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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Schedule 14D-9
Solicitation/Recommendation Statement Under
Section 14(d)(4) of the
Securities Exchange Act of 1934
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Shared Medical Systems Corporation
(Name of Subject Company)
Shared Medical Systems Corporation
(Name of Person Filing Statement)
Common Stock, $.01 Par Value
(Including the Associated Preferred Stock Purchase Rights)
(Title of Class of Securities)
(CUSIP Number of Class of Securities)
819486 10 1
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Bonnie L. Shuman, Esq.
General Counsel
Shared Medical Systems Corporation
51 Valley Stream Parkway
Malvern, Pennsylvania 19355-1406
(610) 219-6300
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person Filing Statement)
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Copy to:
Thomas E. Wood, Esq.
Drinker Biddle & Reath LLP
1000 Westlakes Drive, Suite 300
Berwyn, Pennsylvania 19312-2409
(610) 993-2200
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[_]Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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Item 1. Subject Company Information.
The name of the subject company is Shared Medical Systems Corporation, a
Delaware corporation (the "Company"). The address of the principal executive
offices of the Company is 51 Valley Stream Parkway, Malvern, Pennsylvania
19355-1406. The telephone number of the Company at its principal executive
offices is (610) 219-6300.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Statement")
relates is the Common Stock, par value $.01 per share, of the Company (the
"Common Stock") and the associated preferred stock purchase rights (the
"Rights") issued pursuant to the Rights Agreement dated as of May 1, 1991, by
and between the Company and Pittsburgh National Bank, as Rights Agent, as
amended and restated by Amendment No. 1 to Rights Agreement dated as of March
27, 2000, by and between the Company and ChaseMellon Shareholder Services,
L.L.C., as successor Rights Agent (the "Rights Agreement"), as amended by
Amendment No. 2 thereto dated as of May 1, 2000. As of April 30, 2000, there
were 27,012,963 shares of Common Stock outstanding.
Item 2. Identity and Background of Filing Persons.
The filing person is the subject company. The Company's name, business
address and business telephone number are set forth in Item 1 above.
This Statement relates to the tender offer by Autobahn Acquisition
Corporation (the "Purchaser"), a Delaware corporation and a wholly-owned
subsidiary of Siemens Corporation, a Delaware corporation ("Siemens"), to
purchase all of the outstanding shares of Common Stock and the associated
Rights (the shares of Common Stock together with any associated Rights are
referred to in this Statement as the "Shares"), at a purchase price of $73.00
per Share, net to the seller in cash (the "Offer Price"), upon the terms and
subject to the conditions set forth in the Purchaser's Offer to Purchase,
dated May 10, 2000, and in the related Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the
"Offer"). Siemens is a wholly-owned indirect subsidiary of Siemens
Aktiengesellschaft. The Offer is described in a Tender Offer Statement on
Schedule TO (as amended or supplemented from time to time, the "Schedule TO"),
filed by Siemens and the Purchaser with the Securities and Exchange Commission
(the "Commission") on May 10, 2000. The Offer is being made in accordance with
the Agreement and Plan of Merger, dated as of April 30, 2000, among Siemens,
the Purchaser and the Company (the "Merger Agreement"). The Merger Agreement
provides that, subject to the satisfaction or waiver of certain conditions,
following completion of the Offer, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), the Purchaser will be
merged with and into the Company (the "Merger"). Following the consummation of
the Merger, the Company will continue as the surviving corporation (the
"Surviving Corporation") and will be a wholly-owned subsidiary of Siemens. As
more fully described in Item 3 below, at the effective time of the Merger (the
"Effective Time"), each issued and outstanding Share (other than Shares owned
by Siemens, the Purchaser, any of their respective subsidiaries, the Company
or any of its subsidiaries, which will be cancelled, and Shares, if any, held
by stockholders who did not vote in favor of the Merger Agreement and who
comply with all of the relevant provisions of Section 262 of the DGCL relating
to dissenters' rights of appraisal) will be converted into the right to
receive $73.00 in cash or any greater amount per Share paid pursuant to the
Offer (the "Merger Consideration").
The Schedule TO states that the principal offices of the Purchaser and
Siemens are located at 153 East 53rd Street, New York, New York 10022.
Item 3. Past Contacts, Transactions, Negotiations and Agreements.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Rule l4f-1 under the Securities Exchange Act (the "Information Statement")
that is attached as
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Annex B to this Statement and is incorporated herein by reference. Except as
described in this Statement (including in the Exhibits hereto and in Annex B
hereto) or incorporated herein by reference, to the knowledge of the Company,
as of the date of this Statement there exists no material agreement,
arrangement or understanding or any actual or potential conflict of interest
between the Company or its affiliates and (1) the Company's executive
officers, directors or affiliates or (2) Siemens, the Purchaser or the their
respective executive officers, directors or affiliates.
The Merger Agreement. The summary of the Merger Agreement and the
description of the conditions of the Offer contained in Sections 11 and 13,
respectively, of the Offer to Purchase of Siemens and the Purchaser, dated May
10, 2000 and filed as Exhibit (a)(1) to the Schedule TO, which is being mailed
to stockholders together with this Statement, are incorporated herein by
reference. Such summary and description are qualified in their entirety by
reference to the Merger Agreement, which has been filed as Exhibit (e)(1)
hereto and is incorporated herein by reference.
Effects of the Offer and the Merger Under Company Incentive Agreements and
Plans Between the Company and its Directors and Executive Officers.
Certain members of the Company's management and the Company's Board of
Directors (the "Board" or the "Board of Directors") have interests in the
transactions contemplated by the Merger Agreement that are in addition to
their interests as Company shareholders generally. The Board was aware of
these interests and considered them, among other matters, in approving the
Merger Agreement and the transactions contemplated thereby.
Stock Option Agreements. The Merger Agreement provides that each outstanding
option to purchase shares of Common Stock granted to the Board or the
executive officers or other employees under any stock option agreement or
similar arrangement (each, a "Company Stock Option") will automatically, in
accordance with the terms of the applicable agreements or arrangements
governing such Company Stock Option (each, a "Company Stock Option
Agreement"), be converted into the right to receive an amount in cash equal to
the product obtained by multiplying (1) the difference between the Merger
Consideration and the per share exercise price of such Company Stock Option,
by (2) the number of shares of Common Stock covered by such Company Stock
Option. All cash payments will be made at the times, in the amounts and with
interest in accordance with the applicable Company Stock Option Agreement,
except that any payments that would otherwise be made (pursuant to the vesting
schedule of the applicable Company Stock Option Agreement) more than 30 months
after the consummation of the Merger will instead be paid in quarterly
installments as nearly equal as possible, with interest at the rate of 10.0%
per annum, over the first thirty months after the consummation of the Merger.
The purchase of a majority of the Shares pursuant to the Offer will constitute
a "change in control" for purposes of the change-in-control provisions
applicable to the Company Stock Options held by Company employees and by the
Company's non-employee directors. The vesting schedules in the Company Stock
Option Agreements with the Company's non-employee directors and with Marvin S.
Cadwell, the Company's President and Chief Executive Officer, are to be
accelerated, and Mr. Cadwell will be entitled to the applicable cash payments
in respect of his Company Stock Options upon the consummation of the Merger
and the non-employee directors will be entitled to the applicable cash
payments in respect of their Company Stock Options upon their removal from
office following the consummation of the Merger.
Restricted Stock Agreements. The Merger Agreement provides that each holder
of a restricted share of Common Stock will be entitled to receive the Merger
Consideration payable with respect to such restricted share in accordance with
the terms of the applicable agreements or arrangements governing such
restricted share (each, a "Restricted Stock Agreement"). All cash payments
will be made in accordance with the vesting schedules set forth in the
applicable Restricted Stock Agreement, except that any payments that would
otherwise be made (pursuant to such vesting schedule) more than 30 months
after the consummation of the Merger will instead be paid in quarterly
installments as nearly equal as possible, with interest at the rate of 10.0%
per annum, over the first thirty months after the consummation of the Merger.
Except as described in the immediately preceding
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sentence, the vesting schedules set forth in the Company's existing Restricted
Stock Agreements will not be accelerated as a result of the consummation of
the Offer.
Parachute Payments. To the extent that any payments to any of the Company's
executive officers are subject to the excise tax on excess parachute payments
under Section 4999 of the Internal Revenue Code of 1986, as amended, Siemens
will be required to "gross up" such payments to cover such tax. The Company
expects that Marvin S. Cadwell, the Company's President and Chief Executive
Officer, will be the only executive officer to receive a parachute payment
pursuant to the transactions contemplated by the Merger Agreement.
Certain Arrangements With Mr. Cadwell. The Board of Directors, at a meeting
held April 28, 2000, approved a cash bonus of $600,000 for Mr. Cadwell, the
Company's President and Chief Executive Officer, payable upon the successful
completion of the transactions contemplated by the Merger Agreement. At the
same meeting, the Board approved a Company loan to Mr. Cadwell in the amount
of $432,994.46. Mr. Cadwell used the proceeds of the loan to pay the exercise
price (and applicable taxes) for the exercise of Company Stock Options held by
him that were scheduled to expire in May 2000. The loan is repayable on demand
and is interest free for 90 days, but bears interest at the rate of 6% per
annum thereafter until paid. The loan was made independently of the
transactions contemplated by the Merger Agreement.
Certain Retention and Other Arrangements Under Consideration. Siemens has
indicated that it wants to implement, and is considering, the adoption of a
retention plan intended to provide financial incentives for certain employees
to remain in the employ of the Company for 30 months following the Merger.
Siemens is also considering possible amendments to the existing deferred
compensation arrangements between the Company and certain officers. The
existing terms of the deferred compensation arrangements are described in the
Information Statement.
Item 4. The Solicitation or Recommendation.
(a) Recommendation of the Board of Directors. The Board of Directors, at a
meeting held on April 30, 2000, determined that the terms of the Offer and the
Merger are fair to and in the best interests of the stockholders of the
Company. All but one member of the Board were present at this meeting, at
which the Board unanimously approved the Offer and the Merger and the other
transactions contemplated by the Merger Agreement, and approved the Merger
Agreement, including for purposes of the "interested stockholder" provisions
of the DGCL. The absent director had not participated in the deliberations
becasue of an affiliation with a potential strategic partner of the Company.
The Board of Directors recommends that stockholders accept the Offer and
tender their Shares in the Offer.
(b) (i) Background of the Offer; Contacts with Siemens.
