<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)
Shared Medical Systems Corporation
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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
June 9, 2000
----------------
The Annual Meeting of Stockholders of Shared Medical Systems Corporation
will be held at The Hotel duPont, 11th and Market Streets, Wilmington,
Delaware, on Friday, June 9, 2000, at 11:30 a.m. for the following purposes:
1) To elect six directors for one-year terms;
2) To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on April 17, 2000, 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 18, 2000
<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.
Each share of the Company's Common Stock, except for the shares held in the
Company's treasury, is entitled to one vote. On March 31, 2000, there were
26,971,875 shares of Common Stock outstanding (not including 3,884,920 shares
held in the Company's treasury). April 17, 2000 is the record date for
stockholders entitled to notice of and to vote at the Annual Meeting.
This Proxy Statement and the accompanying proxy are being mailed to
stockholders on or about April 18, 2000.
ANNUAL REPORT
A copy of the Shared Medical Systems Corporation Annual Report, including
financial statements for the year ended December 31, 1999, 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 March 31, 2000, 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 of Amount and Nature
Title of Class Beneficial Owner of Beneficial Ownership Percent of Class
-------------- --------------------------- ----------------------- ----------------
<C> <S> <C> <C>
Common Stock Waddell & Reed Investment 2,710,600(1) 10.0%
Management Company
6300 Lamar Avenue
Shawnee Mission, KS 66201
Common Stock Wellington Management 2,388,300(2) 8.9%
Company, LLP
75 State Street
Boston, Massachusetts 02109
Common Stock William Blair & Company, 2,277,671(3) 8.4%
L.L.C.
222 West Adams Street
Chicago, Illinois 60606
Common Stock FMR Corp. 1,297,134(4) 4.8%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- --------
(1) As reflected in the Schedule 13G filed on April 7, 2000 with the
Securities and Exchange Commission by Waddell & Reed Investment
Management Company ("WRIMC"), Waddell & Reed, Inc. ("WRI"), Waddell &
Reed Financial Services, Inc. ("WRFSI"), and Waddell & Reed Financial,
Inc. ("WRFI"), the shares indicated are beneficially owned by one or more
open-end investment companies or other managed accounts which are advised
or sub-advised by WRIMC, an investment advisory subsidiary of WRI. WRI is
a subsidiary of WRFSI, which is in turn a subsidiary of WRI. WRIMC is
reporting direct sole voting power and sole dispositive power over all of
the shares indicated, and the other entities are reporting indirect
voting and dispositive powers over such shares.
(2) As reflected in the Schedule 13G filed on February 11, 2000 with the
Securities and Exchange Commission by Wellington Management Company LLP.
("WMC"), a registered investment adviser, WMC has shared voting power
over 1,156,200 of such shares and shared dispositive power over all of
the shares indicated.
(3) As reflected in the Schedule 13G Amendment filed on February 28, 2000
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 379,520 of such shares and sole dispositive
power over all of the shares indicated.
(4) As reflected in a Schedule 13G Amendment filed on February 14, 2000 with
the Securities and Exchange Commission by FMR Corp. ("FMR"), Edward C.
Johnson 3rd and Abigail P. Johnson, FMR has sole dispositive power over
all of the shares indicated and sole voting power over 209,494 of such
shares; Fidelity Management & Research Company, a registered investment
adviser and subsidiary of FMR, is the beneficial owner of 979,000 of such
shares, Fidelity Management Trust Company, a bank subsidiary of FMR, is
the beneficial owner of 309,134 of such shares, and 9,000 of such shares
are owned directly by Edward C. Johnson 3rd, Chairman of FMR, or in trust
for the benefit of Mr. Johnson or a family member.
2
<PAGE>
Directors and Management
The following table sets forth, as of December 31, 1999, 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)
------------------------ -------- --------------------- ----------
<S> <C> <C> <C>
Directors
R. James Macaleer, 65 1969 957,534(2) 3.6%
Chairman of the Board of the
Company; Chairman of the Board and
Chief Executive Officer (1969-1995).
Director, Arrow International, Inc.
