<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:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(a) (2))
[_] 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] 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:
<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
------------------------ -------- --------------------- ---------
Directors
- ---------
<S> <C> <C> <C>
R. James Macaleer, 62 1969 983,309 (2) 4.2%
Chairman of the Board of the Company;
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 information processing services company;
Chairman of the Board and Chief Executive Officer
(1982-1996). Director, Olsten Corp., Public Service
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
telecommunications company (1994-1995);
Executive Vice President and Chief Financial
Officer, NYNEX Corporation, a regional
telecommunications company, (1993-1994);
Senior Vice President and Chief Financial
Officer (1992-1993); Vice President-Finance
(1990-1992). Director, Vanstar Corporation.
Marvin S. Cadwell, 53 1995 71,424 (6) *
President and Chief Executive Officer
of the Company since 1995; Executive 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 international
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 Human
Services (1992). Director, Advanced Tissue Sciences,
Inc., Capstone Pharmacy Services, Inc., Coram
Healthcare Corporation, Neopath, Inc., Quest
Diagnostics Incorporated, St. Jude Medical, Inc.,
Syncor International Corporation, United Healthcare
Corporation.
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 as a group (18 persons) 1,290,605 (10) 5.5%
</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 11 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.
4
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors has determined that the number of directors to be
elected at the Annual Meeting to be held on 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.
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.
5
<PAGE>
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 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
6
<PAGE>
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 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.
7
<PAGE>
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 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 14) 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
8
<PAGE>
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.
9
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
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 11 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 11. 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 11. 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 11. 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.
10
<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
11
<PAGE>
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 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.
12
<PAGE>
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.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
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 - - - - - -
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.
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>
13
<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(2)
[Graph Appears Here]
1991 1992 1993 1994 1995 1996
Shared Medical
Systems Cor-
poration $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 100.00 118.43 151.15 178.67 251.10 390.36
(Software &
Services) Index
- ---------------------
(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.
(2) Shared Medical Systems Corporation
S&P 500 Index
S&P Computers (Software & Services) Index
14
<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 of outstanding Common Stock. Each Right initially enables its
15
<PAGE>
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
16
<PAGE>
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 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, 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 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
17
<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 .
