<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 [_] 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
SHARED MEDICAL SYSTEMS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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), 14a-6(i)(1), 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
51 VALLEY STREAM PARKWAY
MALVERN, PENNSYLVANIA 19355
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
APRIL 25, 1996
----------------
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 Thursday, April 25, 1996, 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 February 29, 1996,
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 22, 1996
<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 February 29, 1996, the record date for stockholders entitled to notice of
and to vote at the Annual Meeting, there were 23,381,457 shares of Common
Stock outstanding (not including 4,024,927 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 22, 1996.
ANNUAL REPORT
A copy of the Shared Medical Systems Corporation Annual Report, including
financial statements for the year ended December 31, 1995, 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 following table sets forth, as of December 31, 1995, information
regarding the voting securities of the Company owned "beneficially," within
the meaning of the rules of the Securities and Exchange Commission, by persons
known by the Company to own beneficially more than 5% of the indicated class:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -------------- ------------------------ ----------------------- ----------------
<S> <C> <C> <C>
Common Stock Husic Capital Management 1,414,700(1) 6.1%
555 California Street
Suite 2900
San Francisco, CA 94104
Common Stock McCullough, Andrews & 1,242,850(2) 5.3%
Cappiello, Inc.
101 California Street
Suite 4250
San Francisco, CA 94111
</TABLE>
- --------
(1) As reflected in the Schedule 13G Amendment No.2 dated February 12, 1996,
and filed with the Securities and Exchange Commission jointly by Husic
Capital Management, Frank J. Husic & Co., its sole general partner, and
Frank J. Husic, the sole shareholder of the general partner. According to
the amended Schedule 13G, Husic Capital Management, a registered
investment adviser, shares the power to vote 1,075,000 of the shares
indicated with the general partner and its sole shareholder and shares
dispositive power over all 1,414,700 shares with such persons.
1
<PAGE>
(2) As reflected in the Schedule 13G Amendment No.1 dated February 14, 1996,
and filed with the Securities and Exchange Commission jointly by
McCullough, Andrews and Cappiello, Inc. and its shareholders, Robert F.
McCullough, David H. Andrews and Frank A. Cappiello, Jr. According to the
Schedule 13G, McCullough, Andrews and Cappiello, Inc., a registered
investment adviser, and its shareholders, have shared voting and
dispositive power over the shares indicated.
DIRECTORS AND MANAGEMENT
The following table sets forth, as of December 31, 1995, the name, age,
position(s) with the Company, principal occupation(s) for the past five years,
other directorships, and beneficial Common Stock ownership of the directors of
the Company; the name, age, position held and beneficial Common Stock
ownership of each of the Company's executive officers named in this Proxy
Statement; and the beneficial Common Stock ownership of all of the Company's
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, 61 1969 982,327(2) 4.2%
Chairman of the Board of the Compa-
ny; Chairman of the Board and
Chief Executive Officer (1969-
1995).
Raymond K. Denworth, Jr., 63 1976 40,000(3) *
Attorney, Partner, Drinker Biddle &
Reath, counsel to the Company.
Frederick W. DeTurk, 67 1981 18,300(4) *
President, DeTurk Enterprises,
Inc., a management consulting
firm.
Josh S. Weston, 67 1987 9,200(5) *
Chairman of the Board and Chief Ex-
ecutive Officer, Automatic Data
Processing, Inc., an information
processing services company. Di-
rector, Public Service Enterprise
Group, Inc., Olsten Corp.
Jeffrey S. Rubin, 52 1993 4,000(6) *
Vice Chairman, Vanstar Corporation,
a technology services company,
since 1995; Senior Vice President,
GTE Corporation, a telecommunica-
tions company (1994-1995); Execu-
tive Vice President and Chief Fi-
nancial Officer, NYNEX Corpora-
tion, a regional telecommunica-
tions company, (1993-1994); Senior
Vice President and Chief Financial
Officer (1992-1993); Vice Presi-
dent-Finance (1990-1992). Direc-
tor, Vanstar Corporation.