Frederick W. DeTurk, 71 1981 26,800(3) *
President, DeTurk Enterprises, Inc.,
a management consulting firm.
Josh S. Weston, 71 1987 14,099(4) *
Honorary Chairman of the Board,
Automatic Data Processing, Inc.,
(ADP), an information processing
services company; Chairman of ADP
(1996-1998); Chairman of the Board
and Chief Executive Officer of ADP
(1982-1996). Director, Olsten Corp.,
Russ Berrie and Company, Inc.
Jeffrey G. Rubin, 56 1993 19,200(5) *
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).
Marvin S. Cadwell, 56 1995 160,736(6) *
President and Chief Executive
Officer of the Company since 1995;
Executive Vice President (1993-
1995).
Gail R. Wilensky, Ph.D., 56 1996 13,200(7) *
Senior Fellow, Project Hope, an
international health foundation,
since 1993. Director, Advanced
Tissue Sciences, Inc., Manor Care,
Inc., Quest Diagnostics
Incorporated, St. Jude Medical,
Inc., Syncor International
Corporation, United Healthcare
Corporation.
Non-Director Executive Officers
Francis W. Lavelle, 50 80,278(8) *
Senior Vice President
Terrence W. Kyle, 49 56,475(9) *
Senior Vice President, Treasurer and
Assistant Secretary
David F. Perri, 50 52,227(10) *
Senior Vice President
V. Brewster Jones, 55 26,330(11) *
Senior Vice President
All executive officers and directors
as a group (15 persons) 1,519,321(12) 5.6%
</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 30,923 shares owned jointly by Mr. Macaleer and his wife;
includes 15,772 shares held in the Company's Retirement Savings Plan;
includes 560,000 shares held by Grantor Retained Annuity Trusts (GRATs)
established by Mr. Macaleer in 1999 for which he serves as trustee with
voting and investment control.
(3) Includes 22,000 shares which Mr. DeTurk had the right to acquire within
60 days after December 31, 1999, upon exercise of stock options; includes
500 shares of restricted stock.
(4) Includes 12,000 shares which Mr. Weston had the right to acquire within
60 days after December 31, 1999, upon exercise of stock options; includes
500 shares of restricted stock.
(5) Includes 18,000 shares which Mr. Rubin had the right to acquire within 60
days after December 31, 1999, upon exercise of stock options; includes
400 shares of restricted stock.
(6) Includes 149,500 shares which Mr. Cadwell had the right to acquire within
60 days after December 31, 1999, 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 11 below.
(7) Includes 12,000 shares which Dr. Wilensky had the right to acquire within
60 days after December 31, 1999, upon exercise of stock options; includes
400 shares of restricted stock.
(8) Includes 72,707 shares which Mr. Lavelle had the right to acquire within
60 days after December 31, 1999, upon exercise of stock options; includes
3,870 shares of restricted stock; includes 1,567 shares held in the
Company's Retirement Savings Plan; does not include 6,027 shares held in
a rabbi trust pursuant to the deferred compensation arrangement for Mr.
Lavelle described on page 11 below.
(9) Includes 45,248 shares which Mr. Kyle had the right to acquire within 60
days after December 31, 1999, upon exercise of stock options; includes
3,650 shares of restricted stock; includes 6,072 shares held in the
Company's Retirement Savings Plan; does not include 5,382 shares held in
a rabbi trust pursuant to the deferred compensation arrangement for Mr.
Kyle described on page 11 below.
(10) Includes 47,500 shares which Mr. Perri had the right to acquire within 60
days after December 31, 1999, upon exercise of stock options; includes
3,770 shares of restricted stock; does not include 5,036 shares held in a
rabbi trust pursuant to the deferred compensation arrangement for Mr.
Perri described on page 11 below.
(11) Includes 15,500 shares which Mr. Jones had the right to acquire within 60
days after December 31, 1999, upon exercise of stock options; includes
7,330 shares of restricted stock; does not include 7,809 shares held in a
rabbi trust pursuant to the deferred compensation arrangement for Mr.
Jones described on page 11 below.
