SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Medic Computer 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 0-11.
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>
MEDIC COMPUTER SYSTEMS, INC.
8601 SIX FORKS ROAD
RALEIGH, NORTH CAROLINA 27615
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1997
TO THE SHAREHOLDERS OF MEDIC COMPUTER SYSTEMS, INC.
The Annual Meeting of Shareholders of Medic Computer
Systems, Inc. (the "Company") will be held at the Raleigh
Marriott Crabtree Valley, Raleigh, North Carolina, on Monday,
May 12, 1997, at 10:00 a.m., for the following purposes:
<TABLE>
<S> <C>
I. To elect a Board of five directors;
II. To ratify the appointment of Coopers & Lybrand L.L.P. as the certified public
accountants of the Company for the year ending December 31, 1997; and
III. To act upon such other matters as may properly come before the meeting or any
adjournment thereof.
</TABLE>
The foregoing items are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on
March 31, 1997 as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting or
any adjournment or adjournments thereof. All such shareholders
are cordially invited to attend the meeting in person. However,
to assure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed proxy card as promptly
as possible in the postage-prepaid envelope enclosed for that
purpose. Any shareholder attending the meeting may vote in
person, even if such shareholder returned a proxy.
The Company's Proxy Statement and proxy is submitted
herewith along with the Company's Annual Report for the year
ended December 31, 1996.
IMPORTANT -- YOUR PROXY IS ENCLOSED. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, SHAREHOLDERS ARE URGED TO EXECUTE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
Raleigh, North Carolina
April 18 , 1997
By Order of the Board of Directors
Luanne L. Roth,
Vice President, Chief Financial
Officer and Secretary
<PAGE>
MEDIC COMPUTER SYSTEMS, INC.
8601 SIX FORKS ROAD
RALEIGH, NORTH CAROLINA 27615
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 12, 1997
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited by the Board of Directors of Medic Computer
Systems, Inc., a North Carolina corporation (the "Company"). The cost of
soliciting proxies will be borne by the Company. In addition to solicitation of
proxies by mail, employees of the Company, without extra remuneration, may
solicit proxies personally or by telephone. The Company will reimburse brokerage
firms and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses for forwarding proxy materials to beneficial owners and
seeking instruction with respect thereto. The mailing address of the principal
executive offices of the Company is 8601 Six Forks Road, Raleigh, North Carolina
27615. Copies of this Proxy Statement and accompanying proxy card were mailed to
shareholders on or about April 18, 1997.
REVOCABILITY OF PROXIES
Any shareholder giving a proxy has the power to revoke it at any time
before it is voted by giving written notice to the Company (Attention: Luanne L.
Roth, Secretary). If the maker of a proxy attends the Annual Meeting of
Shareholders and elects to vote in person, any previously executed proxy is
thereby revoked.
VOTING AND SOLICITATION
When the enclosed proxy is properly executed and returned, the shares it
represents will be voted in accordance with the directions indicated thereon, or
if no direction is indicated thereon (and the proxy is not subsequently properly
revoked), it will be voted (i) FOR the election of the five nominees for
director identified below, (ii) FOR ratification of the appointment of Coopers &
Lybrand L.L.P. as certified public accountants of the Company for the year
ending December 31, 1997, and (iii) in the discretion of the proxies named
therein on any other matters as may properly come before the meeting.
Shareholders will be entitled to one vote for each share of Common Stock held on
the record date.
Only the holders of Common Stock of record at the close of business on
March 31, 1997 are entitled to notice of and to vote at the meeting. On that
date, 25,723,004 shares of Common Stock were outstanding. The affirmative vote
of a plurality of the shares entitled to vote at the Annual Meeting is required
to elect the directors and a majority of the shares present or represented and
entitled to vote at the Annual Meeting is required for ratification of the
appointment of Coopers & Lybrand.
