<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Eclipsys 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:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
ECLIPSYS CORPORATION
777 EAST ATLANTIC AVENUE, SUITE 200
DELRAY BEACH, FLORIDA 33483
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD ON WEDNESDAY, APRIL 21, 1999
The Annual Meeting of Stockholders of Eclipsys Corporation (the "Company")
will be held at the Delray Beach Marriott, 10 North Ocean Boulevard, Delray
Beach, Florida 33444, on Wednesday, April 21, 1999 at 10:00 a.m., local time, to
consider and act upon the following matters:
1. To elect three Class I directors for the ensuing three years.
2. To approve the Company's 1999 Stock Incentive Plan (the "1999 Plan").
3. To approve related amendments to the Company's 1998 Stock Incentive Plan
(the "1998 Incentive Plan") and Amended and Restated 1998 Employee Stock
Purchase Plan (the "Purchase Plan") to reflect an increase in the number
of shares of Voting Common Stock authorized for issuance under all the
Company's stock plans (the Purchase Plan, the 1996 Stock Plan, the 1998
Incentive Plan and the 1999 Plan) from 4,333,333 to 7,000,000.
4. To ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's independent auditors for the
current fiscal year.
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on March 10, 1999 will be
entitled to notice of and to vote at the meeting or any adjournment thereof. The
stock transfer books of the Company will remain open following the record date.
By Order of the Board of Directors,
/s/ T. JACK RISENHOOVER, II
T. Jack Risenhoover, II, Secretary
Delray Beach, Florida
March 25, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS
MAILED IN THE UNITED STATES.
<PAGE> 3
ECLIPSYS CORPORATION
777 EAST ATLANTIC AVENUE, SUITE 200
DELRAY BEACH, FLORIDA 33483
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, APRIL 21, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Eclipsys Corporation (the "Company") for
use at the Annual Meeting of Stockholders to be held on Wednesday, April 21,
1999 and at any adjournment of that meeting. All executed proxies will be voted
in accordance with the stockholders' instructions, and if no choice is
specified, executed proxies will be voted in favor of the matters set forth in
the accompanying Notice of Meeting. Any proxy may be revoked by a stockholder at
any time before its exercise by delivery of written revocation or a subsequently
dated proxy to the Secretary of the Company or by voting in person at the Annual
Meeting.
On March 10, 1999, the record date for the determination of stockholders
entitled to vote at the Annual Meeting (the "Record Date"), there were
outstanding and entitled to vote an aggregate of 31,101,547 shares of Common
Stock ("Voting Common Stock") of the Company (constituting all of the voting
stock of the Company). Holders of Voting Common Stock are entitled to one vote
per share. Holders of the Company's Non-Voting Common Stock are not entitled to
vote at the Annual Meeting.
The Company's Annual Report for the year ended December 31, 1998 is being
mailed to stockholders, along with these proxy materials, on or about March 30,
1998.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1998 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS INCLUDED IN THE
COMPANY'S ANNUAL REPORT.
VOTES REQUIRED
The holders of a majority of the shares of Voting Common Stock outstanding
and entitled to vote at the Annual Meeting will constitute a quorum for the
transaction of business at the Annual Meeting. Shares of Voting Common Stock
represented in person or by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum is present at the
Annual Meeting.
The affirmative vote of a plurality of the votes cast by stockholders
entitled to vote on the matter is required for the election of directors. The
affirmative vote of a majority of the shares of Voting Common Stock voting on
the matter is required to approve the 1999 Stock Incentive Plan and the
amendment of the Amended and Restated 1998 Employee Stock Purchase Plan and to
ratify the selection by the Board of Directors of PricewaterhouseCoopers LLP as
the Company's independent auditors for the current year.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and
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<PAGE> 4
will also not be counted as shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on matters
(such as the election of directors, the amendments to the stock plans and the
ratification of the selection of the auditors) that require the affirmative vote
of a plurality or a majority of the votes cast or the shares voting on the
matter.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of the Company's Voting Common Stock as of March 10, 1999 by (i) each
person or entity who is known by the Company to beneficially own more than 5% of
the outstanding shares of Common Stock, (ii) by each director or nominee for
director, (iii) by each of the executive officers named in the Summary
Compensation Table set forth under the caption "Executive Compensation" below,
and (iv) by all directors and executive officers as a group. Unless otherwise
indicated, each person or entity named in the table has sole voting power and
investment power (or shares such power with his or her spouse) with respect to
all shares of capital stock listed as owned by such person or entity.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENTAGE OWNED
- ------------------------ --------------------- ----------------
<S> <C> <C>
General Atlantic Partners, LLC(2).................. 6,855,255 22.0%
c/o General Atlantic Service Corporation
Three Pickwick Plaza
Greenwich, CT 06830
Warburg Pincus Ventures, L.P....................... 3,215,625 10.3
466 Lexington Avenue
New York, NY 10017
Wilfam, L.P.(3).................................... 2,126,288 6.8
c/o Eclipsys Corporation
777 East Atlantic Avenue, Suite 200
Delray Beach, FL 33483
Alltel Information Services, Inc.(4)............... 2,077,497 6.7
4001 Rodney Parham Road
Little Rock, AR 72212
Harvey J. Wilson(5)................................ 2,712,423 8.7
James E. Hall(6)................................... 40,276 *
Robert J. Vanaria(7)............................... 56,943 *
T. Jack Risenhoover, II(8)......................... 11,145 *
Steven A. Denning(9)............................... 6,858,866 22.0
G. Fred DiBona(10)................................. 35,277 *
Eugene V. Fife(11)................................. 35,277 *
William E. Ford(12)................................ 6,858,866 22.0
Patrick T. Hackett(13)............................. 3,215,625 10.3
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENTAGE OWNED
- ------------------------ --------------------- ----------------
<S> <C> <C>
Robert Kell(14).................................... 1,000,000 3.2%
Jay B. Pieper(15).................................. 991,901 3.2
Robert F. Raco(16)................................. 471,895 1.5
All executive officers and directors as a group (12
persons)(17)..................................... 15,433,239 48.6
</TABLE>
- -------------------------
* Less than 1%
(1) The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual or entity has sole or shared voting power or
investment power and any shares as to which the individual or entity has
the right to acquire beneficial ownership within 60 days after March 10,
1999 through the exercise of any stock option, warrant or other right. The
inclusion herein of such shares, however, does not constitute an admission
that the named stockholder is a direct or indirect beneficial owner of such
shares.
(2) Consists of 1,052,661 shares held by General Atlantic Partners 28, L.P.
("GAP 28"), 3,768,830 shares held by General Atlantic Partners 38, L.P.
("GAP 38"), 504,674 shares held by General Atlantic Partners 47, L.P. ("GAP
47"), 403,883 shares held by General Atlantic Partners 48, L.P. ("GAP 48")
and 1,125,207 shares held by GAP Coinvestment, L.P. ("GAP Coinvestment").
The general partner of GAP 28, GAP 38, GAP 47 and GAP 48 is General
Atlantic Partners, LLC, a Delaware limited liability company. The managing
members of General Atlantic Partners, LLC are the general partners of GAP
Coinvestment. Messrs. Denning and Ford are both managing members of General
Atlantic Partners, LLC. Messrs. Denning and Ford disclaim beneficial
ownership of shares owned by GAP 28, GAP 38, GAP 47, GAP 48 and GAP
Coinvestment and their inclusion herein shall not be deemed an admission of
beneficial ownership. 60,236 shares of Voting Common Stock held by GAP 38
are subject to options granted by GAP 38 to Alltel Information Services,
Inc. ("AIS"), and 10,463 shares of Voting Common Stock held by GAP
Coinvestment are subject to options granted by GAP Coinvestment to AIS. See
footnote (4) below.
(3) 32,904 shares of Voting Common Stock held by Wilfam, L.P. ("Wilfam") are
subject to options granted by Wilfam to AIS. See footnote (4) below.
(4) Affiliates of General Atlantic Partners, LLC ("General Atlantic") and
Harvey Wilson agreed in January 1997 to grant to AIS options to purchase
103,603 shares of Voting Common Stock, at an exercise price of $.01 per
share and pursuant to option agreements to be entered into after the
closing of the acquisition of AIS. Specifically, (i) GAP 38 granted to AIS
an option to purchase 60,236 shares of Voting Common Stock held by GAP 38,
(ii) GAP Coinvestment granted to AIS an option to purchase 10,463 shares of
Voting Common Stock held by GAP Coinvestment and (iii) the predecessor of
Wilfam granted to AIS an option to purchase
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<PAGE> 6
32,904 shares of Voting Common Stock held by it (which option now relates
to shares held by Wilfam). AIS may only exercise these options if either of
the holders of certain warrants exercises them to purchase shares of
Non-Voting Common Stock, in which case AIS may exercise the options to
purchase on an aggregate basis one share of Voting Common Stock for each
approximately 6.67 shares of Non-Voting Common Stock issued pursuant to the
warrants. On February 3, 1999, one of the warrant holders exercised its
warrant to purchase 360,951 shares of Eclipsys Non-Voting Common Stock. To
the extent that AIS exercises the options, the option shares will be
transferred to AIS by GAP 38, GAP Coinvestment and Wilfam on a pro rata
basis.
