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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 0-26345
CareInsite, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3630930
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
669 River Drive, River Drive Center Two 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:
Common Stock, $.01 par value
(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 12 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 at least 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 common stock held by persons other
than affiliates of the registrant, as of September 21, 1999, was approximately
$821,831,748 (based on the last sale price of the registrant's common stock on
the NASDAQ National Market System on that date and, for purpose of this
computation only, the assumption that Medical Manager Corporation and all of the
registrant's directors and officers are affiliates).
The number of shares of the registrant's common stock outstanding at
September 21, 1999 was 70,410,134.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The Company's healthcare e-commerce services are still under development
and no revenues have been generated from the sale of these services.
Additionally, the market for the Company's services is unproven. These factors
make it difficult to evaluate the Company's business and prospects. The Company
has incurred substantial operating losses since the Company's inception and
there can be no assurance that the Company will generate significant revenues or
profitability in the future. The Company intends to significantly increase its
expenditures primarily in the areas of development, sales and marketing, data
center operations and customer support. As a result, the Company expects to
incur substantial operating losses for at least the next two fiscal years.
The Company expects to generate a significant portion of its revenue
from payers and suppliers who are expected to pay initial set-up and ongoing
maintenance fees associated with organizing, loading and maintaining their
content, transaction fees for the transmission of payer content to physicians
and transaction fees for lab orders/results and prescription routing. The
Company also expects to generate revenue from physicians who are expected to pay
a monthly fee for access to a range of the Company's services.
Management believes that they have a unique understanding of the
economic leverage inherent in facilitating the automation of certain clinical,
administrative and financial processes. Accordingly, the Company also has
contracted with certain payers and in the future may contract with other payers
and suppliers to guarantee them incremental cost savings from the use of certain
of the Company's services. If any of these payers or suppliers do not realize
the guaranteed level of cost savings, the Company will be obligated to make a
payment to that payer or supplier, which payment may exceed the Company's
charges to that payer or supplier. In some cases, the Company intends to share
in any cost savings in excess of the guaranteed cost savings. The amount and
timing of transaction revenue generated under these arrangements may be impacted
by the Company's guarantee of cost savings.
On December 24, 1996, Medical Manager acquired Avicenna, a privately
held, development stage company that marketed and built Intranets for managed
healthcare plans, integrated healthcare delivery systems and hospitals. The
acquisition of Avicenna marked the inception of Medical Manager's healthcare
electronic commerce business. On January 23, 1997, Medical Manager acquired
CareAgents, a privately held, development stage company engaged in developing
Internet-based clinical commerce applications. On November 24, 1998, Medical
Manager formed CareInsite, Inc. (formerly Synetic Healthcare Communications,
Inc.). On January 2, 1999, Medical Manager contributed the stock of CareAgents
to Avicenna. Concurrently, Avicenna contributed the stock of CareAgents and
substantially all of Avicenna's other assets and liabilities to the Company.
Medical Manager also contributed $10,000,000 in cash to the Company. As of
September 21, 1999, Medical Manager held a 72.1% interest in the Company through
Avicenna. These transactions, which resulted in the formation of the Company,
have been accounted for using the carryover basis of accounting and the
Company's financial statements include the accounts and operations of Avicenna
and CareAgents for all periods presented from the date each entity was acquired.
Effect of Recent Transactions
THINC. In January 1999, the Company and The Health Information Network
Connection LLC, referred to as THINC, and THINC's founding members, Greater New
York Hospital Association, Empire Blue Cross and Blue Shield, Group Health
Incorporated and HIP Health Plans, entered into definitive agreements and
consummated a broad strategic alliance. Under these arrangements, among other
things, the Company:
* acquired a 20% ownership interest in THINC in exchange for $1,500,000
in cash and a warrant to purchase an aggregate of 4,059,118 shares of
common stock of the Company, exercisable on December 13, 1999 at $4.00
per share of common stock issued and which expires on January 1, 2006,
subject to certain exceptions, referred to as the THINC warrant;
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* agreed to extend senior loans to THINC of $2,000,000 of working
capital line of credit (the "Working Capital Line of Credit") and
$1,500,000 of contingent line of credit (the "Contingent Line of
Credit");
* entered into a Management Services Agreement with THINC pursuant to
which the Company will manage all operations of THINC, including, as
part of the services, providing THINC with certain content and
messaging services, and THINC will provide the Company with the right
to deploy its prescription and laboratory communication services on
the THINC network on behalf of the payers;
* licensed to THINC the Company content and messaging services for use
over the THINC network; and
* entered into Clinical Transaction Agreements with each of Empire,
Group Health Incorporated and HIP, referred to together as the "THINC
Payers," to provide online prescription and laboratory communication
services.
As part of this arrangement, THINC entered into Managed Care Transaction
Contracts with each of the THINC payers whereby the THINC payers agreed to use
the THINC network for their online medical claims submission, eligibility,
benefit plan detail, roster distribution, remittance advice distribution, claims
inquiry, referral/pre-certification and authorization, and encounter submission
transactions.
The estimated fair value of the THINC warrant at the date issued was
approximately $1,700,000, as determined using the Black-Scholes option-pricing
model. The Company accounts for the Company's investment in THINC using the
equity method of accounting. For the twelve months ended December 31, 1998,
THINC incurred a net loss of $4,837,000. For the six months ended June 30, 1999,
THINC incurred a net loss of $3,309,000. The Company anticipates that THINC will
continue to incur losses over the next twelve to eighteen months. The carrying
value of the Company's investment in THINC exceeds its pro rata share of the net
assets of THINC. This excess of $2,880,000 is being amortized over a ten-year
period.
Cerner. In January 1999, the Company also entered into agreements and
consummated a broad strategic alliance with Cerner. Cerner, a publicly traded
corporation, is a supplier of clinical and management information systems for
healthcare organizations. Under this arrangement, the Company, among other
things, obtained a perpetual software license to the functionality embedded in
Cerner's HNA, including their HNA Millennium Architecture, in exchange for
12,437,500 shares of the Company's common stock (such shares are subject to
certain restrictions on transfer and other adjustments). In addition, the
Company issued to Cerner a warrant to purchase up to 1,008,445 shares of common
stock at $4.00 per share, exercisable only in the event THINC exercises its
warrant. Also, the Company will issue to Cerner 2,503,125 additional shares of
common stock on or after February 15, 2001 at $0.01 per share in the event the
Company has achieved a stated level of physician participation by 2001. The
software acquired from Cerner was valued at approximately $20,800,000 based on
the value of the equity consideration as determined using an income approach
valuation methodology. In connection with the Company's strategic relationship
with Cerner, the Company sold Cerner a beneficial interest of 2% of THINC. As
beneficial owner Cerner will receive any dividends, income and liquidation or
disposition proceeds related to their 2% interest. However, the Company will
remain the owner of record, will exercise voting rights and will have the right
to sell, transfer, exchange, encumber, or otherwise dispose of this 2% interest.
Cerner has also agreed to fund $1,000,000 of the Company's $2,000,000 senior
loan to THINC. Additionally, the Company and Cerner entered into a Marketing
Agreement that allows for the marketing and distribution of the Company's
services to the physicians and providers associated with more than 1,000
healthcare organizations who currently utilize Cerner's clinical and management
information system. In addition, Cerner committed to make available engineering
and systems architecture personnel and expertise to accelerate the deployment of
the Company's services, as well as ongoing technical support and future
enhancements to HNA. Concurrent with the Offering, the Company sold 537,634
shares of its common stock directly to Cerner for net proceeds of approximately
$9,000,000. As of September 21, 1999, Cerner owned 18.7% of the outstanding
common stock of the Company.
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Med-Link. On May 24, 1999, the Company acquired Med-Link for $14,000,000
in cash. Med-Link is a regional provider of electronic data interchange services
to healthcare providers and payers in the northeastern United States that
automate their claims and other managed care transactions. Med-Link currently
processes over 12 million managed care transactions annually for approximately
12,000 physicians.
Horizon. In June 1999, the Company entered into a five and one-half year
agreement with Horizon to provide online prescription, laboratory and managed
care communication services. In connection with this transaction, among other
things, the Company issued to Horizon a warrant to purchase an aggregate of
811,824 shares of common stock of the Company ("Horizon warrant"). The Horizon
warrant is exercisable December 23, 2001 at $18.00 per share and expires on
January 4, 2005. The Horizon warrant and the shares of the Company's common
stock issuable upon the exercise of the Horizon warrant are subject to certain
restrictions on transfer. The estimated fair value of the warrant at the date
issued was approximately $6,725,000 as determined using the Black-Scholes
option-pricing model.
