<PAGE>
As Filed with the Securities and Exchange Commission on December 30, 1996.
REGISTRATION NO. 333-18771
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SYNETIC, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 22-2975182
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
669 RIVER DRIVE, RIVER DRIVE CENTER II
ELMWOOD PARK, NEW JERSEY 07407
(201) 703-3400
(Address, including Zip Code, and telephone number, including area code, of
Registrant's principal executive offices)
CHARLES A. MELE, ESQ.
VICE PRESIDENT--GENERAL COUNSEL
SYNETIC, INC.
669 RIVER DRIVE, RIVER DRIVE CENTER II
ELMWOOD PARK, NEW JERSEY 07407
(201) 703-3400
(Name, address, including Zip Code, and telephone number, including area code,
of agent for service)
Copy to:
CREIGHTON O'M. CONDON, ESQ.
DAVID J. BEVERIDGE, ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 848-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: From time to time after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION BECOMES EFFECTIVE.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion
Preliminary Prospectus Dated December 30, 1996
PROSPECTUS
383,252 Shares
SYNETIC, INC.
Common Stock
_________________________
All of the 383,252 shares (the "Shares") of Common Stock, par value
$.01, (the "Common Stock") of Synetic, Inc. ("Synetic" or the "Company") offered
hereby are being offered (the "Offering") by certain stockholders of the Company
named herein (collectively, the "Selling Stockholders") who received such shares
that were originally issued in connection with the merger (the "Avicenna
Acquisition") of a wholly owned subsidiary of the Company with and into Avicenna
Systems Corp. ("Avicenna") on December 24, 1996. See "The Company --New Area of
Business and Recent Acquisition" and "Selling Stockholders." The Company will
not receive any proceeds from the sale of the Shares.
The Company has been advised by each Selling Stockholder that the Shares
may be offered or sold by or for the account of such Selling Stockholders from
time to time, at prices and on terms to be determined at the time of sale, to
purchasers directly or through underwriters, brokers, dealers or agents, who may
receive compensation in the form of underwriting discounts, commissions or
concessions. From time to time the Selling Stockholders may engage in short
sales, short sales versus the box, puts and calls and other transactions in
securities of the Company, or derivatives thereof, and may sell and deliver the
Shares in connection therewith. The Selling Stockholders and any brokers,
dealers, agents or underwriters that participate with the Selling Stockholders
in the distribution of Shares may be deemed to be "underwriters" within the
meaning of the Securities Act, in which event any discounts, concessions and
commissions received by such brokers, dealers, agents or underwriters and any
profit on the resale of the Shares purchased by them may be deemed to be
underwriting discounts and commissions under the Securities Act. The aggregate
net proceeds to the Selling Stockholders from the sale of the Shares offered by
the Selling Stockholders hereby will be the purchase price of such Shares, less
any commissions, if any, and other expenses of issuance and distribution not
borne by the Company. See "Plan of Distribution."
The Common Stock is quoted on the Nasdaq National Market under the
symbol "SNTC." On December 27, 1996, the closing price of the Common Stock was
$50.00 per share.
________________
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON
STOCK OFFERED HEREBY.
________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
________________
The date of this Prospectus is ___________, 199_.
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2
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT CHARGE
TO EACH PERSON, INCLUDING EACH BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS
DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL
DOCUMENTS THAT ARE INCORPORATED HEREIN BY REFERENCE (OTHER THAN EXHIBITS, UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS).
REQUESTS SHOULD BE DIRECTED TO VICTOR L. MARRERO, VICE PRESIDENT--FINANCE,
SYNETIC, INC., 669 RIVER DRIVE, RIVER DRIVE CENTER II, ELMWOOD PARK, NEW JERSEY
07407, TELEPHONE (201) 703-3400. IN ORDER TO INSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY NO LATER THAN FIVE BUSINESS DAYS PRIOR
TO THE DATE ON WHICH SUCH PERSON MUST MAKE A FINAL INVESTMENT DECISION.
_________________________________________
IN CONNECTION WITH THIS OFFERING, IF THE OFFERING IS UNDERWRITTEN, THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICE OF THE COMMON STOCK AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ
NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, IF THE OFFERING IS UNDERWRITTEN,
CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"PLAN OF DISTRIBUTION."
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy and information statements and other information filed by
the Company can be inspected and copied, at prescribed rates, at the public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material may also be obtained, at prescribed rates, by writing to the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. In addition, the Company's Common
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3
Stock is quoted on the Nasdaq National Market System. Reports, proxy and
information statements and other information concerning the Company can be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on
Form S-3 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and such Common
Stock, reference is made to the Registration Statement. Statements contained in
the Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference to such contract, agreement or other document. The Registration
Statement may be inspected without charge at the principal office of the
Commission in Washington, D.C. and copies of all or any part thereof may be
obtained from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission
(Commission file number 0-17822) pursuant to the Exchange Act and are hereby
incorporated by reference:
(i) The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996 (the "1996 10-K"); and
(ii) The Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1996 (the "First Quarter 10-Q").
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock shall be deemed to
be incorporated by reference in this Prospectus and to be made a part hereof
from their respective dates of filing. Any statement contained in any document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that is
also deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
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4
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FORWARD-LOOKING INFORMATION
This Prospectus contains, under the caption "The Company--New Area of
Business and Recent Acquisition", and incorporates by reference certain forward-
looking statements and information relating to the Company that are based on the
beliefs of the Company's management as well as assumptions made by and
information currently available to the Company's management. When used in this
Prospectus or the documents incorporated by reference, the words "anticipate",
"believe", "estimate", "expect" and similar expressions, as they relate to the
Company or the Company's management, are intended to identify forward-looking
statements. Such statements reflect the current view of the Company with respect
to future events and are subject to certain risks, uncertainties and
assumptions. These risks may include product demand and market acceptance risks,
the feasibility of developing commercially profitable Internet healthcare
services, the effect of economic conditions, user acceptance, the impact of
competitive products, services and pricing and product development,
commercialization and technological difficulties. See "Risk Factors." Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated or expected. The Company
does not intend to update these forward-looking statements.
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5
THE COMPANY
The Company is a Delaware corporation and was incorporated in 1989.
Its principal offices are located at 669 River Drive, River Drive Center II,
Elmwood Park, New Jersey 07407, and its telephone number is (201) 703-3400.
