UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File No. 1-11993
MIM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 05-0489664
(State of incorporation) (IRS Employer Identification No.)
One Blue Hill Plaza, Pearl River, New York 10965
(914) 735-3555
(Address and telephone number of Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value per share
(Title of class)
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 twelve months (or for such shorter period that the
registrant was required to file such reports), 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 Common Stock (its only
voting stock) held by non-affiliates of the registrant as of April 27, 1998 was
approximately $42,238,571 million. (Reference is made to the final paragraph of
Part II, Item 5 herein for a statement of the assumptions upon which this
calculation is based.)
On April 27, 1998 there were outstanding 13,481,350 shares of the
registrant's Common Stock.
<PAGE>
MIM Corporation's ("MIM" or the "Company") Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, filed with the Securities and Exchange
Commission on March 31, 1997, is hereby amended by adding the following:
PART III
Item 10. Directors and Executive Officers of Registrant.
Directors of the Company
The following table sets forth, as of April 27, 1998, certain information
with respect to each current director and each nominee for election as a
director:
Name Age Position
- - ---- --- --------
Richard H. Friedman (1).......... 47 Chief Operating Officer, Chief Financial
Officer and Director
Scott R. Yablon (1).............. 47 Director
Louis A. Luzzi, Ph.D. (1)........ 65 Director
Richard A. Cirillo (1)........... 46 Director
Michael Kooper (2)............... 63 Director
John H. Klein (3)................ 52 Chief Executive Officer, Chairman of the
Board and Director
E. David Corvese(4) ............. 42 Director
(1) A current director and a nominee to serve as a director at the Company's
next annual meeting.
(2) Nominated by a majority of the directors to serve as a director at the
Company's next annual meeting.
(3) Mr. Klein has agreed to resign as an employee and as the Company's Chief
Executive Officer, as Chairman of the Board and as a director effective May
15, 1998.
(4) Will not stand for re-election.
* * * * *
Richard H. Friedman joined MIM in April 1996 and, in May 1996, was elected
Chief Operating Officer, Chief Financial Officer and a director of MIM. Mr.
Friedman also served as MIM's Treasurer from April 1996 until February 1998.
Effective May 15, 1998, Mr. Friedman will assume the title of Chief Executive
Officer and relinquish the titles of Chief Operating Officer and Chief Financial
Officer. From February 1992 to December 1994, Mr. Friedman served as Chief
Financial Officer and Vice President of Finance of Zenith (as defined below).
From January 1995 to January 1996, he was Vice President of Administration of
NAMPG.
Scott R. Yablon joined MIM on May 1, 1998 and, effective May 15, 1998,
will serve as its Chief Financial Officer and Chief Operating Officer. Mr.
Yablon has served as a director of MIM since July 1996. Prior to joining MIM, he
held the position of Vice President - Administration for Forbes Inc. since 1981,
and was its Vice President - Finance and Administration. He was also a member of
the Investment Committee of Forbes Inc., Vice President, Treasurer and Secretary
of Forbes Investors Advisory Institute and Vice President and Treasurer of
Forbes Trinchera, Sangre de Cristo Ranches, Fiji Forbes and Forbes Europe.
Louis A. Luzzi, Ph.D. has served as a director of MIM since July 1996. Dr.
Luzzi is Dean of Pharmacy and Provost for Health Science Affairs of the
University of Rhode Island College of Pharmacy. He has been a Professor of
Pharmacy at the University of Rhode Island since 1981. Dr. Luzzi participates in
several university, industry and government committees and has published
numerous research articles.
Richard A. Cirillo has served as a director of MIM since April 1998. Mr.
Cirillo is a member of the law firm of Rogers & Wells LLP, which he has been
associated with since 1975. Rogers & Wells LLP has served as outside general
counsel to the Company since March 1997.
E. David Corvese has served as a director of the Company since March 1996
and as Vice Chairman since May 1996. Mr. Corvese has served as Chairman of
Pro-Mark Holdings, Inc., a Delaware corporation, since June 1995 and also served
as President and Chief Executive Officer of Pro-Mark from March 1994 to June
1995. Also, since 1995 Mr. Corvese has served as the Manager of MIM Holdings,
LLC, a management company controlled by Mr. Corvese and members of his family.