Medical Manager Health Systems. The Company has an agreement with
Medical Manager Health Systems, under which CareInsite will be the exclusive
provider of certain network, web hosting and transaction services to Medical
Manager Health Systems. Medical Manager Health Systems is a leading provider of
comprehensive physician practice management information systems that address the
financial, administrative and clinical practice needs of physicians. The Company
intends to provide its healthcare e-commerce services to Medical Manager Health
Systems' physician base by integrating those services into Medical Manager
Health Systems' physician practice management information systems. The Company
intends to use Medical Manager Health Systems' sales and support network as a
means from which to distribute, install and support the Company's transaction,
messaging and content services to Medical Manager Health Systems physicians.
AOL. In September 1999, the Company entered into a strategic alliance
with America Online, Inc. ("AOL") for the Company to be AOL's exclusive provider
of a comprehensive suite of services that connect AOL's 18 million members, as
well as CompuServe members and visitors to AOL's Web-based brands Netscape,
AOL.COM and Digital City (collectively, "AOL Members"), to physicians, health
plans, pharmacy benefit managers, covered pharmacies and labs. Under the
agreement, the Company and AOL have agreed to create co-branded sites which will
enable AOL Members to manage their healthcare through online communication with
their physicians, health plans, pharmacy benefit managers, covered pharmacies
and labs. Through this arrangement, AOL Members will have access to the
Company's secure, real-time services being developed that allow them, among
other things, to select and enroll in health plans, choose their providers,
schedule appointments, renew and refill plan approved prescriptions, view lab
results, review claims status, receive explanation of benefits, review patient
education materials provided by their health plans, understand plan policies and
procedures and receive plan treatment authorizations. The Company and AOL have
also agreed to collaborate in sales and marketing to the healthcare industry,
and they intend to leverage their alliance into cross-promotional and shared
advertising revenue initiatives. Under the financial terms of the arrangement,
the Company has agreed to make $30,000,000 of guaranteed payments to AOL.
Under a separate agreement entered into in September 1999, AOL purchased
100 shares of the Company's newly issued convertible redeemable preferred stock
("Preferred Stock") at a price of $100,000 per share, or $10,000,000 of
Preferred Stock in the aggregate, with an option to purchase up to an additional
100 shares of Preferred Stock in September 2000 at the same price. At the option
of AOL, in March 2002, the Preferred Stock is either redeemable in whole for
$100,000 per share in cash or convertible in whole, on a per share basis, into
(i) the number of shares of the Company's common stock equal to $100,000 divided
by $49.25 (or 2,030.5 shares) and (ii) a warrant exercisable for the same number
of shares of the Company's common stock, or 2,030.5 shares, at a price of $49.25
per share. In the event that AOL elects to convert the 100 shares of Preferred
Stock it purchased in September 1999, it would receive 203,046 shares of the
Company's common stock and a warrant exercisable into an additional 203,046
shares at $49.25 per share. Prior to March 2002, AOL has the right to require
the Company to redeem the Preferred Stock in whole at $100,000 per share in the
event of a change in control of the Company. The Preferred Stock is non-voting
except under certain extraordinary circumstances and no dividend is payable on
the Preferred Stock unless the Company declares a dividend on its common stock.
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Results of Operations
Year Ended June 30, 1999 Compared to Year Ended June 30, 1998
Total revenues in fiscal year 1999 were $1,364,000, and were comprised
of (i) $371,000 of revenue attributable to the newly acquired Med-Link
subsidiary and (ii) service revenues from affiliates of $993,000 consisting of
management services provided to THINC.
Cost of revenues, other than to affiliates, was $69,000. Cost of
services to affiliates of $993,000 consisted primarily of employee compensation
and benefits expense for those employees supporting the THINC business.
Research and development expenses consist primarily of employee
compensation, the cost of consultants and other direct expenses incurred in the
development of the Company's services. These expenses were $11,253,000 in fiscal
year 1999 compared to $4,159,000 in fiscal year 1998. Research and development
expenses in fiscal year 1999 includes a $2,381,000 write-off of capitalized
software costs which relate to the abandonment of the Company's development
efforts with respect to certain of the Company's services. Those efforts were
abandoned as a result of encountering a high risk development issue associated
with integrating those services with the acquired Cerner technology. Excluding
this write-off of capitalized software, total expenditures for research and
development, including amounts capitalized, were $16,641,000 in fiscal year 1999
and $8,783,000 in fiscal year 1998. The increase in total expenditures was
related to the purchase of third party licenses, as well as increases in
development personnel and outside consultants. Of the total expenditures,
$7,769,000 was capitalized during fiscal year 1999 and $4,624,000 was
capitalized during fiscal year 1998. The Company's policy is to capitalize
software development costs once technological feasibility has been established.
Sales and marketing expenses consist primarily of salaries and benefits,
travel for sales, marketing and business development personnel, and promotion
related expenses such as advertising, marketing materials, and tradeshows. Sales
and marketing expenses were $1,910,000 in fiscal year 1999 compared to
$1,733,000 in fiscal year 1998. The increase reflects the addition of payer
oriented marketing staff partially offset by the elimination of the remaining
advertising and Intranet sales and marketing personnel. Included in sales and
marketing expenses are charges from Medical Manager of $650,000 in fiscal year
1999 and $575,000 in fiscal year 1998. These charges represent an allocation of
compensation costs for Medical Manager personnel who devoted a majority of their
time to the Company, and primarily relate to business development and marketing
support services.
General and administrative expenses consist primarily of compensation
for legal, finance, management and administrative personnel. General and
administrative expenses were $4,205,000 in fiscal year 1999 compared to
$2,840,000 in fiscal year 1998. The increase in general and administrative
expenses of $1,365,000 resulted primarily from increased costs associated with
supporting the growth in the research and development efforts. Included in
general and administrative expenses are charges from Medical Manager of $400,000
for fiscal year 1999 and $261,000 for fiscal year 1998. These charges represent
an allocation of compensation costs for Medical Manager personnel who devoted a
majority of their time to the Company, and primarily relate to administrative
and legal services. The increase in these allocated expenses is due to increased
staffing to support the business. The Company expects to hire additional
personnel and incur additional costs related to being a public company.
Accordingly, the Company intends to increase the absolute dollar level of
general and administrative expenses in future periods.
The Company recorded $4,300,000 in litigation charges during fiscal year
1999, related to the Company's ongoing defense against assertions that it
violated certain agreements with Merck & Co., Inc. and Merck-Medco Managed Care,
L.L.C. Refer to Item 3 of this Report.
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Year Ended June 30, 1998 Compared to Period from Inception (December 24, 1996)
Through June 30, 1997
Research and development expenses were $4,159,000 for the year ended
June 30, 1998 and $7,505,000 for the period from Inception (December 24, 1996)
through June 30, 1997. Total expenditures for research and development,
including amounts capitalized, were $8,783,000 for the year ended June 30, 1998
and $7,853,000 for the period from Inception (December 24, 1996) through June
30, 1997. The increase in total expenditures was primarily due to the longer
fiscal period and a significant increase in research and development personnel.
This increase was partially offset by the write-off of $5,228,000 in costs
associated with the acquisitions of rights to certain intellectual property and
software technologies in the period from Inception (December 24, 1996) through
June 30, 1997, for which there was no comparable write-off for the year ended
June 30, 1998. This write-off primarily related to a royalty-free perpetual
license for pharmacy and prescription related software applications, together
with the supporting documentation. The Company licensed these assets for use in
developing certain components of the Company's computer applications. As the
Company had not established the technological feasibility of the Company's
applications prior to the date the license was acquired, and there was no
alternative future use of the licensed technology, the entire cost was charged
to research and development expense. Research and development costs capitalized
for the year ended June 30, 1998 and for the period from Inception (December 24,
1996) through June 30, 1997 were $4,624,000 and $348,000, respectively.