Marvin S. Cadwell, 52 1995 61,922(7) *
President and Chief Executive Offi-
cer of the Company since 1995;
Chief Operating Officer (1995);
Executive Vice President (1993-
1995); Senior Vice President
(1992-1993); Vice President (1986-
1992).
NON-DIRECTOR EXECUTIVE OFFICERS
Francis W. Lavelle, 46 21,996(8) *
Senior Vice President
Matthew B. Townley, 39 1,129(9) *
Vice President
Terry A. Pitts, 46 6,020(10) *
Vice President
All current executive officers and 1,295,843(11) 5.5%
directors as a group
(17 persons)
</TABLE>
- --------
*Less than 1%
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 and Employee Stock Ownership 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 29,473 shares owned
jointly by Mr. Macaleer and his wife; includes 14,028 shares held in the
Company's Retirement and Savings Plan and 24 shares held in the Company's
Employee Stock Ownership Plan.
(3) Includes 8,000 shares which Mr. Denworth had the right to acquire within
60 days after December 31, 1995, upon exercise of stock options; does not
include shares owned beneficially by Mr. Denworth's son, as to which he
disclaims beneficial ownership.
(4) Includes 18,000 shares which Mr. DeTurk had the right to acquire within
60 days after December 31, 1995, upon exercise of stock options.
(5) Includes 9,000 shares which Mr. Weston had the right to acquire within 60
days after December 31, 1995, upon exercise of stock options.
(6) Consists of 4,000 shares which Mr. Rubin had the right to acquire within
60 days after December 31, 1995, upon exercise of stock options.
(7) Includes 45,600 shares which Mr. Cadwell had the right to acquire within
60 days after December 31, 1995, upon exercise of stock options; includes
14,199 shares owned jointly by Mr. Cadwell and his wife; includes 24
shares held in the Company's Employee Stock Ownership Plan; includes
2,100 shares of restricted stock; does not include 16,576 shares held in
a rabbi trust pursuant to the deferred compensation arrangement for Mr.
Cadwell described on page 9.
(8) Includes 20,051 shares which Mr. Lavelle had the right to acquire within
60 days after December 31, 1995, upon exercise of stock options; includes
463 shares of restricted stock; includes 1,069 shares held in the
Company's Retirement and Savings Plan.
(9) Includes 368 shares held in the Company's Retirement and Savings Plan.
(10) Includes 4,000 shares of restricted stock; includes 456 shares held in
the Company's Retirement and Savings Plan.
(11) Includes 200,970 shares which certain executive officers and directors
had the right to acquire within 60 days after December 31, 1995, upon
exercise of stock options, 61,856 shares as to which beneficial ownership
is based on shared voting and investment power, 14,372 shares of
restricted stock, 23,402 shares held in the Company's Retirement and
Savings Plan and 213 shares held in the Company's Employee Stock
Ownership Plan.
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 25, 1996 shall be six. The
Board has nominated Messrs. Macaleer, Denworth, DeTurk, Weston, Rubin and
Cadwell for election as directors of the Company at the 1996 Annual Meeting.
It is the intention of the persons named in the proxy to vote for the nominees
listed above unless otherwise directed. Each of the nominees is presently
serving as a director for a term which will expire on the date of the 1996
Annual Meeting provided his successor is then elected. All of the nominees
were elected by the stockholders at the Annual Meeting held in 1995. 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.
3
<PAGE>
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 1995.
The Board of Directors has established an Audit committee, a Management and
Compensation Committee and a Stock Option Committee, but has not established a
nominating committee.
The Audit Committee is currently composed of Messrs. DeTurk (Chairman) 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 1995, 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 1995, the Management and Compensation Committee
held four meetings.
The Stock Option Committee is currently composed of Messrs. Macaleer
(Chairman), Denworth, DeTurk and Weston. This Committee grants stock options
and awards restricted stock to Company employees under the terms and
conditions of the Company's employee stock option and restricted stock plans.
