<PAGE>
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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:
[_]Confidential, for Use of the
[ ]Preliminary Proxy Statement Commission Only (as permitted by
Rule 14a-6(a) (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)
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE 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:
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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:
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<PAGE>
SHARED MEDICAL SYSTEMS CORPORATION
51 VALLEY STREAM PARKWAY
MALVERN, PENNSYLVANIA 19355
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
MAY 9, 1997
----------------
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, May 9, 1997, at 11:30 a.m. for the
following purposes:
1) To elect seven directors for one-year terms;
2) To approve the Amendment to the Certificate of Incorporation to increase
the number of authorized shares of Common Stock, par value $.01 per
share, from 60,000,000 to 120,000,000;
3) 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 14, 1997, 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
April 4, 1997
<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 14, 1997, the record date for stockholders entitled to notice of
and to vote at the Annual Meeting, there were 24,863,992 shares of Common
Stock outstanding (not including 4,058,672 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 April 4, 1997.
ANNUAL REPORT
A copy of the Shared Medical Systems Corporation Annual Report, including
financial statements for the year ended December 31, 1996, 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.
1
<PAGE>
SECURITY OWNERSHIP
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of December 31, 1996, 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 The Capital Group Companies, Inc. 2,220,000(1) 9.3%
333 South Hope Street
Los Angeles, CA 90071
Common Stock Putnam Investments, Inc. 1,690,399(2) 7.2%
One Post Office Square
Boston, Mass. 02109
Common Stock William Blair & Company, L.L.C. 1,869,208(3) 7.9%
222 West Adams Street
Chicago, IL 60606
</TABLE>
- --------
(1) As reflected in the Schedule 13G dated February 12, 1997, and filed with
the Securities and Exchange Commission jointly by The Capital Group
Companies, Inc. ("Capital Group") and Capital Research and Management
Company ("Capital Research"). According to the Schedule 13G, Capital Group
and Capital Research, a registered investment adviser and wholly-owned
subsidiary of Capital Group, have dispositive power but no voting power
over the shares indicated.
(2) As reflected in the Schedule 13G Amendment No. 1 dated January 27, 1997,
and filed with the Securities and Exchange Commission jointly by Putnam
Investments, Inc. ("PI"), Putnam Investment Management, Inc. ("PIM") and
The Putnam Investment Advisory Company, Inc. ("PAC"). According to the
Schedule 13G, PI has shared dispositive power over all 1,690,399 shares
and shared voting power over 49,032 of such shares; PIM, a registered
investment adviser and wholly-owned subsidiary of PI, has shared
dispositive power over 1,597,467 of such shares; and PAC, a registered
investment adviser and wholly-owned subsidiary of PI, has shared
dispositive power over 92,932 of such shares and shared voting power over
49,032 of such shares.
(3) As reflected in the Schedule 13G dated February 14, 1997, and filed with
the Securities and Exchange Commission by William Blair & Company, L.L.C.
("William Blair"), a registered investment adviser. According to the
Schedule 13G, William Blair has sole voting power over 510,830 shares and
sole dispositive power over all of the shares indicated.
2
<PAGE>
DIRECTORS AND MANAGEMENT
The following table sets forth, as of December 31, 1996, 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, 62 1969 983,309(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., 64 1976 42,000(3) *
Attorney, Partner, Drinker Biddle &
Reath, counsel to the Company.
Frederick W. DeTurk, 68 1981 13,300(4) *
President, DeTurk Enterprises,
Inc., a management consulting
firm.
Josh S. Weston, 68 1987 1,099 *
Chairman of the Board, Automatic
Data Processing, Inc., an informa-
tion processing services company;
Chairman of the Board and Chief
Executive Officer (1982-1996). Di-
rector, Olsten Corp., Public Serv-
ice Enterprise Group, Inc.,
Vanstar Corporation.
Jeffrey S. Rubin, 53 1993 6,000(5) *
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, 53 1995 71,424(6) *
President and Chief Executive Offi-
cer of the Company since 1995; Ex-
ecutive Vice President (1993-
1995); Senior Vice President
(1992-1993); Vice President (1986-
1992).
