UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
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[ ] TRANSACTION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER 0-22052
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PROXYMED, INC.
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(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
FLORIDA 65-0202059
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2501 DAVIE ROAD, SUITE 230, FORT LAUDERDALE, FLORIDA 33317-7424
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER (954) 473-1001
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SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
COMMON STOCK, $.001 PAR VALUE
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
[X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to Items
405 of Regulation S-B in this form, and no disclosure will be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The issuer's revenues for the year ended December 31, 1996, its most
recent fiscal year, were $3,054,151.
The aggregate market value of the voting stock held by non-affiliates
computed using $7.25 per share, the closing price of the Common Stock on March
25, 1997, was approximately $61,731,000.
As of March 25, 1997, 9,673,396 shares of the issuer's common stock were
issued and outstanding.
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PART I
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ITEM 1
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DESCRIPTION OF BUSINESS
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THE COMPANY
ProxyMed, Inc. (together with its subsidiaries, the "Company"), is a
healthcare information technology company providing online transaction
processing services to physicians and other healthcare providers.
The Company seeks to satisfy the connectivity needs of physicians and
other healthcare providers by providing one-stop shopping for online
transactions through ProxyNet(/trademark/), its national healthcare information
network. To provide these services, the Company has established and is
continuing to develop and upgrade a physical network infrastructure and data
center currently located at the Company's Fort Lauderdale, Florida,
headquarters.
The Company believes that the majority of its future revenues will be
generated by recurring fees on ProxyNet(/trademark/) and by the sale of
subscriptions to clinical databases. The cornerstone of the Company's
distribution strategy is its Electronic Commerce Partner ("ECP") program which
partners with leading physician office management information system ("POMIS")
vendors to provide seamless online connectivity to ProxyNet from the systems
already in use by the vast majority of the physicians in the country.
The Company was incorporated in Florida in 1989, and its executive offices
are located at 2501 Davie Road, Suite 230, Fort Lauderdale, Florida 33317-7424.
The Company's telephone number is (954) 473-1001.
BUSINESS OVERVIEW
The healthcare industry generates billions of clinical and financial
transactions each year, including, but not limited to, prescriptions, lab orders
and results, radiology orders and results, claims, eligibility inquiries,
encounters and referrals. The Company believes that the healthcare industry lags
behind many other transaction intensive industries, such as travel and banking,
in the number of transactions processed electronically. For physicians to meet
the clinical and financial demands of managed care, the Company believes that
moving patient-centered clinical and financial data all along the continuum of
care electronically will become a business requirement. For this to be
accomplished, physicians, labs, pharmacies, hospitals, correctional
institutions, long term care facilities, home health providers and payors must
establish online connectivity to each other's information systems. The Company's
goal is to replace
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paper and time intensive clinical and financial transactions between the various
participants in the healthcare system with automated online transactions.
The healthcare marketplace continues to undergo changes from both the
payor and provider perspectives. Payors are undergoing substantial
consolidation, and the health maintenance organization ("HMO") model continues
to increase market penetration throughout the country. Providers also are
consolidating, and physician practice management ("PPM") companies continue to
grow and gain acceptance. While this structural change takes place, the
reimbursement methodology also has changed greatly, switching from a
fee-for-service, cost-plus manner to a prepaid, capitated or fixed fee system.
Physicians control most healthcare decisions and so, in this role, they
are a focal point for numerous patient-related clinical and financial
transactions that are generated each year. The Company believes that each
physician, in order to efficiently and economically access and utilize the
needed clinical and financial information, eventually will subscribe to one
online content service providing access to all required data. The Company
believes that physicians will choose not to enter into long-term
subscriptions to multiple online content services. This is due to perceived
logistical inefficiencies in multiple online connections, administrative
reliance on multiple customer service organizations, and format and translation
problems associated with multiple vendors.
The Company believes that the combination of the size of the market, the
amount of change currently taking place and the relative lack of penetration of
automation creates business opportunities for automation vendors, especially
those focused on online connectivity and the movement of clinical as well as
financial data.
Currently, the Company provides physician to pharmacy connectivity for the
transfer of electronic prescription messages and physician to lab connectivity
for online ordering of tests and reporting of results. The Company is also
currently providing connectivity to radiology centers. In addition, the Company
currently provides a number of value-added services with its connectivity
offerings including message translation and database publishing and
distribution. These databases include a drug database, drug utilization review
("DUR"), formulary database and lab medical necessity database. The Company
believes that the integration of these services and a variety of other services
into a single source provider is what will differentiate the Company from other
connectivity and transaction service providers.
The Company recognizes the relationships that existing POMIS vendors have
in providing access to the physician's office system. Instead of competing with
existing vendor relationships,
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the Company offers an ECP program to these vendors which gives their software
systems access to ProxyNet directly from their applications without having to
integrate another stand-alone device. This "open architecture" approach allows
the Company to market its products, as well as hardware and maintenance
services, through established healthcare software companies and leverage their
large existing customer bases. To date, the Company has arrangements with 21
practice management software vendors with potential access to approximately
150,000 of the nation's approximately 500,000 prescribing physicians.
Over the past two years, the Company has developed an online pharmacy
network. With its agreements with pharmacy software vendors and national chain
pharmacies, the Company has contracts which provide access to over 30,000 of the
approximately 50,000 pharmacies in the United States. Through the acquisition of
Clinical MicroSystems, Inc. ("CMS"), the Company has integrated its software
products and connectivity services with 23 of the 27 leading laboratory system
vendors. Currently, the lab network has over 100 participating hospital labs.
The Company has not yet generated material recurring revenues from its
healthcare information technology operations, and there can be no assurance
that the Company will ever generate such revenues. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
PRODUCTS AND SERVICES
CLINICAL TRANSACTIONS
PRESCRIPTIONS
There were over 2 billion prescriptions filled in the United States
in 1996. This large and growing volume magnifies the inefficiencies of the
current system; however, it provides a business opportunity to the Company. A
large percentage of a pharmacy's labor cost is spent on processing new
prescription orders and obtaining authorizations from physicians for additional
refills. New prescription orders are usually handwritten and frequently
illegible or incomplete, requiring extensive labor in processing each order. The
refill authorization process typically has been performed completely via
telephone calls between pharmacy and physician, resulting in additional labor
expense and lost time by both pharmacies and physicians' offices.
The Company's pharmacy transaction service replaces both the paper
prescription and the phone calls with a quick and efficient online transaction
between the physician's clinical management system and the pharmacy. This
transaction service saves both time and labor from the ordering process, as well
as providing more accurate and informative orders.
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The Company has been providing this service for over three years
and, because of this experience, has been able to establish a number of
value-added services which differentiate the Company from competing services.
These additional services include: a directory service allowing efficient
routing of transactions and quick notification of new participants on the
network; translation services which allow a physician's system using one message
format and identifier scheme to communicate with a pharmacy using a different
message format and identifier scheme; and communication protocol translation
allowing a physician using a communication protocol, such as RP/IP, to
communicate with a pharmacy using a different protocol, such as X.25.
LABORATORY ORDERS AND RESULTS
A large part of a medical lab's day-to-day operation is made up of
receiving and processing paper based orders from physicians and then
distributing paper based reporting of the test results performed back to the
physician. These test results play a large role in the physician's decisions on
current treatment options. As such, the more data rich and timely a result can
be delivered, the sooner and better informed a medical decision can be made.
Through its acquisition of CMS on March 14, 1997, the Company has
acquired an online lab software product called "ClinScan", which allows labs to
receive orders online and to distribute test results online back to the ordering
physician, saving significant labor costs and providing better service to the
labs, the patients, and the physicians. CMS has been offering this service for
six years and has earned industry recognition as one of the leading providers of
this service. See "Acquisitions" below.
RADIOLOGY ORDERS AND TRANSCRIBED RESULTS
Through the acquisition of CMS, the Company is currently providing
connectivity between physicians and hospital-based radiology centers to
facilitate the dissemination of transcribed radiology results.
CLINICAL INFORMATION SERVICES
The Company offers clinical information services through subscriptions to
the following proprietary or licensed databases: (i) a drug database developed
by the Company containing over 5,000 drugs, which is updated periodically and
provides automatic generic equivalent substitution notifications; (ii) a set of
clinical drug databases ("DUR databases") which provide valuable information
relating to allergies, drug interactions and duplicate therapies, developed and
updated periodically by several unaffiliated parties, and offered by the Company
pursuant to sublicenses; and (iii) databases containing certain MCOs'
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formularies and preferred drug lists published by the Company. All of these
databases are accessible through MS-DOS and Windows-based systems.
SOFTWARE PRODUCTS AND SYSTEMS
The Company has developed various software products which are designed to
facilitate connectivity to and use of its transaction services through ProxyNet,
the Company's healthcare information network. Customers are able to access
ProxyNet and utilize the Company's network services either through the Company's
own products, or those of its ECP vendors' software products described above.
The Company's software products include the following: ProxyScript(/registered
trademark/) provides pharmacy management at the point of care, the prescribing
physician's office, and automates the generation, processing and management of
prescriptions; ProxyView(/trademark/) enables MCOs, including HMOs and PPMs, to
perform data repository and reporting functions from affiliated physicians; and
RxReceive(/trademark/) permits pharmacies to receive prescriptions
electronically. "ClinScan", a newly acquired product, allows labs to receive
orders online and to distribute test results online back to the ordering
physician. The Company has recently developed and introduced
ProxyCare(/trademark/), a prescription management and formulary compliance
system for use in assisted care living facilities, nursing homes and
correctional facilities.
ACQUISITIONS
On March 14, 1997, the Company acquired the assets and business of CMS,
based in Babylon, New York, for a total of $6,000,000 payable in cash and
unregistered common stock. CMS, founded in 1987, is the developer of "ClinScan",
the nation's leading physician desktop lab ordering and results posting software
with approximately 3,000 physician users at approximately 1,800 sites in 26
states. CMS is also one of the nation's leading providers of online connectivity
to regional commercial labs and hospital-based labs with over 100 lab customers
receiving online orders from and transmitting results to physician offices. CMS
has achieved system integration with direct interfaces already developed for 23
of the 27 top lab information systems in the country. CMS also interfaces to
POMIS vendors, including "The Medical Manager", the most widely used physician
office management and clinical record system. See Note (3)(a) to the
Consolidated Financial Statements. CMS customers are primarily hospitals and
regional commercial labs who typically purchase a number of software licenses
for "ClinScan" and distribute the system at no charge to physicians who are high
volume customers of the lab. As a result, the efficiency of the ordering and
results communication process is increased for both the physicians and the lab.
The Company believes that ProxyNet represents an existing infrastructure through
which CMS can achieve its goal of providing an intranet offering of its services
to hospitals and integrated delivery networks and that
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this acquisition is consistent with its overall strategy designed to enable the
Company to become the nation's leading provider of online transaction sets. The
Company is continuing to review and analyze various other potential acquisitions
which fit within its strategic business plan. See Note (12) to Consolidated
Financial Statements.
SALES AND MARKETING
The Company began marketing its healthcare information technology products
and services in April 1995. The Company markets these products and services to
(i) healthcare providers, including hospitals, emergency room facilities, POMIS
vendors and individual physician practices; (ii) health care payors, including
MCOs (primarily HMOs and their affiliated physicians) and traditional insurance
companies; (iii) chain and independent pharmacies; (iv) medical practice and
pharmacy management software companies that would like to offer electronic
prescription transmittal as part of their software packages; (v) online
transaction processing companies that would like to offer a prescription
software product in connection with their transaction processing services; and
(vi) pharmacy benefit management ("PBM") companies that do not have the
capability to provide doctors with electronic prescription transmittal.
The Company markets or intends to market its healthcare information
technology products and services primarily through (i) medical practice and
pharmacy management software vendors, who will act as distributors by buying the
Company's products and services and reselling them through their own
comprehensive software packages; and (ii) direct sales by the Company's sales
and marketing staff, including its regional account executives. The Company also
exhibits at national and regional trade shows and advertises in several key
trade publications. The Company's relatively limited sales of these products and
services to date are attributable to direct sales; however, the Company believes
that a substantial portion of its future sales will be derived through its
electronic commerce partner program and other strategic relationships.
The Company has developed many strategic relationships with providers of
information systems to physicians under its electronic commerce partner ("ECP")
program. As of March 25, 1997, the Company has entered into ECP agreements with
providers representing more than 150,000 physicians or 28% of the total
prescribing physicians in the United States. The Company's goal is to provide
one information access device on each physician's desktop which will prove both
practical and inexpensive. Each ECP incorporates the Company's clinical
functionality and other capabilities and databases directly into its own POMIS
vendors. The Company has 21 multi-year agreements with these POMIS and
electronic medical record ("EMR") vendors which provide the Company with access
for the licensing of the Company's databases and the electronic transmission of
secured transactions with
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physicians and connectivity to pharmacies, hospitals, labs, payors and MCOs over
ProxyNet. Under certain of these agreements, the Company and the POMIS and EMR
vendors may share ProxyNet transaction revenues.
In addition, the Company markets to, and contracts with, pharmacy
providers to receive prescriptions which are electronically transmitted to their
pharmacies from physician providers. This market segment includes pharmacy
chains, independent pharmacy owners and pharmacy information system vendors. As
of March 25, 1997, the Company has 15 multi-year agreements with these pharmacy
providers which represent access to more than 30,000 of the over 50,000
pharmacies in the United States. The Company is in various stages of discussions
with other POMIS, EMR and pharmacy providers, and plans to have a substantial
number of these as its subscribers during 1997. Through the acquisition of CMS,
the Company has integrated its services with 23 of the 27 leading laboratory
system vendors. Currently, the lab network has over 100 participating hospital
labs. These products and services are designed by the Company to facilitate the
flow of healthcare information among these parties in order to provide them and
their patients with safe, efficient, confidential and cost effective healthcare.
The Company also markets through certain other strategic relationships. In
May 1996, the Company signed an agreement with Medical Manager Corp. ("MMC"),
the owner and licensor of "The Medical Manager," the leading PPM software,
presently used by approximately 110,000 physicians throughout the United States.
The integration process has been completed, and the Company believes that MMC
will be offering the Company's products and services on a non-exclusive basis to
its customers during the second half of 1997, at which time the Company should
start deriving revenues from this relationship. See Note (3)(a) to the
Consolidated Financial Statements.
In March 1996, the Company entered into a license agreement with Managed
Healthcare Affiliates ("MHA"), a pharmaceutical buying group whose members
consist of approximately 800 institutional pharmacies serving approximately
8,000 nursing homes with a total of approximately 1,000,000 beds, representing
over 50% of the total nursing home beds in the country. The agreement provides
that MHA shall have the limited exclusive right to market ProxyCare, the
Company's recently introduced prescription management and formulary compliance
system for use in the long-term healthcare sector, to all its member
institutional pharmacy customers, subject to MHA meeting certain minimum sales
performance standards. The Company is free to market ProxyCare to any non-MHA
member. The agreement expires December 31, 2001, with automatic renewal for
successive one-year periods, unless terminated by the terms of the agreement. In
return, the Company will pay MHA a commission of 10% of the net revenue received
by ProxyMed for licensing of ProxyCare and the per bed capitation fees received
from the subscribing
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institutional pharmacies and nursing homes. No commissions are payable to MHA
for any hardware, installation or training purchased.
In February 1996, the Company signed a strategic marketing agreement with
Inteplex, Inc. and Bergen Brunswig Drug Company, both of which are wholly owned
subsidiaries of Bergen Brunswig Drug Corporation (collectively, "Bergen"), a
multi-billion dollar national pharmaceutical and medical supplies distributor.
Under the Bergen agreement, Bergen paid a one time, nonrefundable fee of
$1,000,000 for a nonexclusive limited license to market certain of the Company's
software products and electronic prescription transactions throughout the United
States. The term of the Agreement is for 12 months, and automatically renews for
successive 12 month periods unless terminated for cause. The Company is
prohibited from entering into similar arrangements for certain designated
products and services with certain of Bergen's principal competitors, including
other major national pharmaceutical and medical supplies distributors. Under the
Bergen agreement, the Company must pay Bergen 10% to 30% of all net sales (as
defined) of certain designated products and services, depending on the total
annual volume of such sales, including sales not resulting from Bergen
referrals. The Company has completed training of the Bergen sales people;
however, sales through Bergen so far have been disappointing and there can be no
assurance that they will improve significantly. See Note (3)(b) to the
Consolidated Financial Statements.
In March 1996, the Company entered into a license agreement with Blue
Cross and Blue Shield of Massachusetts, Inc. ("BCBSM"), a large health insurance
provider based in Boston, Massachusetts, with over 2,000,000 members throughout
New England. Under this agreement (the "BCBSM Agreement"), BCBSM agreed to a
one-time license fee of $204,000 in exchange for which it received a right to
license and customize the Company's ProxyScript software to physicians,
including its approximately 12,000 affiliated physicians, on an exclusive basis
in Massachusetts, Vermont, New Hampshire, Maine and Rhode Island (the "States"),
and on a nonexclusive basis in Connecticut. BCBSM has announced its intention to
link ProxyScript licensees in the States through its Healthwire network. Under
the BCBSM Agreement, until March 1, 1998, the Company is barred from competing
in the States (except Connecticut) with BCBSM for the electronic prescription
business, and BCBSM is barred from competing with the Company's electronic
prescription business outside the States. See Note (3)(c) to the Consolidated
Financial Statements.
The Company also plans to gain market penetration by selling its products
and services to MCOs, who may suggest or mandate use of a formulary compliance
system or some connection to ProxyNet to all of the physicians with whom they
contract.
The development and marketing of the Company's healthcare technology
products and services is an emerging business and, as
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such, is subject to uncertainty as to demand and market acceptance for the newly
introduced products and services. Achieving market acceptance for the Company's
products and services requires significant marketing efforts and expenditure of
significant funds to create awareness and demand by pharmacies, physician
groups, managed care organizations and other potential customers.
PRODUCT DEVELOPMENT
The Company believes that its future success will depend in large part on
its ability to enhance its current line of products and services, develop new
products and services, maintain technological competitiveness and satisfy an
evolving range of customers' requirements. The Company's product development
group is responsible for improving and upgrading existing products and services,
exploring applications of core technologies and incorporating new technologies
into the Company's products and services.
The basic development of ProxyNet, ProxyScript and RxReceive occurred as
part of the Company's former drug dispensing operations, which were sold to
Eckerd Corporation in March 1995. The bulk of the development costs for those
products and services was accounted for as direct expenses of those operations,
as those products were provided to customers at no charge. Beginning in March
1995, the cost of modifying these products for sale to end users has been
capitalized. Also during 1995 and 1996, the Company engaged in significant
product development activity to ensure that it remains competitive in the
healthcare information technology market. The amount capitalized as of December
31, 1996 is $816,947. None of these costs have been borne by the Company's
customers. Research and development expense was approximately $177,000 in 1996
and was not material in 1995.
COMPETITION
The Company faces competition from other healthcare information technology
companies and other specialty technology companies. Many of the Company's
competitors are significantly larger and have greater financial resources than
the Company. The area of prescription processing networks has been targeted by
many companies, including, but not limited to, International Business Machines
Corporation, MedE America Corporation, Envoy Corporation, National Data
Corporation and others. The Company is also aware that other transaction
processing companies have targeted healthcare information networks as a growth
market, which could in the future utilize their networks to process electronic
healthcare related transactions. Certain of these companies have announced pilot
programs. The Company is not aware of any significant competition to its online
lab ordering and results posting software programs. The Company believes that
the competition it faces and will face in the foreseeable future
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will be based primarily on product/service quality, customer support and
marketing. The Company believes that its products and services are more advanced
than the competing products and services currently available because the
Company's products and services have been developed and enhanced through actual
utilization by physicians and pharmacies over the past three years. The Company
believes that its ability to compete successfully in the healthcare information
technology market will depend upon its ability to offer a variety of integrated
products and services and to implement a national marketing campaign which
brings its products and services to the attention of its potential customer
base.
The Company's ECP agreements for distribution of its products and
services, described above in "Sales and Marketing," are primarily non-exclusive.
The Company believes that the key to its competitive success will be its ability
to win the "race" with its competitors to control physicians' desktops by
offering a wider variety of online healthcare products and services. Once large
numbers of physicians are connected to and satisfied with ProxyNet and its
comprehensive array of services, the Company believes that it will be difficult
for competitors to dislodge the Company from these customers, notwithstanding
the nonexclusivity of the marketing arrangements with the ECPs. There can be no
assurance that the Company will be able to compete successfully and there can be
no assurance that the Company's sales and marketing programs and growth
strategies will be successful or that the Company will ever achieve
profitability.
INSTITUTIONAL PHARMACY BUSINESS
The Company's wholly-owned subsidiary, ProxyCare, Inc., is a pharmacy
business operated by the Company since 1994 in South Florida that dispenses and
delivers unit dose oral prescription drugs to patients residing in long term
care facilities, primarily in assisted care living facilities in Dade, Broward
and Palm Beach counties. Prescriptions are delivered monthly to such facilities
utilizing a unique packaging system called "Medicine-On-Time", which is licensed
from an unaffiliated third party. The Company is considering whether ProxyCare,
Inc. fits within its long-term business plan; however, as of the date of this
Report, there are no understandings, commitments or agreements for the sale of
ProxyCare, Inc.
GOVERNMENT REGULATION
The Company's products and services are not directly subject to
governmental regulations; however, the user base is subject to extensive and
frequently changing federal and state laws and regulations. A primary feature of
the Company's products and services is the ability to electronically transmit
(either by computer-to-facsimile or computer-to-computer) prescriptions from a
doctor's office to a pharmacy. The ability of a pharmacist to
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fill an electronically transmitted prescription is governed by federal and state
law. The United States Drug Enforcement Agency ("DEA") oversees the handling of
certain classes of drugs called "controlled substances." The United States
Congress has approved the dispensing of prescriptions transmitted via facsimile
of original, signed prescriptions for controlled substances other than for
Schedule II drugs (narcotics). Neither Congress nor the DEA has specifically
addressed electronic transmission of computer-generated prescriptions for
controlled substances. No assurance can be given that Congress or the DEA will
accept this method of transmitting prescriptions for controlled substances in
the future.
State boards of pharmacy oversee the handling of all classes of drugs
within their states. Although a majority of the states have approved the
dispensing of prescriptions transmitted via facsimile, less than 25% of the
states have pharmacy laws and regulations that permit the electronic dispensing
of prescriptions. Nonetheless, in a limited number of states where electronic
transmission of computer-generated prescriptions is not specifically addressed,
the state boards have generally taken the position that these prescriptions are
permissible.