Porex Technologies Corp. (together with its subsidiaries, "Porex"), a
wholly owned subsidiary of the Company, designs, manufactures and distributes
porous and solid plastic components and products used in healthcare, industrial
and consumer applications. Porex's principal products, which incorporate porous
plastics, are used to filter, wick, drain, vent or control the flow of fluids or
gases. In November 1996, Synetic established a new wholly owned subsidiary to
develop and provide inter-enterprise connectivity for healthcare communications,
information and commerce, using the distributive power of the Internet. This
subsidiary will pursue the development of this business through the use of
Synetic's internal resources as well as pursuing the acquisition of
complementary businesses.
NEW AREA OF BUSINESS AND RECENT ACQUISITION
The Company will direct its efforts in a new area of business relating
to the use of Internet-based technology to expand the channels of communication
in the healthcare industry. The creation of these new channels is intended to
benefit providers and payors of healthcare services by improving the quality of
patient care, securing appropriate utilization of healthcare services, reducing
administrative costs and enforcing benefit plan guidelines. The initial focus
will address the unmet needs of physicians by providing physicians with a
portfolio of interactive services designed to help them more efficiently
practice medicine in today's managed care environment. These services will
provide an objective, content-neutral utility for providers and payors to
communicate with each other.
In its first transaction related to this new business, the Company
announced on December 24, 1996 that it was acquiring Avicenna, a privately held,
developmental-stage company located in Cambridge, Massachusetts. Avicenna
markets and builds Intranets for managed healthcare plans, integrated
healthcare delivery systems and hospitals. Avicenna's controlled-access
Intranet systems are designed to allow managed care organizations and provider
groups to exchange transactional, procedural, patient outcome and educational
information. The Company believes that Avicenna's development of Internet
technology-based information systems will provide Synetic with a platform for
building a new generation of inter-enterprise healthcare transaction
applications. These applications are expected to enable managed care
organizations, pharmacy benefit managers, clinical laboratories, physicians and
other providers of healthcare services to share information in a secure and
confidential manner while preserving their investment in existing technologies.
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6
Pursuant to the Agreement and Plan of Merger, dated as of December 23,
1996, among the Company, Synternet Acquisition Corp., a wholly owned subsidiary
of the Company, Avicenna and the Selling Stockholders, the Company acquired all
of Avicenna's outstanding equity (including employee stock options) and
$1,000,000 principal amount of convertible demand notes for a purchase price of
approximately $30.5 million (subject to post-closing adjustments), consisting of
428,642 shares of Common Stock, based on a market price of $51.725 per share,
and options exercisable for 161,015 shares of Common Stock. As additional
consideration, certain of the Selling Stockholders received nontransferable
warrants covering 250,000 shares of Common Stock, which are exercisable in two
years at an exercise price of $54.50 per share. The Selling Stockholders
acquired all 383,252 shares of Common Stock offered hereby in the Avicenna
Acquisition.
The Company anticipates that a substantial portion of the purchase
price for Avicenna will be attributed to purchased research and development
costs. Under generally accepted accounting principles, Synetic will charge to
expense the portion of the purchase price attributable to purchased research and
development costs. Synetic anticipates that this charge will be recognized
during the quarter ended December 31, 1996. Avicenna has operated at a loss
since its inception two years ago, a substantial portion of which related to
research and development expenses, and as of November 30, 1996 had an unaudited
accumulated deficit of approximately $3,100,000. The current rate of these
expenses approximates $1,500,000 per fiscal quarter. Synetic expects to continue
to incur significant research and development expenses and to incur additional
operating losses in connection with this new area of business until Avicenna
successfully develops and markets its products and services. There can be no
asurance that such products and services will be successfully developed or
marketed. Research and development expenses relating to Avicenna may be
materially greater in the future than the current amounts, until Avicenna
successfully develops and markets its products and services. Synetic
anticipates, however, that such research and development expenses will not
exceed $2,250,000 per fiscal quarter for the third and fourth quarters of the
current fiscal year ending June 30, 1997 and will not result in net losses for
Synetic on a consolidated basis for the current fiscal year, or for any of the
fiscal quarters ending December 31, 1996, March 31, 1997 and June 30, 1997,
respectively (excluding the anticipated charge for purchased research and
development costs relating to the acquisition of Avicenna). See "Risk Factors--
Expansion Risk of New Business Area."
ACQUISITION PROGRAM
The Company continues to pursue an acquisition program pursuant to
which it will seek to effect one or more acquisitions of or business
combinations with businesses that the Company believes have significant growth
potential. The Company intends initially to concentrate its acquisition efforts
in the healthcare industry but such emphasis is not intended to limit in any
manner the Company's ability to pursue acquisition opportunities in other
industries. The Company's acquisition program could result in a substantial
change in the business, operations and financial condition of the Company. No
assurance can be given that the Company will succeed in consummating any
acquisitions or that the Company will be able to successfully manage or
integrate any business that it acquires. The future growth of the Company will
depend primarily on its ability to consummate one or more such acquisitions and
to operate such businesses successfully. See "Business--Acquisition Program" in
the 1996 10-K.
CERTAIN CORPORATE HISTORY
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7
Prior to June 28, 1989, the date of the initial public offering of the
Company, the Company was an indirect wholly owned subsidiary of Medco
Containment Services, Inc. ("Medco"). Thereafter, the Company became a publicly
held, partially owned subsidiary of Medco. Medco provided healthcare cost
containment services, principally managed prescription drug programs, to benefit
plan sponsors. On November 18, 1993, Medco was acquired by Merck & Co., Inc.
("Merck") in a merger transaction, and as a result, the Company became an
indirect, partially owned subsidiary of Merck. Merck is a pharmaceutical
manufacturer. Until December 14, 1994, the Company's operations consisted of
Porex and a group of subsidiaries that provided institutional pharmacy services
(the "Institutional Pharmacies Business").
On December 14, 1994, the Company consummated certain transactions
pursuant to which: (1) the Company sold the Institutional Pharmacies Business
to Pharmacy Corporation of America, an indirect wholly owned subsidiary of
Beverly Enterprises, Inc. (such sale is referred to herein as the
"Divestiture"), for approximately $107,300,000; (2) the Company purchased
5,268,463 shares of its Common Stock, from Merck for an aggregate purchase price
of $37,764,019, pursuant to the Purchase and Sale Agreement, dated as of May 24,
1994, between the Company and Merck; and (3) SN Investors, L.P. ("SN
Investors"), a limited partnership the general partner of which is SYNC, Inc.