Gail R. Wilensky, Ph.D. 53 1996 -- *
Senior Fellow, Project Hope, an in-
ternational health foundation,
since 1993; Deputy Assistant to
the President For Policy
Development-Health and Welfare
(1992-1993); Administrator, Health
Care Financing Administration,
U.S. Department of Health and Hu-
man Services (1992). Director, Ad-
vanced Tissue Sciences, Inc., Cap-
stone Pharmacy Services, Inc.,
Coram Healthcare Corporation,
Neopath, Inc., Quest Diagnostics
Incorporated, St. Jude Medical,
Inc., Syncor International Corpo-
ration, United Healthcare Corpora-
tion.
NON-DIRECTOR EXECUTIVE OFFICERS
Francis W. Lavelle, 47 32,068(7) *
Senior Vice President
Matthew B. Townley, 40 1,581(8) *
Senior Vice President
Terrence W. Kyle, 46 17,582(9) *
Senior Vice President, Treasurer
and Assistant Secretary
All executive officers and directors 1,290,605(10) 5.5%
as a group
(18 persons)
</TABLE>
- --------
*Less than 1%
3
<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 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 30,378 shares owned
jointly by Mr. Macaleer and his wife; includes 14,469 shares held in the
Company's Retirement Savings Plan.
(3) Includes 10,000 shares which Mr. Denworth had the right to acquire within
60 days after December, 31, 1996, 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 10,000 shares which Mr. DeTurk had the right to acquire within 60
days after December 31, 1996, upon exercise of stock options.
(5) Consists of 6,000 shares which Mr. Rubin had the right to acquire within
60 days after December 31, 1996, upon exercise of stock options.
(6) Includes 69,500 shares which Mr. Cadwell had the right to acquire within
60 days after December 31, 1996, upon exercise of stock options; includes
162 shares owned jointly by Mr. Cadwell and his wife; includes 1,050
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 10 below.
(7) Includes 30,103 shares which Mr. Lavelle had the right to acquire within
60 days after December 31, 1996, upon exercise of stock options; includes
139 shares of restricted stock; includes 1,180 shares held in the
Company's Retirement and Savings Plan.
(8) Includes 476 shares held by Mr. Townley in the Company's Retirement
Savings Plan.
(9) Includes 11,248 shares which Mr. Kyle had the right to acquire within 60
days after December 31, 1996, upon exercise of stock options; includes
6,158 shares held in the Company's Retirement Savings Plan.
(10) Includes 215,841 shares which certain executive officers and directors
had the right to acquire within 60 days after December 31, 1996, upon
exercise of stock options, 48,724 shares as to which beneficial ownership
is based on shared voting and investment power, 5,424 shares of
restricted stock, and 24,496 shares held in the Company's Retirement
Savings 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 May 9, 1997 shall be seven. The
Board has nominated Messrs. Macaleer, Denworth, DeTurk, Weston, Rubin and
Cadwell and Dr. Wilensky for election as directors of the Company at the 1997
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 1997 Annual Meeting provided his or her successor is then elected. All of
the nominees, except for Dr. Wilensky, were elected by the stockholders at the
Annual Meeting held in 1996. Dr. Wilensky was appointed to the Board on August
12, 1996. 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 seven
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 (a "Specified
Non-Vote"), will not be included in the vote totals.
4
<PAGE>
MEETINGS AND COMMITTEES OF BOARD
The Board of Directors held six meetings during 1996.
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 and Dr. Wilensky. 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 for 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 1996,
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 1996, the Management and Compensation Committee
held three meetings.
The Stock Option Committee is currently composed of Messrs. Weston
(Chairman) and DeTurk. This Committee grants stock options and awards
restricted stock to Company employees and directors under the terms of the
Company's stock option and restricted stock plans. During 1996, the Stock
Option Committee held three meetings.
COMPENSATION OF DIRECTORS
Currently, 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.
In August 1996 the Board of Directors revised the compensation for the
Company's directors, with the changes to take effect May 1, 1997. Effective
May 1, 1997, the monthly retainers and the Committee Chairman fees will be
replaced by the equity-based compensation described below, and the fee for
non-employee director attendance at a meeting of the Board of Directors will
be increased to $2,000. The additional fees of $1,000 for attendance at any
separately-scheduled meeting of any committee of the Board, and $500 for
committee meetings scheduled in conjunction with Board meetings will continue.
Directors will also continue to be reimbursed for any expenses attendant to
membership on the Board.
