Participant, and consistent with the provisions of the Plan, the
terms and conditions pertaining to such SARs. However, the grant price of a
Freestanding SAR shall be at
<PAGE>
least equal to the Fair Market Value of a Share on the date of grant of the
SAR. The grant price of Tandem or Affiliated SARs shall equal the Option
Price of the related Option. In no event shall any SAR granted to an Insider
become exercisable within the first six (6) months after the date it was
granted.
7.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part of
the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Shares subject to the underlying ISO at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only
when the Fair Market Value of the Shares subject to the ISO exceeds the Option
Price of the ISO.
7.3 EXERCISE OF AFFILIATED SARS. Affiliated SARs shall be deemed to be
exercised upon the exercise of the related Options. The deemed exercise of
Affiliated SARs shall not necessitate a reduction in the number of related
Options.
7.4 EXERCISE OF FREESTANDING SARS. Freestanding SARs shall be exercisable on
such terms and conditions as shall be determined by the Committee, in its sole
discretion.
7.5 SAR AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, the conditions of
exercise and such other provisions as the Committee, in its sole discretion,
shall determine.
7.6 TERM OF SARS. The term of a SAR granted under the Plan shall be
determined by the Committee, in its sole discretion.
7.7 PAYMENT OF SAR AMOUNT. Upon exercise of a SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the date of
exercise over the grant price; times
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.
7.8 RULE 16b-3 REQUIREMENTS. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on exercise of a SAR (including,
without limitation, the right of the Committee to limit the time of exercise to
specified periods) as may be required to satisfy the requirements of Rule 16b-3
promulgated under the Exchange Act.
<PAGE>
For example, if the Participant is an Insider, the ability of the
Participant to exercise SARs for cash will be limited to the Window Periods
during each year. However, if the Committee determines that the Participant no
longer is an Insider, or if the Federal securities laws change to permit
Insiders greater freedom of exercise of SARs, then the Committee may permit
Insiders to exercise SARs at other times.
7.9 NONTRANSFERABILITY OF SARS. No SAR granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will, the laws of descent and distribution, or as permitted
under Section 10. Further, all SARs granted to a Participant under the Plan
shall be exercisable during his or her lifetime only by such Participant.
SECTION 8
RESTRICTED STOCK
8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to eligible Employees and Consultants in such amounts as the
Committee, in its sole discretion, shall determine.
8.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by an Award Agreement that shall specify the Period (or Periods) of
Restriction, the number of Restricted Stock Shares granted, and such other terms
and conditions as the Committee, in its sole discretion, shall determine.
8.3 TRANSFERABILITY. Except as provided in this Section 8, Shares of
Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the end of the applicable Period of Restriction
established by the Committee and specified in the Award Agreement, or upon
earlier satisfaction of any other conditions, as specified by the Committee in
its sole discretion and set forth in the Award Agreement. However, in no event
may any Restricted Stock granted to an Insider become vested in a Participant
prior to six (6) months following the date of its grant. All rights with respect
to the Restricted Stock granted to a Participant under the Plan shall be
available during his or her lifetime only to such Participant.
8.4 OTHER RESTRICTIONS. The Committee, in its sole discretion, may impose
such other restrictions on any Shares of Restricted Stock as it may deem
advisable including, without limitation, restrictions based upon the achievement
of specific performance goals (Company-wide, divisional, and/or individual),
and/or restrictions under applicable Federal or state securities laws; and may
legend the certificates representing Restricted Stock to give appropriate notice
of such restrictions.
8.5 CERTIFICATE LEGEND. In addition to any legends placed on certificates
pursuant to Section 8.4, each certificate representing Shares of Restricted
Stock shall bear the following legend:
"The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer as set forth in the Health
Systems Design Corporation
<PAGE>
1996 Omnibus Equity Incentive Plan, and in a Restricted Stock Agreement.
A copy of the Plan and such Restricted Stock Agreement may be obtained
from the Secretary of Health Systems Design Corporation."
8.6 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Section 8,
Shares of Restricted Stock covered by each Restricted Stock grant made under the
Plan shall become freely transferable by the Participant after the last day of
the Period of Restriction. The Committee, in its discretion, may accelerate the
time at which any restrictions shall lapse, and/or remove any restrictions.
After the Shares are released from restrictions, the Participant shall be
entitled to have the legend or legends required by Section 8.4 and 8.5 removed
from his or her Share certificate.
8.7 VOTING RIGHTS. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares unless otherwise provided in the Award Agreement.
8.8 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder shall be
entitled to receive all dividends and other distributions paid with respect to
those Shares while they are so held, unless otherwise provided in the Award
Agreement. If any such dividends or distributions are paid in Shares, the Shares
shall be subject to the same restrictions on transferability and forfeitability
as the Shares of Restricted Stock with respect to which they were paid.
In the event that any dividend or distribution constitutes a "derivative
security" or an "equity security" pursuant to the rules promulgated under
Section 16 of the Exchange Act, such dividend or distribution shall be subject
to a vesting period equal to the longer of: (i) the remaining vesting period of
the Shares of Restricted Stock with respect to which the dividend or
distribution is paid; or (ii) six months. The Committee shall establish
procedures for the application of this provision.
