<PAGE>
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
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Exchange Act Rule 14a-11 or 14a-12
SHARED MEDICAL SYSTEMS CORPORATION
(Name of Registrant as Specified In Its Charter)
SHARED MEDICAL SYSTEMS CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $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:*
(4) Proposed maximum aggregate value of transaction:
- --------
*Set forth the amount on which the filing is calculated and state how it was
determined.
[_] 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>
SHARED MEDICAL SYSTEMS CORPORATION
51 VALLEY STREAM PARKWAY
MALVERN, PENNSYLVANIA 19355
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
APRIL 29, 1994
----------------
The Annual Meeting of Stockholders of Shared Medical Systems Corporation will
be held at The Union League of Philadelphia, 140 South Broad Street,
Philadelphia, Pennsylvania on Friday, April 29, 1994, at 11:30 A.M., for the
following purposes:
1. To elect six directors for one-year terms;
2. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on March 4, 1994, as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting or any adjournments thereof.
All stockholders are cordially invited to attend the meeting in person, but
whether or not you plan to attend, please sign, date and mail the enclosed
proxy in the enclosed envelope, which requires no postage if mailed in the
United States.
James C. Kelly
Secretary
March 25, 1994
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
51 VALLEY STREAM PARKWAY
MALVERN, PENNSYLVANIA 19355
----------------
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Shared Medical
Systems Corporation. Any stockholder giving a proxy has the power to revoke it
at any time prior to its use by giving notice to the Secretary.
On March 4, 1994, the record date for stockholders entitled to notice of and
to vote at the Annual Meeting, there were 22,823,970 shares of Common Stock
outstanding (not including 4,016,344 shares held in the Company's treasury).
Each share of the Company's Common Stock, except for the shares held in the
Company's treasury, is entitled to one vote.
This Proxy Statement and the accompanying proxy are being mailed to
stockholders on or about March 25, 1994.
ANNUAL REPORT
A copy of the Shared Medical Systems Corporation Annual Report, including
financial statements for the year ended December 31, 1993, on which no action
will be asked by the Board of Directors, is enclosed herewith. It is not to be
regarded as proxy solicitation material.
SECURITY OWNERSHIP
PRINCIPAL STOCKHOLDERS
The Company does not know of any person who, as of March 4, 1994,
beneficially owned more than 5% of the Company's outstanding Common Stock.
1
<PAGE>
DIRECTORS AND MANAGEMENT
Listed below as of December 31, 1993, are the name, age, position(s) with the
Company, principal occupation(s) for the past five years, other directorships,
and beneficial Common Stock ownership of each of the individuals who were
directors of the Company as of that date; the name, age, position held and
beneficial Common Stock ownership of each of the Company's current and former
executive officers named in this Proxy Statement; and beneficial Common Stock
ownership of all current executive officers and directors as a group:
<TABLE>
<CAPTION>
DIRECTOR COMMON STOCK PERCENT OF
NAME OF BENEFICIAL OWNER SINCE BENEFICIALLY OWNED(1) CLASS
------------------------ -------- --------------------- ----------
<S> <C> <C> <C>
DIRECTORS
R. James Macaleer, 59 1969 1,017,973(2) 4.5%
Chairman of the Board and Chief Ex-
ecutive Officer of the Company.
Raymond K. Denworth, Jr., 61 1976 38,000(3) *
Attorney. Partner, Drinker Biddle &
Reath, counsel to
the Company. Director, Germantown
Savings Bank.
Frederick W. DeTurk, 65 1981 14,300(4) *
President, DeTurk Enterprises,
Inc., a management consulting
firm.
Josh S. Weston, 65 1987 5,200(5) *
Chairman and Chief Executive Offi-
cer, Automatic Data Processing,
Inc., an information processing
services company. Director, Public
Service Enterprise Group, Inc.
Harvey J. Wilson, 54 1993 87,655 *
Private investor. Director, Legent
Corporation, Philadelphia Suburban
Corporation.
Jeffrey S. Rubin, 50 1993 -- *
Executive Vice President and Chief
Financial Officer, NYNEX Corpora-
tion, a regional telecommunica-
tions company, since 1993; Senior
Vice President and Chief Financial
Officer (1992-1993); Vice Presi-
dent-Finance (1990-1992). Vice
President-Finance and Chief Finan-
cial Officer, Combustion Engineer-
ing, Inc., an engineering firm
(1987-1990). Director,
ComputerLand Corporation.
