<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Shared Medical Systems Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--Enter Company Name Here--
- --------------------------------------------------------------------------------
(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 15, 1998
----------------
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 15, 1998, at 11:30 a.m. for the
following purposes:
1) To elect seven directors for one-year terms;
2) To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on March 19, 1998, as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting or any adjournments thereof.
All stockholders are cordially invited to attend the meeting in person, but
whether or not you plan to attend, please sign, date and mail the enclosed
proxy in the enclosed envelope, which requires no postage if mailed in the
United States.
James C. Kelly
Secretary
March 31, 1998
<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 19, 1998, the record date for stockholders entitled to notice of
and to vote at the Annual Meeting, there were 26,285,663 shares of Common
Stock outstanding (not including 4,061,472 shares held in the Company's
treasury). Each share of the Company's Common Stock, except for the shares
held in the Company's treasury, is entitled to one vote.
This Proxy Statement and the accompanying proxy are being mailed to
stockholders on or about March 31, 1998.
ANNUAL REPORT
A copy of the Shared Medical Systems Corporation Annual Report, including
financial statements for the year ended December 31, 1997, 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, 1997, 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>
TITLE
OF NAME AND ADDRESS AMOUNT AND NATURE
CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
----- ------------------- ----------------------- ----------------
<S> <C> <C> <C>
Common
Stock The Capital Group Companies, Inc. 2,520,000(1) 10.0%
333 South Hope Street
Los Angeles, CA 90071
Common
Stock Firstar Corporation 1,627,200(2) 6.5%
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Common
Stock William Blair & Company, L.L.C. 2,669,078(3) 10.6%
222 West Adams Street
Chicago, IL 60606
</TABLE>
- --------
(1) As reflected in the Schedule 13G Amendment No.2 dated February 10, 1998,
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"), 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 separate Schedules 13G dated February 13, 1998, and filed
with the Securities and Exchange Commission by Firstar Corporation
("Firstar") and Firstar Investment Research & Management Company, LLC
("FIRMC"), Firstar has sole dispositive power over 1,444,800 of such
shares, shared dispositive power over 182,400 of such shares, sole voting
power over 1,335,200 of such shares and shared voting power over 182,400
of such shares; and FIRMC, a registered investment adviser and subsidiary
of Firstar, has sole dispositive power over 770,100 of such shares, shared
dispositive power over 857,100 of such shares, sole voting power over
660,500 of such shares and shared voting power over 853,900 of such
shares.
(3) As reflected in the Schedule 13G dated February 14, 1998, and filed with
the Securities and Exchange Commission by William Blair & Company, L.L.C.
("William Blair"), a registered investment adviser, William Blair has sole
voting power over 974,320 of such 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, 1997, 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(1)
------------------------ -------- --------------------- ----------
DIRECTORS
<S> <C> <C> <C>
R. James Macaleer, 63 1969 972,381(2) 3.9%
Chairman of the Board of the
Company; Chairman of the Board and
Chief Executive Officer (1969-
1995).
Raymond K. Denworth, Jr., 65 1976 39,000(3) *
Attorney, Of Counsel to Drinker
Biddle & Reath, LLP, counsel to
the Company, since 1997; Partner,
Drinker Biddle & Reath (1968-
1997).
Frederick W. DeTurk, 69 1981 17,800(4) *
President, DeTurk Enterprises,
Inc., a management consulting
firm.
Josh S. Weston, 69 1987 5,599(5) *
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, 54 1993 10,400(6) *
Partner, Boles Knop and Company
LLC, an investment banking
company, since 1997; Vice
Chairman, Vanstar Corporation, a
technology services company (1995-
1997); 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).
Marvin S. Cadwell, 54 1995 91,086(7) *
President and Chief Executive
Officer of the Company since 1995;
Executive Vice President (1993-
1995); Senior Vice President
(1992-1993).
Gail R. Wilensky, Ph.D., 54 1996 4,400(8) *
Senior Fellow, Project Hope, an
international health foundation,
since 1993; Deputy Assistant to
the President For Policy
Development--Health and Welfare
(1992-1993). Director, Advanced
Tissue Sciences, Inc., NeoPath,
Inc., Pharmerica Inc., Quest
Diagnostics Incorporated, St. Jude
Medical, Inc., Syncor
International Corporation, United
Healthcare Corporation.
