<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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:
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(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
1111 BROADWAY, SUITE 1800
OAKLAND, CALIFORNIA 94607
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, APRIL 19, 2000, 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 it's corporate offices, 1111 Broadway,
Suite 1800, Oakland, California, on Wednesday, April 19, 2000, at 10:00 A.M. for
the following purposes:
(1) To elect five directors.
(2) 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 25, 2000, will be entitled to vote at the meeting and any adjournment
thereof.
Dated: March 13, 2000
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
1111 BROADWAY, SUITE 1800
OAKLAND, CALIFORNIA 94607
------------------------
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 April 19, 2000 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 25, 2000, will be entitled to vote at the Annual Meeting. As
of the close of business on February 25, 2000, there were outstanding 6,739,158
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 March 13, 2000.
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 five directors proposed by the Board. 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. 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 Item 1 of this Proxy
Statement.
<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>
Arthur M. Southam, M.D............... 43 President and Chief Executive Officer of the Company since 1996
August 1999. Dr. Southam served as Chief Executive Officer
of Health Net, a 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, a health maintenance
organization, and from 1986 to 1993 was employed at
CareAmerica Health Plans in a number of capacities,
including Executive Vice President and Chief Operating
Officer.
Richard C. Auger..................... 56 Chairman of the Board of the Company since 1988. Mr. Auger 1988
is a 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.................... 49 Ms. Roth served as Executive Director of Business 1988
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.
</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>
Christopher J. Herron................ 50 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 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................. 45 Partner of Mackowski & Shepler, a private investment 1992
partnership located in San Francisco, since 1992.
</TABLE>
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 and J. Matthew
Mackowski. 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 two meetings
during fiscal 1999.
The members of the Compensation Committee are Christopher J. Herron 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 1999.
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 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 $500 for each meeting held on the same day as a Board
meeting and $1,000 for each meeting not held on the same day as a Board meeting.
Additionally, each Board member who is not an employee of the Company receives
compensation for attending meetings in which they are participating on the
direction of the Company. Further, under the Nonemployee Director
3
<PAGE>
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 serves as Chairman of the
Board and provided consulting services to the Company, receiving $67,050 during
fiscal 1999 for such services. Ms. Roth provided consulting services to the
Company and received $55,937 during fiscal 1999 for such services. Mr. Auger and
Ms. Roth receive a fee of $125 per hour for consulting services to the Company
and it is expected that they will continue to provide consulting services to the
Company in fiscal 2000.
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
$100,000 for services in all capacities to the Company and its subsidiaries
during fiscal 1997, 1998 and 1999 (collectively, the "Named Executive
Officers"), is set forth below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
-------------------------------------------------- ------------------------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($) OPTIONS COMPENSATION($)
- -------------------------------- -------- --------- -------- ---------------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
ARTHUR M. SOUTHAM, M.D. ........ 1999 -- -- $ 60,000(1) 35,000
President and Chief Executive
Officer since August 1999
RUSSELL J. HARRISON ............ 1999 $588,000(2) -- -- -- -- --
President and Chief Executive 1998 $250,000 $71,875 -- -- -- --
Officer from August 1997 until 1997 $ 40,702 -- -- -- 350,000 --
August 1999
STEVEN L. MOORE ................ 1999 $135,000 -- -- -- -- --
Executive Vice President--Chief 1998 $ 73,176 $50,000 $ 38,120(3) -- 60,000 --
Financial Officer since April
1998
ROBERT D. ARCHIBALD ............ 1999 $200,000 -- -- -- -- --
Executive Vice President-- 1998 $106,371 $50,000 $249,100(4) -- 75,000 --
Operations since April 1998
</TABLE>
- ------------------------------
(1) Represents amount paid to 2C Solutions, LLC, in which Dr. Southam is a
partner, in fiscal 1999 for Dr. Southam's services. See "Employment
Contracts" below.