While there is no definitive statutory or case law authority in North
Carolina as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining whether a quorum is
present and determining the number of shares present or represented and entitled
to vote. In the absence of controlling precedent to the contrary, the Company
intends to treat abstentions in this manner. Although there is no applicable
North Carolina statutory or case law authority, in a 1988 case, BERLIN V.
EMERALD PARTNERS, the Delaware Supreme Court held that broker nonvotes may be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business, but not counted for purposes of determining the number
of shares present or represented and entitled to vote. Accordingly, the Company
intends to treat broker nonvotes in this manner.
<PAGE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
NOMINEES
The Company's Bylaws provide that the number of directors constituting the
Board of Directors shall be no less than three and no more than nine. The number
of director seats currently authorized is five. Five directors are to be elected
to serve for one year, until the election and qualification of their successors,
and it is intended that proxies not limited to the contrary will be voted FOR
the nominees named below. If any nominee is unable or declines to serve as a
director at the time of the Annual Meeting of Shareholders, the individuals
named in the enclosed proxy may exercise their discretion to vote for any
substitute proposed by the Board of Directors. It is not anticipated that any
nominee listed below will be unable or will decline to serve as a director. None
of the nominees is related by blood, marriage or adoption to any other nominee
or any executive officer of the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE SINCE
<S> <C> <C>
John P. McConnell 46 1982
Alan W. Winchester 41 1996
John L. Corse 55 1992
Thomas C. Nelson 34 1990
Patrick V. Hampson 42 1993
</TABLE>
JOHN P McCONNELL co-founded the Company in June 1982 and has served as
President and Chief Executive Officer and as a director of the Company since
that time.
ALAN W. WINCHESTER co-founded the Company in June 1982 and has served as
President-Clinical Products Division since April 1996, as Vice
President-Customer Services since February 1993, as Vice President-Sales from
June 1982 to October 1989 and as a director since March 1996. Mr. Winchester
pursued a Master of Divinity degree from Southeastern Theological Seminary from
January 1990 to December 1992 and re-joined the Company in November 1992.
JOHN L. CORSE has served as a director of the Company since August 1992.
Since February 1995, he has served as President of Hughes Advanced Systems, a
subsidiary of Hughes Aircraft Company and a provider of information systems and
services to businesses. From 1993 to 1995, Mr. Corse was a self-employed
business consultant. From 1992 to 1993, he served as President and Chief
Executive Officer of Security Software America, Inc., a software publisher
serving government contractors and government agencies. Mr. Corse is also a
director of Computer Learning Centers, Inc.
THOMAS C. NELSON has served as a director of the Company since December
1993 and previously from November 1990 to September 1992. Mr. Nelson has been a
general partner of Wakefield Group, L.P., a venture capital partnership based in
Charlotte, North Carolina, since September 1988 and Vice Chairman and Executive
Vice President of National Gypsum Company since February and May 1996,
respectively. From September 1992 until September 1993, Mr. Nelson served as a
White House Fellow in the Department of Defense.
PATRICK V. HAMPSON has served as a director of the Company since February
1993. Mr. Hampson is President and CEO of MED3000 Group, Inc. and President of
Strategic HealthCare Advisors, Inc. in Pittsburgh, Pennsylvania. MED3000 Group,
Inc. and Strategic HealthCare Advisors provide consulting and integration
services to the healthcare community.
VOTE REQUIRED
The five nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them shall be elected
as directors of the Company.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The business of the Company is under the general management of the Board of
Directors as provided by the laws of North Carolina and the Bylaws of the
Company. During the year ended December 31, 1996, the Board of Directors held
four formal meetings, excluding actions that were taken by unanimous written
consent during the year. Each member of the Board attended at least 75 percent
of the 1996 meetings of the Board of Directors and Board committees of which he
was a member.
The Board of Directors has established an Audit Committee, a Compensation
Committee and a Stock Plan Committee. The Audit Committee consists of Messrs.
Corse, Nelson and Hampson. The Audit Committee held two meetings during 1996.
