-----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, R4tDLxSZIjWhe2Xcw+O0wgLOL53QAaudAEjnaK0oXSZKvNcAzrW0zfMxlq4X8RwJ BDY0mxvIIH3MYr38Sx+2zA== 0000950130-99-006069.txt : 19991029 0000950130-99-006069.hdr.sgml : 19991029 ACCESSION NUMBER: 0000950130-99-006069 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19991028 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDICAL MANAGER CORP/NEW/ CENTRAL INDEX KEY: 0000850436 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 222975182 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-17822 FILM NUMBER: 99736359 BUSINESS ADDRESS: STREET 1: 669 RIVER DRIVE STREET 2: RIVER DRIVE CENTER II CITY: ELMWOOD PARK STATE: NJ ZIP: 07407-1361 BUSINESS PHONE: 2017033400 MAIL ADDRESS: STREET 1: 669 RIVER DRIVE STREET 2: RIVER DRIVE CENTER II CITY: ELMWOOD PARK STATE: NJ ZIP: 07407-1361 FORMER COMPANY: FORMER CONFORMED NAME: MEDICAL MANAGER CORP /NEW/ DATE OF NAME CHANGE: 19990723 FORMER COMPANY: FORMER CONFORMED NAME: SYNETIC INC DATE OF NAME CHANGE: 19920703 10-K/A 1 FORM 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1999 Commission file number 0-17822 MEDICAL MANAGER CORPORATION (formerly known as Synetic, Inc.) (Exact name of registrant as specified in its charter) Delaware 22-2975182 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 669 River Drive 07407-1361 Elmwood Park, New Jersey (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (201) 703-3400 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of each Class ------------------- Common Stock, $.01 par value 5% Convertible Subordinated Debentures due 2007 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the registrant's voting stock (based on the last sale price of registrant's voting stock on the NASDAQ National Market System on September 21, 1999 and, for the purpose of this computation only, the assumption that all of the registrant's directors and executive officers are affiliates) held by non-affiliates of the registrant was approximately $1,464,861,000. The number of shares of registrant's Common Stock, $.01 par value, outstanding at September 21, 1999 was 34,912,263. DOCUMENTS INCORPORATED BY REFERENCE None. PART III Item 10. Directors and Executive Officers of the Registrant. Pursuant to General Instruction G(3) to the Annual Report on Form 10-K, certain of the information regarding executive officers of the Company required by Item 401 of Regulation S-K is included in Part I of this report. The directors of the Company are as follows: Director Principal Name Age Since Occupation ---- --- -------- ---------- Thomas R. Ferguson(1)(2) 73 1989 Mr. Ferguson has been a member of the law firm of Ferguson, Case, Orr, Paterson & Cunningham for more than five years. Mervyn L. Goldstein, M.D. 62 1989 Dr. Goldstein has been a physician in private practice, Associate Clinical Professor of Medicine at the Albert Einstein College of Medicine in New York City and Attending Physician in Medicine and Oncology and Physician Director of Utilization Management at Montefiore Medical Center in New York City for more than five years. Ray E. Hannah 63 1989 Mr. Hannah has been Co-Chairman of Porex Technologies Corp. ("Porex") since January 1998 and was President of Porex from September 1987 through December 1997 and its Chief Executive Officer from November 1992 through December 1997 and an executive officer of the Company from June 1989 through June 1998. Courtney F. Jones 59 1999 Mr. Jones was a director of Medical Manager Health Systems from April 1997 until July 1999. Mr. Jones was Managing Director in charge of the New World Banking Group of Bankers Trust from December 1997 through June 1999. From July 1989 to December 1990, Mr. Jones was Managing Director in the Investment Banking Division of Merrill Lynch & Co., Inc. From October 1985 until July 1989, he served as Chief Financial Officer, Executive Vice President and a member of the Board of Directors of Merrill Lynch. Prior to that, Mr. Jones served as Treasurer and Secretary of the Finance Committee of the Board of Directors of General Motors Corporation. Mr. Jones is a director of First Data Corporation, a provider of transaction processing services to businesses and consumers, EM Solutions, a precision metal enclosure supplier to the electronics and telecommunications industries and Outsourcing Solutions, Inc., a receivables management company. John H. Kang(1) 36 1999 See "Part I. Executive Officers." 2 Raymond Kurzweil 51 1999 Mr. Kurzweil was a director of Medical Manager Health Systems from April 1997 until July 1999. Mr. Kurzweil was the founder of Kurzweil Applied Intelligence, Inc. and served as its Chief Technology Officer from its inception in 1982 to 1997, when it was acquired by Lernout & Hauspie ("L&H"). He currently serves as a consultant to L&H. Mr. Kurzweil served as the Chairman and Chief Executive Officer of Kurzweil Educational Systems, Inc. until its acquisition by L&H in 1998. Mr. Kurzweil serves as President and Chief Executive Officer of Medical Learning Company, Inc., a joint venture with the American Board of Family Practice that provides educational and reference information to family medicine doctors via the web and CD- ROM. . Roger H. Licht 45 1989 Mr. Licht has been a member of the law firm of Licht & Licht for more than five years. James V. Manning(1) 52 1989 Mr. Manning was Vice Chairman of the Board of the Company from March 1998 to July 1999 and was Chief Executive Officer of the Company from January 1995 to March 1998 and President of the Company from July 1996 to March 1998. Mr. Manning was, until March 1998, an executive officer of the Company for more than the last five years and was, until December 1994, an executive officer of Medco for more than five years. He is also Chairman of the Board of Group One Software, Inc., a computer software company. Bernard A. Marden 80 1997 Mr. Marden has been a private investor for more than five years. He is also a director of Organogenesis, Inc. of Canton, Massachusetts, a biotech company. Charles A. Mele 43 1989 See "Part I. Executive Officers." Chris A. Peifer 51 1999 Mr. Peifer was a director of Medical Manager Health Systems from April 1997 until July 1999. Mr. Peifer has been the President of Tice Financial Services, Inc. in Tampa, Florida since 1987. Mr. Peifer is also a director of PrimeSource of Dallas, Texas and Bay Cities Bank of Tampa, Florida. Herman Sarkowsky(2) 74 1989 Mr. Sarkowsky has been Chairman of the Board and Chief Executive Officer of Sarkowsky Investment Corporation, a diversified investment company, for more than five years. Mr. Sarkowsky is also a director of Hollywood Park, Inc., a diversified gaming company. Michael A. Singer(1) 52 1999 See "Part I. Executive Officers." Paul C. Suthern 47 1993 See "Part I. Executive Officers." 