(2) Includes accrued compensation under the termination agreement.
(3) Represents amount paid to Mr. Moore in fiscal 1998 for consulting services
prior to his joining the Company in April 1998.
(4) Represents amount paid to Alta Associates, in which Dr. Archibald was a
stockholder, in fiscal 1998 for consulting services.
4
<PAGE>
The following table sets forth certain information regarding stock options
granted during fiscal 1999 to the Named Executive Officers. None of the Named
Executive Officers received awards of stock appreciation rights during fiscal
1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM(3)
-------------------------------------------- --------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
- ---- ------------- -------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Arthur M. Southam, M.D............ 35,000 6% $4.5625 8/3/2009 $100,427 $254,501
</TABLE>
- ------------------------
(1) All options granted in fiscal 1999 are subject to a five-year vesting
schedule commencing August 1999. Under the terms of the Company's 1996
Omnibus Equity Incentive Plan, the Compensation Committee retains
discretion, subject to plan limits, to modify the terms of outstanding
options.
(2) All options were granted at fair market value at date of grant.
(3) Realizable values are reported net of the option exercise price. The dollar
amounts under these columns are the result of calculations at the 5% and 10%
rates (determined from the price at the date of grant, not the stock's
current market value) set by the Securities and Exchange Commission and
therefore are not intended to forecast possible future appreciation, if any,
of the Company's stock price. Actual gains, if any, on stock option
exercises are dependent on the future performance of the common stock as
well as the optionholder's continued employment through the vesting period.
The potential realizable value calculation assumes that the optionholder
waits until the end of the option term to exercise the option.
The following table sets forth certain information with respect to stock
option exercises during fiscal 1999 and stock options held by each of the
Company's Named Executive Officers as of September 30, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE-MONEY OPTIONS AT
SHARES ACQUIRED OPTIONS AT FY-END(#) FY-END($)(1)
NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------------- ----------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Arthur M. Southam, M.D..... -- -- 15,000/40,000 0/0
Russell J. Harrison........ -- -- 151,663/198,337 0/0
Steven L. Moore............ -- -- 16,000/44,000 0/0
Robert D. Archibald........ -- -- 20,000/55,000 0/0
</TABLE>
- ------------------------
(1) Based on a price per share of $3.50, which was the price of a share of
common stock on the Nasdaq National Market as of the close of business on
September 30, 1999.
5
<PAGE>
EMPLOYMENT CONTRACTS
In 1998, the Company entered into an employment contract with Russell J.
Harrison, pursuant to which Mr. Harrison served as Chief Executive Officer of
the Company. Pursuant to the agreement, Mr. Harrison received a base salary of
$250,000 per year and was eligible to receive an annual cash bonus of up to
$150,000, based upon achieving certain performance goals. In addition, pursuant
to the agreement, Mr. Harrison was granted options to purchase 350,000 shares of
the Company's common stock. Mr. Harrison was given 60 days notice of termination
without cause on August 3, 1999. Mr. Harrison's contract requires that he be
paid the equivalent of his base salary and other benefits for 18 months and any
pro-rated bonus.
In 1999, the Company entered into a consulting contract with 2C Solutions,
LLC for Arthur Southam's services as President and Interim Chief Executive
Officer. Dr. Southam is a partner in 2C Solutions, LLC. Pursuant to the
agreement, 2C Solutions, LLC received $30,000 per month for Dr. Southam's
services, as well as an option to purchase up to 35,000 shares of the Company's
common stock. In the event of a change in control of the Company, the options
become immediately vested.