8.9 RETURN OF RESTRICTED STOCK TO COMPANY. Subject to the applicable Award
Agreement and Section 8.6, upon the earlier of (a) the Participant's termination
of employment, or (b) the date set forth in the Award Agreement, the Restricted
Stock for which restrictions have not lapsed shall revert to the Company and,
subject to Section 4.2, again shall become available for grant under the Plan.
SECTION 9
PERFORMANCE UNITS AND PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan,
Performance Units and Performance Shares may be granted to eligible Employees
and Consultants at any time and from time to time, as shall be determined by the
Committee, in its sole discretion. The Committee shall have complete discretion
in determining the number of Performance Units and Performance Shares granted to
each Participant.
9.2 VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share
<PAGE>
shall have an initial value equal to the Fair Market Value of a Share on the
date of grant. The Committee shall set performance goals in its discretion
which, depending on the extent to which they are met, will determine the
number and/or value of Performance Units/Shares that will be paid out to the
Participants. The time period during which the performance goals must be met
shall be called a "Performance Period." Performance Periods of Awards granted
to Insiders shall, in all cases, exceed six (6) months in length.
9.3 EARNING OF PERFORMANCE UNITS/SHARES. After the applicable Performance
Period has ended, the holder of Performance Units/Shares shall be entitled to
receive a payout of the number of Performance Units/Shares earned by the
Participant over the Performance Period, to be determined as a function of the
extent to which the corresponding performance goals have been achieved.
Notwithstanding the preceding sentence, after the grant of a Performance
Unit/Share, the Committee, in its sole discretion, may waive the achievement of
any performance goals for such Performance Unit/Share.
9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES. Payment of
earned Performance Units/Shares shall be made in a single lump sum, within
forty-five (45) calendar days following the close of the applicable Performance
Period. The Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market
Value equal to the value of the earned Performance Units/Shares at the close of
the applicable Performance Period) or in a combination thereof.
Prior to the beginning of each Performance Period, Participants may, in the
discretion of the Committee, elect to defer the receipt of any Performance
Unit/Share payout upon such terms as the Committee shall determine.
9.5 CANCELLATION OF PERFORMANCE UNITS/SHARES. Subject to the applicable
Award Agreement, upon the earlier of (a) the Participant's termination of
employment, or (b) the date set forth in the Award Agreement, all remaining
Performance Units/Shares shall be forfeited by the Participant to the Company,
and subject to Section 4.2, the Shares subject thereto shall again be available
for grant under the Plan.
9.6 NONTRANSFERABILITY. Performance Units/Shares may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further a Participant's
rights under the Plan shall be exercisable during the Participant's lifetime
only by the Participant or the Participant's legal representative.
SECTION 10
BENEFICIARY DESIGNATION
As provided in this Section 10, each Participant under the Plan may name a
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of the Participant's death
before he or she receives any or all of such benefit and/or who may exercise any
vested Award under the Plan following the Participant's death. Each such
designation shall revoke all prior designations by the same Participant and must
be in a form and manner acceptable to the Committee. In the absence of
<PAGE>
any such designation, benefits remaining unpaid at the Participant's death
shall be paid to the Participant's estate and, subject to the terms of the
Plan, any unexercised vested Award may be exercised by the administrator or
executor of the Participant's estate.
SECTION 11
DEFERRALS
The Committee, in its sole discretion, may permit a Participant to defer
such Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock, or the satisfaction of any requirements or goals with respect to
Performance Units/Shares. Any such deferral elections shall be subject to such
rules and procedures as shall be determined by the Committee from time to time.
SECTION 12
RIGHTS OF EMPLOYEES
12.1 NO EFFECT ON EMPLOYMENT OR SERVICE. Nothing in the Plan shall interfere
with or limit in any way the right of the Company to terminate any Participant's
employment or service at any time, with or without cause. For purposes of the
Plan, transfer of employment of a Participant between the Company and any one of
its Subsidiaries (or between Subsidiaries) shall not be deemed a termination of
employment.
12.2 PARTICIPATION. No Employee or Consultant shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
SECTION 13
AMENDMENT, SUSPENSION, OR TERMINATION
13.1 AMENDMENT, SUSPENSION, OR TERMINATION. The Board, in its sole
discretion, may alter, amend or terminate the Plan, or any part thereof, at any
time and for any reason; provided, however, that without further stockholder
approval, no such alteration or amendment shall (a) materially increase the
benefits accruing to participants under the Plan, (b) materially increase the
number of securities which may be issued under the Plan, or (c) materially
modify the requirements as to eligibility for participation in the Plan;
provided, further, that stockholder approval is not required if such approval is
not required in order to assure the Plan's continued qualification under Rule
16b-3 promulgated under the 1934 Act. Neither the amendment, suspension, nor
termination of the Plan shall, without the consent of the Participant, alter or
impair any rights or obligations under any Award theretofore granted. No Award
may be granted during any period of suspension nor after termination of the
Plan.