Effective August 15, 1996, the Board of Directors terminated the 1991 Non-
Qualified Stock Option Plan for Non-Employee Directors, and amended the 1994
Non-Qualified Stock Option and Restricted Stock Plan to allow for non-employee
director participation. Thus, non-employee directors are currently eligible to
receive stock option grants and restricted stock awards under the 1994 plan.
In addition, 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 is eligible to receive stock options under the terms of the 1987
Non-Qualified Stock Option Plan for Non-Employee Directors. However, no
options have been granted under the this plan since 1987, and the Board does
not anticipate granting any further options under the 1987 plan, which expires
in June 1997.
Commencing with the 1997 Annual Meeting of Stockholders, at the time of each
Annual Meeting of the Company's stockholders each non-employee director who
will continue in service as a director after the meeting
5
<PAGE>
will be granted 400 shares of Company restricted stock, and each director who
will serve as Chairman of a committee of the Board immediately following the
meeting will be granted an additional 100 shares of Company restricted stock.
The shares of restricted stock will vest on the later of six months after the
date of grant, or January 1 of the following year. The shares of restricted
stock will be forfeited if the director's service on the Board is terminated
prior to vesting.
Under the new director compensation structure non-employee directors will
receive options to purchase 20,000 shares of the Company's Common Stock upon
joining the Board and every five years thereafter during the term of their
service. These options will vest in installments of 20% per year and unvested
options shall be forfeited if Board service is terminated.
In order to implement the new director compensation program, Messrs,
Denworth, DeTurk, and Weston, who last received stock option grants in 1991,
and Dr. Wilensky, who joined the Board in 1996, were each granted in 1996
options to purchase a total of 20,000 shares of the Company's Common Stock. As
part of the transition to this program, Mr Rubin, who last received a stock
option grant in 1993, was granted in 1996 an option to purchase 4,000 shares
of the Company's Common Stock, which vests in installments of 50% per year.
The exercise prices for these options are equal to the fair market value of
the Company's 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 1996, 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, Chairman
(if any), 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 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 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 organizational
performance is accomplished through the use of bonus plans that include
various corporate and organizational 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
6
<PAGE>
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 also 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 individual executive officer.
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 organizational performance, as
applicable, as well as subjective considerations of individual performance.
Corporate and organizational performance measurements include criteria such as
target versus actual attainment of revenue, pretax income, sales to new and
existing customers, accounts receivable days outstanding and capital
expenditures. 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 relative weighting of corporate and organizational performance
measurements varied among the individual bonus plans for the Company's named
executive officers for 1996. For certain of the named executive officers with
performance bonus plans in 1996, the payment of bonuses was contingent upon
the attainment of a corporate earnings target. Corporate earnings for 1996
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. 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 1996 the Stock
Option Committee approved grants of stock options to various executive
officers, including three 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.
The Committee set Mr. Cadwell's salary for 1996 at $460,000, representing an
increase of 12% from the salary set for him upon his becoming Chief Executive
Officer in August 1995. This increase was based on the positive financial
results achieved by the Company during 1995, as well as the Committee's
consideration of comparative data and Mr. Cadwell's individual performance and
responsibilities.
The Committee adopted a performance bonus plan for Mr. Cadwell for 1996 in
which the amount of Mr. Cadwell's bonus was determined based on objective
measures of corporate performance (consolidated earnings
7
<PAGE>
and software sales). The plan provided for a target bonus amount to be
established based upon the relative attainment of corporate earnings per
share, with no bonus payable if earnings per share fell below certain
designated levels. The target bonus amount was then subject to further
adjustment based upon software sales attained against target software sales.
Corporate earnings per share and software sales for 1996 exceeded the targets
in the plan and the maximum bonus was paid to Mr. Cadwell.
The Committee has compared the compensation provided to Mr. Cadwell with the
compensation paid to the Chief Executive Officers of the other companies
included in the S&P Computers (Software and Services) Index (the published
industry index against which the performance of the Company's stock is
measured in the graph on page 13) 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 Committee: Stock Option Committee:
Raymond K. Denworth, Jr. Josh S. Weston
Frederick W. DeTurk Frederick W. DeTurk
Josh S. Weston
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Macaleer, Chairman of the Board of the Company, was Chairman of the
Stock Option Committee until August 15, 1996. While serving on such Committee,
Mr. Macaleer was not eligible to receive grants of stock options or awards of
restricted stock under the terms of the Company's stock option and restricted
stock plans.