Other state laws which may affect the Company's ability to market in
certain states include certain state requirements that require licensure as
either a doctor or a pharmacy in order for a third party to send or receive a
prescription. A common carrier, such as a telephone company, is often excluded
from such requirements. The Company's ability to market in such states would
depend upon each state's willingness to deem the Company to be a common carrier
of such prescriptions, the assurance of which cannot be given.
In addition to certain state licensing requirements, each state has
various laws protecting the confidentiality of patient medical information,
including prescription information. Although it is not uncommon for a third
party to have access to such information, such third party has an obligation to
maintain the confidentiality of such information and could be subject to
liability if that obligation is breached. The Company has procedures in place to
maintain the confidentiality of the information it receives as part of its
ProxyNet services; however, there can be no assurance that inadvertent
disclosure of information will not expose the Company to costly litigation.
The Company's institutional pharmacy business must comply with the Florida
Pharmacy Act, rules of the Florida Board of Pharmacy, the Florida Drug and
Cosmetic Act and the Florida Comprehensive Drug Abuse Prevention and Control
Act. In addition, the Florida Department of Professional Regulation inspects the
Company's facilities to ensure compliance with all applicable laws and
regulations.
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Under federal laws and regulations, the Company's institutional pharmacy
business must comply with the Federal Food, Drug and Cosmetic Act and the
Federal Drug Abuse Act. These laws and regulations establish standards
concerning the labeling, packaging, advertising, and adulteration of
prescription drugs and the dispensing of controlled substances and prescription
drugs.
The Company believes that it is in substantial compliance with all
material federal and state laws and regulations governing its operations and has
obtained all licenses necessary for the operation of its business. There can be
no assurance that the Company will not be materially adversely affected by
existing or new regulatory requirements or interpretations, including, but not
limited to, those restricting the electronic transmission of prescriptions.
INTELLECTUAL PROPERTY
The Company regards certain features of its products, services and
documentation as proprietary, and relies on a combination of contract,
copyright, trademark and trade secret laws and other measures to protect its
proprietary information. As part of its confidentiality procedures, the Company
generally enters into nondisclosure agreements with its employees, distributors
and customers, and limits access to and distribution of its software, databases,
documentation and other proprietary information. The Company has no patents. The
Company has filed a federal trademark registration for ProxyScript, and intends
to file such applications for ProxyNet, RxReceive, ProxyView and ProxyCare. The
Company believes that because of the rapid pace of technological change in the
EDI industry, trade secret and copyright protection are less significant than
factors such as the knowledge, ability, experience and integrity of the
Company's employees, frequent product enhancements and the timeliness and
quality of support services.
The Company is not aware that its products, services, trademarks or other
proprietary rights infringe the proprietary rights of third parties; however,
there can be no assurance that third parties will not assert infringement claims
against the Company in the future with respect to current or future products. As
the number of software products available on the market increases and the
functions of those products further overlap, software developers may become
increasingly subject to infringement claims. Any such claims, with or without
merit, could result in costly litigation or might require the Company to enter
into royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company.
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EMPLOYEES
As of March 25, 1997, the Company employed 75 full-time employees. The
Company is not and never has been a party to a collective bargaining agreement.
The Company considers its relationship with its employees to be good.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains "forward-looking statements" within the meaning of
the federal securities laws. These forward-looking statements include, among
others, the Company's growth strategy based upon its interpretation of
healthcare industry trends and management's ability to successfully develop,
implement, market and sell its online transaction processing services to
physicians and other health care providers. Further, it assumes that the Company
will be able to successfully acquire or develop all of the necessary clinical
and financial transaction sets and integrate them into the Company's existing
products and services. Also important will be the ability of the Company to
develop and execute its strategic relationships, especially with the providers
of information systems to physicians under the Company's electronic commerce
partner program, and with pharmacy chains, independent pharmacy owners and
pharmacy information system vendors.
ITEM 2
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DESCRIPTION OF PROPERTY
-----------------------
The Company leases approximately 12,000 square feet of space in a facility
in Fort Lauderdale, Florida, for its executive offices, pursuant to a lease
expiring in January 1999, at a monthly rent of $7,454.
The Company's institutional pharmacy subsidiary, ProxyCare, Inc. leases
4,700 square feet of space in a facility in Davie, Florida, pursuant to a lease
expiring in August 1997 at a monthly rent of $2,894. The Company is also subject
to leases for two sites where it previously operated pharmacies. One of these
leases, in the amount of $1,457 per month, expires in August 1997, and the other
lease, in the amount of $941 per month, expires in October 1998.
The Company's CMS division leases 1,500 square feet of space in a facility
in Babylon, New York, pursuant to a lease expiring in June 1997 at a monthly
rent of $2,207.
The Company's leases generally contain renewal options and require the
Company to pay costs such as property taxes, maintenance and insurance. The
Company considers its present facilities adequate for its operations and
believes that
14
<PAGE>
alternative and additional facilities are readily available in the event that a
particular lease is not renewed.
ITEM 3
------
LEGAL PROCEEDINGS
-----------------
The Company is not a party to any material legal proceedings.
ITEM 4
------
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 1996.
15
<PAGE>
PART II
-------
ITEM 5
------
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
-------------------------------------------------------
The Company's Common Stock trades on the National Market tier of the
Nasdaq Stock Market under the symbol "PILL." The following table sets forth the
high and low sale prices of the Common Stock for the periods indicated. The
Common Stock has traded on The Nasdaq National Market since November 8, 1996.
Previously, the Common Stock traded on the SmallCap tier of The Nasdaq Stock
Market.
HIGH LOW
------ -----
1995:
First Quarter $ 5.00 $3.17
Second Quarter 5.17 3.67
Third Quarter 5.33 3.67
Fourth Quarter 4.83 3.00
1996:
First Quarter $ 5.33 $3.42
Second Quarter 17.92 3.33
Third Quarter 15.67 9.13
Fourth Quarter 10.75 5.75
1997:
First Quarter $ 9.50 $7.25
(through March 25, 1997)
On March 25, 1997, the last reported sale price of the Common Stock was
$7.25 per share. As of March 25, 1997, there were approximately 120 holders of
record of the Common Stock. The Company believes that many of these holders of
record are in "street name" and that the number of individual shareholders is
over 2,500.
The Company has not paid any dividends on its Common Stock. The Company
intends to retain all earnings for use in its operations and the expansion of
its business, and does not anticipate paying any dividends on the Common Stock
in the foreseeable future. The payment of dividends is within the discretion of
the Company's Board of Directors. Any future decision with respect to dividends
will depend on future earnings, future capital needs and the Company's operating
and financial condition, among other factors.
16
<PAGE>
ITEM 6
------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
GENERAL
From inception until 1995, the Company's business was principally related
to the dispensing of prescription drugs through a variety of methods of
delivery, including retail and institutional pharmacies and its home infusion
therapy subsidiary. In the first quarter of 1995, management determined that the
Company's retail pharmacy business was undesirable, primarily due to the need
for substantial additional capital required to achieve the economies of scale
required for profitable operations, and decided to shift the emphasis of the
Company's business. As part of the retail pharmacy operations, the Company
provided at no charge to its customers certain of its healthcare information
technology products and services, which were favorably received. Management also
recognized a need for these products and services in the marketplace.
Consequently, the Company elected to pursue the commercialization of its
healthcare information technology products and services, and sold its retail
pharmacy and home infusion operations to Eckerd Corporation ("Eckerd") and
National Health Care Affiliates, Inc. ("NHCA") in March and September 1995,
respectively. In March 1997, the Company expanded its healthcare information
technology product offerings through the purchase of CMS, the developer of
ClinScan, a physician desktop lab ordering and results posting software used by
over 100 labs and approximately 3,000 physicians throughout the United States.
The Company also owns and operates ProxyCare, Inc. ("ProxyCare"), its
institutional pharmacy subsidiary which dispenses prescription drugs to patients
in long-term care facilities; however, the Company is considering whether
ProxyCare fits within its long-term business plan. There are no understandings,
commitments or agreements at the date of this Report for the sale of ProxyCare.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996, COMPARED TO
YEAR ENDED DECEMBER 31, 1995
NET SALES. Net sales for 1996 decreased by $4,568,652, or 60%, to
$3,054,151 from net sales of $7,622,803 in 1995. This decrease was primarily
attributable to the Eckerd and NHCA dispositions which occurred in 1995. The
combined net sales of these operations comprised 70% of the Company's net sales
in 1995. After eliminating the sales represented by these operations which were
sold, net sales for 1996 increased $774,453, or 34%, compared to the net sales
"as adjusted" for
17
<PAGE>
1995 of $2,279,698. This increase is due to the net effect of three factors.
First, the Company recognized revenue totaling $1,204,000 from two one-time
license fees in 1996 (Bergen and BCBSM), whereas no license fee revenue was
received in the 1995 period. Second, Bergen purchased $529,298 of computer
equipment containing the Company's software in 1996, which did not occur in
1995. Third, sales by the Company's remaining drug dispensing operations,
ProxyCare, decreased $1,108,292, or 50%, to $1,088,144 in 1996, compared to net
sales of $2,196,436 in 1995. This decrease was due primarily to the loss of
business from several customers, much of which was associated with the
operations sold to Eckerd. The Company believes that price fluctuations are not
a significant factor affecting ProxyCare's sales because of contractual fixed
pricing arrangements with many customers.
GROSS PROFIT MARGIN. Gross profit margin for 1996 was 57% compared to a
gross profit margin of 32% for 1995. Gross profit margin, after deducting the
sales and cost of sales related to the operations sold to Eckerd and NHCA, was
57% for 1996 compared to 33% for 1995. This increase is due to the favorable
impact of the one-time license fee revenues received in the first quarter of
1996 from Bergen and BCBSM.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for 1996 increased by $979,081, or 19% to $6,032,021
from selling, general and administrative expenses of $5,052,940 for 1995. After
deducting selling, general and administrative expenses related to the operations
sold to Eckerd and NHCA, selling, general and administrative expenses for 1996
increased by $2,943,322, or 95%, over selling, general and administrative
expenses "as adjusted" for 1995 of $3,088,699. This increase is due to the net
effect of two factors. First, selling, general and administrative expenses for
ProxyCare decreased in 1996 by approximately 44% from the 1995 levels primarily
due to cost control measures instituted after the loss of certain customers in
1996. As a result of these measures, ProxyCare's selling, general and
administrative expenses as a percentage of sales was maintained at approximately
33% of net sales in 1996, compared to 29% in 1995. Second, other selling,
general and administrative expenses for the Company's other recurring
operations, as adjusted, increased by $3,223,833, or 132%, to $5,667,996 for
1996, compared to $2,444,163 for 1995, primarily due to the Company's efforts to
develop and market its new products and services. This increase primarily
resulted from the following: (i) additional payroll and related costs for sales,
product development, customer service, clinical pharmacy service and management
personnel related to the Company's new products and services ($1,742,000); (ii)
additional marketing expenses related to these products and services, including
marketing materials, attendance at national and local trade shows, expenses for
pilot programs for potential customers and travel costs ($420,000); (iii)
additional depreciation, amortization and computer costs
18
<PAGE>
related to new network equipment and capitalized software costs ($147,000); (iv)
additional consulting fees to various software and business consultants
($229,000); (v) charges related to certain compensatory stock options and
warrants issued in the second quarter of 1996, primarily related to the MMC
licensing agreement, as described in Note (3) of Notes to Consolidated Financial
Statements ($300,000); (vi) commissions including those under the Bergen
agreement ($79,000); (vii) additional stockholders' expenses related to the
Company's annual meeting and relations with institutional and other investors
($174,000); and (viii) net increases in various other selling, general and
administrative expenses ($133,000).
INTEREST, NET. The Company earned net interest income for 1996 of
$436,569, whereas the Company incurred net interest expense for 1995 of
$151,625. This reflects the use of proceeds from the Eckerd and NHCA sales in
1995, and proceeds from the sale of equity securities in 1995 and 1996, to
retire all indebtedness, resulting in the elimination of interest expense. In
the second quarter of 1996, the Company retired all indebtedness, and since then
all available cash has been invested in interest-bearing money market accounts
and U.S. Treasury Notes.
OTHER. The gain (loss) on sale of assets in 1996 and 1995 relates to the
sale of certain, but not all, of the assets related to the Company's HMO
prescription drug dispensing operations to Eckerd. Initially, a loss on the sale
was recorded in the first quarter of 1995, and contingent income was recorded in
subsequent periods based on the amount of prescription business retained by
Eckerd through September 30, 1996. Ultimately, the Company recognized a
cumulative gain on the sale of approximately $275,000. The extraordinary gain on
sale of subsidiary of $669,664 in 1995 relates to the sale of the business of
ProxyFusion, Inc. to NHCA. See Note 4 of Notes to Consolidated Financial
Statements for a description of these transactions.
NET LOSS. As a result of the foregoing, the Company recorded a net loss of
$2,853,735 in 1996, as compared to a net loss of $2,848,887 in 1995. The Company
believes it is making progress in its electronic commerce partner and pharmacy
relationships, potential acquisitions (one of which was consummated in March
1997), and other plans to increase the usage of its healthcare information
technology products and services. However, the Company anticipates that it will
continue to incur significant operating losses until it generates a substantial
flow of recurring revenues from its products and services. There can be no
assurance that the Company will ever realize a significant level of recurring
revenues from the sale of its products and services or that revenues from these
operations, the operations of any businesses it may acquire or operations of
ProxyCare will ultimately result in significant reductions in losses or
achievement of profitability.
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In 1996, cash used in operating activities totaled $3,549,115. However,
primarily as a result of the sale of 3,367,500 shares of common stock in May
1996 which resulted in net proceeds of $13,041,309, the exercise of certain
stock options and warrants during 1996 which resulted in net proceeds of
$1,860,902, and the collection of amounts due from the operations sold in 1995
totaling $1,949,275, the Company had cash, cash equivalents and investments in
U.S. Treasury Notes totaling $12,029,056 as of December 31, 1996. These
available funds continue to be used for operations, for the further development
and marketing of the Company's new products and services, and for the
acquisition of equipment and other general corporate purposes.
In August 1996, the Company completed the conversion of all of its Series
A Preferred Stock into Common Stock, which eliminated the payment of future cash
dividends on the Series A Preferred Stock. In addition, during 1996 the Company
paid off all of its interest-bearing debt obligations. As of December 31, 1996,
there were no material commitments for the purchase of property or equipment.
During 1996, the Company obtained a revolving loan agreement with a bank
for borrowings of up to $5,000,000. Outstanding borrowings bear interest at the
prime rate less 3/4%, are due on demand and are collateralized by U.S. Treasury
Notes.
Accounts receivable turnover for ProxyCare was 4.9 times in 1996 compared
to 5.8 times in 1995. Inventory turnover for ProxyCare was 3.8 times in 1996
compared to 6.9 times in 1995. Both of these indicators were adversely affected
by the decline in ProxyCare's 1996 sales as discussed above.
On March 14, 1997, the Company acquired substantially all of the assets of
CMS, the developer of the ClinScan physician desktop lab ordering and results
posting software product. The purchase price consisted of the following:
$3,000,000 in cash and 125,786 shares of unregistered common stock paid at
closing, plus $2,000,000 in cash and common stock payable over a three year
period. The acquisition will be accounted for as a purchase. CMS reported net
sales of $1,758,645 and pre-tax income of $288,762 for the year ended December
31, 1996.
As mentioned above, the Company expects to continue to incur significant
negative net cash flow from operations until it begins receiving substantial
recurring revenues from the sale of its healthcare information technology
products and services. Furthermore, while the Company presently has no material
commitments for capital expenditures, management is committed to the strategy of
investing funds in further marketing and development of its products and
services, and may pursue
20
<PAGE>
additional acquisitions which are deemed to be in accordance with its business
strategy and which may require substantial cash outlays. With the cash resources
received in 1996, management believes that the Company's current cash resources
are sufficient to support its planned operations through at least the first
quarter of 1998, although there can be no assurance that such resources in fact
will be sufficient. If additional acquisitions are identified, it is likely that
the Company will seek to raise funding for such acquisitions through the sale
and issuance of equity securities; however, there can be no assurance that such
equity financing will be available to the Company or will be available on terms
acceptable to the Company.
ITEM 7
------
FINANCIAL STATEMENTS
--------------------
The financial statements are included herein beginning at Page F-1.
ITEM 8
------
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
---------------------------------------------------
The Company has not had any change in or disagreement with its accountants
on accounting and financial disclosures during its two most recent fiscal years
or any later interim period.
21
<PAGE>
PART III
--------
ITEM 9
------
DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
-------------------------------------------------
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
Harold S. Blue(1) 35 Chairman of the Board, Chief
Executive Officer
John Paul Guinan(1) 36 President, Chief Operating
Officer and Director
Gary N. Mansfield(1) 36 Executive Vice President -
Corporate Development and
Director
Bennett Marks(1) 48 Executive Vice President -
Finance, Chief Financial
Officer and Director
Carol A. Dragan 50 Executive Vice President -
Operations
Frank M. Puthoff 51 Executive Vice President -
Chief Legal Officer and
Secretary
Bruce S. Roberson 48 Executive Vice President -
Sales and Marketing
Harry A. Gampel 77 Director
Samuel X. Kaplan(2)(3) 74 Director
Bertram J. Polan(2)(3) 45 Director
Eugene R. Terry(2)(3) 58 Director
- --------------------------
(1) Member of the Executive Committee, the Chairman of which is Mr. Blue.
(2) Member of the Audit Committee, the Chairman of which is Mr. Polan.
(3) Member of the Compensation Committee, the Chairman of which is Mr.
Terry.
HAROLD S. BLUE has been Chairman of the Board and Chief Executive Officer
of the Company since February 1993, and has been a director since August 1991.
He served as interim President and Chief Operating Officer from March 1994 to
June 1995. From August 1991 until February 1993, Mr. Blue served as Vice
President of the Company. From July 1992 until February 1995, Mr. Blue served as
Chairman of the Board and Chief
22
<PAGE>
Executive Officer of Health Services, Inc., a physician practice management
company, which was sold to Inphynet in 1995. From June 1979 to February 1992,
Mr. Blue was the President and Chief Executive Officer of Budget Drugs, Inc., a
retail discount pharmacy chain comprised of six stores located in South Florida.
From September 1984 to August 1988, Mr. Blue founded and was the Executive Vice
President of Best Generics Incorporated, a generic pharmaceutical distribution
company. In August 1988, Best Generics was sold to Ivax Corporation, a
publicly-traded pharmaceutical manufacturer. Mr. Blue served as a member of the
Board of Directors of Ivax for approximately two years before resigning, and
continued to serve as a consultant to Ivax pursuant to a consulting agreement
that expired in August 1993. He is currently a director of AccuMed
International, Inc., a publicly traded company which manufactures and markets
diagnostic screening products for clinical laboratories.
JOHN PAUL GUINAN has been the President and a director of the Company
since June 1995 and was an Executive Vice President of the Company from July
1993 until June 1995. From March 1993 to June 1993, Mr. Guinan was the Chief
Executive Officer and co-founder of ProxyScript, Inc. (f/k/a Medical Containment
Systems, Inc.), which the Company acquired in June 1993. From 1989 until April
1993, Mr. Guinan founded and developed two companies: The Desktop Professionals,
Inc., a company which supplied automation systems to South Florida professional
offices; and POSitive Thinking, Inc., a software development company which
specialized in point of sale systems.
GARY N. MANSFIELD has been a director of the Company since June 1995 and
has been an Executive Vice President of the Company since July 1993. From March
1993 to June 1993, Mr. Mansfield was the Executive Vice President and co-founder
of ProxyScript, Inc. From January 1991 to March 1993, Mr. Mansfield co-founded
and developed POSitive Thinking, Inc. Mr. Mansfield also served on the Board of
Directors of Best Generics Incorporated prior to that company being sold to Ivax
Corporation.
BENNETT MARKS has been Executive Vice President - Finance, Chief Financial
Officer and a director of the Company since October 1993. From May 1991 to
October 1993, Mr. Marks was Vice President - Finance and a director of FiberCorp
International, Inc., a public company engaged in the manufacturing and marketing
of network management systems for use by telecommunication companies. From 1981
to April 1991, Mr. Marks was an audit partner with KPMG Peat Marwick, an
international accounting and consulting firm. While with KPMG Peat Marwick, Mr.
Marks was the partner on audits of numerous public companies and served as an
Associate SEC Reviewing Partner. He also served as the Administrative Partner in
Charge of KPMG Peat Marwick's West Palm Beach office. Mr. Marks is a certified
public accountant.
23
<PAGE>
CAROL A. DRAGAN joined the Company in October 1996 and serves as the
Company's Executive Vice President - Operations. From November 1995, she served
as a healthcare and information technology consultant. From June 1995 to
November 1995, she was Executive Vice President and General Manager of the
Pharmacy Division of MedE America Corporation, which merged with General
Computer Corporation in June 1995. From January 1993 to September 1994, she was
Vice President Corporate Development of General Computer Corporation and from
October 1994 to June 1995, its President and Chief Executive Officer and served
in other executive positions there from January 1991. From November 1989 to
January 1991, she was Vice President, Integrated Systems for Telxon Corporation,
a manufacturer of portable hardware and software systems.
FRANK M. PUTHOFF was appointed Executive Vice President, Chief Legal
Officer and Secretary of the Company in August 1996. From July 1994, he was Vice
President, General Counsel and Secretary for Miami Subs Corporation. Between
July 1990 and July 1994, he held several management positions with Ground Round
Restaurants, Inc., serving most recently as Senior Vice President, General
Counsel and Secretary.
BRUCE S. ROBERSON was appointed Executive Vice President - Sales and
Marketing of the Company in October 1996. From June 1994 to October 1996, he
served as Vice President - Sales and Marketing for Health Care Information for
National Data Corporation. From December 1993 to June 1994, he was Director of
Business Development for First Consulting Group and from September 1990 to
December 1993, he was Vice President of Sales and Marketing for IBAX Healthcare,
a joint venture of International Business Machine Corp. and Baxter
International, Inc. From 1988 to September 1990, he was manager of the Florida
operations of the American Express Health Systems Group and from June 1984 to
November 1988, he was Senior Sales Executive of McDonald Douglas Health Systems
Company.
HARRY A. GAMPEL has been a director of the Company since February 1996.
Mr. Gampel has over 36 years of experience in commercial and residential real
estate development in the Northeastern United States and Florida as Chairman of
Gampel Organization, Hollywood, Florida, and as President of Gampel Realty
Company, Hartford, Connecticut.
SAMUEL X. KAPLAN has been a director of the Company since August 1995.