The functions of the Audit Committee are to recommend the engagement of the
Company's independent auditors and to review with them the plan and scope of
their audit for each year, the results of the audit and the auditors' letter
regarding
2
<PAGE>
their observations and recommendations to the Company, if any. The Committee
reports to the entire Board with respect to audit-related matters. The
Compensation Committee consists of Messrs. Corse, Hampson and Nelson. The Stock
Plan Committee consists of Mr. McConnell and Mr. Nelson. The Compensation
Committee's functions are to review the remuneration of the Company's officers
and make adjustments with respect thereto, to administer other aspects of the
Company's compensation programs, and to make recommendations to the full Board
regarding compensation for Board services. The Stock Plan Committee's functions
are to administer the Company's Amended and Restated Stock Plan (the "Stock
Plan") and to make recommendations to the full Board regarding the
administration of the Stock Plan. During 1996, the Compensation Committee held
one meeting.
All directors are reimbursed for expenses incurred in connection with each
Board and committee meeting attended, and historically nonemployee directors
were paid $750 for each Board meeting attended in person. In January 1996, this
per meeting payment was eliminated and each nonemployee director of the Company
was granted an option to purchase 4,000 shares of Common Stock at an exercise
price of $30.00 per share (the fair market value on the date of grant) vesting
ratably over three years based on continued service as a director. No other
compensation was paid by the Company to directors for such services.
PROPOSAL NO. 2 -- RATIFICATION OF SELECTION OF CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of the Company has appointed the firm Coopers &
Lybrand L.L.P. ("Coopers") to serve as the certified public accountants of the
Company for the year ending December 31, 1997, and recommends that the
shareholders ratify such action. If the appointment of Coopers is not ratified
by the shareholders, the Board of Directors will reconsider its selection.
Coopers has audited the accounts of the Company since 1990 and has advised the
Company that it does not have, and has not had, any direct or indirect financial
interest in the Company or its subsidiaries in any capacity other than that of
serving as independent accountants. Representatives of Coopers are expected to
attend the Annual Meeting of Shareholders. They will have an opportunity to make
a statement, if they desire to do so, and will also be available to respond to
appropriate questions.
The affirmative vote of a majority of the shares present or represented and
entitled to vote shall constitute ratification of the appointment of Coopers.
The Board of Directors unanimously recommends a vote "FOR" the ratification
of the appointment of Coopers as certified public accountants for 1997.
3
<PAGE>
OTHER INFORMATION
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the ownership
of shares of the Company's Common Stock as of March 31, 1997 (except as
otherwise noted in the footnotes) by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
director of the Company, (iii) each of the current Named Executive Officers, as
listed in the Summary Compensation Table below, and (iv) all directors and
executive officers of the Company as a group. Except as indicated in footnotes
to this table, the persons named in this table have sole voting and investment
power with respect to all shares of Common Stock indicated.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENTAGE
NAME OWNED OWNED (1)
<S> <C> <C>
Putnam Investments, Inc. (2) 3,304,456 12.8%
One Post Office Square
Boston, Massachusetts 02109
Pilgrim Baxter & Associates, Ltd. (3) 2,474,600 9.6%
11255 Drummers Lane, Suite 300
Wayne, Pennsylvania 19087-1590
T. Rowe Price Associates, Inc. (4) 1,887,400 7.3%
100 East Pratt Street
Baltimore, Maryland 21202
John P. McConnell (5) 1,745,911 6.8%
8601 Six Forks Road
Raleigh, North Carolina 27615
Nicholas-Applegate Capital Mgmt (6) 1,096,538 4.3%
600 West Broadway, 29th Floor
San Diego, California 92101
Kenneth B. Howard (7) 627,210 2.4%
Thomas C. Nelson (8) 566,263 2.2%
Michael J. Custode 220,790 *
Alan W. Winchester (9) 73,500 *
G. Michael Anthony (10) 10,470 *
Patrick V. Hampson (11) 8,374 *
John L. Corse (12) 7,333 *
All current executive officers and 3,408,465 13.2%
directors as a group (10 persons) (13)
</TABLE>
* Less than one percent.
