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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-18771
PROSPECTUS
254,147 SHARES
SYNETIC, INC.
Common Stock
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All of the 254,147 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 Corporation ("Avicenna") on December 24, 1996. See "The Company--
Healthcare Communications Business--Acquisitions" and "Selling Stockholders."
The Company issued 428,643 shares in connection with the Avicenna Acquisition,
of which 383,252 were originally offered by certain persons who received shares
of the Company issued in connection with the Avicenna Acquisition, including the
Selling Stockholders. Of the 383,252 shares originally offered, 129,105 shares
were sold by such persons as of September 26, 1997 and 254,147 are offered
hereby by the Selling Stockholders. See "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 of 1933, as amended (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 ("Nasdaq")
under the symbol "SNTC." On October 1, 1997, the closing price of the Common
Stock was $41 per share.
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THE OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
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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.
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The date of this Prospectus is October 3, 1997.
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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 ANTHONY VUOLO, VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER, 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.
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IF THE OFFERING IS UNDERWRITTEN, CERTAIN PERSONS PARTICIPATING
IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR
OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING OVER-ALLOTMENT,
STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE
IMPOSITION OF A PENALTY BID, DURING AND AFTER THE OFFERING. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
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 NASDAQ IN
ACCORDANCE WITH RULE 103 OF REGULATION M. 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 is required to file
electronic versions of these documents with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
The Commission maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with
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3
the Commission. In addition, the Company's Common Stock is quoted on Nasdaq.
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, 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 document has been filed with the Commission
(Commission file number 0-17822) pursuant to the Exchange Act and is hereby
incorporated by reference:
(i) The Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1997 (the "1997 10-K");
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 herein or 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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FORWARD-LOOKING INFORMATION
This Prospectus contains, under the captions "The
Company--Healthcare Communications Business--Business Strategy" and
"--Acquisitions," "The Company--Acquisition Program" and "Risk Factors--New
Business Area--Healthcare Communications," and elsewhere, 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
GENERAL
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.
Synetic, Inc. is engaged in two principal business activities,
plastics technologies and healthcare communications. 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.
Through its wholly owned subsidiary, Avicenna, the Company has directed its
efforts in a new area of business relating to the use of Internet 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.
PLASTICS TECHNOLOGIES BUSINESS
General
Porex designs, manufactures and distributes porous and solid
plastic components and products used in healthcare, industrial and consumer
applications. Porous plastics are permeable plastic structures having
omnidirectional (i.e., porous in all directions to the flow of fluids or gases)
interconnecting pores. Porous plastics are manufactured by Porex with pore sizes
between approximately 5 and 500 micrometers (one micrometer is equal to
one-millionth of a meter; an object of 40 micrometers in size is about as small
as can be discerned by the naked eye). Porous plastic materials can be molded
from several thermoplastic raw materials and are produced by Porex at its own
manufacturing facilities as fabricated devices, custom- molded shapes, sheets,
tubes or rods depending on application or manufacturer specifications. Porex
also purchases for resale through its distribution channels certain products
which are complementary to its manufactured product lines.
Healthcare Products
Porex's proprietary products for life sciences, clinical and
surgical applications include blood serum filters, blood tube closure devices,
pipette tips and a line of medical/surgical products designed primarily for use
in plastic and reconstructive surgery and maxillofacial surgery. Porex also
manufactures and sells a line of plastic vials and produces components made to
the specifications of original equipment manufacturers for incorporation into
their healthcare products.
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Porex's blood serum filters are used to separate microscopic
particles and fibrous matter (fibrin) from centrifuged blood serum to prevent
clogging of automated laboratory chemical analysis equipment. Porex also
manufactures a line of closure devices that are used with blood serum filters
and tubes. In response to health concerns regarding the handling of human blood,
new blood testing equipment has been developed by other companies which does not
require filtered blood serum for analysis, or which eliminates the need for
handling of blood serum by medical personnel. The use of such new equipment has
reduced the demand for Porex's current line of blood serum filters.
Porex produces a line of filtered and non-filtered pipette
tips which are used for dispensing fluids, primarily in industrial research
laboratories.
Porex's surgical products are marketed primarily to surgeons
who specialize in plastic and reconstructive surgery and maxillofacial surgery.
The product line includes MEDPOR(R) Surgical Implant material, which is
polymeric biomaterial used for craniofacial reconstruction and augmentation, and
TLS(R) Surgical Drainage Systems for small wound sites. Porex also markets
TLS(R) Surgical Marker pens to mark the areas of proposed surgical incision.
Porex manufactures MEDPOR(R) Surgical Implant material and distributes, and in
some cases assembles, the other items in its surgical product line.