In January 2000, the above agreement with 2C Solutions was amended to
reflect the change from an interim to a more ongoing role of Arthur Southam as
Chief Executive Officer. Pursuant to the amendment, 2C Solutions, LLC is to
receive $35,000 per month for Dr. Southam's services, as well as bonuses to be
paid based on a change in control of the company and general performance. The
amendment extends the original agreement to September 30, 2000, and may continue
quarterly thereafter. The agreement may be terminated without cause with
90 days notice.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Mr. Mackowski and Mr. Herron. No
member of the Compensation Committee has at any time been an officer or employee
of the Company or its subsidiary. No interlocking relationship exists between
any member of the Company's Compensation Committee and any member of any other
company's board of directors or compensation committee. No such relationship
existed in fiscal 1999.
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 and continued to receive $7,500 per month until May 1999. Under
this arrangement, Mackowski & Shepler received payments totaling $60,000 in
fiscal 1999. After the agreement expired, Mackowski & Shepler provided services
totaling $18,506 in fiscal 1999.
TRANSACTIONS WITH THE COMPANY
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.
6
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
To the Board of Directors:
The Compensation Committee (the "Committee") is comprised of two outside
directors of the Board of Directors, and is responsible for setting and
monitoring policies governing the compensation of executive officers. The
Committee reviews the performance and compensation level for the Chief Executive
Officer and provides overall guidelines for awards under the Company's 1996
Omnibus Equity Incentive Plan.
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 seeking to link executive pay to the interests of the stockholders, the
Committee believes that the most appropriate measure of corporate performance is
an increase in long-term share value, which involves improving such quantitative
performance measures as revenue, net income, cash flow, operating margins,
earnings per share, and return on shareholders' equity. Other qualitative
factors may be considered by the Committee as elements leading to the increase
in long term value of the Company to its stockholders. These factors include
successful completion of new products, customer retention and satisfaction,
establishment of corporate strategic relationships, as well as the general
performance of individual job responsibilities.
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 Committee's objective in setting CEO compensation is to provide a base
salary and stock option package that is capable of attracting and retaining
high-performance individuals, and augment the package with variable incentives
tied to improvement in revenue, earnings and share price. Under the compensation
agreement with the Company's former CEO, Russell J. Harrison, the compensation
package included annual salary of $250,000, a bonus of up to $150,000 based on
achievement of specific revenue, earnings and stock price targets, 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 was given 60 days
notice of termination without cause on August 3, 1999. Mr. Harrison's contract
requires that he be paid the equivalent of his base salary and other benefits
for 18 months and any pro-rated bonus.
In 1999, the Company entered into a consulting contract with 2C Solutions,
LLC for Arthur Southam's services as President and Interim Chief Executive
Officer. Dr. Southam is a partner in 2C Solutions, LLC. Pursuant to the
agreement, 2C Solutions, LLC received $30,000 per month for Dr. Southam's
services, as well as an option to purchase up to 35,000 shares of the Company's
common stock. In the event of a change in control of the Company, the options
become immediately vested.
In January 2000, the above agreement with 2C Solutions was amended to
reflect the change from an interim to the ongoing role of Arthur Southam as
Chief Executive Officer. Pursuant to the amendment, 2C Solutions, LLC is to
receive $35,000 per month for Dr. Southam's services, as well as bonuses to be
paid based on a change in control of the company and general performance. The
amendment extends the
7
<PAGE>
original agreement to September 30, 2000, and may continue quarterly thereafter.
The agreement may be terminated without cause with 90 days notice.
The Committee believes that Mr. Southam's compensation package provides
adequate financial incentive to achieve the share price and Company performance
objectives set by the Board for the current fiscal year.
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 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
J. Matthew Mackowski
March 4, 2000
8
<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, 1999 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.
COMPARISON OF 43 MONTH CUMULATIVE TOTAL RETURN*
AMONG HEALTH SYSTEMS DESIGN CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ COMPUTER & DATA PROCESSING INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HEALTH SYSTEMS NASDAQ STOCK NASDAQ COMPUTER &
<S> <C> <C> <C>
DESIGN CORPORATION MARKET (U.S.) DATA PROCESSING
3/5/96 100 100 100
Sep-96 88 113 115
Sep-97 74 155 156
Sep-98 37 157 202
Sep-99 27 256 339
</TABLE>
* $100 INVESTED ON 3/5/96 IN STOCK OR INDEX--INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30.
