<PAGE> 1
As filed with the Securities and Exchange Commission on April 27, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HEALTH MANAGEMENT SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation or organization)
13-2770433
(I.R.S. Employer Identification Number)
401 Park Avenue South, New York, New York 10016
(Address of Principal Executive Offices)
HEALTH MANAGEMENT SYSTEMS, INC.
1999 LONG-TERM INCENTIVE STOCK PLAN
(Full title of the Plan)
Paul J. Kerz, President
Health Management Systems, Inc.
401 Park Avenue South
New York, New York 10016
(Name and address of agent for service)
(212)685-4545
(Telephone number, including area code, of agent for service)
copies to:
Bruce S. Coleman, Esq.
Coleman, Rhine & Goodwin LLP
750 Lexington Avenue
New York, New York 10022
(212) 317-8880
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of maximum maximum
securities Amount offering aggregate Amount of
to be to be price per offering registration
registered registered share (1) price (1) fee(2)
- ------------------------------ ------------------------ --------------- ----------------------- ---------------
<S> <C> <C> <C> <C>
Common Stock, 4,751,356(2) $4.53 $21,523,643 $-
$.01 par value
- ------------------------------ ------------------------ --------------- ----------------------- ---------------
</TABLE>
- -------------------
(1) Estimated pursuant to Rules 457(c) and 457(h) under the Securities Act
of 1933, as amended, and based on the average of the high and low sale
price reported on the Nasdaq-Amex National Market System of $4.53 on
April 19, 1999.
(2) Pursuant to Rule 429(a) under the Securities Act, this Registration
Statement contains a combined prospectus that relates to Registration
Statements Nos. 33-65560, 33-76638 and 33-3706 previously filed by the
Registrant. Pursuant to Rule 429(b) under the Securities Act, all
4,751,356 shares included herein are being carried forward from
Registration Statements Nos. 33-65560, 33-76638 and 33-3706. Filing
fees aggregating $32,198.87 were previously paid with such Registration
Statements.
Pursuant to Rule 416 under the Securities Act of 1933, there are also
being registered hereby such additional indeterminate number of shares of Common
Stock as may become issuable by reason of share splits, share dividends and
similar adjustments as set forth in the provisions of the Stock Option Plan and
the respective option agreements entered into thereunder.
<PAGE> 3
EXPLANATORY NOTE
This Registration Statement has been prepared in accordance with the
requirements of Form S-8 to register shares of Common Stock issuable pursuant to
the Registrant's 1999 Long-Term Incentive Stock Plan (the "Plan"). Under cover
of this Form S-8 is a Reoffer Prospectus prepared in accordance with the
requirements of Part I of Form S-3. The S-3 Reoffer Prospectus may be utilized
for reofferings of Common Stock acquired by certain Selling Shareholders through
participation in the Plan.
<PAGE> 4
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
Pursuant to Rule 428(b)(1) under the Securities Act of 1933, as amended
(the "Act"), an Information Statement with respect to the Health Management
Systems, Inc. 1999 Long-Term Incentive Stock Plan (the "Plan") will be
distributed to holders of stock options granted under such Plan. The Information
Statement, together with the documents incorporated by reference herein pursuant
to Item 3 of Part II below, taken together, constitute a Section 10(a)
prospectus and the Information Statement is hereby incorporated by reference in
this Registration Statement.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
There are hereby incorporated by reference herein the following
documents which have been filed with the Securities and Exchange Commission (the
"Commission"):
(a) the Registrant's Annual Report on Form 10-K for its fiscal year
ended October 31, 1998, filed with the Commission on January 11, 1999;
(b) the Registrant's Quarterly Report on Form 10-Q for the quarter
ended January 31, 1999, filed with the Commission on March 17, 1999;
(c) all other reports filed pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") since the end
of the Registrant's fiscal year ended October 31, 1998; and
(d) the description of the Registrant's Common Stock contained in the
Registrant's Form 8-A filed with the Commission.
All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this Registration
Statement and prior to the filing of a post-effective amendment hereto that
indicate that all securities offered have been sold or that deregisters all such
securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents.
II-1
<PAGE> 5
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained herein or in any other
subsequently filed document that also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 722 of the New York Business Corporation Law (the "BCL")
provides that a corporation may indemnify directors and officers as well as
other employees and individuals against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees, in connection
with actions or proceedings, whether civil or criminal (other than an action by
or in the right of the corporation - a "derivative action"), if they acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard is applicable in the case of derivative actions, except that
indemnification only extends to amounts paid in settlement and reasonable
expenses (including attorneys' fees) incurred in connection with the defense or
settlement of such actions, and the statute does not apply in respect of a
threatened action, or a pending action that is settled or otherwise disposed of,
and requires court approval before there can be any indemnification where the
person seeking indemnification has been found liable to the corporation. Section
721 of the BCL provides that Article 7 of the BCL is not exclusive of other
indemnification that may be granted by a corporation's certificate of
incorporation, disinterested director vote, stockholder vote, agreement or
otherwise. Article VIII, Section 7, of the Registrant's by-laws requires the
Registrant to indemnify its officers and directors to the fullest extent
permitted under the BCL.