(the "General Partner"), whose sole stockholder is Mr. Martin J. Wygod, Chairman
of the Board of the Company, purchased 5,061,857 shares of Common Stock (the
"Wygod Shares") from Merck for an aggregate purchase price of $36,283,079,
pursuant to an assignment by the Company of the right to purchase such shares
from Merck. The purchases of shares of Common Stock from Merck by the Company
and SN Investors are hereinafter referred to as the "Purchase". The shares of
Common Stock purchased by the Company are being held as treasury shares and are
no longer outstanding or entitled to vote.
Immediately prior to the consummation of the Purchase, Merck owned
approximately 58% of the issued and outstanding Common Stock. As a result of
the consummation of the Purchase, Mr. Wygod and SN Investors own an aggregate of
approximately 32% of the outstanding Common Stock as of December 15, 1996 and
Merck no longer owns an equity interest in the Company.
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8
RISK FACTORS
Prior to making an investment decision with respect to the Common
Stock offered hereby, prospective investors should carefully consider the
specific factors set forth below, together with all of the other information
appearing herein, in light of their particular investment objectives and
financial circumstances.
ACQUISITION PROGRAM
The Company pursues an acquisition program pursuant to which it seeks
to effect acquisitions of or business combinations with businesses that the
Company believes have significant growth potential. The future growth of the
Company will depend primarily on its ability to consummate acquisitions and to
operate such businesses successfully. The Company's acquisition program could
result in a substantial change in the business, operations and financial
condition of the Company. Although management of the Company will endeavor to
evaluate the risks inherent in any particular acquisition candidate, there can
be no assurance that the Company will properly ascertain all such risks. Any
acquisitions will be limited, as required by agreements to which the Company is
a party, to areas of business that would not be competitive with certain
businesses of Merck and its subsidiaries or with the Institutional Pharmacies
Business. See "Certain Relationships and Related Transactions" in the 1996 10-
K. No assurances, however, can be given that the Company will succeed in
consummating any acquisition or that the Company will be able to successfully
manage or integrate any business that it acquires.
The success of the Company's acquisition program will depend on, among
other things, the availability of acquisition candidates, the availability of
funds to finance acquisitions, and the availability of management resources to
oversee the operation of acquired businesses. Financing for acquisitions may
come from several sources, including, without limitation, (a) cash and cash
equivalents on hand and marketable securities and (b) proceeds from the
incurrence of indebtedness or the issuance of additional Common Stock, preferred
stock, convertible debt or other securities, which could result in substantial
dilution of the percentage ownership of the stockholders of the Company at the
time of any such issuance. The proceeds from any financing may be used for
costs associated with identifying and evaluating prospective acquisition
candidates, and for structuring, negotiating, financing and consummating any
such acquisition transactions and for other general corporate purposes. The
Company does not intend to seek stockholder approval for any such acquisition or
security issuance unless required by applicable law or regulation. Although Mr.
Wygod has indicated his intention to assist the Company in its acquisition
program by bringing opportunities for potential acquisitions to the Company and
to assist the Company in negotiating such acquisitions and in seeking financing
in the event any such acquisition were to be financed by the Company, he is not
an officer or an employee of the Company nor is he required pursuant to any
contractual obligation to provide such support or assistance.
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9
EXPANSION RISK OF NEW BUSINESS AREA
The Company is in the initial development phase of offering services
to provide inter-enterprise connectivity to payors and providers in the
healthcare industry through its new subsidiary. Avicenna, the Company's first
acquisition in this new business area, has operated at a loss since its
inception two years ago, and as of November 30, 1996 had an unaudited
accumulated deficit of approximately $3,100,000. The current rate of these
expenses approximates $1,500,000 per fiscal quarter. Synetic expects to continue
to incur significant research and development expenses and to incur additional
operating losses in connection with this new area of business until Avicenna
successfully develops and markets its products and services. There can be no
assurance that such products and services will be successfully developed or
marketed. Research and development expenses relating to Avicenna may be
materially greater in the future than the current amounts, until Avicenna
successfully develops and markets its products and services. Synetic
anticipates, however, that such research and development expenses will not
exceed $2,250,000 per fiscal quarter for the third and fourth quarters of the
current fiscal year ending June 30, 1997 and will not result in net losses for
Synetic on a consolidated basis for the current fiscal year, or for any of the
fiscal quarters ending December 31, 1996, March 31, 1997 and June 30, 1997,
respectively (excluding the anticipated charge for purchased research and
development costs relating to the acquisition of Avicenna. See "The
Company--New Area of Business and Recent Acquisition"). Further, the Company
expects to acquire additional businesses to supplement its own internal efforts
and those of Avicenna. There is no specific time frame for the first commercial
introduction of these new services, and the Company anticipates that it will
incur significant development expenses until these services are successfully
developed and marketed. No assurances can be given that the Company's effort in
establishing such services will be successful or that it will succeed in
consummating such acquisitions or that such acquisitions will ultimately provide
Synetic with the ability to offer these services.
REGULATION OF POREX
Porex manufactures and distributes certain medical/surgical devices,
such as plastic and reconstructive surgical implants and tissue expanders, which
are subject to government regulations, including approval procedures instituted
by the Food and Drug Administration. Certain other healthcare products may
also be subject to such regulations and approval processes. Compliance with
such regulations and the process of obtaining approvals can be costly,
complicated and time-consuming, and there can be no assurance that such
approvals will be granted on a timely basis, if ever. See "Business--Porex--
Regulation" in the 1996 10-K.
POTENTIAL LIABILITY RISK AND AVAILABILITY OF INSURANCE
The products sold by the Company expose it to potential risk for
product liability claims particularly with respect to Porex's Life Sciences,
Clinical and Surgical products. The Company believes that Porex carries
adequate insurance coverage against product liability claims and other risks.
There can be no assurance, however, that claims in excess of Porex's
insurance coverage will not arise. In addition, Porex's insurance policies
must be renewed annually. In 1994, Porex was notified that its insurance
carrier would not renew its then-existing insurance coverage after December 31,
1994 with respect to actions and claims arising out of Porex's distribution of
silicone mammary implants. However, Porex has exercised its right to purchase
extended reporting period coverage with respect to such actions and claims.
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10
Such coverage provides insurance, subject to existing policy limits but for an
unlimited time period, with respect to actions and claims made after December
31, 1994 that are based on events that occurred during the policy period. Porex
has renewed its insurance coverage with the same carrier for other liability
claims. Although Porex has been able to obtain adequate insurance coverage at an
acceptable cost in the past and believes that it is adequately indemnified for
products manufactured by others and distributed by it, there can be no assurance
that in the future it will be able to obtain such insurance at an acceptable
cost or be adequately protected by such indemnification. See "Business--Porex--
Health care Products" and "Legal Proceedings--Mammary Implant Litigation" in the
1996 10-K.