9
<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 December 31, 1999.
SHARES BENEFICIALLY OWNED AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
EXECUTIVE OFFICER OR DIRECTOR COMMON SHARES PERCENT
- ----------------------------- ------------- --------
<S> <C> <C>
Richard C. Auger (1)........................................ 1,566,800 23%
Catherine C. Roth (1)....................................... 1,187,600(2) 18%
J. Matthew Mackowski (1).................................... 1,445,739(3) 21%
The D3 Family Fund, L.P..................................... 338,000 5%
19605 N.E. 8(th) Street
Camas, Washington 98607
Dimensional Fund Advisors (4)............................... 424,500(4) 6%
1299 Ocean Avenue, 11(th) Floor,
Santa Monica, CA 90401
Russell J. Harrison......................................... 157,495(5) 2%
Christopher J. Herron....................................... 0 --
Arthur M. Southam, M.D...................................... 21,000(6) *
Steven L. Moore............................................. 20,666(7) *
Robert D. Archibald......................................... 26,250(8) *
All directors and officers as a group (eight persons)....... 4,425,550(9) 65%
</TABLE>
- ------------------------
(*) Less than 1%.
(1) The address of Mr. Auger, Ms. Roth and Mr. Mackowski is 1111 Broadway, Suite
1800, Oakland, California 94607. 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 248,000 shares of Common Stock held by Ms. Roth's children.
(3) Includes 24,000 shares issuable upon exercise of an outstanding stock option
exercisable within 60 days as of December 31, 1999. Also includes 686 share
held in the name of Mr. Mackowski's spouse.
(4) Based on a Schedule 13G filed with the Securities and Exchange Commission
reflecting beneficial ownership as of December 31, 1999.
(5) Includes 157,495 shares issuable upon exercise of an outstanding stock
option exercisable as of December 31, 1999. These options expired
unexercised on January 4, 2000.
(6) Includes 15,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days as of December 31, 1999.
(7) Includes 20,666 shares issuable upon exercise of outstanding stock options
exercisable within 60 days as of December 31, 1999.
(8) Includes 26,250 shares issuable upon exercise of outstanding stock options
exercisable within 60 days as of December 31, 1999.
(9) Includes 243,411 shares issuable upon exercise of outstanding stock options
exercisable within 60 days as of December 31, 1999. See Note (5) above.
10
<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, 1998 to September 30, 1999 all filing requirements applicable to its
officers, directors, and greater than ten-percent beneficial owners were
complied with, except that Arthur M. Southam, M.D. failed to file a Form 4
reflecting such person's change in beneficial ownership. A subsequent Form 5 for
the fiscal year was filed timely.
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 2001
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 November 13, 2000.
Proposals should be addressed to the Company at 1111 Broadway, Suite 1800,
Oakland, California 94607, 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 2001 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 27, 2001. 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 2001 Annual Meeting of Stockholders of the Company.
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: March 13, 2000.
By Order of the Board of Directors
Catherine C. Roth,
SECRETARY
11
<PAGE>
DETACH HERE
PROXY
HEALTH SYSTEMS DESIGN CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS APRIL 19, 2000
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 corporate offices at 1111
Broadway, Suite 1800, Oakland, California, on April 19, 2000, 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>
HEALTH SYSTEMS DESIGN CORPORATION
c/o EquiServe
P.O. Box 9398
Boston, MA 02205-9398
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.
1. The election of five Directors.
NOMINEES: (01) Richard C. Auger, (02) Catherine C. Roth,
(03) Christopher J. Herron, (04) J. Matthew Mackowski
and (05) Arthur M. Southam
FOR ALL WITHHOLD ALL
/ / / /
/ / __________________________
For all nominees except
nominees noted above
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:________