(12) Includes 478,045 shares which certain executive officers and directors
had the right to acquire within 60 days after December 31, 1999, upon
exercise of stock options, 50,217 shares as to which beneficial ownership
is based on shared voting and investment power, 24,369 shares of
restricted stock, and 24,343 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 June 9, 2000 shall be six. The
Board has nominated Messrs. Macaleer, DeTurk, Weston, Rubin and Cadwell and
Dr. Wilensky for election as directors of the Company at the 2000 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 2000 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
1999. If, prior to the election, any of the nominees should become unable to
serve for any reason, the persons named as proxies will have full discretion
to vote for such other persons as may be nominated by the Board. The Board of
Directors has no reason to believe that any nominee will be unable to serve.
Necessary Votes
In the election of directors, assuming a quorum is present, the six nominees
receiving the highest number of votes cast at the meeting will be elected
directors. Shares represented by proxies which are marked to withhold
authority to vote in the election of directors and shares subject to a
specific direction not to cast a vote, such as a broker non-vote, will not be
included in the vote totals.
Meetings and Committees of Board
The Board of Directors held twenty-seven meetings during 1999. All directors
attended at least 75% of the meetings of the Board of Directors and the
Committees thereof of which they are members, except for Mr. Weston.
During 1999 the Board of Directors had the following ongoing Committees: an
Audit Committee, a Management and Compensation Committee and a Stock Option
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 1999,
the Audit Committee held four meetings.
The Management and Compensation Committee is currently composed of Messrs.
DeTurk (Chairman) and Weston and Dr. Wilensky. This Committee makes
recommendations to the Board of Directors concerning remuneration arrangements
for certain executive officers. During 1999, 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 1999, the Stock
Option Committee held three meetings.
Compensation of Directors
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 Company plans. At the time of each Annual
Meeting of the Company's stockholders each elected non-employee director is
granted 400 shares of Company restricted stock, and each non-employee director
who is appointed as Chairman of a committee of the Board 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 1999, at
the time of the Annual Meeting of Stockholders, Messrs. DeTurk, Weston and
Raymond K. Denworth, Jr. 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 non-employee directors in 1999.
The Company from time to time may make donations to one or more charitable
institutions on behalf of directors. In 1999, 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.
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
6
<PAGE>
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 1999 at $620,000, representing an
increase of 12.7% from the salary set for him for 1998. This increase was
based on the positive financial results achieved by the Company during 1998,
as well as the Committee's consideration of comparative data and Mr. Cadwell's
individual performance and responsibilities.
The Committee adopted full and half-year performance bonus plans for Mr.
Cadwell for 1999. Mr. Cadwell's bonus under the full-year plan was determined
based on objective measures of corporate performance (consolidated earnings
per share; a defined "sales" component, primarily consisting of the present
value of software, remote processing, and certain professional service fee
sales, plus current year revenues from certain other professional services,
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 1999 measured against a target. The
Company failed to achieve the minimum earnings per share level for 1999
specified in the plan, and accordingly Mr. Cadwell was not paid a bonus for
1999.
Mr. Cadwell's half-year bonus plan provided for a bonus to be paid to Mr.
Cadwell if service and systems fees revenue growth and consolidated earnings
growth in the first half of 1999, as compared to the first half of 1998,
exceeded designated target levels. While service and systems fees revenue
growth did exceed the targeted levels, earnings growth did not, and therefore
this bonus was not paid.
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 three publicly-held competitors of the
Company which were 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.
In 1999 the Stock Option Committee approved a grant of stock options to Mr.
Cadwell as shown in the Summary Compensation Table and the Option Grants in
Last Fiscal Year Table.
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 named non-CEO executive officers for 1999.
