SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. _____)
FILED BY THE REGISTRANT [ X ]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
[X] Definitive Proxy Statement ONLY (AS PERMITTED BY RULE 14A-6(E) (2)
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
LIFEMARK CORPORATION
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) or
item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
______________________________________________________________________
2) Aggregate number of securities to which transaction applies:
______________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
______________________________________________________________________
4) Proposed maximum aggregate value of transaction:
______________________________________________________________________
5) Total fee paid:
______________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
______________________________________________________________________
2) Form, Schedule or Registration Statement No.:
______________________________________________________________________
3) Filing Party:
______________________________________________________________________
4) Date Filed:
______________________________________________________________________
<PAGE>
LIFEMARK CORPORATION
(FORMERLY MANAGED CARE SOLUTIONS, INC.)
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
SEPTEMBER 13, 1999
You are cordially invited to attend the Annual Meeting of Stockholders of
Lifemark Corporation (the "Company" or "Lifemark"), formerly Managed Care
Solutions, Inc., which will be held at the Lifemark corporate offices located at
7600 North 16th Street, Suite 150, Phoenix, Arizona on Monday,
September 13, 1999, at 4:00 p.m., Mountain Time, for the following purposes:
1. To elect directors; and
2. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on August 23, 1999
are entitled to vote at the Annual Meeting or any adjournment thereof.
A Proxy Statement and a proxy card solicited by the Board of Directors are
enclosed herewith. The Proxy Statement should be read carefully. It is important
that your shares be represented at the Annual Meeting regardless of the size of
your holdings. Whether or not you intend to be present at the meeting in person,
we urge you to please mark, date and sign the enclosed proxy card and return it
in the envelope provided for that purpose, which does not require postage if
mailed in the United States. If you attend the meeting, you may, if you wish,
withdraw your proxy and vote in person.
/s/ Stephen G. Smyth
---------------------------------
Stephen G. Smyth
SECRETARY
Phoenix, Arizona
August 24, 1999
<PAGE>
LIFEMARK CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 13, 1999
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Lifemark Corporation (the "Company" or "Lifemark"),
formerly Managed Care Solutions, Inc., of proxies for use at the Annual Meeting
of Stockholders of the Company to be held at the Lifemark corporate offices
located at 7600 North 16th Street, Suite 150, Phoenix, Arizona on Monday,
September 13, 1999, at 4:00 p.m., Mountain Time, and at any adjournment thereof.
Proxies properly executed and returned in a timely manner will be voted at
the Annual Meeting in accordance with the directions specified therein. If no
direction is indicated, they will be voted for the election of the nominees
named herein as directors and on other matters properly presented for a vote, in
accordance with the judgment of the persons acting under the proxies. Any
stockholder giving a proxy has the power to revoke it any time before it is
voted, either in person at the meeting, by written notice to the Secretary of
the Company, or by delivery of a later-dated proxy.
The Company's executive offices are located at 7600 North 16th Street,
Suite 150, Phoenix, Arizona 85020 and its telephone number is 602-331-5100.
Proxy materials are being mailed to stockholders beginning on or about
August 24, 1999.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on August 23, 1999,
are entitled to vote at the Annual Meeting. The only voting stock of the Company
outstanding is its Common Stock, of which 4,808,068 shares were outstanding at
the close of business on August 18, 1999. Each share of Common Stock issued and
outstanding is entitled to one vote. The six nominees for director receiving the
most votes will be elected as directors; abstentions and broker non-votes will
have no effect on the election of directors. Votes will be tabulated, using an
automated scanner, by the inspectors of election appointed by the Company.
3
<PAGE>
COMMON STOCK OWNERSHIP BY MANAGEMENT
The following table sets forth, as of June 30, 1999, certain information
regarding the beneficial ownership of Common Stock by each of the Company's
directors, executive officers named in the "Summary Compensation Table", and by
all directors and executive officers of the Company as a group, and by each
person known by the Company to be the beneficial owner of 5 percent or more of
the outstanding Common Stock.
SHARES PERCENT OF
NAME(1) BENEFICIALLY OWNED COMMON STOCK
------- ------------------ ------------
Rhonda E. Brede..................... 68,345 (2) 1.3%
James A. Burns...................... 175,500 (3) 3.5%
William G. Brown.................... 157,932 (2)(5) 3.0%
Rogers K. Coleman................... -- *
Richard C. Jelinek.................. 726,320 (2)(4)(5) 14.1%
Henry H. Kaldenbaugh................ 575,204 (2) 11.3%
Risa Lavizzo-Mourey................. 26,365 (2) *
John G. Lingenfelter................ 479,919 (2) 9.4%
Michael J. Kennedy.................. 87,769 (2) 1.7%
Michael D. Hernandez................ 100,000 (2) 2.0%
Hollybank Investments, LP........... 607,947 (6) 12.0%
Blue Cross and Blue Shield of Texas,
Inc. 879,221 (7) 14.8%
All directors and executive officers
as a group (10 persons)........... 2,231,510 (2)(5) 41.7%
*Represents less than 1% of Common Stock beneficially owned.