Mr. Denworth, Chairman of the Management and Compensation Committee, was a
partner in the law firm Drinker Biddle & Reath, counsel to the Company,
through January 1997 and is now of counsel to that firm.
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, 1996, December 31, 1995, and December 31, 1994.
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------- -----------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND COMPEN- STOCK OPTIONS COMPEN-
PRINCIPAL POSITION YEAR SALARY(2) BONUS SATION AWARDS(6) (# SH.) SATION(8)
- ------------------ ---- --------- -------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
R. James Macaleer 1996 $240,820 $ 88,000 $ -- $ -- -- $198,202(9)
Chairman of the Board 1995 491,606 $150,000 -- -- -- 176,818
1994 509,970 120,000 -- -- -- 3,073
Marvin S. Cadwell 1996 $478,543(3) $176,000 $ -- $ -- -- $ 3,679
President and Chief 1995 400,174(3) 125,000 -- 712,311(7) 50,000 3,514
Executive Officer 1994 363,151(3) 96,000 -- -- 100,000 3,240
Francis W. Lavelle 1996 $249,141 $217,980 $ -- $ -- 10,000 $ 2,239
Senior Vice President 1995 240,810 160,826 -- -- 30,000 2,310
1994 240,803 -- (4) -- -- 10,000 1,948
Matthew B. Townley(1) 1996 $240,513 $112,080 $ -- $ -- 5,000 $ 2,425
Senior Vice President 1995 194,440 98,896 -- -- 30,000 1,470
Terrence W. Kyle 1996 $276,946 $ 70,560 $ -- $ -- 5,000 $ 2,239
Senior Vice President, 1995 270,696 -- (5) -- -- 30,000 2,178
Treasurer and Assistant 1994 257,075 -- (5) -- -- 10,000 1,950
Secretary
</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 10 of $17,391 for 1996, $16,301 for 1995, $15,279 for 1994.
(4) Mr. Lavelle was not covered under a bonus plan for 1994.
(5) Mr. Kyle was not covered under a bonus plan for 1995 or 1994.
(6) The number and value of shares of restricted stock held on December 31,
1996, by the named executive officers was as follows: Mr. Macaleer, 0
shares ($0); Mr. Cadwell, 1,050 shares ($51,702); Mr. Lavelle, 139 shares
($6,844); Mr. Townley, 0 shares ($0); and Mr. Kyle, 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. 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 10. 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, 1996 was $816,638.
(7) 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 10. The 2,100 shares of restricted stock vest in
50% increments on May 11, 1996 and May 11, 1997.
(8) Amounts indicated in this column for 1996 include Company contributions to
the Company's Retirement Savings Plan for the named individuals in the
following amounts: Mr. Macaleer, $2,239, Mr. Cadwell, $2,239, Mr. Lavelle,
$2,239, Mr. Townley, $2,475, and Mr. Kyle, $2,239; and income attributable
to the provision of additional life insurance for Mr. Cadwell in the
amount of $1,440. Under the terms of this insurance arrangement, Mr.
Cadwell has not and will not receive or be allocated an interest in any
cash surrender value under the related insurance policy.
(9) This amount includes a benefit to Mr. Macaleer of $195,963 resulting from
the Split Dollar Agreement described on page 10. 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 for 1996 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.
9
<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 1996.
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
interest-free use of the premiums paid by the Company under the Split Dollar
Agreement are reflected in the Summary Compensation Table in the column marked
"All Other Compensation."
In 1995, prior to 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 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. Imputed interest on the loan is reflected in the Summary
Compensation Table in the column marked "Salary."
During 1996, the Company entered into employment agreements with most of its
executive officers, including Messrs. Lavelle, Townley and Kyle. The
agreements with Messrs. Lavelle, Townley and Kyle provide for termination
benefits, consisting of monthly base salary, incentive compensation and COBRA
payments, to be paid for an eighteen-month period following termination of
their employment without cause. Their agreements also provide for the payment
of a benefit consisting of one year of base salary and incentive compensation
in the event their employment is terminated within one year following a
"change in control" of the Company. Generally, a "change in control" means an
acquisition by any person of 40% or more of the outstanding voting securities
of the Company, a merger or consolidation where majority ownership of the
Company is changed, a liquidation or dissolution of the Company, or a sale of
substantially all of the Company's assets. The agreements also provide for the
payment of certain benefits in the event employment is terminated as a result
of death or disability. These employment agreements include covenants on the
part of the executive to keep Company information confidential during and
after the executive's employment, and not to compete with the Company's
business during the executive's employment and for a period extending eighteen
months following termination of the executive's employment.