Sales and marketing expenses were $1,733,000 for the year ended June 30,
1998 and $1,150,000 for the period from Inception (December 24, 1996) through
June 30, 1997. The increase reflects the impact of the longer fiscal period
partially offset by a reduction in advertising and Intranet sales and marketing
personnel. This reduction is reflective of the Company's change in the business
model from the development of Intranets and the generation of advertising
revenue from pharmaceutical and medical device manufacturers who advertise on
these Intranets to the Company's focus on clinical e-commerce. Included in sales
and marketing expenses are charges from Medical Manager of $575,000 for the year
ended June 30, 1998 and $206,000 for the period from Inception (December 24,
1996) through June 30, 1997. These charges represent an allocation of
compensation costs for personnel who devote a majority of their time to the
Company, and primarily relate to business development and marketing support
services. The increase in these allocated expenses is primarily due to the
longer fiscal period and to a lesser extent, increased staffing.
General and administrative expenses were $2,840,000 for the year ended
June 30, 1998 and $937,000 for the period from Inception (December 24, 1996)
through June 30, 1997. The increase in general and administrative expenses of
$1,903,000 resulted primarily from the longer fiscal period and increased
occupancy costs. Included in general and administrative expenses are charges
from Medical Manager of $261,000 for the year ended June 30, 1998 and $24,000
for the period from Inception (December 24, 1996) through June 30, 1997. These
charges represent an allocation of compensation costs for personnel who devote a
majority of their time to the Company, and primarily relate to administrative
and legal services. The increase in these allocated expenses is primarily due to
the longer fiscal period and, to a lesser extent, increased staffing.
Purchased research and development for the period from inception
(December 24, 1996) through June 30, 1997 was $32,185,000. This relates to the
write-off of the portion of the purchase price allocated to acquired in-process
research and development for the Avicenna and CareAgents acquisitions.
In connection with the acquisitions of Avicenna and CareAgents, the
Company allocated a portion of each purchase price to acquired in-process
research and development. The amount allocated to acquired in-process research
and development for each of these acquisitions was determined based on an income
approach valuation methodology. For both Avicenna and CareAgents a nine year
forecast of revenues and costs attributable to the acquired technology was
prepared. The nine year projection period was consistent with the expected
useful lives of the technology under development. The resulting operating cash
flows were then reduced by working capital and capital expenditures and
discounted to present value based on a discount rate of 30% for Avicenna and 50%
for CareAgents. These different discount rates were used because, at the time of
acquisition, Avicenna had commenced operations, had more than 30 employees and
had received financing. In contrast, CareAgents, at the time of acquisition, had
not commenced operations, had no employees other than its stockholders, and had
not received any financing. These amounts have been
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expensed on the respective acquisition dates as the in-process research and
development had not reached technological feasibility and had no alternative
future use. A description of the acquired in-process research and development
and the estimates made by us is set forth below.
Avicenna. Avicenna's business plan was to design and market Intranets to
provider organizations to provide communication and reference capabilities to
these organizations. Doctors in these organizations would communicate via e-mail
and forum groups with centralized medical reference information with the
objective of reducing costs in a managed care environment. The fundamental
technology plan was to develop a client/server based application to allow
hospital affiliated doctors to access a local Intranet that housed medical
reference information, in-house policies and procedures, and communication among
the various parties. This required development of electronic search, medical
reference material storage and communication capabilities such as forums and
e-mail. The revenue model had been, prior to acquisition, primarily one based on
pharmaceutical and medical device manufacturers' advertising fees on these
Intranets. Avicenna also envisioned creating a search capability that would
allow doctors to quickly access relevant reference information on a variety of
medical topics from databases that were licensed to Avicenna. These databases
would be customized in format by Avicenna.
As of the acquisition date, Avicenna was in the early stages of its
development and the systems under development had not yet reached technological
feasibility. There was a working public Intranet site and they had begun to
implement the search techniques. Their primary mechanism to allow users to
search their Intranet sites and access content provided by hospitals,
advertisers, and others was to develop a method of customizing that content via
a software utility known as "Framework." Framework was in the initial stage of
development with the substantive system design, coding, and testing work
remaining incomplete. Framework was the fundamental piece of code that would
enable users to be able to both search and reference the content contained on an
Avicenna Intranet and thereby realize their business model.
As of the December 24, 1996 acquisition date, Avicenna had incurred
approximately $1,263,000 in research and development costs to develop the
technology to its status described above. It was estimated that over $3,000,000
of costs remained to complete the projects described above in the following
calendar year and that additional significant costs remained in subsequent years
to further enhance and maintain the capabilities of the Avicenna system.
Subsequent to the date of acquisition, we have modified the acquired technology
from both Avicenna and CareAgents and incorporated them into a broader system,
the CareInsite system.
CareAgents. CareAgents' business plan was to design and market Internet
based clinical commerce applications that allowed the various healthcare
participants to exchange information and conduct basic medical transactions with
each other. Participants included patients, providers, and suppliers. The
fundamental technology plan was to create an Internet and standards based
connection between the participants and then provide specific transaction
capabilities using both internally and externally developed application
software.
CareAgents' technology was in the very early stages of development with
basic user requirements, a business plan, preliminary system architecture with
process flow diagrams and prototyping efforts comprising the work completed to
date. In excess of $8,000,000 in costs remained over the next two years to
mature the technology to the point of technological feasibility and then
complete for first product deployment. No work had been completed on a detailed
engineering design or on building or testing any substantive code.
Liquidity and Capital Resources
The Company's operations since Inception (December 24, 1996) have been
funded through capital contributions from its parent company Medical Manager. On
June 16, 1999, the Company completed its initial public offering of 6,497,500
shares at $18.00 of its Common Stock (the "Offering"). The net cash proceeds of
the Offering were approximately $106,446,000, after deducting anticipated
amounts for underwriting discounts and commissions and Offering expenses. As of
June 30, 1999 the Company had $118,689,000 of cash and cash equivalents and
short-term marketable securities.
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Cash used in operating activities was $18,276,000 during fiscal year
1999, $9,052,000 in fiscal year 1998 and $5,011,000 for the period from
Inception (December 24, 1996) through June 30, 1997. The cash used during this
period was primarily attributable to the losses associated with the development
of the Company's business activities.
Cash used in investing activities was $77,767,000 during fiscal year
1999, $6,721,000 in fiscal year 1998 and $1,371,000 for the period from
Inception (December 24, 1996) through June 30, 1997. The cash used during fiscal
year 1999 was primarily related to purchases of short-term marketable securities
for $54,392,000, the acquisition of Med-Link for $14,000,000 and software
development costs of $7,769,000. The Company's short-term marketable securities
are invested in various investment-grade commercial paper, money market accounts
and certificates of deposit.
Cash provided by financing activities was $159,747,000 for fiscal year
1999, $15,842,000 for fiscal year 1998 and $6,628,000 for the period from
Inception (December 24, 1996) through June 30, 1997. The Company completed its
Offering on June 16, 1999 for net proceeds of $108,366,000, after deducting
underwriting discounts and issuance costs paid through June 30, 1999. The
Company also issued additional shares to Cerner and Medical Manager during
fiscal year 1999 for net proceeds of $23,000,000. The Company's parent company
Medical Manager also contributed additional capital and paid its stock
subscription receivable for an aggregate of $28,381,000.
Pursuant to the Company's strategic relationship with THINC, the Company
has committed to the Working Capital Line of Credit and the Contingent Line of
Credit. In connection with the Company's strategic relationship with Cerner,
Cerner has agreed to fund $1,000,000 of the Working Capital Line of Credit. As
of September 21, 1999, the Company has funded the entire $2,000,000 of the
Working Capital Line of Credit and Cerner has paid the Company $750,000 of the
$1,000,000 portion of the Working Capital Line of Credit it has committed to.
The Company was not required to fund any amounts to THINC under the Contingent
Line of Credit.
The Company currently anticipates that the net proceeds from the
Offering and proceeds from the sale of shares to Cerner in a concurrent private
transaction, together with the Company's available cash resources, will be
sufficient to meet the Company's presently anticipated working capital, capital
expenditure and business expansion requirements for approximately the next 18 -
24 months. There can be no assurance that the Company will not require
additional capital prior to the expiration of this 18 - 24 month period. Even if
such additional funds are not required, the Company may seek additional equity
or debt financing. There can be no assurance that such financing will be
available on acceptable terms, if at all, or that such financing will not be
dilutive to the Company's stockholders.
The Company continues to pursue an acquisition program pursuant to which
it seeks to effect one or more acquisitions or other similar business
combinations with businesses it believes have significant growth potential.
