SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment # 1)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _______________
Commission file number 0-22162
SIMIONE CENTRAL HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 22-3209241
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6600 Powers Ferry Road, Atlanta, Georgia 30339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 644-6700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ x ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant on March 24, 1999: $6,377,917.
There were 3,867,033 shares of Common Stock outstanding at April 28, 2000.
Documents incorporated by reference in this Form 10-K/A: None
<PAGE>
Introductory Note:
This Form 10-K/A is filed to include the information required by Part III,
Items 10-13 of Form 10-K, which the Registrant previously anticipated
incorporating by reference from its definitive proxy statement.
PART III
Item 10. Directors and Executive Officers.
The directors of the Company are as follows:
R. Bruce Dewey, age 48, became a director of Simione in March 2000 upon the
closing of the merger with MCS pursuant to the terms of the MCS Merger
Agreement, has served as Senior Vice President of Mestek since 1994 and
Secretary of Mestek since 1992. Mr. Dewey was General Counsel of Mestek from
1994 to 1999 and was Vice President -- Administration prior to 1994. Prior to
joining Mestek in 1990, Mr. Dewey was an attorney in private practice in
Seattle, Washington most recently with Cairncross, Ragen & Hempelmann from 1987
to 1990. Prior to the merger of Mestek, Inc. and Reed National Corp., Mr. Dewey
had been Assistant to the President of Reed from 1979 to 1983 and had been
affiliated with the Cooper-Weymouth, Peterson division of Reed from 1975 to
1979. In accordance with the terms of the merger agreement, Mr. Dewey was
appointed the Chief Executive Officer of Simione as of September 9, 1999. Mr.
Dewey will remain Senior Vice President and Secretary of Mestek and will spend
approximately 75% of his time on Simione. Mr. Dewey was a director of MCS from
June 1992 to August 1999.
Barrett C. O'Donnell, age 46, has served as Chairman of the Board of
Simione since June 15, 1998, and served as Chief Executive Officer and President
from June 15, 1998 to September 9, 1999. Mr. O'Donnell has been a director of
Simione since October 1996. From October 1992 until October 1996, Mr. O'Donnell
served as Chairman of the Board of InfoMed Holdings, Inc., a Delaware
corporation that merged with Simione Central Holding, Inc., a Georgia
corporation, to form Simione effective October 8, 1996. Mr. O'Donnell also
served as Chief Executive Officer of InfoMed from November 1994 to October 1996.
From 1978 to present, Mr. O'Donnell has been Chairman of the Board, President
and Chief Executive Officer of O'Donnell Davis, Inc., which is in the consulting
and investment advisory services business.
William J. Simione, Jr., age 57, is a certified public accountant who has
served as Vice Chairman of the Board and Executive Vice President of Simione
since October 1996. From January 1996 until October 1996, Mr. Simione served as
the President of Simione Central, Inc., a wholly owned subsidiary of Simione.
From January 1975 until December 1995, Mr. Simione was Managing Partner of the
Home Health Care Consulting Division of Simione & Simione, CPAs. Since September
1995, Mr. Simione has also served as a director and an audit committee member of
Personnel Group of America, Inc., a leading provider of information technology
services and commercial staffing solutions. Mr. Simione has 32 years of
experience in the home health care industry.
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James A. Gilbert, age 51, has served as a director of Simione since May
1997 and as Secretary of Simione since February 2000. Mr. Gilbert has been
General Partner of Live Oak Equity Partners, a venture capital firm, since July
1998. From September 1996 to November 1997, Mr. Gilbert served as President,
Chief Operating Officer and a director of IMNET Systems, Inc., a provider of
electronic information and document management systems to the health care
industry. From January 1995 to September 1996, Mr. Gilbert served as Senior Vice
President and General Counsel at HBO & Company, a health care information
company. From 1988 to December 1994, Mr. Gilbert held several other positions at
HBO & Company.
Dr. David O. Ellis, age 57, is President and a director of EGL Holdings,
Inc., an Atlanta-based merchant banking group providing investment services and
capital to United States middle market companies. He has been with EGL and the
predecessor company, Corporate Finance Associates, since 1982. Dr. Ellis is
currently a director of several privately-held companies.
Jesse I. Treu, age 52, became a director of Simione in August 1999. Since
1995, he has been Chairman of the board of directors of CareCentric. Jesse I.
Treu, Ph.D. has been a general partner of Domain Associates, L.L.C. and a member
of Biotechnology Investments Limited's U.S. Venture Capital advisory group since
Domain's inception 13 years ago. Prior to the formation of Domain, Dr. Treu had
twelve years' health care experience at GE and Technicon Corporation in a number
of research, marketing management, and corporate staff positions. As a venture
capitalist, he has been a director of over 18 early-stage health care companies,
11 of which have become public companies. Dr. Treu has served as founder,
president, and chairman of several of these companies. Dr. Treu received his
B.S. from Rensselaer Polytechnic Institute, and his M.A. and Ph.D. degrees from
Princeton University. Mr. Treu was elected to the board pursuant to the
CareCentric merger agreement.
Daniel J. Mitchell, age 42, became a director of Simione in August 1999.
From 1995 to the closing of the CareCentric merger in 1999, he was a director of
CareCentric. Mr. Mitchell is a General Partner of Capital Health Venture
Partners, a venture capital firm that manages the American Healthcare Fund and
the American Healthcare Fund II and founding manager of Sequel Venture Partners.
Prior to co-founding Capital Health in 1985, he was with the Institutional
Venture Capital Fund at the First National Bank of Chicago from 1983 to 1985,
and with the Bank's Trust Investment Management Division from 1981 to 1982. He
holds a BS from the University of Illinois and an MBA from the University of
California, Berkeley. Mr. Mitchell was elected to the board pursuant to the
CareCentric merger agreement.