The Company has a Retirement 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
10
<PAGE>
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 1996, 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 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 1996, Messrs. Macaleer, Cadwell, Lavelle, Townley
and Kyle 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 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 plan mentioned above, the Company
currently maintains the following plans under which stock options and
restricted stock may be granted and awarded: 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.
Certain outstanding stock option agreements between the Company and each of
its executive officers ("Optionees"), generally provide that if the Company
terminates Optionee's employment, or there is a "material adverse change in
the conditions of Optionee's employment with the Company" (as defined below),
within two (2) years after a "change in control" (as defined above) of the
Company, then the unvested portion of the stock option will become fully
vested and immediately exercisable upon the date of such termination or
material change; provided that no more than 40,000 options will be so
accelerated without the approval of the Stock Option Committee of the Board at
the time of the Change in Control. A "material adverse change in the
conditions of Optionee's employment with the Company" generally means a
reduction in compensation, duties, responsibilities or authority of Optionee
or a significant change in work location.
The following summary table details for the named executive officers stock
options granted in 1996 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>
INDIVIDUAL GRANTS
---------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------------
NAME GRANTED IN FISCAL YEAR ($/SH) DATE 5% 10%
- ---- ---------- -------------- -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Macaleer -- -- $ -- -- $ -- $ --
Mr. Cadwell -- -- -- -- -- --
Mr. Lavelle 10,000(1) 2.50% 45.375 11/13/06 285,361 723,161
Mr. Townley 5,000(1) 1.25% 45.375 11/13/06 142,680 361,580
Mr. Kyle 5,000(1) 1.25% 45.375 11/13/06 142,680 361,580
</TABLE>
- --------
(1) The options become exercisable in 20% increments on November 13, 1997,
1998, 1999, 2000 and 2001.
11
<PAGE>
The following summary table details stock option exercises for the named
executive officers during 1996, 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,
1996. 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 F-Y 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 -- -- 69,500 210,000 2,362,250 4,971,250
Mr. Lavelle -- -- 25,103 65,104 854,246 1,150,528
Mr. Townley 1,250 55,781 -- 57,750 -- 953,437
Mr. Kyle 11,248 442,261 6,248 57,500 212,270 1,047,500
</TABLE>
12
<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
Computers (Software & Services).
COMPARISON OF FIVE-YEAR
CUMULATIVE TOTAL RETURN(/1/)
AMONG SHARED MEDICAL SYSTEMS CORPORATION, S&P 500 INDEX AND
S&P COMPUTERS (SOFTWARE AND SERVICES) INDEX
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Shared Medical Systems Corporation $100.00 $109.07 $125.63 $170.56 $288.85 $265.49
S&P 500 Index 100.00 107.62 118.46 120.03 165.13 203.05
S&P Computers (Software & Services) Index 100.00 118.43 151.15 178.67 251.10 390.36
</TABLE>
- --------
(1) Assumes $100 invested on December 31, 1991 in Shared Medical Systems
Corporation Common Stock, the S&P 500 Index and the S&P Computers
(Software & Services) Index.
13
<PAGE>
AMENDMENT TO CERTIFICATE OF INCORPORATION
PROPOSED AMENDMENT
On February 14, 1997, the Board of Directors unanimously proposed an
amendment (the "Amendment") to the Certificate of Incorporation of the Company
that would increase the number of authorized shares of Common Stock, par value
$.01 per share, from 60,000,000 to 120,000,000 shares. At the meeting, the
stockholders will be asked to approve the Amendment. Under the proposed
Amendment, the first paragraph of Article FOURTH of the Company's Restated
Certificate of Incorporation would be amended to read in full as follows:
"FOURTH: The total number of shares of stock which the Corporation shall
have the authority to issue is 121,000,000 shares, divided into 1,000,000
shares of Preferred Stock, each of which shall have the par value of $.10
per share, and 120,000,000 shares of Common Stock, each of which shall have
the par value of $.01 per share."