II-2
<PAGE> 6
Any amendment to or repeal of the Registrant's certificate of
incorporation or by-laws shall not adversely affect any right or protection of a
director of the Registrant for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
Exhibit
Number Description
4 Health Management Systems, Inc. 1999 Long-Term Incentive Stock Plan.
5 Opinion of Coleman, Rhine & Goodwin LLP with respect to the legality of
the securities being registered.
23.1 Consent of Coleman, Rhine & Goodwin LLP (included in Exhibit 5).
23.2 Consent of KPMG LLP.
24 Powers of Attorney.
ITEM 9. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) to file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement;
(b) that, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
II-3
<PAGE> 7
(c) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions described in Item 6 above, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 8
REOFFER PROSPECTUS
HEALTH MANAGEMENT SYSTEMS, INC.
401 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10016
(212)685-4545
637,001 Shares
Health Management Systems, Inc.
Our Common Stock is listed on the Nasdaq-Amex National Market System under
the symbol "HMSY". The reported last sale price of the Common Stock on the
Nasdaq-Amex National Market System on April 19, 1999, was $4.44 per share.
These shares of Common Stock may be issued to our officers, directors and
employees when they exercise stock options and other awards granted to them
under our Long-Term Incentive Stock Plan and our prior Stock Option and
Restricted Stock Purchase Plan. These shareholders may then sell these shares in
the open market or otherwise. We will not receive any part of the proceeds from
these sales.
The shares have not been approved by the SEC or any state securities
commission, nor have these organizations determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
The date of this Prospectus is April 27, 1999
<PAGE> 9
TABLE OF CONTENTS
Where You Can Find More Information.....................................1
About Health Management Systems, Inc. ("HMS")...........................2
Selling Shareholders....................................................4
Plan of Distribution....................................................5
Validity of the Shares..................................................5
Experts.................................................................5
Other Matters...........................................................6
<PAGE> 10
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from our web site at www.hmsy.com or at the SEC's web site at www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 until the selling shareholders sell all the shares covered by this
prospectus. This prospectus is part of a registration statement we filed with
the SEC (Registration No. 333-____).
We are incorporating the following documents by reference:
Annual Report on Form 10-K for the year ended October 31, 1998; and
Quarterly Report on Form 10-Q for the quarter ended January 31, 1999.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Shareholder Services
Health Management Systems, Inc.
401 Park Avenue South
New York, New York 10016
(212)685-4545
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The selling shareholders will
not make an offer of these shares in any state where the offer is not permitted.
You should not assume that the information in this prospectus or any supplement
1
<PAGE> 11
is accurate as of any date other than the date on the front of those documents.
ABOUT HMS
HMS furnishes proprietary information management and data processing
products and services to healthcare providers and payors, including government
health service agencies. These services address the various types of data
generated by the interaction of the participants in the healthcare delivery
process: the providers of care, the third-party payors, and the patients.
Through its product and service offerings, the Company acts as an outsourcer of
information management functions addressing the operational, administrative,
financial, and clinical data that result from the rendering of healthcare
services to patients. The Company's product and service offerings benefit its
clients by enhancing revenue (achieved through improved reimbursability,
profitability, and/or collectability), accelerating cash flow, reducing
operating and administrative costs (by supplying advanced information
analytics), and improving decision-making capabilities (via the provision of
useful information).
Healthcare providers receive payment for services from patients,
third-party payors, or a combination thereof. Third-party payors include
commercial insurance companies, governments or their fiscal agents and
intermediaries, health maintenance organizations, preferred provider
organizations, third-party administrators for self-insured companies, and
managed care companies. Although patients generally retain primary
responsibility for payment for all healthcare services, third-party payors bear
the preponderance of the responsibility for many charges for care. Obtaining
reimbursement from third-party payors has become increasingly difficult because
of frequent changes in reimbursement formulae and contractual requirements for
pre-admission certification and utilization review, and administrative
procedures instituted by third-party payors in an effort to control costs. To be
successful in obtaining payment from third-party payors, hospitals and other
healthcare providers require regulatory knowledge and technical skills to manage
complex data collection, integration, analysis, and accounts receivable
management functions. To ensure that program costs are not greater than
necessary, third-party payors require knowledge and skills analogous to those
required by providers.
2
<PAGE> 12
Using the operational, financial, administrative, and clinical data
generated as part of the healthcare delivery process, the Company applies
proprietary software and other analytical tools to transform data into valuable
information that clients use to (i) minimize operating and administrative costs
while improving profitability, (ii) measure the quality of care, and (iii)
optimize the outcome of the transfer payment processes linking payors,
providers, and patients. Customers of the Company utilize the Company's products
and services to improve their decision-making and operating capabilities and to
achieve improved operational, administrative, financial, and clinical
performance. The Company believes its customers benefit from the Company's
unique understanding of the healthcare delivery and associated transfer payment
processes, from the perspective of both providers and payors.