(1) The address of all of the persons named or identified above, except
Hollybank Investments, LP, Blue Cross and Blue Shield of Texas, Inc. and
James Burns, is c/o Lifemark Corporation, 7600 North 16th Street, Suite 150,
Phoenix, Arizona 85020.
(2) Includes 32,500, 3,750, 3,750, 13,750, 41,250, 18,750, 65,250, 100,000, and
269,000 shares covered by options and/or warrants held by Ms. Brede,
Dr. Kaldenbaugh, Dr. Lingenfelter, Mr. Jelinek, Mr. Brown,
Dr. Lavizzo-Mourey, Mr. Kennedy, Mr. Hernandez, and all directors and
officers as a group, respectively, which were exercisable within sixty days
of June 30, 1999. Such persons disclaim beneficial ownership of such shares.
(3) The address of James A. Burns is 75-5814 Neke Place, Kailua-Kona, Hawaii
96740.
(4) Includes 25,333 shares owned by Mr. Jelinek's wife.
(5) Includes 77,922 shares which may be acquired upon conversion of $300,000 in
principal amount of a Convertible Note of the Company and 10,000 shares
covered by a currently exercisable stock purchase warrant. Both the
Convertible Note and Stock Purchase Warrant are held by a trust created by
Mr. Brown for the benefit of members of his family, of which Mr. Jelinek is
one of the co-trustees.
(6) Represents shares as of June 23, 1999, as reported on Schedule 13D.
Hollybank Investments, LP disclaims beneficial ownership with respect to all
of the shares for all purposes other than for reporting purposes on Schedule
13D. The address of Hollybank Investments, LP is One Financial Center, Suite
1600, Boston, Massachusetts, 02111.
(7) Represents 779,221 shares which may be acquired upon conversion of
$3,000,000 in principal amount of a Convertible Secured Note of the Company
and 100,000 shares covered by a currently exercisable stock purchase
warrant. The address of Blue Cross and Blue Shield of Texas, Inc. ("BCBSTX")
is 901 S. Central Expressway, Richardson, Texas 75080.
4
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
John Lingenfelter failed to timely file a Form 5 with respect to 20
transactions in which he gifted a certain number of shares of Common Stock and
changed the form of ownership of certain other Common Stock.
ELECTION OF DIRECTORS
Six directors are to be elected at the Annual Meeting. The persons named
below have been designated by the Board of Directors as nominees for election as
directors, for terms expiring at the next Annual Meeting of Stockholders. All
nominees are currently serving as directors.
Unless authority is withheld, signed proxies which are returned in a
timely manner will be voted for the election of the six nominees for director,
provided that if any of such nominees should be unable to serve by virtue of an
unexpected occurrence, the proxies will be voted for such other person or
persons as will be determined by the holders of the proxies in their discretion.
Nominees receiving a plurality of the votes of the shares present or represented
by proxy at the Annual Meeting and entitled to vote will be elected as
directors.
Biographical information concerning the six nominees is presented below.
Rhonda Brede, age 42, has been President, Chief Operating Officer and a
director of the Company since July 1999. Previously, she was Lifemark's Senior
Vice President of Health Plan Administration and Implementation with
responsibility for all of the Company's owned and managed health plan
operations. She also has been the Chief Executive Officer of Ventana Health
Systems, Inc. ("Ventana") and Arizona Health Concepts, Inc. ("AHC") since 1998
and Senior Vice President of the Company since 1996. During the period 1993 to
1996, she was Executive Director for Ventana. Ms. Brede has been involved in
management and operations of Ventana, a prepaid, fully capitated LTC health plan
since its inception in 1989. She has 13 years of experience in managed health
care, including commercial, Medicaid Acute Care and Long-Term Care ("LTC")
environments.
Richard C. Jelinek, age 62, Chairman of the Board of the Company, was
co-founder of a predecessor of Medicus Systems Corporation in 1969 and served as
Chief Executive Officer and Director of these corporations (the "Predecessor
Corporation") from its incorporation in December 1984 until February 1996 and of
the Company since March 1996. From 1983 to 1985 he was also Chairman of the
Board and Chief Executive Officer of Mediflex Systems Corporation. Prior to
1969, Mr. Jelinek was Associate Professor of Industrial Engineering and Hospital
Administration and Director, Systems Engineering Group, Bureau of Hospital
Administration at The University of Michigan. He has a Ph.D. in Industrial
Engineering from The University of Michigan.