CERTAIN LITIGATION
During the year ended June 30, 1988, Porex began distributing silicone
mammary implants ("implants") in the United States pursuant to a distribution
arrangement (the "Distribution Agreement") with a Japanese manufacturer (the
"Manufacturer"). Because of costs associated with increased government
regulation and examination, Porex's supplier determined to withdraw its implants
from the United States market. On July 9, 1991, the FDA mandated a recall of
all implants manufactured by companies that elected not to comply with certain
FDA regulations regarding data collection. Accordingly, Porex notified all of
its customers not to use any implants sold by Porex and to return such implants
to Porex for a full refund. Porex had ceased offering implants for sale prior
to the recall date. Porex believes that after accounting for implants returned
to it, the aggregate number of recipients of implants distributed by Porex under
the Distribution Agreement in the United States totals approximately 2,500.
Since March 1991, Porex has been named as one of many co-defendants in
a number of actions brought by recipients of implants. One of the pending
actions, Donna L. Turner v. Porex Technologies Corporation, et al., is styled as
a class action. Certain of the actions against Porex have been dismissed where
it was determined that the implant in question was not distributed by Porex. In
addition, as of December 20, 1996, 55 claims have been settled on a favorable
basis by the Manufacturer, or by the insurance carriers of Porex, without
material cost to Porex. As of December 20, 1996, 210 actions and 40 out-of-
court claims were pending against Porex. Of the 210 actions, 93 involve
implants identified as distributed by Porex and 84 cases involve implants
identified as not having been distributed by Porex. In the remaining 33
actions, the implants have not been identified. The number of claims made by
individuals during the fiscal year ended June 30, 1996 was significantly lower
than the number of claims made during the fiscal year ended June 30, 1995.
The typical case or claim alleges that the individual's mammary
implants caused one or more of a wide range of ailments. These implant cases
and claims generally raise difficult and complex factual and legal issues and
are subject to many uncertainties and complexities, including, but not limited
to, the facts and circumstances of each particular case
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11
or claim, the jurisdiction in which each suit is brought, and differences in
applicable law. The Company does not have sufficient information to evaluate
each case and claim.
In 1994, Porex was notified that its insurance carrier would not renew
its then-existing insurance coverage after December 31, 1994 with respect to
actions and claims arising out of Porex's distribution of implants. However,
Porex has exercised its right, under such policy, to purchase extended reporting
period coverage with respect to such actions and claims. Such coverage provides
insurance, subject to existing policy limits but for an unlimited time period,
with respect to actions and claims made after December 31, 1994 that are based
on events that occurred during the policy period. In addition, Porex has other
excess insurance where it has similarly purchased extended reporting period
coverage which by its terms would expire December 31, 1997. However, Porex
expects to purchase further extended reporting period coverage from the excess
insurers to the extent such coverage is reasonably available. The Company
believes that its present coverage, together with Porex's insurance policies in
effect on or before December 31, 1994, should provide adequate coverage against
liabilities that could result from actions or claims arising out of Porex's
distribution of implants. To the extent that certain of such actions and claims
seek punitive and compensatory damages arising out of alleged intentional torts,
such damages, if awarded, may or may not be covered, in whole or in part, by
Porex's insurance policies. In addition, Porex's recovery from its insurance
carriers is subject to policy limits and certain other conditions. Porex has
been expensing the retention amount under its policies as incurred.
The Company believes that Porex has a valid claim for indemnification
under the Distribution Agreement with respect to any liabilities that could
result from pending actions or claims by recipients of implants or any similar
actions or claims that may be commenced in the future. However, Porex's right
to indemnification is subject to a disagreement with the Manufacturer. Pending
the resolution of such disagreement, the Manufacturer has been paying a portion
of the costs of the settled claims.
<PAGE>
12
SHARES AVAILABLE FOR FUTURE SALE
The 5,061,857 Wygod Shares are "restricted securities," within the
meaning of Rule 144 promulgated pursuant to the Securities Act ("Rule 144"),
subject to the volume restrictions of Rule 144 but for which the two-year
holding period has expired. In addition, as more fully set forth in "Certain
Relationships and Related Transactions" in the 1996 10-K, the Wygod Shares are
subject to certain restrictions on transfer. Upon expiration of such
restrictions, SN Investors may be able to sell without registration under the
Securities Act the number of such shares permitted under Rule 144. The Company
has granted certain demand registration rights to Mr. Wygod with respect to the
Wygod Shares that are assignable to SN Investors. Any sales by SN Investors
pursuant to Rule 144 or such registration rights could have a material adverse
effect on the prevailing market price for the Common Stock. See "Description
of Capital Stock--Shares Eligible for Future Sale."
As of December 15, 1996, the Company has reserved an aggregate of
5,163,720 shares of Common Stock for issuance pursuant to stock option
agreements and stock option plans. Pursuant to the Avicenna Acquisition, the
Company will reserve an additional 961,015 shares of Common Stock for issuance
pursuant to stock option plans, 80,522 of which may be issued immediately, and
an additional 250,000 shares for issuance upon the exercise of warrants
exercisable after December 23, 1998. The sale of a substantial amount of such
additional shares of Common Stock following their issuance could have a material
adverse effect on the market price of the Common Stock.
<PAGE>
13
USE OF PROCEEDS
The Company will receive no proceeds from the sale of Shares by the
Selling Stockholders.
<PAGE>
14
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data set forth below for the five years in the
period ended June 30, 1996 has been derived from the Consolidated Financial
Statements of the Company, which have been audited by Arthur Andersen LLP,
independent accountants. The selected financial data as of and for the three-
month periods ended September 30, 1995 and 1996 are derived from unaudited
consolidated financial statements of the Company which, in the opinion of
management, include all normal and recurring adjustments necessary to present
fairly the financial position and the results of operations of the Company for
those periods. Such information should be read in conjunction with the
Consolidated Financial Statements of the Company and the related notes thereto
included in the 1996 10-K and First Quarter 10-Q that are incorporated by
reference into this Prospectus. The selected financial data for the five years
in the period ended June 30, 1996 has been restated to reflect the Divestiture.
