<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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SYSTEMED INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
SYSTEMED INC.
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[SYSTEMED INC. LOGO]
970 WEST 190TH STREET, SUITE 400
TORRANCE, CALIFORNIA 90502
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, MAY 24, 1996
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Systemed
Inc. (the "Company") will be held at the Torrance Marriott Hotel, 3635 Fashion
Way, Torrance, California, on Friday, May 24, 1996 at 9:00 a.m. for the
following purposes:
(1) To elect members of the Board of Directors to serve until the next
Annual Meeting of Stockholders; and
(2) To transact such other business as may be properly brought before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 26, 1996 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting. Only holders of the Company's Common Stock and 8%
Convertible Preferred Stock at the close of business on the record date are
entitled to vote at the meeting.
Accompanying this Notice are a Proxy and Proxy Statement. IF YOU WILL NOT
BE ABLE TO ATTEND THE MEETING TO VOTE IN PERSON, PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
The Proxy may be revoked at any time prior to its exercise at the meeting.
By Order of the Board of
Directors,
Sam Westover
President and Chief Executive
Officer
Torrance, California
April 19, 1996
<PAGE> 3
SYSTEMED INC.
970 WEST 190TH STREET, SUITE 400
TORRANCE, CALIFORNIA 90502
------------------------
ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, MAY 24, 1996
------------------------
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to the stockholders of Systemed Inc., a
Delaware corporation, in connection with the solicitation of proxies by and on
behalf of the Board of Directors of the Company. The proxies solicited hereby
are to be voted at the Annual Meeting of Stockholders of the Company to be held
on May 24, 1996, and at any and all adjournments thereof (the "Annual Meeting").
This Proxy Statement and form of Proxy are being mailed to the Company's
stockholders on or about April 19, 1996.
A form of proxy is enclosed for your use. The shares represented by each
properly executed unrevoked proxy will be voted as directed by the stockholder
for the nominees to the Board of Directors and for any other matter properly
brought before the stockholders. If no direction is made, the shares represented
by each properly executed proxy will be voted for management's nominees for the
Board of Directors. As to any other business which may properly be brought
before the stockholders and be submitted to a vote of stockholders, proxies
received by the Board of Directors will be voted in accordance with the best
judgment of the designated proxy holders.
Any proxy given may be revoked at any time prior to the exercise thereof by
filing with the Secretary of the Company an instrument revoking such proxy or by
the filing of a duly executed proxy bearing a later date. Any stockholder
present at the meeting who has given a proxy may withdraw it and vote their
shares in person if such stockholder so desires.
It is contemplated that the solicitation of proxies will be made primarily
by mail. The Company will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy material to the
beneficial owners of the shares and will reimburse them for their expenses in so
doing. Should it appear desirable to do so in order to ensure adequate
representation of shares at the meeting, officers, agents and employees of the
Company may communicate with stockholders, banks, brokerage houses and others by
telephone, or in person to request that proxies be furnished. All expenses
incurred in connection with this solicitation will be borne by the Company. The
Company has no present plans to hire special employees or paid solicitors to
assist in obtaining proxies, but reserves the option of doing so if it should
appear that a quorum otherwise might not be obtained.
The Bylaws of the Company provide that the holders of a majority of the
shares of stock of the Company issued and outstanding and entitled to vote at
the Annual Meeting, present in person or represented by proxy, shall constitute
a quorum. Except as otherwise provided by statute, the Certificate of
Incorporation of the Company or the Bylaws, all matters coming before the Annual
Meeting shall be decided by the vote of the holders of a majority of the stock
present in person or represented by proxy at the Annual Meeting and entitled to
vote thereat. Votes cast at the Annual Meeting will be tabulated by the persons
appointed by the Company to act as inspectors of election for the Annual
Meeting. The inspectors of election will treat shares of voting stock
represented by a properly signed and returned proxy as present at the Annual
Meeting for purposes of determining a quorum, without regard to whether the
proxy is marked as casting a vote or abstaining.
<PAGE> 4
Likewise, the inspectors of election will treat shares of voting stock
represented by "broker non-votes" (i.e., shares of voting stock held in record
name by brokers or nominees as to which (i) instructions have not been received
from the beneficial owners or persons entitled to vote; (ii) the broker or
nominee does not have discretionary voting power under applicable rules or the
instrument under which it serves in such capacity; or (iii) the record holder
has indicated on the proxy card or has executed a proxy and otherwise notified
the Company that it does not have authority to vote such shares on that matter)
as present for purposes of determining a quorum. Directors will be elected by a
favorable vote of a plurality of the shares of voting stock present and entitled
to vote, in person or by proxy, at the Annual Meeting. Accordingly, abstentions
or broker non-votes as to the election of Directors will not affect the election
of the candidates receiving the plurality of votes. All other matters to come
before the Annual Meeting require the approval of a majority of the shares of
voting stock present and entitled to vote thereat. Therefore, abstentions as to
a particular proposal will have the same effect as votes against such proposal.
Broker non-votes as to a particular proposal, however, will be deemed shares not
entitled to vote on such proposal, and will not be counted as votes for or
against such proposal, and will not be included in calculating the number of
votes necessary for approval of such proposal.