3
<PAGE> 13
SELLING SHAREHOLDERS
The Selling Shareholders are offering 637,001 shares of Common Stock
which may be acquired by them pursuant to awards under the Company's Long-Term
Incentive Stock Plan or the Company's prior Stock Option and Restricted Stock
Purchase Plan. The Grants are either currently exercisable or will vest on or
prior to October 31, 1999. There is no assurance that any of the Selling
Shareholders will offer for sale or sell any or all of the Common Stock offered
by them pursuant to this Prospectus.
The following table sets forth certain information with respect to the
Selling Shareholders as of April 19, 1999, and includes awards which will vest
on or prior to October 31, 1999:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
NUMBER OF PERCENT OF NUMBER OF SHARES TO BE
SHARES OWNED CLASS OWNED SHARES OFFERED OWNED AFTER PERCENT OF
NAME PRIOR TO OFFERING PRIOR TO HEREBY COMPLETION OF CLASS OWNED
OFFERING OFFERING(1) AFTER OFFERING(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Paul J. Kerz 1,079,317 6.1% 299,019 780,298 4.4%
Robert V. Nagelhout 269,785 1.5% 64,916 204,869 1.2%
Alan L. Bendes 21,000 * 21,000 0 *
Donald J. Staffa 200,872 1.1% 148,155 52,717 *
Thomas J. Kazamek 210,762 1.2% 78,713 132,049 *
Lewis D. Levetown 10,738 * 3,000 7,738 *
Randolph G. Brown 3,250 * 2,500 750 *
William W. Neal 40,171 * 2,500 37,671 *
Galen D. Powers 17,685 * 12,198 5,487 *
Ellen A. Rudnick 7,000 * 2,500 4,500 *
Richard H. Stowe 64,114 * 2,500 61,61 *
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* denotes percentage of ownership is less than 1%
(1) Assumes all shares offered by this prospectus will be sold.
4
<PAGE> 14
PLAN OF DISTRIBUTION
The Selling Shareholders may, from time to time, offer all or part of
the shares acquired by them pursuant to awards on the over-the-counter market or
such national securities exchange upon which the Common Stock is traded at the
time of such sales, at prices prevailing at the time of such sales, or in
negotiated transactions. Selling Shareholders may also pledge their shares to
banks, brokers or other financial institutions as security for margin loans or
other financial accommodations that may be extended to such Selling
Shareholders, and any such pledgee institution may similarly offer, sell and
effect transactions in such shares. The Company will pay all expenses in
preparing and reproducing the Registration Statement of which this Prospectus is
a part, but will not receive any part of the proceeds of any sales of such
shares. In addition, any securities covered by this Prospectus which qualify for
sale pursuant to Rule 144 under the Act may be sold under Rule 144 rather than
pursuant to this Prospectus. The Selling Shareholders will pay the brokerage
commissions charged to sellers in connection with such sales. Each Selling
Shareholder (and pledgee) reserves the sole right to accept and, together with
its agents from time to time, to reject, in whole or in part, any proposed
purchase of shares to be made directly or through agents.
The Company and the Selling Shareholders may enter into customary
agreements concerning indemnification and the provision of information in
connection with the sale of their shares of Common Stock.
VALIDITY OF THE SHARES
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Coleman, Rhine & Goodwin LLP, 750 Lexington
Avenue, New York, New York 10022. Partners of Coleman, Rhine & Goodwin LLP own
6,762 shares of Common Stock.
EXPERTS
The consolidated financial statements and financial statement schedule
of the Company as of October 31, 1998 and 1997, and for each of the years in the
three-year period ended October 31, 1998, have been incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
5
<PAGE> 15
OTHER MATTERS
The Business Corporation Law of the State of New York provides that,
under certain circumstances, directors, officers, employees or agents of a New
York corporation may be indemnified against expenses, payments, fines and
amounts actually and reasonably incurred by them in connection with settling, or
otherwise disposing of, suits or threatened suits, to which they are a party or
threatened to be named a party by reason of acting in any of such capacities, if
such person acted in good faith and in a manner such person reasonably believed
to be in, or not opposed to, the best interests of the corporation. The by-laws
of the Company provide for indemnification of officers and directors under the
circumstances, and to the extent, permitted by law. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing provisions
and agreements, the Company has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in such
Securities Act and is therefore unenforceable.
6
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement on Form S-8 to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York, State of New York, on April 27, 1999.
HEALTH MANAGEMENT SYSTEMS, INC.
By: /s/ Paul J. Kerz
-------------------------------------
Paul J. Kerz
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities indicated below on the respective dates set forth below.
<TABLE>
<S> <C> <C>
/s/ Paul J. Kerz Chairman, President, Chief Executive Officer April 27, 1999
- ---------------------------- and Director
Paul J. Kerz
/s/ Robert V. Nagelhout Executive Vice President, Chief Operating April 27, 1999
- ---------------------------- Officer and Director
Robert V. Nagelhout
/s/ Alan L. Bendes Senior Vice President and Chief Financial and April 27, 1999
- ---------------------------- Accounting Officer
Alan L. Bendes
/s/ Donald J. Staffa Senior Vice President and Director April 27, 1999
- ----------------------------
Donald J. Staffa
/s/ Randolph G. Brown Director April 27, 1999
- ----------------------------
Randolph G. Brown
/s/ William W. Neal Director April 27, 1999
- ----------------------------
William W. Neal
/s/ Galen D. Powers Director April 27, 1999
- ----------------------------
Galen D. Powers
/s/ Ellen A. Rudnick Director April 27, 1999
- ----------------------------
Ellen A. Rudnick
/s/ Richard H. Stowe Director April 27, 1999
- ----------------------------
Richard H. Stowe
</TABLE>
II-5
<PAGE> 17
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
4 Health Management Systems, Inc. 1999 Long-Term
Incentive Stock.