As of March 14, 1997, of the 60,000,000 shares of Common Stock now
authorized to be issued under the Certificate of Incorporation, 28,922,664
were issued (of which 24,863,992 were outstanding) and 3,548,996 shares were
reserved for issuance under the Company's stock option and restricted stock
plans. The Amendment will not affect the number of shares of preferred stock
authorized, which is 1,000,000 shares of preferred stock, par value $.10 per
share.
PURPOSES AND EFFECTS OF AMENDMENT
The Board believes that the proposed increase in authorized shares is
desirable because it will provide the Company with more flexibility to issue
shares of Common Stock as the need may arise without the expense and delay of
a special stockholders' meeting, unless stockholder action is required by
applicable law or under the rules of the NASDAQ Stock Market or any exchange
on which the Company's Common Stock may then be listed. Such shares could be
issued by the Board of Directors for proper corporate purposes, including in
connection with possible future stock dividends or stock splits, equity
financings, strategic investments or acquisitions, and grants of additional
options or other equity incentives to the Company's employees. Except for
issuances under the existing stock plans, the Board of Directors has no
present plans or commitments with respect to the issuance of the proposed
additional authorized shares of Common Stock.
Each additional share of Common Stock authorized by the proposed Amendment
will have the same rights and privileges as each share of Common Stock
currently authorized. Stockholders will have no statutory preemptive rights to
receive or purchase any of the Common Stock authorized by the proposed
Amendment. The increase in authorized Common Stock will not have any immediate
effect on the rights of existing stockholders. To the extent that the
additional authorized shares are issued in the future, they will decrease the
existing stockholders' percentage equity ownership and, depending on the price
at which they are issued, could be dilutive to the existing stockholders.
The increase in the authorized shares of Common Stock could have an anti-
takeover effect. Shares of authorized and unissued Common Stock could (within
the limits imposed by applicable law) be issued in one or more transactions
that would make a takeover of the Company more difficult, and therefore less
likely. Any such issuance of additional stock could have the effect of
diluting the earnings per share and book value per share of outstanding shares
of Common Stock, and such additional shares could be used to dilute the stock
ownership or voting rights of persons seeking to obtain control of the
Company.
OTHER CONSIDERATIONS
The Company has previously adopted certain measures which have an anti-
takeover effect. In 1991, the Board of Directors adopted a Stockholders Rights
Plan under which the Company has distributed to its stockholders rights to
purchase capital stock of the Company ("Rights") at the rate of one Right for
each share
14
<PAGE>
of outstanding Common Stock. Each Right initially enables its holder, upon the
occurrence of certain events, to purchase 1/1000th of a share of Series A
Participating Preferred Stock of the Company at a price of $80. The Right will
convert into a right to purchase Common Stock (or in certain circumstances,
cash, property or other securities of the Company) of the Company, or under
certain circumstances, of another company, having a value equal to $160. The
Rights will be exercisable if, with certain limitations and exceptions,
someone launches a tender offer to acquire, or actually acquires, 15% or more
of the Company's outstanding Common Stock or is designated an "Adverse Person"
by the Board of Directors. The Stockholders Rights Plan is designed to deter
coercive or unfair takeover tactics that could deprive stockholders of an
opportunity to realize the full value of their shares. The Stockholder Rights
Plan may have a more general anti-takeover effect by discouraging the
accumulation of Common Stock by potential acquirers of the Company.
The 1,000,000 shares of Preferred Stock which the Company is authorized to
issue may be issued by the Board of Directors, without further action or
authorization by the Company's stockholders (unless specifically required by
applicable laws and regulations), in more than one series, and generally may
have such designations, preferences and relative rights, qualifications and
limitations as the Board of Directors may fix by resolution at the time of
issuance. In the event that the Board of Directors did not approve of an
attempt to gain control of the Company, it might be possible for the Board of
Directors to issue a series of Preferred Stock with rights and preferences
which would impede the completion of such a transaction. The Board of
Directors does not intend to issue any Preferred Stock except on terms which
it deems to be in the best interest of its stockholders, and the Company has
no plans, arrangements, commitments or understandings to issue shares of
Preferred Stock.
