<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] 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 Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
HEALTH MANAGEMENT SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
HEALTH MANAGEMENT SYSTEMS, INC.
401 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10016
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MARCH 14, 2000
The Annual Meeting of Shareholders (the "Meeting") of Health Management
Systems, Inc. (the "Company") will be held at the offices of the Company, 401
Park Avenue South, New York, New York, on March 14, 2000 at 11:00 a.m., Eastern
Standard Time, for the following purposes:
1. To elect three directors to serve for two-year terms expiring at
the annual meeting in 2002 and until their successors are elected and
qualified;
2. To consider and take action on the ratification of the selection of
KPMG LLP as the Company's independent certified public accountants for
Fiscal Year 2000;
3. To take action on a shareholder's proposal, if properly presented
at the Meeting; and
4. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
Only shareholders of record at the close of business on January 25, 2000
will be entitled to receive notice of and to vote at the Meeting.
Shareholders are cordially invited to attend the Meeting in person. Whether
or not you expect to attend, WE URGE YOU TO READ THE ACCOMPANYING PROXY
STATEMENT AND THEN COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED FORM OF PROXY
IN THE ACCOMPANYING POSTAGE-PREPAID ENVELOPE. It is important that your shares
be represented at the Meeting by virtue of your executed proxies should you be
unable to attend the Meeting in person. Your promptness in responding will
assist us to prepare for the Meeting and to avoid the cost of a follow-up
mailing. If you receive more than one form of proxy because you own shares
registered in different names or at different addresses, each form of proxy
should be completed and returned.
Sincerely,
/s/ KATHY L. ARENDT
Kathy L. Arendt
Secretary
February 4, 2000
<PAGE> 3
HEALTH MANAGEMENT SYSTEMS, INC.
401 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10016
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MARCH 14, 2000
GENERAL INFORMATION
This Proxy Statement is furnished to shareholders of Health Management
Systems, Inc., a New York corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company of proxies for use at its
Annual Meeting of Shareholders (the "Meeting"). The Meeting is scheduled to be
held on Tuesday, March 14, 2000, at 11:00 a.m., Eastern Standard Time, at the
offices of the Company, 401 Park Avenue South, New York, New York, and at any
adjournments thereof. It is anticipated that the mailing to shareholders of this
Proxy Statement and the enclosed form of proxy will commence on or about
February 4, 2000.
At the Meeting, shareholders will be asked to vote upon: (1) the election
of three directors; (2) the ratification of the selection of independent
certified public accountants for Fiscal Year 2000; (3) a shareholder's proposal,
if properly presented at the Meeting; and (4) such other business as may
properly come before the Meeting and at any adjournments thereof.
VOTING RIGHTS AND VOTES REQUIRED
The close of business on January 25, 2000 has been fixed as the record date
(the "Record Date") for the determination of shareholders entitled to receive
notice of and to vote at the Meeting. As of the close of business on such date,
the Company had outstanding and entitled to vote 17,462,321 shares of common
stock, par value $0.01 per share (the "Common Stock").
A majority of the outstanding shares of Common Stock must be represented in
person or by proxy at the Meeting in order to constitute a quorum for the
transaction of business. The record holder of each share of Common Stock
entitled to vote at the Meeting will have one vote for each share so held.
Directors are elected by a plurality of the votes cast. Shareholders may
not cumulate their votes. The three candidates receiving the highest number of
votes will be elected. In tabulating the votes, votes withheld in connection
with the election of one or more nominees and broker nonvotes will be
disregarded and will have no effect on the outcome of the vote.
The affirmative vote of the holders of a majority of the shares of Common
Stock represented at the Meeting in person or by proxy and entitled to vote
thereat will be required to ratify the selection of the Company's independent
certified public accountants and to adopt any shareholder proposal duly
presented at the Meeting. In determining whether these proposals have received
the requisite number of affirmative votes, abstentions and broker nonvotes will
be disregarded and will have no effect on the outcome of the vote.
VOTING OF PROXIES
If the accompanying proxy is properly executed and returned, the shares
represented by the proxy will be voted at the Meeting as specified in the proxy.
If no instructions are specified, the shares represented by any
<PAGE> 4
properly executed proxy will be voted FOR the election of the nominees listed
below under "Election of Directors", FOR the ratification of the selection of
independent certified public accountants, and AGAINST the adoption of the
shareholder proposal.
REVOCATION OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by a
shareholder at any time before it is exercised by written notice to the
Secretary of the Company, by timely notice of a properly executed proxy bearing
a later date delivered to the Company, or by voting in person at the Meeting.
SOLICITATION OF PROXIES
The Company will bear the cost of this solicitation, including amounts paid
to banks, brokers, and other record owners to reimburse them for their expenses
in forwarding solicitation material regarding the Meeting to beneficial owners
of Common Stock. The solicitation will be by mail, with the material being
forwarded to the shareholders of record and certain other beneficial owners of
Common Stock by the Company's officers and other regular employees (at no
additional compensation). Such officers and employees may also solicit proxies
from shareholders by personal contact, by telephone, or by other means if
necessary in order to assure sufficient representation at the Meeting.
ChaseMellon Shareholder Services, L.L.C. has been retained to receive and
tabulate proxies and to provide representatives to act as inspectors of election
for the Meeting.
2
<PAGE> 5
MATTERS SUBJECT TO SHAREHOLDER VOTE
1. ELECTION OF DIRECTORS
Pursuant to the Company's by-laws, the Board of Directors of the Company is
currently divided into two classes, with one class standing for election each
year for two-year terms. The terms of three directors will expire at the
Meeting. Accordingly, the term of three nominees listed below, if elected at the
Meeting, will expire at the 2002 annual meeting. The terms of the other current
directors listed below will expire at the 2001 annual meeting.
The three persons designated by the Board of Directors as nominees for
election as directors with terms expiring at the 2002 annual meeting are
Randolph G. Brown, Robert V. Nagelhout, and Galen D. Powers.