NON-DIRECTOR EXECUTIVE OFFICERS
Marvin S. Cadwell, 50 47,939(6) *
Executive Vice President
Marion G. Tomlin, 54 34,071(7) *
Senior Vice President
Francis W. Lavelle, 44 6,429(8) *
Senior Vice President
Terrence W. Kyle, 43 12,419(9) *
Vice President of Finance, Treasur-
er, Assistant Secretary
All current executive officers and
directors as a group (14 persons) 1,296,490(10) 5.7%
FORMER EXECUTIVE OFFICERS
Jack L. Ernsberger, 51 46,000(12) *
Former Vice Chairman(11)
Graham O. King, 53 35,064(14) *
Former President(13)
</TABLE>
- --------
* Less than 1%
(Footnotes continued on following page)
2
<PAGE>
(1) Except as otherwise noted, the beneficial ownership reflected in this table
is based on present, direct and sole voting and investment power with
respect to the shares. Beneficial ownership of shares held in the Company's
Retirement and Savings Plan is based on investment power. Beneficial
ownership of shares of restricted stock, which are subject to vesting, is
based on voting power.
(2) Does not include shares owned beneficially by Mr. Macaleer's wife, as to
which he disclaims beneficial ownership; includes 25,089 shares owned
jointly by Mr. Macaleer and his wife; includes 12,900 shares held in the
Company's Retirement and Savings Plan.
(3) Includes 4,000 shares which Mr. Denworth had the right to acquire within 60
days after December 31, 1993 upon exercise of stock options.
(4) Includes 14,000 shares which Mr. DeTurk had the right to acquire within 60
days after December 31, 1993 upon exercise of stock options.
(5) Includes 5,000 shares which Mr. Weston had the right to acquire within 60
days after December 31, 1993 upon exercise of stock options.
(6) Includes 17,800 shares which Mr. Cadwell had the right to acquire within 60
days after December 31, 1993 upon exercise of stock options; includes
24,117 shares owned jointly by Mr. Cadwell and his wife; includes 6,000
shares of restricted stock; includes 22 shares held in the Company's
Retirement and Savings Plan.
(7) Includes 7,800 shares which Mr. Tomlin had the right to acquire within 60
days after December 31, 1993 upon exercise of stock options; includes
15,000 shares of restricted stock; includes 840 shares held in the
Company's Retirement and Savings Plan.
(8) Includes 5,000 shares which Mr. Lavelle had the right to acquire within 60
days after December 31, 1993 upon exercise of stock options; includes 561
shares of restricted stock; includes 847 shares held in the Company's
Retirement and Savings Plan.
(9) Includes 7,497 shares which Mr. Kyle had the right to acquire within 60
days after December 31, 1993 upon exercise of stock options; includes 4,773
shares held in the Company's Retirement and Savings Plan.
(10) Includes 69,332 shares which certain executive officers and directors had
the right to acquire within 60 days after December 31, 1993 upon exercise
of stock options, 66,612 shares as to which beneficial ownership is based
on shared voting and investment power, 21,561 shares of restricted stock,
and includes 20,268 shares held in the Company's Retirement and Savings
Plan.
(11) Mr. Ernsberger resigned as Vice Chairman of the Company effective October
1, 1993.
(12) Includes 20,000 shares owned by Mr. Ernsberger's wife.
(13) Mr. King resigned as President of the Company effective November 30, 1993.
(14) Includes 29,800 shares which Mr. King had the right to acquire within 60
days after December 31, 1993 upon exercise of stock options; includes 357
shares owned by Mr. King's wife and children.
3
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors has determined that the number of directors to be
elected at the Annual Meeting to be held on April 29, 1994 shall be six. The
Board has nominated each of the individuals who are listed in this Proxy
Statement as directors of the Company for election at the 1994 Annual Meeting.
It is the intention of the persons named in the proxy to vote for such nominees
unless otherwise directed. Each of the nominees is presently serving as a
director for a term which will expire on the date of the 1994 Annual Meeting
provided his successor is then elected. All of the nominees, except for Mr.
Rubin, were elected by the stockholders at the Annual Meeting held in 1993. Mr.
Rubin was appointed to the Board on October 29, 1993. If, prior to the
election, any of the nominees should become unable to serve for any reason, the
persons named as proxies will have full discretion to vote for such other
persons as may be nominated by the Board. The Board of Directors has no reason
to believe that any nominee will be unable to serve.
NECESSARY VOTES
In the election of directors, assuming a quorum is present, the six nominees
receiving the highest number of votes cast at the meeting will be elected
directors. Shares represented by proxies which are marked to withhold authority
to vote in the election of directors and shares subject to a specific direction
not to cast a vote, such as a broker non-vote, will not be included in the vote
totals.
MEETINGS AND COMMITTEES OF BOARD
The Board of Directors held seven meetings during 1993.