Porex manufactures various porous plastic components that it
sells to other healthcare product manufacturers for incorporation into their
finished products. These porous plastics are used to vent or diffuse gases or
fluids and are used as membrane supports in other manufacturers' products. The
components include (i) disks used to support membranes, modules and other
filtration devices, (ii) a venting system for catheters which allows air to vent
from a catheter as it is inserted into a vein, while at the same time preventing
blood spillage and possible contamination of hospital personnel, (iii) a porous
disk used in pipette tips to prevent the fluid to be pipetted from passing into
the pipette instrument, and (iv) an oxygen diffuser, which is typically used in
oxygen therapy equipment to humidify oxygen.
Porex manufactures and sells a full line of plastic vials for
pharmaceuticals. Porex also produces close tolerance solid plastic components
which use most thermoplastic resins, but primarily polystyrene, polypropylene
and thermoplastic rubber for medical and industrial applications. These products
are custom designed and produced to satisfy individual customer specifications.
Industrial Products
Porex manufactures a variety of custom porous plastic
components for industrial applications. These components are produced as molded
shapes, and in sheets, tubes and rods, individually designed to customer
specifications as to size, rigidity, porosity and other needs.
Porex's industrial applications include (i) automotive
products, primarily porous plastic vents used in automobile batteries as a flame
arrester, (ii) wastewater treatment filter
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support media, (iii) filters to remove particulate matter, oil and water
residues from compressed air lines, (iv) silencers and mufflers to reduce sound
levels produced by compressed air exhaust, and (v) products for facilitating the
movement of powdered materials. Porex also manufactures a large variety of
highly specialized plastic components to meet specific applications for
manufacturers.
Consumer Products
Porex manufactures a line of porous plastic components used in
a variety of home and office products and appliances. Porex's consumer products
include a variety of writing pen tips or "nibs" which Porex supplies to
manufacturers of marking and highlighting pens. The porous nib conducts the ink
stored in the pen barrel to the writing surface by capillary action. Porex
produces a variety of porous plastic filters used in home water filters and
conditioners. The filters are used for particle and sediment removal through
devices attached to a sink or faucet. The Company also manufactures filters
incorporating activated carbon used to reduce chlorine levels in drinking water
thereby improving its taste and odor. Porex's porous plastic components are used
in health and beauty aid products (such as deodorant and fragrance applicators).
HEALTHCARE COMMUNICATIONS BUSINESS
Business Strategy
The Company's objective is to use Internet technology to
create an influential interactive health services channel linking physicians
with the payors, suppliers and consumers of healthcare in order to control
healthcare costs and improve patient outcomes. The Company expects to provide a
content-neutral, application rich utility thereby creating a channel which
serves as a conduit for the private content that any healthcare organization
wishes to communicate to physicians and other healthcare providers. There can be
no assurances given as to a specific time-frame for the Company's first
commercial introduction of its products and services. The Company anticipates
that it will incur significant expenses in connection with the development of
these products and services. The provision of products and services using
Internet technology in the healthcare communications industry is a developing
business. For a discussion of certain risks inherent in this developing
business, see "Risk Factors."
Key elements of the Company's strategy are to:
o Develop and deploy a low-cost service that provides
physicians access to a suite of communication,
information and transaction functions. This secure,
online network will offer physicians one solution to
their needs for (i) messaging services such as
electronic mail, discussion groups and forums; (ii)
information or content relevant to their practices
such as reference materials, medical databases and
payor-specific policies and procedures; and (iii)
transaction applications covering high volume,
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8
routine administrative, financial and clinical
transactions. This service is intended to enable
physicians to seek information and conduct
transactions in a uniform manner, for all patients,
the results of which should be to help physicians
practice medicine more efficiently in today's managed
care environment.
o Differentiate this suite of client server
applications by its ability to allow physicians and
their staffs to conduct not only administrative and
financial but also clinical transactions. These
transactions would include but not be limited to
prescription writing, drug utilization and formulary
review, eligibility verification, referrals,
treatment authorizations, claims and encounter
submissions, as well as laboratory test submission
and reporting, and pharmacy routing. The ability to
integrate payor-specific content such as benefit
rules and care guidelines with patient-specific
information at the time of treatment will
significantly enhance the delivery of high quality,
cost-effective care.
o Contract with managed care organizations, integrated
health delivery systems, pharmacy benefit managers
and clinical laboratories so that they might provide
physicians with access to their proprietary benefit
plan information and treatment guidelines as well as
their administrative and managed care processes. The
Company's management believes that this new channel
of communications will allow each of the parties to
(i) leverage their existing healthcare information
systems infrastructure, (ii) integrate their
proprietary rules and guidelines with transactions,
and (iii) realize administrative and medical resource
savings while improving provider relationships and
streamlining managed care processes. The Company
anticipates it will be compensated by such parties as
a result of the value created.