(5) Consists of (i) 85,460 shares issuable upon the exercise of stock options
which are exercisable within 60 days of March 10, 1999, (ii) 2,126,288
shares held by Wilfam and (iii) 500,675 shares held by an irrevocable
grantor trust for the benefit of Mr. Wilson and members of his family (the
"Trust"). The sole trustee of the Trust is an independent individual not
affiliated with Mr. Wilson. Wilfam is a limited partnership, the general
partner of which is Wilfam, Inc., a corporation (the "Corporate General
Partner"). Mr. Wilson is one of the four directors of the Corporate General
Partner. All of the stock of the Corporate General Partner is owned by the
Trust and other irrevocable family trusts of which the sole trustee is an
individual not affiliated with Mr. Wilson. Mr. Wilson disclaims beneficial
ownership of these shares and their inclusion herein shall not be deemed an
admission of beneficial ownership.
(6) Includes 21,110 shares issuable upon exercise of stock options which are
exercisable within 60 days of March 10, 1999.
(7) Includes 23,610 shares issuable upon exercise of stock options which are
exercisable within 60 days of March 10, 1999.
(8) Includes 1,442 shares issuable upon the exercise of stock options which are
exercisable within 60 days of March 10, 1999.
(9) Includes 3,611 shares issuable upon the exercise of stock options which are
exercisable within 60 days of March 10, 1999. See footnote (2) above.
(10) Includes 3,611 shares issuable upon the exercise of stock options which are
exercisable within 60 days of March 10, 1999.
(11) Includes 20,277 shares issuable upon the exercise of stock options which
are exercisable within 60 days of March 10, 1999.
(12) Includes 3,611 shares issuable upon the exercise of stock options which are
exercisable within 60 days of March 10, 1999. See footnote (2) above.
(13) These shares are held by Warburg, Pincus Ventures, L.P. Mr. Hackett is a
Managing Director of Warburg, Pincus & Co., the sole general partner of
Warburg, Pincus Ventures, L.P. Mr. Hackett disclaims beneficial ownership
of these shares and their inclusion herein shall not be deemed an admission
of beneficial ownership.
(14) These shares are held by Motorola, Inc. Mr. Kell is a vice president of
Motorola, Inc. Mr. Kell disclaims beneficial ownership of these shares and
their inclusion herein shall not be deemed an admission of beneficial
ownership.
4
<PAGE> 7
(15) Includes 3,611 shares issuable upon the exercise of stock options which are
exercisable within 60 days of March 10, 1999. The remaining 988,290 shares
are held by Partners HealthCare System, Inc. ("Partners"). Mr. Pieper is a
Vice President of Partners. Mr. Pieper disclaims beneficial ownership of
the shares held by Partners and their inclusion herein shall not be deemed
an admission of beneficial ownership.
(16) Includes 471,895 shares issuable upon the exercise of stock options which
are exercisable within 60 days of March 10, 1999.
(17) See notes (2) and (5) through (16) above.
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation provides
that the Board of Directors is classified into three classes (designated Class I
Directors, Class II Directors and Class III Directors), with members of each
class holding office for staggered three-year terms. There are currently three
Class I Directors, whose terms expire at the Annual Meeting, three Class II
Directors, whose terms expire at the 2000 Annual Meeting of Stockholders, and
three Class III Directors, whose terms expire at the 2001 Annual Meeting of
Stockholders (in all cases subject to the election and qualification of their
successors and to their earlier death, resignation or removal).
The persons named in the enclosed proxy will vote to elect as Class I
Directors the three nominees named below, all of whom are presently Class I
Directors of the Company, unless authority to vote for the election of any or
all of the nominees is withheld by marking the proxy to that effect. All of the
nominees have indicated their willingness to serve, if elected, but if any
should be unable or unwilling to serve, proxies may be voted for a substitute
nominee designated by the Board of Directors. Each Class I Director will be
elected to hold office until the 2002 Annual Meeting of Stockholders (subject to
the election and qualification of his successor and to his earlier death,
resignation or removal).
NOMINEES FOR CLASS I DIRECTORS
Set forth below, for each nominee, are his name and age, his positions with
the Company, his principal occupation and business experience during the past
five years and the year of the commencement of his term as a director of the
Company:
EUGENE V. FIFE is 58 years old and has served on the Board of Directors
since May 1997. Since September 1996, Mr. Fife has been the President and Chief
Executive Officer of Multimedia Medical Systems, Inc., a clinical information
systems company. Mr. Fife was formerly a general partner in Goldman Sachs & Co.
where he served as a member of its Management Committee and as Chairman of
Goldman Sachs International. Mr. Fife retired in 1995 and remains a limited
partner of the firm. Mr. Fife is also a director of Baker, Fentress & Company,
an investment company.
WILLIAM E. FORD is 37 years old and has served on the Board of Directors
since May 1996. Mr. Ford is a Managing Member of General Atlantic Partners LLC,
a private equity firm that invests globally in software, services and related
information technology companies, and has been with General Atlantic since 1991.
Mr. Ford also serves as a director of GT Interactive Software Corp., an
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<PAGE> 8
interactive entertainment software company; Envoy Corporation, an electronic
data processing company; LHS Group Inc., a billing solutions company; and
E*Trade Group, Inc., an on-line discount broker.
ROBERT F. RACO is 62 years old and has served on the Board of Directors
since December 31, 1998, the date of the Company's acquisition of Transition
Systems, Inc. ("Transition"). Mr. Raco was originally named to the Board of
Directors pursuant to the agreement between the Company and Transition in
connection with the Transition acquisition. Mr. Raco was President and Chief
Executive Officer of Transition from 1990 until its acquisition in December 1998
and served as a director of Transition since 1986. Mr. Raco joined Transition at
its inception and served as Executive Vice President and Chief Operating Officer
from 1986 to 1989. Mr. Raco previously served as Vice President of Information
Services at New England Medical Center, Inc. until 1990.
INCUMBENT CLASS II DIRECTORS
JAY B. PIEPER is 56 years old and has served on the Board of Directors
since May 1996. Since May 1995, Mr. Pieper has served as Vice President of
Corporate Development and Treasury Affairs for Partners HealthCare System, Inc.,
the parent of Brigham and Women's Hospital, Inc. and Massachusetts General
Hospital. From March 1986 to May 1995, Mr. Pieper was Senior Vice President and
Chief Financial Officer for Brigham and Women's Hospital.
ROBERT KELL is 52 years old and has served on the Board of Directors since
February 1999. Since July 1998, Mr. Kell has served as Vice President and
Director of Finance and Strategy for the Commercial, Government and Industrial
Solutions Sector of Motorola, Inc. From January 1993 to June 1998, Mr. Kell
served as Vice President and Director of Finance for the Paging Products Group
of Motorola, Inc.
PATRICK T. HACKETT is 37 years old and has served on the Board of Directors
since December 31, 1998. Mr. Hackett was originally named to the Board of
Directors pursuant to the agreement between the Company and Transition in
connection with the Transition acquisition. Mr. Hackett has been a Managing
Director of Warburg, Pincus & Co. since 1994. Mr. Hackett was an Associate at
Warburg, Pincus & Co. from 1990 to 1991 and a Vice President from 1991 to 1993.
Mr. Hackett is also a director of Coventry Corporation, a managed healthcare
company, and VitalCom Inc., a healthcare computer networking company.
INCUMBENT CLASS III DIRECTORS
HARVEY J. WILSON, the Company's founder, is 60 years old and has served as
Chief Executive Officer and Chairman of the Board of Directors since the Company
was formed in December 1995. From January 1984 to December 1995, Mr. Wilson
invested privately in software and technology companies. Mr. Wilson was a
co-founder of Shared Medical Systems Corporation, a healthcare information
systems provider. Mr. Wilson is a director of Philadelphia Suburban Corporation,
a water utility company.
STEVEN A. DENNING is 50 years old and has served on the Board of Directors
since March 1997. Mr. Denning is a Managing Member of General Atlantic Partners
LLC, a private equity firm that invests globally in software, services and
related information technology companies, and has been with
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<PAGE> 9
General Atlantic Partners LLC since 1980. Mr. Denning is also a director of GT
Interactive Software Corp., an interactive entertainment software development
company.
G. FRED DIBONA is 48 years old and has served on the Board of Directors
since May 1996. Since 1990, Mr. DiBona has been the President and Chief
Executive Officer of Independence Blue Cross and its subsidiaries. Mr. DiBona is
also a director of Magellan Health Services, Inc., a specialized managed
healthcare company; PECO Energy Company, a public energy company; Philadelphia
Suburban Corporation, a water utility company; and Tasty Baking Company, a
packaged foods company.