From June 1991 to November 1993, Mr. Corvese served as President of PPI, a
company engaged in the business of providing informational products, market
analysis and consulting services to the pharmaceutical industry. Mr. Corvese is
also a past President of the Rhode Island Pharmaceutical Association and is a
member of the American Pharmaceutical Association, the American Society of
Hospital Pharmacists and the Rhode Island Society of Hospital Pharmacists.
Effective March 31, 1998, Mr. Corvese resigned from his position as an employee
and officer of the Company and its subsidiaries and has agreed not to stand for
re-election as director of the Company. Effective January 1, 1998, the Company
had agreed to grant Mr. Corvese an administrative leave from all positions held
in the Company and each of its subsidiaries.
Martin ("Michael") Kooper is a nominee for election as a director of the
Company at its next annual meeting. Mr. Kooper has served as President of The
Kooper Group since December 1997, a successor to Michael Kooper Enterprises.
From 1980 through December 1997, Mr. Kooper served as President of Michael
Kooper Enterprises.
2
<PAGE>
Executive Officers of the Company
The following table sets forth, as of April 27, 1998, the executive
officers of the Company:
Name Age Position
- - ---- --- --------
John H. Klein (1)........ 52 Chairman of the Board, Chief Executive
Officer and Director
Richard H. Friedman (2).. 47 Chief Financial Officer, Chief Operating
Officer and Director
Barry A. Posner.......... 34 Vice President, Secretary and General Counsel
Scott R. Yablon (3)...... 47
Larry E. Edelson-Kayne... 50 Treasurer and Controller
- - --------
(1) Effective May 15, 1998, Mr. Klein has agreed to resign as an employee, and
officer and director of the Company.
(2) Effective May 15, 1998, Mr. Friedman will assume the title of Chief
Executive Officer of the Company. As of such date, he will no longer serve
as Chief Financial Officer and Chief Operating Officer.
(3) Effective May 15, 1998, Mr. Yablon will assume the titles of Chief
Financial Officer and Chief Operating Officer of the Company.
*****
John H. Klein joined the Company in April 1996 and was elected Chief
Executive Officer, Chairman of the Board and a director of the Company in May
1996. From May 1989 to December 1994, Mr. Klein served as President, Chief
Executive Officer, a director and a member of the Executive Committee of the
Board of Directors of Zenith Laboratories, Inc. ("Zenith"), a manufacturer of
multi-source generic pharmaceutical drugs. In December 1994, Zenith was acquired
by IVAX Corporation ("IVAX"), an international health care company and a major
multi-source generic pharmaceutical manufacturer and marketer. From January 1995
to January 1996, Mr. Klein was President of IVAX's North American Multi-Source
Pharmaceutical Group and each of its operating companies, including Zenith and
Zenith Goldline (collectively, "NAMPG"). From January 1995 to January 1996, he
was also an executive officer and a member of the Executive Committee of IVAX.
Mr. Klein has served as Chairman of the Generic Pharmaceutical Industry
Association since March 1995.
3
<PAGE>
Richard H. Friedman joined the Company in April 1996 and was elected Chief
Financial Officer, Chief Operating Officer, and a director of the Company in May
1996. Mr. Friedman also served as MIM's Treasurer from April 1996 until February
1998. From February 1992 to December 1994, Mr. Friedman served as Chief
Financial Officer and Vice President of Finance of Zenith. From January 1995 to
January 1996, he was Vice President of Administration of NAMPG.
Barry A. Posner joined the Company in March 1997 as General Counsel and
was elected as the Company's Secretary at that time. On April 16, 1998, Mr.
Posner was elected Vice President of the Company. From September 1990 through
March 1997, Mr. Posner was associated with the Stamford, Connecticut law firm of
Finn Dixon & Herling LLP, where he practiced corporate law, specializing in the
areas of mergers and acquisitions and securities law, and commercial real estate
law.
Larry E. Edelson-Kayne joined the Company in February 1998 as Treasurer
and Controller. Immediately prior thereto, Mr. Edelson-Kayne had served since
1989 as Corporate Controller of Forbes Inc., a publisher of business and other
magazines. Mr. Edelson-Kayne was responsible for all accounting, reporting and
budgetary functions of Forbes Inc.
Scott R. Yablon joined MIM on May 1, 1998 and, effective May 15, 1998,
will serve as its Chief Financial Officer and Chief Operating Officer. Mr.
