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 [ ]
[ X ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (aspermitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2)
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Managed Care Solutions, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Managed Care Solutions, Inc.
- --------------------------------------------------------------------------------
(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:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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<PAGE>
MANAGED CARE SOLUTIONS, INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
June 2, 1999
You are cordially invited to attend the Annual Meeting of Stockholders
of Managed Care Solutions, Inc. (the "Company") which will be held at the
Managed Care Solutions, Inc. corporate offices located at 7600 North 16th
Street, Phoenix, Arizona on Wednesday, June 2, 1999, at 8:00 a.m., Mountain
Time, for the following purposes:
1. To elect directors;
2. To consider and vote upon a proposal to approve and adopt the
Company's 1998 CEO Stock Option Plan;
3. To consider and vote upon a proposal to adopt an amendment to
the Company's Certificate of Incorporation changing the Company's
name from Managed Care Solutions, Inc. to Lifemark, Inc.; and
4. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on April 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.
Stephen G. Smyth
Secretary
Phoenix, Arizona
April 30, 1999
<PAGE>
MANAGED CARE SOLUTIONS, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
June 2, 1999
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Managed Care Solutions, Inc. (the "Company") of
proxies for use at the Annual Meeting of Stockholders of the Company to be
held at the Managed Care Solutions, Inc. corporate offices located at
7600 North 16th. Street, Suite 150, Phoenix, Arizona at 8:00 a.m., Mountain
Time, on Wednesday, June 2, 1999 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, for the approval of the 1998 CEO Stock
Option Plan, for the adoption of the amendment to the Company's Certificate of
Incorporation changing the Company name to Lifemark, Inc. 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
April 30, 1999.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record at the close of business on April 23, 1999,
are entitled to vote at the Annual Meeting. The only voting stock of the
Company outstanding is its Common Stock, of which 4,766,983 shares were
outstanding at the close of business on April 23, 1999. Each share of Common
Stock issued and outstanding is entitled to one vote. With respect to the
proposal to approve the 1998 CEO Stock Option Plan, an abstention will have
the effect of a vote against such proposal, and non-voted shares will have no
effect on the approval of such proposal (assuming the presence of a quorum).
With respect to the proposal to adopt the amendment to the Company's
Certificate of Incorporation changing its name, any share not voted in favor
of adoption, whether by abstention, broker non-vote or otherwise, will have
the effect of a vote against the amendment. Votes will be tabulated, using
an automated scanner, by the inspectors of election appointed by the Company.
1
<PAGE>
COMMON STOCK OWNERSHIP BY MANAGEMENT
The following table sets forth, as of February 28, 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
------- ------------------ ------------
Michael D. Hernandez................ 100,000 (2) 2.0%
James A. Burns...................... 207,500 (7) 4.1%
Henry H. Kaldenbaugh................ 575,204 (2) 11.5%
John G. Lingenfelter................ 521,129 (2) 10.4%
Richard C. Jelinek.................. 727,320 (2)(3)(4) 14.3%
William G. Brown.................... 157,932 (2)(4) 3.1%
Risa Lavizzo-Mourey................. 26,365 (2) *
Rogers K. Coleman................... - *
Michael J. Kennedy.................. 85,637 (2) 1.7%
Hollybank Investments, LP........... 722,947 (5) 14.4%
Blue Cross and Blue Shield of Texas, Inc. 879,221 (6) 14.9%
All directors and executive officers
as a group (9 persons)............ 2,313,165 (2)(4) 43.5%
*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 Managed Care Solutions, Inc., 7600 North 16th
Street, Suite 150, Phoenix, Arizona 85020.
(2) Includes 100,000, 3,750, 3,750, 3,750, 26,250, 13,750, 65,250, and
216,500 shares covered by options and/or warrants held by
Mr. Hernandez, Dr. Kaldenbaugh, Dr. Lingenfelter, Mr. Jelinek,
Mr. Brown, Dr. Lavizzo-Mourey, Mr. Kennedy, and all directors and
officers as a group, respectively, which were exercisable within
sixty days of February 28, 1999. Such persons disclaim beneficial
ownership of such shares.
(3) Includes 25,333 shares owned by Mr. Jelinek's wife.
(4) 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.
(5) Represents shares as of December 10, 1998, as reported on Schedule
13D, Amendment No. 3. 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.
(6) 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. is 901 S. Central Expressway, Richardson, Texas 75080.
(7) The address of James A. Burns is 75-5814 Neke Place, Kailua-Kona,
Hawaii 96740.
2
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Henry Kaldenbaugh failed to timely file a Form 4 with respect to two
transactions in which he acquired 3,000 shares of common stock and sold 1,000
shares of Common Stock during the fiscal year ended May 31, 1998.