The Board of Directors has established an Audit Committee and a Management
and Compensation Committee, but has not established a nominating committee.
The Audit Committee is currently composed of Messrs. DeTurk (Chairman),
Wilson and Rubin. This Committee makes recommendations to the Board of
Directors concerning the engagement, retention or discharge of independent
public accountants, reviews with the Company's independent public accountants
the plans and results of their auditing engagement, reviews their independence,
considers the range of fees for audit and non-audit functions, reviews the
scope and results of the Company's internal auditing procedures, reviews the
adequacy of the Company's system of internal accounting controls, directs and
supervises any investigations into matters within the scope of the foregoing
duties, and performs such other related functions as the Board of Directors may
from time to time delegate to the Audit Committee. During 1993 the Audit
Committee held three meetings.
The Management and Compensation Committee is currently composed of Messrs.
Denworth (Chairman), DeTurk, and Weston. This Committee makes recommendations
to the Board of Directors concerning remuneration arrangements for certain
executive officers. During 1993 the Management and Compensation Committee held
one meeting.
COMPENSATION OF DIRECTORS
Each director who is not otherwise employed by the Company is paid a monthly
retainer of $1,500, an additional fee of $1,000 for attendance at each meeting
of the Board of Directors, an additional fee of $1,000 for attendance at any
separately-scheduled meeting of any committee thereof, and an additional fee of
$500 for committee meetings scheduled in conjunction with Board meetings. The
Chairman of the Audit Committee and the Chairman of the Management and
Compensation Committee are each paid an annual fee of $2,500. Directors may be
reimbursed for any expenses attendant to membership on the Board.
4
<PAGE>
Any director who became a member of the Board after January 1, 1980, and who
is not or has never been an employee of the Company or its subsidiaries may be
eligible to receive options for Common Stock under the terms of the 1987 Non-
Qualified Stock Option Plan for Non-Employee Directors. In making a
determination as to whether a director shall be granted an option and the
number of shares covered by an option, the committee administering the Plan
(whose members are not eligible to participate in the Plan) takes into account
the duties of the director and the director's present and potential
contributions to the success of the Company. A director may receive options to
purchase no more than 10,000 shares of Common Stock under this Plan.
In addition to the above-described plan, all non-employee directors are
eligible to receive options for Common Stock under the terms of the 1991 Non-
Qualified Stock Option Plan for Non-Employee Directors. Under the terms of this
Plan, an option for 10,000 shares of Common Stock was granted on May 1, 1991,
to each non-employee director then on the Board. In addition, the terms of the
Plan provide that, effective upon the first election or appointment of a
director, such newly elected or appointed director will be granted an option
for 10,000 shares of Common Stock. The Plan also provides that an option for
10,000 shares of Common Stock will be granted to each director upon each
director's five-year anniversary of continuous service on the Board subsequent
to the effective date of the Plan.
The Company has instituted a program whereby donations are made to one or
more charitable institutions on behalf of directors. In 1993, donations
totaling $20,000 were made on behalf of Mr. Weston to charities specified by
him.
EXECUTIVE COMPENSATION
REPORT OF MANAGEMENT AND COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE ON
EXECUTIVE COMPENSATION
The Management and Compensation Committee of the Board of Directors (the
"Committee") is composed of three non-employee directors. The Committee is
responsible for setting the salaries of the Chief Executive Officer, Vice
Chairman (if any) and President (if any) of the Company, recommending to the
full Board compensation arrangements for those executive officers, and advising
the Chief Executive Officer on compensation for other key executives. All
recommendations relating to awards of stock options and restricted stock to the
Company's executive officers are reviewed by, and subject to the approval of,
the Stock Option Committee of the Board.
COMPENSATION POLICIES
The Company's executive compensation policies, endorsed by the Committee, are
designed to provide competitive levels of compensation that integrate pay with
the Company's performance goals, reward above-average corporate performance,
recognize individual initiative and achievements, and assist the Company in
attracting and retaining qualified executives. The orientation of executive
compensation policies toward Company and divisional performance has been
accomplished by the utilization of various performance criteria.
Compensation is individually set for each executive officer from among a set of
components. The primary components of compensation currently being utilized are
salary, performance bonuses, stock option grants, and restricted stock grants.
The Committee believes that stock ownership by management and stock-based
compensation arrangements are beneficial in aligning management's and
shareholders' interests in the enhancement of shareholder value. Therefore, the
Company has utilized stock-based compensation arrangements in the Company's
compensation packages for most of its executive officers.