William G. Brown, age 56, is a partner of Bell, Boyd & Lloyd, Chicago,
Illinois, counsel to the Company, and has been a director of the Predecessor
Corporation since its incorporation in 1984 and of the Company since March 1996.
Mr. Brown also served as Secretary of the Predecessor Corporation since its
incorporation and of the Company from March 1996 until October 1998. Mr. Brown
is also a director of MYR Group, Inc., Dovenmuehle Mortgage, Inc. and CFC
International, Inc.
Risa Lavizzo-Mourey, M.D., age 45, is the Sylvan Eisman Professor of
Medicine and Health Care Systems at the University of Pennsylvania.
Dr. Lavizzo-Mourey earned her medical degree at Harvard Medical School followed
by a Masters of Business Administration at the University of Pennsylvania's
Wharton School. Dr. Lavizzo-Mourey has served on numerous Federal advisory
committees and, most recently, on President Clinton's Commission for Consumer
Protection and Quality in the Health Care Industry. She is a member of the
Institute of Medicine of the National Academy of Science. Dr. Lavizzo-Mourey
joined the Predecessor Corporation Board in April 1994 and has served as a
director of the Company since March 1996. She is also a director of Beverly
Enterprises and The Hangar Orthopedics Inc.
5
<PAGE>
Henry H. Kaldenbaugh, M.D., age 54, is a founder of two subsidiaries of
the Company, Ventana and AHC, as well as Managed Care Solutions of Arizona, Inc.
("MCSAZ"), which was dissolved June 1997, and has been a director of the Company
since March 1996. He has been an officer and board member of Ventana and AHC
since their inception and of MCSAZ from 1993 to 1997. He has had a family
medicine and pediatric practice in northern Arizona since 1977. Dr. Kaldenbaugh
is board certified in pediatrics and quality assurance and utilization and
review. Dr. Kaldenbaugh served as medical director of AHC from 1992 through 1997
and has been an officer or director of AHC, Ventana and MCSAZ (until its
dissolution) since their inception. He served as Administrative Medical Director
for Health Management Associates, Inc. from 1990 through 1991, for Northern
Arizona Family Health Plan from 1988 through 1991, and for the Arbors Nursing
Facility from 1984 through 1987. Dr. Kaldenbaugh received his medical degree
from Baylor University.
John G. Lingenfelter, M.D., age 71, is the Vice Chairman of the Company
and a founder of AHC, Ventana and MCSAZ. He has been a director of the Company
since March 1996, and has been an officer and board member of Ventana and AHC
since their inception and of MCSAZ from 1993 to 1997. Dr. Lingenfelter has
engaged in the general practice of medicine in Kingman, Arizona since 1961. He
served as Mohave County, Arizona Health Director from 1966 through 1982 and
Medical Director of the Kingman Health Care Center from 1985 to 1995. He has
been serving as Mohave County Hospital District Board Trustee since 1988 to
present. He was a member of the Mohave County board of education and past
President of the Mohave County Union High School District from 1979 to 1986. He
has been a director since 1980 of The Stockmen's Bank, Kingman, Arizona.
Dr. Lingenfelter received his medical degree from the University of Iowa.
MEETINGS AND COMMITTEES OF THE BOARD
During the fiscal year ended May 31, 1999, the Board of Directors held
four meetings. No director attended fewer than three-fourths of the aggregate
number of meetings of the Board and of the committees described below on which
he or she served during the past fiscal year. The Board has designated an Audit
Committee, whose functions include making recommendations to the Board on the
selection and retention of the Company's auditors, a Compensation Committee,
whose functions include making recommendations to the Board regarding the
salaries and bonuses to be paid, and a Stock Option Committee, whose functions
include granting options under, and administering, the Company's stock option
plans. William Brown and Henry Kaldenbaugh are currently the members of the
Audit Committee; Richard Jelinek, Mr. Brown and Dr. Risa Lavizzo-Mourey are
currently the members of the Compensation Committee; and Mr. Jelinek and
Dr. Lavizzo-Mourey are currently the members of the Stock Option Committee.
During the fiscal year ended May 31, 1999, the Audit Committee met three times,
the Compensation Committee met one time and the Stock Option Committee met
two times.