Unless a contrary direction is indicated, it is intended that proxies
received will be voted for the election as directors of the three nominees to
serve for two-year terms expiring at the 2002 annual meeting, and in each case
until their successors are elected and qualified. In the event any nominee for
director declines or is unable to serve, the proxies may be voted for a
substitute nominee selected by the Board of Directors. The Board of Directors
expects that each nominee named in the following table will be available for
election.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
<TABLE>
<CAPTION>
SERVED AS
POSITION WITH THE COMPANY DIRECTOR
NAME OR PRINCIPAL OCCUPATION FROM
- ---- ------------------------- ---------
<S> <C> <C>
Nominees for directors for two-year terms ending in 2002:
Randolph G. Brown...................... Chairman and Chief Executive Officer of One Inc., 1998
a surgery center management company
Robert V. Nagelhout.................... President of the Company's Software Division 1996
Galen D. Powers........................ Senior Founder and President of Powers, Pyles, 1992
Sutter & Verville, P.C., a law firm
Directors continuing in office until 2001:
Paul J. Kerz........................... Chairman, President and Chief Executive Officer of 1974
the Company
William W. Neal........................ Managing Principal of Piedmont Venture Partners, 1989
an investment firm
Ellen A. Rudnick....................... Executive Director, Entrepreneurship Program, 1997
University of Chicago Graduate School of Business
Richard H. Stowe....................... Senior Advisor to Capital Counsel LLC, an asset 1989
management firm
</TABLE>
3
<PAGE> 6
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of the Company as of January 25, 2000:
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Paul J. Kerz........................... Chairman, President and Chief Executive Officer, and
Director
Alan L. Bendes......................... Senior Vice President and Chief Financial Officer
Richard B. Brown....................... President, Revenue Services Division
Lewis D. Levetown...................... Vice President, Human Resources
Robert V. Nagelhout.................... President, Software Division, and Director
Randolph G. Brown...................... Director
William W. Neal........................ Director
Galen D. Powers........................ Director
Ellen A. Rudnick....................... Director
Richard H. Stowe....................... Director
</TABLE>
PAUL J. KERZ, 58, a founder of the Company, has been its Chairman,
President and Chief Executive Officer, and a director since the Company's
inception in 1974. From 1970 until 1973, he served as Senior Vice President of
Finance and Chairman of the Management Review Committee of the New York City
Health and Hospitals Corporation. Prior to 1970, Mr. Kerz served in various
capacities in state and federal Bureaus of the Budget.
ALAN L. BENDES, 46, joined the Company during Fiscal Year 1999 as its
Senior Vice President and Chief Financial Officer. From 1997 to January 1999,
Mr. Bendes served as an independent business consultant and on staff for
wireless and internet technology companies. From 1987 through 1996, Mr. Bendes
served as Vice President -- Finance and Administration, Chief Financial Officer,
Treasurer, and Secretary for United States Paging Corporation (at the time a
publicly held company and currently a wholly owned subsidiary of MCI Worldcom).
From 1985 through 1987, Mr. Bendes was the Chief Financial and Operations
Officer of Toscany Imports, Ltd., a distributor of glassware and giftware and a
subsidiary of Alco Standard Corporation. From 1980 through 1984, Mr. Bendes
served as Chief Financial Officer of Meinhard Commercial Corporation, the
factoring subsidiary of CIT Corporation. From 1974 to 1980, he was a member of
KPMG LLP's audit staff.
RICHARD B. BROWN, JR., 44, joined the Company during Fiscal Year 1999 and
serves as President of the Company's Revenue Services Division. From 1995
through 1998, Mr. Brown held operational and strategic planning positions with
Coastal Physicians Group and Oxford Specialty Management, a start-up venture
wholly owned by Oxford Health Plan. From 1977 to 1994, Mr. Brown worked for
International Business Machines Corporation ("IBM"), including four years as a
Principal in the Healthcare Practice of the IBM Consulting Group.
LEWIS D. LEVETOWN, 57, has been Vice President of Human Resources of the
Company since 1988. From 1982 until he joined the Company, he was Senior Vice
President, Human Resources for Automated Data Processing, Inc. ("ADP").
ROBERT V. NAGELHOUT, 45, serves as President of the Company's Health Care
microsystems, Inc. ("HCm") subsidiary, a position he held since HCm's
acquisition by the Company in February 1995, and became the President of the
Company's Software Division in December 1999. From November 1997 through
December 1999, Mr. Nagelhout served as the Company's Chief Operating Officer.
Prior to co-founding HCm in 1983, he served as a consultant at Ernst & Whinney
(now Ernst & Young).
4
<PAGE> 7
RANDOLPH G. BROWN, 57, was appointed a director of the Company in May 1998.
Mr. Brown has served as Chairman and Chief Executive Officer of One Inc., a
developer and manager of refractive and cataract surgery centers in New York,
since August 1999. Previously, Mr. Brown had been an independent business
consultant since November 1996, principally as a venture partner with
Morgenthaler Venture Partners. From July 1987 through October 1996, Mr. Brown
served in various senior executive capacities, including Chairman, President and
Chief Executive Officer, for Medaphis Corporation, a provider of accounts
receivable management services to hospital-affiliated physicians and hospitals.
From 1978 through 1987, Mr. Brown was employed in various management positions
by Humana Inc., a provider, at that time, of integrated healthcare delivery
services.
WILLIAM W. NEAL, 67, has been Managing Principal of Piedmont Venture
Partners since July 1996. From 1989 to April 1996, he served as Chief Executive
Officer of Broadway and Seymour, a company that provides software and computer
systems to the banking industry. From 1985 through July 1989, he was a partner
of Welsh, Carson, Anderson and Stowe ("WCAS"), an investment firm. Mr. Neal was
Senior Vice President -- Marketing of ADP from 1984 to 1985 and a Group
President of ADP from 1978 to 1984. He served as a director of ADP from 1982
until 1985.