See "Certain Relationships and Related Transactions" in the 1996 10-K.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales.............................. $ 28,486 $ 30,645 $33,093 $39,179 $ 45,128 $ 11,036 $ 11,185
Income from continuing
operations before
provisions for income
taxes................................. 6,031 5,430 1,080 1,078 13,202 3,127 3,527
Provision for income taxes............. 2,151 2,046 411 443 4,617 1,203 1,138
-------- -------- ------- ------- -------- -------- --------
Income from continuing
operations............................ 3,880 3,384 669 635 8,585 1,924 2,389
Income from discontinued
operations............................ 1,376 2,734 1,823 15,459 -- -- --
-------- -------- ------- ------- -------- -------- --------
Net income............................. $ 5,256 $ 6,118 $ 2,492 $16,094 $ 8,585 $ 1,924 $ 2,389
======== ======== ======= ======= ======== ======== ========
Net income per share (1):
Continuing operations................. $ 0.24 $ 0.19 $ 0.04 $ 0.04 $ 0.48 $ 0.11 $ 0.13
Discontinued operations............... 0.09 0.16 0.10 0.89 -- -- --
-------- -------- ------- ------- -------- -------- --------
Net income per share (2)............... $ 0.33 $ 0.35 $ 0.14 $ 0.93 $ 0.48 $ 0.11 $ 0.13
======== ======== ======= ======= ======== ======== ========
<CAPTION>
AT JUNE 30, AS OF SEPTEMBER 30,
------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital........................ $ 44,350 $ 65,673 $ 64,625 $105,279 $166,328 $170,493
Net assets of discontinued
operations............................ 25,352 52,548 55,882 -- -- --
Total assets........................... 163,011 189,494 194,009 188,174 199,592 204,223
Long term debt, less
current portion....................... 81,714 81,058 80,716 -- -- --
Stockholders' equity................... 74,056 102,378 105,130 166,832 181,089 185,376
</TABLE>
___________________
(1) Restated to reflect a two-for-one stock split effected on February 26,
1993.
(2) No cash dividends were declared by the Company during the periods presented
above.
<PAGE>
15
SELLING STOCKHOLDERS
This Prospectus covers the offer and sale by each Selling Stockholder
of Common Stock owned by such Selling Stockholder. Set forth below are the
names of each Selling Stockholder, the nature of any position, office or other
material relationship that the Selling Stockholder has had within the past three
years with the Company or any of its predecessors or affiliates, the number of
shares of Common Stock beneficially owned as of December 30, 1996 by each
Selling Stockholder, the number of Shares that may be offered and sold by or on
behalf of each Selling Stockholder hereunder and the amount of Common Stock to
be owned by each Selling Stockholder upon the completion of the Offering if all
Shares offered by such Selling Stockholder are sold. None of the Selling
Stockholders beneficially owns more than 1% of the outstanding Common Stock.
Any or all of the Shares listed below under the heading "Shares to be Sold" may
be offered for sale by or on behalf of the Selling Stockholders.
Each of the Selling Stockholders listed below acquired the Shares
hereby offered for sale in the Avicenna Acquisition on December 24, 1996, as
described herein. See "Recent Developments" above.
<TABLE>
<CAPTION>
Shares Beneficially
Owned Prior to Shares Beneficially
Offering Owned After Offering
----------------------- Shares --------------------
Selling Stockholders Number Percent Offered Number Percent
- -------------------- ------ ------- --------- ------ --------
<S> <C> <C> <C> <C> <C>
Inder-Jeet Gujral/(1)/............. 90,781 * 45,391 45,390 *
Advanced Technology
Ventures IV, L.P./(2)/........... 107,301 * 107,301 0 0
Delphi Venture III,
L.P./(3)/......................... 105,369 * 105,369 0 0
Delphi BioInvestments III,
L.P./(4)/......................... 1,931 * 1,931 0 0
Nazem & Company/(5)/............... 107,300 * 107,300 0 0
CGJR Health Care Services Private
Equities, L.P./(6)/.............. 9,913 * 9,913 0 0
Other Selling Stockholders, each
of whom is selling less than
6,050 shares in the Offering
and beneficially owns less
than 1% of the outstanding
Common Stock..................... 6,047 * 6,047 0 0
</TABLE>
<PAGE>
16
- -------------------
* The percentage of shares of Common Stock beneficially owned does not
exceed one percent of the outstanding shares of Common Stock.
/(1)/ Mr. Gujral, the current President of Avicenna, held the position of
President of Avicenna and owned 379,200 shares of Avicenna common stock
immediately prior to the Avicenna Acquisition.
/(2)/ Advanced Technology Ventures IV, L.P. ("Advanced Technology") owned
333,334 shares of preferred stock, 6,945 shares of common stock and
$333,334 principal amount of convertible demand notes of Avicenna
immediately prior to the Avicenna Acquisition. 107,301 shares held in
the name of Advanced Technology may be distributed to and sold by certain
limited partners of Advanced Technology, each of whom beneficially holds
less than 1% of the outstanding shares of Common Stock.
/(3)/ Delphi Venture III, L.P. ("Delphi Venture") owned 327,438 shares of
preferred stock, 6,821 shares of common stock and $327,438 principal
amount of convertible demand notes of Avicenna immediately prior to the
Avicenna Acquisition. 105,369 shares held in the name of Delphi Venture
may be distributed to and sold by certain limited partners of Delphi
Venture, each of whom beneficially holds less than 1% of the outstanding
shares of Common Stock.
/(4)/ Delphi BioInvestments III, L.P. ("Delphi BioInvestments") owned 5,895
shares of preferred stock, 123 shares of common stock and $5,895
principal amount of convertible demand notes of Avicenna immediately
prior to the Avicenna Acquisition. 1,931 shares held in the name of
Delphi BioInvestments may be distributed to and sold by certain limited
partners of Delphi BioInvestments, each of whom beneficially holds less
than 1% of the outstanding shares of Common Stock.
/(5)/ Nazem & Company IV, L.P. ("Nazem") owned 333,333 shares of preferred
stock, 6,944 shares of common stock and $333,333 principal amount of
convertible demand notes of Avicenna immediately prior to the Avicenna
Acquisition. 107,300 shares held in the name of Nazem may be distributed
to and sold by certain limited partners of Nazem, each of whom
beneficially holds less than 1% of the outstanding shares of Common
Stock.
/(6)/ CGJR Health Care Services Private Equities, L.P. ("CGJR") owned 33,333
shares of preferred stock of Avicenna immediately prior to the Avicenna
Acquisition. 9,913 shares held in the name of CGJR may be distributed to
and sold by certain limited partners of CGJR, each of whom beneficially
holds less than 1% of the outstanding shares of Common Stock.