<PAGE>
SECTION 14
WITHHOLDING
14.1 TAX WITHHOLDING. Prior to the delivery of any Shares of cash pursuant
to the Plan, the Company shall have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount sufficient
to satisfy Federal, state, and local taxes (including the Participant's FICA
obligation) required by law to be withheld with respect to any Awards.
14.2 SHARES WITHHOLDING. The Committee may, in its absolute discretion,
permit a Participant to satisfy such tax withholding obligation, in whole or in
part, by electing to have the Company withhold Shares having a value equal to
the amount required to be withheld or by delivering to the Company already-owned
shares to satisfy the withholding requirement. The amount of the withholding
requirement shall be deemed to include any amount which the Committee agrees may
be withheld at the time the election is made, not to exceed the amount
determined by using the maximum federal, state or local marginal income tax
rates applicable to the Participant with respect to the Award on the date that
the amount of tax to be withheld is to be determined (the "Tax Date"). The value
of the Shares to be withheld or delivered will be based on their Fair Market
Value on the Tax Date. Such elections will be subject to the following
restrictions: (1) the election must be made on or before the Tax Date; (2) the
election will be irrevocable; and (3) the election will be subject to the
disapproval of the Committee. Each election by an Optionee or Grantee whose
transactions in shares of Common Stock are subject to Section 16(b) of the
Exchange Act will be subject to the following additional restrictions: (1) the
election may not be made within six months of the grant of the Award (except
that this limitation will not apply in the event the death or disability of the
Participant occurs prior to the expiration of the six-month period), and (2) the
election must be made either at least six months before the Tax Date or within a
Window Period.
SECTION 15
INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, notion,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan or
any Award Agreement and against and from any and all amounts paid by him or her
in settlement thereof, with the Company's approval, or paid by him or her in
settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against him
or her, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company's Articles of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may have to indemnify
them or hold them harmless.
<PAGE>
SECTION 16
SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
SECTION 17
LEGAL CONSTRUCTION
17.1 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
17.2 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
17.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
Notwithstanding any other provision set forth in the Plan, if required by
the then-current Section 16 of the Exchange Act, any "derivative security" or
"equity security" offered pursuant to the Plan to any Insider may not be sold or
transferred for at least six (6) months after the date of grant of such Award.
The terms "equity security" and "derivative security" shall have the meanings
ascribed to them in the then-current rules promulgated under Section 16 of the
Exchange Act.
17.4 SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions under
this Plan are intended to comply with all applicable conditions of Rule 16b-3 or
its successors under the Exchange Act. To the extent any provision of the Plan,
Award Agreement or action by the Committee fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable by the
Committee.
17.5 GOVERNING LAW. The Plan and all Award Agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of
California.
17.6 CAPTIONS. Captions are provided herein for convenience only, and are
not to serve as a basis for interpretation or construction of the Plan.
12
<PAGE>
[1468 - HEALTH SYSTEMS DESIGN CORPORATION] [FILE NAME: HSD43B.ELX]
[VERSION - 2] [2/18/99]
HSD43B DETACH HERE
- --------------------------------------------------------------------------------
PROXY
HEALTH SYSTEMS DESIGN CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS MARCH 23, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard C. Auger, Catherine C. Roth and J.
Matthew Mackowski, or any of them, each with power of substitution, as
proxies of the undersigned, to attend the Annual Meeting of Stockholders of
HEALTH SYSTEMS DESIGN CORPORATION to be held at the Oakland Marriott, 1001
Broadway, Oakland, California, on March 23, 1999, at 10:00 A.M., and any
adjournment or postponement thereof, and to vote the number of shares the
undersigned would be entitled to vote if personally present on the following
matters set forth on the reverse side and upon such other business as may
properly come before the meeting and any adjournment or postponement thereof.
- ------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------- -------------
<PAGE>
[1468 - HEALTH SYSTEMS DESIGN CORPORATION] [FILE NAME: HSD43A.ELX]
[VERSION - 2] [2/18/99]
HSD43A DETACH HERE
- --------------------------------------------------------------------------------
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF CONTRARY DIRECTIONS,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS LISTED BELOW
AND FOR PROPOSAL 2.
1. The election of six Directors.
NOMINEES: Russell J. Harrison, Richard C. Auger, Catherine C. Roth,
Christopher J. Herron, J. Matthew Mackowski and Arthur M.
Southam
FOR ALL WITHHOLD ALL
/ / / /
/ /
--------------------------------------------
For all nominees except nominees noted above
2. To approve the amendment of the 1996 Omnibus Equity Incentive Plan to
increase the number of shares authorized for issuance thereunder by
150,000.
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
STOCKHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN
THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
The signature should correspond exactly with the name appearing on the
certificate evidencing your Common Stock. If more than one name appears, all
should sign. Joint owners should each sign personally.
Signature: Date:
------------------------------------ ------------------------
Signature: Date:
------------------------------------ ------------------------