(1) As of March 31,1997 the Company had 25,723,004 shares of Common Stock
outstanding. Share ownership in each case includes shares issuable upon
exercise of outstanding options or warrants that may be exercised within 60
days after March 31, 1997 for purposes of computing the percentage of
Common Stock owned by such person but not for purposes of computing the
percentage owned by any other person.
(2) As reported in the Schedule 13G dated January 27, 1997 filed with the
Securities and Exchange Commission ("SEC") by Putman Investments, Inc.
("Putman"), Putman has shared voting power over 111,000 shares and shared
dispositive power over 3,304,456 shares.
(3) As reported in the Schedule 13G dated February 14, 1997 filed with the SEC
by Pilgrim Baxter & Associates, Ltd. ("PBA"), PBA has shared voting and
sole dispositive power over such shares.
(4) As reported in the Schedule 13G dated February 14, 1997 filed with the SEC
by T. Rowe Price, Inc. ("TRP"). TRP has sole voting power over 113,600
shares and sole dispositive power over 1,887,400 shares.
(5) Includes 40,000 shares owned by the Company's Profit Sharing Plan and
Trust, of which Mr. McConnell is a trustee and therefore deemed a
beneficial owner of such shares. Also includes 4,800 shares owned by
certain of Mr. McConnell's family members.
(6) As reported in the Schedule 13G dated February 7, 1997 filed with the SEC
by Nicholas-Applegate Capital Management ("NACM"), NACM has sole voting
power over 850,835 shares, shared voting power over 2,100 shares, and sole
dispositive power over 1,096,538 shares.
(FOOTNOTES CONTINUED ON NEXT PAGE)
4
<PAGE>
(7) Includes 83,206 shares owned by Mr. Howard's spouse.
(8) Includes 564,930 shares owned by Wakefield Group, L.P. Mr. Nelson is a
general partner of Wakefield Group, L.P. and has shared voting and
investment power with respect to the shares owned by Wakefield Group, L.P.
Also includes 1,333 non-qualified stock options exercisable until January
2, 2006.
(9) Includes 15,000 shares transferable to Mr. Winchester pursuant to an
assignment of option shares originally transferable to Mr. McConnell
pursuant to an option granted to Mr. McConnell by Springdale Venture
Partners, L.P. and Wakefield Group, L.P., that is exercisable until August
11, 2002. Includes 2,607 incentive stock options and 17,393 non-qualified
stock options exercisable until January 2, 2006.
(10) Includes 720 shares owned by Mr. Anthony's spouse.
(11) Shares held by Mr. Hampson are jointly held by Mr. Hampson and his spouse
as joint tenants with the right of survivorship. Includes eight shares
owned by a family member of Mr. Hampson. Also includes 1,333 non-qualified
stock options exercisable until January 2, 2006.
(12) Includes 1,333 non-qualified stock options exercisable until January 2,
2006.
(13) See footnotes 5 and 7-12. Also includes 117,214 shares owned directly by
and 31,400 shares owned directly by family members of executive officers
not named in the table.