VOTING SECURITIES
Only holders of record of the Company's Common Stock, $.001 par value (the
"Common Stock"), and 8% Convertible Preferred Stock, $.001 par value (the
"Preferred Stock"), at the close of business on March 26, 1996 are entitled to
notice of and to vote at the Annual Meeting. As of March 26, 1996, the Company
had issued and outstanding 22,324,773 shares of Common Stock and 161,325 shares
of Preferred Stock. Each share of Common Stock and Preferred Stock issued and
outstanding on March 26, 1996 is entitled to one vote on each matter to come
before the meeting.
At the Annual Meeting, stockholders will have cumulative voting rights with
respect to the election of Directors, pursuant to which each share will have the
number of votes for Directors which equals the number of Directors which may be
elected (eight). Such votes may be cast for one nominee or allocated among two
or more nominees. Stockholders may exercise such rights either in person or by
proxy with or without advance notice to the Company. There are no conditions
precedent to the exercise of the right to cumulate votes. In the event that the
Board of Directors deems it appropriate, proxies may be cumulated and
distributed unequally among the eight nominees identified herein in order to
ensure the election of the maximum number of such nominees. The eight nominees
receiving the highest number of votes at the Annual Meeting will be elected.
ELECTION OF DIRECTORS
NOMINEES
Directors are elected at each Annual Meeting of Stockholders and hold
office until the next Annual Meeting of Stockholders or until their respective
successors are elected and qualified. THE BOARD OF DIRECTORS IS OF THE OPINION
THAT THE ELECTION TO THE BOARD OF DIRECTORS OF THE PERSONS IDENTIFIED BELOW, ALL
OF WHOM ARE CURRENTLY SERVING AS DIRECTORS OF THE COMPANY AND HAVE CONSENTED TO
CONTINUE TO SERVE IF ELECTED, WOULD BE IN THE BEST INTERESTS OF THE COMPANY. The
names of such nominees are as follows: Ronald P. Arrington, James F. Doherty,
John E. Flood, Jr., J. Roberts Fosberg, Craig L. McKnight, Frederick M. Myers,
Jon C. Thorson, M.D. and Sam Westover.
Shares represented by proxies will be voted FOR the election of the above
named nominees unless a stockholder indicates that the proxy shall not be voted
for all or any one of the nominees. If for any reason a nominee should, prior to
the Annual Meeting, become unavailable for election as a Director, an event not
now anticipated, the shares represented by proxies voted in favor of the nominee
will be voted for such substitute nominee if any, as may be recommended by the
Board of Directors. In no event, however, shall the proxies be voted for a
greater number of persons than the number of nominees named.
2
<PAGE> 5
Set forth below is certain information with respect to the nominees to the
Board of Directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Ronald P. Arrington 53 Director
James F. Doherty 66 Director
John E. Flood, Jr. 66 Director and Vice Chairman of the Board
J. Roberts Fosberg 59 Director and Chairman of the Board
Craig L. McKnight 45 Director
Frederick M. Myers 73 Director
Jon C. Thorson, M.D. 64 Director
Sam Westover 40 President, Chief Executive Officer and Director
</TABLE>
RONALD P. ARRINGTON, ESQ., is Chairman of the Compensation Committee and a
member of the Executive Committee of the Board of Directors. He has been a
Director of the Company since 1981. Mr. Arrington has been engaged in the
practice of law since 1968 and is a member of the law firm of Rutan & Tucker,
Costa Mesa, California. Mr. Arrington is currently also a member of the Board of
Directors of Proxima Corporation.
JAMES F. DOHERTY, ESQ., has been a Director of the Company since July 1994.
Mr. Doherty is a member of the Compensation Committee of the Board of Directors.
He is the former chief administrative officer of Group Health Association of
America, Inc. ("GHAA"), the largest national trade association for organized
prepaid healthcare systems in the United States. He served as Executive Director
of GHAA from July 1979 to March 1986, at which time he was named President of
GHAA, a position in which he served until his retirement in September 1993. Mr.
Doherty also served as founding president of the National Health Lawyers
Association.
JOHN E. FLOOD, JR., has served as a Director of the Company since 1984.
From April 1986 through August 1993 he served as Chairman of the Board of
Directors of the Company. He was named Vice Chairman of the Board in August
1993. He is a member of the Audit, Compensation and Executive Committees of the
Board of Directors. Mr. Flood is currently a management consultant.
J. ROBERTS FOSBERG, has served as the Company's Chairman of the Board since
August 1993. From July 1986 through August 1993 he served as the Company's
President and Chief Executive Officer. Mr. Fosberg was elected to the Company's
Board of Directors in September 1986. Mr. Fosberg also serves on the
Compensation and Executive Committees of the Board of Directors.
CRAIG L. MCKNIGHT, has been a Director of the Company since July 1995 and
is a member of the Compensation Committee of the Board. Since March 1995, Mr.
McKnight has served as Executive Vice President of Magellan Health Services
("Magellan"), which was previously known as Charter Medical Corporation, and
since October 1995 Mr. McKnight has also served as Chief Financial Officer of
Magellan. From June 1994 to March 1995, Mr. McKnight was the Partner-in-Charge
of the Philadelphia Health Care Practice of Coopers & Lybrand L.L.P. Prior to
June 1994, Mr. McKnight was responsible for the Health Care Practice of Coopers
& Lybrand on the West Coast. Mr. McKnight has 22 years of experience in public
accounting.