During 1995, the Stock Option Committee held three meetings.
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.
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 options and the number
of shares covered by options, 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. No options have been
granted under this Plan since 1987, and the Board does not anticipate granting
any further options under the 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.
4
<PAGE>
Under the terms of this Plan, options for 10,000 shares of Common Stock were
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 non-employee director, such newly elected or
appointed director will be granted options for 10,000 shares of Common Stock.
The Plan also provides that options for 10,000 shares of Common Stock will be
granted to each non-employee director upon such director's five-year
anniversary of continuous service on the Board subsequent to the effective
date of the Plan. Options granted under the Plan have an exercise price equal
to the fair market value of the underlying Common Stock on the date of grant.
The Company has instituted a program whereby donations are made to one or
more charitable institutions on behalf of directors. In 1995 donations
totaling $30,000 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 and any
Chairman, Vice Chairman or President 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 grants of stock options and restricted stock
awards 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 relate pay to the
Company's performance goals, reward above-average corporate performance,
recognize individual initiative and achievement, and assist the Company in
attracting and retaining qualified executives. Compensation is individually
set for each executive officer from among the following primary components:
salary, performance bonuses, and stock-based compensation (stock option grants
and restricted stock awards). Each of these components contributes towards
helping the Company meet its compensation policy objectives.
The orientation of executive compensation toward Company and divisional
performance is accomplished through the use of bonus plans that include
various corporate and divisional performance criteria. These plans create a
direct link between an executive's compensation and the Company's achievement
of its performance goals. Bonus plans are also structured with individual
performance criteria in order to reward individual achievement. The Committee
believes that stock-based compensation aligns executive interests with
stockholder interests by tying an executive's compensation to stockholder
return, gives executives a significant long-term interest in the Company's
success, and helps to retain executives. Therefore, the Company has utilized
stock-based compensation arrangements in the Company's compensation packages
for most of its executive officers. From time to time, a portion of the
performance bonuses payable to the Company's executive officers are paid in
the form of restricted stock.
In addition to the primary components of compensation described above, the
Company has adopted individual life insurance and deferred compensation
arrangements for certain named executive officers as described in this proxy
statement. The Company also provides medical and other benefits to its
executive officers under broad-based benefit plans which are generally
available to the Company's other employees.
The Company's compensation policies have not changed in response to the
Revenue Reconciliation Act of 1993's treatment of annual compensation
exceeding $1 million paid to any named executive officer.
5
<PAGE>
EXECUTIVE OFFICER COMPENSATION
Salary levels for the Company's executive officers are determined based on
individual performance, experience and responsibilities, comparative market
data and consideration of the other primary components of compensation
provided.
In establishing performance bonus plans for the Company's executive officers,
including several of the named executive officers, the Company utilizes
objective measurements of corporate and divisional performance, as applicable,
as well as subjective considerations of individual performance. Corporate
performance measurements include criteria such as target versus actual
attainment of earnings and annual software sales. Divisional performance
measurements include criteria such as target versus actual attainment of
pretax income, sales to new and existing clients, and accounts receivable days
outstanding. Considerations of individual performance include the executive
officer's initiative and contribution to overall corporate performance,
managerial performance and successful accomplishment of any special projects.
The measurements which had the most significant impact on performance bonuses
earned in 1995 for the Company's named executive officers were target versus
actual attainment of corporate earnings and corporate annual software sales or
divisional sales, as applicable. For certain of the named executive officers
with performance bonus plans in 1995, the payment of bonuses was contingent
upon the attainment of a corporate earnings target. Corporate earnings for
1995 satisfied the target in these plans. Accordingly, bonuses were then paid
to these executive officers based on target versus actual annual corporate
software sales.