Financing for such acquisitions may come from several sources, including,
without limitation, (a) the Company's cash, cash equivalents and marketable
securities and (b) proceeds from the incurrence of additional indebtedness or
the issuance of common stock, preferred stock, convertible debt or other
securities. There can be no assurance that the Company's acquisition program
will be successful. See "-Business-Acquisition Program".
New Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position, or "SOP," 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires
that entities capitalize certain costs related to internal-use software once
certain criteria have been met. The Company is required to implement SOP 98-1
for the year ending June 30, 2000. Management believes that the adoption of SOP
98-1 will have no material impact on the Company's financial condition or
results of operations.
In April 1998, the American Institute of Certified Public Accountants
issued SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5
requires that entities expense start-up costs as incurred. The Company is
required to implement SOP 98-5 for the year ending June 30, 2000. Management
believes that
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the adoption of SOP 98-5 is expected to have no material impact on the Company's
financial condition or results of operations.
Year 2000 Compliance
Many currently installed computer systems and software products are
coded to accept or recognize only two digit entries for the year in the date
code field. These systems and software products will need to accept four digit
year entries to distinguish 21st century dates from 20th century dates. As a
result, computer systems and/or software used by many companies and governmental
agencies may need to be upgraded to comply with such Year 2000 requirements or
risk system failure or miscalculations causing disruptions of normal business
activities.
State of Readiness. The Company has made a preliminary assessment of the
Year 2000 readiness of its information technology systems, including the
hardware and software that enable the Company to develop and deliver its
healthcare e-commerce services as well as its non-information technology
systems. The Company's assessment plan consists of:
* quality assurance testing of the Company's internally developed
proprietary software;
* contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related to
developing the Company's healthcare e-commerce network;
* contacting vendors of material non-IT systems;
* assessment of repair or replacement requirements;
* repair or replacement; and
* implementation.
The Company has been informed by its vendors of material hardware and
software components of its IT systems that the products used by the Company are
currently Year 2000 compliant. The Company has also been informed by its non-IT
system vendors that the products used by the Company are currently Year 2000
compliant.
Costs. To date, the Company has not incurred any material expenditures
in connection with identifying or evaluating Year 2000 compliance issues. Most
of the Company's expenses have related to, and are expected to continue to
relate to, the operating costs associated with time spent developing a Year 2000
compliant healthcare e-commerce channel.
The Company is not currently aware of any Year 2000 compliance problems
relating to its information technology or non-information technology systems
that the Company believes would have a material adverse effect on its business,
financial condition and results of operations. There can be no assurance that
the Company will not discover Year 2000 compliance problems that will require
substantial revisions to the Company's systems or services. In addition, there
can be no assurance that third-party software, hardware or services incorporated
into the Company's material information technology and non-information
technology systems will not need to be revised or replaced, all of which could
be time consuming and expensive. Any failure to fix the Company's information
technology systems or to replace third-party software, hardware or services on a
timely basis could result in lost revenues, increased operating costs, the loss
of customers and other business interruptions, any of which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
In addition, there can be no assurance that physicians, payers,
suppliers, Internet access companies, third-party service providers, vendors,
business partners and others outside the Company's control will be Year 2000
compliant. The failure by such entities to be Year 2000 compliant could result
in a systemic failure beyond the Company's control, such as a prolonged Internet
or communications failure, which could also
9
<PAGE>
prevent the Company from delivering the Company's services to its customers,
decrease the use of the Internet or prevent users from accessing the Company's
service. Such a failure could have a material adverse effect on the Company's
business, results of operations and financial condition. Also, a general Year
2000 systemic failure could require healthcare companies to spend large amounts
of money to correct any such failures, reducing the amount of money that might
otherwise be available to be spent on services such as the Company's.
Contingency plan. The Company is continuing to assess and test its
systems for Year 2000 compliance. The Company has also developed contingency
plans for system failure, service disruption and data corruption issues due to
Year 2000 problems. In the event that there is a system problem due to a Year
2000 date, the Company will immediately attempt to diagnose and fix the problem.
At the same time, the Company will change (a) the system clock back to 1999
while separately logging all transactions so affected and/or (b) the dates
within transactions to 1999 while separately logging all transactions so
affected. In the event that a Year 2000 problem occurs at an external entity,
that entity will be informed of the problem and the Company will continue to
review and repair the dates until the problem is fixed. The Company makes no
assurance that it will be able to successfully diagnose and/or fix any Year 2000
problems that occur or that the cost of doing so will not be material.
As the Year 2000 issue has many elements and potential consequences,
some of which are not reasonably foreseeable, the ultimate impact of the Year
2000 on the Company's operations could differ materially from the Company's
expectations.
This discussion contains forward-looking statements relating to the
Company's operations that are based on management's current expectations,
estimates and projections about the Company, and the healthcare e-commerce
industry. Words such as "expects," "intends," "plans," "projects," "believes,"
"estimates," "anticipates" and variations of these words and similar expressions
are used to identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict. Further, certain forward-looking
statements are based upon assumptions as to future events that may not prove to
be accurate. Therefore, actual outcomes and results may differ materially from
what is expressed or forecast in such forward-looking statements. The Company
undertakes no obligation, and does not intend, to update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise. A number of important factors could cause actual results to differ
materially from those indicated by such forward-looking statements. Such factors
include establishing a successful business model; ability to penetrate physician
offices; acceptance of the Company's services; results of the Company's
strategic relationships with Medical Manager, Cerner, THINC and Horizon; limited
customer base; competition; technology; litigation; Year 2000 issues; government
regulation of the Internet or healthcare e-commerce services and worldwide
economic conditions.
10
<PAGE>
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:
<TABLE>
<CAPTION>
Director Principal
Name Age Since Occupation
---- --- -------- ----------
<S> <C> <C> <C>
Mark J. Adler, M.D. * 43 1999 Dr. Adler has been medical director and an oncologist for the Oncology Medical
Center of San Diego, since he founded it in 1991. He is also currently
President and Chief Executive Officer of Medical Group of North County
(internal medicine and oncology group), which is based in San Diego,
California.
Roger C. Holstein 46 1999 See "Part I - Executive Officers."
James R. Love 43 1999 See "Part I - Executive Officers."
James V. Manning 52 1999 Mr. Manning was Vice Chairman of the Board of Medical Manager from March 1998
to July 1999, was Chief Executive Officer of Medical Manager from January 1995
to March 1998, was President of Medical Manager from July 1996 to March 1998
and, until March 1998, was an executive officer of Medical Manager for more
than the last five years. Until December 1994, Mr. Manning had been an
executive officer of Medco for more than five years. Mr. Manning is also
Chairman of the Board of Group One Software, Inc., a computer software
company.
David M. Margulies, M.D. 48 1999 See "Part I - Executive Officers."
Charles A. Mele 43 1998 Mr. Mele has been Executive Vice President--General Counsel of Medical Manager
since March 1998 and was Vice President--General Counsel of Medical Manager
from July 1995 to March 1998. Mr. Mele was an executive officer of Medical
Manager from May 1989 to December 1994 and was an executive officer of Medco
for more than five years, until March 1995. Mr. Mele is also a director of
Group 1 Software, Inc., a computer software company.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Lawrence A. Rader * 62 1999 Mr. Rader has been a General Partner of the Rader Fund since May 1995. Prior
to May 1995, Mr. Rader was a Securities Analyst with Merrill Lynch for over 17
years.
Michael A. Singer 52 1999 Mr. Singer has been Vice Chairman and Co-Chief Executive Officer of Medical
Manager since July 1999. Mr. Singer was Chairman of the Board of Medical
Manager Health Systems from February 1997 to July 1999, and has been Chief
Executive Officer of Medical Manager Health Systems since February 1997. Mr.
Singer is the founder of Medical Manager Research & Development, Inc.
("MMR&D"), and the principal inventor of The Medical Manager(R) software
program. From MMR&D's inception in 1981, Mr. Singer has been a director and
its President and Chief Executive Officer.
Joseph E. Smith * 60 1999 Mr. Smith is a director of Boren, LePore and Associates, Inc., Avanir
Pharmaceuticals, Claneil Enterprises, Inc., Roberts Pharmaceutical
Corporation, Sensus Drug Development Corporation and VIVUS, Inc. He also
serves on the Board of Trustees of the International Longevity Center, a non-
profit organization. Mr. Smith served in various positions with Warner-Lambert
Company from March 1989 to September 1997. His last position at Warner-Lambert
was Corporate Vice President as well as a member of the Office of the Chairman
and the firm's Management Committee.