FREDERICK M. MYERS, ESQ., has served as a Director of the Company since
1983. Mr. Myers is also Chairman of the Audit Committee and a member of the
Compensation Committee of the Board. He is a member of the law firm of Cain,
Hibbard, Myers, & Cook, Pittsfield, Massachusetts. Mr. Myers has been engaged in
the practice of law since 1948 and has been a Director of Patten Corporation
since 1990.
JON C. THORSON, M.D., has served as a Director of the Company since
September 1986 and is a member of the Compensation Committee of the Board. He is
President of Alpha Group, a consulting and development firm.
SAM WESTOVER, has served as President and Chief Executive Officer of the
Company since August 1993 and as a Director of the Company since July 1992. Mr.
Westover is Chairman of the Executive Committee of the Company's Board of
Directors. From January 1993 until August 1993, Mr. Westover served as Senior
3
<PAGE> 6
Vice President, Chief Financial Officer and Treasurer of Wellpoint Health
Networks, the largest publicly traded managed healthcare company in the U.S.
Prior to joining Wellpoint, Mr. Westover served as Chief Financial Officer and
Senior Vice President, Corporate Financial Services of Blue Cross of California,
a position to which he was named in May 1990.
MEETINGS OF BOARD AND COMMITTEES
The Board of Directors held ten meetings during the fiscal year ended
December 31, 1995. No director attended fewer than 75 percent of the aggregate
of the meetings of the Board and the Committees upon which he served, except for
Mr. Arrington who attended 73 percent of such meetings and Mr. McKnight who
attended 67 percent of such meetings held during the period for which he was a
director.
The Board of Directors has standing Executive, Audit and Compensation
Committees, but does not have a Nominating Committee. In practice, the entire
Board performs the function of a Nominating Committee. The Executive Committee
of the Board held no meetings during the fiscal year ended December 31, 1995.
The Executive Committee has many of the powers of the full Board of Directors
and meets as necessary between Board meetings to transact certain matters which
require Board action. The Executive Committee is composed of Mr. Westover, who
serves as Chairman, Mr. Arrington, Mr. Flood and Mr. Fosberg.
The Audit Committee of the Board of Directors held one meeting during the
fiscal year ended December 31, 1995. The Committee's responsibility is to review
and act or report to the Board of Directors with respect to various audit and
accounting matters, including the selection of independent auditors, the
determination of the scope of audit procedures, the nature of the services to be
performed by and the fees to be paid to the Company's independent auditors, the
establishment of the accounting practices of the Company, and the monitoring of
all phases of the Company's operations. The Audit Committee is composed of Mr.
Myers, who acts as Chairman, and Mr. Flood.
The Compensation Committee of the Board of Directors held one meeting
during the fiscal year ended December 31, 1995. The Committee is responsible for
making recommendations to the Board concerning such executive compensation
arrangements and plans as it deems appropriate. The Compensation Committee is
presently composed of Messrs. Doherty, Flood, Fosberg, McKnight, Myers, Thorson
and Mr. Arrington, who serves as Chairman.
BOARD COMPENSATION
Members of the Board of Directors who are not officers of the Company
receive annual fees in the amount of $6,000 in their capacity as Directors.
Directors do not receive a per diem fee for their attendance at meetings of the
Board or its Committees. In May 1995, each of the Directors who was not then an
officer of the Company also received a compensatory option, which vested at date
of grant and expires in five years, for the purchase of 10,000 shares of Common
Stock under the 1993 Non-Employee Director Plan at the exercise price of
$6.8125, for his service on the Board for the twelve month period ended April
30, 1996. The annual fee and options were prorated for Mr. McKnight who was
elected after the 1995 Annual Meeting of Stockholders. The option for 8,333
shares of Common Stock granted to Mr. McKnight has an exercise price of $7.125.
Directors also received cash reimbursement for travel expenses incurred in
attending meetings of the Board of Directors. Members of the Board of Directors
who are not employees of the Company and who are elected at the 1996 Annual
Meeting of Stockholders will receive options for the purchase of 10,000 shares
of the Company's Common Stock at the closing price for such shares on the first
business day following such meeting.
By agreement with the Company's Board of Directors effective February 3,
1995, Mr. J. Roberts Fosberg, Chairman of the Board of the Company, is entitled
to receive a cash payment upon the occurrence of any "terminating transaction"
entered into by the Company on or before November 26, 1996 in an amount equal to
the amount by which the value of the Company's Common Stock for purposes of the
"terminating transaction" exceeds the exercise prices of Mr. Fosberg's options
for an aggregate of 15,000 shares (i) which were outstanding on February 3,
1995, and (ii) which remain unvested as of the date of the "terminating
transaction." The options have an exercise price of $5.563.
4
<PAGE> 7
The term "terminating transaction" means any of the following events: (i)
the dissolution or liquidation of the Company; (ii) a reorganization, merger or
consolidation of the Company with one or more other corporations (except with
respect to a transaction, the sole purpose of which is to change the domicile or
name of the Company), as a result of which the Company goes out of existence or
becomes a subsidiary of another corporation (which shall be deemed to have
occurred if another corporation shall own, directly or indirectly, more than
fifty percent (50%) of the aggregate voting power of all outstanding equity
securities of the Company); or (iii) a sale of all or substantially all of the
Company's assets.
Also by agreement with the Company's Board of Directors effective January
1, 1995, Mr. Fosberg's compensation was reduced from $175,000 per year to $6,630
per annum and he retained his health care benefits coverage under the Company's
plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Arrington, Doherty, Flood, Fosberg, Myers and Thorson comprised
the Compensation Committee of the Board of Directors as of December 31, 1995.