Since 1987, Mr. Kaplan has been a health care management consultant. He has also
been the President of U.S. Care, Inc., a California-based company which designs
and administers long-term care insurance programs, since 1987, when he founded
that company. In 1962, he founded U.S. Administrators, Inc., a health care
management company, which he served as President and Chairman until 1987.
24
<PAGE>
BERTRAM J. POLAN has been a director of the Company since August 1995. Mr.
Polan is the founder and President of Gemini Bio-Products, Inc., a
California-based supplier of biological products used in medical schools,
private medicine research institutes and the bio-technology industry, which he
founded in 1985. From 1973 to 1985, Mr. Polan was employed in various executive
capacities, most recently as vice president of sales and marketing, with North
American Biologicals, Inc., one of the world's largest independent providers of
human plasma products.
EUGENE R. TERRY has been a director of the Company since August 1995.
Mr. Terry is a pharmacist and the founder and Chairman of Bloodline, Inc., a
New Jersey-based company engaged in the blood services business, which he
founded in 1980. In 1971, Mr. Terry founded Home Nutritional Support, Inc.
("HNSI"), one of the first companies established in the home infusion
industry. In 1984, HNSI was sold to Healthdyne, Inc. HNSI was later sold to
the W.R. Grace Group. From 1975 to 1984, Mr. Terry was also founder and
Chief Executive Officer of Paramedical Specialties, Inc., a respiratory and
durable medical equipment company, which was also sold to Healthdyne, Inc.
Directors are elected annually at the Company's annual meeting of
shareholders. Each director of the Company serves until his successor is elected
and qualified or until the earlier death, resignation, removal or
disqualification of the director. The officers are elected annually by the
directors.
The Company has agreed, through August 5, 1998, if so requested by the
underwriter of the Company's initial public offering, to nominate and use its
best efforts to elect a designee of the underwriter as a director of the Company
or, at the underwriter's option, as a non-voting adviser to the Board of
Directors of the Company. No such nominee has been designated to date.
The Company has "key person" life insurance policies on the lives of Mr.
Blue and Mr. Guinan in the amount of $1,000,000 each.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company has reviewed the Forms 3 and 4 and amendments thereto
furnished to it pursuant to Rule 16a-3(e) promulgated by the Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934 (the
"Exchange Act") during the Company's fiscal year ended December 31, 1996, and
Form 5 and amendments thereto furnished to the Company with respect to such
year. Based solely on such review and the representations of each director and
executive officer, the Company is not aware of any failure to timely file a
required Form.
25
<PAGE>
ITEM 10
-------
EXECUTIVE COMPENSATION
----------------------
The following table sets forth the compensation paid during the past
three fiscal years to the Company's Chief Executive Officer and the other three
most highly compensated executive officers of the Company with annual
compensation for such years over $100,000 (the "named executive officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------- --------------------- -------
OTHER ALL
NAME AND ANNUAL RESTRICTED # OF OTHER
PRINCIPAL COMPEN- STOCK OPTIONS/ LTIP COMPEN-
POSITION YEAR SALARY(S) BONUS SATION AWARD(S) SARS PAYOUTS SATION
--------- ---- --------- ----- ------- ---------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harold S. Blue 1996 100,983 -- -- -- 150,000 -- --
Chairman and CEO 1995 60,000 -- -- -- -- -- --
1994 60,000 -- -- -- -- -- --
John Paul Guinan 1996 127,792 -- -- -- 15,000 -- --
President and COO 1995 99,693 -- -- -- 202,500 -- --
1994 55,481 -- -- -- 15,000 -- --
Gary N. Mansfield 1996 102,147 -- -- -- 150,000 -- --
Executive V.P. 1995 83,077 -- -- -- 37,500 -- --
1994 42,923 -- -- -- 15,000 -- --
Bennett Marks 1996 107,542 -- 10,625(1) -- 86,250 -- --
Exec. V.P. 1995 100,000 -- 15,000(1) -- 15,000 -- --
and CFO 1994 90,000 -- 15,000(1) -- -- -- --
- ---------------------------------------------------------------------------------------------
<FN>
- -----------------------
(1) Mr. Marks received a non-accountable expense allowance of $15,000 (net of
taxes) per year through September 15, 1996.
</FN>
</TABLE>
The following table provides information on stock option grants during
fiscal year 1996 to each of the named executive officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------
% OF TOTAL
OPTIONS/SARS
NUMBER OF GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE
---- ------------ -------------- ----------- ----------
Harold S. Blue 150,000 17% 3.50 04/03/01
John Paul Guinan 15,000 2% 6.94 11/10/06
Gary N. Mansfield 150,000 17% 3.50 04/03/01
Bennett Marks 30,000 3% 6.94 11/10/06
56,250 6% 3.50 04/12/01
- ------------------------------------------------------------------------------
The following table sets forth certain information concerning unexercised
options held by each of the named executive officers:
26
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
- ------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED N-THE-MONEY
OPTIONS/SARS AT FY-END (#) OPTIONS/SARS AT FY-END ($)
-------------------------- --------------------------
# OF SHARES VALUE
ACQUIRED REALIZED
NAME ON EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harold S. Blue -- -- 180,000 -- 615,000 --
John Paul Guinan -- -- 172,500 45,000 492,375 141,975
Gary N. Mansfield -- -- 82,500 120,000 256,200 416,850
Bennett Marks -- -- 122,500 38,750 338,250 66,825
- ------------------------------------------------------------------------------------------------------
</TABLE>
There were no awards made to a named executive officer in the last
completed fiscal year under any long-term incentive plan for performance to
occur over a period longer than one fiscal year.
COMPENSATION OF DIRECTORS
Employee directors of the Company are not compensated for their services
as directors. The Company reimburses all directors for reasonable expenses
incurred in attending board meetings. In addition, non-employee directors
receive stock options under the 1995 Outside Plan (described below) upon the
directors' initial election or appointment to the Board of Directors. In 1995
and 1996, Messrs. Gampel, Kaplan, Polan and Terry, upon joining the Board, were
each granted options to purchase 75,000 shares of Common Stock at an exercise
price equal to the market price on the date of grant. These options were
immediately vested with respect to 22,500 shares, with installments of 22,500
and 30,000 shares vesting one and two years from the date of grant,
respectively. These options expire five years after the dates of grant.
EMPLOYMENT AGREEMENTS WITH THE NAMED EXECUTIVE OFFICERS
On April 1, 1996, the Company entered into an Employment Agreement with
Mr. Blue for a period of three years, which is automatically extended from year
to year unless terminated by either party upon 60 days written notice. Mr. Blue
receives an annual base salary of $125,000 and is entitled to such bonuses as
may be awarded from time to time by the Board of Directors and to participate in
any stock option or bonus plans which the Company may now have or in the future
develop. Mr. Blue may be terminated for "cause," as defined in the Agreement. If
he is terminated for cause, he will be entitled to base salary earned, and he
will retain all vested stock options which shall remain exercisable for 90 days
after the date of termination. If he is terminated "without cause," then he will
be entitled to receive an amount equal to his base salary plus bonus, if any,
and continuation of health insurance for six months following termination. In
addition, the Agreement contains confidentiality and noncompetition covenants.
Messrs. Guinan and Mansfield are parties to employment agreements with the
Company which are
27
<PAGE>
substantially similar to Mr. Blue's, with their annual base salaries being
$125,000 and $115,000, respectively.
In November 1996, the Company entered into an Employment Agreement
with Mr. Marks. The Agreement is for a three-year term and automatically extends
from year to year thereafter unless terminated by the Company upon 90 days
written notice or by the employee upon 30 days written notice prior to the end
of the initial term or any extension. Mr. Marks receives an annual base salary
of $125,000 and is entitled to such bonuses as may be awarded from time to time
by the Board of Directors and to participate in any stock option or bonus plans
which the Company may now have or in the future develop. Mr. Marks may be
terminated for "cause" as defined in the Agreement. If he is terminated for
cause, he will be entitled to base salary earned, and he will retain all vested
stock options which shall remain exercisable for 90 days after the date of
termination. If, upon 90 days prior written notice, he is terminated "without
cause," he will entitled to receive an amount equal to his base salary plus
bonus, if any, and continuation of health insurance for six months following
termination, plus any unvested options shall vest. In addition, the Agreement
contains confidentiality and noncompetition covenants.
STOCK OPTION PLANS
The Board of Directors has adopted three stock option plans for its
employees, officers and outside directors: the 1993 Stock Option Plan (the "1993
Plan"); the 1995 Stock Option Plan (the "1995 Plan"); and the 1995 Outside
Director Stock Option Plan (the "1995 Outside Plan", and collectively with the
1993 Plan and the 1995 Plan, the "Plans"). The purpose of the Plans is to
provide certain directors, officers and key employees of the Company with a
greater personal interest in the success of the Company and to enhance the
ability of the Company to attract and maintain the services of qualified
personnel.
The 1993 and 1995 Plans provide for the issuance of up to 600,000 shares
and 376,250 shares of Common Stock, respectively, upon exercise of options
designated as either "incentive stock options" or "non-qualified options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). The 1995 Outside Plan provides for the issuance of up to 300,000 shares
upon exercise of "non-qualified options." The Plans are administered by the
Compensation Committee of the Board of Directors, which determines, among other
things, the persons to be granted options under the Plans, the number of shares
subject to each option and the option price.
With respect to the 1993 and 1995 Plans, the exercise price of any
incentive stock option may not be less than the fair market value of the shares
subject to the option on the date of grant; provided, however, that the exercise
price of any incentive stock option granted to an eligible employee who is or
28
<PAGE>
will be the beneficial owner of more than 10% of the outstanding voting power of
the Company may not be less than 110% of the fair market value of the shares
underlying such options on the date of grant. Non-qualified options may not be
granted with exercise prices less than the fair market value of the shares
subject to the option on the date of grant. Incentive stock options may be
granted only to employees and no option granted under the 1993 Plan to an
employee may be exercised unless, at the time of exercise, the grantee is an
employee of the Company or a subsidiary or was an employee within the preceding
three months. In the event of death, options may be exercised during a twelve
month period following such event. The Company may grant an employee options for
any number of shares, except that the value of the shares subject to one or more
incentive stock options first exercisable in any calendar year may not exceed
$100,000 (determined at the date of grant). Options are not transferable, except
upon the death of the optionee. The 1993 and 1995 Plans have been approved by
the Company's shareholders. The Plans may be amended by the Board of Directors
from time to time; however, the number of shares covered by the 1995 Plan and
1993 Plan may not be changed, nor may certain other material amendments to those
Plans be made, without further shareholder approval.
The term of each option granted under the Plans and the manner in which it
may be exercised is determined by the Compensation Committee, provided that no
option may be exercisable more than 10 years after the date of grant and, in the
case of an incentive stock option granted to an eligible employee who is or will
be the beneficial owner of more than 10% of the outstanding voting power of the
Company, no more than five years after the date of grant. Incentive stock
options under the 1993 and 1995 Plans may be granted during the 10-year period
following the dates of the Plans.
See Note (10) of Notes to Consolidated Financial Statements for
information regarding options issued or available under the Plans.
LIABILITY AND INDEMNIFICATION OF
DIRECTORS AND OFFICERS OF THE COMPANY
The Company has entered into Indemnification Agreements with each of its
directors and executive officers limiting their personal liability for monetary
damages for breach of their fiduciary duties as officers and directors, except
for liability that cannot be eliminated under the Florida Business Corporation
Act. The Florida Business Corporation Act provides that directors of a
corporation will not be personally liable for monetary damages for breach of
their fiduciary duty as directors, except for liability (i) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (ii) for any unlawful payment of a dividend or unlawful stock
repurchase or redemption, as provided in Section 607.0834 of the Florida
Business Corporation Act, (iii) for any
29
<PAGE>
transaction from which the director derived an improper personal benefit, or
(iv) for a violation of criminal law. The Restated Articles of Incorporation and
Bylaws of the Company also provide that the Company shall indemnify its
directors and officers to the fullest extent permitted by Section 607.0831 of
the Florida Business Corporation Act, including circumstances in which
indemnification is otherwise discretionary. The Company has procured and
maintains a policy of insurance under which the directors and officers of the
Company are insured, subject to the limits of the policy, against certain losses
arising from claims made against such directors and officers.
ITEM 11
-------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
---------------------
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of March 25, 1997, with respect to
(i) each person known to the Company to be the beneficial owner of more than 5%
of the Company's Common Stock, (ii) each director, (iii) each executive officer
named in the Executive Compensation chart, and (iv) all directors and officers
of the Company as a group:
NAME AND ADDRESS(1) # OF SHARES (2) % OF CLASS
- ---------------- --------------- ----------
Harold S. Blue(3) 912,532 9.3
John Paul Guinan(4) 172,500 1.8
Gary N. Mansfield(5) 207,000 2.1
Bennett Marks(6) 148,750 1.5
Harry A. Gampel(7) 273,558 2.8
Samuel X. Kaplan(4) 45,000 *
Bertram J. Polan(8) 52,500 *
Eugene R. Terry(9) 60,000 *
Kingdon Capital Management Corporation 775,000 8.0
152 West 57th Street
New York, NY 10019
Cramer Rosenthal McGlynn, Inc. 719,000 7.4
520 Madison Avenue
New York, NY 10022
Weiss, Peck & Greer, L.L.C. 558,000 5.8
One New York Plaza
New York, NY 10004
All directors and officers 2,058,763 19.5
as a group (18 persons)(10)
30
<PAGE>
- -----------------------------------
(1) The address for each person, unless otherwise noted, is 2501 Davie Road,
Suite 230, Fort Lauderdale, Florida 33317-7424.
(2) In accordance with Rule 13d-3 of the Exchange Act, shares that are not
outstanding, but that are subject to options, warrants, rights or
conversion privileges exercisable within 60 days from March 14, 1997, have
been deemed to be outstanding for the purpose of computing the percentage
of outstanding shares owned by the individual having such right, but have
not been deemed outstanding for the purpose of computing the percentage
for any other person.
(3) Includes 732,532 shares held of record, and 180,000 shares issuable upon
the exercise of currently exercisable stock options.
(4) Represents shares issuable upon the exercise of currently exercisable
stock options.
(5) Includes 49,500 shares held of record and 157,500 shares issuable upon the
exercise of currently exercisable stock options.
(6) Includes 7,500 shares held of record, and 141,250 shares issuable upon the
exercise of currently exercisable stock options.
(7) Includes 228,558 shares held of record, and 45,000 shares issuable upon
the exercise of currently exercisable stock options.
(8) Includes 7,500 shares held of record, and 45,000 shares issuable upon
exercise of currently exercisable stock options.
(9) Includes 15,000 shares held of record, and 45,000 shares issuable upon
exercise of currently exercisable stock options.
(10) Includes 1,158,829 shares held of record, and 899,934 shares issuable upon
the exercise of currently exercisable stock options.
ITEM 12
-------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Mr. Blue was a principal shareholder in three medical centers which were
customers of the Company's former drug dispensing business in 1995. Dr. Steven
Fox, a former director of the Company, was a principal shareholder in two
medical centers which were also customers of the Company's former drug
dispensing business in 1995. The Company received a total of approximately 4% of
its revenues in 1995 from these five medical centers.
In July 1995, Mr. Blue purchased 8,000 shares of the Company's Series A
Preferred Stock at an aggregate price of $200,000 pursuant to the Company's
private placement of such stock. Such Preferred Stock was converted into 75,232
shares of Common Stock in August 1996 pursuant to the terms of the Preferred
Stock.
31
<PAGE>
PART IV
-------
ITEM 13
-------
EXHIBITS, LISTS AND REPORTS ON FORM 8-K
---------------------------------------
(a) EXHIBITS
Exhibits required to be filed by Item 601 of Regulation S-B as
exhibits to this Report are listed in the Exhibit Index appearing on pages
34 and 35.
(b) REPORTS ON FORM 8-K
No Form 8-K reports were filed by the Company with the Securities
and Exchange Commission during the quarter ended December 31, 1996.
32
<PAGE>
SIGNATURE
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: March 26, 1997 PROXYMED, INC.
By: /s/ HAROLD S. BLUE
---------------------------------
Harold S. Blue, Chairman of the
Board and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ HAROLD S. BLUE Chairman of the Board and Chief March 26, 1997
- --------------------- Executive Officer (principal
Harold S. Blue executive officer)
/s/ JOHN PAUL GUINAN President, Chief Operating March 26, 1997
- --------------------- Officer and Director
John Paul Guinan
/s/ GARY N. MANSFIELD Executive Vice President- March 26, 1997
- --------------------- Corporate Development and Director
Gary N. Mansfield
/s/ BENNETT MARKS Executive Vice President- March 26, 1997
- -------------------- Finance, Chief Financial Officer
Bennett Marks and Director (principal financial
and accounting officer)
/s/ HARRY A. GAMPEL Director March 26, 1997
- ----------------------
Harry A. Gampel
/s/ SAMUEL X. KAPLAN Director March 26, 1997
- ----------------------
Samuel X. Kaplan
/s/ BERTRAM J. POLAN Director March 26, 1997
- ----------------------
Bertram J. Polan
/s/ EUGENE R. TERRY Director March 26, 1997
- ----------------------
Eugene R. Terry
33
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Articles of Incorporation, as amended (incorporated by
reference to Exhibit 3.1 of the Registration Statement on
Form SB-2, File No. 333-2678).
3.2 Bylaws, as amended (incorporated by reference to Exhibit 3.1
of the Registration Statement on Form SB-2, File No.
333-2678).
10.1 License Agreement between the Company and Blue Cross and Blue
Shield of Massachusetts, Inc., dated March 1, 1996
(incorporated by reference to Exhibit 3.1 of the Registration
Statement on Form SB-2, File No. 333-2678).
10.2 Strategic Marketing Agreement among the Company, IntePlex,
Inc. and Bergen Brunswig Drug Company dated February 1, 1996
(incorporated by reference to Exhibit 1 of Form 8-K, File No.
0-22052, reporting an event dated February 1, 1996).
10.3 Agreement for Acquisition of Stock between the Company and
National Health Care Affiliates, Inc. dated September 6, 1995
(incorporated by reference to Exhibit 1 of Form 8-K, File No.
0-22052, reporting an event dated August 28, 1996).
10.4 Asset Purchase Agreement between the Company and Eckerd
Corporation (incorporated by reference to Exhibit 1 to the
Form 8-K, File No. 0-22052, reporting an event dated February
7, 1995).
10.5 Employment Agreement between the Company and Harold S. Blue
(incorporated by reference to Exhibit 3.1 of the Registration
Statement on Form SB-2, File No. 333-2678).
10.6 Employment Agreement between the Company and John Paul Guinan
(incorporated by reference to Exhibit 3.1 of the Registration
Statement on Form SB-2, File No. 333-2678).
10.7 Employment Agreement between the Company and Bennett Marks
dated November 11, 1996.
10.8 Employment Agreement between the Company and Carol Dragan
dated November 11, 1996.
34
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.9 Employment Agreement between the Company and Glenn Gilchrist
dated March 14, 1997.
10.10 Asset Purchase Agreement between the Company and Clinical
MicroSystems, Inc. and Glenn Gilchrist (incorporated by
reference to Exhibit 1 of Form 8-K, File No. 000-22052
reporting an event dated March 14, 1997).
10.11 Employment Agreement between the Company and Frank M. Puthoff
dated November 11, 1996.
10.12 Amended 1993 Stock Option Plan (incorporated by reference to
Exhibit A of the Company's Proxy Statement for its 1994 Annual
Meeting of Shareholders).
10.13 1995 Stock Option Plan (incorporated by reference to
Exhibit 3.1 of the Registration Statement on Form SB-2, File.
No. 333-2678)
10.14 1995 Outside Director Stock Option Plan (incorporated by
reference to Exhibit 3.1 of the Registration Statement on Form
SB-2, File No. 333-2678).
10.15 Employment Agreement between the Company and Bruce Roberson
dated October 17, 1996 (incorporated by reference to Exhibit
10.1 of the 10-QSB for the period ending September 30, 1996).
10.16 Form of Indemnification Agreement for All Officers and
Directors (incorporated by reference to Exhibit 10.3 of the
10-QSB for the period ending September 30, 1996).
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 3.1 of the Registration Statement on Form SB-2, File
No. 333-2678).
23 Consent of Independent Auditors.
27 Financial Data Schedule
35
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants F-2
Consolidated Financial Statements:
Consolidated Balance Sheet - December 31, 1996 F-3
Consolidated Statements of Operations - Years Ended
December 31, 1996 and 1995 F-4
Consolidated Statements of Stockholders' Equity -
Years Ended December 31, 1996 and 1995 F-5
Consolidated Statements of Cash Flows - Years
Ended December 31, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7 - F-15
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
ProxyMed, Inc.
We have audited the accompanying consolidated balance sheet of ProxyMed, Inc.
and subsidiaries as of December 31, 1996, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
two years in the period ended December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ProxyMed, Inc. and
subsidiaries as of December 31, 1996, and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
- ----------------------------
Coopers & Lybrand L.L.P.
Miami, Florida
February 25, 1997, except for Note 12 as to which
the date is March 14, 1997
F-2
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
------
Current assets:
Cash and cash equivalents $ 6,020,358
Investment in U.S. Treasury Notes 6,008,698
Accounts receivable - trade, net of allowance
for doubtful accounts of $17,000 650,600
Other receivables 165,345
Inventory 195,964
Other current assets 164,963
-----------
Total current assets 13,205,928
Property and equipment, net 1,069,662
Capitalized software costs, net 795,479
Goodwill, net 597,637
Other assets 26,349
-----------
Total assets $15,695,055
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses 664,750
Deferred revenue 115,000
-----------
Total current liabilities 779,750
-----------
Commitments and contingencies (Notes 10 and 11)
Stockholders' equity:
Common stock - $.001 par value. Authorized 20,000,000
shares; issued and outstanding 9,541,610 shares 9,542
Additional paid-in capital 25,944,057
Accumulated deficit (11,038,294)
-----------
Total stockholders' equity 14,915,305
-----------
Total liabilities and stockholders' equity $15,695,055
===========
See accompanying notes.