From time to time during the last several years, the Company has evaluated
its position and prospects in the healthcare information technology services
and systems industry and has considered various possible strategies for
increasing stockholder value, including entering into strategic alliances or
combinations with potential partners. In particular, during the period from
approximately mid-1998 until the Company's execution of the Merger Agreement
with Siemens, the Company conducted exploratory discussions regarding possible
business combinations with several potential partners. Some of these
discussions evolved beyond preliminary evaluation into substantive
negotiations. Goldman, Sachs & Co. ("Goldman Sachs"), who at the request of
the Company had also contacted other potentially interested parties, advised
the Company in these discussions.
In the midst of this process, on March 2, 2000, Eclipsys Corporation, a
substantially smaller business than the Company, announced an uninvited public
proposal to acquire the Company in exchange for Eclipsys' stock. At the time
this proposal was made public Eclipsys' stock was trading at approximately
$28.63 per share, and the proposal contemplated the issuance of Eclipsys stock
worth $67 in exchange for each outstanding share of the Company. Eclipsys
subsequently announced its intention to nominate its own slate of directors at
the Company's annual meeting, and to challenge through litigation certain
provisions of the Company's Shareholder Rights Plan. The Board decided that it
was not interested in pursuing the proposed combination with Eclipsys, which
would in essence have amounted to an acquisition by the Company of the smaller
corporation. (Based on
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Eclipsys' stock price at the time of the proposal, the transaction would have
resulted in the Company's stockholders owning approximately two-thirds of the
combined entity.) On March 6, 2000, the Company also publicly confirmed that
it had hired Goldman Sachs to assist it in its strategic explorations. At the
end of March, Eclipsys announced that it had signed an agreement for a
combination of Eclipsys with another entity and that it was withdrawing its
proposal for a combination with the Company and related litigation. Eclipsys
has also since notified the Company that it will not nominate directors at the
Company's annual meeting. On Friday, April 28, 2000, the closing price for
Eclipsys' common stock on the NASDAQ Stock Market was $8.00 per share.
During the course of the Company's exploratory process, Credit Suisse First
Boston, on behalf of Siemens, contacted Goldman Sachs on March 13, 2000 to
discuss Siemens' interest in acquiring the Company. Siemens, at the invitation
of Goldman Sachs, indicated in a letter dated March 17, 2000 (addressed to Mr.
Cadwell, the Company's President and Chief Executive Officer, and delivered to
Goldman Sachs) its preliminary interest in acquiring the Company for $72.00 in
cash per Share. Following execution of a confidentiality agreement on March
23, 2000, with the Company, Siemens became one of the potential acquirors with
which the Company was engaged in discussions. Siemens conducted its financial,
legal, technical and operational due-diligence reviews of the Company in late
March and early April.
On April 13, 2000, Goldman Sachs, at the direction of the Company's Board,
sent instruction letters to certain parties interested in a business
combination with the Company, including Siemens, soliciting definitive
proposals. The letter indicated that the Company would consider in its review
of a party's proposal, among other things, the price offered, the certainty of
closing a transaction, the existence of any financial contingencies, and the
number and substantive nature of the party's comments to the Company's draft
Merger Agreement (copies of which were then circulated on April 17, 2000). The
letter designated April 26, 2000 as the final date for the Company's receipt
of proposals. The Company received Siemens' definitive proposal on April 26,
2000, which indicated a price of $72.25 in cash per Share.
On April 28, 2000, at a special meeting of the Company's Board, the members
of the Company's senior management, together with the Company's legal and
financial advisors, reviewed in detail with the Board the definitive proposals
received as of April 26. The discussions included a detailed review of, among
other things, the consideration offered by each of the bidders, the presence
of any financing contingencies in its proposals, the Company's previous
interactions with various potential strategic partners, the performance of the
Company's business and stock price, the potential benefits and risks and
financial rationales of a transaction with each of the bidders, the Board's
fiduciary duties, and the terms of the Company's draft Merger Agreement as
proposed to be revised by certain of the bidders. After lengthy discussion,
the Board authorized the Company's senior management to proceed with
negotiations with Siemens, on the basis of the price and other terms in its
definitive proposal, to determine if, in fact, the parties could reach an
agreement on a transaction that would be acceptable to the Board.
On April 29 and 30, 2000, members of management of the Company and Siemens,
together with their respective legal and financial advisors, extensively
negotiated the terms (including price) of the proposed acquisition and the
definitive documentation. In the course of these negotiations, in response to
the Company's request to increase the offered price, Siemens AG and Siemens
increased the offered purchase price to $73.00 in cash per Share.
The Board met again on April 30 to discuss the updated status of Siemens'
offer, including the increase in consideration to $73.00. During this meeting,
members of the Company's senior management, together with the Company's legal
and financial advisors, reviewed in detail with the Board, among other things,
the status of the negotiations of the Merger Agreement with Siemens'
management and advisors and the Board's fiduciary duties. Goldman Sachs
rendered its opinion that as of that date and based on and subject to the
matters stated in such opinion the $73.00 in cash per Share to be received by
holders of Shares in the Offer and the Merger was fair from a financial point
of view to such holders. The members of the Board present at the meeting
unanimously approved the Merger Agreement and the transactions contemplated
thereby, subject to certain changes discussed at the meeting. The Board
further authorized the officers to complete the negotiations and to enter into
and perform the Merger Agreement.
Siemens and the Company executed the Merger Agreement on April 30, 2000, and
the transaction was announced prior to the opening of trading in the Shares on
May 1, 2000.
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(ii) Reasons for the Recommendation of the Board of Directors.
In reaching its recommendations described above in this Item 4, the Board of
Directors considered a number of factors, including the following:
1. No Superior Proposals. Despite the fact that the willingness of the
Company to actively consider proposals for a change-in-control transaction
or other strategic alliance was known within the relevant business
community, and despite numerous and substantial discussions between the
Company and various potentially interested parties over a period of several
months, none of those discussions resulted in any proposals which the Board
believed to be financially superior to the terms set forth in the Merger
Agreement.
2. Company Operating and Financial Condition. The current and historical
financial condition and results of operations of the Company, as well as
the prospects and strategic objectives of the Company, including the risks
involved in achieving those prospects and objectives as an independent
entity, and the current and expected conditions in the healthcare
information technology services and systems industry.
3. Transaction Financial Terms; Premium to Market Price. The relationship
of the Offer Price and the Merger Consideration to the historical market
price of the Shares, the Company's historical earnings before interest,
taxes, depreciation and amortization ("EBITDA") and other financial
performance measures including applicable multiples. The highest, lowest
and average trading prices during the twelve-month period preceding the
announcement of the Merger Agreement were $72.31, $35.94, and $52.25,
respectively, and the $73.00 Offer Price and Merger Consideration
represented a 76% premium over the $41.4375 closing price of the Shares on
the New York Stock Exchange on April 28, 2000 (the last trading day prior
to the Board meeting at which the Board of Directors approved the Merger
Agreement). The Board also considered the form of consideration to be paid
to holders of Shares in the Offer and the Merger, and the certainty of
value of such cash consideration compared to stock or other forms of
consideration. The Board was aware that the consideration received by
holders of Shares in the Offer and Merger would be taxable to such holders
for federal income tax purposes.
4. Strategic Alternatives. The Board's review, with its financial and
other advisors, with respect to trends in the healthcare information
technology services and systems industries and the strategic alternatives
available to the Company, including the Company's alternative to remain an
independent public company, the possibility of acquisitions or mergers with
other companies in its industry or complementary industries, as well as the
risks and uncertainties associated with such alternatives. The Board
considered comparable transactions as well as possible alternatives to the
Offer and the Merger involving third parties, the likelihood of
consummation of such comparable and alternative transactions and the risks
associated therewith.
5. Fairness Opinion of Goldman, Sachs & Co. Presentations from Goldman
Sachs and the opinion of Goldman Sachs that, as of April 30, 2000 and based
on and subject to the matters stated in such opinion, the $73.00 in cash
per Share to be received by holders of Shares in the Offer and the Merger
is fair from a financial point of view to such holders. A copy of the
opinion of Goldman Sachs setting forth the assumptions made, procedures
followed, matters considered and limits on the review undertaken by Goldman
Sachs in arriving at its opinion, is attached hereto as Annex A and
incorporated herein by reference. Stockholders are urged to read this
opinion in its entirety. The Board was aware that Goldman Sachs becomes
entitled to certain fees described in Item 5 below upon the consummation of
the Offer.
6. Timing of Completion. The Board considered the anticipated timing of
consummation of the transactions contemplated by the Merger Agreement,
including the structure of the transactions as a cash tender offer for all
of the Shares, which should allow stockholders to receive the transaction
consideration earlier than in an alternative form of transaction, followed
by the Merger in which stockholders will receive the same consideration as
received by stockholders who tender their Shares in the Offer.
7. No Financing Contingency. Neither the Offer nor the Merger is subject
to any financing condition and Siemens has represented that it has
available to it, and will make available to the Purchaser, sufficient
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funds to consummate the Offer, the Merger and the transactions contemplated
thereby. The Board also considered the likelihood of obtaining required
regulatory approvals, and the terms of the Merger Agreement regarding the
obligations of both companies to pursue such regulatory approvals.
8. Alternative Transactions. The Board of Directors considered that under
the terms of the Merger Agreement, the Company is prohibited from
soliciting acquisition proposals from any third parties and from engaging
in discussions or negotiations with, or furnishing non-public information
to, a third party who makes a written acquisition proposal. The Board
considered that the terms of the Merger Agreement permit the Company to
inform itself concerning an unsolicited acquisition proposal and to
recommend any such proposal that is superior to the Offer and the Merger,
if, among other things, (a) the Board determines in good faith after
consultation with its financial advisors that such acquisition proposal is
likely to lead to a "superior proposal" (defined to mean a third party
acquisition proposal that is more favorable than the Offer to the Company's
stockholders from a financial point of view and is reasonably likely to be
consummated), (b) the Board determines in good faith and after consultation
with its legal and financial advisors that any such action is necessary for
the Board to fulfill its fiduciary duties, (c) prior to the Board
withdrawing or changing its recommendation of the Offer in connection with
or as a result of such acquisition proposal, Siemens shall have had the
right for a period of three calendar days to amend the terms of the Offer
in response to such acquisition proposal, and (d) the Company pays Siemens
the amount of $85 million. The Board considered the possible effect of
these provisions of the Merger Agreement on third parties who might be
interested in exploring an acquisition of the Company. In this regard, the
Board recognized that the provisions of the Merger Agreement relating to
the payment of such amount and the solicitation and negotiation of
acquisition proposals were insisted upon by Siemens as a condition to
entering into the Merger Agreement. The Board of Directors also considered
the contacts that the Company had made with certain third parties regarding
a potential transaction involving the Company, and took into account the
views of management and Goldman Sachs that it is unlikely that a third
party would be prepared to pay a higher price for the Shares than the Offer
Price and the Merger Consideration in a transaction that could be completed
on a timely basis and without a financing contingency.