Mr. McKnight joined the Compensation Committee as of February 2, 1996. No member
of such Committee is or has been an officer or employee of the Company, except
for Mr. Fosberg.
The law firm of Rutan & Tucker, one of the members of which is Mr.
Arrington, received compensation for legal services to the Company during fiscal
1995. The Company intends to retain the services of such firm in fiscal 1996.
Mr. Westover served as Senior Vice President, Chief Financial Officer and
Treasurer of Wellpoint Health Networks until he became President and Chief
Executive Officer of the Company in August 1993. Wellpoint previously entered
into a significant contract with the Company's Systemed Pharmacy Inc. subsidiary
to manage and administer a prescription drug plan.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the last three fiscal years
as to (i) the Company's Chief Executive Officer, and (ii) each individual
serving as an executive officer of the Company at December 31, 1995 who received
more than $100,000 in salary and bonuses for services rendered to the Company
during the last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------------- -------------------
OTHER SECURITIES ALL
NAME AND PRINCIPAL ANNUAL UNDERLYING OTHER
POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#) COMPENSATION
- - -------------------- ----- -------- -------- ------------ ------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sam Westover........ 1995 $220,751 $103,230 -- 100,000 --
President and Chief 1994 $212,500 $218,000 -- 100,000 --
Executive Officer 1993 $109,067(A) -- -- 295,000(B) $ 6,000(C)
Perry I. Cohen...... 1995 $189,971 $ 39,814 -- 50,000 --
Senior Vice 1994 $168,784(D) $211,000(E) -- 250,000 --
President
Mark P. Hanrahan.... 1995 $131,885 $ 52,515 -- 25,000 --
Senior Vice 1994 $123,750(D) $ 99,000(F) -- 150,000 --
President
Kenneth J. Kay...... 1995 $152,888 $ 53,488 -- 50,000 $ 354(G)
Senior Vice 1994 $ 72,788(D) $ 51,000 -- 150,000 --
President,
Finance and
Administration
and Chief Financial
Officer
Michael J. Barone... 1995 $115,485 $ 14,325 -- 25,000 $ 66(G)
Vice President, 1994 $105,699 $ 30,366 -- 50,000 --
Chief Pharmacy 1993 $ 91,624 -- -- -- --
Officer
</TABLE>
5
<PAGE> 8
- - ---------------
(A) Represents compensation from the commencement of Mr. Westover's employment
as President and Chief Executive Officer of the Company on August 12, 1993.
(B) Includes options for the purchase of 10,000 shares of Common Stock received
by Mr. Westover for his service as an outside member of the Board of
Directors during fiscal 1993.
(C) Represents compensation received by Mr. Westover for his service as an
outside member of the Board of Directors during fiscal 1993.
(D) Represents salary from the commencement of Messrs. Cohen's, Hanrahan's and
Kay's employment in January 1994, February 1994 and July 1994, respectively.
(E) Includes the payment of an $80,000 one-time bonus to Mr. Cohen upon his
employment with the Company.
(F) Includes the payment of a $10,000 one-time bonus to Mr. Hanrahan upon his
employment with the Company.
(G) Represents employer matching contribution under the Section 401(k) plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning Common Stock
options granted to the named executive officers during the fiscal year ended
December 31, 1995.
OPTION GRANTS IN FISCAL YEAR 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
NUMBER OF EXERCISE OF STOCK PRICE
SECURITIES PERCENT OF TOTAL OR APPRECIATION
UNDERLYING OPTIONS GRANTED BASE FOR OPTION TERM(C)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED(A) FISCAL YEAR 1995 ($/SH)(B) DATE 5% 10%
---- ----------- ---------------- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sam Westover......... 100,000(D) 10.6% $ 6.75 5/26/05 $424,504 $1,075,776
Perry I. Cohen....... 50,000 5.3% $6.8125 2/06/05 $214,217 $ 542,868
Mark P. Hanrahan..... 25,000 2.7% $6.8125 2/06/05 $107,109 $ 271,434
Kenneth J. Kay....... 50,000 5.3% $6.8125 2/06/05 $214,217 $ 542,868
Michael J. Barone.... 25,000 2.7% $6.8125 2/06/05 $107,109 $ 271,434
</TABLE>
- - ---------------
(A) Unless otherwise indicated, all options are exercisable for a term of ten
years, subject to earlier termination upon the occurrence of certain events
related to termination of employment, and subject to adjustment upon certain
corporate events. Options are exercisable 25 percent upon the one year
anniversary of date of grant and 25 percent on each anniversary thereafter.
(B) The options were granted at fair market value on the date of grant. The
exercise price may be paid by delivery of cash or already owned shares,
subject to certain conditions.
(C) The amounts shown under these columns are the result of calculations at the
5 percent and 10 percent rates required by the Securities and Exchange
Commission and are not intended to forecast future appreciation of the
Company's stock price.
(D) Options are exercisable 25 percent upon grant and 25 percent on each
anniversary of grant.