In 1999 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,
<TABLE>
<S> <C>
Management and Compensation Committee: Stock Option Committee:
Frederick W. DeTurk Josh S. Weston
Josh S. Weston Frederick W. DeTurk
Gail R. Wilensky
</TABLE>
8
<PAGE>
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 years
ended December 31, 1999, December 31, 1998, and December 31, 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
---------------------------- ------------------------
Other Securities
Annual Restricted Underlying All Other
Name and Principal Salary Compen- Stock Options Compen-
Position Year (1) Bonus sation Awards(4) (# sh.) sation(15)
------------------ ---- -------- -------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Marvin S. Cadwell 1999 $624,152(2) $ -- $ -- $ -- 100,000 $3,343
President and Chief 1998 566,695(2) -- -- -- -- 3,267
Executive Officer 1997 524,706(2) 320,000 -- -- -- 3,655
Terrence W. Kyle 1999 $331,155 $ 30,000 $ -- $ 29,616(5) 10,000 $2,357
Senior Vice President, 1998 311,115 25,610 -- 286,255(6) 30,000 2,357
Treasurer and Assistant 1997 289,448 114,000 -- 243,075(7) 10,000 2,239
Secretary
Francis W. Lavelle 1999 $376,015(3) $111,485 $16,244(3) $ 39,639(8) 15,000 $2,357
Senior Vice President 1998 300,796 80,559 -- 320,561(9) 40,000 2,357
1997 264,553 226,000 -- 243,075(7) 10,000 2,239
David F. Perri 1999 $287,588 $ 30,649 $ -- $ 35,083(10) 7,500 $2,357
Senior Vice President 1998 269,453 53,196 -- 267,852(11) 20,000 2,357
1997 251,071 151,000 -- 243,075(7) 15,000 2,239
V. Brewster Jones 1999 $301,418 $ 35,750 $ -- $ 37,817(12) 15,000 $1,100
Senior Vice President 1998 261,155 58,812 -- 415,341(13) 40,000 1,100
1997 135,241 91,000 -- 556,775(14) 25,000 660
</TABLE>
- --------
(1) Includes amounts contributed by the Company towards the purchase of the
Common Stock of the Company under the Employee Stock Purchase Plan,
where applicable.
(2) Includes imputed interest on the Company loan to Mr. Cadwell described
below of $14,401 for 1999, $14,893 for 1998, $18,554 for 1997.
(3) The salary amount indicated for Mr. Lavelle includes $32,556 reimbursed
to Mr. Lavelle for interest payments made on the PNC Bank, N.A. loan
described below, and the amount indicated in the Other Annual
Compensation column represents a payment made to Mr. Lavelle for the
additional taxes he incurred as a result of such reimbursement.
(4) The number and value of shares of restricted stock held on December 31,
1999, by the named executive officers was as follows: Mr. Cadwell, 0
shares ($0); Mr. Kyle, 3,650 shares ($185,922); Mr. Lavelle, 3,870
shares ($197,128); Mr. Perri, 3,770 shares ($192,034); and Mr. Jones,
7,330 shares ($373,372). Dividends on these shares are paid directly to
the holders of the stock, at the same rate as dividends paid to all
other stockholders. Each of the named executive officers is the
beneficiary of separate rabbi trusts which hold shares of the Company's
Common Stock, as described below. 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 the named executive officer's benefit. The
number and value of shares held in trust for each named executive
officer on December 31, 1999 was as follows: Mr. Cadwell, 16,576 shares
($844,340); Mr. Kyle, 5,382 shares ($274,146); Mr. Lavelle, 6,027 shares
($307,000); Mr. Perri, 5,036 shares ($256,521); and Mr. Jones, 7,809
shares ($397,771).
(5) Represents the dollar value of 650 shares of restricted stock awarded to
the named executive officer in 1999 which vest in increments of 216, 216
and 218 shares on September 23, 2000, 2001 and 2002, respectively.
9
<PAGE>
(6) Represents the dollar value of 5,382 shares issued in 1998 to a rabbi
trust pursuant to the deferred compensation arrangement for Mr. Kyle
described below.
(7) Represents the dollar value of 5,000 shares of restricted stock awarded
to the named executive officer in 1997 which vest in 20% increments on
August 14, 1998, 1999, 2000, 2001 and 2002.
(8) Represents the dollar value of 870 shares of restricted stock awarded to
the named executive officer in 1999 which vest in increments of 290
shares on September 23, 2000, 2001 and 2002, respectively.
(9) Represents the dollar value of 6,027 shares issued in 1998 to a rabbi
trust pursuant to the deferred compensation arrangement for Mr. Lavelle
described below.