6
<PAGE>
COMPENSATION
Set forth below is information concerning the executive officers of the
Company as of May 31, 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- AWARDS
------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
POSITION (1) YEAR ($) ($) ($) (#) ($) (2)
- ------------------ ------ ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Hernandez (3)
Former Chairman and
Chief Executive Officer 1999 200,000 25,000 - - -
1998 78,030 25,000 - 400,000 -
James A. Burns
Vice Chairman, President
and Chief Operating Officer 1999 40,465 37,000 253,823 (4) - 3,724
1998 175,000 - - - 10,987
1997 164,792 - - - 8,955
Michael J. Kennedy
Chief Financial Officer 1999 143,125 47,125 - - 3,978
1998 136,000 32,500 28,016 (5) - 3,284
1997 125,000 - 31,809 (5) 87,000 1,458
</TABLE>
(1) Includes each person who served as the Chief Executive Officer during the
most recent fiscal year and the other most highly compensated executive
officers as measured by salary and bonus meeting the disclosure threshold
requirements pursuant to Item 402 of S.E.C. Regulation S-K.
(2) The amounts shown for Mr. Burns for fiscal 1999 represents officer's life
insurance of $665, auto allowance of $1,300 and computer equipment of
$1,759. The amount shown for Mr. Kennedy for fiscal year 1999 includes
officer's disability insurance of $598. The Company has a contributory
retirement savings plan, which covers eligible employees who qualify as to
age and length of service. Participants may contribute 1% to 15% of their
salaries, subject to maximum contribution limitations imposed by the
Internal Revenue Service. The amount shown for Mr. Kennedy for fiscal year
1999 include Company contributions to his account in the amount of $3,380.
(3) Mr. Hernandez was relieved of his duties as Chairman and Chief Executive
Officer of the Company on July 15, 1999. Pursuant to his employment
contract, 200,000 options were cancelled on July 15, 1999 and 200,000 of
his options are exercisable on or before December 12, 1999.
(4) The amount shown for Mr. Burns represents a severance payment of $169,823
and payments in excess of the fair market value for 75,000 shares
purchased by the Company from Mr. Burns of $84,000 during fiscal year
1999.
(5) The amount shown for Mr. Kennedy in each year represents moving expense
related reimbursement.
7
<PAGE>
OPTION / SAR GRANTS TABLE
The Company did not make any grants to named executives during fiscal
1999.
<TABLE>
<CAPTION>
OPTION / SAR EXERCISES AND YEAR-END VALUATION
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
---------------------------------------------------
AND FY END OPTION/SAR VALUES
----------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
OPTIONS/SARS AT FY-END SARS AT FY-END
SHARES ACQUIRED VALUE
ON EXERCISE (1) REALIZED (2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME(#) ($) (#) (#) ($) ($) ($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Hernandez - - 100,000 300,000 - -
James A. Burns 75,000 46,875 - - - -
Michael J. Kennedy - - 65,250 21,750 48,938 16,313
</TABLE>
(1) Number of securities underlying options/SAR exercised.
(2) Market value of underlying securities on date of exercise, minus the
exercise or base price.
DIRECTOR COMPENSATION
All directors of the Company are paid an annual retainer of $10,000. In
addition, under the Company's 1995 Directors' Stock Option Plan, an option to
purchase 20,000 shares of Common Stock is granted to each director of the
Company who is not an officer, employee or greater than five percent stockholder
of the Company at the time of such director's initial election to the Board.
Under the Company's 1996 Non-Employee Director Stock Option Plan, each
non-employee director of the Company receives, on the date of each annual
meeting of stockholders, an option to purchase 5,000 shares of Common Stock.
Options under each of the 1995 Directors' Stock Option Plan and the 1996
Non-Employee Director Stock Option Plan are for a term of ten years, become
exercisable with respect to 25% of the shares covered thereby on each of the
first four anniversaries of the date of grant and have an exercise price equal
to the fair market value on the date of grant.
EMPLOYMENT AGREEMENTS
The Company is a party to an employment agreement with
Michael D. Hernandez providing for his employment as Chairman and
Chief Executive Officer of the Company. Mr. Hernandez was relieved of his duties
as Chairman and Chief Executive Officer of the Company and each of its
subsidiaries on July 15, 1999. The agreement, which was entered into on
January 1998 and had an initial term of four years, provided that during
Mr. Hernandez's employment, he was to receive an annual salary of not less than
$200,000, was eligible to participate in the Company's bonus plan with a
targeted bonus of 25% of his base salary in accordance with the Company's
customary practices and formulae, and was to devote not less than 75% of his
full time to the business and affairs of the Company. Upon execution of this
employment agreement, Mr. Hernandez received a signing bonus of $25,000.