BOARD AND COMMITTEE MEETINGS
The Board of Directors has an Executive Development and Compensation
Committee composed of Messrs. Denning (Chairman), DiBona and Fife, which makes
recommendations concerning salaries and incentive compensation for executive
officers and administers and grants stock options and awards pursuant to the
Company's stock option plans (except that grants to directors and certain
officers must be made by the Board of Directors as a whole). The Executive
Development and Compensation Committee met six times during 1998.
The Board of Directors also has an Audit Committee, currently composed of
Messrs. Pieper (Chairman) and Ford, which reviews the results and scope of the
audit and other services provided by the Company's independent public
accountants. The Audit Committee met two times during 1998.
Mr. Harvey J. Wilson is an ex-officio member of both the Audit Committee
and the Executive Development and Compensation Committee.
The Board of Directors met nine times during 1998. Each director attended
at least 75% of the aggregate of the number of Board meetings and the number of
meetings held by all committees on which he then served.
DIRECTOR COMPENSATION
Directors are reimbursed for any expenses incurred in connection with
attendance at meetings of the Board Directors or any committee of the Board of
Directors, but are not otherwise compensated for such service. On April 8, 1998,
the non-employee directors (Messrs. Denning, DiBona, Fife, Ford, Pieper and
Richard Severns) were each granted a non-qualified stock option to purchase
13,333 shares of Voting Common Stock at a purchase price of $13.50 per share
under the Company's 1998 Stock Incentive Plan. These options vest annually over
a four year period.
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<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth the total compensation paid or accrued for
the last two years for the Company's Chief Executive Officer and its three other
executive officers (together, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION (1) SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(2) COMPENSATION(3)
- --------------------------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Harvey J. Wilson................... 1997 $150,000 $ -- -- $ --
Chairman of the Board and 1998 200,000 -- 333,332 --
Chief Executive Officer
James E. Hall...................... 1997 177,971 50,000 50,000 96
President and Chief 1998 200,000 125,000 43,333 3,635
Operating Officer
Robert J. Vanaria.................. 1997 7,692 150,000 99,999 4
Senior Vice President, 1998 200,000 80,000 -- 5,664
Administration and
Chief Financial Officer
T. Jack Risenhoover................ 1997 74,039 7,500 26,666 343
Vice President, Secretary 1998 103,846 45,000 -- 2,355
and General Counsel
</TABLE>
- -------------------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted because such perquisites and other personal benefits
constituted less than the lesser of $50,000 or 10% of the total annual
salary of the Named Executive Officer.
(2) Represents the number of shares covered by options to purchase shares of
Voting Common Stock granted during the applicable year.
(3) Represents Company contributions to group term life insurance policies and,
with respect to Mr. Vanaria and Mr. Risenhoover, Company contributions on
their behalf to the Company's 401(k) Plan.
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<PAGE> 11
STOCK OPTION GRANTS
The following table sets forth grants of stock options to each of the Named
Executive Officers during the year ended December 31, 1998.
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(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ---------- ------------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Harvey J. Wilson(2)............ 66,666 6.1% $15.00 4/8/08 $628,888 $1,593,727
66,666 6.1 30.00 4/8/08 -- 593,737
100,000 9.1 45.00 4/8/08 -- --
100,000 9.1 60.00 4/8/08 -- --
James E. Hall(3)............... 10,000 0.9 9.06 1/6/08 56,978 144,393
33,333 3.1 15.00 5/22/08 314,444 796,863
Robert J. Vanaria.............. -- -- -- -- -- --
T. Jack Risenhoover............ -- -- -- -- -- --
</TABLE>
- -------------------------
(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the Voting Common Stock on the date of option grant over
the term of the options. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and do not reflect the
Company's estimate of future stock price growth. Actual gains, if any, on
stock option exercises and Voting Common Stock holdings are dependent on the
timing of such exercise and the future performance of the Voting Common
Stock. There can be no assurance that the rates of appreciation assumed in
this table can be achieved or that the amounts reflected will be received by
the individuals.
(2) Mr. Wilson's option vests (i) as to the shares priced at $15.00, over three
years, (ii) as to the shares priced at $30.00, over four years and (iii) as
to the shares priced at $45.00 and $60.00, over five years. Vesting under
Mr. Wilson's option is subject to acceleration at the discretion of the
Board of Directors.
(3) Mr. Hall's options vest over three years.
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<PAGE> 12
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning option
exercises by the Named Executive Officers in 1998 and the number and value of
unexercised options held by each of the Named Executive Officers on December 31,
1998.
AGGREGATE OPTION EXERCISES AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR END AT FISCAL YEAR END(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harvey J. Wilson............... -- -- -- 333,332 -- $ 933,324
James E. Hall.................. 16,666 $281,304 -- 76,667 -- 1,432,879
Robert J. Vanaria.............. 33,333 51,999 16,666 50,000 $358,319 1,075,000
T. Jack Risenhoover............ -- -- 8,109 18,557 180,046 413,274
</TABLE>
- -------------------------
(1) Represents the difference between the exercise prices and the fair market
value per share of the Voting Common Stock at the date of exercise. For
exercises prior to the Company's initial public offering, the fair market
value was the value determined from time to time by the Company's Board of
Directors. For exercises after the initial public offering, the fair market
value was the last sale price of the Voting Common Stock on the date of
exercise as reported on the Nasdaq National Market.
(2) Represents the difference between the exercise price and the last sale price
of the Voting Common Stock as reported on the Nasdaq National Market on
December 31, 1998 ($29.00).
EMPLOYMENT ARRANGEMENTS
On May 1, 1996, Harvey J. Wilson entered into an Employment Agreement with
the Company. The Company agreed to employ Mr. Wilson as its Chief Executive
Officer until May 1, 1999, with an annual salary of $150,000, subject to
deferral until the Company has reached certain milestones and subject to
adjustment from time to time thereafter. In January 1998, Mr. Wilson's annual
salary was increased to $200,000. Upon termination of his employment, unless
terminated for cause, Mr. Wilson shall be entitled to payment of his salary and
continuation of his benefits for a period of months determined by the Board of
Directors which is consistent with its practice for senior executives. Mr.
Wilson has agreed not to compete with the Company during his term of employment
and for three years thereafter.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company is party to a license agreement (the "Partners License") with
Partners HealthCare System, Inc. ("Partners"). Under the terms of the Partners
License, the Company may
10
<PAGE> 13
develop, commercialize, distribute and support certain technology and license
it, as well as sell related services, to other healthcare providers and
hospitals throughout the world (with the exception of the Boston, Massachusetts
metropolitan area). Prior to the Company's initial public offering, no sales of
products incorporating the licensed technology were made and, consequently, no
royalties were paid by the Company pursuant to the Partners License. The royalty
arrangement under the Partners License terminated upon the Company's initial
public offering. Subsequent to the Company's initial public offering, the
Company has sold products incorporating the licensed technology. The Company is
obligated to offer to Partners and certain of its affiliates an internal use
license, granted on most favored customer terms, to all new software
applications developed by the Company, whether or not derived from the licensed
technology, and major architectural changes to the licensed technology. Partners
and certain of its affiliates are also entitled to receive internal use
licenses, also granted on most favored customer terms, for any changes to any
module or application included in the licensed technology requiring at least one
person-year of technical effort. The Company has an exclusive right of first
offer to commercialize new information technologies developed in connection with
Partners. If the Company breaches any material term of the license, or if Mr.
Harvey J. Wilson voluntarily terminates his employment with the Company prior to
May 1999, the license may become non-exclusive, at Partners' option. If Partners
converts the current license to a non-exclusive license, it must return 370,609
shares of Voting Common Stock to the Company. As part of the Partners License,
the Company provided certain development services to Partners. Fees for these
development services paid by Partners to the Company totaled $1.2 million for
1998. Mr. Jay Pieper, a director of the Company, is Vice President of Corporate
Development and Treasury Affairs for Partners. Partners was not affiliated with
the Company at the time of the negotiation of the Partners License.
In January 1998, the Company acquired the Emtek Healthcare Systems division
of Motorola, Inc. ("Motorola") (the "Emtek Acquisition") for aggregate
consideration of $11.7 million (net of a $9.6 million receivable from Motorola),
consisting of 1,000,000 shares of Voting Common Stock issued to Motorola and the
assumption of $12.3 million in liabilities. In connection with the Emtek
Acquisition, the Company entered into a software and support agreement with
Motorola pursuant to which the Company agreed to provide certain software and
support services to Motorola's international customers for a minimum period of
one year in exchange for negotiated annual payments. As of December 31, 1998,
payments from Motorola totaled $9.6 million on the $9.6 million receivable owed
and $500,000 under the software and support agreement. Mr. Richard Severns, a
Senior Vice President of Motorola, served as a director of the Company during
1998 and Mr. Robert Kell, a Vice President of Motorola, is currently a director
of the Company. None of Mr. Severns, Mr. Kell or Motorola was affiliated with
the Company at the time of the negotiation of the Emtek Acquisition.
Affiliates of General Atlantic purchased (i) in February 1998, an aggregate
of 900,000 shares of Series G Convertible Preferred Stock (each of which was
converted on a two-for-three basis into Voting Common Stock in the initial
public offering in August 1998) for an aggregate of $9.0 million and (ii) in
August 1998, in the initial public offering, an aggregate of 600,000 shares of
Voting Common Stock. Messrs. William Ford and Steven Denning, both of whom are
directors of the Company, are Managing Members of General Atlantic.