Paul C. Suthern 47 1998 See "Part I - Executive Officers."
Martin J. Wygod 59 1999 See "Part I - Executive Officers."
</TABLE>
- ----------------------------------
* Member of the Audit and Compensation Committees.
Messrs. Manning, Mele, Singer, Suthern, and Wygod are also directors of
Medical Manager. No family relationship exists among any of the directors or
executive officers of the Company, except that Messrs. Wygod and Suthern are
brothers-in-law. No arrangement or understanding exists between any director or
executive officer of the Company or any other person pursuant to which any
director or executive officer was selected as a director or executive officer of
the Company, except that Mr. Singer was elected to the Board of Directors of the
Company pursuant to the Agreement and Plan of Merger among Synetic, Inc., Marlin
Merger Sub, Inc. and Medical Manager Corporation dated as of May 16, 1999. All
executive officers of the Company are elected annually by the Board 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. Wygod filed an amended Form 4 to include a purchase of
2,000 shares of the Company's common stock by his spouse, in her capacity as
trustee for the benefit of her son.
12
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table presents information concerning compensation paid for
services to the Company to its Chief Executive Officer and its four most highly
compensated executive officers of the Company for the fiscal year ended June 30,
1999 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation ------------
--------------------------- Other Annual Securities All Other
Name and Principal Salary Bonus Compensation Underlying Compensation
Position Year ($) ($) ($) Options/SARs (1) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul C. Suthern...... 1999 180,000 (2) 0 237,750 (3) 200,000 0
President and 1998 87,923 (2) 0 0 194,000 0
Chief Executive
Officer
Roger C. Holstein.... 1999 175,000 0 0 180,000 4,814 (6)
Executive Vice 1998 112,404 (4) 225,000 (5) 0 1,750 (6)
President - Sales
And Marketing
David M. Margulies... 1999 175,000 0 0 100,000 0
Executive Vice 1998 175,000 0 0 272,728 (7) 0
President - Chief 1997 72,019 (8) 0 0 272,728 (7) 0
Scientist
Richard S. Cohan..... 1999 175,000 0 0 290,000 (9) 0
Executive Vice
President -
Operations
David C. Amburgey.... 1999 90,000 (10) 36,000 (10) 0 100,000 5,323 (6)
Senior Vice 1998 93,461 (10) 36,000 (10) 0 25,000 0
President -
General Counsel
and Secretary
</TABLE>
- -------------------------------
(1) For the fiscal year ended June 30, 1999, the options granted to the
Named Executive Officers were options to purchase shares of the
Company's common stock, other than a grant of options to purchase
190,000 shares of Medical Manager's common stock to Mr. Cohan. For the
prior years, all options listed in the table were options to purchase
shares of Medical Manager's common stock.
(2) Mr. Suthern was President and CEO of Medical Manager until July 23,
1999. Mr. Suthern received additional compensation for services rendered
to Medical Manager during fiscal years 1999 and 1998 of $20,000 and
$9,769, respectively.
(3) Comprised of income from the exercise of options to purchase shares of
Medical Manager's common stock (the excess of the fair market value on
the date of exercise over the exercise price).
(4) Mr. Holstein became an employee on November 6, 1997. As such, only
compensation paid subsequent to November 6, 1997 is reflected above.
(5) Represents a one-time bonus paid to Mr. Holstein upon his execution of
his employment agreement with Medical Manager.
(6) Comprised of matching contributions to the Porex Technologies Corp.
401(k) Savings Plan, a tax qualified retirement plan sponsored by a
subsidiary of Medical Manager.
13
<PAGE>
(7) Dr. Margulies' options were originally granted on January 23, 1997 and
were canceled and replaced on January 7, 1998.
(8) Dr. Margulies became an employee of the Company on January 23, 1997. As
such, only compensation paid subsequent to January 23, 1997 is reflected
above.
(9) Includes options to purchase 190,000 shares of Medical Manager's common
stock.
(10) Mr. Amburgey received additional compensation for services rendered to
Medical Manager during fiscal years 1999 and 1998 of $14,000 and
$14,385, respectively.
OPTION GRANTS IN LAST FISCAL YEAR
The following table presents information concerning the options to
purchase the Company's and Medical Manager's common stock, as applicable,
granted during the fiscal year ended June 30, 1999 to the Named Executive
Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
- -------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base Grant Date
Options/SARs Employees in Price Expiration Present
Name Granted (#) (1) Fiscal Year (2) ($/Share) Date Value ($)(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Paul C. Suthern......... 200,000 4.3% 18.00 6/15/09 2,140,848
Roger C. Holstein....... 180,000 3.9% 18.00 6/15/09 1,926,763
David M. Margulies...... 100,000 2.1% 18.00 6/15/09 1,070,424
Richard S. Cohan........ 100,000 2.1% 18.00 6/15/09 1,070,424
190,000 (4) 3.8% 33.75 10/09/08 642,865
David C. Amburgey....... 100,000 2.1% 18.00 6/15/09 1,070,424
</TABLE>
- -----------------------------
(1) These options vest (other than the 190,000 options granted to Mr. Cohan)
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 from the date of grant.
The option to purchase 190,000 shares of Medical Manager's common stock
granted to Mr. Cohan vests and becomes exercisable at the rate of 20%
per year, commencing on the first anniversary of the date of grant.
(2) Based upon the total number of stock options granted to all employees of
the Company and its affiliates, except for the 190,000 shares issued to
Mr. Cohan, which are based upon the total number of stock options
granted to all employees of Medical Manager and its affiliates in the
last fiscal year.
(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 the Company and 0.4083 for Medical Manager, as applicable,
calculated using a weighted historical average of comparable companies.
The ultimate values of the options will depend on the future market
price of the Company's or Medical Manager's common stock, as applicable,
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 the Company's or Medical Manager's
common stock, as applicable, 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.
(4) Represents options to purchase shares of Medical Manager's common stock.
14
<PAGE>
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table presents information concerning the value realized
upon the exercise of options to purchase the Company's or Medical Manager's
common stock during the last fiscal year and the fiscal year-end value of
options to purchase the Company's and Medical Manager's common stock held
by the Named Executive Officers.
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-the-Money Options at
Exercise Realized Options at Fiscal Year End (#) Fiscal Year End ($) (1)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
__________________ _________ ___________ ________________ ___________________ ________________ _________________
<S> <C> <C> <C> <C> <C> <C>
Paul C. Suthern 0 0 0 200,000 0 4,462,500 (2)
6,000 237,750 302,800 191,200 16,933,775 8,038,850 (3)
Roger C. Holstein 0 0 0 180,000 0 4,016,250 (2)
0 0 208,000 300,000 8,562,500 12,112,500 (3)
David M. Margulies 0 0 0 100,000 0 2,231,250 (2)
0 0 0 272,728 0 10,107,982 (3)
Richard S. Cohan 0 0 0 100,000 0 2,231,250 (2)
0 0 0 190,000 0 7,635,625 (3)
David C. Amburgey 0 0 0 100,000 0 2,231,250 (2)
0 0 35,000 65,000 1,338,438 2,470,937 (3)
</TABLE>
------------------
(1) Based upon the fiscal year-end closing price of the Company's
common stock or Medical Manager's common stock, as applicable,
of $40.3125 and $73.9375, 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 Medical Manager's common stock.
EMPLOYMENT AGREEMENTS
MARGULIES EMPLOYMENT AGREEMENT. Medical Manager entered into an
employment agreement with David M. Margulies, M.D. as of January 23,
1997 in connection with Medical Manager's acquisition of CareAgents. Dr.
Margulies' employment agreement provides for an employment period of
five years, subject to monthly renewal thereafter. Dr. Margulies' base
salary is $175,000, which may be increased by the Board of Directors of
Medical Manager in its sole discretion. Dr. Margulies' agreement does
not fix Dr. Margulies' responsibilities or title, other than to provide
that he will provide services to Medical Manager, CareAgents and their
respective affiliates and subsidiaries, as specified by the Chief
Executive Officer or the Board of Directors of Medical Manager from time
to time.