The Company is not aware of any business which currently
provides the scope and breadth of the services described above. However, various
companies including, but not limited to, certain physician office management
information systems companies, EDI/data networking companies, online medical
information service companies, and systems integration companies, some of which
may have greater resources than the Company, have announced that they are
developing a combination of one or more of these products and services. There
can be no assurance that such companies will not develop and successfully market
the healthcare communications products and services described herein in a manner
which would have a material adverse effect on the Company.
Acquisitions
The Company has completed two acquisitions which form the
foundation of its healthcare communications business. On December 24, 1996, the
Company acquired all of the
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9
outstanding equity and indebtedness (including stock options) of Avicenna, a
privately held development stage company located in Cambridge, Massachusetts,
for shares of Synetic Common Stock with a market value of $30.5 million at the
time of the acquisition. As additional consideration, the Company issued to
certain of the sellers nontransferable warrants covering 250,000 shares of
Synetic Common Stock, exercisable after December 23, 1998 at a price of $54.50
per share. On January 23, 1997, the Company acquired privately held CareAgents
for shares of Synetic Common Stock with a market value of $5 million at the time
of the acquisition. As of June 30, 1997, Avicenna and CareAgents have,
collectively, 68 employees.
During the fiscal year ended June 30, 1997, the Company
recorded a non-recurring charge of $37.4 million primarily relating to purchased
research and development costs in conjunction with its acquisitions of Avicenna
and CareAgents. Under generally accepted accounting principles, the amount of
purchase price allocable to purchased research and development costs is required
to be expensed immediately after the acquisition.
As a result of the acquisitions of Avicenna and CareAgents,
the Company expects to incur significant ongoing research and development
expenditures in connection with this new area of business. For the six months
ended June 30, 1997, such expenditures were approximately $5.0 million. There
can be no assurances that the products or services developed by the Company will
be successfully marketed.
The Company is pursuing the development of its healthcare
communications business through the use of its internal resources as well as
pursuing the acquisition of complementary businesses. The Company anticipates
that it may enter into acquisitions, joint ventures, strategic alliances or
other business combinations. These transactions may materially change the nature
and scope of this business. There can be no assurance that the Company will
succeed in consummating such transactions or that such transactions will
ultimately provide the Company with the ability to offer the products and
services described.
ACQUISITION PROGRAM
The Company maintains an acquisition program and intends to
concentrate its acquisition efforts in businesses which are complementary to the
Company's healthcare communications strategy. This emphasis, however, is not
intended to limit in any manner the Company's ability to pursue acquisition
opportunities in other healthcare-related businesses or in other industries. See
"--Healthcare Communications Business--Acquisitions" and "Risk
Factors--Acquisition Program."
CERTAIN CORPORATE HISTORY
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
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10
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 Martin J. Wygod, 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 contained in an
Investment Agreement between Mr. Wygod and the Company, dated as of September
13, 1994 (the "Investment Agreement"). The Investment Agreement also governs the
terms and conditions under which the Wygod Shares will be held by Mr. Wygod and
his permitted assigns and transferees. SN Investors has agreed to be bound by
all of the restrictions and obligations applicable to Mr. Wygod under the
Investment Agreement. The purchases of shares of Common Stock from Merck by the
Company and SN Investors are hereinafter referred to as the "Purchase." As a
result of the consummation of the Purchase, Mr. Wygod and SN Investors own an
aggregate of approximately 29.3% of the outstanding Common Stock as of September
15, 1997 and Merck no longer owns an equity interest in the Company. The shares
of Common Stock purchased by the Company are being held as treasury shares and
are no longer outstanding or entitled to vote.
The Investment Agreement provides that, until the earliest to
occur of December 14, 1998, the death or adjudication of incompetency of Mr.