Yablon has served as a director of MIM since July 1996. Prior to joining MIM, he
held the position of Vice President - Administration for Forbes Inc. since 1981,
and was its Vice President - Finance and Administration. He was also a member of
the Investment Committee of Forbes Inc., Vice President, Treasurer and Secretary
of Forbes Investors Advisory Institute and Vice President and Treasurer of
Forbes Trinchera, Sangre de Cristo Ranches, Fiji Forbes and Forbes Europe.
Executive officers are elected or appointed by, and serve at the pleasure
of, the Board of Directors. Each of the above-named executive officers has an
employment agreement with the Company providing for, among other things, serving
in the executive position(s) listed herein-above.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors and officers of MIM and persons, or "groups" of persons, who own more
than 10% of a registered class of MIM's equity securities (collectively,
"Covered Persons") to file with the Securities and Exchange Commission and The
NASDAQ Stock Market, within specified time periods, initial reports of
beneficial ownership, and subsequent reports of changes in ownership, of certain
equity securities of MIM. Based solely on its review of copies of such reports
furnished to it and upon written representations of Covered Persons that no
other reports were required, other than as described below, MIM believes that
all such filing requirements applicable to Covered Persons with respect to all
periods up to and including 1997 have been complied with on a timely basis. Mr.
Posner's initial statement of beneficial ownership on Form 3 was not timely
filed.
Item 11. Executive Compensation
The following table sets forth certain information concerning the annual,
long-term and other compensation of the chief executive officer and the other
executive officers of the Company and the the most highly compensated
non-executive officer of the Company's subsidiaries (the "Named Executive
Officers") for services rendered in all capacities to MIM and its subsidiaries
during 1997 and 1996:
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and Principal Position Year Salary(1) Bonus Other Long-Term All Other
- - --------------------------- ---- --------- ----- Compensation(2) Compensation Compensation
--------------- Awards ------------
Securities
Underlying Options
------------------
<S> <C> <C> <C> <C> <C> <C>
John H. Klein................. 1997 $325,000 -- $ 12,000 $ 4,710(7)
Chief Executive Officer 1996 $220,192 -- $ 9,000 3,660,000(3)
E. David Corvese.............. 1997 $325,000 -- $ 11,917 $ 61,681(5)
Vice Chairman 1996 $174,791 -- $ 11,924 1,336,950(4) $ 76,850(6)
Richard H. Friedman........... 1997 $275,000 -- $ 12,000 $ 4,710(7)
Chief Operating Officer 1996 $187,977 -- $ 7,000 1,500,000(3) $ 3,657(7)
and Chief Financial Officer
Barry A. Posner............... 1997 $127,366(8) -- $ 4,166 50,000(9) $ 4,710(7)
Vice President, Secretary 1996
and General Counsel
E. Paul Larrat(10)............ 1997 $155,000 -- $ 3,600 -- $ 4,113(7)
Executive Vice President, 1996 $135,556 -- $ 3,600 157,500(11) $ 7,549(12)
Pro-Mark Holdings, Inc.
</TABLE>
4
<PAGE>
(1) The annualized base salaries of the Named Executive Officers for 1997 were
as follows: Mr. Klein ($325,000), Mr. Corvese ($325,000), Mr. Friedman
($275,000), Mr. Posner ($175,000), E. Paul Larrat ($155,000) and Steven
Dias ($135,000).
(2) Consists of automobile allowances.
(3) Represents options to purchase shares of MIM Common Stock from E. David
Corvese. See "Common Stock Ownership by Certain Beneficial Owners and
Management" below.
(4) Represents options to purchase shares of MIM Common Stock from MIM issued
in connection with the formation of MIM in exchange for options to
purchase Pro-Mark common stock that were previously granted by Pro-Mark.
(5) Represents $43,604 of legal costs and expenses paid by Pro-Mark and MIM
Holdings, LLC on behalf of Mr. Corvese and $18,077 of life insurance
premiums paid by Mr. Corvese and reimbursed by MIM.
(6) Represents $3,799 of legal costs and expenses paid by Pro-Mark and MIM
Holdings, LLC on behalf of Mr. Corvese and $73,051 of life insurance
premiums paid by Mr. Corvese and reimbursed by MIM.
(7) Consists of up to $3,000 of life insurance premiums paid by the Named
Executive Officer and reimbursed by MIM.
(8) The annualized base salary for Mr. Posner, who joined MIM in March 1997,
initially was $165,000 and increased to $175,000 effective in June 1997.
(9) Represents options to purchase shares of MIM Common Stock from MIM.