Winston R. Hindle, Jr., age 68, became a director of Simione in March, 2000
upon the closing of the merger with MCS pursuant to the terms of the MCS Merger
Agreement. Mr. Hindle has been a director of Mestek since 1994. Mr. Hindle was
Senior Vice President of Digital Equipment Corporation, Maynard, Massachusetts,
prior to his retirement in July, 1994. In his 32 years with Digital, he managed
both corporate functions and business units and was a member of Digital's
Executive Committee. Mr. Hindle is a member of Mestek's Executive Committee. Mr.
Hindle was a director of MCS, Inc. from 1994 until the date of the MCS merger in
March 2000. Mr. Hindle is also a director of Keane, Inc., of Boston,
Massachusetts and CP Clare Corporation of Beverly, Massachusetts.
3
<PAGE>
David W. Hunter, age 70, became a director of Simione in March, 2000 upon
the closing of the merger with MCS pursuant to the terms of the MCS Merger
Agreement. Mr. Hunter has served as a director of Mestek since 1985. Mr. Hunter
has been Chairman of Hunter Associates, Inc., an investment banking firm in
Pittsburgh, Pennsylvania since 1992. From 1990 to 1992 he was Chairman Emeritus
of Parker/Hunter, Inc., an investment banking firm in Pittsburgh, Pennsylvania,
where he was Chairman from 1978 until 1990. Mr. Hunter is also a director of
Lockhart Companies, Kiene Diesel Accessories, Inc., Justifacts, Quanterra, Inc.
and U.S. Tool & Die Corporation. He served as Chairman of the Board of Governors
of the National Association of Securities Dealers, Inc. from 1986 to 1987.
John E. Reed, age 84, became a director of Simione in March, 2000 upon the
closing of the merger with MCS pursuant to the terms of the MCS Merger
Agreement. Mr. J.E. Reed had been the Chairman of the Board of MCS since 1986.
Mr. Reed has been a director of Mestek since 1986. Mr. J.E. Reed has been
Chairman of the Board, President and Chief Executive Officer of Mestek since
1989, is a member of the Executive Committee and serves on the boards of
Mestek's subsidiaries. From 1986 until 1989 he was President and Chief Executive
Officer and prior to the 1986 merger of Mestek, Inc. and Reed National Corp.,
had been President and Chief Executive Officer of Reed since he founded it in
1946. Mr. Reed is also a director of Wainwright Bank & Trust Co., Boston,
Massachusetts.
Stewart B. Reed, age 51, became a director of Simione in March, 2000 upon
the closing of the merger with MCS pursuant to the terms of the MCS Merger
Agreement. Mr. Reed had been a director of MCS since 1987. Mr. Reed is also a
director of Mestek, a position he has held since 1986. Mr. Reed served as
Executive Vice President of Mestek from 1986 to 1996. Prior to the 1986 Merger
of Mestek, Inc. and Reed National Corp., Mr. Reed had been Executive Vice
President of Reed National Corp. in charge of corporate development. Mr. Reed
had been employed by Reed National Corp. since 1970. Mr. Reed is the son of John
E. Reed, Chairman of the Board, President and Chief Executive Officer of Mestek
and the Chairman of the Board of MCS.
Edward K. Wissing, age 62, became a director of Simione in March, 2000 upon
the closing of the merger with MCS pursuant to the terms of the MCS Merger
Agreement. Mr. Wissing retired in 1998 from American HomePatient of Nashville,
Tennessee, a regional provider of home health care products and services, a
company which he founded. He maintains an active role in the home health care
industry and has twice chaired the Health Industry Distributors Association
(HIDA). Mr. Wissing has also served as chairman of HIDA's Educational Foundation
and serves on the board of American HomePatient and Psychiatric Solutions, Inc.,
a Nashville-based mental health services provider.
Board of Directors and Committee Meetings
The Board of Directors of the Company held seven meetings during 1999.
During 1999, the board of directors had an Audit Committee and a Compensation
Committee. The Audit Committee:
- - reviews Simione's accounting practices and financial results;
- - consults with and reviews the services provided by Simione's independent
accountants; and
- - reviews and approves, with the concurrence of a majority of the
disinterested directors of Simione, transactions, if any, with affiliated
parties.
4
<PAGE>
The Audit Committee during 1999 consisted of Messrs. Anatharaman and
Gilbert. At December 31, 1999, the only member of the Audit Committee was Mr.
Anantharaman. The Audit Committee met as necessary to discharge their duties.
The Compensation Committee:
- - reviews and recommends to the board of directors the compensation and
benefits of all the executive officers of Simione;
- - administers Simione's compensation and benefit plans; and
- - reviews general policies relating to compensation and benefits of employees
of Simione.
The members of the Compensation Committee during 1999 were Messrs.
Anantharaman and Gilbert. The Compensation Committee held one meeting during
1999.
Each of Simione's directors in 1999 attended at least 75% of the meetings
of the board of directors and the Committees, if any, on which they served.
After the completion of the MCS merger, the board of directors reorganized
its committee structure. The new committee memberships are as follows:
Executive Committee: John E. Reed (Chairman)
R. Bruce Dewey
Barrett C. O'Donnell
Compensation Committee: David O. Ellis (Chairman)
Daniel J. Mitchell
Jesse I. Treu
Audit Committee: Winston R. Hindle, Jr. (Chairman)
David O. Ellis
James A. Gilbert
Nominating Committee: David W. Hunter (Chairman)
William J. Simione, Jr.
Edward K. Wissing
Voting Agreement
The merger agreement contains a voting agreement regarding the election of
directors. Under this agreement, the directors of Simione will appoint six
individuals designated by MCS' stockholders to the board of Simione. For a
period of eighteen months after the effective date of the merger, Simione will
name the six MCS designees as nominees to the Simione board in any proxy
statement relating to the election of directors.
For so long as Simione's Series B Preferred Stock remains outstanding, in
the event that Simione's board is unable to reach a decision on a vote on any
matter in two consecutive board meetings, the number of directors shall be
increased by one member and the holders of the Series B Preferred Stock shall
have the right to appoint such member.