If his employment is terminated:
* by Medical Manager for "cause" (as such term is
defined in the agreement, generally consisting
of a breach of any material provision of the
agreement, willful misconduct relating to
Medical Manager or its affiliates, failure to
perform his duties in any material respect,
willful violation of laws applicable to the
business of Medical Manager or its affiliates,
commission of a common law fraud or conviction
of a felony or crime involving moral turpitude);
or
* due to the resignation of Dr. Margulies for any
reason,
15
<PAGE>
Medical Manager will have no obligation to Dr. Margulies other than the payment
of his earned and unpaid compensation to the effective date of termination.
If his employment is terminated:
* by Medical Manager as a result of Dr. Margulies'
permanent disability;
* as a result of Dr. Margulies' death; or
* by Medical Manager without "cause,"
Medical Manager will have no obligation to Dr. Margulies other than the payment
of his earned and unpaid compensation to the effective date of termination and
as specified in the stock option agreement described below.
Pursuant to a stock option agreement between Medical Manager and Dr.
Margulies, Dr. Margulies has been granted nonqualified stock options to purchase
272,728 shares of Medical Manager common stock. The options become exercisable
in the following manner: 40% on January 7, 2000 and an additional 20% on each of
January 7, 2001, January 7, 2002 and January 7, 2003. Upon termination of his
employment, the options will terminate to the extent not vested, unless such
termination of employment is without "cause" or as a result of permanent
disability or death, in which case the options will continue to vest as if he
remained in the employ of Medical Manager through the earlier of the next date
on which additional options would vest or the occurrence of any circumstance or
event that would constitute "cause."
Dr. Margulies' employment agreement contains confidentiality obligations
that survive indefinitely and non-solicitation and non-competition obligations
which apply for a certain period of time following termination of employment.
All obligations of Medical Manager may be assigned to any of its affiliates
without the consent of Dr. Margulies.
HOLSTEIN EMPLOYMENT AGREEMENT. Medical Manager entered into an
employment agreement with Roger C. Holstein as of November 6, 1997. Mr.
Holstein's employment agreement provides for an employment period of five years,
subject to monthly renewal thereafter. Mr. Holstein's base salary is $175,000,
which may be increased by the Board of Directors of Medical Manager in its sole
discretion, except that when revenues from the healthcare communications
business exceed $30,000,000, the Board of Directors will increase Mr. Holstein's
compensation to a level commensurate with his contribution, as determined in its
reasonable judgement. Mr. Holstein's employment agreement provided for a one-
time payment of $225,000 to Mr. Holstein upon the signing of the agreement. Mr.
Holstein's employment agreement fixes Mr. Holstein's title as Executive Vice
President of Medical Manager, and provides that his responsibilities will be
determined by the Chairman of the Board of Directors and the Chief Executive
Officer of Medical Manager from time to time.
If his employment is terminated:
* by Medical Manager for "cause" (as such term is defined
in the agreement, which is substantially similar to the
definition contained in the Margulies Agreement); or
* due to the resignation of Mr. Holstein for any reason
other than "cause" (as such term is defined in the
agreement, generally consisting of a breach of any
material provision, demotion or relocation),
Medical Manager will have no obligation to Mr. Holstein other than the payment
of his earned and unpaid compensation to the effective date of termination.
If his employment is terminated:
* by Medical Manager as a result of Mr. Holstein's
permanent disability; or
* as a result of Mr. Holstein's death,
16
<PAGE>
Medical Manager will have no obligation to Mr. Holstein other than the payment
of his earned and unpaid compensation to the effective date of termination and
with respect to stock options, as specified in the following paragraph.
If his employment is terminated:
* by Medical Manager without "cause;" or
* by Mr. Holstein for "cause,"
Medical Manager will have an obligation:
* to pay Mr. Holstein his earned and unpaid compensation
to the effective date of termination and a monthly
severance payment equal to one twelfth of his then
applicable base salary (less required deductions) for a
period ending two years from the date of such
termination or until the occurrence of a circumstance or
event that would constitute "cause"; and
* with respect to stock options, as specified in the next
paragraph.
In addition, Mr. Holstein has the right to terminate his employment upon 30
days' written notice to Medical Manager at any time after a 12-month period
following the occurrence of "change of control." A "change of 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 Medical Manager and
following such acquisition Mr. Wygod ceases to hold one
or more of the positions of the Chairman of the Board of
Directors of Medical Manager, Chief Executive Officer of
Medical Manager 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 Medical Manager'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 Medical Manager.
In the event of such a termination, his stock options will be treated in the
manner described in the following paragraph.
In the event of termination of Mr. Holstein's employment agreement by
Medical Manager without "cause" or by Mr. Holstein for "cause," the options to
purchase 500,000 shares of Medical Manager common stock held by Mr. Holstein
will remain outstanding and continue to vest as though Mr. Holstein remained in
the employ of Medical Manager through the earlier of the second anniversary of
the date of termination and the occurrence of a circumstance or event that would
constitute "cause." In the event of termination of Mr. Holstein's employment
agreement by Mr. Holstein due to a "change in control" or as a result of Mr.
Holstein's death or permanent disability, the options will remain outstanding
and continue to vest as though Mr. Holstein remained in the employ of Medical
Manager through the earlier of:
* the later of November 6, 2002 and the last date on which
such options actually vest; and
* the occurrence of a circumstance or event that would
constitute "cause."
Mr. Holstein's employment agreement contains confidentiality obligations that
survive indefinitely and non-solicitation and non-competition obligations which
apply for a certain period of time following termination of employment. All
obligations of Medical Manager may be assigned to any of its affiliates without
the consent of Mr. Holstein.
17
<PAGE>
COHAN EMPLOYMENT AGREEMENT. Medical Manager entered into an employment
agreement with Richard S. Cohan as of May 26, 1998. Mr. Cohan's employment
agreement provides for an employment term of five years, subject to renewal on a
yearly basis. Mr. Cohan's base salary is $175,000, which may be increased by the
Board of Directors of Medical Manager in it sole discretion. Mr. Cohan's
employment agreement provides that his responsibilities will be determined by
the Chairman of the Board of Directors and the Chief Executive Officer of
Medical Manager from time-to-time.
If his employment is terminated:
* by Medical Manager for "cause" (as such term is defined
in the agreement, which is substantially similar to the
definition contained in the Margulies Agreement); or
* due to the resignation of Mr. Cohan,
Medical Manager will have no obligation to Mr. Cohan other than the payment of
his earned and unpaid compensation to the effective date of termination.
If his employment is terminated:
* by Medical Manager as a result of Mr. Cohan's permanent
disability; or
* as a result of Mr. Cohan's death,
Medical Manager will have no obligation to Mr. Cohan other than the payment of
his earned and unpaid compensation to the effective date of termination and his
option to purchase 190,000 shares of Medical Manager's common stock will remain
outstanding and continue to vest as if he remained in the employ of Medical
Manager until October 9, 2003.
If his employment is terminated:
* by Medical Manager without "cause;" or
* by Mr. Cohan for "cause,"
Medical Manager will have the following obligations:
* to pay Mr. Cohan his earned and unpaid compensation to
the effective date of termination and a monthly
severance payment equal to one twelfth of his then
applicable base salary (less required deductions) for a
period ending one year from the date of such termination
or until the occurrence of a circumstance or event that
would constitute "cause,"
* With respect to his option to purchase 190,000 shares of
Medical Manager's common stock, it will remain
outstanding and continue to vest as if Mr. Cohan
remained in the employ of Medical Manager through the
earlier of the first anniversary of the date of
termination or the occurrence of a circumstance or event
that would constitute "cause."
Mr. Cohan's employment agreement contains confidentiality obligations
that survive indefinitely and non-solicitation and non-competition obligations
which apply for a certain period of time following termination of employment.
All obligations of Medical Manager may be assigned to any of its affiliates
without the consent of Mr. Cohan.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company or Medical Manager do not
receive additional compensation for serving as directors of the Company.
Directors who are not employees of either the Company or Medical Manager will
receive compensation equal to $30,000 per year in either cash, shares of the
Company's common stock or a combination thereof.
18
<PAGE>
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.