3 Albert M. Weis(1)(2) 72 1989 Mr. Weis has been President of A.M. Weis & Co., Inc., a commodities trading corporation, for more than five years. Mr. Weis has been the Chairman of the Board of the New York Board of Trade since June 1998. Mr. Weis is also a member of the Board of the Commodities Clearing Corporation. Martin J. Wygod(1) 59 1989 See "Part I. Executive Officers." - ----------------------- (1) Member of the Executive Committee. (2) Member of the Stock Option, Compensation and Audit Committees. Messrs. Manning, Mele, Singer, Suthern and Wygod are also directors of CareInsite. No family relationship exists among any of the directors or executive officers except that Martin J. Wygod, Chairman of the Board of the Company, and Paul C. Suthern are brothers-in-law. Messrs. Singer, Kang, Jones, Kurzweil and Peifer were elected to the Board of Directors of the Company pursuant to the Agreement and Plan of Merger, dated as of May 16, 1999 among Synetic, Inc., Marlin Merger Sub, Inc., and Medical Manager Corporation (the "MMHS Acquisition Agreement"). Under the provisions of the employment agreements between the Company and each of Mr. Singer and Mr. Kang, the Company has agreed that during the terms of such agreements the Company will, subject to its fiduciary duties, use its best efforts to include Mr. Singer and Mr. Kang in management's nominees for election, and recommend the election of Mr. Singer and Mr. Kang, as members of the Board of Directors. No other arrangement or understanding exists between any director or executive officer and any other person pursuant to which any director or executive officer was selected as a director or executive officer of the Company. All executive officers are elected annually by the Board of Directors and serve at the discretion of the Board. ---------------------- Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company during the year ended June 30, 1999 and Forms 5 and amendments thereto furnished to the Company for such year, no person failed to file on a timely basis, as disclosed in the above forms, reports required by Section 16(a) of the Securities Exchange Act of 1934, as amended, during such year, except that Mr. Weis filed an amended Form 4 to reflect the exercise of a stock option to purchase 30,000 shares of the Company's common stock and Mr. Marden filed an amended Form 5 to reflect a gift of 50,000 shares of the Company's common stock to a charitable trust. 4 Item 11. Executive Compensation. The following table presents information concerning compensation paid for services to the Company and its subsidiaries during the last three fiscal years with respect to the Company's Chief Executive Officer and its four most highly compensated executive officers as of the fiscal year ended June 30, 1999 (the "Named Executive Officers"):
Summary Compensation Table -------------------------- Long Term Compensation Annual Compensation ---------------- ------------------------- Securities Underlying Name and Principle Other Annual Options/ All Other Position Year Salary ($) Bonus ($) Compensation SARs (#)(1) Compensation ($) - ------------------------- --------- ------------ ----------- --------------- ---------------- ------------------ Paul C. Suthern.............. 1999 200,000 ___ 237,750(3) 200,000 ___ President & Chief 1998 97,692 ___ ___ 194,000 ___ Executive Officer (2) 1997 ___ ___ ___ ___ ___ Kim A. Davis................. 1999 325,000 89,269 52,123(4) ___ 5,080(5) Senior Vice President - 1998 158,750 ___ ___ 250,000 ___ Chief Executive 1997 ___ ___ ___ ___ ___ Officer and President of Porex Kirk G. Layman............... 1999 200,000 ___ ___ 75,000 5,846(6) Senior Vice President - 1998 200,000 ___ ___ ___ ___ Finance - Chief 1997 15,385 ___ ___ 150,000 ___ Accounting Officer and Secretary Charles A. Mele.............. 1999 190,000 ___ 1,585,000(3) 160,000 5,178(6) Executive Vice 1998 159,692 ___ ___ 85,000 3,163(6) President and General 1997 150,000 ___ ___ 195,000 2,019(6) Counsel Anthony Vuolo................ 1999 190,000 ___ 158,500(3) 75,000 5,178(6) Senior Vice President - 1998 159,692 ___ ___ 50,000 3,163(6) Business Development 1997 150,000 ___ ___ 81,000 2,019(6)
- ---------------------- (1) The options granted during the fiscal year ended June 30, 1999 were options to purchase shares of CareInsite's common stock. For the prior years, the options granted were options to purchase shares of the Company's common stock. (2) As of July 23, 1999, Mr. Suthern no longer serves as Chief Executive Officer of the Company. He remains Chief Executive Officer of CareInsite. As of such date, Mr. Wygod, as Chairman of the Board, became an executive officer of the Company and Messrs. Singer and Kang became Co-Chief Executive Officers of the Company. For a description of the employment agreements for Messrs. Singer and Kang, see "Employment Agreements". (3) Comprised of income from the exercise of Company stock options (the excess of the fair market value on the date of exercise over the exercise price). (4) Comprised of reimbursement for relocation expenses and auto allowance of $35,720 and $16,403, respectively. (5) Comprised of Company matching contributions to the Porex Technologies Corp. 401(k) Savings Plan ("Porex 401(k) Plan") and insurance premiums paid on behalf of Mr. Davis of $4,688 and $392, respectively. (6) Comprised of Company matching contributions to the Porex 401(k) Plan. 5 The following table presents information concerning the options granted to the Named Executive Officers during the last fiscal year. All options granted during the last fiscal year to the Named Executive Officers were options to purchase shares of CareInsite's common stock. No options to purchase shares of the Company's common stock were granted to the Named Executive Officers during the last fiscal year.