5 Opinion of Coleman, Rhine & Goodwin LLP with
respect to the legality of the securities being
registered.
23.1 Consent of Coleman, Rhine & Goodwin LLP (included
in Exhibit 5).
23.2 Consent of KPMG LLP.
24 Powers of Attorney.
<PAGE> 1
EXHIBIT 4
HEALTH MANAGEMENT SYSTEMS, INC.
1999 LONG-TERM INCENTIVE STOCK PLAN
ARTICLE I -- PURPOSES
The purposes of the Health Management Systems, Inc. 1999 Long-Term
Incentive Stock Plan are to promote the interests of the Corporation and its
shareholders by strengthening the Corporation's ability to attract and retain
highly competent officers and other employees, and to provide a means to
encourage stock ownership and proprietary interest in the Corporation by such
persons. The 1999 Long-Term Incentive Stock Plan is intended to provide plan
participants with stock-based incentive compensation which is not subject to the
deduction limitation rules prescribed under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), and should be construed to the
extent possible as providing for remuneration which is "performance-based
compensation" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
ARTICLE II -- DEFINITIONS
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings:
a. "AWARD" means, individually or in the aggregate, an award granted
to a Participant under the Plan in the form of an Option, a Stock Award, or
an SAR, or any combination of the foregoing.
b. "BOARD" means the Board of Directors of Health Management Systems,
Inc.
c. "COMMITTEE" means the Compensation Committee of the Board of
Directors, a subcommittee thereof, or such other committee as may be
appointed by the Board of Directors. The Committee shall be comprised of
two or more members of the Board of Directors who shall be "non-employee
directors" under Rule 16b-3 of the Exchange Act and "outside directors"
under Section 162(m) of the Code.
d. "CORPORATION" means Health Management Systems, Inc., or any entity
that is directly or indirectly controlled by Health Management Systems,
Inc., and its subsidiaries.
e. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
f. "FAIR MARKET VALUE" means the fair market value of a Share as of
the relevant date of determination, as determined in accordance with a
valuation methodology approved by the Committee. In the absence of any
alternative valuation methodology approved by the Committee, the Fair
Market Value of a Share shall equal the average of the highest and the
lowest quoted selling price of a Share as reported on the composite tape
for the principal national securities exchange on which the Shares are
traded on that date, or, in the event that the Shares are not listed for
trading on a national securities exchange but are quoted on an automated
system, on such automated system, in any such case on the valuation date
(or, if there were no sales on the valuation date, the average of the
highest and the lowest quoted selling prices as reported on said composite
tape or automated system for the most recent day before the valuation date
during which a sale occurred).
1
<PAGE> 2
g. "INCENTIVE STOCK OPTION" means a stock option that complies with
Section 422 of the Code, or any successor law.
h. "NON-QUALIFIED STOCK OPTION" means a stock option that does not
meet the requirements of Section 422 of the Code, or any successor law.
i. "OPTION" means an option awarded under Article VI to purchase
Shares. An Option may be either an Incentive Stock Option or a
Non-Qualified Stock Option, as determined by the Committee in its sole
discretion.
j. "PARTICIPANT" means, (i) with respect to an Incentive Stock
Option, any full-time employee of the Corporation, including an officer or
director of the Corporation and (ii) with respect to all other Awards which
may be granted under the Plan, any individual employed by, or performing
services for, the Corporation, including, without limitation, officers and
directors of the Corporation.
k. "PLAN" means this Health Management Systems, Inc. 1999 Long-Term
Incentive Stock Plan, as amended and restated from time to time.
l. "PRIOR PLAN" means the Health Management Systems, Inc. Stock
Option and Restricted Stock Purchase Plan, as amended and restated from
time to time.
m. "SAR" means a stock appreciation right.
n. "SHARES" means shares of the Corporation's common stock, $.01 par
value per share.
o. "STOCK AWARD" means an Award made under Article VI in Shares.
p. "SUBSTITUTE AWARD" has the meaning set forth in Article V(b).
The term "CHANGE OF CONTROL" has the meaning set forth in Article X.
ARTICLE III -- EFFECTIVE DATE AND DURATION
The Plan shall become effective upon its approval by the shareholders of
the Corporation. Prior to such shareholder approval, the Committee may grant
Awards conditioned on shareholder approval. If such shareholder approval is not
obtained at or before the first annual meeting of shareholders to occur after
the adoption of the Plan by the Board (including any adjournment or adjournments
thereof), the Plan and any Awards made thereunder shall terminate ab initio and
be of no further force and effect. In no event shall any Awards be made under
the Plan after January 10, 2009, which is the day before the tenth anniversary
of the date of the Plan's adoption by the Board.