Wygod or a Change of Control (as defined in the Investment Agreement) (the
"Restriction Period"), (a) Mr. Wygod and SN Investors are required to vote (or
cause to be voted) the Wygod Shares (i) with respect to election of directors,
for the nominees who would have been elected based on the vote of all shares of
Common Stock, other than the Wygod Shares, in proportion to the votes that such
nominees received, and (ii) on all other matters to come before the stockholders
of the Company, in the same manner as a majority of the outstanding shares of
Common Stock (other than the Wygod Shares) are voted and (b) except for sales
pursuant to a tender or exchange offer for the shares of Common Stock that is
not opposed by the Board of Directors of the Company, neither Mr. Wygod nor SN
Investors may transfer interests in the Wygod Shares (except that Mr. Wygod may
transfer interests in SN Investors to the extent otherwise permitted by the
Investment Agreement). A "Change of Control" under the Investment Agreement
includes (A) various types of business combinations or other extraordinary
transactions, (B) certain changes
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11
in the composition of a majority of the Board of Directors of the Company and
(C) the issuance by the Company following the closing of the Purchase of shares
of Common Stock constituting in the aggregate more than 50% of the shares of
Common Stock outstanding as of immediately following the closing of the
Purchase. As of September 15, 1997, the Company had issued 5,141,256 shares of
Common Stock since the closing of the Purchase. Accordingly, the issuance of an
aggregate of 1,113,599 additional shares of Common Stock would be a "Change of
Control" as described in clause (C) above. Upon the expiration of the
obligations of Mr. Wygod and SN Investors as described in this paragraph, Mr.
Wygod and SN Investors may be in a position to influence the election of the
Company's Board of Directors as well as the direction and future operations of
the Company.
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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 or incorporated by reference herein, in light of their particular
investment objectives and financial circumstances.
NEW BUSINESS AREA--HEALTHCARE COMMUNICATIONS
Initial Development Phase. The Company is in the initial
development phase of offering products and services to provide inter-enterprise
connectivity to payors and providers in the healthcare industry. The provision
of products and services using Internet technology in the healthcare
communications industry is a developing business. There can be no assurance as
to a specific time frame for the Company's first commercial introduction of its
products and services. The Company anticipates that it will incur significant
expenses in connection with the development of these products and services.
There can be no assurance that these products and services will be successfully
developed by the Company. Avicenna, the Company's first acquisition in this
area, has operated at a loss since its inception two years ago. CareAgents, the
Company's second acquisition in this area, founded in 1996, is a start-up
company with a very limited operating history. The Company is pursuing the
development of its healthcare communications business through the use of its
internal resources as well as pursuing the acquisition of complementary
businesses. The Company anticipates that it may enter into acquisitions, joint
ventures, strategic alliances or other business combinations. These transactions
may materially change the nature and scope of this business. There can be no
assurance that the Company will succeed in consummating such transactions or
that such transactions will ultimately provide the Company with the ability to
offer the products and services described.
Uncertainty of Market Acceptance. As is typical in a
developing business, demand and market acceptance for new and unproven products
and services are subject to a high level of uncertainty. Achieving market
acceptance for the Company's products and services will require substantial
marketing efforts and expenditure of significant funds to create awareness and
demand by participants in the healthcare industry. No assurances can be given
that the Company's effort in establishing such products and services will be
successful, that the Company will be able to succeed in positioning its services
as a preferred method for healthcare communications, that there will be
significant market acceptance for its products and services or that any pricing
strategy developed by the Company will be economically viable or acceptable to
the market.
Research and Development Expenses; Profitability. Synetic
expects to continue to incur significant research and development expenses in
connection with its healthcare communications business until the products and
services developed by the Company are successfully marketed. There can be no
assurance (i) that the products or services will be
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successfully marketed or (ii) as to when, and to what extent, if any, the
healthcare communications business of the Company will become profitable.
GOVERNMENT REGULATION OF HEALTHCARE
Participants in the healthcare industry are subject to
extensive and frequently changing regulation under numerous laws administered by
governmental entities at the federal, state and local levels. Many current laws
and regulations, when enacted, did not anticipate the methods of healthcare
communication under development by the Company. The Company believes, however,
that these laws and regulations will nonetheless be applied to the Company's
healthcare communications business. Accordingly, the Company's healthcare
communications business may be affected by current regulations as well as future
regulations specifically targeted to this new segment of the healthcare
industry.
Current laws and regulations which may affect the healthcare
communications business include (i) the regulation of confidential patient
medical record information, (ii) laws relating to the electronic transmission of
prescriptions from physicians' offices to pharmacies, (iii) regulations
governing the use of software applications in the diagnosis, cure, treatment,
mitigation or prevention of disease and (iv) laws or regulations relating to the
relationships between or among healthcare providers. In addition, physicians,
insurance companies, pharmacies and other participants in the healthcare
industry are subject to their own laws and regulations which may affect the
Company's healthcare communications business. The Company expects to conduct its
healthcare communications business in substantial compliance with all material
federal, state and local laws and regulations governing its operations. However,
the impact of regulatory developments in the healthcare industry is complex and
difficult to predict, and there can be no assurance that the Company will not be
materially adversely affected by existing or new regulatory requirements or
interpretations.