Option/SAR Grants in Last Fiscal Year Individual Grants ------------------------------------------------------------------- Number of Securities % of Total Underlying Options/SARs Exercise Options/ Granted to or Base SARs Employees in Price Expiration Grant Date Name Granted (#) Fiscal Year (2) ($/Sh) Date Present Value ($)(3) - ----------------------- ------------------- ---------------- -------------- ------------ --------------------- Paul C. Suthern......... 200,000 4.3% 18.00 6/15/09 2,140,848 Kim A. Davis............ ___ ___ ___ ___ ___ Kirk G. Layman.......... 75,000 1.6% 18.00 6/15/09 802,818 Charles A. Mele......... 160,000 3.5% 18.00 6/15/09 1,712,678 Anthony Vuolo........... 75,000 1.6% 18.00 6/15/09 802,818
____________ (1) These options vest and become exercisable as follows: 40% of the shares subject to the options vest at the end of a 30 month period from the date of grant, and 20% of such shares vest at the end of each subsequent 12- month period, with the options being fully vested 66 months after the date of grant. (2) Based upon the total number of options to purchase shares of CareInsite's common stock granted to all employees of the Company and its affiliates. (3) The estimated grant date present value as of the most recent fiscal year end reflected in the above table is determined using the Black-Scholes model. The material assumptions and adjustments incorporated in the Black-Scholes model in estimating the value of the options reflected in the above table include the following: (i) the respective option exercise price, specified above, equal to the fair market value of the underlying stock on the date of grant; (ii) the exercise of options within three years of the date that they become exercisable; (iii) a risk-free interest rate of 5.65% per annum; and (iv) volatility of 0.5327 for CareInsite calculated using a weighted historical average of comparable companies. The ultimate values of the options will depend on the future market price of CareInsite's common stock, which cannot be forecast with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of CareInsite's common stock over the exercise price on the date the option is exercised. There is no assurance that the value realized by an optionee will be at or near the value estimated by the Black-Scholes model or any other model applied to value the options. 6 The following table presents information concerning the value realized upon the exercise of options to purchase the Company's common stock and the fiscal year-end value of options to purchase the Company's common stock and CareInsite's common stock held by the Named Executive Officers. Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities Value of Unexercised Underlying Unexercised In-the-Money Options/ Shares Options/SARs at FY-End (#) SARs at FY-End ($)(1) Acquired Value ----------------------------- ------------------------------- Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable - ------------------ --------------- ------------ ----------- ------------- ----------- ------------- Paul C. Suthern 6,000 237,750 302,800 191,200 16,933,775 8,038,850 (2) ___ ___ ___ 200,000 ___ 4,462,500 (3) Kim A. Davis ___ ___ 50,000 200,000 1,871,875 7,487,500 (2) ___ ___ ___ ___ ___ ___ Kirk G. Layman ___ ___ 60,000 90,000 2,343,750 3,515,625 (2) ___ ___ ___ 75,000 ___ 1,673,438 (3) Charles A. Mele 40,000 1,585,000 125,000 185,000 5,664,813 7,397,688 (2) ___ ___ ___ 160,000 ___ 3,570,000 (3) Anthony Vuolo 4,000 158,500 182,400 113,600 10,560,050 5,028,200 (2) ___ ___ ___ 75,000 ___ 1,673,438 (3)
____________ (1) Based upon the fiscal year-end closing price of the Company's common stock or CareInsite's common stock, as applicable, of $73.9375 and $40.3125, respectively. (2) All information on this line relates to options to purchase shares of the Company's common stock. (3) All information on this line relates to options to purchase shares of CareInsite's common stock. Compensation of Directors Directors who are also employees of the Company or its subsidiaries do not receive additional compensation for their service as directors. Those directors who are not employees of the Company received no cash compensation for serving as directors for the fiscal year ended June 30, 1999. The Company's 1991 Director Stock Option Plan (the "Director Plan") provides for an automatic annual grant of an option to purchase 10,000 shares of common stock to each director who is not an officer or employee of the Company. Such shares are subject to vesting requirements in accordance with the terms of the Director Plan. The Director Plan is administered by the Board of Directors or any executive officer or officers designated by the Board. Non-employee directors (other than those directors who serve on the Stock Option Committee) have also received, in the past, options to purchase the Company's common stock under the Company's 1989 Class A Stock Option Plan (the "Class A Plan"), and the Company from time to time has granted options to purchase the Company's common stock to certain of such directors outside the Company's stock option plans on terms similar to those contained in the Class A Plan. EMPLOYMENT AGREEMENTS SINGER EMPLOYMENT AGREEMENT. On May 16, 1999, the Company entered into an employment agreement with Michael A. Singer effective upon the consummation of the Medical Manager Merger. The term of the agreement is five years subject to automatic monthly renewal. The employment agreement provides for Mr. Singer's appointment as the sole Vice Chairman and the Co-Chief Executive Officer of the Company and as the most senior executive officer of Medical Manager Research and Development Inc., a Florida corporation and a wholly owned subsidiary of the Company. The employment agreement also provides that during the term of his employment, the Company will use its best efforts to include Mr. Singer in management's nominees for election, and recommend his election, as a member of the Company's board of directors. The employment agreement provides for an annual base salary of $250,000, subject to increase in the discretion of the Board. 