-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J5V34c7sxnlByEQLG7HAtX8fGdYb+r9dWTx2PO/szN4HXIDeyaNjXoEa9JUSjSA0 qdFQ47a6GsCOhkqWtDfpEw== 0001036050-00-000866.txt : 20000526 0001036050-00-000866.hdr.sgml : 20000526 ACCESSION NUMBER: 0001036050-00-000866 CONFORMED SUBMISSION TYPE: SC14D9C PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20000510 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SHARED MEDICAL SYSTEMS CORP CENTRAL INDEX KEY: 0000089415 STANDARD INDUSTRIAL CLASSIFICATION: 7373 IRS NUMBER: 231704148 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC14D9C SEC ACT: SEC FILE NUMBER: 005-10410 FILM NUMBER: 625231 BUSINESS ADDRESS: STREET 1: 51 VALLEY STREAM PKWY CITY: MALVERN STATE: PA ZIP: 19355 BUSINESS PHONE: 6102196300 MAIL ADDRESS: STREET 1: 51 VALLEY STREAM PKWY CITY: MALVERN STATE: PA ZIP: 19355 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SHARED MEDICAL SYSTEMS CORP CENTRAL INDEX KEY: 0000089415 STANDARD INDUSTRIAL CLASSIFICATION: 7373 IRS NUMBER: 231704148 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC14D9C BUSINESS ADDRESS: STREET 1: 51 VALLEY STREAM PKWY CITY: MALVERN STATE: PA ZIP: 19355 BUSINESS PHONE: 6102196300 MAIL ADDRESS: STREET 1: 51 VALLEY STREAM PKWY CITY: MALVERN STATE: PA ZIP: 19355 SC 14D9 1 SCHEDULE 14D-9 FOR SHARED MEDICAL SYSTEMS CORP - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- Schedule 14D-9 Solicitation/Recommendation Statement Under Section 14(d)(4) of the Securities Exchange Act of 1934 ---------------- 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 ---------------- 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) ---------------- Copy to: Thomas E. Wood, Esq. Drinker Biddle & Reath LLP 1000 Westlakes Drive, Suite 300 Berwyn, Pennsylvania 19312-2409 (610) 993-2200 - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- [_]Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. 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 1 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 2 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 3 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. 4 (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 5 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 6 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 7 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 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:
Exhibit No. Description ----------- ----------- (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).
- - -------- * Included with the Statement mailed to stockholders. 9 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 EX-99.A.1 2 LETTER TO STOCKHOLDERS MDATED MAY 10, 2000 EXHIBIT A(1) [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 EX-99.A.2 3 OPINION OF GOLDMAN SACHS & COMPANY EXHIBIT A(2) [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 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 EX-99.E.2 4 CONFIDENTIALITY AGREEMENT EXHIBIT E(2) 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. - "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 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 "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. 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 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. 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 -------------------------- EX-99.E.3 5 INFORMATION STATEMENT DATED MAY 10, 2000 EXHIBIT E(3) 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 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 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:
Amount and Nature Title of Class Name and Address of Beneficial Owner of Beneficial Ownership Percent of Class -------------- ------------------------------------------- ----------------------- ---------------- 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
- - -------- (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 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:
Common Stock Percent Director Beneficially of Name of Beneficial Owner Since Owned(1) Class(1) - - ------------------------ -------- ------------ ------- 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)...........................
- - -------- *Less than 1% B-4 (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 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 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 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 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 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
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) - - ------------------------ ---- -------- -------- ------- ---------- ---------- ---------- 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
- - -------- (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 (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 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 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
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% - - ---- -------------------- --------------- ----------- ---------- -------------- -------------- 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
- - --------
(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 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
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 - - ---- --------------- -------------- ----------- ------------- ----------- ------------- 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
B-14 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 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.
Present Principal Occupation or Name and Address Age Employment - - ---------------- --- ------------------------------- 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
B-16
Present Principal Occupation or Name and Address Age Employment - - ---------------- --- ------------------------------- 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
B-17 EX-99.E.4 6 FORM OF NON EMPLOYEE DIRECTORS CHANGE IN CONTROL EXHIBIT E(4) 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 (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 "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 EX-99.E.5 7 CHANGE OF CONTROL PROVISIONS EXHIBIT E(5) 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 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 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. 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. -----END PRIVACY-ENHANCED MESSAGE-----