The Company also has adopted certain broad-based employee benefit plans in
which executive officers are eligible to participate. In addition, the Company
had adopted individual life insurance and deferred compensation arrangements
for certain named executive officers as described in this proxy statement.
5
<PAGE>
The Committee has not yet deemed it necessary to consider the possible effect
on the Company's compensation policies of the treatment, under the federal
Revenue Reconciliation Act of 1993, of annual compensation exceeding $1 million
paid to any individual executive officer.
RELATIONSHIP OF COMPANY PERFORMANCE TO EXECUTIVE COMPENSATION
Compensation paid to the Company's named executive officers in 1993, as
reflected in the Summary Compensation Table, consisted primarily of base salary
and performance bonuses.
The Company utilizes measurements of both corporate and individual performance
in setting compensation for its executive officers. The amount of the
performance bonus earned by some executive officers is based on measures of
corporate performance, such as target versus actual consolidated quarterly
earnings, annual divisional sales and pre-tax income of divisions for which the
executive officer is responsible. Subjective considerations of individual
performance are also considered in establishing base salaries and, to various
extents, performance bonuses, including the executive officer's initiative and
contribution to overall corporate performance, the executive officer's
managerial performance and the executive officer's successful accomplishment of
any special projects.
Earnings growth had an important effect on compensation earned for 1993 by
several of the Company's named executive officers under their performance bonus
plans. Under these plans, if the quarterly earnings targets were not satisfied,
no performance bonus would be payable. If the quarterly targets were satisfied,
performance criteria would then determine the amount of the bonus earned. The
Committee determined that quarterly earnings for 1993 satisfied the target
levels, and bonuses paid to these executive officers were then based on target
versus actual annual divisional sales and pre-tax income for the divisions for
which they were responsible.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Macaleer is eligible to participate in executive compensation plans similar
to those available to the other named executive officers, except that Mr.
Macaleer is not eligible to receive grants of stock options and restricted
stock. The Committee's general approach in setting Mr. Macaleer's annual
compensation is to set compensation levels in accordance with the policies set
forth in this report. Specifically, the Committee's objective is to correlate
Mr. Macaleer's compensation with the performance of the Company, while seeking
to keep his compensation competitive with that provided by comparable
companies.
In 1993 the Committee sought to achieve this objective by adopting a
performance bonus plan for Mr. Macaleer in which the amount of Mr. Macaleer's
performance bonus was determined based on measures of corporate performance,
and by comparing Mr. Macaleer's compensation with the compensation paid to the
chief executive officers of the other companies included in the S&P Computer
Software and Services Index (the published industry index, which includes the
Company, against which the performance of the Company's stock is measured in
the graph on page 11 below) and two publicly-held competitors of the Company
which are not included in such index. As a result of such comparison, the
Committee determined that Mr. Macaleer's compensation was in line with that
provided by such other companies given the relative amount of the Company's
revenues and net income. Thus, when grouping the companies surveyed by the
Committee (including the Company) from largest to smallest in terms of revenue,
net income, and salary and bonus compensation paid to the CEO, based on the
latest available fiscal year-end data, the Company was in the bottom third of
the Companies surveyed in all three categories.
Mr. Macaleer's salary for 1993 was increased 4.7%. This increase was based on
the positive financial results achieved by the Company in 1992, including a
7.0% increase in revenues and a 12.2% increase in net income from 1991, as well
6
<PAGE>
as the Committee's consideration of subjective factors relating to Mr.
Macaleer's performance. Mr. Macaleer received a 6.0% salary increase for 1992
based on the Company's positive financial results for 1991, including an 8.8%
increase in revenues and an 11.6% increase in net income from 1990. Mr.
Macaleer did not receive an increase in salary in 1991.
The entire performance bonus paid to Mr. Macaleer in 1993 was based on
objective performance criteria (quarterly consolidated earnings and divisional
sales and pre-tax income). The factor given the most weight in Mr. Macaleer's
1993 performance bonus was whether or not the Company satisfied its earning
targets. The Committee determined that such targets had been satisfied.
Respectfully submitted,
Management and Compensation Committee: Stock Option Committee:
Raymond K. Denworth, Jr. R. James Macaleer
Frederick W. DeTurk Raymond K. Denworth, Jr.
Josh S. Weston Frederick W. DeTurk
Josh S. Weston
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Macaleer, the Chairman of the Board and Chief Executive Officer of the
Company, is Chairman of the Stock Option Committee. As stated above, under the
terms of the Company's stock option and restricted stock plans, Mr. Macaleer is
not eligible to receive grants of stock options or restricted stock.
Mr. Denworth, Chairman of the Management and Compensation Committee and a
member of the Stock Option Committee, is a partner in the law firm Drinker
Biddle & Reath, counsel to the Company.