7 Mr. Singer's employment agreement may be terminated at any time by the Company for "cause". Upon such termination, Mr. Singer will receive only base salary that was earned but unpaid as of the date of termination. "Cause" is defined to include a willful failure by Mr. Singer to perform his duties under his employment agreement, a material breach by Mr. Singer of the employment agreement, Mr. Singer's willful misconduct relating, directly or indirectly, to the Company, or his commission of a common law fraud against the Company or conviction of a felony. With respect to failure to perform duties or a material breach that is curable, Mr. Singer must be provided with written notice and an opportunity to cure the alleged failure or breach. If Mr. Singer's employment is terminated due to death or "disability" (as defined in the employment agreement) he will be entitled to the following severance benefits: . continuation of his base salary (at the rate in effect at the time of such termination) for the remainder of the original term under the employment agreement (or later, if the employment agreement has been extended); . continued participation in the Company's health and welfare benefit plans for the remainder of the original term under the employment agreement (or later, if the employment agreement has been extended) or until he is offered comparable coverage with a subsequent employer; and . accelerated vesting of outstanding stock options granted under the employment agreement which are not yet vested on the date of termination. If Mr. Singer's employment is terminated by the Company without "cause", he will be entitled to the following severance benefits: . continuation of his base salary (at the rate in effect at the time of such termination) for a period commencing on the date of termination and ending on the later of (i) the second anniversary of the date of termination and (ii) the fifth anniversary of the effective date of the employment agreement; . continued participation in the Company's health and welfare benefit plans for a period commencing on the date of termination and ending on the later of (i) the second anniversary of the date of termination and (ii) the fifth anniversary of the effective date of the employment agreement, or until he is offered comparable coverage with a subsequent employer; and . accelerated vesting of outstanding stock options granted under the employment agreement which are not yet vested on the date of termination. In the event that Mr. Singer resigns for "good reason" (as such term is defined in the employment agreement, generally consisting of a material breach by the Company of the employment agreement; a diminution of Mr. Singer's responsibilities or title; a reduction in Mr. Singer's base salary; a relocation of Mr. Singer's workplace; a notice of non-renewal of the employment agreement; a "change in control" that is not approved by a majority of the incumbent Company board of directors; or after Mr. Singer has remained employed by the Company for six months following a "change in control" that is approved by a majority of the incumbent Company board of directors), he will receive the same severance benefits as if his employment had been terminated by the Company without "cause". "Change in control" is defined to include the following events: . when any person becomes the beneficial owner of the Company's securities representing more than 50% of the combined voting power of its then outstanding securities; . when, during any period of 24 consecutive months during the term of the employment agreement, the individuals who, at the beginning of such period, constitute the board of directors of the Company, cease for any reason other than death to constitute at least a majority of such board; . when there is a merger or consolidation of the Company with any other corporation, other than a merger or consolidation (i) which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent 50% or more of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, (ii) effected to implement a recapitalization of the Company (or similar transaction) in which no person becomes the beneficial owner 8 of securities of the Company representing more than 50% of the combined voting power of the then outstanding securities or (iii) where at least a majority of the members of the board of directors of the corporation resulting from such merger or consolidation were incumbent members of the Company board of directors; or . where there is a sale or disposition of all or substantially all of the Company's assets, or the Company adopts a plan of complete liquidation. The employment agreement contains confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that end on the later of the first anniversary of the date employment has ceased and the fifth anniversary of the effective time of the Medical Manager Merger. The employment agreement also contains provisions giving the Company exclusive ownership of any inventions, discoveries, improvements and the like which were developed or conceived by Mr. Singer as a result of his employment with the Company. KANG EMPLOYMENT AGREEMENT. On May 16, 1999, the Company entered into an employment agreement with John H. Kang effective upon the consummation of the Medical Manager Merger. The employment agreement with Mr. Kang is substantially similar to that for Mr. Singer except that the employment agreement with Mr. Kang provides: . for Mr. Kang's appointment as the Co-Chief Executive Officer of the Company; . that during the term of the employment Mr. Kang will be eligible to participate in an annual incentive bonus plan to be established by the Company for selected senior executives; and . that in the event of termination of Mr. Kang's employment by the Company other than for "cause", or if Mr. Kang resigns for "good reason" in addition to the benefits described above under Mr. Singer's employment agreement, he will be entitled to a bonus equal to the maximum bonus that would have been payable for the fiscal year in which his employment terminates. Singer and Kang Option Grants. At the effective time of the Medical Manager Merger, pursuant to each of their employment agreements, Mr. Singer and Mr. Kang were each granted an option to purchase 650,000 shares of the Company's common stock at an exercise price equal to the fair market value at the effective time of the Merger. Subject to certain events, the options will vest in five equal installments, commencing on the first anniversary of the date of grant. The options will not be exercisable following the tenth anniversary of the date of grant and are subject to earlier termination under the circumstances described above. The employment agreements provide that Messrs. Singer's and Kang's outstanding and unvested options will immediately become fully vested and exercisable upon any of the following: . the six-month anniversary of a change in control that is approved by a majority of the incumbent members of the Company board of directors if Mr. Singer or Mr. Kang, as the case may