5
<PAGE>
The three major stockholders of MCS, John E. Reed, Stewart Reed and E.
Herbert Burk, are obligated to vote their Simione shares in favor of all
nominees named in Simione's proxy statements. However, Simione will not be
required to nominate, and the major stockholders of MCS will not be required to
vote for, a particular candidate if that candidate is subject to
disqualifications related to potential director misconduct. The initial group of
designees elected by the MCS stockholders were John E. Reed, Stewart B. Reed,
David W. Hunter, Winston R. Hindle, Jr., R. Bruce Dewey and Edward K. Wissing.
Director Compensation
Directors who are officers of the Company receive no additional
compensation for serving on the Board of Directors. Directors who are not
officers of the Company, receive fees of $1,000, $500 and $250 for each Board,
Committee and telephone meeting, respectively, attended. All directors receive
reimbursement for certain expenses in connection with attendance at Board and
Committee meetings.
The Company has a consulting agreement with EGL, a venture capital firm,
whereby EGL provides consulting services on general business operations and
corporate investments including financial analysis, review of industry trends
and assistance with respect to merger or acquisition opportunities. Mr.
Anantharaman, a former director of the Company, was a partner at EGL from 1987
until June 1998. The consulting agreement expired on June 30, 1999 and provided
for a monthly consulting fee of $5,000, plus reimbursement of out-of-pocket
expenses. The fees were determined by negotiation between the parties. The
Company did not pay any consulting fees to EGL for the year ended December 31,
1999.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors is currently comprised
of Mr. John E. Reed, Dr. David O. Ellis and Mr. Treu. During 1999, Messrs.
Anantharaman and Gilbert served on the Compensation Committee. None of these
directors ever served as an officer or employee of the Company or any of its
subsidiaries.
On July 12, 1999, Simione entered into a merger agreement (the "Agreement")
with CareCentric Solutions, Inc. The CareCentric merger was completed on August
12, 1999, for total consideration of $9,312,460. Under the Agreement,
CareCentric merged into a wholly-owned subsidiary of Simione, and Simione issued
3,034,521 shares of Series A Preferred Stock to the former preferred
stockholders and noteholders of CareCentric and paid $3.00 per share in cash to
the former common stockholders of CareCentric (approximately $200,000 in the
aggregate). On March 7, 2000, Simione's stockholders approved the conversion of
the Series A Preferred Stock into Simione common stock. After giving effect to
Simione's one-for-five reverse stock split effected on the same date, the Series
A Preferred Stock was converted into 606,904 shares of Simione common stock on
March 7, 2000. The former CareCentric preferred stockholders and noteholders
will receive additional shares of Simione common stock (up to a maximum of
606,904 additional shares) if the average closing market price of Simione common
stock during the fourth quarter of 2000 is less than $15.00 per share.
6
<PAGE>
Mr. Treu was a stockholder and director of CareCentric. As a result of the
merger, Mr. Treu received beneficial ownership of 155,424 shares of Simione
common stock.
On May 26, 1999, Simione signed an agreement ("MCS Agreement") to merge
with MCS, Inc., a wholly-owned subsidiary of Mestek, Inc. The MCS Agreement was
amended in August 1999 to provide that the calculation of the merger
consideration would not include the shares issued in the CareCentric merger and
was further amended in September 1999 to provide for additional funding from
Mestek and the spin-off of MCS to Mestek stockholders.
On March 6, 2000, MCS was spun off from its former parent company, Mestek,
Inc. On March 7, 2000, Simione completed the merger with MCS, Inc. Simione
issued approximately 1.5 million shares of common stock to MCS stockholders in
exchange for all of the outstanding shares of MCS common stock. This number of
shares has been adjusted to reflect a one-for-five reverse stock split that was
completed immediately prior to the merger. In connection with the closing of the
merger, Mestek invested $6 million in Simione in exchange for 5.6 million shares
of Series B preferred stock and warrants to purchase 400,000 shares of Simione
common stock. The $6 million investment consisted of the cancellation of $4
million in aggregate principal value of promissory notes and payment of interest
accrued thereon, and payment of the remaining amount in cash to Simione at the
closing of the merger.
The consideration paid by Simione to acquire MCS was determined by
reference to a valuation report from an independent valuation firm and as a
result of arm's-length negotiations. The description of the MCS merger agreement
contained herein is qualified in its entirety by reference to the Second Amended
and Restated Agreement and Plan of Merger and Investment Agreement dated as of
October 25, 1999 by and among Simione, MCS, Mestek, Inc. and three major
stockholders of Mestek included as Exhibit 2.1 to Simione's Registration
Statement on Form S-4 (Registration No. 333-96529) and incorporated herein by
reference.
Subsequent to the MCS merger, approximately 39% or 1,489,853 shares of the
outstanding common stock of Simione are owned by the former MCS stockholders.
One of the stockholders, John E. Reed, by virtue of the spin-off of MCS to
the stockholders of Mestek and the merger of MCS into Simione, controls
approximately 22% of the common stock on matters to be voted upon by
stockholders of Simione. The Series B Preferred Stock issued to Mestek has
voting rights equal to 2,240,000 shares of Simione common stock, or
approximately 36% of the total voting power. The Series C Preferred Stock,
issued to Mestek upon conversion of its promissory note at the closing of the
merger, has voting rights equal to 170,000 shares of Simione common stock, or
approximately 2.7% of the total voting power. Mr. Reed, through direct share
ownership and as trustee under various family trusts, controls approximately 57%
of the vote on matters to be voted upon by stockholders of Mestek. This voting
power at the Mestek level makes Mr. Reed capable of exercising voting power of
the Series B and Series C Preferred Stock at the Simione level. Accordingly, Mr.
Reed controls, through his direct and indirect control of 22% of Simione common
stock and his indirect control of the Series B and Series C Preferred Stock,
approximately 52% of the vote on matters to be voted upon by stockholders of
Simione.