<PAGE>
17
PLAN OF DISTRIBUTION
The Company has been advised by each Selling Stockholder that such
Selling Stockholder may sell all or a portion of the Shares offered by such
Selling Stockholder hereby from time to time through the Nasdaq National Market.
The Selling Stockholders may also make private sales to purchasers directly or
to or through a broker or brokers. Alternatively, the Selling Stockholders may
from time to time offer the Shares through underwriters, brokers, dealers or
agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the Selling Stockholders and/or the purchasers
of the Shares for whom they act as agent. From time to time the Selling
Stockholders may engage in short sales, short sales versus the box, puts and
calls and other transactions in securities of the Company, or derivatives
thereof, and may sell and deliver the Shares in connection therewith. The
distribution of the Shares may be effected from time to time in one or more
transactions that may take place through the Nasdaq National Market or any
national securities exchange on which the Common Stock is approved for listing
in the future, including block trades or ordinary broker's transactions, or
through privately negotiated transactions, or through an underwritten public
offering, or through a combination of any such methods of sale, at the market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. To the extent required, the number of
Shares to be sold, the purchase price, the name of any such agent, broker,
dealer or underwriters and any applicable commissions with respect to a
particular offer will be set forth in an accompanying Prospectus Supplement.
The aggregate net proceeds to the Selling Stockholders from the sale of the
Shares offered by the Selling Stockholders hereby will be the purchase price of
such Shares, less any commissions, if any, and other expenses of issuance and
distribution not borne by the Company.
The Selling Stockholders and any brokers, dealers, agents or
underwriters that participate with the Selling Stockholders in the distribution
of Shares may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any discounts, concessions and commissions
received by such brokers, dealers, agents or underwriters and any profit on
the resale of the Shares purchased by them may be deemed to be underwriting
discounts and commissions under the Securities Act.
The Company has agreed to bear all expenses (other than any
commissions or discounts of underwriters, dealers or agents or brokers' fees and
the fees and expenses of their counsel) in connection with the registration of
the Shares being offered by the Selling Stockholders hereby.
If the Shares are sold in an underwritten offering, the underwriters
and selling group members, if any, may engage in passive market making
transactions in the Company's Common Stock on the Nasdaq National Market
immediately prior to the commencement of the sale of shares in such offering, in
accordance with Rule 10b-6A under the Exchange Act. Passive market making
consists of displaying bids on the Nasdaq National Market limited by the
<PAGE>
18
bid prices of market makers not connected with such offering and purchases
limited by such prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited in amount to 30% of the passive
market maker's average daily trading volume in the Common Stock during the
period of the two full consecutive calendar months prior to the filing with the
Commission of the Registration Statement of which this Prospectus is a part and
must be discontinued when such limit is reached. Passive market making may
stabilize the market price of the Common Stock at a level above that which might
otherwise prevail and, if commenced, may be discontinued at any time.
No underwriter, broker, dealer or agent has been engaged by the Company
in connection with the distribution of the Shares to which this Prospectus
relates.
Any shares covered by this Prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this Prospectus. There is no assurance that the Selling
Stockholders will sell any or all of the Shares. The Selling Stockholders may
transfer, devise or gift such shares by other means not described herein.
In order to comply with certain states' securities laws, if
applicable, the Common Stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Common Stock may not be sold unless the Common Stock has been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.
<PAGE>
19
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company is
subject to the Delaware General Corporation Law and to provisions contained in
the Company's Certificate of Incorporation and By-Laws, copies of which are
exhibits to the 1996 10-K that is incorporated by reference into this
Prospectus. Reference is made to such exhibits for a detailed description of
the provisions thereof summarized below.
The authorized capital stock of the Company consists of 10,000,000
shares of Preferred Stock, $.01 par value (the "Preferred Stock"), and
50,000,000 shares of Common Stock, $.01 par value. None of the Preferred Stock
is issued and outstanding. At December 15, 1996, there were 16,868,665 shares of
Common Stock outstanding, and the Company issued an additional 428,642 shares in
connection with the Avicenna Acquisition. Holders of capital stock of the
Company have no preemptive or other subscription rights.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more
series, without stockholder approval. The Board of Directors is authorized to
determine (subject to limitations prescribed by law) the other rights including
voting rights, if any, preferences, terms and limitations to be granted to and
imposed upon any wholly unissued series of Preferred Stock and to fix the number
of shares of any series of Preferred Stock and the designation of any such
series. The Company has no present plans to issue any shares of Preferred
Stock. Because of its broad discretion with respect to the creation and
issuance of any series of Preferred Stock without stockholder approval, the
Board of Directors could adversely affect the voting power of Common Stock. The
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company.
COMMON STOCK
Subject to prior rights of any Preferred Stock then outstanding, the
holders of outstanding shares of Common Stock are entitled to receive dividends
out of assets legally available therefor declared and paid by the Company. The
Company does not currently anticipate paying cash dividends to holders of its
Common Stock.
Upon liquidation, dissolution or winding up of the Company, the assets
legally available for distribution to stockholders are distributable ratably
among the holders of the Common Stock at the time outstanding, subject to the
rights, if any, of the holders of any Preferred Stock then outstanding. Since
the Company's Board of Directors has the authority to fix the rights and
preferences of, and to issue, the Company's authorized but unissued Preferred
Stock without approval of the holders of its Common Stock, the rights of such
holders may be materially limited or qualified by the issuance of the Preferred
Stock.
<PAGE>
20
VOTING RIGHTS
Stockholders are entitled to one vote for each share of Common Stock
held of record, except that for the election of directors, stockholders have
cumulative voting rights. Cumulative voting for directors means that, at each
election of directors, the number of shares eligible to be voted by a
stockholder is multiplied by the number of directors to be elected. A
stockholder may cast all such stockholder's votes for a single candidate, or may
allocate them among two or more candidates in any manner such stockholder
chooses. For example, if three directors are to be elected, holders of one-
third of the shares would be able, by cumulating their votes, to elect one
director, regardless of how the other shares are voted. Currently, the Company
has 11 directors. The maximum number of directors permitted under the Company's
Certificate of Incorporation is 12.
The affirmative vote of the holders of at least two-thirds of the
Company's shares entitled to vote in an election of directors is required to
amend (i) the provisions of the Company's Certificate of Incorporation relating
to cumulative voting, classification of the Company's directors into three
classes, election of only one-third of the Board at each annual meeting of
stockholders and the power to remove directors or fill vacancies, and (ii) the
By-Laws to increase the number of directors above 12. The Company's Certificate
of Incorporation also provides that any or all directors may be removed with or
without cause prior to completion of their term only upon the vote of holders of
two-thirds of the outstanding shares of Common Stock entitled to vote generally
in the election of directors.