6
<PAGE> 9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information regarding stock options
exercised by the named executive officers during the fiscal year ended December
31, 1995, as well as the number of exercisable and unexercisable stock options
and their values at December 31, 1995.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1995 AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED IN-THE-
UNEXERCISED OPTIONS MONEY OPTIONS AT
AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(B)
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE (#) REALIZED ($)(A) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ---------------- ---------------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
Sam Westover........ -- -- 381,250/125,000 $2,500/$0
Perry I. Cohen...... -- -- 125,000/175,000 $62,500/$62,500
Mark P. Hanrahan.... -- -- 75,000/100,000 $0/$0
Kenneth J. Kay...... -- -- 75,000/125,000 $0/$0
Michael J. Barone... -- -- 17,000/63,000 $6,375/$3,000
</TABLE>
- - ---------------
(A) Represents market value of underlying securities at exercise date, minus the
exercise price of the option.
(B) Represents the NASDAQ closing price of underlying securities at fiscal
year-end, minus the exercise price of the options. An option is in-the-money
if the fair market value for the underlying securities exceeds the exercise
price of the option.
EXECUTIVE COMPENSATION ARRANGEMENTS
By agreement between the Company and Sam Westover upon his appointment as
President and Chief Executive Officer of the Company, Mr. Westover received
salary at the monthly rate of $23,750 through December 31, 1993, at which time
his salary was adjusted to $212,500 annually. Beginning in 1994 he was also
entitled to receive a performance bonus in an amount equal to 75 percent of his
base salary upon the achievement of sales and profitability goals as determined
by the Board of Directors. Upon the commencement of his employment, Mr. Westover
also received an option for the purchase of 285,000 shares of Common Stock of
the Company, exercisable for a period of ten years, 33 percent of which vested
upon the date of grant, with 33 percent vesting upon each successive anniversary
of the date of grant. Under the terms of the Change of Control Severance
Agreement dated September 29, 1995 between the Company and Mr. Westover, in the
event of an Involuntary Termination of Mr. Westover's employment within three
years of a "terminating transaction", Mr. Westover will receive a payment equal
to two times his Annual Base Compensation. Annual Base Compensation is the
greater of (i) annual base salary and target bonus on the date of the
"terminating transaction" and (ii) annual base salary and target bonus on the
date of Involuntary Termination. Involuntary Termination is a termination of
employment by: (a) discharge by the Company for any reason other than for cause
or (b) resignation within six months of one of the following events: (i) a
reduction in the annual base salary or target bonus immediately prior to the
date of the "terminating transaction"; (ii) any significant reduction in the
nature or scope of duties and responsibilities from those applicable immediately
prior to the date of the "terminating transaction"; or (iii) change in the
location of the principal place of employment by more than 20 miles. The Change
of Control Severance Agreement expires July 31, 1998.
Under the terms of the Employment Agreement (the "Agreement") dated January
19, 1994 between the Company and Perry I. Cohen, Senior Vice President, Mr.
Cohen will be employed by the Company for a period of 3 years unless earlier
terminated upon material breach by Mr. Cohen. Under the terms of the Agreement,
Mr. Cohen will be paid an annual salary of $185,000 subject to performance
review increases. Mr. Cohen also received a one-time bonus of $80,000 upon his
employment by the Company and was granted an option for the purchase of 250,000
shares of Common Stock. The bonus is subject to reimbursement to the Company by
Mr. Cohen in an amount equal to 12 1/2 percent ($10,000) in the event he
terminates the Agreement on or between January 19, 1996 and January 19, 1997.
In February 1996, the Company and Mark P. Hanrahan entered into an
agreement which terminated Mr. Hanrahan's employment agreement that was entered
into in January 1994. Under the agreement, the
7
<PAGE> 10
Company will continue to pay Mr. Hanrahan his annual salary of $135,000 through
November 15, 1996. The Company is also required to make a final payment to Mr.
Hanrahan of $33,750 on November 15, 1996.
By agreement between the Company and Kenneth J. Kay, Senior Vice President,
Finance and Administration, and Chief Financial Officer, entered into upon Mr.
Kay's employment by the Company in July 1994, in the event that the Company is
acquired during Mr. Kay's employment, the Company will, upon the effective date
of such acquisition, make an additional cash payment to Mr. Kay in an amount
equal to the difference between the aggregate value (which is the difference
between the acquisition price and his exercise price) of his initial stock
option grant and $356,250. Under the terms of the Change of Control Severance
Agreement dated September 29, 1995 between the Company and Mr. Kay, in the event
of an Involuntary Termination of Mr. Kay's employment within three years of a
"terminating transaction," Mr. Kay will receive a payment equal to two times his
Annual Base Compensation, which is defined above in the description of Mr.
Westover's Change of Control Severance Agreement. The Change of Control
Severance Agreement expires July 31, 1998.
Under the terms of an Employment Agreement dated June 30, 1992 between the
Company's subsidiary, Systemed Pharmacy Inc., and Michael J. Barone, Mr.
Barone's annual salary, which was $115,485 at December 31, 1995, is subject to
annual review. Mr. Barone's employment may be terminated by Systemed Pharmacy
Inc. following 90 days prior written notice.
Pursuant to the Company's termination policy, all employees of the Company,
including officers, are eligible to receive termination benefits in the event of
any involuntary termination of their employment by the Company other than for
cause.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS*
The Compensation Committee of the Board of Directors hereby presents to the
stockholders of the Company this report concerning the compensation of the
Company's executive officers, including the executive officers named in the
Summary Compensation Table contained elsewhere herein. The Compensation
Committee is responsible for setting and administering the compensation policies
of the Company with respect to its executive officers and, on an annual basis,
determining the compensation of each executive officer.