ARTICLE IV -- ADMINISTRATION
The Committee shall be responsible for administering the Plan, and shall
have full power to interpret the Plan and to adopt such rules, regulations and
guidelines for carrying out the Plan as it may deem necessary or appropriate.
This power includes, but is not limited to, selecting Award recipients,
establishing all Award terms and conditions, adopting procedures and regulations
governing Awards, and making all other determinations necessary or advisable for
the administration of the Plan. All decisions made by the Committee shall be
final and binding on all persons.
2
<PAGE> 3
The Committee may delegate some or all of its power to the Chairman and
Chief Executive Officer or other executive officer of the Corporation as the
Committee deems appropriate; provided, that (i) the Committee may not delegate
its power with regard to the grant of an Award to any person who is a "covered
employee" within the meaning of Section 162(m) of the Code, or any successor
law, or who, in the Committee's judgment, is likely to be a covered employee at
any time during the period an Award to such employee would be outstanding and
(ii) the Committee may not delegate its power with regard to the selection for
participation in the Plan of an officer or other person subject to Section 16 of
the Exchange Act or decisions concerning the timing, pricing or amount of an
Award to such an officer or other person.
ARTICLE V -- AVAILABLE SHARES
a. General. Subject to adjustment as provided in Article V(d) of the
Plan, the number of Shares that may be issued under the Plan shall not exceed,
in the aggregate, 4,751,356 shares, comprised of:
(i) 1,383,906 shares of Common Stock that remain available for
issuance under the Prior Plan as of January 19, 1999; plus
(ii) 3,367,450 shares of Common Stock subject to any award outstanding
under the Prior Plan on such date which thereafter lapses, expires or is
otherwise terminated without the issuance of such shares.
Shares issued under this Plan may be either authorized but unissued shares,
treasury shares or any combination thereof. No fractional Shares shall be
issued. Cash may be paid in lieu of any fractional Shares in settlement of
Awards.
b. Rules Applicable to Determining Shares Available for Issuance. For
purposes of determining the number of Shares that remain available for issuance,
the following shares shall be added back to the limit set forth in Article V(a)
above and again be available for Awards:
(i) The number of Shares tendered to pay the exercise price of an
Option or other Award;
(ii) The number of Shares withheld from any Award to satisfy a
Participant's tax withholding obligations or, if applicable, to pay the
exercise price of an Option or other Award;
(iii) The number of Shares subject to an Option or other outstanding
Award which are not issued by reason of the expiration, termination,
cancellation or forfeiture of such Award; and
(iv) Any Shares acquired pursuant to the exercise of an Option or
other Award which thereafter are repurchased by the Corporation.
In addition, the number of Shares subject to Awards that are granted in
substitution of an option or other award (a "Substitute Award") issued by an
entity acquired by (or whose assets are acquired by) the Corporation shall not
reduce the number of Shares available under the Plan.
c. Special Limits. The number of Shares for which Awards may be granted
to any person in any fiscal year shall not exceed 150,000.
d. Adjustments. In the event of any stock dividend, stock split,
combination or exchange of securities, merger, consolidation, recapitalization,
spin-off or other distribution (other than normal cash dividends) of any or all
of the assets of the Corporation to shareholders, or any other similar change or
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event, such proportionate adjustments, if any, as the Committee in its
discretion may deem appropriate to reflect such change or event shall be made
with respect to the number and class of securities available under the Plan, the
number and class of securities subject to each outstanding Option and the
purchase price per security, the terms of each outstanding SAR, and the number
and class of securities subject to each outstanding Stock Award shall be
appropriately adjusted by the Committee, such adjustments to be made in the case
of outstanding Options without an increase in the aggregate purchase price. If
any such adjustment would result in a fractional security being (a) available
under the Plan, such fractional security shall be disregarded, or (b) subject to
an Award, the Corporation shall pay the holder of such Award, in connection with
the first vesting, exercise or settlement of such Award in whole or in part
occurring after such adjustment, an amount in cash determined by multiplying (i)
the fraction of such security (rounded to the nearest hundredth) by (ii) the
excess, if any, of (A) the Fair Market Value on the vesting, exercise or
settlement date over (B) the exercise price, if any, of such Award.
ARTICLE VI -- AWARDS
a. General. The Committee shall determine the type or types of Award(s)
to be made to each Participant. Awards may be granted singly, in combination or
in tandem. In the sole discretion of the Committee, Awards also may be made in
combination or in tandem with, in replacement of, as alternatives to, or as the
payment form for grants or rights under any other compensation plan of the
Corporation including a plan of any entity acquired by (or whose assets are
acquired by) the Corporation. The Committee shall have full authority to
determine and specify in the applicable agreement reflecting an Award the
effect, if any, that a Participant's termination of employment for any reason
will have on the vesting, exercisability, payment or lapse of restrictions
applicable to an Award. With respect to the foregoing, the terms and conditions
of an Incentive Stock Option may (but need not) include any of the following
provisions:
(i) In the event the full-time employment of a Participant is
terminated by the Corporation or any parent or subsidiary (as those terms
are defined in Sections 424(e) and 424(f) of the Code, or any successor
law) of the Corporation for any reason other than "for cause," as
determined by the Board, the unexercised portion of any Incentive Stock
Option held by such Participant at that time may only be exercised within
three months after the date on which the Participant ceased to be so
employed, and only to the extent that the Participant could have otherwise
exercised such Incentive Stock Option as of the date on which he ceased to
be so employed.