The provisions in the Certificate of Incorporation of the Company
relating to a staggered Board of Directors, super-majority requirements and
delegation of rights to issue Preferred Stock may have the effect not only of
discouraging tender offers or other stock acquisitions but also of deterring
existing stockholders from making management changes. A staggered Board, while
promoting stability in Board membership and management, also moderates the pace
of any change in control of the Board of Directors by extending the time
required to elect a majority, effectively requiring action in at least two
annual meetings. Moreover, a staggered Board makes it more difficult for
minority stockholders, even with cumulative voting, to elect a director. For
example, to elect one director of a non-staggered 12-member Board, stockholders
with cumulative voting would need only one-twelfth of the votes cast. To elect
one member of a staggered Board with three classes and 12 members, stockholders
with cumulative voting would need one-fourth of the votes cast. The provisions
with respect to removal of directors, while intended to prevent circumvention of
benefits derived from classification of directors and to prevent a transfer of
control of the Board of Directors through the removal process, also have the
effect of preventing removal of a director for just cause by a majority of
outstanding voting shares. The ability of the Board of Directors to issue
Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could make it more difficult for a
third party to secure a majority of
<PAGE>
21
outstanding voting stock. See "Certain Relationships and Related Transactions"in
the 1996 10-K for a description of voting restrictions on shares held by SN
Investors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Registrar &
Transfer Company.
SHARES ELIGIBLE FOR FUTURE SALE
As of December 15, 1996, the Company has 16,868,665 shares of Common
Stock outstanding and issued 428,442 shares in connection with the Avicenna
Acquisition on December 24, 1996. Of the outstanding shares as of December 15,
1996, the 11,806,808 shares not owned by SN Investors are freely tradable
without restrictions or further registration under the Securities Act; provided,
however, that any shares owned by an "affiliate" of the Company (as that term is
defined in the rules and regulations under the Securities Act) may not be resold
in a public distribution except in compliance with the registration requirements
of the Securities Act or pursuant to Rule 144 thereunder. All of the remaining
5,061,857 shares held by SN Investors are "restricted securities" within the
meaning of Rule 144, subject to the volume restrictions of Rule 144 but for
which the two-year holding period has expired. Of the 428,642 shares issued in
connection with the Avicenna Acquisition, 383,252 may be sold pursuant to this
Prospectus and 45,390 are subject to a two year lock-up. In the Avicenna
Acquisition, certain employees of Avicenna received options to purchase 161,015
shares of Common Stock, 80,522 of which vested on December 24, 1996 and 80,493
of which will vest on December 24, 1998. As additional consideration in the
Avicenna Acquisition, certain Selling Stockholders also received, in the
aggregate, nontransferable warrants covering 250,000 shares of Common Stock,
which are exercisable after December 23, 1998.
In general, Rule 144 under the Securities Act provides that an
affiliate of the Company or any holder of restricted securities, subject to any
applicable holding period, may sell within any three-month period a number of
shares that does not exceed the greater of 1% of the then outstanding shares of
the Common Stock or the average weekly trading volume in composite trading on
all exchanges during the four calendar weeks preceding such sale. In addition,
sales under Rule 144 may be made only through unsolicited "broker's
transactions" and are subject to various other conditions.
As more fully set forth in "Certain Relationships and Related
Transactions" in the 1996 10-K, the Wygod Shares are subject to certain
contractual restrictions on transfer. Upon expiration of such restrictions, SN
Investors may be able to sell without registration under the Securities Act the
number of such shares permitted under Rule 144, in a transaction complying with
the registration requirements of the Securities Act or in a private transaction
not subject to such requirements. The Investment Agreement between Mr. Wygod and
the Company, dated as of September 13, 1994 (as more fully described in "Certain
Relationships and Related Transactions" in the 1996 10-K), provides certain
demand registration rights to Mr. Wygod at Mr. Wygod's expense, which are
assignable to any permitted transferee of the
<PAGE>
22
Wygod Shares; provided that in no event is the Company required to file in the
aggregate more than two registration statements in connection therewith. Mr.
Wygod has not assigned such registration rights to SN Investors. While Mr. Wygod
currently intends to assign such registration rights to SN Investors in the
event the General Partner determines to sell or otherwise transfer the Wygod
Shares under circumstances in which registration would be required, Mr. Wygod is
under no obligation to do so.
For information concerning shares which may be issued under the
Company's stock option plans, see "Risk Factors--Shares Available for Future
Sale."
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of
the Common Stock offered hereby will be passed upon for the Company by Shearman
& Sterling, New York, New York. Shearman & Sterling is a limited partner in SN
Investors.
The statements of law under the caption "Risk Factors--Regulation of
Porex" in this Prospectus and under the caption "Business--Porex--Regulation" in
the Company's 1996 10-K, incorporated by reference herein, are based upon the
opinion of Emens, Kegler, Brown, Hill & Ritter Co., L.P.A., Columbus, Ohio,
special regulatory counsel to the Company. Robert D. Marotta, Esq., of counsel
to such firm, holds 75,000 options to purchase Common Stock.
EXPERTS
The audited Consolidated Financial Statements and schedules of the
Company that are incorporated by reference into this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
<PAGE>
================================================================================
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALES OR EXCHANGES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
_____________________
TABLE OF CONTENTS
Page
----
Available Information............................... 2
Incorporation of Certain Documents by Reference..... 3
Forward-Looking Information......................... 4
The Company......................................... 5
Risk Factors........................................ 8
Use of Proceeds..................................... 13
Selected Financial Data............................. 14
Selling Stockholders................................ 15
Plan of Distribution................................ 17
Description of Capital Stock........................ 19
Legal Matters....................................... 22
Experts............................................. 22
================================================================================
================================================================================
383,252 Shares
SYNETIC, INC.
Common Stock
______________
PROSPECTUS
______________
__________, 199_
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following expenses, other than the Securities and Exchange Commission
registration fee, are estimated. All expenses of the offering will be paid by
the Company.