11
<PAGE> 14
Wilfam Ltd., a limited partnership whose managing general partner is Mr.
Harvey J. Wilson and whose limited partners are members of Mr. Wilson's
immediate family, is a limited partner in certain affiliates of General
Atlantic. As such, Wilfam Ltd. participated in the February 1998 investment
discussed above. The Wilfam Ltd. indirect investment was approximately $185,000
in Series G Convertible Preferred Stock, which was subsequently converted as
discussed above.
During the year ended December 31, 1998, the Company from time to time
chartered an airplane for corporate purposes from an aircraft charter company.
The Company paid $446,040 to the charter company during 1998. The aircraft
provided for use by the Company was leased by the charter company from RMSC of
West Palm Beach ("RMSC"), a company that is wholly owned by Mr. Harvey J.
Wilson. In connection with these charters, RMSC invoiced the charter company
$309,510 in 1998. Mr. Wilson has no ownership interest in the charter company.
The Company believes that the terms of the charters were at least as favorable
to it as those that could have been negotiated with unaffiliated third parties.
The Company has adopted a policy that all transactions between it and its
executive officers, directors and affiliates must (i) be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties
and (ii) be approved by a majority of the members of the Board of Directors and
by a majority of the disinterested members of the Board of Directors.
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<PAGE> 15
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
This report addresses the compensation policies of the Company applicable
to its officers during fiscal 1998. The Company's executive compensation program
is administered by the Executive Development and Compensation Committee of the
Board of Directors (the "Committee"), which is composed of three non-employee
directors. The Committee is responsible for determining the compensation package
of each executive officer, including the Chief Executive Officer. In fiscal
1998, the Board of Directors did not modify in any material way or reject any
action or recommendation of the Committee with respect to executive officer
compensation.
OVERVIEW AND PHILOSOPHY
The Company's executive compensation program is designed to promote the
following objectives:
- To provide competitive compensation that will help attract, retain and
reward highly qualified executives who contribute to the long-term
success of the Company.
- To align management's interests with the success of the Company by
placing a portion of the executive's compensation at risk in relation to
the Company's performance.
- To align management's interests with stockholders by including long-term
equity incentives.
The Committee believes that the Company's executive compensation program
provides an overall level of compensation that is competitive within its
industry and among companies of comparable size and complexity. To ensure that
compensation is competitive, the Company regularly compares its compensation
practices with those of other similar companies and sets its compensation
guidelines based on this review. The Committee also seeks to achieve an
appropriate balance of the compensation paid to a particular individual and the
compensation paid to other executives and attempts to maintain an appropriate
mix of salary and incentive compensation. While compensation data are useful
guides for comparative purposes, the Committee believes that a successful
compensation program also requires the application of judgment and subjective
determinations of individual performance.
EXECUTIVE COMPENSATION PROGRAM
The Company's executive compensation program consists of base salary,
annual incentive compensation in the form of cash bonuses, and long-term equity
incentives in the form of stock options. Executive officers also are eligible to
participate in certain benefit programs which are generally available to all
employees of the Company, such as life insurance benefits and the Company's
Employee Stock Purchase Plan and 401(k) savings plan.
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<PAGE> 16
BASE SALARY
At the beginning of each year, the Committee establishes an annual salary
plan for the Company's senior executive officers based on recommendations made
by the Company's Chief Executive Officer. The Committee attempts to set base
salary compensation within the range of salaries of executive officers with
comparable qualifications, experience and responsibilities at other companies in
the same or similar businesses, and of comparable size and success. In setting
the annual cash compensation for Company executives, the Committee reviews
compensation for comparable positions by reviewing compensation data available
in a number of publicly available surveys and databases. All of the companies in
the Peer Group (as defined below) are included, along with other companies, in
the compensation data reviewed. In addition to external market data, salary
determinations depend both upon the Company's financial performance and upon the
individual's performance as measured by certain subjective non-financial
objectives. These non-financial objectives include the individual's contribution
to the Company as a whole, including his or her ability to motivate others,
develop the skills necessary to grow as the Company matures, recognize and
pursue new business opportunities and initiate programs to enhance the Company's
growth and success.
ANNUAL INCENTIVE COMPENSATION
The Company's bonus program is designed to provide its key employees with
cash incentives to achieve the Company's financial goals. At the beginning of
each year, the Committee establishes target annual bonuses for each executive
officer, which the executive will receive if the Company achieves its targeted
financial objectives for the year. Cash bonuses are then paid annually based
upon the Company's attainment of these targeted financial objectives for the
year. During 1998, annual cash bonus targets for the Named Executive Officers,
including Mr. Wilson, were between 25% and 200% of base salary. Total bonuses of
$250,000 were awarded to the Named Executive Officers on the basis of 1998
performance.
LONG-TERM EQUITY INCENTIVES
The Company's stock option program is designed to promote the identity of
long-term interests between the Company's employees and its stockholders and to
assist in the retention of executives. The size of option grants is generally
intended by the Committee to reflect the executive's position with the Company
and his or her contributions to the Company. Stock options generally vest over a
three to five year period in order to encourage key employees to continue in the
employ of the Company. In 1998, all stock options were granted at an option
price equal to the fair market value of the Company's Voting Common Stock on the
date of the grant.
14
<PAGE> 17
BENEFITS
The Company's executive officers are entitled to receive medical and life
insurance benefits and to participate in the Company's 401(k) retirement savings
plan on the same basis as other full-time employees of the Company. The
Company's 1998 Employee Stock Purchase Plan, which is available to virtually all
employees including executive officers, allows participants to purchase shares
at a discount of 15% from the fair market value at the beginning or end of the
applicable purchase period.
The amount of perquisites, as determined in accordance with the rules of
the Securities and Exchange Commission relating to executive compensation, did
not exceed 10% of salary and bonus for 1998 for any of the Named Executive
Officers.
SUMMARY OF COMPENSATION OF CHIEF EXECUTIVE OFFICER
In 1998, Mr. Wilson, the Company's Chief Executive Officer, received a
salary of $200,000. Mr. Wilson's target bonus was 200% of his base salary, and
was based on targeted growth in earnings, revenue, and market development and
improvement in customer satisfaction and the product development cycle. Based on
these measurements, Mr. Wilson did not receive a bonus related to 1998. In April
1998, Mr. Wilson was granted a non-statutory option to purchase up to 333,332
shares of Voting Common Stock as described in the Option Grants in Last Fiscal
Year table above.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation in excess of $1 million paid to
the corporation's Chief Executive Officer and four other most highly paid
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limitation if certain requirements are met. The
Committee has determined that it will make every reasonable effort, consistent
with sound executive compensation principles and the needs of the Company, to
ensure that all amounts paid to the Company's Chief Executive Officer or to any
of the other Named Executive Officers comply with Section 162(m).
EXECUTIVE DEVELOPMENT AND
COMPENSATION COMMITTEE
Steven A. Denning
G. Fred DiBona
Eugene V. Fife
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<PAGE> 18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Denning, Mr. DiBona and Mr. Fife served during 1998 as members of the
Executive Development and Compensation Committee. Mr. Harvey J. Wilson, an
executive officer of the Company, was an ex-officio member of the Executive
Development and Compensation Committee and in such capacity participated in
certain deliberations of the Committee. None of Mr. Denning, Mr. DiBona or Mr.
Fife was at any time during 1998, or at any other time, an officer or employee
of the Company. See "Certain Relationships and Transactions" for a description
of certain relationships and transactions between the Company and affiliates of
Mr. Denning and Mr. Wilson.
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total stockholder return on the
Voting Common Stock of the Company from August 7, 1998 (the first trading date
following the Company's initial public offering) to December 31, 1998 with the
cumulative total return of (i) U.S. companies traded on the Nasdaq Stock Market
(the "Nasdaq Index") and (ii) an index of six similar publicly traded companies
(the "Peer Group"). The Peer Group is composed of HBO & Company (now known as
McKesson HBOC), Cerner Corporation, Shared Medical Systems Corporation,
Quadramed Corporation, Sunquest Information Systems, Inc., and IDX Systems
Corporation. This graph assumes the investment of $100.00 on August 7, 1998 in
the Company's Voting Common Stock, the Nasdaq Index and the Peer Index, and
assumes any dividends are reinvested.
[CHART]
<TABLE>
<CAPTION>
ECLIPSYS
CORPORATION NASDAQ INDEX PEER GROUP
----------- ------------ ----------
<S> <C> <C> <C>
August 7, 1998 100.00 100.00 100.00
December 31, 1998 171.85 120.05 99.01
</TABLE>
16
<PAGE> 19
APPROVAL OF THE 1999 STOCK INCENTIVE PLAN
On February 23, 1999, the Board of Directors adopted, subject to
stockholder approval, the Company's 1999 Stock Incentive Plan (the "1999 Plan"),
and provided that a total of 7,000,000 shares of Voting Common Stock be
available for issuance under the Company's stock plans (including the 1999 Plan,
the 1998 Employee Stock Purchase Plan, the 1998 Stock Incentive Plan and the
1996 Stock Plan). The Board of Directors has previously provided that no further
options or awards may be granted under the 1996 Stock Plan and has provided
that, upon stockholder approval of the 1999 Plan, no further options or awards
may be granted under the 1998 Stock Incentive Plan.