F-3
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
----------- ----------
Net sales $ 3,054,151 7,622,803
----------- ----------
Costs and expenses:
Cost of sales 1,327,423 5,196,745
Selling, general and administrative
expenses 6,032,021 5,052,940
----------- ----------
7,359,444 10,249,685
----------- ----------
Operating loss (4,305,293) (2,626,882)
Other income (expense):
Gain (loss) on sale of assets (Note 4) 1,014,989 (740,044)
Interest, net 436,569 (151,625)
---------- ----------
Loss before extraordinary item (2,853,735) (3,518,551)
Extraordinary item - gain on sale of
subsidiary, net of income tax
effect (Note 4) -- 669,664
----------- ----------
Net loss (2,853,735) (2,848,887)
Dividends on cumulative preferred stock 95,803 113,362
----------- ----------
Net loss applicable to
common shareholders $(2,949,538) (2,962,249)
=========== ==========
Loss per share of common stock:
Loss before extraordinary item $ (.39) (.75)
Extraordinary gain -- .14
----------- ----------
Net loss $ (.39) (.61)
=========== ==========
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
PROXYMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
PREFERRED STOCK COMMON STOCK
-------------------- -------------------- ADDITIONAL
NUMBER PAR NUMBER PAR PAID-IN ACCUMULATED
OF SHARES VALUE OF SHARES VALUE CAPITAL DEFICIT TOTAL
--------- ----- --------- ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1995 -- $-- 4,782,674 $4,783 $ 8,666,924 $ (5,335,672) $ 3,336,035
Sale of preferred stock, net
of expenses of $318,781 95,000 950 -- -- 2,055,269 -- 2,056,219
Common stock issued for
acquired businesses -- -- 33,171 33 86,032 -- 86,065
Common stock and options
issued for services -- -- 17,250 17 66,246 -- 66,263
Preferred stock dividends -- -- -- -- (102,075) -- (102,075)
Conversion of preferred
stock to common stock (12,000) (120) 112,500 113 7 -- --
Net loss -- -- -- -- -- (2,848,887) (2,848,887)
------- ----- --------- ------ ----------- ------------ -----------
Balances, December 31, 1995 83,000 830 4,945,595 4,946 10,772,403 (8,184,559) 2,593,620
Sale of common stock, net
of expenses of $1,831,816 -- -- 3,367,500 3,367 13,037,942 -- 13,041,309
Exercise of stock options and
warrants -- -- 432,610 433 1,860,469 -- 1,860,902
Common stock issued for
services -- -- 15,000 15 55,985 -- 56,000
Compensatory stock options -- -- -- -- 300,172 -- 300,172
Preferred stock dividends -- -- -- -- (82,963) -- (82,963)
Conversion of preferred
stock to common stock (83,000) (830) 780,905 781 49 -- --
Net loss -- -- -- -- -- (2,853,735) (2,853,735)
------- ----- --------- ------ ----------- ------------ -----------
Balances, December 31, 1996 -- $-- 9,541,610 $9,542 $25,944,057 $(11,038,294) $14,915,305
======= ===== ========= ====== =========== ============ ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
------------ -----------
Cash flows from operating activities:
Net loss $(2,853,735) (2,848,887)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 322,588 297,883
Common stock issued for services 56,000 --
Compensatory warrants issued (Note 3) 300,172 --
Amortization of covenant
not-to-compete (Note 4) (80,000) (20,000)
(Gain) loss on sale of assets (Note 4) (1,014,989) 740,044
Gain on sale of subsidiary (Note 4) -- (669,664)
Provision for doubtful accounts 8,105 73,598
Changes in assets and liabilities,
net of effect of acquisitions
and dispositions:
Accounts receivable (203,113) 934,786
Inventory 42,299 44,721
Accounts payable and accrued
expenses (58,102) (3,505,399)
Other changes (68,340) 58,244
----------- ----------
Net cash used in operating activities (3,549,115) (4,894,674)
----------- ----------
Cash flows from investing activities:
Purchases of U.S. Treasury Notes (8,541,153) --
Maturities of U.S. Treasury Notes 2,532,455 --
Proceeds from sale of dispensary assets 1,300,000 3,551,481
Proceeds from sale of subsidiary 649,275 892,363
Capital expenditures (665,891) (143,195)
Capitalized software (570,557) (246,390)
----------- ----------
Net cash provided by (used in)
investing activities (5,295,871) 4,054,259
----------- ----------
Cash flows from financing activities:
Net proceeds from sale of equity
securities (Note 2) 13,041,309 2,056,219
Proceeds from exercise of stock
options and warrants 1,860,902 --
Payment of notes payable,
long-term debt and capital leases (417,884) (1,787,662)
Payment of preferred stock dividends (82,963) (102,075)
----------- ----------
Net cash provided by
financing activities 14,401,364 166,482
----------- ----------
Net increase (decrease) in cash 5,556,378 (673,933)
Cash at beginning of period 463,980 1,137,913
----------- ----------
Cash at end of period $ 6,020,358 463,980
=========== ==========
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 31,123 292,310
=========== ==========
Common stock issued for businesses purchased $ -- 86,065
=========== ==========
Details of acquisitions and dispositions:
Working capital components,
other than cash $ -- 1,986,321
Property and equipment -- 1,748,111
Intangible assets -- 1,002,239
Other assets -- (222,447)
Net loss -- (70,380)
----------- ----------
Net cash from acquisitions and
dispositions $ -- 4,443,844
=========== ==========
See accompanying notes.
F-6
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BUSINESS OF THE COMPANY - The Company provides healthcare technology
products and on-line transaction processing services to physicians through their
existing practice management information systems, as well as connectivity to
various healthcare providers (such as pharmacies, hospitals and managed care
organizations) through ProxyNet, the Company's national healthcare information
network. In addition, the Company derives revenues from dispensing prescription
drugs to patients who are residing in long-term care facilities, and until their
sale in 1995, through dispensaries, by mail, and through infusion administered
in the patient's home (see Note 4). To date, the Company's nationwide services
have been provided from its operating facilities located in Florida. The
Company's operations are subject to extensive and evolving statutory and
regulatory framework on both the state and federal levels.
(b) PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany transactions have been eliminated in consolidation.
(c) USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The development and distribution of the Company's
healthcare technology products and services is an emerging business and, as
such, is subject to uncertainty as to demand and market acceptance for the newly
introduced products and services. Achieving market acceptance for the Company's
products and services requires significant marketing efforts and expenditure of
significant funds to create awareness and demand by pharmacies, physician
groups, managed care organizations and other potential customers. As a result,
such factors can affect the Company's estimates of the recoverability and useful
lives of property and equipment, capitalized software costs and goodwill, among
other items, and actual results could differ from those estimates.
(d) REVENUE RECOGNITION - Revenues from sales of software or software
licenses are recognized upon delivery of the software, or ratably upon the
completion of any significant Company obligations. Revenues from software
rentals are recognized over the rental period. Revenues from sales of computer
hardware are recognized upon shipment of the hardware. Revenues from the
Company's prescription drug dispensing activities are reported at net realizable
amounts from HMO providers and patients at the time the individual prescriptions
are filled or services are provided.
(e) CASH, CASH EQUIVALENTS AND INVESTMENTS - The Company considers all
highly liquid investments with original maturities of three months or less to be
cash equivalents. Excess cash is invested in U.S. Treasury Notes, or in bank
certificates of deposit and money market accounts. As of December 31, 1996, the
carrying value of the Company's investment in U.S. Treasury Notes approximated
its fair market value.
F-7
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(f) INVENTORY - Inventory, which consists primarily of prescription drugs,
is stated at the lower of cost (first-in, first-out method) or market.
(g) PROPERTY AND EQUIPMENT - Property and equipment is stated at cost.
Property and equipment under capital leases is stated at the present value of
minimum lease payments at the inception of the lease. Depreciation of property
and equipment is calculated on the straight-line method over the estimated
useful lives of the assets. Property and equipment held under capital leases and
leasehold improvements are amortized on the straight-line method over the
shorter of the lease term or the estimated useful lives of the assets.
(h) CAPITALIZED SOFTWARE COSTS - Certain computer software costs are
capitalized in accordance with Statement of Financial Accounting Standards
("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed," and are reported at the lower of unamortized cost
or net realizable value. Such costs are capitalized when they are related to a
product which has achieved technological feasibility or that has an alternative
future use, and are amortized on the straight-line method over two to five
years. Software development costs incurred prior to achieving technological
feasibility are charged to research and development expense when incurred.
Research and development expense was approximately $177,000 in 1996, and was not
material in 1995. Accumulated amortization of capitalized software costs at
December 31, 1996 is $21,468.
(i) GOODWILL - Goodwill, which relates to the acquisition of the Company's
institutional pharmacy business, is amortized on the straight-line basis over 40
years. The recoverability of goodwill is assessed based upon an analysis of
estimated future cash flows on an undiscounted basis, as is permitted under SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." Accumulated amortization of goodwill at December 31,
1996 is $38,088.
(j) INCOME TAXES - The Company provides for income taxes pursuant to the
provisions of SFAS No. 109, "Accounting for Income Taxes." Deferred income taxes
are determined based upon differences between financial reporting and tax bases
of assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. Deferred
tax assets are also established for the future tax benefits of loss and credit
carryovers. Valuation allowances are established for deferred tax assets based
on the weight of available evidence.
(k) NET LOSS PER SHARE - Net loss per share of common stock is computed by
dividing net loss applicable to common shareholders by the weighted average
shares of common stock outstanding during the year (7,660,383 shares and
4,816,980 shares for the years ended December 31, 1996 and 1995, respectively).
The effects of common stock equivalents and convertible preferred stock have not
been included in the computations as their effect would be anti-dilutive or
immaterial. In addition, the implementation of recently issued SFAS No. 128,
"Earnings Per Share," which is effective for periods ending after December 15,
1997, is not expected to have an impact on net loss per share as presented
herein.
F-8
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(2) EQUITY SECURITIES
(a) STOCK SPLIT - On June 6, 1996, the Board of Directors authorized a
three-for-two stock split on the Company's common stock payable July 8, 1996 to
shareholders of record on June 24, 1996. All applicable share and per share data
have been retroactively adjusted for the stock split.
(b) COMMON STOCK OFFERING - In 1996, the Company raised net proceeds of
$13,041,309 in an underwritten offering to the public of 3,367,500 shares of
common stock at a price of $4.42 per share. As part of the transaction, the
Company issued warrants to purchase 300,000 shares of common stock to the
underwriter, which are exercisable through May 7, 2001 at a price of $5.63 per
share.
(c) PREFERRED STOCK OFFERING - In 1995, the Company raised net proceeds of
$2,056,219 through a private placement sale of 23.75 units of Series A
convertible preferred stock for $100,000 per unit. Each unit was convertible
into 37,500 shares of common stock, and the preferred stock bore a cumulative
annual dividend of 9%. Harold S. Blue, the Company's chairman, purchased two
units in the offering. During 1996, all of the outstanding preferred stock was
converted into common stock. As of December 31, 1996, underwriter warrants for
the purchase of 209,198 shares of common stock at an exercise price of $4.17 per
share remain outstanding through June 9, 2000. If the preferred stock had been
converted as of the beginning of 1996, net loss per share would have been $(.34)
for 1996.
The Company has 1,870,000 authorized but unissued shares of preferred
stock, par value $.01 per share, which is entitled to rights and preferences to
be determined at the discretion of the Board of Directors.
(d) OTHER WARRANTS - In connection with the Company's initial public
offering in 1993 and a private placement of common stock in 1994, warrants are
outstanding to the underwriter and the placement agent for the purchase of up to
49,101 and 78,265 shares of common stock, respectively, at exercise prices of
$3.94 and $3.06 per share through August 5, 1998 and August 19, 1999,
respectively.
(3) LICENSING AGREEMENTS
(a) THE MEDICAL MANAGER - In May 1996, the Company signed an Electronic
Commerce and Healthcare Information Licensing Agreement with Medical Manager
Corp. ("MMC"). The agreement requires the Company to provide MMC with a
"software developer's toolbox" to enable MMC to integrate the Company's products
and services into MMC's existing prescription module in its physician practice
management software, The Medical Manager. The Medical Manager software is
reportedly used by over 110,000 physicians in 22,000 offices throughout the
United States. Under the agreement, the
F-9
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Company shares in defined revenues paid by physicians to MMC, and MMC is
entitled to a portion of all defined transaction fee revenue derived from the
Company's prescription network services. As part of the agreement, the Company
granted a five-year warrant to MMC for the purchase of 150,000 shares of common
stock for $3.50 per share. The compensatory value of this warrant, as well as a
warrant for 37,500 shares exercisable at $4.17 per share issued in connection
with a license agreement with Blue Cross and Blue Shield of Massachusetts, Inc.
("BCBSM") (see (c) below), and certain other stock options for 12,500 shares
issued to two consultants, have been charged to expense in 1996 in the amount of
$300,172. The weighted average fair value of each compensatory warrant and
option was estimated at $1.50 at the date of grant using the Black-Scholes
option pricing model with the following assumptions: risk-free interest rate of
6.17%, expected life of 5 years, expected volatility of 60.8%, and no dividend
yield.
(b) BERGEN BRUNSWIG - In February 1996, the Company signed a marketing
agreement with IntePlex, Inc. and Bergen Brunswig Drug Company, both of which
are wholly-owned subsidiaries of Bergen Brunswig Drug Corporation (collectively
"Bergen"), a multi-billion dollar national pharmaceutical and medical supplies
distributor. Under the agreement, Bergen paid a one-time, non-refundable fee of
$1,000,000 for a non-exclusive limited license to market certain of the
Company's products (as defined in the agreement) throughout the United States.
The term of the agreement is for 12 months, and automatically renews for
successive 12 month periods unless terminated as provided under the agreement.
The Company is prohibited from entering into similar arrangements for certain
designated products with certain of Bergen's principal competitors, including
other major national pharmaceutical and medical supplies distributors. Under the
agreement, the Company will pay Bergen from 10% to 30% of net sales (as defined)
from the sale of these products, depending on the total annual volume of sales,
including certain sales of the defined products not resulting from Bergen
referrals, and including prescription transactions between participating
physicians, pharmacies and managed care organizations over ProxyNet. The
$1,000,000 fee was recorded as revenue in 1996. In addition, Bergen purchased
$529,298 of computer equipment containing ProxyScript software in 1996, which is
included in sales.
(c) BLUE CROSS AND BLUE SHIELD OF MASSACHUSETTS, INC. ("BCBSM") - In March
1996, the Company entered into a license agreement with BCBSM, a large health
insurance provider based in Boston, Massachusetts. Under this agreement, BCBSM
agreed to pay a one-time license fee of $204,000 in exchange for which it
received a right to license the Company's product, ProxyScript, to physicians
exclusively, including its approximately 12,000 affiliated physicians, in
Massachusetts, Vermont, New Hampshire, Maine and Rhode Island (the "States"),
and on a non-exclusive basis in Connecticut. BCBSM intends to link ProxyScript
licensees in the States through its Healthwire network. Under the BCBSM
agreement, the Company is barred until March 1, 1998 from competing in the
States with BCBSM for the electronic prescription business, and BCBSM is barred
from competing with the Company's electronic prescription business outside the
States for the same period. The license fee was recorded as revenue in 1996.
F-10
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(4) DISPOSITIONS
(a) SALE OF CERTAIN DISPENSARY ASSETS - On March 15, 1995, the Company
sold to Eckerd Corporation ("Eckerd") certain, but not all, of the assets
related to the Company's HMO prescription drug dispensing operations for
$4,830,387. Of this total purchase price, $2,200,000 was contingent on the
amount of prescription business retained by Eckerd through September 30, 1996.
Accordingly, the Company initially recorded a loss on the sale, and recognized
additional income as prescription data was provided by Eckerd. Ultimately, the
Company collected the entire purchase price, including the entire contingent
amount, and recognized a cumulative gain on the sale of approximately $275,000.
Net sales related to these prescription drug dispensing operations prior to
their sale were $3,404,000 in 1995.
(b) SALE OF SUBSIDIARY - On September 29, 1995, the Company sold to
National Health Care Affiliates, Inc. and an affiliate thereof (collectively
"NHCA") all of the outstanding common stock of its wholly-owned subsidiary,
ProxyFusion, Inc., for $1,542,029. ProxyFusion, Inc. provides home infusion
therapy services, including pharmacy and nursing services, primarily to HMO
patients. An extraordinary gain on this sale of $669,664 was recorded in 1995,
and $200,000 is being amortized to income over the 30-month period of the
Company's covenant-not-to-compete. Net sales related to these operations prior
to their sale were approximately $1,936,000 in 1995.
(5) LOAN AGREEMENT
The Company has a revolving loan agreement with a bank for borrowings of
up to $5,000,000. Outstanding borrowings bear interest at the prime rate less
3/4%, are due on demand and are collateralized by U.S. Treasury Notes. There
were no borrowings outstanding as of December 31, 1996.
(6) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1996:
ESTIMATED USEFUL LIVES
----------------------
Furniture, fixtures and equipment $1,535,604 5 to 7 years
Leasehold improvements 139,480 Life of lease
----------
1,675,084
Less accumulated depreciation 605,422
----------
Property and equipment, net $1,069,662
==========
Depreciation expense was approximately $297,000 in 1996 and $239,000 in 1995.
F-11
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consists of the following at December 31,
1996:
Accounts payable $399,353
Accrued expenses related to sales of
assets and subsidiary 59,914
Accrued contractual employment obligations 92,202
Other accrued expenses 113,281
--------
Total accounts payable and accrued expenses $664,750
========
(8) INCOME TAXES
The significant components of the deferred tax asset account is as follows
at December 31, 1996:
Net operating losses - Federal $ 4,386,000
Net operating losses - State 673,000
Other - net (principally allowance for
doubtful accounts and depreciation) (166,000)
----------
Total deferred tax assets 4,893,000
Less valuation allowance (4,893,000)
----------
Net deferred tax assets $ -
==========
Based on the weight of available evidence, a valuation allowance has been
provided to offset the entire deferred tax asset amount. Net deferred assets and
the valuation allowance recorded relating thereto increased by $2,093,000 in
1996, primarily due to net operating losses. The net operating loss
carryforwards, which amount to $12,901,000 as of December 31, 1996, begin to
expire in 2008.
The benefit for income taxes differs from the amount computed by applying
the statutory federal income tax rate to the net loss reflected on the
Consolidated Statements of Operations due to the following:
1996 1995
------ ------
Federal income tax benefit at statutory rate 35.0% 35.0%
State income tax benefit 3.5 3.5
Increase in valuation allowance (38.5) (38.5)
----- -----
- -
===== =====
F-12
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(9) SIGNIFICANT CUSTOMERS
Approximately 50% of the Company's sales for 1996 were to Bergen as more
fully described in Note 3. Approximately 26% of the Company's sales for 1995
were to providers under contract with Humana Medical Plan, Inc. and Humana
Health Insurance Company of Florida, Inc. (collectively referred to as Humana),
an HMO with national operations. The operations that accounted for these sales
were disposed of in 1995 as discussed in Note 4.
(10) STOCK OPTIONS
In 1993 and 1995, the Company adopted two stock option plans for
executives, directors and other key personnel, under which both incentive stock
options and non-qualified options may be issued. Under the 1993 and 1995 plans,
options to purchase up to 600,000 shares and 376,250 shares, respectively, of
common stock may be granted. Options may be granted at prices equal to the fair
market value at the date of grant, except that incentive stock options granted
to persons owning more than 10% of the outstanding voting power must be granted
at 110% of the fair market value at the date of grant. In order to qualify as an
incentive stock option, the value of shares exercisable in any one calendar year
cannot exceed $100,000 (as determined at the date of grant). In 1995, the
Company also adopted a stock option plan for outside directors under which
options to purchase up to 300,000 shares of common stock may be granted at
prices and with vesting periods as may be determined by the Board of Directors
or the Compensation Committee thereof. In addition, as of December 31, 1996,
options for the purchase of 310,000 shares were granted principally as
inducements to newly-hired officers and employees. Stock options issued by the
Company generally vest within three years, and expire up to ten years from the
date granted. Stock option activity was as follows for the two years ended
December 31, 1996:
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK WEIGHTED AVERAGE
--------------------------------- EXERCISE PRICE OF
AVAILABLE FOR OPTION UNDER PLAN SHARES UNDER PLAN
-------------------- ---------- -----------------
<S> <C> <C> <C>
Balance, January 1, 1995 48,000 552,000 $4.15
Options authorized 450,000 -- --
Options granted (679,875) 679,875 --
Options expired 297,750 (297,750) $4.32
-------- ---------
Balance, December 31, 1995 115,875 934,125 $3.73
Options authorized 532,500 -- --
Options granted (875,250) 875,250 $5.20
Options exercised -- (139,601) $4.22
Options expired 231,124 (231,124) $4.00
-------- ---------
Balance, December 31, 1996 4,249 1,438,650 $4.59
======== =========
</TABLE>
F-13
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The following table summarizes information regarding outstanding and
exercisable options as of December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- ------------------------
WEIGHTED AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- ------------ ----------- ---------------- -------- ----------- --------
<C> <C> <C> <C> <C> <C>
$3.17 - 4.00 888,500 3.86 $3.53 613,250 $3.57
$4.01 - 6.50 171,750 2.86 $4.37 119,250 $4.38
$6.51 - 9.88 378,400 8.90 $7.15 89,734 $7.32
--------- -------
1,438,650 822,234
========= =======
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its plans. Accordingly, no compensation expense has been
recognized for its stock-based compensation plans for options issued to
employees. Had compensation cost for such options been recorded based upon the
fair value at the grant date consistent with the methodology prescribed in SFAS
No. 123, "Accounting for Stock-Based Compensation," the Company's net loss and
net loss per share would have been $(3,723,924) and $(.49) for 1996, and
$(3,271,095) and $(.68) for 1995, respectively. The weighted average fair value
of each option granted during 1996 is estimated at $2.31 at the date of grant
using the Black-Scholes option pricing model with the following assumptions:
risk-free interest rate of 6.08%, expected life of 7 years, expected volatility
of 65.1%, and no dividend yield.
(11) COMMITMENTS AND CONTINGENCIES
(a) LEASES - The Company leases certain premises and equipment under
operating leases which expire on various dates through 2001. The leases for the
premises contain renewal options, and require the Company to pay such costs as
property taxes, maintenance and insurance. Future minimum lease payments under
noncancelable operating leases with initial or remaining lease terms in excess
of one year are as follows: $128,000 in 1997, $106,000 in 1998, $17,000 in 1999,
$12,000 in 2000, $5,000 in 2001. The Company has paid off all obligations on its
capital leases. Total rent expense for all operating leases amounted to $119,000
for 1996 and $161,000 for 1995.
(b) EMPLOYMENT AGREEMENTS - The Company has employment agreements with
certain of its officers and employees for terms of up to three years, with
compensation for up to nine months if terminated under certain conditions.