be, is still employed by the Company, or if prior to the six-month anniversary of a change in control, the date when his employment is terminated by the Company without cause or Mr. Singer or Mr. Kang, as the case may be, resigns for good reason; . a change in control that is not approved by a majority of the incumbent members of the Company board of directors that occurs during the term of the employment agreement; or . prior to the occurrence of a change in control, a material reduction in Mr. Singer's or Mr. Kang's, as the case may be, title or responsibilities or a relocation of his workplace which remains in effect for 30 days following his written notice of such event to the Company. DAVIS EMPLOYMENT AGREEMENTS. Each of the Company and Porex entered into an employment agreement with Kim Davis, effective as of January 1, 1998, pursuant to which he serves as Senior Vice President of the Company and Chief Executive Officer of Porex. Each of Mr. Davis's agreements provides for an employment period of five years, subject to monthly renewal thereafter. Under Mr. Davis's employment agreements, he will be entitled to: . an aggregate base salary of $325,000; . participation in Porex's EVA/TM/ Incentive Plan; . certain perquisites; and 9 . compensation based upon the performance of business units acquired during his employment period (the "Transaction Based Compensation"), as more fully described in the following paragraph. The maximum amount of Transaction-Based Compensation, if any, will be 1% of the aggregate consideration paid by Porex (whether in cash, property or securities) for each acquisition. Such compensation is payable as follows: 33% after the determination of operating profits for the acquired entity for the first full year following the closing date of any such acquisition, 50% after such determination for the second full year, and 17% after such determination for the third year. Notwithstanding the foregoing, not more than $200,000 in a given year shall be payable to Mr. Davis in respect of Transaction-Based Compensation with respect to all acquisitions and Transaction-Based Compensation applicable to an acquisition will only be payable if the projections that had been presented to the Board in connection with the approval of such acquisition have been met for the applicable year. In the event that Mr. Davis's employment is terminated either (i) by the Company or Porex without cause (as defined in Mr. Davis's agreement with Porex, which generally includes willful failure to perform his duties, willful misconduct relating to the Company, breach of a material policy of the Company or material provision of his agreement, commission of a fraud against the Company or conviction of a felony involving moral turpitude), (ii) by Mr. Davis as a result of an unremedied material reduction in his duties or (iii) upon 30 days' notice at any time after a 12-month period following the occurrence of a change in control (as generally described below) (or such shorter period to the extent the acquiring company does not request his services during such 12-month period) (a "Change in Control Termination"), Mr. Davis will receive . two years continuation of base salary; . one year continuation of welfare benefits (or, if earlier, until he obtains comparable coverage from a subsequent employer), . amounts held in the "bank" under the Incentive Plan, . the pro rata portion of his bonus under the Incentive Plan for the year of termination, if any, and . any remaining unpaid installment payments of Transaction-Based Compensation that would be made assuming Mr. Davis had remained employed for two additional years, if any (subject to the $200,000 limit and the achievement of projections). A "Change in Control" will occur if: . any person, entity or group (excluding Mr. Martin J. Wygod) acquires at least 50% of the voting power of the outstanding voting securities of Porex and following such acquisition Mr. Wygod ceases to hold one or more of the positions of the Chairman of the Board of Directors, Chief Executive Officer or a senior executive officer of the acquirer of the 50% voting power (in each case, with duties and responsibilities substantially equivalent to those prior to such acquisition); . the occurrence of a reorganization, merger or consolidation or sale of or other disposition of all or substantially all of Porex's assets and following such an event Mr. Wygod ceases to hold the positions described above; or . the occurrence of a complete liquidation or dissolution of Porex. Mr. Davis will also be entitled to the payments described above in the event his employment terminates by reason of his death or disability, except that he will be entitled to all remaining unpaid installments of Transaction- Based Compensation (subject to the $200,000 limit and the achievement of projections) and he is not entitled to continuation of welfare benefits. In the event of the expiration of the employment period by mutual agreement, he will be entitled to: . amounts held in the bank under the Incentive Plan, and . any unpaid installment payments of Transaction-Based Compensation, (subject to the $200,000 limit and the achievement of projections). 10 In the event that Mr. Davis's employment is terminated for cause or his resignation (other than for reasons described above), Mr. Davis will receive earned and unpaid compensation through the effective date of termination and will forfeit amounts held in the "bank" under the Incentive Plan and any unpaid installment payments of Transaction-Based Compensation. In connection with his entering into the employment agreements, the Company granted Mr. Davis options to purchase 250,000 shares of the Company's common stock. The option shares vest in five equal installments on January 1, 1999 and each of the next four anniversaries of such date, subject generally to continued employment. In the event of a termination of Mr. Davis's employment by the Company without Cause, as a result of his disability, by Mr. Davis due to an unremedied material reduction in duties or responsibilities or a Change in Control Termination, Mr. Davis's options will continue to vest as if he remained in the employ of the Company for two years following the date of termination. 11 Item 12. Security Ownership of Certain Beneficial Owners and Management. PRINCIPAL STOCKHOLDERS The following table sets forth certain information as of October 15, 1999 (except as otherwise indicated) concerning the beneficial ownership of the Company's common stock by each person known by the Company to own more than 5% of its common stock.