SUMMARY OF THE 1999 PLAN
The following summary of the 1999 Plan is qualified in its entirety by
reference to the 1999 Plan, a copy of which is attached as Annex A to this Proxy
Statement.
DESCRIPTION OF AWARDS
The 1999 Plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), non-statutory stock options, restricted stock awards and other
stock-based awards, including the grant of shares based upon certain conditions,
the grant of securities convertible into Voting Common Stock and the grant of
stock appreciation rights (collectively "Awards").
INCENTIVE STOCK OPTIONS AND NON-STATUTORY STOCK OPTIONS. Optionees receive
the right to purchase a specified number of shares of Voting Common Stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. Options may be granted at an
exercise price which may be less than, equal to or greater than the fair market
value of the Voting Common Stock on the date of grant. Under present law,
however, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Code may not be
granted at an exercise price less than the fair market value of the Voting
Common Stock on the date of grant (or less than 110% of the fair market value in
the case of incentive stock options granted to optionees holding more than 10%
of the voting power of the Company). Options may not be granted for a term in
excess of ten years. The 1999 Plan permits the Board to determine the manner of
payment of the exercise price of options, including through payment by cash,
check or in connection with a "cashless exercise" through a broker, by surrender
to the Company of shares of Voting Common Stock, by delivery to the Company of a
promissory note, or by any other lawful means.
RESTRICTED STOCK AWARDS. Restricted stock Awards entitle recipients to
acquire shares of Voting Common Stock, subject to the right of the Company to
repurchase all or part of such shares from the recipient in the event that the
conditions specified in the applicable Award are not satisfied prior to the end
of the applicable restriction period established for such Award.
OTHER STOCK-BASED AWARDS. Under the 1999 Plan, the Board has the right to
grant other Awards based upon the Voting Common Stock having such terms and
conditions as the Board may determine, including the grant of shares based upon
certain conditions, the grant of securities convertible into Voting Common Stock
and the grant of stock appreciation rights.
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<PAGE> 20
ELIGIBILITY TO RECEIVE AWARDS
Officers, employees, directors, consultants and advisors of the Company and
its subsidiaries are eligible to be granted Awards under the 1999 Plan. Under
present law, however, incentive stock options may only be granted to employees.
The maximum number of shares with respect to which an Award may be granted to
any participant under the 1999 Plan may not exceed 2,000,000 shares per calendar
year.
As of March 9, 1999, approximately 1,400 persons were eligible to receive
Awards under the 1999 Plan, including the Company's four executive officers and
eight non-employee directors. The granting of Awards under the 1999 Plan is
discretionary, and the Company cannot now determine the number or type of Awards
to be granted in the future to any particular person or group.
ADMINISTRATION
The 1999 Plan is administered by the Board of Directors. The Board has the
authority to adopt, amend and repeal the administrative rules, guidelines and
practices relating to the 1999 Plan and to interpret the provisions of the 1999
Plan. Pursuant to the terms of the 1999 Plan, the Board of Directors may
delegate authority under the 1999 Plan to one or more committees of the Board,
and subject to certain limitations, to one or more executive officers of the
Company. The Board has authorized the Executive Development and Compensation
Committee to administer certain aspects of the 1999 Plan, including the granting
of options to certain officers. Subject to any applicable limitations contained
in the 1999 Plan, the Board of Directors, the Committee, or any other committee
or executive officer to whom the Board delegates authority, as the case may be,
selects the recipients of Awards and determines (i) the number of shares of
Voting Common Stock covered by options and the dates upon which such options
become exercisable, (ii) the exercise price of options, (iii) the duration of
options, and (iv) the number of shares of Voting Common Stock subject to any
restricted stock or other stock-based Awards and the terms and conditions of
such Awards, including conditions for repurchase, issue price and repurchase
price.
The Board of Directors is required to make appropriate adjustments in
connection with the 1999 Plan and any outstanding Awards to reflect stock
dividends, stock splits and certain other events. In the event of a merger,
liquidation or other Acquisition Event (as defined in the 1999 Plan), the Board
of Directors is authorized to provide for outstanding Options or other
stock-based Awards to be assumed or substituted for, to accelerate the Awards to
make them fully exercisable prior to consummation of the Acquisition Event or to
provide for a cash out of the value of any outstanding options. If any Award
expires or is terminated, surrendered, canceled or forfeited, the unused shares
of Voting Common Stock covered by such Award will again be available for grant
under the 1999 Plan.
AMENDMENT OR TERMINATION
No Award may be made under the 1999 Plan after February 23, 2009, but
Awards previously granted may extend beyond that date. The Board of Directors
may at any time amend, suspend or terminate the 1999 Plan, except that after the
date of such amendment no Award intended to comply with Section 162(m) of the
Code shall become exercisable, realizable or vested (to the extent such
18
<PAGE> 21
amendment was required to grant such Award) unless and until such amendment
shall have been approved by the Company's stockholders.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1999 Plan and with respect to the sale of Voting Common Stock acquired under the
1999 Plan.
INCENTIVE STOCK OPTIONS
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Voting Common Stock acquired through the exercise of the option ("ISO Stock").
The exercise of an incentive stock option, however, may subject the participant
to the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
NON-STATUTORY STOCK OPTIONS
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a non-statutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
non-statutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Voting Common
Stock acquired through the exercise of the option ("NSO Stock") on the Exercise
Date over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant
19
<PAGE> 22
generally will recognize capital gain or loss in an amount equal to the
difference between the sale price of the NSO Stock and the participant's tax
basis in the NSO Stock. This capital gain or loss will be a long-term gain or
loss if the participant has held the NSO Stock for more than one year prior to
the date of the sale.
RESTRICTED STOCK AWARDS
A participant will not recognize taxable income upon the grant of a
restricted stock Award, unless the participant makes an election under Section
83(b) of the Code (a "Section 83(b) Election"). If the participant makes a
Section 83(b) Election within 30 days of the date of the grant, then the
participant will recognize ordinary income, for the year in which the Award is
granted, in an amount equal to the difference between the fair market value of
the Voting Common Stock at the time the Award is granted and the purchase price
paid for the Voting Common Stock. If a Section 83(b) Election is not made, the
participant will recognize ordinary income, at the time that the forfeiture
provisions or restrictions on transfer lapse, in an amount equal to the
difference between the fair market value of the Voting Common Stock at the time
of such lapse and the original purchase price paid for the Voting Common Stock.
The participant will have a basis in the Voting Common Stock acquired equal to
the sum of the price paid and the amount of ordinary compensation income
recognized.
Upon the disposition of the Voting Common Stock acquired pursuant to a
restricted stock Award, the participant will recognize a capital gain or loss
equal to the difference between the sale price of the Voting Common Stock and
the participant's basis in the Voting Common Stock. The gain or loss will be a
long-term gain or loss if the shares are held for more than one year. For this
purpose, the holding period shall begin just after the date on which the
forfeiture provisions or restrictions lapse if a Section 83(b) Election is not
made, or just after the Award is granted if a Section 83(b) Election is made.
OTHER STOCK-BASED AWARDS
The tax consequences associated with any other stock-based Award granted
under the 1999 Plan will vary depending on the specific terms of such Award,
including, whether or not the Award has a readily ascertainable fair market
value, whether or not the Award is subject to forfeiture provisions or
restrictions on transfer, the nature of the property to be received by the
participant under the Award, the applicable holding period and the participant's
tax basis for the Award or underlying Voting Common Stock.
TAX CONSEQUENCES TO THE COMPANY
The grant of an Award under the 1999 Plan will have no tax consequences to
the Company. Moreover, in general, neither the exercise of an incentive stock
option nor the sale of any Voting Common Stock acquired under the 1999 Plan will
have any tax consequences to the Company. The Company generally will be entitled
to a business-expense deduction, however, with respect to any ordinary
compensation income recognized by a participant under the 1999 Plan, including
as a result of the exercise of a non-statutory stock option, a Disqualifying
Disposition, or a Section 83(b) Election. Any such deduction will be subject to
the limitations of Section 162(m) of the Code.
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<PAGE> 23
BOARD RECOMMENDATION
The Board of Directors believes that the approval of the 1999 Stock
Incentive Plan is in the best interests of the Company and its stockholders and
therefore recommends that the stockholders vote FOR this proposal.