F-14
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(12) SUBSEQUENT EVENTS
On March 14, 1997, the Company acquired substantially all of the assets of
Clinical MicroSystems, Inc. ("CMS"). CMS is the developer of ClinScan, a
physician desktop lab ordering and results posting software which, according to
their records, is used by over 100 labs and 3,000 physicians throughout the
United States. The purchase price consisted of the following: $3,000,000 in cash
and 125,786 shares of unregistered common stock paid at closing, plus $2,000,000
in cash and common stock payable over a three year period. The acquisition will
be accounted for as a purchase. CMS reported net sales of $1,758,645 and pre-tax
income of $288,762 for the year ended December 31, 1996.
On February 24, 1997, the Company's Board of Directors approved the 1997
Stock Option Plan, under which options for the purchase of up to 250,000 shares
of common stock may be granted under terms similar to those described in Note
10. The 1997 Plan is subject to approval by the Company's shareholders.
F-15
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DISCRIPTION
- -------- -----------
10.7 Employment Agreement between the Company and Bennett
Marks dated November 11, 1996.
10.8 Employment Agreement between the Company and Carol
Dragan dated November 11, 1996.
10.9 Employment Agreement between the Company and Glenn
Gilchrist dated March 14, 1997.
10.11 Employment Agreement between the Company and Frank M.
Puthoff dated November 11, 1996.
23 Consent of Independent Accountants
27 Financial Data Schedule
EXHIBIT 10.7
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
11th day of November, 1996, by and between PROXYMED, INC. ("Company") and
Bennett Marks residing at 4744 N.W. 100 Terrace, Coral Springs, FL 33076
("Employee").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee is
willing to accept employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth hereinafter and other good and valuable considerations, the receipt
and sufficiency of which is hereby acknowledged, the Company and the Employee
agree as follows:
1. TERM. The term of this Agreement shall commence on November 11, l996 (the
"Effective Date") and shall continue until November 10, l999 (hereafter the
"Term), and shall be automatically extended from year to year thereafter unless
i) terminated by the Company by delivery of not less than ninety (90) days
written notice to Executive prior to the end of the initial Term or any
extension thereof, in which case the employment of Executive shall terminate on
the date specified for termination in such notice, or ii) terminated by
Executive by delivery of not less than thirty (30) days written notice to the
Company, in which case the employment of Executive shall terminate on the date
which is thirty (30) days following the date notice is received by the Company.
2. POSITION; DUTIES; LOYALTY.
a) POSITION. Employee will be employed as Executive Vice
President-Finance, Chief Financial Officer and Treasurer of the Company and
shall render exclusive service to the Company as an employee pursuant to the
terms, provisions and conditions hereinafter set forth.
b) DUTIES. Employee shall be employed by the Company on a full-time
exclusive basis. Employee shall perform the duties and have the authority and
responsibilities set out in the ByLaws of the Company and customarily
accompanying those of a chief financial officer and treasurer of a public
company.
c) LOYALTY. Employee shall devote the full time required for his
position and shall give his best efforts to the business of the Company and to
the performance of the duties and obligations described in this Agreement.
Employee shall not, directly or indirectly, alone, or as a partner, officer,
director or shareholder of any other institution, be engaged in any other
commercial activities whatsoever, or continue or assume any other corporate
affiliations without the prior written consent of the Company, which consent
shall not be unreasonably withheld, except for (a) passive investments, and (b)
minimal time utilized for business activities that do not compete with the
business of the Company or its subsidiaries.
3. COMPENSATION AND EXPENSES.
a) SALARY. In consideration for the services rendered by the Employee
under this Agreement, the Company shall pay the Employee a monthly base salary
of $10,416.67 (the
<PAGE>
"Base Salary") in accordance with the Company's customary payroll practices,
plus a $500 per month car allowance, subject to federal and state taxes, if any,
through September 16, 1997, and increasing to $11,458.33 per month on September
16, 1997, and increasing to $13, 333.33 per month on September 16, 1998.
b) ADDITIONAL COMPENSATION. As a further incentive and inducement to
the Executive to accept employment by the Company and to devote his best efforts
to the business and affairs of the Company, the Employee shall be entitled to
such bonuses that may be awarded from time to time by the Compensation Committee
or the Board of Directors of the Company, and to participate in any stock option
or bonus plans which the Company may now have or in the future develop.
c) EXPENSES. Company shall promptly pay or reimburse the Employee for
all reasonable business expenses actually incurred or paid by the Employee in
the performance of his services hereunder in accordance with the policies and
procedures of the Company for the reimbursement of business expenses for its
senior level executives, provided that the Executive properly accounts therefor
in accordance with the Company's policy.
d) TAX WITHHOLDING. The Company shall have the right to deduct or
withhold from the compensation due Employee hereunder any and all sums required
for Federal income and social security taxes and all state or local taxes now
applicable or that may be enacted and become applicable in the future.
4. BENEFITS.
a) VACATION. Employee shall be entitled to three weeks of vacation with
pay in the first year of his employment, and thereafter. Vacation not taken does
not accrue unless approved in writing by the Company. Employee shall not be
entitled to receive any additional compensation from the Company on account of
his failure to take a vacation.
b) PARTICIPATION IN BENEFIT PLANS. Employee shall be entitled to
participate in whatever benefit plans, including health insurance, that are
extended to all executives of the Company, on the same terms that such benefits
are so extended. The Company shall not be obligated to maintain any special or
additional plans for Employee's benefit. Employee shall also be entitled to
participate in benefit plans extended to other senior executives of the Company.
5. TERMINATION.
a) TERMINATION WITHOUT CAUSE; DEATH; DISABILITY. In the event of
Employee's Disability (as defined herein), this Agreement may be terminated at
the election of the Company. Upon termination for death or Disability, Employee
or his/her beneficiary or estate or legal representative shall be entitled to
receive the amounts payable under Section 5 (c). For purposes of this Agreement,
"Disability" is defined to mean the inability of Employee due to illness or
physical or mental infirmity (as determined by a physician selected by Employee
and acceptable to the Company) to perform his duties hereunder on a full-time
basis for six consecutive months with reasonable accommodation by the Company.
Employee shall, upon request of the Company, furnish information and assistance
to the Company, and, in addition, upon reasonable request of the Company's Board
of Directors or its designees, shall make himself available to undertake
reasonable assignments consistent with the dignity, importance and scope of his
position and his physical and mental health.
2
<PAGE>
b) TERMINATION FOR CAUSE. The Company may terminate Employee's
employment hereunder for "cause", effective immediately upon giving written
notice thereof. For purposes of this Agreement, the term "cause" shall be
limited to (i) conviction of a felony or of any crime involving fraud or
misrepresentation; (ii) the continued failure by Employee to substantially
perform his duties to the Company after receipt of written notice from the
Company specifying any action or inaction by Employee which is deemed by the
Company to constitute a failure to perform his duties hereunder with
suggestions, where feasible, as to how Employee may remedy such failure, and
Employee has failed to correct the unsatisfactory performance within thirty (30)
days of such notice; (iii) Employee's gross negligence or willful misconduct
which is materially injurious to the Company, monetarily or otherwise; (iv)
proven dishonesty affecting the Company; (v) excessive use of alcohol or illegal
drugs interfering with the performance of Employee's duties and the continuance
thereof after written warning; (vi) any material breach by Employee of the
Company's then current policies with written notice thereof and an appropriate
period to cure such breach where the breach is not one subject to immediate
termination under the Company's policies, or of the covenants contained in
Section 6 of this Agreement regarding confidentiality. For purposes of the
paragraph, no act or failure to act on Employee's part shall be considered
"willful" unless done, or omitted to be done, by Employee not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company. If at any time the Company shall determine that Employee has
engaged in one or more activities constituting "cause" for termination
hereunder, Employee's employment shall be terminated for cause. Company shall
pay Employee his full Base Salary through the date of termination at the then
current rate (including any applicable bonus and accrued vacation pay), and all
stock options, if any, which have become vested and exercisable on or before the
date of termination, with such options remaining exercisable for such period of
time specified as in Employee's Option Agreement(s). Company shall then have no
further obligations to Employee. Employee may give a written request to the
Company within thirty (30) days after such termination requesting an opportunity
to be heard by the Board of Directors of the Company. If Employee timely so
requests such an opportunity to be heard, such opportunity shall be made
available to Employee within 30 days after such written request. If the Board,
with the advice of counsel, determines that there was cause for termination, its
determination shall be deemed to be conclusive and final. In the event Employee
is terminated for cause, Section 6.a) and 6.b) will be of no force or effect. If
the Board determines in its reasonable judgment that there was not sufficient
basis to terminate Employee for cause, Employee shall be reinstated with all
back pay and benefits restored.
3
<PAGE>
c) PAYMENT UPON TERMINATION WITHOUT CAUSE. In the event of any
termination without cause, Employee shall be given ninety (90) days prior
written notice. Employee shall execute a full and complete release of any and
all claims against the Company in a form satisfactory to the Company, in which
event Employee (or his estate) shall be entitled to severance pay of (i) an
amount equal to Employee's Base Salary on the date of termination for 6 months
commencing on the date of termination payable in accordance with the Company's
customary payroll practices plus (ii) a pro rata portion of any bonus
compensation which would have been paid to Employee under any bonus plan which
is adopted by the Company's Compensation Committee or Board of Directors in such
year if the Company and Employee had met the targeted goals to the date of
termination, plus (iii) the continuation of all benefits including, without
limitation, all insurance plans) for 6 months after termination plus (iv) any
remaining unvested options shall vest. A termination pursuant to Section 1 above
shall not be deemed to be a termination without cause under this Section or a
termination for Good Reason under Section 5.f) or subject to this Section 5.c).
d) ACCELERATION. If the Company defaults in the payment of any amounts
owed hereunder to Employee following written notice by Employee and fails to
cure such default within ten days from the date of such notice, Employee shall
be entitled to accelerate the entire amount due hereunder. The Company shall
have the opportunity to cure a monetary default one time after which time, if
another default occurs, Employee shall be entitled to accelerate the entire
amount due hereunder upon written notice by Employee without affording the
Company an opportunity to cure.
e) RETURN OF COMPANY PROPERTY. Upon notice of termination by the
Company or resignation by Employee, Employee shall immediately return to the
Company all property of the Company in Employee's possession, including
Confidential Information (as defined below). Employee acknowledges that the
Company may withhold any compensation and benefits owed to Employee hereunder
until all such property is returned.
f) EMPLOYEE TERMINATION FOR GOOD REASON. Employee may terminate this
Agreement for Good Reason by giving Company ninety (90) days prior written
notice. Good Reason means: a) the assignment of any duties inconsistent in any
respect with Employee's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities hereunder, or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose as isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of written notice from Employee;
b) any reduction of Employee's Base Salary or the failure by the Company to
provide Employee with an incentive compensation program and health and the
benefits hereunder no less favorable than the benefits Employee was entitled to
hereunder; and c) if Company's principal office is relocated in the future more
than fifty (50) miles from Ft. Lauderdale, FL. In such event, Employee's
termination shall be treated as a termination without cause and he shall be
entitled to the payments enumerated in Section 5.c) above.
g) MITIGATION. If Employee becomes entitled to compensation pursuant to
Section 5. c) or 5. f) above, Executive shall use reasonable efforts to seek
other employment; provided, however, that he shall not be required to accept a
position of less importance or dignity or of a substantially different character
than the position held as of the date of termination or a position that could
require Executive to engage in activity in violation of the non-competition
provisions of Section 6 hereof nor shall he be required to accept a position
outside South Florida. The amount of any cash compensation paid or payable from
any such
4
<PAGE>
employment shall be reported to the Company on a monthly basis and such amount
shall be credited against amounts otherwise payable by the Company to Executive
under Sections 5.c) or 5.f) above. Other than as provided in this Section 5(g),
Executive shall have no duty to mitigate the amount of any payment provided for
in this Agreement.
6. COVENANTS OF EMPLOYEE.
a) Employee agrees that during the Term and for one year following a
termination of employment for any reason, he will not, directly or indirectly,
engage, assist or participate in, whether as a director, officer, executive,
agent, manager, consultant to vendors/sellers (but may consult to end
users/purchasers), partner, owner or independent contractor or other
participant, in any line of business which is the same as the Company or any of
its subsidiaries are engaged in as of the termination of this Agreement without
the written consent of the Company, which consent shall not be unreasonably
withheld. Employee and Company agree that this clause is to protect the
interests of the Company while at the same time allowing the Employee to pursue
gainful employment with any other company Employee so chooses, so long as such
Employee does not, within the relevant time period herein, engage in any line of
business that directly competes with any line of business engaged in by the
Company or any of its subsidiaries as of the date Employee terminates his
employment with Company. Nothing contained herein shall prevent Employee from
acquiring less than 1% of any class of securities of any company that competes
with the Company that has any of its securities listed on a national securities
exchange or traded in the over-the-counter market, provided Employee remains a
passive investor.
b) Employee agrees that during the Term and for one year after the
termination of employment for any reason, he will not, directly or indirectly,
without the prior written consent of the Company, induce or solicit any person
employed or hereafter employed by the Company or any of its subsidiaries to
leave the employ of the Company or any of its subsidiaries or solicit,
recruit,hire or attempt to solicit, recruit or hire any person employed by the
Company. Further, Employee agrees that for a period of one year after the
termination of this Agreement, he will not, directly or indirectly, without the
prior written consent of the Company, solicit, divert away, take away, or
attempt to take away any customer of the Company who was a customer which
Employee had, alone or in conjunction with others, served during his employment
with the Company. Regarding the latter sentence, Company and Employee agree that
Employee may contact and do business with those customers, however during the
relevant time period, he may not solicit or sell them any product or service in
the lines of business that were the same as then being offered by the Company or
any of its subsidiaries as of the termination of employee's employment.
c) Employee agrees and acknowledges the he will disclose promptly to
the Company every discovery, improvement and invention made, conceived or
developed by Employee during the entire period of employment (whether or not
during working hours) which discoveries, improvements, or inventions are capable
of use in any way in connection with the business of Company. To the fullest
extent permitted by law, all such discoveries, inventions and improvements will
be deemed works made for hire. Employee grants and agrees to convey to Company
or its nominee the entire right, title and interest, domestic and foreign, which
he may have in such discoveries, improvements or inventions, or a lesser
interest therein, at the option of Company. Employee further agrees to promptly,
upon request, sign all applications for patents, copyrights, assignments and
other appropriate documents, and to perform all acts and to do all things
necessary and appropriate to carry out the intent of this section, whether or
not Employee is still an employee of the Company at the time of such requests.
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d) Employee agrees and acknowledges that the Confidential Information
of the Company and its subsidiaries (as hereinafter defined) is valuable,
special and unique to its business, that such business depends on such
Confidential Information, and that the Company wishes to protect such
Confidential Information by keeping it confidential for the use and benefit of
the Company. Based on the foregoing, Employee agrees to undertake the following
obligations with respect to such Confidential Information.
i) Employee agrees to keep any and all Confidential Information in
trust for the use and benefit of the Company.
ii) Employee agrees that, except as required by Employee's duties
or authorized in writing by the Company and its subsidiaries, he will not at any
time during and for a period of 10 years after the termination of his employment
with the Company and its subsidiaries, disclose, directly or indirectly, any
Confidential Information of the Company or any of its subsidiaries. except as
maybe required by applicable law or court order, in which case Employee shall
promptly notify Company so as to allow it to seek a protective order if it so
elects.
iii) Employee agrees to take all reasonable steps necessary, or
reasonably requested by the Company or its subsidiaries, to ensure that all
Confidential Information of the Company is kept confidential for the use and
benefit of the Company and its subsidiaries; and
iv) Employee agrees that, upon termination of his employment by
the Company or any of its subsidiaries or at any other time the Company may in
writing so request, he will promptly deliver to the Company all materials
constituting Confidential Information (including all copies thereof) that are in
the possession of or under the control of Employee. Employee further agrees
that, if requested by the Company to return any Confidential Information
pursuant to this Subsection (iv), he will not make or retain any copy or extract
from such materials.
For the purposes of this Section 6 (c), Confidential Information
means any and all information developed by or for the Company or any of its
subsidiaries of which Employee gained knowledge by reason of his employment by
the Company or any of its subsidiaries prior to the date hereof or during his
employment that is not generally known in any industry in which the Company or
its subsidiaries is or may become engaged, but does not apply to information
which is generally known to the public or the trade, unless such knowledge
results from an unauthorized disclosure by Employee. Confidential Information
includes, but is not limited to, any and all information developed by or for the
Company concerning plans, marketing and sales methods, materials, processes,
business forms, procedures, devices used by the Company, its subsidiaries,
suppliers and customers with which the Company had dealt with prior to
Employee's termination of employment with the Company and its subsidiaries,
plans for development of new products, services and expansion into new areas or
markets, internal operations, and any trade secrets, proprietary information of
any type owned by the Company and its subsidiaries, together with all written,
graphic and other materials relating to all or any part of the same. The Company
will receive all materials, including, software programs, source code, object
code, specifications, documents, abstracts, and summaries developed in
connection with Employee's employment. Employee acknowledges that the programs
and documentation developed in connection with Employee's employment with the
Company shall be the exclusive property of the Company, and that the Company
shall retain all right, title and interest in such materials, including without
limitation patent and copyright interests. Nothing herein shall be construed as
a license from the Company to make, use, sell or copy any inventions, ideas,
trade secrets, trademarks, copyrightable works, or other
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intellectual property of the Company during the term of this Agreement or
subsequent to its termination.
e) INJUNCTIVE RELIEF.
i) Employee acknowledges and agrees that the covenants and
obligations contained in this Section 6 relate to special, unique and
extraordinary matters and that a violation of any of the terms of this Section
will cause the Company irreparable injury for which adequate remedies at law are
not available. Therefore, Employee agrees that the Company shall be entitled
(without having to post a bond or other surety) to an injunction, restraining
order, or other equitable relief from any court of competent jurisdiction,
restraining the Employee from committing any violation of the covenants and
obligations set forth in this Section 6.
ii) The Company's rights and remedies under this Section are
cumulative and are in addition to any other rights and remedies the Company may
have pursuant to the specific provisions of this Agreement and at law or in
equity.
7. MISCELLANEOUS.
a) ATTORNEY'S FEES. In the event a proceeding is brought to enforce or
interpret any part of this Agreement or the rights or obligations of any party
to this Agreement, the non- prevailing party shall pay the prevailing party's
fees and expenses, including reasonable attorney fees, unless the court or panel
of arbitrators determine otherwise.
b) SUCCESSORS AND ASSIGNS. This Agreement and the benefits hereunder
are personal to the Company and are not assignable or transferable by the
Employee without the written consent of the Company. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the Company and
the Employee and the Employee's heirs and legal representatives, and the
Company's successors and assigns.
c) GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the law of the State of Florida, without regard to the
application of principles of conflict of laws.
d) NOTICES. All notices and other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been given if delivered personally or sent by certified mail, return receipt
requested, postage prepaid, to the parties to this Agreement addressed to the
Company at its then principal office, as notified to Employee, or to the
Employee at his address specified on page 1 of this Agreement, or to either
party hereto at such other address or addresses as he or it may from time to
time specify for such purposes in a notice similarly given. All notices and
communications shall be deemed to have been received on the date of delivery.
e) MODIFICATION; WAIVER. No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by a duly authorized officer of the Company and is agreed to in a
writing signed by the Employee and such officer. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
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f) COMPLETE UNDERSTANDING. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
h) VALIDITY. The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
i) SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and if any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid, this Agreement
shall be construed as if such invalid word or words, phrase or phrases, sentence
or sentences, clause or clauses, or section or sections had not been inserted.
j) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
k) ARBITRATION. Except for disputes relating to Section 6 of this
Agreement, any and all disputes or controversies that shall arise under or in
connection with this Agreement or in any other way related to Employee's
employment by the Company, including termination of employment, shall be
submitted to a panel of three arbitrators under the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association then
in effect. The parties hereby acknowledge that the Federal Arbitration Act takes
precedence over any state arbitration statutes, rules and regulations. Each of
the arbitrators shall be qualified and experienced in employment related matters
with at least one arbitrator being a licensed attorney. The arbitrators must
base their determination solely on the terms and conditions of this Agreement
and the law in the State of Florida. The arbitrators shall have the authority to
award any remedies that a court may order or grant, except that they will have
no authority to award punitive damages or any other damages not measured by the
prevailing party's actual damages, and may not, in any event, make any ruling,
finding or award that does not conform to the terms and conditions of this
Agreement. Arbitration shall be held either in Broward County or Dade County,
Florida, and the parties hereby agree to accept service of process at the
address above written and in the personal jurisdiction and venue as set out
herein. Both parties expressly covenant and agree to be bound by the decision of
the arbitrators as the final determination of the matter in dispute. Judgment
upon the award rendered by the arbitrators may be entered into any court having
jurisdiction thereof. The non-prevailing party shall pay the prevailing party's
fees and costs, including reasonable attorney fees, unless the court or panel of
arbitrators determine otherwise.
l) INDEMNIFICATION. In accordance with the Company's Articles
and Bylaws, the Company agrees to defend, indemnify and hold harmless the
Employee ("Indemnified Party") for acts in his capacity as Employee to the
fullest extent permitted by Florida corporate law at the present time (or as
such right of indemnity may be increased in the future) including in particular
and without limitation with respect to the execution and delivery of this
Agreement or Employee's accepting employment with the Company. The Company
agrees to reimburse the Indemnified Party in advance for any costs of defending
any action or investigation (including
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reasonable attorneys' fees and expenses) regarding Employee's performance of his
duties under this Agreement, subject to an undertaking from the Indemnified
Party to repay the Company if the Indemnified Party is determined not to be
entitled to such indemnity by a court of competent jurisdiction; provided that,
the Company shall first have the opportunity to defend Employee so long as
counsel hired by the Company does not have a conflict with representation of
both the Company and the Employee and Employee approves of such counsel.
Notwithstanding the foregoing, the Company shall not be required to advance
expenses for the defense of Employee for any causes of action that relate to
activities of Employee that the Company in good faith determines are outside of
the scope of the duties required of Employee under this Agreement and not
related to the execution and delivery of this Agreement or Employee's accepting
employment with the Company, including without limitation, for causes of action
such as sexual harassment, torts, etc.
m) Sections 5. 6 and 7 shall survive the termination of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
COMPANY:
PROXYMED, INC., EMPLOYEE:
a Florida corporation
By: _____________________________________ ______________________
Harold Blue, Chairman and C.E.O. Bennett Marks
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
11th day of November, 1996 by and between PROXYMED, INC. ("Company") and Carol
A. Dragan residing at 110 SW 91st Ave., Apt. #308 Plantation, FL. 33324
("Employee").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee is
willing to accept employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth hereinafter and other good and valuable considerations, the receipt
and sufficiency of which is hereby acknowledged, the Company and the Employee
agree as follows:
1. TERM. The term of this Agreement shall commence on October 1, l996 (the
"Effective Date") and shall continue until September 30, l999 (hereafter the
"Term), and shall be automatically extended from year to year thereafter unless
i) terminated by the Company by delivery of not less than ninety (90) days
written notice to Executive prior to the end of the initial Term or any
extension thereof, in which case the employment of Employee shall terminate on
the date specified for termination in such notice, or ii) terminated by Employee
by delivery of not less than thirty (30) days written notice to the Company, in
which case the employment of Employee shall terminate on the date which is
thirty (30) days following the date notice is received by the Company.