Mr. Hernandez also received options to purchase 400,000 shares of the Company's
Common Stock, subject to vesting in four equal increments of 25% on
January 12, 1999, 2000, 2001 and 2002. In the event of a change in control of
the Company, all of Mr. Hernandez's outstanding options would vest and become
exercisable on the date of the change in control. The Company agreed that if
Mr. Hernandez's employment was terminated by the Company other than for cause
or, without his consent, the Company reduced his base salary or targeted
bonus opportunity, materially changed his duties or responsibilities or
changed the location of his principal place of work, and as a result of such
change or changes he voluntarily terminated his employment, then, in either
event, the 25% of Mr. Hernandez's outstanding options scheduled to vest on the
next January 12 would vest and become exercisable on the date of termination of
his employment, and he would be entitled to receive his base salary for a
period of 12 months following notice of termination, as well as a pro rata
bonus.
8
<PAGE>
On March 1, 1996, the Company entered into an employment agreement with
Mr. Burns. The agreement provided that he would receive a salary of at least
$175,000 annually, and that if his employment was terminated by the Company
(other than for cause), he would receive severance payments at the rate of
$175,000 annually (i) until March 1, 1999, in the event of termination prior to
March 1, 1998; (ii) for a period of one year if termination occurred between
March 1, 1998 and March 1, 1999; (iii) until March 1, 2000 if termination
occurred between March 1, 1999 and September 1, 1999; and (iv) for a period of
six months if termination occurred after September 1, 1999. Mr. Burns'
employment agreement further provided that in no event would severance pay
exceed six months if at the time of termination the Company had not had net
income after taxes during the preceding 12 months of at least $1,000,000. The
agreement also provided for the grant of options to purchase 150,000 shares of
Common Stock. Effective August 1, 1998, Mr. Burns resigned as an officer and
director of the Company and each of its subsidiaries. Pursuant to the terms of
his separation agreement, Mr. Burns was paid $37,000 as a bonus for fiscal year
1998 and an aggregate of $169,823 as severance payments during the 12 months
ended July 31, 1999. The remaining 75,000 unvested stock options held by
Mr. Burns were cancelled.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
The Company's compensation policies applicable to its executive officers
are administered by the Compensation Committee and, with respect to stock
options, the Stock Option Committee of the Board of Directors.
COMPENSATION PHILOSOPHY
The Company's compensation programs are designed to link executives'
compensation to the performance of the Company and provide competitive
compensation for Company executives relative to a select group of peer companies
in order to attract and retain high caliber senior executives essential to the
long-term prosperity of the Company. The compensation mix reflects a balance of
annual base salary, bonus and equity-based incentives. Emphasis, however, is
placed on the more strategic equity-based plans intended to build shareholder
value and provide incentives to motivate executive behavior over the long term.
COMPENSATION PROGRAM
Executive officer compensation consists of two key elements: (1) an annual
cash component comprised of base salary and bonus and (2) a long-term equity
component with respect to which existing holdings of Common Stock are recognized
and in appropriate cases stock options are granted. The policies with respect to
each of these elements are described below.
(1) Annual Compensation
Base salaries for executive officers are determined by evaluating the
responsibilities of the position and comparing it with other executive officer
positions in the Company and the marketplace. For this purpose, the "market"
consists of a broad range of companies with which the Company feels it competes
for executive talent. This group is different than the peer group used for
comparison purposes in the stock price performance graph that appears elsewhere
in this Proxy Statement because the Company believes the market for executive
talent extends to a broader range of companies than those included in the stock
price performance graph.
Annual salary adjustments are determined by a review of market research,
Company performance (measured by earnings per share growth), the individual's
contribution to that performance, and for executive officers responsible for
particular business units, the financial and operating results of their business
units. No specific weights are assigned to these factors.
9
<PAGE>
Annual bonuses for executive officers in fiscal 1999 were awarded in
accordance with the Company Performance Incentive program, a bonus incentive
program based on the Company meeting or exceeding its targeted earnings
objective and is defined as a percentage of each executive's salary. The Company
Performance Incentive program is designed to link compensation to the
performance of the Company. Under this program, the Company must produce a
minimum target return to shareholders before Company performance awards are
generated. At the minimum target level, 40% of the Company Performance award is
given. An additional award of 60% of the Company Performance award can be paid
should the Company achieve 100% of the target performance level. For fiscal
1999, greater than the minimum target return to shareholders was achieved and
100% of Company Performance Incentive bonuses were awarded.
(2) Long-Term Compensation
To align shareholders' and executive officers' interests, the Company's
long-term compensation plan uses stock option grants whose value is related to
the value of Common Stock. Grants of stock options are made under the Company's
1995 and 1996 Stock Option Plans and 1998 CEO Stock Option Plan. In granting
options, the Board takes into account existing holdings and options already held
by each executive. The size of each option grant is determined by the
individual's position within the Company, the individual's level of
responsibility and the number of options currently held by the individual.