GALEN D. POWERS, 63, is the senior founder and has served as President of
Powers, Pyles, Sutter & Verville P.C., a Washington, D.C. law firm specializing
in healthcare and hospital law, since he founded the firm in 1983. Mr. Powers
was the first chief counsel of the federal Health Care Financing Administration
and has served as a director and the President of the National Health Lawyers
Association.
ELLEN A. RUDNICK, 49, is Executive Director and Clinical Associate
Professor of the Entrepreneurship Program at the University of Chicago Graduate
School of Business. She also serves as Chairman of CEO Advisors, Inc. a
privately held consulting firm. From 1993 until 1999, Ms. Rudnick served as
Chairman of Pacific Biometrics, Inc., a publicly held healthcare biodiagnostics
company and its predecessor, Bioquant. From 1990 to 1992, she was President and
Chief Executive Officer of Healthcare Knowledge Resources ("HKR"), a privately
held healthcare information technology corporation, and subsequently served as
President of HCIA, Inc. ("HCIA") following the acquisition of HKR by HCIA. From
1975 to 1990, Ms. Rudnick served in various positions at Baxter Health Care
Corporation, including Corporate Vice President and President of its Management
Services Division.
RICHARD H. STOWE, 56, is a Senior Advisor to Capital Counsel LLC, an asset
management firm. From 1979 until 1998, Mr. Stowe was a general partner of WCAS.
Prior to 1979, he was a Vice President in the venture capital and corporate
finance groups of New Court Securities Corporation (now Rothschild Inc.). Mr.
Stowe is a director of MedQuist, Inc., a provider of medical record
transcription services, New American Healthcare Corporation, an owner of
non-urban hospitals, The Cerplex Group, Inc., a provider of outsourcing services
for electronic equipment, and several private companies.
DIRECTORS' FEES
Non-employee directors are paid $1,500 for each regularly scheduled Board
of Directors meeting, $500 for each regularly scheduled committee meeting, and
$250 for each special Board of Directors or committee meeting which they attend,
and are reimbursed for expenses incurred in attending meetings. Each non-
employee director is also granted options annually to purchase 1,500 shares of
Common Stock under the Company's 1995 Non-Employee Director Stock Option Plan
and may be awarded additional options under the Company's 1999 Long-Term
Incentive Stock Plan. On November 13, 1998, each non-employee director
5
<PAGE> 8
was granted options to purchase 7,500 shares of Common Stock at an exercise
price of $6.44 per share under the Company's prior Employee Stock Option and
Restricted Stock Purchase Plan.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held six meetings during Fiscal Year 1999. In
addition, there was one meeting of independent members of the Board. Each
director attended at least 75% of the aggregate of the total number of meetings
of (a) the Board of Directors, and (b) the committees on which the director
served.
The committees of the Board of Directors consist of an Audit and Compliance
Committee and a Compensation Committee.
AUDIT AND COMPLIANCE COMMITTEE. The Audit and Compliance Committee
recommends to the Board of Directors the annual appointment of independent
certified public accountants with whom the Committee reviews audit fees, the
scope and timing of the audit, the adequacy of internal controls, and any other
services rendered. The functions of the Audit and Compliance Committee also
include review of corporate compliance and related matters. The Audit and
Compliance Committee is comprised of Messrs. Powers and Brown, both of whom are
independent directors. The Audit and Compliance Committee held four meetings
during Fiscal Year 1999.
COMPENSATION COMMITTEE. The Compensation Committee reviews and recommends
the compensation and bonuses of the executives of the Company. The Compensation
Committee also administers the Company's 1999 Long-Term Incentive Stock Plan,
Employee Stock Purchase Plan, and 1995 Non-Employee Director Stock Option Plan.
The Compensation Committee is comprised of Messrs. Neal and Stowe, both of whom
are independent directors. The Compensation Committee held two meetings during
Fiscal Year 1999.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules issued thereunder, the Company's executive
officers and directors are required to file with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. reports of
ownership and changes in ownership of Common Stock. Copies of such reports are
required to be furnished to the Company. Based solely on review of the copies of
such reports furnished to the Company, or written representations that no other
reports were required, the Company believes that during Fiscal Year 1999 all of
its executive officers and directors complied with the requirements of Section
16(a), except that Robert V. Nagelhout, an officer and director of the Company,
did not timely report his disposition of 90,225 shares of Common Stock for the
month of December 1998 and Galen D. Powers, a director of the Company, did not
timely file the annual Form 5 with respect to his acquisition of 1,500 options
to purchase Common Stock.
ADDITIONAL INFORMATION REGARDING COMPENSATION OF EXECUTIVE OFFICERS AND
DIRECTORS IS PROVIDED ON PAGES 9 THROUGH 13 OF THIS PROXY STATEMENT.
2. RATIFICATION OF THE SELECTION OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
The Board of Directors, in accordance with the recommendation of the Audit
and Compliance Committee, has selected, subject to ratification by the
shareholders, KPMG LLP, independent certified public accountants, to audit the
consolidated financial statements of the Company and its subsidiaries for Fiscal
Year 2000. KPMG LLP has audited the Company's financial statements since Fiscal
Year 1981.
6
<PAGE> 9
The Company expects representatives of KPMG LLP to attend the Meeting, to
be available to respond to appropriate questions from shareholders, and to have
the opportunity to make a statement if so desired.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF KPMG LLP AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR FISCAL
YEAR 2000.
3. SHAREHOLDER PROPOSAL
Mr. William Steiner, 4 Radcliffe Drive, Great Neck, New York 11024, the
beneficial owner of 1,700 shares (having held shares with a market value of at
least $2,000 since April 7, 1997) of Common Stock, has given notice that he
intends to present for action at the Meeting, the following Resolution:
"Resolved that the shareholders of Health Management Systems, Inc.
urge the Health Management Systems, Inc. Board of Directors to arrange for
the prompt sale of Health Management Systems, Inc. to the highest bidder."