Mr. DeTurk, a member of the Management and Compensation Committee and a
member of the Stock Option Committee, is the President and principal
stockholder of DeTurk Enterprises, Inc., a management consulting firm. In 1993
the Company engaged DeTurk Enterprises, Inc. to provide human resources
consulting services. The Company does not expect the total compensation to be
paid to DeTurk Enterprises, Inc. for such engagement to exceed $10,000.
COMPENSATION SUMMARIES
In order to provide the Company's stockholders with a concise and
comprehensive overview of compensation awarded, earned or paid to the Company's
executive officers named in this Proxy Statement, several tables and narrative
descriptions have been prepared, detailing this information.
The Summary Compensation Table, and its accompanying explanatory footnotes,
includes individual annual and long-term compensation information on the named
executive officers, for services rendered in all capacities during the fiscal
years ended December 31, 1993, December 31, 1992 and December 31, 1991.
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------- ---------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPEN- STOCK OPTIONS COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS SATION AWARDS(7) (# SH.) SATION(9)
- --------------------------- ---- --------- -------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
R. James Macaleer 1993 $484,908 $120,000 $-- $ -- -- $ 3,960
Chairman of the Board 1992 458,262 48,000 -- -- -- 5,685
and Chief Executive Of- 1991 435,780 -- -- -- -- 5,257
ficer
Marvin S. Cadwell 1993 $310,145(3) $ 85,000 $-- $ -- -- $ 4,077
Executive Vice President 1992 223,572 75,000 -- -- 100,000 3,075
1991 205,000 110,000(4) -- -- -- 2,578
Marion G. Tomlin 1993 $209,652 $ 60,000 $-- $ -- -- $ 3,799
Senior Vice President 1992 208,575 23,125 -- -- -- 3,186
1991 214,099 37,650(4) -- 24,379 -- 3,032
Francis W. Lavelle(1) 1993 $131,977 $104,000(5) $-- $ -- -- $ 1,880
Senior Vice President
Terrence W. Kyle 1993 $238,408 $ -- (6) $-- $ -- -- $ 2,499
Vice President of Fi- 1992 197,333 -- -- -- 15,000 2,095
nance, 1991 173,442 -- -- -- 20,000 1,865
Treasurer and Assistant
Secretary
<CAPTION>
FORMER EXECUTIVE OFFICERS
-------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack L. Ernsberger 1993 $272,911 $ -- $-- $ -- -- $94,285
Former Vice Chairman 1992 355,000 60,000 -- -- -- 2,780
1991 340,000 -- -- -- 100,000 2,670
Graham O. King 1993 $331,325 $ -- $-- $ -- -- $33,551
Former President 1992 355,412 95,000 -- -- -- 5,323
1991 331,209 15,000(4) -- -- 194,500(8) 4,445
</TABLE>
- --------
(1) In accordance with SEC rules regarding compensation disclosure, no
information is reported for those years in which an individual was not an
executive officer of the Company.
(2) Includes amounts contributed by the Company towards the purchase of the
Common Stock of the Company under the Employee Stock Purchase Plan.
(3) Includes $14,321 of imputed interest on the Company loan to Mr. Cadwell
described on page 9.
(4) Includes bonus amounts earned in 1991 which were calculated and paid in
1992 subsequent to the publication of the 1992 Proxy Statement.
(5) Represents an estimate of the total value of Mr. Lavelle's bonus for 1993,
the final amount of which has not yet been determined. A portion of such
bonus may be paid in the form of restricted stock.
(6) Mr. Kyle was not covered under a bonus plan during the reported years.
(7) The number and value of shares of restricted stock held on December 31,
1993, by the named executive officers was as follows: Mr. Macaleer, 0
shares ($0), Mr. Cadwell, 6,000 shares ($149,190), Mr. Tomlin, 15,000
shares ($372,975), Mr. Lavelle, 561 shares ($13,949), Mr. Kyle, 0 shares
($0), Mr. Ernsberger, 0 shares ($0), and Mr. King, 0 shares ($0). Dividends
on these shares are paid directly to the holders of the stock, at the same
rate as dividends paid to all other stockholders. In 1991, Mr. Tomlin was
granted 1,212 shares of restricted stock, 100% of which vested ten months
from the date of grant.
(8) Includes an option for 94,500 shares of the Common Stock of the Company
granted in connection with the surrender of outstanding options for 125,000
shares of the Common Stock of the Company, which were exercisable at a
higher exercise price.