John Lingenfelter failed to timely file a Form 4 with respect to nine
transactions in which he acquired an aggregate of 13,000 shares of Common
Stock and gifted of an aggregate of 21,600 shares of Common Stock during the
fiscal year ended May 31, 1998.
Rogers Coleman failed to timely file a Form 3 upon his initial election
as a director of the Company.
ELECTION OF DIRECTORS
Seven 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 seven 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 seven nominees is presented
below.
Michael D. Hernandez, age 53, has been Chairman and Chief Executive
Officer of the Company since January 1998. He has also been President and
Chief Executive Officer of The Cova Corporation since March 1988.
Previously, he was Managing Director and Management Committee member of The
First Boston Corporation from 1984 to 1988. From 1973 to 1984, he was with
Kidder, Peabody & Company as a partner and Director. Mr. Hernandez is
currently serving on the Board of Directors of The Cova Corporation and the
International Diagnostic Corporation (Chairman). He has served on the
Boards of Directors of Charter Medical Corporation (Chairman);
The First Boston Corporation (Management Committee); HCHP, Inc. (Chairman);
Securities Industry Association (Executive Committee); and PathoGenesis
Corporation.
Richard C. Jelinek, age 62, Vice 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 of that corporation from its incorporation
in December 1984 until February 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. He has been a
director of a predecessor of the Company (the "Predecessor Corporation")
since its incorporation in 1984 and of the Company since March 1996.
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.
3
<PAGE>
Risa Lavizzo-Mourey, M.D., age 45, is the Sylvan Eisman Professor of
Medicine and Health Care Systems at the University of Pennsylvania and a
board certified Internist and Geriatrician. 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 Group.
Henry H. Kaldenbaugh, M.D., age 53, is a founder of three subsidiaries
of the Company, Ventana Health Systems, Inc. ("Ventana"), Arizona Health
Concepts, Inc. ("AHC") and Managed Care Solutions of Arizona, Inc. ("MCSAZ"),
and has been a director of the Company since the March 1996. He has been an
officer and board member of Ventana and AHC since their inception and of
MCSAZ since 1993. 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 MCSAZ, AHC and Ventana 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 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 since 1993. 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 Mojave 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.
Rogers K. Coleman, M.D., age 67, has been President and Chief Executive
Officer of Blue Cross and Blue Shield of Texas, Inc. ("BCBSTX") since 1991.
He served as Executive Vice President from 1988 to 1991, adding the title of
Chief Operating Officer in 1990. From 1986 to 1988, Dr. Coleman was Vice
President and Medical Director and from 1976 to 1986, he was Associate
Medical Director. Prior to joining BCBSTX, Dr. Coleman was in private
practice for 18 years. Dr. Coleman is a director of Advance Paradigm Group
Medical and Surgical Services, Inc., Blue Cross and Blue Shield of New
Hampshire, Rio Grande HMO, Inc., Health Care Benefits, Inc., and Blue Cross
and Blue Shield Association.
MEETINGS AND COMMITTEES OF THE BOARD
During the fiscal year ended May 31, 1998, the Board of Directors held
eight 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, 1998,
the Stock Option Committee met two times, the Audit Committee met one time
and the Compensation Committee met two times.
4
<PAGE>
COMPENSATION
Set forth below is information concerning the executive officers of the
Company as of May 31, 1998. Information for James Burns, who became an
executive officer of the Company on March 1, 1996, includes compensation
received from MCSAZ prior to that date during the fiscal year ended May 31,
1996.
<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 ($) ($) ($) (#) ($) (4)
- ------------------ ------ ------ ------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Hernandez
Chairman and
Chief Executive Officer 1998 78,030 25,000 - 400,000 -
James A. Burns
Vice Chairman, President
Chief Executive Officer
and Chief Operating Officer 1998 175,000 37,000 - - 10,987
Vice Chairman, President
and Chief Executive Officer 1997 164,792 - - - 8,955
Vice Chairman 1996 162,319 75,000 - 150,000 1,568
Michael J. Kennedy
Chief Financial Officer 1998 136,000 32,500 28,016 (2) - 3,284
Chief Financial Officer 1997 125,000 - 31,809 (2) 87,000 (3) 1,458
Chief Financial Officer 1996 16,098 - - 87,000 (3) -
</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 amount shown for Mr. Kennedy in each year represents moving
expense related reimbursement.
(3) The options shown as granted in fiscal year 1997 to Mr. Kennedy
reflect the repricing of the options originally granted in fiscal 1996.
(4) The amounts shown for Mr. Burns for fiscal 1998 include term life
insurance premiums of $1,140, officers disability insurance of $663,
split dollar insurance premiums of $509 and auto allowance of $7,800.
The amount shown for Mr. Kennedy for fiscal year 1998 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 amounts shown for Mr. Burns and
Mr. Kennedy for fiscal year 1998 include Company contributions to their
account in the amount of $875 and $2,686, respectively.