(10) $65,000 of Mr. Larrat's base salary is paid to Mr. Larrat indirectly by
the Company to the University of Rhode Island College of Pharmacy through
a time sharing arrangement. In turn, the University pays such amount to
Mr. Larrat. The balance of his base salary is paid directly by the
Company.
(11) Consists of 77,500 options to purchase the Company's Common Stock at an
exercise price equal to $0.0067 per share and 60,000 options to purchase
the Company's Common Stock at an exercise price equal to $13.00 per
share.
(12) Consists of life insurance premiums paid to such person by the Company.
* * * * *
The following table sets forth information concerning stock option grants
made during 1997 to the Named Executive Officers. The grants listed hereunder
are also reflected in the Summary Compensation Table. In accordance with the
rules and regulations of the Commission, the hypothetical gains or "option
spreads" for each option grant are shown assuming compound annual rates of stock
price appreciation of 5% and 10% from the grant date to the expiration date. The
assumed rates of growth are prescribed by the Commission and are for
illustrative purposes only; they are not intended to predict the future stock
prices, which will depend upon market conditions and MIM's future performance,
among other things.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants (1)
-----------------------------------------------------------
Name Number of % of Total Exercise Expiration Potential Realizable Value at
- - ---- Securities Options Price Date Assumed Annual Rates of Stock
Underlying Granted to ($/share) ---- Price Appreciation for Option
Options Employees --------- ------------------------------
Granted in 1997 Term
---------------- -------------- 5% ---- 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
John H. Klein..........
E. David Corvese.......
Richard H. Friedman....
Barry A. Posner........ 50,000(1) 58.8% $7.4375 3/26/07 $233,870 $592,673
E. Paul Larrat.........
</TABLE>
- - ----------
(1) The first third of such options became exercisable on March 26, 1997. The
remaining two thirds of such options become exercisable in equal
installments on March 26, 1998 and 1999.
5
<PAGE>
The following table sets forth for each Named Executive Officer the number
of shares covered by both exercisable and unexercisable stock options held as of
December 31, 1997. Also reported are the values for "in-the-money" options,
which represent the difference between the respective exercise prices of such
stock options and $4.75, the per share closing price of the MIM Common Stock on
December 31, 1997.
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Shares Value Number of Securities Value of Unexercised
Acquired On Realized Underlying Unexercised In-the-Money Options at
Exercise (#) ($) Options at Fiscal Year-End Fiscal Year-End
------------ --- -------------------------- ---------------
Name Exercisable Unexercisable Exercisable Unexercisable
- - ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John H. Klein (1)........ -- -- 3,040,000 620,000 $8,370,000 --
E. David Corvese (2)..... -- -- 1,336,950 -- $6,341,555 --
Richard H. Friedman (1).. -- -- 1,500,000 -- $6,975,000 --
Barry A. Posner (3)...... -- -- -- 50,000 -- --
E. Paul Larrat........... 20,000 248,666 97,500 40,000 $ 367,606 --
</TABLE>
(1) Indicated options are to purchase shares of MIM Common Stock from E. David
Corvese (see "Common Stock Ownership by Certain Beneficial Owners and
Management" above). In February 1998, Messr. Klein and Friedman exercised
these options for a total of 1,800,000 and 1,500,000 shares, respectively.
(2) Indicated options are to purchase shares of MIM Common Stock from MIM issued
in exchange for options previously granted by Pro-Mark (see "Compensation
Committee Interlocks and Insider Participation" below).
(3) Indicated options are to purchase shares of MIM Common Stock from MIM.
*****
Item 12. Common Stock Ownership by Certain Beneficial Owners and Management
Except as otherwise set forth below, the following tables sets forth, to
MIM's knowledge, as of the date of April 27, 1998, the beneficial ownership of
MIM's Common Stock by: (i) each person or entity known to MIM to own
beneficially five percent or more of MIM's Common Stock; (ii) each of MIM's
directors; (iii) each of the Named Executive Officers of MIM and its
subsidiaries set forth in the Summary Compensation Table appearing later in this
filing; and (iv) all directors and executive officers of MIM as a group. Such
information is based upon information provided to MIM by such persons.