APPROVAL OF THE AMENDMENTS OF THE
1998 STOCK INCENTIVE PLAN AND THE
AMENDED AND RESTATED 1998 EMPLOYEE STOCK PURCHASE PLAN
On February 23, 1999, in connection with its adoption of the 1999 Plan, the
Board of Directors adopted, subject to stockholder approval, related amendments
to the 1998 Stock Incentive Plan (the "1998 Incentive Plan") and the Amended and
Restated 1998 Employee Stock Purchase Plan (the "Purchase Plan") to reflect the
increase from 4,333,333 to 7,000,000 of the total number of shares of Voting
Common Stock available for issuance in the aggregate under the Company's stock
plans (including the 1999 Plan, the Purchase Plan, the 1998 Incentive Plan and
the 1996 Stock Plan).
The Board of Directors has provided that, upon stockholder approval of the
1999 Plan, no further options or awards may be granted under the 1998 Incentive
Plan. The proposed amendment to the 1998 Incentive Plan is intended to ensure
that existing options under the 1998 Incentive Plan remain valid.
SUMMARY OF THE 1998 INCENTIVE PLAN
The terms of the 1998 Incentive Plan are substantially identical to the
terms of the 1999 Plan as described above, except that the 1998 Incentive Plan
does not have a limitation on the maximum number of shares with respect to which
an award may be granted to any participant per calendar year. The tax
consequences of Awards under the 1998 Incentive Plan are similar to those of the
1999 Plan. This summary is qualified in its entirety by reference to the 1998
Incentive Plan, a copy of which may be obtained from the Secretary of the
Company.
SUMMARY OF THE PURCHASE PLAN
The following is a brief summary of the material terms of the Purchase
Plan. This summary is qualified in its entirety by reference to the Purchase
Plan, a copy of which may be obtained from the Secretary of the Company.
GENERAL. The Purchase Plan provides eligible employees with the
opportunity to purchase shares of the Company's Voting Common Stock at a
discounted price.
ELIGIBILITY. Each employee of the Company and its eligible subsidiaries,
including any director who is also an employee, is eligible to participate in
the Purchase Plan, provided he or she (i) is employed by the Company or any
eligible subsidiary on the applicable offering commencement date, (ii) is
regularly employed by the Company or any eligible subsidiary for more than 20
hours per week and (iii) has been employed by the Company or any eligible
subsidiary for at least three months prior to enrolling in the Purchase Plan.
21
<PAGE> 24
OFFERINGS. The Purchase Plan is implemented through a series of offerings,
each of which is three months in length. Participants in an offering purchase
shares with funds set aside through payroll withholding. An employee may elect
to have a percentage from 1% to up to 15% withheld from his or her pay for
purposes of purchasing shares under the Purchase Plan, subject to certain
limitations on the maximum number of shares that may be purchased.
PURCHASE PRICE. The price at which shares may be purchased during each
offering is the lower of (i) 85% of the closing price of the Voting Common Stock
as reported on the Nasdaq National Market on the date that the offering
commences or (ii) 85% of the closing price of the Voting Common Stock as
reported on the Nasdaq National Market on the date that the offering terminates.
NUMBER OF SHARES; ADJUSTMENTS. Currently, an aggregate of 4,333,333 shares
of Voting Common Stock may be issued pursuant to the Purchase Plan, less shares
issued or subject to outstanding options under the 1998 Stock Incentive Plan,
the 1996 Stock Plan. If the proposed amendment is approved at the Annual
Meeting, the maximum number of shares issuable under the Purchase Plan will
increase to 7,000,000 shares, less shares issued or subject to outstanding
options under the 1999 Plan, the 1998 Stock Incentive Plan, and the 1996 Stock
Plan. The Purchase Plan contains provisions relating to adjustments to be made
under the Purchase Plan in the event of stock splits and other similar events
and certain mergers, acquisitions and other extraordinary corporate transactions
involving the Company.
ADMINISTRATION. The Purchase Plan is administered by the Board of
Directors of the Company, which has the authority to make rules and regulations
for the administration of the Purchase Plan. Pursuant to the terms of the
Purchase Plan, the Board of Directors may delegate authority under the Purchase
Plan to a committee of the Board.
AMENDMENT OR TERMINATION. The Board of Directors may at any time terminate
or amend the Purchase Plan, provided that no amendment may be made without prior
approval of the stockholders of the Company if such approval is required by
Section 423 of the Code, and in no event may any amendment be made which would
cause the Purchase Plan to fail to comply with Section 423 of the Code.
FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE PLAN
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to purchases made under the
Purchase Plan and with respect to the sale of Voting Common Stock acquired under
the Purchase Plan.
TAX CONSEQUENCES TO PARTICIPANTS. In general, a participant will not
recognize taxable income upon enrolling in the Purchase Plan or upon purchasing
shares of Voting Common Stock at the end of an offering. Instead, if a
participant sells Common Stock acquired under the Purchase Plan at a sale price
that exceeds the price of which the participant purchased the Voting Common
Stock, then the participant will recognize taxable income in an amount equal to
the excess of the sale price of the Voting Common Stock over the price at which
the participant purchased the Voting Common Stock. A portion of that taxable
income will be ordinary income, and a portion may be capital gain.
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If the participant sells the Voting Common Stock more than one year after
acquiring it and more than two years after the date on which the offering
commenced (the "Grant Date"), then the participant will be taxed as follows. If
the sale price of the Voting Common Stock is higher than the price at which the
participant purchased the Voting Common Stock, then the participant will
recognize ordinary compensation income in an amount equal to the lesser of:
(i) fifteen percent of the fair market value of the Voting Common Stock on
the Grant Date; and
(ii) the excess of the sale price of the Voting Common Stock over the price
at which the participant purchased the Voting Common Stock.
Any further income will be long-term capital gain. If the sale price of the
Voting Common Stock is less than the price at which the participant purchased
the Voting Common Stock, then the participant will recognize long-term capital
loss in an amount equal to the excess of the price at which the participant
purchased the Voting Common Stock over the sale price of the Voting Common
Stock.
If the participant sells the Voting Common Stock within one year after
acquiring it or within two years after the Grant Date (a "Disqualifying
Disposition"), then the participant will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Voting Common
Stock on the date that it was purchased over the price at which the participant
purchased the Voting Common Stock. The participant will also recognize capital
gain in an amount equal to the excess of the sale price of the Voting Common
Stock over the fair market value of the Voting Common Stock on the date that it
was purchased or capital loss in an amount equal to the excess of the fair
market value of the Voting Common Stock the date that it was purchased over the
sale price of the Voting Common Stock. This capital gain or loss will be a
long-term capital gain or loss if the participant has held the Common Stock for
more than one year prior to the date of the sale and will be short-term capital
gain or loss if the participant has held the Voting Common Stock for a shorter
period.
TAX CONSEQUENCES TO THE COMPANY. The offering of Voting Common Stock under
the Purchase Plan will have no tax consequences to the Company. Moreover, in
general, neither the purchase nor the sale of Voting Common Stock acquired under
the Plan will have any tax consequences to the Company except that the Company
will be entitled to a business-expense deduction with respect to any ordinary
compensation income recognized by a participant upon making a Disqualifying
Disposition. Any such deduction will be subject to the limitations of Section
162(m) of the Code.
BOARD RECOMMENDATION
The Board of Directors believes that the approval of the amendments of the
1998 Incentive Plan and the Purchase Plan is in the best interests of the
Company and its stockholders and therefore recommends that the stockholders vote
FOR this proposal.
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RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP
as the Company's independent auditors for the current fiscal year.
PricewaterhouseCoopers LLP has served as the Company's independent auditors
since the Company's inception. Although stockholder approval of the Board of
Directors' selection of PricewaterhouseCoopers LLP is not required by law, the
Board of Directors believes that it is advisable to give stockholders an
opportunity to ratify this selection. If this proposal is not approved at the
Annual Meeting, the Board of Directors may reconsider its selection of
PricewaterhouseCoopers LLP.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Annual Meeting and will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly presented
to the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews, and the Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and, as required by law, the Company will
reimburse them for their out-of-pocket expenses in this regard.
Pursuant to Securities Exchange Act Rule 14a-8(e), proposals of
stockholders intended to be presented at the 2000 Annual Meeting of Stockholders
must be received by the Company at its principal office at 777 East Atlantic
Avenue, Suite 200, Delray Beach, Florida 33483, not later than November 25, 1999
for inclusion in the proxy statement for that meeting. Under the Company's By-
laws, proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders that do not comply with Rule 14a-8(e) must be received
by the Company at its principal office in Delray Beach, Florida no less than 60
days nor more than 90 days prior to the date of that meeting. If public notice
of the annual meeting of stockholders of the Company is not given at least 70
days before the meeting date, any stockholder proposal must be received by the
Company within 10 days after such public notice. A copy of the Company's By-laws
may be obtained from the Secretary of the Company.
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SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During 1998, Mr. Wilson filed a timely Form 4 that failed to report the
automatic conversion of certain securities held by Wilfam Ltd. in connection
with the Company's initial public offering. The transaction was timely reported
on a separate Form 4 filed by Wilfam Ltd. The Company is not aware of any other
failure by its officers, directors and holders of 10% of the Company's Voting
Common Stock to comply in a timely manner during 1998 with Section 16(a) filing
requirements.