Stock option grants and restricted stock awards are made from time to time to
executive officers other than Mr. Macaleer. In recommending and approving
stock option grants and restricted stock awards for executive officers, the
Committee and the Stock Option Committee consider the executive's current and
anticipated contribution to the long-term performance of the Company and the
executive's overall compensation package, including the executive's current
options and restricted stock holdings. Stock option grants and restricted
stock awards are not necessarily made to each executive officer during each
year. In 1995 the Stock Option Committee approved grants of stock options and
awards of restricted stock to various executive officers, including four of
the named executive officers as shown in the Summary Compensation Table and
the Option Grants in Last Fiscal Year Table.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee's general approach in setting the Chief Executive Officer's
annual compensation is to set compensation in accordance with the policies set
forth in this report. Specifically, the Committee's objective is to correlate
the Chief Executive Officer's compensation with the performance of the
Company, while seeking to keep his compensation competitive with that provided
by comparable companies.
In early 1995, the Committee set Mr. Macaleer's salary for the remainder of
the year at $505,000, representing an increase of 5.2%. This increase was
based on the positive financial results achieved by the Company in 1994,
including a 9.9% increase in revenues and a 13.2% increase in net income from
1993, as well as the Committee's consideration of comparative data and Mr.
Macaleer's individual performance and responsibilities.
The Committee adopted a performance bonus plan for Mr. Macaleer for 1995 in
which the amount of Mr. Macaleer's bonus was determined based on objective
measures of corporate performance (consolidated earnings and software sales).
The plan provided for a sliding scale bonus based upon the relative attainment
of corporate earnings per share and software sales, with no bonus payable if
either earnings per share or software sales fell below certain designated
levels. Corporate earnings per share and software sales for 1995 exceeded the
targets in the plan and the maximum bonus, less a modest adjustment because he
served as Chief Executive Officer for only a part of the year, was paid to Mr.
Macaleer.
On August 10, 1995, Mr. Macaleer retired as Chief Executive Officer of the
Company and Mr. Cadwell was appointed to replace him. Mr. Macaleer retains the
office of Chairman of the Board. Upon the appointment of Mr. Cadwell as Chief
Executive Officer, the Committee set his salary for the remainder of the year
at $410,000,
6
<PAGE>
representing an increase of 10.8%. This salary increase was based primarily on
the increase in Mr. Cadwell's responsibilities as well as the Company's desire
to keep Mr. Cadwell's salary competitive with that provided by comparable
companies. Also upon Mr. Cadwell's appointment, the Company entered into the
deferred compensation arrangement with him described on page 9 and he was
granted an option to purchase 50,000 shares of the Company's Common Stock as
reflected in the Summary Compensation Table and the Option Grants in Last
Fiscal Year Table. The option has an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant and vests in 20%
increments on the third through seventh anniversaries of the date of grant. As
with all executive stock-based compensation, in granting this option the Stock
Option Committee considered Mr. Cadwell's current and anticipated contribution
to the long-term performance of the Company, his overall compensation package,
and the general benefits of stock-based compensation in relating compensation
to Company performance and helping to retain key executives.
The Committee determined that the 1995 performance bonus plan for Mr. Cadwell,
which the Committee had established earlier in the year, should remain in
effect following Mr. Cadwell's appointment as Chief Executive Officer. Mr.
Cadwell's performance bonus plan utilized the same measurements of corporate
performance, and operated in the same fashion, as Mr. Macaleer's 1995
performance bonus plan described above. Thus as a result of the Company's
performance in 1995, Mr. Cadwell was paid the maximum bonus amount.
The Committee has compared the compensation provided to Mr. Macaleer and Mr.
Cadwell 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 12) and
two publicly-held competitors of the Company which are not included in such
index. As a result of such comparison, the Committee has determined that the
Company's Chief Executive Officer compensation is 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 their respective Chief
Executive Officers, based on the latest available fiscal year-end data, the
Company was ranked in the bottom half of the companies surveyed in all three
categories.