5
<PAGE>
Option / SAR Grants Table
The following table provides information on stock options granted to
the named executive officers during fiscal year 1998. The potential
realizable value of each grant of options was determined assuming that the
market price of the underlying security appreciates in value from the date of
grant to the end of the option term at annualized rates of 5% and 10% as
required pursuant to Item 402 of S.E.C. Regulation S-K.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
-------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants 10-Year Option Term
------------------------------------------------------------ ----------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Expiration 5%(2) 10%(2)
Name Granted (#)(1) Fiscal Year Price ($/Sh) Date ($) ($)
---- -------------- ------------ ------------ ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Hernandez 400,000 82.5 4.00 1/12/08 1,006,231 2,549,988
</TABLE>
(1) Options granted to Mr. Hernandez in fiscal year 1998 are exercisable
starting 12 months after the original grant date, with 25 percent of
the shares covered thereby becoming exercisable at that time and with
an additional 25 percent of the option shares becoming exercisable on
each successive anniversary date, with full vesting occurring on the
fourth anniversary date. The options were granted for a term of 10
years, subject to earlier termination in certain events related to
termination of employment.
(2) These amounts represent certain assumed rates of appreciation only.
Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the future performance of the Common Stock
and overall stock market conditions. There can be no assurance that
the amounts reflected in this table will be achieved.
Option / SAR Exercises and Year-end Valuation
<TABLE>
<CAPTION>
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 - - - 400,000 - 1,400,000
James A. Burns - - 75,000 75,000 318,750 318,750
Michael J. Kennedy - - 43,500 43,500 184,875 184,875
</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.
6
<PAGE>
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 the
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. Pursuant
to the policies of BCBSTX, Dr. Coleman did not receive any options under the
1995 Directors' Stock Option Plan and will not receive any options under the
1996 Non-Employee Director Stock Option Plan.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with
Michael D. Hernandez providing for his employment as Chairman and
Chief Executive Officer of the Company. The agreement, which was
entered into in January 1998 and has an initial term of four years,
provides that during Mr. Hernandez' employment, he is to receive an annual
salary of not less than $200,000, is 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 is 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' outstanding
options will vest and become exercisable on the date of the change in
control. The Company has agreed that if Mr. Hernandez's employment is
terminated by the Company other than for cause or, without his consent, the
Company reduces his base salary or targeted bonus opportunity, materially
changes his duties or responsibilities or changes the location of his
principal place of work, and as a result of such change or changes he
voluntarily terminates his employment, then, in either event, the 25% of
Mr. Hernandez' outstanding options scheduled to vest on the next January 12
will vest and become exercisable on the date of termination of his
employment, and he shall be entitled to receive his base salary for a period
of 12 months following notice of termination, as well as a pro rata bonus.
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 occurs between
March 1, 1998 and March 1, 1999; (iii) until March 1, 2000 if termination
occurs between March 1, 1999 and September 1, 1999; and (iv) for a period of
six months if termination occurs after September 1, 1999.
Mr. Burns' employment agreement further provided that in no event will
severance pay exceed six months if at the time of termination the Company has
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. During the year beginning on August 1, 1998, Mr. Burns will be paid an
aggregate of $193,700 as severance payment.
7
<PAGE>
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 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
The Company's 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.
Annual bonuses for executive officers in for fiscal 1998 were awarded in
accordance with the Company Performance Incentive Program. The Company
Performance Incentive bonus is an 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 150% of the target performance level. For
fiscal 1998, the minimum target return to shareholders was achieved, and
therefore 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. 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.
8
<PAGE>
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
Each of Mr. Hernandez and Mr. Burns were compensated pursuant to their
employment agreements (described above under "Employment Agreements"), which
were effective January 12, 1998 and March 1, 1996, respectively. Included in
Mr. Hernandez's compensation was a signing bonus of $25,000. Mr. Burns'
bonus was a result of achieving a certain targeted performance for fiscal 1998
as described above. In determining the level of compensation, Mr. Hernandez's
and Mr. Burns' experience in the health care industry were 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 1996 Stock
Option Plan, 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
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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.
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.
May 31,
-------------------------
March 1, 1996 1996 1997 1998
------------- ---- ---- ----
Managed Care Solutions 100 152 76 182
NASDAQ U.S. 100 114 128 163
NASDAQ Health Services 100 113 94 96
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The following graph compares the cumulative total shareholder return on
Predecessor Corporation (then known as Medicus Systems Corporation) Common
Stock from June 1, 1993 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.
1993 1994 1995 1996 (1)
---- ---- ---- ----
Medicus 100 192 116 106
NASDAQ U.S. 100 106 125 160
Peer Group 100 122 162 208
(1) Data is shown as of the effective date of the Mergers.
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.