(ii) In the event the full-time employment of a Participant is
terminated by the Corporation or any parent or subsidiary (as those terms
are defined in Sections 424(e) and 424(f) of the Code, or any successor
law) of the Corporation "for cause," as determined by the Board, or if such
employment is terminated voluntarily by the Participant, the unexercised
portion of any Incentive Stock Option held by such Participant shall
terminate immediately effective the date the Participant ceased to be so
employed.
(iii) In the event a Participant shall cease to be employed by the
Corporation or any parent or subsidiary (as those terms are defined in
Sections 424(e) and 424(f) of the Code, or any successor law) of the
Corporation on a full time basis by reason of his "disability" (within the
meaning of Section 422 of the Code or any successor law) or on account of
death or retirement, the unexercised portion of any Incentive Stock Option
held by such Participant at that time may only be exercised within one year
after the date on which the Participant ceased to be so employed (or for
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such shorter exercise periods that may apply for purposes of Section 422 of
the Code, or any successor law), and only to the extent that the
Participant could have otherwise exercised such Incentive Stock Option as
of the date on which the Participant ceased to be so employed.
b. Types of Awards. The types of Awards that may be granted under the
Plan are:
(i) Options. An Option shall represent the right to purchase a
specified number of Shares during a specified period up to ten years as
determined by the Committee. The purchase price per Share for each Option
shall not be less than 100% (110% in the case of an Incentive Stock Option
granted to an optionee ("10% Stockholder") who, at the time of grant, owns
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Corporation or its parent (as defined in Section
424(e) of the Code, or any successor law) or its subsidiaries) of the Fair
Market Value on the date of grant; provided, that a Substitute Award may be
granted with a purchase price per Share that is intended to preserve the
economic value of the award which the Substitute Award replaced. The term
of each Option shall be fixed by the Committee, but no Incentive Stock
Option shall be exercisable more than ten years (five years, in the case of
an Incentive Stock Option granted to a 10% Stockholder) after the date on
which the Option is granted. If an Option is granted retroactively in
substitution for an SAR, the Fair Market Value in the Award agreement may
be the Fair Market Value on the grant date of the SAR. An Option may be in
the form of an Incentive Stock Option or a Non-Qualified Stock Option, as
determined by the Committee. The Shares covered by an Option may be
purchased, in accordance with the applicable Award agreement, by cash
payment or such other method permitted by the Committee, including (i)
tendering Shares valued at the Fair Market Value at the date of exercise;
(ii) authorizing a third party to sell the Shares (or a sufficient portion
thereof) acquired upon exercise of an Option, and assigning the delivery to
the Corporation of a sufficient amount of the sale proceeds to pay for all
the Shares acquired through such exercise and any tax withholding
obligations resulting from such exercise; or (iii) any combination of the
above. In the case of an Incentive Stock Option, the aggregate Fair Market
Value of Shares (determined at the time of grant of the Option) with
respect to which Incentive Stock Options are exercisable for the first time
by an optionee during any calendar year (under all such plans of optionee's
employer corporation and its parent and subsidiaries (as those terms are
defined in Sections 424(e) and 424(f) of the Code, or any successor law))
shall not exceed $100,000.
(ii) SARs. An SAR shall represent a right to receive a payment, in
cash, Shares or a combination, equal to the excess of the Fair Market Value
of a specified number of Shares on the date the SAR is exercised over the
Fair Market Value on the grant date of the SAR as set forth in the Award
agreement, except that if an SAR is granted retroactively in substitution
for an Option, the designated Fair Market Value in the Award agreement may
be the Fair Market Value on the grant date of the Option. An SAR may be
granted alone or in addition to other Awards, or in tandem with an Option.
An SAR granted in tandem with an Option may be granted either at the same
time as such Option or subsequent thereto. If granted in tandem with an
Option, an SAR shall cover the same number of Shares as covered by the
Option (or such lesser number of shares as the Committee may determine) and
shall be exercisable only at such time or times and to the extent the
related Option shall be exercisable, and shall have the same term and
exercise price as the related Option (which, in the case of an SAR granted
after the grant of the related Option, may be less than the Fair Market
Value per Share on the date of grant of the tandem SAR). Upon exercise of
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an SAR granted in tandem with an Option, the related Option shall be
canceled automatically to the extent of the number of Shares covered by
such exercise; conversely, if the related Option is exercised as to some or
all of the Shares covered by the tandem grant, the tandem SAR shall be
canceled automatically to the extent of the number of Shares covered by the
Option exercise.