Stock options are granted with an exercise price equal to the fair market
value of the Common Stock on the date of grant. Stock options generally vest in
four annual increments and are exercisable up to ten years from the date
granted. Stock options provide incentive for the creation of shareholder value
over the long term since the full benefit of the compensation package cannot be
realized unless an appreciation occurs in the price of Common Stock over a
specified number of years.
CEO COMPENSATION
Mr. Hernandez was compensated pursuant to his employment agreement
(described above under "Employment Agreements"), which was effective
January 12, 1998. Included in Mr. Hernandez's compensation was a signing bonus
of $25,000. In determining the level of compensation, Mr. Hernandez's experience
in the health care industry was considered.
POLICY WITH REGARD TO THE $1 MILLION DEDUCTION LIMIT
In 1993, Section 162(m) was added to the Internal Revenue Code. This
section generally limits to $1 million the tax deduction for compensation paid
to executive officers of a publicly-held corporation who are named in the proxy
statement, subject to an exception for "performance - based" compensation plans
as defined under that section. The Company's 1995 and 1996 Stock Option Plans,
as Amended and 1998 CEO Stock Option Plan are each intended to qualify as a
"performance-based plan". The Compensation and Stock Option Committee has
determined that the other compensation currently paid to the Company's executive
officers is not expected to exceed the limitation as set forth in Section
162(m).
The foregoing report has been approved by all members of the Compensation
and Stock Option Committees.
Richard C. Jelinek
William G. Brown
Risa Lavizzo-Mourey
10
<PAGE>
PERFORMANCE GRAPH
The Company as it presently exists is the result of a spinoff and
subsequent merger transactions which occurred on March 1, 1996. Prior to
March 1, 1996 the Company was named Medicus Systems Corporation (the
"Predecessor Corporation"). On March 1, 1996, all of the assets of the
Predecessor Corporation, other than those related to its managed care
business, were transferred to a wholly owned subsidiary of the Predecessor
Corporation, and all of the shares of that company, then named Medicus Systems
Corporation ("Medicus"), were distributed (the "Distribution") on a
share-for-share basis to stockholders of the Predecessor Corporation.
Immediately after the Distribution, the Company, which then consisted only of
the managed care business of the Predecessor Corporation, effected a
one-for-three reverse stock split. Also on March 1, 1996, immediately after the
reverse stock split, the Company acquired three Arizona corporations engaged in
the managed care business through merger transactions (the "Mergers") pursuant
to which each of the Arizona corporations became a wholly owned subsidiary of
the Company, and the Company's name was changed to Managed Care Solutions, Inc.
On July 12, 1999, the Company changed its name to Lifemark Corporation.
The following graph compares the cumulative total shareholder return on
Common Stock since March 1, 1996 (the effective date of the Mergers and the date
on which the Common Stock began trading under the symbol MCSX) to that of the
Nasdaq market index and Nasdaq Health Services index. The Company stock symbol
was changed to LMRK effective with the adoption of the Company's new name,
Lifemark Corporation.
MAY 31,
----------------------------------
MARCH 1, 1996 1996 1997 1998 1999
------------- ---- ---- ---- ----
Lifemark Corporation 100 152 76 182 97
NASDAQ U.S. 100 114 128 162 228
NASDAQ Health Services 100 113 94 95 82
11
<PAGE>
The following graph compares the cumulative total shareholder return on
Predecessor Corporation (then known as Medicus Systems Corporation) Common Stock
from June 1, 1994 to February 29, 1996 (the last trading day prior to the
effective date of the Mergers) to that of the Nasdaq market index and an index
comprised of the Common Stock of 13 peer companies that compete in the
healthcare information systems industry. In calculating cumulative total
shareholder return, reinvestment of dividends is assumed, and the returns of
each member of the peer group are weighted for market capitalization.
JUNE 1, 1994 MAY 31, 1995 FEBRUARY 29, 1996
------------ ------------ -----------------
Medicus 100 60 55
NASDAQ U.S. 100 119 151
Peer Group 100 134 171
The peer group of companies was selected based upon their being in the
business of healthcare information systems and related services. The companies
in the peer group, which for performance graph purposes, does not include the
Predecessor Corporation, are as follows: Access Health Marketing, First Data
Corporation, GMIS, Inc., Health Management Systems, Health Risk Management,
Keane, Inc., Medaphis Corporation, Medic Computer Systems, Mediware Informations
Systems, Policy Management Systems, Shared Medical Systems, Spacelabs Medical,
Inc. and US Services, Inc.