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For the fiscal year ended May 31, 1998, the Company incurred legal fees
for general legal services of $74,000 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, 1998, Dr. Kaldenbaugh served as a Medical
Director of AHC, and the Company paid Medical Director and consulting fees of
$74,000 to Dr. Kaldenbaugh.
Certain Relationships and Related Transactions
The Company. As of May 31, 1998, Dr. Kaldenbaugh owed $33,760 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 during fiscal
year 1998 was $95,251. 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 1998, the Company received $2,871,820 from Rio
Grande HMO, Inc. ("RGHMO"), a subsidiary of BCBSTX, and BCBSTX pursuant to
administrative services agreements between the Company and each of RGHMO and
BCBSTX.
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 the Company's common stock at
a conversion price of $3.85 per share. BCBSTX also received a warrant to
purchase 100,000 shares of the Company's common stock at an exercise price of
$4.45 per share. On May 31, 1998, $3,426,000 was due to BCBSTX pursuant to
the note consisting of $3,000,000 in principal and $426,000 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, Vice 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 MCS 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, 1998, the Company paid an aggregate of $24,000 in interest to Brown
GST Trust.
MCSAZ. In October 1995, MCSAZ borrowed $155,000 from a trust
established by Dr. Lingenfelter, $52,000 from a trust established by Dr.
Kaldenbaugh, and $43,000 from a trust established by Geralde Curtis, who was
then a director and officer of MCSAZ. 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 each to Dr. Kaldenbaugh and Ms. Curtis pursuant to
promissory notes, 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 and Ms. Curtis 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 loans was to
provide Dr. Kaldenbaugh and Ms. Curtis funds to pay taxes incurred as a
result of their owning shares in AHC, then a Subchapter S corporation. In
July 1997, Ms. Curtis paid the promissory note and accrued interest in full.
On May 31, 1998, $177,000, $61,000 and $52,000 were outstanding on notes
payable to the trusts established by Dr. Lingenfelter, Dr. Kaldenbaugh and
Ms. Curtis, respectively. In June 1998, the Company paid $52,000 to Ms.
Curtis' trust, which satisfied in full the promissory note plus accrued
interest. In June 1998, the Company also made a $97,000 payment to Dr.
Lingenfelter's trust.
Ventana. In October 1995, Dr. Kaldenbaugh borrowed $95,055 and Ms.
Curtis borrowed $97,704 from Ventana pursuant to promissory notes due
December 31, 2000 providing for interest to accrue at 8% per annum. The notes
are secured by a pledge of the Common Stock received by Dr. Kaldenbaugh and
Ms. Curtis in the Mergers in exchange for their stock in Ventana. The purpose
of the loans was to provide Dr. Kaldenbaugh and Ms. Curtis funds to pay taxes
as described in the preceding paragraph. On July 24, 1997, Ms. Curtis repaid
all existing loans from Ventana. As of May 31, 1998, $115,333 was outstanding
under the loans to Dr. Kaldenbaugh.
12
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During fiscal year 1998, Dr. Lingenfelter received total payments of
$236,301 under risk sharing contracts between Dr. Lingenfelter and Ventana in
Mohave County, Arizona. As of May 31, 1998, Dr. Lingenfelter is owed an
additional $113,217 pursuant to such contracts.
Arizona Health Concepts. Dr. Kaldenbaugh received payments of $42,710
during fiscal year 1998 pursuant to risk sharing contracts with AHC. As of
May 31, 1998, Dr. Lingenfelter and Dr. Kaldenbaugh are owed $23,740 and
$8,483, respectively, pursuant to such 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."
PROPOSAL TO APPROVE THE 1998 CEO STOCK OPTION PLAN
In order to continue to encourage ownership of the Company's Common
Stock by executives, key personnel and directors of the Company and to
provide incentives for them to make maximum efforts for the success of the
business, the Board of Directors of the Company has adopted and recommends
that stockholders vote to approve the Managed Care Solutions, Inc. 1998 CEO
Stock Option Plan (the "1998 CEO Plan"). Options granted under the 1998 CEO
Plan are intended not to qualify as "Incentive Stock Options" as defined in
the Internal Revenue Code of 1986 (the "Code").
The 1998 CEO Plan was adopted by the Board of Directors on January 12,
1998. On that date, Mr. Hernandez received options to purchase 400,000
shares under the 1998 CEO Plan, at an exercise price of $4.00 per share. The
closing sales price of the Common Stock on that date was $4.00. The grants
to Mr. Hernandez represent all of the shares covered by the 1998 CEO Plan and
approval of the 1998 CEO Plan will also constitute, in effect, approval of
such grants.
The following description is qualified in its entirety by reference to
the terms of the 1998 CEO Plan, a copy of which is attached to this proxy
statement as Exhibit A.