9. Other Terms and Conditions of the Merger Agreement. In addition to the
terms described above, the Board also considered other terms and conditions
of the Offer, the Merger and the Merger Agreement.
10. Potential Conflicts of Interest. The Board of Directors considered
the interests of certain Company executives in the Offer and the Merger
(see Item 3 "-----Effects of the Offer and the Merger Under Company
Incentive Agreements and Plans Between the Company and its Directors and
Executive Officers.").
The foregoing includes the material factors considered by the Board of
Directors. In view of its many considerations, the Board did not find it
practical to, and did not, quantify or otherwise assign relative weights to
the specific factors considered. In addition, individual members of the Board
may have given different weights to the various factors considered. After
weighing all of these considerations, the Board determined to approve the
Merger Agreement and recommend that holders of Shares tender their Shares in
the Offer.
(c) Intent to Tender. To the best knowledge of the Company, each executive
officer, director, affiliate or subsidiary of the Company who owns Shares
presently intends to tender in the Offer all Shares that they own of record or
beneficially, other than Shares, if any, that they may have the right to
purchase by exercising stock options, restricted Shares and Shares, if any,
that if tendered (instead of being converted into cash in the Merger) would
cause them to incur liability under the short-swing profits provisions of the
Securities Exchange Act.
Item 5. Persons/Assets Retained, Employed, Compensated or Used.
Pursuant to a letter agreement dated February 4, 2000, which superseded
certain previous agreements between the parties, the Company retained Goldman
Sachs to act as its exclusive financial advisor to assist the Company in
connection with the possible sale of all or a portion of the Company. Pursuant
to the letter agreement, the Company has agreed to pay Goldman Sachs a
transaction fee equal to 0.50% of the aggregate
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consideration paid in connection with the Offer and the Merger (including
amounts paid to holders of options, warrants and convertible securities), plus
the principal amount of all indebtedness for borrowed money as set forth on
the most recent consolidated balance sheet of the Company prior to the
consummation of the Offer.
In addition, the Company has agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including attorneys' fees and
disbursements, and to indemnify Goldman Sachs and related persons against
certain liabilities, including liabilities under the federal securities laws.
Goldman Sachs has provided certain investment banking services to the
Company and Siemens from time to time for which they have received customary
compensation including, with respect to Siemens, acting as its financial
advisor in the acquisitions of the conventional power generation business of
Westinghouse Electric in November 1997 and Milltronics Limited in January
2000, and as lead manager in the issuance of its medium term notes in 1996 and
1997.
Except as described above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to stockholders on its behalf concerning
the Offer.
Item 6. Interest in Securities of the Subject Company.
No transactions in Shares have been effected during the past 60 days by the
Company or, to the knowledge of the Company, by any executive officer,
director, affiliate or subsidiary of the Company, other than exercises by
certain executive officers of stock options granted under Company stock option
plans, on-going purchases of Shares under the Company's Employee Stock
Purchase Plan for the benefit of certain executive officers who participate in
such plan, and on-going transactions in the Company stock fund of the
Company's Retirement Savings Plan (401K) for the benefit of certain executive
officers who participate in such plan.
Item 7. Purposes of the Transaction and Plans or Proposals.
Except as set forth in this Statement, the Company is not currently
undertaking or engaged in any negotiations in response to the Offer that
relate to (1) a tender offer for or other acquisition of the Company's
securities by the Company, any subsidiary of the Company or any other person;
(2) an extraordinary transaction, such as a merger, reorganization or
liquidation, involving the Company or any subsidiary of the Company; (3) a
purchase, sale or transfer of a material amount of assets of the Company or
any subsidiary of the Company; or (4) any material change in the present
dividend rate or policy, or indebtedness or capitalization of the Company.
Except as set forth in this Statement, there are no transactions,
resolutions of the Board of Directors, agreements in principle, or signed
contracts in response to the Offer that relate to one or more of the events
referred to in the preceding paragraph.
Item 8. Additional Information.
Rights Agreement. Each Right issued pursuant to the Rights Agreement
entitles the registered holder thereof to purchase one one-thousandth of a
share of Series A Junior Participating Preferred Stock, par value $0.10 per
share (the "Preferred Shares"), of the Company at a purchase price of $80.00,
subject to adjustment. On the earlier of (1) the tenth business day (or such
later date as determined by the Board) following a public announcement that a
person or group of affiliated or associated persons (an "Acquiring Person")
has acquired beneficial ownership of 15% or more of the outstanding Shares,
(2) the tenth business day (or such later date as determined by the Board)
following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer the consummation of which would result in that
person becoming an Acquiring Person, or (3) the tenth business day following
the day a person (an "Adverse Person") accumulates an amount of capital stock
in the Company that the Board determines is adverse to the Company and the
Company's stockholders (the earlier of such dates being the "Distribution
Date"), the Rights become exercisable and trade separately from the Common
Stock. After the Distribution Date, each holder of a Right (other than the
Acquiring Person or
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Adverse Person) will thereafter have the right to acquire shares of Common
Stock having a market value of two times the purchase price of the Right; or,
in certain circumstances, the right to acquire shares of the Acquiring
Person's capital stock having a market value of two times the purchase price
of the Right. The Rights may be redeemed by the Company at a price of $.001
per Right.
The Company and the Rights Agent under the Rights Agreement amended the
Rights Agreement as of May 1, 2000 to provide that neither the Offer nor the
Merger will constitute a "Triggering Event" or give rise to a Distribution
Date, in each case, for the purposes of and as defined in the Rights
Agreement, and neither Siemens nor the Purchaser will be considered an
Acquiring Person or an Adverse Person for the purposes of and as defined in
the Rights Agreement.
Delaware General Corporation Law. As a Delaware corporation, the Company is
subject to Section 203 of the DGCL. In general, Section 203 would prevent an
"interested stockholder" (generally defined as a person beneficially owning
15% or more of a corporation's voting stock) from engaging in a "business
combination" (as defined in Section 203) with a Delaware corporation for three
years following the date such person became an interested stockholder unless:
(1) before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination, (2) upon consummation of the transaction which resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding, for purposes of
determining the number of shares of outstanding, stock held by directors who
are also officers and by employee stock plans that do not allow plan
participants to determine confidentially whether to tender shares), or (3)
following the transaction in which such person became an interested
stockholder, the business combination is (x) approved by the board of
directors of the corporation and (y) authorized at a meeting of stockholders
by the affirmative vote of the holders of at least 66 2/3% of the outstanding
voting stock of the corporation not owned by the interested stockholder. In
accordance with the provisions of Section 203, the Board of Directors has
approved the Merger Agreement, as described in Item 4 above and, therefore,
the restrictions of Section 203 are inapplicable to the Merger.
Regulatory Approvals.
United States Antitrust Compliance. Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules that have
been promulgated thereunder by the Federal Trade Commission (the "FTC"),
certain acquisition transactions may not be consummated unless certain
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the FTC and certain waiting period
requirements have been satisfied. The purchase of Shares pursuant to the Offer
is subject to these requirements.
The Purchaser has indicated to the Company that it intends to file, and the
Company also intends to file, a Notification and Report Form under the HSR Act
with respect to the Offer and Merger with the Antitrust Division and the FTC
on or about May 10, 2000. The waiting period applicable to the purchase of
Shares pursuant to the Offer would expire at 11:59 p.m., New York City time,
on or about May 25, 2000, unless early termination of the waiting period is
granted or the Purchaser receives a request for additional information or
documentary material prior thereto. The Purchaser has indicated that it
intends to request early termination of the waiting period pursuant to the HSR
Act. There can be no assurance given, however, that the waiting period will be
terminated early. If either the Antitrust Division or the FTC were to request
additional information or documentary material from the Purchaser, the waiting
period would be extended until 11:59 p.m., New York City time, on the tenth
day after substantial compliance by the Purchaser with such request.
Thereafter, such waiting period can be extended only by court order. The
Company expects, and the Purchaser has indicated to the Company that it
expects, the waiting period to expire without extension if not earlier
terminated.
8
<PAGE>
German Antitrust. Under German laws and regulations relating to the
regulation of monopolies and competition, certain acquisition transactions may
not be consummated in Germany unless certain information has been furnished to
the German Federal Cartel Office (the "FCO" or Bundeskartellamt) and certain
waiting period requirements have been satisfied without issuance by the FCO of
an order to refrain. The purchase of the Shares by the Purchaser pursuant to
the Offer and the consummation of the Merger may be subject to such
requirements. Under such laws, the FCO has one month (unless earlier
terminated by the FCO) from the time of filing of such information with the
FCO to clear the Offer and the Merger or to advise the parties of its
intention to investigate the Offer and the Merger in-depth, in which case the
FCO has four months from the date of filing in which to take steps to oppose
the Offer and the Merger. According to the German law against restraints of
competition, the purchase of the Shares pursuant to the Offer may not be
consummated before the end of the one-month period, and, provided that the FCO
has informed the parties about the initiation of an in-depth review within
such period, before the end of the four-month period or its agreed-upon
extension, unless the FCO has given its clearance to the transaction in
writing before the end of such periods. In the course of its reviews, the FCO
will examine whether the proposed acquisition of the Shares by the Purchaser
pursuant to the Offer would create a dominant market position or strengthen an
already-existing dominant position in Germany. If the FCO makes such a
finding, it will act to prohibit the transaction. While Siemens AG, Siemens
and the Purchaser do not believe that there is any basis for the FCO to
investigate the Offer and the Merger in-depth, there can be no assurance that
the FCO will not investigate or oppose the transactions or that the FCO will
not extend the waiting period. Siemens AG expects to file the information with
the FCO on or about May 11, 2000. Siemens AG and Siemens currently expect to
obtain the requisite clearance by the FCO prior to the expiration date of the
Offer. In the event that such clearance is not obtained prior to the
expiration date of the Offer, the Purchaser will extend the Offer until the
end of the one-month waiting period that will otherwise apply (on or about
June 11, 2000) and, if Siemens and the Purchaser deem it necessary, for such
longer period as Siemens and the Purchaser may determine in their sole
discretion.
Other Filings. Siemens and the Company each conduct operations in a number
of foreign countries, and filings may have to be made with foreign governments
under their pre-merger notification statutes. The filing requirements of
various nations are being analyzed by the parties and, where necessary, the
parties intend to make such filings.