Supporting Statement:
The purpose of the Maximize Value Resolution is to give all Health
Management Systems, Inc. shareholders the opportunity to send a message to
the Health Management Systems, Inc. Board that they support the prompt sale
of Health Management Systems, Inc. to the highest bidder. A strong and/or
majority vote by the shareholders would indicate to the Board the
displeasure felt by the shareholders of the shareholder returns over many
years and the drastic action that should be taken. Even if it is approved
by the majority of the Health Management Systems, Inc. shares represented
and entitled to vote at the annual meeting, the Maximize Value Resolution
will not be binding on the Health Management Systems, Inc. Board. The
proponent however believes that if this resolution receives substantial
support from the shareholders, the Board may choose to carry out the
request set forth in the resolution.
The prompt auction of Health Management Systems, Inc. should be
accomplished by any appropriate process the Board chooses to adopt,
including a sale to the highest bidder whether in cash, stock, or a
combination of both. It is expected that the Board will uphold its
fiduciary duties to the utmost during the process.
The proponent further believes that if the resolution is adopted, the
management and the Board will interpret such adoption as a message from the
Company's shareholders that it is no longer acceptable for the Board to
continue with its current management plan and strategies.
The proponent urges your support and that you vote for this
resolution.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THE
PROPOSAL FOR THE FOLLOWING REASONS: A shareholder resolution calling for the
Board of Directors to effect a business combination or sale of the Company would
adversely affect the Company's negotiating position in connection with any such
transaction. The Board's ability to seek the best terms for shareholders would
therefore be compromised. Furthermore, the proposed resolution is inappropriate,
as the New York Business Corporation Law requires that the Board of Directors
approve the proposed terms of any such transaction and determine it to be in the
best interests of the Company and its shareholders prior to recommending that
the necessary shareholder approval be obtained. Conducting a shareholder vote
prior to the Board's consideration of a specific transaction would be both
meaningless and counter-productive. While your Board of Directors will
responsibly consider all possible alternatives that have the potential of
favorably impacting the Company, the Board of
7
<PAGE> 10
Directors currently believes that it is in the best interests of the Company and
its shareholders to remain as an independent company and continue to focus its
efforts upon growing the Company's business and its operating results.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THIS
PROPOSAL.
8
<PAGE> 11
ADDITIONAL INFORMATION
STOCK OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of January 25, 2000 by (a) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding shares of
Common Stock, (b) each executive officer identified in the Summary Compensation
Table below, (c) each director and nominee for director, and (d) all executive
officers and directors as a group. Except as otherwise noted, the named
shareholder had sole voting and investment power with respect to such
securities.
<TABLE>
<CAPTION>
NAME AMOUNT PERCENTAGE
- ---- --------- ----------
<S> <C> <C>
Awad Asset Management
250 Park Avenue
New York, NY 10177........................................ 1,903,160 10.9%
Paul J. Kerz(a)............................................. 1,079,317 6.1%
Alan L. Bendes(b)........................................... 42,000 *
Richard B. Brown(c)......................................... 8,750 *
Thomas J. Kazamek(d)........................................ 255,670 1.5%
Robert V. Nagelhout(e)...................................... 144,598 *
Randolph G. Brown(f)........................................ 3,625 *
William W. Neal(g).......................................... 40,921 *
Galen D. Powers(h).......................................... 18,435 *
Ellen A. Rudnick(i)......................................... 7,750 *
Richard H. Stowe(j)......................................... 64,864 *
All executive officers and directors as a group (eleven
persons)(k)............................................... 1,678,758 9.3%
</TABLE>
- ---------------
* denotes percentage of ownership is less than 1%
(a) Includes (i) 84,828 shares of Common Stock owned by members of the family of
Mr. Kerz or trusts for the benefit of such family members, as to which Mr.
Kerz disclaims beneficial ownership, and (ii) outstanding options to
purchase 299,019 shares of Common Stock that are currently exercisable or
will become exercisable before March 31, 2000.
(b) Includes outstanding options to purchase 42,000 shares of Common Stock that
are currently exercisable or will become exercisable before March 31, 2000.
(c) Includes outstanding options to purchase 8,750 shares of Common Stock that
are currently exercisable or will become exercisable before March 31, 2000.
(d) Includes 1,598 shares of Common Stock and outstanding options to purchase
10,768 shares of Common Stock owned by members of the family of Mr. Kazamek,
as to which Mr. Kazamek disclaims beneficial ownership. Also, includes
outstanding options to purchase 110,963 shares of Common Stock that are
currently exercisable or will become exercisable before March 31, 2000.
(e) Includes (i) 6,000 shares of Common Stock held in trusts for the benefit of
family members, as to which Mr. Nagelhout disclaims beneficial ownership,
and (ii) outstanding options to purchase 88,958 shares of Common Stock that
are currently exercisable or will become exercisable before March 31, 2000.
9
<PAGE> 12
(f) Includes outstanding options to purchase 3,625 shares of Common Stock that
are currently exercisable or will become exercisable before March 31, 2000.
(g) Includes 27,980 shares of Common Stock owned by members of the family of Mr.
Neal, as to which Mr. Neal disclaims beneficial ownership. Also includes
outstanding options to purchase 8,500 shares of Common Stock that are
currently exercisable or will become exercisable before March 31, 2000.
(h) Includes 237 shares of Common Stock owned by members of the family of Mr.
Powers, as to which Mr. Powers disclaims beneficial ownership. Also includes
outstanding options to purchase 18,198 shares of Common Stock that are
currently exercisable or will become exercisable before March 31, 2000.
(i) Includes outstanding options to purchase 4,750 shares of Common Stock that
are currently exercisable or will become exercisable before March 31, 2000.