NON-DIRECTOR EXECUTIVE OFFICERS
Francis W. Lavelle, 48 46,232(9) *
Senior Vice President
Terrence W. Kyle, 47 29,681(10) *
Senior Vice President, Treasurer
and Assistant Secretary
David F. Perri, 48 34,552(11) *
Senior Vice President
Guillermo N. Ramas, Sr., 52 5,100(12) *
Senior Vice President and President
of SMS International
All executive officers and directors
as a group (16 persons) 1,328,372(13) 5.2%
</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. In accordance with SEC rules regarding
beneficial ownership disclosure, shares which are not outstanding but
which are deemed beneficially owned by a person or group of persons are
considered outstanding for purposes of computing the percentage of the
Company's Common Stock owned by such person or group of persons, but such
shares are not considered outstanding for purposes of computing the
percentage of the Company's Common Stock owned by any other person.
(2) Includes 30,378 shares owned jointly by Mr. Macaleer and his wife;
includes 14,896 shares held in the Company's Retirement Savings Plan.
(3) Includes 14,000 shares which Mr. Denworth had the right to acquire within
60 days after December, 31, 1997, upon exercise of stock options; does
not include shares owned beneficially by Mr. Denworth's wife or son, as
to which he disclaims beneficial ownership.
(4) Includes 14,000 shares which Mr. DeTurk had the right to acquire within
60 days after December 31, 1997, upon exercise of stock options.
(5) Includes 4,000 shares which Mr. Weston had the right to acquire within 60
days after December 31, 1997, upon exercise of stock options.
(6) Includes 10,000 shares which Mr. Rubin had the right to acquire within 60
days after December 31, 1997, upon exercise of stock options.
(7) Includes 89,500 shares which Mr. Cadwell had the right to acquire within
60 days after December 31, 1997, upon exercise of stock options; includes
162 shares owned jointly by Mr. Cadwell and his wife; 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.
(8) Includes 4,000 shares which Dr. Wilensky had the right to acquire within
60 days after December 31, 1997, upon exercise of stock options.
(9) Includes 39,155 shares which Mr. Lavelle had the right to acquire within
60 days after December 31, 1997, upon exercise of stock options; includes
5,000 shares of restricted stock; includes 1,323 shares held in the
Company's Retirement Savings Plan.
(10) Includes 17,998 shares which Mr. Kyle had the right to acquire within 60
days after December 31, 1997, upon exercise of stock options; includes
5,000 shares of restricted stock; includes 6,534 shares held in the
Company's Retirement Savings Plan.
(11) Includes 29,000 shares which Mr. Perri had the right to acquire within
60 days after December 31, 1997, upon exercise of stock options;
includes 5,500 shares of restricted stock.
(12) Includes 5,000 shares of restricted stock; does not include 10,000
shares held in a rabbi trust pursuant to the deferred compensation
arrangement for Mr. Ramas described on page 10 below.
(13) Includes 259,443 shares which certain executive officers and directors
had the right to acquire within 60 days after December 31, 1997, upon
exercise of stock options, 49,172 shares as to which beneficial
ownership is based on shared voting and investment power, 30,500 shares
of restricted stock, and 23,656 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 15, 1998 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 1998
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 1998 Annual Meeting provided his or her successor is then elected. All of
the nominees were elected by the stockholders at the Annual Meeting held in
1997. 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 five meetings during 1997.
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 1997,
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 1997, the Management and Compensation Committee
held four 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 1997, the Stock
Option Committee held four meetings.
COMPENSATION OF DIRECTORS
Effective May 1, 1997 the Company revised the compensation for its
directors. Under the revised compensation program, each director who is not
otherwise employed by the Company is paid a fee of $2,000 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. Directors are also reimbursed for any expenses attendant to
membership on the Board.
5
<PAGE>
Non-employee directors are currently eligible to receive stock option grants
and restricted stock awards under the 1994 Non-Qualified Stock Option and
Restricted Stock Plan. The revised compensation program calls for both
restricted stock awards and stock option grants for non-employee directors.
Under the program, 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 is 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 is granted an additional 100 shares of
Company restricted stock. The shares of restricted stock vest on the later of
six months after the date of grant, or January 1 of the following year. The
shares of restricted stock are forfeited if the director's service on the
Board is terminated prior to vesting. In 1997, at the time of the Annual
Meeting of Stockholders, Messrs. Denworth, DeTurk and Weston were each granted
500 shares of Company restricted stock, and Mr. Rubin and Dr. Wilensky were
each granted 400 shares of Company restricted stock.