COMPENSATION OF EXECUTIVE OFFICERS
The following table reflects all cash and noncash compensation paid by the
Company to the Named Executive Officers for their services in all capacities
during the years ended December 31, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
NAME AND PRINCIPAL ANNUAL COMPENSATION COMPENSATION ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS COMPENSATION (1)
<S> <C> <C> <C> <C> <C>
John P. McConnell, 1996 $300,000 $252,817 $ 26,235(2)(4)(5)
President and Chief 1995 285,000 252,000 -- 27,889(3)(5)(6)
Executive Officer 1994 263,618 175,000 -- 31,853(4)(5)(6)
Alan W. Winchester, 1996 167,595 70,000 60,000 19,390(2)(5)
President, Clinical 1995 137,800 64,000 -- 18,409(3)(5)
Products Division 1994 130,000 55,000 -- 17,312(5)(6)
Kenneth B. Howard, 1996 176,610 71,000 -- 18,944(2)(5)
Vice President, Sales and 1995 167,400 64,000 -- 19,251(2)(5)
Marketing 1994 160,400 60,000 -- 20,683(5)(6)
Michael J. Custode, 1996 218,711 -- -- 13,325(2)
Vice President, 1995 212,240 -- -- 13,601(3)
Product Strategies 1994 204,500 -- -- 17,130(6)
G. Michael Anthony, 1996 128,475 55,000 -- 19,393(2)(5)
Vice President, 1995 122,354 50,000 -- 19,241(3)(5)
Engineering 1994 115,973 45,000 -- 19,071(5)(6)
</TABLE>
(1) Consists of contributions by the Company for the benefit of the Named
Executive Officers to the Medic Computer Systems, Inc. Profit Sharing Plan
(the "Profit Sharing Plan"), Pension Plan (the "Pension Plan") and Employee
Retirement Savings Plan (the "401(k) Plan"). Company contributions under the
Profit Sharing Plan generally vest (become nonforfeitable) at the rate of
20% per year after completion of two years of service until they are fully
vested after six years of service. Company contributions under the Pension
Plan generally vest at the rate of 20% per year after completion of three
years of service until they are fully vested after seven years of service.
Company contributions under the 401(k) Plan generally vest in full after
three years of service. Company contributions under each of such plans are
normally distributed upon termination of employment with the Company or, in
the case of the Profit Sharing Plan, after the participant reaches the age
of 65, if earlier than termination of employment.
(2) In 1996 the Company made the following respective contributions to the
Profit Sharing Plan, the Pension Plan and the 401(k) Plan for the benefit
of: Mr. McConnell $5,019,$8,306 and $250; Mr. Winchester $5,019, $8,744 and
$227; Mr. Howard $5,019, $8,306 and $219; Mr. Custode $5,019, $8,306 and $0;
and Mr. Anthony $5,019, $6,799 and $375.
5
<PAGE>
(3) In 1995, the Company made the following respective contributions to the
Profit Sharing Plan, the Pension Plan and the 401(k) Plan for the benefit
of: Mr. McConnell, $5,242, $8,359 and $250; Mr. Winchester, $5,242, $7,504
and $263; Mr. Howard, $5,242, $8,359 and $250; Mr. Custode, $5,242, $8,359
and $0; and Mr. Anthony, $5,242, $6,424 and $375.
(4) The Company paid life insurance premiums for the benefit of John P.
McConnell in the amount of $5,460, $6,838 and $5,254 in 1996, 1995 and 1994,
respectively.
(5) In each of 1996, 1995 and 1994, the Company paid automobile allowances of
$7,200 to Mr. McConnell, $5,400 to Mr. Winchester, $5,400 to Mr. Howard, and
$7,200 to Mr. Anthony.
(6) In 1994, the Company made the following respective contributions to the
Profit Sharing Plan, the Pension Plan and the 401(k) Plan for the benefit
of: Mr. McConnell, $8,254, $10,832 and $313; Mr. Winchester, $4,652, $6,979
and $281; Mr. Howard, $6,653, $8,380 and $250; Mr. Custode, $7,000, $10,130
and $0; and Mr. Anthony, $5,498, $5,998 and $375.
OPTIONS, GRANTS, EXERCISES AND HOLDINGS AND YEAR-END OPTION VALUES
The following table summarizes all option grants during the year ended
December 31, 1996 to the Named Executive Officers:
OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
%
OF
TOTAL EXERCISE
NUMBER OPTIONS OR
OF GRANTED BASE POTENTIAL REALIZABLE
SHARES TO PRICE VALUE AT ASSUMED
UNDERLYING EMPLOYEES PER ANNUAL RATES OF STOCK
OPTIONS IN SHARE EXPIRATION PRICE APPRECIATION OF
NAME GRANTED 1996 (1) DATE OPTION TERM (2)
<S> <C> <C> <C> <C> <C> <C>
5% 10%
Alan W. Winchester 60,000(3) 34.7% $30.00 1/2/2006 $1,132,200 $2,868,600
</TABLE>
(1) The exercise price may be paid in cash or a check to the order of the
Company, or by any other means determined by the Board of Directors.