RELIANCE ON RAPIDLY CHANGING TECHNOLOGY
All businesses which rely on Internet technology, including
the healthcare communications business described herein, are subject to rapid
technological change, changing customer needs, frequent new product
introductions and evolving industry standards. In addition, as the
communications, computer and software industries continue to experience rapid
technological change, the Company must be able to quickly and successfully adapt
its products and services so that they adapt to such changes. There can be no
assurance that the Company will not experience difficulties that could delay or
prevent the successful development and introduction of its healthcare
communications products and services. The Company's inability to respond to
technological changes in a timely and cost-effective manner could have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, there can be no assurance that technologically
superior products and services will not be developed by competitors, or that any
such products and services will not have an adverse effect upon the Company's
operating results.
<PAGE>
14
COMPETITION IN HEALTHCARE COMMUNICATIONS
The Company is not aware of any business which currently
provides the scope and breadth of the healthcare communications products and
services currently being developed by the Company. However, various companies
including, but not limited to, certain physician office management information
systems companies, EDI/data networking companies, online medical information
service companies, and systems integration companies, some of which may have
greater resources than the Company, have announced that they are developing a
combination of one or more of these products and services. There can be no
assurance that such companies will not develop and successfully market the
healthcare communications products and services described herein in a manner
which would have a material adverse effect on the Company. See "The
Company--Healthcare Communications Business--Business Strategy."
RISKS OF PRODUCT DEVELOPMENT; PROPRIETARY RIGHTS
The Company's future success and ability to compete in the
healthcare communications business may be dependent in part upon its proprietary
rights to products and services which it develops. The Company may rely on a
combination of copyrights, trademarks and trade secrets and contractual
restrictions to protect its content and technology and on similar proprietary
rights of its content and technology providers. There can be no assurance that
the steps taken by the Company or such providers would be adequate to prevent
misappropriation of their respective proprietary rights or that the Company's
competitors will not independently develop content or technology that are
substantially equivalent or superior. In addition, there can be no assurance
that licenses for any intellectual property of third parties that might be
required for the Company's products or services would be available on
commercially reasonable terms or at all. Although the Company intends to take
steps to insure that it is not infringing the proprietary rights of any third
parties, there can be no assurance that patent infringement or other claims will
not be asserted against the Company or one of its content or technology
providers or that such claims will not be successful. The Company could incur
substantial costs and diversion of management resources with respect to the
defense of any such claims. Furthermore, parties making such claims against the
Company or a content or technology provider could secure a judgment awarding
substantial damages, as well as injunctive or other equitable relief which could
effectively block the Company's ability to provide products or services in
certain of its markets. Such a judgment could have a material adverse effect on
the Company's business, financial condition and results of operations.
<PAGE>
15
GOVERNMENT REGULATION OF POREX
Porex manufactures and distributes certain medical/surgical
devices, such as plastic and reconstructive surgical implants, which are subject
to government regulations, including approval procedures instituted by the Food
and Drug Administration. Future 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--Plastics Technologies Business--Regulation" in
the 1997 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 (as defined in
"The Company--General") 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. 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. See "--Certain Litigation." 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 "The Company--Plastics Technologies Business--Healthcare
Products" and "Legal Proceedings--Mammary Implant Litigation" in the 1997 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.
<PAGE>
16
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 September 10, 1997, 61 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 September 10, 1997, 225 actions
and 31 out-of-court claims were pending against Porex. Of the 225 actions, 108
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, 1997 was similar to the number
of claims made during the fiscal year ended June 30, 1996, both of which were
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 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
<PAGE>
17
Manufacturer. Pending the resolution of such disagreement, the Manufacturer has
been paying a portion of the costs of the settled claims.
ACQUISITION PROGRAM
The Company maintains an acquisition program and intends to
concentrate its acquisition efforts on businesses which are complementary to the
Company's healthcare communications strategy, but such emphasis is not intended
to limit in any manner the Company's ability to pursue acquisition opportunities
in other healthcare-related businesses or in other industries. The Company
anticipates that it may enter into acquisitions, joint ventures, strategic
alliances or other business combinations. These transactions may materially
change the nature and scope of the business. Any transactions will be limited,
as required by agreements to which the Company is a party, to areas of business
which would not be competitive with certain businesses of Merck & Co., Inc. and
its subsidiaries or with the Institutional Pharmacies Business (as defined in
"The Company--Certain Corporate History"). See "The Company--Certain Corporate
History" above and "Certain Relationships and Related Transactions" in the 1997
10-K. Although management of the Company will endeavor to evaluate the risks
inherent in any particular transaction, there can be no assurance that the
Company will properly ascertain all such risks. In addition, no assurances can
be given that the Company will succeed in consummating any such transactions,
that such transactions will ultimately provide the Company with the ability to
offer the products and services described or that the Company will be able to
successfully manage or integrate any resulting business.