In addition, non-employee directors 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 vest in
installments of 20% per year and unvested options are forfeited if the
director's service on the Board is terminated prior to vesting. No options
were granted to directors in 1997.
The Company maintains a program whereby donations are made to one or more
charitable institutions on behalf of directors. In 1997, 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.
EXECUTIVE OFFICER COMPENSATION POLICIES
The Company's executive compensation policies, endorsed by the Committee, are
designed to provide competitive levels of compensation that relate pay to the
Company's performance goals, reward above-average corporate performance,
recognize individual initiative and achievement, and assist the Company in
attracting and retaining qualified executives. Compensation is individually
set for each executive officer from among the following primary components:
salary, performance bonuses, and stock-based compensation (stock option grants
and restricted stock awards). Each of these components contributes towards
helping the Company meet its compensation policy objectives.
The orientation of executive compensation toward Company and organizational
performance is accomplished through the use of bonus plans that include
various corporate and operating segment 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 its executive officers.
6
<PAGE>
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 stock options and restricted stock holdings.
Stock option grants and restricted stock awards are not necessarily made to
each executive officer during each year. 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.
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 1997 at $505,000, representing an
increase of 9.8% from the salary set for him for 1996. This increase was based
on the positive financial results achieved by the Company during 1996, 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 1997 in
which the amount of Mr. Cadwell's bonus was determined based on objective
measures of corporate performance (consolidated earnings per share; a defined
"sales" component, consisting of the present value of the gross margin on new
sales, adjusted for the impact, if any, of deinstallations and the rate of
revenue retained in renewal agreements; and accounts receivable days
outstanding). 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 defined
"sales" attained against target, and the Company's accounts receivable days
outstanding during the fourth quarter of 1997 measured against a target. The
bonus paid to Mr. Cadwell for 1997 included the bonus calculated under the
performance bonus plan, and a discretionary increase (of approximately 10%)
approved by the Committee as a result of Mr. Cadwell's strong performance in
1997.
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 a publicly-held competitor of the
Company which was 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.
7
<PAGE>
COMPENSATION OF NON-CEO EXECUTIVE OFFICERS
Salary levels for the Company's non-CEO 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 non-CEO executive
officers, the Company utilizes objective measurements of consolidated and
applicable operating segment performance, as well as subjective considerations
of individual performance. Consolidated and operating segment performance
measurements include criteria such as target versus actual attainment of
revenue, pretax income, sales to new and existing customers and accounts
receivable days outstanding. Considerations of individual performance include
the executive officer's initiative and contribution to overall corporate
performance, managerial performance and successful accomplishment of any
special projects, if applicable. The relative weighting of consolidated and
operating segment performance measurements varied among the individual bonus
plans for the Company's non-CEO named executive officers for 1997.
In 1997 the Stock Option Committee approved grants of stock options to various
executive officers, including the four non-CEO executive officers named in
this Proxy Statement as shown in the Summary Compensation Table and the Option
Grants in Last Fiscal Year Table.
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. 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, 1997, December 31, 1996, and December 31, 1995.
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------- ------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPEN- STOCK OPTIONS (# COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS SATION AWARDS(7) SH.) SATION(12)
- --------------------------- ---- --------- -------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Marvin S. Cadwell 1997 $524,706(3) $320,000 $-- $ -- -- $3,655
President and Chief 1996 478,543(3) 176,000 -- -- -- 3,679
Executive Officer 1995 400,174(3) 125,000 -- 712,311(8) 50,000 3,514
Francis W. Lavelle 1997 $264,553 $226,000(5) $-- $243,075(9) 10,000 $2,239
Senior Vice President 1996 249,141 217,980 -- -- 10,000 2,239
1995 240,810 160,826 -- -- 30,000 2,310
Terrence W. Kyle 1997 $289,448 $114,000(5) $-- $243,075(9) 10,000 $2,239
Senior Vice President, 1996 276,946 70,560 -- -- 5,000 2,239
Treasurer 1995 270,696 -- (6) -- -- 30,000 2,178
and Assistant Secretary
David F. Perri 1997 $251,071 $151,000(5) $-- $243,075(9) 15,000 $2,239
Senior Vice President 1996 210,914 107,920 -- -- 10,000 2,239
1995 197,682 84,978 -- 52,954(10) 10,000 2,178
Guillermo N. Ramas, Sr. (1) 1997 $239,270(4) $ 23,000 $-- $243,075(9) 10,000 $ --
Senior Vice President and 1996 263,493(4) 40,759 -- 563,125(11) 10,000 --
President of SMS
International
</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. Most of Mr. Ramas' compensation was paid
in pesetas. Such amounts were translated into US Dollars using an average
exchange rate for the applicable year.