(2) The compounding assumes a 10-year exercise period for all option grants.
These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock and overall stock market conditions. The
amounts reflected in this table may not be necessarily be achieved.
(3) These options were granted in January 1996 and are exercisable one third
December 1996 and two thirds December 1997.
The following table sets forth information concerning each exercise of
stock options during 1996 by each of the Named Executive Officers and the
year-end value of unexercised options:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
NUMBER
OF
UNEXERCISED VALUE OF
OPTIONS/SARS UNEXERCISED IN-
AT THE-MONEY
SHARES FY-END OPTIONS/SARS AT
ACQUIRED EXERCISABLE/ FY-END (1)
ON VALUE UNEXERCISABLE EXERCISABLE/
NAME EXERCISE REALIZED (2) UNEXERCISABLE (2)
<S> <C> <C> <C> <C>
Alan W. Winchester........................................ 37,140 $1,310,468 35,000/40,000 $810,805/$412,520
Michael J. Custode........................................ 20,000 $637,500 -- --
</TABLE>
(1) Market value of underlying securities at fiscal year end, minus the exercise
price.
(2) The first number represents the number or value (as called for by the
appropriate column) of exercisable options; the second number represents the
number or value (as appropriate) of unexercisable options.
6
<PAGE>
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
establishing compensation levels for management. The policy of the Compensation
Committee is to establish compensation for executive officers utilizing two
components, a base salary and a performance-based bonus. In addition, the Stock
Plan Committee periodically makes grants, or recommendations to the Board of
Directors regarding grants, of options to purchase Common Stock, based on the
same factors utilized in awarding bonuses. Base salary for 1996 for the
Company's President was determined partially upon an evaluation by the
Compensation Committee of the Company's performance during 1995, including the
successful completion of several acquisitions. The levels of base compensation
established for executive officers reflected the President's evaluation of each
individual's performance during 1995, the expectation of the Board with respect
to individual duties in 1996, and the average percentage increase in base
salaries for non-executive officers of the Company during 1995. Base salaries of
executive officers for 1996 represented an increase of approximately 6.9% over
1995 base salaries.
In 1996, the Board of Directors approved payments under a bonus plan for
key management personnel. The participants in, the amounts to be awarded under,
and the performance criteria to be met pursuant to, the bonus plan (except as
relating to the President) were established by the President, and cash bonuses
to the participants were awarded by the Board upon satisfaction of the
performance criteria. Bonuses were based on the performance of the Company as
reflected by the level of the Company's revenue, income from operations, net
income and earnings per share ("EPS") as compared to 1995. Bonuses were also
established in part as an incentive to future performance. Mr. McConnell's
target bonus is calculated at 70% of his base salary and was based on the
Company achieving a target EPS. Additional bonus was paid out to Mr. McConnell
according to a mathematical formula used when the Company exceeds its target
EPS, although Mr. McConnell declined his full bonus payable under this
calculation. In 1996, bonuses under the plan totaled approximately $894,000. For
1996, Messrs. McConnell, Winchester, Howard, and Anthony were paid $252,817,
$70,000, $71,000 and $55,000, respectively, under the bonus plan. It is
anticipated that similar types of management bonus plans will be implemented for
years subsequent to 1996.
The Company's compensation policy has been generally to exclude the Named
Executive Officers from annual option grants under the Stock Plan. The reasons
for this policy are (i) the Named Executive Officers each own enough of the
Company's equity securities that their interests are closely tied to the
interests of shareholders in general, and (ii) the Company provides
performance/incentive based compensation to such individuals through the
management bonus plan in lieu of granting stock options. Notwithstanding the
foregoing, the Company could change this policy at any time, although there are
no current plans to do so.