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Jelinek, Mr. Brown and Dr. Lavizzo-Mourey are currently members of
the Compensation Committee and Mr. Jelinek and Dr. Lavizzo-Mourey are
currently members of the Stock Option Committee. None of the Company's
directors have interlocking or other relationships with other boards or the
Company that require disclosure under Item 402(j) of S.E.C. Regulation S-K,
except as described below.
For the fiscal year ended May 31, 1999, the Company incurred legal fees
for general legal services of $48,600 to the law firm of Bell, Boyd & Lloyd, of
which William G. Brown, a director of the Company, is a partner. During the
fiscal year ended May 31, 1999, Dr. Kaldenbaugh was paid consulting fees of
$84,000 by the Company.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE COMPANY. As of May 31, 1999, Dr. Kaldenbaugh owed $10,526 to the
Company pursuant to a promissory note in the original principal amount of
$94,000, with interest at the rate of 3%. The highest balance outstanding during
fiscal year 1999 was $33,760. The note was originally payable to Ventana, and
was transferred to the Company during the fiscal year ended May 31, 1997. The
note is payable upon demand. The purpose of this loan was to provide
Dr. Kaldenbaugh funds to settle litigation in 1992 concerning a covenant not to
compete to which he was subject.
During fiscal year 1999, the Company received $7,711,755 from Rio Grande
HMO, Inc. ("RGHMO"), a subsidiary of BCBSTX, pursuant to administrative services
agreements between the Company and RGHMO.
In October 1996, the Company signed an agreement whereby BCBSTX invested
$3,000,000 in the Company in the form of a convertible secured loan. The loan
has an original term of three years with a renewal option for two additional
one-year periods, if certain conditions are met. The loan bears interest at a
rate of 8% per annum. Principal and interest are payable at the end of the
initial three-year term and, thereafter, at the end of each annual extension.
The loan is convertible into Common Stock at a conversion price of $3.85 per
share. BCBSTX also received a warrant to purchase 100,000 shares of Common Stock
at an exercise price of $4.45 per share. BCBSTX has the right of first refusal
to participate as an equity partner in future Lifemark funding requirements. On
May 31, 1999, $3,710,000 was due to BCBSTX pursuant to the note consisting of
$3,000,000 in principal and $710,000 of accrued interest.
In a separate transaction, a trust created by William G. Brown, a director
of the Company, for the benefit of members of his family, and of which
Richard C. Jelinek, Chairman and Director, is one of the co-trustees,
(the "Brown GST Trust") invested $300,000 in the Company through a convertible
unsecured loan and received a warrant to purchase 10,000 shares of Common Stock.
The interest rate, term, conversion price, and warrant exercise price are the
same for the Brown GST Trust as for BCBSTX, except that interest on the loan
is payable monthly. During the fiscal year ended May 31, 1999, the Company
paid an aggregate of $24,000 in interest to the Brown GST Trust.
MCSAZ. In October 1995, MCSAZ borrowed $155,000 from a trust established
by Dr. Lingenfelter and $52,000 from a trust established by Dr. Kaldenbaugh. The
notes, due December 31, 2000, provide for interest income to be accrued at 8%
per annum. MCSAZ then loaned from these funds $118,000 to Dr. Kaldenbaugh
pursuant to a promissory note, due December 31, 2000, also providing for
interest to accrue at 8% per annum. The notes are secured by a pledge of the
Company Common Stock received by Dr. Kaldenbaugh in the Mergers in exchange for
their stock in MCSAZ. The stock pledge also secures the above described loans
from the trusts to MCSAZ. The purpose of the loan was to provide Dr. Kaldenbaugh
funds to pay taxes incurred as a result of his owning shares in AHC, then a
Subchapter S corporation. In June 1998, the Company made a $97,000 payment to
Dr. Lingenfelter's trust. On May 31, 1999, $87,000 and $66,000 were outstanding
on notes payable to the trusts established by Dr. Lingenfelter and
Dr. Kaldenbaugh, respectively, and $158,000 was outstanding on the note
receivable from Dr. Kaldenbaugh.
VENTANA. In October 1995, Dr. Kaldenbaugh borrowed $95,055 from Ventana
pursuant to a promissory note due December 31, 2000 providing for interest to
accrue at 8% per annum. The note is secured by a pledge of Common Stock received
by Dr. Kaldenbaugh in the Mergers in exchange for their stock in Ventana. The
purpose of the loan was to provide Dr. Kaldenbaugh funds to pay taxes as
described in the preceding paragraph. As of May 31, 1999, $122,938 was
outstanding under the loan to Dr. Kaldenbaugh.