The Company's executive compensation program is designed to align executive
compensation with the Company's performance. The goals of the executive
compensation program are: (i) to attract and retain key executives critical to
the success of the Company; (ii) to provide levels of compensation which are
competitive with those offered by the Company's competitors and by other
companies of similar size; and (iii) to motivate executives to enhance long-term
stockholder value by building appropriate ownership in the Company. The Company
retained the services of an independent executive compensation consulting firm
for the last fiscal year to assist the Committee in connection with its duties
in executive compensation matters.
The annual compensation for the executive officers, including Sam Westover,
the Company's President and Chief Executive Officer, includes base salary,
coupled with cash bonuses and stock options. Base salaries are the fixed
component of the executive officers' compensation package. Salaries are set and
adjusted based primarily upon competitive standards and length of service, and
once adjusted, fall within the median of the range of increases implemented by
other companies, of similar size, geographic location and industry, which were
surveyed for comparability.
The award of cash bonuses was made pursuant to the Company's Bonus Plan
based upon the performance of the Company and its two principal subsidiaries
during 1995 against established Bonus Plan targets for revenues and earnings.
Based upon strategic objectives, the Company made a change to weight more
heavily the revenue component in 1995 (60 percent) versus the earnings component
(40 percent) as compared to the performance targets utilized in the prior year.
A substantial portion of the compensation of executive officers is based
upon the award of stock options which rely on increases in the value of the
Company's Common Stock. The award of options is intended to encourage such
employees to establish a meaningful, long-term ownership interest in the Company
consistent
8
<PAGE> 11
with the interests of the Company's stockholders. Under the Company's stock
option plans, options are granted from time to time to certain officers and key
employees of the Company at the fair market value of the shares of Common Stock
at the time of grant. Because the compensation element of options is dependent
on increases over time in the market value of such shares, stock options
represent compensation that is tied to the Company's long-term performance. The
award of stock options to executive officers is determined based upon individual
performance, position within the Company, inducement to join and remain with the
Company, the amount of options already held, and contribution towards
enhancement of stockholder value.
The Committee has reviewed the 1995 base salaries of each of the executive
officers and is of the opinion that such salaries were reasonable in view of
those paid by the Company's competitors and by other companies of similar size.
The Committee has also reviewed the cash bonuses paid to executive officers
pursuant to the Company's Bonus Plan and has determined that such amounts and
the previously established revenue and earnings targets upon which such amounts
were awarded were reasonable. The Committee also reviewed the stock options
awarded to the executive officers for their services in 1995 and is of the
opinion that the option awards were reasonable in view of the officers'
individual performance and positions with the Company.
The Committee has also reviewed Mr. Westover's base salary for 1995 and is
of the opinion that such salary was reasonable in view of those paid to CEO's of
the Company's competitors and by other companies of similar size. Mr. Westover
received options for the purchase of 100,000 shares of the Company's Common
Stock during 1995 which the Committee believes to be appropriate in light of
compensation paid by the Company's competitors and by other companies of a
similar size. Mr. Westover received a cash bonus of $103,230 for 1995, pursuant
to the terms of the Company's Bonus Plan and the achievement of the established
performance factors discussed above. Mr. Westover was paid an annual salary of
$221,500 during 1995. The Company has not adopted any policy with respect to
limiting executive compensation to the one million dollar deductible maximum
permitted under Internal Revenue Code Section 162(m).
COMPENSATION COMMITTEE:
Ronald P. Arrington, Chairman
James F. Doherty
John E. Flood, Jr.
J. Roberts Fosberg
Craig L. McKnight
Frederick M. Myers
Jon C. Thorson, M.D.
- - ---------------
* The preceding report of the Compensation Committee shall not be deemed to be
incorporated by reference into any filing by the Company under either the
Securities Act of 1933 or the Securities Exchange Act of 1934 (the "Exchange
Act"), including without limitation, all Registration Statements on Form S-3
and Form S-8 filed by the Company which incorporate future Exchange Act
filings by reference.
9
<PAGE> 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 22, 1996 by the Company's
Directors, by the nominees, by the named executive officers, by all Directors
and executive officers as a group and by the only persons or entities known to
the Company to own beneficially more than 5 percent of the outstanding shares of
the Company's voting securities. Unless otherwise indicated, the persons named
in the table possess sole voting and investment power with respect to the shares
listed (except to the extent such authority is shared with spouses under
applicable law).
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
OWNED BENEFICIALLY
AS OF MARCH 22, 1996
--------------------------
NO. OF PERCENT
SHARES OF CLASS
--------- --------
<S> <C> <C>
Wellington Management Company............................... 1,984,000(1) 8.89%
75 State Street
Boston, Mass 02109
American Express Company.................................... 1,850,000(2) 8.29%
American Express Tower
World Financial Center
New York, NY 10285
Foxmeyer Health Corporation................................. 1,676,300(3) 7.5%
1220 Senlac Drive
Carrollton, Texas 78006
Ronald P. Arrington......................................... 109,096(4) *
James F. Doherty............................................ 18,192(5) *
John E. Flood, Jr........................................... 194,162(6) *
J. Roberts Fosberg.......................................... 773,018(7) 3.4%
Craig L. McKnight........................................... 8,333(5) *
Frederick M. Myers.......................................... 171,623(8) *
Jon C. Thorson, M.D......................................... 144,178(9) *
Sam Westover................................................ 406,250(5) 1.8%
Perry I. Cohen.............................................. 212,500(5) *
Mark P. Hanrahan............................................ 118,750(5) *
Kenneth J. Kay.............................................. 106,250(5) *
Michael J. Barone........................................... 77,863(10) *
All Directors and Executive Officers as a Group (16
Persons).................................................. 2,450,165(11) 10.6%
</TABLE>
- - ---------------
* Represents less than 1 percent of the outstanding shares.