For compensation paid to the President and other named executive officers
in 1996, no reference was made to the data for comparable companies included in
the performance graph attached to this report and included with the Company's
proxy materials for its Annual Meeting of Shareholders to be held on May 12,
1997. The Board believes that not all of the companies included in the
performance graph are necessarily comparable for the purpose of determining
compensation for the Company's executives.
JOHN L. CORSE
PATRICK V. HAMPSON
JOHN P. MCCONNELL
THOMAS C. NELSON
ALAN W. WINCHESTER
COMPENSATION COMMITTEE AND STOCK PLAN COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The members of the Compensation Committee are Messrs. Corse, Hampson and
Nelson. The members of the Stock Plan Committee are Mr. McConnell and Mr.
Nelson. Mr. McConnell was the President of the Company during 1996. In addition,
Mr. McConnell also participated in discussions of the Board of Directors
concerning executive officer compensation during 1996 with the exception that he
was not present for discussions relating to his compensation. Other than Mr.
McConnell, no officers, former officers or employees of the Company participated
in such discussions. In addition, Mr. McConnell serves on the Board of Directors
of MED3000 Group, Inc. of which Mr. Hampson is President and CEO.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Messrs. McConnell, Anthony,
Custode and Howard. Pursuant to those agreements, Mr. McConnell serves as the
Company's President, Mr. Anthony as the Company's Vice President, Engineering,
Mr. Custode as the Company's Vice President, Product Strategies and Mr. Howard
as the Company's Vice President, Sales and Marketing. All of the employment
agreements contain noncompetition and confidentiality provisions binding the
7
<PAGE>
employees. Each of the agreements with Messrs. McConnell, Anthony and Howard is
for an indefinite term but terminates upon (i) death or disability of the
employee, (ii) termination of the employee by the Company with or without cause,
or (iii) 30 days' advance notice by the employee. The agreement with Mr. Custode
is for a term of four years, expiring in June 1997, subject to termination
without further Company obligation in the event of resignation by, or
termination for cause of, the employee. Under this agreement, the Company must
pay the employee his salary and benefits for one month after his death or
disability, and for the remainder of the agreement term in the event of any
other termination.
PERFORMANCE GRAPH(1)
COMPARISON OF FIFTY-TWO MONTH(2) CUMULATIVE
TOTAL RETURN(3) AMONG
MEDIC COMPUTER SYSTEMS, INC.,
CRSP(4) TOTAL RETURN INDEX FOR THE NASDAQ STOCK MARKET AND
CRSP NASDAQ COMPUTER & DATA PROCESSING SERVICES STOCKS INDEX
(Performance Graph appears here. Plot points are listed in the table
below.)
<TABLE>
<CAPTION>
August 31 December 31 June 30 December 31 June 30 December30 June 30 December 29 June 28 December 31
1992 1992 1993 1993 1994 1994 1995 1995 1996 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medic 100 161.19 110.45 167.16 173.13 370.15 459.70 722.39 968.67 962.70
Nasdaq Stock Market 100 120.66 125.29 138.51 126.49 135.40 168.83 191.47 216.78 235.53
Nasdaq Computer &
Data Processing 100 120.95 126.82 128.01 127.00 155.40 207.34 236.67 275.42 292.27
</TABLE>
(1) Assumes $100 invested on August 31, 1992 in each of the Company's Common
Stock, the CRSP Total Return Index for the NASDAQ Stock Market and CRSP
NASDAQ Computer & Data Processing Services Stocks Index.
(2) Indicates comparison of total return for all of 1993 to 1996 and for that
period of 1992 (August 4- December 31) during which the Company's Common
Stock was registered under Section 12 of the Exchange Act, except that
August 31, 1992 was used as the reference date for the beginning of the
measurement period in order to have a comparable beginning reference date
for the comparison indices.
(3) Total return assumes reinvestment of dividends. "CRSP" is the Center for
Research in Securities Prices at the University of Chicago.