(9) This column reflects amounts attributable to Company contributions to the
Company's Retirement and Savings Plan and income attributible to the
provision of additional life insurance for the named individuals. For the
fiscal year ended December 31, 1993, such amounts were, respectively, as
follows: Mr. Macaleer, $0 and $3,960; Mr. Cadwell, $3,029 and $1,048; Mr.
Tomlin, $2,669 and $1,130; Mr. Lavelle, $1,880 and $0; Mr. Kyle, $2,499 and
$0; Mr. Ernsberger, $3,375 and $910; and Mr. King, $1,980 and $1,988. Under
the terms of these insurance arrangements, none of the named individuals
has or will receive or be allocated an interest in any cash surrender value
under the related insurance policies. This column also includes the
following amounts paid, payable or accrued to Messrs. Ernsberger and King
in 1993 in connection with their resignations: Mr. Ernsberger, $90,000; Mr.
King, $29,583.
8
<PAGE>
The Company has entered into a deferred compensation agreement with Mr.
Macaleer. In 1977, the Company agreed to defer certain compensation for Mr.
Macaleer, which is payable over a twenty-year period after termination of
employment. In 1986, Mr. Macaleer became eligible to receive the maximum amount
of deferred benefits under this agreement. The obligations of the Company
relating to this agreement were fully accrued as of December 31, 1988; no
additional amounts were accrued in 1993.
Messrs. Ernsberger and King each had employment agreements with the Company
which governed the terms of their employment prior to their resignations in
1993. Pursuant to these agreements, Messrs. Ernsberger and King will be
eligible to receive retirement income of $4,000 and $5,000 per month,
respectively, for 20 years upon reaching ages 60 and 58, respectively. In
accordance with the terms of Mr. King's employment agreement, the term of
certain of Mr. King's exercisable stock options was extended and certain of his
unexercisable stock options became exercisable prior to his resignation. At the
time of his resignation 57,800 of Mr. King's stock options were exercisable and
have since been exercised. A total of 136,700 of Mr. King's stock options
expired unexercised as a result of his resignation.
The Company is party to employment agreements with Messrs. Cadwell and
Tomlin, each of which is terminable at any time by either party. Pursuant to
these agreements, Messrs. Cadwell and Tomlin have been granted stock options
and restricted stock under the Company's plans described below. These
agreements also provide for termination benefits under certain circumstances.
Mr. Cadwell's benefits will be paid if he is terminated without cause or upon a
reduction, without cause, in his responsibilities, compensation and/or title.
Mr. Tomlin's benefits will be paid if he is involuntarily terminated without
cause. Pursuant to the terms of his employment agreement, in 1992, Mr. Cadwell
received an interest-free, six-year term loan in the principal amount of
$300,000. This loan is secured by a mortgage on Mr. Cadwell's principal
residence.
The Company has entered into a severance arrangement with Mr. Ernsberger in
connection with his resignation as Vice Chairman of the Company on October 1,
1993. Pursuant to the arrangement, the Company has agreed to pay to Mr.
Ernsberger, on a monthly basis from October 1993 until the earlier of July 1994
or Mr. Ernsberger's subsequent employment, an amount equal to Mr. Ernsberger's
monthly salary at the time of his resignation and premium payments to continue
certain insurance benefits. Under the terms of the severance arrangement,
certain of Mr. Ernsberger's unexercisable stock options became exercisable
prior to his resignation. At the time of his resignation 51,428 of Mr.
Ernsberger's stock options were exercisable and have since been exercised. A
total of 133,573 of Mr. Ernsberger's stock options expired unexercised as a
result of his resignation. Mr. Ernsberger has released the Company from all
claims based on his employment or resignation.
The Company has entered into a severance arrangement with Mr. King in
connection with his resignation as President of the Company effective November
30, 1993. Pursuant to the arrangement, the Company has agreed to pay to Mr.
King on a monthly basis from December 1993 until the earlier of October 1994 or
Mr. King's subsequent employment, an amount equal to Mr. King's monthly salary
at the time of his resignation and premium payments to continue certain
insurance benefits. Mr. King has released the Company from all claims based on
his employment or resignation.
The Company has a Retirement and Savings Plan that is funded by the
participants' salary reduction contributions. All employees of the Company are
eligible to participate in the plan upon joining the Company. The plan is
intended to permit any eligible employee who wishes to participate to
contribute up to 15% of the employee's compensation on a before-tax basis under
Section 401(k) of the Internal Revenue Code, subject to certain limitations.
The plan provides for discretionary Company matching contributions which are to
be made in proportion to each employee's contribution as well as discretionary
Company profit-sharing contributions, subject to certain limitations.