(1) Information set forth in the table is based on Wellington's Schedule 13G
dated December 31, 1995.
(2) Information set forth in the table is based on American Express Company's
Schedule 13G dated December 31, 1995. The shares are owned by American
Express Company, American Express Financial Corporation and IDS Life
Capital Resource Fund, which filed a Schedule 13G as a group. The Company
has subsequently received a new Schedule 13G dated March 29, 1996 from
American Express Company indicating that its ownership of Common Stock has
fallen below the 5 percent level.
(3) Information set forth in the table is based on Foxmeyer Health
Corporation's Schedule 13D (formerly NII Health Care Corporation), as
amended, filed August 11, 1994.
(4) Includes 60,000 shares subject to presently exercisable options and 49,096
shares held in a family trust.
(5) Represents shares subject to presently exercisable options.
(6) Includes 110,000 shares subject to presently exercisable options and 58,585
shares held in a family trust.
(7) Consists of 430,000 shares subject to presently exercisable options and
343,018 shares held in a family trust.
10
<PAGE> 13
(8) Mr. Myers holds 2,500 shares of Convertible Preferred Stock (representing
1.5 percent of that class). The table includes 3,375 shares issuable upon
conversion of the Convertible Preferred Stock and 60,000 shares subject to
presently exercisable options. Also includes 50,556 Common Stock shares
owned by Mr. Myer's wife, as to which Mr. Myers disclaims beneficial
ownership.
(9) Includes 30,000 shares subject to presently exercisable options, and 20,613
shares of Common Stock issuable upon conversion of the Company's 10% Senior
Secured Convertible Notes.
(10) Includes 43,750 shares subject to presently exercisable options and 1,752
shares held in an IRA trust.
(11) Includes 1,461,442 shares subject to presently exercisable options, 20,613
shares of Common Stock issuable upon conversion of the Notes described
above and 3,375 shares issuable upon conversion of Convertible Preferred
Stock.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors, executive officers and persons who own more than 10 percent of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
Directors and greater than 10 percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations by Directors and
executive officers of the Company that no other reports were required, during
the fiscal year ended December 31, 1995, all Section 16(a) filing requirements
applicable to the Company's officers, Directors and greater than 10 percent
beneficial owners were complied with, except that the following persons were
late in filing their Form 3, Initial Statement of Beneficial Ownership of
Securities: Michael J. Barone, James J. Brehany, Paul H. Hayase, Craig L.
McKnight and Dennis K. Tsuyuki.
11
<PAGE> 14
STOCK PERFORMANCE GRAPH*
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock, based on its market price, with the
cumulative total return of companies on the Total Return Index for the NASDAQ
Stock Market and Value Line's Index for the Medical Supplies Industry for the
period beginning December 31, 1990 through December 31, 1995.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) NASDAQ Medical Supplies Systemed
<S> <C> <C> <C>
1990 $100 $100 $100
1991 160.56 163.34 213.04
1992 186.87 144.55 243.45
1993 214.51 128.80 156.52
1994 209.69 151.54 243.48
1995 296.30 223.53 160.87
</TABLE>
Note: Assumes $100 invested on December 31, 1990 in the Company, the Total
Return Index for the NASDAQ Stock Market and the Value Line Index for the
Medical Supplies Industry. The dollar amounts shown at each year-end are as of
the last trading day prior to the end of the Company's fiscal year. Also assumes
reinvestment of dividends.
- - ---------------
* The information set forth in the preceding graph shall not be deemed to be
incorporated by reference into any filing by the Company under either the
Securities Act of 1933 or the Securities Exchange Act of 1934 ("Exchange Act")
including without limitation, all Registration Statements on Form S-3 and Form
S-8 filed by the Company which incorporate future Exchange Act filings by
reference.
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Arthur Andersen LLP,
certified public accountants, to audit the accounts of the Company for the year
ending December 31, 1996, and to perform other accounting services for the
Company as needed. Arthur Andersen LLP was the certified public accountants for
the year ended December 31, 1995 and Ernst & Young LLP was the certified public
accountants for the year ended December 31, 1994. A representative of Arthur
Andersen LLP will be at the Annual Meeting of Stockholders to be held on May 24,
1996 and will be available to respond to appropriate questions.