The Purchaser's Designation of Persons to be Elected to the Board of
Directors. The Information Statement attached as Annex B to this Statement is
being furnished in connection with the possible designation by Siemens,
pursuant to the terms of the Merger Agreement, of certain persons to be
elected to the Board of Directors other than at a meeting of the Company's
stockholders.
Item 9. Material to be Filed as Exhibits.
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
(a)(1) Letter to Stockholders of the Company, dated May 10, 2000.*
(a)(2) Opinion of Goldman, Sachs & Co., dated April 30, 2000 (included as
Annex A to the Statement).*
(a)(3) Press Release issued by the Company (incorporated by reference to
press release under cover of Schedule 14D-9 filed by the Company
on May 2, 2000).
(a)(4) Sections 11 and 13 of the Offer to Purchase dated May 10, 2000
(incorporated by reference to Exhibit (a)(1) to the Schedule TO of
the Purchaser filed on May 10, 2000).
(e)(1) Agreement and Plan of Merger, dated as of April 30, 2000, among
Siemens, the Purchaser and the Company (incorporated by reference
to Exhibit (d)(1) to the Schedule TO of the Purchaser filed on
May 10, 2000).
(e)(2) Confidentiality Agreement, dated March 23, 2000, between Siemens
and the Company.
(e)(3) The Information Statement of the Company dated May 10, 2000
(included as Annex B to the Statement).*
(e)(4) Form of non-employee directors' Change in Control (Stock Options)
Agreement.
(e)(5) Change of control provisions applicable to employee Stock Options.
(e)(6) Amendment No. 2 to the Rights Agreement, dated as of May 1, 2000
(incorporated by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K filed on May 10, 2000).
</TABLE>
- - --------
* Included with the Statement mailed to stockholders.
9
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
Shared Medical Systems Corporation
/s/ Terrence W. Kyle
By: _________________________________
Terrence W. Kyle
Senior Vice President, Chief
Financial Officer
and Assistant Secretary
Dated: May 10, 2000
10
<PAGE>
EXHIBIT A(1)
<PAGE>
[LOGO]
Shared Medical Systems Corporation
51 Valley Stream Parkway
Malvern, Pennsylvania 19355-1406
May 10, 2000
Dear Stockholder:
I am pleased to inform you that Shared Medical Systems Corporation has
entered into a merger agreement with Siemens Corporation, pursuant to which a
wholly-owned subsidiary of Siemens has commenced a tender offer to purchase
all of the outstanding shares of SMS's common stock for $73.00 per share in
cash. The tender offer is conditioned upon, among other things, a minimum of a
majority of SMS's shares outstanding being tendered and not withdrawn and the
receipt of required regulatory approvals. The tender offer will be followed by
a merger in which each share of SMS common stock not purchased in the tender
offer will be converted into the right to receive $73.00 per share in cash.
Your Board of Directors has determined that the terms of the Siemens offer
and the merger are fair to and in the best interests of SMS's stockholders,
and recommends that SMS's stockholders accept the Siemens offer and tender
their shares of SMS common stock pursuant to the offer.
In arriving at its recommendation, the Board of Directors considered a
number of factors, as described in the attached Schedule 14D-9, including the
opinion of the Company's financial advisor, Goldman, Sachs & Co., that, as of
the date of such opinion and based on and subject to the matters stated in
such opinion, the $73.00 in cash per share of SMS common stock to be received
by the holders of SMS common stock in the tender offer and the merger is fair
from a financial point of view to such holders. A copy of such opinion setting
forth the assumptions made, procedures followed, matters considered and limits
on the review undertaken by Goldman Sachs in rendering its opinion, can be
found in Annex A to the Schedule 14D-9. You should read the opinion carefully
and in its entirety.
Enclosed are Siemens' Offer to Purchase, dated May 10, 2000 and Letter of
Transmittal and related documents. These documents set forth the terms and
conditions of the tender offer. The Schedule 14D-9 describes in more detail
the reasons for your Board's conclusions and contains other information
relating to the tender offer. We urge you to consider this information
carefully.
/s/ Marvin S. Cadwell
Marvin S. Cadwell
President and Chief Executive
Officer
<PAGE>
EXHIBIT A(2)
<PAGE>
[GOLDMAN, SACHS & CO. LETTER]
PERSONAL AND CONFIDENTIAL ANNEX A
April 30, 2000
Board of Directors
Shared Medical Systems Corporation
51 Valley Stream Parkway
Malvern, PA 19355
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock, par value $0.01
per share (the "Shares"), of Shared Medical Systems Corporation (the "Company")
of the $73.00 in cash proposed to be paid for each Share in the Tender Offer
and the Merger (each as defined below) pursuant to the Agreement and Plan of
Merger, dated as of April 30, 2000, among Siemens Corporation ("Buyer"),
Autobahn Acquisition Corporation, a wholly-owned subsidiary of Buyer, and the
Company (the "Agreement"). The Agreement provides for a tender offer for all of
the Shares (the "Tender Offer") pursuant to which Autobahn Acquisition
Corporation will pay $73.00 per Share in cash for each Share accepted. The
Agreement further provides that following completion of the Tender Offer,
Autobahn Acquisition Corporation will be merged with and into the Company (the
"Merger") and each outstanding Share (other than Shares already owned by Buyer
or any of its subsidiaries, Shares held in the treasury of the Company and any
Dissenting Shares (as defined in the Agreement)) will be converted into the
right to receive $73.00 in cash.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. We also have provided certain investment banking services to Buyer
from time to time, including having acted as its financial advisor in the
acquisitions of the conventional power generation business of Westinghouse
Electric in November 1997 and Milltronics Limited in January 2000, and as lead
manager in the issuance of its medium term notes in 1996 and 1997, and may
provide investment banking services to Buyer and its subsidiaries in the
future. Goldman, Sachs & Co. is a full service securities firm and, in the
ordinary course of its trading activities, it may from time to time effect
transactions and hold positions in securities, including derivative securities,
of the Company or Buyer for its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five years ended December 31, 1999; certain interim reports
to stockholders and Quarterly Reports on Form 10-Q of the Company; certain
other
A-1
<PAGE>
communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management.
We also have held discussions with members of the senior management of the
Company regarding its past and current business operations, financial
condition and future prospects. In addition, we have reviewed the reported
price and trading activity for the Shares, compared certain financial and
stock market information for the Company with similar information for certain
other companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the healthcare
information technology industry specifically and in other industries generally
and performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In addition,
we have not made an independent evaluation or appraisal of the assets and
liabilities of the Company or any of its subsidiaries and we have not been
furnished with any such evaluation or appraisal. Our advisory services and the
opinion expressed herein are provided for the information and assistance of
the Board of Directors of the Company in connection with its consideration of
the transactions contemplated by the Agreement and such opinion does not
constitute a recommendation as to whether or not any holder of Shares should
tender such Shares in connection with the Tender Offer or how such holders
should vote with respect to the Merger.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the $73.00
in cash to be received by the holders of Shares in the Tender Offer and the
Merger is fair from a financial point of view to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- - ----------------------
GOLDMAN, SACHS & CO.
A-2
<PAGE>
EXHIBIT E(2)
<PAGE>
March 23, 2000
Siemens Corporation
153 East 53rd Street
New York, NY 10022
Attn: Michael W. Schiefen
Vice President - Corporate Development
CONFIDENTIALITY AND STANDSTILL AGREEMENT
----------------------------------------
Ladies and Gentlemen:
Siemens Corporation ("Siemens") has expressed an interest in exploring a
possible transaction (a "Transaction") involving Shared Medical Systems
Corporation and its Affiliates (collectively, the "Company"). In connection
with the Transaction, the parties contemplate exchanging Information (as defined
herein). This letter agreement sets forth the terms and conditions on which
this Information will be exchanged.
1. Definitions:
-----------
- "Affiliate" has the meaning set forth in Rule 12b-2 promulgated under
the Securities Exchange Act of 1934, as amended (the "1934 Act").
- "Disclosing Party" means the party (or its Affiliates or
Representatives) providing Information (or on whose behalf Information
is provided) to the other party (or its Affiliates or Representatives).
- "Evaluation Material" means all Information received by a Receiving
Party (or its Affiliates or Representatives) from a Disclosing Party (or
its Affiliates or Representatives) together with all notes, documents,
and materials prepared by or for the Receiving Party (or its Affiliates
or Representatives) which reflect, interpret, evaluate, include or are
derived from such Information; provided that "Evaluation Material" shall
not include Information which: (i) was or becomes generally available to
or known by the public other than as a result of a disclosure by a
Receiving Party (or its Affiliates or Representatives) in violation of
this Agreement; or (ii) was or becomes available to the Receiving Party
on a non-confidential basis from a source other than the Disclosing
Party (or its Affiliates or Representatives), which the Receiving Party
believes was not prohibited from so disclosing by any contractual, legal
or fiduciary obligation.
<PAGE>
- "Information" means all information, in whatever form or medium (oral,
written, printed, electronic, etc.), including, without limitation, all
financial, business, and other information, trade secrets, technical
data, processes, documents, data bases, plans, marketing and client data
provided to a Receiving Party (or its Affiliates or Representatives) by
a Disclosing Party (or its Affiliates or Representatives), whether
before, on or after the date of this Agreement.
- "Person" means any corporation, partnership, limited liability
company, joint venture, business entity, or individual.
- "Receiving Party" means a party (or its Affiliates or Representatives)
who receives Information from a Disclosing Party (or its Affiliates or
Representatives).
- "Representative" means any director, officer, associate, partner,
employee, agent, financing source, attorney, investment banker, or other
advisor who provides advice or counsel to a party in connection with the
interpretation, evaluation, processing, or review of Information or
Evaluation Material or otherwise in connection with a Transaction.
- "Standstill" means the provisions of Section 4 of this Agreement.
2. Confidentiality and Non Disclosure.
----------------------------------
As a condition to receiving information from a Disclosing Party (or
its Affiliates or Representatives), each Receiving Party agrees to treat all
Information concerning the Disclosing Party (and its Affiliates and
Representatives) in accordance with the provisions of this Agreement and to take
or abstain from taking certain other actions as set forth herein for a period of
36 months.
Each Receiving Party agrees that Evaluation Material will not be used
by it (or its Affiliates or Representatives) in any way that is detrimental to
the Disclosing Party or for any purpose other than evaluating and effectuating a
Transaction between it and the Disclosing Party, and that the Evaluation
Material will be kept confidential by it (and by its Affiliates or
Representatives); provided, however, that any such Evaluation Material may be
disclosed to a party's Representatives who are working on or consulted in
connection with any such Transaction (it being agreed that such Representatives
shall be informed of the confidential nature of such information and the
obligations set forth in this Agreement). Each party shall be liable for any
breach of this Agreement by its Affiliates or Representatives (including,
without limitation, by such Affiliates and Representatives who, subsequent to
the first date of disclosure of Information hereunder, become former Affiliates
or Representatives of such Party).