Discretionary Company matching contributions and profit-sharing contributions
vest in accordance with a schedule based upon the employee's length of service
and are payable upon an employee's retirement, death, disability or termination
of employment or, under specified circumstances, upon an employee's immediate
and heavy financial emergency. Contributions are invested, in
9
<PAGE>
such proportions as the employee may elect, in Common Stock of the Company or
in any of five mutual investment funds. In 1993, the Company made no
discretionary profit-sharing contributions to the plan. The Summary
Compensation Table shows the value of Company matching contributions made to
the plan for the named executive officers for 1993 in the column marked "All
Other Compensation".
Under the Company's Employee Stock Purchase Plan all employees of the Company
may elect to designate up to 10% of gross compensation to be withheld by the
Company and invested in shares of the Company's Common Stock through open-
market purchases made by a bank custodian. The Company contributes 15% of the
price of the Company shares acquired and also pays brokerage fees and other
expenses of the plan. Shares purchased under the plan are distributed to
employees quarterly. During 1993, Messrs. Macaleer, Cadwell, Tomlin, Lavelle
and Kyle and, prior to their resignations, Messrs. King and Ernsberger, were
eligible to participate in the Company's Employee Stock Purchase Plan under the
same terms and conditions as all other employees of the Company. Amounts
contributed by the Company in 1993 towards the purchase of Common Stock of the
Company for the named executive officers under the Employee Stock Purchase Plan
are included in the column marked "Salary" in the Summary Compensation Table.
In addition to the director stock option plans referred to above, the Company
has the following plans under which stock options and restricted stock may be
awarded: the 1986 Non-Qualified Stock Option Plan, the 1986 Incentive Stock
Option and Non-Qualified Stock Option Plan, the 1988 Incentive Stock Option and
Non-Qualified Stock Option Plan and the 1990 Non-Qualified Stock Option and
Restricted Stock Plan. Depending upon the plan, options may not have a term
exceeding ten or twenty years. Restricted stock awards are subject to vesting
schedules.
In accordance with the provisions of these plans, all key employees,
including executive officers of the Company but with the exception of the Chief
Executive Officer, may be eligible to receive awards under these plans in the
form of options for the purchase of Common Stock of the Company or awards of
restricted stock of the Company.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following summary table details stock option exercises for the named
executive officers during 1993, including the aggregate value of gains on the
date of exercise. In addition, this table includes the number of shares covered
by both exercisable and unexercisable stock options as of December 31, 1993.
Also reported are the values for "in-the-money" options which represent the
positive spread between the exercise price of any such existing stock options
and the year-end fair market value of the Company's Common Stock.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END OPTIONS AT FY-END
------------------------- -------------------------
SHARES ACQUIRED
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Macaleer -- $ -- -- -- $ -- $ --
Mr. Cadwell -- -- 17,800 111,700 215,625 933,750
Mr. Tomlin -- -- 7,800 11,700 97,500 146,250
Mr. Lavelle -- -- -- 40,207 -- 380,380
Mr. Kyle -- -- 2,497 42,494 31,213 433,050
Mr. Ernsberger 51,428 500,887 -- -- -- --
Mr. King 28,000 251,000 29,800 -- 329,663 --
</TABLE>
10
<PAGE>
PERFORMANCE GRAPH ANALYSIS
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock, based on the market price of the Common
Stock and assuming reinvestment of dividends, with the cumulative total return
of companies in the S&P 500 Index and the S&P Industry Group Index for Computer
Software & Services.
COMPARISON OF FIVE YEAR
CUMULATIVE TOTAL RETURN(/1/)
AMONG SHARED MEDICAL SYSTEMS CORPORATION, S&P 500 INDEX AND S&P COMPUTER
SOFTWARE AND SERVICES INDEX(/2/)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
S&P
Shared Computer
Medical S&P Software
Measurement period Systems 500 & Services
(Fiscal year Covered) Corporation Index Index
- --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
12/31/88 $ 100.00 $ 100.00 $ 100.00
FYE 12/31/89 $ 81.69 $ 131.69 $ 121.89
FYE 12/31/90 $ 100.13 $ 127.60 $ 95.15
FYE 12/31/91 $ 149.99 $ 166.47 $ 145.05
FYE 12/31/92 $ 163.61 $ 179.15 $ 171.77
FYE 12/31/93 $ 188.43 $ 197.21 $ 219.23
</TABLE>
- --------
(1) Assumes $100 invested on December 31, 1988 in Shared Medical Systems
Corporation Common Stock, S&P 500 Index and the S&P Computer Software &
Services Index.
(2) Shared Medical Systems Corporation
S&P 500 Index
S&P Computer Software & Services Index
11
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
During 1993, Graham O. King, the Company's former President, failed to report
one transaction on a timely basis pursuant to Section 16(a) of the Securities
Exchange Act of 1934.