(j) Includes outstanding options to purchase 8,500 shares of Common Stock that
are currently exercisable or will become exercisable before March 31, 2000.
(k) Includes outstanding options to purchase 609,031 shares of Common Stock that
are currently exercisable or will become exercisable before March 31, 2000.
10
<PAGE> 13
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for the
Fiscal Years ended October 31, 1999, 1998, and 1997 awarded to or earned by the
Chief Executive Officer and by each of the other four most highly compensated
executive officers of the Company.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
FISCAL ------------------------------- STOCK OPTIONS
NAME AND PRINCIPAL POSITION YEARS SALARY BONUS OTHER(A) AWARDED(B)
- --------------------------- ------ -------- ------- -------- -------------
<S> <C> <C> <C> <C> <C>
Paul J. Kerz........................... 1999 $364,000 0 $ 3,500 95,000
Chairman, President and 1998 364,000 75,000 6,867 0
Chief Executive Officer 1997 381,000 0 11,029 0
Alan L. Bendes(c)...................... 1999 197,000 40,000 3,500 105,000
Senior Vice President and 1998 0 0 0 0
Chief Financial Officer 1997 0 0 0 0
Richard B. Brown(c).................... 1999 200,000 40,000 3,247 75,000
President, Revenue Services Division 1998 0 0 0 0
1997 0 0 0 0
Thomas J. Kazamek...................... 1999 225,000 0 8,173 75,000
Senior Vice President 1998 225,000 50,000 7,900 20,000
1997 180,000 60,000 4,367 126,213
Robert V. Nagelhout.................... 1999 312,000 0 11,338 80,000
President, Software Division 1998 312,000 65,000 10,830 86,170
1997 185,000 75,000 4,911 32,580
</TABLE>
- ---------------
(a) Includes matching contributions under the Company's 401(k) and Profit
Sharing Plans.
(b) Excludes November 30, 1999 awards to Messrs. Brown, Kazamek, and Nagelhout
of 5,000, 9,000, and 10,000 options, respectively, to purchase Common Stock
at an exercise price of $4.59 per share.
(c) Joined the Company during Fiscal Year 1999.
STOCK OPTIONS
The Company's 1999 Long-Term Incentive Stock Plan allows grants of stock
options and other rights relating to its Common Stock. In general, whether
exercising stock options is profitable depends on the relationship between the
Common Stock's market price and the option's exercise price, as well as on the
optionee's investment decisions. Options that are "in the money" on a given date
can become "out of the money" if prices change on the stock market. For these
reasons, the Company believes that placing a current value on outstanding
options is highly speculative and may not represent the true benefit, if any,
that may be realized by the optionee. The following two tables give more
information on stock options.
11
<PAGE> 14
The following table sets forth selected option grant information for the
Fiscal Year ended October 31, 1999 with respect to options awarded to the Chief
Executive Officer and each of the other four most highly compensated executive
officers of the Company.
OPTION GRANTS IN LAST FISCAL YEAR(a)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER % OF TOTAL OF STOCK PRICE APPRECIATION
TYPE OF OF OPTIONS EXERCISE FOR OPTION TERM
OPTION OPTIONS GRANTED TO PRICE PER EXPIRATION ---------------------------
NAME GRANTED GRANTED EMPLOYEES(B) SHARE DATE 5%(C) 10%(c)
- ---- ------- ------- ------------ --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul J. Kerz............ ISO 95,000 5% $6.44 11/13/08 $384,371 $974,436
Alan L. Bendes.......... ISO 105,000 5% 4.70 03/26/09 310,890 787,356
Richard B. Brown........ ISO 75,000 4% 6.44 11/13/08 303,451 769,291
Thomas J. Kazamek....... ISO 75,000 4% 6.44 11/13/08 303,451 769,291
Robert V. Nagelhout..... ISO 80,000 4% 6.44 11/13/08 323,681 820,577
</TABLE>
- ---------------
(a) Excludes November 30, 1999 awards to Messrs. Brown, Kazamek, and Nagelhout
of 5,000, 9,000, and 10,000 options, respectively, to purchase Common Stock
at an exercise price of $4.59 per share.
(b) Represents individual option grant as a percentage of total options issued
in Fiscal Year 1999.
(c) The hypothetical potential appreciation shown in these columns reflects the
required calculations at compounded annual rates of 5% and 10% set by the
Securities and Exchange Commission, and therefore is not intended to
represent either historical appreciation or anticipated future price
appreciation of the Common Stock.
The following table sets forth selected stock option exercise information
as of October 31, 1999 and for the Fiscal Year then ended relating to the Chief
Executive Officer and each of the other four most highly compensated executive
officers of the Company.
STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END STOCK OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR-END Fiscal Year-End(a)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Paul J. Kerz................. 0 0 299,019 85,500 0 0
Alan L. Bendes............... 0 0 21,000 84,000 0 0
Richard B. Brown............. 0 0 7,500 67,500 0 0
Thomas J. Kazamek............ 0 0 83,713 122,500 0 0
Robert V. Nagelhout.......... 0 0 86,458 93,542 0 0
</TABLE>
- ---------------
(a) Value of unexercised "in-the-money" options is determined by multiplying the
number of shares subject to such options by the difference between the
exercise price per share and $4.22, the average of the high and low price
per share of the Common Stock on the Nasdaq-Amex National Market System on
October 29, 1999.
12
<PAGE> 15
The following table sets forth selected information regarding the Company's
Employee Stock Purchase Plan as of October 31, 1999.