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Nasdaq has challenged the voting rights of the Series B Preferred Stock.
Simione is in discussions with Nasdaq regarding this issue.
In addition, as a result of these holdings, Mr. Reed was able to determine
the composition of the MCS board designees that were appointed to the Simione
board, and Mr. Reed would be able to select a 13th director to break a deadlock
in the event that Simione's board is unable to reach a decision on a vote on any
matter in two consecutive board meetings.
Except as set forth under "-- Director Compensation", there were no other
material transactions between the Company and any of the members of the
Compensation Committee during the year ended December 31, 1999.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the federal securities laws, the Company's directors and executive
officers, and any persons holding more than 10% of the Common Stock outstanding,
are required to report their initial ownership of Common Stock and any
subsequent changes in that ownership to the Commission and The Nasdaq Stock
Market. Specific due dates have been established and the Company is required to
disclose any failure to file by these dates during the Company's most recent
fiscal year. To the Company's knowledge, all of these filing requirements were
satisfied. In making these disclosures, the Company has relied solely on its
review of copies of the reports that have been submitted to the Company with
respect to its most recent fiscal year.
Information relating to the executive officers of the Company is provided
in Part I hereof.
Item 11. Executive Compensation.
Compensation Summary
The following table sets forth all compensation paid by the Company for the
years ended December 31, 1999, 1998 and 1997 to each of the individuals who
served as Chief Executive Officer during 1999, the four most highly compensated
other executive officers, and two individuals for whom disclosure would have
been provided but for the fact that such individuals were not serving as
executive officers of the Company at the end of the last fiscal year(together,
the "Named Executive Officers").
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<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Annual Compensation -----------------
------------------------------------------------------------ Number of
Other Securities All Other
Annual Underlying Compensation
Salary Bonus Compensation Options ($)(1)
Name and Principal Position Year ($) ($) ($) Grants(#)
-------------------------------------------- --------------------------- ------------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Barrett C. O'Donnell 1999 $ 179,167 -- $ -- 50,000 $ 400
Chairman of the Board, and 1998 191,667 -- -- -- --
Former Chief Executive Officer 1997 -- -- -- -- 144,000
and President (2)
R. Bruce Dewey 1999 175,000 -- -- 30,000 --
President and Chief Executive
Officer (3)
William J. Simione, Jr. 1999 300,000 -- -- -- 784
Vice Chairman of the Board and 1998 300,000 -- -- 75,000 4,500
Executive Vice President 1997 300,000 -- -- -- 6,134
Robert J. Simione 1999 225,000 -- -- -- 827
Senior Vice President of 1998 225,000 -- -- 41,000 1,653
Consulting 1997 225,000 -- -- -- 1,443
Gary M. Bremer 1999 -- -- 332,769 (5) -- 117
Former Chief Executive Officer 1998 248,764 -- 140,113 (5) -- 3,000
and Chairman of the Board (4) 1997 329,000 -- 45,934 (6) -- 29,909 (8)
Jack Arthur 1999 150,000 37,500 -- -- 2,050
Senior Vice President of Product
Management and Quality Assurance
Kathryn B. McClellan 1999 147,961 -- -- 15,000 439
Senior Vice President of Product
Services
Jay S. Shevins 1999 79,880 -- 159,761 (7) -- 491
Former Senior Vice President of
Product Management (4)
</TABLE>
_______________________________________
(1) Represents group life insurance and disability insurance premium payments,
except for Mr. O'Donnell's 1999 amount which represents amounts paid to ODD
for consulting services.
(2) Mr. O'Donnell became Chairman, Chief Executive Officer and President on
June 15, 1998, and resigned as Chief Executive Officer and President on
September 9, 1999.
(3) Mr. R. Bruce Dewey became Chief Executive Officer of Simione on September
9, 1999, and is paid an annual base salary of $175,000. Since Mr. Dewey
devotes 25% of his time to his duties as Senior Vice President of Mestek,
25% of this salary is paid directly by Mestek.
(4) Mr. Bremer resigned as Chairman of the Board in June 1998. Mr. Shevins
resigned as Senior Vice President of Product Management in April, 1999, and
Mr. Hare resigned as Chief Financial Officer in April 2000.
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(5) Represents amounts paid pursuant to a severance agreement dated July 22,
1998 (see "Item 11. Executive Compensation - Severance Agreements").
(6) Represents certain car allowance, club membership and insurance expense
reimbursements.
(7) Represents amounts paid pursuant to a severance agreement dated April 1,
1999 (see "Item 11. Executive Compensation - Severance Agreements").
(8) Includes $20,698 of interest imputed to Mr. Bremer in 1997 in connection
with a promissory note to the Company for $900,000 entered into on March 5,
1996 by Mr. Bremer. The Company forgave all interest (5.05% per annum) that
accrued on the outstanding principal balance of this promissory note. In
July 1997, Mr. Bremer repaid in full the then outstanding principal balance
of $850,000.
Grants of Stock Options
The following table sets forth certain information with respect to
individual grants of stock options by the Company to the Named Executive
Officers during the year ended December 31, 1999.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Potential
Number of Realizable Value
Securities % of Total at Assumed Annual
Underlying Options Rates of Stock
Options Granted to Exercise Price Appreciation
Granted(#) Employee in Price for Option Term(2)
Name (1) Fiscal Year ($/Sh) 5% ($) 10% ($)
- --------------------------------------- -------------------- -------------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Barrett C. O'Donnell 50,000 36.5% $ 10.00 $ 314,447 $ 796,871
R. Bruce Dewey 30,000 21.9% 8.75 165,084 418,357
Jack Arthur -- -- -- -- --
Kathryn B. McClellan 15,000 10.9% 7.50 70,751 179,296
</TABLE>
- --------------------------------
(1) Except for Mr. O'Donnell's stock options, which are immediately vested, the
stock options reflected in this table vest as to 33 1/3% of the shares of
Common Stock covered thereby on the first, second and third anniversary of
the date of grant. The exercise price of all such stock options reflected
in this table is equal to the fair market value of the Common Stock on the
date of grant.