Respectfully submitted,
Management and Compensation Stock Option Committee:
Committee: R. James Macaleer
Raymond K. Denworth, Jr. Raymond K. Denworth, Jr.
Frederick W. DeTurk Frederick W. DeTurk
Josh S. Weston Josh S. Weston
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Macaleer, the Chairman of the Board of the Company, is Chairman of the
Stock Option Committee. 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 awards of 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.
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, 1995, December 31, 1994, and December 31, 1993.
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------- --------------------------
OTHER
ANNUAL RESTRICTED SECURITIES
NAME AND COMPEN- STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY (2) BONUS SATION AWARDS(5) OPTIONS(#SH.) COMPENSATION(8)
- ------------------ ---- ---------- -------- ------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. James Macaleer 1995 $491,606 $150,000 $ -- $ -- -- $176,818(9)
Chairman of the Board 1994 509,970 120,000 -- -- -- 3,073
1993 484,908 120,000 -- -- -- 3,960
Marvin S. Cadwell 1995 $400,174(3) $125,000 $ -- $712,311(6) 50,000 $ 3,514
President and Chief 1994 363,151(3) 96,000 -- -- 100,000 3,240
Executive Officer 1993 310,145(3) 85,000 -- -- -- 4,077
Francis W. Lavelle 1995 $240,810 $160,826 $ -- $ -- 30,000 $ 2,310
Senior Vice President 1994 240,803 -- (4) -- -- 10,000 1,948
1993 131,977 84,238 -- 10,166(7) -- 1,880
Matthew B. Townley(1) 1995 $194,440 $ 98,896 $ -- $ -- 30,000 $ 225
Vice President
Terry A. Pitts(1) 1995 $215,834 $ 69,952 $ -- $ -- 14,000 $ 2,475
Vice President
</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 imputed interest on the Company loan to Mr. Cadwell described on
page 9 of $16,301 for 1995, $15,279 for 1994 and $14,321 for 1993.
(4) Mr. Lavelle was not covered under a bonus plan for 1994.
(5) The number and value of shares of restricted stock held on December 31,
1995, by the named executive officers was as follows: Mr. Macaleer, 0
shares ($0); Mr. Cadwell, 2,100 shares ($114,167); Mr. Lavelle, 463
shares ($25,171); Mr. Townley, 0 shares ($0); and Mr. Pitts, 4,000 shares
($217,460). Dividends on these shares are paid directly to the holders of
the stock, at the same rate as dividends paid to all other stockholders.
Mr. Cadwell is also the beneficiary of a rabbi trust which holds 16,576
shares of the Company's Common Stock as described on page 9. Dividends on
these shares are paid to the trustee at the same rate as dividends paid
to all other stockholders and held as trust assets for Mr. Cadwell's
benefit. The values of such shares on December 31, 1995 was $901,320.
(6) Represents the dollar value of 2,100 shares of restricted stock awarded
to Mr. Cadwell in 1995 and 16,576 shares of Common Stock issued in 1995
to a rabbi trust pursuant to the deferred compensation arrangement for
Mr. Cadwell described on page 9. The 2,100 shares of restricted stock
will vest in 50% increments on May 11, 1996 and May 11, 1997.
(7) Represents the dollar value of 413 shares of restricted stock awarded in
1994 as a portion of Mr. Lavelle's bonus for 1993. The shares vest in
increments of 137, 137 and 139 shares on July 27, 1995, 1996 and 1997,
respectively.
(8) This column includes amounts attributable to Company contributions to the
Company's Retirement and Savings Plan and income attributable to the
provision of additional life insurance for the named individuals. For the
fiscal year ended December 31, 1995, such amounts were, respectively, as
follows: Mr. Macaleer, $2,475 and $1,569; Mr. Cadwell, $2,178 and $1,336;
Mr. Lavelle, $2,310 and $0; Mr. Townley, $225 and $0; and Mr. Pitts,
$2,475 and $0. 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.