Number of Shares Percent
Name and/or Address of Beneficial Owner Beneficially Owned (1)(2) of Class
- - --------------------------------------- ------------------------ ---------
E. David Corvese (3) .................. 4,169,056(4) 28.6%
25 North Road
Peace Dale, RI 02883
John H. Klein ......................... 3,040,000(5) 22.7%
One Blue Hill Plaza
Pearl River, NY 10965
Richard H. Friedman ................... 1,500,000 11.2%
One Blue Hill Plaza
Pearl River, NY 10965
6
<PAGE>
Ernest Corvese, Trustee of The ........ 704,760 5.3%
Corvese Irrevocable Trust - 1992(3)
25 North Road
Peace Dale, RI 02883
Nancy P. Corvese(3) ................... 672,106 5.0%
25 North Road
Peace Dale, RI 02883
Barry A. Posner ....................... 17,567(6) *
One Blue Hill Plaza
Pearl River, NY 10965
Louis A. Luzzi, Ph.D .................. 6,967(7)(9) *
University of Rhode Island
College of Pharmacy
Fogerty Hall
Kingston, RI 02881
Richard A. Cirillo .................... -- *
c/o Rogers & Wells LLP
200 Park Avenue
New York, NY 10166
Michael Kooper ........................ -- *
770 Lexington Avenue
New York, NY 10021
Scott R. Yablon ....................... 506,667(8)(9) 3.6%
One Blue Hill Plaza
Pearl River, NY 10965
Larry E. Edelson-Kayne ................ -- --
One Blue Hill Plaza
Pearl River, NY 10965
E. Paul Larrat ........................ 97,500(10) --
167 Tillinghast Road
E. Greenwich, RI 02818
All directors and executive officers
as a group (eight persons) ............ 5,542,407(11) 61.1%
- - ----------
(1) The inclusion herein of any shares as beneficially owned does not
constitute an admission of beneficial ownership of those shares. Except as
otherwise indicated, each person has sole voting power and sole investment
power with respect to all shares beneficially owned by such person.
(2) Shares deemed beneficially owned by virtue of the right of an individual
to acquire them within 60 days after June 1, 1998 upon the exercise of an
option are treated as outstanding for purposes of determining beneficial
ownership and the percentage beneficially owned by such individual.
(3) Nancy P. Corvese and Ernest Corvese are the spouse and father,
respectively, of E. David Corvese. Each of such persons disclaims
beneficial owner ship of the shares owned by such other persons. The
beneficiaries of The Corvese Irrevocable Trust - 1992 are the children of
E. David Corvese.
(4) Includes 1,178,450 shares issuable upon exercise of options. Also includes
1,860,000 shares owned by Mr. Corvese that are subject to options granted
by Mr. Corvese to Mr. Klein set forth in footnote 5 below, of which
options to purchase 1,540,000 shares are currently exercisable.
(5) Includes 1,240,000 shares that Mr. Klein has the right to acquire from Mr.
Corvese pursuant to stock option agreements and excludes 620,000 shares
subject to the unvested portion thereof.
(6) Includes 16,666 shares issuable upon exercise of the vested portion of
options. Excludes 33,333 shares subject to the unvested portion of options
held by Mr. Posner.
7
<PAGE>
(7) Dr. Luzzi and his wife share voting and investment power over these
shares.
(8) Consists of shares issuable upon exercise of the vested portion of
options. Excludes 500,000 shares subjected to the unvested portion of
options held Mr. Yablon.
(9) Excludes 13,333 and 13,333 shares subject to unvested options held by
Messrs. Luzzi and Yablon, respectively.
(10) Consists of 97,500 shares issuable upon exercise of the vested portion of
options.
(11) See footnotes 4 through 10 above. Excludes 50,000 shares subject to
unvested options held by Larry E. Edelson-Kayne.
In May 1996, Mr. Corvese granted to Messrs. Klein and Friedman options to
purchase 1,800,000 and 1,500,000, respectively, shares owned by Mr. Corvese.
These options are immediately exercisable and have a term of ten years, subject
to earlier termination upon certain mergers or consolidations of MIM or the sale
or other disposition of all or substantially all of the assets of MIM ("Change
of Control"). On January 26, 1998, Messrs. Klein and Friedman fully exercised
their respective aforesaid options utilizing personal funds. By reason of said
option exercises, a change of control of MIM was effected to the extent that the
percentage of the voting securities of MIM legally owned by Mr. Corvese
decreased from 46.0% to 21.2% (or from 50.9% to 28.4%, assuming the exercise by
Mr. Corvese of his outstanding options), while the percentage legally owned by
Messrs. Klein and Friedman increased from 0% to 13.5% and 11.2%, respectively
(or 12.3% and 10.2%, respectively, assuming the exercise by Mr. Corvese of his
outstanding options).