(2) The dollar amounts under these columns represent the potential realizable
value of each grant of option assuming that the market price of the Common
Stock appreciates in value from the date of grant at the 5% and 10% annual
rates prescribed by the Securities and Exchange Commission (the
"Commission") and, therefore, are not intended to forecast possible future
appreciation, if any, of the price of the Common Stock. The actual value,
if any, that an executive officer may ultimately realize will depend on the
excess of the stock price over the exercise price on the date the stock
option is exercised. Therefore, there can be no assurance that the value
realized by an executive officer upon actual exercise of the stock options
granted in 1999 will be at or near the Potential Realizable Value indicated
in the table.
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<PAGE>
Option Exercises and Holdings
The following table sets forth information concerning options exercised
during the fiscal year ended December 31, 1999 and the value of unexercised
stock options held at the end of the fiscal year ended December 31, 1999 by each
Named Executive Officer.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Shares
Acquired Number of Securities
on Value Underlying Unexercised Value of in-the-Money
Exercise Realized Options at Options at
Name (#) ($) December 31,1999 (#) December 31, 1998 ($) (1)
---- --------- ---------- --------------------------------- -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Barrett C. O'Donnell 13,600 $128,248 84,196 -- $ 0 --
R. Bruce Dewey -- -- -- 30,000 -- 18,750
William J. Simione, Jr. -- -- 17,111 10,000 0 0
Robert J. Simione -- -- 8,723 5,333 0 0
Jack Arthur -- -- 5,000 10,000 7,825 15,650
Gary M. Bremer -- -- 34,242 -- 0 --
Kathryn B. McClellan -- -- 3,000 18,000 0 28,125
Jay S. Shevins -- -- 1,000 -- 0 --
</TABLE>
___________________
(1) Dollar values were calculated by determining the difference between the
fair market value of the underlying securities at year-end at $9.375 per
share, as adjusted for the reverse split and the exercise price of the
options.
Employment Agreements
A Simione subsidiary has an employment agreement with Mr. William J.
Simione, Jr., Vice Chairman of the Board and an Executive Vice President of
Simione, which provides for a base salary of $300,000, plus benefits, and a
potential bonus payable at the discretion of the board of directors. The
agreement was signed on January 1, 1996 and has an initial five year term that
can be renewed for additional one year terms unless terminated by either party.
The agreement provides for severance upon a change of control of Simione equal
to three times his average annual compensation for the five year period
preceding the date of the change of control of Simione. The agreement also
contains a non-compete provision prohibiting Mr. Simione from competing with
Simione during the term of the agreement and for an additional three year period
if he is terminated in connection with a change in control.
Simione has an employment agreement with Jack Arthur, Senior Vice President
of Product Management and Quality Assurance, that provide for base salary of
$150,000 per year plus benefits, and a potential bonus of up to $75,000 per
year. In addition Simione made a loan of $100,000 to Mr. Arthur on January 19,
1999 at a rate equal to Wachovia Bank's prime lending rate, payable over 5
years. See "Certain Relationships and Related Transactions".
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<PAGE>
Severance Agreements
Simione entered into a severance agreement with Gary M. Bremer, a former
director and officer of Simione, on July 22, 1998. Mr. Bremer was Chairman of
the Board of Simione from October 1996 until June 1998 and also served as
Simione's Chief Executive Officer from October 1996 until April 1997. Pursuant
to such severance agreement, Mr. Bremer receives, from the period July 1, 1998
until December 10, 2000, severance at an annual rate of $400,000 payable in
semi-monthly installments plus a total payment of $50,000 and reimbursement of
COBRA premiums payable over the same period. Under the severance agreement, Mr.
Bremer retained rights to all his vested Simione options on the date of the
agreement but forfeited any rights to non-vested stock options. The severance
agreement was amended in October and November of 1999 to allow the Company to
defer $89,470.24 of payments due Mr. Bremer through December 31, 1999 until
December 10, 2000 pursuant to a promissory note with an annual interest rate of
9%.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information as to the number of shares of
Simione common stock that will be owned immediately after giving effect to the
merger by:
- - each director of Simione;
- - the Chief Executive Officer and the four other most highly compensated
executive officers of Simione;
- - all Simione directors and executive officers, as a group; and
- - each person, entity, or group of affiliated persons known by Simione to be
the beneficial owner of more than 5% of Simione's common stock, based on
that person's or entity's ownership of Simione common stock and the number
of outstanding shares of Simione common stock as of April 28, 2000.
For purposes of this table, beneficial ownership of securities is defined
according to the rules of the SEC and means generally the power to vote or
exercise investment discretion with respect to securities, regardless of any
economic interests therein. Except as otherwise indicated, Simione believes that
the beneficial owners of shares of Simione common stock listed below will have
sole investment and voting power with respect to such shares, subject to
community property laws where applicable. In addition, for purposes of this
table, a person or group is deemed to have beneficial ownership of any shares
which such person has the right to acquire within 60 days after the date as of
which these data are presented. For purposes of calculating the percentage of
outstanding shares held by each person named above, any shares which this person
has the right to acquire within 60 days after the date as of which these data
are presented are deemed to be outstanding, but not for the purpose of
calculating the percentage ownership of any other person.
The percentages were calculated based on the ratio of the number of shares
of Simione common stock beneficially owned by such beneficial owner as of April
28, 2000 to the sum of:
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- - 3,867,033 the total number of outstanding shares of common stock as of
April 28, 2000; and
- - the number of shares of common stock issuable upon exercise of options or
warrants held by the applicable beneficial owner exercisable within 60 days
of April 28, 2000.