By Order of the Board of Directors,
/s/ T. JACK RISENHOOVER, II
T. Jack Risenhoover, II, Secretary
March 25, 1999
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO ATTEND
THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN IF THEY HAVE SENT IN THEIR
PROXIES.
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ANNEX A
ECLIPSYS CORPORATION
1999 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this 1999 Stock Incentive Plan (the "Plan") of Eclipsys
Corporation, a Delaware corporation (the "Company"), is to advance the interests
of the Company's stockholders by enhancing the Company's ability to attract,
retain and motivate persons who make (or are expected to make) important
contributions to the Company by providing such persons with equity ownership
opportunities and performance-based incentives and thereby better aligning the
interests of such persons with those of the Company's stockholders. Except where
the context otherwise requires, the term "Company" shall include any present or
future subsidiary corporations of Eclipsys Corporation as defined in Section
424(f) of the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder (the "Code") and any other business venture (including,
without limitation, a joint venture or limited liability company) in which the
Company has a significant interest, as determined by the Board of Directors of
the Company (the "Board").
2. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock, or other
stock-based awards (each, an "Award") under the Plan. Any person who has been
granted an Award under the Plan shall be deemed a "Participant".
3. ADMINISTRATION, DELEGATION
(a) ADMINISTRATION BY BOARD OF DIRECTORS. The Plan will be administered by
the Board. The Board shall have authority to grant Awards and to adopt, amend
and repeal such administrative rules, guidelines and practices relating to the
Plan as it shall deem advisable. The Board may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board's sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
(b) DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.
(c) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). If and when the common
stock, $0.01 par value per share, of the Company
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(the "Common Stock") is registered under the Securities Exchange Act of 1934
(the "Exchange Act"), the Board shall appoint one such Committee of not less
than two members, each member of which shall be an "outside director" within the
meaning of Section 162(m) of the Code and a "non-employee director" as defined
in Rule 16b-3 promulgated under the Exchange Act." All references in the Plan to
the "Board" shall mean the Board or a Committee of the Board or the executive
officer referred to in Section 3(b) to the extent that the Board's powers or
authority under the Plan have been delegated to such Committee or executive
officer.
4. STOCK AVAILABLE FOR AWARDS
(a) NUMBER OF SHARES. Subject to adjustment under Section 4(c), Awards may
be made under the Plan for up to an aggregate number of shares of Common Stock
equal to (i) 7,000,000 less (ii) the sum of (X) the number of shares as to which
options are then outstanding under the Company's Amended and Restated 1998
Employee Stock Purchase Plan (the "Purchase Plan") and the number of shares
previously sold under the Purchase Plan, (Y) the number of shares as to which
options are then outstanding under the Company's 1996 Stock Plan (the "1996
Plan") and the number of shares previously issued upon the exercise of options
granted under the 1996 Plan and the number of shares of restricted or
unrestricted stock granted under the 1996 Plan then outstanding and (Z) the
number of shares as to which "Awards" have previously been made or shares issued
under the Company's 1998 Stock Incentive Plan (the "1998 Plan"), as such number
shall be reduced to the extent shares become reavailable for issuance under the
1998 Plan pursuant to Section 4(a) thereof. If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of Incentive Stock
Options (as hereinafter defined), to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) PER-PARTICIPANT LIMIT. Subject to adjustment under Section 4(c), for
Awards granted after the Common Stock is registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), the maximum number of shares of
Common Stock with respect to which an Award may be granted to any Participant
under the Plan shall be 2,000,000 per calendar year. The per-Participant limit
described in this Section 4(b) shall be construed and applied consistently with
Section 162(m) of the Code.
(c) ADJUSTMENT TO COMMON STOCK. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the per-participant limit set forth in Section 4(b), (iii)
the number and class of security and exercise price per share subject to each
outstanding Option, (iv) the repurchase price per security subject to each
outstanding Restricted Stock Award, and (v) the terms of each other outstanding
stock-based Award shall be appropriately adjusted by the Company (or substituted
Awards may be made, if applicable) to the extent the Board shall determine, in
good faith, that such an adjustment (or substitution) is necessary and
appropriate. If this Section 4(c) applies and
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Section 8(e)(1) also applies to any event, Section 8(e)(1) shall be applicable
to such event, and this Section 4(c) shall not be applicable.
5. STOCK OPTIONS
(a) GENERAL. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
(c) EXERCISE PRICE. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement.
(d) DURATION OF OPTIONS. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement. No Option will be granted for a term in excess of
10 years.
(e) EXERCISE OF OPTION. Options may be exercised only by delivery to the
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.
(f) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may otherwise provide in an Option Agreement,
delivery of an irrevocable and unconditional undertaking by a creditworthy
broker to deliver promptly to the Company sufficient funds to pay the
exercise price, or delivery by the Participant to the Company of a copy of
irrevocable and unconditional instructions to a creditworthy broker to
deliver promptly to the Company cash or a check sufficient to pay the
exercise price;
(3) to the extent permitted by the Board and explicitly provided in an
Option Agreement (i) by delivery of shares of Common Stock owned by the
Participant valued at their fair market value as determined by the Board in
good faith ("Fair Market Value"), which Common Stock was owned by the
Participant at least six months prior to such delivery, (ii) by delivery of
a promissory note of the Participant to the Company on terms determined by
the Board, or (iii) by payment of such other lawful consideration as the
Board may determine; or
(4) any combination of the above permitted forms of payment.
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6. RESTRICTED STOCK
(a) GRANTS. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award").
(b) TERMS AND CONDITIONS. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
8. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) DOCUMENTATION. Each Award under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine. Each Award may
contain terms and conditions in addition to those set forth in the Plan.
(c) BOARD DISCRETION. Except as otherwise provided by the Plan, each type
of Award may be made alone or in addition or in relation to any other type of
Award. The terms of each type of Award need not be identical, and the Board need
not treat Participants uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a
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Participant and the extent to which, and the period during which, the
Participant, the Participant's legal representative, conservator, guardian or
Designated Beneficiary may exercise rights under the Award.
(e) ACQUISITION EVENTS ACQUISITION AND CHANGE IN CONTROL EVENTS
(1) DEFINITIONS
a. An "Acquisition Event" shall mean:
(i) any merger or consolidation of the Company with or into
another entity as a result of which the Common Stock is
converted into or exchanged for the right to receive
cash, securities or other property; or
(ii) any exchange of shares of the Company for cash,
securities or other property pursuant to a statutory
share exchange transaction.
b. A "Change in Control Event" shall mean:
(i) the acquisition by an individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership of
any capital stock of the Company if, after such
acquisition, such Person beneficially owns (within the
meaning of Rule 13d-3 promulgated under the Exchange
Act) 30% or more of either (x) the then-outstanding
shares of common stock of the Company (the "Outstanding
Company Common Stock") or (y) the combined voting power
of the then-outstanding securities of the Company
entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change in
Control Event: (A) any acquisition directly from the
Company (excluding an acquisition pursuant to the
exercise, conversion or exchange of any security
exercisable for, convertible into or exchangeable for
common stock or voting securities of the Company, unless
the Person exercising, converting or exchanging such
security acquired such security directly from the
Company or an underwriter or agent of the Company), (B)
any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (C) any
acquisition by any corporation pursuant to a Business
Combination (as defined below) which complies with
clauses (x) and (y) of subsection (iii) of this
definition or (D) any acquisition by General Atlantic
Partners 28, L.P., General Atlantic Partners 38, L.P.,
General Atlantic Partners 47, L.P., GAP Coinvestment
Partners, L.P. and any other entities controlled by or
under common control with any of the foregoing entities,
within the meaning of the Exchange Act; or
(ii) such time as the Continuing Directors (as defined
below) constitute a minority of the Board (or, if
applicable, the Board of Directors of a successor
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corporation to the Company), where the term "Continuing
Director" means at any date a member of the Board (x)
who was a member of the Board on the date of the
initial adoption of this Plan by the Board or (y) who
was nominated or elected subsequent to such date by at
least a majority of the directors who were Continuing
Directors at the time of such nomination or election or
whose election to the Board was recommended or endorsed
by at least a majority of the directors who were
Continuing Directors at the time of such nomination or
election; provided, however, that there shall be
excluded from this clause (y) any individual whose
initial assumption of office occurred as a result of an
actual or threatened election contest with respect to
the election or removal of directors or other actual or
threatened solicitation of proxies or consents, by or
on behalf of a person other than the Board; or
(iii) the consummation of a merger, consolidation,
reorganization or statutory share exchange involving
the Company or a sale or other disposition of all or
substantially all of the assets of the Company (a
"Business Combination"), unless, immediately following
such Business Combination, each of the following two
conditions is satisfied: (x) all or substantially all
of the individuals and entities who were the beneficial
owners of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly
or indirectly, more than 50% of the then-outstanding
shares of common stock and the combined voting power of
the then-outstanding securities entitled to vote
generally in the election of directors, respectively,
of the resulting or acquiring corporation in such
Business Combination (which shall include, without
limitation, a corporation which as a result of such
transaction owns the Company or substantially all of
the Company's assets either directly or through one or
more subsidiaries) (such resulting or acquiring
corporation is referred to herein as the "Acquiring
Corporation") in substantially the same proportions as
their ownership of the Outstanding Company Common Stock
and Outstanding Company Voting Securities,
respectively, immediately prior to such Business
Combination and (y) no Person (excluding the Acquiring
Corporation, any Exempt Person or any employee benefit
plan (or related trust) maintained or sponsored by the
Company or by the Acquiring Corporation) beneficially
owns, directly or indirectly, 30% or more of the
then-outstanding shares of common stock of the
Acquiring Corporation, or of the combined voting power
of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior
to the Business Combination).