Amount Name and Address of and Nature of Percent of Beneficial Owner Beneficial Ownership Class (1) ---------------- -------------------- --------- Martin J. Wygod....................... 5,651,183(2)(3) 16.0% P.O. Box 7188 Rancho Santa Fe, California 92067 SN Investors, L.P..................... 5,061,857(2) 14.5% 818 Washington Street Wilmington, Delaware 19801 Michael A. Singer..................... 3,681,250(4)(5) 10.5% 15151 Northwest 99/th/ Street Alachua, Florida 32615 MAS 1997 Family Limited Partnership... 3,668,750(4) 10.5% 8989 Westheimer, Suite 228E Houston, Texas 77063
- ------------------- (1) The number of shares of the Company's common stock deemed outstanding includes: (i) 34,968,411 shares of common stock outstanding as of October 15, 1999, (ii) the number of shares, if any, of the Company's common stock that the respective persons named in the above table have the right to acquire presently or within 60 days of October 15, 1999 upon exercise of stock options and (iii) the number of shares, if any, of the Company's common stock, which the respective persons named in the above table have the right to acquire upon conversion of the Company's 5% Convertible Subordinated Debentures due 2007 ("Convertible Debentures"). (2) SN Investors, the general partner of which is controlled by Mr. Wygod, is the record and beneficial owner of 5,061,857 shares of the Company's common stock. Mr. Wygod is an indirect beneficial owner of such shares and they are included in the total of 5,651,183 shares listed as beneficially owned by Mr. Wygod. See "Item 13. Certain Relationships and Related Transactions-Investment Agreement" for additional information regarding SN Investors. (3) Includes 249,333 shares of the Company's common stock that Mr. Wygod has the right to acquire presently or within 60 days of October 15, 1999 upon exercise of stock options or upon conversion of Convertible Debentures. Includes 2,000 shares of the Company's common stock beneficially owned by Mr. Wygod's spouse, as to which shares Mr. Wygod disclaims beneficial ownership. Includes 3,500 shares of the Company's common stock and shares of the Company's common stock issuable upon conversion of $1,500,000 principal amount of Convertible Debentures owned by Synetic Foundation, Inc. ("Synetic Foundation"), a charitable foundation of which Messrs. Manning, Suthern and Wygod are trustees and share voting and dispositive power, and 186,961 shares of the Company's common stock and shares of the Company's common stock issuable upon conversion of $500,000 principal amount of Convertible Debentures owned by the Rose Foundation ("Rose Foundation"), a private charitable foundation of which Messrs. Wygod and Mele are trustees and share voting and dispositive power. (4) MAS 1997 Family Limited Partnership ("MAS Family Partnership"), the general partner of which is a company controlled by Mr. Singer, and the sole limited partner of which is Mr. Singer, is the record and beneficial owner of 3,668,750 shares of the Company's common stock. Mr. Singer is an indirect beneficial owner of such shares and they are included in the total of 3,681,250 shares listed as beneficially owned by Mr. Singer. (5) Includes 12,500 shares of the Company's common stock owned by MDDS Partnership Ltd. ("MDDS Ltd."), the general partner of which is controlled by Mr. Singer and the limited partners of which are Mr. Singer and certain of his family members. 12 SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth certain information, as of October 15, 1999, concerning the ownership of the Company's and CareInsite's common stock by each of the directors, each of the Named Executive Officers, and by all directors and executive officers of the Company as a group.
Medical Manager CareInsite ------------------------------------------- --------------------------------------- Amount and Percent of Amount and Percent of Nature of Beneficial Class (3) Nature of Beneficial Class (4) Name of Beneficial Owner Ownership (1)(2) Ownership (1) ------------------------ ---------------------------------------------- --------------------------------------- Kim A. Davis............................... 50,080 * 7,000 * Thomas R. Ferguson......................... 126,116 * 6,000 * Mervyn L. Goldstein........................ 124,716(5) * 9,900 * Ray E. Hannah.............................. 139,067 * 10,000 * Courtney F. Jones.......................... 21,250 * 0 * John H. Kang............................... 328,508 * 0 * Raymond Kurzweil........................... 15,000 * 0 * Kirk G. Layman............................. 60,113 * 5,000 * Roger H. Licht............................. 84,333 * 3,000 * James V. Manning........................... 333,299(6) * 22,500 * Bernard A. Marden.......................... 356,001 1.02% 22,500 * Charles A. Mele............................ 387,359(7) 1.10% 10,000 * Chris A. Peifer............................ 101,647(8) * 8,000 * Herman Sarkowsky........................... 269,339(9) * 22,500 * Michael A. Singer.......................... 3,681,250(10) 10.53% 15,000(10) * Paul C. Suthern............................ 378,298(6)(11) 1.07% 22,500 * Anthony Vuolo.............................. 218,604 * 10,000 * Albert M. Weis............................. 166,888(12) * 22,950 * Martin J. Wygod............................ 5,651,183(6)(7)(13) 16.05% 38,000(13) * All directors and executive officers as a group (21 persons).................. 12,521,968 33.93% 270,850 *
- -------------------------------- * Less than one percent. (1) The persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, unless otherwise indicated in the following footnotes. (2) Includes the following number of shares of the Company's common stock that the following persons have the right to acquire presently or within 60 days of October 15, 1999 upon exercise of stock options or upon conversion of Convertible Debentures: Mr. Davis, 50,000; Mr. Ferguson, 81,666; Dr. Goldstein, 81,666; Mr. Hannah, 46,166; Mr. Jones, 21,250; Mr. Kang, 6,250; Mr. Kurzweil, 15,000; Mr. Layman, 60,000; Mr. Licht, 80,333; Mr. Manning, 223,333; Mr. Marden, 89,333; Mr. Mele, 173,166; Mr. Peifer, 15,000; Mr. Sarkowsky, 105,000; Mr. Suthern, 368,300; Mr. Vuolo, 214,433; Mr. Weis, 54,166; Mr. Wygod, 249,333; and all directors and executive officers as a group, 1,934,395. Includes 80 shares of the Company's common stock allocated to the account of Mr. Davis, 1,595 shares of the Company's common stock allocated to the account of Mr. Hannah, 113 shares of the Company's common stock allocated to the account of Mr. Layman, 275 shares of the Company's common stock allocated