ACCOUNTANTS
The firm of Arthur Andersen & Co. served as the Company's independent public
accountants for 1993. In accordance with past Company practice, the Company has
not yet selected its independent public accountants for 1994. A representative
of Arthur Andersen & Co. is expected to be present at the Annual Meeting of
Stockholders and will be available to respond to appropriate questions. He will
also have the opportunity to make a statement if he desires to do so.
ANNUAL REPORT ON FORM 10-K
UPON THE WRITTEN REQUEST OF ANY BENEFICIAL OWNER, AS OF MARCH 4, 1994, OF THE
COMPANY'S COMMON STOCK, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS
ANNUAL REPORT ON FORM 10-K (INCLUDING FINANCIAL STATEMENTS AND SCHEDULES) FOR
THE YEAR ENDED DECEMBER 31, 1993. A LIST OF THE EXHIBITS TO SUCH ANNUAL REPORT
WILL ALSO BE PROVIDED, AND COPIES OF SUCH EXHIBITS WILL BE FURNISHED UPON
REQUEST AND PAYMENT OF A REASONABLE FEE. REQUESTS SHOULD BE DIRECTED TO
TERRENCE W. KYLE, VICE PRESIDENT OF FINANCE, SHARED MEDICAL SYSTEMS
CORPORATION, 51 VALLEY STREAM PARKWAY, MALVERN, PENNSYLVANIA 19355.
STOCKHOLDER PROPOSALS
Under Securities and Exchange Commission rules, certain stockholder proposals
may be included in the Company's proxy statement. Any shareholder desiring to
have such a proposal included in the Company's proxy statement for the annual
meeting to be held in 1995 must cause a proposal in full compliance with Rule
14a-a(8) under the Securities Exchange Act of 1934 to be received at the
Company's executive offices not later than November 25, 1994.
OTHER MATTERS
Management of the Company knows of no matters other than those discussed
herein which will be brought before the meeting by any person. If, however, any
such matter shall properly come before the meeting, the persons named in the
enclosed proxy will vote the same in accordance with their best judgment.
The cost of preparing, printing and mailing the Notice of Annual Meeting,
this Proxy Statement, the proxy, etc. will be borne by the Company. Employees
of the Company may solicit proxies by personal interview, mail, telephone,
facsimile transmission and telegraph. The Company will reimburse brokers and
other persons holding stock in their names or in the names of nominees for
their expenses in forwarding proxies and proxy materials to beneficial owners
of the shares.
By Order of the Board of Directors
James C. Kelly
Secretary
12
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
SHARED MEDICAL SYSTEMS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 29, 1994
The undersigned hereby appoints R. James Macaleer and James C. Kelly, or each
of them, as Proxies, each with full power of substitution and revocation, to
attend the Annual Meeting of Stockholders of Shared Medical Systems Corporation
on April 29, 1994 and any adjournment thereof, and thereat to vote all shares
which the undersigned would be entitled to vote if personally present upon the
matters as set forth in the Notice of Annual Meeting and Proxy Statement.
<PAGE>
Please mark
[X]your votes
as this
--------------
COMMON
Authority Authority
is is
Granted Withheld
Item 1-Election ------- --------
of Six Directors
for a Term of
One Year. ------- --------
If you wish to withhold In their discretion, the proxies are
authority to vote for one authorized to vote upon such other
or more but less than all business as may properly come before
of the six nominees named the meeting.
in the Proxy Statement
(Messrs. Macaleer,
Denworth, DeTurk, Weston, THIS PROXY WHEN PROPERLY EXECUTED WILL
Wilson and Rubin), please BE VOTED IN THE MANNER DIRECTED HEREIN
list the names of such BY THE UNDERSIGNED STOCKHOLDER. IF NO
nominees for whom DIRECTION IS MADE, THIS PROXY WILL BE
authority is withheld: VOTED FOR THE SIX NOMINEES LISTED IN
ITEM 1 (PROVIDED, HOWEVER, THAT IF,
PRIOR TO THE ELECTION, ANY SUCH NOMINEE
- ---------------------- SHALL BECOME UNABLE TO SERVE, THE
PROXIES MAY VOTE FOR SUCH OTHER PERSONS
AS MAY BE NOMINATED). THE UNDERSIGNED
HEREBY REVOKES ANY PROXY OR PROXIES
HERETOFORE GIVEN TO VOTE SUCH SHARES AT
SAID MEETING OR ANY ADJOURNMENTS
THEREOF.
Signature(s) ___________________________ 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