(iii) Stock Awards. A Stock Award shall represent an Award made in or
valued in whole or in part by reference to Shares, such as performance or
phantom shares or units. Stock Awards may be payable in whole or in part in
Shares. All or part of any Stock Award may be subject to conditions and
restrictions established by the Committee, and set forth in the Award
agreement or other plan or document, which may include, but are not limited
to, continuous service with the Corporation, and/or the achievement of one
or more performance goals. The performance criteria that may be used by the
Committee in granting Stock Awards contingent on performance goals shall
consist of total shareholder return, net sales, operating income, income
before income taxes, net income, net income per share (basic or diluted),
profitability as measured by return ratios, including return on invested
capital, return on equity and return on investment, cash flows, market
share or cost reduction goals. The Committee may select one criterion or
multiple criteria for measuring performance, and the measurement may be
based on Corporation or business unit performance, or based on comparative
performance with other companies.
ARTICLE VII -- DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that any Awards under the Plan earn dividends or
dividend equivalents. Such dividends or dividend equivalents may be paid
currently or may be credited to a Participant's Plan account. Any crediting of
dividends or dividend equivalents may be subject to such restrictions and
conditions as the Committee may establish, including reinvestment in additional
Shares or Share equivalents.
ARTICLE VIII -- PAYMENTS AND PAYMENT DEFERRALS
Payment of Awards may be in the form of cash, Shares, other Awards or
combinations thereof as the Committee shall determine, and with such
restrictions as it may impose. The Committee, either at the time of grant or by
subsequent amendment, may require or permit Participants to elect to defer the
issuance of Shares or the settlement of Awards in cash under such rules and
procedures as it may establish under the Plan. It also may provide that deferred
settlements include the payment or crediting of interest on the deferral
amounts, or the payment or crediting of dividend equivalents where the deferral
amounts are denominated in Share equivalents.
ARTICLE IX -- TRANSFERABILITY
a. Unless otherwise specified in an Award agreement, Awards shall not be
transferable or assignable other than by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company. The interests of Participants under the Plan are not subject to their
debts or other obligations and, except as may be required by the tax withholding
provisions of Code or any state's income tax act, or pursuant to an agreement
between a Participant and the Corporation, may not be voluntarily sold,
transferred, alienated, assigned or encumbered.
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b. Notwithstanding the foregoing, the Committee, in its discretion and
subject to such limitations and conditions as the Committee deems appropriate,
may (i) amend Awards of Incentive Stock Options to convert the Options granted
thereby to Non-Qualified Stock Options, or (ii) grant Non-Qualified Stock
Options, in each case on terms which permit the Participant to transfer all or a
part of the Option, for estate or tax planning purposes or for donative
purposes, and without consideration, to a member of the Participant's immediate
family (as defined by the Committee), a trust for the exclusive benefit of such
immediate family members, or a partnership, corporation or limited liability
company the equity interests of which are owned exclusively by the Participant
and/or one or more members of the Participant's family.
ARTICLE X -- CHANGE OF CONTROL
Either in contemplation of or in the event of a Change of Control (as
defined below), the Committee may provide for appropriate adjustments (including
acceleration of vesting and settlements of or substitutions for Awards either at
the time an Award is granted or at a subsequent date).
A "Change of Control" shall occur when:
a. a "Person" (which term, when used in this Article X, shall have
the meaning it has when it is used in Section 13(d) of the Exchange Act,
but shall not include the Corporation, any trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation, or
any corporation owned, directly or indirectly, by the shareholders of the
Corporation in substantially the same proportions as their ownership of
Voting Stock (as defined below) of the Corporation) is or becomes, without
the prior consent of a majority of the Continuing Directors of the
Corporation (as defined below), the Beneficial Owner (as defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly, of
Voting Stock (as defined below) representing twenty percent or more of the
combined voting power of the Corporation's then outstanding securities; or
b. the shareholders of the Corporation approve a reorganization,
merger or consolidation or the Corporation sells, or otherwise disposes of,
all or substantially all of the Corporation's property and assets, or the
Corporation liquidates or dissolves (other than a reorganization, merger,
consolidation or sale which would result in all or substantially all of the
beneficial owners of the Voting Stock of the Corporation outstanding
immediately prior thereto continuing to beneficially own, directly or
indirectly (either by remaining outstanding or by being converted into
voting securities of the resulting entity), more than fifty percent of the
combined voting power of the voting securities of the Corporation or such
entity resulting from the transaction (including, without limitation, an
entity which as a result of such transaction owns the Corporation or all or
substantially all of the Corporation's property or assets, directly or
indirectly) outstanding immediately after such transaction in substantially
the same proportions relative to each other as their ownership immediately
prior to such transaction); or
c. the individuals who are Continuing Directors of the Corporation
(as defined below) cease for any reason to constitute at least a majority
of the Board of the Corporation.
The term "Continuing Director" means (i) any member of the Board who is a
member of the Board immediately after the 1999 annual meeting of shareholders,
or (ii) any person who subsequently becomes a member of the Board whose
nomination for election or election to the Board is recommended or approved by a
majority of the Continuing Directors. The term "Voting Stock" means all capital
stock of the Corporation which by its terms may be voted on all matters
submitted to shareholders of the Corporation generally.