The table reflects the one-for-five reverse stock split (the "Reverse
Split") that became effective on March 7, 2000. The number of shares shown below
does not reflect ownership of 5,600,000 shares of Series B Preferred Stock and
850,000 shares of Series C Preferred Stock. The Series B Preferred Stock has 0.4
votes per share and the Series C Preferred Stock has 0.2 votes per share.
Neither the Series B Preferred Stock nor the Series C Preferred Stock is
convertible into common stock. Mestek owns 100% of the Series B Preferred Stock
and 100% of the Series C Preferred Stock. The "total voting power" reflects the
effect of the Series B Preferred Stock and Series C Preferred Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK TOTAL
BENEFICIALLY VOTING
OWNED POWER
-------------------------------- ------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------ ------ -------
<S> <C> <C> <C> <C>
Mestek, Inc.(1)(2) 400,000 9.4 42.1
John E. Reed(1)(2)(3) 965,989 22.6 50.6
Stewart B. Reed(2)(4) 376,657 9.7 6.0
Barrett C. O'Donnell(5) 257,395 6.5 4.0
O'Donnell Davis, Inc.(6) 192,395 4.9 3.0
Dr. David O. Ellis(7) 197,434 5.1 3.1
Gary M. Bremer(8) 179,191 4.6 2.8
William J. Simione, Jr.(9) 27,886 * *
Robert J. Simione(10) 10,931 * *
R. Bruce Dewey(2) 52 * *
Dr. Charles N. Mead -- -- --
William A. Thomasmeyer -- -- --
Michael Quinn 612 * *
Jack Arthur(11) -- -- --
James A. Gilbert(11)(12) 6,417 * *
Winston R. Hindle, Jr.(2) 1,534 * *
David W. Hunter(2)(13) 2,453 * *
Kathryn B. McClellan(5)(14) 3,093 * *
Daniel J. Mitchell(15) 74,734 1.9 1.2
Jesse I. Treu(16) 155,424 4.0 2.5
Edward K. Wissing(2) -- -- --
All directors and executive officers as a group (19 persons)(17)
1,864,204 47.2 65.8
</TABLE>
- -------------------------
* Less than 1%.
(1) Includes 400,000 shares issuable upon exercise of a warrant to be issued to
Mestek in the MCS merger. Does not include approximately 388,742 shares
issuable upon an option to be issued to Mestek in the MCS merger. This
option only vests as existing Simione options, warrants or conversion
rights are exercised. For purposes of this table, we have assumed that John
E. Reed has voting control of the securities held by Mestek.
(2) The address is 260 North Elm Street, Westfield, Massachusetts 01085.
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(3) Excludes 1,593 shares of common stock which are held by Mr. Reed's wife and
11,319 shares of common stock which are held by a family trust for which he
is not trustee, to which he disclaims ownership. Excludes 291,362 shares of
common stock which are held by John E. Reed as trustee for various family
trusts, but for which he disclaims beneficial ownership; of the 291,362
shares disclaimed by John E. Reed, 225,550 shares are included in the
shares listed as beneficially owned by his son, Stewart B. Reed, as
described in note (4) below. Includes 89,312 shares of common stock owned
by Sterling Realty Trust, a Massachusetts business trust of which John E.
Reed is the trustee and of which he and a family trust are the
beneficiaries.
(4) Includes 225,550 shares of common stock which are owned by the Stewart B.
Reed Trust, of which Stewart B. Reed is the beneficiary and John E. Reed is
the trustee.
(5) Includes 27,000 shares issuable upon exercise of warrants and 84,196 shares
issuable upon exercise of options. Mr. O'Donnell is a stockholder, director
and officer of ODD. Accordingly, pursuant to Rule 13d-3 under the Exchange
Act, he is deemed to be an indirect beneficial owner of Simione's
securities beneficially owned by ODD.
(6) Includes 27,000 shares issuable upon exercise of warrants and 34,196 shares
issuable upon exercise of options
(7) Includes 170,786 shares held by, and 6,189 shares issuable upon exercise of
options by, Rowan Nominees Limited ("Rowan"). Rowan is nominee for EGL
Holdings, Inc. Mr. Ellis is president and a director of EGL Holdings, Inc.
Includes 1,837 shares held by Mr. Ellis' wife. Includes 8,020 shares
issuable upon exercise of options.
(8) Includes 34,243 shares issuable upon exercise of options. Excludes any
interest Mr. Bremer has in the Simione Central Holdings, Inc. Profit
Sharing Plan Trust (the "Profit Sharing Plan").
(9) Includes 17,111 shares issuable upon exercise of options.
(10) Includes 8,722 shares issuable upon exercise of options.
(11) Includes 4,167 shares issuable upon exercise of options.
(12) The address is 6600 Powers Ferry Road, Atlanta, Georgia 30339. Includes
5,000 shares issuable upon exercise of options
(13) Excludes 1,593 shares of Simione common stock held by his spouse to which
he disclaims ownership.
(14) Includes 3,000 shares issuable upon exercise of options.
(15) Includes 74,734 shares held by a limited partnership of which Mr. Mitchell
is a general partner. Mr. Mitchell disclaims beneficial ownership of these
shares.
(16) Includes 150,565 shares held by Domain Partners III, L.P., a Delaware
limited partnership ("DP III"), and 4,859 shares held by DP III Associates,
L.P., a Delaware limited partnership ("DP III A"). DP III and DP III A are
Delaware limited partnerships, each of whose principal business is that of
a private investment partnership. The sole general partner of DP III and DP
III A is One Palmer Square Associates III,L.P., a Delaware limited
partnership ("OPSA III"), whose principal business is that of acting as the
general partner of DP III and DP III A. Mr. Treu is a general partner of
OPSA III. Mr. Treu disclaims beneficial ownership of these shares.
(17) Includes 136,405 shares issuable upon exercise of options and 427,000
shares issuable upon exercise of warrants.
14
<PAGE>
Item 13. Certain Relationships and Related Transactions.