(10) Represents the dollar value of 770 shares of restricted stock awarded to
the named executive officer in 1999 which vest in increments of 256, 256
and 258 shares on September 23, 2000, 2001 and 2002, respectively.
(11) Represents the dollar value of 5,036 shares issued in 1998 to a rabbi
trust pursuant to the deferred compensation arrangement for Mr. Perri
described below.
(12) Represents the dollar value of 830 shares of restricted stock awarded to
the named executive officer in 1999 which vest in increments of 276, 276
and 278 shares on September 23, 2000, 2001 and 2002, respectively.
(13) Represents the dollar value of 7,809 shares issued in 1998 to a rabbi
trust pursuant to the deferred compensation arrangement for Mr. Jones
described below.
(14) Represents the dollar value of a total of 10,000 shares of restricted
stock awarded to Mr. Jones in 1997. The shares vest in the following
increments: 1,750 shares on October 24, 1998, 1,750 shares on
October 24, 1999, 2,000 shares on October 24, 2000, 2,000 shares on
October 24, 2001, 2,000 shares on October 24, 2002, and 500 shares on
October 24, 2003.
(15) Amounts indicated in this column for 1999 include Company contributions
to the Company's Retirement Savings Plan for the named individuals in
the following amounts: Mr. Cadwell, $2,357, Mr. Kyle, $2,357, Mr.
Lavelle, $2,357, Mr. Perri, $2,357, and Mr. Jones, $1,100; and income
attributable to the provision of additional life insurance for Mr.
Cadwell in the amount of $986. 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.
The Company has entered into deferred compensation arrangements with all of
the named executive officers. Under these arrangements, shares of restricted
Company stock were placed into separate rabbi trusts to be held for each such
executive officer's benefit. The number of shares placed into these trusts for
the benefit of each named executive officer is as follows: Mr. Cadwell, 16,576
shares; Mr. Kyle, 5,382 shares; Mr. Lavelle, 6,027 shares; Mr. Perri, 5,036
shares; and Mr. Jones, 7,809 shares. These arrangements generally 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.
The arrangements also provide for the distribution to the employee or his
estate of all or specified portions of the shares and related assets held by
the trust in the event of earlier termination of employment caused by death,
disability, a change in control of the Company, or discharge without cause, or
in the case of Mr. Cadwell, voluntary termination of employment. The values of
the shares placed in the rabbi trusts for the each named executive officer's
benefit are reflected in the Summary Compensation Table in the column marked
"Restricted Stock Awards," or in the related footnote to the table.
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. In 1998 the Company 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."
The Company has entered into employment agreements with most of its
executive officers, including Messrs. Kyle, Lavelle, Perri and Jones. The
agreements with Messrs. Kyle, Lavelle, Perri and Jones provide for
10
<PAGE>
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 agreed to guarantee a $500,000 loan received by Mr. Lavelle in
1998 from PNC Bank, N.A. and to reimburse Mr. Lavelle for interest payments
made on the loan and for the additional taxes incurred by Mr. Lavelle as a
result of such reimbursement. Amounts reimbursed to Mr. Lavelle in 1999 for
interest payments on the loan, and for the additional taxes incurred, are
reflected in the Summary Compensation Table in the columns marked "Salary" and
"Other Annual Compensation," respectively.
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 ten mutual investment funds. In 1999, 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 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. During 1999, Messrs. Cadwell, Kyle, Lavelle, Perri
and Jones 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, the 1994 Non-Qualified Stock Option and
Restricted Stock Plan, the 1999 Restricted Stock Plan and the 1999 Stock
Option Plan. Depending upon the plan, options may not have a term exceeding
ten or twenty years. Restricted stock awards are subject to vesting schedules.