(2) Includes amounts contributed by the Company towards the purchase of the
Common Stock of the Company under the Employee Stock Purchase Plan where
applicable.
(3) Includes imputed interest on the Company loan to Mr. Cadwell described on
page 10 of $18,554 for 1997, $17,391 for 1996, $16,301 for 1995.
(4) Includes allowances paid to Mr. Ramas for housing and use of an
automobile.
(5) Represents an estimate of the total value of the named executive officer's
bonus for 1997. A portion of such bonus will be paid in the form of
restricted stock.
(6) Mr. Kyle was not covered under a bonus plan for 1995.
(7) The number and value of shares of restricted stock held on December 31,
1997, by the named executive officers was as follows: Mr. Cadwell, 0
shares ($0); Mr. Lavelle, 5,000 shares ($329,950); Mr. Kyle, 5,000 shares
($329,950); Mr. Perri, 5,500 shares ($362,945); and Mr. Ramas, 5,000
shares ($329,950). 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 and Mr. Ramas are also the beneficiaries of
separate rabbi trusts which hold 16,576 shares, and 10,000 shares,
respectively, 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 and Mr. Ramas' benefit. The value of the shares held in trust
for Mr. Cadwell on December 31, 1997 was $1,094,016, and the value of the
shares held in trust for Mr. Ramas on December 31, 1997 was $660,000.
(8) 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 vested
in 50% increments on May 11, 1996 and May 11, 1997.
(9) Represents the dollar value of 5,000 shares of restricted stock awarded to
the named executive officer in 1997. The 5,000 shares of restricted stock
vest in 20% increments on August 14, 1998, 1999, 2000, 2001 and 2002.
(10) Represents the dollar value of 1,500 shares of restricted stock awarded
to Mr. Perri in 1995. The 1,500 shares of restricted stock vest in
increments of 500 shares each on May 11, 1996, 1997, and 1998.
(11) Represents the dollar value of 10,000 shares issued in 1996 to a rabbi
trust pursuant to the deferred compensation arrangement for Mr. Ramas
described on page 10.
(12) Amounts indicated in this column for 1997 include Company contributions
to the Company's Retirement Savings Plan for the named individuals in the
following amounts: Mr. Cadwell, $2,507, Mr. Lavelle, $2,239, Mr. Kyle,
2,239, and Mr. Perri, $2,239; and income attributable to the provision of
additional life insurance for Mr. Cadwell in the amount of $1,148. 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
<PAGE>
In 1995 and 1996 the Company entered into deferred compensation arrangements
with Messrs. Cadwell and Ramas, respectively. Under these arrangements, 16,576
shares of restricted Company stock were placed into a rabbi trust to be held
for Mr. Cadwell's benefit, and 10,000 shares of restricted Company stock were
placed into a separate rabbi trust to be held for Mr. Ramas' benefit. These
arrangements provide that if the employee remains employed by the Company
until age 60, the shares placed in trust for his benefit and their dividend
proceeds will be distributed to him over a twenty-year period after
termination of employment. Generally, the employee will not be entitled to any
benefits under these deferred compensation arrangements if his employment with
the Company terminates prior to his reaching age 60. However, if such
termination results from death or disability, or a change in control of the
Company as defined in the applicable deferred compensation agreement, or
discharge by the Company for any reason other than cause as defined, the
employee or his estate will be entitled to receive all or a specified portion
of the shares and related assets held by the trust. The values of the shares
placed in the rabbi trusts for Mr. Cadwell's and Mr. Ramas' benefit are
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. The Company has recently extended the repayment term for this loan
by an additional three years. 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, Kyle, Perri and Ramas. The
agreements with Messrs. Lavelle, Kyle, Perri and Ramas 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 US employees of the Company
are eligible to participate in the plan upon joining the Company. The plan is
intended to permit any eligible employee who wishes to participate to
contribute up to 15% of the employee's compensation on a before-tax basis
under Section 401(k) of the Internal Revenue Code, subject to certain
limitations. The plan provides for discretionary Company matching
contributions which are to be made in proportion to each employee's
contribution as well as discretionary Company profit-sharing contributions,
subject to certain limitations. Discretionary Company matching contributions
and profit-sharing contributions vest based upon the employee's length of
service and are payable upon an employee's retirement, death, disability or
termination of employment or, under specified circumstances, upon an
employee's immediate and heavy financial emergency. Contributions are
invested, in such proportions as the employee may elect, in Common Stock of
the Company or in any of nine mutual investment funds. In 1997, 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."