to the account of Mr. Mele and 270 shares of the Company's common stock allocated to the account of Mr. Vuolo under the Porex 401(k) Plan as of June 30, 1999. (3) The number of shares of the Company's common stock deemed outstanding includes: (i) 34,968,411 shares of the Company's common stock outstanding as of October 15, 1999, (ii) the number of shares of the Company's common stock that the respective persons named in the above table have the right to acquire presently or within 60 days of October 15, 1999 upon exercise of stock options and (iii) the number of shares of the Company's common stock that the respective persons named in the above table have the right to acquire upon conversion of Convertible Debentures. (4) The number of shares of CareInsite's common stock deemed outstanding includes 70,410,134 shares of CareInsite's common stock outstanding as of October 15, 1999. As of October 15, 1999, none of the CareInsite stock options granted to the respective persons named in the above table is exercisable within 60 days. (5) Includes 200 shares of the Company's common stock owned by Dr. Goldstein's spouse, as to which Dr. Goldstein disclaims beneficial ownership. 13 (6) Includes 3,500 shares of the Company's common stock and shares of the Company's common stock issuable upon conversion of $1,500,000 principal amount of Convertible Debentures owned by the Synetic Foundation. (7) Includes 186,961 shares of the Company's common stock and shares of the Company's common stock issuable upon conversion of $500,000 principal amount of Convertible Debentures owned by the Rose Foundation. (8) Includes 25,974 shares of the Company's common stock held in trust for Mr. Peifer's family members. (9) Includes 15,000 shares of the Company's common stock owned by a charitable foundation of which Mr. Sarkowsky is a director. (10) Includes 3,668,750 shares of the Company's common stock owned by MAS Family Partnership and 12,500 shares of the Company's common stock owned by MDDS Ltd. MDDS Ltd. also owns 15,000 shares of CareInsite's common stock. (11) Includes 1,200 shares of the Company's common stock held in custodial accounts for Mr. Suthern's children. (12) Includes 3,250 shares of the Company's common stock owned by a corporation of which Mr. Weis is the sole stockholder, sole director and president and 3,200 shares of the Company's common stock held in trust for Mr. Weis's children. (13) Includes 5,061,857 shares of the Company's common stock owned beneficially and of record by SN Investors. Mr. Wygod is an indirect beneficial owner of such shares. See "Footnote 2 to the Principal Stockholders Table". Includes 2,000 shares of the Company's common stock beneficially owned by Mr. Wygod's spouse, as to which shares Mr. Wygod disclaims beneficial ownership. Mr. Wygod's spouse also beneficially owns 2,000 shares of CareInsite's common stock which are in a trust for Mr. Wygod's stepson, as to which shares Mr. Wygod disclaims beneficial ownership. 14 Item 13. Certain Relationships and Related Transactions. Investment Agreement. On December 14, 1994, pursuant to the Purchase and Sale Agreement dated as of May 24, 1994 between the Company and Merck & Co., Inc. (the "Purchase and Sale Agreement"), the Company purchased 5,268,463 shares of the Company's Common Stock from Merck for an aggregate purchase price of $37,764,019. At the time of the purchase by the Company, SN Investors purchased 5,061,857 shares of the Company's Common Stock (the "Wygod Shares") from Merck for an aggregate purchase price of $36,283,079. The purchase by SN Investors was made pursuant to an assignment by the Company to Mr. Wygod of the right to purchase the Wygod Shares pursuant to the Investment Agreement between Mr. Wygod and the Company, dated as of September 13, 1994 (the "Investment Agreement"). Mr. Wygod, as permitted under the Investment Agreement, further assigned to SN Investors his right to purchase the Wygod Shares. The Investment Agreement also provides certain demand registration rights to Mr. Wygod at Mr. Wygod's expense that are assignable to any permitted transferee of the Wygod Shares. Mr. Wygod has not assigned such registration rights to SN Investors. While Mr. Wygod currently intends to assign such registration rights to SN Investors in the event the General Partner determines to sell or otherwise transfer the Wygod Shares under circumstances in which registration would be required, Mr. Wygod is under no obligation to do so. The Investment Agreement also provided for certain restrictions on voting and disposition of shares of the Company's common stock. Under the terms of the Investment Agreement, such restrictions are no longer in effect. Registration Rights of Messrs. Singer, Kang and Merlich. The MMHS Acquisition Agreement provides certain demand registration rights to Messrs. Singer, Kang and Richard Merlich, a former director of Medical Manager Health Systems. CareInsite. As of October 15, 1999, the Company owned 72.1% of the outstanding common stock of CareInsite. The Company and CareInsite have entered into or will enter into a number of agreements for the purpose of defining the ongoing relationship between the two companies. Additional or modified agreements, arrangements and transactions may be entered into by CareInsite and the Company in the future. Any such future agreements, arrangements and transactions will be determined through negotiations between the Company and CareInsite, as the case may be. The following is a summary of certain existing agreements between the Company and CareInsite: Tax sharing agreement Effective June 16, 1999, the Company no longer files a consolidated federal income tax return with CareInsite, but will continue to file a combined tax return with CareInsite for California income tax purposes. The Company and CareInsite entered into a tax sharing agreement providing, among other things, that, for periods prior to CareInsite's initial public offering (the "Offering") and during which the Company was included in the Company's consolidated federal income tax returns, CareInsite will be required to pay the Company an amount equal to CareInsite's federal income tax liabilities for these periods, determined as if the Company had filed federal income tax returns on a separate company basis. Additionally, for periods both before and after the Offering, in situations where CareInsite files a combined return with the Company for state income tax purposes, such as for California, CareInsite will be required to pay the Company an amount equal to CareInsite's state income tax liabilities, determined as if the Company had filed state