<TABLE>
<CAPTION>
Amount
and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership Class (1)
- ------------------------------------ -------------------- ----------
<S> <C> <C>
Medical Manager Corporation 50,763,375 72.1%
669 River Drive, Center 2
Elmwood Park, NJ 07407
Cerner Corporation 14,157,704 (2) 19.8%
2800 Rockcreek Parkway, Suite 601
Kansas City, MO 64117
The Health Information Network Connection LLC 4,059,118 (3) 5.5%
1155 Avenue of the Americas, Suite 311
New York, NY 10036
</TABLE>
- -------------------------------
(1) The number of shares of the Company's common stock deemed outstanding
includes: (i) 70,410,134 shares of common stock outstanding as of
October 15, 1999 and (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 warrants.
(2) Includes a warrant to purchase up to 1,008,445 shares of common stock at
$4.00 per share within 60 days of October 15, 1999. The warrant is
exercisable only if THINC exercises the warrant described in footnote 3
below.
(3) Represents a warrant to purchase up to 4,059,118 shares of common stock
at $4.00 per share. The warrant is exercisable on December 13, 1999 and
expires on January 1, 2006, subject to certain exceptions. The warrant
and the shares of the Company's common stock issuable upon the exercise
of the warrant are subject to certain restrictions on transfer.
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<PAGE>
Security Ownership of Management
The following table sets forth certain information as of October 15,
1999, concerning the ownership of the Company's and Medical Manager's common
stock by each of the directors, each of the Named Executive Officers, and all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
CareInsite Medical Manager
----------------------------------- -------------------------------------
Shares of Shares of
Common Stock Common Stock
Beneficially Percent of Beneficially Percent of
Name Owned (1) Class (2) Owned (1) (3) Class (4)
- ----------------------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
Mark J. Adler, M.D........................... 15,000 (5) * 1,000 (5) *
David C. Amburgey............................ 400 * 35,000 *
Richard S. Cohan............................. 7,000 * 38,000 *
Roger C. Holstein............................ 10,000 * 259,435 *
James V. Manning............................. 22,500 * 333,299 (6) *
David M. Margulies........................... 18,000 * 28,917 *
Charles A. Mele.............................. 10,000 * 387,359 (7) 1.10%
Larry Rader.................................. 22,500 (8) * 0 *
Michael A. Singer............................ 15,000 (9) * 3,681,250 (9) 10.53%
Joseph E. Smith.............................. 22,500 * 0 *
Paul C. Suthern.............................. 22,500 * 378,298 (6) (10) 1.07%
Martin J. Wygod.............................. 38,000 (11) * 5,651,183 (6) (7)(12) 16.05%
Directors and executive officers as a group (15
persons)..................................... 241,900 * 10,793,741 29.72%
</TABLE>
* Less than 1% of the shares outstanding of the class.
- ----------------------------------------
(1) The persons named in the above 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) The number of shares of the Company's common stock deemed outstanding
includes 70,410,134 shares of the Company's common stock outstanding as
of October 15, 1999. As of October 15, 1999, none of the stock options
granted to the respective persons named in the above table is
exercisable within 60 days.
(3) Includes the following number of shares of Medical Manager'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 and
the number of shares of Medical Manager's common stock that the
following persons have the right to acquire upon conversion of Medical
Manager's convertible debentures: Mr. Amburgey, 35,000; Mr. Cohan,
38,000; Mr. Holstein, 258,833; Mr. Manning, 223,333; Mr. Mele, 173,166;
Mr. Suthern, 368,300; Mr. Wygod, 249,333; and all directors and
executive officers as a group, 1,345,965. Includes 275 shares of Medical
Manager's common stock allocated to the account of Mr. Mele and 127
shares of Medical Manager's common stock allocated to the account of Mr.
Holstein under the Porex 401(k) Plan as of June 30, 1999.
(4) The number of shares of Medical Manager's common stock deemed
outstanding includes: (i) 34,968,411 of Medical Manager's common stock
outstanding as of October 15, 1999, (ii) the number of shares, if any,
of Medical Manager'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 Medical Manager's common stock, which the respective
persons named in the above table have the right to acquire upon
conversion of Medical Manager's convertible debentures.
(5) All shares are owned by the Adler Family Trust.
(6) Includes 3,500 shares of Medical Manager's common stock and shares of
Medical Manager's common stock issuable upon conversion of $1,500,000
principal amount of Medical Manager convertible debentures owned by the
Synetic Foundation, Inc., a charitable foundation of which Messrs.
Manning, Suthern and Wygod are trustees and share voting and dispositive
power.
(7) Includes 186,961 shares of Medical Manager's common stock and shares of
Medical Manager's common stock issuable upon conversion of $500,000
principal amount of Medical Manager's convertible debentures owned by
the Rose Foundation, a private charitable foundation of which Messrs.
Wygod and Mele are trustees and share voting and dispositive power.
(8) All 22,500 shares of the Company's common stock are owned by Mr. Rader's
spouse. Mr. Rader disclaims beneficial ownership of these shares.
20
<PAGE>
(9) All 15,000 shares of the Company's common stock are 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. MDDS Ltd. also owns 12,500
shares of common stock in Medical Manager. The remaining 3,668,750
shares of common stock of Medical Manager are owned by MAS 1997 Family
Limited Partnership, the general partner of which is a company
controlled by Mr. Singer, and the sole limited partner of which is Mr.
Singer. 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.
(10) Includes 1,200 shares of Medical Manager's common stock held in
custodial accounts for Mr. Suthern's children.
(11) Includes 2,000 shares of the Company's common stock beneficially owned
by Mr. Wygod's spouse, in a trust for Mr. Wygod's stepson, as to which
shares Mr. Wygod disclaims beneficial ownership.
(12) Includes 2,000 shares of Medical Manager's common stock beneficially
owned by Mr. Wygod's spouse, as to which shares Mr. Wygod disclaims
beneficial ownership. Also includes 5,061,857 shares of Medical Manager
common stock for which SN Investors, the general partner of which is
controlled by Mr. Wygod, is the record and beneficial owner. 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Medical Manager Corporation
As of October 15, 1999, Medical Manager owned 72.1% of the outstanding
common stock of the Company. The Company and Medical Manager 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
Medical Manager in the future. Any such future agreements, arrangements and
transactions will be determined through negotiations between the Company and
Medical Manager, as the case may be. As of the date hereof, the Company is
controlled by Medical Manager and consequently such negotiations will not be
arm's-length. The following is a summary of certain existing agreements between
the Company and Medical Manager. The Company believes these agreements are made
on terms no less favorable to it than could have been obtained from unaffiliated
third parties.
Tax sharing agreement
Effective June 16, 1999, the Company no longer files a consolidated
federal income tax return with Medical Manager, but will continue to file a
combined tax return with Medical Manager for California income tax purposes. The
Company and Medical Manager entered into a tax sharing agreement providing,
among other things, that, for periods prior to the Offering and during which the
Company was included in Medical Manager's consolidated federal income tax
returns, the Company will be required to pay Medical Manager an amount equal to
the Company'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 the Company files a combined return with Medical Manager for state income
tax purposes, such as for California, the Company will be required to pay
Medical Manager an amount equal to the Company's state income tax liabilities,
determined as if the Company had filed state income tax returns on a separate
company basis. If the Company experiences a net operating loss resulting in no
federal or state income tax liability for a taxable period in which it was
included in Medical Manager's consolidated federal or combined state income tax
returns, the Company will be entitled to a payment from Medical Manager equal to
the reduction, if any, in the federal or state income tax liability of the
Medical Manager consolidated group by reason of the use of the Company's net
operating loss. Further, under the tax sharing agreement, if the Company
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 the Company and Medical Manager as described
below, then the Company is required to pay an amount equal to those tax benefits
to Medical Manager when they are actually realized by the Company. The tax
sharing agreement also provides for Medical Manager to conduct tax audits and
tax controversies on the Company's behalf for periods, and with respect to
returns, in which the Company is included in the Medical Manager consolidated or
combined returns.
21
<PAGE>
Services agreement
The Company and Medical Manager entered into a services agreement dated
as of January 1, 1999, pursuant to which Medical Manager will provide the
Company with certain administrative services which may include payroll,
accounting, business development, legal, tax, executive services and information
processing and other similar services. The Company pays the actual costs of
providing these services. Such costs include an allocable portion of the
compensation and other related expenses of employees of Medical Manager who
serve as officers of the Company. This agreement is terminable by either party
upon 60 days prior written notice in certain events, or by Medical Manager, at
any time, if Medical Manager ceases to own at least 50% of the voting stock of
the Company. The services agreement shall terminate by its terms, if not
previously terminated or renewed, on January 1, 2004.