10
<PAGE>
Under the Company's Employee Stock Purchase Plan, all US 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 1997, Messrs. Cadwell, Lavelle, Kyle and Perri
were eligible to participate in the Company's Employee Stock Purchase Plan
under the same terms and conditions as all other US 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.
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 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 1997 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. Cadwell -- -- $ -- -- $ -- $ --
Mr. Lavelle 10,000(1) 1.6% 48.3125 08/14/07 303,835 769,977
Mr. Kyle 10,000(1) 1.6% 48.3125 08/14/07 303,835 769,977
Mr. Perri 15,000(2) 2.4% 48.3125 08/14/07 455,752 1,154,965
Mr. Ramas 10,000(3) 1.6% 48.3125 08/14/07 303,835 769,977
</TABLE>
- --------
(1) The options become exercisable in 25% increments on August 14, 1999, 2000,
2001 and 2002.
(2) The options become exercisable in 15% increments on the first and second
anniversary of the date of grant, 20% increments on the third, fourth and
fifth anniversary of the date of grant, and a 10% increment on the sixth
anniversary of the date of grant.
(3) The options become exercisable in 20% increments on August 14, 1999, 2000,
2001, 2002 and 2003.
11
<PAGE>
The following summary table details stock option exercises for the named
executive officers during 1997, 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,
1997. 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. Cadwell -- $ -- 89,500 190,000 $4,414,375 $7,321,250
Mr. Lavelle -- -- 39,155 61,052 1,866,171 1,726,240
Mr. Kyle -- -- 17,998 55,750 845,270 1,585,406
Mr. Perri 4,000 202,050 29,000 41,000 1,395,938 1,007,813
Mr. Ramas 10,100 287,825 -- 65,500 -- 1,876,688
</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
[Performance Graph Appears Here]
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
Shared Medical Systems
Corporation $100.00 $115.17 $156.37 $264.82 $243.40 $331.29
S&P 500 Index 100.00 110.08 111.53 153.45 188.68 251.63
S&P Computers (Software
& Services) Index 100.00 127.63 150.87 212.03 329.63 459.17
- --------
(1) Assumes $100 invested on December 31, 1992 in Shared Medical Systems
Corporation Common Stock, the S&P 500 Index and the S&P Computers
(Software & Services) Index.
13
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During 1997, SEC Form 4 reports were filed late with respect to one
transaction by a charitable remainder trust for which Mr. Macaleer serves as
trustee, and one transaction by Mr. Ramas.
ACCOUNTANTS
The firm of Arthur Andersen LLP served as the Company's independent public
accountants for 1997. In accordance with past Company practice, the Company
has not yet selected its independent public accountants for 1998. 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 19, 1998, 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, 1997. 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 1999 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 1, 1998.
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
14
<PAGE>
This Proxy is Solicited By The Board of Directors Of The Company
P SHARED MEDICAL SYSTEMS CORPORATION
R PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
O May 15, 1998
X The undersigned hereby appoints R. James Macaleer and James C. Kelly,
or each of them, as Proxies, each with full power of substitution and
Y revocation, to attend the Annual Meeting of Stockholders of Shared
Medical Systems Corporation on May 15, 1998 and any adjournment thereof,
and thereat to vote all shares which the undersigned would be able 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 votes as
indicated in this example
- -------------------------------------------------------------------------------
1. Election of Directors FOR all AUTHORITY
nominees WITHHELD
To withhold authority to vote for one or more
but less than all of the seven nominees named
in the Proxy Statement (Messrs. Macaleer,
Denworth, DeTurk, Weston, Rubin and Cadwell
and Dr. Wilensky), please list the name(s) of
the nominee(s) for whom authority is withheld:
- -----------------------------------------------
- -------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE SEVEN NOMINEES LISTED IN ITEM 1.
___
|
Signature_______________________ Signature______________________ Date________
Note: (Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such).
FOLD AND DETACH HERE