<TABLE>
<CAPTION>
EMPLOYEE STOCK PURCHASE PLAN
-----------------------------------
NUMBER OF SHARES VALUE OF SHARES
NAME OF INDIVIDUAL OR GROUP PURCHASED(A) Purchased(b)
- --------------------------- ---------------- ---------------
<S> <C> <C>
Paul J. Kerz................................................ 0(c) $ 0(c)
Alan L. Bendes.............................................. 0 0
Richard B. Brown............................................ 0 0
Thomas J. Kazamek........................................... 3,468 (15,502)
Robert V. Nagelhout......................................... 7,606 (28,827)
All current executive officers as a group................... 18,756 (75,671)
All employees, other than executive officers, as a group.... 701,489 $(2,852,452)
</TABLE>
- ---------------
(a) Represents the cumulative number of shares of Common Stock purchased by
employee.
(b) Calculated as the difference between the purchase price per share paid by
employees and $4.22, the closing price of the Common Stock on the
Nasdaq-Amex National Market System on October 29, 1999 multiplied by the
cumulative number of shares purchased by the employees. Amounts in
parentheses indicate the purchase prices exceeded the market value at
October 29, 1999.
(c) Mr. Kerz is not eligible to participate in this Plan because his beneficial
ownership of the outstanding Common Stock exceeds 5%.
PROFIT SHARING PLAN
The Company had a discretionary defined contribution profit sharing plan in
which a substantial number of its employees participated. For the Fiscal Years
ended October 31, 1999, 1998, and 1997, profit sharing expense was $0, $0, and
$197,000, respectively.
Effective October 31, 1997, the Company terminated its profit sharing plan,
including the 401(k) plan. A replacement, but identical, 401(k) plan was
established as of November 1, 1997. Following approval by the Internal Revenue
Service, an initial distribution of the assets of the terminated profit sharing
plan was completed on December 18, 1998, with the majority of the individual
accounts having been distributed in March 1999. The Company expects to
distribute the remainder in Fiscal Year 2000.
401(k) PLAN
Effective January 1, 1992, the Company amended its profit sharing plan to
include a 401(k) plan, which permits an employee to contribute a portion of the
employee's compensation, subject to certain limitations. At its discretion, the
Company may make annual contributions to the 401(k) plan for the benefit of
participating employees. For the Fiscal Years ended October 31, 1999, 1998, and
1997, 401(k) plan expense was $1,102,000, $959,000, and $804,000, respectively.
For the Fiscal Year ended October 31, 1999, $3,500 was contributed on behalf of
each of Mr. Kerz, Mr. Bendes, and Mr. Levetown, and $3,247 was contributed on
behalf of Mr. Brown.
Mr. Nagelhout and Mr. Kazamek participate under the 401(k) plan of the
Company's HCm subsidiary, which is valued at the end of each calendar year. For
the calendar year ended December 31, 1999, $11,338 and $8,173 was contributed on
behalf of Mr. Nagelhout and Mr. Kazamek, respectively.
As of January 1, 2000, the Company adopted a unified company-wide 401(k)
plan.
13
<PAGE> 16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Richard H. Stowe and William W.
Neal, both of whom are non-employee directors of the Company. No member of such
Committee was at any time during Fiscal Year 1999 or at any other time an
officer or employee of the Company. No executive officer of the Company served
on the compensation committee of another entity or on any other committee of the
board of directors of another entity performing similar functions during the
Company's last fiscal year.
Notwithstanding contrary statements set forth in any of the Company's
previous filings under the Securities Act of 1933 (the "Securities Act") or the
Exchange Act that might incorporate future filings, including this Proxy
Statement, the Compensation Committee report, and the performance graph set
forth below shall not be incorporated by reference into such future filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report provides an explanation of the philosophy underlying the
Company's executive compensation program and details on how decisions were
implemented during Fiscal Year 1999 regarding the compensation paid to the
Company's executive officers.
The Company's mission is to be a significant provider of quality products
and services in the markets it serves. To support this and other strategic
objectives as approved by the Board of Directors and to provide adequate returns
to the shareholders, the Company must compete for, attract, develop, motivate,
and retain top quality executive talent at the corporate office and operating
business units of the Company during periods of both favorable and unfavorable
business conditions.
The Company's executive compensation program is a critical management tool
in achieving this goal. 'Pay for performance' is the underlying philosophy for
the Company's executive compensation program. Consistent with this philosophy,
the program has been carefully conceived and is independently administered by
the Compensation Committee (the "Committee") of the Board of Directors, which is
comprised entirely of non-employee directors. The program is designed to link
executive pay to corporate performance, including share price, recognizing that
there is not always a direct correlation in the short-term between executive
performance and share price.
The program is designed and administered to:
- reward individual and team achievements that contribute to the attainment
of the Company's business goals; and
- provide a balance of total compensation opportunities, including salary,
bonus, and longer-term cash and equity incentives, that are competitive
with similarly situated companies and reflective of the Company's
performance.
In seeking to link executive pay to corporate performance, the Committee
believes that the most appropriate measure of corporate performance is the
increase in long-term shareholder value, which involves improving such
quantitative performance measures as revenue, net income, cash flow, operating
margins, earnings per share, and return on shareholders' equity. The Committee
may also consider qualitative corporate and individual factors which it believes
bear on increasing the long-term value of the Company to its shareholders. These
include: (i) the development of competitive advantages; (ii) the ability to deal
effectively with the growing complexity of the Company's businesses; (iii)
success in developing business strategies,
14
<PAGE> 17
managing costs, and improving the quality of the Company's products and services
as well as customer satisfaction; and (iv) the general performance of individual
job responsibilities.
The Company's executive compensation program consists of: (i) a base
salary; (ii) an annual bonus; and (iii) a long-term incentive represented by
stock options.
COMPENSATION OF EXECUTIVE OFFICERS
Salary. In determining the amount of compensation to be paid to the
executive officers of the Company, the Committee adheres to long established
compensation policies of the Company pursuant to which executive compensation is
determined. Base salary determinants include the prevailing rate of compensation
for positions of like responsibility in the particular geographic area, the
level of the executive's compensation in relation to other executives of the
Company with the same, more, or less responsibilities, and the tenure of the
individual. To ensure both competitiveness and appropriateness of base salaries,
the Company retains professional consultants on a periodic basis to update the
job classification and pay scale structure pursuant to which individual
executives (and the remainder of the Company's employees) are classified and the
pay ranges with which their jobs are associated.