Without the prior written consent of the other party, neither party
will (and will direct its Affiliates or Representatives not to) disclose to any
Person, except as such party reasonably believes based upon the advice of
counsel to be required by law, regulation, rule of any applicable
<PAGE>
stock exchange or legal process, or as requested by a regulatory authority,
either the existence of this Agreement, the exchange of Information, the fact
that discussions or negotiations are taking place concerning a Transaction or
any of the terms, conditions or other matters with respect to any such
Transaction, including the existence or status thereof.
If a party (or any of its Affiliates or Representatives) is required
by legal process to disclose all or any part of the Information contained in the
other party's Evaluation Material, it will promptly notify the other party of
the existence and terms of, and circumstances surrounding, such a request so
that the other party may, if it desires, seek an appropriate protective order.
If a party seeks such an order, the other party will provide such cooperation as
shall be reasonably requested of it. Anything in this Agreement to the contrary
notwithstanding, each party may (in the absence of such an order or in
compliance therewith) provide so much of such information as it is advised by
its counsel that it must provide to avoid legal sanction, so long as it uses
reasonable efforts to obtain confidential treatment by the recipient thereof and
consults in advance with the other party as to such disclosure.
Each party acknowledges that it is aware of its obligations under
United States securities laws regarding trading in the securities of an issuer
while in possession of material non-public information of such issuer, and that
it has advised its Affiliates and Representatives of such obligations.
3. Return or Destruction of Evaluation Material.
--------------------------------------------
Each party agrees upon written request from the other promptly to
deliver to the other all Information and Evaluation Material (whether in its
possession or the possession of its Affiliates or Representatives) and to not
retain any copies, extracts or other reproductions in whole or in part of such
material or, alternatively, to destroy, and cause its Affiliates or
Representatives to destroy, such Information and Evaluation Material and, upon
the request of the other, confirm such destruction separately in writing. The
delivery or destruction of such material shall not relieve a party of its
obligation of confidentiality or any other obligations hereunder.
4. Standstill.
----------
For a period of 24 months after the date of this Agreement unless
requested in writing by the Company, neither Siemens nor any entity which
Siemens controls will in any manner, directly or indirectly, (a) effect, or
seek, offer, propose or agree (whether publicly or otherwise) to effect, or
otherwise participate in (i) any acquisition of securities (or beneficial
ownership thereof) of the Company except for de minimus purchases for benefit
plans and the like, (ii) any tender or exchange offer, merger or other business
combination or asset purchase involving the Company, (iii) any recapitalization,
restructuring, liquidation, dissolution or other extraordinary transaction with
respect to the Company, or (iv) any "solicitation" of "proxies" (as such terms
are used in the proxy rules of the Securities and Exchange Commission) or
consents to vote any voting or other securities of the Company; (b) form, join
or otherwise participate in a
<PAGE>
"group" (as defined under the 1934 Act) or otherwise act, alone or in concert
with others, (i) to own, or seek, offer, propose or agree to acquire, any voting
or other securities of the Company except for de minimus purchases for benefit
plans and the like, or (ii) to seek to control or influence the management,
Board of Directors, or policies of the Company; (c) take any action which might
force the Company to make a public announcement regarding any of the types of
matters set forth in (a) above; (d) disclose any intention, plan or arrangement
inconsistent with, or take any action to circumvent, the terms of this
Agreement; (e) become a participant in any election contest with respect to the
Company, seek to influence any Person with respect to the voting or other
securities of the Company or demand a copy of the list of the stockholders or
other books and records of the Company; (f) loan money to, advise or assist any
Person with any action inconsistent with the terms of this Agreement; (g) induce
or attempt to induce any Person who is then an employee, or use the Information
or Evaluation Material to induce or attempt to induce any customer or supplier
of the Company, to terminate a then-existing relationship with the Company,
except that, subject to the provisions of clause (h), below, Siemens may offer
employment to and hire any person who responds to Siemens' general solicitations
for employment, such as through newspaper advertisements and trade journals; (h)
employ or attempt to employ any employee listed on Schedule A attached unless
such Person's employment with the Company shall have been terminated at least
six months prior to the date on which Siemens or its Affiliates or
Representatives offers such Person employment; (i) request the Company or its
Affiliates or Representatives, directly or indirectly, to amend or waive any
provision of this Section (including this sentence); (j) take any action which
might require the Company to make a public announcement regarding the
possibility of a merger, consolidation, business combination or other
transaction of any kind with Siemens; or (k) enter into any discussion or
arrangements with or advise, assist or encourage any other Persons in connection
with any of the foregoing.
5. Due Diligence Procedures.
------------------------
It is understood that the Company and Siemens may, as may be mutually
agreed upon, conduct appropriate due diligence using procedures acceptable to
each of them and reasonably designed to effectuate the purposes of this
Agreement.
6. Representations and Warranties.
------------------------------
Each party represents and warrants, by signing this Agreement, that it
is duly authorized and empowered to execute this Agreement. This Agreement may
be executed in one or more counterparts. Each party understands that the other
makes no representation or warranty as to the accuracy or completeness of the
Information or Evaluation Material furnished by or on behalf of it. Except to
the extent set forth in any definitive agreement, neither party (nor any of its
Affiliates or Representatives) shall have any liability to the other party (or
any of its Affiliates or Representatives) arising as a result of the use of the
Information or other Evaluation Material supplied or on behalf of it.
<PAGE>
7. No Binding Agreement.
--------------------
(a) Unless and until a definitive agreement between the parties with
respect to a Transaction has been executed and delivered, neither party will be
under any legal obligation of any kind whatsoever with respect to such a
Transaction by virtue of this or any written or oral expression with respect to
such a Transaction by such party or by any of its Affiliates or
Representatives, except, in the case of this Agreement, for the matters
specifically agreed to herein (which include, but are not limited to, matters
with respect to confidentiality and the Standstill). For purposes of this
Agreement, the term "definitive agreement" does not include a letter of intent
or any other preliminary written agreement, whether or not executed, nor does
it include any actual or purported written or verbal acceptance of any offer or
proposal. Except as otherwise agreed in writing or as expressly provided
herein, each party and its respective Affiliates and Representatives will be
free to conduct the process relating to any Transaction as they in their sole
discretion determine (including, without limitation, changing any procedures
relating to a Transaction, or negotiating with and entering into a definitive
agreement with any other person, without in any such case prior notice to the
other party or any other person). Neither party will have any claims against
the other party or any of its Affiliates or Representatives arising out of or
relating to any Transaction other than those, if any, arising under this
Agreement or any definitive agreement and then only in accordance with the
terms hereof or thereof, as the case may be.
(b) Without limiting the generality or effect of any other provision
of this Agreement, each party acknowledges and agrees on behalf of itself and
its Affiliates that, regardless of the facts and circumstances, (i) no
Representative of either party had, has or will have any duty to the other party
in connection with any Transaction, including the evaluation of any Transaction,
and (ii) neither party has any right to recovery against any of the other
party's Representatives in respect of any Transaction, including the evaluation
of any Transaction, on any theory, whether for alleged breach of contract,
negligent misrepresentation, actual or constructive fraud, federal or state
securities or other laws or otherwise.
8. No Waiver.
---------
No failure or delay by a party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege.
9. Injunctive Relief.
-----------------
Money damages may not be a sufficient remedy for any breach of this
Agreement and each party shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach, and each
waives any requirement for the securing or posting of any bond in connection
with such remedy. Such remedy shall not be deemed to be the exclusive
<PAGE>
remedy for breach of this Agreement, but shall be in addition to all other
remedies available at law or equity.
10. Successors.
----------
The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
including without limitation any person acquiring a majority of the outstanding
voting securities of either party.
11. Governing Law; Consent to Jurisdiction.
--------------------------------------
This Agreement is made pursuant to, and shall be construed and enforced in
accordance with, the laws of the State of Delaware (and United States federal
law to the extent applicable), irrespective of the principal place of business
or domicile of the parties hereto, and without giving effect to otherwise
applicable principles of conflicts of law. Each party consents to personal
jurisdiction in any action brought in any federal or state court within the
State of Delaware having subject matter jurisdiction in the matter for purposes
of any action arising out of this Agreement. The parties hereto irrevocably
waive trial by jury. Notwithstanding anything to the contrary herein or that may
be based on facts or circumstances pertaining to the transactions under
discussion between the parties hereto, this letter agreement, the Evaluation
Material or Information provided hereunder or otherwise, the Company hereby
irrevocably and unconditionally waives and releases for itself and on behalf of
its affiliates all rights and claims that they may now or hereafter have the
Siemens' parent, Siemens Aktiengesellschaft or any of its affiliates or
subsidiaries organized outside of the United States, are subject to the
jurisdiction of the federal or state courts of the United States with respect to
this Agreement or the Evaluation Material or Information; provided, however,
-------- -------
that nothing in such waiver and release shall affect the Company's and its
affiliates' rights, if any, to pursue any claim whatsoever against Siemens
Aktiengesellschaft or any of its affiliates or subsidiaries organized outside of
the United States in the courts of the Federal Republic of Germany.
<PAGE>
If you are in agreement with the foregoing, please so indicate by
signing and returning one copy of this Agreement, whereupon it will constitute
our agreement with respect to the subject matter hereof.