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ARTICLE XI -- AWARD AGREEMENTS
Awards may be evidenced by an agreement that sets forth the terms,
conditions and limitations of such Award. Such terms may include, but are not
limited to, the term of the Award, the provisions applicable in the event the
Participant's employment terminates, and the Corporation's authority to
unilaterally or bilaterally amend, modify, suspend, cancel or rescind any Award.
The Committee need not require the execution of any such agreement by a
Participant, in which case acceptance of the Award by the respective Participant
shall constitute agreement by the Participant to the terms of the Award.
ARTICLE XII -- AMENDMENTS
The Board may amend the Plan at any time as it deems necessary or
appropriate, subject to any requirement of shareholder approval required by
applicable law, rule or regulation, including Section 162(m) and Section 422 of
the Code, or any successor law; provided, however, that no amendment shall be
made without shareholder approval if such amendment would increase the maximum
number of Shares available under the Plan (subject to Article V(d)), or effect
any change inconsistent with Section 422 of the Code, or any successor law. No
amendment may impair the rights of a holder of an outstanding Award without the
consent of such holder. The Board may suspend the Plan or discontinue the Plan
at any time; provided, that no such action shall adversely affect any
outstanding Award.
ARTICLE XIII -- MISCELLANEOUS PROVISIONS
a. Employment Rights. The Plan does not constitute a contract of
employment and participation in the Plan will not give a Participant the right
to continue in the employ of the Corporation on a full-time, part-time, or any
other basis. Participation in the Plan will not give any Participant any right
or claim to any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan.
b. Governing Law. Except to the extent superseded by the laws of the
United States, the laws of the State of New York, without regard to its conflict
of laws principles, shall govern in all matters relating to the Plan.
c. Severability. In the event any provision of the Plan shall be held to
be illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if such illegal or invalid provisions had never been contained in
the Plan.
d. Withholding. The Corporation shall have the right to withhold from any
amounts payable under the Plan all federal, state, foreign, city and local taxes
as shall be legally required.
e. Effect on Other Plans or Agreements. Payments or benefits provided to
a Participant under any stock, deferred compensation, savings, retirement or
other employee benefit plan are governed solely by the terms of such plan.
f. Foreign Employees. Without amending the Plan, the Committee may grant
awards to eligible persons who are foreign nationals on such terms and
conditions different from those specified in the Plan as may, in the judgment of
the Committee, be necessary or desirable to foster and promote achievement of
the purposes of the Plan and, in furtherance of such purposes, the Committee may
make such modifications, amendments, procedures, subplans and the like as may be
necessary or advisable to comply with provisions of laws in other countries or
jurisdictions in which the Corporation or its subsidiaries operates or has
employees.
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Exhibit 5
Coleman, Rhine & Goodwin LLP
750 Lexington Avenue
New York, New York 10022
April 27, 1999
Health Management Systems, Inc.
401 Park Avenue South
New York, NY 10016
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by
Health Management Systems, Inc. (the "Company") with the Securities and Exchange
Commission on or about April 27, 1999 (the "Registration Statement") in
connection with the registration under the Securities Act of 1933, as amended,
of 4,751,356 shares of common stock, $.01 par value (the "Shares"), of the
Company reserved for issuance under the Company's 1999 Long-Term Incentive Stock
Plan (the "Plan"). As legal counsel for the Company, we have examined the
proceedings taken and are familiar with the proceedings proposed to be taken by
the Company in connection with the sale and issuance of the Shares under the
Plan.
It is our opinion that, when issued and sold in the manner referred to
in the Plan and pursuant to the respective agreement which accompanies each
grant under the Plan, the Shares will be legally and validly issued, fully paid
and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever it appears in the
Registration Statement and any amendments to it.
Very truly yours,
/s/ Coleman, Rhine & Goodwin LLP
Coleman, Rhine & Goodwin LLP
<PAGE> 1
Exhibit 23.2
Accountants' Consent
Board of Directors
Health Management Systems, Inc.
We consent to the use of our report incorporated by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
New York, New York
April 27, 1999
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes Paul J.
Kerz and Alan L. Bendes, and each of them, with full power of substitution and
full power to act without the other, his true and lawful attorney-in-fact and
agent in his name, place and stead, to execute in the name and on behalf of each
such person, individually and as a director of Health Management Systems, Inc.,
a New York corporation (the "Company"), and to file, the Registration Statement
of the Company on Form S-8 (the "Registration Statement"), and any and all
amendments to the Registration Statement, including any and all post-effective
amendments.
WITNESS our hands on the respective dates set forth below:
SIGNATURE DATE
--------- ----
/s/ Robert V. Nagelhout April 27, 1999
- --------------------------------
Robert V. Nagelhout
/s/ Donald J. Staffa April 27, 1999
- --------------------------------
Donald J. Staffa
/s/ Randolph G. Brown April 27, 1999
- --------------------------------
Randolph G. Brown
/s/ William W. Neal April 27, 1999
- --------------------------------
William W. Neal
/s/ Galen D. Powers April 27, 1999
- --------------------------------
Galen D. Powers
/s/ Ellen A. Rudnick April 27, 1999
- --------------------------------
Ellen A. Rudnick
/s/ Richard H. Stowe April 27, 1999
- --------------------------------
Richard H. Stowe