(2) EFFECT ON OPTIONS
a. ACQUISITION EVENT. Upon the occurrence of an Acquisition
Event (regardless of whether such event also constitutes a
Change in Control Event), or the execution by the Company of
any agreement with respect to an Acquisition Event (regardless
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of whether such event will result in a Change in Control
Event), the Board shall provide that all outstanding Options
shall be assumed, or equivalent options shall be substituted,
by the acquiring or succeeding corporation (or an affiliate
thereof); provided that if such Acquisition Event also
constitutes a Change in Control Event, except to the extent
specifically provided to the contrary in the instrument
evidencing any Option or any other agreement between a
Participant and the Company, such assumed or substituted
options shall be immediately exercisable in full upon the
occurrence of such Acquisition Event. For purposes hereof, an
Option shall be considered to be assumed if, following
consummation of the Acquisition Event, the Option confers the
right to purchase, for each share of Common Stock subject to
the Option immediately prior to the consummation of the
Acquisition Event, the consideration (whether cash, securities
or other property) received as a result of the Acquisition
Event by holders of Common Stock for each share of Common
Stock held immediately prior to the consummation of the
Acquisition Event (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders
of a majority of the outstanding shares of Common Stock);
provided, however, that if the consideration received as a
result of the Acquisition Event is not solely common stock of
the acquiring or succeeding corporation (or an affiliate
thereof), the Company may, with the consent of the acquiring
or succeeding corporation, provide for the consideration to be
received upon the exercise of Options to consist solely of
common stock of the acquiring or succeeding corporation (or an
affiliate thereof) equivalent in fair market value to the per
share consideration received by holders of outstanding shares
of Common Stock as a result of the Acquisition Event.
Notwithstanding the foregoing, if the acquiring or succeeding
corporation (or an affiliate thereof) does not agree to
assume, or substitute for, such Options, then the Board shall
(x) upon written notice to the Participants, provide that all
then unexercised Options will become exercisable in full as of
a specified time (the "Acceleration Time") prior to the
Acquisition Event and will terminate immediately prior to the
consummation of such Acquisition Event, except to the extent
exercised by the Participants before the consummation of such
Acquisition Event, and/or (y) in the event of an Acquisition
Event under the terms of which holders of Common Stock will
receive upon consummation thereof a cash payment for each
share of Common Stock surrendered pursuant to such Acquisition
Event (the "Acquisition Price"), provide that all outstanding
Options shall terminate upon consummation of such Acquisition
Event and each Participant shall receive, in exchange
therefor, a cash payment equal to the amount (if any) by which
(A) the Acquisition Price multiplied by the number of shares
of Common Stock subject to such outstanding Options (whether
or not then exercisable), exceeds (B) the aggregate exercise
price of such Options.
b. CHANGE IN CONTROL EVENT THAT IS NOT AN ACQUISITION
EVENT. Upon the occurrence of a Change in Control Event that
does not also constitute an Acquisition Event, except to the
extent specifically provided to the contrary in the instrument
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evidencing any Option or any other agreement between a
Participant and the Company, all Options then-outstanding
shall automatically become immediately exercisable in full.
(3) EFFECT ON RESTRICTED STOCK AWARDS
a. Acquisition Event that is not a Change in Control Event. Upon
the occurrence of an Acquisition Event that is not a Change in
Control Event, the repurchase and other rights of the Company
under each outstanding Restricted Stock Award shall inure to
the benefit of the Company's successor and shall apply to the
cash, securities or other property which the Common Stock was
converted into or exchanged for pursuant to such Acquisition
Event in the same manner and to the same extent as they
applied to the Common Stock subject to such Restricted Stock
Award.
b. CHANGE IN CONTROL EVENT. Upon the occurrence of a Change in
Control Event (regardless of whether such event also
constitutes an Acquisition Event), except to the extent
specifically provided to the contrary in the instrument
evidencing any Restricted Stock Award or any other agreement
between a Participant and the Company, all restrictions and
conditions on all Restricted Stock Awards then-outstanding
shall automatically be deemed terminated or satisfied.
(4) EFFECT ON OTHER AWARDS
a. ACQUISITION EVENT THAT IS NOT A CHANGE IN CONTROL EVENT. The
Board shall specify the effect of an Acquisition Event that is
not a Change in Control Event on any other Award granted under
the Plan at the time of the grant of such Award.
b. CHANGE IN CONTROL EVENT. Upon the occurrence of a Change in
Control Event (regardless of whether such event also
constitutes an Acquisition Event), except to the extent
specifically provided to the contrary in the instrument
evidencing any other Award or any other agreement between a
Participant and the Company, all other Awards shall become
exercisable, realizable or vested in full, or shall be free of
all conditions or restrictions, as applicable to each such
Award.
(f) ASSUMPTION OF OPTIONS UPON CERTAIN EVENTS. The Board may grant Awards
under the Plan in substitution for stock and stock-based awards held by
employees of another corporation who become employees of the Company as a result
of a merger or consolidation of the employing corporation with the Company or
the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate in the circumstances.
(g) WITHHOLDING. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. The Board may allow Participants to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The
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Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to a Participant.
(h) AMENDMENT OF AWARD. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(i) CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(j) ACCELERATION. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of all restrictions or that any other stock-based Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.
9. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
(c) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant intended to comply with Section 162(m) of the Code shall become
exercisable, vested or realizable, as applicable to such Award, unless and until
the Plan has been approved by the Company's stockholders to the extent
stockholder approval is required by Section 162(m) in the manner required under
Section 162(m) (including the vote required under Section 162(m)). No Awards
shall be granted under the Plan after the completion of ten years from the
earlier of (i) the date on which the Plan was adopted by the Board or (ii) the
date the Plan was approved by the Company's stockholders, but Awards previously
granted may extend beyond that date.
A-9
<PAGE> 37
(d) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that after the date of such
amendment, no Award granted to a Participant that is intended to comply with
Section 162(m) shall become exercisable, realizable or vested, unless and until
such amendment shall have been approved by the Company's stockholders as
required by Section 162(m) (including the vote required under Section 162(m)).
(e) GOVERNING LAW. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
Adopted by the Board of Directors
on February 23, 1999
A-10
<PAGE> 38
SKU#1759
<PAGE> 39
PROXY ECLIPSYS CORPORATION PROXY
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 21, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, having received notice of the meeting and management's
proxy statement therefor, and revoking all prior proxies, hereby appoint(s)
Harvey J. Wilson, Robert J. Vanaria and T. Jack Risenhoover, II, and each of
them, with full power of substitution, as proxies to represent and vote, as
designated herein, all shares of stock of Eclipsys Corporation (the "Company")
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of the Company to be held at the Delray Beach
Marriott, 10 North Ocean Boulevard, Delray Beach, Florida 33444 on Wednesday,
April 21, 1999, at 10:00 a.m., local time, and at any adjournment thereof (the
"Meeting").
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is given, this proxy will
be voted FOR all proposals. Attendance of the undersigned at the meeting or at
any adjournment thereof will not be deemed to revoke this proxy unless the
undersigned shall revoke this proxy in writing or shall deliver a subsequently
dated proxy to the Secretary of the Company or shall vote in person at the
Meeting.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID RETURN ENVELOPE.
1. To elect the following three Class I directors (except as marked below)
for a three-year term.
NOMINEES: Robert F. Raco, William E. Ford and Eugene V. Fife
[ ] FOR all nominees [ ] WITHHOLD authority to vote
for all nominees
[ ] FOR all nominees except the following nominee(s):
------------------------------------------------------------------------
(Continued, and to be signed, on reverse side)
<PAGE> 40
2. To approve the Company's 1999 Stock Incentive Plan (the "1999 Plan").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve related amendments to the Company's 1998 Stock Incentive Plan
(the "1998 Incentive Plan") and the Company's Amended and Restated 1998
Employee Stock Purchase Plan (the "Purchase Plan") to reflect an increase
in the number of shares of Voting Common Stock authorized for issuance
under all the Company's stock plans (the Purchase Plan, the 1996 Stock
Plan, the 1998 Incentive Plan and the 1999 Plan) from 4,333,333 to
7,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's independent auditors for the
current fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Dated , 1999
----------------------
----------------------------------
Signature
----------------------------------
Signature if held jointly
Please sign exactly as name
appears hereon. If the stock is
registered in the names of two or
more persons, each should sign.
Executors, administrators,
trustees, guardians, attorneys
and corporate officers should add
their titles.