On January 1, 1996, InfoMed Holdings, Inc., a predecessor corporation of
Simione, entered into a lease agreement with Gateway LLC with respect to
Simione's Pompano Beach, Florida office. O'Donnell Davis, Inc. owns 70% of
Gateway LLC and more than 5% of Simione's common stock. In addition, Mr. Barrett
C. O'Donnell, Chairman of the Board of Simione, is the Chairman of the Board,
President and Chief Executive Officer and a 75% stockholder of ODD. Reid
Horovitz, former General Counsel and Secretary of Simione, owns 10% of Gateway
LLC. Pursuant to the lease agreement, Gateway LLC leases approximately 20,291
square feet to Simione for a term of five years that commenced on January 1,
1996. In addition, on October 24, 1997 a subsidiary of Simione entered into a
written addendum extending the Pompano lease through December 31, 2001. Simione
has an option to renew the lease for an additional five year term. Rental
payments from Simione for the year ended December 31, 1998 and 1999 totaled
$384,528 and $420,000, respectively. In addition to these lease payments,
Simione is obligated to pay its share of the office building's operating
expenses. The lease payments were determined by negotiation between the parties.
Simione believes that the terms of the lease agreement are at least as favorable
as could have been obtained elsewhere for similar facilities from unaffiliated
third parties. Gateway LLC sold the Pompano lease to an unrelated third party in
August 1998.
On January 1, 1998, Simione replaced an oral lease agreement with S&S
Realty for Simione's Hamden, Connecticut office with a written agreement. Mr.
William J. Simione, Jr. owns 45% of S&S Realty. Pursuant to the lease agreement,
S&S Realty leases approximately 6,500 square feet to Simione for a term expiring
on December 31, 2002. Rental payments for the year ended December 31, 1998 and
1999 totaled $130,000 and $147,000 respectively. The scheduled annual rental
payments for each year of the remaining term may, upon thirty (30) days' written
notice from S&S Realty, be increased by $5,850. In addition to these lease
payments, Simione is obligated to pay its share of the office building's
operating expenses, other than water, which is provided by S&S Realty. The lease
payments were determined by negotiation between the parties. Simione believes
that the terms of the lease agreement are at least as favorable as could have
been obtained elsewhere for similar facilities from unaffiliated third parties.
On November 1, 1996, Simione Central, Inc., a wholly-owned subsidiary of
Simione ("SCI"), entered into various information, support and management
service agreements with certain affiliates of Columbia/HCA Healthcare
Corporation. As part of the negotiation of the Columbia agreements, Columbia/HCA
required that SCI, formerly a subsidiary of Central Health Holding Company,
guarantee indemnification obligations of the former stockholders of Central
Health Holding, including Mr. Bremer, to those Columbia/HCA affiliates for
potential liabilities relating to the Central Health Holding Company Employee
Stock Ownership Plan Trust or its participants, including potential liabilities
resulting from a then ongoing investigation of the plan by the Department of
Labor and the Internal Revenue Service's then ongoing audit of issues related to
the plan. Columbia/HCA became indirectly responsible for these plan obligations
as a result of its acquisition of Central Health Holding by purchasing all of
Central Health Holding's stock. Because all of the former Central Health Holding
stockholders were also stockholders of Simione as a result of the January 1996
spin-off of Simione from Central Health Holding, SCI agreed to undertake the
guaranty. Also, on November 1, 1996, the plan was converted into the Simione
Central Holdings, Inc. Profit Sharing Plan and sponsorship of the plan was
transferred from Central Health Holding to Simione. Under the terms of the
guaranty, SCI guarantees Columbia/HCA against:
15
<PAGE>
- - plan losses arising from a fiduciary breach, prohibited transaction or
other violation of law relating to the plan; or
- - liabilities related to the plan which are not paid by the former
stockholders of Central Health Holding other than the plan.
These liabilities are guaranteed only to the extent that they are not
recovered by Columbia/HCA through other indemnity provisions of the stock
purchase agreement. Columbia/HCA's other sources of potential recovery include
amounts accrued on Central Health Holding's closing balance sheet at the time of
sale and escrow accounts established for the benefit of Columbia/HCA by the
former stockholders of Central Health Holding. SCI's maximum liability under the
guaranty is limited to:
- - $20 million for obligations arising before November 1, 1997;
- - $17.5 million for obligations arising before November 1, 1998;
- - $15 million for obligations arising before November 1, 1999;
- - $15 million for obligations arising before November 1, 2000; and
- - $0 thereafter.
At no time during the term of the guaranty will SCI's liability exceed $20
million in the aggregate. Pursuant to the guaranty, SCI agreed that on each date
that a guaranteed obligation is required to be paid to Columbia/HCA, SCI would
grant Columbia/HCA a security interest equal to the amount of such guaranteed
obligation in SCI's accounts receivable. SCI also granted to Columbia/HCA and
the parties to the Columbia Agreements the right to offset any liability arising
under the guaranty against any payments due from such parties to SCI for
information, management and support services.
At September 30, 1999, no claims had been made under the guaranty, and
currently Simione does not anticipate incurring any losses associated with the
guaranty.
On April 17, 1998, Simione was a party to a Stock Purchase Agreement among
Eclipsys Corporation and certain stockholders of Simione including Gary M.
Bremer, a former director and officer of Simione, and William J. Simione, Jr.,
Vice Chairman of the Board and Executive Vice President of Simione. Pursuant to
the Stock Purchase Agreement, Eclipsys Corporation purchased from the
stockholders 84,000 shares, including 37,500 shares from Mr. Bremer and 5,000
shares from Mr. Simione, of Simione's Common Stock at a price of $66.25 per
share. Additionally, in the event Simione receives an offer from a third party
to purchase more than 5% of its common stock, Eclipsys Corporation will have the
option to purchase from Simione up to an additional 4.9% of Simione's Common
Stock at $66.25 per share. This option is available in connection with the MCS
merger, and Eclipsys has been provided with notice of such option. Management of
Simione does not expect Eclipsys to exercise its option, unless the market price
of Simione common stock equals or exceeds the option's exercise price of $66.25
per share. On April 28, 2000, the last practicable trading date for which
results were available for inclusion in this report, the reported high sales
price per share of Simione common stock on Nasdaq was $2.0625 and the reported
low sales price was $2.1875. If Eclipsys exercises its option, the ownership
interests of other Simione stockholders will be diluted by up to 4.9%.