Very truly yours,
SHARED MEDICAL SYSTEMS CORPORATION
By: /s/ Marvin S. Cadwell
----------------------------------------------
Name: Marvin S. Cadwell
-------------------------------------------
Title: President/Chief Executive Officer
-----------------------------------------
Confirmed and Agreed to:
Siemens Corporation
By: /s/ Michael W. Schiefen
--------------------------
Name: Michael W. Schiefen
--------------------------
Title: VP, Corporate Development
--------------------------
Date: March 23, 2000
--------------------------
<PAGE>
EXHIBIT E(3)
<PAGE>
ANNEX B
SHARED MEDICAL SYSTEMS CORPORATION
51 Valley Stream Parkway
Malvern, Pennsylvania 19355-1406
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about May 10, 2000 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Statement") of Shared Medical Systems Corporation (the "Company"). You are
receiving this Information Statement in connection with the possible election
of persons designated by Autobahn Acquisition Corporation (the "Purchaser"), a
Delaware corporation and a wholly-owned subsidiary of Siemens Corporation, a
Delaware Corporation ("Siemens"), to a majority of the seats on the Board of
Directors (the "Board of Directors" or the "Board") of the Company. On April
30, 2000, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement") with the Purchaser and Siemens, pursuant to which the
Purchaser is required to commence a tender offer to purchase all outstanding
shares of Common Stock, par value $0.01 per share, of the Company (the "Common
Stock") and the associated preferred stock purchase rights (the shares of
Common Stock and any associated preferred stock purchase rights are referred
to in this Statement as the "Shares"), at a price per Share of $73.00, net to
the seller in cash (the "Offer Price"), upon the terms and conditions set
forth in the Purchaser's Offer to Purchase, dated May 10, 2000, and in the
related Letter of Transmittal (which, together with any amendments and
supplements thereto, collectively constitute the "Offer"). Copies of the Offer
to Purchase and the Letter of Transmittal have been mailed to stockholders of
the Company and are filed as Exhibits (a)(1) and (a)(2) respectively, to the
Tender Offer Statement on Schedule TO (as amended from time to time, the
"Schedule TO") filed by Siemens and the Purchaser with the Securities and
Exchange Commission (the "Commission") on May 10, 2000. The Merger Agreement
provides that, subject to the satisfaction or waiver of certain conditions,
following completion of the Offer, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), the Purchaser will be
merged with and into the Company (the "Merger"). Following consummation of the
Merger, the Company will continue as the surviving corporation and will be a
wholly-owned subsidiary of Siemens. At the effective time of the Merger (the
"Effective Time"), each issued and outstanding Share (other than Shares that
are owned by Siemens, the Purchaser, any of their respective subsidiaries, the
Company or any of its subsidiaries, and Shares held by stockholders of the
Company who did not vote in favor of the Merger Agreement and who comply with
all of the relevant provisions of Section 262 of the DGCL) will be converted
into the right to receive $73.00 in cash or any greater amount per Share paid
pursuant to the Offer.
The Offer, the Merger, and the Merger Agreement are more fully described in
the Statement to which this Information Statement is attached as Annex B,
which was filed by the Company with the Commission on May 10, 2000 and which
is being mailed to stockholders of the Company along with this Information
Statement.
This Information Statement is being mailed to you in accordance with Section
14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and Rule 14f-1 promulgated thereunder. The information set forth herein
supplements certain information set forth in the Statement. Information set
forth herein related to Siemens, the Purchaser or the Purchaser Designees (as
defined herein) has been provided by Siemens. You are urged to read this
Information Statement carefully. You are not, however, required to take any
action in connection with the matters set forth herein.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on May
10, 2000. The Offer is currently scheduled to expire at 5:00 p.m., New York
City time, on June 7, 2000, unless the Purchaser extends it in accordance with
the Merger Agreement and the Exchange Act and the rules promulgated
thereunder.
B-1
<PAGE>
GENERAL
The Common Stock is the only class of equity securities of the Company
outstanding which is entitled to vote at a meeting of the stockholders of the
Company. As of the close of business on April 30, 2000, there were 27,012,963
outstanding shares of Common Stock, of which Siemens and the Purchaser own no
shares as of the date hereof.
DESIGNATION OF DIRECTORS BY PURCHASER
The Merger Agreement provides that immediately upon the acceptance for
payment of and payment for shares of the Common Stock by the Purchaser or any
of its affiliates pursuant to the Offer, the Purchaser shall be entitled to
designate up to such number of directors (the "Purchaser Designees"), rounded
up to the next whole number, for election or appointment to the Board of
Directors of the Company as will give the Purchaser, subject to compliance
with Section 14(f) of the Exchange Act, representation on the Board of
Directors of the Company equal to the product of (i) the total number of
directors on the Board of Directors of the Company (giving effect to the
increase in size of such Board pursuant to this paragraph) and (ii) the
percentage that the number of shares of the Common Stock beneficially owned by
the Purchaser and its affiliates (including shares of Common Stock so accepted
for payment and purchased) bears to the number of shares of Common Stock then
outstanding. In furtherance thereof, concurrently with such acceptance for
payment and payment for such shares of Common Stock, the Company shall, upon
request of Parent or the Purchaser and in compliance with Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder, promptly increase the size
of its Board of Directors by such number as is necessary to enable the
Purchaser Designees to be so elected or appointed to the Company's Board of
Directors, and, subject to applicable law, the Company shall take all
reasonable actions available to the Company to cause such designees of the
Purchaser to be so elected or appointed. The Merger Agreement provides that at
such time, the Company will, if requested by Parent or the Purchaser and
subject to applicable law, also take all reasonable action necessary to cause
persons designated by the Purchaser to constitute at least the same percentage
(rounded up to the next whole number) as is on the Company's Board of
Directors of (i) each committee of the Company's Board of Directors, (ii) each
board of directors (or similar body) of each subsidiary of the Company and
(iii) each committee (or similar body) of each such board.
Notwithstanding the foregoing, if Shares are purchased pursuant to the
Offer, there will be until the Effective Time at least two members of the
Board who were directors on the date of the Merger Agreement and who are not
employees of the Company.
It is expected that the Purchaser Designees will assume office promptly
following the purchase by Purchaser of any Shares pursuant to the terms of the
Offer, which purchase cannot be earlier than June 7, 2000, and that, upon
assuming office, the Purchaser Designees together with the continuing
directors of the Company will thereafter constitute the entire Board.
As of the date of this Information Statement, the Purchaser has not
determined who will be the Purchaser Designees. However, the Purchaser
Designees will be selected from among the persons listed in Schedule I
attached hereto. Schedule I also includes certain information with respect to
each such person. Each of the persons listed in Schedule I has consented to
serve as a director of the Company if appointed or elected. None of such
persons currently is a director of, or holds any positions with, the Company.
Siemens and the Purchaser have advised the Company that, to the best of their
knowledge, none of the persons listed on Schedule I or any of their affiliates
beneficially owns any equity securities or rights to acquire any such
securities of the Company, nor has any such person been involved in any
transaction with the Company or any of its directors, executive officers or
affiliates that is required to be disclosed pursuant to the rules and
regulations of the Commission other than with respect to transactions between
Siemens, the Purchaser and the Company that have been described in the
Schedule TO or the Statement.
B-2
<PAGE>
STOCK 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>
Amount and Nature
Title of Class Name and Address of Beneficial Owner of Beneficial Ownership Percent of Class
-------------- ------------------------------------------- ----------------------- ----------------
<S> <C> <C> <C>
Common Stock............ Waddell & Reed Investment Management 2,710,600(1) 10.0%
Company
6300 Lamar Avenue
Shawnee Mission, KS 66201
Common Stock............ Wellington Management Company, LLP 2,388,300(2) 8.9%
75 State Street
Boston, Massachusetts 02109
Common Stock............ William Blair & Company, L.L.C. 2,277,671(3) 8.4%
222 West Adams Street
Chicago, Illinois 60606
Common Stock............ FMR Corp. 1,297,134(4) 4.8%
P82 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.
B-3
<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 the Executive
Compensation--Summary Compensation Table; and the beneficial Common Stock
ownership of all of the Company's executive officers and directors as a group:
<TABLE>
<CAPTION>
Common Stock Percent
Director Beneficially of
Name of Beneficial Owner Since 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 1,519,321(12) 5.6%
group (15 persons)...........................
</TABLE>
- - --------
*Less than 1%
B-4
<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 B-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 B-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 B-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 B-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 B-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.
B-5
<PAGE>
BOARD OF DIRECTORS
1999 Board Meetings
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.
Board Committees in 1999
During 1999 the Board of Directors had the following ongoing Committees: an
Audit Committee, a Management and Compensation Committee and a Stock Option
Committee.
Audit 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.
Management and Compensation Committee. 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.
Stock Option Committee. 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.
Director Compensation
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.
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, unless the
director's service is terminated within 30 months of a change in control of
B-6
<PAGE>
the Company, in which case the director's unvested options accelerate and
become immediately due and payable. 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.
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 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
Information 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.
B-7
<PAGE>
Chief Executive Officer Compensation
The Committee's general approach in setting the Chief Executive Officer's
annual compensation is to set compensation in accordance with the policies set
forth in this report. Specifically, the Committee's objective is to correlate
the Chief Executive Officer's compensation with the performance of the
Company, while seeking to keep his compensation competitive with that provided
by comparable companies.
The Committee set Mr. Cadwell's salary for 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 B-15) 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.
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
B-8
<PAGE>
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 Information 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:
Frederick W. DeTurk Josh S. Weston
Josh S. Weston Frederick W. DeTurk
Gail R. Wilensky
B-9
<PAGE>
EXECUTIVE COMPENSATION
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 Information 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).
B-10
<PAGE>
(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.
(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."
B-11
<PAGE>
In April 2000, the Company made a loan of $432,994.46 to Mr. Cadwell. Mr.
Cadwell used the proceeds of the loan to pay the exercise price (and
applicable taxes) for the exercise of employee stock options which were
scheduled to expire in May 2000. The loan is repayable upon the demand of the
Company. The loan is interest-free for 90 days and thereafter bears interest
at a rate of 6% per annum.
In April 2000, the Board of Directors of the Company approved a cash bonus
for Mr. Cadwell of $600,000 payable upon the successful completion of the
transactions contemplated by the Merger Agreement.
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 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.
B-12
<PAGE>
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 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) under certain circumstances 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. 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 for
Individual Grants 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>
- - --------
<TABLE>
<S> <C>
</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.
B-13
<PAGE>
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>
B-14
<PAGE>
PERFORMANCE GRAPH
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 1999
---- ---- ---- ---- ---- ----
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.
B-15
<PAGE>
SCHEDULE I
As of the date of this Information Statement, the Purchaser has not
determined who will be the Purchaser Designees. However, such Purchaser
Designees will be selected from the following list of directors and executive
officers of Siemens or its affiliates. The information contained herein
concerning Siemens and its directors and executive officers and those of its
affiliates has been furnished by Siemens and the Purchaser. The Company
assumes no responsibility for the accuracy or completeness of such
information.
The name, present principal occupation or employment and five-year
employment history of each of the persons is set forth below. None of the
persons listed below owns any Shares or has engaged in any transactions with
respect to Shares during the past 60 days. During the last five years, none of
the persons listed below has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) nor was such person a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction, and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws. None of the persons listed below (i) is currently a
director of, or holds any position with, the Company (ii) has a familial
relationship with any of the directors or executive officers of the Company or
(iii) based on information provided to the Company by Siemens (which is to the
best of Siemens' knowledge), beneficially owns any securities (or rights to
acquire any securities) of the Company. The Company has been advised by
Siemens that, to the best of Siemens' knowledge, none of the persons listed
below has been involved in any transaction with the Company or any of its
directors, executive officers or affiliates which is required to be disclosed
pursuant to the rules and regulations of the Commission.