2. POSITION; DUTIES; LOYALTY.
a) POSITION. Employee will be employed as Executive Vice President, Systems
& Clinical Information Divisions of the Company and shall render services to the
Company pursuant to the terms, provisions and conditions hereinafter set forth.
b) DUTIES. Employee shall be employed by the Company on a full-time,
exclusive basis. Employee shall perform such duties and have such authority and
responsibilities customarily accompanying those of an executive officer within
the scope of the position.
c) LOYALTY. Employee shall devote the full time required for the position
and shall give her best efforts to the business of the Company and the
performance of the duties and obligations described in this Agreement. Employee
shall not, directly or indirectly, alone, or as a partner, officer, director or
shareholder of any other institution, be engaged in any other commercial
activities whatsoever, or continue or assume any other corporate affiliations
without the prior written consent of the Company, which consent shall not be
unreasonably withheld, except for (a) passive investments, and (b) minimal time
utilized for business activities that do not compete with the business of the
Company or its subsidiaries.
3. COMPENSATION AND EXPENSES.
a) SALARY. In consideration for the services rendered by the Employee under
this Agreement, the Company shall pay the Employee a monthly base salary of
$6,250.00 (the "Base Salary") in accordance with the Company's customary payroll
practices, plus a $500 per
<PAGE>
month car allowance, subject to federal and state taxes, if any, through March
15, l997, with Base Salary increasing to $8,750 per month thereafter.
b) ADDITIONAL COMPENSATION. On March 16, l997, Employee shall receive a one
time incentive bonus of $12,000, subject to federal and state taxes, if any. As
a further incentive and inducement to Employee to accept employment by the
Company and to devote her best efforts to the business and affairs of the
Company, Employee shall be entitled to such bonuses that may be awarded from
time to time by the Compensation Committee or the Board of Directors of the
Company, and to participate in any stock option or bonus plans which the Company
may now have or in the future develop.
c) RELOCATION. Employee has received a one time net amount of $15,000
toward any and all relocation expenses, including federal and state taxes, if
any.
d) OPTIONS. Employee will receive a stock option agreement to purchase up
to 60,000 shares of the Company's common stock at its fair market value defined
as the mean of the high and low prices at common stock is reported to have
traded on the NASDAQ/NMS System at the close of business on the date the Board
of Directors or the Compensation Committee have approved the grant, which is
November 11, 1996, at an exercise price of $6.94 per share. The options will
vest over a three (3) year period as follows: 6,600 on January 1, 1997; 5,400 on
October 1, l997; 24,000 on October 1, l998; and 24,000 on September 30, 1999.
The option is being granted as an inducement to a new employee essential to
Employee's entering into this Agreement. As such, the option being granted is a
non-qualified option outside of any stock option plan adopted by the Company.
The terms of Employee's stock option agreement will be on a form as approved by
the Board of Directors on November 11, l996 and will be for a ten (10) year term
with "change of control" provisions similar to those contained in Company' 1995
Stock Option Plan.
e) EXPENSES. Company shall promptly pay or reimburse the Employee for all
reasonable business expenses actually incurred or paid by the Employee in the
performance of her services hereunder in accordance with the policies and
procedures of the Company for the reimbursement of business expenses for its
senior level executives, provided that Employee properly accounts therefor in
accordance with the Company's policy. Employee has received reimbursement for
travel and living expenses related to relocation through October 11, l996, after
which date Company shall have no further obligation for such expenses.
f) TAX WITHHOLDING. The Company shall have the right to deduct or withhold
from the compensation due Employee hereunder any and all sums required for
Federal income and social security taxes and all state or local taxes now
applicable or that may be enacted and become applicable in the future.
4. BENEFITS.
a) VACATION. Employee shall be entitled to three weeks of vacation with pay
in the first year of her employment, and thereafter. Vacation not taken does not
accrue unless approved in writing by the Company. Employee shall not be entitled
to receive any additional compensation from the Company on account of her
failure to take a vacation.
b) PARTICIPATION IN BENEFIT PLANS. Employee shall be entitled to
participate in whatever benefit plans, including health insurance, that are
extended to all executives of the Company, on the same terms that such benefits
are so extended. The Company shall not be obligated to maintain any special or
additional plans for Employee's benefit. Employee shall
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also be entitled to participate in benefit plans extended to other executive
vice presidents of the Company.
5. TERMINATION.
a) TERMINATION WITHOUT CAUSE; DEATH; DISABILITY. In the event of Employee's
Disability (as defined herein), this Agreement may be terminated at the election
of the Company. Upon termination for death or Disability, Employee or her
beneficiary or estate or legal representative shall be entitled to receive the
amounts payable under Section 5 (c). For purposes of this Agreement,
"Disability" is defined to mean the inability of Employee due to illness or
physical or mental infirmity (as determined by a physician selected by Employee
and acceptable to the Company) to perform her duties hereunder on a full-time
basis for six consecutive months with reasonable accommodation by the Company.
Employee shall, upon request of the Company, furnish information and assistance
to the Company, and, in addition, upon reasonable request of the Company's Board
of Directors or its designees, shall make herself available to undertake
reasonable assignments consistent with the dignity, importance and scope of his
position and his physical and mental health.
b) TERMINATION FOR CAUSE. The Company may terminate Employee's employment
hereunder for "cause", effective immediately upon giving written notice thereof.
For purposes of this Agreement, the term "cause" shall be limited to (i)
conviction of a felony or of any crime involving fraud or misrepresentation;
(ii) the continued failure by Employee to substantially perform her duties to
the Company after receipt of written notice from the Company specifying any
action or inaction by Employee which is deemed by the Company to constitute a
failure to perform her duties hereunder with suggestions, where feasible, as to
how Employee may remedy such failure, and Employee has failed to correct the
unsatisfactory performance within thirty (30) days of such notice; (iii)
Employee's gross negligence or willful misconduct which is materially injurious
to the Company, monetarily or otherwise; (iv) proven dishonesty affecting the
Company; (v) excessive use of alcohol or illegal drugs interfering with the
performance of Employee's duties and the continuance thereof after written
warning; (vi) any material breach by Employee of the Company's then current
policies with written notice thereof and an appropriate period to cure such
breach where the breach is not one subject to immediate termination under the
Company's policies or of the covenants contained in Section 6 of this Agreement
regarding confidentiality. For purposes of the paragraph, no act or failure to
act on Employee's part shall be considered "willful" unless done, or omitted to
be done, by Employee not in good faith and without reasonable belief that her
action or omission was in the best interest of the Company. If at any time the
Company shall determine that Employee has engaged in one or more activities
constituting "cause" for termination hereunder, Employee's employment shall be
terminated for cause. Company shall pay Employee her full Base Salary through
the date of termination at the then current rate (including any applicable bonus
and accrued vacation pay), and all stock options, if any, which have become
vested and exercisable on or before the date of termination, with such options
remaining exercisable for such period of time specified as in Employee's Option
Agreement(s). Company shall then have no further obligations to Employee.
Employee may give a written request to the Company within thirty (30) days after
such termination requesting an opportunity to be heard by the Board of Directors
of the Company. If Employee timely so requests such an opportunity to be heard,
such opportunity shall be made available to Employee within 30 days after such
written request. If the Board, with the advice of counsel, determines that there
was cause for termination, its determination shall be deemed to be conclusive
and final. In the event Employee is terminated for cause, Section 6.a) and 6.b)
will be of no force or effect. If the
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Board in its reasonable judgment that there was not sufficient basis to
terminate Employee for cause, Employee shall be reinstated with all back pay and
benefits restored.
c) PAYMENT UPON TERMINATION WITHOUT CAUSE. In the event any termination
without cause, Employee shall be given ninety (90) days prior written notice.
Employee shall execute a full and complete release of any and all claims against
the Company in a form satisfactory to the Company, in which event Employee (or
her estate) shall be entitled to severance pay of (i) an amount equal to
Employee's Base Salary on the date of termination for 6 months commencing on the
date of termination payable in accordance with the Company's customary payroll
practices plus (ii) a pro rata portion of any bonus compensation which would
have been paid to Employee under any bonus plan which is adopted by the
Company's Compensation Committee or Board of Directors in such year if the
Company and Employee had met the targeted goals to the date of termination, plus
(iii) the continuation of all benefits including, without limitation, all
insurance plans) for 6 months after termination plus (iv) any remaining unvested
options shall vest. A termination pursuant to Section 1 above shall not be
deemed to be a termination without cause under this Section or a termination for
Good Reason under Section 5.f) or subject to this Section 5.c).
d) ACCELERATION. If the Company defaults in the payment of any amounts owed
hereunder to Employee following written notice by Employee and fails to cure
such default within ten days from the date of such notice, Employee shall be
entitled to accelerate the entire amount due hereunder. The Company shall have
the opportunity to cure a monetary default one time after which time, if another
default occurs, Employee shall be entitled to accelerate the entire amount due
hereunder upon written notice by Employee without affording the Company an
opportunity to cure.
e) RETURN OF COMPANY PROPERTY. Upon notice of termination by the Company or
resignation by Employee, Employee shall immediately return to the Company all
property of the Company in Employee's possession, including Confidential
Information (as defined below). Employee acknowledges that the Company may
withhold any compensation and benefits owed to Employee hereunder until all such
property is returned.
f) EMPLOYEE TERMINATION FOR GOOD REASON. Employee may terminate this
Agreement for Good Reason by giving Company ninety (90) days prior written
notice. Good Reason means: a) the assignment of any duties inconsistent in any
respect with Employee's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities hereunder, or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose as isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of written notice from Employee;
b) any reduction of Employee's Base Salary or the failure by the Company to
provide Employee with an incentive compensation program and health and the
benefits hereunder no less favorable than the benefits Employee was entitled to
hereunder; and c) if Company's principal office is relocated in the future more
than fifty (50) miles from Ft. Lauderdale, FL. In such event, Employee's
termination shall be treated as a termination without cause and she shall be
entitled to the payments enumerated in Section 5.c) above.
g) MITIGATION. If Employee becomes entitled to compensation pursuant to
Section 5. c) or 5. f) above, Executive shall use reasonable efforts to seek
other employment; provided, however, that she shall not be required to accept a
position of less importance or dignity or of a substantially different character
than the position held as of the date of
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termination or a position that could require Executive to engage in activity in
violation of the non-competition provisions of Section 6 hereof nor shall she be
required to accept a position outside South Florida. The amount of any cash
compensation paid or payable from any such employment shall be reported to the
Company on a monthly basis and such amount shall be credited against amounts
otherwise payable by the Company to Executive under Sections 5.c) or 5.f) above.
Other than as provided in this Section 5.g), Executive shall have no duty to
mitigate the amount of any payment provided for in this Agreement.
6. COVENANTS OF EMPLOYEE.
a) Employee agrees that during the Term and for one year following a
termination of employment for any reason, he will not, directly or indirectly,
engage, assist or participate in, whether as a director, officer, executive,
agent, manager, consultant to vendors/sellers (but may consult to end
users/purchasers), partner, owner or independent contractor or other
participant, in any line of business which is the same as the Company or any of
its subsidiaries are engaged in as of the termination of this Agreement without
the written consent of the Company, which consent shall not be unreasonably
withheld. Employee and Company agree that this clause is to protect the
interests of the Company while at the same time allowing the Employee to pursue
gainful employment with any other company Employee so chooses, so long as such
Employee does not, within the relevant time period herein, engage in any line of
business that directly competes with any line of business engaged in by the
Company or any of its subsidiaries as of the date Employee terminates her
employment with Company. Nothing contained herein shall prevent Employee from
acquiring less than 1% of any class of securities of any company that competes
with the Company that has any of its securities listed on a national securities
exchange or traded in the over-the-counter market, provided Employee remains a
passive investor.
b) Employee agrees that during the Term and for one year after the
termination of employment for any reason, she will not, directly or indirectly,
without the prior written consent of the Company, induce or solicit any person
employed or hereafter employed by the Company or any of its subsidiaries to
leave the employ of the Company or any of its subsidiaries or solicit, recruit,
hire or attempt to solicit, recruit or hire any person employed by the Company.
Further, Employee agrees that for a period of one year after the termination of
this Agreement, she will not, directly or indirectly, without the prior written
consent of the Company, solicit, divert away, take away, or attempt to take away
any customer of the Company who was a customer which Employee had, alone or in
conjunction with others, served during his employment with the Company.
Regarding the latter sentence, Company and Employee agree that Employee may
contact and do business with those customers, however during the relevant time
period, she may not solicit or sell them any product or service in the lines of
business that were the same as then being offered by the Company or any of its
subsidiaries as of the termination of employee's employment.
c) Employee agrees and acknowledges the she will disclose promptly to the
Company every discovery, improvement and invention made, conceived or developed
by Employee during the entire period of employment (whether or not during
working hours) which discoveries, improvements, or inventions are capable of use
in any way in connection with the business of Company. To the fullest extent
permitted by law, all such discoveries, inventions and improvements will be
deemed works made for hire. Employee grants and agrees to convey to Company or
its nominee the entire right, title and interest, domestic and foreign, which
she may have in such discoveries, improvements or inventions, or a lesser
interest therein, at the option of Company. Employee further agrees to promptly,
upon request, sign all applications for patents, copyrights, assignments and
other appropriate documents, and to
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perform all acts and to do all things necessary and appropriate to carry out the
intent of this section, whether on not Employee is still an employee of the
Company at the time of such requests.
d) Employee agrees and acknowledges that the Confidential Information of
the Company and its subsidiaries (as hereinafter defined) is valuable, special
and unique to its business, that such business depends on such Confidential
Information, and that the Company wishes to protect such Confidential
Information by keeping it confidential for the use and benefit of the Company.
Based on the foregoing, Employee agrees to undertake the following obligations
with respect to such Confidential Information.
i) Employee agrees to keep any and all Confidential Information in
trust for the use and benefit of the Company.
ii) Employee agrees that, except as required by Employee's duties or
authorized in writing by the Company and its subsidiaries, she will not at any
time during and for a period of 10 years after the termination of his employment
with the Company and its subsidiaries, disclose, directly or indirectly, any
Confidential Information of the Company or any of its subsidiaries. except as
maybe required by applicable law or court order, in which case Employee shall
promptly notify Company so as to allow it to seek a protective order if it so
elects.
iii) Employee agrees to take all reasonable steps necessary, or
reasonably requested by the Company or its subsidiaries, to ensure that all
Confidential Information of the Company is kept confidential for the use and
benefit of the Company and its subsidiaries; and
iv) Employee agrees that, upon termination of his employment by the
Company or any of its subsidiaries or at any other time the Company may in
writing so request, she will promptly deliver to the Company all materials
constituting Confidential Information (including all copies thereof) that are in
the possession of or under the control of Employee. Employee further agrees
that, if requested by the Company to return any Confidential Information
pursuant to this Subsection (iv), she will not make or retain any copy or
extract from such materials.
For the purposes of this Section 6 (c), Confidential Information means
any and all information developed by or for the Company or any of its
subsidiaries of which Employee gained knowledge by reason of his employment by
the Company or any of its subsidiaries prior to the date hereof or during her
employment that is not generally known in any industry in which the Company or
its subsidiaries is or may become engaged, but does not apply to information
which is generally known to the public or the trade, unless such knowledge
results from an unauthorized disclosure by Employee. Confidential Information
includes, but is not limited to, any and all information developed by or for the
Company concerning plans, marketing and sales methods, materials, processes,
business forms, procedures, devices used by the Company, its subsidiaries,
suppliers and customers with which the Company had dealt with prior to
Employee's termination of employment with the Company and its subsidiaries,
plans for development of new products, services and expansion into new areas or
markets, internal operations, and any trade secrets, proprietary information of
any type owned by the Company and its subsidiaries, together with all written,
graphic and other materials relating to all or any part of the same. The Company
will receive all materials, including, software programs, source code, object
code, specifications, documents, abstracts, and summaries developed in
connection with Employee's employment. Employee acknowledges that the programs
and documentation developed in connection with Employee's employment with the
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Company shall be the exclusive property of the Company, and that the Company
shall retain all right, title and interest in such materials, including without
limitation patent and copyright interests. Nothing herein shall be construed as
a license from the Company to make, use, sell or copy any inventions, ideas,
trade secrets, trademarks, copyrightable works, or other intellectual property
of the Company during the term of this Agreement or subsequent to its
termination.
e) INJUNCTIVE RELIEF.
i) Employee acknowledges and agrees that the covenants and obligations
contained in this Section 6 relate to special, unique and extraordinary matters
and that a violation of any of the terms of this Section will cause the Company
irreparable injury for which adequate remedies at law are not available.
Therefore, Employee agrees that the Company shall be entitled (without having to
post a bond or other surety) to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Employee from committing any violation of the covenants and obligations set
forth in this Section 6.
ii) The Company's rights and remedies under this Section are cumulative
and are in addition to any other rights and remedies the Company may have
pursuant to the specific provisions of this Agreement and at law or in equity.
7. MISCELLANEOUS.
a) ATTORNEY'S FEES. In the event a proceeding is brought to enforce or
interpret any part of this Agreement or the rights or obligations of any party
to this Agreement, the non- prevailing party shall pay the prevailing party's
fees and expenses, including reasonable attorney fees, unless the court or panel
of arbitrators determine otherwise.
b) SUCCESSORS AND ASSIGNS. This Agreement and the benefits hereunder are
personal to the Company and are not assignable or transferable by the Employee
without the written consent of the Company. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the Company and the
Employee and the Employee's heirs and legal representatives, and the Company's
successors and assigns.
c) GOVERNING LAW. This Agreement shall be construed in accordance with and
governed by the law of the State of Florida, without regard to the application
of principles of conflict of laws.
d) NOTICES. All notices and other communications required or permitted to
be given under this Agreement shall be in writing and shall be deemed to have
been given if delivered personally or sent by certified mail, return receipt
requested, postage prepaid, to the parties to this Agreement addressed to the
Company at its then principal office, as notified to Employee, or to the
Employee at his address specified on page 1 of this Agreement, or to either
party hereto at such other address or addresses as he or it may from time to
time specify for such purposes in a notice similarly given. All notices and
communications shall be deemed to have been received on the date of delivery.
e) MODIFICATION; WAIVER. No provisions of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is approved
by a duly authorized officer of the Company and is agreed to in a writing signed
by the Employee and such officer. No waiver by either party hereto at any time
of any breach by the other party hereto of, or
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compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
f) COMPLETE UNDERSTANDING. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
h) VALIDITY. The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
i) SEVERABILITY. The invalidity of any one or more of the words, phrases,
sentences, clauses or sections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid in law, and if any
one or more of the words, phrases, sentences, clauses or sections contained in
this Agreement shall be declared invalid, this Agreement shall be construed as
if such invalid word or words, phrase or phrases, sentence or sentences, clause
or clauses, or section or sections had not been inserted.
j) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
k) ARBITRATION. Except for disputes relating to Section 6 of this
Agreement, any and all disputes or controversies that shall arise under or in
connection with this Agreement or in any other way related to Employee's
employment by the Company, including termination of employment, shall be
submitted to a panel of three arbitrators under the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association then
in effect. The parties hereby acknowledge that the Federal Arbitration Act takes
precedence over any state arbitration statutes, rules and regulations. Each of
the arbitrators shall be qualified and experienced in employment related matters
with at least one arbitrator being a licensed attorney. The arbitrators must
base their determination solely on the terms and conditions of this Agreement
and the law in the State of Florida. The arbitrators shall have the authority to
award any remedies that a court may order or grant, except that they will have
no authority to award punitive damages or any other damages not measured by the
prevailing party's actual damages, and may not, in any event, make any ruling,
finding or award that does not conform to the terms and conditions of this
Agreement. Arbitration shall be held either in Broward County or Dade County,
Florida, and the parties hereby agree to accept service of process at the
address above written and in the personal jurisdiction and venue as set out
herein. Both parties expressly covenant and agree to be bound by the decision of
the arbitrators as the final determination of the matter in dispute. Judgment
upon the award rendered by the arbitrators may be entered into any court having
jurisdiction thereof. The non-prevailing party shall pay the prevailing party's
fees and costs, including reasonable attorney fees, unless the court or panel of
arbitrators determine otherwise.
l) INDEMNIFICATION. In accordance with the Company's Articles and Bylaws,
the Company agrees to defend, indemnify and hold harmless the Employee
("Indemnified Party") for acts in his capacity as Employee to the fullest extent
permitted by Florida corporate law at
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the present time (or as such right of indemnity may be increased in the future)
including in particular and without limitation with respect to the execution and
delivery of this Agreement or Employee's accepting employment with the Company.
The Company agrees to reimburse the Indemnified Party in advance for any costs
of defending any action or investigation (including reasonable attorneys' fees
and expenses) regarding Employee's performance of her duties under this
Agreement, subject to an undertaking from the Indemnified Party to repay the
Company if the Indemnified Party is determined not to be entitled to such
indemnity by a court of competent jurisdiction; provided that, the Company shall
first have the opportunity to defend Employee so long as counsel hired by the
Company does not have a conflict with representation of both the Company and the
Employee and Employee approves of such counsel. Notwithstanding the foregoing,
the Company shall not be required to advance expenses for the defense of
Employee for any causes of action that relate to activities of Employee that the
Company in good faith determines are outside of the scope of the duties required
of Employee under this Agreement and not related to the execution and delivery
of this Agreement or Employee's accepting employment with the Company, including
without limitation, for causes of action such as sexual harassment, torts, etc.
m) Sections 5, 6 and 7 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
COMPANY:
PROXYMED, INC., EMPLOYEE:
a Florida corporation
By: _____________________________________ __________________________
Harold Blue, Chairman and C.E.O. Carol A. Dragan
9
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
14th day of March, l997 by and between PROXYMED, INC. ("Company") and Glenn
Gilchrist residing at 270 Curtin Avenue, W. Islip, NY 11795 ("Employee").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee is
willing to accept employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth hereinafter and other good and valuable considerations, the receipt
and sufficiency of which is hereby acknowledged, the Company and the Employee
agree as follows:
1. TERM. The term of this Agreement shall commence on March 14, l997, the
"Effective Date") and shall continue for two (2) years (hereafter the "Term).