DESCRIPTION OF THE 1998 CEO PLAN
The 1998 CEO Plan is administered by a committee of the Board of
Directors composed of no fewer than two outside, non-employee directors
designated by the Board of Directors. The Stock Option Committee (the
"Committee") currently administers the 1998 CEO Plan. The Committee has
authority to determine the persons to be granted options under the 1998 CEO
Plan, the number of shares subject to each option, the time or times at which
options will be granted, the option price of the shares subject to each
option (which price shall not be less than the fair market value of the
shares at the date of grant), and the time or times when each option becomes
exercisable and the duration of the exercise period.
Options may be granted to key employees and directors (other than
members of the Committee) of the Company. Options may be granted with
respect to a total of not more than 400,000 shares of Common Stock under the
1998 CEO Plan, subject to antidilution and other adjustment provisions.
Options to purchase up to 400,000 shares of Common Stock may be granted to
the Chief Executive Officer of the Company. No options may be granted under
the 1998 CEO Plan after January 12, 2008. If an option expires or is
terminated or canceled unexercised as to any shares, such released shares may
again be optioned (including a grant in substitution for a canceled option).
13
<PAGE>
Each option is for such term of not more than ten years as shall be
determined by the Committee at the date of the grant. Each option becomes
exercisable in such installments, at such time or times, and may be subject
to such conditions, including conditions based upon the performance of the
Company, as the Committee may in its discretion determine at the date of
grant. The Committee may accelerate the exercisability of any option or, at
any time before the expiration or termination of an option previously
granted, extend the terms of such option for such additional period as the
Committee, in its discretion, shall determine, except that the aggregate
option period with respect to any option, including the original term of the
option and any extensions thereof, shall never exceed ten years.
The Committee may permit the purchase price for shares purchased upon
exercise of an option to be paid, all or in part, by the delivery to the
Company of other shares of Common Stock of the Company in such circumstances
and manner as the Committee may specify, valued at the fair market value of
the Common Stock at the close of business on the date preceding the date of
exercise.
If the employment or tenure as a director of any optionee with the
Company or any of its subsidiaries is terminated for any reason other than
death, permanent disability, retirement or cause, such optionee's option, to
the extent the option is exercisable at the date of termination, shall expire
ninety days after the termination of employment or directorship (or upon the
scheduled termination of the option, if earlier). In the event of
termination of employment or directorship because of death or permanent
disability, the option may be exercised in full, unless otherwise provided at
the time of grant, without regard to any installments established at the time
of grant, by the optionee or, if he is not living, by his heirs, legatees, or
legal representative, during its specified term prior to one year after the
date of death or permanent disability. In the event of termination of
employment or directorship because of retirement, the option may be exercised
by the optionee (or, if he dies within three months after such termination,
by his heirs, legatees, or legal representative), at any time during its
specified term prior to three months after the date of such termination, but
only to the extent the option was exercisable at the date of such
termination. If an optionee is discharged for cause, his option shall expire
forthwith and all rights to purchase shares under it shall terminate
immediately. For this purpose, "discharge for cause" means a discharge on
account of dishonesty, disloyalty or insubordination.
No option is transferable by the optionee otherwise than by will or the
laws of descent and distribution or pursuant to a qualified domestic
relations order, and each option shall be exercisable during an optionee's
lifetime only by him or his legal representative.
The Board of Directors may amend or discontinue the 1998 CEO Plan at
any time. However, no such amendment or discontinuation shall (a) change or
impair any option previously granted without the consent of the optionee, (b)
increase the maximum number of shares which may be purchased by all
optionees, (c) change the minimum purchase price, (d) change the limitations
on the option period or increase the time limitations on the grant of
options, or (e) permit the granting of options to members of the Committee.
14
<PAGE>
Options granted as of May 31, 1998 under the 1998 CEO Plan subject in
each case to shareholder approval, are displayed in the following table.
New Plan Benefits
-----------------
1998 CEO
Stock Option Plan (#)
---------------------
NAME
- ----
Michael D. Hernandez 400,000
James A. Burns -
Michael J. Kennedy -
Executive Officers as a Group 400,000
Other Employees (including non-executive
Officers) as a group -
On April 14, 1999, the last reported sales price of the Company's Common
Stock on the Nasdaq National Market (as reported by the Nasdaq National
Market) was $ 4.25 per share.
FEDERAL TAX CONSEQUENCES
The Company understands that no gain or loss will be recognized to an
optionee upon the grant of an option under the 1998 CEO Plan, but that upon
exercise of the option ordinary income measured by the excess of the fair
market value of the shares acquired over the option price will be recognized
by the optionee. The Company will be entitled to a deduction equal to the
amount of ordinary income recognized by the optionee. An optionee's basis in
shares acquired upon the exercise of an option will be equal to the option
price plus the amount of ordinary income recognized by the optionee. An
optionee's holding period begins on the date on which the option is exercised.