The success of the Company's acquisition program will depend
on, among other things, the availability of suitable candidates, the
availability of funds to finance transactions, and the availability of
management resources to oversee the operation of resulting businesses. Financing
for such transactions 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. The
issuance of additional securities, including Common Stock, could (i) result in
substantial dilution of the percentage ownership of the stockholders of the
Company at the time of any such issuance, (ii) result in substantial dilution of
the Company's earnings per share and (iii) adversely affect the prevailing
market price for the Common Stock. The proceeds from any financing may be used
for costs associated with identifying and evaluating prospective candidates, and
for structuring, negotiating, financing and consummating any such transactions
and for other general corporate purposes. The Company does not intend to seek
stockholder approval for any such transaction or security issuance unless
required by applicable law or regulation. Although Mr. Martin J. Wygod, Chairman
of the Board of the Company, has indicated his intention to assist the Company
in its acquisition program by bringing opportunities for potential transactions
to the Company and to assist the Company in negotiating such transactions and in
seeking financing in the event any such transaction 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.
See "The Company--Acquisition Program."
<PAGE>
18
SHARES AVAILABLE FOR FUTURE SALE
The 5,061,857 Wygod Shares (as defined in "The
Company--Certain Corporate History") 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 holding period
has expired. In addition, as more fully set forth in "Certain Relationships and
Related Transactions" in the 1997 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 "The Company--Certain Corporate History"
and "Shares Eligible for Future Sale."
As of September 15, 1997, the Company has reserved an
aggregate of 8,273,444 shares of Common Stock for issuance pursuant to stock
option agreements and stock option plans 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.
In February 1997, the Company sold in the aggregate $165
million principal amount of 5% Convertible Subordinated Debentures due 2007 (the
"Debentures") in a public offering. The Debentures are convertible, at the
option of the holder, at any time prior to maturity, unless previously redeemed
or repurchased, into shares of Common Stock at a conversion price of $60 per
share of Common Stock (equivalent to a conversion rate of 16.667 shares per
$1,000 principal amount of Debentures), subject to adjustment in certain events.
The Company may be caused to issue 2,750,000 additional shares upon the
conversion of the outstanding Debentures at their stated conversion price. The
Company is unable to predict the effect, if any, that the conversion of the
Debentures into shares of Common Stock will have on the market price for the
Common Stock prevailing from time to time. See "Description of Capital
Stock--Debentures."
CERTAIN ANTITAKEOVER EFFECTS
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. See "Description of
Capital Stock--Common Stock." In addition, the requirement that the Company
repurchase the Debentures, at the option of the holder, upon the occurrence of a
designated event may, in certain circumstances, make more difficult or
discourage a takeover of the Company. See "Description of Capital
Stock--Debentures."
<PAGE>
19
USE OF PROCEEDS
The Company will receive no proceeds from the sale of Shares
by the Selling Stockholders.
<PAGE>
20
CAPITALIZATION
The following table sets forth the capitalization of the Company at
June 30, 1997.
<TABLE>
<CAPTION>
AT
JUNE 30, 1997
--------------
(IN THOUSANDS)
<S> <C>
Cash and marketable securities(1)...................................................... $ 315,828
=======
Long-term debt:
5% Convertible Subordinated Debentures due 2007.............................. $ 165,000
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized; none
issued........................................................................ --
-------
Common stock, $.01 par value, 50,000,000 shares authorized;
22,865,149 shares issued; 17,564,980 shares issued and outstanding (2)........ 229
Additional paid-in capital.................................................... 196,212
Treasury Stock, at cost; 5,300,169 shares..................................... (39,462)
Retained earnings............................................................. 31,757
--------
Total stockholders' equity................................................ 188,736
-------
Total capitalization........................................ $ 353,736
========
</TABLE>
- ----------------
(1) Includes as of June 30, 1997 cash and cash equivalents and short- and
long-term marketable securities.
(2) Does not include at June 30, 1997 (i) an aggregate of 8,358,045 shares
reserved for issuance pursuant to certain stock option agreements and
stock option plans, (ii) 250,000 Shares reserved for issuance upon
exercise of warrants issued in connection with the acquisition of Avicenna
and (iii) 2,750,000 shares reserved for issuance upon conversion of the
Debentures. See "Description of Capital Stock--Debentures."