Mr. Corvese also granted to Mr. Klein an additional option to purchase
1,860,000 shares owned by Mr. Corvese (the "Additional Option"). The Additional
Option has a term of ten years, subject to earlier termination upon a Change in
Control of MIM or within certain specified periods following Mr. Klein's death,
disability or termination of employment for any reason. The Additional Option
becomes exercisable in installments of 620,000 shares each commencing on
December 31, 1996, 1997 and 1998, respectively, and is immediately exercisable
upon the approval of a Change of Control by the MIM Board and, if required,
stockholders.
In addition, Mr. Corvese and certain people and entities affiliated with
him have entered into a voting agreement with MIM. Under the voting agreement,
MIM will vote their respective shares of MIM Common Stock in favor of the
proposal to approve the issuance of MIM Common Stock in connection with the
Merger.
Compensation of Directors
Directors who are not officers of MIM ("Outside Directors") receive fees
of $1,500 per month and $500 per meeting of the MIM Board and any committee
thereof and are reimbursed for expenses incurred in connection with attending
such meetings. In addition, each Outside Director joining MIM since the adoption
of MIM's 1996 Non-Employee Directors Stock Incentive plan (the "Directors Plan")
receives options to purchase 20,000 shares of MIM Common Stock under that plan.
Directors who are also officers of MIM are not paid any director fees.
The Directors Plan was adopted in July 1996 to attract and retain
qualified individuals to serve as non-employee directors of MIM, to provide
incentives and rewards to such directors and to associate more closely the
interests of such directors with those of MIM's stockholders. The Directors Plan
provides for the automatic grant of non-qualified stock options to purchase
20,000 shares of MIM Common Stock to non-employee directors joining MIM since
the adoption of the Directors Plan. The exercise price of such options is equal
to the fair market value of the MIM Common Stock on the date of grant. Options
granted under the Directors Plan generally vest over three years. A reserve of
100,000 shares of MIM Common Stock has been established for issuance under the
Directors Plan. Through May 15, 1998, options to purchase 20,000 shares have
been granted under the Directors plan to each of Messrs. Luzzi and Yablon at an
exercise price of $13 per share and options to purchase 20,000 shares had been
granted under the Directors Plan to Mr. Cirillo at an exercise price of $4.35
per share.
8
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the MIM Board administers MIM's stock
incentive plans and makes recommendations to the MIM Board regarding executive
officer compensation matters, including policies regarding the relationship of
corporate performance and other factors to executive compensation. During 1997,
the members of the Committee were Messrs. Luzzi and Yablon.
At December 31, 1997, Mr. and Mrs. Corvese were indebted to MIM in the
amount of $978,750 respecting loans received from MIM in June 1994 and amended
in June 1997 in said amount. The loans bear interest at 7.125% per annum, with
interest payable monthly and principal payable in full on or before June 15,
2000, and are secured by a first mortgage on the Corveses' principal residence.
Compensation Committee Report On Executive Compensation
Prior to March 1997, there was no committee of the MIM Board responsible
for establishing or recommending compensation policies applicable to MIM's
executive officers. The compensation to executive officers for 1996 and 1997 was
determined by negotiation between MIM and the executive officers and is set
forth in the executive officers' respective employment agreements with MIM
described below. As such, other than Mr. Posner's salary increase described
below, executive compensation during 1997 was not performance based. Since then,
the Compensation Committee has been delegated responsibilities regarding
executive compensation matters. See "Compensation Committee Interlocks and
Insider Participation."
Employment Agreements
In May 1996, Messrs. Klein, Corvese and Friedman entered into executive
employment agreements with MIM which provide for initial base salaries at
annualized rates of $325,000, $325,000 and $275,000, respectively, and certain
fringe benefits including automobile and life insurance allowances. Such
executives are (or were) also eligible to participate in an executive bonus
program for senior executive officers. The term of employment is four years,
subject to earlier termination by either party. If employment is terminated
early due to disability, or by MIM without cause, or by the executive with
cause, MIM is obligated to continue to pay his salary and provide fringe
benefits for twelve months following termination. During the term of employment
and for one year after the later of termination of severance payments (unless
MIM terminates the executive without cause) or employment, the executive may
not, directly or indirectly, participate in the United States (other than with
MIM) in the pharmacy benefit management business, any business then being
engaged in by MIM or any component of any such business, nor may the executive
induce any customers to take actions disadvantageous to MIM. In June 1997, Mr.