Allocations from Medical Manager to the Company 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
Medical Manager employees worked providing services to the Company. As of June
30, 1999, the Company owes Medical Manager an aggregate of $853,000 associated
with services agreement, reimbursable expenses and certain costs related to the
Offering.
Indemnification agreement
The Company and Medical Manager entered into an indemnification
agreement, under the terms of which the Company will indemnify and hold harmless
Medical Manager, 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 the Company before or after the Offering.
Similarly, Medical Manager 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 Medical Manager other than the business of the Company before or after the
Offering.
With respect to the Merck litigation (see "Item 3. Legal Proceedings"),
this agreement provides that Medical Manager 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. The Company records amounts funded by Medical
Manager as a capital contribution, which was $4,300,000 through June 30, 1999.
The agreement further provides that any damages awarded to the Company and
Medical Manager in the litigation will be for the account of Medical Manager.
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
The Company has an agreement with Medical Manager Health Systems, under
which the Company will be the exclusive provider of certain network, web hosting
and transaction services to Medical Manager Health Systems. Under this
agreement, the Company will pay certain fees to Medical Manager Health Systems
on transactions performed on behalf of Medical Manager Health Systems'
customers. The Company and Medical Manager Health Systems 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
that the merger between Synetic and Medical Manager 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 the Company resulting in a
change of control of the Company or by mutual consent of the Company and Medical
Manager Health Systems.
22
<PAGE>
THINC
In January 1999, the Company, The Health Information Network Connection
LLC ("THINC"), and the THINC founding members, Greater New York Hospital
Association, Empire Blue Cross and Blue Shield ("Empire"), Group Health
Incorporated ("GHI"), and HIP Health Plans ("HIP") entered into definitive
agreements and consummated a broad strategic alliance. Under this arrangement,
among other things, the Company
* acquired a 20% ownership interest in THINC in exchange for
$1,500,000 in cash and a warrant to purchase an aggregate of
4,059,118 shares of common stock of the Company,
* agreed to extend senior loans to THINC of $2,000,000 of working
capital line of credit (the "Working Capital Line of Credit")
and $1,500,000 of contingent line of credit (the "Contingent
Line of Credit"),
* entered into a Management Services Agreement with THINC pursuant
to which the Company will manage all operations of THINC,
including providing THINC with certain content and messaging
services,
* licensed to THINC content and messaging services for use over
the THINC network and
* entered into Clinical Transaction Agreements with each of
Empire, GHI and HIP (the "THINC Payers") to provide online
prescription and laboratory transaction services.
The Company's Clinical Transaction Agreement with GHI specifies that the
Company does not have the right to provide prescription communication services
to GHI unless either the Company enters into an agreement with GHI's pharmacy
benefit manager outlining a methodology for the implementation of such services
or GHI elects to proceed without such an agreement. GHI's current pharmacy
benefit manager is Merck-Medco, a company with whom the Company is currently
involved in litigation. See "Item 3- Legal Proceedings." To date, the Company
has not entered into any such agreement with Merck-Medco and GHI has not made
such election.
As part of this arrangement, THINC entered into Managed Care Transaction
Contracts with each of the THINC Payers whereby the THINC Payers agreed to use
the THINC network for their online medical claims submission, eligibility,
benefit plan detail, roster distribution, remittance advice distribution, claims
inquiry, referral/pre-certification and authorization, and encounter submission
transactions.
The warrant issued to THINC is exercisable beginning on December 13,
1999 at $4.00 per share of common stock and expires on January 1, 2006, subject
to certain exceptions. The warrant and the shares of the Company's common stock
issuable upon the exercise of the warrant are subject to certain restrictions on
transfer. The estimated fair value of the warrant on the date issued was
$1,700,000, as determined using the Black-Scholes option-pricing model.
In connection with the management services agreement with THINC, the
Company has billed approximately $993,000 related to services performed and
$205,000 of associated reimbursable expenses. In addition, the Company and
Cerner have funded to THINC an aggregate of $500,000 of the Working Capital Line
of Credit, to which the Company and Cerner are committed. The Company's portion
of the Working Capital Line of Credit funded was $250,000. These amounts are
included in the "receivable from affiliate" balance of $1,448,000 included on
the balance sheet as of June 30, 1999.
Cerner
In January 1999, the Company entered into definitive agreements and
consummated a broad strategic alliance with Cerner Corporation ("Cerner").
Cerner, a publicly traded corporation, is a supplier of clinical and management
information systems for healthcare organizations. Under this arrangement, the
Company, among other things, obtained a perpetual software license to the
functionality embedded in Cerner's Health Network Architecture ("HNA"),
including HNA Millennium Architecture, in exchange for 12,437,500 shares of the
Company's common stock (such shares are subject to certain restrictions on
transfer
23
<PAGE>
and other adjustments). In addition, the Company issued to Cerner a warrant to
purchase up to 1,008,445 shares of common stock at $4.00 per share, exercisable
only in the event THINC exercises its warrant. Also, the Company will issue to
Cerner 2,503,125 additional shares of common stock on or after February 15, 2001
at $0.01 per share in the event the Company has achieved a stated level of
physician participation by 2001.
The software acquired from Cerner was valued at $20,800,000, based on
the value of the equity consideration as determined using an income approach
valuation methodology. A ten year forecast of revenues and costs was prepared
with the resulting cash flows reduced by working capital and capital
expenditures. The net results were then discounted to present value based on a
weighted average discount rate of 30%.
In connection with the Company's strategic relationship with Cerner, the
Company sold to Cerner a beneficial interest representing 2% of THINC. As
beneficial owner, Cerner will receive any dividends, income and liquidation or
disposition proceeds related to its 2% interest. However, the Company will
remain the owner of record, will exercise voting rights and will have the right
to sell, transfer, exchange, encumber, or otherwise dispose of Cerner's 2%
interest. Cerner has also agreed to fund $1,000,000 of the Working Capital Line
of Credit.
Additionally, the Company and Cerner entered into a Marketing Agreement
that allows for the marketing and distribution of the Company's services to the
physicians and providers associated with more than 1,000 healthcare
organizations who currently utilize Cerner's clinical and management information
system. In addition, Cerner committed to make available engineering and systems
architecture personnel and expertise to accelerate the deployment of the
Company's services, as well as ongoing technical support and future enhancements
to HNA. Concurrent with the initial public offering of the Company's common
stock, the Company sold 537,634 shares of its common stock to Cerner for net
proceeds of approximately $9,000,000. As of October 15, 1999, Cerner owned 18.7%
of the outstanding common stock of the Company.
During fiscal year 1999, Cerner charged the Company approximately
$320,000 of fees and expenses related to the development of the Company's
services. In connection with the Working Capital Line of Credit, Cerner has
contributed $500,000 to the Company for the benefit of THINC. As of June 30,
1999, $250,000 is included on the Company's balance sheet for the benefit of
THINC from Cerner as part of the payable to affiliate of $497,000.
Other
On August 26, 1998, Medical Manager loaned $100,000 to Richard Cohan,
the Company's Executive Vice President-Operations. The funds were advanced
pursuant to a promissory note with recourse bearing interest at the fixed rate
per annum equal to 5.48%. Under the promissory note, Medical Manager has the
right to set off any profits resulting from the exercise of any employee stock
options granted to Mr. Cohan by Medical Manager.
Under an Employment Agreement dated as of June 11, 1999 between the
Company and Robert Dieterle, the Company's Executive Vice President-Chief
Operating Officer, Mr. Dieterle may request that the Company provide a loan or
loans to him in the aggregate principal amount of up to $380,000 at any time
prior to June 10, 2001. On September 17, 1999, at Mr. Dieterle's request, the
Company loaned $70,000 to him. These funds were advanced pursuant to a
promissory note bearing interest at the fixed rate per annum equal to 5.98%.
This $70,000 loan is collateralized by a first lien on Mr. Dieterle's options to
purchase either the Company's or Medical Manager's common stock. The Company
does not have recourse to Mr. Dieterle in the event that the collateral pledged
under the note is insufficient to satisfy his obligation to repay the loan.
24
<PAGE>
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.
CAREINSITE, INC.
Date: October 27, 1999 By: /s/ James R. Love
---------------------------------
Name: James R. Love
Title: Executive Vice President
and Chief Financial Officer
25