<PAGE>
21
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, 1997 has been derived from the Consolidated Financial
Statements of the Company, which have been audited by Arthur Andersen LLP,
independent accountants. Such information should be read in conjunction with the
Consolidated Financial Statements of the Company and the related notes thereto
included in the 1997 10-K that is incorporated by reference into this
Prospectus. The selected financial data for the three years in the period ended
June 30, 1995 have been restated to reflect the Divestiture as described in "The
Company--Certain Corporate History." See "Certain Relationships and Related
Transactions" in the 1997 10-K.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(IN THOUSAND, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales................................... $ 30,645 $ 33,093 $ 39,179 $ 45,128 $ 52,885
Income (loss) from continuing
operations before
provisions for income taxes........ 5,430 1,080 1,078 13,202 (24,626)
Provision for income taxes.................. 2,046 411 443 4,617 2,834
---------- ---------- ----------- ----------- -----------
Income (loss) from continuing operations.... 3,384 669(1) 635(2) 8,585 (27,460)(3)
Income from discontinued operations......... 2,734 1,823 15,459 -- --
---------- ---------- ----------- ----------- -----------
Net income (loss)........................... $ 6,118 $ 2,492 $ 16,094 $ 8,585 $ (27,460)
========== ========== =========== =========== ===========
Net income (loss) per share:
Continuing operations.............. $ 0.19 $ 0.04(1) $ 0.04(2) $ 0.48 $ (1.60)(3)
Discontinued operations............ 0.16 0.10 0.89 -- --
---------- ---------- ----------- ----------- -----------
Net income (loss) per share................. $ 0.35 $ 0.14 $ 0.93 $ 0.48 $ (1.60)
========== ========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30,
---------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital............................. $ 65,673 $ 64,625 $105,279 $ 166,328 $93,309
Net assets of discontinued operations....... 52,548 55,882 -- -- --
Total assets................................ 189,494 194,009 188,174 199,592 382,103
Long term debt, less current portion........ 81,058 80,716 -- -- 165,000
Stockholders' equity(4)..................... 102,378 105,130 166,832 181,089 188,736
</TABLE>
- -------------------
(1) Includes a non-recurring charge of $(372) or $(.02) per share related
to one-time payments made to certain executive officers in conjunction
with the acquisition of the Company's former parent.
(2) Includes (i) a non-recurring charge of $(3,683) or $(.21) per share
primarily related to the award of stock options to certain officers in
connection with the completion of the sale of the institutional
pharmacy business and the purchase of the shares of Company stock owned
by Merck & Co. and (ii) a non-recurring charge of $(1,049) or $(.06)
per share, related to the conversion and redemption of the Company's 7%
Convertible Subordinated Debentures due 2001 in February 1995. See "The
Company--Certain Corporate History."
(3) Includes a non-recurring charge of $(35,583) primarily relating to
purchased research and development costs in conjunction with the
acquisitions of Avicenna and CareAgents. See "The Company--Healthcare
Communications Business--Acquisitions." Excluding the effects of this
non-recurring charge, net income per share was $.43.
(4) No cash dividends were declared by the Company during the periods
presented above.
<PAGE>
22
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 September 26, 1997 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. Information
as to the number of shares beneficially owned as of September 26, 1997 by the
Selling Stockholders was obtained from information provided by Registrar and
Transfer Company, the Transfer Agent for the Common Stock, and the Selling
Stockholders. 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 Offered" 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 "The Company--Healthcare Communications Business--
Acquisitions." The Company issued 428,643 shares in connection with the Avicenna
Acquisition, of which 383,252 were originally offered by certain persons who
received shares of the Company issued in connection with the Avicenna
Acquisition, including the Selling Stockholders. Of the 383,252 shares
originally offered, 129,105 shares were sold by such persons as of September 26,
1997 and 254,147 are offered hereby by the Selling Stockholders.
<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) ............................. 45,391 * 0 45,391 *
Advanced Technology
Ventures IV, L.P.(2) ........................... 70,800 * 70,800 0 0
Delphi Venture III, L.P.(3)....................... 94,302 * 94,302 0 0
Delphi BioInvestments III, 1,698 * 1,698 0 0
L.P.(4).........................................
Nazem & Company(5)................................ 81,300 * 81,300 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>
- -------------------
* 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. 70,800 shares held in
the name of Advanced
<PAGE>
23
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. 94,302 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. 1,698 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. 81,300 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.
<PAGE>
24
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 Nasdaq. 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 Nasdaq 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, during and
after the offering, the Underwriters may purchase and sell the Common Stock in
the open market. These transactions may include over-allotment and stabilizing
transactions and purchases to cover syndicate short positions created in
connection with the offering. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-dealers
in respect of the Common Stock sold in the offering for their account may be
reclaimed by the syndicate if such securities are repurchased by the syndicate
in stabilizing or
<PAGE>
25
covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Common Stock which may be higher than the price
that might otherwise prevail in the open market. These transactions may be
effected on Nasdaq, in the over-the-counter market or otherwise, and these
activities, if commenced, may be discontinued at any time.