VOTE REQUIRED
Approval of the 1998 CEO Plan requires the affirmative vote of the
holders of a majority of the shares of Common Stock present or represented by
proxy at the Annual Meeting and entitled to vote. The Board of Directors
recommends that stockholders vote FOR approval of the plan. If no other
direction is given, signed proxies which are returned in a timely manner will
be voted for approval of the 1998 CEO Plan. Abstentions will have the effect
of a vote against the 1998 CEO Plan and non-voted shares will have no effect
on the approval of Plan (assuming the presence of a quorum).
PROPOSAL TO CHANGE THE COMPANY'S NAME
The Board of Directors has unanimously approved and recommended the
adoption by the stockholders of the following amendment to the Company's
Restated Certificate of Incorporation, which would change the Company's name
from "Managed Care Solutions, Inc." to "Lifemark, Inc.".
"Article First of the Company's Restated Certificate of Incorporation,
as amended to date, is hereby amended to read as follows:
FIRST: the name of the corporation is Lifemark, Inc."
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The reasons for the Board's approval and recommendation to the
stockholders are as follows:
The Boards of Directors and senior management of The Company recommend
the adoption of a new corporate name and identity. The adoption of a new
name would be instrumental in developing a brand name that more accurately
reflects the company's core business concentration. In addition, the new
name will assist in developing a corporate as well as a commercial awareness
of the company's national presence and expertise in the delivery of quality
managed care services. After serious consideration, it is believed that the
adoption of a new name is in the best interests of the company and related
parties.
Our new name, which reflects our approach of delivering quality cost
effective care in a manner that markedly improves patients' quality of life,
is Lifemark, Inc. "Life" because we are dealing with people's livelihoods
and "mark" because our presence is felt long after we implement our initial
improvements. We believe the adoption of this name will result in a greater
understanding of our business.
The Board of Directors recommends that stockholders vote FOR the
proposed amendment. The affirmative vote of the holders of a majority of the
outstanding shares of the Company's common stock is necessary to adopt the
proposed amendment. Abstentions and broker non-voters will have the effect
of a vote against the proposed amendment.
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 1999. 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 Company was previously delivered to stockholders its Annual Report
on Form 10-K for the fiscal year ended May 31, 1998. 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 Annual
Meeting of Stockholders currently for October 28, 1999 must be received by
the Company no later than May 27, 1999 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
August 10, 1999.
16
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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
17
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EXHIBIT A
MANAGED CARE SOLUTIONS, INC.
1998 CEO STOCK OPTION PLAN
The purpose of this Stock Option Plan (the "Plan") is to benefit
Managed Care Solutions, Inc. (the "Company") and its subsidiaries through the
maintenance and development of management by offering certain present and
future executive and key personnel a favorable opportunity to become holders
of stock in the Company over a period of years, thereby giving them a
permanent stake in the growth and prosperity of the Company and encouraging
the continuance of their services with the Company or its subsidiaries.
Options granted under this Plan are intended not to qualify as "Incentive
Stock Options" as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and the Plan shall be construed so as to carry
out that intention.
1. ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee") of the Board of Directors composed of no fewer than two
"non-employee" "outside" directors designated by the Board of Directors. For
purposes of this Plan, "non-employee" directors shall include directors who
meet the tests for "non-employee directors" under the rules and regulations
adopted by the Securities and Exchange Commission under Section 16 of the
Securities Exchange Act of 1934 and (b) "outside" directors shall include
directors who meet the tests for "outside director" under the Regulations
adopted by the Internal Revenue Service relating to Section 162 of the Code,
including all of the transition rules thereunder. A majority of the
Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, or acts approved
in writing by all of the members, shall be the acts of the Committee. This
Plan and options granted under this Plan are intended to qualify for
exemption from Section 16(b) of the Securities Exchange Act of 1934 and to
qualify as performance-based compensation under Section 162 of the Code and
shall be interpreted in such a way as to result in such qualification.
Subject to the provisions of the Plan, the Committee shall have full
and final authority, in its absolute discretion, (a) to determine the persons
to be granted options under the Plan, (b) to determine the number of shares
subject to each option, (c) to determine the time or times at which options
will be granted, (d) to determine the option price of the shares subject to
each option, which price shall not be less than the minimum specified in
Section 4 of the Plan, (e) to determine the time or times when each option
becomes exercisable and the duration of the exercise period, (f) to prescribe
the form or forms of the agreements evidencing any options granted under the
Plan (which forms shall be consistent with the Plan), (g) to adopt, amend and
rescind such rules and regulations as, in the Committee's opinion, may be
advisable in the administration of the Plan, and (h) to construe and
interpret the Plan, the rules and regulations and the agreements evidencing
options granted under the Plan and to make all other determinations deemed
necessary or advisable for the administration of the Plan. Any decision made
or action taken in good faith by the Committee in connection with the
administration, interpretation, and implementation of the Plan and of its
rules and regulations shall, to the extent permitted by law, be conclusive
and binding upon all optionees under the Plan and upon any person claiming
under or through such an optionee, and no director of the Company shall be
liable for any such decision made or action taken by the Committee.