2. POSITION; DUTIES; LOYALTY.
a) POSITION. Employee will be employed by the Company as a Senior Vice
President and shall render service to the Company as an employee pursuant to the
terms, provisions and conditions hereinafter set forth.
b) DUTIES. Employee shall be employed by the Company on a full-time,
exclusive basis either at its offices at 400 West Main Street, Babylon, New York
or its principal corporate offices in Fort Lauderdale, Florida; provided
however, that for the first year of the Term of this Agreement, Employee shall
be employed at the New York office unless before the expiration of such one year
period Company and Employee shall mutually agree that he shall relocate to the
Company's Fort Lauderdale office. Employee shall perform such duties and have
such authority and responsibilities customarily accompanying such position and
responsibility for directing the laboratory/radiology services, part of an
operating division of the Company, such other duties consistent with his
position as shall be directed by his supervisor.
c) LOYALTY. Employee shall devote the full time required for his
position and shall give his best efforts to the business of the Company and to
the performance of the duties and obligations described in this Agreement.
Employee shall not, directly or indirectly, alone, or as a partner, officer,
director or shareholder of any other institution, be engaged in any other
commercial activities whatsoever, or continue or assume any other corporate
affiliations without the prior written consent of the Company, which consent may
be unreasonably withheld, except for (a) passive investments, and (b) minimal
time utilized for business activities that do not compete with the business of
the Company or its subsidiaries.
3. COMPENSATION AND EXPENSES.
a) SALARY. In consideration for the services rendered by the Employee
under this Agreement, the Company shall pay the Employee a monthly base salary
of $8,333.33 ("Base Salary") in accordance with the Company's customary payroll
practices, plus a $500 per month
<PAGE>
car allowance, subject to federal and state taxes, if any. Employee will receive
an annual minimum increase of at least five (5%) percent so long as the Company
is profitable.
b) RELOCATION. The Company shall pay Employee all reasonable, necessary
and actual costs for Employee's relocation, if so requested by Company, to the
Fort Lauderdale area, including actual moving expenses, travel expenses for
Employee and Employee's spouse to look for housing, rental expenses in Fort
Lauderdale, Florida broker's commission on the sale of Employee's house, closing
costs, including attorney's fees and points and associated costs, as well as
grossing up any such expenses taxable to Employee. However, Employee agrees that
in no event shall Company be obligated to pay Employee for all relocation costs,
including any gross up, more than $25,000. All expenses shall be submitted to
the Company for its approval.
c) ADDITIONAL COMPENSATION. As a further incentive and inducement to
the Employee to accept employment by the Company and to devote his best efforts
to the business and affairs of the Company, the Employee shall be entitled to
such bonuses that may be awarded from time to time by the Compensation Committee
or the Board of Director of the Company, and to participate in any stock option
or bonus plans which the Company may now have or in the future develop.
d) EXPENSES. Company shall promptly pay or reimburse the Employee for
all reasonable business expenses actually incurred or paid by the Employee in
the performance of his services hereunder in accordance with the policies and
procedures of the Company for the reimbursement of business expenses for its
senior level employees, including without limitation reasonable expenses
relating to travel, hotel and related costs associated with transportation to
and from Employee's principal residence to the Company's principal corporate
office in Fort Lauderdale, Florida, provided that Employee properly accounts
therefor in accordance with the Company's policy.
e) TAX WITHHOLDING. The Company shall have the right to deduct or
withhold from the compensation due Employee hereunder any and all sums required
for Federal income and social security taxes and all state or local taxes now
applicable or that may be enacted and become applicable in the future.
4. BENEFITS.
a) VACATION. Employee shall be entitled to three (3) weeks of vacation
with pay in the first year of his employment, and thereafter. Vacation not taken
during a calendar year does not accrue unless approved in writing by the
Company. Employee shall not be entitled to receive any additional compensation
from the Company on account of his failure to take a vacation.
b) PARTICIPATION IN BENEFIT PLANS. Employee shall be entitled to
participate in whatever benefit plans, including health insurance, that are
extended to all executives of the Company, on the same terms that such benefits
are so extended. Employee shall be entitled to family health insurance coverage
beginning 90 days from the commencement of employment from the Company's
insurance carrier (currently Humana HMO), or, if not available in New York,
comparable coverage available locally or through COBRA coverage from Employee's
previous employer. If Employee elects the Humana PPO option, any additional
premium will be payable by Employee. The Company agrees to reimburse Employee
for (i) actual expenses of COBRA coverage from Employee's prior employer for the
first ninety (90) days of employment, and (ii) the actual cost of COBRA coverage
or coverage that is
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available locally if coverage by the Company's insurance carrier is not
available in New York, but not to exceed the cost of the Company's HMO coverage.
The Company shall not be obligated to maintain any special or additional plans
for Employee's benefit. Employee shall also be entitled to participate in
benefit plans extended to other senior executives of the Company.
5. TERMINATION.
a) TERMINATION WITHOUT CAUSE; DEATH; DISABILITY. In the event of
Employee's Disability (as defined herein), this Agreement may be terminated at
the election of the Company. Upon termination for death or Disability, Employee
or his/her beneficiary or estate or legal representative shall be entitled to
receive the amounts payable under Section 5 (c). For purposes of this Agreement,
"Disability" is defined to mean the inability of Employee due to illness or
physical or mental infirmity (as determined by a physician selected by Employee
and acceptable to the Company) to perform his duties hereunder on a full-time
basis for six consecutive months with reasonable accommodation by the Company.
During the period of any such Disability and prior to termination hereof on
account of such Disability, Employee shall, upon request of the Company, furnish
information and assistance to the Company, and, in addition, upon reasonable
request of the Company's Board of Directors or its designees, shall make himself
available to undertake reasonable assignments consistent with the dignity,
importance and scope of his position and his physical and mental health.
b) TERMINATION FOR CAUSE. The Company may terminate Employee's
employment hereunder for "cause", effective immediately upon giving written
notice thereof. For purposes of this Agreement, the term "cause" shall be
limited to (i) a felony conviction, (ii) a final arbitration decision pursuant
to Section 7(k) of this Agreement that Employee has committed an act of fraud or
embezzlement or sexual harassment against the Company or any of its
subsidiaries, employees, customers or agents or (iii) excessive use of alcohol
or illegal drugs interfering with the performance of Employee's duties and the
continuance thereof after written warnings and (iv) any intentional and material
breach by Employee of the covenants contained in Section 6 hereof regarding
covenants of employee. For purposes of this paragraph, no act or failure to act
on Employee's part shall be considered "willful" unless done, or omitted to be
done, by Employee not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company. If at any time the
Company shall determine that Employee has engaged in one or more activities
constituting "cause" for termination hereunder, Employee's employment shall be
terminated for cause. Company shall pay Employee his full Base Salary through
the date of termination at the then current rate (including any applicable bonus
and accrued vacation pay). Company shall then have no further obligations to
Employee. Employee may give a written request to the Company within thirty (30)
days after such termination requesting an opportunity to be heard by the Board
of Directors of the Company. If Employee timely so requests such an opportunity
to be heard, such opportunity shall be made available to Employee within 30 days
after such written request. If the Board, with the advice of counsel, determines
that there was "cause" for termination, and the Employee disagrees with such
determination, the dispute shall be decided by arbitration pursuant to Section
7(k) hereof; provided, however, that the prevailing party shall be entitled to
receive its own fees and expenses, including, without limitation, reasonable
attorneys' fees from the nonprevailing party. If the Board determines in its
reasonable judgment that there was not sufficient basis to terminate Employee
for "cause", or if a final arbitration decision is rendered to such effect,
Employee shall be reinstated with all back pay and benefits restored. Employee
agrees that the Company will be permitted to withhold any post-employment
compensation due to him hereunder from the date notice of termination due
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to "cause" is given, subject to Company's obligation to restore such
compensation in accordance with the provisions of the preceding sentence.
c) PAYMENT UPON TERMINATION WITHOUT CAUSE. In the event of any
termination without cause, Employee shall be given ninety (90) days prior
written notice, Employee shall execute a full and complete release of any and
all claims against the Company in a form satisfactory to the Company, in which
event Employee (or his estate) shall be entitled to severance pay of an amount
equal to Employee's Base Salary on the date of termination for three (3) months
commencing on the effective date of termination payable in accordance with the
Company's customary payroll practices, plus (ii) the additional payments, if
any, which have not yet been paid to Employee or his assignee or designee under
Section 2(c) of the Asset Purchase Agreement dated February 11, 1997 between
Clinical MicroSystems, Inc., Employee, and the Company, plus (iii) a pro rata
portion of any bonus compensation, if any, which would have been paid to
Employee under any bonus plan of the Company in which the Employee is then
participating if the Employee had met his targeted goals to the date of
termination, plus (iv) the continuation of all employee benefits enjoyed by the
Employee as of the date that notice of termination is given to Employee
(including, without limitation, all insurance plans) for six (6) months after
termination, plus (v) the vesting of any unvested options. A termination
pursuant to Section 1 above shall not be deemed to be a termination without
cause under this Section, provided, that upon termination pursuant to Section 1
the additional payments, if any, which have not yet been paid to Employee under
Section 2 of the Asset Purchase Agreement shall immediately, irrevocably and
unconditionally become payable on the dates referred to in Section 2. In
addition, if the Company materially reduces Employee's duties referred to in
Section 2(b) hereof, compensation or benefits hereunder, or requests that he
relocate without reimbursing Employee for his reasonable, actual and necessary
relocation expenses, such event shall be deemed to be a termination without
cause and Employee shall be entitled to all of the payments described herein.
d) ACCELERATION. If the Company defaults in the payment of any amounts
owed hereunder to Employee following written notice by Employee and fails to
cure such default within thirty (30) days from the date of such notice, Employee
shall be entitled to accelerate the entire amount due hereunder. The Company
shall have the opportunity to cure a monetary default one time after which time,
if another default occurs, Employee shall be entitled to accelerate the entire
amount due hereunder upon written notice by Employee without affording the
Company an opportunity to cure.
e) RETURN OF COMPANY PROPERTY. Upon notice of termination by the
Company or resignation by Employee, Employee shall immediately return to the
Company all property of the Company in Employee's possession, including
Confidential Information (as defined below). Employee acknowledges that the
Company may withhold any employment compensation and benefits owed to Employee
hereunder until all such property is returned.
f) MITIGATION. If Employee becomes entitled to compensation pursuant to
Section 5.c) above, Executive shall use reasonable efforts to seek other
employment; provided, however, that he shall not be required to accept a
position of less importance or dignity or of a substantially different character
than the position held as of the date of termination or a position that could
require Executive to engage in activity in violation of the non-competition
provisions of Section 6 hereof nor shall he be required to accept a position
outside South Florida. The amount of any cash compensation paid or payable from
any such employment shall be reported to the Company on a monthly basis and such
amount shall be credited against amounts otherwise payable by the Company to
Executive under clauses (i), (iii) and
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(iv) of Section 5.c) above. Other than as provided in this Section 5.f),
Executive shall have no duty to mitigate the amount of any payment provided for
in this Agreement.
6. COVENANTS OF EMPLOYEE.
a) Employee agrees that during the Term and for five (5) years
following a termination of employment for any reason, he will not, directly or
indirectly, engage, or assist or participate in, whether as a director, officer,
executive, agent, manager, consultant, partner, owner or independent contractor
or other participant, in any Line of Business (as defined below) which is the
same as the Company or any of its subsidiaries are engaged in as of the
termination of this Agreement without the written consent of the Company.
Employee and Company agree that this paragraph is to protect the interests of
the Company while at the same time allowing the Employee to pursue gainful
employment with any other company Employee so chooses, so long as such Employee
does not, within the relevant time period herein, engage in any Line of Business
that directly competes with the Company or any of its subsidiaries as of the
date Employee terminates his employment with Company. Nothing contained herein
shall prevent Employee from acquiring less than 1% of any class of securities of
any company that competes with the Company that has any of its securities listed
on a national securities exchange or traded in the over-the-counter market,
provided Employee remains a passive investor.
b) For purposes of Section 6 hereof, Line of Business is defined as (i)
that line of business which the Company is purchasing pursuant to the Asset
Purchase Agreement and any related laboratory/radiology software line of
business engaged in by the Company as of the date of Employee's termination of
employment, and (ii) the internet and intranet transmission of healthcare data
business.
c) Employee agrees that during the Term and for five (5) years after
the termination of employment for any reason, he will not, without the prior
written consent of the Company, induce or solicit any person employed or
hereafter employed by the Company or any of its subsidiaries to leave the employ
of the Company or any of its subsidiaries or solicit, recruit, hire or attempt
to solicit, recruit or hire any person employed by the Company. Further,
Employee agrees that for a period of five (5) years after the termination of
employment, he will not, directly or indirectly, without the prior written
consent of the Company, solicit, divert away, take away, or attempt to take away
any customer of the Company who was a customer which Employee had, alone or in
conjunction with others, served during his employment with the Company.
d) Employee agrees and acknowledges that he will disclose promptly to
the Company every discovery, improvement and invention made, conceived or
developed by Employee during the entire period of employment (whether or not
during working hours) which discoveries, improvements, or inventions are within
the scope of any line of business engaged in by the Company during such term. To
the fullest extent permitted by law, all such discoveries, inventions and
improvements will be deemed works made for hire. Employee grants and agrees to
convey to Company or its nominee the entire right, title and interest, domestic
and foreign, which he may have in such discoveries, improvements or inventions,
or a lesser interest therein, at the option of Company. Employee further agrees
to promptly, upon request, sign all applications for patents, copyrights,
assignments and other appropriate documents, and to perform all acts and to do
all things necessary and appropriate to carry out the intent of this section,
whether or not Employee is still an employee of the Company at the time of such
requests.
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e) Employee agrees and acknowledges that the Confidential Information
of the Company and its subsidiaries (as hereinafter defined) is valuable,
special and unique to its business, that such business depends on such
Confidential Information, and that the Company wishes to protect such
Confidential Information by keeping it confidential for the use and benefit of
the Company. Based on the foregoing, Employee agrees to undertake the following
obligations with respect to such Confidential Information.
i) Employee agrees to keep any and all Confidential Information in
trust for the use and benefit of the Company.
ii) Employee agrees that, except as required by Employee's duties
or authorized in writing by the Company and its subsidiaries, he will not at any
time during and for a period of 10 years after the termination of his employment
with the Company and its subsidiaries, disclose any Confidential Information of
the Company or any of its subsidiaries. except as maybe required by applicable
law or court order, in which case Employee shall promptly notify Company so as
to allow it to seek a protective order if it so elects.
iii) Employee agrees to take all reasonable steps necessary, or
reasonably requested by the Company or its subsidiaries, to ensure that all
Confidential Information of the Company is kept confidential for the use and
benefit of the Company and its subsidiaries; and
iv) Employee agrees that, upon termination of his employment by
the Company or any of its subsidiaries or at any other time the Company may in
writing so request, he will promptly deliver to the Company all materials
constituting Confidential Information (including all copies thereof) that are in
the possession of or under the control of Employee. Employee further agrees
that, if requested by the Company to return any Confidential Information
pursuant to this Subsection (iv), he will not make or retain any copy or extract
from such materials.
For the purposes of this Section 6 (e), Confidential Information
means any and all information developed by or for the Company or any of its
subsidiaries of which Employee gained knowledge by reason of his employment by
the Company or any of its subsidiaries prior to the date hereof or during his
employment that is not generally known in any industry in which the Company or
its subsidiaries is engaged, or has developed written plans during the term of
Employee's employment by the Company to become engaged, but does not apply to
information which is known or is readily available to the public or the trade,
unless such knowledge results from an unauthorized disclosure by Employee.
Confidential Information includes, but is not limited to, any and all
information developed by or for the Company concerning plans, marketing and
sales methods, materials, processes, business forms, procedures, devices used by
the Company, its subsidiaries, suppliers and customers with which the Company
had dealt with prior to Employee's termination of employment with the Company
and its subsidiaries, plans for development of new products, services and
expansion into new areas or markets, internal operations, and any trade secrets,
proprietary information of any type owned by the Company and its subsidiaries,
together with all written, graphic and other materials relating to all or any
part of the same. The Company will receive all materials, including, software
programs, source code, object code, specifications, documents, abstracts, and
summaries developed in connection with Employee's employment. Employee
acknowledges that the programs and documentation developed in connection with
Employee's employment with the Company shall be the exclusive property of the
Company, and that the Company shall retain all right, title and interest in such
materials, including without limitation patent and copyright interests. Nothing
herein shall be construed as a license from the Company to make, use, sell or
copy any inventions, ideas, trade secrets, trademarks,
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copyrightable works, or other intellectual property of the Company during the
term of this Agreement or subsequent to its termination.
Employee acknowledges that there is no general geographical restriction
contained in this Section 6 because the Company's business is not confined to
one geographical area and is national and international in scope.
Notwithstanding the foregoing, if a court of competent jurisdiction were to
determine that the foregoing covenants would be held to be unreasonable in time,
distance and/or scope may be reduced by appropriate order of the court to that
deemed reasonable.
f) INJUNCTIVE RELIEF.
i) Employee acknowledges and agrees that the covenants and
obligations contained in this Section 6 relate to special, unique and
extraordinary matters and that a violation of any of the terms of this Section
will cause the Company irreparable injury for which adequate remedies at law are
not available. Therefore, Employee agrees that the Company shall be entitled
(without having to post a bond or other surety) to an injunction, restraining
order, or other equitable relief from any court of competent jurisdiction,
restraining the Employee from committing any violation of the covenants and
obligations set forth in this Section 6.
ii) The Company's rights and remedies under this Section are
cumulative and are in addition to any other rights and remedies the Company may
have pursuant to the specific provisions of this Agreement and at law or in
equity.
7. MISCELLANEOUS.
a) ATTORNEY'S FEES. In the event a proceeding is brought to
enforce or interpret any part of this Agreement or the rights or obligations of
any party to this Agreement, each party shall pay their own fees and expenses,
including reasonable attorney fees, except as provided in Section 5(b) hereof.
b) SUCCESSORS AND ASSIGNS. This Agreement and the benefits
hereunder are personal to the Company and are not assignable or transferable by
the Employee without the written consent of the Company. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
Company and the Employee and the Employee's heirs and legal representatives, and
the Company's successors and assigns.
c) GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the law of the State of Florida, without regard to the
application of principles of conflict of laws.
d) NOTICES. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified mail,
return receipt requested, postage prepaid, to the parties to this Agreement
addressed to the Company at its then principal office, as notified to Employee,
or to the Employee at his address specified on page 1 of this Agreement, or to
either party hereto at such other address or addresses as he or it may from time
to time specify for such purposes in a notice similarly given. All notices and
communications shall be deemed to have been received on the date of such notice
is sent by certified mail or on the date of delivery if delivered in person,
whichever is earlier.
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e) MODIFICATION; WAIVER. No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by a duly authorized officer of the Company and is agreed to in a
writing signed by the Employee and such officer. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
f) COMPLETE UNDERSTANDING. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
h) VALIDITY. The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
i) SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and if any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid, this Agreement
shall be construed as if such invalid word or words, phrase or phrases, sentence
or sentences, clause or clauses, or section or sections had not been inserted.
j) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
k) ARBITRATION. Except for disputes relating to Section 6 of this
Agreement, any and all disputes or controversies that shall arise under or in
connection with this Agreement or in any other way related to Employee's
employment by the Company, including termination of employment, shall be
submitted to a panel of three arbitrators under the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association then
in effect. The parties hereby acknowledge that the FEDERAL ARBITRATION ACT takes
precedence over any state arbitration statutes, rules and regulations. Each of
the arbitrators shall be qualified and experienced in employment related matters
with at least one arbitrator being a licensed attorney. The arbitrators must
base their determination solely on the terms and conditions of this Agreement
and the law in the State of Florida. The arbitrators shall have the authority to
award any remedies that a court may order or grant, except that they will have
no authority to award punitive damages or any other damages not measured by the
prevailing party's actual damages, and may not, in any event, make any ruling,
finding or award that does not conform to the terms and conditions of this
Agreement. Arbitration shall be held either in Broward County or Dade County,
Florida, and the parties hereby agree to accept service of process at the
address above written and in the personal jurisdiction and venue as set out
herein. Both parties expressly covenant and agree to be bound by the decision of
the arbitrators as the final determination of the matter in dispute. Judgment
upon the award rendered by the arbitrators may be entered into any court having
jurisdiction thereof. Except as otherwise provided in Section 5(b) hereof, each
party shall pay its own fees and expenses, including reasonable attorney fees.
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l) INDEMNIFICATION. In accordance with the Company's Articles
and Bylaws, the Company agrees to defend, indemnify and hold harmless the
Employee ("Indemnified Party") for acts in his capacity as Employee to the
fullest extent permitted by Florida corporate law at the present time (or as
such right of indemnity may be increased in the future) including in particular
and without limitation with respect to the execution and delivery of this
Agreement or Employee's accepting employment with the Company. The Company
agrees to reimburse the Indemnified Party in advance for any costs of defending
any action or investigation (including reasonable attorneys' fees and expenses)
regarding Employee's performance of his duties under this Agreement, subject to
an undertaking from the Indemnified Party to repay the Company if the
Indemnified Party is determined not to be entitled to such indemnity by a court
of competent jurisdiction; provided that, the Company shall first have the
opportunity to defend Employee so long as counsel hired by the Company does not
have a conflict with representation of both the Company and the Employee and
Employee approves of such counsel. Notwithstanding the foregoing, the Company
shall be entitled to reimbursement of any expenses advanced for the defense of
Employee for any cause of action that (a) relates to activities of Employee that
are outside of the scope of the duties required of Employee under this Agreement
and not related to the execution and delivery of this Agreement or Employee's
accepting employment with the Company, including without limitation, for causes
of action such as sexual harassment, or other intentional misconduct; and (b)
which result in a final judgment of guilt or liability against Employee.
m) Sections 5a), 5.b), and 5.c), 6 and 7 shall survive the
termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
COMPANY: EMPLOYEE:
PROXYMED, INC., GLENN GILCHRIST
a Florida corporation
By: _________________________________ ________________________
Harold Blue, Chairman and C.E.O.
9
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
11th day of November, 1996 by and between PROXYMED, INC. ("Company") and Frank
M. Puthoff residing at 1479 N.E. 57th Place, Ft. Lauderdale, Florida 33334
("Employee").