Palmieri terminated his employment agreement and resigned as a director and
officer. On March 31, 1998, Mr. Corvese terminated his employment agreement and
resigned as an officer and employee of MIM. In addition, Mr. Corvese agreed not
to stand for re-election as a director of MIM.
Effective March 1997, Mr. Posner entered into an executive employment
agreement with MIM which provides for an initial base salary at an annualized
rate of $165,000 (increasing to $175,000 after three months based upon a
favorable review by the Chief Operating Officer), options to purchase 50,000
shares of MIM Common Stock at the then current fair market value, and certain
fringe benefits including life insurance and eligibility for participation in
MIM's executive bonus program. The agreement continues until terminated by
either party. If employment is terminated due to disability, or by MIM without
cause, or by Mr. Posner with cause, MIM is obligated to continue to pay his
salary and provide fringe benefits for nine months following termination. If Mr.
Posner ceases to serve as General Counsel or is assigned a position which
principally has business responsibilities, thereafter he is subject to
restrictions on competition similar to those applying to the other above-listed
executive officers.
9
<PAGE>
Stockholder Return Performance Graph
MIM's Common Stock first commenced public trading on August 15, 1996 in
connection with MIM's underwritten initial public offering of common stock. The
graph set forth below compares, for the period of August 15, 1996 through
December 31, 1997, the total cumulative return to holders of MIM Common Stock
with the cumulative total return of the NASDAQ Stock Market (U.S.) Index and the
NASDAQ Health Services Index.
Comparison of Cumulative Total Return Among MIM,
The NASDAQ Stock Market (U.S.) Index and the NASDAQ Health Services Index*
[The following table was depicted as a line chart in the printed material.]
<TABLE>
<CAPTION>
Cumulative Total Return
---------------------------------------------------------------------
8/15/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mim Corp MIM 100 112 38 49 111 75 37
NASDAQ STOCK MARKET (U.S.) 100 108 114 107 127 149 139
NASDAQ HEALTH SERVICES 100 104 92 86 96 105 94
</TABLE>
- - ----------
* The above graph assumes an investment of $100 in MIM's Common Stock on
August 15, 1996 and in the NASDAQ Stock Market (U.S.) Index and the NASDAQ
Health Services Index on July 31, 1996, and that all dividends were
reinvested. The performances shown in the above table are not necessarily
indicative of future performance.
Item 13. Certain Relationships and Related Transactions
At December 31, 1997, Alchemie Properties, LLC, a Rhode Island limited
liability company of which Mr. Corvese is the manager and principal owner
("Alchemie"), was indebted to MIM in the amount of $280,629 respecting a loan
received from MIM in 1994 in the original principal amount of $299,000. The loan
bears interest at 10% per annum, with interest payable monthly and principal
payable in full on or before December 1, 2004, and is secured by a lien on
Alchemie's rental income.
During 1997, MIM paid $136,582 in rent to Alchemie pursuant to a ten-year
lease entered into in December 1994 for approximately 7,200 square feet of
office space in Peace Dale, Rhode Island.
At December 31, 1997, MIM Holdings, LLC ("MIM Holdings") was indebted to
MIM in the amount of $456,000 respecting loans received from MIM during 1995 in
the aggregate principal amount of $1,078,000. MIM holds a $456,000 promissory
note from MIM Holdings due March 31, 2001 that bears interest at 10% per annum.
Interest generally is payable quarterly, although in December 1996 the note was
amended to extend the due date to September 30, 1997 for all interest accruing
from January 1, 1996 to said date. This note is guaranteed by Mr. Corvese and
further secured by the assignment to MIM of a $100,000 promissory note that was
originally given by an MIM officer to MIM Holdings. The remaining $622,000 of
indebtedness will not be repaid and was recorded as a stockholder distribution
during the first half of 1996.
At December 31, 1997, MIM Holdings paid off a $99,000 loan received from
MIM during the first half of 1996. Originally scheduled to be repaid by
September 30, 1996 without interest, the $86,000 principal amount outstanding at
December 31, 1996 had been rescheduled to be due and payable on September 30,
1997 together with 10% interest accruing on the unpaid balance since September
30, 1996 pursuant to an unsecured promissory note.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
MIM Corporation
By: /s/ Barry Posner
----------------------------
Title: Vice President
Date: April 30, 1998
10