Unless otherwise indicated, each of the persons listed below is a citizen of
the Federal Republic of Germany. Unless otherwise indicated, each such person
has held his or her present occupation as set forth below, or has been an
executive officer at Siemens AG, for the past five years.
<TABLE>
<CAPTION>
Present Principal Occupation or
Name and Address Age Employment
- - ---------------- --- -------------------------------
<S> <C> <C>
Reinhard Benditte 48 Executive Vice President and Chief
Siemens Medical Systems, Inc. Financial Officer, Siemens Medical
186 Wood Avenue South Systems, Inc., Iselin, New Jersey.
Iselin, New Jersey 08830 Previously Chief Financial Officer of
Siemens Automotive Corporation
Bernhard K. Halfpap 51
Siemens AG
Henkestrasse 127 Head of Business Planning of
D-91050 Erlangen Medical Engineering Division of
Germany Siemens AG, Erlangen, Germany
Robert Kirschbaum 52 Corporate Legal Counsel, Siemens
Siemens AG AG, Erlangen, Germany
Werner von Siemens Strasse 50
D-91050 Erlangen
Germany
Klaus Kleinfeld 42 Corporate Vice President and Group
Siemens AG Executive, Medical Engineering
Henkestrasse 127 Division of Siemens AG. Previously
D-91050 Erlangen President of Angiography,
Germany Fluoroscopy and Radiography
Systems Division of Medical
Engineering of Siemens AG;
President of the Siemens
Management Consulting Group
</TABLE>
B-16
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or
Name and Address Age Employment
- - ---------------- --- -------------------------------
<S> <C> <C>
Thomas N. McCausland 57
Citizen of USA President and Chief Executive Officer,
Siemens Medical Systems, Siemens Medical Systems, Inc., Iselin,
Inc. New Jersey. Previously Vice President
186 Wood Avenue South of Sales and Marketing, Siemens
Iselin, New Jersey 08830 Energy & Automation, Inc.
Kenneth R. Meyers 39 Legal Counsel, Siemens Corporation,
Citizen of USA New York, New York
Siemens Corporation
153 East 53rd Street
New York, New York 10022
Erich Reinhardt 53 Chief Executive Officer and Group
Siemens AG President, Medical Engineering
Henkestrasse 127 Division of Siemens AG, Erlangen,
D-91050 Erlangen Germany
Germany
Goetz Steinhardt 56 Corporate Vice President and Group
Siemens AG Executive, Medical Engineering
Henkestrasse 127 Division of Siemens AG, Erlangen,
D-91050 Erlangen Germany
Germany
</TABLE>
B-17
<PAGE>
EXHIBIT E(4)
<PAGE>
CHANGE IN CONTROL (STOCK OPTIONS) AGREEMENT
BACKGROUND
As of this date, November 6, 1998, [NAME OF NON-EMPLOYEE DIRECTOR]
("Optionee") currently holds outstanding stock options (the "Options") to
purchase shares of the Common Stock of Shared Medical Systems Corporation (the
"Company"), which Options were granted to Optionee by the Company. In
consideration of the efforts expended and to be expended by Optionee on behalf
of the Company, the Company wishes to amend the terms of the Options to
provide for accelerated vesting upon the occurrence of certain events.
NOW THEREFORE, in consideration of the premises recited above, the Company,
intending to be legally bound hereby, agrees as follows:
Unless otherwise defined herein, capitalized terms shall have the meanings
set forth in Section 5 below.
(1) In the event there is a Change in Control of the type described in clause
(A) of the definition of Change in Control which is not approved by a
majority of the members of the Prior Board, then all outstanding Options
shall become fully vested and immediately exercisable upon such Change in
Control. In the event the stockholders of the Company approve a
transaction of the type described in clause (B) of the definition of
Change in Control which is not approved by a majority of the members of
the Prior Board, then all outstanding Options shall become fully vested
and immediately exercisable upon the date of such stockholder approval,
which shall be at least 10 business days prior to consummation of the
transaction.
(2) In the event there is a Change in Control which is approved by a majority
of the members of the Prior Board, in which (i) the transaction results in
or will result in a change in ownership of 100% of the combined voting
power of the Company's then outstanding securities, or is of the type
described in clauses (B)(i), (ii) or (iii) of the definition of Change in
Control where the stockholders of the Company will receive consideration
in the transaction, and (ii) the Acquiror or any Affiliate of the Acquiror
is an issuer of Publicly-Traded Stock, then upon such Change in Control
each outstanding Option shall automatically be converted into an option to
acquire shares of such Publicly-Traded Stock as follows (a Change in
Control transaction of the type described in this paragraph is hereinafter
referred to as a "Public Acquiror Transaction"):
(a) If the consideration paid or to be paid to the stockholders of the
Company in the Public Acquiror Transaction consists in whole or in part
of Publicly-Traded Stock, then each outstanding Option shall
automatically be converted into an option to acquire the kind and
amount of shares of such Publicly-Traded Stock (and other securities,
money or property) which would be paid to the holder of such Option had
such Option been fully vested and exercised immediately prior to the
effective time of the Public Acquiror Transaction.
(b) If the consideration paid or to be paid to the stockholders of the
Company in the Public Acquiror Transaction is cash or other
consideration not including Publicly-Traded Stock, then each
outstanding Option shall automatically be converted into an option to
acquire the amount of shares of Publicly-Traded Stock of the Acquiror
or its Affiliate equal in value (based on the closing price of such
Publicly-Traded Stock as of the effective time of the Public Acquiror
Transaction) to the value of the consideration which would be paid to
the holder of such Option had such Option been fully vested and
exercised immediately prior to the effective time of the Public
Acquiror Transaction.
The converted Options covered by this Section 2 shall have the same
vesting schedules, expiration dates and other terms as they had immediately
prior to the Public Acquiror Transaction, except that if, within 30 months
after the consummation of the Public Acquiror Transaction, the Optionee is
removed from service without Cause or not reelected for service on the
Board of Directors of the Company or any successor or purchasing entity,
then all such outstanding Options shall become fully vested and immediately
exercisable upon the date of such termination of service or non-reelection.
1
<PAGE>
(3) In the event there is a Change in Control which is approved by a majority
of the members of the Prior Board, in which (i) the transaction results in
or will result in a change in ownership of 100% of the combined voting
power of the Company's then outstanding securities, or is of the type
described in clauses (B)(i), (ii) or (iii) of the definition of Change in
Control where the stockholders of the Company will receive consideration
in the transaction, and (ii) neither the Acquiror nor any Affiliate of the
Acquiror is an issuer of Publicly-Traded Stock (a Change in Control
transaction of the type described in this paragraph is hereinafter
referred to as a "Private Acquiror Transaction"), then upon such Change in
Control each outstanding Option shall automatically be converted into the
right to receive cash payments from the Company or any successor or
purchasing entity equal in aggregate principal amount to the excess of (x)
the value of the consideration which would be paid to the holder of such
Option had such Option been fully vested and exercised immediately prior
to the effective time of the Change in Control transaction, over (y) the
exercise price which would have to be paid assuming the Option was fully
vested and exercised at such time (such excess is hereinafter referred to
as the "Cash Value").
The Cash Value of each such Option shall be paid in installments, with
the timing and amount of each such installment to be determined based on
the vesting schedule for such Option as in effect immediately prior to the
Private Acquiror Transaction (i.e. the payment of the Cash Value of a
fully-vested Option shall be made in full upon consummation of the Private
Acquiror Transaction; and the payment of the Cash Value of a partially
vested Option shall be made in installments, with the first installment due
upon consummation of the Private Acquiror Transaction in a percentage
amount equal to the percentage of the Option vested at that time, and
subsequent installments due on the dates the remaining portion of the
Option was to vest in percentage amounts equal to the percentage of the
Option vesting on such dates). Amounts due under this Section 3 shall bear
interest at the rate of 10% per annum from the date of the consummation of
the Private Acquiror Transaction to the date of payment.
Installment payments of the Cash Value of an Option due after
consummation of the Private Acquiror Transaction shall be payable to the
Optionee only for so long as he remains a director of the Company or any
successor or purchasing entity. Notwithstanding anything to the contrary
contained herein, if, within 30 months after the consummation of the
Private Acquiror Transaction, the Optionee is removed from service without
Cause or not reelected for service on the Board of Directors of the Company
or any successor or purchasing entity, then all installment payments of the
Cash Value of the Options not yet paid shall accelerate and become
immediately due and payable, together with unpaid interest calculated to
the date of payment at the rate of 10% per annum, to the Optionee upon the
date of such termination of service or non-reelection.
(4) In the event there is a Change in Control which is approved by a majority
of the members of the Prior Board, in which (i) the transaction results in
or will result in a change in ownership of less than 100% of the combined
voting power of the Company's then outstanding securities, or (ii) the
transaction is a merger of the type described in clause (B)(i) of the
definition of Change in Control where the Company is the survivor of the
merger and the stockholders of the Company will receive no consideration
in the transaction, then the Options shall continue with the same vesting
schedules, expiration dates and other terms as they had immediately prior
to the Change in Control, except that if, within 30 months after such
Change in Control, the Optionee is removed from service without Cause or
not reelected for service on the Board of Directors of the Company or any
successor or purchasing entity, then all such outstanding Options shall
become fully vested and immediately exercisable upon the date of such
termination of service or non-reelection.
(5)As used herein, the following capitalized terms shall have the following
respective meanings:
"Acquiror"--the person or entity acquiring the shares described in clause
(A) of the definition of Change in Control, merging or consolidating with
the Company as described in clause (B)(i) of the definition of Change in
Control, succeeding to the Company's business as a result of a liquidation
or dissolution of the Company as described in clause (B)(ii) of the
definition of Change in Control, or purchasing all or substantially all of
the Company's assets as described in clause (B)(iii) of the definition of
Change in Control.
2
<PAGE>
"Affiliate"--an "Affiliate" of the Acquiror is an entity or person that
directly, or indirectly, controls, or is controlled by, or is under common
control with the Acquiror.
"Cause"--dishonesty, illegal conduct of a serious nature, gross
incompetence, gross misconduct, or gross neglect of Optionee's duties to
the Company.