Bonus. Bonuses are intended to reward both overall corporate performance
and an individual's participation in attaining such performance. From time to
time, bonuses are also awarded to augment base salary when a determination has
been made that an executive's salary is not competitive in light of the factors
discussed above.
Stock Options. The longer-term component of the Company's executive
compensation program consists of stock options. The options generally permit the
option holder to buy the number of shares of the underlying Common Stock (an
"option exercise") at a price equal to or greater than the market price of the
stock at the time of grant. Thus, the options generally gain value only to the
extent the stock price exceeds the option exercise price during the life of the
option. Generally a portion of the options vest over a period of several years
and expire no later than ten years after grant. Stock options are granted upon
the recommendation of management and approval of the Committee based upon their
subjective evaluation of the appropriate amount for the level and amount of
responsibility of each executive officer. For Fiscal Year 1999, certain stock
options that were awarded to four of the six executive officers are subject to a
performance-based vesting schedule. These options vested 25 percent on the Grant
Date and the remaining 75 percent will vest on October 31, 2003, subject to
accelerated vesting of all or a portion of the total options upon realization of
certain annual performance measures. All options whose vesting has not otherwise
been accelerated pursuant to the foregoing will vest on October 31, 2003,
subject only to the continued employment by the Company of the optionee.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Determination of the Company's compensation of Paul J. Kerz, the Company's
Chief Executive Officer and founder, takes into account the factors described
above as pertinent to the remainder of the Company's executives and employees,
while also taking into consideration the proprietary nature of the Company's
business and efforts expended in connection with development of the Company's
strategy and product development activities. The Committee also took into
account (i) Mr. Kerz's strategic contributions to the Company, (ii) Mr. Kerz's
participation in the Company's improving financial results, and (iii) the amount
of Mr. Kerz's compensation relative to chief executive officers of comparable
companies.
15
<PAGE> 18
OTHER
Section 162(m) of the Internal Revenue Code prohibits the Company from
deducting any compensation in excess of $1,000,000 paid to certain of its
executive officers, except to the extent that such compensation is paid pursuant
to a shareholder approved plan upon the attainment of specified performance
objectives. The Committee believes that tax deductibility is an important
factor, but not the sole factor, to be considered in setting executive
compensation policy. Accordingly, the Committee generally intends to take such
reasonable steps as are required to avoid the loss of a tax deduction due to
Section 162(m), but reserves the right, in appropriate circumstances, to pay
amounts which are not deductible. During Fiscal Year 1999, none of the Company's
executive officers received compensation in excess of $1,000,000.
COMPENSATION COMMITTEE
Richard H. Stowe
William W. Neal
SHAREHOLDER RETURN PERFORMANCE GRAPHS
The graph presented below provides a comparison between the cumulative
total shareholder return on the Common Stock since the Company's initial public
offering on December 17, 1992 and (assuming the reinvestment of dividends) the
Nasdaq-Amex U.S. companies index, the Nasdaq-Amex computer and data processing
service companies index, and the Nasdaq-Amex health service companies index,
over the same period. The graph assumes the investment of $100 in the Common
Stock and each of the indices.
[LINE GRAPH]
<TABLE>
<CAPTION>
HMSY NASDAQ COMPOSITE NASDAQ HC NASDAQ INFO
---- ---------------- --------- -----------
<S> <C> <C> <C> <C>
Dec-92 100.00 100.00 100.00 100.00
Oct-93 141.53 115.11 151.33 107.12
Oct-94 189.06 115.72 192.25 128.96
Oct-95 319.79 155.82 197.50 196.82
Oct-96 352.32 183.92 226.78 228.23
Oct-97 97.45 242.06 246.03 307.96
Oct-98 104.95 270.90 191.20 396.52
Oct-99 63.27 452.52 141.74 722.48
</TABLE>
CERTAIN TRANSACTIONS
Loan to Paul J. Kerz
During October 1998, the Company's HSA subsidiary, a Delaware corporation,
made two loans to Paul J. Kerz, an officer and director of HSA, who is also the
Company's Chairman and Chief Executive Officer. One loan, in the principal
amount of $500,000, was secured by a pledge of 162,666 shares of the Company's
common stock owned by Mr. Kerz, while the other loan, in the principal amount of
$250,000, was unsecured. Both loans bore interest at the rate of 5.3125% per
annum, payable semi-annually commencing April 30, 1999,
16
<PAGE> 19
and were due as to principal and all then accrued but unpaid interest on October
31, 2000. During October 1999, HSA (i) extended the due date of both loans to
December 31, 2001 and (ii) increased the total principal amount of the unsecured
loan to $1,000,000, of which a total of $400,000 was outstanding as of October
31, 1999. During November 1999, Mr. Kerz drew down the remaining $600,000 of the
unsecured loan. In addition, the interest rate on the amended loans was
increased to 5.9686% per annum. The amendments to the loans were unanimously
approved by the Board of Directors of HSA and the Company as the sole
stockholder of HSA, following the recommendation of the Compensation Committee
of the Company's Board of Directors that the amendment to the loans were in the
best interest of HSA and the Company, and the unanimous approval of the
amendment to the loans by the independent members of the Company's Board of
Directors.
OTHER RELATIONSHIPS
The Company occasionally transacts business with companies for which
members of its Board of Directors serve as executive officers and/or directors.
In Fiscal Year 1999, none of these transactions was individually significant or
reportable.