(9) This amount includes a benefit of $172,774 to Mr. Macaleer resulting from
the Split Dollar Agreement described on page 9. This benefit represents
the present value based on an actuarial computation, of interest which
will not be required to be paid to the Company by Mr. Macaleer on life
insurance premiums which the Company paid on his behalf in 1995 under the
Split Dollar Agreement. The Split Dollar Agreement provides that the
Company will be repaid for all amounts it expends for such premiums,
either from the cash surrender value or the proceeds of the insurance
policies.
8
<PAGE>
In 1977 the Company entered into a deferred compensation agreement with Mr.
Macaleer under which 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 1995.
In 1995 the Company entered into a Split Dollar Agreement with the trustees
of an insurance trust established by Mr. Macaleer's wife. Under the Split
Dollar Agreement the Company has agreed to pay a portion of the premiums for
certain life insurance policies covering Mr. Macaleer owned by the insurance
trust. The Agreement provides that the Company will be repaid for all amounts
it expends for such premiums, either from the cash surrender value or the
proceeds of the insurance policies. The benefit to Mr. Macaleer from the
provision by the Company of funds, on an interest-free basis, for the payment
of premiums under the Split Dollar Agreement in 1995 are reflected in the
Summary Compensation Table in the column marked "All Other Compensation."
In 1995, upon Mr. Cadwell's appointment as Chief Executive Officer, the
Company entered into a deferred compensation arrangement with him. Under the
arrangement, 16,576 shares of restricted Company Common Stock were placed into
a rabbi trust to be held for Mr. Cadwell's benefit. If Mr. Cadwell remains
employed by the Company until age 60, the shares and their dividend proceeds
will be distributed to Mr. Cadwell over a twenty-year period after termination
of employment. Generally, Mr. Cadwell will not be entitled to any benefits
under this deferred compensation arrangement if his employment with the
Company terminates prior to his reaching age 60. However, if such termination
results from Mr. Cadwell's death or disability, or a change in control of the
Company as defined in the deferred compensation agreement between the Company
and Mr. Cadwell, or his discharge by the Company for any reason other than
cause as defined in the deferred compensation agreement, Mr. Cadwell or his
estate will be entitled to receive all or a specified portion of the shares
and related assets held by the trust. The value of the shares placed in the
rabbi trust for Mr. Cadwell's benefit is reflected in the Summary Compensation
Table in the column marked "Restricted Stock Awards."
The Company is party to an employment agreement with Mr. Cadwell, which is
terminable at any time by either party. Pursuant to this agreement, Mr.
Cadwell has been granted stock options and awarded restricted stock under the
Company's plans described below. The agreement also provides for termination
benefits to be paid to Mr. Cadwell if he is terminated without cause or upon a
reduction, without cause, in his responsibilities, compensation and/or title.
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 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 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 such proportions as the employee may elect, in Common Stock of
the Company or in any of nine mutual investment funds. In 1995 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 1995 in the column marked "All
Other Compensation."
In 1995 the Company moved certain employee stock ownership plan accounts
containing small amounts of Company Common Stock and cash from its Retirement
and Savings Plan into a separate plan, the Employee Stock Ownership Plan, for
the purpose of terminating such separate plan.
9
<PAGE>
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 1995, Messrs. Macaleer, Cadwell, Lavelle, Townley
and Pitts 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 1995 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 mentioned elsewhere, the
Company has the following plans under which stock options and restricted stock
may be granted and 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, the 1990 Non-Qualified Stock
Option and Restricted Stock Plan and the 1994 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 Mr.
Macaleer, may be eligible to receive grants of options for the purchase of
Common Stock of the Company or awards of restricted stock of the Company.