In 1986 the Company adopted, with stockholder approval, two amendments to
the Company's Certificate of Incorporation. The first increased to 75% the
stockholder vote required to effect mergers, consolidations, sales of assets,
liquidations and certain other transactions involving any person who is the
beneficial owner of 15% or more of the Company's voting stock, with certain
exceptions, unless the proposed transaction satisfies at least one of the
following conditions: (i) compliance with certain fair price criteria and
procedural requirements; or (ii) approval by a majority of the "Continuing
Directors." The amendment was intended to prevent certain potential inequities
of two-tier transactions in which higher prices are often offered in the first
stage of the transaction than are offered to the public stockholders remaining
at the second stage, and may discourage takeover attempts by persons intending
to acquire the Company in such a manner, but should not have an effect on
proposed transactions with equal treatment for all stockholders. The 75%
voting requirement could allow a minority of stockholders to prevent the
consummation of a transaction, notwithstanding the fact that a majority of
stockholders may be in favor of it. The second amendment provides that
stockholder action may be taken only at a meeting. Because under the Company's
By-laws stockholders cannot call a special meeting, the amendment may make it
more difficult for stockholders to take action opposed by the Board of
Directors, which may deter persons from seeking to acquire substantial stock
positions in, or control of, the Company.
In 1992, the Company adopted, with stockholder approval, an amendment to the
Company's Certificate of Incorporation eliminating cumulative voting in the
election of directors, and the Board of Directors adopted a By-law provision
requiring a stockholder seeking to nominate one or more directors to give the
Company's Secretary written notice of such intention at least 45 days prior to
the date of the meeting at which directors are to be elected. The Certificate
of Incorporation amendment may deter takeovers by discouraging the
accumulation of large minority stockholdings (as a prelude to a takeover) by
persons who would not make the acquisition without being assured of
representation on the Board of Directors. The By-law provision may make
takeovers more difficult by giving the Board of Directors greater advance
notice of a potential proxy fight.
STOCKHOLDER APPROVAL
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is required for approval of the proposed Amendment. Thus the
effect of an abstention or Specified Non-Vote is the same as that of a vote
against the proposal. If the proposed Amendment is approved by the
stockholders, it will become
15
<PAGE>
effective upon filing and recording of a Certificate of Amendment as required
by the Delaware General Corporation Law.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION. ---
ACCOUNTANTS
The firm of Arthur Andersen LLP served as the Company's independent public
accountants for 1996. In accordance with past Company practice, the Company
has not yet selected its independent public accountants for 1997. 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 MARCH 14, 1997, 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, 1996. 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, SENIOR VICE PRESIDENT, 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 1998 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 December 4, 1997.
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
16
<PAGE>
- --------------------------------------------------------------------------------
This Proxy is Solicited By The Board of Directors Of The Company
SHARED MEDICAL SYSTEMS CORPORATION
P PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
R May 9, 1997
O The undersigned hereby appoints R. James Macaleer and James C. Kelly,
or each of them, as Proxies, each with full power of substitution and
X revocation, to attend the Annual Meeting of Stockholders of Shared Medical
Systems Corporation on May 9, 1997 and any adjournment thereof, and thereat
Y 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 other side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
Please mark
your vote as [X]
indicated in
this example
- --------------------------------------------------------------------------------
1. Election of Directors
To withhold authority to vote for one or more but less than all of the
seven nominees named in the Proxy Statement (Messrs. Maceleer, Denworth, DeTurk,
Weston, Rubin and Cadwell and Dr. Wilensky), please list the name(s) of the
nominee(s) for whom authority is withheld:
FOR all AUTHORITY
nominees WITHHELD
[_] [_]
-------------------------------------------------------------
- --------------------------------------------------------------------------------
A vote FOR is recommended by the Board of Directors:
- --------------------------------------------------------------------------------
2. Approval of Amendment to the Certificate of Incorporation
FOR AGAINST ABSTAIN
[_] [_] [_]
- --------------------------------------------------------------------------------
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 SEVEN NOMINEES LISTED IN ITEM 1 AND FOR APPROVAL OF THE AMENDMENT TO THE
CERTIFICATE OF INCORPORATION REFERRED TO IN ITEM 2.
Signature Signature Date
------------------------ ------------------------- ---------
NOTE: (Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such).
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
. FOLD AND DETACH HERE .