2. ELIGIBILITY. Options shall be granted only to key employees and
directors (other than members of the Committee) of the Company and its
subsidiaries.
3. GRANTING OF OPTIONS.
(a) The Committee may grant options under which a total of not more
than 400,000 shares of the common stock of the Company may be purchased from
the Company, subject to adjustment as provided in paragraph 9. Since this
Plan is being adopted principally to be used for the Chief Executive Officer
of the Company, options to purchase up to 400,000 shares of the common stock
of the Company may be granted to the Chief Executive Officer of the Company.
<PAGE>
(b) No options shall be granted under the Plan after January 12,
2008. If an option expires or is terminated or canceled unexercised as to
any shares, such released shares may again be optioned (including a grant in
substitution for a canceled option). Shares subject to options may be made
available from unissued or reacquired shares of common stock.
(c) Nothing contained in the Plan or in any option granted pursuant
thereto shall confer upon any optionee any right to be continued in the
employment of the Company or any subsidiary of the Company, or interfere in
any way with the right of the Company or its subsidiaries to terminate his
employment at any time.
4. OPTION PRICE. The option price shall be determined by the Committee
and, subject to the provisions of paragraph 9, shall be not less than the
fair market value, at the time the option is granted, of the stock subject to
the option.
5. DURATION OF OPTIONS, INCREMENTS AND EXTENSIONS.
(a) Subject to the provisions of paragraph 7, each option shall be
for such term of not more than ten years as shall be determined by the
Committee at the date of the grant. Each option shall become exercisable in
such installments, at such time or times, and may be subject to such
conditions, including conditions based upon the performance of the Company,
as the Committee may in its discretion determine at the date of grant.
(b) The Committee may in its discretion (i) accelerate the
exercisability of any option or (ii) at any time before the expiration or
termination of an option previously granted, extend the terms of such option
(including options held by officers) for such additional period as the
Committee, in its discretion, shall, determine, except that the aggregate
option period with respect to any option, including the original term of the
option and any extensions thereof, shall never exceed ten years.
6. EXERCISE OF OPTION.
(a) An option may be exercised by giving written notice to the
Company, attention of the Secretary, specifying the number of shares to be
purchased, accompanied by the full purchase price for the shares to be
purchased in cash or by check, except that the Committee may permit the
purchase price for the shares to be paid, all or in part, by the delivery to
the Company of other shares of common stock of the Company in such
circumstances and manner as it may specify. For this purpose, the per share
value of the Company's common stock shall be the fair market value at the
close of business on the date preceding the date of exercise.
(b) At the time of exercise of any option, the Committee may, if it
shall determine it necessary or desirable for any reason, require the
optionee (or his heirs, legatees, or legal representative, as the case may
be) as a condition upon the exercise, to deliver to the Company a written
representation of present intention to purchase the shares for his own
account for investment and an agreement not to distribute or sell such shares
in violation of the registration provisions of applicable securities laws.
If such representation and agreement are required to be delivered, an
appropriate legend may be placed upon each certificate delivered to the
optionee upon his exercise of part or all of the option and a stop transfer
order may be placed with the transfer agent.
(c) Each option shall also be subject to the requirement that, if at
any time the Committee determines, in its discretion, that the listing,
registration or qualification of the shares subject to the option upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the issue or purchase of shares
thereunder, the option may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee.
(d) If the Committee shall determine it necessary or desirable for
any reason, an option shall provide that it is contemplated that the shares
acquired through the exercise of the option will not be registered under
applicable federal and state securities laws and that such shares cannot be
resold unless they are registered under such laws or unless an exemption from
registration is available, and the certificate for any such shares issued
upon the exercise of the option shall bear a legend making appropriate
reference to such provisions.
<PAGE>
7. TERMINATION OF EMPLOYMENT-EXERCISE THEREAFTER.
(a) If the employment or tenure as a director of any optionee with
the Company or any of its subsidiaries is terminated for any reason other
than death, permanent disability, retirement or cause, such optionee's
option, to the extent the option is exercisable at the date of termination,
shall expire ninety days after the termination of employment or directorship
(or upon the scheduled termination of the option, if earlier), and all rights
to purchase shares pursuant thereto shall terminate at such time. Temporary
absence from employment because of illness, vacation, approved leave of
absence, or transfer of employment among the Company and its parent or
subsidiary corporations, shall not be considered to terminate employment or
to interrupt continuous employment.