During fiscal year 1999, Dr. Lingenfelter received total payments of
$126,600 under risk sharing contracts between Dr. Lingenfelter and Ventana in
Mohave County, Arizona. As of May 31, 1999, Dr. Lingenfelter is owed an
additional $26,841 pursuant to such contracts.
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ARIZONA HEALTH CONCEPTS. Dr. Kaldenbaugh received payment of $22,989
pursuant to risk sharing contracts with AHC, and Dr. Lingenfelter received
capitation payments of $115,863 from AHC during fiscal year 1999. As of
May 31, 1999, Dr. Lingenfelter was owed $124,047, pursuant to risk sharing
contracts.
CERTAIN TRANSACTIONS
For descriptions of certain transactions involving Mr. Brown and
Drs. Kaldenbaugh and Lingenfelter and BCBSTX, see the information under the
caption "Compensation and Stock Option Committee Interlocks and Insider
Participation."
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has been selected by the Board of Directors of
the Company, upon the recommendation of its Audit Committee, to continue to act
as auditors in fiscal year 2000. A representative of PricewaterhouseCoopers LLP
will be present at the Annual Meeting. He will have the opportunity to make a
statement, if he desires to do so, and will be available to respond to
appropriate questions.
ANNUAL REPORT
The Annual Report of the Company on Form 10-K for the fiscal year ended
May 31, 1999 is enclosed with this Proxy Statement. Stockholders are referred to
this report for financial and other information about the Company, but such
report is not incorporated in this Proxy Statement and is not a part of the
proxy soliciting material.
PROPOSALS BY STOCKHOLDERS
Any proposals by stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Company no later than
April 26, 2000 in order to be considered by the Board of Directors for inclusion
in the Company's Proxy materials for that meeting. The Company will be entitled
to exercise discretionary proxy authority with respect to any other proposals
presented by stockholders at that meeting unless the Company is notified of such
proposals no later than July 10, 2000.
OTHER MATTERS
Brokerage firms, banks, fiduciaries, voting trustees or other nominees
will be requested to forward the soliciting material to each beneficial owner of
stock held of record by them, and the Company will, upon request, reimburse them
for the reasonable expense of doing so. The entire cost of the solicitation will
be borne by the Company.
The Board of Directors does not intend to present, and does not have any
reason to believe that others will present, any item of business at the Annual
Meeting other than those specifically set forth in the notice of the meeting.
However, if other matters are properly presented for a vote, the proxies will be
voted with respect to such matters in accordance with the judgment of the
persons acting under the proxies.
By Order of the Board of Directors
Stephen G. Smyth
SECRETARY
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PROXY PROXY
LIFEMARK CORPORATION
(FORMERLY MANAGED CARE SOLUTIONS, INC.)
ANNUAL MEETING, SEPTEMBER 13, 1999
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Rhonda E. Brede and Richard C. Jelinek or either of them, each with full power
of substitution, is hereby authorized to vote all shares of Common Stock of
Lifemark Corporation which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of Lifemark Corporation
to be held on September 13, 1999, and at any adjournment thereof, as indicated
herein.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED HEREIN, BUT IF NO
DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR ALL NOMINEES LISTED IN ITEM 1.
PLEASE MARK THIS PROXY AND SIGN AND DATE IT ON THE REVERSE SIDE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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<PAGE>
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LIFEMARK CORPORATION
(formerly Managed Care Solutions, Inc.)
PLEASE MARK VOTE IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
[ ]
The Board of Directors Recommends a Vote "FOR" each Listed Proposal.
FOR ALL
FOR ALL WITHHOLD EXCEPT
1. ELECTION OF DIRECTORS--
NOMINEES: RHONDA E. BREDE, RICHARD C. JELINEK,
JOHN G. LINGENFELTER, M.D., WILLIAM G. BROWN,
HENRY M. KALDENBAUGH, M.D.,
RISA LAVIZZO-MOUREY, M.D. / / / / / /
-----------------------------------------------
(EXCEPT NOMINEE(S) WRITTEN ABOVE)
DATED: ___________________, 1999
SIGNATURE (S)_____________________________
__________________________________________
PLEASE SIGN EXACTLY AS YOUR NAME (OR
NAMES) APPEARS HEREIN. EXECUTORS,
ADMINISTRATORS, TRUSTEES AND OTHERS
SIGNING IN A REPRESENTATIVE CAPACITY
SHOULD INDICATE THE CAPACITY IN WHICH THEY
SIGN. WHERE THERE IS MORE THAN ONE OWNER,
EACH SHOULD SIGN.
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