WHEREAS, upon the terms and subject to the conditions of this
Agreement, the Company desires to employ the Employee and the Employee is
willing to accept employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth hereinafter and other good and valuable considerations, the receipt
and sufficiency of which is hereby acknowledged, the Company and the Employee
agree as follows:
1. TERM. The term of this Agreement shall commence on November 11, l996
(the "Effective Date") and shall continue until November 10, l999 (hereafter the
"Term), and shall be automatically extended from year to year thereafter unless
i) terminated by the Company by delivery of not less than ninety (90) days
written notice to Executive prior to the end of the initial Term or any
extension thereof, in which case the employment of Executive shall terminate on
the date specified for termination in such notice, or ii) terminated by
Executive by delivery of not less than thirty (30) days written notice to the
Company, in which case the employment of Executive shall terminate on the date
which is thirty (30) days following the date notice is received by the Company.
2. POSITION; DUTIES; LOYALTY.
a) POSITION. Employee will be employed as Executive Vice President,
Chief Legal Officer and Secretary of the Company and shall render service to the
Company as an employee pursuant to the terms, provisions and conditions
hereinafter set forth.
b) DUTIES. Employee shall be employed by the Company on a full-time
exclusive basis reportinjg to the Company's Chief Executive Officer. Employee
shall perform the duties and have the authority and responsibilities set out in
the ByLaws of the Company and customarily accompanying those of a chief legal
officer and secretary of a public company.
c) LOYALTY. Employee shall devote the full time required for his
position and shall give his best efforts to the business of the Company and to
the performance of the duties and obligations described in this Agreement.
Employee shall not, directly or indirectly, alone, or as a partner, officer,
director or shareholder of any other institution, be engaged in any other
commercial activities whatsoever, or continue or assume any other corporate
affiliations without the prior written consent of the Company, which consent
shall not be unreasonably withheld, except for (a) passive investments, and (b)
minimal time utilized for business activities that do not compete with the
business of the Company or its subsidiaries.
3. COMPENSATION AND EXPENSES.
a) SALARY. In consideration for the services rendered by the Employee
under this Agreement, the Company shall pay the Employee a monthly base salary
of $10,416.67 (the
<PAGE>
"Base Salary") in accordance with the Company's customary payroll practices,
plus a $500 per month car allowance, subject to federal and state taxes, if any.
b) ADDITIONAL COMPENSATION. As a further incentive and inducement to
the Executive to accept employment by the Company and to devote his best efforts
to the business and affairs of the Company, the Employee shall be entitled to
such bonuses that may be awarded from time to time by the Compensation Committee
or the Board of Directors of the Company, and to participate in any stock option
or bonus plans which the Company may now have or in the future develop. For the
purposes of computing any additional compensation which is calculated on Base
Salary, including any bonuses, raises, insurance plans or other like benefits,
the then current car allowance shall be included in Base Salary.
c) OPTIONS. Employee will receive a stock option agreement to purchase
up to 40,000 shares of the Company's common stock at its fair market value
defined as the mean of the high and low prices of the common stock as reported
to have traded on the NASDAQ/NMS system at the close of business on the date the
Board of Directors or the Compensation Committee shall have approved the grant,
which is November 11, l996 at an exercise price of $6.94 per share. The options
will vest as follows: 13,334 as of the date of grant; 13,333 on August 12, l996;
13,333 on August 12, l997. The Option is being granted as an inducement to a new
employee essential to Employee's entering into this Agreement. As such, the
option being granted is a non-qualified option outside of any stock option plan
adopted by the Company. The terms of Employee's stock option agreement will be
on a form as approved by the Board of Directors on November 11, l996 and will be
for a ten (10)) year term with "change of control" provisions similar to those
contained in Company's 1995 Stock Option Agreement.
d) EXPENSES. Company shall promptly pay or reimburse the Employee for
all reasonable business expenses actually incurred or paid by the Employee in
the performance of his services hereunder in accordance with the policies and
procedures of the Company for the reimbursement of business expenses for its
senior level executives, provided that the Executive properly accounts therefor
in accordance with the Company's policy.
e) TAX WITHHOLDING. The Company shall have the right to deduct or
withhold from the compensation due Employee hereunder any and all sums required
for Federal income and social security taxes and all state or local taxes now
applicable or that may be enacted and become applicable in the future.
4. BENEFITS.
a) VACATION. Employee shall be entitled to three weeks of vacation with
pay in the first year of his employment, and thereafter. Vacation not taken does
not accrue unless approved in writing by the Company. Employee shall not be
entitled to receive any additional compensation from the Company on account of
his failure to take a vacation.
b) PARTICIPATION IN BENEFIT PLANS. Employee shall be entitled to
participate in whatever benefit plans, including health insurance, that are
extended to all executives of the Company, on the same terms that such benefits
are so extended. The Company shall not be obligated to maintain any special or
additional plans for Employee's benefit. Employee shall also be entitled to
participate in benefit plans extended to other executive vice presidents of the
Company.
5. TERMINATION.
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<PAGE>
a) TERMINATION WITHOUT CAUSE; DEATH; DISABILITY. In the event of
Employee's Disability (as defined herein), this Agreement may be terminated at
the election of the Company. Upon termination for death or Disability, Employee
or his/her beneficiary or estate or legal representative shall be entitled to
receive the amounts payable under Section 5 (c). For purposes of this Agreement,
"Disability" is defined to mean the inability of Employee due to illness or
physical or mental infirmity (as determined by a physician selected by Employee
and acceptable to the Company) to perform his duties hereunder on a full-time
basis for six consecutive months with reasonable accommodation by the Company.
Employee shall, upon request of the Company, furnish information and assistance
to the Company, and, in addition, upon reasonable request of the Company's Board
of Directors or its designees, shall make himself available to undertake
reasonable assignments consistent with the dignity, importance and scope of his
position and his physical and mental health.
b) TERMINATION FOR CAUSE. The Company may terminate Employee's
employment hereunder for "cause", effective immediately upon giving written
notice thereof. For purposes of this Agreement, the term "cause" shall be
limited to (i) conviction of a felony or of any crime involving fraud or
misrepresentation; (ii) the continued failure by Employee to substantially
perform his duties to the Company after receipt of written notice from the
Company specifying any action or inaction by Employee which is deemed by the
Company to constitute a failure to perform his duties hereunder with
suggestions, where feasible, as to how Employee may remedy such failure, and
Employee has failed to correct the unsatisfactory performance within thirty (30)
days of such notice; (iii) Employee's gross negligence or willful misconduct
which is materially injurious to the Company, monetarily or otherwise; (iv)
proven dishonesty affecting the Company; (v) excessive use of alcohol or illegal
drugs interfering with the performance of Employee's duties and the continuance
thereof after written warning; (vi) any material breach by Employee of the
Company's then current policies with written notice thereof and an appropriate
period to cure such breach where the breach is not one subject to immediate
termination under the Company's policies, or of the covenants contained in
Section 6 of this Agreement regarding confidentiality. For purposes of the
paragraph, no act or failure to act on Employee's part shall be considered
"wilful" unless done, or omitted to be done, by Employee not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company. If at any time the Company shall determine that Employee has
engaged in one or more activities constituting "cause" for termination
hereunder, Employee's employment shall be terminated for cause. Company shall
pay Employee his full Base Salary through the date of termination at the then
current rate (including any applicable bonus and accrued vacation pay), and all
stock options, if any, which have become vested and exercisable on or before the
date of termination, with such options remaining exercisable for such period of
time specified as in Employee's Option Agreement(s). Company shall then have no
further obligations to Employee. Employee may give a written request to the
Company within thirty (30) days after such termination requesting an opportunity
to be heard by the Board of Directors of the Company. If Employee timely so
requests such an opportunity to be heard, such opportunity shall be made
available to Employee within 30 days after such written request. If the Board,
with the advice of counsel, determines that there was cause for termination, its
determination shall be deemed to be conclusive and final. In the event Employee
is terminated for cause, Section 6.a) and 6.b) will be of no force or effect. If
the Board determines in its reasonable judgment that there was not sufficient
basis to terminate Employee for cause, Employee shall be reinstated with all
back pay and benefits restored.
c) PAYMENT UPON TERMINATION WITHOUT CAUSE. In the event of any
termination without cause, Employee shall be given ninety (90) days prior
written notice. Employee shall execute a full and complete release of any and
all claims against the Company in a form
3
<PAGE>
satisfactory to the Company, in which event Employee (or his estate) shall be
entitled to severance pay of (i) an amount equal to Employee's Base Salary on
the date of termination for 6 months commencing on the date of termination
payable in accordance with the Company's customary payroll practices plus (ii) a
pro rata portion of any bonus compensation which would have been paid to
Employee under any bonus plan which is adopted by the Company's Compensation
Committee or Board of Directors in such year if the Company and Employee had met
the targeted goals to the date of termination, plus (iii) the continuation of
all benefits including, without limitation, all insurance plans) for 6 months
after termination plus (iv) any remaining unvested options shall vest. A
termination pursuant to Section 1 above shall not be deemed to be a termination
without cause under this Section or a termination for Good Reason under Section
5.f) or subject to this Section 5.c).
d) ACCELERATION. If the Company defaults in the payment of any amounts
owed hereunder to Employee following written notice by Employee and fails to
cure such default within ten days from the date of such notice, Employee shall
be entitled to accelerate the entire amount due hereunder. The Company shall
have the opportunity to cure a monetary default one time after which time, if
another default occurs, Employee shall be entitled to accelerate the entire
amount due hereunder upon written notice by Employee without affording the
Company an opportunity to cure.
e) RETURN OF COMPANY PROPERTY. Upon notice of termination by the
Company or resignation by Employee, Employee shall immediately return to the
Company all property of the Company in Employee's possession, including
Confidential Information (as defined below). Employee acknowledges that the
Company may withhold any compensation and benefits owed to Employee hereunder
until all such property is returned.
f) EMPLOYEE TERMINATION FOR GOOD REASON. Employee may terminate this
Agreement for Good Reason by giving Company ninety (90) days prior written
notice. Good Reason means: a) the assignment of any duties inconsistent in any
respect with Employee's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities hereunder, or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose as isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of written notice from Employee;
b) any reduction of Employee's Base Salary or the failure by the Company to
provide Employee with an incentive compensation program and health and the
benefits hereunder no less favorable than the benefits Employee was entitled to
hereunder; and c) if Company's principal office is relocated in the future more
than fifty (50) miles from Ft. Lauderdale, FL. In such event, Employee's
termination shall be treated as a termination without cause and he shall be
entitled to the payments enumerated in Section 5.c) above.
g) MITIGATION. If Employee becomes entitled to compensation pursuant to
Section 5. c) or 5. f) above, Executive shall use reasonable efforts to seek
other employment; provided, however, that he shall not be required to accept a
position of less importance or dignity or of a substantially different character
than the position held as of the date of termination or a position that could
require Executive to engage in activity in violation of the non-competition
provisions of Section 6 hereof nor shall he be required to accept a position
outside South Florida. The amount of any cash compensation paid or payable from
any such employment shall be reported to the Company on a monthly basis and such
amount shall be credited against amounts otherwise payable by the Company to
Executive under Sections 5.c)
4
<PAGE>
or 5.f) above. Other than as provided in this Section 5.g), Executive shall have
no duty to mitigate the amount of any payment provided for in this Agreement.
6. COVENANTS OF EMPLOYEE.
a) Employee agrees that during the Term and for one year following a
termination of employment for any reason, he will not, directly or indirectly,
engage, assist or participate in, whether as a director, officer, executive,
agent, manager, consultant to vendors/sellers (but may consult to end
users/purchasers), partner, owner or independent contractor or other
participant, in any line of business which is the same as the Company or any of
its subsidiaries are engaged in as of the termination of this Agreement without
the written consent of the Company, which consent shall not be unreasonably
withheld. Employee and Company agree that this clause is to protect the
interests of the Company while at the same time allowing the Employee to pursue
gainful employment with any other company Employee so chooses, so long as such
Employee does not, within the relevant time period herein, engage in any line of
business that directly competes with any line of business engaged in by the
Company or any of its subsidiaries as of the date Employee terminates his
employment with Company. Nothing contained herein shall prevent Employee from
acquiring less than 1% of any class of securities of any company that competes
with the Company that has any of its securities listed on a national securities
exchange or traded in the over-the-counter market, provided Employee remains a
passive investor.
b) Employee agrees that during the Term and for one year after
the termination of employment for any reason, he will not, directly or
indirectly, without the prior written consent of the Company, induce or solicit
any person employed or hereafter employed by the Company or any of its
subsidiaries to leave the employ of the Company or any of its subsidiaries or
solicit, recruit,hire or attempt to solicit, recruit or hire any person employed
by the Company. Further, Employee agrees that for a period of one year after the
termination of this Agreement, he will not, directly or indirectly, without the
prior written consent of the Company, solicit, divert away, take away, or
attempt to take away any customer of the Company who was a customer which
Employee had, alone or in conjunction with others, served during his employment
with the Company. Regarding the latter sentence, Company and Employee agree that
Employee may contact and do business with those customers, however during the
relevant time period, he may not solicit or sell them any product or service in
the lines of business that were the same as then being offered by the Company or
any of its subsidiaries as of the termination of employee's employment.
c) Employee agrees and acknowledges the he will disclose promptly to
the Company every discovery, improvement and invention made, conceived or
developed by Employee during the entire period of employment (whether or not
during working hours) which discoveries, improvements, or inventions are capable
of use in any way in connection with the business of Company. To the fullest
extent permitted by law, all such discoveries, inventions and improvements will
be deemed works made for hire. Employee grants and agrees to convey to Company
or its nominee the entire right, title and interest, domestic and foreign, which
he may have in such discoveries, improvements or inventions, or a lesser
interest therein, at the option of Company. Employee further agrees to promptly,
upon request, sign all applications for patents, copyrights, assignments and
other appropriate documents, and to perform all acts and to do all things
necessary and appropriate to carry out the intent of this section, whether or
not Employee is still an employee of the Company at the time of such requests.
5
<PAGE>
d) Employee agrees and acknowledges that the Confidential Information
of the Company and its subsidiaries (as hereinafter defined) is valuable,
special and unique to its business, that such business depends on such
Confidential Information, and that the Company wishes to protect such
Confidential Information by keeping it confidential for the use and benefit of
the Company. Based on the foregoing, Employee agrees to undertake the following
obligations with respect to such Confidential Information.
i) Employee agrees to keep any and all Confidential Information in
trust for the use and benefit of the Company.
ii) Employee agrees that, except as required by Employee's duties or
authorized in writing by the Company and its subsidiaries, he will not at any
time during and for a period of 10 years after the termination of his employment
with the Company and its subsidiaries, disclose, directly or indirectly, any
Confidential Information of the Company or any of its subsidiaries. except as
maybe required by applicable law or court order, in which case Employee shall
promptly notify Company so as to allow it to seek a protective order if it so
elects.
iii) Employee agrees to take all reasonable steps necessary, or
reasonably requested by the Company or its subsidiaries, to ensure that all
Confidential Information of the Company is kept confidential for the use and
benefit of the Company and its subsidiaries; and
iv) Employee agrees that, upon termination of his employment by the
Company or any of its subsidiaries or at any other time the Company may in
writing so request, he will promptly deliver to the Company all materials
constituting Confidential Information (including all copies thereof) that are in
the possession of or under the control of Employee. Employee further agrees
that, if requested by the Company to return any Confidential Information
pursuant to this Subsection (iv), he will not make or retain any copy or extract
from such materials.
For the purposes of this Section 6 (c), Confidential Information
means any and all information developed by or for the Company or any of its
subsidiaries of which Employee gained knowledge by reason of his employment by
the Company or any of its subsidiaries prior to the date hereof or during his
employment that is not generally known in any industry in which the Company or
its subsidiaries is or may become engaged, but does not apply to information
which is generally known to the public or the trade, unless such knowledge
results from an unauthorized disclosure by Employee. Confidential Information
includes, but is not limited to, any and all information developed by or for the
Company concerning plans, marketing and sales methods, materials, processes,
business forms, procedures, devices used by the Company, its subsidiaries,
suppliers and customers with which the Company had dealt with prior to
Employee's termination of employment with the Company and its subsidiaries,
plans for development of new products, services and expansion into new areas or
markets, internal operations, and any trade secrets, proprietary information of
any type owned by the Company and its subsidiaries, together with all written,
graphic and other materials relating to all or any part of the same. The Company
will receive all materials, including, software programs, source code, object
code, specifications, documents, abstracts, and summaries developed in
connection with Employee's employment. Employee acknowledges that the programs
and documentation developed in connection with Employee's employment with the
Company shall be the exclusive property of the Company, and that the Company
shall retain all right, title and interest in such materials, including without
limitation patent and copyright interests. Nothing herein shall be construed as
a license from the Company to make, use, sell or copy any inventions, ideas,
trade secrets, trademarks, copyrightable works, or other
6
<PAGE>
intellectual property of the Company during the term of this Agreement or
subsequent to its termination.
e) INJUNCTIVE RELIEF.
i) Employee acknowledges and agrees that the covenants and
obligations contained in this Section 6 relate to special, unique and
extraordinary matters and that a violation of any of the terms of this Section
will cause the Company irreparable injury for which adequate remedies at law are
not available. Therefore, Employee agrees that the Company shall be entitled
(without having to post a bond or other surety) to an injunction, restraining
order, or other equitable relief from any court of competent jurisdiction,
restraining the Employee from committing any violation of the covenants and
obligations set forth in this Section 6.
ii) The Company's rights and remedies under this Section are
cumulative and are in addition to any other rights and remedies the Company may
have pursuant to the specific provisions of this Agreement and at law or in
equity.
7. MISCELLANEOUS.
a) ATTORNEY'S FEES. In the event a proceeding is brought to enforce or
interpret any part of this Agreement or the rights or obligations of any party
to this Agreement, the non- prevailing party shall pay the prevailing party's
fees and expenses, including reasonable attorney fees, unless the court or panel
of arbitrators determine otherwise.
b) SUCCESSORS AND ASSIGNS. This Agreement and the benefits hereunder
are personal to the Company and are not assignable or transferable by the
Employee without the written consent of the Company. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the Company and
the Employee and the Employee's heirs and legal representatives, and the
Company's successors and assigns.
c) GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the law of the State of Florida, without regard to the
application of principles of conflict of laws.
d) NOTICES. All notices and other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been given if delivered personally or sent by certified mail, return receipt
requested, postage prepaid, to the parties to this Agreement addressed to the
Company at its then principal office, as notified to Employee, or to the
Employee at his address specified on page 1 of this Agreement, or to either
party hereto at such other address or addresses as he or it may from time to
time specify for such purposes in a notice similarly given. All notices and
communications shall be deemed to have been received on the date of delivery.
e) MODIFICATION; WAIVER. No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by a duly authorized officer of the Company and is agreed to in a
writing signed by the Employee and such officer. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
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f) COMPLETE UNDERSTANDING. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
g) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
h) VALIDITY. The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
i) SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and if any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid, this Agreement
shall be construed as if such invalid word or words, phrase or phrases, sentence
or sentences, clause or clauses, or section or sections had not been inserted.
j) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
k) ARBITRATION. Except for disputes relating to Section 6 of this
Agreement, any and all disputes or controversies that shall arise under or in
connection with this Agreement or in any other way related to Employee's
employment by the Company, including termination of employment, shall be
submitted to a panel of three arbitrators under the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association then
in effect. The parties hereby acknowledge that the Federal Arbitration Act takes
precedence over any state arbitration statutes, rules and regulations. Each of
the arbitrators shall be qualified and experienced in employment related matters
with at least one arbitrator being a licensed attorney. The arbitrators must
base their determination solely on the terms and conditions of this Agreement
and the law in the State of Florida. The arbitrators shall have the authority to
award any remedies that a court may order or grant, except that they will have
no authority to award punitive damages or any other damages not measured by the
prevailing party's actual damages, and may not, in any event, make any ruling,
finding or award that does not conform to the terms and conditions of this
Agreement. Arbitration shall be held either in Broward County or Dade County,
Florida, and the parties hereby agree to accept service of process at the
address above written and in the personal jurisdiction and venue as set out
herein. Both parties expressly covenant and agree to be bound by the decision of
the arbitrators as the final determination of the matter in dispute. Judgment
upon the award rendered by the arbitrators may be entered into any court having
jurisdiction thereof. The non-prevailing party shall pay the prevailing party's
fees and costs, including reasonable attorney fees, unless the court or panel of
arbitrators determine otherwise.
l) INDEMNIFICATION. In accordance with the Company's Articles and
Bylaws, the Company agrees to defend, indemnify and hold harmless the Employee
("Indemnified Party") for acts in his capacity as Employee to the fullest extent
permitted by Florida corporate law at the present time (or as such right of
indemnity may be increased in the future) including in particular and without
limitation with respect to the execution and delivery of this Agreement or
Employee's accepting employment with the Company. The Company agrees to
reimburse the Indemnified Party in advance for any costs of defending any action
or investigation (including
8
<PAGE>
reasonable attorneys' fees and expenses) regarding Employee's performance of his
duties under this Agreement, subject to an undertaking from the Indemnified
Party to repay the Company if the Indemnified Party is determined not to be
entitled to such indemnity by a court of competent jurisdiction; provided that,
the Company shall first have the opportunity to defend Employee so long as
counsel hired by the Company does not have a conflict with representation of
both the Company and the Employee and Employee approves of such counsel.
Notwithstanding the foregoing, the Company shall not be required to advance
expenses for the defense of Employee for any causes of action that relate to
activities of Employee that the Company in good faith determines are outside of
the scope of the duties required of Employee under this Agreement and not
related to the execution and delivery of this Agreement or Employee's accepting
employment with the Company, including without limitation, for causes of action
such as sexual harassment, torts, etc.
m) Sections 5. 6 and 7 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
COMPANY:
PROXYMED, INC., EMPLOYEE:
a Florida corporation
By: _______________________________ __________________________
Harold Blue, Chairman and C.E.O. Frank M. Puthoff
9
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of ProxyMed, Inc. and subsidiaries on Forms S-3 (No. 33-95454 and
No. 333-11179) and S-8 (No. 333-04717) of our report, dated February 25, 1997,
except for Note 12 as to which the date is March 14, 1997, on our audits of the
consolidated financial statements of ProxyMed, Inc. and subsidiaries as of
December 31, 1996, and for the years ended December 31, 1996, and 1995, which
report is included in this Annual Report on Form 10-KSB.
/s/ COOPERS & LYBRAND L.L.P.
------------------------
Coopers & Lybrand L.L.P.
Miami, Florida
March 28, 1997
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