8
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of a registered class of the Company's equity
securities (collectively, "Insiders"), to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Insiders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely upon review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1996 all Section 16(a)
filing requirements applicable to its officers, directors and greater-than-ten-
percent shareholders were complied with, except for the following late reports:
(i) one transaction consisting of an option granted pursuant to the Company's
Stock Plan was reported late by Mr. Patrick V. Hampson , (ii) one transaction of
an option granted pursuant to the Company's Stock Plan was reported late by Mr.
Alan W. Winchester, and (iii) one transaction of an option granted pursuant to
the Company's Stock Plan was reported late by Mr. Thomas K. Skelton, Jr.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Shareholders having proposals that they desire to present at next year's
annual meeting of shareholders should, if they desire that such proposals be
included in the Board of Directors' proxy and Proxy Statement relating to such
meeting, submit such proposals in time to be received by the Company at its
principal executive office in Raleigh, North Carolina, not later than December
19, 1997. To be so included, all such submissions must comply with the
requirements of Rule 14a-8 promulgated under the Exchange Act and the Board of
Directors directs the close attention of interested shareholders to that Rule.
Proposals may be mailed to Secretary, Medic Computer Systems, Inc., 8601 Six
Forks Road, Raleigh, North Carolina 27615.
OTHER MATTERS
The shares represented by each properly executed proxy received by the
Company will be voted in accordance with the instructions, if any, given
therein. The Board of Directors knows of no other business to be brought before
the meeting, but it is intended that, as to any such other business, the shares
will be voted pursuant to the proxy in accordance with the best judgment of the
person or persons acting thereunder.
Raleigh, North Carolina
April 18, 1997
By Order of the Board of Directors
Luanne L. Roth
Vice President, Chief Financial Officer
and Secretary
9
<PAGE>
*******************************************************************************
APPENDIX
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
MEDIC COMPUTER SYSTEMS, INC.
8601 Six Forks Road
Raleigh, North Carolina 27615
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
May 12, 1997
The undersigned hereby appoints John P. McConnell and Luanne L. Roth, and
each of them, as proxies, each with full power of substitution, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
Common Stock of Medic Computer Systems, Inc. held of record by the undersigned
on March 31, 1997 at the Annual Meeting of Shareholders to be held at the
Raleigh Marriott Crabtree Valley, Raleigh, North Carolina on May 12, 1997, or at
any adjournment thereof. The following proposals to be brought before the
meeting are more specifically described in the accompanying Proxy Statement.
<TABLE>
<S> <C>
(1) ELECTION OF DIRECTORS:
FOR ALL NOMINEES LISTED BELOW WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED BELOW
(except as marked to the contrary below) [ ] [ ]
</TABLE>
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
John L. Corse Patrick V. Hampson John P. McConnell Thomas C. Nelson Alan
W. Winchester
(2) To ratify the selection of Coopers & Lybrand L.L.P., independent public
accountants, as auditors of the Company for the fiscal year 1997.
VOTE FOR [ ] VOTE AGAINST [ ] ABSTAIN [ ]
(3) In their discretion, to vote upon such other matters as may properly
come before the meeting.
GRANT AUTHORITY [ ] WITHHOLD AUTHORITY [ ]
(over)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE THIS PROXY WILL BE VOTED FOR
MANAGEMENT'S SLATE OF NOMINEES FOR DIRECTOR, FOR PROPOSAL 2, AND IN THE
DISCRETION OF THE PROXIES NAMED HEREIN ON ANY OTHER MATTER AS MAY PROPERLY COME
BEFORE THE MEETING.
Signature
Signature, if held jointly
Please date and sign exactly as
name appears on your stock
certificate. Joint owners should
each sign personally. Trustees,
custodians, executors and others
signing in a representative
capacity should indicate the
capacity in which they sign.
Date: , 1997
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING. IF YOU ATTEND THE
MEETING, YOU CAN VOTE EITHER IN PERSON OR BY YOUR PROXY.