SEC Registration Fee...................... $ 5,982
Legal Fees and Expenses................... $ 90,000
Accounting Fees and Expenses.............. $ 25,000
Blue Sky Fees and Expenses................ $ 1,000
Miscellaneous............................. $ 28,018
---------
Total.................................. $ 150,000
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") provides, in summary, that directors and officers of Delaware
corporations such as the Registrant are entitled, under certain circumstances,
to be indemnified against all expenses and liabilities (including attorneys'
fees) incurred by them as a result of suits brought against them in their
capacity as a director or officer if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
Registrant and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful; provided that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the Registrant,
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, they are fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper. Any such indemnification may be made by the company only as authorized
in each specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct. Article Eleven of the Registrant's Certificate
of Incorporation and Section 6.5 of the Registrant's By-Laws entitles officers,
directors and controlling persons of the Registrant to indemnification to the
full extent permitted by Section 145 of the DGCL, as the same may be
supplemented or amended from time to time.
<PAGE>
Article Thirteen of the Registrant's Certificate of Incorporation provides
that no director shall have any personal liability to the Registrant or its
stockholders for any monetary damages for breach of fiduciary duty as a
director, provided that such provision does not limit or eliminate the liability
of any director (i) for breach of such director's duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (involving certain unlawful dividends or stock
repurchase) or (iv) for any transaction from which such director derived an
improper personal benefit. Amendment to such article does not affect the
liability of any director for any act or omission occurring prior to the
effective time of such amendment.
Reference is made to the Form of Indemnification Agreement between the
Registrant and its directors and officers filed as Exhibit 10.1 to this
Registration Statement pursuant to which the registrant has agreed to indemnify
such directors and officers to the fullest extent permitted by Delaware law, as
the same may be amended from time to time.
ITEM 16. EXHIBITS
Exhibits:
4.1 Certificate of Incorporation of the Company, as amended.
Incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1 (No. 33-28654) (the
"Registration Statement").
4.2 By-Laws of the Company, as amended. Incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1994 (the "1994 10-K").
5.1 Opinion of Shearman & Sterling.
10.1 Form of Indemnification Agreement between the Company and the
directors and officers of the Company. Incorporated by reference
to Exhibit 10.6 to the Registration Statement.
10.2 Agreement and Plan of Merger, dated as of December 23, 1996,
among the Company, Synternet Acquisition Corp., a wholly owned
subsidiary of the Company, Avicenna and the Selling Stockholders.
II-2
<PAGE>
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Emens, Kegler, Brown, Hill & Ritter Co., L.P.A.
23.3 Consent of Shearman & Sterling (included in Exhibit 5.1).
24.1 Powers of Attorney of the Registrant.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement, to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
herein and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
II-3
<PAGE>
persons of the Registrant pursuant to the provisions referred to in Item 20 of
this Registration Statement, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered hereby,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(d) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective, except where
the transaction in which the securities being offered pursuant to this
registration statement would itself qualify for an exemption from Section 5 of
the Securities Act of 1933, absent the existence of other similar (prior or
subsequent) transactions.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Synetic, Inc., a corporation organized and existing under the laws of the State
of Delaware, certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Borough of Elmwood Park, State of
New Jersey, on the 30th day of December, 1996.
SYNETIC, INC.
By /s/Victor L. Marrero
--------------------
Victor L. Marrero
Vice President--Finance and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* President and Chief Executive December 30, 1996
- ---------------------------- Officer; Director
James V. Manning
* Vice President--Technologies December 30, 1996
- ---------------------------- Group; Director
Ray E. Hannah
* Vice President--Finance and Chief December 30, 1996
- ---------------------------- Financial Officer (Principal
Victor L. Marrero Accounting and Financial Officer)
* Vice President--General Counsel; December 30, 1996
- ---------------------------- Director
Charles A. Mele
* Director December 30, 1996
- ----------------------------
Thomas R. Ferguson
* Director December 30, 1996
- ----------------------------
Mervyn L. Goldstein
* Director December 30, 1996
- ----------------------------
Roger H. Licht
* Director December 30, 1996
- ----------------------------
Per G. H. Lofberg
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director December 30, 1996
- ----------------------------
Herman Sarkowsky
* Director December 30, 1996
- ----------------------------
Paul C. Suthern
* Director December 30, 1996
- ----------------------------
Albert M. Weis
* Director December 30, 1996
- ----------------------------
Martin J. Wygod
*By /s/Victor L. Marrero December 30, 1996
--------------------
Victor L. Marrero
Attorney-in-fact
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Description of Document
- ------- -----------------------
4.1 Certificate of Incorporation of the Company,
as amended. Incorporated by reference to
Exhibit 3.1 to the Company's Registration
Statement on Form S-1 (No. 33-28654) (the
"Registration Statement")
4.2 By-Laws of the Company, as amended.
Incorporated by reference to Exhibit 3.2 to
the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994
(the "1994 10-K")
5.1** Opinion of Shearman & Sterling
10.1 Form of Indemnification Agreement between
the Company and the directors and officers of
the Company. Incorporated by reference to
Exhibit 10.6 to the Registration Statement
10.2** Agreement and Plan of Merger, dated as of
December 23, 1996, among the Company, Synternet
Acquisition Corp., a wholly owned subsidiary of
the Company, Avicenna and the Selling Stockholders
23.1* Consent of Arthur Andersen LLP
23.2* Consent of Emens, Kegler, Brown,
Hill & Ritter Co., L.P.A.
23.3** Consent of Shearman & Sterling
(included in Exhibit 5.1)
24.1** Powers of Attorney of the Registrant
- ----------
*Filed herewith.
**Filed previously.
<PAGE>
CONFORMED COPY
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Amendment No. 2 to the Registration Statement on Form S-3
(File No. 333-18771) of our report dated September 27, 1996 included in Synetic,
Inc.'s Form 10-K for the year ended June 30, 1996 and to all references to our
Firm included in this Amendment No. 2 to the Registration Statement.
/s/ ARTHUR ANDERSEN LLP
New York, New York
December 20, 1996
<PAGE>
CONFORMED COPY
EXHIBIT 23.2
CONSENT OF EMENS, KEGLER, BROWN, HILL & RITTER CO., L.P.A.
Dear Ladies and Gentlemen:
We hereby consent to the incorporation by reference into this
Amendment No. 2 to the Synetic, Inc. Registration Statement on Form S-3 (File
No. 333-18771) filed with the Securities and Exchange Commission, of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996. We
also consent to all references to our firm included in this Amendment No. 2 to
Registration Statement.
Columbus, Ohio
December 30, 1996
Very truly yours,
EMENS, KEGLER, BROWN,
HILL & RITTER CO., L.P.A.
By: /s/ Jack A. Bjerke
-----------------------------
Jack A. Bjerke, Vice President