(b) In the event of termination of employment or directorship because
of death or permanent disability (within the meaning of Section 22(e)(3) of
the Code), the option may be exercised in full, unless otherwise provided at
the time of grant, without regard to any installments established under
paragraph 5 hereof, by the optionee or, if he is not living, by his heirs,
legatees, or legal representative or alternate payee under a qualified
domestic relations order, as the case may be, during its specified term prior
to one year after the date of death or permanent disability. In the event of
termination of employment or directorship because of retirement, the option
may be exercised by the optionee (or, if he dies within three months after
such termination, by his heirs, legatees, legal representative or alternate
payee under a qualified domestic relations order, as the case may be), at any
time during its specified term prior to three months after the date of such
termination, but only to the extent the option was exercisable at the date of
such termination.
(c) If an optionee is discharged for cause, his option shall expire
forthwith and all rights to purchase shares under it shall terminate
immediately. For this purpose, "discharge for cause" means a discharge on
account of dishonesty, disloyalty or insubordination.
(d) Notwithstanding the foregoing provisions of this paragraph 7, the
Committee may in the grant of any option make other and different provisions
with respect to its exercise after the optionee's termination of employment
or directorship.
8. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by the
optionee otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order, and each option shall be
exercisable during any optionee's lifetime only by the Optionee or Optionee's
legal representative.
9. ADJUSTMENT.
(a) In the event that the Company's outstanding common stock is
changed by any stock dividend, stock split or combination of shares, the
number of shares subject to this Plan and to options under this Plan shall be
proportionately adjusted.
(b) In case of any capital reorganization, or of any reclassification
of the common stock or in case of the consolidation of the Company with or
the merger of the Company with or into any other corporation (other than a
consolidation or merger in which the Company is the continuing corporation
and which does not result in any reclassification of outstanding shares of
common stock) or of the sale of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation, the Company, or
the corporation resulting from such consolidation or surviving such merger or
to which such sale shall be made, as the case may be, shall determine that
upon exercise of options granted under the Plan after such capital
reorganization, reclassification, consolidation, merger or sale there shall
be issuable upon exercise of an option a kind and amount of shares of stock
or other securities or property (which may, as an example, be a fixed amount
of cash equal to the consideration paid to stockholders of the Company for
shares transferred or sold by them) which the holders of the common stock
(immediately prior to the time of such capital reorganization,
reclassification, consolidation, merger or sale) are entitled to receive in
such transaction as in the judgment of the Committee is required to
compensate equitably for the effect of such event upon the exercise rights of
the optionees. The above provisions of this paragraph shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers and
sales.
(c) In the event of any such adjustment the purchase price per share
shall be proportionately adjusted.
<PAGE>
10. AMENDMENT OF PLAN. The Board of Directors may amend or discontinue the
Plan at any time. However, no such amendment or discontinuance shall (a)
change or impair any option previously granted without the consent of the
optionee, (b) increase the maximum number of shares which may be purchased by
all optionees or any one optionee, (c) change the minimum purchase price, (d)
change the limitations on the option period or increase the time limitations
on the grant of options, or (e) permit the granting of options to members of
the Committee.
11. EFFECTIVE DATE. The Plan has been adopted and authorized by the Board
of Directors for submission to the stockholders of the Company. If the Plan
is approved by the affirmative vote of the holders of a majority of the
outstanding voting stock of the Company at a duly held stockholders' meeting,
it shall be deemed to have become effective on January 12, 1998, the date of
adoption by the Board of Directors. Options may be granted under the Plan
before its approval by the stockholders, but subject to such approval, and in
each such case the date of grant shall be determined without reference to the
date of the approval of the Plan by stockholders.
<PAGE>
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PROXY PROXY
MANAGED CARE SOLUTIONS, INC.
Annual Meeting, June 2, 1999
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Michael D. Hernandez or Richard C. Jelinek or either of them, each with full
power of substitution, is hereby authorized to vote all shares of Common
Stock of Managed Care Solutions, Inc. which the undersigned would be entitled
to vote if personally present at the Annual Meeting of Stockholders of
Managed Care Solutions, Inc. to be held on June 2, 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, (2) for approval of the 1998 CEO Stock Option Plan and (3) for
adoption of the amendment to the Company's Certificate of Incorporation
changing its name to Lifemark, Inc.
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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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: Michael D. Hernandez,
Richard C. Jelinek, William G. Brown, / / / / / /
Risa Lavizzo-Mourey, M.D.,
Henry M. Kaldenbaugh, M.D.,
John G. Lingenfelter, M.D.,
Rogers K. Coleman, M.D.
________________________________________________________
(Except Nominee(s) written above)
FOR AGAINST ABSTAIN
2. Approval of the 1998 CEO Stock Option Plan / / / / / /
3. Adoption of the amendment to the Company's / / / / / /
Certificate of Incorporation changing the
Company's name to Lifemark, Inc.
4. In their discretion, on such other business
as may properly come before the meeting
Dated:__________________, 1999
Signature (s)_____________________________
________________________________________
Please sign exactly as your name (or
names) appears herein. Executors,
administrators, trustees and other
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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