In 1998 the Company amended all of its outstanding stock options to provide
protection to stock option holders in the event of certain changes in control
of the Company. Under these amendments, generally all outstanding stock
options will accelerate (become immediately exercisable) in the event of a
change in control (as defined above) which is not approved by the Company's
Board of Directors. In the event of change in control
11
<PAGE>
which is approved by the Board of Directors, depending on the type of
transaction, outstanding stock options will either be converted into options
to purchase stock in the acquiring company or into the right to receive
deferred payments of a cash amount. These options or payments will then
accelerate (become immediately exercisable or payable) in the event the holder
is terminated from employment without cause or suffers an "adverse employment
change" within 30 months after the change in control transaction, so long as
the former CEO of the Company is not then the CEO of the combined or parent
company. An "adverse employment change" generally means a reduction in
compensation, a material reduction in duties, responsibilities or authority of
the option holder or a significant change in work location.
The following summary table details for the named executive officers stock
options granted in 1999 and the potential realizable values for the respective
options granted based on assumed rates of annual compound stock appreciation
of 5% and 10% computed from the date the options were granted over the full
option term.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
------------------------------------------------------------ ---------------------
% of Total
Number of Securities Options Granted
Options Underlying to Employees in Exercise Expiration
Name Options Granted Fiscal Year Price ($/Sh) Date 5% 10%
- ---- -------------------- --------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Cadwell 100,000(1) 15.3% $47.03 09/23/09 $2,957,773 $7,495,518
Mr. Kyle 10,000(2) 1.5% 40.09 11/16/09 252,148 638,992
Mr. Lavelle 15,000(2) 2.3% 40.09 11/16/09 378,222 958,488
Mr. Perri 7,500(2) 1.1% 40.09 11/16/09 189,111 479,244
Mr. Jones 15,000(2) 2.3% 40.09 11/16/09 378,222 958,488
</TABLE>
- --------
(1) The options become exercisable in increments of 20% on the second and
third anniversaries of the date of grant, and a 60% increment on the
fourth anniversary of the date of grant.
(2) The options become exercisable in increments of 10% on the first, second
and third anniversaries of the date of grant, a 30% increment on the
fourth anniversary of the date of grant, and a 40% increment on the fifth
anniversary of the date of grant.
The following summary table details stock option exercises for the named
executive officers during 1999, 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,
1999. 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 10,000 $406,250 149,500 220,000 $4,650,844 $3,121,245
Mr. Kyle -- -- 45,248 68,500 1,008,252 539,562
Mr. Lavelle -- -- 72,707 82,500 1,789,348 617,156
Mr. Perri -- -- 47,500 50,000 1,180,000 348,515
Mr. Jones -- -- 15,500 64,500 33,750 264,531
</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
[GRAPH]
1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- ----
Shared Medical Systems
Corporation............$100.00 $169.36 $155.66 $211.87 $162.31 $ 168.37
S&P 500 Index............ 100.00 137.58 169.17 225.60 290.08 351.12
S&P Computer (Software &
Services) Index........ 100.00 140.54 218.49 304.35 551.47 1,019.84
- --------
(1) Assumes $100 invested on December 31, 1994 in Shared Medical Systems
Corporation Common Stock, the S&P 500 Index and the S&P Computers
(Software & Services) Index.
13
<PAGE>
ACCOUNTANTS
The firm of Arthur Andersen LLP served as the Company's independent public
accountants for 1999. In accordance with past Company practice, the Company
has not yet selected its independent public accountants for 2000. 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 April 17, 2000, 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, 1999. 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 2001 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 19, 2000.
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>
Please mark [X]
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 six nominees named in the Proxy Statement
(Messrs. Macaleer, 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 SIX NOMINEES LISTED IN ITEM 1.
Signature______________________Signature______________________Date______________
NOTE: (Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such).
--FOLD AND DETACH HERE--
<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
June 9, 2000
X
Y The undersigned hereby appoints R. James Macaleer and James C. Kelly, or
each of them, as Proxies, each with full power of substitution and
revocation, to attend the Annual Meeting of Stockholders of Shared Medical
Systems Corporation on June 9, 2000 and any adjournment thereof, and thereat
to vote all shares which the undersigned would be entitled to vote if
personally present upon the matters as set forth in the Notice of Annual
Meeting and Proxy Statement and, in their discretion, upon any other matters
which may properly come before the meeting.
(Continued and to be signed on other side)
--FOLD AND DETACH HERE--