income tax returns on a separate company basis. If the CareInsite experiences a net operating loss resulting in no federal or state income tax liability for a taxable period in which it was included in the Company's consolidated federal or combined state income tax returns, CareInsite will be entitled to a payment from the Company equal to the reduction, if any, in the federal or state income tax liability of the Company consolidated group by reason of the use of the CareInsite's net operating loss. Further, under the tax sharing agreement, if CareInsite receives a net tax benefit for certain equity based compensation arrangements involving Medical Manager stock, or for the payment by Medical Manager of certain litigation expenses and damages pursuant to the terms of an indemnification agreement between CareInsite and the Company as described below, then CareInsite is required to pay an amount equal to those tax benefits to the Company when they are actually realized by CareInsite. The tax sharing agreement also provides for the Company to conduct tax audits and tax controversies on CareInsite's behalf for periods, and with respect to returns, in which CareInsite is included in the Company's consolidated or combined returns. 15 Services agreement The Company and CareInsite entered into a services agreement dated as of January 1, 1999, pursuant to which the Company will provide CareInsite with certain administrative services which may include payroll, accounting, business development, legal, tax, executive services and information processing and other similar services. CareInsite pays the actual costs of providing these services. Such costs include an allocable portion of the compensation and other related expenses of employees of the Company who serve as officers of CareInsite. This agreement is terminable by either party upon 60 days prior written notice in certain events, or by the Company, at any time, if the Company ceases to own at least 50% of the voting stock of CareInsite. The services agreement shall terminate by its terms, if not previously terminated or renewed, on January 1, 2004. Allocations from the Company to CareInsite were $1,050,000, $836,000 and $230,000 for the fiscal years ended June 30, 1999 and 1998 and for the period from Inception (December 24, 1996) through June 30, 1997, respectively. The allocation was calculated based on the estimated time the employees of the Company worked providing services to CareInsite. As of June 30, 1999, CareInsite owes the Company an aggregate of $853,000 associated with services agreement, reimbursable expenses and certain costs related to the Offering. Indemnification agreement The Company and CareInsite entered into an indemnification agreement, under the terms of which CareInsite will indemnify and hold harmless the Company, on an after tax basis, with respect to any and all claims, losses, damages, liabilities, costs and expenses that arise from or are based on the operations of the business of CareInsite before or after the Offering. Similarly, the Company will indemnify and hold harmless CareInsite, on an after tax basis, with respect to any and all claims, losses, damages, liabilities, costs and expenses that arise from or are based on the operations of the Company other than the business of CareInsite before or after the Offering. With respect to the Merck litigation (see "Item 3. Legal Proceedings"), this agreement provides that the Company will bear both the actual costs of conducting the litigation and any monetary damages that may be awarded to Merck and Merck-Medco in the litigation. CareInsite records amounts funded by the Company as a capital contribution, which was $4,300,000 through June 30, 1999. The agreement further provides that any damages awarded to CareInsite and the Company in the litigation will be for the account of the Company. Finally, the agreement provides that Medical Manager shall not be responsible for any losses suffered by CareInsite resulting from any equitable relief obtained by Merck- Medco against CareInsite, including, but not limited to, any lost profits, other losses, damages, liabilities, or costs or expenses arising from such equitable relief. Medical Manager Health Systems/CareInsite Agreement. Medical Manager Health Systems has an agreement with CareInsite, under which the CareInsite will be the exclusive provider to Medical Manager Health Systems of certain network, web hosting and transaction services. Under this agreement, CareInsite will pay certain fees to Medical Manager Health Systems on transactions performed on behalf of Medical Manager Health Systems' customers. Medical Manager Health Systems and CareInsite may, from time to time, also engage in certain transactions relating to their respective businesses and activities in mutual support of each other's businesses outside of this agreement. The agreement became effective on July 23, 1999, the date on which the Medical Manager Merger was consummated. The agreement has a term of five years, which can be renewed for two successive five year terms subject to the parties reaching agreement on certain renewal terms. The agreement is also subject to early termination in the event either party breaches its material obligations under the agreement, in the case of bankruptcy of either party, in the event that a competitor of Medical Manager Health Systems acquires more than 50% ownership interest of CareInsite resulting in a change of control of CareInsite or by mutual consent of Medical Manager Health Systems and CareInsite. Other. The Company was reimbursed approximately $113,972 by a corporation controlled by Mr. Wygod for the partial use of the Company's office facilities and for services rendered by Company employees during the fiscal year ended June 30, 1999. Medical Manager Research and Development leases property in Alachua, Florida that is owned by a company controlled by Mr. Singer and a member of his family. Medical Manager Research and Development is responsible for all real estate taxes, insurance and maintenance relating to the property. The term of the lease is through March 31, 2004. The lease commenced on April 1, 1996 and provides for annual rentals of approximately $550,000. The Company believes that the rent for such property does not exceed the fair market rental value thereof. 16 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MEDICAL MANAGER CORPORATION October 27, 1999 By: /s/ James R. Love ------------------------ Name: James R. Love Title: Executive Vice President - Finance and Administration and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----