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 Common Stock in accordance with Rule 103 of
Regulation M under the Securities Exchange Act of 1934. In general, a passive
market maker may not bid for or purchase the Common Stock at a price that
exceeds the highest independent bid. In addition, the net daily purchases made
by any passive market maker generally may not exceed 30% of its average daily
trading volume in the Common Stock during a specified two month prior period, or
200 shares, whichever is greater. Passive market making transactions must be
displayed on the Nasdaq electronic inter-dealer reporting system. Passive market
making may stabilize or maintain the market price of the Common Stock above
independent market levels. Underwriters and selling group members (if any) are
not required to engage in passive market making and may end passive market
making activities 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>
26
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 1997 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 September 15, 1997, there were 17,650,965
shares of Common Stock outstanding, including 428,643 shares the Company issued
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>
27
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 10
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 outstanding voting stock. See "Certain
Relationships and Related Transactions" in the 1997 10- K for a description of
voting restrictions on shares held by SN Investors.
<PAGE>
28
DEBENTURES
The Company has issued and outstanding $165 million aggregate
principal amount of Debentures due February 15, 2007. The Debentures are general
unsecured obligations of the Company, subordinate in right of payment to certain
other obligations of the Company, and convertible, at the option of the holder,
at any time prior to maturity, unless previously redeemed or repurchased, into
Common Stock of the Company at a conversion price of $60 per share of Common
Stock (equivalent to a conversion rate of 16.667 shares per $1,000 principal
amount of Debentures), subject to adjustment in certain events as set forth in
the Indenture dated as of February 15, 1997 (the "Indenture"), between the
Company and United States Trust Company of New York, as trustee.
The Debentures bear interest from the date of initial
issuance, February 20, 1997, at 5% per annum, payable semiannually on August 15
and February 15 of each year commencing August 15, 1997. The Debentures will be
redeemable at any time on or after February 15, 2000 at the option of the
Company, in whole or in part, at specified redemption prices plus accrued and
unpaid interest.
The Indenture contains no limitation on the amount of
indebtedness that may be incurred by the Company and its subsidiaries. The
Debentures are required to be repurchased at the option of the holder upon the
consummation of a purchase, merger, acquisition, transfer or other transaction
involving a "Change of Control" (as defined in the Indenture) at 100% of the
principal amount thereof plus accrued and unpaid interest.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is
Registrar & Transfer Company.
<PAGE>
29
SHARES ELIGIBLE FOR FUTURE SALE
As of September 15, 1997, the Company had 17,650,965 shares of
Common Stock outstanding. The 5,061,857 Wygod Shares (as defined in "The
Company--Certain Corporate History") are "restricted securities" within the
meaning of Rule 144, subject to the volume restrictions of Rule 144 but for
which the holding period has expired. Additionally, 45,390 shares issued in
connection with the Avicenna Acquisition and all 106,029 shares issued in
connection with the acquisition of CareAgents are subject to a contractual
restriction on their sale ending on December 23, 1998, in the case of the 45,390
shares issued in connection with the Avicenna acquisition, and January 23, 1999,
in the case of the 106,029 shares issued in connection with the acquisition of
Care Agents. Of the outstanding shares as of September 15, 1997, the 12,589,108
shares not owned by SN Investors are freely tradeable 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. 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 1997 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 (as more fully
described in "Certain Relationships and Related Transactions" in the 1997 10-K),
provides certain demand registration rights to Mr. Wygod at Mr. Wygod's expense,
which are assignable to any permitted transferee of the 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.
<PAGE>
30
For information concerning shares which may be issued under
the Company's stock option plans and the conversion of outstanding Debentures,
see "Risk Factors--Shares Available for Future Sale."
<PAGE>
31
LEGAL MATTERS
Certain legal matters with respect to the legality of the
issuance of the Common Stock offered hereby were 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--Government Regulation of Porex" in this Prospectus and under the
caption "Business--Plastics Technologies Business--Regulation" in the Company's
1997 10-K, incorporated by reference herein, are based upon the opinion of
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>
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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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 3
Forward-Looking Information................................................ 4
The Company................................................................ 5
Risk Factors............................................................... 12
Use of Proceeds............................................................ 19
Capitalization............................................................. 20
Selected Financial Data.................................................... 21
Selling Stockholders....................................................... 22
Plan of Distribution....................................................... 24
Description of Capital Stock............................................... 26
Shares Eligible for Future Sale.............................................29
Legal Matters.............................................................. 31
Experts .................................................................. 31
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</TABLE>
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254,147 Shares
SYNETIC, INC.
Common Stock
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PROSPECTUS
____________
October 3, 1997
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