"Change in Control"--(A) the acquisition by any person (other than the
Company or any affiliate or associate of the Company), as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of beneficial ownership (within the meaning
of Rule 13d-3 under the Exchange Act) of 40% or more of the combined voting
power of the Company's then outstanding securities, or (B) the consummation
of (i) any merger or consolidation where stockholders of the Company
immediately prior to the merger or consolidation do not immediately
thereafter hold more than 50% of the combined voting power of the surviving
company's then outstanding securities, (ii) a liquidation or dissolution of
the Company, or (iii) a sale of all or substantially all of the Company's
assets.
"Prior Board"--the group of individuals most recently elected as
directors by stockholders of the Company, or appointed to fill Board
vacancies by a majority of such stockholder-elected individuals then
serving on the Board, and not Affiliates or nominees of the Acquiror.
"Publicly-Traded Stock"--any capital stock, shares of which are listed
for trading on any national stock exchange or on the over-the-counter
market.
(6) The provisions set forth above shall be deemed to amend all option
agreements or other agreements between the Company and Optionee concerning
the Options, and shall control over any inconsistent provisions contained
therein, and accordingly shall specifically be deemed to replace any
section entitled "Corporate Transaction" in any such agreements.
(7) This Agreement shall be binding upon the Company and any successor or
purchaser of all, or substantially all, of its assets.
Shared Medical Systems Corporation
By: ________________________________
Terrence W. Kyle
Senior Vice President
ACCEPTED AND AGREED:
- - -------------------------------------
[Non-Employee Director Optionee]
3
<PAGE>
EXHIBIT E(5)
<PAGE>
Change of Control Provisions
Applicable to Employee Stock Options
(1) In the event there is a Change in Control of the type described in clause
(A) of the definition of Change in Control which is not approved by a
majority of the members of the Prior Board, then all outstanding Options
shall become fully vested and immediately exercisable upon such Change in
Control. In the event the stockholders of the Company approve a transaction
of the type described in clause (B) of the definition of Change in Control
which is not approved by a majority of the members of the Prior Board, then
all outstanding Options shall become fully vested and immediately
exercisable upon the date of such stockholder approval, which shall be at
least 10 business days prior to consummation of the transaction.
(2) In the event there is a Change in Control which is approved by a majority
of the members of the Prior Board, in which (i) the transaction results in
or will result in a change in ownership of 100% of the combined voting
power of the Company's then outstanding securities, or is of the type
described in clauses (B)(i), (ii) or (iii) of the definition of Change in
Control where the stockholders of the Company will receive consideration in
the transaction, and (ii) the Acquiror or any Affiliate of the Acquiror is
an issuer of Publicly-Traded Stock, then upon such Change in Control each
outstanding Option shall automatically be converted into an option to
acquire shares of such Publicly-Traded Stock as follows (a Change in
Control transaction of the type described in this paragraph is hereinafter
referred to as a "Public Acquiror Transaction"):
(a) If the consideration paid or to be paid to the stockholders of the
Company in the Public Acquiror Transaction consists in whole or in part of
Publicly-Traded Stock, then each outstanding Option shall automatically be
converted into an option to acquire the kind and amount of shares of such
Publicly-Traded Stock (and other securities, money or property) which would
be paid to the holder of such Option had such Option been fully vested and
exercised immediately prior to the effective time of the Public Acquiror
Transaction.
(b) If the consideration paid or to be paid to the stockholders of the
Company in the Public Acquiror Transaction is cash or other consideration
not including Publicly-Traded Stock, then each outstanding Option shall
automatically be converted into an option to acquire the amount of shares
of Publicly-Traded Stock of the Acquiror or its Affiliate equal in value
(based on the closing price of such Publicly-Traded Stock as of the
effective time of the Public Acquiror Transaction) to the value of the
consideration which would be paid to the holder of such Option had such
Option been fully vested and exercised immediately prior to the effective
time of the Public Acquiror Transaction.
The converted Options covered by this Section 2 shall have the same vesting
schedules, expiration dates and other terms as they had immediately prior
to the Public Acquiror Transaction, except that if, within 30 months after
the consummation of the Public Acquiror Transaction, the Company or any
successor or purchasing entity terminates Employee's employment without
Cause, or
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Employee suffers an Adverse Employment Change, and at the time of such
termination or Adverse Employment Change (and immediately thereafter) the
chief executive officer of the Company immediately prior to such Change in
Control is not the chief executive officer of the issuer of the Publicly-
Traded Stock, then all such outstanding Options shall become fully vested
and immediately exercisable upon the date of such termination or Adverse
Employment Change.
(3) In the event there is a Change in Control which is approved by a majority
of the members of the Prior Board, in which (i) the transaction results in
or will result in a change in ownership of 100% of the combined voting
power of the Company's then outstanding securities, or is of the type
described in clauses (B)(i), (ii) or (iii) of the definition of Change in
Control where the stockholders of the Company will receive consideration in
the transaction, and (ii) neither the Acquiror nor any Affiliate of the
Acquiror is an issuer of Publicly-Traded Stock (a Change in Control
transaction of the type described in this paragraph is hereinafter referred
to as a "Private Acquiror Transaction"), then upon such Change in Control
each outstanding Option shall automatically be converted into the right to
receive cash payments from the Company or any successor or purchasing
entity equal in aggregate principal amount to the excess of (x) the value
of the consideration which would be paid to the holder of such Option had
such Option been fully vested and exercised immediately prior to the
effective time of the Change in Control transaction, over (y) the exercise
price which would have to be paid assuming the Option was fully vested and
exercised at such time (such excess is hereinafter referred to as the "Cash
Value").
The Cash Value of each such Option shall be paid in installments, with the
timing and amount of each such installment to be determined based on the
vesting schedule for such Option as in effect immediately prior to the
Private Acquiror Transaction (i.e. the payment of the Cash Value of a
fully-vested Option shall be made in full upon consummation of the Private
Acquiror Transaction; and the payment of the Cash Value of a partially
vested Option shall be made in installments, with the first installment due
upon consummation of the Private Acquiror Transaction in a percentage
amount equal to the percentage of the Option vested at that time, and
subsequent installments due on the dates the remaining portion of the
Option was to vest in percentage amounts equal to the percentage of the
Option vesting on such dates). Amounts due under this Section 3 shall bear
interest at the rate of 10% per annum from the date of the consummation of
the Private Acquiror Transaction to the date of payment.
Installment payments of the Cash Value of an Option due after consummation
of the Private Acquiror Transaction shall be payable to the Employee only
for so long as he remains employed by the Company or any successor or
purchasing entity. Notwithstanding anything to the contrary contained
herein, if, within 30 months after the consummation of the Private Acquiror
Transaction, the Company or any successor or purchasing entity terminates
Employee's employment without
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Cause, or Employee suffers an Adverse Employment Change, and at the time of
such termination or Adverse Employment Change (and immediately thereafter)
the chief executive officer of the Company immediately prior to such Change
in Control is not the chief executive officer of the Company or any
successor or purchasing entity, then all installment payments of the Cash
Value of the Options not yet paid shall accelerate and become immediately
due and payable, together with unpaid interest calculated to the date of
payment at the rate of 10% per annum, to the Employee upon the date of such
termination or Adverse Employment Change.
(4) In the event there is a Change in Control which is approved by a majority
of the members of the Prior Board, in which (i) the transaction results in
or will result in a change in ownership of less than 100% of the combined
voting power of the Company's then outstanding securities, or (ii) the
transaction is a merger of the type described in clause (B)(i) of the
definition of Change in Control where the Company is the survivor of the
merger and the stockholders of the Company will receive no consideration in
the transaction, then the Options shall continue with the same vesting
schedules, expiration dates and other terms as they had immediately prior
to the Change in Control, except that if, within 30 months after such
Change in Control, the Company terminates Employee's employment without
Cause, or Employee suffers an Adverse Employment Change, and at the time of
such termination or Adverse Employment Change (and immediately thereafter),
the chief executive officer of the Company immediately prior to such Change
in Control is not the chief executive officer of both the Company and the
ultimate parent entity of the Company, then all outstanding Options shall
become fully vested and immediately exercisable upon the date of such
termination or Adverse Employment Change.
(5) As used herein, the following capitalized terms shall have the following
respective meanings:
"Acquiror" - the person or entity acquiring the shares described in clause
(A) of the definition of Change in Control, merging or consolidating with
the Company as described in clause (B)(i) of the definition of Change in
Control, succeeding to the Company's business as a result of a liquidation
or dissolution of the Company as described in clause (B)(ii) of the
definition of Change in Control, or purchasing all or substantially all of
the Company's assets as described in clause (B)(iii) of the definition of
Change in Control.
"Adverse Employment Change" - (A) a reduction in the salary or incentive
compensation opportunity of Employee when compared to that in effect
immediately prior to the Change in Control, (B) a clear and material
reduction in the duties, responsibilities or authority of Employee when
compared to those in effect immediately prior to the Change in Control, or
(C) any change in Employee's principal place of work which would increase
Employee's commute by 50 miles or more.
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Any dispute regarding the existence of an Adverse Employment Change shall
be settled by binding arbitration before an arbitrator(s) from the American
Arbitration Association ("AAA") mutually agreed to by Employee and his
employer, conducted under the rules of the AAA.
"Affiliate" - an "Affiliate" of the Acquiror is an entity or person that
directly, or indirectly, controls, or is controlled by, or is under common
control with the Acquiror.
"Cause" - dishonesty, illegal conduct of a serious nature, gross
misconduct, or gross neglect of Employee's duties to the Company.
"Change in Control" - (A) the acquisition by any person (other than the
Company or any affiliate or associate of the Company), as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of beneficial ownership (within the meaning
of Rule 13d-3 under the Exchange Act) of 40% or more of the combined voting
power of the Company's then outstanding securities, or (B) the consummation
of (i) any merger or consolidation where stockholders of the Company
immediately prior to the merger or consolidation do not immediately
thereafter hold more than 50% of the combined voting power of the surviving
company's then outstanding securities, (ii) a liquidation or dissolution of
the Company, or (iii) a sale of all or substantially all of the Company's
assets.
"Prior Board" - the group of individuals most recently elected as directors
by stockholders of the Company, or appointed to fill Board vacancies by a
majority of such stockholder-elected individuals then serving on the Board,
and not Affiliates or nominees of the Acquiror.
"Publicly-Traded Stock" - any capital stock, shares of which are listed for
trading on any national stock exchange or on the over-the-counter market.
(6) The provisions set forth above shall be deemed to amend all option
agreements or other agreements between the Company and Employee concerning
the Options, and shall control over any inconsistent provisions contained
therein. Accordingly, such provisions shall specifically be deemed to
replace any section entitled "Corporate Transactions" in any such
agreements.
(7) This Agreement shall be binding upon the Company and any successor or
purchaser of all, or substantially all, of its assets.