On March 30, 1995, the Company with the approval of the Board of Directors,
advised Ernst & Young LLP that the Company was ending its relationship with such
accounting firm, and was retaining the accounting firm of Arthur Andersen LLP,
as auditors for the fiscal year ended December 31, 1995. The
12
<PAGE> 15
decision to retain Arthur Andersen LLP was based upon a cost/benefit analysis
performed by the Company of its overall relationship and level of services
provided and was not motivated by any disagreements between the Company and
Ernst & Young LLP concerning any accounting matters. Ernst & Young LLP was
originally retained in 1984. In connection with the audits of the Company's
financial statements for each of the two fiscal years ended December 31, 1994,
and in the subsequent interim period, there have been no disagreements with
Ernst & Young LLP relative to accounting principles or practices, financial
statement disclosure, auditing scope or procedures, which if not resolved to
Ernst & Young LLP's satisfaction, would have resulted in a reference to the
subject matters of the disagreement, in connection with its report. For the past
two fiscal years, Ernst & Young LLP's reports on the Company's financial
statements did not contain an adverse opinion or a disclaimer of opinion, nor
were the opinions qualified or modified as to uncertainty, audit scope, or
accounting principles, nor were there any events of the type requiring
disclosure under Item 304(a)(l)(v) of Regulation S-K.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholders are advised that any stockholder proposal intended for
consideration at the 1997 Annual Meeting must be received by the Company at the
address set forth on the first page of this Proxy Statement no later than
December 12, 1996 to be included in the proxy material for the 1997 Annual
Meeting. It is recommended that stockholders submitting proposals direct them to
the Secretary of the Company and utilize certified mail, return-receipt
requested in order to ensure timely delivery.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, as filed with the Securities and Exchange Commission,
is available without charge by writing to: Corporate Secretary, Systemed Inc.,
970 West 190th Street, Suite 400, Torrance, California 90502.
OTHER MATTERS
The Board of Directors knows of no matter to come before the stockholders'
meeting other than as specified herein. If other business should, however, be
properly brought before such meeting the persons voting the proxies will vote
them in accordance with their best judgment.
STOCKHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN PROMPTLY THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
Sam Westover
President and Chief Executive Officer
Torrance, California
April 19, 1996
13
<PAGE> 16
SYSTEMED INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 24, 1996
P
R The undersigned, revoking any proxy heretofore given, hereby appoints
O Sam Westover and Kenneth J. Kay or either of them, proxies of the
X undersigned, each with full power of substitution, to vote and act on
Y and consent with respect to all of the securities which the undersigned
is entitled to vote at the Annual Meeting of Stockholders of Systemed
Inc. to be held at the Torrance Marriott Hotel, 3635 Fashion Way,
Torrance, California on Friday, May 24, 1996 at 9:00 a.m. and at any
continuation or adjournment thereof, with all power the undersigned
would possess if personally present at the meeting.
THE UNDERSIGNED HEREBY DIRECTS AND AUTHORIZES SAID PROXIES, AND
EACH OF THEM, OR THEIR SUBSTITUTES, TO VOTE AS SPECIFIED BELOW WITH
RESPECT TO THE PROPOSALS NOTED IN PARAGRAPH 1 ON THE REVERSE SIDE, OR
IF NO SPECIFICATION IS MADE, TO VOTE IN FAVOR THEREOF.
The undersigned hereby further confers upon said proxies, and each of
them, or their substitutes, discretionary authority to vote in respect
to all other matters which may properly come before the meeting or any
continuation or adjournment thereof.
The undersigned acknowledges receipt of: (1) Notice of Annual Meeting
of Stockholders of the Company, (2) accompanying Proxy Statement, and
(3) Annual Report of the Company for the fiscal year ended December 31,
1995.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
-----------
CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE> 17
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
PLEASE COMPLETE, DATE, SIGN AND RETURN, THIS PROXY IN THE
ENCLOSED POST-PAID ENVELOPE.
1. Election of the following Directors:
NOMINEES: Ronald P. Arrington, James F. Doherty, John E. Flood, Jr., J. Roberts
Fosberg, Craig L. McKnight, Frederick M. Myers, Jon C. Thorson, M.D. and Sam
Westover.
FOR WITHHELD
[ ] [ ]
For except vote withheld from the following nominee(s): MARK HERE
FOR ADDRESS [ ]
- - --------------------------------------------------------------- CHANGE AND
NOTE BELOW
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE
REPRESENTED AT THE MEETING.
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES IT REPRESENTS
WILL BE VOTED AT THE MEETING IN ACCORDANCE WITH THE CHOICES SPECIFIED. IF NO
CHOICES ARE SPECIFIED, THIS PROXY WILL BE VOTED BY THE DESIGNATED PROXIES FOR
THE ELECTION OF THE DIRECTOR NOMINEES LISTED HEREIN, AND IN ACCORDANCE WITH
THEIR BEST JUDGMENT WITH RESPECT TO ANY OTHER MATTERS WHICH MAY PROPERLY COME
BEFORE THE ANNUAL MEETING. IF CUMULATIVE VOTING PROCEDURES ARE INVOKED AT THE
ANNUAL MEETING, AND THIS PROXY CARD INDICATES "FOR" OR NO CHOICE ON PROPOSAL 1,
THE DESIGNATED PROXIES ARE AUTHORIZED TO DISTRIBUTE VOTES REPRESENTED BY THIS
PROXY IN THEIR DISCRETION, SO AS TO ELECT THE MAXIMUM NUMBER OF MANAGEMENT
NOMINEES WHICH MAY BE ELECTED BY CUMULATIVE VOTING.
Please date and sign exactly as name appears
on your stock certificate. If the stock is
registered in the names of two or more persons,
each should sign. Executors, administrators,
trustees, guardians, attorneys and corporate
officers should indicate their full titles.
Signature: Date
-------------------- -------------
Signature: Date
-------------------- -------------