LEGAL
In April and May 1997, five purported class action lawsuits were commenced
in the United States District Court for the Southern District of New York
against the Company and certain of its present and former officers and directors
alleging violations of the Exchange Act in connection with certain allegedly
false and misleading statements. These lawsuits, which sought damages in an
unspecified amount, were consolidated into a single proceeding captioned In re
Health Management Systems, Inc. Securities Litigation (97 CIV-1965 (HB)) and a
Consolidated Amended Complaint was filed. Defendants made a motion to dismiss
the Consolidated Amended Complaint, which was submitted to the Court on December
18, 1997 following oral argument. On May 27, 1998, the Consolidated Amended
Complaint was dismissed by the Court for failure to state a claim under the
federal securities laws, with leave for the plaintiffs to replead. On July 17,
1998, a Second Consolidated Amended Complaint was filed in the United States
District Court for the Southern District of New York, which reiterated
plaintiffs' allegations in their prior Complaint. On September 11, 1998, the
Company and the other defendants filed a motion to dismiss the Second
Consolidated Amended Complaint. The motion was fully briefed in late November
1998, at which time the motion was submitted to the Court. The consolidated
proceeding was reassigned to another Judge. The Court heard oral argument on the
motion to dismiss on June 11, 1999. Prior to rendering its decision on the
motion to dismiss, the Court ordered the parties to attempt to settle the case,
and meetings toward that end were conducted. On December 20, 1999, the parties
reached a tentative agreement on the principal terms of settlement of the
litigation against all defendants. Pursuant to this understanding, without
admitting any wrongdoing, certain of the defendants have agreed to pay, in
complete settlement of this lawsuit, the sum of $4,500,000, not less than 75
percent of which will be paid by the Company's insurance carriers. For the
Fiscal Year ended October 31, 1999, the Company has recorded a charge of
$845,000 related to this proposed settlement. The proposed settlement
understanding is subject to execution of a final settlement agreement and Court
approval. On December 22, 1999, the Judge issued an Order dismissing, without
prejudice, the pending motion to dismiss, as moot. In the event a final
settlement is not consummated, the Company intends to resubmit a motion to
dismiss the second consolidated amended complaint and to continue its vigorous
defense of the lawsuit.
17
<PAGE> 20
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors knows of no
business to be presented at the Meeting other than as set forth herein. If other
matters properly come before the Meeting, the persons named as proxies will vote
on such matters in their discretion.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's 2001
Annual Meeting of Shareholders must be received by the Secretary, Health
Management Systems, Inc., 401 Park Avenue South, New York, New York 10016, no
later than October 6, 2000, in order to be considered for inclusion in the
Company's Proxy Statement and form of proxy relating to such Meeting. Moreover,
with regard to any proposal by a shareholder not seeking to have such proposal
included in the Proxy Statement but seeking to have such proposal considered at
the 2001 Annual Meeting, if such shareholder fails to notify the Company in the
manner set forth above of such proposal no later than December 21, 2000, then
the persons appointed as proxies may exercise their discretionary voting
authority if the proposal is considered at the 2001 Annual Meeting
notwithstanding that shareholders have not been advised of the proposal in the
Proxy Statement for the 2001 Annual Meeting. Any proposals submitted by
shareholders must comply in all respects with (i) the rules and regulations of
the Securities and Exchange Commission, (ii) the provisions of the Company's
Certificate of Incorporation and by-laws, and (iii) New York law.
ANNUAL REPORT
The Company's 1999 Annual Report on Form 10-K is concurrently being mailed
to shareholders. The Annual Report contains consolidated financial statements of
the Company and its subsidiaries and the report thereon of KPMG LLP, independent
certified public accountants.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ KATHY L. ARENDT
Kathy L. Arendt
Secretary
Dated: February 4, 2000
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS ARE
URGED TO COMPLETE, SIGN, DATE, AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE
ENCLOSED ENVELOPE.
18
<PAGE> 21
<TABLE>
<S> <C>
Please mark
your votes as [X]
indicated in
this example
1. ELECTION OF DIRECTORS: NOMINEES: Randolph G. Brown, 2. Ratification of the selection of KPMG
Robert V. Nagelhout, Galen D. Powers LLP as the Company's independent
accountants for the fiscal year
FOR all nominees WITHHOLD ending October 31, 2000.
listed to the right AUTHORITY
(except as marked to the to vote for all nominees ---------------------------------------- FOR AGAINST ABSTAIN
contrary) listed to the right FOR, except for the following nominee(s)
[ ] [ ] [ ]
[ ] [ ]
3. Consideration of a shareholder proposal if 4. To transact such other business as THIS PROXY WHEN PROPERLY EXECUTED WILL
properly presented at the meeting. may properly come before the meeting BE VOTED IN THE MANNER DIRECTED BY THE
or any adjournment thereof. UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
FOR AGAINST ABSTAIN IS GIVEN, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2 AND AGAINST PROPOSAL 3
[ ] [ ] [ ] ABOVE. IF ANY NOMINEE DECLINES OR IS
UNABLE TO SERVE AS A DIRECTOR, THEN THE
PERSONS NAMED AS PROXIES SHALL HAVE FULL
DISCRETION TO VOTE FOR ANY OTHER PERSON
_______ DESIGNATED BY THE BOARD OF DIRECTORS.
|
|
|
Signature_____________________________________________Signature_____________________________________________Date____________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
- ------------------------------------------------------------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
</TABLE>
ANNUAL
MEETING OF
HEALTH MANAGEMENT SYSTEMS, INC. SHAREHOLDERS
MARCH 14, 2000, 11:00 AM
401 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10016
<PAGE> 22
HEALTH MANAGEMENT SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Paul J. Kerz and Kathy L. Arendt, and any one of
them, as proxies, to vote all shares of Common Stock of Health Management
Systems, Inc. (the "Company") held of record by the undersigned as of January
25, 2000, the record date with respect to this solicitation, at the Annual
Meeting of Shareholders of the Company to be held at 401 Park Avenue South,
New York, New York 10016 on Tuesday, March 14, 2000, at 11:00 A.M. and any
adjournments thereof, upon the following matters:
(OVER)
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