The following summary table details for the named executive officers stock
options granted in 1995 and the potential realizable values for the respective
options granted based on assumed rates of annual compound stock appreciation
of 5% and 10% computed from the date the options were granted over the full
option term.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
---------------------------------------------- ------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED IN FISCAL YEAR ($/SH) DATE 5% 10%
- ---- ---------- -------------- -------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Macaleer -- -- $ -- -- $ -- $ --
Mr. Cadwell 50,000(1) 10% 37.00 08/10/05 1,163,455 2,948,424
Mr. Lavelle 30,000(1) 6% 37.00 08/10/05 698,073 1,769,054
Mr. Townley 30,000(1) 6% 37.00 08/10/05 698,073 1,769,054
Mr. Pitts 14,000(1) 3% 37.00 08/10/05 325,767 825,559
</TABLE>
- --------
(1) The options become exercisable in 20% increments on August 10, 1998, 1999,
2000, 2001 and 2002.
10
<PAGE>
The following summary table details stock option exercises for the named
executive officers during 1995, 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,
1995. 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.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING 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 -- -- 45,600 233,900 1,827,225 7,043,525
Mr. Lavelle -- -- 15,051 65,156 598,169 1,808,995
Mr. Townley 1,250 27,500 -- 53,750 -- 1,269,844
Mr. Pitts -- -- -- 44,000 -- 1,079,125
</TABLE>
11
<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
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Shared Medical Systems Corporation $ 100.00 $ 149.80 $ 163.39 $ 188.19 $ 255.49 $ 432.70
S & P 500 Index $ 100.00 $ 130.47 $ 140.41 $ 154.56 $ 156.60 $ 214.86
S & P Computer Software & Services Index $ 100.00 $ 152.45 $ 180.54 $ 230.42 $ 272.37 $ 382.79
</TABLE>
- --------
(1) Assumes $100 invested on December 31, 1990 in Shared Medical Systems
Corporation Common Stock, the S&P 500 Index and the S&P Computer Software
& Services Index.
12
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
SEC Form 3 reports timely filed on May 20, 1995 on behalf of Robert J.
McNeill, David F. Perri, Terry A. Pitts and Matthew B. Townley understated the
amount of shares beneficially owned by such persons by 10, 23, 194 and 35
shares, respectively, due to an administrative error. The understatements
resulted primarily from a failure to report recent purchases made for such
persons' accounts under the Company's Employee Stock Purchase Plan which had
not yet been distributed to such persons by the plan trustee. These errors
were corrected upon discovery.
ACCOUNTANTS
The firm of Arthur Andersen LLP served as the Company's independent public
accountants for 1995. In accordance with past Company practice, the Company
has not yet selected its independent public accountants for 1996. A
representative of Arthur Andersen LLP 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 FEBRUARY 29, 1996,
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, 1995. 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 stockholder
desiring to have such a proposal included in the Company's proxy statement for
the annual meeting to be held in 1997 must cause a proposal in full compliance
with Rule 14a-8 under the Securities Exchange Act of 1934 to be received at
the Company's executive offices not later than November 22, 1996.
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.
All expenses in connection with the solicitation of proxies, including the
cost of preparing, printing and mailing the Notice of Annual Meeting, this
Proxy Statement and the proxy 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
13
<PAGE>
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
SHARED MEDICAL SYSTEMS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 25, 1996
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 25, 1996 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 and, in their discretion, upon any other matters which may properly
come before the meeting.
(Continued and to be signed on the other side)
[UP ARROW] FOLD AND DETACH HERE [UP ARROW]
<PAGE>
PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE
FOR all AUTHORITY
nominees WITHHELD
1. Election of Directors [__] [__]
To withhold authority to vote for one or more
but less than all of the six nominees named in
the Proxy Statement (Messrs. Macaleer, Denworth,
DeTurk, Weston, Rubin and Cadwell), please list
the name(s) of the nominee(s) for whom authority
is withheld:
- ---------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE SIX NOMINEES LISTED IN ITEM 1.
SIGNATURE_____________________ SIGNATURE______________________ DATE____________
NOTE: (PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH).
[UP ARROW] FOLD AND DETACH HERE [UP ARROW]