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<PAGE>
The Stock Purchase Agreement allowed Eclipsys Corporation to designate one
member to the board of directors of Simione until April 17, 2001. The Eclipsys
director designee until the MCS merger was Greg Wilson. Eclipsys did not
exercise its right to designate a replacement for Mr. Wilson. The Stock Purchase
Agreement also states that Eclipsys Corporation will vote its shares in favor of
all the nominees to the board of directors of Simione and in favor of all such
matters recommended by the board of directors.
Also, on April 17, 1998, Simione Central National, Inc., a wholly-owned
subsidiary of Simione now known as Simione Central National, L.L.C., and
Eclipsys Corporation entered into a remarketing agreement. Under the remarketing
agreement, Eclipsys has the exclusive right to market and sub-license Simione's
software to Eclipsys' current and potential customers and Simione is required to
provide installation, implementation, maintenance and support services to
Eclipsys' customers who sub-license Simione's software. Eclipsys is responsible
for responses to requests for proposals, software demos, and providing front
line support to such customers and prospects concerning Simione's software
products. For all Simione software products licensed by Eclipsys to an Eclipsys
customer or prospect, Eclipsys pays a one-time royalty to Simione plus an annual
maintenance fee. The initial term of the agreement expires on April 17, 2000 and
automatically renews for successive two-year terms unless terminated by Simione
or Eclipsys. Through the date of this report, no product/service revenues or
royalty fees under this agreement have been received or recognized.
Mr. Robert J. Simione, the brother of Mr. William J. Simione, Jr. who is
Vice Chairman of the Board and Executive Vice President of Simione, is currently
serving as a Senior Vice President of Simione. In addition, Mr. William J.
Simione, III, the son of Mr. William J. Simione, Jr., is currently serving as a
Consulting Manager of Simione. As compensation for his services, Mr. William J.
Simione, III was paid $76,610 and $80,070 in 1998 and 1999, respectively. See
"Executive Compensation" for further information.
On January 19, 1999, Simione advanced $200,000 in cash to Jack Arthur,
Simione's Senior Vice President of Product Development, pursuant to an unsecured
promissory note with recourse. Under the terms of the promissory note, payments
are to be made as follows: a lump sum payment of $100,000 on January 19, 2001
and $8,333.33 each month thereafter for 12 months. Interest on the outstanding
principal balance of the note from the date of the note until it is fully paid
will accrue at the prime interest rate announced from time to time by Wachovia
Bank. The note provides that the payment obligations of Mr. Arthur may be
forgiven, in whole or in part, by Simione in the event Mr. Arthur achieves
annual performance objectives to be established by Simione and Mr. Arthur. The
annual objectives shall be set at the beginning of each calendar year for the
years 1999, 2000 and 2001 with one third of the loan forgiven upon successful
performance each year. The objectives for 1999 consisted principally of cost
reduction in Simione's development efforts and realignment of product
development to integrate technologies of acquired products with existing company
products. The performance objective for 2000 were set in the first quarter of
2000 and are related to the performance in product management, quality assurance
and development projects. The performance objectives for 2001 have not been
established. Simione shall, through its Chief Executive Officer, have sole
discretion concerning whether to forgive any of such payment obligations. The
1999 objectives were met and accordingly $66,667 was forgiven on January 19,
2000. The principal amount and interest forgiven will be recorded as
compensation expense.
17
<PAGE>
In connection with the execution of the amended merger agreement, Mr. Dewey
was appointed President and Chief Executive Officer of Simione. Mr. Dewey
retained his position of Senior Vice President and Secretary of Mestek. Mr.
Dewey is paid $175,000 per year, three-quarters of which is paid by Simione, and
the remaining one-quarter of which is paid by Mestek. This allocation reflects
the expectation that Mr. Dewey will devote approximately three-quarters of his
working time to his duties as President and Chief Executive Officer of Simione.
Mr. Dewey is eligible to receive a performance bonus of up to 50% of his annual
salary during 2000 by determination of Simione's Compensation Committee. Mr.
Dewey is entitled to severance equal to 12 months salary plus any applicable
bonus in the event he is terminated without cause and does not return to full-
time employment at Mestek.
In addition to his base salary, Mr. Dewey was granted an option to purchase
30,000 shares of Simione common stock at a price of $8.75 per share, which
option vests ratably over three years. Mestek will assign to Mr. Dewey options
to purchase an additional 30,000 shares of Simione common stock to be obtained
by Mestek in the MCS merger at an exercise price of $10.00 per share. These
options vest in the event outstanding Simione options are exercised.
For a description of a severance agreement between Simione and Gary M.
Bremer, a former director and officer of Simione, see "Executive Compensation --
Severance Agreements". For a description of a consulting agreement between
Simione and a director of Simione, see "-- Director Compensation". For a
description of a consulting arrangement between Simione and an affiliate of Mr.
Anantharaman and Dr. Ellis, see "-- Compensation Committee Interlocks and
Insider Participation".
On November 11, 1999, Barrett O'Donnell, Chairman of the Board of Simione,
loaned $500,000 to Simione for 24 months and David Ellis, a stockholder and
director of Simione, loaned $250,000 to Simione for nine months. Both loans have
an interest rate of 9%.
18
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIMIONE CENTRAL HOLDINGS, INC.
Date: May 1, 2000 By: /s/ R. BRUCE DEWEY
----------------------------------
R. Bruce Dewey
President and Chief Executive Officer
1224652v3 19
